INTERNATIONAL TRADE AND THE COMPOSITION OF LABOR MARKET TURNOVER

The composition of labor market turnover is shown to influence patterns of international trade. Job and worker turnover have opposing marginal effects on industry export intensity, highlighting the importance of relative turnover shares on either side of the labor market, as opposed to total volumes of labor mobility, in shaping economic outcomes. Industries with relatively greater shares of worker turnover export more of total production, and those with higher job turnover export less. Furthermore, relatively high job turnover hinders industry adjustment following trade liberalization. These predictions receive support for U.S. manufacturing industries using turnover data in the Quarterly Workforce Indicators available from the U.S. Census Bureau. (JEL F16)     

THE HOME MARKET EFFECT IN INTERNATIONAL ARMS TRADE

I show that military spending contributes to international arms proliferation through a push effect: large demand encourages production growth in the domestic market if transport costs are non‐negligible. Under increasing returns to scale, the country can then supply weapons on the global market at low prices. This is a manifestation of the home market effect (HME), which states that countries with higher demand for a differentiated good will be net exporters of that good. I construct a monopolistic competition model of international trade that accounts for differences in demand across countries, and test its predictions using post‐Cold War data. (JEL F1, H5, R1)     

INTERNATIONAL SUPPLY CHAINS AND THE VOLATILITY OF TRADE

Were the large import fluctuations around the 2007–2009 recession because of increasing trade volatility? I show that import volatility relative to gross domestic product (GDP) increased in the 2000s and examine whether vertical specialization (VS) trade can explain this increase. I develop and calibrate a model of VS trade that generates most of the observed increase in relative import volatility from the 1960s to the 2000s. The increase is because of GDP's shift to less volatile services production. VS trade has a negligible impact. VS causes trade to fall more in recession but also increases the share of output that is traded, leaving volatility unaffected. It increases volatility by shifting trade to more volatile sectors, but this effect is quantitatively small. (JEL E3, F1)     

LABOR MARKET PERFORMANCE EFFECTS OF DISCRIMINATION AND LOSS OF SKILL

We examine the impact of discrimination on labor market performance when workers are subject to a risk of losing skills during an unemployment experience. Within a search and matching framework, we show that both natives and immigrants are affected by discrimination. Discrimination in one sector has positive spillovers, inducing employment to increase in the other sector and the effect on labor market performance therefore depends on whether discrimination is present in only one sector or in both. Discrimination may induce workers to train more or less than natives after having lost their skills, dependent upon in which sector there is discrimination. Net output tends to be most negatively affected by discrimination among high‐skilled workers. (JEL J15, J31, J61, J64, J71)     

INTERNATIONAL NARCOTICS TRADE,FOREIGN AID,AND ENFORCEMENT

Using a general equilibrium model of a developing narcotics‐producing and ‐exporting economy, we analyze the economic effects of policies designed to restrict the production and trade of narcotics: foreign aid tied to anti‐narcotics law enforcement activities, demand reduction policies, and alternative development policies. We characterize the problem as one of serious factor market distortions introduced by illicit production and enforcement. While aid to enforcement generally reduces the production and export of narcotics, it is less effective for economies with market power, and under plausible conditions may raise narcotics output and have negative welfare implications for the recipient. (JEL F1)     

THE TERMS OF TRADE AND THE INTERNATIONAL COORDINATION OF FISCAL POLICY

This paper develops an example of a noncooperative game between fiscal authorities in two countries. The key strategic link between countries is the terms of trade. An equilibrium without cooperation is characterized by excessive tax rates and public spending levels in each country. The outcome is analogous to the Nash equilibrium of the static optimal tarif game in trade theory. But in this model there is also a dynamic distortion caused by noncooperative behaviour. This dynamic distortion depresses capital accumulation and reduces the equilibrium capital stock in each country. Numerical examples suggest a significant welfare benefit of cooperation.     

INTERNATIONAL DEAL EXPERIENCE AND CROSS‐BORDER ACQUISITIONS

I show that corporate directors' human capital facilitates international investments. Directors' experience with cross‐border transactions positively influences firms' decisions to conduct their first cross‐border acquisitions. Cross‐border acquirers are more likely to buy firms headquartered in countries with which the directors have prior deal experience. This effect is strongest for target firms headquartered in culturally and institutionally dissimilar countries. Announced cross‐border acquisitions are received more favorably by financial markets and are more likely to be completed successfully when the announcing firm has a director with cross‐border acquisition experience. These effects are not driven by investment bank involvement in the deal process or by other forms of directors' human capital, and they are robust to endogeneity of director hires. (JEL F23, F21, J24, L23)     

PRODUCT QUALITY, MARKET SIGNALING AND THE DEVELOPMENT OF EAST WEST TRADE

Countertrade, a contractual form in which there is a two-way flow of goods, occupies a position of significance in East-West trade. In this paper, it is shown that countertrade can solve problems which arise when the quality of Eastern European products is unknown. Using the market signaling literature, a theory is formulated in order to make predictions concerning the use of countertrade. Countertrade will be particularly useful when quality information is important but cannot be obtained directly and when a country has a poor quality reputation. These predictions are supported by empirical tests.     

QUALITY DIFFERENCES,THIRD‐DEGREE PRICE DISCRIMINATION,AND WELFARE

We propose a model with two markets to analyze the welfare implications of price discrimination with quality differences. In each market a local firm that operates in that market only competes against a global firm that operates in both markets. Local firms produce higher‐quality goods than the global firm. If the quality levels of the local firms' products are the same, price discrimination is never welfare‐decreasing. If they differ, discrimination is welfare‐increasing if quantity increases. Because of a positive allocation effect of price discrimination, there are parameter values such that welfare increases while total output decreases with price discrimination. (JEL D43, D60)     

PERCEIVED DISCRIMINATION AND WORK‐TO‐LIFE CONFLICT AMONG WORKERS IN THE UNITED STATES

Following scholarship that highlights the importance of negative workplace relationships in predicting conflict between work and nonwork domains, this study examines whether perceptions of sex, race, and age discrimination are related to work‐to‐life conflict using data from the 2002 National Study of the Changing Workforce (N = 2,335). The potential moderating role of workplace social support, including coworker support and supervisor support, is also examined. All three forms of perceived discrimination are associated with higher levels of work‐to‐life conflict even when workplace social support is controlled for. The findings indicate limited support for the moderating role of workplace social support.     

FINANCIAL CONTAGION ON THE INTERNATIONAL TRADE NETWORK

We combine data on international trade linkages with a network approach to map the global trading system as an interdependent complex network. This enables us to obtain indicators of how well connected a country is into the global trading system. We use these network‐based measures of connectedness to explain stock market returns during recent episodes of financial crisis. We find that a crisis is amplified if the epicenter country is better integrated into the trade network. However, target countries affected by such a shock are in turn better able to dissipate the impact if they are well integrated into the network. A network approach can help explain why the Mexican, Asian, and Russian financial crises were highly contagious, while the crises that originated in Venezuela and Argentina did not have such a virulent effect. We suggest that a network approach incorporating the cascading and diffusion of interdependent ripples when a shock hits a specific part of the global trade network provides us with an improved explanation of financial contagion. (JEL F10, F36, F40, G15)     

LABOR MARKET OPENNESS,H‐1B VISA POLICY,AND THE SCALE OF INTERNATIONAL STUDENT ENROLLMENT IN THE UNITED STATES

International students have long comprised an important part of U.S. higher education. However, little is known regarding the factors that encourage students from across the world to enroll in U.S. colleges and universities each year. This paper examines the relationship between international enrollment and the openness of the United States' skilled labor market, currently regulated by the H‐1B program. Gravity regressions reveal that H‐1B visa issuances to a country are positively and significantly related to the number of international students from that country. Causal estimates of the impact of labor market openness are achieved by exploiting a dramatic fall in the H‐1B visa cap in October 2003. Triple difference estimates show that the fall in the cap lowered foreign enrollment by 10%. (JEL F22, I21, J11)     

KNOWLEDGE CAPITAL,INTERNATIONAL TRADE,AND FOREIGN DIRECT INVESTMENT: A SECTORAL ANALYSIS

The knowledge‐capital (KC) model of multinational enterprises (MNEs) is now a widely adopted empirical approach to explain the location and production decisions of global firms based on both horizontal and vertical motivations. Although most of the existing studies have focused on highly aggregated national data, we extend this model to sectoral data consisting of broad manufacturing industries and explicitly account for the dynamic nature of international investment data. The empirical results from a dynamic panel data analysis indicate that the predictions of the KC model regarding MNE behavior vary by the type of industry. Production processes in electronics and transportation equipment are more characterized by efficient vertical specialization of research and development activities and assembly, whereas other sectors display more complex motivations. (JEL F14, F23, L23)     

TRADE OVERLAP AND INTRA-INDUSTRY TRADE

Theorizing about and empirically measuring "intraindustry trade" is pointless if "factor proportions" vary more within than among "industries." Available data show this to be the case.     

TRADE COSTS AND TRADE COMPOSITION

In this paper, we investigate whether countries' trade costs act like other national endowments by affecting the composition of countries' exports. Using an econometric approach that controls for endogeneity by accounting for potentially relevant omitted variables, we find strong evidence for a sample of 37 industrialized and transition countries that national trade costs systematically affect the composition of trade and can be viewed therefore as a source of comparative advantage. Industries located in countries with low trade costs capture significantly higher shares of world exports, where this effect is stronger in trade cost intensive industries. (JEL F11, F14)