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"Quality Upgrading and Productivity Gains from Domestic Market Access Changes in India", Jan 2025.
Paper
Abstract: Does greater access to domestic higher-income markets lead to quality upgrading and gains in productivity among local firms? Taking advantage of a major highway project in India, I find that firms responded differently to large and small increases in access to higher-income markets. When shocks were large, local firms produced higher-quality output by using more skilled labor, capital, and expensive materials, leading to productivity gains. For small shocks, local firms also produced higher-quality output but only by using more quantities of input and without any signs of productivity gains. Seen through the lens of the model, these results suggest that firms face substantial adjustment costs that prevent them from adopting more sophisticated production processes when shocks are small. Since income differences found within India are relatively narrow, my analysis suggests that developing countries do not need to rely solely on demand from high-income countries to incentivize quality upgrading and to capture associated productivity benefits.
"Trade Protection, Stock-Market Returns, and Welfare" with Mary Amiti, Matthieu Gomez, and David Weinstein, Dec 2024.
Paper - Online Appendix - NBER WP - NYFed Blog 1 - NYFed Blog 2 - Old Version
Media coverage: The Economist, Barron's, Quartz, Breitbart, Reuters, The Wall Street Journal, Forbes
Abstract: This paper develops a methodology to assess the expected impact of trade-policy announcements on aggregate welfare using financial market reactions. We use an infinite-horizon specific factors model of production to map the present discounted value of firm cash flows into aggregate welfare. We show that the policy-induced movement in the present value of firm cash flows—a variable that can be estimated from financial data—encapsulates the welfare impact of the tariffs. After applying our framework to the data, we find that the U.S.-China trade war lowered U.S. welfare by three percent.
Abstract: This paper investigates whether regional exposure to the 2018 trade war tariffs influenced voting patterns in the U.S. House of Representatives elections. Using county-level data and accounting for input-output linkages, I find that higher protection offered by import tariffs led to increases in votes for Republican candidates. However, the overall impact was negative and economically small as gains from import tariffs on outputs were canceled by those on inputs. Moreover, there is no evidence that import tariff exposure induced party switching, as votes for Democratic candidates remained unaffected. Lastly, exposure to retaliatory tariffs had negligible electoral consequences. These findings highlight the limited political impact of trade war tariffs in the 2018 midterm elections.
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