History, Culture, and Trade: A Dynamic Gravity Approach

What determines trade patterns? Habit persistence in consumer tastes and learning-by-doing in production imply that history and culture matter. Deriving a dynamic gravity equation from a simple model, it is shown that cultural similarity is a product of history, so that trade patterns are a function of bilateral GDP, current trade costs, and the past history of trade costs. Using a trade data set which spans from 1870 to 2000, I demonstrate that many gravity variables operate via lagged trade, that historical trade shocks matter, and that trade patterns are persistent, even across centuries.Dynamic Gravity Equation, Endogenous Preferences, Habit Persistence, Learning By-Doing.

Estimating the impact of currency unions on trade using a dynamic gravity framework

This paper revisits the early time series estimates of currency unions on trade from an historical perspective using a dynamic gravity equation and by conducting in-depth case studies of currency union breakups. The early large estimates were driven by omitted variables, as many currency union exits were coterminous with warfare, communist takeovers, coup d'etats, genocide, bloody wars of independence, various other geopolitical travesties, or were predated by trade collapses. Static gravity estimates are found to be sensitive to controlling for these omitted variables, while a dynamic gravity specification implies that currency unions do not increase trade.Currency Unions, Trade, Dynamic Gravity, Decolonization

History, culture, and trade: a dynamic gravity approach

What determines trade patterns? Habit persistence in consumer tastes and learning-by-doing in production imply that history and culture are key determinants. Deriving a dynamic gravity equation from a simple model, it is shown that cultural similarity is a product of history, so that trade patterns are a function of bilateral GDP, current trade costs, and the past history of trade costs. Using a trade data set which spans from 1870 to 2000, it is shown that many gravity variables operate via lagged trade, that historical trade shocks matter, and that trade patterns are persistent, even across centuries.Dynamic Gravity Equation, Endogenous Preferences, Habit Persistence, Learning- By-Doing

On ‘Trade Induced Technical Change: The Impact of Chinese Imports on Innovation, IT and Productivity’

Bloom, Draca, and Van Reenen (2016) find that Chinese import competition induced a rise in patenting, IT adoption, and TFP by up to 30% of the total increase in Europe in the late 1990s and early 2000s. We uncover several coding errors in an important robustness check of their patent results. When corrected, we find no statistically significant relationship between Chinese competition and patents. Other specifications in the original paper use a problematic log(1+patents) transformation. This normalization induces bias given low average patent counts for firms in China-competing sectors, and rapidly declining patents across the sample

Constraints on Mars Aphelion Cloud Belt Phase Function and Ice Crystal Geometries

This study constrains the lower bound of the scattering phase function of Martian water ice clouds (WICs) through the implementation of a new observation aboard the Mars Science Laboratory (MSL). The Phase Function Sky Survey (PFSS) was a multiple pointing all-sky observation taken with the navigation cameras (Navcam) aboard MSL. The PFSS was executed 35 times during the Aphelion Cloud Belt (ACB) season of Mars Year 34 over a solar longitude range of L_s=61.4{\deg}-156.5{\deg}. Twenty observations occurred in the morning hours between 06:00 and 09:30 LTST, and 15 runs occurred in the evening hours between 14:30 and 18:00 LTST, with an operationally required 2.5 hour gap on either side of local noon due the sun being located near zenith. The resultant WIC phase function was derived over an observed scattering angle range of 18.3{\deg} to 152.61{\deg}, normalized, and compared with 9 modeled phase functions: seven ice crystal habits and two Martian WIC phase functions currently being implemented in models. Through statistical chi-squared probability tests, the five most probable ice crystal geometries observed in the ACB WICs were aggregates, hexagonal solid columns, hollow columns, plates, and bullet rosettes with p-values greater than or equal to 0.60, 0.57,0.56,0.56, and 0.55, respectively. Droxtals and spheres had p-values of 0.35, and 0.2, making them less probable components of Martian WICs, but still statistically possible ones. Having a better understanding of the ice crystal habit and phase function of Martian water ice clouds directly benefits Martian climate models which currently assume spherical and cylindrical particles.Comment: Accepted Manuscript by Planetary and Space Scienc

Basing rate adjustments for motor carriers on statistical evidence

Pricing services of motor carriers is a dynamic process, with continuous pressure from customers to offer competitive rates and discounts. This can lead to a profusion of special arrangements with rates that poorly reflect the services rendered. This article shows how standard database systems and statistical models can be used to extract useful information from bills of lading to assist in the pricing of freight services. Summaries of business performance are produced according to terminal facility, shipping origin, shipping destination, individual shipping lane and individual customer. User-friendly statistical models are constructed to produce benchmarks for rates and revenues considering the services rendered. Differences between actual and benchmark levels of performance help to identify situations that may call for managerial reinforcement or corrective intervention. With illustrations from a major motor carrier, the authors discuss how even small motor carriers can develop such models and use them for planning their rate adjustments and managing customer relationships

Relative Prices, Hysteresis, and the Decline of American Manufacturing

This study uses new measures of real exchange rates to investigate the decline of American manufacturing employment in the early 2000s, comparing it to the smaller decline in the 1980s. I find that US manufacturing sectors with greater initial exposure to trade in the 1970s were disproportionately affected by the ensuing dollar appreciation in the 1980s, and that more open sectors in the 1990s also suffered comparative declines in output and employment when US unit labor costs appreciated relative to US trading partners. Employment losses in both the 1980s and in the early 2000s were due to increased job destruction and suppressed job creation, and appear to exhibit hysteresis. Additionally, more open sectors experienced relative declines in shipments, value-added, investment, production worker wages, and total factor productivity as US relative unit labor costs in manufacturing rose. I explain the persistent effects of exchange rate movements on manufacturing using a Melitz model extension with sunk fixed costs, which leads to a dynamic gravity equation whereby shocks to trade have persistent effects that decay over time. The appreciation of US relative unit labor costs can plausibly more than two-thirds of the decline in manufacturing employment in the early 2000s

Estimating the impact of currency unions on trade using a dynamic gravity framework

This paper revisits the early time series estimates of currency unions on trade from an historical perspective using a dynamic gravity equation and by conducting in-depth case studies of currency union breakups. The early large estimates were driven by omitted variables, as many currency union exits were coterminous with warfare, communist takeovers, coup d'etats, genocide, bloody wars of independence, various other geopolitical travesties, or were predated by trade collapses. Static gravity estimates are found to be sensitive to controlling for these omitted variables, while a dynamic gravity specification implies that currency unions do not increase trade

History, culture, and trade: a dynamic gravity approach

What determines trade patterns? Habit persistence in consumer tastes and learning-by-doing in production imply that history and culture are key determinants. Deriving a dynamic gravity equation from a simple model, it is shown that cultural similarity is a product of history, so that trade patterns are a function of bilateral GDP, current trade costs, and the past history of trade costs. Using a trade data set which spans from 1870 to 2000, it is shown that many gravity variables operate via lagged trade, that historical trade shocks matter, and that trade patterns are persistent, even across centuries

Relative Prices, Hysteresis, and the Decline of American Manufacturing

This study uses new measures of real exchange rates to study the collapse of US manufacturing employment in the early 2000s in historical and international perspective. To identify a causal impact of RER movements on manufacturing, I compare the US experience in the early 2000s to the 1980s, when large US fiscal deficits led to a sharp appreciation in the dollar, and to Canada's experience in mid-2000s, when high oil prices and a falling US dollar led to an equally sharp appreciation of the Canadian dollar. I use disaggregated sectoral data and a difference-in-difference methodology, finding that an appreciation in relative unit labor costs for the US lead to disproportionate declines in employment, output, investment, and productivity in relatively more open manufacturing sectors. In addition, I find that the impact of a temporary shock to real exchange rates is surprisingly long-lived. I explain the persistent effects of exchange rate movements on manufacturing using a Melitz model extension with sunk fixed costs, which leads to a dynamic gravity equation whereby shocks to trade have persistent effects that decay over time. The appreciation of US relative unit labor costs can plausibly explain more than two-thirds of the decline in manufacturing employment in the early 2000s