Ross J. Hallren

Published Research

Tariff Evasion in Global Trade Data

(with Austin Drenski and Jean N. Lee), Journal of International Trade & Economic Development (2019)

We find evidence of pervasive tariff evasion in the global data on trade from 1988 to 2015. Using over 35 million observations of data on import and export flows at the HS6 product category level, we find evidence of substantial underreporting of imports relative to export data on average and particularly when tariffs on product categories are high. These effects are stronger in more corrupt destination countries, as measured by the World Bank's Worldwide Governance Indicators [World Bank. 2016. Worldwide Governance Indicators. September 25, 2016]. In addition, evidence of tariff evasion increases significantly in economic downturns. We document these patterns in the global data and explore the welfare effects of this evasion by (1) putting a lower bound on the extent to which there are revenue losses from tariff evasion, and by (2) estimating the effects of corruption as measured by this indicator on global trade in a simple gravity model.

Whence the Beef: The Effect of Repealing Mandatory Country of Origin Labeling (COOL)

(with Alexandra Opanasets, Southern Economic Journal (2017))

Increasingly, international trade policy analysis explores the economic effects of changes in ad-valorem tariffs or equivalent nontariff measures on vertically integrated markets for which high quality data are unavailable. Standard Constant Elasticity of Substitution (CES) Armington models fail to account for either vertical linkages or parameter uncertainty. Here, we introduce a vertically integrated, nested two-sector Armington model that incorporates uncertainty in the estimates of Armington elasticities through Monte Carlo simulation. As an illustrative case, we model the effects of changes in country of origin labeling (COOL) rules on the market shares of cattle in the U.S. beef market. By accounting for parameter uncertainty in this way, we are able to estimate the distribution of potential effects of repealing mandatory COOL. Ultimately, we predict that, in all but the most extreme cases,Mexico and Canada would not gain as much market share from the repeal of mandatory COOL as they claim in their World Trade Organization (WTO) filings against the regulation.

Quasi-Experimental Analysis of the Impact of Exchange Rate Regime Selection on Crisis Recovery: Evidence from the Asian Financial Crisis

(Applied Economics Letters (Oct 2014))

Research typically treats exchange rate regime selection as exogenous. Using the Asian Financial Crisis as a case study, we show that countries that peg in 1996 and countries that float in 1996 are, on average, different from each other on variables that affect the outcomes of interest. After accounting for endogenous exchange rate regime selection using propensity score matching, we find that a country’s exchange rate regime choice in 1996 had no significant impact on the size of the shock to real income levels, but reduced subsequent income growth and weakly increased inflation.

Working Papers

A U.S. Regional Model of Import Competition and Jobs

(with David Riker, USITC Working Paper Series, 2017)

We develop an industry-specific partial equilibrium model that quantifies the impact of trade policy on workers in the United States, while recognizing that transportation costs separate U.S. product markets and labor markets into sub-national regions. The model illustrates, in a simple way, how nationally uniform changes in trade policy or in other costs of importing can have significantly different effects on employment in different parts of the United States, depending on differences in import penetration into the regions. We use the model to simulate the impact of an illustrative ten percent reduction in the cost of importing household appliances from China on employment in the competing U.S. industry. If the U.S. product market is fully integrated nationwide, then the reduction in import charges is estimated to reduce industry employment in all regions of the country by 12.03 percent. If the product market is separated into regions and there are no inter-regional shipments, then the employment effects vary significantly across the regions, including an estimated 5.08 percent reduction in industry employment in the East and an estimated 27.68 percent reduction in the West. Finally, in a more realistic intermediate case with inter-regional shipments estimated with an industry-specific gravity model, the employment effects are an estimated 6.28 percent reduction in industry employment in the East and an estimated 24.46 percent reduction in the West. The model also estimates changes in the prices faced by consumers in each region.

A Comparison of Partial Equilibrium Models of Tariff Rate Quotas

(with David Riker, USITC Working Paper Series, 2017)

In this short paper we consider the impact of a TRQ on industry-specific imports and domestic production using two different types of partial equilibrium models, an Armington CES model and a Krugman CES model of trade. In the Armington model with only adjustment on the intensive margin of trade, a TRQ that fills has the same effect on trade as a flat tariff at the out-of-quota rate. On the other hand, when there is also adjustment on the extensive margin of trade, as in a Krugman or Melitz model of trade, the two policies are not equivalent and the in-quota rate has an effect on trade and domestic production even when the TRQ fills.

An Introduction to Partial Equilibrium Modeling of Trade Policy

(with David Riker, USITC Working Paper Series, 2017)

This paper introduces the theoretical framework and data inputs of a basic partial equilibrium model of how an industry’s import volumes, domestic shipments, and prices would change in response to a change in trade policy. We start with an overview of economic models used to estimate the effects of tariffs and quotas on imports. Then we go step-by-step through the equations that we use to calculate the changes in the economic outcomes and discuss the data required to run the model. Next, we report several illustrative applications. We conclude with a discussion of several extensions of the basic model.

The Impact of Dollarization and Currency Boards on Income and Inflation: A Synthetic Control Analysis

We use the synthetic control method (SCM) to estimate the effect of official dollarization in Ecuador and quasi-dollarization, in the form of a currency board, in Argentina. We show that these monetary arrangements were effective at controlling inflation in these two countries. Interestingly, in contrast with previous research, we find these policies had no impact on real income. Despite the success of these policies, Argentina abandoned its currency board in 2002, devalued its currency, and repudiated much of its outstanding government debt causing renewed inflation and a loss of significant consumer wealth. Ecuador, conversely, continues to operate under dollarization, fourteen years after implementation. We discuss the roles of labor market adjustments and fiscal discipline as explanations for these divergent outcomes.

Research in Progress

A Second Comparison of Partial Equilibrium Models of TRQs with Sensitivity Analysis

(with David Riker, 2017)

Breaking the Fall: Does a Country's Pre-Crisis Exchange Rate Regime Soften the Impact of a Currency Crisis

Using a sample of emerging market and developing countries, I analyze the financial consequences of having a fixed exchange rate at the onset of a speculative attack or currency crisis. I find a country’s pre-crisis exchange rate regime has no impact on currency depreciation or equity returns during the first year of the crisis. This paper contributes to the literature by considering all crises and attacks from 1972 to 2003, rather than using a case study approach, and by analyzing only the subset of countries that actually experience these events. Consequently, these findings are generalizable across all crises and better isolate the average treatment effect on the treated (ATT) of having a peg before a crisis on a country’s performance during the crisis.

A Practical Guide to Calculating Cumulative Tariffs along Global Value Chains, Austin Drenski, Ross J. Hallren, and William Powers

North American Sub-National Model of Import Competition and Jobs, Ross J. Hallren

Inequality over the Business Cycle (with D. Hicks)