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Exploring the Hiring, Pay, and Trading Patterns of U.S. Firms: The Dominance of Multinationals Engaged in Related-Party Trade
December 2024
Working Paper Number:
CES-24-77
We link U.S. job records with both firm-level business register and customs records to construct a novel set of summary statistics and descriptive regressions that highlight the central role played by the small set of multinational firms (denoted RP XM firms) who engage in both importing and exporting with related parties in translating international trade shocks to shifts in labor demand. We find that RP XM firms 1) dominate trade volumes; 2) account for very disproportionate shares of national employment and payroll; 3) employ greater shares of workers in higher pay deciles; 4) disproportionately poach other firms' high paid workers; 5) offer higher raises to their existing workers. These hiring and pay patterns generally exist even among new RP XM firms, but strengthen with RP XM tenure, and continue to hold, albeit at smaller magnitudes, after conditioning on standard proxies for firm and worker productivity. Taken together, these findings reveal that RP XM status is a reliable proxy for the kind of firm that drives the initial labor market impacts of trade shocks, and that high paid workers are likely to be most directly exposed to such shocks.
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Aggregation Bias in the Measurement of U.S. Global Value Chains
September 2024
Working Paper Number:
CES-24-49
This paper measures global value chain (GVC) activity, defined as imported content of exports, of U.S. manufacturing plants between 2002 and 2012. We assesses the extent of aggregation bias that arises from relying on industry-level exports, imports, and output to establish three results. First, GVC activity based on industry-level data underestimate the actual degree of GVC engagement by ignoring potential correlations between import and export activities across plants within industries. Second, the bias grew over the sample period. Finally, unlike with industry-level measures, we find little slowdown in GVC integration by U.S. manufacturers.
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Supply Chain Adjustments to Tariff Shocks: Evidence from Firm Trade Linkages in the 2018-2019 U.S. Trade War
August 2024
Working Paper Number:
CES-24-43
We use the 2018-2019 U.S. trade war to examine how supply chains adjustments to a tariff cost shock affect imports and exports. Using confidential firm-trade linked data, we show that the decline in imports of tariffed goods was driven by discontinuations of U.S. buyer'foreign supplier relationships, reduced formation of new relationships, and exits by U.S. firms from import markets altogether. However, tariffed products where imports were concentrated in fewer suppliers had a smaller decline in import growth. We then construct measures of export exposure to import tariffs by linking tariffs paid by importing firms to their exported products. We find that the most exposed products had lower exports in 2018-2019, with most of the impact occurring in 2019.
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The Changing Firm and Country Boundaries of US Manufacturers in Global Value Chains
July 2023
Working Paper Number:
CES-23-38
This paper documents how US firms organize goods production across firm and country boundaries. Most US firms that perform physical transformation tasks in-house using foreign manufacturing plants in 2007 also own US manufacturing plants; moreover manufacturing comprises their main domestic activity. By contrast, 'factoryless goods producers' outsource all physical transformation tasks to arm's-length contractors, focusing their in-house efforts on design and marketing. This distinct firm type is missing from standard analyses of manufacturing, growing in importance, and increasingly reliant on foreign suppliers. Physical transformation 'within-the-firm' thus coincides with substantial physical transformation 'within-the-country,' whereas its performance 'outside-the-firm' often also implies 'outside-the-country.' Despite these differences, factoryless goods producers and firms with foreign and domestic manufacturing plants both employ relatively high shares of US knowledge workers. These patterns call for new models and data to capture the potential for foreign production to support domestic innovation, which US firms leverage around the world.
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Who's Most Exposed to International Shocks? Estimating Differences in Import Price Sensitivity across U.S. Demographic Groups
March 2023
Working Paper Number:
CES-23-13R
Differences in consumption patterns across demographic groups mean that international price shocks differentially affect such groups. We construct import price indexes for U.S. households that vary by age, race, marital status, education, and urban status. Black households and urban households experienced significantly higher import price inflation from 1996-2018 compared to other groups, such as white households and rural households. Sensitivity to international price shocks varies widely, implying movements in exchange rates and foreign prices, both during our sample and during the Covid-19 pandemic, drove sizable differences in import price inflation ' and total inflation ' across households.
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Global Sourcing and Multinational Activity: A Unified Approach
September 2022
Working Paper Number:
CES-22-36
Multinational firms (MNEs) accounted for 42 percent of US manufacturing employment, 87 percent of US imports, and 84 of US exports in 2007. Despite their disproportionate share of global trade, MNEs' input sourcing and final-good production decisions are often studied separately. Using newly merged data on firms' trade and FDI activity by country, we show that US MNEs are more likely to import not only from the countries in which they have affiliates, but also from other countries within their affiliates' region. We rationalize these patterns in a unified framework in which firms jointly determine the countries in which to produce final goods, and the countries from which to source inputs. The model generates a new source of scale economies that arises because a firm incurs a country specific fixed cost that allows all its assembly plants to source inputs from that country. This shared fixed cost across plants creates interdependencies between firms' assembly and sourcing locations, and leads to non-monotonic responses in third markets to bilateral trade cost changes.
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U.S. Market Concentration and Import Competition
August 2022
Working Paper Number:
CES-22-34
Many studies have documented that market concentration has risen among U.S. firms in recent decades. In this paper, we show that this rise in concentration was accompanied by tougher product market competition due to the entry of foreign competitors. Using confidential census data covering the universe of all firm sales in the U.S. manufacturing sector, we find that rising import competition increased concentration among U.S. firms by reallocating sales from smaller to larger U.S. firms and by causing firm exit. However, this increase in concentration was counteracted by the expansion of foreign firms, which reduced domestic firms' share of the U.S. market inclusive of foreign firms' sales. We find that once the sales of foreign exporters are taken into account, U.S. marketconcentration in manufacturing was stable between 1992 and 2012.
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Two-sided Search in International Markets
January 2022
Working Paper Number:
CES-22-02
We develop a dynamic model of international business-to-business transactions in which sellers and buyers search for each other, with the probability of a match depending on both individual and aggregate search effort. Fit to customs records on U.S. apparel imports, the model captures key cross-sectional and dynamic features of international buyer-seller relationships. We use the model to make several quantitative inferences. First, we calculate the search costs borne by heterogeneous importers and exporters. Second, we provide a structural interpretation for the life cycles of importers and exporters as they endogenously acquire and lose foreign business partners. Third, we pursue counterfactuals that approximate the phaseout of the Agreement on Textiles and Clothing (the 'China shock") and the IT revolution. Lower search costs can significantly improve consumer welfare, but at the expense of importer pro ts. On the other hand, an increase in the population of foreign exporters can congest matching to the extent of dampening or even reversing the gains consumers enjoy from access to extra varieties and more retailers.
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A Long View of Employment Growth and Firm Dynamics in the United States: Importers vs. Exporters vs. Non-Traders
December 2021
Working Paper Number:
CES-21-38
The first experimental product from the U.S. Census Bureau's Business Dynamics Statistics (BDS) program -- BDS-Goods Traders -- provides annual, public-use measures of business dynamics by four mutually exclusive goods-trading classifications: exporter only, importer only, exporter and importer, and non-trader. The BDS-Goods Traders offers a comprehensive view of employment growth at firms associated with goods trading activities in the United States from 1992-2019. We highlight three patterns. First, employment is skewed towards goods traders in several ways. Only 6% of all U.S. firms are goods traders but they account for half of total employment. Moreover, 80% of large firms and 70% of older firms are goods traders. Second, exporter-importer firms represent 70% of manufacturing employment and over half of employment in services-producing industries (management, retail, transportation, utilities, and wholesale). Third, goods-traders exhibit higher net job creation rates than non-traders controlling for firm size, age, and sector. Goods traders contribution to total job creation grows over time, rising to more than half after 2008.
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A Search and Learning Model of Export Dynamics
August 2021
Working Paper Number:
CES-21-17
Exporting abroad is much harder than selling at home, and overcoming hurdles to exporting takes time. Our goal is to identify specific barriers to exporting and to measure their importance. We develop a model of firm-level export dynamics that features costly customer search, network effects in finding buyers, and learning about product appeal. Fitting the model to customs records of U.S. imports of manufactures from Colombia we replicate patterns of exporter maturation. A potentially valuable intangible asset of a firm is its customer base and knowledge of a market. Our model delivers some striking estimates of what such assets are worth. Averaging across active exporters, the loss from total market amnesia (losing its current U.S. customer base along with its accumulated knowledge of product appeal) is US$ 3.4 million, about 34 percent of the value of exporting overall. About half is the loss of future sales to existing customers while the rest is the cost of relearning its appeal in the market and reestablishing visibility as an exporter. Given the importance of search, learning, and visibility, the 5-year response of total export sales to an exchange rate shock exceeds the 1-year response by about 40 percent.
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