Rising Inequality as a Threat to the Liberal International Order , forthcoming at International Organization (2021)
(with Ronald Rogowski)
Abstract: The rise of top-heavy inequality--earnings concentration within a very thin layer of elites--calls into question our understanding of the distributional effects of the Liberal International Order. Far more people lose from globalization, and fewer gain, than traditional economic models suggest. We review three modern trade theories (neo-HOSS, NNTT, and Economic Geography) that each arrive at the conclusion of top-heavy inequality by introducing some form of unit heterogeneity--an assumption that the actors we once treated as identical actually differ from one another in important ways. Heterogeneity allows the gains from globalization to concentrate within: a narrow segment of workers with superlative talents, extraordinarily productive firms, or heavily agglomerated cities. An analysis of European voting data show that shocks from trade and migration elicit populist opposition only where the top 1 percent have gained most. With few politically feasible alternatives to protectionism, most notably the failure of democracies to redistribute income, our analysis predicts a persistence of public support for anti-globalization parties, especially those on the right.
Enduring the Great Recession: Economic Integration in the European Union , at The Review of International Organizations (2021)
(with Lauren Peritz, Ryan Weldzius, and Ronald Rogowski)
Abstract: Scholars have long feared that regional economic specialization, fostered by freer trade, would make the European Union vulnerable to economic downturn. The most acute concerns have been over the adoption of the common currency: by adopting the euro, countries renounce their ability to meet an asymmetric shock with independent revaluations of their currencies. We systematically test the predictions that regional specialization increases vulnerability to economic downturn using a novel dataset that covers all of the EU's subnational regions and major sectors of the economy between 2000 and 2013. We find that, contrary to conventional wisdom, the most specialized regions actually fared better during the 2008-09 global financial crisis. Specialized regions performed worse only in states that remained outside the Eurozone. The heightened vulnerability of non-Eurozone states cannot be attributed to fiscal or social policy failures. Rather, our results suggest the common currency may have helped Eurozone members share risk. This bodes well for the resiliency of the EU, even as it navigates another economic downturn from the asymmetric impact of the novel coronavirus.
Global capital markets, housing prices, and partisan fiscal policies , Economics & Politics (2018)
Abstract: In recent years, global imbalances have channeled the excess savings of surplus countries toward the real estate markets of deficit countries. By consequence, the deficit countries that attracted lots of foreign capital experienced large run‐ups in house prices, whereas most surplus countries that exported capital exhibited flat or slow house price growth. We first use new house price data and a novel instrumental variable design to show the causal relationship between housing prices and capital inflows, particularly through debt bonanzas. We then argue that international capital flows affect the fiscal policy preferences of both voters and political parties by way of their impact on housing prices. Where capital inflows are large and housing prices are rising, we expect voters to respond by demanding both lower taxes and less publicly‐provided social insurance because rising house prices allow homeowners to self‐insure against income loss. In contrast, declining house prices produce greater demands for social insurance, particularly among those most exposed to housing market risk. We present evidence from two cross‐national surveys that supports these claims, as well as a “before and after” analysis of the housing crash in Eastern Europe. We also show that the connection between house prices and social policy also manifests itself in government spending outcomes, mediated by partisan control.