Trade and Investment under Policy Uncertainty: Theory and Firm Evidence

We provide theoretical and empirical evidence that policy uncertainty can significantly affect firm level investment and entry decisions in the context of international trade. When market entry costs are sunk, policy uncertainty can create a real option value of waiting to enter foreign markets until conditions improve or uncertainty is resolved. Using a dynamic, heterogeneous firms model we show that: (i) investment and entry into export markets is reduced when trade policy is uncertain, and (ii) preferential trade agreements (PTAs) are valuable to exporters even if applied trade barriers are currently low or zero. We derive a structural equation that predicts how firm entry responds to changes in applied tariffs and a theory-based measure of policy uncertainty. Our novel approach using observable trade policies allows us to estimate the impact of policy uncertainty and quantify its aggregate implications. We apply this method to Portugal's accession to the European Community in 1986 using new firm-level trade data. We find that (i) the trade policy reform accounted for a large fraction of the observed Portuguese exporting firms' entry and sales upon accession (ii) the accession removed uncertainty about future preferences and (iii) this uncertainty channel accounted for a large fraction of the predicted growth. These results have broader implications for other PTAs and our approach can be applied to analyze other sources of policy uncertainty.

Economic and Policy Uncertainty: Export Dynamics and the Value of Agreements

We examine the interaction of economic and policy uncertainty in a dynamic, heterogeneous firms model. Uncertainty about foreign income, trade protection and their interaction dampens export investment. This can be mitigated by trade agreements, which are particularly valuable in periods of increased demand volatility. We use firm data to establish new facts about U.S. export dynamics in 2003-2011 and estimate the model. We find a significant role for uncertainty in explaining the trade collapse in the 2008 crisis and partial recovery in its aftermath. Consistent with the model predictions, we find that the negative effects worked (1) through the extensive margin, (2) in destinations without preferential agreements with the U.S. (accounting for over half its trade) and (3) in industries with higher potential protection. U.S. exports to non-preferential markets would have been 6.5% higher under an agreement—equivalent to an 8% foreign GDP increase. These findings highlight and quantify the value of international policy commitments through agreements that mitigate uncertainty, particularly during downturns.https://deepblue.lib.umich.edu/bitstream/2027.42/144506/1/1382_Handley.pd

Exporting Under Trade Policy Uncertainty: Theory and Evidence

Policy commitment and credibility are important for inducing agents to make costly, irreversible investments. Policy uncertainty can delay investment and reduce the response to policy change. I provide theoretical and novel quantitative evidence for these effects by focusing on trade policy, a ubiquitous but often overlooked source of uncertainty, when a firm's cost of export market entry is sunk. While an explicit purpose of the World Trade Organization (WTO) and preferential trade agreements (PTAs) is to secure long term market access, little theoretical and empirical work analyzes the value of these agreements for reducing uncertainty to prospective exporters. Within a dynamic model of heterogeneous firms, I show that trade policy uncertainty will delay the entry of exporters into new markets and make them less responsive to applied tariff reductions. Policy instruments that reduce or eliminate uncertainty such as PTAs or binding trade policy commitments at the WTO can increase entry even when applied protection is unchanged. I test the predictions for WTO commitments by a developed country, Australia, and the value of securing preferences through a PTA for a developing country, Portugal circa 1986. I test the model using a disaggregated and detailed dataset of product level Australian imports in 2004 and 2006. I use the variation in tariffs and binding commitments across countries, products and time, to construct model-consistent measures of uncertainty. The estimates indicate that lower WTO commitments increase entry. Reducing trade policy uncertainty is at least as effective quantitatively as unilateral applied tariff reductions for Australia. These results illuminate and quantify an important new channel for trade creation in the world trade system. I use Portugal's accession to the European Community (EC) in 1986 to test whether securing pre-existing preferences reduced trade policy uncertainty for firms. I use a firm-level dataset of Portugeuse exporters to show that net entry into EC was higher than what could have been achieved if the EC had simply lowered tariffs without admitting Portugal to the EC. Structural estimates from the model suggest that EC accession reduced the probabality of preference reversals to higher tariffs by up to 24 percent

The spread of marine anoxia on the northern Tethys margin during the Paleocene-Eocene Thermal Maximum

Records of the paleoenvironmental changes that occurred during the Paleocene-Eocene Thermal Maximum (PETM) are preserved in sedimentary rocks along the margins of the former Tethys Ocean and Peri-Tethys. This paper presents new geochemical data that constrain paleoproductivity, sediment delivery, and seawater redox conditions, from three sites that were located in the Peri-Tethys region. Trace and major element, iron speciation, and biomarker data indicate that water column anoxia was established during episodes when inputs of land-derived higher plant organic carbon and highly weathered detrital clays and silts became relatively higher. Anoxic conditions are likely to have been initially caused by two primary processes: (i) oxygen consumption by high rates of marine productivity, initially stimulated by the rapid delivery of terrestrially derived organic matter and nutrients, and (ii) phosphorus regeneration from seafloor sediments. The role of the latter process requires further investigation before its influence on the spread of deoxygenated seawater during the PETM can be properly discerned. Other oxygen-forcing processes, such as temperature/salinity-driven water column stratification and/or methane oxidation, are considered to have been relatively less important in the study region. Organic carbon enrichments occur only during the initial stages of the PETM as defined by the negative carbon isotope excursions at each site. The lack of observed terminal stage organic carbon enrichment does not support a link between PETM climate recovery and the sequestration of excess atmospheric CO2 as organic carbon in this region; such a feedback may, however, have been important in the early stages of the PETM

Inflation and Dark Energy from spectroscopy at z > 2

The expansion of the Universe is understood to have accelerated during two epochs: in its very first moments during a period of Inflation and much more recently, at z < 1, when Dark Energy is hypothesized to drive cosmic acceleration. The undiscovered mechanisms behind these two epochs represent some of the most important open problems in fundamental physics. The large cosmological volume at 2 < z < 5, together with the ability to efficiently target high-$z$ galaxies with known techniques, enables large gains in the study of Inflation and Dark Energy. A future spectroscopic survey can test the Gaussianity of the initial conditions up to a factor of ~50 better than our current bounds, crossing the crucial theoretical threshold of $\sigma(f_{NL}^{\rm local})$ of order unity that separates single field and multi-field models. Simultaneously, it can measure the fraction of Dark Energy at the percent level up to $z = 5$, thus serving as an unprecedented test of the standard model and opening up a tremendous discovery space

Offshoring and Employment : Evidence from Firm Microdata

The impact of offshoring and trade has become a huge economic and political topic in the US. This research will investigate the impact of this offshoring on firms and labor markets by exploiting access to a novel combination of extremely detailed Census micro data spanning firms, workers and trade transactions. By improving our understanding of offshoring at the firm and employee level, this research will inform the political debate and provide better evidence for crafting trade, labor, and corporate tax policies

Organizational health impact assessment

The following dissertation offers a theoretical justification for the use of a modified Mental Well-Being Impact Assessment (MWIA) for use in organizational settings. An Organizational Health Impact Assessment (OHIA) was developed by evaluating the utility of the components of the MWIA when applied to a business environment, through analysis of the theoretical and empirical support for these components in the organizational literature, with special consideration given to the relationship between social justice, mental well-being, and business outcomes. Modifications to the MWIA model and process, including the Desktop Screening Tool, are recommended in order to better align the OHIA with organizational practice. Future research directions for determining the efficacy of the OHIA in practical business environments are discussed