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International Trade

Paper Session

Friday, Jan. 7, 2022 10:00 AM - 12:00 PM (EST)

Hosted By: American Economic Association
  • Chair: Natalia Ramondo, Boston University

Automation, Trade and Multinational Activity: Micro Evidence from Spain

Katherine Stapleton
,
World Bank
Michael Webb
,
Stanford University

Abstract

We use a rich dataset of Spanish manufacturing firms from 1990 to 2016 to shed new light on how automation in a high-income country affects trade and multinational activity involving lower-income countries. We exploit supply-side improvements in the capabilities of robots, as described in the text of robotics patents, that made it become technologically feasible over time to automate some specific tasks and not others. We show that, contrary to the assertion that automation in high-income countries will cause the reshoring of production, the use of robots in Spanish firms actually had a positive impact on their imports from, and number of affiliates in, lower-income countries. Robot adoption caused firms to expand production and increase labour productivity and TFP. For firms that had not yet offshored production to lower-income countries, robot adoption caused them to start newly doing so. By contrast, for firms that were already offshoring to lower-income countries, robot adoption had no impact on their offshoring but decreased their share of imports sourced from lower-income countries. We show that these findings can be explained in a framework that incorporates firm heterogeneity, the choice between automation, offshoring and performing tasks at home and where automation and offshoring both involve upfront fixed costs, such that their sequencing matters.

No Sugar Coating: Quantifying the Welfare Losses from the Cuban Embargo

Stefania Garetto
,
Boston University
Marie Petkus
,
Centre College

Abstract

Using newly digitized historical trade data from the United States Foreign Commerce Yearbooks, we recover Cuba's revealed comparative advantage at the beginning of the 20th century. Additionally, we simulate counterfactual scenarios of the evolution of Cuba's trade and living standards under different economic and political scenarios using a projection of our estimates. This counterfactual analysis provides a quantitative answer to a long-standing question about the Cuban economy: the "road not taken". How would the Cuban economy look today if the United States trade embargo did not occur? How did the United States involvement in the Cuban sugar industry affect Cuban specialization and growth? The answers to these questions shed light on our understanding of the consequences of extreme specialization for developing countries in situations of political instability.

Self-Harming Trade Policy? Protectionism and Production Networks

Matteo Cacciatore
,
HEC Montreal
Alessandro Barattieri
,
University of Quebec-Montreal

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.

International Trade of Essential Goods during a Pandemic

Fernando Leibovici
,
Federal Reserve Bank of St. Louis
Ana Maria Santacreu
,
Federal Reserve Bank of St. Louis

Abstract

This paper studies the role of international trade of essential goods during a pandemic. We consider a multi-sector small open economy model with essential and non-essential goods. Essential goods provide utility relative to a reference consumption level, and a pandemic consists of an increase in this reference level along with higher foreign prices and demand for these goods. The economy produces domestic varieties of both types of goods using capital and labor subject to sectoral adjustment costs, and all varieties are traded internationally subject to trade barriers. We find that trade plays an important
role on the impact of a pandemic, providing countries with access to imports of essential goods, while also leading domestic producers to reallocate domestic sales toward the rest of the world. We study the optimal response of international trade policy during a pandemic. We find that the optimal unilateral trade policy response to the pandemic is to subsidize imports while taxing exports. These findings are consistent with evidence on changes in trade barriers across countries during the COVID-19 pandemic.

Trade and Establishments: Reevaluating Why Location Matters

Jooyoun Park
,
Kent State University
Mina Kim
,
U.S. Bureau of Labor Statistics
Benjamin Raymond
,
U.S. Bureau of Labor Statistics

Abstract

This paper uses microdata from the BLS’ Occupational Employment and Wage Statistics (OEWS) program to study the effects of import exposure on occupational mix and wages within U.S. manufacturing establishments. More specifically, we study the interaction of industry-specific forces (product-market-specific cost-saving pressures) and local forces (layoffs and resulting excess supply of routine production workers at commuting zone-level) in influencing an establishment‘s decision whether to reorganize through adjustments in labor inputs. Our preliminary results show that location has a significant impact on how establishments reorganize their occupation mix. Young establishments and entrants in commuting zones with high exposure to imports from low-wage countries employ routine tasks more intensively compared to their counterparts in low exposure areas. Mature establishments in high exposure areas do not seem to change their occupational mix while those in low exposure areas display a substantial reduction in the usage of routine tasks. We also find that the negative wage effect on production occupations is significantly larger in high exposure areas, but this seems to occur mainly through establishment exits and entry rather than within establishments.
JEL Classifications
  • F1 - Trade