Italo Colantone

New imported inputs, new domestic products

We study the effects of new imported inputs on the entry of new domestic products and their characteristics. To this purpose, we construct a novel, comprehensive and extremely detailed dataset, which contains product-level information on foreign trade and domestic production for 25 EU countries over 1995-2007. Using these data, we identify new domestic goods and new imported inputs, controlling for all changes in commodity classifications over time. We then show that new imported inputs substantially boost the introduction of new domestic products. We also show that this effect is directly proportional to the quality of new imported inputs and inversely related to their price (conditional on quality). Finally, we document that new products are characterized by higher prices and higher quality relative to existing goods, and that such premia are larger the greater is the use of new imported inputs in production.

Global Competition and Brexit

Using disaggregated referendum returns and individual-level data, we show that support for the Leave option in the referendum regarding European Union membership of the United Kingdom was systematically higher in regions hit harder by economic globalization. We focus on the shock of surging imports from China over the past three decades. An instrumental variables approach supports a causal interpretation. We claim that this effect is driven by the displacement determined by globalization in the absence of effective compensation of its losers. On the other hand, neither stocks nor inflows of immigrants in a region are associated with support for the Leave option. The analysis of individual data from the British Election Study shows that attitudes towards immigration are strongly correlated with vote choice. Yet, attitudes about immigration are more closely related to the import shock than to the actual incidence of immigration in a region.

The Hidden Cost of Globalization: Import Competition and Mental Distress

We study the effect of import competition on workers’ mental distress. To this purpose, we source information on the mental health of British workers from the British Household Panel Survey, and combine it with measures of import competition in more than 100 industries over 2001-2007. We find an increase in import competition to have a positive, statistically significant, and large impact on mental distress. The effect is strikingly robust to controlling for a wide range of individual, household, and industry characteristics. We show that part of the effect is due to import competition worsening the current labor market situation of individuals, in terms of higher probability of job displacement and lower wage growth. Additionally, and most importantly, we show that import competition worsens mental health also for individuals witnessing no change in observable labor market conditions, by increasing stress on the job and worsening expectations about the future.

The Trade Origins of Economic Nationalism: Import Competition and Voting Behavior in Western Europe

We investigate the impact of globalization on electoral outcomes in fifteen Western European countries, over 1988-2007. We employ both official election results at the district level and individual-level voting data, combined with party ideology scores from the Comparative Manifesto Project. We compute a region-specific measure of exposure to Chinese imports, based on the historical industry specialization of each region. To identify the causal impact of the import shock, we instrument imports to Europe using Chinese imports to the United States. At the district level, a stronger import shock leads to: (1) an increase in support for nationalist parties; (2) a general shift to the right in the electorate; and (3) an increase in support for radical right parties. These results are confirmed by the analysis of individual-level vote choices. In addition, we find evidence that voters respond to the shock in a sociotropic way.

Low-Cost Import Competition: Do Small Firms Respond Differently?

We investigate the impact of import competition from low-cost countries on the exit of domestic firms from the manufacturing industries of eight European countries. We find a significant positive impact on the exit of large firms, while small firms are not directly affected. The empirical evidence is consistent with small firms having a comparative advantage in terms of flexibility and niche-filling capabilities, on a narrower relevant geographic market.