Work in Progress
Political distortions are prevalent in many developing countries and can imply substantial productivity losses. Theory is ambiguous as to whether openness to trade amplifies or reduces the effects of such distortions. This paper shows that trade liberalization in India decreased the value of firms' political connections, suggesting a reduction in political distortions. First, using variation in firms' connections stemming from political turnover, we identify that political connections increase firms' performance by 10-20%. Second, we evaluate how the value of political connections changes after India's externally imposed tariff reductions, using a triple-difference and difference-in-discontinuities design. We find that political connections become substantially less valuable when tariffs on input goods are reduced. Our findings imply that access to international markets reduces firms' dependence on political connections to source input goods, thus reducing the distortionary effect of such connections. The effects are stronger in more corrupt states, where baseline political distortions are expected to be higher. Our results suggest a new margin for gains from trade in the presence of political distortions, through a direct effect of trade liberalization on the prevalence of such distortions.
“Importing Gender Equality”
“Trade-Induced Protests: Evidence from the Brazilian Trade Liberalization”
This paper examines whether trade liberalization can induce shifts in citizens' willingness to mobilize and participate in protests. Specifically, I study the regional effects of Brazil's trade liberalization in the 1990s. I show that regions that were exposed to larger tariff reductions experienced a relative increase in protests. Protests increased in harder-hit regions almost immediately after the liberalization, and the effect is amplified over time. By studying potential mechanisms, I show that the surge in protests follows the pattern of the trade-induced increase in income inequality and reductions in government spending.
“Aid for Whom? – An Empirical Evaluation of the Impact of Aid for Trade”
This study evaluates the impact of the increasing engagement in the categories of aid that constitutes the concept called Aid for Trade. Due to the possibility that aid flows are influenced by recipient countries' characteristics, previous literature has faced difficulties in identifying the causal effect of Aid for Trade. To tackle this, I exploit plausibly exogenous variation in the distribution of Aid for Trade stemming from changes in the political ideology of the governments in donor countries before and after the official establishment of Aid for Trade. I find that Aid for Trade fulfills the stated objectives of helping developing countries to expand trade. Moreover, I show that Aid for Trade is an effective use of aid in terms of the more general goals of aid assistance.