Cargo hold
Trade, Foreign Direct Investment and Immigration Policy Making in the US
Margaret Peters
International Organization, forthcoming
Abstract:
This paper argues that immigration policy formation in the US after 1950 can only be understood in the context of the increasing integration of world markets. Increasing trade openness has exposed firms that rely on immigrant labor to foreign competition and increased the likelihood that these firms fail. Increasing openness by other states to foreign direct investment allowed these same firms to move production overseas. Firms' choice to close their doors or to move overseas decreases their need for labor at home, leading them to spend their political capital on issues other than immigration. Their lack of support for open immigration, in turn, allows policymakers to restrict immigration. An examination of voting behavior on immigration in the US Senate shows that the integration of world capital and goods markets has had an important effect on the politics of immigration in the US and shows little support for existing theories of immigration policy formation. In addition to increasing our understanding of immigration policy, this paper, thus, sheds light on how trade openness and firms' choice of production location can affect their preference for other foreign economic policies as well as domestic policies such as labor, welfare and environmental policies.
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Racial Diversity and American Support for Trade Protection
Alexandra Guisinger
University of Notre Dame Working Paper, August 2013
Abstract:
Why does trade protection remain so popular among so many Americans? While support has decreased for most forms of government-supported income transfers and for government regulations in general, trade protection retains wide-spread support across the political spectrum. I argue that for many, trade protection serves as an alternative to transfer programs like Welfare which have become racialized in public discourse. Individuals tend to support some level of redistribution, but this preference appears to be highly conditional on community characteristics, with support falling as community diversity increases. Trade protection, as a non-income based redistribution mechanism, turns the relationship on its head. Trade protection is supported because it aids “the deserving workers” rather than the “undeserving” poor, who are commonly perceived as primarily drawn from minority groups. As a result, support for redistribution via trade protection increases with community diversity, in contrast to support for race and income based redistribution policies. Using individual survey responses from three decades of the American National Election Study (ANES), I analyze support for three types of transfer programs “Welfare”, “Social Security”, and “limits on imports” and find evidence that validates the contention that racial diversity contributes to the continued support of trade protection. Support for trade protection is highest in communities with higher levels of racial diversity; while support for Welfare is lowest in these communities. This finding on trade protection offers an important caveat to the more general literature linking increased diversity with lower support for public goods, adds an additional component to models of individual trade policy preference formation, and help explains the cross-partisan nature of support for trade protection.
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Task Routineness and Trade Policy Preferences
Bruce Blonigen & Jacob McGrew
NBER Working Paper, September 2013
Abstract:
Understanding the formation of individual trade policy preferences is a fundamental input into the modeling of trade policy outcomes. Surprisingly, past studies have found mixed evidence that various labor market and industry attributes of workers affect their trade policy preferences, even though recent studies have found that trade policy can have substantial impacts on workers’ incomes. This paper provides the first analysis of the extent to which task routineness affects trade policy preferences using survey data from the American National Election Studies (ANES). We find substantial evidence that greater task routineness leads workers to be much more supportive of import restrictions, consistent with recent evidence on how trade openness puts downward pressure on employment and wages for workers whose occupations involve routine tasks. In fact, other than education levels, task routineness is the only labor market attribute that displays a robust correlation with individuals’ stated trade policy preferences. We also provide evidence that there are some significant interactions between the economic and non-economic factors in our study. For example, women’s trade policy views are much more invariant to their labor market attributes than men.
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Import Competition and Skill Content in U.S. Manufacturing Industries
Yi Lu & Travis Ng
Review of Economics and Statistics, October 2013, Pages 1404-1417
Abstract:
Skill content varies enormously across industries and over time. This paper shows that import competition can explain a significant portion of the variation in various skill measures across manufacturing industries. Industries that face more intense import competition employ more nonroutine skill sets, including cognitive, interpersonal, and manual skills, and fewer cognitive routine skills. In addition, we find that the impact of import competition on skills is not driven by imports from low-wage countries or from China. A number of robustness checks also suggest that our results are unlikely to be driven by econometric problems.
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Ellen Gutterman
Foreign Policy Analysis, forthcoming
Abstract:
The US Foreign Corrupt Practices Act of 1977 (FCPA) is having an unprecedented moment. In 2010, corporations paid $1.8 billion in FCPA fines, penalties, and disgorgements — the most ever recorded in this controversial Act's history and half of all criminal-division penalties at the Justice Department. While this recent pattern of enforcement is itself interesting, a deeper puzzle lies in the origins and early trajectory of the FCPA. Throughout the late 1970s and most of the 1980s, major US business groups opposed its unilateral ban on transnational bribery and lobbied the government to repeal this costly constraint on American businesses operating overseas. Yet, despite a decade of pressure from otherwise powerful groups, the government failed to respond to business demands amidst strategic trade concerns about the FCPA. Why? The paper applies a Constructivist lens, together with concepts from the theory of legal reasoning, to analyze the early history of the FCPA and explain its continued significance in US foreign economic policy. Anti-corruption norm resonance and the pressure publicly to justify norm-transgressing practices made foreign corrupt practices by American businesses “easier done than said.”
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Using Field Experiments in International Relations: A Randomized Study of Anonymous Incorporation
Michael Findley, Daniel Nielson & J.C. Sharman
International Organization, October 2013, Pages 657-693
"After receiving clearance from our university’s institutional review board, we adopted email aliases, posed as international consultants, and requested confidential incorporation from 1,264 corporate service providers in 182 countries...First, there is a substantial level of non-compliance with the international standards mandating that providers obtain certified ID from beneficial owners when forming shell companies...Second, service providers are no more likely to comply with international rules when they are prompted about the existence and content of the rules...Third, service providers are most sensitive to the combination of information about international standards and mention of legal penalties for not following these standards...Although it depressed response rates (as might be expected), it also made providers less, not more, likely to either refuse service or demand certified documents (depending on the specification of the statistical analysis) compared to the placebo condition. This finding is at odds with the idea that sanctions enhance compliance."
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US versus Them: Mass Attitudes toward Offshore Outsourcing
Edward Mansfield & Diana Mutz
World Politics, October 2013, Pages 571-608
Abstract:
Economists have argued that outsourcing is another form of international trade. However, based on a representative national survey of Americans conducted in 2007 and 2009, the distribution of preferences on these two issues appears to be quite different. This article examines the origins of attitudes toward outsourcing, focusing on the extent to which it reflects (1) the economic vulnerabilities of individuals; (2) the information they receive about outsourcing, including their subjective understanding of what constitutes outsourcing; and (3) noneconomic attitudes toward foreign people and foreign countries. The findings emphasize the importance of variations in understandings of the term, as well as the highly symbolic nature of attitudes toward this issue. Individuals who believe the US should distance itself from international affairs more generally, who are nationalistic, or who feel that members of other ethnic and racial groups within the US are less praiseworthy than their own group tend to have particularly hostile reactions to outsourcing. The informational cues people receive are also important influences on their understanding of and attitudes toward outsourcing. Experimental results further emphasize the symbolic nature of attitudes toward outsourcing. Taken together, the results strongly suggest that attitudes are shaped less by the economic consequences of outsourcing than by a sense of “us” versus “them.”
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A race to the bottom? Employment protection and foreign direct investment
William Olney
Journal of International Economics, forthcoming
Abstract:
A common critique of globalization is that it leads to a race to the bottom. Specifically, it is assumed that multinationals invest in countries with lower regulatory standards and that countries competitively undercut each other’s standards in order to attract foreign capital. This paper tests this hypothesis and finds robust empirical support for both predictions. First, a reduction in employment protection rules leads to an increase in foreign direct investment (FDI). Furthermore, changes in employment protection legislation have a larger impact on the relatively mobile types of FDI. Second, there is evidence that countries are competitively undercutting each other’s labor market standards.
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International trade and wage inequality: A non-monotonic relationship
Dan Liu
Economics Letters, November 2013, Pages 244–246
Abstract:
In this paper, I empirically examine the non-monotonic relationship between openness and within-group wage inequality predicted by Helpman, Itskhoki and Redding (2010a) using a panel data for the US, 1983–2005. Within-group wage inequality is measured for each industry and matched with exports. It can be shown that after controlling for year fixed effects, industry fixed effects and labor compositions, within-group wage inequality first increases with the degree of openness and then decreases. The average turning point, measured by the ratio of exports to domestic sales, is around 0.3–0.35. The results are robust to various measures of within-group wage inequality.
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Policy Uncertainty, Trade and Welfare: Theory and Evidence for China and the U.S.
Kyle Handley & Nuno Limão
NBER Working Paper, August 2013
Abstract:
We assess the impact of U.S. trade policy uncertainty (TPU) toward China in a tractable general equilibrium framework with heterogeneous firms. We show that increased TPU reduces investment in export entry and technology upgrading, which in turn reduces trade flows and real income for consumers. We apply the model to analyze China's export boom around its WTO accession and argue that in the case of the U.S. the most important policy effect was a reduction in TPU: granting permanent normal trade relationship status and thus ending the annual threat to revert to Smoot-Hawley tariff levels. We construct a theory-consistent measure of TPU and estimate that it can explain between 22-30% of Chinese exports to the US after WTO accession. We also estimate a welfare gain of removing this TPU for U.S. consumers and find it is of similar magnitude to the U.S. gain from new imported varieties in 1990-2001.
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Oded Stark
European Economic Review, October 2013, Pages 1–9
Abstract:
This paper considers the integration of economies as a merger of populations. The premise is that the merger of groups of people alters their social landscape and their comparators. The paper identifies the effect of the merger on aggregate distress. A merger is shown to increase aggregate distress, measured as aggregate relative deprivation: the social distress of a merged population is greater than the sum of the social distress of the constituent populations when apart. Physiological evidence from neighboring disciplines points to an increase in societal stress upon merger.
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The effect of WTO on the extensive and the intensive margins of trade
Pushan Dutt, Ilian Mihov & Timothy Van Zandt
Journal of International Economics, forthcoming
Abstract:
We use 6-digit bilateral trade data to document the effect of WTO/GATT membership on the extensive and intensive product margins of trade. We construct gravity equations for the two product margins where the specifications of these gravity equations aremotivated by a Melitz-Chaney model. The empirical results show that standard gravity variables provide good explanatory power for bilateral trade on both margins. Importantly, we show that the impact of the WTO is concentrated almost exclusively on the extensive product margin of trade, i.e. trade in goods that were not previously traded. In our preferred specification, WTO membership increases the extensive margin of exports by 25%. At the same time, WTO membership has a negative impact on the intensive margin. Our results suggest that WTO membership works as reducing the fixed rather than the variable costs of trade.
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Who governs? Delegations and delegates in global trade lawmaking
Terence Halliday, Josh Pacewicz & Susan Block-Lieb
Regulation & Governance, September 2013, Pages 279–298
Abstract:
Who governs in the international organizations (IOs) that promulgate global norms on trade and commercial law? Using a new analytic approach, this paper focuses on previously invisible attributes of a global legislature – the state and non-state delegations and delegates that create universal norms for international trade and commercial law through the most prominent trade law legislature, the UN Commission on International Trade Law (UNCITRAL). Based on ten years of fieldwork, extensive interviews, and unique data on delegation and delegate attendance and participation in UNCITRAL's Working Group on Insolvency, we find that the inner core of global trade lawmakers at UNCITRAL represent a tiny and unrepresentative subset of state and non-state actors. This disjunction between UNCITRAL's public face, which accords with a global norm of democratic governance, and its private face, where dominant states and private interests prevail, raises fundamental questions about legitimacy and efficacy of representation in global lawmaking.
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Opening to the East: Shipping Between Europe and Asia, 1770–1830
Peter Solar
Journal of Economic History, September 2013, Pages 625-661
Abstract:
Shipping costs between Europe and Asia were reduced by two-thirds between the 1770s and the 1820s. Copper sheathing and other technical improvements which allowed ships to make more frequent voyages over longer lifetimes accounted for part of the cost reduction. British hegemony in the Indian Ocean, which ended an eighteenth-century arms race, accounted for the rest by allowing the substitution of smaller ships which cost less to build and required fewer men per ton. These changes were at least as important as the elimination of monopoly profits in narrowing intercontinental price differentials during the early nineteenth century.
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The Political Economy of Project Preparation: An Empirical Analysis of World Bank Projects
Christopher Kilby
Journal of Development Economics, November 2013, Pages 211–225
Abstract:
Using a novel application of stochastic frontier analysis to overcome data limitations, this paper finds substantially shorter project preparation periods for World Bank loans to countries that are geopolitically important (especially to the U.S.). Accelerated preparation is one explanation for how the World Bank might increase the number of loans to a recipient member country within a fixed time frame, for example in response to that country siding with powerful donor countries on important UN votes or while that country occupies an elected seat on the UN Security Council or the World Bank Executive Board. This channel of donor influence has important implications for institutional reform and provides a new angle to examine the cost of favoritism and the impact of project preparation.
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The Effects of Transactions Costs and Social Distance: Evidence from a Field Experiment
Jonathan Meer & Oren Rigbi
B.E. Journal of Economic Analysis & Policy, July 2013, Pages 271–296
Abstract:
We use data from a field experiment at Kiva, the online microfinance platform, to examine the role of transactions costs and social distance in decision-making. Requests for loans are either written in English or another language, and our treatment consists of posting requests in the latter category with or without translation. We find evidence that relatively small transactions costs have a large effect on the share of funding coming from speakers of languages other than that in which the request was written. Social distance plays a smaller role in funding decisions.
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Genetic distance, transportation costs, and trade
Paola Giuliano, Antonio Spilimbergo & Giovanni Tonon
Journal of Economic Geography, forthcoming
Abstract:
Genetic distance, geographic proximity, and economic variables are strongly correlated. Disentangling the effects of these factors is crucial for interpreting these correlations. We show that geographic factors that shaped genetic patterns in the past are also relevant for current transportation costs and could explain the correlation between trading flows and genetic distance. After controlling for geography, the impact of genetic distance on trade disappears. We make our point by constructing a database on geographical barriers, by introducing a novel dataset on transportation costs, and by proposing a new classification of goods according to the ease with which they can be transported.
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International aid and financial crises in donor countries
Hai-Anh Dang, Stephen Knack & Halsey Rogers
European Journal of Political Economy, December 2013, Pages 232–250
Abstract:
The recent global financial crisis placed new economic and fiscal pressures on donor countries that may have long-term effects on their ability and willingness to provide aid. Not only did donor-country incomes fall, but the cause of the drop – the banking and financial-sector crisis – may exacerbate the long-term effect on aid flows. This paper estimates how donor-country banking crises have affected aid flows in the past, using panel data from 24 donor countries between 1977 and 2010. We find that banking crises in donor countries are associated with a substantial additional fall in aid flows, beyond any income-related effects, at least in part because of the high fiscal costs of crisis and the debt hangover in the post-crisis periods. Aid flows from crisis-affected countries are estimated to fall by 28 percent or more (relative to the counterfactual) and to bottom out only about a decade after the banking crisis hits. In addition, our results confirm that donor-country incomes are robustly related to per-capita aid flows, with an elasticity of about 3. Findings are robust to estimation using either static or dynamic panel data methods to account for possible biases. Because many donor countries, which together provide two-thirds of aid, were hit hard by the global recession, this historical evidence indicates that aggregate aid could fall by a significant amount (again, relative to counterfactual) in the coming years. We also explore how crises affect different types of aid, such as social-sector and humanitarian aid, as well as whether strategic interaction among donors is likely to deepen or mitigate the fall in aid.