Trade mission
Importing Political Polarization? The Electoral Consequences of Rising Trade Exposure
David Autor et al.
MIT Working Paper, April 2016
Abstract:
Has rising trade integration between the U.S. and China contributed to the polarization of U.S. politics? Analyzing outcomes from the 2002 and 2010 congressional elections, we detect an ideological realignment that is centered in trade-exposed local labor markets and that commences prior to the divisive 2016 U.S. presidential election. Exploiting the exogenous component of rising trade with China and classifying legislator ideologies by their congressional voting record, we find strong evidence that congressional districts exposed to larger increases in import competition disproportionately removed moderate representatives from office in the 2000s. Trade-exposed districts initially in Republican hands become substantially more likely to elect a conservative Republican, while trade-exposed districts initially in Democratic hands become more likely to elect either a liberal Democrat or a conservative Republican. Polarization is also evident when breaking down districts by race: trade-exposed locations with a majority white population are disproportionately likely to replace moderate legislators with conservative Republicans, whereas locations with a majority non-white population tend to replace moderates with liberal Democrats. In contrast with much previous work in political science, we find limited impacts of economic shocks on the probability of party turnover (an anti-incumbency effect) or on the electoral vote shares of the major parties (a party realignment effect). Focusing on legislator behavior rather than on party vote counts, we find that trade exposure abets the replacement of incumbents from both parties with more ideologically strident successors.
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Does Trade Liberalization with China Influence U.S. Elections?
Yi Che et al.
NBER Working Paper, April 2016
Abstract:
This paper examines the impact of trade liberalization on U.S. Congressional elections. We find that U.S. counties subject to greater competition from China via a change in U.S. trade policy exhibit relative increases in turnout, the share of votes cast for Democrats and the probability that the county is represented by a Democrat. We find that these changes are consistent with Democrats in office during the period examined being more likely than Republicans to support legislation limiting import competition or favoring economic assistance.
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Good Jobs, Bad Jobs: What's Trade Got to Do with it?
James Lake & Daniel Millimet
Southern Methodist University Working Paper, March 2016
Abstract:
Using US local labor markets between 1990 and 2010, we analyze the heterogeneous impact of rising trade exposure on employment growth of 'good' and 'bad' jobs. Three salient findings emerge. First, rising local exposure to import competition, via falling US tariffs or rising Chinese import penetration, reduces (increases) employment growth of bad (good) jobs. Conversely, improved local access to export markets, via falling foreign tariffs, increases (reduces) employment growth of bad (good) jobs. Second, falling US tariff protection is substantially more important, economically and statistically, than rising Chinese import penetration. Third, globalization generates occupational polarization but not job polarization.
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Going for the Gold: The Economics of the Olympics
Robert Baade & Victor Matheson
Journal of Economic Perspectives, Spring 2016, Pages 201-218
Abstract:
In this paper, we explore the costs and benefits of hosting the Olympic Games. On the cost side, there are three major categories: general infrastructure such as transportation and housing to accommodate athletes and fans; specific sports infrastructure required for competition venues; and operational costs, including general administration as well as the opening and closing ceremony and security. Three major categories of benefits also exist: the short-run benefits of tourist spending during the Games; the long-run benefits or the "Olympic legacy" which might include improvements in infrastructure and increased trade, foreign investment, or tourism after the Games; and intangible benefits such as the "feel-good effect" or civic pride. Each of these costs and benefits will be addressed in turn, but the overwhelming conclusion is that in most cases the Olympics are a money-losing proposition for host cities; they result in positive net benefits only under very specific and unusual circumstances. Furthermore, the cost-benefit proposition is worse for cities in developing countries than for those in the industrialized world. In closing, we discuss why what looks like an increasingly poor investment decision on the part of cities still receives significant bidding interest and whether changes in the bidding process of the International Olympic Committee (IOC) will improve outcomes for potential hosts.
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On the Origins and Development of Pakistan's Soccer-Ball Cluster
David Atkin et al.
World Bank Economic Review, forthcoming
Abstract:
Sialkot, Pakistan, is the world center of hand-stitched soccer-ball manufacturing. The existence of the cluster is puzzling and seems to argue against the "home market effect", since there is little local demand for soccer balls. This paper traces the development of the cluster from its origins in the late 1800s and shows that it was rooted in an initial home market effect due to the presence of British colonists. Subsequent expansion was driven by agglomeration forces and effective industrial policy. The case study underlines the importance of longer-term historical dynamics and the role of industrial policy for understanding a country's contemporaneous pattern of specialization in the world economy.
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Corruption: Transcending Borders
Esteban Alemán Correa, Michael Jetter & Alejandra Montoya Agudelo
Kyklos, May 2016, Pages 183-207
Abstract:
Is corrupt behavior transmitted internationally? Using panel data for 123 countries from 1995 to 2012, our results suggest a positive and statistically meaningful relationship between neighboring countries' corruption levels and domestic graft. This result is robust to including two-way fixed effects, country-specific time trends, and the standard set of control variables. The effect becomes stronger as income increases, if capital cities are located closer to each other, and if countries share a common political union, such as the European Union. We find less evidence for common language or comparable institutional backgrounds (e.g., similar degrees of democracy), but some evidence for trade relationships as potential transmission channels. These findings allow two main conclusions. First, a country with corrupt neighbors will find it difficult to get rid of corruption. Second, on a more positive note, efforts aimed at decreasing domestic corruption levels could produce positive externalities in affecting neighboring countries. This could particularly hold true within a common institutional framework, such as the European Union.
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Under One Roof: Supply Chains and the Protection of Foreign Investment
Leslie Johns & Rachel Wellhausen
American Political Science Review, February 2016, Pages 31-51
Abstract:
We argue that economic links, such as supply chains, can create a common roof that protects foreign investors in host countries that lack strong institutions to protect property rights. Supply chains link the activities of firms: when a host government breaks a contract with one firm, other firms in the supply chain are harmed. These partner firms therefore have incentive to protect one another's property rights. This leads to the key implication of our argument: host governments are less likely to violate the property rights of firms that are more tightly linked with other firms in the host economy. We test our argument with cross-national data on investment arbitration, a survey of US multinational subsidiaries in Russia, and case studies from Azerbaijan. Our findings imply that one benefit of outsourcing in developing and transition economies is the creation of a network of partner firms that protect each other's property rights.
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The Hazardous Effects of Antidumping
Tibor Besedeš & Thomas Prusa
Economic Inquiry, forthcoming
Abstract:
We investigate the extent to which antidumping actions eliminate trade altogether. Using quarterly 10-digit HS-level export data for products involved in U.S. antidumping cases we find that antidumping actions increase the hazard rate by more than 50%. We find strong evidence of investigation effects with the impact during the initiation and preliminary duty phases considerably larger than once final duties are imposed. There are also important differences with respect to the size of duties with cases with large duties experiencing very large investigation effects. We show the antidumping (AD)-affected countries are less likely to return to the market even after the AD order is removed.
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Size matters! Who is bashing whom in trade war?
Kaz Miyagiwa, Huasheng Song & Hylke Vandenbussche
International Review of Economics & Finance, September 2016, Pages 33-45
Abstract:
In this paper we present a dynamic model of trade wars in contingent protection. We find that "market size" matters in trade wars in the sense that countries are more likely to initiate anti-dumping cases against countries having sufficiently smaller home markets relative to their own, but less likely against countries with larger markets. We test this "selective-targeting hypothesis" using World Bank data of worldwide anti-dumping filings during the years 1995-2014, and find strong support for it. Thus, our study indicates the importance of relative market size in understanding recent patterns of anti-dumping filings and contingent protection in world trade.
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Population Aging and Comparative Advantage
Jie Cai & Andrey Stoyanov
Journal of International Economics, forthcoming
Abstract:
In this paper we show that demographic differences between countries are a source of comparative advantage in international trade. Since many skills are age-dependent, population aging decreases the relative supply and increases the relative price of skills which depreciate with age. Thus, industries relying on skills in which younger workers are relatively more efficient will be more productive in countries with a younger labor force and less productive in countries with an older population. Building upon the neuroscience and economics literature, we construct industry-level measures of intensities in various age-dependent skills and show that population aging leads to specialization in industries which use age-appreciating skills intensively and erodes comparative advantage in industries for which age-depreciating skills are more important.