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]

Abstract: We examine US firms’ responses to future tariff increases and their macroeconomic implications. We build a novel firm-level import dataset spanning from 2012 to 2019, a period covering the 2018–2019 trade war on steel, aluminum, and Chinese imports. We find a significant front-running response to tariffs. First, firms’ imports, inventories, and number of product-country partners begin to increase four quarters before a tariff increase. Second, before a specific product-country is affected by a higher tariff, firms choose to import not only from that targeted product-country but also the same products from countries unaffected by the tariff (extensive margin), alongside increasing overall import volumes for the product (intensive margin). Then, we develop a dynamic trade model where forward-looking firms decide on inventories and the intensive and extensive margins of importing. The calibrated model replicates the empirical findings. We find that firms’ front-running of tariffs puts downward pressure on prices and expands output prior to the tariff and that these ex-ante responses lead to a smoother transition of prices and output to the new steady state. We show that the aggregate data patterns corroborate this model’s predictions. Last, we quantify the extent to which firms’ anticipatory response results in an overstatement of the trade elasticity in both the short and long run.

"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