Research

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November 2024
Mitigating Policy Uncertainty: What Financial Markets Reveal About Firm-Level Lobbying

Abstract Elections can lead to significant changes in policy and, thus, are a significant source of policy uncertainty. Firms can respond to such uncertainty by lobbying, but it is hard to quantify whether they do so and, if so, how much lobbying benefits them. We construct a new dataset and firm-level measure of exposure to policy uncertainty using investors' expectations of variability in stock returns in the aftermath of the 2020 US presidential election. We show that lobbying reduces policy uncertainty, and that this result holds even after controlling for selection into lobbying and for sectoral heterogeneity. We then develop and quantify a model of heterogeneous firms with endogenous lobbying. We find that affecting policy through lobbying is costly and the returns from it are highly skewed and rapidly diminishing. Thus, while lobbying expenditures reduce the impact of policy risk, few firms anticipate sufficient gains to invest in it.

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November 2024
Reversing Protectionism: A First Look at Product-level Trade Data from Smoot-Hawley to the GATT

Abstract This paper studies U.S. trade policy from the Smoot-Hawley Tariffs through the 1947 General Agreement on Tariffs and Trade. Given the recent return to broad-based import protection policies, it is more important than ever that we understand the historical dynamics behind the U.S.'s largest trade liberalization in the last century. Our novel dataset of product-level tariff commitments and imports enables the first detailed empirical study of this dynamic period in trade policy, providing new stylized facts about U.S. tariffs and empirical evidence that changes in these tariffs are consistent with predictions from the terms-of-trade theory.

Working paper Supplemental Data Appendix
October 2024 Quarterly Journal of Political Science
Inefficient Concessions and Mediation

Abstract When two parties are engaged in conflict and each distrusts the other's ability to pursue peace, concessions can be used to indicate an interest in making peace. However, when negotiating parties are concerned that concessions could be used against them in the future, a lack of trust can prevent optimal concessions from being made. It can also reduce the possibility of peace. We use mechanism design to explore ways in which a third party mediator can act as a guarantor that promised concessions will be delivered, thereby reducing inefficiencies and increasing the potential for peace. In this process, we open up a new rationale for mediation: to increase the inefficiency of signaling in a preliminary round of negotiations.

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November 2023
Who You Gonna Call? : Gender Inequality in External Demands for Parental Involvement

Abstract Gender imbalance in time spent on children causes labor market gender inequalities. We investigate a novel source of this inequality: external demands for parental involvement. We pair a theoretical model with a large-scale field experiment with a near-universe of US schools. Schools receive an email from a two-parent household and are asked to contact one parent. Mothers are 1.4 times more likely than fathers to be contacted. We decompose this inequality into discrimination stemming from differential beliefs about parents’ responsiveness versus other factors, including gender norms. Our findings underscore how agents outside the household contribute to gender inequalities.

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October 2021 World Trade Review, 20, pp. 509-523
Under Pressure: Intractable Trade Conflicts and Korea — Pneumatic Valves

Abstract The Appellate Body (AB) report in Korea–Pneumatic Valves is among the most structurally complex of recent trade remedies reports. The AB weaves a complicated web to explicate the intricacies of the relationship among the relevant provisions on injury determination in anti-dumping disputes in the midst of a contentious and long-running series of disputes between two close regional trading powers. This Article first examines the Korean investigation and its significance in economic terms. Second, it analyzes the AB's conclusions on Article 6.2 of the Dispute Settlement Understanding regarding the panel request and the significance of the AB's treatment. Third, it studies the AB's comments on the panel's anti-dumping calculations where the AB amplifies its prior pronouncements on the elements of injury and causation. Finally, the Article situates this dispute in the broader political debates playing out both at the AB and between the two disputing parties.

Cite DOI Published version Working paper WTO Case Law Project
February 2021
Endogenous Politics and the Design of Trade Institutions

Abstract While most of the literature on the design of trade agreements and trading institutions takes the political pressure governments face to be exogenous, this paper endogenizes politics in a standard model for studying trade policy design questions. One can use this simple modeling framework to distinguish between the dynamics induced by exogenous political shocks and endogenous incentives of political actors, unifying these two strands of literature. The modeling framework can also provide fuller answers to trade policy design questions by elucidating the interactions between exogenous and endogenous political forces. Applications to tariff caps and the escape clause show that important insights are missed if attention is restricted to exogenous political shocks. Most notably, endogenous politics destroys a traditionally-defined escape clause's ability to provide flexibility in the face of political shocks when lobbies use the flexibility to seek rents. This can explain why WTO Safeguard use is conditioned on measurable economic indicators.

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April 2020 World Trade Review, 19(2), pp. 267 - 281
How Trade-Restrictive Is Standardized Packaging? Economic and Legal Implications of the WTO Panel Reports in Australia–Tobacco Plain Packaging

Abstract The lengthy and long-awaited WTO Panel Reports in Australia–Tobacco Plain Packaging contain a host of material for reflection, particularly in relation to the Agreement on Technical Barriers to Trade (TBT) and the Agreement on Trade-Related Aspects of Intellectual Property Rights. While two of the Panel Reports proceed to appeal, we consider with respect to the two adopted Panel Reports the Panel's reasoning in relation to Article 2.2 of the TBT, focusing on the meaning of trade-restrictiveness. This concept central to WTO law has been under-examined to date, and these Panel Reports demonstrate some of the complexities in identifying trade-restrictive measures, particularly where they are non-discriminatory. The Panel found that Australia's measures restrict trade because they contribute to their objective of reducing tobacco consumption. Therefore, any equally effective alternative will similarly restrict trade. This curious result under TBT Article 2.2 may be particular to non-discriminatory measures that target ‘socially bad’ products such as tobacco.

Cite DOI Published version Working paper WTO Case Law Project
March 2020
Research and Development Laboratories in the Production Process

Abstract A large body of evidence points to relationships between investment in research and development (R&D), productivity, and economic growth. This study aims to advance the understanding of precisely how R&D investments contribute to the productivity of firms: both the firms that undertake the investments directly as well as neighboring firms that benefit from spillover effects. Combining a unique data set of R&D labs with firm-level data from Compustat and restricted-use Census data at the firm- and establishment-level, this project will first answer a series of descriptive questions about how R&D labs in the U.S. are embedded in the production structure of firms. Are locations devoted to innovation dispersed or concentrated relative to other establishments that perform other functions? Does this vary by industry or domestic ownership status? In which industries do firms tend to locate labs near their own headquarters versus their production facilities or the labs of other firms? This project will extend previous work that identifies the size and location of agglomerations of R&D labs and measures the strength of knowledge spillovers within each agglomeration. Firm-level panel regressions will be used to elucidate the impact on firm productivity of R&D labs, the characteristics of the agglomeration in which labs are located, and the position of labs within the production structure of the firm.

March 2020 Regional Science and Urban Economics, 81, 103490
Localized Knowledge Spillovers: Evidence from the Spatial Clustering of R&D Labs and Patent Citationss

Abstract Buzard et al. (2017) show that American R&D labs are highly spatially concentrated even within a given metropolitan area. We argue that the geography of their clusters is better suited for studying knowledge spillovers than are states, metropolitan areas, or other political or administrative boundaries that have predominantly been used in previous studies. In this paper, we assign patents and citations to these newly defined clusters of R&D labs. Our tests show that the localization of knowledge spillovers, as measured via patent citations, is strongest at small spatial scales and diminishes with distance. On average, patents within a cluster are about two to four times more likely to cite an inventor in the same cluster than one in a control group. Of import, we find that the degree of localization of knowledge spillovers will be understated in samples based on metropolitan area definitions compared to samples based on the R&D clusters. At the same time, the strength of knowledge spillovers varies widely between clusters. The results are robust to the specification of patent technological categories, the method of citation matching, and alternate cluster definitions.

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September 2019 Overcoming Intractable Conflicts: New Approaches to Constructive Transformations; Miriam Elman, Catherine Gerard, Galia Golan, and Louis Kriesberg, eds. London: Rowman & Littlefield (2019)
Unrecognized States: Theory, Cases and Policy Implications

Abstract Unrecognized states destabilize the international system and impoverish their residents. Thus, unrecognized statehood is a profoundly undesirable outcome, and yet it is often a stable equilibrium. Game theoretic modeling has proven effective at clarifying the strategic logic that sustains unrecognized states, and offers insight into possible paths to resolution. In this chapter we draw on these insights, and illustrate them with discussion individual cases. The game theory on which we draw analyzes not only the actions of unrecognized states and the home states from which they are attempting to secede, but also the patrons that support these unrecognized states and the actors in the international community who work to induce peaceful settlement. In this piece we focus particularly on evaluating the policy options available to peace and development-seeking actors in the international community as they work to resolve these stalemated conflicts.

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September 2019
Explaining Gradualism in Trade Agreements: A Political Economy Approach

Abstract A notable feature of many international trading relationships is the gradual way in which barriers to trade have been dismantled in the post-war period (Bhagwati, 1988). Most notably, large-scale tariff reductions within the framework of the GATT/WTO have come as a result of a series of nine rounds of negotiations that began in 1947. From a theoretical point of view, it is not clear why this process should either proceed in stages or be inherently time consuming. But if one begins from the assumption that free trade is efficient, it makes sense to look for mechanisms related to whatever frictions have led to trade being restricted in the first place. I argue that one important reason that inefficient tariffs are maintained is the exertion of political power by inefficient import-competing industries. When an industry encounters a shock to its support such as a key politician losing an election or an important committee position, its ability to maintain its current level of protection is reduced. The resulting loss of protection and therefore rents can lead to erosion of future political power and accompanying protection. I will make this argument using a dynamic model of political economy. I plan to provide supportive evidence from peril point investigations in the early rounds of the GATT negotiations.

April 2019 World Trade Review, 18(2), pp. 327 - 351
The U.S. -- Tax Incentives Dispute: Subsidies and Investment Promotion Reaching New Heights in the Aviation Sector: The US--Tax Incentives Dispute

Abstract This paper analyzes the most recent WTO Appellate Body (AB) report in a series of disputes between the US and the EU over government support to aircraft manufacturers Boeing and Airbus. The measures under dispute in US–Tax Incentives were investment promotion subsidies provided to Boeing by the State of Washington. The EU contended that the Washington State subsidies, which were conditioned on Boeing locating production of specific parts of its new 777X program within the state, were prohibited import substitution subsidies. The AB took this case as an opportunity to consolidate WTO case-law on import substitution subsidies. It confirmed a single legal standard for export promotion and import substitution subsidies but with a stricter requirement for a finding of a violation in the case of import substitution subsidies. We argue that the AB, in allowing the subsidies to Boeing, unnecessarily blurred the distinction between contingency in law and contingency in fact by ruling that identifying a condition requiring the use of domestic inputs would be a necessary element for a determination of a de facto contingency. This appears to be an unduly formalistic view that leaves little legal space for any de facto contingency claim in the future.

Cite DOI Published version Working paper WTO Case Law Project
November 2017
Temporary Trade Barriers: When Will They End?

Abstract {Under WTO law, temporary trade barriers such as antidumping duties must be removed after a period of four or five years. However, under rather vague legal conditions, they can be renewed. This institutional environment provides the structure to carefully study the determinants of the extit{length} of protection. We present a theoretical political-economy model of the renewal process and find that the probability a temporary trade barrier will be renewed decreases in the level of trade agreement tariffs and is also likely to decrease in the level of the anti-dumping duties. An increase in an industry's profitability is shown to increase the probability of renewal also increases. Lobbying effort also increases the probability for a fixed strength of the lobby, while the strength of the lobby itself has more nuanced effects on the renewal probability.

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September 2017 Journal of Urban Economics, 101, pp. 14 - 26
The Agglomeration of American R&D Labs

Abstract We employ a unique data set to examine the spatial clustering of about 1700 private R&D labs in California and in the U.S. Northeast Corridor. Using these data, which contain the R&D labs’ complete addresses, we are able to more precisely locate innovative activity than with patent data, which only contain zip codes for inventors’ residential addresses. We avoid the problems of scale and borders associated with using fixed spatial boundaries, such as zip codes, by developing a new point-pattern procedure. Our multiscale core-cluster approach identifies the location and size of significant R&D clusters at various scales, such as a half mile, 1 mile, 5 miles, and more. Our analysis identifies four major clusters in the Northeast Corridor (one each in Boston, New York–Northern New Jersey, Philadelphia–Wilmington, and Washington, D.C.,) and three major clusters in California (one each in the Bay Area, Los Angeles, and San Diego).

Cite DOI Article in CityLab Working Paper Published version
September 2017 Journal of International Economics, 108, pp. 226-242
Self-enforcing Trade Agreements and Lobbying

Abstract 'In an environment where international trade agreements must be enforced via promises of future cooperation, the presence of an import-competing lobby has important implications for optimal punishments. When lobbies work to disrupt trade agreements, a Nash reversion punishment scheme must balance two conflicting objectives. Longer punishments help to enforce cooperation by increasing the government's costs of defecting, but, because the lobby prefers the punishment outcome, this also incentivizes lobbying effort and with it political pressure to break the agreement. Thus the model generates an optimal length for Nash reversion punishments, and it depends directly on the political influence of the lobbies. Trade agreement tariffs are shown to be increasing in the political influence of the lobbies, as well as their patience levels.'

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December 2016 The Journal of Law, Economics and Organization, 33(3)
Unrecognized States: A Theory of Self-Determination and Foreign Influence

Abstract Unrecognized states are characterized by stagnant or crumbling economies and political instability, often serve as havens for illicit trade, and challenge the territorial sovereignty of recognized states. Their persistence is both intellectually puzzling and normatively problematic, but unrecognized statehood can be a remarkably stable outcome, persisting for decades. Our dynamic four-player model reveals that unrecognized statehood emerges as an equilibrium outcome when a patron state is willing and able to persistently invest resources to sustain it. We assess options available to actors in the international community who seek to impose their preferred outcomes in these disputes and find that, although sanctions are the most frequently employed, they can often lead to renewed conflict instead of the intended resolution.

Cite DOI Published version Working paper Monkey Cage article
August 2016 Review of International Economics, 25, pp. 21-43
Trade Agreements in the Shadow of Lobbying

Abstract This paper presents a model of international trade agreements in which the executive branches of each government negotiate agreements while the legislative branches, subject to political pressure from firms, can disrupt them. Lobbying is in the style of Grossman and Helpman's ‘Protection for Sale’ model with a new feature: all actors face uncertainty arising from the complexity of the legislative process. I demonstrate that the higher the executives set tariffs in a trade agreement, the less effort lobbies put forth to prevent its ratification. Thus trade agreements act as a domestic political commitment device: executives set relatively high tariffs to discourage lobbying and increase the chance that the agreement will be ratified. The model sheds light on the empirical puzzle surrounding governments’ welfare weights in the Grossman and Helpman model and provides a new explanation for failures to ratify trade agreements.

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May 2016
Lobbying and Legislative Uncertainty

Abstract This paper seeks to understand how uncertainty affects the incentives for lobbying and the associated prospects for the passage of legislation. We introduce a model of vote buying in which there is uncertainty about the ideological positions of legislators with information about this uncertainty symmetric among all players. When legislators' voting behavior cannot be perfectly anticipated in this manner, the model is able to describe various realistic aspects of lobbying and voting behavior. For example, it predicts that lobbyists on both sides of an issue may be active at the same time, that moderate legislators and those about which there is average uncertainty receive more bribes than those that are ideologically extreme, and that ideal points gross of bribes need not be equalized. Estimating ideal points using a logistic item response model, we find support for these predictions in U.S. House of Representatives roll call data.

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December 2013 Handbook of Industry Studies and Economic Geography, F. Giarratani, G. Hewings, and P. McCann, eds. Cheltenham: Edward Elgar Publishing (2013), pp. 389 - 410
The Geography of Research and Development Activity in the U.S.

Abstract This study details the location patterns of R&D labs in the U.S., but it differs from past studies in a number of ways. First, rather than looking at the geographic concentration of manufacturing firms (e.g., Ellison and Glaeser, 1997; Rosenthal and Strange, 2001; and Duranton and Overman, 2005), we consider the spatial concentration of private R&D activity. Second, rather than focusing on the concentration of employment in a given industry, we look at the clustering of individual R&D labs by industry. Third, following Duranton and Overman (2005), we look for geographic clusters of labs that represent statistically significant departures from spatial randomness using simulation techniques. We find that R&D activity for most industries tends to be concentrated in the Northeast corridor, around the Great Lakes, in California’s Bay Area, and in southern California. We argue that the high spatial concentration of R&D activity facilitates the exchange of ideas among firms and aids in the creation of new goods and new ways of producing existing goods. We run a regression of an Ellison and Glaeser (1997) style index measuring the spatial concentration of R&D labs on geographic proxies for knowledge spillovers and other characteristics and find evidence that localized knowledge spillovers are important for innovative activity.

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May 2012 Theoretical Economics, 7(2), pp. 283-322
Contract, Renegotiation, and Holdup: Results on the Technology of Trade and Investment

Abstract This paper examines a class of contractual relationships with specific investment, a nondurable trading opportunity, and renegotiation. Trade actions are modeled as individual and trade-action-based option contracts (“nonforcing contracts”) are explored. The paper introduces the distinction between divided and unified investment and trade actions, and it shows the key role this distinction plays in determining whether efficient investment and trade can be achieved. Under a nonforcing dual-option contract, the party without the trade action is made the residual claimant with regard to the investment action, which induces efficient investment in the divided case. The unified case is more problematic. Here, efficiency is typically not attainable, but the dual-option contract is still optimal in a wide class of settings. More generally, the paper shows that, with ex post renegotiation, constraining parties to use “forcing contracts” implies a strict reduction in the set of implementable value functions.

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September 2008 Business Review, 2008:Q3, pp. 1 - 11
The Geography of Research and Development Activity in the U.S.

Abstract In the U.S., metropolitan areas contain the largest concentrations of people and jobs. Despite some drawbacks, these so-called agglomeration economies also have benefits, such as the cost savings that result from being close to suppliers and workers. Spatial concentration is even more pronounced among establishments that do basic research and development (R&D). In this article, we show that geographic concentration of R&D extends beyond locations such as Silicon Valley. In fact, many types of R&D establishments are highly concentrated geographically.

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