Search Results
Discussion Paper
What Has Driven the Labor Force Participation Gap since February 2020?
The U.S. labor force participation rate (LFPR) currently stands at 62.5 percent, 0.8 percentage point below its level in February 2020. This “participation gap” translates into 2.1 million workers out of the labor force. In this post, we evaluate three potential drivers of the gap: First, population aging from the baby boomers reaching retirement age puts downward pressure on participation. Second, the share of individuals of retirement age that are actually retired has risen since the onset of the COVID-19 pandemic. Finally, long COVID and disability more generally may induce more people ...
Discussion Paper
Will New Steel Tariffs Protect U.S. Jobs?
President Trump announced a new tariff of 25 percent on steel imports and 10 percent on aluminum imports on March 8, 2018. One objective of these tariffs is to protect jobs in the U.S. steel industry. They were introduced under a rarely used 1962 Act, which allows the government to impose trade barriers for national security reasons. Although the tariffs were initially to apply to all trading partners, Canada and Mexico are currently exempt subject to NAFTA negotiations, and implementation of the tariffs for the European Union, Argentina, Australia, and Brazil has been paused. South Korea has ...
Report
Importers, exporters, and exchange rate disconnect
Large exporters are simultaneously large importers. In this paper, we show that this pattern is key to understanding low aggregate exchange rate pass-through as well as the variation in pass-through across exporters. First, we develop a theoretical framework that combines variable markups due to strategic complementarities and endogenous choice to import intermediate inputs. The model predicts that firms with high import shares and high market shares have low exchange rate pass-through. Second, we test and quantify the theoretical mechanisms using Belgian firm-product-level data with ...
Journal Article
Is the United States losing its productivity advantage?
Strikingly high rates of labor productivity growth in China, India, and other emerging economies have prompted concerns that U.S. workers and firms are losing ground to their competitors in world markets. A closer look at the evidence, however, suggests that rapid foreign productivity growth will bring gains as well as losses to the U.S. economy. Some import-competing firms may be compelled to restructure or leave the market, but consumers will benefit from lower import prices and more import varieties, and U.S. exporters may gain access to cheaper intermediate products from abroad.
Discussion Paper
Pass-Through of Wages and Import Prices Has Increased in the Post-COVID Period
Annual CPI inflation reached 9.1 percent in June 2022, the highest reading since November 1981. The broad-based nature of the recent inflation readings has increased concerns that inflation may run above the Federal Reserve’s target for a longer period than anticipated. In this post we use detailed industry-level data to examine two prominent cost-push-based explanations for high inflation: rising import prices and higher labor costs. We find that the pass-through of wages and input prices to the U.S. Producer Price Index has grown during the pandemic. Both the large changes in these costs ...
Discussion Paper
New China Tariffs Increase Costs to U.S. Households
Tariffs on $200 billion of U.S. imports from China subject to earlier 10 percent levies increased to 25 percent beginning May 10, 2019, after a breakdown in trade negotiations. In this post, we consider the cost of these higher tariffs to the typical U.S. household.
Journal Article
What's behind volatile import prices from China?
In a sharp departure from earlier trends, the price of U.S. imports from China rose 6 percent in the 2006-08 period. To explore the forces behind this surprising increase, the authors create a new import index that uses highly disaggregated data to track price developments in different product types. The index reveals that the largest price increases were concentrated in industrial supplies - goods that rely heavily on commodity inputs. The authors conclude that the surge in commodity prices through mid-2008 was the primary driver of the rising import prices from China.
Discussion Paper
Do Import Tariffs Help Reduce Trade Deficits?
Import tariffs are on the rise in the United States, with a long list of new tariffs imposed in the last few months—25 percent on steel imports, 10 percent on aluminum, and 25 percent on $50 billion of goods from China—and possibly more to come. One of the objectives of these new tariffs is to reduce the U.S. trade deficit, which stood at $568.4 billion in 2017 (2.9 percent of GDP). The fact that the United States imports far more than it exports is viewed by some as unfair, so the idea is to try to reduce the amount that the nation imports from the rest of the world. While more costly ...
Report
International shocks and domestic prices: how large are strategic complementarities?
How strong are strategic complementarities in price setting across firms? In this paper, we provide a direct empirical estimate of firms? price responses to changes in prices of their competitors. We develop a general framework and an empirical identification strategy to estimate the elasticities of a firm?s price response both to its own cost shocks and to the price changes of its competitors. Our approach takes advantage of a new micro-level data set for the Belgian manufacturing sector, which contains detailed information on firm domestic prices, marginal costs, and competitor prices. The ...
Discussion Paper
High Import Prices along the Global Supply Chain Feed Through to U.S. Domestic Prices
The prices of U.S. imported goods, excluding fuel, have increased by 6 percent since the onset of the COVID-19 pandemic in February 2020. Around half of this increase is due to the substantial rise in the prices of imported industrial supplies, up nearly 30 percent. In this post, we consider the implications of the increase in import prices on U.S. industry inflation rates. In particular, we highlight how rising prices of imported intermediate inputs, like industrial supplies, can have amplified effects through the U.S. economy by increasing the production cost of goods that rely heavily on ...