Does Trade Liberalization with China Influence U.S. Elections?
This paper examines the impact of trade liberalization on U.S. Congressional elections. We find that U.S. counties subject to greater competition from China via a change in U.S. trade policy exhibit relative increases in turnout, the share of votes cast for Democrats and the probability that the county is represented by a Democrat. We find that these changes are consistent with Democrats in office being more likely than Republicans to support legislation limiting import competition or favoring economic assistance.
The Heterogeneous Effects of Trade across Occupations: A Test of the Stolper-Samuelson Theorem
This paper develops and implements a novel test of the Stolper-Samuelson theorem. We use nationally-representative matched employer-employee panel data from 1997 through 2015 to study the effect of the rise in China’s exports on French worker earnings. Our version of the Stolper-Samuelson theorem states that there is a negative correlation between occupation exposure to Chinese competition and change in worker earnings. First, we document substantial heterogeneity in trade adjustment across occupations. Then, consistent with the Stolper-Samuelson prediction, we show that workers initially ...
Globalization and inflation in Europe
What is the impact of import competition from other low-wage countries (LWCs) on inflationary pressure in Western Europe? This paper seeks to understand whether labor-intensive exports from emerging Europe, Asia, and other global regions have a uniform impact on producer prices in Germany, France, Italy, Sweden, and the United Kingdom. In a panel covering 110 (4-digit) NACE industries from 1995 to 2008, IV estimates predict that LWC import competition is associated with strong price effects. More specifically, when Chinese exporters capture 1 percent of European market share, producer prices ...
Labor Market Effects of Global Supply Chain Disruptions
We examine the labor market consequences of recent global supply chain disruptions induced by COVID-19. Specifically, we consider a temporary increase in international trade costs similar to the one observed during the pandemic and analyze its effects on labor market outcomes using a quantitative trade model with downward nominal wage rigidities. Even omitting any health related impacts of the pandemic, the increase in trade costs leads to a temporary but prolonged decline in U.S. labor force participation. However, there is a temporary increase in manufacturing employment as the United ...
Offshoring, low-skilled immigration, and labor market polarization
During the last three decades, jobs in the middle of the skill distribution disappeared, and employment expanded for high- and low-skill occupations. Real wages did not follow the same pattern. Although earnings for the high-skill occupations increased robustly, wages for both low- and middle-skill workers remained subdued. We attribute this outcome to the rise in offshoring and low-skilled immigration, and we develop a three-country stochastic growth model to rationalize this outcome. In the model, the increase in offshoring negatively affects the middle-skill occupations but benefits the ...
Labor market polarization and international macroeconomic dynamics
During the last thirty years, labor markets in advanced economies were characterized by their remarkable polarization. As job opportunities in middle-skill occupations disappeared, employment opportunities concentrated in the highest- and lowest-wage occupations. I develop a two-country stochastic growth model that incorporates trade in tasks, rather than in goods, and reveal that this setup can replicate the observed polarization in the United States. This polarization was not a steady process: the relative employment share of each skill group fluctuated significantly over short-to-medium ...
Micro- and Macroeconomic Impacts of a Place-Based Industrial Policy
We investigate the impact of a set of place-based subsidies introduced in Turkey in 2012. Using firm-level balance-sheet data along with data on the domestic production network, we first assess the policy’s direct and indirect impacts. We find an increase in economic activity in industry-province pairs that were the focus of the subsidy program, and positive spillovers to the suppliers and customers of subsidized firms. With the aid of a dynamic multi-region, multi-industry general equilibrium model, we then assess the program’s impacts. Based on the calibrated model, we find that, in the ...
The Labor Market Effects of Offshoring by U.S. Multinational Firms: Evidence from Changes in Global Tax Policies
Estimating the causal effect of offshoring on domestic employment is difficult because of the inherent simultaneity of multinational firms? domestic and foreign affiliate employment decisions. In this paper, we resolve this identification problem using variation in Bilateral Tax Treaties (BTTs), which reduce the effective cost of offshore activity by mitigating double taxation. We derive a panel difference-in-differences research design from a standard model of multinational firms, demonstrating the simultaneity problem and showing how to resolve it using BTTs as an instrument for offshore ...
Trade and Labor Market Dynamics: General Equilibrium Analysis of the China Trade Shock
We develop a dynamic trade model with spatially distinct labor markets facing varying exposure to international trade. The model captures the role of labor mobility frictions, goods mobility frictions, geographic factors, and input-output linkages in determining equilibrium allocations. We show how to solve the equilibrium of the model and take the model to the data without assuming that the economy is at a steady state and without estimating productivities, migration frictions, or trade costs, which can be difficult to identify. We calibrate the model to 22 sectors, 38 countries, and 50 U.S. ...
Offshoring in Developing Countries: Labor Market Outcomes, Welfare, and Policy
Does a reduction in offshoring cost benefit workers in the world's factories in developing countries? Using a parsimonious two-country model of offshoring we find very nuanced results. These include cases where wages monotonically improve, worsen, as well as where wages exhibit an inverted U-shaped relationship with the offshoring cost. We identify qualitative conditions under which these relationships hold. Since global welfare always rises with an improvement in offshoring technology, we find that there is a role for a wage tax or a minimum wage in the developing country. We derive the ...