Lang (Kate) Yang

Feler and Senses assess the impact of trade shocks on local government finances in the United States. They find that increased import competition from China reduces housing prices and business activity in affected regions, which subsequently diminishes property and sales tax collections and the provision of local public goods. We replicate the authors’ published results and find that they are generally robust to alternative sample construction procedures and the removal of analytical weights. We also extend the authors’ methodology to evaluate the impact of trade shocks on local capital outlays, borrowing, and cash reserves. We find that the reduction in local expenditures resulting from Chinese trade exposure is driven in large part by decreased spending on fixed assets and that local governments facing greater import competition experience larger declines in cash and financial investments.