U.S. Market Concentration and Import Competition
A rapidly growing literature has shown that market concentration among domestic firms has increased in the United States over the last three decades. Using confidential census data for the manufacturing sector, we show that typical measures of concentration, once adjusted for sales by foreign exporters, actually stayed constant between 1992 and 2012. We reconcile these findings by linking part of the increase in domestic concentration to import competition. Although concentration among U.S.-based firms rose, the growth of foreign firms, mostly at the bottom of the sales distribution, ...
The Impact of Import Tariffs on U.S. Domestic Prices
The United States imposed new import tariffs on about $283 billion of U.S. imports in 2018, with rates ranging between 10 percent and 50 percent. In this post, we estimate the effect of these tariffs on the prices paid by U.S. producers and consumers. We find that the higher import tariffs had immediate impacts on U.S. domestic prices. Our results suggest that the aggregate consumer price index (CPI) is 0.3 percent higher than it would have been without the tariffs.
High Import Prices along the Global Supply Chain Feed Through to U.S. Domestic Prices
The prices of U.S. imported goods, excluding fuel, have increased by 6 percent since the onset of the COVID-19 pandemic in February 2020. Around half of this increase is due to the substantial rise in the prices of imported industrial supplies, up nearly 30 percent. In this post, we consider the implications of the increase in import prices on U.S. industry inflation rates. In particular, we highlight how rising prices of imported intermediate inputs, like industrial supplies, can have amplified effects through the U.S. economy by increasing the production cost of goods that rely heavily on ...
Spatial Wage Gaps and Frictional Labor Markets
We develop a job-ladder model with labor reallocation across firms and space, which we design to leverage matched employer-employee data to study differences in wages and labor productivity across regions. We apply our framework to data from Germany: twenty-five years after the reunification, real wages in the East are still 26 percent lower than those in the West. We find that 60 percent of the wage gap is due to labor being paid a higher wage per efficiency unit in West Germany, and quantify three distinct barriers that prevent East Germans from migrating west to obtain a higher wage: ...
Did State Reopenings Increase Consumer Spending?
The spread of COVID-19 in the United States has had a profound impact on economic activity. Beginning in March, most states imposed severe restrictions on households and businesses to slow the spread of the virus. This was followed by a gradual loosening of restrictions (“reopening”) starting in April. As the virus has re-emerged, a number of states have taken steps to reverse the reopening of their economies. For example, Texas and Florida closed bars again in June, and Arizona additionally paused operations of gyms and movie theatres. Taken together, these measures raise the question of ...
Many Small Businesses in the Services Sector Are Unlikely to Reopen
The services sector was hit hard during the COVID-19 pandemic. Small businesses were particularly affected, and many of them were forced to close. We examine the state of these firms using micro data from Homebase (HB), a scheduling and time tracking tool that is used by around 100,000 businesses, mostly small firms, in the leisure and hospitality and retail industries. The data reveal that 35 percent of businesses that were active prior to the pandemic are still closed and that most have been inactive for twenty weeks or longer. We estimate that each additional week of being closed reduces ...
How Did State Reopenings Affect Small Businesses?
In our previous post, we looked at the effects that the reopening of state economies across the United States has had on consumer spending. We found a significant effect of reopening, especially regarding spending in restaurants and bars as well as in the healthcare sector. In this companion post, we focus specifically on small businesses, using two different sources of high-frequency data, and we employ a methodology similar to that of our previous post to study the effects of reopening on small business activity along various dimensions. Our results indicate that, much like for consumer ...
How Did China’s COVID-19 Shutdown Affect U.S. Supply Chains?
The COVID-19 pandemic has had a significant impact on trade between the United States and China so far. As workers became sick or were quarantined, factories temporarily closed, disrupting international supply chains. At the same time, the trade relationship between the United States and China has been characterized by rising protectionism and heightened trade policy uncertainty over the last few years. Against this background, this post examines how the recent period of economic disruptions in China has affected U.S. imports and discusses how this episode might impact firms’ supply chains ...
Will New Steel Tariffs Protect U.S. Jobs?
President Trump announced a new tariff of 25 percent on steel imports and 10 percent on aluminum imports on March 8, 2018. One objective of these tariffs is to protect jobs in the U.S. steel industry. They were introduced under a rarely used 1962 Act, which allows the government to impose trade barriers for national security reasons. Although the tariffs were initially to apply to all trading partners, Canada and Mexico are currently exempt subject to NAFTA negotiations, and implementation of the tariffs for the European Union, Argentina, Australia, and Brazil has been paused. South Korea has ...
Has Market Power of U.S. Firms Increased?
A number of studies have documented that market concentration among U.S. firms has increased over the last decades, as large firms have grown more dominant. In a new study, we examine whether this rising domestic concentration means that large U.S. firms have more market power in the manufacturing sector. Our research argues that increasing foreign competition over the last few decades has in fact reduced U.S. firms’ market power in manufacturing.