International Supply
The Golden Revolving Door
Ling Cen et al.
NBER Working Paper, June 2024
Abstract:
Using both the onset of the US-China trade war in 2018 and the most recent Russia-Ukraine war and associated trade tensions, we show a counterintuitive pattern in global trade. Namely, while the average firm trading with these nations significantly decreases their trade with these jurisdictions following sanctions, government-linked firms show a marked contrast. In particular, government-linked firms actually significantly increase their trading activity following the onset of formal sanctions. The increase is large -- roughly 33% (t=4.01). We find no increase broadly to other countries (even countries in the same regions) at the same time, nor of these same firms in these same regions at other times. In terms of mechanism, government-linked supplier firms are nearly twice as likely to receive tariff exemptions. More broadly, these effects are increasing in the level of government connection. For instance, firms geographically closer to the government agencies they supply increase their imports more acutely. Using micro-level data, government-supplying firms recruiting more employees with past government work experience also increase trading activity more -- particularly when the past employee worked in a government-contracting role. Lastly, this results in sizable accrued benefits in terms of firm-level profitability, market share gains, and outsized stock returns.
Globalization, Government Popularity, and the Great Skill Divide
Cevat Giray Aksoy, Sergei Guriev & Daniel Treisman
Journal of Politics, forthcoming
Abstract:
We provide the first large-scale, global evidence on the impact of the skill composition of trade on political approval. We show that political implications of trade shocks depend on the relationship between workers’ skills and the characteristics of goods traded. Using Gallup World Poll surveys of a million respondents from 121 countries over 2005–18, we show that growth in high-skill intensive exports increases confidence in government among skilled individuals relative to unskilled ones. Growth in high-skill intensive imports has the opposite effect. Growth in low-skill intensive exports (imports) increases (decreases) confidence in government among unskilled individuals relative to skilled ones. To identify causal relationships, we construct instruments based on time-varying effects of air and sea distances on bilateral trade in goods of different skill intensity.
Technological Changes and Countries’ Tax Policy Design: Evidence from Anti–Tax Avoidance Rules
Alissa Brühne, Martin Jacob & Harm Schütt
Management Science, forthcoming
Abstract:
We investigate the association between technological changes and corporate tax policies in 34 OECD countries between 1996 and 2016. We use a shift-share design to capture the differential exposure of countries to U.S. technological advancements. Our study shows that countries’ antitax avoidance rules are tightened as their exposure to U.S. technological advancements increases. The tightening is particularly concentrated in countries that are larger, more exposed to intangibles, and have higher profit shifting incentives. Our findings have important implications for corporate executives as a country’s anti–tax avoidance rules are associated with foreign technological advancements.
Paper Tiger? Chinese Science and Home Bias in Citations
Shumin Qiu, Claudia Steinwender & Pierre Azoulay
NBER Working Paper, May 2024
Abstract:
We investigate the phenomenon of home bias in scientific citations, where researchers disproportionately cite work from their own country. We develop a benchmark for expected citations based on the relative size of countries, defining home bias as deviations from this norm. Our findings reveal that China exhibits the largest home bias across all major countries and in nearly all scientific fields studied. This stands in contrast to the pattern of home bias for China’s trade in goods and services, where China does not stand out from most industrialized countries. After adjusting citation counts for home bias, we demonstrate that China’s apparent rise in citation rankings is overstated. Our adjusted ranking places China fourth globally, behind the US, the UK, and Germany, tempering the perception of China’s scientific dominance.
Tariff wars, unemployment, and top incomes
Elias Dinopoulos, Gunnar Heins & Bulent Unel
Journal of Monetary Economics, forthcoming
Abstract:
Motivated by the 2018–19 global tariff war, we develop a multi-country trade model with occupational choice, heterogeneous firms, and unemployment. The model features a complete tariff pass-through and positive optimal tariffs addressing product and labor-market distortions. The quantitative analysis of the model with four countries/regions shows that raising tariffs unilaterally by a country increases welfare but also raises unemployment and top incomes in that country, whereas having the opposite impact on tariff-targeted countries. A global tariff war reduces every country’s welfare, unemployment, and top-income inequality, whereas moving from a worldwide tariff war to free trade raises every country’s welfare, unemployment, and top-income inequality.
The Value of De Minimis Imports
Pablo Fajgelbaum & Amit Khandelwal
NBER Working Paper, June 2024
Abstract:
Section 321 of the 1930 Trade Act allows up to $800 in imports per person per day to enter the US duty-free and with minimal customs requirements. Fueled by rising direct-to-consumer trade, these “de minimis” shipments have exploded yet are not recorded in Census trade data. Who benefits from this type of trade, and what are the policy implications? We analyze international shipment data, including de minimis shipments, from three global carriers and US Customs and Border Protection. Lower-income zip codes are more likely to import de minimis shipments, particularly from China, suggesting that the tariff and administrative fee incidence in direct-to-consumer trade is pro-poor. Theoretically, imposing tariffs above a threshold leads to terms-of-trade gains through bunching, even in a setting with complete pass-through to linear tariffs. Empirically, bunching pins down the demand elasticity for direct shipments. Eliminating §321 would reduce aggregate welfare by $11.8-$14.3 billion and disproportionately hurt lower-income and minority consumers.
On the Ubiquity of Declining Business Dynamism
David Hummels & Kan Yue
NBER Working Paper, June 2024
Abstract:
Recent work documents declining business dynamism in the United States, with concerning implications for markups, innovation and productivity. Using import data for 146 countries over three decades we document a set of new stylized facts describing market dynamism world-wide. Market entry rates and the reallocation of market shares fall significantly over time. Young exporters experience rising prices, falling market shares, and increased exit probabilities relative to longer-tenured incumbents. While the variance of price shocks hitting markets is rising, long-tenured incumbents exhibit lower volatility in prices and the response of prices and quantities to tariff shocks are falling over time. These patterns hold for over 90 percent of countries and products suggesting the inadequacy of explanations that point to the macroeconomic or regulatory environment of particular countries or the unique industrial organization of particular products.
Transnational Legal Spillover? A Re-Appraisal of the OECD Anti-Bribery Convention
Elizabeth Acorn & Michael O Allen
International Studies Quarterly, June 2024
Abstract:
Can prosecutions by US authorities help spread enforcement of foreign bribery laws to other countries? In this article, we explore this question by re-examining earlier scholarship that found that US prosecutions of foreign corporations under the Foreign Corrupt Practices Act (FCPA) increase the likelihood that the corporation's home state will enforce its own foreign bribery laws. Using a conditional-frailty Cox model that allows us to model foreign bribery enforcement actions as repeat-events, we do not find evidence that FCPA prosecutions lead to sustained increases of foreign bribery enforcement by target countries. We also find that prior results are not robust to the inclusion of an important confounding variable: a country's level of exposure to corruption in their trading partners. Still, while our findings indicate a more limited role of US law enforcement in this area, we nonetheless see many promising avenues for future research on transnational law enforcement and its consequences.
Trains, trade, and transformation: A spatial Rogowski theory of America's 19th-century protectionism
Kenneth Scheve & Theo Serlin
American Journal of Political Science, forthcoming
Abstract:
We study the effect of expanding trade on societal coalitions through its impact on development. We combine a majoritarian political model with a spatial model of trade to argue that trade-induced economic change -- by bringing new workers to locations closer to world markets -- can lead to losses rather than gains in political power for the factors of production advantaged by increased trade. We study how this phenomenon explains rising protectionism in the United States from 1880 to 1900. Using county-level changes in transportation costs induced by railroad expansion, our estimates indicate that falling costs increased population and farm values but reduced the proportion of farmers. Reduced transportation costs caused a reduction in vote shares for the Democratic Party, which favored liberal trade policies, and an increase in an original newspaper-based measure of protectionist sentiment. Expanding trade alters not only political interests but also the geographic distribution of those interests.