Findings

What gets in

Kevin Lewis

January 02, 2019

The Economics and Politics of Revoking NAFTA
Raphael Auer, Barthélémy Bonadio & Andrei Levchenko
NBER Working Paper, December 2018

Abstract:

We provide a quantitative assessment of both the aggregate and the distributional effects of revoking NAFTA using a multi-country, multi-sector, multi-factor model of world production and trade with global input-output linkages. Revoking NAFTA would reduce US welfare by about 0.2%, and Canadian and Mexican welfare by about 2%. The distributional impacts of revoking NAFTA across workers in different sectors are an order of magnitude larger in all three countries, ranging from -2.7 to 2.26% in the United States. We combine the quantitative results with information on the geographic distribution of sectoral employment, and compute average real wage changes in each US congressional district, Mexican state, and Canadian province. We then examine the political correlates of the economic effects. Congressional district-level real wage changes are negatively correlated with the Trump vote share in 2016: districts that voted more for Trump would on average experience greater real wage reductions if NAFTA is revoked.


A Trump Effect on the EU’s Popularity? The U.S. Presidential Election as a Natural Experiment
Lara Minkus, Emanuel Deutschmann & Jan Delhey
Perspectives on Politics, forthcoming

Abstract:

Did the election of Donald Trump affect the popularity of the European Union (EU) in Europe? Theoretically, both a positive rally effect (due to a perceived external threat) and a negative domino effect (due to resignation among Europhiles and/or reinforcement among europhobe nationalists) are plausible. We treat Trump’s unexpected victory as an external shock and use a Eurobarometer survey that was conducted in all EU-28 member states four days prior to (control group) and six days after the election (treatment group) as source material for a natural experiment. The analysis reveals that the election of Trump caused a significant increase in the EU’s popularity in Europe immediately after the election. This “Trump effect” is considerable in size, roughly equivalent to three years of education. Gains in popularity were particularly high among respondents who perceived their country as economically struggling and, surprisingly, among the political right, suggesting that Trump’s victory broadened and ideologically diversified the EU’s base of support.


The good, the bad and the ugly: Chinese imports, European Union anti-dumping measures and firm performance
Liza Jabbour et al.
Journal of International Economics, March 2019, Pages 1-20

Abstract:

This paper analyses the effects of the European Union's anti-dumping tariffs against Chinese imports on all affected firms: “the good” European import-competing firms, “the bad” Chinese exporters and “the ugly” European importers of dumped products. The results show that temporary import tariffs are beneficial to the least productive “good” EU producers, but harms the most productive “ugly” EU importers. Overall, the net effects of anti-dumping policy on European employment and exports are largely negative. Also tariffs enhance the productivity of surviving “bad” Chinese exporters and widens the productivity gap with European competitors.


Macroeconomic Consequences of Tariffs
Davide Furceri et al.
NBER Working Paper, December 2018

Abstract:

We study the macroeconomic consequences of tariffs. We estimate impulse response functions from local projections using a panel of annual data that spans 151 countries over 1963-2014. We find that tariff increases lead, in the medium term, to economically and statistically significant declines in domestic output and productivity. Tariff increases also result in more unemployment, higher inequality, and real exchange rate appreciation, but only small effects on the trade balance. The effects on output and productivity tend to be magnified when tariffs rise during expansions, for advanced economies, and when tariffs go up, not down. Our results are robust to a large number of perturbations to our methodology, and we complement our analysis with industry-level data.


Automation and Offshoring in Durable Goods Manufacturing: An Indiana Case Study
Timothy Slaper
Economic Development Quarterly, forthcoming

Abstract:

The loss of manufacturing jobs is largely attributed to either offshoring or automation. Using state-level data from the Annual Survey of Manufactures and unit record administrative data from the Indiana Department of Workforce Development, we determine the drivers of durable goods manufacturing employment losses in Indiana. We test a simple model that explains changes in industry production employment by changes in output, wages, intermediate input consumption, productivity, capital-to-labor ratios, or a proxy related to these explanatory variables. Using the unit record data, the authors assess the consequences of large layoff events on the wages of those who remain employed at a particular manufacturing establishment. The data suggest that offshoring was the primary driver for employment losses and productivity gains in Indiana, not automation. We also find that average wages for workers at establishments that experienced large redundancy events rose for those workers who remained after large layoff events.


The IMF As a Biased Global Insurance Mechanism: Asymmetrical Moral Hazard, Reserve Accumulation, and Financial Crises
Phillip Lipscy & Haillie Na-Kyung Lee
International Organization, forthcoming

Abstract:

A large literature has established that the International Monetary Fund (IMF) is heavily politicized. We argue that this politicization has important consequences for international reserve accumulation and financial crises. The IMF generates moral hazard asymmetrically, reducing the expected costs of risky lending and policies for states that are politically influential vis-à-vis the institution. Using a panel data set covering 1980 to 2010, we show that proxies for political influence over the IMF are associated with outcomes indicative of moral hazard: lower international reserves and more frequent financial crises. We support our causal claims by applying the synthetic control method to Taiwan, which was expelled from the IMF in 1980. Consistent with our predictions, Taiwan's expulsion led to a sharp increase in precautionary international reserves and exceptionally conservative financial policies.


The Rise of the Dollar and Fall of the Euro as International Currencies
Matteo Maggiori, Brent Neiman & Jesse Schreger
NBER Working Paper, December 2018

Abstract:

The modern notion of an international currency involves use in areas of international finance and trade that extend well beyond central banks' coffers. In addition to their important roles as foreign exchange reserves, international currencies are most frequently used to denominate corporate and government bonds, bank loans, and import and export invoices. These currencies offer unrivaled liquidity, constituting large shares of the volume on global foreign exchange markets, and are commonly chosen as the anchors targeted by countries with pegged or managed exchange rate regimes. In this short article, we provide evidence suggesting a recent rise in the use of the dollar, and fall of the use in the euro, with similar patterns manifesting across all these aspects of international currency use.


Population relatedness and cross-country idea flows: Evidence from book translations
Andrew Dickens
Journal of Economic Growth, December 2018, Pages 367–386

Abstract:

This paper establishes a robust relationship between idea flows across countries, as captured by book translations, and two measures of population relatedness. I argue that linguistic distance imposes a cost on idea flows, whereas genetic distance captures an incentive to communicate when dissimilar countries have more to learn from each other. Consistent with this hypothesis, I find that linguistic distance is negatively associated with book translations, whereas genetic distance is positively associated with book translations after conditioning on linguistic and geographic distance. In particular, the benchmark estimate indicates that a one standard deviation increase in linguistic distance reduces book translations by 12%, while a one standard deviation increase in genetic distance increases book translations by 10%.


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