Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=Transcript of the talk, from the video's captions. Auto-generated: speaker names in particular are unreliable.
=

# The Political Economy of Firm Networks: CEO Ideology and Global Trade (interview)

Authors:   
Discussant: None  
Video: https://www.youtube.com/watch?v=hDwkeC_kXQg&t=0s


## Talk (00:00:00 – 00:09:53)

[00:00:04] I study how politics and ideology impacts firms and important uh uh corporate decisions. And so a key takeaway from my research is that uh ideology or partisanship affects much more than just who we vote for, but that  
[00:00:19] it shapes our e economic thinking, how we see the economy, for example, and important economic and financial decisions. And importantly, you know, I since I don't study households, but important decision makers such as CEOs,  
[00:00:31] it shows that kind of financial literacy doesn't protect you from ideological bias or partisan bias creeping into your decisions.  
[00:00:43] Yeah. So, partisan trading is the phenomenon that we study in this new paper um which shows that co ideology impacts um which countries uh firms trade with. And so in particular, it's alignment with foreign governments that  
[00:00:57] seems to be important for SEO's willingness to engage in foreign trade.  
[00:01:10] Yes. So in earlier work uh with my co-authors, we studied uh changes in the political composition of uh executive teams in the US and we saw this big trend towards uh more partisan segregation. So more Democrats working  
[00:01:25] only with Democrats, Republicans with Republicans. And so that kind of raises the question, you know, how does partisanship impact uh uh firm managers and the decisions that they take? And this is kind of the question that we  
[00:01:38] took on in in this project. >> Yeah. So what we see is that when cos  
[00:01:54] are more ideologically aligned with uh the government and power in a foreign country, they are more likely to uh maintain uh trade relationship with that uh country. So they're more likely to trade. Um and vice versa, you know, they  
[00:02:07] um compared to when they're misaligned, they are more likely to reduce trading activity. And so um to give you an example, um what the empirical setup that we exploit is close foreign elections. to kind of see how democratic  
[00:02:20] and republican cos change their trading behavior around an election that switches the government from right to left or left to right. So to give you an example in 2013 in Italy there was an  
[00:02:33] election that um led to a change in the government from center right to center left. So what that means for Republican le firms, this would be an increase in ideological distance, decrease in ideological distance for Democrats. And  
[00:02:47] then uh what we see is that Democratic uh le firms were more likely to continue trading uh with Italian firms after that election.  
[00:03:06] >> Yeah. So there are two ways I think to interpret that result. One is you could see shorter term relationships as being kind of a proxy for uh lower switching cost. So it's easier to kind of substitute that that short relationship  
[00:03:21] with a new relationship. Whereas if you have a really long established uh relationship with a foreign trade partner, you might be less willing to give that up um for ideological reasons.  
[00:03:32] Um, another way to think about that result is that if you have a longer trade relationship, you might have more information about that country that you can rely on when you're making these decisions so that your political gut reaction to the election outcomes might  
[00:03:46] be just less influential. So there's, you know, either switching cost or uh, you know, uh, information uh, quality of the information that you have could explain why we see stronger effects for shorter relationships.  
[00:04:08] Yeah. So we see uh economic costs um first of all for the foreign trade partners. So we see that when USCOs experience an increase in ideological distance our main result is that they reduce trading and we see this is very  
[00:04:22] costly for their foreign trade partners. There's a 9% decline in their export revenues. These are very export-heavy uh reliant firms and so um and so they're very much impacted not in their not export avenue uh revenue but the export  
[00:04:36] revenue very much so. US firms themselves are less affected on average.  
[00:04:41] But once we zoom in on the firms with high import or export exposure, we see that um they are uh when they are highly uh uh strong importers, we see their cost margins uh go up by about 1% when  
[00:04:55] ideological distance increases and we also find revenue effects for both you know firms with strong export and import exposure. So also for the US firms themselves once we zoom in on those with very high uh foreign trade exposure we  
[00:05:09] see economic effects suggesting that this tendency to reduce trade when ideological distance increases is actually not in their economic interests.  
[00:05:26] I think our results highlight an important friction to trade that hasn't received as much attention. Of course, we've, you know, heard a lot about uh government uh imposed restrictions and that has been studied a lot such as tariffs and sanctions and these are very  
[00:05:41] important for uh uh foreign trade activity. Um but our results suggest that there's another friction which is actually you know it doesn't have to be with to do anything that the government maybe does uh to restrict trade but it's kind of voluntary trade restrictions  
[00:05:55] that are coming from the private firms themselves and it's the channel is you know through the ide ideology of their leaders I think it shows that you know ideology  
[00:06:18] can pose a barrier uh to trade and importantly what we can uh what we see is that when uh firms experience an increase in ideological distance they actually contract their uh foreign trade network. So they trade with fewer  
[00:06:32] foreign partners, their networks become more concentrated and so this raises questions about um you know uh vulnerability of those networks if they become more concentrated and it's essentially contributing to a narrowing  
[00:06:46] of supply chains via the channel of uh ideology.  
[00:06:56] Yeah, we have evidence that um the cos that experienced an increase in ideological distance perceive these uh countries as riskier and uh we have evidence from that on conference calls where um we can see how often do they  
[00:07:10] measure risk uh uh do they mention risk in in cont in the context of talking uh talking about these countries that they trade with and uh and definitely they're more likely to mention risk uh when uh when ideological distance goes up. So  
[00:07:24] what we think is going on is that they're not, you know, maybe consciously making, you know, a politically motivated decision, but that their ideology clouds their their economic thinking and that if they see a government that's more ali that's uh  
[00:07:38] implementing policies that's more aligned with their own worldview, uh they just, you know, think that that country is in safer hands and there's less likely uh they're like less likely to be disruptions or or very negative  
[00:07:50] states of the world in that country. I so I don't think it's symbolic for the reasons that I said that what I think is going on is that um they're thinking  
[00:08:05] they're making economically the economic decisions or financially driven decisions but that um ideology kind of clouds our view of the economy and and and shapes it and so this is why I don't  
[00:08:17] think there's um they're strategic in the sense that you know they're hoping hoping to make a, you know, kind of affect political outcomes um or or make a political statement, but that they're thinking they're making effectively an  
[00:08:30] economic decision. Yeah. So, I I don't think we're at the point at where we can make very concrete  
[00:08:43] policy uh um uh suggestions, but I do think there are at least two concerns that are raised by our results. One is as I mentioned this this fact that we see um narrowing of uh of uh trade  
[00:08:57] networks uh when ideological uh distance goes up and so that certainly you know raises questions about does this make um you know disruptions more likely kind of expose them to more risks uh individual country risk if they're trading with  
[00:09:12] with few partners. Um so that's one concern. The other concern that we would like to explore more is that it's kind of gives for us uh quite a bit of influence over you know uh uh foreign trade partners and potentially also the  
[00:09:26] local economies in those countries given that we see very large economic effects on their trade partners if they if the large US firms stop trading with you.  
[00:09:36] you know the that has um uh negative outcomes for the firms. And so understanding more how does this affect actually the the local economy in these countries and potentially even you know uh influence future uh political outcomes is something that we would love  
[00:09:50] to understand better.