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] [Slide (NBER SI ITM)]
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.
"College Education and Inequality Across Space" with Bipul Verma [Draft]
Abstract: Since 1980, wage inequality across US states has increased. We study the role of college education in driving the divergence. We begin with a novel fact: cross-state differences in the growth of the college-educated workforce since 1980 are accounted for primarily by residents' own college attainment, not by the migration of graduates across states. Motivated by this fact, we build a quantitative spatial model with endogenous college education and migration, and ask two questions. To what extent have federal and state higher education policies contributed to the growing cross-state wage inequality? And does a state's investment in higher education pay off within its own borders, when the graduates it educates are free to leave? First, we find that the policies curbed the rise in inequality: had tuition discounts and public appropriations remained at their 1980 levels, the standard deviation of log mean wages across states would have risen from 0.115 in 1980 to 0.155 by 2019, instead of to 0.138 in the baseline, a 75% larger increase. Second, we find that it does for most states: on average, a dollar per capita of state higher education spending generates 3.4 dollars of per capita wage growth. The return, however, differs with two state characteristics: the existing college share, which dampens the enrollment response where it is already high, and the propensity for brain drain. Both results crucially depend on the agglomeration externality: individuals do not internalize the effect of their education on local productivity.
“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