Publication

Lee, Sang Min (2026): "Globalization and Structural Transformation: The Role of Tradable Services," Journal of International Economics. [Journal Link] [GitHub repo]

Working Papers

"Tariff Front-Running" with Maria-Jose Carreras-Valle [Draft] [SSRN]

Abstract: We examine US firms’ responses to future tariff increases and their macroeconomic implications. We build a novel firm-level import dataset and use it to study the 2018–2019 tariffs on steel, aluminum, and Chinese imports. We find that firms front-run tariffs by exploiting the roughly one-year lag between the initiation of the investigation into foreign trade practices and tariff implementation: Firms’ imports, inventories, and number of product-country partners begin to rise a year before the tariff increase. Moreover, firms increase imports not only from the targeted product-country but also from the same product in countries unaffected by the tariff, along both the intensive and extensive margins. We then develop a dynamic trade model in which forward-looking firms hold inventories and choose their set of trade partners. We find that tariff front-running puts downward pressure on aggregate prices and expands output prior to the tariff and that these anticipatory responses generate a smoother and longer transition to the new steady state. Last, we find that anticipatory responses lead to short- and long-run trade elasticities roughly twice as large as those in the unanticipated case.

"Higher Education Policies and Spatial Inequality Across US States" with Bipul Verma [Draft]

Abstract: To what extent have the federal and state higher education policies—which have affected the supply and demand of college education—contributed to the growing cross-state wage inequality since 1980? To address this question, we develop and estimate a quantitative spatial model with endogenous college education and migration. The model features skill-biased technical changes and agglomeration effects, which means that a state’s average wage rises as more residents attain college degrees or as college-educated workers migrate into the state. Counterfactual analyses reveal that tuition discounts and public appropriations by the federal and state governments have become more progressive. In the baseline, the standard deviation of log mean wages across states increased from 0.087 in 1980 to 0.117 in 2019. In contrast, had the higher education policies remained at their 1980 levels, the standard deviation would have risen by 73% more to 0.139 by 2019. Agglomeration effects played a significant role in this result: if they had been half as strong as estimated, the standard deviation would have increased by 17% more (instead of 73%) in the counterfactual than in the baseline.

“FDI and Aggregate Productivity Growth in Chinese Manufacturing Firms” [Draft available upon request]

Abstract: This paper develops a firm-dynamics model with heterogeneous productivities and foreign direct investment (FDI). In the model, a firm can improve its productivity through foreign technology adoption, innovation, and spillovers (imitation). Unlike domestic firms, FDI firms possess foreign technology adoption capabilities. Moreover, they participate in innovation at different rates from domestic firms. These features of the model generate different productivity distributions for domestic and FDI firms. The model is disciplined using the micro-evidence from Chinese firms and their patents from 1998 to 2007. By calibrating the productivity distributions to the dataset, this study shows that the annual growth rate of aggregate productivity would decrease from 8.42% to 7.50% without the presence of FDI firms. Counterfactual exercises demonstrate that the growth contribution mainly accrues through foreign technology adoption, which explains 0.72 p.p. of the total gain of 0.92 p.p.

Selected Work in Progress

"Tradability of Goods and Real Exchange Rate Fluctuations" with Caroline Betts and Timothy J. Kehoe