Making them pay
Exposure to Chinese Imports and Media Slant: Evidence from 147 U.S. Local Newspapers over 1998–2012
Yi Lu, Xiang Shao & Zhigang Tao
Journal of International Economics, September 2018, Pages 316-330
Abstract:
Does the recent surge in Chinese imports affect the media slant against China in the United States? Using a data set of 147 U.S. local newspapers over 1998–2012, this paper shows that newspapers whose circulation counties face greater exposure to Chinese imports report more negative news about China, and are more likely to endorse Democrats. The results hold with two identification strategies and three measures of media slant. The paper further shows that, in U.S. House and Senate elections between 2000 and 2012, media slant is associated with increased voting shares for Democrats, who are traditionally champions for the poor and critical of globalization.
The Taxing Deed of Globalization
Peter Egger, Sergey Nigai & Nora Strecker
American Economic Review, forthcoming
Abstract:
This paper examines the effects of globalization on the distribution of worker-specific labor taxes using a unique set of tax calculators. We find a differential effect of higher trade and factor mobility on relative tax burdens in 1980-1993 versus 1994-2007 in the OECD. Prior to 1994, greater openness meant that higher income earners were taxed progressively more. However, after 1994, we document a globalization-induced rise in the labor income tax burden of the middle class, while the top 1% of workers and employees faced a reduction in their tax burden of 0.59-1.45 percentage points.
A Global View of Creative Destruction
Chang-Tai Hsieh, Peter Klenow & Ishan Nath
University of Chicago Working Paper, July 2018
Abstract:
In the wake of the U.S.-Canada Free Trade Agreement, both the U.S. and Canada experienced a sustained increase in job reallocation, including firms moving into exporting. The change was concentrated in industries with bigger tariff cuts, and involved big firms as much as small firms. To mimic these patterns, we formulate a model of innovation by both domestic and foreign firms. In the model, trade liberalization quickens the pace of creative destruction and thereby speeds the flow of technology across countries. The resulting dynamic gains from trade liberalization are an order of magnitude larger than the gains in a standard static model.
Re-examining the Effects of Trading with China on Local Labor Markets: A Supply Chain Perspective
Zhi Wang et al.
NBER Working Paper, August 2018
Abstract:
The United States imports intermediate inputs from China, helping downstream US firms to expand employment. Using a cross-regional reduced-form specification but differing from the existing literature, this paper (a) incorporates a supply chain perspective, (b) uses intermediate input imports rather than total imports in computing the downstream exposure, and (c) uses exporter-specific information to allocate imported inputs across US sectors. We find robust evidence that the total impact of trading with China is a positive boost to local employment and real wages. The most important factor is employment stimulation outside the manufacturing sector through the downstream channel. This overturns the received wisdom from the reduced-form literature and provides statistical support for a key mechanism hypothesized in general equilibrium spatial models.
Trade, poverty, and social protection in developing countries
Raj Desai & Nita Rudra
European Journal of Political Economy, forthcoming
Abstract:
How do shifts in trade affect social protections for the poor? Although the fraction of the world's population considered the “extreme” poor has fallen by over one-half over the past quarter century, many of those lifted above the global poverty line remain vulnerable to shocks that could place them back into poverty. These are the groups that require social protection to stabilize their incomes. Among the shocks to which the absolute poor have been exposed are those created by trade liberalization, particularly of the agricultural sector. The resulting risks, uncertainties, and threats to social stability from this type of trade require that the poor be provided with some forms of adjustment assistance. We examine the effects of trade components on several dimensions of social protection in developing countries, including spending, coverage, and adequacy over the past two decades. We find that, contrary to previous studies, disaggregating trade may be a key to determining which international market variables drive expansion of social protection. Disaggregating trade balances in agricultural vs. manufactured goods reveals that net food and agricultural exporters provide better social protection than countries that report agricultural trade deficits. Meanwhile, countries with manufacturing trade surpluses tend to experience reduced social protection coverage. We reason that governments of net agricultural exporters face incentives to invest in social programs that extend eligibility to the rural poor. Manufacturing export-driven economies, on the other hand, are likely participants in global production chains that limit the capacity of the public sector to extend social protection.
Multinational Profit Shifting and Measures throughout Economic Accounts
Jennifer Bruner, Dylan Rassier & Kim Ruhl
NBER Working Paper, August 2018
Abstract:
Profit shifting to low-tax countries imposes challenges for the treatment of multinational enterprises in economic accounts. Using adjustments for profit shifting calculated in Guvenen et al. (2017) under an alternative measurement methodology, this paper empirically demonstrates how the effects of profit shifting cascade throughout a fully articulated set of economic accounts for the United States in 2014. We find a 1.5 percent and 3.5 percent increase in measured U.S. gross domestic product and operating surplus, respectively, and a 33.5 percent decrease in measured income receivable from the rest of world. As a result of offsetting effects, measured U.S. gross national saving decreases by 0.8 percent, and national borrowing increases by 6.9 percent. There are also potentially significant implications for analytic uses of the measures, including decreases for the labor share of income and the return on U.S. direct investment abroad and increases for the trade in services balance and the return on domestic non-financial business.
Does Machine Translation Affect International Trade? Evidence from a Large Digital Platform
Erik Brynjolfsson, Xiang Hui & Meng Liu
MIT Working Paper, July 2018
Abstract:
Artificial intelligence (AI) is surpassing human performance in a growing number of domains. However, there is limited evidence of its economic effects. Using data from a digital platform, we study a key application of AI: machine translation. We find that the introduction of a machine translation system has significant increased international trade on this platform, increasing exports by 17.5%. Furthermore, heterogeneous treatment effects are all consistent with a substantial reduction in translation-related search costs. Our results provide causal evidence that language barriers significantly hinder trade and that AI has already begun to improve economic efficiency in at least one domain.
Tax Revenues and the Fiscal Cost of Trade Liberalization, 1792-2006
Julia Cagé & Lucie Gadenne
Explorations in Economic History, forthcoming
Abstract:
This article examines the impact of trade liberalization on government revenues. Using a new dataset on tax revenues for 130 countries between 1792 and 2006, we identify ninety-nine episodes of trade liberalization defined as a large fall in trade tax revenues not accompanied by a decrease in trade. Seven took place before World War One, seven in the interwar period, eighteen in the Bretton Woods period and the remainder after 1970. We examine the extent to which countries were able to recover the tax revenues lost by liberalizing trade by using other sources of revenue. We find that historical (pre-1970) trade liberalization episodes were unlikely to be accompanied by decreases in tax revenues, especially during the Bretton Woods era. In the recent period however, over 40% of the developing countries in our sample experience a fall in total tax revenues that lasts more than ten years after an episode of trade liberalization. Overall, trade liberalization led to larger and longer-lived declines in tax revenues in developing countries since 1970 than in today’s rich countries in the 19th and 20th centuries. Results are similar when we consider government expenditures, suggesting decreases in trade tax revenues negatively affect governments’ capacity to provide public services in many developing countries.
Weight gains from trade in foods: Evidence from Mexico
Osea Giuntella, Matthias Rieger & Lorenzo Rotunno
NBER Working Paper, August 2018
Abstract:
In this paper, we investigate the effects of trade in foods on obesity in Mexico. To do so, we match data on Mexican food imports from the U.S. with anthropometric and food expenditure data. Our findings suggest that exposure to food imports from the U.S. explains four percent of the rise in obesity prevalence among Mexican women between 1988 and 2012. Pro-obesity effects are more pronounced in areas receiving more unhealthy food imports. We also find that food imports may widen health disparities between education groups. By linking trade flows to obesity, the paper sheds light on an important channel through which globalisation may affect health.