Working Papers
Presented at: Stony Brook International Conference on Game Theory (2022), Midwest Trade and Theory Conference (2023)
Abstract: Lobbying activities are important to the promotion of Free Trade Agreements (FTAs). I quantify the influence of lobbying on the ratification probability of FTAs by constructing a dataset containing all lobbying activities related to FTAs in the United States. I set up a contest model of lobbying where heterogeneous players choose expenditures to affect the ratification probability of FTAs. I use structural gravity estimation to estimate the trade profit gains from FTAs and use Maximum Likelihood estimation to back out the ratification probabilities. Results suggest that lobbying in the manufacturing sector increased ratification probability by 12 percentage points on average, and the expected gains from lobbying are 2.5 times the lobbying expenditures on average. Additionally, free riding lowers lobbying expenditures by 50%. Last, higher lobbying effectiveness increases ratification probability but has ambiguous effects on the number of lobbies and total expenditures. These findings highlight the effects of lobbying on the formation of international agreements.
Abstract: What's the optimal trade policy? With WTO largely lowering the implemented tariffs, new aspects arise from this long-standing question. Export tax is a possible alternative policy tool to restore protection when import tariffs are constrained. This work explores the determinants of optimal export policy when exporters have market power, are heterogeneous, and participate in the Global Value Chain (GVC). I derive an analytical solution for optimal export policy. Then I empirically show that the theoretical determinants have significant effects on the implemented export policies by China after it acceded to WTO in 2001. These results highlight the importance of exporter selection and participation in the GVC in shaping a country's trade policy.
Other Papers
"Optimal Export Policy in General Equilibrium for Exporters with Market Power"
Countries would increase export tax when import tariff is lower, according to Lerner Symmetry. However, with the historically low level of import barriers, export tax is still not popular among countries. One explanation is that the market power of exporters leaves little room for restrictive export policies. In this article, I explore optimal export policies when exporters have different levels of market power. I develop a multi-country-multi-sector general equilibrium gravity model, where sectors interact with each other through both labor market and substitution in demand. I derive a general form of optimal export policy and show analytically that export restrictions decrease with exporters' market power and increase with cross-price elasticity of demand.
"Measuring the Effects and Evolution of Non-tariff Measures"
Abstract: Non-tariff Measures (NTMs) are trade policy measures other than tariffs and tariff-rate quotas that have a direct impact on international trade. This paper studies the effects of 6 types of NTMs on trade flows during 2000-2015 by constructing a dataset of import flows and trade policies for 110 countries and 96 HS2 level products. Using poisson pseudo-maximum likelihood to estimate a structural gravity model, I find that both implementation effects and marginal effects of NTMs converge to zero over time. This pattern benefits countries that seek to impose more NTMs out of non-protective purposes as they will face less distortions brought by NTMs on import flows. However, it hurts countries that seek to impose more protective measures as they will lose effective policy tools to restrict imports.