Lydia Cox
CVResearchPolicy Writing

Working Papers

The Long-Term Impact of Steel Tariffs on U.S. Manufacturing   (February 2023)
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.

Big G   (September 2022)
with Gernot Muller, Ernesto Pasten, Raphael Schoenle, and Michael Weber
Revise and Resubmit at the Journal of Political Economy
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.

The Regressive Nature of the U.S. Tariff Code: Origins and Implications   (September 2022)
with Miguel Acosta
Media Coverage: Trade Talks Podcast
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 document the presence, historical origins, and consequences of this regressive pattern. Regressive tariffs are present throughout the tariff code, but are especially pervasive in consumer goods categories, where tariffs are 4 percentage points higher, on average, for low-value varieties. Using a newly constructed dataset on legislated tariffs that covers all major trade agreements back to the 1930 Smoot-Hawley Tariff Act, we show that this variation in rates across varieties largely originated in trade agreements made in the 1930s and 40s and has persisted over time. Welfare estimates suggest that the regressive nature of tariff rates on consumer goods has important distributional consequences.

Work in Progress

Buy American Restrictions on Government Purchases: Implications for U.S. Manufacturing
with Miguel Acosta
Abstract The U.S. federal government has had regulations in place for almost a century to restrict the use of foreign content in its purchases. We study how these domestic content restrictions---in particular, the Buy American Act of 1933 (BAA)---affect industry outcomes, and whether they achieve their policy objectives of bolstering domestic production and providing insulation from foreign shocks. To do this, we analyze firm-level data on import shipments and government contracts, and exploit arbitrary thresholds that determine the stringency of BAA restrictions. At the firm level, we find no evidence that domestic content restrictions spill over into a firm's overall production processes; instead, firms create separate, domestic, supply lines solely for their convernment sales. Second, we find that this inefficiency magnifies industry responses to global shocks, in stark contrast to the policy objective of insulation. In all cases, the effect of BAA restrictions is modulated by the government's share of an industry's production.