Journal of International Economics最新文献

How do local government borrowing, default, and migration interact? We find in-migration results in excessive debt accumulation due to a key externality: Immigrants help repay previously-issued debt. In addition to providing direct IV evidence on this mechanism, we show cities are heavily indebted, near state-imposed borrowing limits, vulnerable to interest rate increases, and default even after periods of robust population and productivity growth. Our quantitative model reproduces these features of the data and reveals a bifurcation: in-migration strongly affects borrowing, but borrowing only weakly affects migration. The model predicts large interest rate declines in the Great Recession prevented a wave of municipal defaults.

Banking regulation routinely designates domestic government debt as safe, even when this debt is risky. We show, in a parsimonious model, that this failure to recognize the riskiness of government debt induces domestic banks to “gamble” with depositors’ funds by purchasing risky government bonds and assets correlated with them. Sovereign defaults then result in banking crises; however, by permitting banks to gamble, the regulator lowers the government’s borrowing costs ex-ante. Thus, the government has an incentive to ignore the riskiness of the sovereign bonds. We derive a set of testable implications and present supporting empirical evidence from sovereign debt crises in Russia, Argentina, and the Eurozone.

The Feenstra (1994) method is widely used in the international trade literature to estimate supply and demand elasticities. The method is mechanically an IV strategy, and we demonstrate that this has important implications for its application and reliability. The assumptions needed for it to yield unbiased estimates are stronger than previously understood, and in practice, estimates are subject to bias due to both weak instruments and violations of the exclusion restriction. We illustrate how these arise in context and show that standard tests identify estimates that are likely to be biased. In an application to U.S. import data, estimates of import demand and export supply elasticities are substantially lower among goods that pass standard tests relative to those that fail. We find evidence that this difference in elasticities reflects reduction of bias as well as some selection in the set of goods that tend to pass both tests.

We examine the role of trade policy uncertainty (TPU) in shaping the import decisions of firms. In a model where firms must incur sunk costs to adopt new imported varieties of an input, a reduction in TPU for a given input increases imports of that input (a substitution effect) and possibly other inputs (a scale effect). We explore this in the context of China’s accession to the WTO, which bound China’s tariffs. We find that, controlling for current tariffs, the threat of reversion to past high tariffs reduces imports, but much less so after WTO accession, consistent with lower TPU. The current-tariff trade elasticity also increases after WTO entry, reflecting a greater perceived permanence of current tariffs. We find evidence of both substitution and scale effects for imports, and post accession, firms were more likely to adopt products previously subject to higher tariff risk.

We develop a quantitative framework for decomposing trade patterns. We derive price indexes that determine comparative advantage and the aggregate cost of living. If firms and products are imperfect substitutes, we show that these price indexes depend on variety, average appeal (including quality), and the dispersion of appeal-adjusted prices. We show that they are only weakly related to standard empirical measures of average prices. We find that 40 percent of the cross-section variation in comparative advantage, and 90 percent of the time-series variation, is accounted for by variety and average appeal, with less than 10 percent attributed to average prices.

By preemptive austerity, we mean a policy that increases taxes to deter potential rollover crises. The policy is so successful that the usual danger signal of a rollover crisis, a high yield on new bonds sold, does not show up, because the policy eliminates the danger. Mechanically, high taxes make the safe zone in the model – the set of sovereign debt levels for which the government prefers to repay its debt rather than default – larger. By announcing a high tax rate at the beginning of the period, the government ensures that tax revenue will be high enough to service sovereign debt becoming due, which deters panics by international lenders but is ex-post suboptimal. That is why, as it engages in preemptive austerity, the government continues to reduce the level of debt to a point where, at least asymptotically, high taxes are no longer necessary.

Firms in regional trade areas choose whether to comply with rules of origin (RoO) or pay a tariff penalty. Stricter content requirements initially expand regional part sourcing, but contract it when set at levels above a threshold, analogously to the Laffer curve for taxes. We calibrate the model to fit part cost shares for autos sold in North America. The effects of the 75% RoO imposed in 2020 depend on the relevant tariff and the ability to relocate assembly. With fixed assembly locations, the higher RoO reduces employment in all three countries for cars, where tariffs are low. For trucks, the 25% US tariff induces more compliance in Canada and Mexico, increasing employment in those countries. With the option to relocate assembly, higher RoOs redistribute employment to the US, but Canada and Mexico lose more, leading to a half percent decline in North American employment for both cars and trucks.

We quantify the joint impact of the China shock and automation of labor, across US commuting zones (CZs) in the period 2000–2007. To this end, we employ a multi-sector gravity model of trade with Roy-Fréchet worker heterogeneity across sectors, where labor input can be automated. Automation and increased import competition from China are both sector-specific; they lead to contractions in a sector’s labor demand and a decline in relative income for CZs more specialized in that sector, amplified by a voluntary reduction in hours worked and an increase in frictional unemployment. The estimated model fits well with the aggregate performance of manufacturing subsectors and with the variation across CZs in changes in average income, the hourly wage, hours worked, the employment rate and employment in manufacturing. By itself, the China shock has stronger distributional effects than automation, but its impact on aggregate gains is less than a third of automation’s impact.

We examine the impact of commodity price changes on the business cycles and capital flows in emerging markets and developing economies (EMDEs), distinguishing between their role as a source of shock and as a channel of transmission of global shocks. Our findings reveal that surges in export prices, triggered by commodity price shocks, boost domestic GDP, an effect further amplified by the endogenous decline of country spreads. However, the effects on capital flows appear muted. Shifts in U.S. monetary policy and global risk appetite drive the global financial cycle in EMDEs. Eased global credit conditions, attributed to looser U.S. monetary policy or lower global risk appetite, lead to a rise in export prices, higher output, a decrease in government borrowing costs, and stimulate greater capital flows. The endogenous response of export prices amplifies the output effects of a more accommodative U.S. monetary policy while country spreads magnify the impact of shifts in global risk appetite.

We examine how a sovereign’s ability to borrow abroad affects the country’s growth and steady-state consumption when the government is both myopic and self-interested. Surprisingly, government myopia can increase a country’s access to external borrowing and extend the government’s effective horizon, giving it a stake in incentivizing private production and savings despite its self-interest. In a high-saving country, the lengthening of the government’s effective horizon can incentivize it to tax less, resulting in a “growth boost”, with higher steady-state household consumption than if it could not borrow abroad. However, in a country that saves little, the government may engage in repressive tax policies to channel domestic savings into government bonds. This increases future governments’ costs of default, and in turn enhances current debt capacity and spending, but can lead to a “growth trap” where steady-state household consumption is lower than without government’s access to external borrowing.