Traded
Stalled Racial Progress and Japanese Trade in the 1970s and 1980s
Mary Kate Batistich & Timothy Bond
Review of Economic Studies, forthcoming
Abstract:
We assess the impact of a rapid rise in Japanese import competition on the growth in racial earnings and employment gaps during the 1970s and 80s. Using commuting zone level variation in exposure, we find Japanese competition led to a decrease in manufacturing employment and labor force participation for blacks. This was driven by a shift in demand for skill in manufacturing. The difference in effects between the 10th percentile most and least exposed commuting zone was equivalent to 36-46% of the relative rise in black non-labor force participation, and 78-96% of the relative decline in black median male earnings.
Did the 2018 Trade War Improve Job Opportunities for US Workers?
Beata Javorcik et al.
University of Oxford Working Paper, December 2022
Abstract:
This paper uses data on the near universe of job adverts posted online in the US to study the impact of the 2018 trade war on US job opportunities. We develop measures of labour market exposure to three key channels of impact from the trade war: import protection for US producers, the higher cost of imported inputs for US producers, and exposure of US exporters to retaliatory tariffs. We find evidence that both tariffs on imported inputs and retaliatory tariffs led to a relative decline in online job postings in affected commuting zones. These effects were stronger for lower skilled postings than for higher skill postings. By contrast, we do not find any evidence of positive impacts of import protection on job openings. We estimate that the tariffs led to a combined effect of 175,000 fewer job postings in 2018, or 0.6 percent of the US total, with two thirds of this aggregate decline due to the imported input tariffs and one-third due to retaliatory tariffs.
China in Tax Havens
Christopher Clayton et al.
NBER Working Paper, January 2023
Abstract:
We document the rise of China in offshore capital markets. Chinese firms use global tax havens to access foreign capital both in equity and bond markets. In the last twenty years, China's presence went from raising a negligible amount of capital in these markets to accounting for more than half of equity issuance and around a fifth of global corporate bonds outstanding in tax havens. Using rich micro data, we show that a range of Chinese firms, including both tech giants and SOEs, use these offshore centers. We conclude by discussing the macroeconomic and financial stability implications of these patterns.
Do Women Make More Protectionist Trade Policy?
Timm Betz, David Fortunato & Diana O'Brien
American Political Science Review, forthcoming
Abstract:
Women have more protectionist trade preferences than men do. We assess whether this well-documented relationship between gender and protectionism in the mass public carries over into a relationship between women's political representation and (a) party platforms, and (b) governments' trade policy choices. Looking across countries and over time, we demonstrate that with an increase in women's representation, political party trade policy positions become more protectionist. For government trade policy choices, we identify more nuanced results. The protectionist effect of women's representation is limited to the most visible products: consumption goods. Women's representation has no effect on intermediate inputs, where firm demands for trade liberalization are more pronounced and policy makers are thus constrained in implementing a protectionist agenda. These findings contribute to scholarship on the descriptive-substantive representation link, add a new dimension to our understanding of trade politics, and demonstrate the importance of applying a gendered lens to international political economy research.
Crash for cash: Offshore financial destinations and IMF programs
Andreas Kern et al.
European Journal of Political Economy, forthcoming
Abstract:
A growing body of literature scrutinizes the harmful consequences of capital flight to offshore financial destinations. While financial integration is a well-known facilitator of capital flight, we shed light on an under-appreciated determinant -- the availability of an IMF bailout. Expanding on previous literature analyzing moral hazard in the context of IMF programs, we introduce a socially even more destructive mechanism that we label the 'crash for cash' effect. We argue that by drawing on the IMF, elites can benefit from accumulating excessive debt to extract rents and hide these safely in offshore financial destinations while steering their countries into financial disaster. To test this mechanism, we show that elite wealth in offshore bank accounts has a first-order impact on a captured government's willingness to draw on a lender of last resort. From a policy perspective, our analysis underscores the importance of closing financial loopholes to mitigate the devastating socio-economic effects of sophisticated financial engineering in a financially integrated global economy.
Catching Up by 'Deglobalizing': Capital Account Policy and Economic Growth
Paul Bergin, Woo Jin Choi & Ju Pyun
NBER Working Paper, February 2023
Abstract:
While substantial empirical research has evaluated the question of whether capital account openness promotes economic growth, this paper finds empirical evidence for cases where the opposite is true -- that a policy of capital controls can promote economic growth, when combined with a policy of reserve accumulation. Using panel data from 45 countries from 1985-2019, we find that capital controls combined with reserve accumulation -- strategic capital account policy -- contribute to growth in real GDP and TFP. This effect is stronger for emerging markets and prior to the global financial crisis. We show that the policy is strongly associated with enlarging the scale of the manufacturing sector and productivity, and is consistent with theories of learning-by-doing through exporting.
Delegating Discipline: How Indexes Restructured the Political Economy of Sovereign Bond Markets
Ben Cormier & Natalya Naqvi
Journal of Politics, forthcoming
Abstract:
Outside of the rich world, international financial markets are thought to discipline borrowing governments by monitoring political and economic characteristics. But increasingly, asset managers do not assess individual country risk/return profiles. They replicate benchmark indexes, delegating investment decisions to index providers. This has two effects. First, it relocates market discipline into the hands of index providers. Second, it alters the constraints sovereigns face when accessing bond markets, conditioning the relationship between a sovereign's political-economic features and its ability to raise capital. Using a novel dataset of index inclusion and weights, we show country-specific factors traditionally associated with bond market access do not have the expected constraining effects on countries included in a major index, but do continue to affect excluded countries. Index investment has profoundly restructured debt markets by circumscribing the disciplinary link between country characteristics and capital allocation, with wide-ranging implications for the political economy of debt and finance.
New Measurement of Export Participation in U.S. Manufacturing
Christoph Boehm, Aaron Flaaen & Nitya Pandalai-Nayar
NBER Working Paper, January 2023
Abstract:
We measure export participation rates in the U.S. manufacturing sector using a new administrative dataset and compare them to participation rates constructed from the commonly used Census of Manufacturers (CM). Both at the establishment and firm level export participation rates are near 40 percent in the administrative data, almost twice as high as in the CM. The discrepancy appears to result predominantly from under-counting of small exporters in the CM. Our findings call for reconsidering the conventional wisdom that around 20 percent of manufacturing firms export.
Power politics and the expansion of US exports, 1879-1938
Antonio Tena-Junguito & Maria Isabel Restrepo-Estrada
Economic History Review, forthcoming
Abstract:
In this article, we present quantitative evidence for the first time of the effect of US power politics on the expansion of its export market from the late nineteenth century to the eve of the Second World War. Like other empires, US imperial policy was expressed through annexation, gunboat policies, and asymmetrical trade agreements. We find that US exports to territories that became colonies or protectorates and those involved in other US military interventions grew more than three times faster between 1880-5 and 1934-8 than in the rest of the world. Our most relevant contribution to this discussion relies on a new geographically extensive database with information on bilateral trade flows, market size, trade costs, and variables that capture US political and military power. We first estimate a gravity equation to see the relationship between our power politics variables and US exports. Then, we present causal evidence of the role played by the colonies and protectorates in the expansion of US exports through an event study and the estimation of a generalized difference-in-differences model.
A Theory of Fear of Floating
Javier Bianchi & Louphou Coulibaly
NBER Working Paper, January 2023
Abstract:
Many central banks whose exchange rate regimes are classified as flexible are reluctant to let the exchange rate fluctuate. This phenomenon is known as "fear of floating". We present a simple theory in which fear of floating emerges as an optimal policy outcome. The key feature of the model is an occasionally binding borrowing constraint linked to the exchange rate that introduces a feedback loop between aggregate demand and credit conditions. Contrary to the Mundellian paradigm, we show that a depreciation can be contractionary, and letting the exchange rate float can expose the economy to self-fulfilling crises.