I am pleased to see VP candidate
@JDVance
is engaging with our research. A thread below offering comments and implications for Trump’s tariff proposals.
Senator
@JDVance
, as you requested I've done a bit more digging into the talking points on tariffs we were provided by industry-funded lobby groups. Unfortunately they do not meet our usual high standards for evidence.
Jonathan Eaton was an exceptional scholar and a wonderful mentor. Cecilia Fieler and I wrote an intellectual obituary describing his academic work and legacy that was just posted on VoxEU.
Now forthcoming in
@JPubEcon
: "How many jobs can be done at home?" with
@BrentNeiman
. Manuscript: Replication package: Brent and I wrote this paper entirely from our homes.
Brad Setzler & I are excited our paper on foreign multinationals in the US has been accepted by the QJE.
Key questions: How much more does a worker earn when hired by a foreign multinational? How are domestic firms and their workers in nearby locations affected by foreign firms?
Recently accepted by
#QJE
, “The Effects of Foreign Multinationals on Workers and Firms in the United States,” by Setzler and Tintelnot (
@FelixTintelnot
):
Our paper Trade and Domestic Production Networks recently got accepted by the
@RevEconStud
. While you may have seen a previous version, the paper has changed a lot over the last three years, becoming more descriptive and more concise.
All in all, our research suggests that an across-the-board 20 percent increase in tariffs on all countries can have large effects on inflation for American consumers.
It's great to see our paper on the production relocation and consumer price effects of tariffs in print at the AER. Here is a summary by the AEA from an interview with my co-author
@Aaronflaaen
.
It has taken as a very long time to complete this paper, but I believe it was very much worthwhile. Joint work with Emmanuel Dhyne, Ken Kikkawa, Toshiaki Komatsu, and Magne Mogstad
Belgian firms pass on a large share of a foreign demand shock to their domestic suppliers, face upward-sloping labor supply curves, and have sizable fixed overhead costs in labor, from Dhyne, Kikkawa, Komatsu, Mogstad, and
@FelixTintelnot
New short paper with great co-authors. The theoretical setup generalizes the one of my job market paper from 10+ years ago, published as Tintelnot (2017). Here, it is admissible that export-platform plants are complements.
Our paper on the effects of trade policy on production relocation and consumer prices - in the context of the washing machine industry - is forthcoming in the American Economic Review.
Forthcoming in the AER: "The Production Relocation and Price Effects of U.S. Trade Policy: The Case of Washing Machines" by Aaron Flaaen, Ali Hortaçsu, and Felix Tintelnot.
We also found an equivalent price increase for dryers (a complementary good! see the paper); taken together, this implies roughly full pass-through of the tariffs to US consumers. Our study, published in 2020, focused on the impact of these tariffs in their first year.
1/n New paper with
@pol_antras
,
@Tfpiasecki
, and
@AgusGutierrez92
. Our work was motivated by the recent US-China trade war: “Does it matter whether tariffs are placed on final or intermediate goods?”
Will washing machines become the next pick-up trucks, with high tariff protection for 50+ years? Since 2012 washing machines imports into the United States have been significantly restricted.
However, the 2018 global tariffs resulted in more dramatic increases in consumer prices. We found roughly a 10 percent price increase on washers, compared to oven ranges, dishwashers, and refrigerators.
In joint work with Ali Hortacsu and
@Aaronflaaen
, our paper examined in detail the price effects from a global 20 percent increase in tariffs on a particular product: washing machines
Thrilled to be joining
@UCLA
Econ as an AP in 2024 after spending next year as a
@IESPrinceton
fellow. Big thanks to everyone who had a hand in making it happen 🙏
A second point: In February 2023 the washer tariffs expired. What happened in 2023? We see a large decline in consumer prices for laundry equipment, roughly around 13 percent. The price of other appliances fell by 3 percent over the same period.
In 2018, prices for washers and dryers rose by 10%, without noticeably altering the trend. By 2020, prices for laundry equipment were 10% higher than they would have been without the tariff-induced price shift.
Economist Esteban Rossi-Hansberg has been appointed the Glen A. Lloyd Distinguished Service Professor at
@UChicago
where he will join the faculty of the Kenneth C. Griffin Department of Economics this summer.
@JDVance
points out that after two years, the price of laundry equipment has fallen to its pre-tariff level.
@JustinWolfers
is right to point out that even over the longer horizon the price of laundry equipment has risen more than the price of other appliances.
If you are interested in working with me and
@FelixTintelnot
for the next two years, please apply. The academic environment at BFI is simply fantastic.
🎉Congratulations!🎉
Ralph Ossa will be joining the
@WTO
as Chief Economist as of January 1, 2023. Proud to have an Economist from
@UZH_en
in this important role and delighted that he will remain affiliated with our Department. All the best, Ralph!
#Pioneeringeconomics
#WTO
We found that in prior years, when tariffs were placed on an individual country alone, such as on washers coming from China in 2016, the price effects were muted; companies could just relocate to other export platform countries.
Two additional points are worth making. First, consider the longer time series of the CPI of laundry equipment. You can see a clear downward trend in laundry equipment prices since late 2012, with laundry equipment prices falling around 5 percent per year.
FINDING: US multinational firms are more likely to import not only from the countries in which they have affiliates, but also from other countries within their affiliates’ region. More by
@pol_antras
,
@evgeni_fadeev
,
@tfpiasecki
, and
@felixtintelnot
here:
Forthcoming in the AER: "Misperceived Social Norms: Women Working Outside the Home in Saudi Arabia" by Leonardo Bursztyn, Alessandra L. González, and David Yanagizawa-Drott.
The BLS price index takes into account quality improvements, which – all else equal—lead to declines in measured price indexes. Quality was indeed improving over this period – such as increases to washer capacity. Tariffs didn't change the fact that washers are getting bigger.
The 12th paper to win the JIE's Bhagwati Award for International Trade is "The Comparative Advantage of Cities" by Donald Davis
@newyorkonomics
and Jonathan Dingel
@TradeDiversion
, which appeared in the JIE in Volume 123.
What are the effects of foreign multinationals on workers and firms in the U.S.? A compressed and non-technical summary of our
@QJEHarvard
article with Brad Setzler at
@micro_econ
New from Bradley Setzler
@PennStateEcon
&
@FelixTintelnot
"What happens when foreign firms expand local employment?"
A recent study uses U.S. tax records on firms and workers to investigate how the actions of multinational firms affect host locations.
Not in my pile (because we can't hire them due to conflict-of-interest rules), but very highly recommended are the following three students (in alphabetical order):
13.Moreover, since our granular framework coincides with the standard model in the limit, it can be used to quantify the role of granularity in economic outcomes and assess the (un)suitability of the continuum approximation.
7.Every job created by a foreign multinational generates:
- 0.5 jobs at local domestic firms
- $13,400 in wage gains, two-thirds from indirect effects
Lastly, foreign multinationals extract much of the local surplus they generate via job subsidies.
Today and tomorrow: CESifo Area Conference on
#Global
Economy 2023. We welcome all participants 🤗. Keynote lecturers:
@FelixTintelnot
and Karen Helene Ulltveit-Moe
@UniOslo
- scientific organizer: Peter Egger
@ETH_en
5. How much shocks in foreign markets affect the sales of a firm depends on how much the firm ultimately sells to these markets, not whether these sales are from direct or indirect exports.
@borusyak
I go beyond the standard textbook in my trade undergraduate class, especially in the 2nd half of the course. My impression is that students appreciate it.
6.These indirect effects of foreign multinationals on domestic firms are greater for
- domestic firms in the tradable sector
- domestic firms with 100+ employees
- high-wage workers at domestic firms
However, no benefit for low-wage workers.
Very sad news for Harvard, but congratulations,
@GitaGopinath
, and best of luck! We will miss you.
👇👇👇
First Deputy Managing Director Geoffrey Okamoto to Leave IMF, Gita Gopinath to Be IMF’s New First Deputy Managing Director
4.Indirect effects: we leverage spatial clustering of foreign multinationals by country of origin and country-specific shocks to construct a shift-share instrument.
For example, Canadian-owned firms disproportionately cluster along the Northern border.
3. It has long been posited that high-skilled workers benefit more from foreign investment. We provide the first systematic evidence in favor of this hypothesis in the U.S.
We find the wage premium ranges from 20% for highest-skilled workers to 0% for least-skilled.
5.A 1 percentage point increase in employment at foreign firms leads to positive effects at domestic firms in the same commuting zone:
- 0.96% increase in value added
- 0.53% increase in employment
- 0.15% increase in wages for continuing workers
2.Multinational firms owned in high GDP per capita countries
- pay higher premiums to their workers
- disproportionately hire skilled workers.
For example, firms owned in New Zealand, Norway, Sweden, and the UK pay wages 10% more than domestic firms.
If the within firm elasticity of labor substitution across the MNE's plants is smaller than the cross-firm elasticity of demand, complementarity forces dominate.
5.The assumption we make in the theory is that individuals have continuum-case rational expectations about prices. In other words, they take the limit case of the number of individuals going to infinity, for their expectations about prices.
2.The paper is motivated by the fact that while there is a growing body of fine spatial data, mapping these data to conventional models assuming a continuum of individuals at every location is problematic due to selection and overfitting issues (more on this below).
@RickEcon
@BakerInstitute
@RiceUniversity
Congratulations, Rick! Thanks so much for the great training you provide to students and the many public goods you create. A big loss for UChicago.
1. Direct effects: A worker in the US earns about 7 percent more on average when moving from a domestic to a foreign-owned firm.
This premium does not arise from the foreignness of the multinationals per se, as domestic-owned multinationals pay a similar wage premium.
2/n In the data, import tariffs often are higher on final goods than on intermediate goods. The main explanation has been lobbying by downstream firms. In this paper, we show that there is an efficiency
rationale for this phenomenon.
We use Belgian VAT data on firm-to-firm transactions combined with firm-level international trade data to study the direct and indirect participation of firms in foreign trade. We find that ...
3. While directly exporting and importing firms are larger, the non-direct importers or exporters do not have to be large to obtain a lot of inputs from abroad or see most of their sales going to foreign markets.
@IvanWerning
Note that these models feature discrete choices of locations, so with finite people the local labor supply curves would be ugly step functions. Our timing assumption makes local labor supply curves vertical in second stage, so it's an easy-to-solve trade model.
4.1. Do individuals internalize that their own residence and work-place location decisions affect prices? 2. How do individuals form expectations about prices that are influenced by other agents’ decisions?