Somebody else's products
Presidential Particularism and US Trade Politics
Kenneth Lowande, Jeffery Jenkins & Andrew Clarke
Political Science Research and Methods, forthcoming
Abstract:
Research on presidential distributive politics focuses almost exclusively on federal domestic spending. Yet, presidential influence on public policy extends well-beyond grant allocation. Since the early 20th Century, for example, the president has had substantial discretion to adjust tariff schedules and non-tariff barriers "with the stroke of a pen." These trade adjustments via presidential directive allow us to test the logic of presidential particularism in an area of policy understudied among presidency scholars. We examine unilateral adjustments to US trade policies between 1917 and 2006, with a detailed analysis of those made between 1986 and 2006, and find that presidents - in accordance with electoral incentives - strategically allocate trade protections to industries in politically valuable states. In general, states in which the president lacks a comfortable electoral majority are systematically more likely to receive protectionist unilateral orders. Overall, our results show that the president's distributive imperative extends into the realm of foreign affairs, an arena in which the president has substantial authority to influence public policy.
NAFTA and the Gender Wage Gap
Shushanik Hakobyan & John McLaren
University of Virginia Working Paper, April 2017
Abstract:
Using U.S. Census data for 1990-2000, we estimate effects of NAFTA on U.S. wages, focusing on differences by gender. We find that NAFTA tariff reductions are associated with substantially reduced wage growth for married blue-collar women, much larger than the effect for other demographic groups. We investigate several possible explanations for this finding. It is not explained by differential sensitivity of female-dominated occupations to trade shocks, or by household bargaining that makes married female workers less able to change their industry of employment than other workers. We find some support for an explanation based on an equilibrium theory of selective non-participation in the labor market, whereby some of the higher-wage married female workers in their industry drop out of the labor market in response to their industry's loss of tariff. However, this does not fully explain the findings, so we are left with a puzzle.
Globalization and the Decline in Labor Shares: Exploring the Relationship beyond Trade and Financial Flows
Andrew Young & Maria Tackett
European Journal of Political Economy, forthcoming
Abstract:
We employ data from up to 125 countries during the 1970-2009 period to explore the relationship between globalization and labor share. Existing studies report a negative relationship between trade and investment flows and labor shares. While we also find that economic flows are often negatively related to labor shares, measures of social globalization tend to be positively related to labor shares. While greater mobility of goods and capital may be associated with increases in capital's bargaining power, all else equal, greater flows of information, ideas, and people may increase the bargaining power of workers.
Globalization and Human Capital Investment: Export Composition Drives Educational Attainment
Emily Blanchard & William Olney
Journal of International Economics, May 2017, Pages 165-183
Abstract:
Human capital is among the most important drivers of long-run economic growth, but its macroeconomic determinants are still not well understood. This paper demonstrates the importance of a key demand-side driver of education, using exogenously-driven changes in the composition of a country's exports as a lens to study how shifting patterns of production influence subsequent educational attainment. Using a panel of 102 countries and 45 years, we find that growth in less skill-intensive exports depresses average educational attainment while growth in skill-intensive exports increases schooling. These results provide insight into which types of sectoral growth are most beneficial for long-run human capital formation and suggest that trade liberalization could exacerbate initial differences in factor endowments across countries.
Political Cleavages within Industry: Firm-level Lobbying for Trade Liberalization
In Song Kim
American Political Science Review, February 2017, Pages 1-20
Abstract:
Existing political economy models explain the politics of trade policy using inter-industry differences. However, this article finds that much of the variation in U.S. applied tariff rates in fact arises within industry. I offer a theory of trade liberalization that explains how product differentiation in economic markets leads to firm-level lobbying in political markets. High levels of product differentiation eliminates the collective action problem faced by exporting firms while import-competing firms need not fear product substitution. To test this argument, I construct a new dataset on lobbying by all publicly traded manufacturing firms from reports filed under the Lobbying Disclosure Act of 1995. I find that productive exporting firms are more likely to lobby to reduce tariffs, especially when their products are sufficiently differentiated. I also find that highly differentiated products have lower tariff rates. The results challenge the common focus on industry-level lobbying for protection.
Do Economic Problems at Home Undermine Worker Safety Abroad?: A Panel Study, 1980-2009
Sijeong Lim & Aseem Prakash
World Development, August 2017, Pages 562-577
Abstract:
Do economic downturns in the Global North undermine worker safety in the Global South? Literature suggests that bilateral trade linkages lead to the diffusion of "good" labor standards from importing countries of the Global North to exporting countries of the Global South. The crucial mechanism is the ability and willingness of importing firms to deploy their market leverage and ask for improved labor standards from their overseas suppliers. Yet, cost-cutting pressures emanating from economic downturns might lead the same importing firms to give lower priority to worker safety in their overseas supply chains. When importing firms demand price reductions, overseas suppliers might respond by reducing wages, ignoring safety regulations, and working their labor force for longer hours. The observable implication is that worker safety in the Global South may deteriorate during economic downturns in their export markets located in the Global North. We evaluate our hypothesis using a panel of 83 developing countries for the period during 1980-2009, and find that economic downturns in developed country markets are associated with significant increases in non-fatal occupational injury rates in developing countries. The injury-increasing effect is more pronounced in developing countries with weak workers' rights protection.
The Distributional Consequences of Large Devaluations
Javier Cravino & Andrei Levchenko
NBER Working Paper, May 2017
Abstract:
We study the impact of large exchange rate devaluations on the cost of living at different points on the income distribution. Poor households spend relatively more on tradeable product categories, and consume lower-priced varieties within categories. Changes in the relative price of tradeables and of lower-priced varieties affect the cost of living of low-income relative to high-income households. We quantify these effects following the 1994 Mexican devaluation and show that they can have large distributional consequences. Two years post-devaluation, the cost of living for the bottom income decile rose 1.48 to 1.62 times more than for the top income decile.
The Unintended Consequences of Bilateralism: Treaty Shopping and International Tax Policy
Vincent Arel-Bundock
International Organization, April 2017, Pages 349-371
Abstract:
The international tax system is a complex regime composed of thousands of bilateral tax treaties. These agreements coordinate policies between countries to avoid double taxation and encourage international investment. I argue that by solving this coordination problem on a bilateral basis, states have inadvertently created opportunities for treaty shopping by multinationals. These opportunities, in turn, reduce the potency of fiscal policy, put pressure on governments to change their domestic tax laws, and ultimately constrain state autonomy. This constraint is theoretically distinct from the usual race-to-the-bottom story and it generates different testable implications. I use a motivating case study to show how multinationals leverage the structure of the treaty network to reduce their tax burden. Then, I develop a new measure of treaty-shopping opportunities for firms in 164 countries. Where the proliferation of tax treaties allows multinationals to engage in treaty shopping, states' fiscal autonomy is limited, and governments tend to maintain lower tax rates.
Skill Acquisition and the Dynamics of Trade-Induced Inequality
Eliav Danziger
Journal of International Economics, July 2017, Pages 60-74
Abstract:
I develop and calibrate a dynamic general-equilibrium trade model with endogenous skill demand and supply. Simulations show that removing US trade barriers would lead to aggregate gains in the United States of 4.5%. Individual workers' gains, however, depend on their education, age and birth cohort. The biggest winners, the oldest educated workers alive during trade liberalization, gain 6.7%, while their uneducated peers gain the least, only 1.2%. A major finding is that ignoring either the endogeneity of the skill supply or the post-liberalization dynamics, as the existing literature does, leads to a substantial bias in the quantitative assessment of trade liberalization.
The Impact of Exporting and Foreign Direct Investment on Product Innovation: Evidence from Chinese Manufacturers
Michael Olabisi
Contemporary Economic Policy, forthcoming
Abstract:
To understand the drivers of product innovation at the firm level, I compare the effects of foreign direct investment (FDI) and exporting on product innovation using a rich firm-level database of manufacturing and industrial enterprises. The article focuses on product innovation, as it is vital to economic development. Estimates from linear regressions and propensity score matching tests show that learning-by-exporting is a stronger predictor of product innovation. Firms that receive foreign investment also tend to engage in more product innovation, but not at the same level as the firms that export. Additional tests confirm that as they start and stop exporting, firms change their patterns of investment in the drivers of product innovation - fixed capital and research.
The effect of foreign lending on domestic loans: An analysis of US global banks
Edith Liu & Jonathan Pogach
Economics Letters, July 2017, Pages 151-154
Abstract:
This paper examines the effect of foreign lending on the domestic lending for US global banks. We show that greater foreign loan growth complements, rather than detracts from, domestic commercial lending. Exploiting a confidential data (FFIEC 009) on international loan exposure of US banks, we estimate that a 1% increase in foreign office lending is associated with a 0.6% growth in domestic commercial lending, suggesting complementarity across these lending channels. However, when capital raising is tight during the Global Financial Crisis of 2008, we find that foreign lending did come at the expense of domestic lending.