PUBLICATION

"Winners and Losers in U.S.–China Trade Disputes: A Dynamic Compositional Analysis of Foreign Direct Investment" with Yohan Park. 2024. Social Science Quarterly.

Abstract: The trade conflicts between the United States and China have significantly disrupted global trade and economic growth. In today’s globalized economy where the production of goods and services spans across multiple nations, these disputes have far-reaching consequences that extend beyond the involved parties and impact the broader global economy. We examine the effects of the U.S.-China trade disputes on multinational investment patterns in China and Southeast Asia. Methods:Using a dynamic compositional approach, we analyze data on firm-level greenfield foreign direct investment. We observe European firms increasing their investments in China to enhance market penetration, while American firms are withdrawing, redirecting their focus toward Southeast Asia to mitigate dependence on the Chinese market. This shift highlights broader international business strategy trends amid geopolitical and economic changes. The results indicate significant transformations in global supply chains, shedding light on the extensive effects of U.S.–China trade tensions on global economic equilibrium and how these tensions are reshaping international investment and supply chain dynamics.

"Paving Their Own Road? Local Chinese and World Bank Aid and Foreign Direct Investment in Africa" with Samuel Brazys. 2024. The Chinese Journal of International Politics. 17 (1). 28–47.

Abstract: China’s emergence as a major donor and economic partner to sub-Saharan Africa has prompted questions if the aims and impacts of China’s efforts in the region are driven by self-serving commercial motives. While there are strong reasons to think that the foreign aid may make a location more attractive to investment, generally, by improving the infrastructural, institutional, or human capital environment and/or by serving as a signal of a location’s risk, there is also reason to suspect that Chinese aid may be “paving the way” for investment by Chinese firms. To investigate, this paper uses spatial and temporal variations in localized, geo-referenced data to find a strong overall support that local aid boosts local foreign direct investment (FDI). However, we also find some evidence that Chinese aid boosts its own FDI compared to FDI from third-party countries; but this differential effect is also visible with the Chinese FDI’s response to the World Bank aid as well as in the relationship between both aid and FDI from the USA, suggesting that the Chinese FDI may simply be following any aid and that the relationship between its aid and FDI is not exceptional among bilateral donors.

"The political economy of vaccine distribution and China's Belt and Road Initiative" with Krishna Chaitanya Vadlamannati. 2023. Business and Politics. 25 (1). 67-88.

Abstract: To what extent do national strategic interests influence countries’ distribution of health assistance during a global health crisis? We examine China's global COVID-19 vaccine allocation, focusing on the relationship between its vaccine prioritization and its geopolitical expansion through the Belt and Road Initiative (BRI). We claim China uses its vaccine diplomacy as a comprehensive tool to promote its grand strategy and expand its global leadership and influence. Employing a newly available dataset on Chinese COVID-19 vaccine deliveries for a cross-section of 108 BRI member countries, our study shows that countries with foreign direct investment flows into BRI projects have received more vaccines from China. Our findings confirm that donor strategic concerns affect bilateral foreign assistance. Our results remain robust to several robustness checks, including endogeneity concerns.

"Heterogeneity in how investors respond to disputes: Greenfield FDI and co-Industrial disputes" with Erica Owen and GS Shim. 2021. The Journal of Politics. 83 (4).

Abstract: Do investment disputes reduce foreign direct investment (FDI)? Investors may perceive host governments involved in arbitration as riskier. Yet a dispute may also signal new economic opportunities for firms hoping to enter the same industry as the disputant firm. These competing pressures mean the impact of disputes on FDI is ex ante unclear. However, the balance of risk and opportunity varies across industry fixed asset intensity (FAI). FAI is associated with both the irreversibility of investment, which influences risk, as well as the structure of the market, which shapes competitive opportunities arising from a dispute. We expect the rewards from investment to exceed risk as industry FAI increases. Using new data on industry-level greenfield FDI between countries from 2003 to 2015, we find that a co-industrial dispute reduces investment in industries with low FAI but increases FDI in those with high FAI. These results highlight the importance of heterogeneous investors.

"A command to estimate and interpret models of dynamic compositional dependent variables: New features for dynsimpie" with Flavio Souza, Andrew Q. Philips, Amanda Rutherford, and Guy D. Whitten. 2020. The Stata Journal. 20 (3). 584-603.

Abstract: Philips, Rutherford, and Whitten (2016, Stata Journal 16: 662–677) introduced dynsimpie, a command to examine dynamic compositional dependent variables. In this article, we present an update to dynsimpie and three new adofiles: cfbplot, effectsplot, and dynsimpiecoef. These updates greatly enhance the range of models that can be estimated and the ways in which model results can now be presented. The command dynsimpie has been updated so that users can obtain both prediction plots and change-from-baseline plots using postestimation commands. With the new command dynsimpiecoef, various types of coefficient plots can also be obtained. We illustrate these improvements using monthly data on support for political parties in the United Kingdom.

"Distinguishing territorial structure from electoral adventurism: The distinct sources of static and dynamic nationalization" with Thomas Mustillo. 2016. Electoral Studies 44. 341-350.

Abstract: Estimates of static nationalization do not always reflect stark qualitative differences between parties. We use a research design oriented around a comparison of sharply different parties - the unstable Democratic Left in Ecuador and the stable Broad Front in Uruguay - to develop the distinctiveness of static and dynamic nationalization. Snapshot measures that only consider a single election suggest that both parties are poorly statically nationalized; but we show that the former case is highly statically nationalized, and that the observed territorial differences arise because it is poorly dynamically nationalized. We adopt the linear mixed modeling approach to reduce the bias in extant estimators. The approach is also informative about the sources of variance in a party's territorial support: relatively stable district attributes account for static nationalization, while features unique to the electoral cycle account for dynamic nationalization. Substantively, our study alters conclusions about parties operating in highly unstable electoral contexts.

UNDER REVIEW

"Legalization of International Institutions and Its Discontents: GATT vs. WTO Adjudication, 1989-2015"

Abstract: Many international organizations and multilateral negotiations are criticized as being driven by power politics, which disadvantages less powerful members. Does legalization of international institutions help mitigate power asymmetries and the unequal distribution of the benefits of international cooperation? I answer this question in the context of the transition from the GATT to the WTO dispute settlement mechanism (DSM). Drawing on both game theory and empirical analysis, this paper explores whether the WTO helps weak and poor countries when it comes to disputes with their more powerful counterparts. I argue that the legal features of the WTO DSM strengthen the bargaining power of weaker complainants. As a result, they have fared better under the WTO than they do under the GATT. In addition to that, I argue that the WTO helps smaller and poorer complainants disproportionally. The WTO provides poorer and smaller complainants with more gains in trade flows relative to richer and larger complainant countries. I test the argument using an original data set on post-dispute trade flows of the disputed products directly listed in each GATT and WTO dispute filed between 1989 and 2015. I show that small and poor complainants are more likely than large and rich complainants to increase heir exports of the disputed products to the defendant's market after the dispute ends in the WTO relative to the GATT. I also find that the richest complainants (top 2% of the sample) will decrease their post-dispute exports to the defendant in the WTO relative to the GATT.

"Following the Flag vs. Business as Usual: Sectoral Heterogeneity in How Multinationals Respond to Political Tensions" with Yohan Park

Do deteriorating political relations between states disrupt economic relations? The existing literature suggests that political tensions discourage foreign direct investment (FDI) due to increased political risks. Our study examines how the impact of political tensions on FDI varies across industries. We propose that the preemption risk posed by competitors creates a threshold where tensions no longer affect economic relations, allowing investors to continue with `business as usual.' When increased political risk arising from political tensions outweighs the threat of preemption in the market, multinationals are likely to reduce their investment. However, when the risk of losing market share to competitors is significant, firms are less likely to `follow the flag,' thereby mitigating the negative impact of political tensions. Using project-level greenfield FDI data from the \emph{fDi Markets} database, we find that political tensions between home and host countries reduce investment in less fixed-asset-intensive industries, but have little to no impact on high fixed-asset industries. Our results suggest that in a highly competitive globalized world, investments in strategically important industries like primary, energy, and resources are largely insulated from political frictions between states.

IN PROGRESS

"Multinational Firms and the Impact of Trade Disputes on Investment Decisions" with Erica Owen and Yohan Park

Abstract: The rise of global value chains (GVCs) is reshaping the political economy of trade in several ways, including the politics of trade disputes. Trade disputes affect access to markets and suppliers in ways that are likely to affect investment decisions. Indeed, recent work examines how multinationals influence the initiation and duration of disputes. Yet we do not know how multinationals respond to trade frictions in a world of GVCs. We offer a theory of international trade and investment that interrelates trade, FDI, global production, and GVC participation. We expect that the effect of trade disputes will depend on how and to what extent the industry integrates into global value chains. Disputes over intermediate goods, relative to final goods, may cause serious disruption to tightly integrated GVCs. For industries reliant on imports of intermediates, disputes and the consequent risk will make investors seek alternate suppliers other than the host government involved in a dispute. Thus, disputes over intermediate goods will decrease FDI in that host. At the same time, a dispute will increase FDI in other potential supplier countries. The magnitude of the effects will increase as the industry becomes more dependent on the imports of intermediate goods for production. We use data on dyad-industry level greenfield FDI from FDI markets between 2003 and 2016 to test our hypotheses. We examine WTO disputes for all countries and use the United Nations-sponsored Integrated Database of Trade Disputes for Latin America and the Caribbean (IDATD) to examine all trade disputes in Latin America.

"Voter Rationality, Information Environments, and COVID-19: Evidence from Survey Experiments in South Korea" with Jongwoo Jeong

An important literature on democratic responsiveness evaluates voter rationality by examining whether voters punish their politicians based on events that are outside the control of their leaders such as natural disasters and external shocks. Do voters evaluate their leaders based on such events because they are irrational? While existing studies have suggested mixed results, Ashworth et al. (2018) argue that voter responsiveness to such events does not necessarily determine voter (ir)rationality. Yet, voters learn new information about the incumbent through those events; and it bases rational voters’ evaluations. To test this claim, we take advantage of the recent global COVID-19 pandemic. We identify the citizens with exposure to different information environments about the government performance in response to this exogenous event. Using two survey experiments in South Korea, we show that individuals exposed to good news (positive evaluations on government reaction to the virus) were more likely to assess the incumbent favorably than individuals exposed to either neutral or bad news (n=600). To further understand which information matters, we also implement a conjoint experiment (n=600).

"Balancing Act: Dispute Settlement and Power Asymmetries in International Trade Agreements"

with Minju Kim

Regional trade agreements (RTAs) have become increasingly common in the international trading system since the end of the Second World War. Notwithstanding the recent surge in regionalism, dispute settlement mechanisms (DSMs) are much less utilized in RTAs than in the World Trade Organization (WTO). In this study, we examine how variations in the institutional design of dispute resolution mechanisms across RTAs and the WTO influence power distribution among member states and their forum choices, focusing on its distributional and institutional consequences. Our extension of Rosendorff’s (2005) model of the WTO to RTAs demonstrates that RTA-DSMs increase the power disparity by providing more flexibility to stronger countries at the expense of weaker countries. Therefore, DSMs generate a trade-off in gains between large and small countries in RTAs instead of the trade-off between “rigidity and stability” in the WTO. The significant losses sustained by weak countries in RTA-DSMs generate the loss in the stability of the regional trading system. In the context of international trade agreements involving Canada, Mexico, and the United States, we empirically examine the implications of our game-theoretic model. Using dispute data from the WTO, the North American Free Trade Agreement (NAFTA), and the United States–Mexico–Canada Agreement (USMCA), our statistical analysis shows patterns of disputes within international trade regimes. Our findings suggest that, within the WTO, less powerful members adeptly insulate power politics within the multilateral trading system compared to their counterparts in regional trade agreements.