Trade relations between the United States and China have grown increasingly tense, spurred by concerns that growing imports from China have led to plant closures and job loss in the United States. We find a link between the sharp decline in U.S. manufacturing employment after 2000 and the granting of Permanent Normal Trade Relations (PNTR) to China, which eliminated uncertainty about China‘s continued access to the U.S. market. Our research into the reactions of U.S. and Chinese firms to PNTR highlights the sensitivity of firm behavior to policy uncertainty.
globalization
Absolute poverty: when necessity displaces desire
The number of people living in poverty in countries around the world is commonly measured using the World Bank’s poverty line – the ‘$1 per day’ that many people have heard of, though it has risen over time and now stands at $1.90 per day. However this measure assumes that the needs of the poor are the same in every country, an assumption at odds with the evidence and common sense. This paper develops a Basic Needs Poverty Line that overcomes this problem giving us new and in some cases surprising insight into the severity of the poverty problem in both rich and poor countries around the world.
Gains from trade: evidence from nineteenth century Japan
Japan’s nineteenth century opening to world commerce after a long period of economic self-sufficiency provides a natural experiment to test the theory of comparative advantage and the gains from trade that it predicts. Drawing on a wide range of historical sources for data on prices, output and trade flows, this research finds that the country benefited from a significant boost to GDP in the years following its forced reintegration with the global economy. The evidence constitutes a strong indication of the potential costs of rejection of today’s open system of world trade.
Reducing the cost of living: how global retailers improve household welfare in Mexico
Big-box retail stores arriving from foreign countries have transformed the way Mexican households shop for goods, sparking a “supermarket revolution”. Traditionally, consumers in developing countries have shopped at street markets and small, independent stores. However, consumers have switched to shopping at foreign retailers, who offer a larger variety of products at cheaper prices. Despite concerns that foreign retailers might adversely affect local employment and household incomes, our evidence shows that allowing them to operate their businesses in Mexico has generated substantial welfare gains for households across the income spectrum by lowering the cost of living, while having limited impacts on total employment, incomes, and local businesses closing.
