Topics in International Trade
Sunday, Jan. 6, 2019 8:00 AM - 10:00 AM
- Chair: John Lopresti, College of William and Mary
Knowledge Diffusion, Trade and Innovation across Countries and Sectors
AbstractWe provide a unified framework to quantify the cross-country and cross-sector interactions between trade, innovation and knowledge spillovers. We study the effect of trade liberalization in a multi-country and multi-sector endogenous growth model in which comparative advantage and the stock of knowledge are endogenously determined by innovation and knowledge spillovers. A reduction in trade costs induces a reallocation of innovation and comparative advantage across sectors, which translates into higher growth in the counterfactual balanced growth path (BGP). Welfare gains from trade are significantly larger than in static models of trade. Heterogeneous knowledge spillovers generate dispersion in comparative advantage, becoming additional sources of growth and welfare.
WTO Tariff Commitments and Temporary Protection: Complements or Substitutes?
AbstractThere is a long-held notion in the trade policy literature that traditional tariff instruments and temporary protection (TP) measures are substitutes. Despite this prediction, there is only mixed empirical evidence for a link between tariff reductions and the usage pattern of antidumping, safeguard and countervailing duties. Based on recent theoretical advances, I argue in this paper that the relevant trade policy margin for implementing TP measures is instead tariff overhangs, the difference between WTO bound and applied tariffs. Lower tariff overhangs constrain countries to raise their MFN applied rates without legal repercussions, independent of past tariff changes. Using detailed sectoral data for a sample of 30 WTO member countries during the period 1996-2014, I find strong evidence for an inverse link between tariff overhangs and TP activity. This result implies that tariff overhangs and TP measures are substitutes, vindicating the importance of existing tariff commitments as a key determinant of alternative protection instruments.
Tasks, Occupations, and Wage Inequality in an Open Economy
AbstractThis paper documents and theoretically explains a nexus between globalization and residual wage inequality through internal labor market reorganization. Combining time-varying within-occupation task information from representative German labor force surveys with linked plant--worker data for Germany, we establish three interrelated facts: (1) larger plants and exporters organize production into more occupations, and (2) workers at larger plants and exporters perform fewer tasks within occupations, while (3) overall and residual wages are more dispersed at larger plants. To explain these facts, we build a model in which the plant endogenously bundles tasks into occupations and workers match to occupations. By splitting the task range into more occupations, the plant can assign workers to a narrower task range per occupation, reducing worker mismatch and raising worker efficiency as well as the within-plant dispersion of wages. Embedding this rationale into a Melitz (Econometrica 2003) model, where fixed span-of-control costs increase with occupation counts, we show that inherently more productive (exporter) plants exhibit higher worker efficiency and wider wage dispersion and that economy-wide wage inequality is higher in the open economy for an empirically confirmed parametrization. Estimation of our model shows that a worker's average number of tasks is inversely related to plant revenues and that the within-plant wage dispersion is positively related to plant size.
What Are the Price Effects of Trade? Evidence from the United States and Implications for Quantitative Trade Models
AbstractWe estimate the impact of trade with China on U.S. consumer prices and use this evidence to
discipline quantitative trade models. Using confidential price data from the U.S. Bureau of Labor Statistics and two complementary identification strategies from Pierce and Schott (2016) and Autor et al. (2013), we find that trade with China had a large impact on U.S. prices. Between 2000 and 2007, a one percentage point increase in Chinese import penetration in a given industry led to a three percentage point fall in the Consumer Price Index in that industry. This effect is large but plausible; abstracting from GE effects and benchmarking our estimates against those of Autor et al. (2013), our results imply that increased Chinese import penetration generated benefits to U.S. consumers through lower prices equal to $101,250 per lost manufacturing job, or a cumulative 1.97% fall in the aggregate U.S. CPI between 2000 and 2007. These price effects are one order of magnitude larger than in the class of trade models nested by Arkolakis et al. (2012). In contrast with these models, we find that (i) the price response of pre-existing domestic varieties drives the overall price effects; (ii) market concentration is a key predictor of the magnitude of the price response. We also document that, for a given trade shock, the price response is larger for product categories that cater to richer households.
- F4 - Macroeconomic Aspects of International Trade and Finance