Homecoming
China's Global Ownership
Jennie Bai et al.
NBER Working Paper, April 2026
Abstract:
We study the global footprint and real effects of Chinese overseas corporate ownership. By assembling a comprehensive micro-level dataset of 161,773 firms across 159 countries (2012-2021), we independently reconstruct multi-layered ownership chains to trace capital through offshore tax havens to its ultimate origin. This approach reveals a global footprint substantially broader than official FDI statistics. Chinese-controlled foreign assets expanded at 20% annually, reaching $2.1 trillion or roughly 3% of global corporate assets by 2021. Chinese investors -- particularly state-owned enterprises (SOEs) -- strategically target R&D-intensive and supply-chain-linked firms. Following acquisition, target firms increase capital stock and R&D expenditures, yet these inputs fail to generate higher patent output and are accompanied by a significant decline in profitability. We document a novel 'innovation spillback' mechanism: while target innovation remains stagnant, Chinese parent firms experience a sharp acceleration in granted patents following their first developed-economy acquisition. Furthermore, a greater Chinese presence crowds out R&D at non-target peer firms, though aggregate industry-level innovation remains unchanged. China thus represents a distinctively state-driven model of global ownership that accepts weaker near-term performance to internalize technological capacity at home.
Fortune or Fear? State Legislators' Responses to Chinese Ownership of US Agricultural Land
Ze Han
International Studies Quarterly, June 2026
Abstract:
This paper investigates the divergent responses of US state legislators to Chinese investment in American agricultural land. Although these investments represent a minor fraction of all foreign-held agricultural acres, they have triggered significant legislative efforts. Often, these efforts are justified by national security concerns, but there are also economic gains to be had. Do legislators whose districts stand to benefit economically from Chinese investments put security concerns aside, or does fear of China trump material gains? This study finds that in districts with greater exposure to Chinese agricultural land holdings, local economic benefits outweigh other concerns. Using a unique dataset that links Chinese agricultural land ownership to state legislators' roll-call votes, I find a negative correlation between the scale of Chinese-owned land and support for restrictive measures. Exploring mechanisms through quantitative analysis and qualitative examination, I show how local economic benefits influence voter perceptions, which in turn affect legislative decisions.
Tariffs, Global Value Chains, and the Incidence of Protection: Evidence from US Automobiles
Luke Heeney, Christopher Knittel & Jasdeep Mandia
NBER Working Paper, April 2026
Abstract:
In many modern industries, firms compete in differentiated-product markets while relying on complex global value chains for intermediate inputs. In such settings, trade policies such as tariffs on vehicles and parts operate not only through consumer substitution and firm pricing, but also through firms' cost structures and sourcing decisions. We develop a structural model of the U.S. automobile market that integrates random-coefficients demand, multiproduct firm pricing, and a flexible supply-side framework in which shocks to the cost of imported parts transmit imperfectly into manufacturers' marginal costs. The model is disciplined by novel model-level data on imported-parts exposure and exploits exchange-rate variation to identify cost pass-through. Our counterfactual analysis quantifies the effects of alternative tariff policies on prices, profits, and welfare. First, tariffs on imported vehicles alone reallocate demand toward domestically assembled products and increase U.S. producer surplus, generating a gain of approximately $1 billion for U.S.-headquartered firms, while reducing consumer surplus by about $14 billion. Second, extending tariffs to imported intermediate inputs fundamentally alters these effects: consumer surplus losses roughly double, and producer surplus for U.S.-headquartered firms declines by about $2.6 billion. These aggregate effects mask substantial heterogeneity: firms with greater exposure to imported parts experience losses, whereas those relying more on domestic inputs are better able to increase profits. Overall, the results show that tariff incidence depends critically on firms' exposure to global value chains and cannot be inferred from final assembly locations alone.
Global Markets and Local Representation
Timm Betz, Paul Binder & Jonas Geus
British Journal of Political Science, April 2026
Abstract:
How do global market pressures affect domestic politics? A well-established literature documents that import competition fuels the rise of populist leaders and right-wing parties. We shift attention to a thus far unexplored consequence: the place-based nature of globalization pressures moves voters towards candidates with local ties. These effects are most pronounced where import pressures raise the salience of pre-existing local identities, and where import pressures hit key industries in local economic clusters, creating spillovers throughout the community. We offer evidence from elections to the US House of Representatives from 2002 to 2016, focusing on candidates' place of birth as expression of local ties. Our results provide a novel perspective on how economic globalization affects politics: local ties are a key dimension of descriptive representation, translating the place-based economic consequences of globalization into politics. Moreover, we highlight how indirect exposure to global markets through spillovers shapes the political response to globalization.
Tariffs in 2025: Short-Run Impacts on the U.S. Economy
Pablo Fajgelbaum & Amit Khandelwal
NBER Working Paper, April 2026
Abstract:
In 2025, the U.S. raised average tariff duties from 2.4% to 9.6%, bringing protectionism to its highest level in eighty years. We explore the structure of these tariffs, estimate their short-run impacts, and summarize the growing literature on their effects. Across trade partners, the tariffs are correlated with trade deficits but not with geopolitical or strategic industrial goals, other than targeting China. In our baseline estimate, 90% of the tariffs are passed through to tariff-inclusive prices paid by U.S. importers. Incorporating the estimated price and trade responses into a static trade framework, we find an overall welfare impact ranging from a loss of 0.13% of GDP to a gain of 0.10%. These small net welfare impacts reflect sizable consumption losses roughly offset by income and revenue gains, with their sign hinging on whether U.S. terms-of-trade adjusted (on which the data are inconclusive). Among their stated rationales, the tariffs have been effective at raising federal revenue and diverting trade from China. However, it remains uncertain whether they will reduce the trade deficit, lower prices set by foreign exporters, promote manufacturing jobs, increase "friend-shoring" among aligned countries, or reshore key sectors; evidence from 2018-19 and 2025 indicators suggests a narrow path towards achieving these goals.
Decoupling Dollar and Treasury Privilege
Wenxin Du, Ritt Keerati & Jesse Schreger
NBER Working Paper, March 2026
Abstract:
We document a strong decoupling between the convenience yield on the U.S. dollar and U.S. Treasuries. We measure the convenience of the U.S. dollar using covered interest parity (CIP) deviations between risk-free bank rates, such as secured overnight rates since the benchmark reform. In parallel, we measure the convenience of U.S. Treasury bonds through CIP deviations between government bond yields. We find a pronounced divergence between the two convenience measures in recent years: while the U.S. dollar exhibits strong convenience post-Global Financial Crisis, the U.S. Treasury convenience has not only declined substantially but has turned negative, most strongly so at medium- to long-term maturities. We argue that the relative supply of government bonds between the US and other developed markets is a key driver of the U.S. Treasury convenience compared to other government bonds. Finally, we present a simple framework with a constrained global financial intermediary to link dollar and Treasury convenience.
Trade in AI-Related Products
Michael Waugh
NBER Working Paper, April 2026
Abstract:
This paper documents facts about international trade in AI-related products. I develop a large language model (LLM) classification tool that maps HS10 codes in U.S. trade data to products used in the construction and operation of AI infrastructure. AI-related products account for 23 percent of U.S. imports in 2025, and imports of these products have grown by 73 percent since 2023. Over the same period, imports of non-AI-related products have grown by only 3 percent, with the divergence between the two categories beginning in early 2024. Mexico is a key market on both the import and export side, and together with Taiwan these two countries account for about half of all U.S. trade in AI-related products. Trade policy has treated these products lightly with product-level exemptions shielding much of AI-related imports from tariffs. Absent the AI boom, a simple accounting exercise suggests that the U.S. goods trade deficit would have been nearly $200 billion smaller in 2025.
Immigrants at the Margin: Labor Market Effects of the Minimum Wage
Mark Borgschulte, Heepyung Cho & Darren Lubotsky
NBER Working Paper, April 2026
Abstract:
We examine the differential effects of minimum wages on immigrant and native workers in the United States. We find that minimum wage increases lead to reduced hours of work among immigrants with no effect on their employment. The effects are concentrated among recently-arrived, likely-undocumented workers in high turnover industries. Native workers show no such response, even when examining native subgroups with similar characteristics to the most affected immigrants. We conclude that affected immigrant labor markets feature low-surplus, low-investment employment relationships with flexible hours, but they are embedded in labor markets where replacement is unusually costly.
Patent Visibility and the Diffusion of "Trapped Knowledge"
Randol Yao
MIT Working Paper, November 2025
Abstract:
Valuable knowledge developed in one part of the world may remain trapped due to frictions in how knowledge is exposed globally. This paper examines how increasing the visibility of foreign innovations -- by granting US patents -- "untraps" knowledge. Using difference-in-differences with an examiner leniency instrument, I find that US grants of foreign patents significantly increase the intensity and reach of forward citations. Using a novel measure of "trappedness," I show that knowledge from historically more trapped countries and sectors sees larger diffusion benefits after US grants. These findings highlight the central role of the US as a platform of global knowledge diffusion.
Why Fur over Fish? Conflict-Induced Transaction Costs and Industry Composition in New France
Vincent Geloso & Casey Pender
George Mason University Working Paper, January 2026
Abstract:
Why did furs dominate New France's eighteenth-century exports, rather than fish, timber, or other staples? To answer this, we develop a two-sector, small open economy model in which war and conflict impose a common per-unit-weight transaction cost on all Atlantic trade. Non-fur staples rely on bulky, complementary imported inputs (e.g., for fish, salt and barrels), while fur "production" uses lighter, more substitutable inputs. Higher conflict costs, therefore, decrease profitability relatively more in the freight-intensive sector with less input substitutability, shifting output toward fur, even when world prices are fixed. To demonstrate that our model has external validity, we assemble new archival microdata from the Ursulines de Québec bills of lading (Factures et Connaissements, 1692--1758) and complementary evidence on maritime losses and protection at sea. From this, we find that freight-and-commission shares jump in wartime, and imported cargo tilts toward high-value-to-weight items. Thus, we offer a new supply-side explanation for fur's dominance in New France during a period riddled with war, and its later shift away from furs as maritime security improved and major conflicts subsided.