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Working Paper
The Effects of Terror on International Air Passenger Transport: An Empirical Investigation
This paper presents a theoretical model (adapted from the structural gravity model by Anderson and van Wincoop, 2003) to capture the effects of terrorism on air passenger traffic between nations affected by terrorism. We then use equations derived from this model, in conjunction with alternative functional forms for trade costs, to estimate the effects of terrorism on bilateral air passenger flows from 57 source countries to 25 destination countries for the period of 2000 to 2014. We find that an additional terrorist incident results in approximately a 1.2% decrease in the bilateral air ...
Working Paper
Offshoring Barriers, Regulatory Burden and National Welfare
We present a model which considers both regulatory burden of offshoring barriers and possible terms of trade gains from such barriers. Non-tariff barriers are shown to be unambiguously welfare-reducing, and tariff barriers raise welfare only when associated terms-of-trade gains exceed resulting regulatory burdens, in which case there is a positive optimal offshoring tax. Otherwise, free trade is optimal. Welfare reductions from an offshoring tax are more likely with several developed nations engaging in offshoring. We derive and characterize the Nash equilibrium in such a case.
Working Paper
Offshoring in Developing Countries: Labor Market Outcomes, Welfare, and Policy
Does a reduction in offshoring cost benefit workers in the world's factories in developing countries? Using a parsimonious two-country model of offshoring we find very nuanced results. These include cases where wages monotonically improve, worsen, as well as where wages exhibit an inverted U-shaped relationship with the offshoring cost. We identify qualitative conditions under which these relationships hold. Since global welfare always rises with an improvement in offshoring technology, we find that there is a role for a wage tax or a minimum wage in the developing country. We derive the ...
Working Paper
On Trade Policy Preference and Offshoring Ties
This paper unpacks the role of the domestic content of imports as a novel source of policy interdependence along the global supply chain. We show how a rise in local contents embodied in imports can skew national trade policy preferences, and pull upstream and downstream countries in asymmetric ways with respect to (i) the nature of unilaterally optimal trade policy prescriptions, and (ii) the attractiveness of leveraging market access-based dispute settlement procedures. We discuss the pros and cons of deep trade integration as a remedy, involving well-enforced labor standards both upstream ...
Journal Article
Offshoring to a Developing Nation with a Dual Labor Market
We present a model of offshoring of tasks to a developing nation characterized by a minimum-wage formal sector and a flexible-wage informal sector. Some offshored tasks are outsourced by the formal sector to the lower-wage informal sector.
Working Paper
On Terms of Trade, Offshoring Ties, and the Enforcement of Trade Agreements
This paper unpacks the role of offshoring in the enforcement of trade agreements. In a two-country model of task offshoring, we show that by depressing demand and thus demand for embodied labor, own-tariff effects on factor content weighted terms of trade are: (i) negative in upstream countries, backfiring on upstream workers, and (ii) positive in downstream countries which render imported labor tasks even cheaper. This progression in own-tariff effects on terms of trade along the supply chain presents a novel challenge to the effectiveness of dispute settlement rules designed to nullify ...