Importing Problems
Bean Counters: The Effect of Soy Tariffs on Change in Republican Vote Share Between the 2016 and 2018 Elections
Olga Chyzh & Robert Urbatsch
Journal of Politics, forthcoming
Abstract:
How do trade wars affect voting for the President’s party? President Trump’s aggressive tariffs on China, despite his largely rural electoral support base, provide a unique opportunity to analyze the relationship between international trade policy and domestic support. If trade-related considerations were ever decisive to American voters, the stark decrease in soy prices, a direct effect of Trump-initiated tariffs immediately preceding the 2018 midterm election, serves as a critical test for studying their effect. This letter shows a robust inverse relationship between county-level soybean production and the change in Republican vote share between the 2016 and 2018 congressional elections.
Global Supply Chains in the Pandemic
Barthélémy Bonadio et al.
NBER Working Paper, May 2020
Abstract:
We study the role of global supply chains in the impact of the Covid-19 pandemic on GDP growth for 64 countries. We discipline the labor supply shock across sectors and countries using the fraction of work in the sector that can be done from home, interacted with the stringency with which countries imposed lockdown measures. Using the quantitative framework and methods developed in Huo, Levchenko and Pandalai-Nayar (2020), we show that the average real GDP downturn due to the Covid-19 shock is expected to be -31.5%, of which -10.7% (or one-third of the total) is due to transmission through global supply chains. However, “renationalization” of global supply chains does not in general make countries more resilient to pandemic-induced contractions in labor supply. The average GDP drop would have been -32.3% in a world without trade in inputs and final goods. This is because eliminating reliance on foreign inputs increases reliance on the domestic inputs, which are also subject to lockdowns. Whether renationalizing supply chains insulates a country from the pandemic depends on whether it plans to impose a more or less stringent lockdown than its trading partners. Finally, unilateral lifting of the lockdowns in the largest economies can contribute as much as 6-8% to GDP growth in some of their smaller trade partners.
The Impact of Retaliatory Tariffs on Agricultural and Food Trade
Colin Carter & Sandro Steinbach
NBER Working Paper, May 2020
Abstract:
This paper analyzes the short-run trade effects of retaliatory tariffs against agriculture and food exports from the United States. The results indicate that these tariffs caused a substantial decline in U.S. agriculture and food exports and induced a reorientation of international trade patterns. We find that losses in foreign trade with retaliatory countries outweigh the gains from trade with non-retaliatory countries by more than USD 14.4 billion. Our results also indicate that non-retaliatory countries accommodated the increased demand from retaliatory countries by reorienting their trade relationships. We find that countries in South America and Europe benefited the most from these adjustments gaining more than USD 13.5 billion in additional foreign sales. The effects of retaliatory tariff increases across products vary substantially, with soybeans and meat products experiencing the most considerable redistribution effects.
Pleasing the Principal: U.S. Influence in World Bank Policymaking
Richard Clark & Lindsay Dolan
American Journal of Political Science, forthcoming
Abstract:
How do policies in international organizations reflect the preferences of powerful institutional stakeholders? Using an underutilized data set on the conditions associated with World Bank loans, we find that borrower countries that vote with the United States at the United Nations are required to enact fewer domestic policy reforms, and on fewer and softer issue areas. Though U.S. preferences permeate World Bank decision making, we do not find evidence that borrower countries trade favors in exchange for active U.S. intervention on their behalf. Instead, we propose that U.S. influence operates indirectly when World Bank staff — consciously or unconsciously — design programs that are compatible with U.S. preferences. Our study provides novel evidence of World Bank conditionality and shows that politicized policies can result even from autonomous bureaucracies.
Depression of the deprived or eroding enthusiasm of the elites: What has shifted the support for international trade?
Philipp Harms & Jakob Schwab
European Journal of Political Economy, forthcoming
Abstract:
We use the 2003 and 2013 waves of the International Survey Program (ISSP) in order to explore the change in people's attitudes that may be behind the recent backlash against globalization. We show that the average support for international trade has decreased in many – albeit not all – countries, and we demonstrate that these changes are related to the depth and length of the global financial crisis of 2008/09 as well as the evolution of income inequality. Moreover, our results document a declining support of those individuals who are likely to benefit from international trade: the young, high-skilled and well-off. We show that this “eroding enthusiasm of the elites” is empirically relevant even if we control for individuals' increasing exposure to international labor-market competition.
Choosing a Lesser Evil: Partisanship, Labor, and Corporate Taxation under Globalization
Zhiyuan Wang
Political Research Quarterly, forthcoming
Abstract:
Leftist governments tend to tax corporations heavily. However, they are unable to do so all the time. In this study, I posit that whether leftist governments can enact this preferred tax policy is conditional on the policy environment. When leftist governments are pressured by their economic competitors to reduce labor rights protection, instead of giving in, they choose to cut corporate tax rates, because the former is more politically harmful than the latter, and the latter is equally effective in achieving the policy goal the former is intended to accomplish. Using novel global data on labor rights from 1994 to 2012 and the structural equivalence technique to capture the policy pressure to restrict labor rights, I find robust evidence for the argument. This finding suggests that facing globalized economic competition, leftist governments make strategic compromise by adopting market-oriented policies in issue areas that deviate from their desirable ideological positions but are less costly than simply yielding to the pressure to alter policies in those issue areas that directly hurt their core constituencies.
Income Distribution, International Integration, and Sustained Poverty Reduction
Pinelopi Goldberg & Tristan Reed
NBER Working Paper, May 2020
Abstract:
What is the pathway to development in a world with less international integration? We answer this question within a model that emphasizes the role of demand-side constraints on national development, which we identify with sustained poverty reduction. In this framework, development is linked to the adoption of an increasing returns to scale technology by imperfectly competitive firms, who need to pay the fixed setup cost of switching to that technology. Sustained poverty reduction is measured as a continuous decline in the share of the population living below $1.90/day PPP in 2011 US dollars over a five year period. This outcome is affected in a statistically significant and economically meaningful way by both domestic market size, which is measured as function of the income distribution, and international market size, which is measured as a function of legally-binding provisions to international trade agreements, including the General Agreement on Tariffs and Trade, the World Trade Organization and 279 preferential trade agreements. Counterfactual estimates suggest that, in the absence of international integration, the average resident of a low and lower-middle income country does not live in a market large enough to experience sustained poverty reduction.
The hidden cost of trade liberalization: Input tariff shocks and worker health in China
Haichao Fan, Faqin Lin & Shu Lin
Journal of International Economics, forthcoming
Abstract:
This study examines the health effect of input tariff reductions on Chinese manufacturing workers and its heterogeneity across skill levels. We first provide a simple model to demonstrate the mechanisms. We then put the predictions of the model into a test using the China Health and Nutrition Survey data. Exploiting prefecture variations in input tariff shocks, we find that input tariff reductions following China's WTO accession adversely affect worker health through increased working hours. Moreover, input tariff reductions widen both the income and the health gaps between skilled and unskilled workers. Further welfare analysis indicates that ignoring health outcomes would substantially underestimate the welfare disparity between skilled and unskilled workers.
Is international tax competition only about taxes? A market-based perspective
Céline Azémar, Rodolphe Desbordes & Ian Wooton
Journal of Comparative Economics, forthcoming
Abstract:
This paper revisits tax competition among governments for foreign direct investment (FDI) by considering the role played by the economic dynamism of competitors on the setting of corporate tax rates (CTRs). Using a database with worldwide coverage over the period 1995–2014, we find that strong growth performance of neighbouring countries is associated with a lower CTR, especially in developed countries. This spatial effect is particularly manifest if competing countries are large and open to capital flows. These results appear to hold in most regions of the world and suggest that governments perceive foreign economic dynamism as a threat, leading them to reduce their CTRs to maintain their FDI attractiveness.
Regulatory Cooperation and Foreign Portfolio Investment
Mark Lang et al.
Journal of Financial Economics, forthcoming
Abstract:
We investigate the effect of cross-border regulatory cooperation in the enforcement of securities laws on global-mutual-fund portfolio allocations. Our research design exploits a shock to the Securities and Exchange Commission’s oversight of foreign firms cross-listed on a US stock exchange around the signing of the Multilateral Memorandum of Understanding (MMoU), a non-binding, information-sharing arrangement between global securities regulators. In signatory countries, foreign investment in US-cross-listed firms increases by $110 billion relative to non-cross-listed firms. The strongest effects are for investors facing greater information asymmetries, those from countries closely linked to the US, and non-US foreign investors, suggesting significant spillover effects from international regulatory cooperation.
Lexicographic biases in international trade
Hua Cheng, Cui Hu & Ben Li
Journal of International Economics, forthcoming
Abstract:
The names of traders should not matter if information is symmetric across traders. By examining export data from Chinese customs, we find persistent lexicographic biases in firm-level export records. Firms whose names are lexicographically earlier in the Chinese-character rank export more to countries that have greater language proximities to Chinese, while firms whose names are lexicographically earlier in the English-romanization rank export more to countries that have greater language proximities to English. The lexicographic biases signify linguistic visibility as a source of comparative advantage in international trade.
Trade and Welfare (Across Local Labor Markets)
Ryan Kim & Jonathan Vogel
NBER Working Paper, May 2020
Abstract:
What are the welfare implications of trade shocks? We provide a sufficient statistic that measures changes in welfare, to a first-order approximation, taking into account adjustment in labor supply, in frictional unemployment, and in the sectors to which workers apply while allowing for arbitrary heterogeneity in worker productivity and nonpecuniary returns across sectors. We apply these insights to measure changes in welfare across commuting zones (CZs) in the U.S. between 2000-2007. We find that granting China permanent normal trade relations lowers the welfare of a CZ at the 90th percentile of exposure by 3.1 percentage points relative to a CZ at the 10th percentile; of this, approximately 65 percent is due to changes in unemployment and much of this is driven by the non-pecuniary costs of unemployment.
The Domestic Impact of International Standards
Rebecca Perlman
International Studies Quarterly, forthcoming
Abstract:
Regulation is no longer purely a domestic affair. International standards now exist across a broad range of regulatory arenas, touching on issues that may be central to domestic values, such as the regulation of health, safety, and the environment. Although a number of studies have looked at the domestic impact of globalization more generally, few scholars have evaluated the effects of international standards, specifically. This paper investigates that issue, with an empirical focus on agrochemicals. Using original data on changes to US agrochemical regulations between 1996 and 2015, I evaluate whether and how domestic rules have changed in response to international standards. Contrary to common fears, I find little evidence that international standards primarily act as a ceiling, thereby undermining domestic regulations. Instead, international standards seem to serve as focal points, pulling nations toward leniency as well as toward stringency. These findings not only contribute to the broader literature on the domestic effects of globalization, but they also allay concerns that international standards could act as a regulatory cap, encouraging nations to sacrifice caution for economic gain.