Internationalized
Antiglobalization sentiment: Exposure and immobility
James Bisbee & Peter Rosendorff
American Journal of Political Science, forthcoming
Abstract:
Individuals with heightened labor market insecurity express more protectionist, xenophobic, and isolationist sentiment. We construct a novel measure of labor market insecurity that combines an individual's industry-based exposure to import competition with an occupation-based measure of job immobility. Immobility captures the similarity of an individual's job to others in the economy, weighted by their prevalence. The holder of a job that is dissimilar to others in the industry or in the state experiences more anxiety regarding their labor market prospects in the face of a globalization shock, and is more likely to express antiglobalization sentiment.
International Spillovers of U.S. Fiscal Challenges
Joshua Aizenman et al.
NBER Working Paper, August 2024
Abstract:
Expansionary fiscal policies have increased significantly following the subprime crisis in 2007 and the COVID-19 crisis, leading to fiscal dominance concerns, where a growing share of monetary authorities may be forced to deviate from policy targets to accommodate fiscal policies. Meanwhile, peripheral economies are constantly influenced by monetary and fiscal conditions in center economies, with the United States (U.S.) as the predominant force. In light of these developments, we examine the potential international spillovers from U.S. inflationary spells and growing fiscal concerns to the policy interest rates in Emerging Market Economies (EMEs) and Developed Economies (DEs). We introduce a new index of fiscal dominance concerns using Principal Components Analysis, and extend the concept to an international perspective, as opposed to previous literature examining fiscal dominance in a domestic environment. The results are confirmed by robustness analysis and show that greater U.S. fiscal challenges affect negatively the policy rates in both EMEs and DEs, with a greater impact observed in EMEs. Moreover, a low degree of financial repression is associated with more significant spillover effects from greater U.S. fiscal challenges.
Return to the United States: Impact of Reshoring Announcements and Reshoring Risks on Market Valuation
Miyuki Cheng et al.
Management Science, forthcoming
Abstract:
With soaring labor and logistics costs in developing countries, supply chain disruptions during the COVID-19 pandemic triggered Western firms to “reshore” some of their offshore operations (performed in-house or outsourced) for certain strategically important products or production processes from foreign countries to their home countries. Although reshoring can create more domestic jobs and reduce supply chain risks, the impact of various external and internal risks associated with reshoring on market reaction remains unclear. This observation motivates us first to conduct a text mining analysis, revealing four important types of reshoring risks inherent to (1) foreign currency fluctuation, (2) intellectual property (IP) protection, (3) reshoring types (in-house, insourced, or outsourcing-to-outsourcing (OTO)), and (4) reshoring location choice (Republican- versus Democrat-led states). We then examine how these risk factors help explain the variations in reshoring’s market valuation based on 281 reshoring initiatives of 132 publicly traded firms in the United States announced between 2009 and 2022. Our empirical analysis reveals that the market reacts more positively to a firm’s reshoring announcement when the firm reshores under a high-currency-fluctuation environment or from countries with weak IP protection. However, the market’s reaction is more negative when the firm’s reshoring announcement entails insourced reshoring operations or when the reshored location is a Democrat- rather than Republican-led state. We do not find a significant market reaction to OTO reshoring.
Do U.S. multinationals use income shifting to facilitate and hide corruption?
Paul Demeré, Jeffrey Gramlich & Yoonsoo Nam
Journal of Accounting and Public Policy, July-August 2024
Abstract:
We investigate whether U.S. multinational companies use income shifting to facilitate and hide corruption activities by examining whether income shifting responds to corruption pressures. We use enforcement actions under the Foreign Corrupt Practices Act (FCPA) as shocks to the costs of direct corruption and find that firms appear to respond to increased costs of direct corruption by shifting income abroad. This corruption-motivated income shifting is more common in industries with greater corruption exposure and among firms with more effective internal controls. We also find evidence that corruption-motivated income shifting acts differently from income shifting for tax avoidance purposes and is difficult for corporate monitors to combat. Overall, our results are consistent with companies using income shifting as an opaque tool for corruption when FCPA enforcement actions curtail more direct forms of corruption.
Sabotage as Industrial Policy
Jin Liu, Martin Rotemberg & Sharon Traiberman
NBER Working Paper, August 2024
Abstract:
We characterize sabotage, exemplified by recent U.S. policies concerning China's semiconductor industry, as trade policy. For some (but not all) goods, completely destroying foreigners’ productivity increases domestic real income by shifting the location of production and improving the terms of trade. The gross benefit of sabotage can be summarized by a few sufficient statistics: trade and demand elasticities and import and production shares. The cost of sabotage is determined by countries' relative unit labor costs for the sabotaged goods. We find important non-monotinicities: for semiconductors, partially sabotaging foreign production would lower US real income, while comprehensive sabotage would raise it.
Losing sleep at the international market: Daylight Saving Time and exchange rates
Michael Nower
Economics Letters, August 2024
Abstract:
This article examines the impact of the move into and out of Daylight Saving Time (DST) on bilateral exchange rates. When a country starts DST, the value of its currency depreciates, which is reversed when the country exits DST.
Who gets the flow? Financial globalisation and wealth inequality
Simone Arrigoni
Journal of Macroeconomics, September 2024
Abstract:
This paper studies whether the advent of financial globalisation has contributed to increasing wealth inequality in the United States, France, and the United Kingdom. I find that (i) positive changes in the benchmark measure of financial globalisation are associated with a positive change in the top 1% and 10% wealth shares and a negative change in the wealth share of the bottom 50% of the distribution. This is equivalent to an average gain of $1 trillion for the top 10% and $1.6 trillion for the top 1%, over the period of interest. (ii) Portfolio equities and financial derivatives appear to be the driving components behind the increase in wealth shares. (iii) The implied change in wealth shares is driven by the accumulation of new financial wealth (flow) rather than the valuation of existing one. (iv) The dynamic is strengthened when a banking crisis hits the economy, possibly because people at the top of the distribution can recover their lost wealth faster than people at the bottom. The main finding is robust to an expanded country sample, albeit reducing the historical context beyond the scope of this paper.
Informational lobbying and commercial diplomacy
Calvin Thrall
American Journal of Political Science, forthcoming
Abstract:
What determines the content of bilateral diplomacy? I argue that the foreign policy issues prioritized by specific embassies are influenced by their diplomats' sources of information. For evidence, I study the proliferation of American Chambers of Commerce (AmChams) -- private interest groups composed of US firms that are operating in specific host states -- over the 20th and early 21st centuries. AmChams became key sources of information for US embassies, particularly on issues of relevance to the private sector (such as tax, trade, and investment regulations). Using novel text data from approximately 1500 oral history interviews with former diplomats, and leveraging the institutional structure of diplomatic rotation, I show that diplomats who were exposed to active AmCham branches paid significantly greater attention to commercial issues. These results identify a new avenue through which interest groups can influence foreign policy, help explain the proliferation of probusiness international agreements over the past several decades, and contribute to the growing literature on diplomacy in the international political economy.
Transoceanic pathogen transfer in the age of sail and steam
Elizabeth Blackmore & James Lloyd-Smith
Proceedings of the National Academy of Sciences, 23 July 2024
Abstract:
In the centuries following Christopher Columbus’s 1492 voyage to the Americas, transoceanic travel opened unprecedented pathways in global pathogen circulation. Yet no biological transfer is a single, discrete event. We use mathematical modeling to quantify historical risk of shipborne pathogen introduction, exploring the respective contributions of journey time, ship size, population susceptibility, transmission intensity, density dependence, and pathogen biology. We contextualize our results using port arrivals data from San Francisco, 1850 to 1852, and from a selection of historically significant voyages, 1492 to 1918. We offer numerical estimates of introduction risk across historically realistic ranges of journey time and ship population size, and show that both steam travel and shipping regimes that involved frequent, large-scale movement of people substantially increased risk of transoceanic pathogen circulation.