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Pennsylvania Convention Center, 111-A
Hosted By:
American Economic Association
to volatile returns. Risk-averse investors trading multiple assets will favor stocks
that tend to yield high returns in bad times, that is, when the marginal utility of
consumption is high. In this paper, I develop a firm-level gravity model of trade
with risk-averse investors to show that firms seeking to maximize their present value
will take into account that shareholders discount expected profits depending on the
correlation with their expected marginal utility of consumption. The model predicts
that, ceteris paribus, firms sell more to markets where proits covary less with the
income of their investors. This holds true even in the presence of complete and
internationally integrated financial markets. To test the model's prediction, I use
data on stock returns to estimate correlations between demand growth in export
markets and expected marginal utility growth of U.S. investors. I then show that
the covariance pattern is reflected in the pattern of U.S. exports across destination
markets and time within narrowly dened product-level categories, as predicted by
the model. I conclude that by maximizing shareholder value, exporters are actively
engaged in global risk sharing.
Topics in International Trade
Paper Session
Sunday, Jan. 7, 2018 8:00 AM - 10:00 AM
- Chair: James Tybout, Pennsylvania State University
Estimating Unequal Gains Across United States Consumers With Supplier Trade Data
Abstract
Using supplier-level trade data, we estimate the effect on consumer welfare from changes in U.S. imports both in the aggregate and for different household income groups from 1998 to 2014. To do this, we use consumer preferences which feature non-homotheticity both within sectors and across sectors. After structurally estimating the parameters of the model, using the universe of U.S. goods imports, we construct import price indices in which a variety is defined as a foreign establishment producing an HS10 product that is exported to the United States. We find that lower income households experienced the most import price inflation, while higher income households experienced the least import price inflation during our time period. Thus, we do not find evidence that the consumption channel has mitigated the distributional effects of trade that have occurred through the nominal income channel in the United States over the past two decades.Globalization, Gender, and the Family
Abstract
How do globalization shocks that reduce labor demand in high-income countries influence the affected workers' family decisions? Using population register data covering all marriages, divorces and births together with employer-employee matched data from Denmark, we establish that rising import competition caused by the removal of textile quotas on China as this country joined the WTO in 2001 had a significant impact on the family-market work balance. Single workers affected by import competition tend to have higher likelihood of marriage, fertility and parental leave rates, married workers have significantly lower likelihood of divorce than comparable workers not affected by Chinese import competition. Notwithstanding the fact that marriage and childbirth are decisions made by couples, we find, strikingly, that these pro-family, pro-child effects are gender biased, with women, not men, being the main drivers. Furthermore, differences between the affected men and women, their jobs, their partners do not fully account for this gender bias, and we show that gender roles matter in the adjustment to globalization shocks. These results carry substantially over when we generalize the analysis to the entire Danish economy. We thus present worker-level evidence that globalization has significant effects on the family-market work balance and triggers consequences that affect future generations.Structural Change and Global Trade
Abstract
Since 1970, services has risen from 50 percent of the world's final consumption expenditures to nearly 80 percent. Services are also far less traded between countries than goods. Thus, as consumers become more service-oriented, the world will become ``less open'', affecting international trade volumes. Using a general equilibrium trade model with non-homothetic preferences and endogenous shifts in consumption behavior, we quantify the impact of such structural change on global trade across 27 countries. We find that world trade as a fraction of GDP would have been about 23 percentage points or 70 percent higher by 2015 if country-level expenditure patterns were unchanged from 1970 onwards. Income effects explain about one-quarter of this counterfactual. Without input-output linkages in production, the counterfactual increase in world trade with no structural change would be even greater. Finally, the process of structural transformation toward services systematically impedes the gains from trade.Global Risk Sharing Through Trade in Goods and Assets: Theory and Evidence
Abstract
Firms facing uncertain demand at the time of production expose their shareholdersto volatile returns. Risk-averse investors trading multiple assets will favor stocks
that tend to yield high returns in bad times, that is, when the marginal utility of
consumption is high. In this paper, I develop a firm-level gravity model of trade
with risk-averse investors to show that firms seeking to maximize their present value
will take into account that shareholders discount expected profits depending on the
correlation with their expected marginal utility of consumption. The model predicts
that, ceteris paribus, firms sell more to markets where proits covary less with the
income of their investors. This holds true even in the presence of complete and
internationally integrated financial markets. To test the model's prediction, I use
data on stock returns to estimate correlations between demand growth in export
markets and expected marginal utility growth of U.S. investors. I then show that
the covariance pattern is reflected in the pattern of U.S. exports across destination
markets and time within narrowly dened product-level categories, as predicted by
the model. I conclude that by maximizing shareholder value, exporters are actively
engaged in global risk sharing.
JEL Classifications
- F4 - Macroeconomic Aspects of International Trade and Finance