My current research is defined by three overarching themes. First, how do domestic and international factors shape the strategies of multinational corporations (MNCs)? More specifically, I use unique firm and project level micro data to study how domestic and international political factors shape the decisions as well as experiences of MNCs abroad. I am also interested in how the effect of these variables may vary according to firm characteristics. This line of research is most salient in my job market paper, which uses original project level investment data to study how interstate relations interact with domestic political institutions in an MNC’s home country to shape (1) probability of MNC investment, (2) probability of host country expropriation of MNC assets, and (3) whether MNCs decide to use formal arbitration when faced with expropriation.
Second, what determines the choice of national financial safety measures such as capital controls and reserve accumulation? I have two co-authored papers with Phillip Lipscy (Stanford) examining the effect of the IMF on reserve accumulation. I have also been contributing to an IMF-sponsored project that seeks to code capital controls in 80 countries across time. We plan to use this original data to understand the determinants and consequences of financial liberalization.
Third, how do firms help shape an individual’s preferences on trade policies? My paper with Yu-Ming Liou (a graduate student at Georgetown) examines how firm characteristics interact with an individual’s position in a firm to shape trade preferences.
I hold a regional specialization in East Asia and use both language skills and regional expertise in Japan and Korea to derive generalizable theoretical implications that can be applied in other developed economy contexts. Detailed descriptions of my current projects can be found below:
(Job Paper) Why Arbitrate?:
The Role of Home State Economic Institution in Investor-State Arbitration
Why do investors from certain countries exhibit a higher tendency to file investor-state arbitrations compared to investors from other countries? Existing studies have not addressed this question due to the inability to identify a full universe of potential arbitration cases. In this paper, I create an original data set that allows for the study of investment, expropriation, and arbitration initiation stages to account for the selection process into investor-state arbitration. I show that a firm’s country of origin (home country) plays an important role in that firm’s usage of ISDS, as the home country’s state-to-state relations and state-business ties both influence the probability of expropriation and potential subsequent arbitration. Investors from countries with strong state-firm ties are less likely to experience expropriation when they invest in host states that share strong common interests with their home state. This is likely a result of the host government’s reluctance to make decisions (e.g. expropriation) that would damage its relationship with the home government given potential benefits from future cooperation. Moreover, once expropriation takes place, investors from countries with strong state-business ties are less likely to use ISDS to resolve disputes if home and host states hold strong common interests. The findings of this research imply that MNCs are not stateless entities unrestrained by home characteristics. Moreover, this study suggests that ISDS may not “depoliticize” investment disputes as believed by many.
"The IMF as a Biased Global Insurance Mechanism"
(With Phillip Lipscy) Forthcoming at International Organization
Scholars have debated whether the International Monetary Fund (IMF) generates moral hazard – encouraging irresponsible behavior by reducing the costs of risky lending and policies. However, this has been difficult to test empirically. We argue that the IMF creates a biased global insurance mechanism – distributing moral hazard unevenly across the international system. Using a panel data set covering 1980-2010, we show that IMF members expected to exercise strong influence over the institution’s decisions tend to be associated with outcomes indicative of moral hazard: more generous treatment by the IMF, lower reserves, and more frequent currency crises. Countries that lack such influence behave very differently, pursing aggressive self-insurance through reserve accumulation. We support our causal claims by using the synthetic control method to examine Taiwan’s expulsion from the IMF in 1980: consistent with our theory, expulsion led to a sharp increase in international reserves.
Where You Work Is Where You Stand: A Firm-Based Theory of Trade Opinion
(With Yu-Ming Liou) Revise & Resubmit at International Organization
What determines public support for trade liberalization? IPE scholars have generally focused on the effects of openness on employment. However, standard distributional theories of trade preferences do not reflect recent developments in trade economics suggesting that the primary distributional impact of openness is felt at the firm, rather than at the skill, sector, or occupation level. To address this theoretical disconnect and drawing on insights from transaction cost economics and the theory of heterogeneous firms, Co-author Yu-Ming Liou and I present a firm-based theory of individual trade preferences. We argue that differences in firm productivity produce variations in firm preferences of economic policy, in turn influencing employee preferences. Using the only available large-scale survey data that combines trade opinion with measures of employer productivity (2008 Japanese General Social Survey), we show that employees of more-globalized firms are significantly more supportive of trade than employees of domestically-oriented firms, regardless of the comparative advantage of their sector of employment. Moreover, we find that this effect is conditioned by employees' relative position within their firms. Those who are more likely to benefit directly from firm success - e.g. permanent employees, headquarters employees, or managers - hold the most pro-trade preferences.
A Liberal Reward?: How Do State Foreign Policy Preferences Condition Investors’ Perception of BITs Compliance?
Why have some states withdrawn from bilateral investment treaties (BITs) after being challenged with an investor-state claim while other states in a similar situation have continued to participate? In this paper, I argue that this discrepancy is attributable to the disproportionate accrual of benefits of BITs depending on the host country’s systematic foreign policy alignment. When investors believe that a country generally abides by the rules and norms of the liberal international system, they view BITs as credible commitments that states will refrain from expropriation. However, investors are more suspicious when countries who do not typically accept the rules and norms of the liberal international system ratify BITs given that these countries may do so merely as a window dressing, as seen in other issue areas such as human rights. I find strong quantitative evidence for this hypothesis. My results show that BITs increase investment flows only in countries who typically accept liberal proposals in the UN General Assembly. Moreover, pending or settled investor claims lead to reductions in investments only in those countries that typically vote in an illiberal manner. These illiberal countries experience only the negative side of the investment system: dispute claims provide negative information about an investment climate that leads to the perception that the signing of the BIT is an empty signal.
Complements or Substitutes?:
Evaluating the Relationship between Domestic Capital Controls and BITs
(With Dennis Quinn)
Past research shows that laws and treaties liberalizing FDI – i.e. loosening of domestic capital controls and ratification of investment treaties – are only weakly correlated with increases in actual FDI inflows. We argue that this is because domestic capital controls and investment treaties interact in a complex manner to shape firms' FDI decisions. We find that BITs effectively function as a substitute for capital outflows openness in countries with a policy of open capital inflows, thereby leading to greater FDI in such countries. BITs raise the appeal of investing in host countries with heavy restrictions on capital outflows since BITs enhance foreign investors’ ability to exit their investments by generally providing repatriation and other guarantees for investor capital return or resale. Some have argued that investors find BITs to be more credible – and thus invest more in a country – when that country already has a policy of open capital outflows. We find no evidence for this argument, as our data show that FDI does not increase upon BIT signing for countries with open capital outflow policies.
The Political Economy of International Reserve Accumulation: Self-Insurance or Mercantilism? (With Phillip Lipscy)
Why do countries accumulate international reserves? The massive accumulation of reserves by many Asian countries in recent years has been associated with global imbalances such as the US current account deficit and perverse capital flows from developing to developed countries. However, the reasons for this reserve accumulation remain contentious. In this paper, we evaluate two leading hypotheses about Asian reserve accumulation. First, reserve accumulation may be a consequence of Asian countries pursuing export-led development policies that deliberately undervalue their currencies. Second, countries underrepresented in the IMF may pursue precautionary reserve accumulation as a means of self-insurance. Using the synthetic control method, we examine whether reserve accumulation accelerated for countries when: 1. they transitioned to export oriented industrialization, and 2. when they experienced political or economic events that affected their relationship with the IMF. The results call into question the mercantilist account and suggest reserve accumulation is primarily motivated by precautionary concerns.
Do BITs Attract Foreign Investment?: Measuring FDI as Firm Investment Decisions
While many studies have evaluated the effect of BITs on FDI, they have relied on measures aggregated to the country-year level, This has made it impossible to study FDI at the firm level, but perhaps more importantly, has produced inferential challenges even for testing of structural theories with implications at the country level. In this paper, we employ a novel dataset of Korean firms' foreign investments (measured at the level of affiliate-parent-country-year) to investigate a persistent question in the IPE literature on FDI: do BITs increase bilateral investment levels? In so doing, we are able to overcome many of the inferential challenges due to omitted variable bias that have dogged the literature on FDI as well as to identify heterogeneous treatment effects on firm investment choices according to, for example, productivity. We present some preliminary evidence that consistent with the expectations of the theory of heterogeneous firms, the positive effect of BITs on investment is primarily felt among more-productive firms..