Global Stuff
Estimating the Regional Welfare Impact of Tariff Changes: Application to the United States
Robert Feenstra & Chang Hong
NBER Working Paper, September 2024
Abstract:
We propose an empirical method using a translog expenditure function to estimate the regional welfare impact of changes in import tariffs, and we apply this method to the United States. Tariff revenue is assumed to be distributed on a per-capita basis, so states with greater production will experience a welfare gain from tariffs on those products (due to rising producer surplus) while those with little production will lose (due to falling consumer surplus). Over 2002-17, we find that 28 states benefitted from reduced tariffs, with national welfare gains of $5.8 billion or $50 per household in 2017. These national gains were eliminated by the tariff increases after 2017, with national losses of $57 per household in 2019 and rising to $103 per household in 2022, but 25 states still gained. These estimates of the national losses from tariff increases are lower than found in other studies for the 2017-19 period, due to this study incorporating product exclusions that reduced the tariffs on certain products and also due to differences in the methods of calculation.
The Increasing Cost of Buying American
Matilde Bombardini et al.
NBER Working Paper, September 2024
Abstract:
The latest resurgence in the U.S. of policies aimed at reducing imports and bolstering domestic production has included the expansion of Buy American provisions. While some of these are new and untested, in this paper we evaluate long-standing procurement limitations on the purchase of foreign products by the U.S. Federal Government. We use procurement micro-data to first map and measure the positive employment effects of government purchases. We then calibrate a quantitative trade model adapted to include features relevant to the Buy American Act: a government sector, policy barriers in final and intermediate goods, labor force participation, and external economies of scale. We show that current Buy American provisions on final goods purchase have created up to 100,000 jobs at a cost of between $111,500 and $137,700 per job. However, the recently announced tightening of the policy on the use of foreign inputs will create fewer jobs at a higher cost of $154,000 to $237,800 per job. We also find scant evidence of the use of Buy American rules as an effective industrial policy.
Non-tariff barriers to trade
Marco Leonardi & Elena Meschi
Journal of Law, Economics, and Organization, forthcoming
Abstract:
Prior to the recent resurgence prompted by the US-China trade war, tariffs on international trade had been consistently diminishing over the past few decades. In response, advanced countries increasingly turned to non-tariff measures (NTMs) to protect their industries from foreign competition. In this article, we exploit a novel database on NTMs to investigate their impact on the labor market in the United States. We use the political importance of an industry, measured by its employment share in swing states during presidential elections, as an instrumental variable for NTM protection. Our results suggest that NTMs mitigate the adverse employment effects resulting from exposure to Chinese import competition, but exert a negative influence on manufacturing wages, particularly for skilled workers.
Demographic Impacts of China's Trade Liberalization: Marriage, Spousal Quality, and Fertility
Wei Luo & Xianqiang Zou
Journal of Population Economics, July 2024
Abstract:
This study examines the effects of export tariff liberalization on women's marriage and fertility choices in China. Utilizing a shift-share design that combines industry-level variation in export tariff reduction with differences in industry composition across cities, we discover that women in areas with greater export tariff reductions exhibit a reduced inclination to marry, postpone marriage, and have a higher likelihood to marry well-educated partners. Moreover, these reductions in export tariffs negatively impact women's fertility primarily through altering marriage formation and timing, and marginally affect newborn sex ratios. We further explore potential channels and highlight the role of improvements in women's absolute and relative economic status. Our results underscore the influence of global trade on demographic trends.
How Bureaucrats Represent Economic Interests: Partisan Control over Trade Adjustment Assistance
Minju Kim
International Studies Quarterly, September 2024
Abstract:
Embedded liberalism prescribes compensating workers hurt by globalization, but government compensation programs are often criticized for their lack of responsiveness. I explain the lack of responsiveness by illuminating bureaucrats who approve the compensation programs in the frontline. I examine how career bureaucrats distribute Trade Adjustment Assistance (TAA) benefits, the single largest federal program in the United States that compensates workers displaced by international trade. Exploiting the quasi-random assignment of TAA petitions to individual investigators at different stages of their careers, I find that career bureaucrats are less likely to certify TAA petitions and are more likely to delay investigations during Republican presidencies relative to Democratic presidencies. This partisan performance, however, applies uniquely to career bureaucrats who are not tenured and increases in magnitude during periods of high alignment between labor and the Democratic Party. The political sustainability of globalization depends on an institutional design that shapes the career incentives of bureaucrats.
Framing Layoffs: Media Coverage, Blame Attribution, and Trade-Related Policy Responses
Ryan Brutger & Alexandra Guisinger
Political Behavior, forthcoming
Abstract:
Who is blamed when factories close or when there are mass layoffs? Whether it be the closing of an auto plant or the threatened off-shoring of the Carrier furnace factory, media reports frequently incorporate justifications -- or frames -- that provide context about the closure or layoffs. We conduct an analysis of media coverage of factory layoffs in the United States and Canada, and find that the most common frames often include foreign competition and trade policy, changing market conditions, or exogenous shocks, such as the pandemic. We argue that such frames alter who the public holds responsible and thus affects the public's preferred policy responses. We test the effect of media frames on the public's blame attribution and subsequent policy preferences using a survey experiment about General Motors factory closings. The results from a sample of almost 6,000 respondents in the US and Canada show that the public is quick to shift blame to the government, reducing blame to the company, and shifting attention to particular government responses. We find that the most common media frames significantly shift support for trade policy in both countries, but have no effect on domestic public assistance programs such as unemployment benefits or retraining and education programs. Notably, most treatment effects are similar across ideological types. The results hold practical implications in terms of the incentives of politicians to promote specific explanations of factory closings and theoretical implications in terms of moderating the highly partisan expectations within the current literature on economic blame attribution.
"If Foreign, Then Cleaner": Individual Corruption Perceptions and Support for Free Trade in Developing Nations
Dihan Shi & Guillermo Rosas
International Studies Quarterly, September 2024
Abstract:
Extant literature on public opinion in international political economy documents the role that domestic corruption perceptions play in the formation of mass attitudes toward a range of integration-related foreign policies. Based on this precedent, we conjecture that corruption perceptions also affect opinions toward free trade. We build on a heuristic approach to attitude formation where individual perceptions of corruption among the political elite trigger positive attitudes toward foreign countries, firms, and products, what we refer to as a "foreignness cue." This cue drives individuals with high perceptions of corruption to be more supportive of free trade. Based on survey data from eighteen Latin American countries, we demonstrate that higher levels of perceived domestic corruption are associated with greater support for free trade. Causal mediation analysis provides additional evidence that positive attitudes toward foreign countries and firms are a conduit through which the corruption perceptions effect operates. We also offer evidence of external validity of the main effect by analyzing additional surveys on a distinct set of less and more developed countries. Our heuristic-based model of support for free trade complements theories based on material self-interest as a basis for attitude formation in the realm of trade policy.
Prosperity and Openness: Early Globalization Experiences and Mass Preferences for Free Trade
Yujin Zhang
Columbia University Working Paper, August 2024
Abstract:
Individuals from different generations have demonstrated distinct attitudes toward international trade, and conventional factors used to predict trade policy preferences have not fully explained these differences. Focusing on individuals' past experiences, this study argues that their early exposure to economic growth and trade openness has lasting effects on trade preferences. Employing cross-national datasets that cover the last three decades and exploring the exogenous shock caused by the Asian Financial Crisis, I demonstrate that increasing exposure to economic upswings in an open economy leads to significantly stronger later-life trade support. Conversely, experiencing economic downturns with greater openness could result in heightened opposition to international trade. Further examination indicates early globalization experiences contribute to sustained trade support by cultivating pro-trade perceptions and enhancing individuals' material well-being. This paper documents the crucial impacts of personal experiences on political attitudes and provides a novel perspective for explaining the formation of trade preferences.
The Limits of Enforcement in Global Financial Governance: Blacklisting in FATF as Rational Myth
Devin Case-Ruchala & Mark Nance
International Studies Quarterly, September 2024
Abstract:
How might international institutions matter? To consider this central question of International Relations, we analyze a most-likely case for the importance of materially driven enforcement: the Financial Action Task Force's (FATF) use of blacklisting in the global regime targeting money laundering and terrorism financing. Scholars and practitioners often argue that fear of financial harm caused by FATF's lists explains the near-global commitment to FATF's standards, even if compliance lags. We search for statistical evidence of this impact across four different measures of financial flows and find that listing is not correlated with financial harm. To explain these null results, we examine bank decision-making and find that the lists' impact is likely diminished by two overlooked factors: the existence of multiple, competing lists and banks' access to more fine-grained, client-specific information provided by third-party companies. We interpret this contradiction -- a commitment to compliance generated in part by a fear of enforcement, despite a lack of evidence for enforcement's impact -- as a "rational myth." The results challenge a common understanding of a major global governance regime, confirm ideas about the limited ability of states or International Organizations to control governance outcomes, and advance a new research agenda on the impact of bank decision-making on global governance.