Brought home
Does Economic Globalization Influence the US Policy Mood?: A Study of US Public Sentiment, 1956–2011
Erica Owen & Dennis Quinn
British Journal of Political Science, forthcoming
Abstract:
Does increasing economic globalization influence aggregate policy mood toward the role and size of government in the United States? Drawing on insights from international political economy scholarship, this article suggests that the impact of trade on aggregate preferences will depend on citizens’ exposure to trade. It hypothesizes that employees of import-competing, export-oriented and multinational firms will adopt a ‘compensatory’ model in which higher levels of imports (exports) lead to a liberal (conservative) shift in policy preferences for more (less) government. It distinguishes between intrafirm and non-intrafirm trade flows. It measures policy mood using Stimson's ‘Mood’, and estimates Error Correction and Instrumental Variable models. Trade flows strongly influence Mood in a manner consistent with hypotheses drawn from international political economy and heterogeneous firms (or ‘new new’) trade theory.
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Policymakers’ Horizon and Trade Reforms: The Protectionist Effect of Elections
Paola Conconi, Giovanni Facchini & Maurizio Zanardi
Journal of International Economics, forthcoming
Abstract:
This paper shows that electoral incentives deter politicians from supporting trade liberalization. We focus on all major trade liberalization bills introduced since the early 1970s in the U.S. Congress, in which House and Senate members serve respectively two- and six-year terms and one third of senators face elections every two years. We show that senators are more likely to support trade liberalization than House representatives. However, this result does not hold for the last generation of senators, who face elections at the same time as House members, suggesting that inter-cameral differences are driven by term length. Considering senators alone, we find that the last generation is less likely to support trade liberalization than the previous two. This result is pervasive and holds both when comparing the behavior of different senators voting on the same bill and that of individual senators voting on different bills. The protectionist effect of election proximity disappears for senators who are retiring or hold safe seats.
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Caroline Flammer
Strategic Management Journal, forthcoming
Abstract:
This study examines whether product market competition affects corporate social responsibility (CSR). To obtain exogenous variation in product market competition, I exploit a quasi-natural experiment provided by large import tariff reductions that occurred between 1992 and 2005 in the U.S. manufacturing sector. Using a difference-in-differences methodology, I find that domestic companies respond to tariff reductions by increasing their engagement in CSR. This finding supports the view of ʻCSR as a competitive strategyʼ that allows companies to differentiate themselves from their foreign rivals. Overall, my results highlight that trade liberalization is an important factor that shapes CSR practices.
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Trading Effects of the FIFA World Cup
Veysel Avsar & Umut Unal
Kyklos, August 2014, Pages 315–329
Abstract:
This study analyzes the trading effects of FIFA World Cup in two dimensions. First, we show that participating in the World Cup significantly increases exports from the participant countries to the host countries, relative to a control group of non-participants. Second, we demonstrate that trade is reasonably higher for host-participant pairs compared to other country pairs. We also provide dynamic estimates for both cases and offer plausible arguments and important channels for our findings.
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Democratization and Foreign Direct Investment Liberalization, 1970–2000
Sonal Pandya
International Studies Quarterly, forthcoming
Abstract:
Despite the central role of foreign direct investment (FDI) in global economic integration, we lack explanations for why countries restrict FDI inflows. This article analyzes the sources of FDI liberalization using a comprehensive new data set of national foreign ownership restrictions spanning over 90 countries for the period 1970–2000. Analyses of this data show that democratization contributes to greater FDI openness. Democratization elevates the political influence of labor, the primary beneficiary of unrestricted FDI inflows. Democracies restrict six percent fewer of their manufacturing and service industries as compared to nondemocracies. This finding is robust to several controls for alternate explanations including economic crises, coercion, and diffusion; alternate measures of both democracy and foreign ownership restrictions; and a variety of model specifications. This article elucidates the political economy foundations of the contemporary world economy.
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The Coevolution of Trade Agreement Networks and Democracy
Mark Manger & Mark Pickup
Journal of Conflict Resolution, forthcoming
Abstract:
The proliferation of preferential trade agreements (PTAs) and the wave of democratization are among the most significant developments in international relations during the past three decades. The correlation between these is well noted. The causal link between these phenomena, however, remains unclear. On one hand, democracies have been found to be more likely to join PTAs. On the other hand, trade agreements should foster democratization because they undermine the ability of governments to distribute rents to maintain an autocratic regime. If PTAs and democracy coevolve through a selection and a contagion effect, then conventional statistical techniques can produce wholly misleading results. This article presents a new approach based on recent advancements in longitudinal network analysis. Our findings confirm that historically, democratization indeed made states more likely to sign PTAs, but that trade agreements also encourage the democratization of a country, in particular if the PTA partners are themselves democracies.
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Effects of China and India on Manufactured Exports of the G7 Economies
Khuong Vu
Contemporary Economic Policy, forthcoming
Abstract:
This article analyzes the effects of China and India on manufactured exports of the G7 economies. The following three findings stand out. First, the rivalry effect of China is robustly significant in all investigated markets, including the world and the G7 countries collectively and individually, while the rivalry effect of India is significant in the French, Italian, Japanese, and world markets but insignificant in other markets. Second, the rivalry effect of China in the world market is substantial in 13 of 22 manufacturing industries, and most pronounced for textiles, telecom equipment, fabricated metal products, computing machinery, and furniture, while this effect of India is significant only in one industry (basic metals). Third, Germany is the only G7 economy that appears not to be affected by China's rivalry effect. Germany has also been more successful than other G7 economies in penetrating the Chinese market.
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From Beijing to Bentonville: Do Multinational Retailers Link Markets?
Keith Head, Ran Jing & Deborah Swenson
Journal of Development Economics, September 2014, Pages 79–92
Abstract:
Four of the world’s five largest retailers — Walmart, Carrefour, Tesco, and Metro — entered China after 1995, following new policies that allowed foreign retailers to participate more fully in the Chinese retail market. As each retailer added both stores and global procurement centers, they created unique footprints that caused Chinese cities to be differentially exposed to the activities of these global retailers. We exploit these differences to identify the effect of multinational retailer presence on city-country exports of retail goods. We find robust evidence that increased exposure to multinational retailers was followed by rising exports. Since the export expansions are not limited to the connections formed by the retailers’ bilateral networks, our evidence suggests that the growing presence of global retailers operated, at least in part, by enhancing the general export capabilities of the affected cities.
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Cem Karayalcin & Hakan Yilmazkuday
World Bank Economic Review, forthcoming
Abstract:
Many developing countries display remarkably high degrees of urban concentration that are incommensurate with their levels of urbanization. The cost of excessively high levels of urban concentration can be very high in terms of overpopulation, congestion, and productivity growth. One strand of the theoretical literature suggests that such high levels of concentration may be the result of restrictive trade policies that trigger forces of agglomeration. Another strand of the literature, however, points out that trade liberalization itself may exacerbate urban concentration by favoring the further growth of those large urban centers that have better access to international markets. The empirical basis for judging this question has been weak so far; in the existing literature, trade policies are poorly measured (or are not measured, as when trade volumes are used spuriously). Here, we use new disaggregated tariff measures to empirically test the hypothesis. We also employ a treatment-and-control analysis of pre- versus post-liberalization performance of the cities in liberalizing and non-liberalizing countries. We find evidence that (controlling for the largest cities that have ports and, thus, have better access to external markets) liberalizing trade leads to a reduction in urban concentration.
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Özalp Özer, Yanchong Zheng & Yufei Ren
Management Science, forthcoming
Abstract:
Whether and how trust and trustworthiness differ between a collectivist society, e.g., China, and an individualistic one, e.g., the United States, generates much ongoing scientific debate and bears significant practical values for managing cross-country transactions. We experimentally investigate how supply chain members' countries of origin — China versus the United States — affect trust, trustworthiness, and strategic information sharing behavior in a cross-country supply chain. We consider a two-tier supply chain in which the upstream supplier solicits demand forecast information from the retailer to plan production; but the retailer has an incentive to manipulate her forecast to ensure abundant supply. The levels of trust and trustworthiness in the supply chain and supplier's capability to determine the optimal production quantity affect the efficacy of forecast sharing and the resulting profits. We develop an experimental design to disentangle these three aspects and to allow for real-time interactions between geographically distant and culturally heterogeneous participants. We observe that, when there is no prospect for long-term interactions, our Chinese participants consistently exhibit lower spontaneous trust and trustworthiness than their U.S. counterparts do. We quantify the differences in trust and trustworthiness between the two countries, and the resulting impact on supply chain efficiency. We also show that Chinese individuals exhibit higher spontaneous trust toward U.S. partners than Chinese ones, primarily because they perceive that individuals from the United States are more trusting and trustworthy in general. This positive perception toward U.S. people is indeed consistent with the U.S. participants' behavior in forecast sharing. In addition, we quantify that a Chinese supply chain enjoys a larger efficiency gain from repeated interactions than a U.S. one does, as the prospect of building a long-term relationship successfully sustains trust and trustworthiness by Chinese partners. We advocate that companies can reinforce the positive perception of westerners held by the Chinese population and commit to long-term relationships to encourage trust by Chinese partners. Finally, we also observe that both populations exhibit similar pull-to-center bias when solving a decision problem under uncertainty (i.e., the newsvendor problem).
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Mario Crucini & Gregor Smith
NBER Working Paper, June 2014
Abstract:
We study the role of distance and time in statistically explaining price dispersion for 14 commodities from 1732 to 1860. The prices are reported for US cities and Swedish market towns, so we can compare international and intranational dispersion. Distance and commodity-specific fixed effects explain a large share — roughly 60% — of the variability in a panel of more than 230,000 relative prices over these 128 years. There was a negative "ocean effect": international dispersion was less than would be predicted using distance, narrowing the effective ocean by more than 3000 km. The absolute effect of distance declined over time beginning in the 18th century. This process of convergence was broad- based, across commodities and locations (both national and international). But there was a major interruption in convergence in the late 18th and early 19th centuries, at the time of the Napoleonic Wars, stopping the process by two or three decades on average.
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Fashions and Fads in Finance: The Political Foundations of Sovereign Wealth Fund Creation
Jeffrey Chwieroth
International Studies Quarterly, forthcoming
Abstract:
What accounts for the spread of Sovereign Wealth Funds (SWFs)? Despite the increasing importance of SWFs in the global economy, we lack persuasive systematic answers to that question. Most analysts take for granted that economic imperatives drive the creation of SWFs; governments create them as effective solutions to the challenges generated by reserve accumulation and commodity-export specialization. In this article, I argue that the evidence fails to support this theory. Instead, the spread of SWFs best resembles the diffusion of a fashion or fad. SWFs became fashionable as an appropriate approach for reserve- and resource-rich countries seeking to manage policy uncertainty related to these economic characteristics. As other countries developed the same characteristics, they followed the lead of their peers and also created SWFs. I provide, with the use of a new data set, the first cross-national political-economy statistical analysis of SWF creation. The results suggest peer group emulation has, indeed, been crucial in shaping the decision of many countries to create SWFs — especially in fuel-exporting countries.
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Entrepreneurship Policy and Globalization
Pehr-Johan Norbäck, Lars Persson & Robin Douhan
Journal of Development Economics, September 2014, Pages 22–38
Abstract:
What explains the world-wide trend of pro-entrepreneurial policies? We study entrepreneurial policy in the form of entry costs in a lobbying model taking into account the conflict of interest between entrepreneurs and incumbents. It is shown that international market integration leads to more pro-entrepreneurial policies, since it is then (i) more difficult to protect domestic incumbents and (ii) pro-entrepreneurial policies make foreign entrepreneurs less aggressive. Using the World Bank Doing Business database, we find evidence that international openness is negatively correlated with the barriers to entry for new entrepreneurs, as predicted by the theory.
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The Price Impact of Joining a Currency Union: Evidence from Latvia
Alberto Cavallo, Brent Neiman & Roberto Rigobon
NBER Working Paper, June 2014
Abstract:
Does membership in a currency union matter for prices and for a country's real exchange rate? The answer to this question is critical for thinking about the implications of joining (or exiting) a common currency area. This paper is the first to use high-frequency good-level data to demonstrate that the answer is yes, at least for an important subset of consumption goods. We consider the case of Latvia, which recently dropped its pegged exchange rate and joined the euro zone. We analyze the prices of thousands of differentiated goods sold by Zara, the world's largest clothing retailer. Price dispersion between Latvia and euro zone countries collapsed swiftly following entry to the euro. The percentage of goods with nearly identical prices in Latvia and Germany increased from 6 percent to 89 percent. The median size of price differentials declined from 7 percent to zero.
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Is Globalization Reducing Absolute Poverty?
Andreas Bergh & Therese Nilsson
World Development, October 2014, Pages 42–61
Abstract:
Using data from 114 countries (1983–2007), we examine the relationship between globalization and World Bank absolute poverty estimates. We find a significant negative correlation between globalization and poverty, robust to several econometric specifications, including a fixed-effect panel — a “long run” first difference — and a pooled OLS-regression. Introducing two instruments for globalization we also show that results are robust to correction for potential endogeneity. We motivate and test the instruments in several ways. In particular information flows and more liberal trade restrictions robustly correlate with lower absolute poverty.
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Calculation of embodied energy in Sino-USA trade: 1997–2011
Ranran Yang et al.
Energy Policy, September 2014, Pages 110–119
Abstract:
In order to find efficient trade measures to reduce China׳s energy consumption and to provide theoretical support for the climate talks between China and America, we investigate the impact of Sino-USA trade on energy consumption from the perspective of embodied energy. An Environmental Input–Output Life Cycle Assessment (EIO-LCA) model was established to calculate the total energy consumption coefficient, the direct consumption coefficient and the complete consumption coefficient of the sectors of the national economies of China and America. After taking into consideration the data of every sector of the national economy in Sino-USA trade, energy embodied in the import and export trade between China and America was calculated to verify the real energy flows in Sino-USA trade. The research results suggest the following: China is the net exporter of embodied energy in Sino-USA trade, and coal, crude oil and natural gas are the major components. In 1997–2011, the net exports of China׳s embodied energy totaled 1523,082,200 t of standard coal, the amount of China׳s energy consumption increased by 895,527,900 t of standard coal, and America׳s energy consumption decreased by 11,871,200 t of standard coal as a result of Sino-USA trade. On this basis, corresponding policies and recommendations are proposed.