Midwest International Trade Conference

Summary of All Sessions
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#	Date/Time	Type	Title/Location	Papers
1	October 16, 2026 14:15-15:45	invited	1-A     Location: TRS 1-099	3
2	October 16, 2026 14:15-15:45	invited	1-B     Location: TRS 1-109	3
3	October 16, 2026 16:15-17:45	invited	2-A     Location: TRS 1-099	3
4	October 16, 2026 16:15-17:45	invited	2-B     Location: TRS 1-109	3
5	October 17, 2026 9:00-10:30	invited	3-A     Location: TRS 1-099	3
6	October 17, 2026 9:00-10:30	invited	3-B     Location: TRS 1-109	3
7	October 17, 2026 9:00-10:30	invited	3-C     Location: TRS 1-077	3
8	October 17, 2026 11:00-12:30	invited	4-A     Location: TRS 1-099	3
9	October 17, 2026 11:00-12:30	invited	4-B     Location: TRS 1-109	3
10	October 17, 2026 11:00-12:30	invited	4-C     Location: TRS 1-077	3
11	October 17, 2026 14:15-15:45	invited	5     Location: TRS 1-099	3
12	October 17, 2026 16:15-17:45	invited	6     Location: TRS 1-099	3
13	October 18, 2026 9:00-10:30	invited	7-A     Location: TRS 1-099	3
14	October 18, 2026 9:00-10:30	invited	7-B     Location: TRS 1-109	3
15	October 18, 2026 11:00-12:30	invited	8-A     Location: TRS 1-099	3
16	October 18, 2026 11:00-12:30	invited	8-B     Location: TRS 1-109	3

 

16 sessions, 48 papers, and 0 presentations with no associated papers

Midwest International Trade Conference
Detailed List of Sessions

Session 1: 1-A October 16, 2026 14:15 to 15:45 Location: TRS 1-099
Session Chair: Raymond Riezman, Aarhus University/UCSB/University of Iowa
Session type: invited
The U.S.-China Trade War and the Geography of Global Production Abstract We study how the U.S.{China trade war affected manufacturing activity in third countries using a novel plant-level dataset covering millions of establishments in 50 major economies, including affiliates of more than 200,000 multinational enterprises (MNEs). Combining establishment-level data with detailed tariff information, we estimate the effects of U.S. and Chinese punitive bilateral output and input tariffs on sales, employment, and establishments across countries, industries, and stages of production. We find that third-country effects of the trade war are highly heterogeneous and largely offsetting, yielding moderately negative net effects overall. Most of the adjustment is driven by multinational enterprises reallocating activity across affiliate networks, while domestic firms respond much less. The effects also vary systematically along global value chains: the most downstream and most upstream industries benefit, whereas industries in intermediate stages of production are adversely affected.
By Harald Fadinger; University of Vienna and CEPR    Lei Li; University of Göttingen    Sophia Praetorius; University of Geneva    Jan Schymik; University of Mannheim
Presented by: Jan Schymik, University of Mannheim
Does Trade with Multinationals Induce Greener Production? Evidence from the Bangladesh Fashion Industry Abstract Global fashion brands face growing pressure to ensure that suppliers in developing countries comply with environmental standards. This concern is especially salient in the apparel industry, whose production processes generate and discharge large volumes of wastewater. We examine how exporting to global fashion brands influences the environmental performance of apparel exporters in Bangladesh. Using a novel dataset that combines custom data with river water quality data, we find that increased export activity near monitoring stations is associated with worse water quality. However, river water quality improves once the majority of nearby firms export to brand buyers. Our finding highlights the important role multinational buyers can play in mitigating industrial pollution, particularly in developing-country contexts where regulatory enforcement is often weak.
By Kazi Iqbal; Bangladesh Institute of Development Studies (BIDS), Dhaka    Moogdho Mahzab; International Food Policy Research Insti    Kazuki Motohashi; Hitotsubashi University    Haruka Takayama; University at Albany - State University of New York
Presented by: Haruka Takayama, University at Albany - State University of New York
Unequal Pay for Equal Luck? Exchange Rate Shocks, Invoicing Currency, and the Pay of Managers and Workers Abstract This paper studies rent-sharing within firms following an unexpected profit shock. We exploit the sharp appreciation of the Swiss franc in January 2015, which increased the competitiveness of exports to Switzerland while raising the cost of imports. Focusing on Denmark, we first document large changes in export and import values to Switzerland, with heterogeneous responses in prices and quantities depending on firms' invoicing currency. We then exploit linked employer-employee data to examine whether these windfall gains and losses are transmitted to wages. We find that rents are shared unequally within firms. The pay of top managers increases significantly among exporters invoicing in Swiss francs, whereas the wages of non-managerial workers remain largely unchanged. Conversely, workers at importing firms experience wage cuts, while managerial pay exhibits downward wage rigidity. Overall, our results suggest that windfall gains and losses are distributed asymmetrically across the occupational hierarchy within firms.
By Jackie M.L. Chan
Presented by: Jackie M.L. Chan,
Session 2: 1-B October 16, 2026 14:15 to 15:45 Location: TRS 1-109
Session Chair: James Lake, University of Tennessee
Session type: invited
(quasi) Fixed Costs and Labor Adjustment Within the Firm Abstract We study employment adjustment within firms in response to a large change in import competition using administrative data that allows us to distinguish workers from owners at Canadian firms. We first develop a model of labor adjustment where owners engage in labor hoarding in response to a negative goods market shock to avoid productivity losses from downsizing as in standard sS models of labor adjustment. Firm owners are only willing to engage in labor hoarding this to the point where the resulting misallocation is less harmful than the potential productivity loss. The resulting band of inaction is smaller for financially fragile firms. Empirical results are not consistent with wage posting models of labor market power: in response to a negative goods market shock, the share of worker income in revenue increases but the share of owner income is unchanged. There is no evidence that increased import competition causes increased layoffs for surviving firms that are financially healthy but financially fragile firms increase layoffs in response to the increase in import competition. These results are consistent with models in which owners of firms bear the incidence of negative goods market shocks.
By Peter Morrow; University of Toronto
Presented by: Peter Morrow, University of Toronto
Intangible Capital, Multinational Production, and Productivity Growth Abstract Over the past three decades, intangible capital and multinational production have risen together and are increasingly concentrated among the most productive firms. We document these patterns using firm-level data and develop a quantitative general equilibrium model in which firms invest in nonrival intangible capital and establish foreign subsidiaries. Nonrivalry generates scalable complementarity: multinational expansion raises the return to intangible investment, while intangible intensity strengthens incentives to expand globally. Our calibration reveals that intangible and rival inputs are gross substitutes, with an elasticity of substitution of 1.8. This implies that when the price of intangible capital falls, firms substitute away from rival factors towards intangible capital, increasing intangible intensity at the firm level and raising output elasticities at the plant level. A structural accounting exercise attributes the joint rise in both trends primarily to declining intangible investment costs, with globalization frictions playing a secondary but amplifying role. A production-function-consistent measure of aggregate TFP reveals that these forces leave true productivity essentially unchanged. What standard measurement approaches attribute to efficiency gains is actually factor deepening in a nonrival input whose contribution is mismeasured—understated by the Solow residual and overstated by the BEA/BLS.
By Sebastian Dyrda; University of Toronto    Guangbin Hong; Michigan State University    Muhammad Ali Sajid; University of Toronto    Joseph Steinberg; University of Toronto
Presented by: Guangbin Hong, Michigan State University
The Pro-Competitive Gains and Losses from Trade Around the World Abstract How do pro-competitive gains from trade vary across countries? We develop a multi-country, multi-sector model featuring rich cross-sector-country heterogeneity in (i) demand elasticities, (ii) the elasticity of import and export markups with respect to the extent of competition, and (iii) productivity, trade costs, market shares, and the number of firms. We find significant cross-country variation in the pro-competitive gains, which crucially depend on import and export shares as well as how elastic demand is for imports compared to exports. The pro-competitive gains from trade are mostly negative, positive for large countries only, and highly sensitive to sectoral tariff variation.
By Hamid Firooz; North Carolina State University    Gunnar Heins; University of Florida
Presented by: Gunnar Heins, University of Florida
Session 3: 2-A October 16, 2026 16:15 to 17:45 Location: TRS 1-099
Session Chair: Raymond Riezman, Aarhus University/UCSB/University of Iowa
Session type: invited
Capital Accumulation, Markups, and Trade Imbalances Abstract We study how capital accumulation and international borrowing and lending shape welfare following changes in productivity and trade barriers when firms price above marginal cost. We quantify a dynamic multi-country, multi-sector model with sector-specific capital accumulation and international borrowing and lending and compare it with a static model with fixed aggregate capital and balanced trade. For China, the dynamic model raises the consumption-equivalent welfare effect of the changes in productivity and trade barriers inferred over 2000--2014 by 49.5 percentage points, from 106.6 percent in the static model to 156.1 percent. Aggregate capital accumulation generates most of the difference between the dynamic and static models by expanding future production and sales, while profit income from those additional sales, or profit shifting, accounts for 65.6 percent of this difference.
By David Shin; University of Tennessee, Knoxville    Hamid Firooz; North Carolina State University
Presented by: David Shin, University of Tennessee, Knoxville
Local Shocks, Global Ripples: Climate Disruptions in Maritime Trade Networks Abstract Climate change is projected to intensify economic damages worldwide, while trade can buffer these impacts by reallocating goods across regions. This adaptive role depends on the reliability of global trade networks, and maritime chokepoints are exposed: localized shocks can propagate through shipping networks, generating welfare losses far beyond the directly affected region. This paper studies this mechanism using the Panama Canal, whose lock system relies on a freshwater reservoir (Gatun Lake), tracing three margins: Canal operations, trade flows, and network propagation. Canal throughput declines once Gatun Lake falls below the Authority's 82-foot water-security level. Low-water months have about 8% fewer transits and 6% less toll revenue, with the adjustment concentrated in the number of transits rather than in cargo per vessel. To estimate the trade response, I construct a scarcity index and decompose it into seasonal, low-frequency, and unanticipated components. Predictable seasonal scarcity has no detectable trade effect, while the low-frequency component remains entangled with global demand cycles. The unanticipated component–hydrological variation shippers cannot plan around—reduces trade on Canal-exposed routes by about 1% per foot, while trade along routes that bypass the Canal expands. To quantify propagation, I develop a structural maritime network model with endogenous routing and spillovers. A one-foot unexpected decline raises transport costs on Canal-incident links by about 0.11%. General-equilibrium spillovers amplify the average trade decline among Canal-exposed pairs from about 1% to about 4%. Losses concentrate in the Canal's neighbors, Latin America and the Caribbean; every U.S. state loses, while some economies along the Suez, Cape, and Malacca corridors gain as trade reallocates. Globally, the aggregate effect is approximately zero–a redistribution across trading partners, not a net loss.
By Jeisson Prieto; Cornell University
Presented by: Jeisson Prieto, Cornell University
From foreign demand to domestic production: A multi-country framework Abstract This paper proposes a novel empirical strategy to study how third-country demand effects determine domestic production. I show that multilateral market access is a key determinant of a country’s output composition in a multi-country trade model with non-homothetic CES preferences and economies of scale. The model predicts that firms’ production choice is determined by a trade-off between demand incentives and production costs, and is reflected in the destination composition of a country’s exports. Using product-level trade data, I confirm that market access increases exports disproportionately to high-income countries - suggesting a higher share of high-quality producers - yet only for exporters in the top quintile of the market access distribution.
By Dorothee Hillrichs; ifo Institute
Presented by: Dorothee Hillrichs, ifo Institute
Session 4: 2-B October 16, 2026 16:15 to 17:45 Location: TRS 1-109
Session Chair: James Lake, University of Tennessee
Session type: invited
Export Responses to Externally-Imposed Labor Standards Abstract We combine administrative data on factory inspections with transaction-level trade data to investigate the effect of externally-influenced labor standard inspections on firm exports. We use inspection timing to implement an event-study design, where we compare exporters that were inspected with those that were never inspected. We find that participation in the labor standards inspection program led inspected firms to double their exports relative to control firms. These effects were evident a year after the inspection program commenced and persisted to the end of the sample period. Our results are consistent with a model where the compliance certification provided by independent inspectors lowered the monitoring costs for foreign buyers.
By Reshad Ahsan; University of Melbourne
Presented by: Reshad Ahsan, University of Melbourne
Delivery Risk, Firm Heterogeneity and Market Power Abstract This paper studies how delivery-time uncertainty affects firms’ sourcing networks, market structure, and aggregate prices. Using granular shipment-level data for U.S. im- porters matched to firm-level financial data, I distinguish realized delivery delays from uncertainty in delivery conditions. I find that firms expand their sourcing networks when delivery uncertainty rises, sourcing from more suppliers, origin countries, and product categories, while realized delays alone do not generate the same response. These sourc- ing responses are heterogeneous across firms: larger firms adjust more strongly and experience more favorable market-share and markup responses when uncertainty increases. To quantify the aggregate implications, I develop a multi-sector equilibrium model in which heterogeneous firms choose supplier networks under delivery risk and compete with oligopolistic pricing. Firms differ in sourcing capacity, so delivery uncertainty generates asymmetric cost responses across firms. This heterogeneity reallocates market share toward firms with stronger sourcing positions and creates a markup amplification channel. Feeding the empirical delivery-uncertainty series into the calibrated model, I find that delivery-time uncertainty accounts for about one-fifth of the peak deviation of U.S. manufacturing PPI from its pre-COVID trend, with markup amplification accounting for roughly one-sixth of the model-implied aggregate price increase. The results show that delivery uncertainty affects aggregate prices not only through expected costs, but also by changing market structure and aggregate markups.
By Manchun Wang; Boston College
Presented by: Manchun Wang, Boston College
The Aggregate(d) Effects of Tariff Policy Abstract A growing empirical literature estimates the inflationary consequences of tariffs. Much of this literature uses local projections (LPs) of aggregate outcomes on a single aggregate ad valorem equivalent (AVE) tariff. We characterize what those regressions recover, show that no model-free correction yields consistent estimates of the inflationary effects of tariffs, and build the sectoral estimator that does. To do so, we embed product-level tariffs — both ad valorem and specific — into a multi-sector open-economy New Keynesian DSGE model with sectoral Calvo pricing, an input–output production network, and capital accumulation. The model decomposes the inflation response to a tariff into five effects: (i) an aggregate AVE effect, (ii) a composition effect reflecting that tariffs on final goods versus capital and intermediate goods have different economic effects, (iii) an input–output network multiplier effect, (iv) a specific-tariff feedback effect whereby changes in prices affect the AVE of specific tariffs, and (v) slow-moving dynamic effects operating through three aggregate general-equilibrium (GE) variables — the real wage, the capital-rental gap, and the real exchange rate — whose persistence comes from capital accumulation and net foreign assets. While the observed aggregate AVE speaks to the first effect alone, we show that standard LPs do not even consistently recover that. Due to the composition and input–output multiplier effects, tariffs have heterogeneous effects on sectoral inflation, and how those responses aggregate is non-trivial. Indeed, the standard LP estimator both mis-weights the sectoral responses and mis-scales their sum. In general, the theory-consistent weights are neither import shares nor consumption expenditure shares. Instead, we show they are a time-invariant open-economy extension of the Rubbo divine-coincidence weights which, by "divine coincidence", also define the price index a central bank pursuing price stability would target. Another problem arises because the presence of specific tariffs implies the aggregate AVE observed in the data is endogenous — falling prices mechanically raise specific tariff AVEs, so the aggregate AVE regressor is itself a fixed point of the inflation path. Moreover, we show the resulting bias flips sign with the sign of inflation: for the same tariff shock, the standard LP would estimate an inflationary response in one era and a disinflationary response in another. Because the specific tariffs that create the endogeneity are legislated before the shock and move the observed AVE through that fixed point, the legislated schedule is a plausibly exogenous and relevant instrument. Instrumenting with that schedule, weighted by the divine coincidence weights above, recovers the aggregate inflation response up to a known scale factor which is computable in closed form from steady-state observables. What this recovers, however, is the response under the monetary regime that actually prevailed. Finally, the estimate comparable across monetary regimes holds the GE variables fixed because they are the only channel in the model that depends on the nature of the central bank's monetary policy rule. However, we show the same input–output network effects mediate both the effect of tariffs on inflation and the slow-moving dynamics of the GE variables. This implies that no model-free strategy — fixed reweighting, recentering, interactive fixed effects, or controls on the observed GE variable paths — recovers the tariff response: each either absorbs the identifying variation or leaves the bias in place. Thus, estimating the inflationary response of tariffs using LPs requires solving the model at the realized regime and using it to remove the contribution of the GE variables from the sectoral panel as a pre-estimation step.
By Miguel Acosta; University of Wisconsin - Madison    Lydia Cox; University of Wisconsin, Madison    Andrew Greenland; NC State University    James Lake; University of Tennessee    John Lopresti; William & Mary    Stefano Lord-Medrano; University of Wisconsin Madison
Presented by: James Lake, University of Tennessee
Session 5: 3-A October 17, 2026 9:00 to 10:30 Location: TRS 1-099
Session Chair: Rishi Sharma, Colgate University
Session type: invited
The Dual Effects of Technology Decoupling: U.S. Export Controls and Innovation in China Abstract This paper studies how U.S. export controls reshape innovation in China using the Entity List as an exogenous policy shock. Exploiting variation in the timing and technological exposure to the Entity List, we adopt a technology-field-level analysis and implement a staggered difference-in-differences design with Chinese patent data from 2010 to 2022. We find that technology fields exposed to U.S. export controls experience a significant increase in patent applications, driven primarily by intensified innovation among incumbent innovators rather than entry by new innovators. However, this expansion in innovation quantity is accompanied by declines in patent quality, generality, and originality, indicating a shift toward more incremental and narrowly focused innovation. Moreover, export controls generate negative spillovers through China’s innovation network, reducing innovation in downstream technologies connected to sanctioned upstream fields. Together, these results reveal a quantity-quality trade-off and show that the innovation consequences of technology decoupling extend beyond the directly targeted technologies, underscoring the importance of system-wide innovation dynamics.
By Runjuan Liu; University of Alberta
Presented by: Runjuan Liu, University of Alberta
Supply Insulation and Firm Adaptation: Evidence from China's Rare Earth Export Quotas Abstract This paper examines how downstream firms adapt to upstream supply disruptions driven by unilateral trade controls. Exploiting China's 2010–2015 rare earth export quotas as a policy shock, we construct an industry penetration index that weights sector-specific input requirements by the physical engineering difficulty of substituting rare earth elements. Combining firm-level data with an LLM-processed patent panel, we show that upstream supply insulation increases domestic downstream total factor productivity and accelerates technological innovation. Mechanism analysis suggests that downstream firms, anticipating the temporary nature of the geopolitical quotas, forgo short-term cash windfalls and instead reallocate resources toward long-term capital investments. Cross-country input-output networks further expose a critical trade-off of trade insulation: while localized supply protections enhance internal resilience, they weaken long-term global value chain positioning and reduce value-added integration.
By Zhimin Li; Peking University
Presented by: Zhimin Li, Peking University
The Effect of Import Competition and Firm Scope on Patent Specialization Abstract We study how source-specific import competition reallocates innovation across distinct strategies within U.S. manufacturing firms between 1990–2017. Using a data-driven classification of patent-level characteristics to distinguish between incremental, mixed, and exploratory innovation, we show that competition from structurally dissimilar countries shifts innovation toward incremental improvements and away from exploratory activity. In contrast, competition from structurally similar countries generates weaker and less systematic reallocation across innovation strategies. These patterns indicate that differences in the production structure of competitors play a central role in shaping how firms adjust their innovation portfolios. Additionally, we show that product scope shapes these responses, such that firms with a wide scope drive the largest amount of variation across different innovation strategies. Our results hold under alternative estimation frameworks and clustering specifications.
By Akseli DeBlieck; Oklahoma State University
Presented by: Akseli DeBlieck, Oklahoma State University
Session 6: 3-B October 17, 2026 9:00 to 10:30 Location: TRS 1-109
Session Chair: Wisarut Suwanprasert, Middle Tennessee State University
Session type: invited
Labor Market Responses to Trade: Job Creation and Destruction Across Space and Sectors Abstract In an era dominated by globalization and international trade, the impact of trade shocks on employment has become a pressing concern for policymakers and the public. This paper examines the impact of the China trade shock on U.S. local labor markets, focusing on unemployment and its key drivers: job finding and job separation rates. Using a shift-share design, I find that regions exposed to the shock experience significant and persistent unemployment increases due to lower job finding and higher job separation rates. To explain these results and capture the persistency, I develop a multi-sector, multi-region labor matching model with endogenous job creation and destruction. The calibrated model shows that the China shock raises the overall U.S. unemployment rate by 0.18 percentage points and accounts for 87% of the decline in the manufacturing employment share of working-age population from 2000 to 2007. Nevertheless, it boosts overall productivity by 0.16% and welfare by 0.04% with all agents, even the unemployed, benefiting from trade. The Hosios (1990) condition alone cannot achieve constrained socially optimal allocations in this model. Without waging a trade war, a redistributive corporate tax policy could improve welfare and reduce unemployment, while restoring the pre-shock manufacturing employment levels.
By Jiong Wu; Ohio State University
Presented by: Jiong Wu, Ohio State University
The Impact of SME Support on Supply Chain Networks Abstract We study how government support for small and medium enterprises (SMEs) reshapes firms’ positions in domestic supply chain networks. A large literature has examined the effects of SME support on firm-level outcomes such as productivity, innovation, exports, and employment, but much less is known about how these policies affect the trading relationships through which firms access markets and inputs, transmit shocks, and build resilience. Understanding these effects is important for evaluating industrial policy because firms’ economic outcomes are shaped not only by their own characteristics but also by their positions within supply chain networks. To address this gap, we construct a novel firm-level panel linking two universal Korean administrative datasets. The Small and Medium Business Integrated Management System (SIMS) records firms’ participation in government SME support programs, covering 28.34 million support records and 4.64 million establishment-year observations from 2010 to 2020. The Korea Enterprise Data on VAT (KEDVAT) captures the universe of domestic firm-to-firm sales, comprising roughly 2 billion transaction records from 2016 to 2024. This linkage allows us to observe firms’ detailed support histories alongside their complete domestic trading relationships, including the number, size, location, and geographic distance of trading partners as well as transaction values. Korea provides a useful setting because government support is pervasive and production is organized around large business groups, leaving many SMEs dependent on a small number of major buyers. Using the linked data, we document that trading relationships are substantially more concentrated on the sales side than on the purchase side: many SMEs derive 90–100% of their sales from a single customer. These patterns highlight the potential importance of policies that help firms expand and diversify their trading relationships. We argue that network outcomes provide a useful complement to conventional measures of policy effectiveness. Compared with outcomes such as sales, employment, and exports, network outcomes capture dimensions of firms’ economic integration that are not reflected in conventional firm-level performance measures. However, participation in support programs remains endogenous to firms’ pre-existing trajectories. For causal identification, we exploit the staggered timing of firms’ entry into support programs and apply the difference-in-differences estimator of Callaway and Sant’Anna (2021), which accommodates staggered adoption and heterogeneous treatment effects. Our main analysis focuses on HR support, one of the largest program categories, and uses a doubly robust estimator controlling for firm size and industry. Event-study estimates show no evidence of differential pre-treatment trends. We find that SME support significantly expands and diversifies firms’ trading relationships. Supported firms acquire new trading partners over time, suggesting that support operates as an ongoing capability-building intervention rather than a one-time shock. They also gain access to larger partners at the upper end of the partner-size distribution, transact over greater geographic distances, and reduce their dependence on their single largest buyer. These effects are particularly notable because support recipients are negatively selected on network quality at baseline: in the cross-section, recipients have smaller and less diversified networks than comparable non-recipients, yet they experience substantial network upgrading following treatment. We find qualitatively similar patterns, with varying magnitudes, for financial and export support, indicating that network diversification is not unique to the design of HR programs. Geographic diversification also occurs without a decline in the share of transactions within the Seoul Metropolitan Area, suggesting that support helps firms add distant relationships rather than replace existing regional ties. Our findings identify a network-based channel through which industrial policy affects firms’ market access and integration into supply chain networks. By helping SMEs diversify away from concentrated buyer dependence, government support may strengthen supply chain resilience while expanding firms’ access to geographically and economically broader markets.
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By Seunghoon Lee    Jee-Hyeong Park; Seoul National University    Heewon Yang; Yonsei University
Presented by: Heewon Yang, Yonsei University
Market Size, Firm Sourcing, and Vertical Specialization Abstract This paper studies how market size shapes vertical specialization across production stages. We develop a model in which heterogeneous firms jointly decide whether to export final goods and import intermediate inputs. The model shows that market size alone can generate endogenous specialization across production stages, even in the absence of technological differences. A larger country tends to specialize in downstream activities and export relatively more final goods, while a smaller country specializes in upstream stages and exports relatively more intermediate inputs. The mechanism depends on how market size affects firms’ joint exporting and importing decisions, altering the composition of firms across production modes and reallocating activity across stages. When input trade costs are high, the model generates a conventional home-market effect in which larger countries sustain higher relative wages. When input trade costs become sufficiently low, however, firms substitute more intensively toward foreign inputs, thereby weakening―and even reversing―the positive relationship between market size and relative wages; nonetheless, a larger country continues to export relatively more final goods. Lower input trade costs also attenuate the welfare gains associated with larger markets and redistribute income across countries participating in global value chains.
By Tomohiro Ara; Fukushima University
Presented by: Tomohiro Ara, Fukushima University
Session 7: 3-C October 17, 2026 9:00 to 10:30 Location: TRS 1-077
Session Chair: Frank Stähler, University of Tübingen
Session type: invited
When Export Tax Incentives End: Multinational Adjustment within and across Countries Abstract This paper examines how multinational enterprises adjust when a host country removes an export-contingent corporate tax incentive. Using affiliate-level data on Korean multinationals, I analyze China’s 2008 elimination of its export-based tax preference. A difference-in-differences design exploits variation in affiliates’ pre-reform export intensity to trace adjustments both within China and across the parent firm’s affiliate network. The results reveal three margins of adjustment. Exposed Chinese affiliates contract their size and shift sales from intra-firm exports to home toward unaffiliated Chinese buyers. At the parent level, exposed parent firms become 8.8 percentage points more likely to enter Southeast Asia—especially in low-technology manufacturing—while entry in other regions remains small. This Southeast Asia entry increase occurs among both exporting and non-exporting affiliates. These findings highlight that export-linked tax incentives can reshape not only the scale of production but also the market orientation and geographic scope of multinational operations.
By Seungyoo Shin; Boston University
Presented by: Seungyoo Shin, Boston University
The Double Edge of Connectivity: Infrastructure and the Geography of Quality Upgrading Abstract Does transport infrastructure drive industrial upgrading, and which firms and regions gain? I combine geocoded firm-product customs data for 2000–2013 with annual maps of China’s expressway buildout in a difference-in-differences design, measuring upgrading by export product quality. Firms near the network gain 7.8 percent, but unevenly. Initially low-quality firms gain most (22.5 percent), while remote Western firms lose 30.4 percent. A direct market-access effect pushes laggards over an upgrading threshold; competitive displacement erodes remote firms as coastal rivals capture shared demand. Infrastructure narrows quality inequality among firms yet can widen it across regions.
By Longzhou Wang; University of Alberta
Presented by: Longzhou Wang, University of Alberta
Globalization of Marriage and Trade Abstract We study how migrant marriage shapes bilateral international trade. We develop a structural gravity model in which household composition amplifies migration's income, origin-demand, and information channels. The theory predicts that these channels operate most intensively for same-origin migrant couples because both spouses share the exporter's origin while pooling resources in the importing country. Using IPUMS International census microdata as our main data source, we construct annual marriage stocks by spouses' countries of birth. We combine these stocks with trade data from the International Trade and Production Database for Estimation (ITPD-E) to estimate their effect on bilateral trade. Conditional on the bilateral migrant stock and a demanding set of fixed effects, countries trade more when the destination contains more married couples in which both spouses were born in the exporter. The relationship is particularly pronounced in agriculture and food, with additional heterogeneity across other industries. A general-equilibrium analysis traces how the estimated effect of migrant marriages on trade propagates to exports, prices, real wages, and welfare.
By Eva Dziadula; University of Notre Dame    Jordi Paniagua; University of Valencia
Presented by: Jordi Paniagua, University of Valencia
Session 8: 4-A October 17, 2026 11:00 to 12:30 Location: TRS 1-099
Session Chair: Rishi Sharma, Colgate University
Session type: invited
Reshoring Policies in the Intangible Economy Abstract Incorporating intangible scalability into a two-country general equilibrium model with firm heterogeneity and endogenous entry, this paper analyzes the macroeconomic effects of reshoring policies—lump-sum subsidies, tax credits, and tariffs—on intangible-intensive offshoring firms. All three policies generate medium-run consumption expansions despite eroding offshore cost advantages. However, their structural mechanisms diverge sharply: tax credits maximize reshoring value-added by incentivizing high-productivity firms, whereas lump-sum subsidies produce the largest transitional welfare gains through more pronounced wage growth. In contrast, tariffs persistently suppress output by contracting foreign demand and offshore value-added. The calibrated Ramsey-optimal policy mix---a 37.0% lump-sum subsidy combined with a 9.6% tariff---enhances welfare by 2.19% relative to the no-policy benchmark. Ultimately, intangible scalability dictates the efficacy of reshoring policies, generating welfare gains that offset the resource misallocation costs of global disintegration.
[slides]
By Jiyoung Lee; University of Washington, Bank of Korea
Presented by: Jiyoung Lee, University of Washington, Bank of Korea
The Impact of Export Demand Shocks on Domestic Used Car Markets: Evidence from South Korea Abstract This paper examines how an exogenous increase in export demand affects the domestic used car market in South Korea. Using population-level vehicle registration data, we trace the shock across dealer-mediated and private-to-private transaction channels. To address the endogeneity of export activity, we construct an instrument combining pre-war model-specific demand in Russia with post-war export growth by vehicle type. The export shock raises both the volume and price of dealers’ purchases from private sellers, while dealers’ domestic retail sales fall in volume and rise in price. More surprisingly, private-to-private transactions expand while their prices remain flat or fall, a pattern inconsistent with conventional seller- or buyer-side spillovers from the dealer market. We develop a model of capacity-constrained intermediation in which a more valuable export option makes dealers more selective, redirecting vehicles they no longer acquire toward the private market. Our findings show that export shocks can reshape domestic markets by altering intermediaries’ selection decisions and reallocating transactions across channels.
By Yoonseung Seon; Yonsei University
Presented by: Yoonseung Seon, Yonsei University
Regulating Local Externalities from Global Shipping Abstract This paper studies the benefits, costs and distributional effects of global and local policies to regulate maritime fuel sulfur content using a global general equilibrium model that accounts for supply chain linkages and vessel routing and the spatial transmission and mortality impacts of local air pollution. We find that IMO 2020 -- a global policy that limits fuel sulfur content to 0.5% -- reduced mortality from shipping pollution by about 175,000 per year at a cost of about 65 billion dollars. Evaluated at conventional value of statistical life (VSL) estimates, the benefits of the policy comfortably exceed the cost. Countries with population centers in major global maritime shipping lanes benefit the most from the policy. Examining local policies, we find substantial heterogeneity in the net benefits of existing and proposed emissions control areas (ECAs) that limit fuel sulfur limits in coastal areas. Many of these local policies would be net benefit positive in the absence of IMO 2020 but become net negative in its presence. We also find a substantial spillover of both the benefits and costs of local policies towards non-implementing countries. Finally, we examine hypothetical policy changes, finding in particular that a ``global ECA'' that limit fuel sulfur only in coastal areas could provide about the same mortality benefits of IMO 2020 at about half the cost.
By Rishi Sharma; Colgate University
Presented by: Rishi Sharma, Colgate University
Session 9: 4-B October 17, 2026 11:00 to 12:30 Location: TRS 1-109
Session Chair: Wisarut Suwanprasert, Middle Tennessee State University
Session type: invited
How Does Trade Competition with a Technological Leader Reshape Domestic Innovation? Abstract I study how import competition from a technological leader affects both the level and direction of innovation in a catching-up economy. I exploit South Korea’s abolition of product-specific restrictions on Japanese imports, which sharply increased imports from Japan but not from elsewhere. Korean patenting fell sharply in exposed technologies and did so before production declined, consistent with an anticipatory adjustment to lower expected returns. I construct a bilateral technology-gap measure from pre-reform Japanese and Korean patenting and show that the decline was larger where Japan’s initial technological advantage was greater. An exact decomposition shows that most of the response reflected portfolio reallocation. Large, diversified incumbents shifted patenting toward established fields while maintaining their overall patenting, whereas smaller firms contracted more broadly. Trade liberalization can therefore induce selective technological retreat without an equally large decline in incumbents’ overall patenting.
By Wonjin Seo; Yonsei University
Presented by: Wonjin Seo, Yonsei University
How Do Reciprocal Tariffs Lead to Freer Trade? Abstract This study examines how a country should respond when faced with so-called reciprocal tariffs imposed by a trading partner, taking into account strategic interactions between countries, which are essential when major economies are involved. A reciprocal tariff policy is assumed to follow one of the following rules: imposing a tariff equal to a trading partner’s, setting a tariff that balances the trade balance, or applying a weighted average of the trade-balancing tariff and the revenue-maximizing tariff. Under these rules, a country adopting reciprocal tariff policy raises (lowers) its tariff when a trading partner increases (decreases) its tariff. We demonstrate that the welfare-maximizing home country benefits from imposing a tariff lower than the optimal tariff in a tariff war against the foreign country that adopts a reciprocal tariff policy, under general demand and cost functions. Although the foreign country follows the rules and does not maximize its welfare, it can be better off than under a tariff war. Surprisingly, if countries are symmetric and marginal cost is constant, the home country chooses a zero tariff on the foreign country, leading to free trade between them.
By Yasuhiro Takarada; Nanzan University    Yasushi Kawabata; Nagoya City University
Presented by: Yasuhiro Takarada, Nanzan University
Trade Diversion, Supply-Chain Reconfiguration, and Rerouting During the U.S.–China Trade War Abstract How did the 2018 U.S.–China trade war affect bystander economies embedded in global value chains? Using Thai customs data from 2013 to 2023, we document sizable trade diversion toward Thailand, a major third-country exporter with extensive trade links to both the United States and China. Thai exports to the U.S. expanded more in products facing larger U.S. tariff increases on Chinese goods. This response was delayed, emerging only after three to four years, and was concentrated in capital goods within selected manufacturing sectors. We show that trade diversion was strongly mediated by global value chains: the products that expanded the most were those with pre-existing supply-chain linkages to China. Firm-level evidence suggests that the U.S. tariffs also lead to both increased imports of Chinese-sourced inputs and the transshipment of Chinese goods through Thailand. Nevertheless, after netting out transshipment and imported input content, we find that trade diversion generated substantial domestic value-added and employment gains. In contrast, Chinese retaliatory tariffs had limited spillover effects. Our findings show that the spillover effects of the trade war operated through supply-chain linkages and delivered meaningful real gains to a bystander economy.
By Wisarut Suwanprasert; Middle Tennessee State University
Presented by: Wisarut Suwanprasert, Middle Tennessee State University
Session 10: 4-C October 17, 2026 11:00 to 12:30 Location: TRS 1-077
Session Chair: Frank Stähler, University of Tübingen
Session type: invited
External reference pricing versus price controls under endogenous product quality Abstract Motivated by the high prices of branded/patented pharmaceuticals in many parts of the world, this paper analyzes price regulations in a two-country (home and foreign) model where a single home firm serves both markets and its R&D investment determines product quality. We study two types of price regulations: direct price controls (PCs) and external reference pricing (ERP) under which the price that the firm is permitted to charge locally depends upon its price abroad. We show that although ERP undermines R&D incentives, its implementation can raise home welfare. However, home's optimal ERP policy is too restrictive from a joint welfare perspective. Furthermore, if the foreign market is subject to a PC, home prefers ERP to a PC due to strategic considerations that come into play due to the international price linkage created by ERP.
By Difei Geng; University of Arkansas    Kamal Saggi; Vanderbilt University
Presented by: Kamal Saggi, Vanderbilt University
Foreign-Market Entry through Other Exporters' Customers Abstract How do exporters find customers when entering a foreign market? We combine monthly Colombian export records with the universe of firm-level Spanish import transactions and show that exporters disproportionately match with buyers previously served by another Colombian exporter. This tendency is stronger among market entrants than among incumbent exporters within narrowly defined product markets. A directed-search model distinguishes four potential mechanisms. Buyer selection is driven primarily by product-specific revealed demand, rather than by buyers’ overall import scale or by exporter- or buyer-side information spillovers. Initial customer composition also predicts entrant survival and exports, while relationships with buyers previously served in the exact same product are more durable and valuable.
By Raúl Mínguez    Asier Minondo; Deusto Business School
Presented by: Asier Minondo, Deusto Business School
On the Deadweight Loss from Credit-Market Frictions in International Trade and Foreign Direct Investment Abstract We develop a theoretical model to study how credit-market frictions affect the efficiency of bank credit allocation to finance foreign-market entry through trade and foreign investment. The frictions include: (i) incomplete information on the part of the bank regarding the likely success of market entry, (ii) incomplete loan contracts, and (iii) bank market power. We characterize the deadweight losses associated with these frictions and study how deadweight losses depend on the productivity of the firms seekingfinancing, the refinancing cost of banks, and the cost of collateral. We find that the deadweight losses are increasing in firm productivity and hence especially high for those firms that in equilibrium select into foreign-market entry. Greater bank refinancing and collateral costs both lead to tougher selection into foreign-market entry. Whereas an increase in the collateral cost increases deadweight losses, an increase in the refinancing cost reduces them. These deadweight losses potentially offset welfare-improving market-share realloaction effects from trade or FDI.
By Horst Raff; Kiel University    Michael Ryan; Western Michigan University    Frank Stähler; University of Tübingen
Presented by: Frank Stähler, University of Tübingen
Session 11: 5 October 17, 2026 14:15 to 15:45 Location: TRS 1-099
Session Chair: Yoto Yotov, Drexel University
Session type: invited
Transportation Cost Heterogeneity: New results for International Trade? Abstract This paper introduces iceberg transportation costs that depend on firm produc- tivity into a model of international trade with monopolistic competition, firm-level heterogeneity, and both constant and variable markups, following the framework of Arkolakis et al. [2019]. Using shipment-level customs data from Chile, I show that larger firms face systematically lower trade costs: a 1% increase in a firm’s total im- ports is associated with a 0.4-0.6 percentage point decline in its iceberg transport cost, measured as freight over CIF. This evidence challenges the standard assumption that trade costs are uniform across firms within a given origin-destination pair. I incor- porate a productivity-dependent iceberg cost, τ(z) = τ/zδ, into the model and show that it strengthens the selection effect, raising the productivity cutoff for exporting and improving the fit to observed patterns of firm participation and the distribution of export sales. In a counterfactual exercise with a 25% increase in U.S. tariffs, the model with heterogeneous trade costs predicts smaller declines in aggregate exports and in the fraction of exporters than a benchmark with constant iceberg costs, but larger welfare losses, as trade becomes more concentrated in a small set of high-markup firms. These results suggest that ignoring firm-level heterogeneity in transportation costs can bias quantitative assessments of trade policy.
By Fernando Letelier; Rutgers University
Presented by: Fernando Letelier, Rutgers University
Evading Sanctions Abstract The sanctions imposed on Russia in 2022 are the most extensive in modern history, yet at least 26% of pre-war EU exports of sanctioned products continued to reach Russia through third-country intermediaries. Standard quantitative trade frameworks, however, assume full enforcement and cannot quantify the consequences of evasion. Combining Russian transaction-level customs records with a new granular dataset on EU export bans, we document the mechanisms and magnitude of sanctions evasion and develop a quantitative trade model with endogenous transshipment to assess its consequences. Our analysis yields three main insights. First, we estimate that the export bans increased effective trade costs from the EU to Russia by about 27% on average, well below the prohibitive levels implied by full enforcement. This observed level of evasion reduces Russia’s real income loss by 22% relative to the full-enforcement scenario. Second, pre-war trade costs predict which countries become transshipment hubs but understate the true cost of evasion: when evasion costs consist only of the additional trade cost from rerouting, Russia’s real income loss falls to just 45% of the full-enforcement level. This implies that the sanctioning coalition created substantial additional barriers beyond the costs of rerouting itself. Third, closing just five transshipment hubs in the model reduces imports by an additional 10 percentage points and increases Russia’s welfare losses by 22%.
By Lisa Scheckenhofer; ifo Institute    Feodora Teti; Ifo Institute    David Torun; University of Zurich    Joschka Wanner; Julius-Maximilians-Universität Würzbur
Presented by: David Torun, University of Zurich
You Can’t Always Get What You Want: Endogenous College Choice in a Globalized World Abstract This paper develops a general equilibrium model of higher education that explains why changes in technology, trade, and education policy can have heterogeneous effects across selective and non-selective colleges. While the conventional view holds that rising demand for skilled labor uniformly increases the returns to higher education and calls for expanding college enrollment, recent evidence suggests that labor market outcomes differ substantially by college selectivity. In particular, graduates of selective institutions have experienced stronger wage gains, whereas less selective colleges have increasingly struggled. The model provides a unified framework to rationalize these patterns by jointly determining college attendance, assortative matching of students across institutions, and labor market outcomes. Students differ in academic aptitude and in the costs of acquiring higher education. The higher education sector consists of two types of colleges. Selective colleges have fixed capacity and admit only students above an endogenous aptitude threshold, generating positive peer effects that increase the marketable skills of their graduates. Non-selective colleges have unlimited capacity, admit all students above a minimum aptitude level, and produce a standardized level of skills. Individuals decide whether to attend college based on expected wage gains relative to heterogeneous education costs, making both college enrollment and the selectivity threshold endogenous. On the production side, firms produce differentiated goods using college-educated labor. Firms may recruit either graduates from selective or non-selective colleges. Employing graduates from selective institutions requires higher fixed costs, reflecting more advanced technologies, recruitment practices, or organizational capabilities, but these workers are more productive because of peer effects acquired during college. Free entry determines the relative wages of the two types of graduates, while product-market equilibrium determines the overall demand for college-educated labor. The interaction between product markets and the education sector jointly determines college enrollment, admission standards, wages, and the allocation of students across institutions. The model generates endogenous assortative matching between students and colleges and highlights how labor market and education market equilibria reinforce one another. An increase in demand for differentiated products raises the demand for college-educated workers but affects selective and non-selective colleges differently through changes in admission standards, peer quality, and graduate wages. Likewise, technological changes that alter the relative cost of employing graduates from selective colleges produce asymmetric effects across institutions. Expanding the capacity of selective colleges increases access but also changes the composition of students, affecting peer effects and the wage premium associated with selectivity. These general equilibrium responses imply that the consequences of education and industrial policies depend crucially on the structure of the higher education market rather than simply on the aggregate supply of graduates. The framework also provides novel policy implications. In particular, restrictions on the access of foreign students to selective colleges reduce peer quality and the productivity of graduates from these institutions. Through general equilibrium adjustments in product and labor markets, such policies can lower wages not only for graduates of selective colleges but also for graduates of non-selective institutions. More broadly, the analysis demonstrates that policies aimed at expanding higher education or increasing the demand for skilled labor cannot be evaluated without accounting for endogenous college selectivity, peer effects, and the interaction between education and product markets. The model therefore offers a new perspective on the heterogeneous evolution of college wage premia and the divergent fortunes of selective and non-selective colleges.
[slides]
By Carsten Eckel; Ludwig-Maximilians-Universität München    Stephen Yeaple; Pennsylvania State University
Presented by: Carsten Eckel, Ludwig-Maximilians-Universität München
Session 12: 6 October 17, 2026 16:15 to 17:45 Location: TRS 1-099
Session Chair: Yoto Yotov, Drexel University
Session type: invited
Multiproduct Transactions in International Markets Abstract This paper establishes that roughly 40 percent of all trade occurs within multiproduct transactions (MPTs). We document that MPTs are characterized by (i) a small number of products and small transaction sizes, (ii) the likelihood of MPTs decline in firm size, (iii) the likelihood of MPTs rises with transaction size, (iv) importers that source from relatively few suppliers. We propose a model of international sourcing rationalizing these features of the data. The model predicts that trade cost reductions leads to a reduction in MPTs, sourcing from a wider set of suppliers, and additional input cost reductions, reinforcing gains from trade.
By Ebehi Iyoha; Harvard Business School
Presented by: Ebehi Iyoha, Harvard Business School
Information Spillovers for Export Markets Abstract Information frictions are substantial barriers to firm success in international markets. However, firm-specific evidence for the effect of trade information on exporting across a network of firms is rare. To fill this gap, we exploit a quasi-natural experiment in Denmark and employ moment inequality estimation approach to establish that: (i) TC supported firms have better export market information than unsupported firms, (ii) unsupported peers of supported firms indirectly gain export information through firm networks, (iii) information spillovers are strongest among firms in close geographic proximity and/or linked through worker transitions, (iv) information spillovers increase total manufacturing exports from the Danish machinery industry by 1-2 percent per year. In aggregate, public benefits from information spillovers are estimated to cover existing export support program costs, but only found to justify program expansion when firm-level export support is targeted to maximize public spillovers.
By Magnus Buus; University of Copenhagen    Jakob Munch; University of Copenhagen    Joel Rodrigue; Vanderbilt University    Georg Schaur; University of Tennessee
Presented by: Joel Rodrigue, Vanderbilt University
The U.S.-China Trade War and Firm Growth in Vietnam: Micro-level Evidence Abstract We study how the 2018–2019 U.S.–China trade war affected employment and firm growth in Vietnamese manufacturing firms, exploiting cross-industry variation in U.S. tariff increases on Chinese goods as a plausibly exogenous demand shock to Vietnamese producers. Using data from the Vietnam Enterprise Survey over 2015–2022, matched to industry-level tariff exposure measures, we estimate difference-in-differences specifications and document three main findings. First, firms in more exposed industries experienced significant employment growth: 4.7\% increase in employment for the average manufacturing firm, rising to 12.6\% among firms with pre-war trade experience. Second, employment gains are highly heterogeneous across ownership types: foreign-owned firms respond most strongly, followed by state-owned enterprises, while private domestic firms benefit only when they had prior export market experience. Third, employment expansion was heterogeneous among workers: firms disproportionately hired female workers, increasing both the level and share of female employment, while average wages declined, consistent with rapid scaling through lower-wage hires. These results highlight the importance of firm heterogeneity and trade experience in shaping the labor market consequences of global trade shocks.
By Anca Cristea; University of Oregon    Hoang Pham; Oregon State University    Ngan Tran; University of Oregon
Presented by: Anca Cristea, University of Oregon
Session 13: 7-A October 18, 2026 9:00 to 10:30 Location: TRS 1-099
Session Chair: Yoto Yotov, Drexel University
Session type: invited
The Anatomy of Tariff Pass-Through into Consumer Prices Abstract Tariffs raise the prices of goods made at home, not just the imports they tax --- an effect that standard pass-through estimates largely miss. Studying the 2025 U.S. tariffs, we find that about 26 percent of the tariff increase passes through to consumer prices. These estimates are measured relative to less-exposed goods and hold aggregate conditions fixed. The direct effect accounts for 64 percent of this increase, as tariffs raise the consumer prices of foreign varieties of a good. The remaining 36 percent arises indirectly --- tariffs raise the cost of imported inputs used by U.S. producers, and domestic producers raise their markups because they face less competition from higher-priced imports. The direct effect passes through quickly, since tariffs raise import prices almost immediately, but the indirect effect takes nine to twelve months to work its way through supply chains. As a result, tariffs have a larger and more drawn-out impact on consumers than the direct effect alone would suggest.
By Mary Amiti; Federal Reserve Bank of New York    Sebastian Heise; Federal Reserve Bank of New York    David Weinstein; Columbia University
Presented by: Sebastian Heise, Federal Reserve Bank of New York
Sanctions Relief and Trade Recovery: Evidence from Iran Abstract This paper examines the trade effects of sanctions relief using a structural gravity model estimated on bilateral trade data covering a broad set of product categories across three sectors, including agriculture, mining and energy, and manufacturing, from 2006 to 2022. Though the analysis incorporates all sanction-relief dyads, it focuses primarily on Iran’s experience under the Joint Comprehensive Plan of Action (JCPOA). The results show that sanctions relief in non-Iran cases is not associated with statistically significant trade effects. Iran’s case, however, is markedly different. Despite substantial heterogeneity, Iran’s trade in agricultural products and in mining and energy commodities increases significantly following sanctions relief. The largest gains are concentrated in important agricultural products, including corn, rice, wheat, other cereals, nuts, fresh fruits, and fresh vegetables, as well as in key mining and energy products such as iron ore and crude petroleum and natural gas. By contrast, the effects on manufacturing trade are mixed. Some important import products benefit from sanctions relief, while others are adversely affected. To a lesser extent, a similar pattern appears for products that are important in both exports and imports, as well as for a small number of products that are important only in exports. These findings advance the nascent literature on the trade effects of sanctions relief by showing that trade recovery is highly uneven across sectors and products and depends heavily on the trade composition of the target country.
By Saleh Tabrizy; The University of Oklahoma
Presented by: Saleh Tabrizy, The University of Oklahoma
Co-production and Multi-product Firms in the Global Economy Abstract World trade is dominated by firms that sell many products to many markets, yet standard models treat product and market scope as separable. This separability misses a first-order force: firms rely on shared non-rival inputs across both products and destinations. Using Chinese customs data matched to product-destination demand shocks, we show that demand growth in related products and destinations increases a firm’s sales in the focal product-destination market. We develop a multi-product, multi-destination firm model featuring core competencies, market-specific demand heterogeneity, and shared non-rival inputs that jointly determine firms’ product and destination scope. We show that standard sufficient statistics fail when trade reshapes firms’ shared capabilities, a force that amplifies the welfare effects of trade-policy shocks. Accounting for shared inputs raises the ACR welfare gain from trade liberalization by 18 percent.
By Chengyuan He; Xiamen University    Xuexin Li; University of Wisconsin - Madison    Wentao Zhou; Michigan State University
Presented by: Xuexin Li, University of Wisconsin - Madison
Session 14: 7-B October 18, 2026 9:00 to 10:30 Location: TRS 1-109
Session Chair: Jay Hyun, Alberta School of Business, University of Alberta
Session type: invited
Global Financial Spillovers of U.S. Trade Policy Abstract This study examines the transmission of structural U.S. tariff shocks to the macro-financial conditions of 26 trading partners using a country-specific structural vector autoregression framework estimated from January 2001 to June 2025. The empirical evidence documents significant cross-sectional heterogeneity in international spillovers driven by competing macroeconomic forces. In economies heavily integrated into international production networks, U.S. tariffs function as stagflationary cost-push shocks that generate immediate inflationary pressures. In comparison, among core Eurozone exporters, a deflationary demand-pull channel dominates because the negative income effects of external demand contraction outweigh input cost frictions. The analysis demonstrates a financial transmission mechanism through which the structural tariff shock initiates rapid asset repricing. Multivariate cross-country regressions demonstrate that global value chain participation systematically amplifies long-run inflationary pressures and suppresses corporate equity valuations, whereas financial openness and free trade agreements mitigate domestic macro-financial sensitivity. Variance decompositions confirm that the structural tariff shock constitutes a primary driver of structural volatility in partner asset markets. Consequently, these asymmetric spillovers force foreign central banks into a strict policy trade-off between anchoring inflation and stabilizing aggregate demand.
By Hakan Yilmazkuday; Florida International University
Presented by: Hakan Yilmazkuday, Florida International University
Trade Policy and Power Politics Abstract Standard optimal tariff theory emphasizes terms-of-trade gains for large countries, but typically abstracts from geopolitical alignment and coercive power. We estimate foreign export supply elasticities for over 100 countries and provide empirical evidence that military power is positively associated with tariff protection, even conditional on standard measures of market power. Motivated by this fact, we develop a model of trade policy in which governments choose tariffs under the threat of military conflict, and geopolitical alliances form endogenously. Military strength shapes disagreement payoffs and the feasibility of peaceful cooperation. The model yields an augmented optimal tariff formula with three components: a standard terms-of-trade motive, a geopolitical term through endogenous bloc formation, and a peace-constraint shadow term reflecting how tariff choices affect the feasibility of peaceful cooperation relative to conflict. Absent geopolitical motives and military power, the model nests the standard static Nash optimal tariff equilibrium.
By Philip Economides; Texas Tech University    Carlos Goes; World Bank Group    Freddie Papazyan; Texas Tech University
Presented by: Philip Economides, Texas Tech University
The Trade Effects of Temporary Trade Barriers Over Their Life Cycle Abstract Temporary trade barriers (TTBs) in the form of antidumping, countervailing and safeguard duties are the most commonly used policy instruments to counteract surges in imports. Using a theory-consistent structural gravity model, this paper investigates for the first time at the product level (HS 6-digit) how the trade effects of these measures vary over their entire life cycle. Employing a cross-country product-level dataset over the period 1995 to 2023, I find that imports from exporters targeted with TTBs are significantly elevated during the pre-investigation period and remain so during the WTO-required investigation to justify these duties. When imposed, TTB tariffs lower imports on average by 24 percent while final duties are in place, but there are only modest negative effects on imports during the preliminary duty phase. The negative import effects intensify with the duration of the final duties. Average price increases are significant but modest during the final duty phase, indicating a limited effectiveness of TTBs to provide protection in the form of higher profit opportunities for import-competing industries. While focusing on TTBs, the estimates in this paper offer detailed insights on how tariff changes more generally affect the trading behavior and market conditions for domestic and foreign firms.
By David Kuenzel; Wesleyan University
Presented by: David Kuenzel, Wesleyan University
Session 15: 8-A October 18, 2026 11:00 to 12:30 Location: TRS 1-099
Session Chair: Yoto Yotov, Drexel University
Session type: invited
Foreign Manufacturing Jobs and Women: Impacts on Work, Marriage, and Childbirth Abstract We investigate the effects of a rapid expansion in the number of jobs in export-oriented foreign-owned manufacturing on marriage and childbirth decisions of young women in Vietnam. Using variation in the location and timing of foreign manufacturing job expansion, we find a reduction in the share of women in their early to mid-20s who are married and are mothers, and a large increase in internal migration. The reductions in marriage and childbirth are particularly pronounced among recent internal migrants. Ten years later, we find little evidence of persistent effects among the initially effected cohorts.
By Natalia Drozdoff; Yale University    Brian McCaig; Wilfrid Laurier University    Nina Pavcnik; Dartmouth College
Presented by: Brian McCaig, Wilfrid Laurier University
Product Exclusions in Free Trade Agreements and Their Implications for Multilateral Trade Liberalization Abstract Free trade agreements (FTAs) are designed to promote trade liberalization, yet politically sensitive products are frequently excluded from tariff elimination despite Article XXIV of the World Trade Organization requiring FTAs to cover substantially all trade. This paper develops a three-country, multi-sector trade model to examine how product exclusions affect endogenous FTA formation, multilateral liberalization, and welfare. Governments are politically motivated and place additional weight on producer surplus in import-competing sectors, while both internal tariffs on excluded products and external tariffs against non-members are determined endogenously. We show that FTA members maintain positive internal tariffs and impose higher external tariffs on excluded products than on non-excluded goods. Product exclusions can make otherwise infeasible FTAs politically viable and may be necessary to achieve multilateral liberalization through an FTA network. Although exclusions reduce the gains from trade liberalization, multilateral liberalization remains welfare-superior to bilateral liberalization even when it requires a greater extent of product exclusions.
By Hiroshi Mukunoki; Gakushuin University    Halis Murat Yildiz; Ryerson University
Presented by: Hiroshi Mukunoki, Gakushuin University
Theory-Consistent Tariff Aggregation Abstract We propose and implement a theory-consistent procedure to aggregate tariffs. Theory implies that (i) the import weights used for aggregation should be net of the impact of tariffs, rather than based on observed imports, and (ii) aggregation must account for trade elasticities, both at the disaggregated and aggregate levels. Our aggregator nests as special cases and corrects the deficiencies of the two existing alternatives - the simple-average and import-weighted tariffs. Our procedure can be applied at any level of aggregation. We deploy it to aggregate 6-digit HS tariffs to the industry-level of the International Trade and Production databases of the USITC. Several applications use the new Theory-Consistent Tariff Database (TCTD) to highlight the advantages of the theory-consistent tariffs.
By James Anderson; Boston College    Mario Larch; University of Bayreuth    Serge Shikher; U.S. International Trade Commission    Yoto Yotov; Drexel University
Presented by: Yoto Yotov, Drexel University
Session 16: 8-B October 18, 2026 11:00 to 12:30 Location: TRS 1-109
Session Chair: Jay Hyun, Alberta School of Business, University of Alberta
Session type: invited
When Brexit Means Brexit: Recovering Trade Policy Expectations from UK Import Stockpiling Abstract We use pre-Brexit stockpiling dynamics to recover expectations over the magnitude and timing of post-Brexit trade costs. Our identification hinges on a model of inventory management in the presence of future trade policy risk, disciplined by the high-frequency boom-bust dynamics of UK imports around Brexit deadlines. We find that the expected trade costs of Brexit were perceived to be large but declined with successive deadline revisions. In contrast, the credibility of proposed Brexit deadlines was highest at the final deadline. These anticipatory effects are obscured in low-frequency trade data, biasing estimates of expected trade costs toward zero.
By Joseph Lansley; University of Rochester    George Alessandria; University of Rochester    Shafaat Khan; Syracuse University
Presented by: Joseph Lansley, University of Rochester
Optimal Tariffs with Trade Dynamics Abstract We study how the dynamics in trade adjustment influence the optimal unilateral tariff. The optimal unilateral tariff leverages a tariff-imposing country's monopsony power on foreign exports. In a static model, that monopsony power is reflected in the inverse of the foreign country's export supply elasticity. But, when trade responds gradually to tariff changes, that export supply elasticity-and the imposing country's monopsony power-also change over time as firms change the export entry and exit decisions. In a general equilibrium macro model with trade dynamics arising from sunk firm-level investments in market access, we show that the optimal one-time tariff chosen by a government with full commitment depends on a weighted sum of the dynamics of the export supply elasticity. The weights are determined by the evolution of the aggregate economy, but can be well-approximated by a sufficient statistic based on the interest rate and the dynamics of the export supply elasticity. If the government can choose a full path of tariffs with commitment, they choose tariffs that start higher and phase out over time to a lower level to exploit the relative fixity of trade in the short run and lessen the long-run distortion. Finally, without commitment, the government chooses substantially higher tariffs, reflecting and incentive for the government to always surprise households and firms with higher tariffs to exploit short-run market power.
By George Alessandria; University of Rochester    Jiaxiaomei Ding; University of Rochester    Shafaat Khan; Syracuse University    Carter Mix; Federal Reserve Board of Governors
Presented by: Jiaxiaomei Ding, University of Rochester
When Regulation Travels: Supply Chain Disruptions and Environmental Spillovers under the Clean Air Act Abstract We study how place-based environmental regulation reshapes supply chains and emissions. Using U.S. establishment data combined with firm-to-firm linkages, we exploit quasi-random variation in Clean Air Act nonattainment designations to estimate the effects of direct and indirect regulatory exposure. Establishments facing regulatory shocks via network counterparts sever ties with regulated partners and face barriers to forming new linkages. Yet these network adjustments explain little of the observed emission changes. Establishments lower emissions under direct and supplier-side regulatory exposures but increase emissions when their customers are regulated—consistent with stronger customer bargaining power shaping firms’ environmental responses under indirect regulatory pressure.
By James Holladay; University of Tennessee    Jay Hyun; Alberta School of Business, University of Alberta    Gueyon Kim; University of California, Santa Cruz    Doyoung Park; Texas A&M University
Presented by: Jay Hyun, Alberta School of Business, University of Alberta

 

This program was last updated on 2026-08-17 18:17:43 EDT