Working Papers
Optimal Monetary and Fiscal Policies in a Disaggregated Economy
(with Jiacheng Feng, Gernot Muller, Ernesto Pasten, Raphael Schoenle, and Michael Weber)
Abstract
The jointly optimal monetary and fiscal policy mix in a multi-sector New Keynesian model with sectoral government spending and productivity shocks entails a separation of roles: Sectoral government spending optimally adjusts to sectoral output gaps and inflation rates--a policy supported by evidence from
sectoral federal procurement data. Monetary policy optimally focuses on aggregate stabilization, but deviates from a zero-inflation target; in a model calibration to the U.S., however, it effectively approximates a zero-inflation target. Because monetary policy is a blunt instrument and government spending
trades off stabilization against the optimal-level public good provision, the first best is not achieved.
The Long-Term Impact of Steel Tariffs on U.S. Manufacturing
Revise and Resubmit, American Economic Review
Media Coverage: Financial Times, Tax Foundation, Econbrowser, Noahpinion, Cato
Abstract
In this paper, I study the long-term effects that temporary upstream tariffs have on downstream industries. Even temporary tariffs can have cascading effects through production networks when placed on upstream products, but to date, little is known about the long-term behavior of these spillovers. Using a novel method for mapping downstream industries to detailed steel inputs, I estimate the effect of the steel tariffs levied by President Bush in 2002-2003 on downstream industry outcomes. I find that upstream steel tariffs have highly persistent negative impacts on downstream industry exports, production, and employment. I use a simple dynamic trade model to show that relationship-specific sunk costs and uncertainty can generate persistence of the magnitude that I find in the data.
The Regressive Nature of the U.S. Tariff Code: Origins and Implications
(with Miguel Acosta)
Conditionally Accepted, Quarterly Journal of Economics
Media Coverage: Trade Talks Podcast
Selected Data
Abstract
The U.S. tariff code has a surprising and little-known feature: Tariffs are systematically higher on lower-end versions of goods relative to their higher-end counterparts. For example, a handbag made of reptile leather has a tariff rate of 5.3 percent, while a plastic-sided handbag has a tariff rate of 16 percent. In this paper, we show that the negative correlation between unit values and tariff rates within narrowly defined goods holds across the entire U.S. tariff schedule, but is driven by consumer goods. We construct new time series of variety-level tariff rates back to 1930 to show that the negative correlation emerged during U.S. trade negotiations in the 1930s and 40s and has persisted until today. We also draw on other historical data and records to shed light on the forces that generated this regressive pattern. Despite its historical origins, the pattern is still relevant for U.S. consumers today: Back-of-the-envelope calculations suggest that equalizing rates on low- and high-value varieties would result in savings that disproportionately benefit lower income consumers.
Published and Forthcoming Papers
Big G
(with Gernot Muller, Ernesto Pasten, Raphael Schoenle, and Michael Weber)
Journal of Political Economy, 132(10), October 2024
Selected Data
Abstract
"Big G" typically refers to aggregate government spending on a homogeneous good. In this paper, we open up this construct by analyzing the entire universe of procurement contracts of the U.S. federal government and establish five facts. First, government spending is granular; that is, it is concentrated in relatively few firms and sectors. Second, relative to private spending its composition is biased. Third, at the contract, firm and sectoral level moderate persistence characterizes spending. Fourth, idiosyncratic variation dominates fluctuations in spending. Last, government spending is concentrated in sectors with relatively sticky prices. Accounting for these facts within a stylized New Keynesian model offers new insights into the fiscal transmission mechanism and aligns the model predictions with the empirical evidence: Fiscal shocks hardly impact inflation, little crowding out of private expenditure occurs, markups can be either pro-cyclical or counter-cyclical, and the multiplier tends to be larger compared to a one-sector benchmark.
Works in Progress
The Macroeconomic Effects of the Buy American Act
(with Miguel Acosta)
Draft available upon request.
Abstract
We ask whether Buy American restrictions on government procurement lead to stronger macroeconomic effects of government spending. We propose a methodology based on a comprehensive understanding of Buy American regulations to identify government spending that is more and less constrained by domestic content restrictions. We validate our methodology in a novel firm-level dataset, and then apply it to federal spending at the state level. Augmenting the relative fiscal multiplier approach of Nakamura and Steinsson (2014), we show that government dollars that are not constrained by domestic content restrictions have a higher relative multiplier than constrained contract dollars. We provide suggestive evidence that constrained spending generates more crowding out of investment than unconstrained spending, as firms adjust production to satisfy the Buy American restrictions.
Policy Writing
Steel Tariffs and U.S. Jobs Revisited
(with Kadee Russ, cross-posted by PBS News Hour.)
Will Steel Tariffs put U.S. Jobs at Risk?
(with Kadee Russ, also covered by The New York Times.)
The Surprising Decline in U.S. Petroleum Consumption
(with Jason Furman, Joshua Linn, and Maurice Obstfeld.)