Onshoring
"Restrict foreigners, not robots": Partisan responses to automation threat
Nicole Wu
Economics & Politics, forthcoming
Abstract:
Recent scholarship on technological change highlights its negative impacts on employment and wages. However, a decade of nationally representative surveys show that Americans hold favorable views toward technology despite concerns over labor displacement. How do people cope with employment threats from a trend they consider desirable? Using a survey experiment, this paper argues that people opt to buffer domestic workers from technological threats with substitute policies against outgroups that they believe could improve wages and employment prospects. Specifically, direct cues about technological displacement make Republicans more likely to demand tighter restrictions on immigration and Democrats more likely to support higher tariffs. In other words, citizens respond to automation anxiety by blaming and penalizing groups that they consider unwelcome or objectionable, depending on their partisanship. Respondents remained reluctant to express support for technological restrictions. Thus, automation anxiety may intensify resistance to globalization, but not necessarily technology.
The German Trade Shock and the Rise of the Neo-Welfare State in Early Twentieth-Century Britain
Kenneth Scheve & Theo Serlin
American Political Science Review, forthcoming
Abstract:
We study the international origins of the neo-welfare state in Britain during the era of globalization before World War I. We introduce a new mechanism linking trade to the expansion of the state. In addition to increasing assessments of the volatility of employment in a market economy, trade shocks changed beliefs about the deservingness of the poor. Employing a shift-share measure of local exposure to German imports, we show that rising imports caused worse labor market outcomes from 1880 to 1910. Import competition led to a decrease in support for the Conservative Party in national elections after 1900, when the Liberal Party supported welfare state reforms. We further show that rising imports increased the use in local newspapers of scientific terms like “unemployment” relative to pejorative terms like “vagrancy” to describe the poor. Political responses to globalization helped shape voter support for the modern British welfare state at its inception.
Rise and Fall of Empires in the Industrial Era: A Story of Shifting Comparative Advantages
Roberto Bonfatti & Kerem Coşar
NBER Working Paper, July 2022
Abstract:
The last two centuries witnessed the rise and fall of empires. We construct a model which rationalises this in terms of the changing trade gains from empires. In the model, empires are arrangements that reduce trade cost between an industrial metropole and the agricultural periphery. During early industrialisation, the value of such bilateral trade increases, and so does the value of empires. As industrialisation diffuses, and as manufactures become more differentiated, trade becomes more multilateral and intra-industry, reducing the value of empires. Our results are consistent with long-term changes in income distribution and trade patterns, and with previous historical arguments.
Do words hurt more than actions? The impact of trade tensions on financial markets
Massimo Ferrari Minesso, Frederik Kurcz & Maria Sole Pagliari
Journal of Applied Econometrics, forthcoming
Abstract:
We use machine learning techniques to quantify trade tensions between US and China. Our measure matches well-known events in the US-China trade dispute and is exogenous to the developments on global financial markets. Local projections show that rising trade tensions leave US markets largely unaffected, except for firms that are more exposed to China, while negatively impacting stock market indices and exchange rates in China and EMEs. We complement these findings with additional evidence suggesting that the US-China trade tensions have been interpreted as a negative demand shock for the Chinese economy rather than as a global risk shock.
Trade Policy and Global Sourcing: An Efficiency Rationale for Tariff Escalation
Pol Antràs et al.
NBER Working Paper, July 2022
Abstract:
Import tariffs tend to be higher for final goods than for inputs, a phenomenon commonly referred to as tariff escalation. Yet neoclassical trade theory – and modern Ricardian trade models, in particular – predict that welfare-maximizing tariffs are uniform across sectors. We show that tariff escalation can be rationalized on efficiency grounds in the presence of scale economies. When both downstream and upstream sectors produce under increasing returns to scale, a unilateral tariff in either sector boosts the size and productivity of that sector, raising welfare. While these forces are reinforced up the chain for final-good tariffs, input tariffs may drive final-good producers to relocate abroad, mitigating their potential productivity benefits. The welfare benefits of final-good tariffs thus tend to be larger, with the optimal degree of tariff escalation increasing in the extent of downstream returns to scale. A quantitative evaluation of the US-China trade war demonstrates that any welfare gains from the increase in US tariffs are overwhelmingly driven by final-good tariffs.
The stealth erosion of dollar dominance and the rise of nontraditional reserve currencies
Serkan Arslanalp, Barry Eichengreen & Chima Simpson-Bell
Journal of International Economics, forthcoming
Abstract:
We document a decline in the dollar share of international reserves since 1999. This decline reflects active portfolio diversification by central bank reserve managers, rather than changes in exchange rates and interest rates, reserve accumulation by a handful of central banks with distinctive balance sheets, or changes in coverage of surveys of reserve composition. Strikingly, the shares of the euro, yen and pound sterling have not concurrently increased. Instead, the shift out of dollars has been in two directions: a quarter into the Chinese renminbi, and three quarters into the currencies of smaller countries that have played a more limited role in reserves. The evolution of the international reserve system in the last 20 years is thus a gradual movement away from the dollar, a modest rise in the role of the renminbi, and changes in market liquidity, relative returns and reserve management enhancing the attractions of nontraditional reserve currencies.
Non-Tariff Barriers in the U.S.-China Trade War
Tuo Chen, Chang-Tai Hsieh & Zheng Michael Song
NBER Working Paper, August 2022
Abstract:
We use Chinese customs data to show that unofficial non-tariff barriers were responsible for 50% of the overall reduction in Chinese imports from the U.S. during the height of the U.S.-China trade war in 2018 and 2019. We infer non-tariff barriers from the change in imports of U.S. products relative to imports from other countries of the same HS-6 product, after controlling for the change in the relative price of U.S. imports to the same product sold by other countries. These barriers were imposed on a small number of agricultural products, did not apply to state-owned importers, and were larger for products where the share of state importers in total imports of the U.S. product was large. Non-tariff barriers were responsible for more than 90% of the welfare cost to Chinese consumers of the U.S.-China trade war. The welfare loss to China of a given reduction in imports from the U.S. from non-tariff barriers is about six times larger than an equivalent import decline due to higher tariffs. Non-tariff barriers are more costly compared to tariffs because they applied to some importers and not others, which results in misallocation, and because non-tariff barriers do not generate revenues.
The Effects of Economic Sanctions on Foreign Asset Expropriation
Hoon Lee, David Lektzian & Glen Biglaiser
Journal of Conflict Resolution, forthcoming
Abstract:
Studies suggest that home countries impose economic sanctions following host state expropriation of home firms. However, and not addressed in the empirical literature, is the possibility that sanctions lead targeted countries to nationalize firms from sender countries. Using bilateral expropriation data from 1985 to 2010, and controlling for endogeneity issues, we find that sanctions significantly increase expropriation risk, encouraging targeted states to inflict pain in a reciprocal manner on sender countries. Expropriations also enable targeted nations to acquire economic assets from foreign firms, undermining the restricting goals of sanctioning states, and provide opportunities for leaders to show political resolve at home by standing up to senders. Our results are robust using monadic or dyadic data and different statistical methods, indicating another sanction-busting strategy used by targeted countries.