Traders
Trade Protectionism and US Manufacturing Employment
Chunding Li, Jing Wang & John Whalley
NBER Working Paper, May 2019
Abstract:
This paper uses a numerical global general equilibrium model to simulate the possible effects of US initiated trade protection measures on US manufacturing employment. The simulation results show that US trade protection measures do not increase but will instead reduce manufacturing employment, and US losses will further increase if trade partners take retaliatory measures. The mechanism is that although the substitution effects between domestic and foreign goods have positive impacts, the substitution effects between manufacturing and service sectors and the retaliatory effects both have negative influences, therefore the whole effect is that the US will lose manufacturing employment.
Is an Army of Robots Marching on Chinese Jobs?
Osea Giuntella & Tianyi Wang
University of Pittsburgh Working Paper, April 2019
Abstract:
A handful of studies have investigated the effects of robots on workers in advanced economies. According to a recent report from the World Bank (2016), 1.8 billion jobs in developing countries are susceptible to automation. Given the inability of labor markets to adjust to rapid changes, there is a growing concern that the effect of automation and robotization in emerging economies may increase inequality and social unrest. Yet, we still know very little about the impact of robots in developing countries. In this paper we analyze the effects of exposure to industrial robots in the Chinese labor market. Using aggregate data from Chinese prefectural cities (2000-2016) and individual longitudinal data from China, we find a large negative impact of robot exposure on employment and wages of Chinese workers. Effects are concentrated in the state-owned sector and are larger among low-skilled, male, and prime-age and older workers. Furthermore, we find evidence that exposure to robots affected internal mobility and increased the number of labor-related strikes and protests.
Disentangling Global Value Chains
Alonso de Gortari
NBER Working Paper, May 2019
Abstract:
The patterns of production underlying the recent rise of global value chains (GVCs) have become increasingly complex. NAFTA supply chains, for example, are now deeply integrated: Using Mexican customs data, I find that exports to the U.S. use a much higher share of American inputs than exports to other countries. However, the conventional framework used to measure GVCs ignores this heterogeneity since it assumes that all output uses the same input mix. I develop a new framework that combines input-output data with additional information on supply chain linkages in order to construct GVCs reflecting the use of inputs observed in the latter. Improving measurement matters quantitatively since it affects both value-added trade measures and counterfactual experiments: I show that incorporating Mexican customs data raises the estimated share of U.S. value in U.S. imported Mexican manufactures from 18% to 30% and amplifies the welfare cost of a NAFTA trade war.
U.S. Presidential Cycles and the Foreign Exchange Market
Samar Ashour, David Rakowski & Salil Sarkar
Review of Financial Economics, forthcoming
Abstract:
We examine the association between the foreign exchange rate of the US dollar and US presidential cycles. Results show that Republican presidencies tend to start with a strong dollar, which then depreciates over the course of the presidency. In contrast, Democratic presidencies tend to begin with a weak dollar that then appreciates. These patterns result in an apparent presidential effect in US foreign exchange rates, the direction of which depends on whether exchange rates are measured by levels or by returns.
Quitting globalization: Trade-related job losses, nationalism, and resistance to FDI in the United States
Yilang Feng, Andrew Kerner & Jane Sumner
Political Science Research and Methods, forthcoming
Abstract:
Existing research has found that American politicians benefit from trying to attract investment and creates jobs. In this paper, we build on this work by describing the drivers of Americans' attitudes toward inward foreign investment (FDI). We posit that foreign and Chinese investment are different than domestic investment in the public imagination and that nationalism and proximity to deindustrialization interact to shape public opinion about them. We propose and test two theories of this interaction using a survey experiment that randomizes whether a respondent is responding to a statement about "business investment," "foreign business investment," or "Chinese business investment". We find that (1) Americans are skeptical of business investments by Chinese, and, to lesser degree, "foreign" firms; (2) the gap in enthusiasm for generic business investment and foreign/Chinese business investment rises with local trade-related job losses; and (3) the distinction between nationalists' and non-nationalists' attitudes toward FDI declines in local job losses.
Trade and Worker Deskilling
Rui Costa, Swati Dhingra & Stephen Machin
NBER Working Paper, June 2019
Abstract:
This paper presents new evidence on international trade and worker outcomes. It examines a big world event that produced an unprecedentedly large shock to the UK exchange rate. In the 24 hours in June 2016 during which the UK electorate unexpectedly voted to leave the European Union, the value of sterling plummeted. It recorded the biggest depreciation that has occurred in any of the world's four major currencies since the collapse of Bretton Woods. Exploiting this variation, the paper studies the impact of trade on wages and worker training. Wages and training fell for workers employed in sectors where the intermediate import price rose by more as a consequence of the sterling depreciation. Calibrating the estimated wage elasticity with respect to intermediate import prices to theory uncovers evidence of a production complementarity between workers and intermediate imports. This provides new direct evidence that, in the modern world of global value chains, it is changes in the cost of intermediate imports that act as a driver of the impact of globalization on worker welfare. The episode studied and the findings add to widely expressed, growing concerns about poor productivity performance relating to skills and to patterns of real wage stagnation that are plaguing contemporary labour markets.
Trade Blocs and Trade Wars during the Interwar Period
David Jacks & Dennis Novy
NBER Working Paper, May 2019
Abstract:
What precisely were the causes and consequences of the trade wars in the 1930s? Were there perhaps deeper forces at work in reorienting global trade prior to the outbreak of World War II? And what lessons may this particular historical episode provide for the present day? To answer these questions, we distinguish between long-run secular trends in the period from 1920 to 1939 related to the formation of trade blocs (in particular, the British Commonwealth) and short-run disruptions associated with the trade wars of the 1930s (in particular, large and widespread declines in bilateral trade, the narrowing of trade imbalances, and sharp drops in average traded distances). We argue that the trade wars mainly served to intensify pre-existing efforts towards the formation of trade blocs which dated from at least 1920. More speculatively, we argue that the trade wars of the present day may serve a similar purpose as those in the 1930s, that is, the intensification of China- and US-centric trade blocs.
Foreign Financing and the International Sources of Property Rights
Timm Betz & Amy Pond
World Politics, July 2019, Pages 503-541
Abstract:
How do firms protect themselves against infringements of their property rights by their own government? The authors develop a theory based on international law and joint asset ownership with foreign firms. Investment agreements protect the assets of foreign firms but are not available to domestic firms. This segmentation of the property rights environment creates a rationale for international financial relationships between firms. By forming financial relationships with foreign firms, domestic firms gain indirect coverage from the property rights available to foreign firms under investment agreements. If a government is less likely to violate the property rights of covered foreign firms, it is also less likely to violate property rights for assets held jointly by domestic and foreign firms. This article presents systematic evidence from data on the activities of firms in countries that have investment agreements with the United States. International financial relationships between firms, through mergers and acquisitions as well as through bond and equity issues, are more common where property rights are weak. The theory suggests a political logic to the fragmentation of firm-ownership stakes across jurisdictions, offers an institutional explanation of international financial flows, and identifies new distributional consequences of international law.
International Business Travel and Technology Sourcing
Nune Hovhannisyan & Wolfgang Keller
NBER Working Paper, May 2019
Abstract:
Access to new foreign technology is often central to countries' development strategies. However, we know very little about the quantitative impact of technology sourcing. In this paper, we study the role of outward international business travel for technology sourcing and innovation by examining whether patenting in European regions is affected by the number of business travelers heading to the United States. Using European regional patent data for the years 1996 to 2010 from Eurostat and information on incoming business travelers from the U.S. Department of Commerce's Survey of International Air Travelers, we find that controlling for a region's R&D spending and size, innovation is increasing in the number of business travelers of the region to the United States. Technology sourcing through in-person business travel is not only statistically but economically significant, accounting, for example, for 20% of the higher patenting in Germany's Greater Stuttgart area, compared to Portugal's Algarve region.
Tracing the Legacy: China's Historical Aid and Contemporary Investment in Africa
Pippa Morgan & Yu Zheng
International Studies Quarterly, forthcoming
Abstract:
In this article we depart from the classic model of foreign direct investment (FDI) determinants and examine the effect of sociohistorical factors on FDI. We argue that past foreign aid projects confer social capital that constitutes specific resources available to investors in the present, increasing their preferences for host countries in which their home country has accumulated more social capital. We use new data on China's historical aid in Africa to test these contentions, uncovering a positive, significant connection between China's historical aid program in Africa (1956-1999) and contemporary (2000-2015) investments by Chinese companies. While China's historical aid may have been politically driven, it has had important long-term consequences for its commercial investors. More broadly, these findings suggest a sociohistorical explanation of the puzzle of why Chinese foreign investments deviate from conventional FDI patterns.
Evidence for the Effect of Monitoring Costs on Foreign Direct Investment
Bruce Blonigen, Anca Cristea & Donghyun Lee
NBER Working Paper, June 2019
Abstract:
A proposed reason for the significant inverse relationship between distance (both physical and cultural) and foreign direct investment is the increased costs for a parent firm to monitor an affiliate when there is greater distance between them. We provide the first direct test of this hypothesis using O*NET data on occupational skills to construct industry-level measures of the importance of monitoring-related skills. We then exploit this cross-industry variation to examine whether physical and cultural distances have a greater impact on cross-border M&A in industries where monitoring-related skills are more important. Using data on worldwide cross-border M&A activity from 1985 through 2014, we find significant evidence for the effect of monitoring costs on cross-border M&A activity. We also show that the relatively low importance of monitoring-related costs in manufacturing industries compared to those in other sectors is an important factor in explaining why cross-border M&A in manufacturing is so large despite its relatively small share of the modern economy.