Papers

2024
Mitchener, Kris James, and Kirsten Wandschneider. 2024. “Currency Wars and Monetary Regime Disintegration”. Abstract

The Great Depression is the canonical case of a widespread currency war, with more than 70 countries devaluing between 1929 and 1936. Existing scholarship, however, has largely focused on the beggar-thy-neighbor effects of devaluations rather than their collective effect on the disintegration of the interwar gold standard. We use newly-compiled, high-frequency bilateral trade data and gravity models that account for when and whether trade partners had devalued to identify the effects of the currency war on global trade. Our empirical estimates show that a country’s trade was reduced by more than 21% following devaluation relative to its trade partners that had yet to devalue. This negative and statistically significant decline in trade suggests that the currency war destroyed the trade-enhancing benefits of the global monetary standard, ending regime coordination and increasing trade frictions.

currency_wars.pdf
Ballard-Rosa, Cameron, Layna Mosley, and Rachel L Wellhausen. 2024. “Contingent Advantage? Sovereign Borrowing, Democratic Institutions and Global Capital Cycles.” British Journal of Political Science 51: 353– 373. Abstract

ABSTRACT

How do domestic and global factors shape governments’ capacity to issue debt in primary capital markets? Consistent with the ‘democratic advantage’, we identify domestic institutional mechanisms, including executive constraints and policy transparency, that facilitate debt issuance rather than electoral events. Most importantly, we argue that the democratic advantage is contingent: investors’ attention to domestic politics varies with conditions in global capital markets. When global financial liquidity is low, investors are risk-averse, and political risk constrains governments’ capacity to borrow. But when global markets are flush, investors are risk-tolerant and less sensitive to political risk. We support our argument with new data on 245,000 government bond issues in primary capital markets – the point at which governments’ costs of market access matter most – for 131 sovereign issuers (1990–2016). In doing so, we highlight the role of systemic factors, which are under-appreciated in much ‘open economy politics’ research, in determining access to capital markets.

ballard-rosa_mosley_wellhausen_2021_contingent_advantage_-_sovereign_borrowing_democratic_institutions_and_global_capital_cycles.pdf
Ballard-Rosa, Cameron, Lucy Martin, and Kenneth Scheve. 2024. “The Structure of American Income Tax Policy Preferences.” The Journal of Politics 79 (1): 1-16.
ballard-rosa_martin_scheve_2017_the_structure_of_american_income_tax_policy_preferences.pdf
Ballard-Rosa, Cameron. 2024. “Hungry for Change: Urban Bias and Autocratic Sovereign Default .” International Organization 70 (02): 313 - 346. Publisher's Version Abstract

What drives autocrats to default on their sovereign debt? This article de- velops the first theory of sovereign debt default in autocracies that explicitly investigates survival incentives of political actors in nondemocracies. Self-interested elites, fearful of threats to their tenure because of urban unrest, may be willing to endure the long-term borrowing costs that defaulting creates rather than risk the short-term survival costs of removing cheap food policies for urban consumers. I test my main claims that both ur- banization and food imports should be associated with greater likelihood of autocratic default using panel data covering forty-three countries over fifty years, finding that autoc- racies that are more reliant on imported food and that are more urbanized are significantly more likely to be in default on their external sovereign debt. I emphasize the regime- contingent nature of these effects by demonstrating that they are reversed when consid- ering democratic sovereign default. I also substantiate the mechanisms put forward in my theory through illustrative historical cases of sovereign debt default in Zambia and Peru, in which I demonstrate that fear of urban unrest in the face of rapidly increasing food prices did indeed drive autocratic elites to default on international debt obligations. In addition to providing the first political theory of debt default in autocracies, the article introduces two robust predictors of autocratic default that have been overlooked in previous work, and highlights the importance of urban-rural dynamics in nondemocratic regimes.

ballard-rosa_2016_hungry_for_change_-_urban_bias_and_autocratic_default.pdf
Stantcheva, Stefanie. 2024. “Understanding of Trade”. Publisher's Version Abstract
This paper sheds new light on two questions: How do people perceive and understand trade and trade policy, and what shapes their support for different trade policies? Despite extensive research documenting the efficiency gains from trade and its distributional impacts on different groups of workers, firms, and consumers, we still need to uncover how people perceive these various effects of trade. Trade involves many trade-offs,. When forming their views on trade policy, people have to balance their roles as consumers and workers, consider both personal and broader economic and societal impacts, and evaluate concerns of efficiency and equity. Which of these considerations matters most? Using new large-scale surveys and experiments, I highlight three main findings. First, while earlier work has established that consumer gains from trade are diffuse and job losses are concentrated, I directly show the impact of these two considerations on people’s views about trade. I find that perceived job risks matter more for policy views than perceived consumer gains. Second, beyond their own material self-interest, people care about the broader efficiency gains and adverse distributional consequences from trade. Support for free trade is best predicted by the belief that trade generates efficiency gains. Concerns about the adverse distributional consequences of trade do not necessarily reduce support for free trade: instead, they increase support for compensatory redistribution. These results also highlight the importance of compensatory redistribution as an indissociable part of trade policy in people’s minds. Third, personal exposure to trade shapes policy views in two ways: directly (through self-interest) and indirectly by changing people’s perceptions of trade’s broader efficiency and distributional implications.
understanding_trade_stantcheva.pdf
Dechezleprêtre, Antoine, Adrien Fabre, Tobias Kruse, Bluebery Planterose, Ana Sanchez Chico, and Stefanie Stantcheva. 2024. “Fighting Climate Change: International Attitudes toward Climate Policies”. Publisher's Version Abstract

This paper studies how people across the world perceive and understand climate change and climate policies, which factors determine their support for climate action, and what type of information shifts their policy views. We design and run new large- scale surveys on more than 40,000 respondents in 20 countries, covering the major greenhouse gas emitters in developed and developing economies. We thus provide new, comprehensive, international microdata on people’s perceptions, understanding, and policy views related to climate change, combined with detailed background information on their socioeconomic characteristics, energy use, and lifestyles. We show that, across countries, support for climate policies hinges on three key perceptions centered around the effectiveness of the policies in reducing emissions (effectiveness concerns), their distributional impacts on lower-income households (inequality concerns), and their impact on the respondents’ household (self-interest). In the experimental part, we show randomly selected subsamples pedagogical videos on either the impacts of climate change in their country or how major climate policies work – their effectiveness in reducing emissions and their distributional implications. Explaining how policies work and who can benefit from them is critical to fostering policy support, whereas simply informing people about climate change’s impacts is ineffective.

international_attitudes_toward_climate_change.pdf
Mitchener, Kris James, Kevin Hjortshoj O'Rourke, and Kirsten Wandschneider. 2024. “The Smoot-Hawley Trade War.” The Economic Journal 132 (647): 2500–2533. Publisher's Version Abstract
We document the outbreak of a trade war after the United States adopted the Smoot-Hawley tariff in June 1930. U.S. trade partners initially protested, with many eventually choosing to retaliate with tariffs. Using a new quarterly dataset on bilateral trade for ninety-nine countries, we show that U.S. exports to retaliators fell by 28%–32%. Using a second new dataset on U.S. exports at the product level, we find that the most important U.S. exports to retaliating markets were particularly affected, suggesting a possible mechanism whereby the United States was targeted despite most-favoured-nation obligations. The retaliators’ welfare gains from trade fell by 8%–16%.
31_ej_smoot-hawley_trade_war.pdf
2023
Itskhoki, Oleg. 2023. “The Story of the Real Exchange Rate.” Annual Review of Economics 13 (Aug. 2021): 423-455. Abstract

The real exchange rate (RER) measures relative price levels across countries, capturing deviations from purchasing power parity (PPP). RER is a key variable in international macroeconomic models as it is central to equilibrium conditions in both goods and asset markets. It is also one of the most starkly-behaved variables empirically, tightly co-moving with the nominal exchange rate and virtually uncorrelated with most other macroeco- nomic variables, nominal or real. This survey lays out an equilibrium framework of RER determination, focusing separately on each building block and discussing corresponding empirical evidence. We emphasize home bias and incomplete pass-through into prices with expenditure switching and goods market clearing, imperfect international risk shar- ing, country budget constraint and monetary policy regime. We show that RER is in- herently a general-equilibrium variable, which depends on the full model structure and policy regime, and therefore partial theories like PPP are insufficient to explain it. We also discuss issues of stationarity and predictability of exchange rates.

2.oleg_itskhoki.pdf
Itskhoki, Oleg. 2023. “Oleg Itskhoki on Exchange Rate Puzzles and Policies .” Economic Dynamics Research Agenda 23 (2).
1.oleg_itskhoki_on_exchange_rate_puzzles_and_policie.pdf
Itskhoki, Oleg. 2023. “Oleg Itskhoki on Exchange Rate Puzzles and Policies .” Economic Dynamics Research Agenda 23 (2).
1.oleg_itskhoki_on_exchange_rate_puzzles_and_policie.pdf
Itskhoki, Oleg. 2023. “Oleg Itskhoki on Exchange Rate Puzzles and Policies .” Economic Dynamics Research Agenda 23 (2).
1.oleg_itskhoki_on_exchange_rate_puzzles_and_policie.pdf
Itskhoki, Oleg. 2023. “Oleg Itskhoki on Exchange Rate Puzzles and Policies .” Economic Dynamics Research Agenda 23 (2).
1.oleg_itskhoki_on_exchange_rate_puzzles_and_policie.pdf
Itskhoki, Oleg. 2023. “Oleg Itskhoki on Exchange Rate Puzzles and Policies .” Economic Dynamics Research Agenda 23 (2).
1.oleg_itskhoki_on_exchange_rate_puzzles_and_policie.pdf
Alfaro, Laura, and Fabio Kanczuk. 2023. “Undisclosed Debt Sustainability.” AEA PAPERS AND PROCEEDINGS 112 (May 2022): 521-525.
pandp.20221000-2.pdf
Alfaro, Laura, Maggie X. Chen, and Davin Chor. 2023. “Can Evidence-Based Information Shift Preferences Towards Trade Policy?”.
alfaro_chen_chor_20230309.pdf
Owen, Erica, Irene Menéndez González, and Stefanie Walter. 2023. “Low-Skill Products by High-Skill Workers: The Distributive Effects of Trade in Emerging and Developing Countries .” Comparative Political Studies Vol. 0(0): 1-36. Abstract

In developing countries, trade is increasingly associated with greater returns to high-skilled labor and rising inequality. These empirical patterns are at odds with canonical models of trade in the developing world. What does this mean for the political economy of trade in these countries? We argue that although developing countries have a comparative advantage in low-skill products, these are produced by workers that are relatively high-skilled compared to their peers. Trade and global production benefit relatively skilled workers, particularly those exposed to exports and inward foreign direct investment in manufacturing. Our argument offers insight into why relatively skilled workers are most supportive of free trade and why inequality is rising in developing countries. We examine micro- and macro-level implications of our argument using cross-national survey data on policy preferences and aggregate data on trade and inequality. The findings have important implications for the political economy of trade and global production in developing countries.

3_mow_cps_2023.pdf
Owen, Erica, and Rena Sung. 2023. “Labor and Trade Protection in Comparative Perspective .” OXFORD RESEARCH ENCYCLOPEDIA, POLITICS . Oxford: Oxford University Press.
2_owen_sung_ore_2020.pdf
Owen, Erica, and Noel P. Johnson. 2023. “Occupation and the Political Economy of Trade: Job Routineness, Offshorability, and Protectionist Sentiment .” International Organization 71 (Fall 2017): 665-699. Abstract

The recent backlash against globalization in many advanced economies raises questions about the source of this protectionist sentiment. Traditional accounts generally attribute the welfare consequences of trade to skill level or industry character- istics, or instead emphasize the nonmaterial determinants of support for openness. Consequently, we know little about how a major labor market characteristic—occupa- tion—shapes both the distributional consequences of and preferences toward trade open- ness. We propose and test a new theory of trade policy preferences based on occupation characteristics. Drawing from the tasks literature in economics, we argue that occupation characteristics are a key determinant of how trade affects workers and thus individuals’ trade preferences. Our theory suggests that, in advanced economies, individuals in routine-task-intensive occupations will be negatively affected by trade, and thus more protectionist. This relationship will increase in the degree to which occupation job tasks can be provided from a distance (i.e., offshorable). We find support for our theory using data from the 2003 and 2013 International Social Survey Programme in high-income democracies. Our results suggest that the occupational characteristics of routineness and offshorability are important determinants of trade preferences, offering additional understanding of the sources of protectionist sentiment even after controlling for labor market characteristics suggested by conventional wisdom.

1_owen_johnston_io_2017.pdf
2022
Furman, Jason. 2022. “Bad News About the Good Inflation News .” Wall Street Journal, March 6, 2022.
bad_news_about_the_good_inflation_news_-_wsj.pdf
Clavin, Patricia, Giancarlo Corsetti, Maurice Obstfeld, and Adam Tooze. 2022. “Lessons of Keynes’s Economic Consequences in a Turbulent Century, CEPR Discussion Paper DP16610, CE”. Abstract

Just over a century old, John Maynard Keynes’s The Economic Consequences of the Peace (1919) remains a seminal document of the twentieth century. At the time, the book was a prescient analysis of political events to come. In the decades that followed, this still controversial text became an essential ingredient in the unfolding of history. In this essay, we review the arc of experience since 1919 from the perspective of Keynes’s influence and his changing understanding of economics, politics, and geopolitics. We identify how he, his ideas, and this text became key reference points during times of turbulence as actors sought to manage a range of shocks. Near the end of his life, Keynes would play a central role in planning the world economy’s reconstruction after World War II. We argue that the “global order” that evolved since then, marked by increasingly polarized societies, leaves the community of nations ill prepared to provide key global public goods or to counter critical collective threats.

cepr-dp16610_3.pdf

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