Made in
Like Me, Buy Me: The Effect of Soft Power on Exports
Andrew Rose
NBER Working Paper, September 2015
Abstract:
In this paper I quantify a gain that a country receives when its global influence is considered to be admirable by others. I use a standard gravity model of bilateral exports, a panel of data from 2006 through 2013, and an annual survey conducted for the BBC by GlobeScan which asks people in up to 46 countries about whether each of up to 17 countries were perceived to have "a mainly positive or negative influence in the world." Holding other things constant, a country's exports are higher if it is perceived by the importer to be exerting more positive global influence. This effect is statistically and economically significant; a one percent net increase in perceived positive influence raises exports by around .8 percent. Succinctly, countries receive a commercial return on their soft power.
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Why Do States Build Walls? Political Economy, Security, and Border Stability
David Carter & Paul Poast
Journal of Conflict Resolution, forthcoming
Abstract:
Borders constitute the international system of states. Accordingly, states will, from time to time, take assertive measures to secure the border, with among the most aggressive strategies being the construction of physical barriers, which we refer to as "border walls." Using original data on man-made border wall construction from 1800 to 2014, we theorize and find that in many cases, wall construction is about economic security. Significant economic disparities between the states will create incentives to illegally transport people or move goods readily available in the poorer country but highly regulated in the richer country. We find that economic disparities have a substantial and significant impact on the presence of a physical wall that is independent of formal border disputes and concerns over instability from civil wars in neighbors. In other words, "prominent examples such as the Maginot Line", constructed largely out of fear of attack, is an exception, not the exemplar, of the reasons states construct border walls.
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Capital Preferences: International Capital and Government Partisanship
Andrey Tomashevskiy
International Studies Quarterly, forthcoming
Abstract:
Many argue that government partisanship influences the size of investment flows into stocks and bonds. But existing literature tells us little about how international capital flows influence election outcomes. I argue that passive investment into stocks, bonds, and other debt instruments - in other words, portfolio investments - increases political contributions to right-wing parties. This investment generates resources for domestic capitalists. These owners of capital then channel these resources into political contributions to right-wing parties and enhance those parties' electoral position. Thus, passive investment bolsters the electoral chances of right-wing governments. I illustrate this process with a formal model of special interest politics in which lobbies operate under budget constraint. Using a new data set on political contributions and statistical analyses for a sample of states from 1980-2009, I find support for my general argument.
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Vance Ginn & Travis Roach
International Trade Journal, Summer 2015, Pages 309-336
Abstract:
This article examines the potential economic effects that the 1994 North American Free Trade Agreement (NAFTA) had on Texas - an oil-producing, large border state. We estimate a five-variable vector autoregressive (VAR) model with quarterly data from January 1976 to March 2011 and construct a structural VAR representation by imposing long-term restrictions to identify U.S. aggregate, oil price, and Texas-specific shocks. After comparing responses to these structural shocks before and after NAFTA, our results suggest that NAFTA contributed to Texas' economy, becoming more resilient to oil price and non-Texas disruptions.
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Economy-wide impacts of reduced wait times at U.S. international airports
Fynnwin Prager et al.
Research in Transportation Business & Management, September 2015, Pages 112-120
Abstract:
Passport and customs inspections monitor the cross-border flows of people and goods, and are a "bottleneck" in the international transportation system that can cause significant and costly wait times for many passengers. U.S. passport inspection wait times have been criticized in recent years, and recent studies show that small changes in U.S. inspection wait times could change international travel demand, impact U.S. economic sectors reliant on international travel, and generate further impacts across the economy. This paper estimates economy-wide impacts of reduced passport inspection wait times at four international airports under two scenarios: 1) adding one Customs and Border Protection (CBP) officer to each of the 14 inspection sites and 2) reducing inspection wait times by 50%. We simulate the economy-wide GDP and employment impacts of these international travel-related spending changes using a computable general equilibrium model of the U.S. economy that accounts for price and substitution effects across supply-chain linkages. Adding 14 officers in the four airports is estimated to increase GDP by $4.5 to $11.7 million and add 36 to 93 jobs across the economy. A 50% wait time reduction at these four airports is estimated to increase GDP by $81.5 m to $260.7 m, and add 651 to 2152 jobs to the U.S. economy.
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Globalization, International Organizations, and Telecommunications
Kirsten Rodine-Hardy
Review of Policy Research, September 2015, Pages 517-537
Abstract:
Since the 1990s over 158 countries established pro-market reforms in telecommunications - a fast pace for such a drastic change. For example, Sweden and Botswana, two nations vastly different across multiple dimensions, both liberalized their telecom sectors. Why did so many countries adopt liberal reforms in such a short period of time? Conventional wisdom highlights the role of global markets and technology, powerful states, global diffusion, and domestic politics. I argue that contrary to these claims, diffusion through key international organizations is the critical and overlooked factor in explaining rapid global convergence of pro-market telecom reforms. Using an original dataset for 189 countries between 1970 and 2003 and event history analysis, I demonstrate that membership in key liberal trading organizations, especially the WTO and the OECD, increases the likelihood that countries will adopt liberal pro-market reforms in telecommunications. These results speak directly to current public policy debates about the reregulation of global markets and bridges the literatures of policy diffusion, institutional design, and regulatory regimes.
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Trade Induced Technical Change? The Impact of Chinese Imports on innovation, IT and Productivity
Nicholas Bloom, Mirko Draca & John Van Reenen
Review of Economic Studies, forthcoming
Abstract:
We examine the impact of Chinese import competition on broad measures of technical change - patenting, IT and TFP - using new panel data across twelve European countries from 1996-2007. In particular, we establish that the absolute volume of innovation increases within the firms most affected by Chinese imports in their output markets. We correct for endogeneity using the removal of product-specific quotas following China's entry into the World Trade Organization in 2001. Chinese import competition led to increased technical change within firms and reallocated employment between firms towards more technologically advanced firms. These within and between effects were about equal in magnitude, and account for 15% of European technology upgrading over 2000-2007 (and even more when we allow for offshoring to China). Rising Chinese import competition also led to falls in employment and the share of unskilled workers. In contrast to low-wage nations like China, developed countries imports had no significant effect on innovation.
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Economic Sanctions and Demand for Protection
Amy Pond
Journal of Conflict Resolution, forthcoming
Abstract:
How do the distributional consequences of economic sanctions impact future trade policy? Regardless of whether sanctions are effective in achieving concessions, sanctions restrict international trade flows, creating rents for import-competing producers, who are protected from international competition. These rents can then be used to pressure the government to implement protectionist policies. Thus, while the lifting of sanctions directly facilitates some international transactions, sanctions also have an indirect effect. They create powerful domestic interest groups in the sanctioned country who seek market protection. I use multiple estimators to evaluate the effect of trade sanctions on tariff rates. The evidence is consistent with the argument that sanctions increase market protection in both the short and long run.
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Does anti-bribery enforcement deter foreign investment?
Brad Graham & Caleb Stroup
Applied Economics Letters, forthcoming
Abstract:
This article presents the first empirical evidence that bilateral fixed capital flows fall in response to anti-bribery enforcement actions. We hand-collect data on individual enforcement actions initiated by the US Department of Justice (DOJ) and show that anti-bribery enforcement in a country is followed by a 40% reduction in foreign fixed capital investments made by US companies in that country.
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Susan Ariel Aaronson & Rodwan Abouharb & Daniel Wang
Global Economy Journal, forthcoming
Abstract:
We use both qualitative and quantitative tools to examine whether membership in the WTO reduces the likelihood of conflict. In our qualitative analysis, we show how WTO facilitates cooperation and transparency. Then we study what policymakers say and do to use trade to promote peace. We also examine whether and how members of the WTO respond to acceding states as well as member states experiencing inter-state conflict. We find member states do little to expand trade with states in conflict. Moreover, they continue to use trade sanctions. Hence, they are sending contradictory messages about the trade/peace relationship. Next we test whether the trust engendered through daily interactions and participation in a rules based system (our membership hypothesis) reduces the likelihood of conflict or whether membership in the WTO which in turn leads to expanded trade reduces the likelihood of conflict (our membership and trade hypothesis). We find no evidence that membership alone reduces the likelihood of either major interstate war or militarized interstate dispute among members. However, when states are both members of the GATT/WTO and benefit from increased trade, they are less likely to engage in militarized interstate disputes. Hence, the liberal illusion is not a complete delusion.
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Cooperation in Hard Times: Self-restraint of Trade Protection
Christina Davis & Krzysztof Pelc
Journal of Conflict Resolution, forthcoming
Abstract:
Hard times give rise to greater demand for protection. International trade rules include provisions that allow for raising barriers to aid industries when they suffer economic injury. Yet widespread use of flexibility measures may undermine the trade system and worsen economic conditions. How do states balance these conflicting pressures? This article assesses the effect of crises on cooperation in trade. We hypothesize that governments impose less protectionism during economic crisis when economic troubles are widespread across countries than when they face crisis in isolation. The lesson of Smoot-Hawley and coordination through international economic institutions represent mechanisms of informal governance that encourage cooperation to avoid a spiral of protectionism. Analysis of industry-level data on protection measures for the period from 1996 to 2011 provides support for our claim that under conditions of shared hard times, states exercise strategic self-restraint to avoid beggar-thy-neighbor policies.
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Does Foreign Entry Spur Innovation?
Yuriy Gorodnichenko, Jan Svejnar & Katherine Terrell
NBER Working Paper, September 2015
Abstract:
Our estimates, based on large firm-level and industry-level data sets from eighteen countries, suggest that FDI and trade have strong positive spillover effects on product and technology innovation by domestic firms in emerging markets. The FDI effect is more pronounced for firms from advanced economies. Moreover, our results indicate that the spillover effects can be detected with micro data at the firm-level, but that using linkage variables computed from input-output tables at the industry level yields much weaker, and usually insignificant, estimated effects. These patterns are consistent with spillover effects being rather proximate and localized.
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Estimating the effects of the container revolution on world trade
Daniel Bernhofen, Zouheir El-Sahli & Richard Kneller
Journal of International Economics, forthcoming
Abstract:
Many historical accounts have asserted that containerization triggered complementary technological and organizational changes that revolutionized global freight transport. We are the first to suggest an identification strategy for estimating the effects of the container revolution on world trade. Our empirical strategy exploits time and cross-sectional variation in countries' first adoption of container facilities and combines it with product-level variation in containerizability and container usage. Applying our container variables on a large panel of product level trade flows for the period 1962-1990, our estimates suggest economically large concurrent and cumulative effects of containerization and lend support for the view of containerization being a driver of 20th century economic globalization.
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Mark Brown
Research in Transportation Business & Management, September 2015, Pages 50-66
Abstract:
In the aftermath of 9/11, a new security regime was imposed on Canada-U.S. truck-borne trade, raising the question of whether the border has 'thickened.' That is, did the cost of moving goods across the border by truck rise and, if so, by how much, and have these additional costs persisted through time? Building on previous work that measured the premium paid by shippers to move goods across the Canada-U.S. border by truck, from the mid- to late 2000s, this paper extends the time series back to 1994, encompassing the pre- and post-9/11 eras. The analysis shows that the premium paid to move goods across the border rose, from 0.3% of the value of goods shipped prior to 9/11, to about 0.6% after 9/11, with these higher costs persisting through to the late 2000s. Whether these additional costs are imposed on the export or import leg of the cross-border journey depends on the balance of cross-border trips, with the export leg bearing these costs until about 2005, and increasingly the import leg thereafter.
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Adding Another Level Individual Responses to Globalization and Government Welfare Policies
Lena Schaffer & Gabriele Spilker
Political Science Research and Methods, forthcoming
Abstract:
Literature on the compensation hypothesis overwhelmingly concentrates on either the macro or micro level of the relationship between globalization and welfare spending. This paper explicitly addresses this shortcoming by using individual citizens and country-specific characteristics in a hierarchical model framework. We start by examining individual's context-conditional reactions to actual economic globalization and welfare generosity; after which, we make the effect of actual economic globalization (welfare generosity) conditional on whether the individual is a globalization winner or loser. In contrast to theoretical expectations, our results indicate that actual economic globalization does not affect people's perception in the manner expected by the compensation hypothesis. However, individuals display more positive attitudes toward globalization if welfare state generosity is proxied using government spending on active labor market programs.
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Benefits of Foreign Ownership: Evidence from Foreign Direct Investment in China
Jian Wang & Xiao Wang
Journal of International Economics, forthcoming
Abstract:
To examine the effect of foreign direct investment, this paper compares the post-acquisition performance changes of foreign- and domestic-acquired firms in China. Unlike previous studies, we investigate the purified effect of foreign ownership by using domestic-acquired firms as the control group. After controlling for the acquisition effect that exists in domestic acquisitions, we find no evidence that foreign ownership can bring additional productivity gains to target firms, though both foreign and domestic acquisitions bring productivity improvements to target firms. In contrast, a strong and robust finding is that foreign ownership significantly improves target firms' financial conditions and exports relative to domestic-acquired firms. Foreign acquisition is also found to improve output, employment and wages for target firms. These findings conflict with the conventional view of productivity-driven FDI and highlight the financial channel through which FDI benefits the host countries.
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Outsourcing: Energy and Empire in the Age of Coal, 1820-1911
On Barak
International Journal of Middle East Studies, August 2015, Pages 425-445
Abstract:
During the long 19th century, British coal proliferated throughout the Ottoman Empire in increasing quantity, rapidity, and regularity via junctions and political arrangements that became evermore stable and dominant. The British used coal export to project their power elsewhere, offshoring the Industrial Revolution by building an infrastructure that could support it overseas and connect it to existing facets of the imperial project. Examining this "outsourcing" and the importance of foreign coal markets to industrialization helps provincialize the steam engine and anchor it in a global context. It also allows us to explore the impact of fossil energy on the Middle East and the ways coal both set the stage for the arrival of oil and informed the possibilities for translating carbon power into politics. Coal, the article suggests, animated political participation in England while reinforcing authoritarian tendencies in the Middle East.