Policy Uncertainty, Trade, and Welfare: Theory and Evidence for China and the United States

By Kyle Handley, N. Limão. World Scientific Studies in International Economics, 2017

759 citations recorded by the source corpus.

We examine the impact of policy uncertainty on trade, prices, and real income through firm entry investments in general equilibrium. We estimate and quantify the impact of trade policy on China's export boom to the United States following its 2001 WTO accession. We find the accession reduced the US threat of a trade war, which can account for over one-third of that export growth in the period 2000-2005. Reduced policy uncertainty lowered US prices and increased its consumers' income by the equivalent of a 13-percentage-point permanent tariff decrease. These findings provide evidence of large effects of policy uncertainty on economic activity and the importance of agreements for reducing it.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/62838cafc77d2697ba47a48f4852b6225a9bd3fe

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Citations in the corpus

Economic Policy Uncertainty Spillovers in Booms and Busts (2019, positive): “…or uncertainty to be relevant for the open economies they model. sc This ﬁnding is corroborated by Born, Mller, and Pfeifer (2013), Handley (2014) and Handley and Lim˜ao (2015, 2017), whose focus is on the link between policy uncertainty, trade, and real activity. u Turning to time series…”
The Impact of Brexit on UK Firms (2019, neutral): “…example papers like Harrison (1994), Pavcnik (2002), Melitz (2003), Amiti and Konings (2007), Goldberg et al. (2009), Topalova and Khandelwal (2011), Bloom et al. (2016), Limão and Maggi (2015), De Loecker et al (2016), Goldberg and Pavcnik (2016), Handley and Limão (2017) and Crowley et al (2018).”
Foreign Competition and Domestic Innovation: Evidence from US Patents (2020, positive): “Pierce and Schott (2016) and Handley and Limao (2017) show that U.S. industries with higher gaps between non-MFN and MFN tariffs experienced more rapid acceleration in Chinese imports after 2000.”
New Perspectives on the Decline of US Manufacturing Employment (2018, background): “Handley and Limão (2017) nd that trade liberalization with China in the 2000s bene ts consumers via increased imported product variety.”
The ‘China shock,’ exports and U.S. employment: A global input–output analysis (2018, positive): “…work find the sizable impact of China’s accession to WTO on the growth of China’s exports (Feng, Li, and Swenson, 2017; Crowley, Song, and Meng, 2016; Handley and Limao, 2017).16 Handley and Limao (2017) show that the reduction of policy uncertainty can explain 22-30% of China’s export growth to…”
The economic effects of trade policy uncertainty (2019, result): “This outcome may appear puzzling in light of recent work by Handley and Limão (2017) —HL, henceforth—who argue that, in the presence of sunk export costs, trade policy uncertainty unequivocally reduces export participation.”
The Costs of Economic Nationalism: Evidence from the Brexit Experiment* (2019, background): “Our paper relates to work on the impact of (trade policy) uncertainty on international trade (see e.g. Novy and Taylor, 2014; Handley and Limão, 2017, 2015; Limão and Maggi, 2015).”