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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 ...
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. In a trade model featuring nonhomothetic preferences and input-output linkages, we find that such structural change has restrained the growth in world trade to GDP by 16 percentage points over this period. This magnitude is similar to how much declining trade costs have boosted openness. Moreover, structural change dampens the measured gains from trade by incorporating endogenous responses of expenditure shares to the trade regime. Ongoing structural change implies declining ...
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
The global labor market impact of rmerging giants: a quantitative assessment
This paper investigates both aggregate and distributional impacts of the trade integration of China, India, and Central and Eastern Europe in a quantitative multi-country multi-sector model, comparing outcomes with and without factor market frictions. Under perfect within-country factor mobility, the gains to the rest of the world from trade integration of emerging giants are 0.37%, ranging from ?0.37% for Honduras to 2.28% for Sri Lanka. Reallocation of factors across sectors contributes relatively little to the aggregate gains, but has large distributional effects. The aggregate gains to ...
Working Paper
What Determines State Heterogeneity in Response to US Tariff Changes?
We develop a structural framework to identify the sources of cross-state heterogeneity in response to US tariff changes. We quantify the effects of unilaterally increasing US tariffs by 25 percentage points across sectors. Welfare changes range from −0.8 percent in Oregon to 2.1 percent in Montana. States gain more when their sectoral comparative advantage covaries negatively with that of the aggregate US. Consequently, “preferred” changes in tariffs vary systematically across states, indicating the importance of transfers in aligning state preferences over trade policy. Foreign ...
Working Paper
The global welfare impact of China: trade integration and technological change
This paper evaluates the global welfare impact of China's trade integration and technological change in a quantitative Ric a rdian-Heckscher-Ohlin model implemented on 75 countries. We simulate two alternative productivity growth scenarios: a balanced one in which China's productivity grows at the sam e rate in each sector, and an unbalanced one in which China's comparative disadvantage sectors catch up disproportionately faster to the world productivity frontier. Contrary to a well-known conjecture (Samuelson 2004), the large majority of countries in the sample, including the developed ones, ...
Working Paper
A Macroeconomic Model of Healthcare Saturation, Inequality and the Output-Pandemia Tradeoff
Covid-19 became a global health emergency when it threatened the catastrophic collapse of health systems as demand for health goods and services and their relative prices surged. Governments responded with lockdowns and increases in transfers. Empirical evidence shows that lockdowns and healthcare saturation contribute to explain the cross-country variation in GDP drops even after controlling for Covid-19 cases and mortality. We explain this output-pandemia tradeoff as resulting from a shock to subsistence health demand that is larger at higher capital utilization in a model with ...
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
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 ...
Newsletter
The Recent Steepening of Phillips Curves
The Phillips curve captures the empirical inverse relationship between the level of inflation and unemployment. The reciprocal of its slope, sometimes referred to as the “sacrifice ratio,” represents the increase in the unemployment rate associated with a 1 percentage point reduction in the inflation rate. In this Chicago Fed Letter, we provide evidence that the Phillips curve has steepened in many industrialized countries since the start of the recovery from the Covid-19 pandemic. This suggests a lower sacrifice ratio now than before 2020.