Crescenzi, Mark J.C. & Bailee Donahue, 2017. ``Rediscovering Reputation Through Theory and Evidence" in Oxford Research Encyclopedia of Politics, ed. William Thompson. New York: Oxford University Press.
Crescenzi, Mark J.C. & Bailee Donahue, 2017. ``Reputation in International Relations" in Oxford Bibliographies in International Relations, ed. Patrick James. New York: Oxford University Press. (Annotated Bibliography)
Adaptation in Border Markets Under Pressure
Advisors: Mark J.C. Crescenzi (Chair), Cameron Ballard-Rosa, Stephen Gent, Navin Bapat, Layna Mosley
My dissertation explores the nexus of borders, conflict and trade. In an increasingly globalized world, borders are among the most consequential international institutions. Yet, very little is known about the repercussions of dysfunctional border institutions on the quality of trade. In this dissertation I examine the impact of one type of border dysfunction -- territorial disputes -- on the risk of cross-border commerce. This risk in turn impacts commodity markets and the political economy of borders. In the first chapter of my dissertation, I ask and answer in what ways do border institutions augment transaction costs to impact the margins of trade. I argue that declines in trade associated with disputed borders is linked to fluctuations in the product-level extensive margin of trade and the subsequent increase of trade once borders are settled are linked to fluctuations in the intensive margin of trade. To test this argument I develop commodity-level measurements of the trade portfolios of disputing and settled dyads to measure the extensive margin of trade and total values of trade weighted by the number of commodities traded for the intensive margin.
The second chapter investigates which commodities are disproportionately impacted by dysfunctional border regimes. Dysfunctional border institutions disrupt cross-border social ties used to engage in trade. Overall, I argue that trade in all commodities will decline as a result of border disputes, but highly differentiated products will suffer the greatest decline because these goods use cross-border information networks more intensively than other types of commodities. To examine the above argument, I use product-level trade data that spans the period of 1962 to 2016 and territorial claims data from 1962 to 2001.
The final chapter asks why are some trade ties easier to re-establish than others in the aftermath of a dispute? We know from prior research that economic networks coordinate around borders, and that border changes can disrupt these networks, but some networks are more fragile than others. Highly differentiated commodities pose greater risk and costlier investment to traders seeking to re-establish cross-border networks following a settlement as they rely on higher levels of interpersonal contact between exporters and importers. When commodities depend upon economic networks that are easily disrupted, economic agents will perceive increased risk. This risk makes firms less likely to trade in highly differentiated commodities in the immediate aftermath of a border settlement. On the other hand, commodities less reliant on cross-border networks are less likely to be disrupted if borders are destabilized post-settlement. In turn, one important determinant of risk involves the heterogeneity of the commodity and the economic network associated with its cross-border exchange. I find that the full settlement of a border dispute is associated with a positive increase in the trade of goods reliant on interpersonal networks.
Papers Under Review
Donahue, Bailee & Mark J.C. Crescenzi, "Weathering the Storm: Discordant Learning About Reputations for Reliability"
In this paper, we investigate how reputations change, and whether states can cultivate reputational reserves that insulate them from unwanted reputation dynamics. Specifically, we examine how reputations for reliability are lost when states violate alliance terms. Can a well-established reputation insulate states from being labeled as unreliable when they violate an alliance contract? This paper develops a theory of discordant learning that predicts that a good reputation for reliability will act as a buffer that allows the violating state to weather the storm of minor crises without paying a reputational cost, whereas states with fragile reputations for reliability are more likely to be punished if they exhibit incongruent behavior. High levels of incongruence, however, such as a major alliance violation during a high-profile war, can trigger an over-correction in a state's reputation. Thus, a state with a stable and good reputation for reliability may absorb a greater reputational cost relative to a state with a fragile or moderate reputation if it exhibits highly incongruent behavior (i.e., the bigger they are the harder they fall). We employ a scenario-based survey experiment to test these expectations. Our analysis will help us understand when to expect a loss in state-reputation, and has implications for when reputation loss can influence alliance formation and conflict behavior.
Donahue, Bailee, Rob Williams & Mark J.C. Crescenzi, "Unsettled Borders in a Market Context"
Border disputes between states can be very costly and disruptive, including major disruptions in trade. From an aggregate perspective, scholars traditionally expect these costs and disruptions to place pressure on states to avoid or resolve these disputes quickly. This view, however, risks oversimplification of the quality of trade and the economic actors driving that trade. We investigate the consequences of complex trade relations on border disputes. Variation in the composition of trade, whether characterized by comparative advantage trade, inter-industry trade, or intra-industry trade, generates variation in the presence and intensity of domestic pressure to avoid or resolve border disputes. We examine the effects of this variation on dispute behavior using an original dataset that combines product-level trade data (spanning from 1962-2001) with ICOW territorial claims data. The use of product-level trade data allows for the analysis of substitutability options which may reduce exit costs and make it easier to escalate border disputes. This analysis helps us better understand the choice to forego trade due to border disputes, and furthers our understanding of the economic impact of unsettled borders.
Carter, David B., Bailee Donahue, and Rob Williams, "Borders, Cooperation, and Illicit Trade"
In the last twenty years, the number of fortified borders around the world has risen precipitously. A growing body of research shows that cross-border economic inequality drives wealthier states to construct border walls. This surge in walls is further argued to be a reaction to the unwanted ``externalities'' of economic openness and globalization, namely, illicit trade and smuggling. While recent studies analyze the effect of walls on legal trade, no studies of which we are aware explore how walls might affect illicit trade. This is a notable omission for two key reasons. First, the most common explanation for wall construction puts combating illicit trade front and center. Second, recent work that finds walls significantly reduce legal trade suggest that this finding derives from border fortifications diverting illegal trade to ports of entry, which leads to more inspection, security, and transaction costs. We begin to fill this gap here by developing new measures of illicit trade flows and assessing their connections to border wall construction and legal trade flows.
Papers In Progress
Bailee Donahue, "Risk and Rebuilding in Economic Cooperation: Reinvestment Challenges After Border Settlement" from Dissertation
The settlement of border disputes often increases trade between states. Analysis of aggregate bilateral trade flows, however, hides important variation in the relative risk and costliness associated with the trade of different commodities across borders. Why are some trade ties easier to re-establish than others in the aftermath of a dispute? We know from prior research that economic networks coordinate around borders, and that border changes can disrupt these networks, but some networks are more fragile than others. Highly differentiated commodities pose greater risk and costlier investment to traders seeking to re-establish cross-border networks following a settlement as they rely on higher levels of interpersonal contact between exporters and importers. When commodities depend upon economic networks that are easily disrupted, economic agents will perceive increased risk. This risk makes firms less likely to trade in highly differentiated commodities in the immediate aftermath of a border settlement. On the other hand, commodities less reliant on cross-border networks are less likely to be disrupted if borders are destabilized post-settlement. In turn, one important determinant of risk involves the heterogeneity of the commodity and the economic network associated with its cross-border exchange. To examine the above argument, I use product-level trade data that spans the period of 1962 to 2016 and territorial settlements data from 1962 to 2001. This analysis helps us to better understand the ways in which both trade and evaluations of risk evolve after the resolution of border disputes.
Bailee Donahue, "Border Institutions and the Margins of Trade" from Dissertation
Many empirical studies at the nexus of trade, conflict and borders have argued that dysfunctional borders decrease trade due to heightened transaction costs. In turn, settled borders increase trade by reducing transaction costs. However, the extent literature has only analyzed the impact of dysfunctional borders and their settlement on the aggregate value of dyadic trade. This analysis at the aggregate risks oversimplifying the full cost of border disputes or the benefits of settlement. This article investigates the impact of border disputes and settlement on transaction costs at the border by decomposing trade into two dimensions -- the intensive (how much is traded) and extensive (the variety of goods traded) margins. I examine the effects of border disputes and settlement on these two dimensions of trade using commodity-level trade data. I find that the presence of a border dispute decreases trade by contracting the variety of goods traded between states. This is indicative of an increase in the fixed cost of trade between states. In contrast, in the immediate aftermath of the full settlement of a territorial dispute the intensity of trade between former disputants increases. This finding suggests a decline in the variable cost of trade. This analysis helps us better understand the consequences of dysfunctional border institutions on transaction costs. Further, decomposing trade into these two dimensions provides scholars with a more nuanced view of the consequences of territorial disputes and their settlement on the long-term health of bilateral trade relations.