Losing Trades
Globalization and Promissory Representation
Christina Schneider & Robert Thomson
American Journal of Political Science, forthcoming
Abstract:
Despite the centrality of promise keeping to representation, we know little about how it is affected by economic globalization, which is one of the modern world's defining characteristics. We argue that globalization reduces governing parties' ability to keep their campaign promises. We test the empirical implications of our theory with a mixed-methods approach that combines a large-n quantitative comparative analysis of pledge fulfillment with a typical case study to trace the underlying causal mechanisms of the theory. The findings indicate that international economic integration exerts a large negative effect on the likelihood of pledge fulfillment in a broad range of contexts and that the hypothesized mechanisms are clearly observable in the detailed case study. These findings have important implications for democratic representation in a globalized world.
Political Trust and American Public Support for Free Trade
David Macdonald
Political Behavior, forthcoming
Abstract:
Debates over trade liberalization vs. protectionism have becoming increasingly relevant as the world moves through a contentious era of economic globalization. This is particularly true in the United States, where an elite consensus on the merits of free trade has fractured in recent years. While we know a good deal about the economic and cultural determinants of trade opinion, we know little about how attitudes toward government may matter. Here, I address this oversight by examining the relationship between political trust and trade support. I do this with cross-sectional and panel data from the American National Election Studies (ANES) and the National Annenberg Election Surveys (NAES), and a survey experiment fielded through Amazon's Mechanical Turk (MTurk). Overall, I find that there is a positive and substantively significant relationship between political trust and mass support for free and open "pro-trade" policies. I attribute this to greater citizen confidence that government will pursue trade deals in the national interest and mitigate any perceived risks associated with free trade. These findings help us to better understand the determinants of public opinion toward trade policy and underscore the consequences of political trust.
China as an International Lender of Last Resort
Sebastian Horn et al.
NBER Working Paper, April 2023
Abstract:
This paper shows that China has launched a new global system for cross-border rescue lending to countries in debt distress. We build the first comprehensive dataset on China's overseas bailouts between 2000 and 2021 and provide new insights into China's growing role in the global financial system. A key finding is that the global swap line network put in place by the People's Bank of China is increasingly used as a financial rescue mechanism, with more than USD 170 billion in liquidity support extended to crisis countries, including repeated rollovers of swaps coming due. The swaps bolster gross reserves and are mostly drawn by distressed countries with low liquidity ratios. In addition, we show that Chinese state-owned banks and enterprises have given out an additional USD 70 billion in rescue loans for balance of payments support. Taken together, China's overseas bailouts correspond to more than 20 percent of total IMF lending over the past decade and bailout amounts are growing fast. However, China's rescue loans differ from those of established international lenders of last resort in that they (i) are opaque, (ii) carry relatively high interest rates, and (iii) are almost exclusively targeted to debtors of China's Belt and Road Initiative. These findings have implications for the international financial and monetary architecture, which is becoming more multipolar, less institutionalized, and less transparent.
The Value of U.S. College Education in Global Labor Markets: Experimental Evidence from China
Mingyu Chen
Management Science, forthcoming
Abstract:
One million international students study in the United States each year, and the majority of them compete in global labor markets after graduation. I conducted a large-scale field experiment and a companion employer survey to study how employers in China value U.S. college education. I sent more than 27,000 fictitious online applications to business and computer science jobs in China, randomizing the country of college education. I find that U.S.-educated applicants are on average 18% less likely to receive a callback than applicants educated in China, with applicants from very selective U.S. institutions underperforming those from the least selective Chinese institutions. The United States-China callback gap is smaller at high-wage jobs, consistent with employers fearing U.S.-educated applicants have better outside options and would be harder to hire and retain. The gap is also smaller at foreign-owned firms, consistent with Chinese-owned firms knowing less about American education. Controlling for high school quality, test scores, or U.S. work experiences does not attenuate the gap, suggesting that the gap is not driven by employer perceptions of negative selection. A survey of 507 hiring managers at college career fairs finds consistent and additional supporting evidence for the experimental findings.
Bound by Ancestors: Immigration, Credit Frictions, and Global Supply Chain Formation
Jaerim Choi, Jay Hyun & Ziho Park
NBER Working Paper, April 2023
Abstract:
This paper shows that the ancestry composition shaped by century-long immigration to the US can explain the current structure of global supply chain networks. Using an instrumental variable strategy, combined with a novel dataset that links firm-to-firm global supply chain information with a US establishment database and historical migration data, we find that the co-ethnic networks formed by immigration have a positive causal impact on global supply chain relationships between foreign countries and US counties. Such a positive impact not only exists in conventional supplier-customer relationships but also extends to strategic partnerships and trade in services. Examining the causal mechanisms, we find that the positive impact is stronger for counties in which more credit-constrained firms are located and that such a stronger effect becomes even more pronounced for foreign firms located in countries with weak contract enforcement. Collectively, the results suggest that co-ethnic networks serve as social collateral to overcome credit constraints and facilitate global supply chain formation.
Honor among thieves: How nineteenth century American pirate publishers simulated copyright protection
Ryan Safner
Economics of Governance, March 2023, Pages 119-141
Abstract:
From 1790 to 1891, the United States prevented foreign authors from obtaining domestic copyright protection, implicitly subsidizing a domestic reprinting industry. With foreign works a "free" and unprotected resource, American publishers created a system of voluntary norms, known as "trade courtesy" to create and enforce pseudo-property rights in uncopyrighted foreign works, simulating the effects of legal copyright protection. This paper analyzes this system using the Bloomington School's institutional design principles to understand its effectiveness and pitfalls in managing the commons of unprotected foreign works in nineteenth Century America.
Trade Shocks and Credit Reallocation
Stefano Federico, Fadi Hassan & Veronica Rappoport
NBER Working Paper, April 2023
Abstract:
This paper identifies a credit-supply contraction that arises endogenously after trade liberalization. Banks with loan portfolios concentrated in sectors exposed to competition from China face an increase in non-performing loans after China's entry into the World Trade Organization. As a result, they reduce the supply of credit to firms, irrespective of the firm's sector of operation. This cut in credit translates into lower employment, investment, and output. Through this mechanism, the financial channel amplifies the shock to firms already hit by import competition from China and passes it on to firms in sectors expected to expand upon trade liberalization.
High-Speed Internet, Financial Technology, and Banking
Angelo D'Andrea & Nicola Limodio
Management Science, forthcoming
Abstract:
Exploiting the staggered arrival of fiber-optic submarine cables, we show that high-speed internet promotes the role of banks and credit in Africa. Variation within country and across multicountry bank networks indicates that high-speed internet induced a 22% expansion in credit supply. We investigate the role of plummeting telecommunication costs in promoting the bank adoption of new financial technologies and study a specific technology used in the interbank market, the real-time gross settlement system (RTGS). We find that upon connecting to high-speed internet, banks adopt the RTGS more extensively, reduce inside liquidity, and increase interbank transactions and lending. We also observe that high-speed internet particularly strengthens firms in countries with weak preexisting interbank markets.
FDI and Superstar Spillovers: Evidence from Firm-to-Firm Transactions
Mary Amiti et al.
NBER Working Paper, April 2023
Abstract:
Despite competition concerns over the increasing dominance of global corporations, many argue that productivity spillovers from multinationals to domestic firms justify pro- FDI policies. For the first time, we use firm-to-firm transaction data in a developed country to examine the impact of forming a new relationship with a multinational, and find a TFP increase of about 8% three or more years after the event. Sales to other buyers, trade and customer quality also increase. However, we also document that starting to supply other "superstar firms" such as those who heavily export or are very large also increases performance by similar amounts, even if the superstar is a non-multinational. Placebos on starting relationships with smaller firms and novel identification strategies relying solely on demand shocks to superstar firms support a causal interpretation. A model of technology transfer rationalizes these effects and also correctly predicts (i) falls in post-event markups; (ii) the type of firms who form superstar relationships and (iii) bigger treatment effects from superstars intensive in R&D, IT and/or human capital. In addition to productivity spillovers, we document the transmission of "relationship capabilities" and "dating agency" effects as the increase in new buyers is particularly strong within the superstar firm's existing network. These results suggest an important role for raising productivity through the supply chains of superstar firms regardless of their multinational status.
Property crime and the China trade shock
David Allen & Charles Sawyer
Applied Economics, forthcoming
Abstract:
Burglary has declined markedly in the U.S.A. We investigate whether increased imports from China (the China Trade Shock), by reducing the market value of theft-worthy goods, reduced the incentive to commit this and other property crimes. Panel data models reveal lower property crime rates in association with increased Chinese imports and comparable effects in relation to other prominent trade partners, indicating minimal property crime displacement effects. Some import effects do link to increased violent crime rates, but none in relation to imports from China. The results illustrate how expanded trade provides social benefits in addition to its well-established economic benefits.