Work in Progress

Globalization Backlash and Political Capture

As an explanation of the recent backlash against globalization, I propose and empirically test a new theory that leverages the concept of political capture over income tax policy in shaping trade policy preferences. In the model, trade protection results from political competition when assessment of the benefits from trade integration depends on post-tax considerations. Voters choose a trade regime, anticipating tax policies of the winning party, which affects their support for protectionist versus liberal parties depending on the effectiveness of income redistribution and the level of political capture. Using country-level data and the diffusion of air technology as an instrumental variable for trade openness, I find that in countries with high political capture, an increase in trade leads to higher votes for protectionist parties. Conversely, in countries with low capture, support for protectionist parties decreases. These findings, consistent with the theoretical framework, are corroborated at the electoral district level within 14 EU countries.

presented at: AMSE, LAGV, RIEF network (ULB), PSE trade summer school, ASSET, Trade Tea Seminar (Bocconi)

China Shock through the lens of Market Access, with Priyam Verma
We study how locations reacts to international trade shocks based on their economic geography. To do so, we derive a new and granular market access (MA) measure of local labor markets based on structural model of Caliendo, Dvorkin and Parro (2019). Differently from past measures, this MA is dynamic, more granular (region-sector) and accounts for Input-Output linkages. Using US as a lab, we estimate MA for 722 x 22 commuting zone-sectors using infrastructure maps to calibrate domestic trade costs. We obtain a structural relationship between wages, employment and MA which we aim to take to the data to study the general equilibrium effects of the China `shock'. To solve endogeneity issues, we build a model based instrument following Allen and Arkolakis (2023). As a counterfactual analysis, we plan to simulate Biden's infrastructure bill to quantify how much improved infrastructure can insure against trade shocks.

Presented at: AMSE (Ph.D. seminar)

Foreign aid and democracy: chinese aid vs world bank aid, with Vera Z. Eichenauer and Matteo Sestito