Globalization and Profitability of US Firms: The
Role of Intangibles
Abstract
China's admission into the WTO in 2001 heralded a new era
of globalization, increasing both import competition in domestic markets and
foreign opportunities for US firms. In the aggregate, the average annual
profitability of US public firms during the post globalization period
(2003-2019) increased by 11.5% of the corresponding pre-globalization period
(1984-2002) profitability. This increase in overall aggregate profitability was
primarily driven by foreign profitability increasing by 47.4% for firms in the
S&P 500 index, which are larger and have more intangible assets created by
R&D and SG&A expenditures. In contrast, following globalization, the
average aggregate domestic profitability of US firms remained flat, and firms
employed more capital to generate sales. Firms with higher intangible assets
benefited more from globalization.
Whereas free trade was once the central cause of
progressive reformers seeking to combat entrenched interests on behalf of
ordinary people, now it is the bête noire of both right-wing nationalists and
the mainstream left. To understand why attitudes changed so radically, one must
follow the money.
RETHINKING MY ECONOMICS - Angus Deaton
I am much more skeptical of the benefits of free trade to
American workers and am even skeptical of the claim, which I and others have
made in the past, that globalization was responsible for the vast reduction in
global poverty over the past 30 years.
The Political Effects of Immigration: Culture or
Economics?
Abstract
We review the growing literature on the political economy
of immigration. First, we discuss the effects of immigration on a wide range of
political and social outcomes. The existing evidence suggests that immigrants
often, but not always, trigger backlash, increasing support for anti-immigrant
parties and lowering preferences for redistribution and diversity among
natives. Next, we unpack the channels behind the political effects of
immigration, distinguishing between economic and noneconomic forces. In examining
the mechanisms, we highlight important mediating factors, such as
misperceptions, the media, and the conditions under which intergroup contact
occurs. We also outline promising avenues for future research.