Here nor There
Robots and reshoring: Evidence from Mexican labor markets
Marius Faber
Journal of International Economics, forthcoming
Abstract:
Robots in advanced economies have the potential to reduce employment in offshoring countries by fueling reshoring. Using robots instead of humans for production may lower the relative cost of domestic production and, in turn, reduce demand for imports from offshoring countries. I analyze the impact of robots on employment in an offshoring country, using data from Mexican local labor markets between 1990 and 2015. Recent literature estimates the effect of robots on local employment by regressing the change in employment on exposure to domestic robots in local labor markets. I construct a similar measure of exposure to foreign robots, based on the initial geographic distribution of export-producing employment across industries, industry-level robot adoption in the US, and a US industry's initial reliance on Mexican imports. To purge results from endogeneity, I use robot adoption in the rest of the world and an index of offshoring as instruments for robot adoption in the US and the share of Mexican imports, respectively. Using these instruments, I show that US robots have a sizeable negative impact on employment in Mexico. This negative effect is stronger for men than for women, and strongest for low-educated machine operators in the manufacturing sector. Consistently with reshoring as a mechanism, I find that the employment effect is mirrored in similarly large reductions in Mexican exports and export-producing plants.
Trade Liberalization and Racial Animus
Alberto Ortega, Ema Di Fruscia & Bryn Louise
Contemporary Economic Policy, forthcoming
Abstract:
Since the year 2000, the number of recorded hate groups in the United States has increased by more than 50 %. Some argue that the strain caused by unemployment or other socioeconomic stressors can play a critical role in the prevalence of extremist groups and crimes. We examine whether a change in U.S. policy to normalize trade relations with China, which fueled a surge in import competition that led to higher levels of unemployment, affected the presence of hate crimes. Using a difference‐in‐differences model and an event‐study framework, we find that areas most exposed to import competition experienced an increase in the number of anti‐Black hate crimes. We also find a qualitatively similar effect on the number of active hate groups in response to import competition. This result holds pre‐ and post‐the Great Recession and is consistent across levels of aggregation. The results are consistent and robust to various controls and specifications.
A matter of taste: Estimating import price inflation across U.S. income groups
Colin Hottman & Ryan Monarch
Journal of International Economics, forthcoming
Abstract:
We estimate import price inflation for different income deciles of U.S. consumers over the years 1998 through 2014. After structurally estimating the parameters of a model capturing non-homotheticity across sectors, we use price data from the universe of foreign establishments exporting goods to the U.S. as well as consumer expenditure information to construct import price indexes. We find that lower income households experienced the most import price inflation, while higher income households experienced the least over our time period.
Fencing Off Silicon Valley: Cross-Border Venture Capital and Technology Spillovers
Ufuk Akcigit et al.
NBER Working Paper, September 2020
Abstract:
The treatment of foreign investors has been a contentious topic in U.S. entrepreneurship policy in recent years. This paper examines foreign corporate investments in Silicon Valley from a theoretical and empirical perspective. We model a setting where such funding may allow U.S. entrepreneurs to pursue technologies that they could not otherwise, but may also lead to spillovers to the overseas firm providing the financing and the nation where it is based. We show that despite the benefits from such inbound investments for U.S. firms, it may be optimal for the U.S. government to raise their costs to deter investments. Using as comprehensive as possible a sample of investments by non-U.S. corporate investors in U.S. start-ups between 1976 and 2015, we find evidence consistent with the presence of knowledge spill-overs to foreign investors.
The Effect of U.S. Tax Reform on the Tax Burdens of U.S. Domestic and Multinational Corporations
Scott Dyreng et al.
Duke University Working Paper, June 2020
Abstract:
We quantify the net effect of recent U.S. tax reform on the tax rates of public U.S. corporations and find they decreased by 7.5 to 11.4 percentage points on average following tax reform. Further, we separately examine the effect of tax reform on purely domestic firms and multinational firms because some key provisions only affect multinational firms. We find both sets of firms benefited from tax reform, although domestics benefited the most. We also find the entirety of multinational tax savings stemmed from tax savings on their domestic operations, not as a result of more favorable taxation of international income. We also find no changes in the federal tax burden on foreign income for firms most likely to be subject to the new anti-abuse provisions. Overall, our findings suggest that despite the recent overhaul in international taxation, the federal tax burden on the foreign earnings of U.S. corporations appears to have been largely unaffected.
Phase out tariffs, phase in trade?
Tibor Besedes, Tristan Kohl & James Lake
Journal of International Economics, forthcoming
Abstract:
An important stylized fact in the empirical Free Trade Agreement (FTA) literature is that member trade flows gradually increase over time following an FTA. Baier and Bergstrand (2007) suggest two explanations: tariff phase-out and delayed pass-through of tariffs into import prices. We examine these hypotheses using 1989–2016 U.S. import growth and product-level data on the tariff phase-out negotiated under NAFTA and the earlier Canada-U.S. FTA. We do not find evidence supporting either hypothesis. While products receiving tariff cuts do show delayed import growth relative to products with unchanged tariffs, the delay in import growth does not correspond to delays in the timing of tariff cuts. We also show that tariff cuts are fully and immediately passed through to U.S. importers as there are virtually no changes in the prices received by exporters either in the short run or the long run. Rather, we find evidence for an important role played by NAFTA tariff cuts reducing the impact of frictions that, in turn, allow for a spatial expansion of imports across the U.S.
The Politics of Trade Adjustment Versus Trade Protection
Sung Eun Kim & Krzysztof Pelc
Comparative Political Studies, forthcoming
Abstract:
The United States’ Trade Adjustment Assistance (TAA) program seeks to help workers transition away from jobs lost to import competition. By contrast, trade remedies like antidumping seek to directly reduce the effect of competition at the border. Though they have very different economic effects, we show that trade adjustment and protectionism act as substitutes. Using the first geo-coded measure of US trade protectionist demands, we show that controlling for trade shocks, counties with a history of successful TAA petitions see fewer calls for trade protection. This effect holds when we confine our analysis to the steel industry, a heavy user of antidumping duties. And though they are both means of addressing import exposure, the two policy options have distinct political effects: in particular, successful TAA petitions carry a significant electoral benefit for Democratic candidates. Greater recognition of the substitutability of trade compensation and protectionism would improve governments’ response to import exposure.
Chinese Aid and Local Ethnic Identification
Ann-Sofie Isaksson
International Organization, forthcoming
Abstract:
Recent empirical evidence suggests that Chinese development finance may be particularly prone to elite capture and patronage spending. If aid ends up in the pockets of political elites and their ethno-regional networks, this may exacerbate ethnic grievances and contribute to ethnic mobilization. In this research note I examine whether Chinese development projects make local ethnic identities more salient in African partner countries. A new geo-referenced data set on the subnational allocation of Chinese development finance projects to Africa is geographically matched with survey data for 50,520 respondents from eleven African countries. The identification strategy compares sites where a Chinese project was under implementation at the time of the interview to sites where a Chinese project will appear subsequently. The empirical results suggest that living near an ongoing Chinese project makes ethnic identities more salient. There is no indication of an equivalent pattern when considering other donors’ development projects.
Cabotage sabotage? The curious case of the Jones Act
William Olney
Journal of International Economics, forthcoming
Abstract:
This paper examines the economic implications of the Jones Act, which restricts domestic waterborne shipments to American vessels. Since the passage of this cabotage law a century ago, a plausibly exogenous rise in foreign competition has contributed to the closure of most American shipyards and to a decline in American-built ships. Thus, the Jones Act requirements have become more onerous over time. The results show that domestic shipments are less likely to be transported via water than imports of the same good into the same state. Exploiting the decline in Jones-Act-eligible vessels over time, additional results show that this cabotage law has disproportionately decreased domestic water trade especially in coastal states. These findings support common, but to date unverified, claims that the Jones Act impedes domestic trade.
Popular Support for Trade Agreements and Partner Country Characteristics: Evidence from an Unexpected Election Outcome
Tom Coupé & Oleksandr Shepotylo
Economic Inquiry, forthcoming
Abstract:
Using quasi‐experimental data from a survey that was conducted immediately before and after the November 2016 presidential election, we analyze how the election of Donald Trump affected the willingness of Europeans to sign a trade and investment agreement with the United States. We find that the election outcome lead to an immediate and sizable negative effect on Europeans' image of the United States. But we do not find that, at the same time, there was a negative reaction in the willingness of Europeans to sign an agreement with the United States.
Trading like a State: Revisiting the Relationship Between Democracy and Trade
Bryan Schonfeld
Princeton Working Paper, June 2020
Abstract:
Under what conditions will democracies enact liberal trade policies? I argue that existing research neglects the role of "legibility", the extent to which governments can monitor their citizens. States that achieve high levels of legibility do not need to rely on tariffs for tax revenue, as they know enough about citizens' private economic activities to successfully deploy other tax instruments. However, states with low legibility face difficult trade-offs between reducing tariffs and maintaining sufficient tax revenue for other policy goals. Existing research finds that democracies prefer both freer trade and higher levels of redistribution than autocracies. I argue that low-legibility democracies will be less likely to liberalize trade because doing so compromises their ability to finance redistributive social policies. I find strong evidence in favor of my theory.