Self-Harming Trade Policy? Protectionism and Production Networks
- American Economic Journal: Macroeconomics (Forthcoming)
Using monthly data on temporary trade barriers (TTBs), we estimate the dynamic employment e¤ects of protectionism through vertical production linkages. First, exploiting high-frequency data and TTB procedural details, we identify trade policy shocks exogenous to economic fundamentals. We then use input-output tables to construct measures of protectionism
affecting downstream producers. Finally, we estimate panel local projections using the identified trade-policy shocks. Protectionism has small and insignificant beneficial effects in protected
industries. The e¤ects in downstream industries are negative, sizable, and significant. The employment decline follows an increase in intermediate-input and final goods prices, and a decline
in stock market returns.
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