Shipping the jobs
Winners and Losers in International Trade: The Effects on U.S. Presidential Voting
Bradford Jensen, Dennis Quinn & Stephen Weymouth
NBER Working Paper, January 2016
Abstract:
This paper studies how international trade influences U.S. presidential elections. We expect the positive employment effects of expanding exports to increase support for the incumbent's party, and job insecurity from import competition to diminish such support. Our national-level models show for the first time that increasing imports are associated with decreasing incumbent vote shares, and increasing exports correlate with increasing vote shares for incumbents. These effects are large and politically consequential. We also construct U.S. county-level measures of employment in high- and low-skill tradable activities. We find increases in incumbent vote shares in counties with concentrations of employment in high-skilled tradable goods and services, and decreases in counties with concentrations of employment in low-skilled manufactured goods. Incumbent parties are particularly vulnerable to losing votes in swing states with high concentrations of low-skilled manufacturing workers with increasing trade exposure. Thus there is an Electoral College incentive to protect this sector.
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Trade, Education, and The Shrinking Middle Class
Emily Blanchard & Gerald Willmann
Journal of International Economics, forthcoming
Abstract:
We develop a new model of trade in which educational institutions drive comparative advantage and the distribution of human capital within and across countries. Our framework exploits a multiplicity of sectors and a continuous support of human capital choices to demonstrate that freer trade can induce crowding out of the middle occupations towards the skill acquisition extremes in one country and simultaneous expansion of middle-income industries in another. Individual gains from trade may be non-monotonic in workers' ability, and middle ability agents can lose the most from trade liberalization. Comparing trade and education policy, our model indicates that targeted education subsidies like Trade Adjustment Assistance are the most effective mechanism to bolster the middle class.
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Jeffrey Frankel
NBER Working Paper, January 2016
Abstract:
After a 30-year absence, calls for international coordination of macroeconomic policy are back. This time the issues go by names like currency wars, taper tantrums, and fiscal compacts. In traditional game theory terms, the existence of spillovers implies that countries are potentially better off if they coordinate policies than under the Nash non-cooperative equilibrium. But what is the nature of the spillover and the coordination? The paper interprets recent macroeconomic history in terms of four possible frameworks for proposals to coordinate fiscal policy or monetary policy: the locomotive game, the discipline game, the competitive depreciation game and the competitive appreciation game. (The paper also considers claims that monetary coordination has been made necessary by the zero lower bound among advanced countries or financial imperfections among emerging markets.) Perceptions of the sign of spillovers and the direction of proposed coordination vary widely. The existence of different models and different domestic interests may be as important as the difference between cooperative and non-cooperative equilibria. In some cases complaints about foreigners' actions and calls for cooperation may obscure the need to settle domestic disagreements.
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Contracting and the Division of the Gains from Trade
Andrew Bernard & Swati Dhingra
NBER Working Paper, October 2015
Abstract:
This paper examines the microstructure of import markets and the division of the gains from trade among consumers, importers and exporters. When exporters and importers transact through anonymous markets, double marginalization and business stealing among competing importers lead to lower profits. Trading parties can overcome these inefficiencies by investing in richer contractual arrangements such as bilateral contracts that eliminate double marginalization and joint contracts that also internalize business stealing. Introducing these contractual choices into a trade model with heterogeneous exporters and importers, we show that trade liberalization increases the incentive to engage in joint contracts, thus raising the profits of exporters and importers at the expense of consumer welfare. We examine the implications of the model for prices, quantities and exporter-importer matches in Colombian import markets before and after the US-Colombia free trade agreement. US exporters that started to enjoy duty-free access were more likely to increase their average price, decrease their quantity exported and reduce the number of import partners.
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Exporting Sweatshops? Evidence from Myanmar
Mari Tanaka
Stanford Working Paper, November 2015
Abstract:
While literature implies that access to the markets in high-income countries increases firm sizes and productivity in developing countries, how exporting and such changes affect employees' working conditions is largely unknown. In this paper, I investigate the causal effect of exporting on working conditions in Myanmar manufacturing firms. This analysis draws on a new survey I conducted on Myanmar manufacturing firms from 2013 to 2015. For identification, I use a natural experimental setting in Myanmar, where export profitability was highly limited in the mid 2000s, but significantly increased in the later years. I employ an instrumental variable strategy that examines the product and geographical characteristics of firms in 2005 that affected exporting status from 2013 to 2015. The results imply that exporting has significant positive effects on fire safety, health management, union formation, wage and the likelihood of receiving a labor compliance audit. The results also indicate that exporting led to increases in firm size and the adoption of management practices recommended in developed countries.
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Do the poor benefit from globalization regardless of institutional quality?
Andreas Bergh, Irina Mirkina & Therese Nilsson
Applied Economics Letters, forthcoming
Abstract:
Despite significant progress towards the Millennium goals, more than one billion people live on less than 1.25 US dollars per day. Previous research suggests that globalization stimulates poverty reduction, but does not investigate what role institutions play in this relationship. Theoretically, globalization could act as either a complement or a substitute to institutional quality in reducing poverty. We find that the poverty-reducing effect of globalization is stronger when institutions are weak. In particular, increasing social globalization reduces poverty more when corruption is high and democratic accountability is low. Thus, globalization has the power to reduce poverty even in countries with low institutional quality.
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Migrants, Ancestors, and Investments
Konrad Burchardi, Thomas Chaney & Tarek Hassan
NBER Working Paper, January 2016
Abstract:
We use 130 years of data on historical migrations to the United States to show a causal effect of the ancestry composition of US counties on foreign direct investment (FDI) sent and received by local firms. To isolate the causal effect of ancestry on FDI, we build a simple reduced-form model of migrations: migrations from a foreign country to a US county at a given time depend on (i) a push factor, causing emigration from that foreign country to the entire United States, and (ii) a pull factor, causing immigration from all origins into that US county. The interaction between time-series variation in country-specific push factors and county-specific pull factors generates quasi-random variation in the allocation of migrants across US counties. We find that a doubling of the number of residents with ancestry from a given foreign country relative to the mean increases by 4.2 percentage points the probability that at least one local firm invests in that country, and increases by 31% the number of employees at domestic recipients of FDI from that country. The size of these effects increases with the ethnic diversity of the local population, the geographic distance to the origin country, and the ethno-linguistic fractionalization of the origin country.
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Globalization and Collective Labor Rights
Robert Blanton & Shannon Lindsey Blanton
Sociological Forum, forthcoming
Abstract:
The impact of globalization has been a perennial source of contention, and issues regarding labor rights have been a visible aspect of this struggle. Despite the popular controversy about a potential "race to the bottom" regarding globalization and labor rights, the empirical record on these linkages remains mixed. Moreover, despite the multifaceted nature of globalization, extant literature in this area has focused purely on several specific facets of economic globalization, such as trade and FDI. We focus on two additional aspects of globalization, social and political integration, as well as a broadly based measure of economic globalization, and examine how they influence collective labor rights - both in terms of labor laws, as well as their enforcement in practice - in the developing world from 1986 to 2002. We find that all three facets of globalization are negatively related to labor rights. Specifically, social, political, and economic globalization are related to the decoupling of labor practices from extant labor laws; that is, labor practices deteriorate while labor laws remain largely unaffected.
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Did China Tire Safeguard Save U.S. Workers?
Sunghoon Chung, Joonhyung Lee & Thomas Osang
European Economic Review, forthcoming
Abstract:
Although temporary trade barriers are perceived as a feasible policy instrument for securing domestic jobs in the presence of increased globalization and economic downturns, no study has assessed whether such temporary barriers have actually saved domestic jobs. To overcome this deficiency, we evaluate the China-specific safeguard case on consumer tires petitioned by the United States. Contrary to claims made by the Obama administration, we find that total employment and average wages in the tire industry were unaffected by the safeguard. Further analysis reveals that this result is not surprising as we find that imports from China are completely diverted to other exporting countries partly due to the strong presence of multinational corporations in the world tire market.
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Cables, Sharks and Servers: Technology and the Geography of the Foreign Exchange Market
Barry Eichengreen, Romain Lafarguette & Arnaud Mehl
NBER Working Paper, January 2016
Abstract:
We analyze the impact of technology on production and trade in services, focusing on the foreign exchange market. We identify exogenous technological changes by the connection of countries to submarine fiber-optic cables used for electronic trading, but which were not laid for purposes related to the foreign exchange market. We estimate the impact of cable connections on the share of offshore foreign exchange transactions. Cable connections between local markets and matching servers in the major financial centers lower the fixed costs of trading currencies and increase the share of currency trades occurring onshore. At the same time, however, they attenuate the effect of standard spatial frictions such as distance, local market liquidity, and restrictive regulations that otherwise prevent transactions from moving to the major financial centers. Our estimates suggest that the second effect dominates. Technology dampens the impact of spatial frictions by up to 80 percent and increases, in net terms, the share of offshore trading by 21 percentage points. Technology also has economically important implications for the distribution of foreign exchange transactions across financial centers, boosting the share in global turnover of London, the world's largest trading venue, by as much as one-third.
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English Language Premium: Evidence From A Policy Experiment In India
Tanika Chakraborty & Shilpi Kapur Bakshi
Economics of Education Review, February 2016, Pages 1-16
Abstract:
In this paper, we estimate the English premium in a globalizing economy, by exploiting an exogenous language policy intervention in India that abolished teaching of English in public primary schools. Our results indicate that a 10 percent lower probability of learning English in primary schools leads to a decline in weekly wages by 8 percent. On an average, this implies 26 percent lower wages for cohorts exposed to the policy change. We find supporting evidence that occupational choice played an important role in determining this wage-gap.