Working Papers
Economic consequences of cabotage restrictions: The effect of the Jones Act on Puerto Rico (with Manuel Jimenez)
We study the consequences of a US cabotage law for Puerto Rico (PR). The fleet of US vessels calling in PR lacks capacity for carrying non-containerized freight. PR’s imports of sea-shipped final products are biased against US mainland sources. This bias is strongest for heavy products and products not typically shipped in containers. Among upstream products, a strong bias against imports of sea-shipped products applies to all sources. Estimated tariff-equivalent costs among final products imply static annual welfare losses of 1.1 percent of household consumption (\$203 per person). We present suggestive evidence that the policy generates additional dynamic losses.
We study the consequences of a US cabotage law for Puerto Rico (PR). The fleet of US vessels calling in PR lacks capacity for carrying non-containerized freight. PR’s imports of sea-shipped final products are biased against US mainland sources. This bias is strongest for heavy products and products not typically shipped in containers. Among upstream products, a strong bias against imports of sea-shipped products applies to all sources. Estimated tariff-equivalent costs among final products imply static annual welfare losses of 1.1 percent of household consumption (\$203 per person). We present suggestive evidence that the policy generates additional dynamic losses.
Variable Scaling and Hypothesis Testing in the Gravity Model (with Anton Yang)
Statistical inference around hypothesis tests in Poisson Pseudo Maximum Likelihood (PPML) models is sensitive to data scaling choices. We show this analytically and demonstrate it using a simple application of the gravity model of trade. The scale of the data on the independent variable affects the scale of both the Likelihood statistic and the Likelihood Ratio test statistic. Lagrange Multiplier tests are similarly sensitive to data scaling choices. When considering Wald tests, we find some nuance. Data scaling affects the Wald statistic when it depends upon the asymptotic variance-covariance matrix, but not when the variance-covariance matrix depends upon residuals from robust estimation. Testing of joint hypotheses in PPML gravity models should therefore rely on Wald tests constructed from robust standard errors.
Statistical inference around hypothesis tests in Poisson Pseudo Maximum Likelihood (PPML) models is sensitive to data scaling choices. We show this analytically and demonstrate it using a simple application of the gravity model of trade. The scale of the data on the independent variable affects the scale of both the Likelihood statistic and the Likelihood Ratio test statistic. Lagrange Multiplier tests are similarly sensitive to data scaling choices. When considering Wald tests, we find some nuance. Data scaling affects the Wald statistic when it depends upon the asymptotic variance-covariance matrix, but not when the variance-covariance matrix depends upon residuals from robust estimation. Testing of joint hypotheses in PPML gravity models should therefore rely on Wald tests constructed from robust standard errors.
Renewable resource rents, taxation and the effects of wind power on rural economies (with Nhu "Claire" Nguyen)
The rapid growth of utility-scale wind energy generation is a potentially important boon to rural economies in the United States. Yet econometric estimates suggest that the local economic benefits of wind energy generation have been modest, perhaps because the sector is capital-intensive and financed almost exclusively by external capital. In this paper we argue that a) both the presence of a critical - but unpaid - factor of production (the wind) and generous federal subsidies are quantitatively important sources of economic rent, and b) a large portion of these rents accrue to providers of capital who reside outside the local economy. We build a partial equilibrium model that illustrates the mechanisms that generate economic rent, and integrate it into a small open economy general equilibrium model of a county’s economy. We calibrate the partial and general equilibrium models to data from two rural counties in Indiana, quantify the economic rents, and consider the consequences of a resource rent tax. Resource rent taxes generate significantly larger economic benefits for communities that host wind power, and offer an opportunity to spread the sector’s economic benefits more broadly within them. Broadly distributed revenues from resource rent taxes might facilitate greater acceptance of utility scale wind power in communities where the sector would otherwise be unwelcome. State public utility commissions provide an analytical infrastructure that could support local taxation of the kind that we consider.
The rapid growth of utility-scale wind energy generation is a potentially important boon to rural economies in the United States. Yet econometric estimates suggest that the local economic benefits of wind energy generation have been modest, perhaps because the sector is capital-intensive and financed almost exclusively by external capital. In this paper we argue that a) both the presence of a critical - but unpaid - factor of production (the wind) and generous federal subsidies are quantitatively important sources of economic rent, and b) a large portion of these rents accrue to providers of capital who reside outside the local economy. We build a partial equilibrium model that illustrates the mechanisms that generate economic rent, and integrate it into a small open economy general equilibrium model of a county’s economy. We calibrate the partial and general equilibrium models to data from two rural counties in Indiana, quantify the economic rents, and consider the consequences of a resource rent tax. Resource rent taxes generate significantly larger economic benefits for communities that host wind power, and offer an opportunity to spread the sector’s economic benefits more broadly within them. Broadly distributed revenues from resource rent taxes might facilitate greater acceptance of utility scale wind power in communities where the sector would otherwise be unwelcome. State public utility commissions provide an analytical infrastructure that could support local taxation of the kind that we consider.
Expediting Trade: Impact Evaluation of an In-House Clearance Program (with Ana M. Fernandes and Claudia Berg)
Despite the importance of trade facilitation as an area of trade and development policy, there have been very few impact evaluations of specific trade facilitation reforms. This paper offers an evaluation of in-house clearance, a reform that allows qualified firms in Serbia to clear customs from within their own warehouse rather than at the customs office. The pooled synthetic control method applied here offers a novel solution to many of the empirical challenges that frustrate efforts to evaluate trade facilitation reforms. The method is used to estimate causal impacts on trade outcomes for 21 firms that adopted in-house clearance for import shipments. The program compressed the distribution of clearance times for adopting firms, but the estimated effects on median clearance times, inspection rates, and import value were not statistically significant. Tests for heterogeneous program impact do not indicate that the program affected adopting firms differently. Overall, the results suggest that the most evident benefit of the program for participating firms is reduced uncertainty about clearance times.
Despite the importance of trade facilitation as an area of trade and development policy, there have been very few impact evaluations of specific trade facilitation reforms. This paper offers an evaluation of in-house clearance, a reform that allows qualified firms in Serbia to clear customs from within their own warehouse rather than at the customs office. The pooled synthetic control method applied here offers a novel solution to many of the empirical challenges that frustrate efforts to evaluate trade facilitation reforms. The method is used to estimate causal impacts on trade outcomes for 21 firms that adopted in-house clearance for import shipments. The program compressed the distribution of clearance times for adopting firms, but the estimated effects on median clearance times, inspection rates, and import value were not statistically significant. Tests for heterogeneous program impact do not indicate that the program affected adopting firms differently. Overall, the results suggest that the most evident benefit of the program for participating firms is reduced uncertainty about clearance times.
In Progress
Protectionism and quality in service industries: A quantitative case study of U.S. maritime shipping (with Manuel Jimenez)
Protectionism and quality in service industries: A quantitative case study of U.S. maritime shipping (with Manuel Jimenez)
