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"Trade relations"
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Globalization and stock price crash risk: evidence from the US granting permanent normal trade relations to China
China’s remarkable growth in exports has sparked concerns regarding the negative effects of the China trade shock; yet its positive aspects often go overlooked. This study uncovers a previously unexplored advantage of the China trade shock – its positive influence on financial stability. We focus on its influence on the stock price crash risk of US firms by leveraging the US granting of Permanent Normal Trade Relations (PNTR) status to China in 2000 as a quasi-natural experiment. Our study identifies a reduction in stock price crash risk for US firms after PNTR. This result remains robust after controlling for various other contemporaneous policies that may be spuriously correlated with the PNTR shock, such as the Sarbanes–Oxley Act, the burst of the Internet bubble in 2000, and policy changes in China. Further examination of the effects of PNTR on Chinese imports, earnings management, investment efficiency, and governance, along with an analysis of cross-sectional variations, indicates that the disciplinary channel, as opposed to the offshoring channel, is likely the primary underlying mechanism. This study enriches our understanding of the consequences of the China trade shock.
Journal Article
IMPORT COMPETITION AND INTERNAL MIGRATION
We examine the U.S. internal migration response to increased import competition following the granting of Permanent Normal Trade Relations to China in 2001. Using a variety of data sets and empirical approaches, we find that local labor markets most exposed to the policy change experienced a relative reduction in population growth over the following decade. The majority of the effect occurs at a lag of seven to ten years and is most pronounced among young individuals and low-education groups. Such population adjustments should influence the interpretation of evidence in the growing literature on import competition and local labor markets.
Journal Article
Import Penetration and Corporate Misconduct: A Natural Experiment
Corporate misconduct receives significant attention in the business ethics literature. This paper studies how corporate misconduct is impacted by import penetration from China, which is largely exogenous to the U.S. product market. Using this natural experiment, we find that heightened Chinese import penetration curbs corporate misconduct of U.S. firms. The effect is more pronounced for firms with weaker corporate governance and firms more vulnerable to product market competition. The findings provide implications for firms facing increased import penetration. Firms may consider improving corporate governance and exploring avenues for differentiation as potential strategies to cope with the competition. In addition, we address the exogeneity concern derived from the influence of Chinese value penetration. Furthermore, we find that competition-related policies such as tariff reduction and U.S. granting China Permanent Normal Trade Relations (PNTR) status also lower corporate misconduct. Our work adds to the debates on competition and corporate misconduct in a cross-country competitive landscape.
Journal Article
Global value chains and global production networks : changes in the international political economy
Global value chains (GVCs) and global production networks (GPNs) have been particularly useful as conceptual frameworks for understanding the global market engagement of firms, regions and nations. This book examines the rise of GVCs and GPNs as dominant features of the international political economy, and sets out new directions for future scholarship in understanding the contemporary global economic system.
Book
The Surprisingly Swift Decline of US Manufacturing Employment
This paper links the sharp drop in US manufacturing employment after 2000 to a change in US trade policy that eliminated potential tariff increases on Chinese imports. Industries more exposed to the change experience greater employment loss, increased imports from China, and higher entry by US importers and foreign-owned Chinese exporters. At the plant level, shifts toward less labor-intensive production and exposure to the policy via input-output linkages also contribute to the decline in employment. Results are robust to other potential explanations of employment loss, and there is no similar reaction in the European Union, where policy did not change.
Journal Article
Housing prices and import competition
We examine one of the secondary effects of the import surge from China in the last few decades: its potentially depressing impact on house price appreciations. To identify a causal impact, we use the granting of Permanent Normal Trade Relations (PNTR) to China in October 2000 as our exogenous treatment event. We consider housing prices for 685 US commuting zones (CZs) in a panel data setting for the years 1990–2020. We find that the 2000 PNTR trade event caused house prices to appreciate about 7 percent less in highly import-exposed CZs within 5–6 years of the trade event and that the price impact has persisted through 2020. The size of the average impact is highly robust to various sensitivity checks. We also show that the price effect of the 2000 PNTR event varied significantly across CZs with different import exposure to China and with different economic characteristics. In some areas, such as around the Great Lakes and parts of Alabama, house prices appreciated by only about half as much between 2000 and 2020 (< 25%) as would have been expected in the absence of the 2000 PNTR policy event.
Journal Article