Customs
Anthony Landry
Economics Letters, August 2013, Pages 318-322
Abstract:
I provide new estimates of border frictions for 14 countries using local, national, and international Big Mac prices. I find that borders generally introduce only small price wedges, far smaller than those observed across New York City neighboring locations.
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Import Competition and the Great U.S. Employment Sag of the 2000s
Daron Acemoglu et al.
MIT Working Paper, May 2013
Abstract:
Even before the Great Recession, U.S. employment growth was unimpressive. Between 2000 and 2007, the economy gave back the considerable jump in employment rates it had achieved during the 1990s, with major contractions in manufacturing employment being a prime contributor to the slump. The U.S. employment "sag" of the 2000s is widely recognized but poorly understood. In this paper, we explore an under-appreciated force contributing to sluggish U.S. employment growth: the swift rise of import competition from China. We find that the increase in U.S. imports from China, which accelerated after 2000, was a major force behind recent reductions in U.S. manufacturing employment and that through input-output linkages with the rest of the economy this negative trade shock has helped suppress overall U.S. job growth.
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Paying a Visit: The Dalai Lama Effect on International Trade
Andreas Fuchs & Nils-Hendrik Klann
Journal of International Economics, forthcoming
Abstract:
Is political compliance a precondition for healthy trade relations with China? The Chinese government frequently threatens that meetings between its trading partners' officials and the Dalai Lama will be met with animosity and ultimately harm trade ties. We run a gravity model of exports to China from 159 partner countries between 1991 and 2008 to test the extent to which bilateral tensions affect trade with autocratic China. In particular, we empirically investigate whether countries that receive the Dalai Lama despite China's opposition experience a significant reduction in their exports to China. In order to account for the potential endogeneity of meetings with the Dalai Lama, the number of Tibet Support Groups and the travel pattern of the Tibetan leader are used as instruments. Our empirical results support the idea that countries officially receiving the Dalai Lama at the highest political level are punished through a reduction of their exports to China. However, this ‘Dalai Lama Effect' is only observed for the Hu Jintao era and not for earlier periods. Furthermore, we find that this effect is mainly driven by reduced exports of machinery and transport equipment and that it disappears in the second year after a meeting took place.
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Digital Piracy Justification: Asian Students Versus American Students
Szde Yu
International Criminal Justice Review, June 2013, Pages 185-196
Abstract:
The literature has shown that digital piracy is more rampant in Asia and Asians are often found to have a more favorable attitude toward digital piracy in research. This study examines the attitude toward justifying digital piracy in light of the techniques of neutralization. A comparison is made between Asian international students and American students. The result shows Asian international students are significantly more likely to justify digital piracy, but their general morality is not significantly different from American students. This finding supports neutralization theory in that people do not need to change their moral belief to favor criminal behavior as long as they can apply the techniques of neutralization to justify it. Moreover, Asian Americans, among all racial groups in the American sample, are the only group that does not show significant difference in their digital piracy justification, compared to the Asian international students. Considering that Asian Americans and Asian international students rarely share the same social environment in their upbringing, this finding further suggests there is something about being Asian, rather than social factors, that endorses digital piracy justification.
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Globalization, Factor Mobility, Partisanship, and Compensation Policies
Wonjae Hwang & Hoon Lee
International Studies Quarterly, forthcoming
Abstract:
This paper examines the relationship between economic globalization, factor mobility, government partisanship, and the relative budgetary salience of two different instruments of compensation policies: social welfare spending and industrial subsidy provision. While welfare spending directly benefits labor, industrial subsidies benefit both capital owners and labor along the sectoral line. Based on both factoral and sectoral models of trade, we theoretically argue and empirically show that governments are more likely to use welfare politics as compensation policies if free trade generates class-based interests in the society, and subsidy politics if trade openness promotes industry-based interests. We also argue that the interactions of the three variables are contingent on government partisanship. When non-class-based interests are salient as a consequence of trade openness, left-wing governments are likely to focus on welfare politics while right-wing governments favor provision of subsidies. However, when class-based interests are salient, even right-wing governments behave similarly to left-wing governments, favoring welfare spending over subsidies as the key compensation policy. In the analysis of compensation policies in the OECD countries between 1980 and 2001, the test results confirm our expectations.
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Offshoring, Wages, and Employment: Theory and Evidence
Guru Sethupathy
European Economic Review, August 2013, Pages 73-97
Abstract:
This paper investigates the wage and employment effects of offshoring. I use firm-level data and two events in Mexico as a natural experiment to identify the effects of a fall in the marginal cost of offshoring to Mexico. I find that domestic wages actually rise at U.S. firms likely to take advantage of this new offshoring opportunity. At the same time, domestic wages fall at U.S. firms unlikely to take advantage of this opportunity. Furthermore, I find no evidence of greater domestic job loss at the former compared to the latter firms. These findings are consistent with productivity effects from offshoring. To explain the mechanism, I develop a theoretical framework that combines heterogeneous firms with imperfect labor markets and rent-sharing. Firms likely to take advantage of new offshoring opportunities increase their productivity and profitability at the expense of their competitors. Through rent-sharing, this channel leads to higher domestic wages at the former firms relative to the latter. Further, there is no empirical evidence of greater domestic job loss at the firms likely to expand their offshoring compared to their competitors that are unlikely to increase their offshoring.
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Trade expansion and employment generation: How mercantilist does China have to be?
Xiao Jiang
International Review of Applied Economics, forthcoming
Abstract:
We conduct an input-output analysis of China's employment changes due to changes in trade structure on a sectoral level. We find that between 2002 and 2007 China generated about 71 million jobs due to trade expansion. We also estimate the additional amount of trade that would be needed if China were using its trade surplus as the main tool to absorb its excess labour. Given the magnitude of this estimated amount, we conclude that this ‘mercantilist' approach to excess labour absorption is not feasible. Finally, using Spearman rank correlation analysis, we find that the ranking of China's sectors' employment generation capacities is inversely related to the ranking of these sectors' trade performances. This suggests that the ‘mercantilist' approach to excess labour absorption is not only infeasible but also inefficient. We end the paper by suggesting a more balanced growth path for China.
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How Foreign Direct Investment Promote Institutional Quality: Evidence from Vietnam
Anh Duc Dang
Journal of Comparative Economics, forthcoming
Abstract:
Using a unique dataset from a provincial competitiveness survey and the rising foreign direct investment (FDI) from joining the World Trade Organization (WTO), I find that variations in economic institutions across the provinces of Vietnam are associated with the flow of foreign investment. To overcome endogeneity problems, I use the minimum distance from each province to a main economic centre as an instrument for foreign investment inflows. The instrumental variable approach shows that the direction of influence is from greater foreign investment to better institutions. These results hold after controlling for various additional covariates, and are also robust to various alternative measures of institutions. I also find that foreign direct investment has greater short-term impacts on institutional quality in the northern provinces.
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Is the Washington Consensus Dead? Growth, Openness, and the Great Liberalization, 1970s-2000s
Antoni Estevadeordal & Alan Taylor
Review of Economics and Statistics, forthcoming
Abstract:
According to the Washington Consensus, developing countries' growth would benefit from reductions in barriers to trade. However, the empirical basis for judging trade reforms is weak. Econometrics are mostly ad hoc; results are typically not judged against models; policies are poorly measured; and most studies are based on pre-1990 experience. We address these concerns - by employing a model with capital and intermediate goods; by compiling new disaggregated tariff measures; and by employing treatment/control regression analysis with differences-in-differences. We find that a specific treatment, liberalizing tariffs on imported capital and intermediate goods, did lead to faster growth, consistent with the model.
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Antidumping and Production-Line Exit: The Case of the US Steel Industry
Bruce Blonigen, Benjamin Liebman & Wesley Wilson
Review of Industrial Organization, June 2013, Pages 395-413
Abstract:
We present and examine a novel data set that contains production line information inside US steel plants. We exploit this highly disaggregated data to perform the first study of entry and exit behavior at the level of the production line within individual plants. Our empirical analysis reveals a number of interesting results. First, smaller production lines are more likely to shut down, as are lines that are owned by larger firms. Younger production lines and lines that have undergone modernization are more likely to survive. Our results indicate that lines that are operated by integrated producers are more likely to exit. We find no evidence, however, that antidumping decreases the likelihood of exit, despite the steel industry's frequent use of antidumping protection.
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Does China's trade expansion help African development? - An empirical estimation
Yong He
China Economic Review, September 2013, Pages 28-38
Abstract:
This paper uses Comtrade panel data to assess the impacts of imports from China, in comparison with those from the United States and France, on Sub-Saharan African manufactured exports (as proxies of production performance). It is found that Chinese impacts are significantly positive in all sectors and in general Chinese impacts are stronger than those of the United States and France. A South-South trade theoretical framework is then explored to interpret this finding: When the absorptive capability of a poorly-developed country is quite limited and (or) a sizeable substitution effect of importing intermediate goods on this country's local production is present, it is better to import from a Southern country with a superior technology than from a Northern country with a very advanced technology. Therefore, my finding has provided evidence that China's increasing trade with Africa is helpful to African economic development.
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Social Psychology and Public Support for Trade Liberalization
Karl Kaltenthaler & William Miller
International Studies Quarterly, forthcoming
Abstract:
This study argues that a central factor in the determinants of citizen attitudes toward trade is the social psychology of the individual in question. Namely, we contend that the level of social trust an individual has will condition the degree to which an individual wants to open her country to imports from other countries. Those individuals with lower relative levels of social trust are less likely to support the notion of freer trade. We base this contention on the logic that those people who are distrustful of people in general are more likely to distrust that which comes from people who are unknown to them, such as goods coming into their country from abroad. This argument is a departure from previous studies of public attitudes toward trade, which have focused on various economic utilitarian considerations and xenophobia that shape citizen attitudes toward trade liberalization. To test our argument, we employ data from the 1995-1997 wave of the World Values Survey. Using a logit regression analysis, we find, as predicted, that the more social trust an individual has, the more likely that person is to support the idea of liberalized trade.
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Dispositional Sources of Economic Protectionism
Christopher Johnston
Public Opinion Quarterly, forthcoming
Abstract:
Despite the increasing salience of issues related to free trade, research on citizen preferences over trade is sparse, and largely limited to economic explanations related to objective exposure. The present paper extends this literature by examining the psychological sources of the protectionist impulse. More specifically, I theoretically and empirically examine how citizens' chronic needs for security and certainty, key traits identified by recent work in the political realm, influence their preferences for protectionism. Examining data from three different national surveys in the U.S. context, I find strong support for the role of these dispositions. In addition to extending our understanding of the antecedents of trade preferences, the present paper has implications for the study of personality and politics, suggesting heterogeneity in the relationship of dispositions to ideology across issue domains. I also discuss the broader implications for American politics, arguing that these findings suggest latent tensions within contemporary party coalitions.
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Estimating the foreign circulation of banknotes
Nikolaus Bartzsch, Gerhard Rösl & Franz Seitz
Economics Letters, May 2013, Pages 165-167
Abstract:
In this paper, we analyze the volume of Euro banknotes issued by Germany and circulating in other Euro area countries as well as outside the Euro area with a banknotes' age model. Our approach suggests that about 60% of banknotes, the equivalent of around € 225 billion, is held abroad.
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The impact of corruption on FDI: Is MENA an exception?
Heba Helmy
International Review of Applied Economics, forthcoming
Abstract:
The eruption of the Arab Spring in Tunisia and Egypt was ensued by deterioration in FDI inflows. Whether a new Middle East free of corruption accompanying previous dictatorships will offset the negative ramifications of the uprisings and enhance FDI in the long run remains debatable. Since the evidence on the causal relationship between corruption and FDI is inconclusive, this study attempts to take another step. The paper investigates the link between corruption and FDI flows to the Middle East and North Africa (MENA) and assesses whether or not corruption has more importance than other FDI determinants. By employing several panel settings with various econometric specifications on 21 MENA countries over the period 2003 to 2009, it is demonstrated that FDI varies positively with corruption. Additionally, FDI in MENA was found to vary positively with per capita income, openness, freedom and security of investments and negatively with the tax and homicide rates. Since corruption was not found to hinder FDI inflows, treating corruption should be based on sound legal procedures that infringe neither on the rights, freedom and security of FDI nor on the degree of openness and freedom of the economy, which are the real stimulants of FDI in MENA.
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Culture, geography and institutions: Empirical evidence from small-scale banking
Franz Hahn
Economic Journal, forthcoming
Abstract:
Empirical evidence increasingly supports the notion that cultural closeness plays a role in economics. In this paper we explore one of the channels through which culture may directly affect economic activities. We find evidence that common cultural heritage has a statistically and economically significant effect on cross-border bank loans (even after geographical closeness and institutional convergence has been taken into account) flowing from Austria's local and regional banks to clients residing in one of the neighbouring Eastern European EU member states. In order to compile formal statistical evidence that common culture plays a role in cross-border bank lending we developed a new instrument of cultural distance that measures Austria's cultural proximity to its neighbouring Eastern countries on the basis of the prevalence of common Austrian surnames with onomastic origins lying in geographic areas of the present-day Czech Republic, Slovak Republic, Hungary and Slovenia, respectively.
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Why Trucks Jump: Offshoring and Product Characteristics
Phillip McCalman & Alan Spearot
Journal of International Economics, forthcoming
Abstract:
In this paper, we study the role of vertical product differentiation in the decision to allocate production between domestic and foreign plants. To do so, we examine the first wave of light-truck offshoring to Mexico that occurred due to substantially lower post-NAFTA trade barriers and a coincident increase in US demand for light trucks. In contrast to the typical assumption, but similar to many other industries, the need for additional capacity was accommodated by investment in both the US and Mexico for the same models of light trucks. Using a new dataset that details the extent of offshoring and domestic production within models, we document sharp differences in how capacity was utilized. Specifically, within models, we find that automakers offshored varieties which tend to be older in design vintage, lower scale, and less complex to produce. In contrast, we find that varieties "inshored" to newer capacity in the US exhibit the opposite characteristics. This highlights the important role of vertical differentiation and the associated variation in production complexity for the sorting of production across borders. A product with a large degree of vertical differentiation may provide scope for a firm to maximize profits by "inshoring" the more complex varieties while offshoring the less complex versions.
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Business in troubled waters: Does adverse attitude affect firm value?
Jung Chul Park et al.
Journal of Corporate Finance, forthcoming
Abstract:
This paper investigates the relationship between US MNCs' valuations and anti-Americanism in countries where MNCs' foreign subsidiaries are located. We find that MNCs suffer value-destruction when they enter markets where people express severe anti-Americanism. However, we uncover that geographic diversification into these high anti-Americanism countries significantly increases firm value if the MNC has high levels of intangibles such as technological know-how and marketing expertise. Our findings are consistent with the notion that the advantages from internalizing the cross-border transfer of intangibles are greater when barriers to competition are higher.
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Wade Cole
Social Forces, forthcoming
Abstract:
Economic and social rights are understudied, and the core international treaty covering these rights - the International Covenant on Economic, Social, and Cultural Rights (ICESCR) - has rarely been analyzed. This paper examines the effect of the ICESCR on (1) labor rights in law and practice and (2) the constitutionalization of socioeconomic rights. Membership in the ICESCR paradoxically improves de facto labor practices but not de jure labor rights laws. This effect represents an instance of "substance without ceremony," and is consistent with recent empirical findings on the effects of global institutionalization. Treaty membership also prompts countries to enact constitutional provisions regarding socioeconomic rights, albeit in purely aspirational language. Countries that ratify the ICESCR remain hesitant to formulate such rights in enforceable terms.
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Everett Peterson et al.
American Journal of Agricultural Economics, forthcoming
Abstract:
Empirically assessing sanitary and phytosanitary regulations has proven difficult because most data sources indicate whether a regulation exists but provide no information on the type or importance of the respective measure. In this article, we construct a novel database of U.S. phytosanitary measures and match these to 47 fresh fruit and vegetable product imports from 89 exporting countries over the period 1996-2008. A product-line gravity equation that accounts for zero trade flows is developed to investigate the trade impact of different pest-mitigation measures. While the results suggest that phytosanitary treatments generally reduce trade, the actual restrictiveness of these measures diminishes dramatically as exporters accumulate experience, and it vanishes when exporters reach a certain threshold. The results have important policy implications considering the number of empirical studies that find a negative impact of non-tariff measures on trade.
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The Heterogeneous Effects of Trade Protection: A Study of US Antidumping Duties on Portland Cement
Maya Cohen-Meidan
Review of Industrial Organization, June 2013, Pages 369-394
Abstract:
For many traded products, high transportation and trade costs can lead to regionally segmented markets, which affect both the pattern of trade and the impact of trade policy. This paper studies the imposition of antidumping duties in the cement industry and finds striking regional variation in their impact on domestic prices, sales and imports. Duties that were imposed on Japanese producers that were shipping cement to the US West-Coast coastal markets led to imperfect substitution to other imports, which allowed domestic prices and production to increase. Imperfect substitution also occurred following duties that were imposed on Mexican producers that were shipping cement to the US Gulf of Mexico coastal markets. But in the US Southwest border markets, the same duties had no impact on the domestic prices of cement. I link the variation in responses across regions to hysteresis that was due to high exit costs.