European Center for Advanced Research in Economics and Statistics

Title : Debt, Drought, and Mobility: How Bankruptcy Institutions ShapeAdjustment to Economic Shocks

Abstract : Understanding how economies adjust to negative shocks is a central questionin economics. This paper provides causal evidence on how indebtedness affectsoccupational and geographic mobility after a negative shock. We focus on U.S.agriculture between 1850 and 1920 and exploit the repeated introduction andrepeal of federal bankruptcy laws, granular variation in drought exposure, andrich county-level and individual-level data. We find that bankruptcy protectionfacilitates reallocation by reducing indebtedness: farmers affected by droughtsare more likely to exit agriculture and migrate to manufacturing jobs in urbancounties. In contrast, in the absence of bankruptcy protection, farmers remainin agriculture and sell portions of their land to other locals. These effectsare reinforced by homestead exemptions, which shield certain assets fromcreditors; bankruptcy law transforms such assets from illiquid to liquid ones.Our findings underscore the role of institutions in enabling individualmobility and structural change following adverse economic shocks.

Title : "PlasticTurkey: International Impacts of China's Waste Import Ban"

Abstract : In pollution haven theories, trade and environmental policies can have signifi-cant effects on the levels and incidence of pollution and economic activity across countries,leading potentially to a race to the bottom. This paper studies the international effects ofChina’s ban on plastic waste imports. In recent decades, high-income countries had beenreducing their plastic waste burden by exporting it to China. This changed in 2017 whenChina banned key plastic waste imports, raising concerns over creation of waste havens inother parts of the world. The paper shows that China’s policy led to a diversion of tradethat had repercussions for countries across the world. Turkey emerged as a major importerof plastic waste from high-income countries. We provide direct evidence that importers inTurkey gained economically from better access to plastic waste that could be recycled andre-used as inputs in production. But their gains did not outweigh the losses of domesticfirms that generated plastic waste and were displaced by import competition after China’sban. These domestic waste generators became more likely to mismanage their plastic waste,including through open burning. Air pollution increased more in Turkish regions wherethese waste generators were located. We model the channels of waste and recycling in agravity model of trade and the environment to explain the empirical findings and to quantifythe environmental externalities from China’s unilateral import ban