“How do Trade Frictions Differentially Impact Trade Outcomes? Lessons from the US Transportation Revolution”
This paper explores the degree to which different trade frictions have distinct impacts on cross-city price behaviors. I demonstrate the usefulness of decomposing prices into trend, cycle, and seasonal frequencies by uncovering unique convergent behaviors at each frequency during the US transportation revolution. I then construct an arbitrage model to determine how these behaviors were driven by freight costs, information lags, and storage costs. I find that freight costs accounted for 94% of the decline in price trend differentials, storage costs accounted for 78% of the decline in the seasonal magnitude of prices, and information lags were important for determining cyclical price correlations. These results lead to three conclusions. First, there is an interesting mapping between trade frictions and frequencies of cross-city price behavior. Second, information lags and storage costs – two frictions that are often overlooked because they cannot be subsumed into iceberg transportation costs – are important determinants of cross-city price behavior. Third, the US experienced a massive convergence in commodity prices during the transportation revolution.
“How Do Information Frictions Impact Trade? Evidence from the Telegraph”
This paper explores how information frictions distort price and export behaviors. I use the spread of the telegraph across the United States as an historical experiment that exogenously decreased news lags across markets. I use the resulting variation in daily news lags to test Steinwender’s (2018) model of arbitrage in the presence of information frictions. My results for the cotton trade between New Orleans and New York are broadly consistent with her model – I find the telegraph decreased price differentials by 21.2%, decreased the variance of these differentials by 62.4%, increased export volatility by 42.3%, and increased exports by 5.6%. These results suggest the importance of traditionally unobserved trade frictions, such as information lags, in determining economic outcomes.
“Impacts of the Smoot-Hawley Tariff: Evidence from Microdata”
Work in Progress
This paper uses a broad panel of imports to determine the degree to which Smoot-Hawley distorted tariff burdens and import volumes. The balanced panel is the largest of its kind, consisting of 926 goods between 1926 and 1933. This panel allows me to leverage microeconometric techniques and to analyze a wider array of industries than previous literature. I find Smoot-Hawley can only explain about 30% of the increase in tariffs on dutiable imports and 5% of the decline in aggregate import volumes, while the remainder can be explained by nominal distortions and changes in national income. These results are broadly consistent with the previous literature by Crucini (1994) and Irwin (1998b).
“The Grand Experiment: introducing a common currency to the United States”
Work in Progress
This paper examines how the introduction of the US dollar as a common currency impacted trade frictions and monetary stability within the post-Revolutionary United States. A newly digitized dataset of historical micro-prices is used to measure the impacts of decreased transaction costs and the increased centralization of monetary control associated with the issuance of a common currency.