Recent Papers and Works in Progress

GROWTH

On Persistent Poverty in a Rich Country (with T. Islam and J. Ziliak, Southern Economic Journal 2014)

We examine differences in income within the U.S., and the regions of persistent poverty that have arisen, using a newly assembled dataset of counties that links historical 19th century Census data with contemporaneous data. The data, along with an augmented human capital growth model, permit us to identify the roles of contemporaneous differences in aggregate production technologies and factor endowments, in conjunction with the historical roles of institutions, culture, geography, and human capital. We allow for possible cross-county factor mobility via a correlated random effects GMM estimator that identifies simultaneously the coefficients on time varying and time-invariant determinants of income. We find evidence of significant regional differences in production technologies, but our decompositions of the poor/non-poor income gap suggests that at least three fourths of the gap is explained by differences in productive factors. Persistently poor counties are different (and poorer) primarily because they have lower levels of factors of production, not because they use the factors they have less efficiently. While much of the income difference is explained by contemporary factors, the contribution of historical levels of human capital is surprisingly large. The combined contribution of historical and contemporary human capital is striking: together, they explain nearly 60 percent of the overall income gap between the persistently poor and non-poor counties.
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On the Robustness of Coefficient Estimates to the Inclusion of Proxy Variables (with C. Bollinger, Journal of Econometric Methods 2014)

This paper considers the most effective use of multiple proxy measures for the same unobserved variable. It extends the results of Lubotsky and Whittenberg (2006) to examine the impact of proxy variables on correctly measured variables. We find that including all proxy variables in the regression minimizes the bias on all other coefficients in the regression. Unlike previous results, estimates of coefficients on other regressors do not require a scaling assumption. We derive a set of bounds based on results from Klepper and Leamer (1984) and Bollinger (2003) for parameters in the model, and compare these results to extreme bounds analysis. We find through Monte Carlo simulations that our bounds perform better than extreme bounds in most circumstances. We also find that our results may overturn many of the results found through extreme bounds analysis. We conclude with an empirical example from the cross-country growth literature in which human capital is measured through three proxy variables: literacy rates and enrollment in primary and secondary school. We find that the coefficient estimate on initial income is "robust," as previous extreme bound analyses have concluded. However, in contrast to previous results, we find that the coefficient estimate on investment cannot be distinguished from zero, while that on population growth is robustly statistically different from zero.
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When is Trade Protection Good for Growth? (with B. Unel, Economic Inquiry 2013)

The empirical relationship between trade protection and economic growth is surprisingly fragile, as shown in a number of other papers. We address one possible explanation for these findings: that the relationship is contingent on the pattern of comparative advantage, following the endogenous growth literature. Our findings suggest that such contingencies do in fact exist - in particular, the correlation between tariffs and growth is strong and positive for skill-abundant countries - and are robust to the choice of control variables.
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TRADE AND/OR ENVIRONMENTAL POLICY

Trade Policy in Majoritarian Systems: The case of the U.S. (with P. Fredriksson and X. Matschke, Canadian Journal of Economics 2011)

We provide a theory of trade policy determination that incorporates the protectionist bias inherent in majoritarian systems, suggested by Grossman and Helpman (2005). The prediction that emerges is that in majoritarian systems, the majority party favors industries located disproportionately in majority districts. We test this prediction using U.S. tariff data and Congressional campaign contribution data from the period 1989 to 1996. We find evidence of a protectionist bias due to majoritarian system politics that is comparable in magnitude to the payoff from being an organized industry.
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Where the Girls Are: Trade and labor market segregation in Colombia (with J. Ederington and K. Troske, IZA Discussion Paper no. 4131, under review)

Gary Becker's theory of discrimination argues that increasing competition will reduce discrimination in the labor market. We use the Colombian trade liberalization episode over the period 1984-91 to investigate this claim on plant-level data in three ways. First, we examine whether women are concentrated in exporting plants. Second, we examine whether the increase in foreign competition due to unilateral trade liberalization disproportionately drove discriminating plants out of the market. Finally, we investigate whether trade liberalization affected hiring decisions (and thus gender segregation) by Colombian firms.
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Game Over? The effect of NAFTA on campaign contributions (with J. Ederington and X. Matschke, in progress)

An emerging line of theoretical work on "politically viable" trade agreements has proposed the potential rent destruction effect of free-trade agreements (FTAs), or the potential for an FTA to reduce incentives for lobbying by committing a country to free trade. In this paper, we investigate the impact of the 1994 signing of the North American Free Trade Agreement (NAFTA) on campaign contributions. We find that after 1994, lobbying contributions decreased most in those industries most integrated with Mexico, consistent with the rent-destruction hypothesis. Our empirical procedure then allows us to uncover which contributions are correlated with this NAFTA lobbying and thus the recipients of "NAFTA contributions."

Environmental Policy in Majoritarian Systems (with P. Fredriksson and X. Matschke, Journal of Environmental Economics and Management 2010)

This paper sheds new light on the determination of environmental policies in majoritarian federal electoral systems such as the U.S., and derives implications for the environmental federalism debate on whether the national or local government should have authority over environmental policies. In majoritarian systems, where the legislature consists of geographically distinct electoral districts, the majority party (at either the national or state level) favors its own home districts; depending on the location of polluting industries and the associated pollution damages, the majority party may therefore impose sub-optimally high or low pollution taxes due to a majority bias. We show that majority bias can influence the social welfare ranking of alternative government policies and, in some cases, may actually bring distortionary policies closer to the first-best solution.
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Trade and Environmental Regulations, New Palgrave Dictionary of Economics Online


Last update: August 2012