Consumer Mobility and the Local Structure of Consumption Industries
with Sumit Agarwal and Ferdinando Monte; January 2020
Abstract: We study local employment, establishment density, and establishment size across industries delivering final consumption, which comprise a substantial fraction of production, shape local amenities, and pay different wages. In a stylized model of consumer mobility, lower industry storability/durability concentrates demand in space, increasing equilibrium employment. Credit card transactions data show that consumer mobility is limited and varies substantially across sectors; moreover, expenditure declines more rapidly with distance in sectors transacted more frequently. Lower storability/durability, proxied by average transaction frequency, increases a sectors local employment via higher establishment density. Variation in consumer mobility is as economically significant as consumers' expenditure shares.
Service Imports, Workforce Composition, and Firm Performance: Evidence from Finnish Microdata
with Andrea Ariu, Katariina Nilsson Hakkala, and Saara Tamminen; October 2019
Abstract: This paper uses unique Finnish firm-level micro data on service imports, workforce composition, and firm characteristics to examine changes in employment composition and performance of Finnish service importers during a period of a significant increase in services imports (2002-2012). We use world service export supply shocks, which we allocate to firms based on their highly specialized service input structure, as an instrument to identify the impact of service offshoring. We find that firms that increase imports of service inputs reduce employment of low-skill service workers, increase employment of (high-skilled) managers and improve their performance in terms of sales (turnover), assets, service exports, and firm survival. The employment composition and performance responses to service imports differ across firms in the manufacturing sector and those in the service sector.
Knowledge Transfer Abroad: The Role of US Inventors in Global R&D Networks
with Lee Branstetter and Britta Glennon; March 2018
Abstract: The location of US multinational foreign R&D has shifted significantly to include emerging markets in addition to traditional Western R&D hubs, resulting in two challenges for multinationals: (1) how to transfer knowledge across geographic distances, and (2) how to facilitate learning when local knowledge sources in given technological areas are inadequate. This paper argues that to overcome these challenges, multinationals utilize home country inventors on foreign affiliate inventor teams – and in particular on teams in locations with insufficiently specialized local knowledge stocks – to facilitate knowledge transfer. Empirical analysis of a comprehensive dataset of US multinational R&D and patenting activity provides robust support for this argument. The findings have important implications for understanding how countries can gain expertise in technical areas and how poor countries can escape the knowledge trap, and they provide insight into management of increasingly dispersed multinational global R&D networks, particularly in locations with relatively unspecialized local inventors.
The IT Revolution and the Globalization of R&D
with Lee Branstetter and Britta Glennon; June 2018
Abstract: Since the 1990s, R&D has become less geographically concentrated, and has seen especially fast growth in emerging markets. One of the distinguishing features of the R&D globalization phenomenon is its concentration within the software/IT domain; the increase in foreign R&D has been largely concentrated within software and IT-intensive multinationals, and new R&D destinations are also more software and IT-intensive multinationals than traditional R&D destinations. In this paper we document three important phenomena: (1) the globalization of R&D, (2) the growing importance of software and IT to firm innovation, and (3) the rise of new R&D hubs. We argue that the shortage in software/IT-related human capital resulting from the large IT- and software-biased shift in innovation drove US MNCs abroad, and particularly drove them abroad to “new hubs” with large quantities of STEM workers who possessed IT and software skills. Our findings support the view that the globalization of US multinational R&D has reinforced the technological leadership of US-based firms in the information technology domain and that multinationals’ ability to access a global talent base could support a high rate of innovation even in the presence of the rising (human) resource cost of frontier R&D.
The Tradability of Services: Geographic Concentration and Trade Costs
Gervais, Antoine and J. Bradford Jensen. "The Tradability of Services: Georgraphic Concentration and Trade Costs," Journal of International Economics, 2019, vol. 118, pp. 331-350.
Abstract: In this paper, we use a unique dataset on the distribution of output and demand across regions of the United States to estimate trade costs for 969 service and manufacturing industries. Our estimation method is a natural extension of the gravity model of trade and identifies trade costs in the absence of trade data. The estimated trade costs are higher on average for service industries, but there is considerable variation across industries within sectors. Using the trade cost estimates, we classify industries into tradable and non-tradable categories. We find that accounting for tradable service industries nearly doubles the international exposure of the US economy, tradable services value added is unevenly distributed across geographical regions, labor productivity and wages are higher on average for tradable industries, and potential welfare gains from trade liberalization in the service sector are sizable.
Bernard, Andrew B., J. Bradford Jensen, Stephen J. Redding, and Peter K. Schott. “Global Firms.” Journal of Economic Literature, 2018, vol. 56, no. 2, pp. 565–619.
Abstract: Research in international trade has changed dramatically over the last twenty years, as attention has shifted from countries and industries towards the firms actually engaged in international trade. The now-standard heterogeneous firm model posits measurezero firms that compete under monopolistic competition and decide whether to export to foreign markets. However, much of international trade is dominated by a few “global firms,” which participate in the international economy along multiple margins and account for substantial shares of aggregate trade. We develop a new theoretical framework that allows firms to have large market shares and decide simultaneously on the set of production locations, export markets, input sources, products to export, and inputs to import. Using US firm and trade transactions data, we provide strong evidence in support of this framework’s main predictions of interdependencies and complementarities between these margins of firm international participation. Global firms participate more intensively along each margin, magnifying the impact of underlying differences in firm characteristics and increasing their shares of aggregate trade.
Winners and Losers in International Trade: The Effects on US Presidential Voting
Jensen, J. Bradford, Dennis P. Quinn, and Stephen Weymouth. “Winners and Losers in International Trade: The Effects on U.S. Presidential Voting,” International Organization, 2017, vol. 7, no. 3, pp. 423-57
Abstract: International trade directly influences US presidential elections. We explore the electoral implications of the increasing tradability of services and the large US surplus in services trade. Our paper builds on prior work showing that job insecurity from import competition in manufacturing diminishes political support for incumbents. We construct novel measures of the tradability of an industry using establishment-level data covering nearly all US economic activity. We find increases in incumbent party vote shares in counties with large numbers of workers in high-skilled tradable services as well as goods, and decreases in counties with high employment in low-skilled manufacturing. Incumbent parties are particularly vulnerable to losing votes in swing states with many low-skilled manufacturing workers. In national-level models, we show for the first time that increasing imports (exports) are associated with decreasing (increasing) presidential incumbent vote shares. The national-level effectsarelargeandpoliticallyconsequential.WealsofindanElectoralCollegeincentive to protect the manufacturing sector and to oppose trade agreements.
The Influence of Firm Global Supply Chains and Foreign Currency Undervaluations on US Trade Disputes
Jensen, J. Bradford, Dennis P. Quinn, and Stephen Weymouth. “The Influence of Firm Global Supply Chains and Foreign Currency Undervaluations on US Trade Disputes,” International Organization, 2015, vol. 69, issue 4, pp. 913-947.
Abstract: We apply insights from “new, new” trade theory to explain a puzzling decline in US firm antidumping (AD) filings in an era of persistent foreign currency undervaluations and increasing import competition. Firms exhibit heterogeneity both within and across industries regarding foreign direct investment (FDI). We propose that firms making vertical or resource-seeking investments abroad will be less likely to file AD petitions, and firms are likely to undertake vertical FDI in the context of currency undervaluation. Hence, we argue, the increasing vertical FDI of US firms makes trade disputes far less likely. We use firm-level data to examine the universe of US manufacturing firms and find that AD filers generally conduct no intrafirm trade with filed-against countries. Wealso find that persistent currency undervaluation is associated over time with increased vertical FDI and intrafirm trade by US multinational corporations (MNCs) in the undervaluing country. Among larger US MNCs, the likelihood of an AD filing is negatively associated with increases in intrafirm trade. In the context of currency undervaluation, we confirm the existing finding that undervaluation is associated with more AD filings. We also find, however, that high levels of intrafirm imports from countries with undervalued currencies significantly decrease the likelihood of AD filings. Our study highlights the centrality of firm heterogeneity in international trade and investment in understanding political mobilization over international economic policy.