Showing papers by "Robert C. Feenstra published in 2011"
Posted Content•
TL;DR: In this paper, the authors examine why credit constraints for domestic and exporting firms arise in a setting where banks do not observe firms' productivities to maintain incentive-compatibility, banks lend below the amount needed for first-best production.
Abstract: This paper examines why credit constraints for domestic and exporting firms arise in a setting where banks do not observe firms' productivities To maintain incentive-compatibility, banks lend below the amount needed for first-best production The longer time needed for export shipments induces a tighter credit constraint on exporters than on purely domestic firms, even in the exporters' home market Greater risk faced by exporters also affects the credit extended by banks Extra fixed costs reduce exports on the extensive margin, but can be offset by collateral held by exporting firms The empirical application to Chinese firms strongly supports these theoretical results, and we find a sizable impact of the financial crisis in reducing exports
46 citations
TL;DR: In this paper, the authors argue that the extensive margin of offshoring responds endogenously to shocks in demand and transmits those shocks across borders in an amplified manner, and demonstrate that the degree of movement of this margin in the data is sufficient to explain relative employment volatility in Mexico and the U.S.
42 citations
TL;DR: In this article, the authors examine why credit constraints for domestic and exporting firms arise in a setting where banks do not observe firms' productivities and find that the longer time needed for export shipments induces a tighter credit constraint on exporters than on purely domestic firms, even in the exporters' home market.
Abstract: This paper examines why credit constraints for domestic and exporting firms arise in a setting where banks do not observe firms' productivities. To maintain incentive-compatibility, banks lend below the amount needed for first-best production. The longer time needed for export shipments induces a tighter credit constraint on exporters than on purely domestic firms, even in the exporters' home market. Greater risk faced by exporters also affects the credit extended by banks. Extra fixed costs reduce exports on the extensive margin, but can be offset by collateral held by exporting firms. The empirical application to Chinese firms strongly supports these theoretical results, and we find a sizable impact of the financial crisis in reducing exports.
18 citations
Posted Content•
TL;DR: The authors showed that real per-capita GDP in China was 50% higher relative to the US in 2005 than the World Bank estimates, and they concluded that it reflects a combination of factors, including substitution bias in consumption, reliance on urban prices which are higher than rural ones, and the use of an expenditure-weighted rather than an outputweighted measure of GDP.
Abstract: The latest World Bank estimates of real GDP per capita for China are significantly lower than previous ones We review possible sources of this puzzle and conclude that it reflects a combination of factors, including substitution bias in consumption, reliance on urban prices which we estimate are higher than rural ones, and the use of an expenditure-weighted rather than an output-weighted measure of GDP Taking all these together, we estimate that real per-capita GDP in China was 50% higher relative to the US in 2005 than the World Bank estimates
12 citations
22 Jun 2011
TL;DR: Pierce and Schott as discussed by the authors found that the surge in Chinese exports to the United States coincides with a substantial decline in U.S. manufacturing employment. But with WTO membership, Chinese firms experienced a reduction in the uncertainty associated with the outcome of that vote.
Abstract: The rise in exports from China has been one of the most significant events in international trade in recent decades. This trend has accelerated since that country's entry into the World Trade Organization (WTO) in 2001. Even before that date, by a vote of the U.S. Congress China received the low-tariff, most-favored-nation status associated with WTO membership each year. But with WTO membership, Chinese firms experienced a reduction in the uncertainty associated with the outcome of that vote. This contributed importantly to the surge in exports to the United States, according to studies by Justin Pierce and Peter Schott and by Kyle Handley and Nuno Limao; their hypothesis is supported by empirical work by Ling Feng, Zhiyuan Li, and Deborah Swenson. (1)Pierce and Schott observe that the surge in Chinese exports to the United States coincides with a substantial decline in U.S. manufacturing employment. Handley and Limao find that the welfare gain for consumers due to this increase in Chinese imports is of the same order of magnitude as the U.S. gain from new imports in the preceding decade. These initial findings highlight the dual role that Chinese imports play for the United States: on the one hand, they create import competition with associated labor-market dislocation; on the other, they benefit U.S. consumers. The first of these roles is explored in a series of papers by David Autor, David Dorn, and Gordon Hanson. (2)They analyze the impact of Chinese import competition between 1990 and 2007 on local U.S. labor markets, exploiting geographic differences in import exposure that are due to initial differences in industry specialization. Higher exposure increases unemployment, lowers labor force participation, and reduces wages. [See Figure 1, at right] At the aggregate level, a conservative estimate is that the import surge accounts for one-quarter of the decline in U.S. manufacturing employment. The regional concentration in the decline in manufacturing employment is inconsistent with some alternative explanations of this phenomenon, notably the possibility of a systemic technology shock. (3)The trade effects on unemployment are confirmed by examining worker-level evidence. (4)Most recently, in joint work with Daron Acemoglu and Brendan Price, these authors find that the import surge from China also contributed to unusually slow employment growth in the United States following the global financial crisis and the Great Recession. (5) While these papers have explored the impact of import competition from China, they do not incorporate the consumer gains or the export opportunities created by expanded Chinese exports. The first attempt to put the surge in Chinese exports into a general equilibrium context is that of Lorenzo Caliendo, Maximiliano Dvorkin, and Fernando Parro. (6) Their computable general equilibrium model incorporates labor mobility frictions and dislocation costs. They find that growing Chinese import competition resulted in a 0.6 percentage point reduction in manufacturing's share of total employment, or approximately one million jobs lost, which is about 60 percent of the change in manufacturing employment not explained by a secular trend. At the same time, the China shock increased U.S. welfare by 0.2 percent in the short run and 6.7 percent in the long run, with very heterogeneous effects across labor markets. Despite the fact that employment impacts and labor market dislocation are much stronger in some areas, the consumer gains and export opportunities mean that nearly all regions experience net benefits from rising Chinese imports. This work has inspired much additional research on the China shock. In the United States, Avraham Ebenstein, Ann Harrison, and Margaret McMillan analyze the impact of globalization at the occupational level and find that offshoring to low-wage countries and imports are both associated with wage declines for U.S. workers, though imports from China have a greater impact than does offshoring. …
3 citations