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Self-Harming Trade Policy? Protectionism and Production Networks

  • Alessandro Barattieri
  • Matteo Cacciatore
American Economic Journal: Macroeconomics
vol. 15, no. 2, April 2023
(pp. 97-128)
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Abstract

Using monthly data on temporary trade barriers (TTBs), we estimate the dynamic employment effects of protectionism through vertical production linkages. First, exploiting high-frequency data and TTB procedural details, we identify trade policy shocks exogenous to economic fundamentals. We then use input-output tables to construct measures of protectionism affecting downstream producers. Finally, we estimate panel local projections using the identified trade policy shocks. Protectionism has small and insignificant beneficial effects in protected industries. The effects in downstream industries are negative, sizable, and significant. The employment decline follows an increase in intermediate input and final goods prices and a decline in stock market returns.

Citation

Barattieri, Alessandro, and Matteo Cacciatore. 2023. "Self-Harming Trade Policy? Protectionism and Production Networks." American Economic Journal: Macroeconomics, 15 (2): 97-128. DOI: 10.1257/mac.20190445

Additional Materials

JEL Classification

  • E24 Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
  • F13 Trade Policy; International Trade Organizations
  • F14 Empirical Studies of Trade
  • F16 Trade and Labor Market Interactions
  • G14 Information and Market Efficiency; Event Studies; Insider Trading
  • L14 Transactional Relationships; Contracts and Reputation; Networks
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