Trade Wars
Partisanship in the Trump Trade War: Evidence from County-Level Crop Planting Data
Shannon Carcelli & Kee Hyun Park
International Studies Quarterly, December 2024
Abstract:
In 2018, the US-China trade war drove down the price of many US agricultural goods. While many farmers responded by planting alternative crops instead, others continued planting the low-value crops, with a high cost to their bottom line and resulting in a large number of agricultural bankruptcies. Why did some farmers disregard their own economic interests and plant low-value crops during the trade war? We argue that political preferences partially explain farmer behavior. Matching geo-referenced crop data to product-level sanctions lists from China, we calculate county-level changes in the planting of crops affected by the tariffs. We find that counties with a higher Trump vote share in the 2016 election were significantly less likely to change planting decisions due to the trade war. This suggests that partisanship may affect the economy more broadly than previously realized.
The Effect of Education on Support for International Trade: Evidence from Compulsory-Education Reforms
Omer Solodoch
International Organization, Fall 2024, Pages 800-822
Abstract:
Across countries and over time, support for economic globalization is strongest among individuals with the highest levels of education. Yet despite long-lasting debates on the sources of this correlation, reliable evidence that isolates the causal effect of education from the nonrandom selection of individuals into education is lacking. To address this fundamental issue, I exploit compulsory-schooling reforms that increased the minimum school-leaving age in eighteen countries. Employing a fuzzy regression discontinuity design, I find that the reform-induced added years of education substantially and durably increased support for trade liberalization. And using new data on the content of school curricula, I find that the effect of schooling largely stems from instilling tolerance and pluralism in citizens and reducing the perceived cultural threat of globalization. In contrast, there is little evidence that the effect of schooling reflects the distributive consequences of international trade, separating globalization winners and losers.
Atlantic Trade and Conflict in Europe
Reshad Ahsan, Laura Panza & Yong Song
Economic Journal, forthcoming
Abstract:
We use over 200 years of conflict and wheat price data to provide the first quantitative evidence that Atlantic trade reduced conflict in Europe. While other determinants of intra-European conflict during the Early to Late Modern period have been proposed, the role of Atlantic trade has not been previously explored due to a lack of historical trade data. We overcome this constraint by using wheat prices to calculate time-varying measures of price pass-through between Europe and the New World, which we use as a proxy for Atlantic trade. To identify the causal effects of Atlantic trade, we exploit exogenous changes in wind patterns and tropical cyclone activity over the Atlantic Ocean to instrument trade. Our results suggest that a one standard deviation increase in Atlantic trade resulted in a 0.157 standard deviation decrease in intra-European conflict onset. We also find empirical support for Atlantic trade increasing real wages and reducing military sizes in Europe, which is consistent with the idea that the possibility of forgone Atlantic trade acted as a deterrent to conflict.
Putting the news in New York and New Orleans: The impact of information frictions on trade
James Harrison
Review of World Economics, November 2024, Pages 1167-1202
Abstract:
It is notoriously difficult to estimate the impact of information frictions on trade. The 1866 transatlantic telegraph connection has been used to estimate these impacts, but I demonstrate this sample violates the assumptions of an arbitrage model in ways that are likely to bias empirical result. I avoid this bias by constructing a novel dataset that meets all relevant assumptions during the 1848 rollout of the telegraph across the U.S., ultimately estimating the magnitude of the distortions on prices, quantities, and efficiency to be roughly half as large as those found in prior literature.
Economic origins of border fortifications
Afiq bin Oslan
Journal of Peace Research, forthcoming
Abstract:
Why do contemporary states fortify their borders? Modern military advancements have made such fortifications obsolete for security, yet scholars have offered no satisfactory alternative theory. I propose a theory of fortifications with economic motivations using a game-theoretic model where states compete to extract wealth over a shared population around a border. Such competition generates inefficiency and states have the option to construct fortifications to disrupt competition. Fortifications contain the wealth of citizens inside the state to be taxed and enforce efficient monopolies of extraction. States hence fortify when such profits outweigh short-term expenses. The models suggest that we should expect fortifications between territories of unequal economic capacities as richer states have more to lose from inefficient competition, complementing existing empirical results.
Import Penetration and Corporate Misconduct: A Natural Experiment
Christopher Dupuis & Ying Zheng
Journal of Business Ethics, December 2024, Pages 475-506
Abstract:
Corporate misconduct receives significant attention in the business ethics literature. This paper studies how corporate misconduct is impacted by import penetration from China, which is largely exogenous to the U.S. product market. Using this natural experiment, we find that heightened Chinese import penetration curbs corporate misconduct of U.S. firms. The effect is more pronounced for firms with weaker corporate governance and firms more vulnerable to product market competition. The findings provide implications for firms facing increased import penetration. Firms may consider improving corporate governance and exploring avenues for differentiation as potential strategies to cope with the competition. In addition, we address the exogeneity concern derived from the influence of Chinese value penetration. Furthermore, we find that competition-related policies such as tariff reduction and U.S. granting China Permanent Normal Trade Relations (PNTR) status also lower corporate misconduct. Our work adds to the debates on competition and corporate misconduct in a cross-country competitive landscape.