Self-Harming Trade Policy? Protectionism and Production Networks

Alessandro Barattieri · Matteo Cacciatore

34 citations0/0 files storedNational Bureau of Economic Research

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Global trade and economics Monetary Policy and Economic Impact Historical Economic and Social Studies

Abstract

Using monthly data on temporary trade barriers (TTBs), we estimate the dynamic em- ployment effects of protectionism through vertical production linkages. First, exploiting high- frequency data and TTB procedural details, we identify trade policy shocks exogenous to eco- nomic fundamentals. We then use input-output tables to construct measures of protectionism affecting downstream producers. Finally, we estimate panel local projections using the identi- fied trade-policy shocks. Protectionism has small and insignificant beneficial effects in protected industries. The effects in downstream industries are negative, sizable, and significant. The em- ployment decline follows an increase in intermediate-input and final goods prices, and a decline in stock market returns.

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References

2008Economic Links and Predictable Returns 2008Panel data methods for fractional response variables with an application to test pass rates 2015Import Competition and the Great US Employment Sag of the 2000s 2010Market Segmentation and Cross‐predictability of Returns 2012Import protection, business cycles, and exchange rates: Evidence from the Great Recession

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