Title: Trade Policy Uncertainty and Household Consumption: Evidence from the U.S.–China Permanent Normal Trade Relations
Speaker: Kaihao Liu, School of Economics, Shandong University
Abstract: This paper examines the significant yet understudied topic of how trade policy uncertainty affects household consumption. Leveraging microdata from the China Urban Household Survey (UHS) and the quasi-natural experiment of the United States granting China Permanent Normal Trade Relations (PNTR) status in 2002, we construct regional trade policy uncertainty indices using the Bartik method and apply a difference-in-differences (DID) approach to identify the causal effects. Our findings reveal that: (1) Reductions in trade policy uncertainty significantly increase household consumption expenditure and per capita consumption while facilitating the upgrading of household consumption structures. These results are robust across various tests, including checks for anticipatory effects, instrumental variable methods, alternative constructions of the explanatory variable, adjustments to data years, exclusion of concurrent policies, placebo tests, and sample replacements. (2) Mechanism analysis identifies four key pathways through which trade policy uncertainty reductions affect household consumption, i.e., household labor force participation, per capita wage and business income, income inequality, and price levels. (3) Heterogeneity analysis shows that the effects of reduced trade policy uncertainty on household consumption vary across regions and households. (4) Further analysis indicates that declining trade policy uncertainty effectively reduces household consumption inequality and promotes prosperity.
Zoom Meeting: https://anu.zoom.us/j/85732864074?pwd=0XnX8tfpfA7X1FHNTjtO1WLEbCp7gv.1&jst=1
Meeting ID: 857 3286 4074, Password: 998314