Policy Uncertainty, Trade, and Welfare: Theory and Evidence for China and the United States

Handley, Kyle; Limão, Nuno

doi:10.1142/9789813147980_0005

Cited by 15 publications

(39 citation statements)

References 55 publications

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“…Increased economic policy uncertainty has been shown to have negative effects on economic activity, employment and investment (Baker, Bloom and Davis ), while partisan political conflict has been shown to have negative effects on economy‐wide and firm‐level investment spending (Azzimonti ). Policy uncertainty has been shown to be an important influence on international trade and investment in a number of theoretical and empirical settings (see Novy and Taylor ; Handley and Limao, , ; Krol ). Economic policy uncertainty has a larger effect in the context of recessions (Caggiano, Castelnuovo and Groshenny 2014; Caggiano, Castelnuovo and Figueres ) and has significant international spillovers (Caggiano and Castelnuovo ).…”

Section: Measuring Economic Policy Uncertainty and Partisan Politicalmentioning

confidence: 99%

“…Existing research largely focuses on the effects of economic policy uncertainty and partisan political conflict on economic activity, employment and investment. Economic policy uncertainty has also been shown to negatively affect cross‐border trade and investment for the United States (Novy and Taylor ; Handley and Limao , ; Krol ). Economic policy uncertainty has a larger effect in the context of recessions (Caggiano, Castelnuovo and Groshenny 2014; Caggiano, Castelnuovo and Figueres ), as well as significant international spillovers (Caggiano and Castelnuovo ).…”

Section: Introductionmentioning

confidence: 99%

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State of Confusion: Economic Policy Uncertainty and International Trade and Investment

Kirchner¹

2019

Australian Economic Review

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Uncertainty about economic policy in Australia and the United States has increased episodically since the Global Financial Crisis. Existing research focuses on the effects on economic activity, employment and investment. I extend this work to examine the effect of policy uncertainty on global trade volumes, industrial production and cross-border trade and investment for Australia and the United States. Australia's relative resilience to policy uncertainty shocks reflects a larger role for the exchange rate in intermediating foreign shocks and the absence of a recession in Australia during the sample period considered.

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Section: Measuring Economic Policy Uncertainty and Partisan Politicalmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

State of Confusion: Economic Policy Uncertainty and International Trade and Investment

Kirchner¹

2019

Australian Economic Review

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“…As a result, China's import penetration into the United States increased. Handley and Limão (2017) and Pierce and Schott (2016) argued that the United States' elimination of uncertainty about tariff increases on Chinese goods was another important reason why U.S. imports from China grew. 5 It is worth noting that for an application of this dimension, not using our solution method will require estimating N × R × J productivity levels, N 2 × R 2 × J asymmetric bilateral trade costs, N 2 × R 2 × J 2 labor mobility costs, and N × R × J stocks of local factors, where N, R, and J are countries, regions, and sectors, respectively.…”

Section: Introductionmentioning

confidence: 99%

“…As a result, China's import penetration into the United States increased. Handley and Limão () and Pierce and Schott () argued that the United States' elimination of uncertainty about tariff increases on Chinese goods was another important reason why U.S. imports from China grew.…”

mentioning

confidence: 99%

Trade and Labor Market Dynamics: General Equilibrium Analysis of the China Trade Shock

Caliendo¹,

Dvorkin

Parro³

2019

ECTA

390

295

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We develop a dynamic trade model with spatially distinct labor markets facing varying exposure to international trade. The model captures the role of labor mobility frictions, goods mobility frictions, geographic factors, and input‐output linkages in determining equilibrium allocations. We show how to solve the equilibrium of the model and take the model to the data without assuming that the economy is at a steady state and without estimating productivities, migration frictions, or trade costs, which can be difficult to identify. We calibrate the model to 22 sectors, 38 countries, and 50 U.S. states. We study how the rise in China's trade for the period 2000 to 2007 impacted U.S. households across more than a thousand U.S. labor markets distinguished by sector and state. We find that the China trade shock resulted in a reduction of about 0.55 million U.S. manufacturing jobs, about 16% of the observed decline in manufacturing employment from 2000 to 2007. The U.S. gains in the aggregate, but due to trade and migration frictions, the welfare and employment effects vary across U.S. labor markets. Estimated transition costs to the new long‐run equilibrium are also heterogeneous and reflect the importance of accounting for labor dynamics.

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“…Khandelwal et al (2013) estimate the effect of quota removals for Chinese products and find that the removal of quotas in China's textile industry leads to both a surge in export volume and a decline in export prices. Handley and Limão (2017) estimate and quantify the impact of trade policy on China's export boom to the USA following its WTO accession. They reveal that China's WTO accession accounted for more than onethird of the export growth to the USA between 2000 and 2005 due to the reduction in the US threat of a trade war.…”

Section: What Is the Global Impact Of China's International Trade?mentioning

confidence: 99%

The Great Opening up and the Roadmap for the Future: The Story of China's International Trade

2018

China and World Economy

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The astonishing surge in China's international trade is the result of comprehensive economic reforms in the 1980s and 1990s. Trade was further bolstered by China's accession to the World Trade Organization (WTO) in 2001. We examine several aspects of China's international trade that might help to explain its surprisingly fast growth and its ever‐growing role in the global economy. A large number of studies have analyzed how trade liberalization, the WTO accession in particular, has profoundly changed the Chinese economy. We survey notable contributions to this literature that analyze the effects of trade liberalization on Chinese firms, individuals and households. Meanwhile, China's exports have had various effects on importing countries and the enormous growth of China's exports is seen by some observers as posing a threat to China's trading partners. Therefore, we discuss the emerging literature on the effects of China's spectacular export growth on consumers, labor markets, innovation, media and politics in foreign countries. Given the new domestic and external circumstances, the Chinese Government is determined to push for the formation of a new trade structure characterized by broad opening up to transform China into a strong trading powerhouse.

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Policy Uncertainty, Trade, and Welfare: Theory and Evidence for China and the United States

Cited by 15 publications

References 55 publications

State of Confusion: Economic Policy Uncertainty and International Trade and Investment

State of Confusion: Economic Policy Uncertainty and International Trade and Investment

Trade and Labor Market Dynamics: General Equilibrium Analysis of the China Trade Shock

The Great Opening up and the Roadmap for the Future: The Story of China's International Trade

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