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Assessing the Globalization Backlash

Paper Session

Saturday, Jan. 5, 2019 2:30 PM - 4:30 PM

Atlanta Marriott Marquis, M303
Hosted By: Econometric Society
  • Chair: Davin Chor, Dartmouth College

Does Trade Liberalization with China Influence United States Elections?

Yi Che
,
Shanghai Jiao Tong University
Yi Lu
,
National University of Singapore
Justin R. Pierce
,
Federal Reserve Board
Peter Schott
,
Yale University
Zhigang Tao
,
University of Hong Kong

Abstract

This paper examines the impact of trade liberalization on U.S. Congressional elections. We nd 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. Using a regression discontinuity analysis, we show that these changes are consistent with Democrats in oce during the period examined being more likely to support legislation limiting import competition or favoring economic
assistance

Information, Globalization and Preferences for Economic Policy: Evidence from Randomized Surveys

Laura Alfaro
,
Harvard Business School
Maggie X. Chen
,
George Washington University
Davin Chor
,
Dartmouth College

Abstract

It has been hypothesized that increased globalization has been a contributing cause behind the rising inequality seen in recent years in many countries around the world. This has led to a discernible rise in anti-globalization sentiment – fueled in part by the information transmitted through political messaging and media coverage – resulting in more calls for protectionist policies to be adopted. In this paper, we investigate the role that information can play in shaping individuals’ views towards globalization and preferences over related economic policies. We do so by designing and administering a survey that contains ​​a randomized information treatment. Each information treatment provides a concise summary of findings by established economic researchers on the extent to which globalization or other candidate forces (such as technology) can explain rising inequality in the U.S. We then examine whether the specific information treatment received has a causal effect on the preferences that respondents subsequently expressed over policy instruments – such as limits on imports, improving the ​​ progressiveness ​ of the tax system, ​and ​ improving the quality of education – to mitigate the effects of rising inequality. We then formally analyze how information might shape individuals’ attitudes towards globalization and preferences over policies is critical, as research on trade policy decisions has typically assumed a full information environment, ​​abstracting from possible biases in the information set that individuals are exposed to.

Border Walls

Treb Allen
,
Dartmouth College
Cauê Dobbin
,
Stanford University
Melanie Morten
,
Stanford University

Abstract

What are the economic impacts of a border wall between the United States and Mexico? We use confidential data on bilateral flows of primarily unauthorized Mexican workers to the United States to estimate how a substantial expansion of the border wall between the United States and Mexico from 2007 to 2010 affected migration. We then combine these estimates with a general equilibrium spatial model featuring multiple labor types and a flexible underlying geography to quantify the economic impact of the wall expansion. At a construction cost of approximately $7 per person in the United States, we estimate that the border wall expansion harmed Mexican workers and high-skill U.S. workers, but benefited U.S. low-skill workers, who achieved gains equivalent to an increase in per capita income of $0.36. In contrast, a counterfactual policy which instead reduced trade costs between the United States and Mexico by 25% would have resulted in both greater declines in Mexico to United States migration and substantial welfare gains for all workers.

The Consequences of the Brexit Vote for UK Inflation and Living Standards: First Evidence

Holger Breinlich
,
University of Nottingham
Elsa Leromain
,
London School of Economics
Dennis Novy
,
University of Warwick
Thomas Sampson
,
London School of Economics

Abstract

We analyze the impact of the Brexit referendum in June 2016 on UK inflation and living standards. We propose a theoretical framework in which households are exposed to imported goods directly through the consumption of foreign final goods and indirectly through the use of foreign intermediates in domestic production. We generate empirical measures of the direct and indirect exposure to imported goods based on UK input-output tables. The pound depreciated by around 10% immediately following the referendum and we show that product groups with larger direct and indirect import shares experienced higher inflation after the vote. Our results suggest that the referendum increased aggregate UK inflation by 1.7 percentage points within one year. Exploiting differences in expenditure patterns across household types we find that the increase in inflation is evenly shared across the income distribution, but not across regions. London is the least affected region, while Scotland, Wales and Northern Ireland are hardest hit. We conclude that voting to leave the EU has already raised the cost of living for UK households.
JEL Classifications
  • F1 - Trade
  • F6 - Economic Impacts of Globalization