Office Hours with… Amit Khandelwal

As a Ph.D. student in economics at Yale in the early 2000s, Amit Khandelwal learned how to apply analytical techniques to real-world problems concerning international trade and economic development.

After earning his degree, he joined the faculty of the Columbia Business School where he spent 15 years studying pressing economic challenges in India, Pakistan, China, and other developing countries. This summer, he returned to Yale with joint appointments in the Department of Economics in the Faculty of Arts and Sciences and the new Yale Jackson School of Global Affairs.

Khandelwal, the Dong-Soo Hahn Professor of Global Affairs and Economics, recently spoke to us for the latest edition of Office Hours, a Q&A series that introduces Yale newcomers to the broader university community.

How do you describe your research to non-economists?

I’m an international trade economist, so I study how the integration of economies affects the growth of those economies. More specifically, I look at how international trade affects developing countries. Whenever two countries trade with each other, you’re going to get some generic effects that would be common in both, but then you might get some differing effects depending on the characteristics of the two countries. Developing countries have a particular set of characteristics that make international trade affect them differently than it affects, say, the United States. A lot of my work involves homing in on those differences.

What’s an example of trade policy affecting developing countries differently than developed countries?

Years ago, I examined an episode in the global trade system that occurred in 2005 after quotas that governed clothing exports to the United States were lifted. Suddenly developing countries like Cambodia, Bangladesh, and China could export apparel to the U.S. free of quota restrictions. Apparel imports in the U.S. skyrocketed, particularly from China.

When the quotas were in place, countries had rules guiding who could export clothing. In Hong Kong, which is highly developed, an auction system allowed companies to bid for licenses to export to the United States. The rules in China were very murky. The set of firms exporting under the quota regime were largely state owned. Immediately after the quotas were removed, the entire export growth in China came from private firms. That shows that under the quota system, access to the export market was being doled out to connected firms as opposed to firms that were potentially the most efficient. Once the quotas were removed, all these private, more efficient firms gained access to the U.S. market. This indicates that in developing countries, political connections play a more important role in who gets to participate in trade than they do in the United States and other developed countries.

You’ve studied the effects of the recent U.S.-China trade war. What did you find?

Discussions of trade wars often focus on the Smoot-Hawley Tariff Act of 1930, which drastically raised tariffs on imported goods. The tariff increases during the U.S.-China trade war starting in 2018 actually targeted a larger share of the country’s GDP than the Smoot-Hawley tariffs. It’s a big event in the history of U.S. economic policy, particularly regarding international trade.

To analyze its effects, we pulled data in real time as the tariffs took effect in waves during 2018 and 2019. We used a standard set of tools and techniques to provide an estimate of the trade war’s cost to the United States. Our analysis focused on the incidence of the tariffs. When a tariff is levied, consumers — in this case, people in the U.S. purchasing goods imported from China — potentially bear the costs through higher prices. But it is possible that the producers — in this case, the exporters in China — lower their prices to share some of the tariff burden. Typically, empirical evidence has found that the burden is roughly split between importers and exporters. In this instance, we found that the costs of the recent trade war were borne entirely by the U.S. economy, meaning that U.S. consumers here really took it on the chin.

What excites you about returning to New Haven?

I’m excited about three things: First, I’m excited about my role at the Jackson School of Global Affairs. It’s very rare to have a chance to build out a new school at such an established institution, particularly when the school is very well funded and has such a great core of students and faculty. Just designing the curriculum, for instance, and thinking about what tools and information about the world students pursuing a master’s in public policy need is going to be fun. Second, the Department of Economics has phenomenal strengths in both international trade and economic development. I’ll be working with outstanding colleagues, both faculty and Ph.D. students. Third, I spent a decade at Columbia Business School teaching M.B.A. students, which I really enjoyed, but I’m looking forward to teaching master’s students, Ph.D. students, and undergraduates. That diversity of teaching is very appealing to me.

What do you like to do outside of work?

I’ve got two very active 7-year-old boys, who take up 99% of my time. I love becoming interested in what interests them. They’re currently adapting from city life and starting to really enjoy biking in the neighborhood, and taking advantage of New Haven’s great outdoor activities, like kayaking. It’s a big benefit of moving from New York City to New Haven.