This paper introduces a novel measure to quantify firms’ sensitivity to shifts in bilateral trade flows between the United States and its trading partners. We exploit the 2016 U.S. presidential election as an exogenous shock to trade policy expectations and assess the stock market reactions of firms across 52 countries. Our findings indicate that firms with higher trade policy sensitivity experienced significantly more negative stock returns surrounding the election. These results are robust to variations in event windows, return model specifications, and alternative estimations of trade policy sensitivity.

The Roy-Borjas model predicts that international migrants are less educated than nonmigrants because the returns to education are generally higher in developing (migrant-sending) than in developed (migrant-receiving) countries. However, empirical evidence often shows the opposite. Using the case of Mexico-U.S. migration, we show that this inconsistency between predictions and empirical evidence can be resolved when the human capital of migrants is assessed using a two-dimensional measure of occupational skills rather than by educational attainment. Thus, focusing on a single skill dimension when investigating migrant selection can lead to misleading conclusions about the underlying economic incentives and behavioral models of migration.

We study the implications of forging stronger political ties with the US on the sensitivities of stock returns around the world to a global common factor – the global financial cycle. Using voting patterns at the United Nations as a measure of political ties with the US along with various measures of the global financial cycle, we document evidence indicating that stronger political ties with the US amplify the sensitivities of stock returns in developing countries to the global financial cycle. We explore several channels and find that a deepening of financial linkages along with a reduction in information asymmetries and an amplification of sentiment are potentially important factors behind this result.

The Roy-Borjas model predicts that international migrants are less educated than nonmigrants because the returns to education are generally higher in developing (migrant-sending) than in developed (migrant-receiving) countries. However, empirical evidence often shows the opposite. Using the case of Mexico-U.S. migration, we show that this inconsistency between predictions and empirical evidence can be resolved when the human capital of migrants is assessed using a two-dimensional measure of occupational skills rather than by educational attainment. Thus, focusing on a single skill dimension when investigating migrant selection can lead to misleading conclusions about the underlying economic incentives and behavioral models of migration.