To Trade or Not to Trade
Tariffs and corporate political activity: A survey experiment on US businesses
Lindsay Dolan et al.
Business and Politics, forthcoming
Abstract:
The trade war with China has cost US producers and consumers hundreds of billions of dollars since 2018. Yet relatively few US businesses took action to oppose it. This study reports the results of an elite survey experiment on business political activity toward trade policy. Researchers presented business managers with information about the input costs of the new tariffs to their bottom line -- information that most subjects acknowledged that they lacked -- and invited them to take political action to express support or opposition to these tariffs. The results suggest that the novel information on economic costs did not significantly increase managers’ propensity to contact members of Congress, donate to political campaigns, sign petitions, or join social media groups. We also found that the firm’s political culture (liberal or conservative) did not significantly influence the effectiveness of the treatment. However, descriptive analysis showed that firm political culture was strongly related to the company’s support for the trade war, suggesting that these preexisting political beliefs were resistant to new information provided in our experiment even if that information could affect the company’s bottom line.
Firm Trade Exposure, Labor Market Competition, and the Worker Incidence of Trade Shocks
Jeronimo Carballo & Richard Mansfield
NBER Working Paper, February 2025
Abstract:
This paper examines how the composition of firm exposure and competition among imperfectly substitutable workers mediate the earnings, welfare, and unemployment incidence of changes in the international trade environment. We merge LEHD job match records with firm-level import and export records from the LFTTD and use them to estimate a large-scale assignment model of the entire U.S. labor market. The model flexibly accommodates frictions from switching regions, industries, trade engagement status, and even particular employers. We construct firm-level estimates of the employment impact of China's WTO entry using exogenous tariff gap variation via four different channels, import and export competition and import and export access, and combine them with the model to evaluate the shock's worker-level incidence. Our results show that the firm composition of shock exposure does matter for medium-run worker-level earnings incidence, with workers at the highly exposed multinational manufacturing firms experiencing the largest shock-induced earnings losses. However, labor market competition causes the shock's impact to spread to seemingly unaffected sectors and trickle down the skill ladder, so that entry-level non-traded service workers and initially unemployed job-seekers account for a large share of earnings losses and particularly unemployment increases.
Relative exposure to negative economic shocks, racial animus, and voting
Daniel Jones, Erica Owen & Rena Sung
University of Pittsburgh Working Paper, January 2025
Abstract:
We examine how relative exposure to negative local economic shocks across racial groups impacts racial animus and voting patterns, guided by group position theories of racism. We expect that when the dominant group experiences greater negative economic effects than a non-dominant group, racial animus among the dominant group is greater. Using data from U.S. commuting zones (2000-2020), we focus on the impact of the China shock on anti-Black racial animus. We measure relative exposure as the gap in import exposure between white and Black workers. Our findings show that negative economic shocks disproportionately affecting white workers, compared to Black workers, lead to increased anti-Black animus and increased Republican presidential vote share, even when controlling for overall import exposure. Taken together, these findings suggest that it is economic decline relative to another group that generates racial animus and outwardly racist behavior, as well as influencing political behavior.
Revealed comparative disadvantage of infants: Exposure to NAFTA and birth outcomes
Hamid Noghanibehambari
Journal of International Economics, forthcoming
Abstract:
This paper investigates the relationship between regional exposure to trade liberalization under the North American Free Trade Agreement (NAFTA) and infant health outcomes in the U.S., focusing on differences in impact across areas with varying levels of import competition. I explore this question by implementing event studies and difference-in-difference regressions that compare birth outcomes of infants born in different years relative to NAFTA and localities with differential exposure to import competition. Using more than 88 M birth records of Natality data, I find significant negative effects on a wide range of birth outcomes. The adverse effects are much larger for infants at the lower tails of birth weight and gestational age distribution. Additional analyses using a wide range of alternative data sources suggest several potential pathways, including reductions in income-employment, decreases in housing wealth, lower health care utilization, lower health insurance use, and lower-quality health insurance.
Global Value Chains and Union Decline in Rich Democracies
Matthew Mahutga, Manjing Gao & Roshan Pandian
American Sociological Review, forthcoming
Abstract:
This article reassesses the classic thesis linking the globalization of production to union decline. Our argument is three-fold. First, prior literature does not appreciate how the exchange conditions characterizing global value chain (GVC) relations between leading firms in rich democracies and supplier firms in less developed countries (LDCs) can undermine unionization through trade. Second, the worldwide entrenchment of GVCs as an organizational form over time, and cross-national variation in the strength and scope of two key labor market institutions (wage-coordination and Ghent systems), should moderate the effect of LDC trade on unionization. Third, trade with LDCs is endogenous in models of union decline, because high unionization often leads to offshoring. Empirically, we use an instrumental variable (IV) design and a panel dataset covering the longest historical period studied to date. IV estimates suggest that trade with LDCs reduces unionization in rich democracies; these estimates are nearly three times as large as results obtained by OLS, and they increase in size as GVCs entrench worldwide. Estimates also weaken in countries with highly coordinated wage-setting institutions and Ghent systems. Nevertheless, conditional effects and counterfactual histories suggest that GVCs cause union decline even in countries with the most union-friendly institutions, and were more important for union decline overall than either wage-coordination or Ghent systems.
Blowback: When China’s Belt and Road Initiative Meets Democratic Institutions
Andrea Ghiselli & Pippa Morgan
International Studies Quarterly, March 2025
Abstract:
China’s Belt and Road Initiative (BRI) has two interconnected goals: increasing China’s diplomatic clout and expanding the presence of Chinese companies overseas. However, contrary to the intuitive notion that good diplomacy creates economic opportunities, we argue that when the partner country is a democracy, these goals conflict. First, we hypothesize and quantitatively uncover a negative relationship between host state democratic institutions and infrastructure contracts won by Chinese firms overseas. Second, we test whether host states’ joining the BRI affects contract volumes. Our results indicate that in states with more democratic institutions, host government joining of the BRI is negatively associated with infrastructure contracts for Chinese companies, pointing to blowback in democracies against the BRI. This study contributes to understanding the complex relationship between diplomacy and commerce, the domestic politics of foreign countries in shaping Chinese foreign policy, and the factors driving China's overseas infrastructure contracting.
Putting Countries on the Map? Pastoral Visits of John Paul II and International Trade
Alexander Popov
Economic Journal, forthcoming
Abstract:
During his Pontificate from 1979 until 2005, Pope John Paul II visited 130 countries, more than the 263 Popes before him combined. I document a significant increase in exports to trading partners with a relatively high share of Catholics following a Pastoral visit, leading to a non-negligible increase in aggregate exports. The biggest beneficiaries in terms of increased trade are visited countries that are at lower stages of economic development and have relatively fewer Catholics and relatively weaker trade links. The effect is absent for other prominent episodes, such as visits by celebrated secular leaders or global sports events.
The decline of manufacturing employment and the rise of the far-right in Austria
Karim Bekhtiar
Journal of Public Economics, February 2025
Abstract:
In recent decades, right-wing populist parties have experienced increased electoral success in many Western democracies. This rise of the far-right, which is strongly built on the support of the working class, coincides with a sharp decline of the manufacturing sector. This paper analyzes the contribution of this manufacturing decline to the rise of the Austrian far-right. Overall, the decline in manufacturing employment has strongly contributed to this rightward shift in the political landscape, with the manufacturing decline explaining around one-third of the observed increase in far-right vote-shares between 1995 and 2019. Regarding the influences of the forces underlying the manufacturing decline, namely international trade and automation technologies, suggests that both forces contributed in roughly equal parts to this development.
An Empire Lost: Spanish Industry and The Effect of Colonial Markets on Peripheral Innovation
Dario Romero
NYU Working Paper, May 2024
Abstract:
This paper examines the impact of international market access on the trajectory of technical change using a historical trade shock that reshaped the Spanish textile industry in the late 19th century. Exploiting the effects of a trade policy change in 1891 that raised out-of-the-empire tariffs and forced the purchase of manufactured cotton goods from the metropole's producers by its colonies, I empirically document a significant increase in cotton textile innovation relative to other fabrics. Moreover, I demonstrate the presence of path dependence in innovation, as the disparity in textile innovation between cotton and other fabrics persisted even after the colonies' independence in 1898. Further analysis reveals that the relative prices of cotton fabrics and benefits accrued by cotton firms played a crucial role in stimulating cotton innovation. These results suggest that the innovation observed was not limited to the mere adoption of foreign technology but instead reflected local conditions in shaping incentives for local innovators to develop technologies tailored to specific local requirements. These findings contribute to the literature on the causal relationship between international trade, foreign markets, and the direction of technical change, shedding light on the possibility of innovation in peripheral countries.
The leisure gains from international trade
Agustín Velásquez
Journal of International Economics, May 2025
Abstract:
The average number of hours worked has been declining in many countries. If workers have preferences such that income effects outweigh substitution effects, then a welfare-improving response to rising income is to reduce labor supply to enjoy more leisure time. Using a multi-country Ricardian trade model, I derive an hours-to-trade elasticity that is composed by the wage (Marshallian) and trade elasticities. I estimate the hours-to-trade elasticity by exploiting exogenous income variation generated by trade. Findings suggest that a one percent increase in imports (as share of GDP) leads to a 0.17 percent decline in hours per worker. This implies dominating income effects backed by a wage elasticity of -0.16 and a trade elasticity close to unity. I quantify that the rise in trade openness between 1950 and 2014 explains, on average, 7.4 percent of the total decline in hours per worker in high-income countries.