Saturday, Jan. 4, 2020 8:00 AM - 10:00 AM (PDT)
- Chair: Jeffrey Bergstrand, University of Notre Dame
Global Sourcing and Assembly with Scale Economies
AbstractWe develop a multi-country model in which firms decide on the location of their assembly plants (i.e., their assembly strategy) as well as the source of the inputs used in their plants worldwide (i.e., their global sourcing strategy). Our framework identifies a natural complementarity between these two strategies and delivers novel implications for the role of geography in shaping the global production strategies of firms. Empirically, we merge U.S. Census data with BEA data on multinational activity to document a series of novel facts regarding the global assembly and global sourcing strategies of U.S. firms. We next develop new tools to structurally estimate the model and perform a counterfactual that illustrates the rich implications of changes in trade costs on global production patterns.
Structural Change Within Versus Across Firms: Evidence from the United States
AbstractUS manufacturing’s employment share fell from 27 to 9 percent between 1977 and
2016. A third of this reallocation is driven by a shift towards services – particularly
professional services and retail – within continuing manufacturers. We show that firms
with in-house professional service establishments are larger, grow faster, are more likely
to survive, and are more likely to open plants in other sectors than firms without
such plants. These trends motivate a model of within-firm structural transformation in
which non-manufacturing workers complement physical production, and where physical
input price reductions induce firms to reallocate towards services. This mechanism is
consistent with US firms’ responses to growing trade with China.
Trade Policy Uncertainty and Stock Returns
AbstractThis paper documents new stylized facts on the effects of trade policy uncertainty on stock returns. We exploit quasi-experimental variation in exposure to policy uncertainty arising from annual votes by Congress to revoke China's NTR tariff rates between 1990 and 2001. Before China was permanently granted NTR rates, US manufacturing industries more exposed to trade policy uncertainty had stock returns 4.3% higher per year than less exposed sectors. Our results are not driven by stock prices' responses to policy-related news, nor by the effect of Chinese competition on expected or realized returns. We argue instead that this difference in average returns is a risk premium for exposure to trade policy uncertainty. Moreover, we document that more exposed sectors had more volatile stock prices, and that indirect exposure to uncertainty through Input-Output linkages also commanded a risk premium.
- F1 - Trade