This PSE summer school addresses recent debates at the frontier of the field: the role of large firms and global value chains in the world economy, advances in methods to analyze firm level export data, the distributive effects of trade, and finally the revival of trade policies
- Global value chains (Pol Antràs, Harvard University, NBER and CEPR) – 8h
- Global leakages and global cooperation (Mathieu Parenti, ULB and CEPR) ‐ 8 h
- Impact of trade liberalization: Measurement issues (Sandra Poncet, PSE) – 3h
- Trade and Income Distribution (Ariell Reshef, PSE and CEPII) ‐ 6 h
Workshop: present your paper
Participants will have the opportunity to submit a paper to be presented within this program. Selected papers will be presented in front of participants and faculty in a slot reserved for such presentations.
Global Value Chains – Pol Antràs
This mini-course will focus on the study of multinational activity with a special emphasis on global value chain (GVC) activity. We will discuss theoretical and empirical studies as well as “micro” and “macro” studies of GVCs. On the empirical front, we will begin reviewing several variants of the “macro approach” to measuring the relevance of GVCs in the world economy, and we also offer a critical evaluation of the country- and industry-level datasets (or World Input Output Tables) that have been used to date. We will next discuss the advantages and disadvantages of a burgeoning alternative “micro approach” that has instead employed firm-level datasets to document the ways in which firms have sliced up their value chains across countries. On the theoretical front, I will propose an analogous dissection of the literature. First, I will review a vast body of work developing country- and industry-level quantitative frameworks that are easily calibrated with World Input Output Tables, and that open the door for counterfactual exercises with minimal demands on estimation. Second, I will overview micro-level frameworks that have treated firms rather than countries or industries as the relevant unit of analysis, and that have unveiled a number of distinctive mechanisms by which GVCs shape the determinants and consequences of international trade flows in ways distinct from traditional models of international trade. I will close the mini-course with a discussion of a still infant literature on the desirability and effects of trade policy in a world of GVCs.
- Measuring global production sharing in the world economy: World Input-Output Tables.
- Firm-level empirical approaches to GVC participation.
- GVC and quantitative trade theory. The view from Macro.
- Micro-level approaches to modelling GVCs.
- GVCs and trade and industrial policy.
Selected key references
Antràs, Pol and Davin Chor (2021), “Global Value Chains, Handbook of International Economics”. Vol. 5. Elsevier.
Johnson, R. C. and Noguera, G. (2012), “Accounting for intermediates: Production sharing and trade in value added”, Journal of International Economics, 86(2), 224-236.
Caliendo, Lorenzo, and Fernando Parro (2015), “Estimates of the Trade and Welfare Effects of NAFTA”, The Review of Economic Studies 82, no. 1 (2015): 1-44.
Antràs, Pol and Alonso de Gortari (2017), “On the Geography of Global Value Chains \ Econometrica”, 84, 4, 1553–1598.
Antràs, Pol, Teresa Fort and Felix Tintelnot (2016), “The Margins of Global Sourcing: Theory and Evidence from U.S”, American Economic Review 107 (9): 2514-64.
Tintelnot, Felix (2012), “Global Production with Export Platforms”. 2017, The Quarterly Journal of Economics, Volume 132, Issue 1, Pages 157–209.
Antras, Pol, Teresa Fort, Agustín Gutiérrez, and Felix Tintelnot, “Trade Policy and Global Sourcing: A Rationale for Tariff Escalation”, Working Paper, Harvard University.
Global leakages and global cooperation – Mathieu Parenti
Global firms that operate in many markets create interdependencies between countries, which complicate the design of cooperative policies and may weaken the efficiency of unilateral policies. In many instances, from the regulation of international trade flows to corporate tax avoidance, to the digitalization of the economy and environmental issues, these interdependencies are central to the design of cooperative and non-cooperative policies. We will review a series of international externalities at play in international trade and foreign direct investment and study how they impact the design of international agreements.
- Do we need deep trade agreements?
- Trade policy and the carbon leakage
- Digital trade
- Tax leakages and tax reforms
Selected key references
Bagwell, K., and R. W. Staiger, (2001), “Domestic policies, national sovereignty, and international economic institutions”. Quarterly Journal of Economics, 116(2), 519-562.
Campolmi A., Fadinger, H., and Forlati, C. (2022) “The design of trade agreements under monopolistic competition”.
Copeland Shapiro Taylor, (2022), “Globalization and the environment Handbook of International Economics”, Volume V, pp. 61-146.
Davies, R. B., Martin, J., Parenti, M., & Toubal, F, (2018), “Knocking on tax haven’s door: Multinational firms and transfer pricing”. Review of Economics and Statistics, 100(1), 120-134.
De Lyon, J., Dhingra, S., and M. Parenti, (2022), “Multinational Enterprises and International Tax Shifting: Evidence from Shutting Down the Mauritius Route to India”.
Dubus A. , Koethenbuerger, M. and M. Parenti, (2022),“Trade in data”, mimeo.
Ferrari, A., Laffite, S., Parenti, M., Toubal, F, (2022), “Profit shifting frictions and the geography of multinational production”.
Maggi, G., and Ossa, R, (2020), “Are trade agreements good for you?”, NBER WP.
Martin, J., Parenti, M., & Toubal, F, (2022), “Corporate tax avoidance: micro evidence and aggregate implications”, CEPR DP.
Parenti, M., and Vannoorenberghe, G, (2021), “A simple theory of deep trade integration”, CEPR DP.
Serrato, J. C. S, (2018), “Unintended consequences of eliminating tax havens”. NBER DP.
Staiger, R. W, (2021), “Does digital trade change the purpose of a trade agreement?” NBER DP.
Tørsløv, LS Wier, G Zucman, (2022), “Missing profits of nations, Review of Economic Studies” (forth.).
Impact of trade liberalization: Measurement issues – Sandra Poncet
A growing empirical literature highlights the importance of the impacts of trade liberalization at the macro (country and regions), meso (sector) and micro (firm and individual) levels. The impacts measured are not limited to purely economic effects (firm productivity, individual wages, unemployment) and include effects on innovation, happiness, electoral outcomes. This course discusses two of the major challenges facing this work: 1) appropriate measuring of liberalization shocks and 2) credible identification. The first challenge relates to the fact that trade liberalization initially comes from a change in protection levels that are defined at the disaggregated level of products (nomenclature of several thousand products). Trade liberalization shocks need to be measured and connected to the affected entity. For example, domestic firms will not be affected the same way if they use imports or goods that are competing with imports, produce products in competition with imports or are exporters. The measured trade shock has to incorporate sourcing information typically available from input-output tables. The second challenge is how to deal with endogeneity of the computed trade liberalization shocks. Much of the empirical trade literature estimates trade-shock impacts computing using shift-shares which poses numerous challenges. The lecture will review the exclusion restriction needed to extract causality when using shift-share indicators and will discuss various checks and tests to deal with identification and statistical inference in this setting.
- What shocks do tariffs changes trigger?
- How to connect trade liberalization to firms or locations’ outcomes?
- Identification using shift-shares
Selected key references
Adao, Rodrigo, Michal Kolesár, and Eduardo Morales, 2019, “Shift-Share Designs: Theory and Inference”. Quarterly Journal of Economics, 134 (4): 1949–2010
Amiti, M. and Konings, J, (2007), “Trade Liberalization, Intermediate Inputs, and Productivity”, American Economic Review, 97 (5), 1611-1638.
Autor, David H., David Dorn, and Gordon H. Hanson, (2013), “The China Syndrome: Local Labor Market Impacts of Import Competition in the United States”. American Economic Review, 103 (6): 2121–68.
Bartik, Timothy J, (1991), “Who Benefits from State and Local Economic Development Policies? Kalamazoo”, MI: W. E. Upjohn Institute for Employment Research.
Borusyak, K., Hull P. and Jaravel X., (2022), “Quasi-experimental shift-share research designs”, Review of Economic Studies, 89(1), 181-213.
Brandt, L., Van Biesebroeck, J., Wang, L. and Zhang, Y, (2017), “WTO accession and performance of Chinese manufacturing firms”. American Economic Review, 107 (9), 2784–2820.
Goldsmith-Pinkham, Paul, Isaac Sorkin, and Henry Swift, (2020), “Bartik Instruments: What, When, Why, and How”. American Economic Review, 110 (8): 2586-2624.
Kovak, Brian K, (2013), “Regional Effects of Trade Reform: What Is the Correct Measure of Liberalization?”. American Economic Review, 103 (5): 1960-76}.
Shu P. and Steinwender, C, (2019), “The Impact of Trade Liberalization on Firm Productivity and Innovation, Innovation Policy and the Economy”, University of Chicago Press, vol. 19(1), pages 39-68.
Topalova, P. and Khandelwal A, (2011), “Trade Liberalization and Firm Productivity: The Case of India”. Review of Economics and Statistics, 93 (3): 995-1009.
Trade and Income Distribution – Ariell Reshef
The goal is to study micro-mechanisms of how globalization may affect income distribution: trade in final goods, trade in intermediate inputs, trade in capital, offshoring. We will consider several channels through which globalization affects domestic labor markets, for example, through changes in relative demand for different types of labor inputs, or through changes in incentives to invest and technological responses. These manifest themselves in the distribution of income via reallocation of resources across productive units, changes in the internal organization of productive units, fair wages, sorting, and more. Relate to this, Prof. Poncet will discuss impacts on local labor markets.
- Why do we think trade and income distribution are linked?
- Market access and variation in composition of activities.
- The capital input channel of trade liberalization.
- Foreign direct investment and offshoring.
- Individual effects and sorting.
Selected key references
Burstein, Cravino and Vogel (2013): “Importing Skill‐Biased Technology”, AEJ: Macroeconomics.
Egger and Kreickemeier (2009): “Firm heterogeneity and the labor market effects of trade liberalization”. International Economic Review.
Harrigan and Reshef (2015): “Skill Biased Heterogeneous Firms, Trade Liberalization and the Skill Premium”, Canadian Journal of Economics.
Harrigan, Reshef and Toubal (2020): Techies, Trade and Skill-Biased Productitvity, NBER Working Paper No. 25295
Helpman, Itskhoki and Redding (2010), “Inequality and unemployment in the global economy”, Econometrica.
Raveh and Reshef (2016), “Capital Imports Composition, Complementarities, and the Skill Premium in Developing Countries”, Journal of Development Economics.
Reshef and Santoni (2021), “Are Your Labor Shares Set in Beijing? The View Through the Lens of Global Value Chains”. Working paper.
Sampson (2014): “Selection into Trade and Wage Inequality”, American Economic Journal: Microeconomics.
Thoenig, and Verdier (2003), “A theory of defensive skill-biased innovation and globalization”, American Economic Review.
Contents - International Trade