Search Results
Journal Article
Understanding Global Trends in Long-run Real Interest Rates
The authors explore trends in long-run real interest rates and their underlying factors for the 20 largest economies from the 1950s through the present day. {{p}}Real, or inflation-adjusted, interest rates may well be the most important prices for any nation?s economy. They govern intertemporal purchasing decisions facing households, firms, and all levels of government. That is, virtually all interactions in the marketplace that entail making a choice between spending now and spending later necessarily involve real interest rates, which specify the real cost of borrowing to make a purchase ...
Working Paper
Structural Change and Global Trade
Services, which are less traded than goods, rose from 50 percent of world expenditure in 1970 to 80 percent in 2015. Such structural change restrained "openness"?the ratio of world trade to world GDP?over this period. We quantify this with a general equilibrium trade model featuring non-homothetic preferences and input-output linkages. Openness would have been 70 percent in 2015, 23 percentage points higher than the data, if expenditure patterns were unchanged from 1970. Structural change is critical for estimating the dynamics of trade barriers and welfare gains from trade. Ongoing ...
Working Paper
Structural Change and Global Trade
Services, which are less traded than goods, rose from 58 percent of world expenditure in 1970 to 79 percent in 2015. Using a Ricardian trade model incorporating endogenous structural change, we quantify how this substantial shift in consumption has affected trade. Without structural change, we find that the world trade to GDP ratio would be 15 percentage points higher by 2015, about half the boost delivered from declining trade costs. In addition, this structural change has lowered the global welfare gains from trade integration by almost 40 percent over the past four decades. Absent further ...
Working Paper
The Evolution of Comparative Advantage: Measurement and Implications
We estimate productivities at the sector level for 72 countries and 5 decades, and examine how they evolve over time in both developed and developing countries. In both country groups, comparative advantage has become weaker: productivity grew systematically faster in sectors that were initially at greater comparative disadvantage. These changes have had a significant impact on trade volumes and patterns, and a non-negligible welfare impact. In the counterfactual scenario in which each country's comparative advantage remained the same as in the 1960s, and technology in all sectors grew at the ...
Working Paper
The Relationship between Debt and Output
In this paper we empirically explore the relationship between debt and output in a panel of 72 countries over the period 1970–2014 using a vector autoregression (VAR). We document two puzzling empirical findings that contrast with what is predicted by a standard small open economy model by Aguiar and Gopinath (2007), where debt and output endogenously respond to total factor productivity (TFP) shocks. First, developing countries’ debt falls after a positive output shock, while the model predicts a debt expansion. Second, output declines in developed and developing countries after a debt ...
Working Paper
A Quantitative Analysis of Tariffs across U.S. States
We develop a quantitative framework to assess the cross-state implications of a U.S. trade policy change: a unilateral increase in the import tariff from 2 to 25 across all goods-producing sectors. Although the U.S. gains overall from the tariff increase, we find the impact differs starkly across locations. Changes in real consumption (welfare) range from as high as 3.8% in Wyoming to $-0.3% in Florida, depending mainly on how exposed states are to differentially-impacted sectors. As a result, the "preferred'' tariff rate varies greatly across states. Foreign retaliation in trade policy ...
Working Paper
The Labor Market Impact of Covid-19 on Asian Americans
Asian Americans faced a disproportionately larger surge in unemployment rates than other racial and ethnic groups during the Covid-19 pandemic. While existing literature typically examines labor demand channels to explain this, we instead explore a labor supply channel. Our hypothesis is that Asian Americans are more cautious about Covid-19 infections and thus more selective about job opportunities, contributing to their higher unemployment rate than other groups. Analysis of cellphone data during the pandemic indicates that non-work mobility significantly decreased in areas with larger Asian ...
Report
Structural change in an open economy
We develop a tractable, three-sector model to study structural change in a two-country world. The model features an endogenous pattern of trade dictated by comparative advantage. We derive an intuitive expression linking sectoral employment shares to sectoral expenditure shares and to sectoral net export shares of total GDP. Changes in productivity and in trade barriers affect expenditure and net export shares, and thus, employment shares, across sectors. We show how these driving forces can generate the "hump" pattern that characterizes the manufacturing employment share as a country ...
Newsletter
The increasing importance of services expenditures and the dampening effect on global trade
Globalization, particularly through international trade in goods, has helped to foster the creation of tremendous amounts of wealth and prosperity across much of the globe while lifting sizable portions of the world’s population out of poverty. In particular, the latter half of the twentieth century delivered unprecedented rates of increased economic integration among many countries. Access to global markets supported the industrialization of emerging economies and opened up new markets for firms in wealthier countries. As a result of the expansion of international trade and competition, ...
Working Paper
Trade Integration, Global Value Chains, and Capital Accumulation
Motivated by increasing trade and fragmentation of production across countries since World War II, we build a dynamic two-country model featuring sequential, multi-stage production and capital accumulation. As trade costs decline over time, global-value-chain (GVC) trade expands across countries, particularly more in the faster growing country, consistent with the empirical pattern. The presence of GVC trade boosts capital accumulation and economic growth and magnifies dynamic gains from trade. At the same time, endogenous capital accumulation shapes comparative advantage across countries, ...