Ahmad Lashkaripour
@lashkaripour.bsky.social
Trade Economist | Associate Professor @ IU Econ | Penn State Econ Alumni | Trade Policy | Climate Policy | Industrial Policy | Quantitative Economics
13. We then clarify the logic behind *ex ante* policy evaluation, a growing yet misunderstood method.
At its core, this approach involves estimating elasticity parameters using in-sample price & quantity data, using them to simulate out-of-sample quantities under optimal prices
At its core, this approach involves estimating elasticity parameters using in-sample price & quantity data, using them to simulate out-of-sample quantities under optimal prices
August 29, 2025 at 2:38 PM
13. We then clarify the logic behind *ex ante* policy evaluation, a growing yet misunderstood method.
At its core, this approach involves estimating elasticity parameters using in-sample price & quantity data, using them to simulate out-of-sample quantities under optimal prices
At its core, this approach involves estimating elasticity parameters using in-sample price & quantity data, using them to simulate out-of-sample quantities under optimal prices
(b) Heterogeneous treatment effects
Industrial policy is justified because the marginal return to adding resources (VMPL) differs across units. Otherwise, there's no rationale for policy. Hence, contexts where industrial policy is warranted are inevitably characterized by HTE.
Industrial policy is justified because the marginal return to adding resources (VMPL) differs across units. Otherwise, there's no rationale for policy. Hence, contexts where industrial policy is warranted are inevitably characterized by HTE.
August 29, 2025 at 2:38 PM
(b) Heterogeneous treatment effects
Industrial policy is justified because the marginal return to adding resources (VMPL) differs across units. Otherwise, there's no rationale for policy. Hence, contexts where industrial policy is warranted are inevitably characterized by HTE.
Industrial policy is justified because the marginal return to adding resources (VMPL) differs across units. Otherwise, there's no rationale for policy. Hence, contexts where industrial policy is warranted are inevitably characterized by HTE.
11. The identification challenges are twofold:
(a) SUTVA violation
By design, industrial policy reallocates factors to treated units by drawing them from non-treated units. So, spillover effects are inherent to the policy itself.
(a) SUTVA violation
By design, industrial policy reallocates factors to treated units by drawing them from non-treated units. So, spillover effects are inherent to the policy itself.
August 29, 2025 at 2:38 PM
11. The identification challenges are twofold:
(a) SUTVA violation
By design, industrial policy reallocates factors to treated units by drawing them from non-treated units. So, spillover effects are inherent to the policy itself.
(a) SUTVA violation
By design, industrial policy reallocates factors to treated units by drawing them from non-treated units. So, spillover effects are inherent to the policy itself.
10. Design-based evaluations face two challenges: measurement and identification.
The measurement issue arises because VMPL is unobserved, while welfare evaluation boils down to whether the policy reallocates factors to high-VMPL sectors and firms or not
The measurement issue arises because VMPL is unobserved, while welfare evaluation boils down to whether the policy reallocates factors to high-VMPL sectors and firms or not
August 29, 2025 at 2:38 PM
10. Design-based evaluations face two challenges: measurement and identification.
The measurement issue arises because VMPL is unobserved, while welfare evaluation boils down to whether the policy reallocates factors to high-VMPL sectors and firms or not
The measurement issue arises because VMPL is unobserved, while welfare evaluation boils down to whether the policy reallocates factors to high-VMPL sectors and firms or not
9. We review the empirical and quantitative examinations of industrial policy, classifying them into two groups:
a) *ex post* evaluations using design-based methods such as DiD
b) *ex ante* model-based evaluations of optimally designed policies
a) *ex post* evaluations using design-based methods such as DiD
b) *ex ante* model-based evaluations of optimally designed policies
August 29, 2025 at 2:38 PM
9. We review the empirical and quantitative examinations of industrial policy, classifying them into two groups:
a) *ex post* evaluations using design-based methods such as DiD
b) *ex ante* model-based evaluations of optimally designed policies
a) *ex post* evaluations using design-based methods such as DiD
b) *ex ante* model-based evaluations of optimally designed policies
8. At a deeper level trade openness presents a dilemma for industrial policy effectiveness—a point more recently emphasized in the literature.
August 29, 2025 at 2:38 PM
8. At a deeper level trade openness presents a dilemma for industrial policy effectiveness—a point more recently emphasized in the literature.
7. Another important but often-overlooked point is that trade measures, such as import restrictions or export promotion, are rarely an optimal or efficient form of industrial policy.
August 29, 2025 at 2:38 PM
7. Another important but often-overlooked point is that trade measures, such as import restrictions or export promotion, are rarely an optimal or efficient form of industrial policy.
6. Open economies face additional challenges when designing IP:
a. Trade introduces a *siphoning effect* where taxes paid by domestic households are partially used to subsidize consumption abroad via exports.
b. Industrial policy distorts relative trade prices ---> disrupts the gains from trade
a. Trade introduces a *siphoning effect* where taxes paid by domestic households are partially used to subsidize consumption abroad via exports.
b. Industrial policy distorts relative trade prices ---> disrupts the gains from trade
August 29, 2025 at 2:38 PM
6. Open economies face additional challenges when designing IP:
a. Trade introduces a *siphoning effect* where taxes paid by domestic households are partially used to subsidize consumption abroad via exports.
b. Industrial policy distorts relative trade prices ---> disrupts the gains from trade
a. Trade introduces a *siphoning effect* where taxes paid by domestic households are partially used to subsidize consumption abroad via exports.
b. Industrial policy distorts relative trade prices ---> disrupts the gains from trade
5. An economy-wide *optimal* policy is rarely implemented in practice. More often, a a few sectors are promoted in isolation (e.g., South Korea’s HCI drive).
In such cases, the *constrained-optimal* policy depends on the upstreamness of the targeted industries.
In such cases, the *constrained-optimal* policy depends on the upstreamness of the targeted industries.
August 29, 2025 at 2:38 PM
5. An economy-wide *optimal* policy is rarely implemented in practice. More often, a a few sectors are promoted in isolation (e.g., South Korea’s HCI drive).
In such cases, the *constrained-optimal* policy depends on the upstreamness of the targeted industries.
In such cases, the *constrained-optimal* policy depends on the upstreamness of the targeted industries.
4. The *welfare gains* from optimal policy, however, depend on which sectors are promoted.
If industrial policy promotes upstream sectors operating below their efficient scale, it would generate larger gains.
If industrial policy promotes upstream sectors operating below their efficient scale, it would generate larger gains.
August 29, 2025 at 2:38 PM
4. The *welfare gains* from optimal policy, however, depend on which sectors are promoted.
If industrial policy promotes upstream sectors operating below their efficient scale, it would generate larger gains.
If industrial policy promotes upstream sectors operating below their efficient scale, it would generate larger gains.
3. We formalize this argument by deriving the optimal policy in a unified framework with various distortions and input-output networks.
Contrary to common instinct, the optimal policy is *newtrok-blind* and *demand-blind*. It only depends on the size of the distortion wedge.
Contrary to common instinct, the optimal policy is *newtrok-blind* and *demand-blind*. It only depends on the size of the distortion wedge.
August 29, 2025 at 2:38 PM
3. We formalize this argument by deriving the optimal policy in a unified framework with various distortions and input-output networks.
Contrary to common instinct, the optimal policy is *newtrok-blind* and *demand-blind*. It only depends on the size of the distortion wedge.
Contrary to common instinct, the optimal policy is *newtrok-blind* and *demand-blind*. It only depends on the size of the distortion wedge.
2. We first outline the welfarist rationale for industrial policy: with externalities or market failures, the *value marginal product of labor (VMPL)* is different across sectors
---> Welfare can be improved by reallocating resources from low-VMPL to high-VMPL sectors.
---> Welfare can be improved by reallocating resources from low-VMPL to high-VMPL sectors.
August 29, 2025 at 2:38 PM
2. We first outline the welfarist rationale for industrial policy: with externalities or market failures, the *value marginal product of labor (VMPL)* is different across sectors
---> Welfare can be improved by reallocating resources from low-VMPL to high-VMPL sectors.
---> Welfare can be improved by reallocating resources from low-VMPL to high-VMPL sectors.
We’ve written a review on *New Industrial Policy* for the Oxford Research Encyclopedia.
It offers a unified framework for analyzing IP effects and survey evidence from both ex post event studies and ex ante model-based evaluations of IP.
🧵thread on key takeaways (link below)
It offers a unified framework for analyzing IP effects and survey evidence from both ex post event studies and ex ante model-based evaluations of IP.
🧵thread on key takeaways (link below)
August 29, 2025 at 2:38 PM
We’ve written a review on *New Industrial Policy* for the Oxford Research Encyclopedia.
It offers a unified framework for analyzing IP effects and survey evidence from both ex post event studies and ex ante model-based evaluations of IP.
🧵thread on key takeaways (link below)
It offers a unified framework for analyzing IP effects and survey evidence from both ex post event studies and ex ante model-based evaluations of IP.
🧵thread on key takeaways (link below)
Our paper on the long-term effects of the Trump 2 tariffs is out in the Journal of International Economics.
We’ve made it open access:
doi.org/10.1016/j.ji...
We’ve made it open access:
doi.org/10.1016/j.ji...
August 13, 2025 at 3:34 PM
Our paper on the long-term effects of the Trump 2 tariffs is out in the Journal of International Economics.
We’ve made it open access:
doi.org/10.1016/j.ji...
We’ve made it open access:
doi.org/10.1016/j.ji...
5/ Tariff revenue impact?
Even in the most favorable scenario, tariffs would finance only about 5-6.5% of the federal budget. Under retaliation, this drops to just 3%.
Even in the most favorable scenario, tariffs would finance only about 5-6.5% of the federal budget. Under retaliation, this drops to just 3%.
April 10, 2025 at 2:24 PM
5/ Tariff revenue impact?
Even in the most favorable scenario, tariffs would finance only about 5-6.5% of the federal budget. Under retaliation, this drops to just 3%.
Even in the most favorable scenario, tariffs would finance only about 5-6.5% of the federal budget. Under retaliation, this drops to just 3%.
4/ Here's the catch: any US welfare gains completely vanish under retaliatory scenarios. If trading partners retaliate, the US faces a welfare loss of nearly 1%.
Remarkably, collective retaliation by all partners would offset nearly all of their initial welfare losses.
Remarkably, collective retaliation by all partners would offset nearly all of their initial welfare losses.
April 10, 2025 at 2:24 PM
4/ Here's the catch: any US welfare gains completely vanish under retaliatory scenarios. If trading partners retaliate, the US faces a welfare loss of nearly 1%.
Remarkably, collective retaliation by all partners would offset nearly all of their initial welfare losses.
Remarkably, collective retaliation by all partners would offset nearly all of their initial welfare losses.
3/ We find the USTR tariff design is actually suboptimal. An optimal tariff would be uniform at ~25% across all partners, not varied based on bilateral deficits as the Liberation Day tariffs are structured.
April 10, 2025 at 2:24 PM
3/ We find the USTR tariff design is actually suboptimal. An optimal tariff would be uniform at ~25% across all partners, not varied based on bilateral deficits as the Liberation Day tariffs are structured.
2/ Without retaliation, the US might see modest welfare gains (1.1%) and reduced trade deficits (-35%). But this comes at a significant cost to trading partners, especially Canada, Mexico, and South American economies.
April 10, 2025 at 2:24 PM
2/ Without retaliation, the US might see modest welfare gains (1.1%) and reduced trade deficits (-35%). But this comes at a significant cost to trading partners, especially Canada, Mexico, and South American economies.
🚨 We just released a paper examining the long-terms economic impacts of "Liberation Day" tariffs.
In summary: while these tariffs may help reduce the trade deficit, they will impose significant costs on the U.S. economy after retaliation by trade partners.
In summary: while these tariffs may help reduce the trade deficit, they will impose significant costs on the U.S. economy after retaliation by trade partners.
April 10, 2025 at 2:24 PM
🚨 We just released a paper examining the long-terms economic impacts of "Liberation Day" tariffs.
In summary: while these tariffs may help reduce the trade deficit, they will impose significant costs on the U.S. economy after retaliation by trade partners.
In summary: while these tariffs may help reduce the trade deficit, they will impose significant costs on the U.S. economy after retaliation by trade partners.
Full paper coauthored w/ Farid Farrokhi (conditionally accepted in Econometrica):
“Can Trade Policy Mitigate Climate Change?"
alashkar.pages.iu.edu/Farrokhi_Las...
“Can Trade Policy Mitigate Climate Change?"
alashkar.pages.iu.edu/Farrokhi_Las...
March 6, 2025 at 6:15 PM
Full paper coauthored w/ Farid Farrokhi (conditionally accepted in Econometrica):
“Can Trade Policy Mitigate Climate Change?"
alashkar.pages.iu.edu/Farrokhi_Las...
“Can Trade Policy Mitigate Climate Change?"
alashkar.pages.iu.edu/Farrokhi_Las...
1/ 🚨 Can the US coerce smaller countries into submission using tariff penalties?
Recent events with Mexico & Canada suggest it is trying. But our latest research indicates these attempts will likely fail and isolate the US economy.
Here's why:👇
Recent events with Mexico & Canada suggest it is trying. But our latest research indicates these attempts will likely fail and isolate the US economy.
Here's why:👇
March 6, 2025 at 6:15 PM
1/ 🚨 Can the US coerce smaller countries into submission using tariff penalties?
Recent events with Mexico & Canada suggest it is trying. But our latest research indicates these attempts will likely fail and isolate the US economy.
Here's why:👇
Recent events with Mexico & Canada suggest it is trying. But our latest research indicates these attempts will likely fail and isolate the US economy.
Here's why:👇
I’ve created a dashboard that projects potential GDP losses for countries if ongoing tariff escalations trigger a global trade war.
I’ll be updating it soon with the latest data.
alashkar.pages.iu.edu/GlobalTariff...
I’ll be updating it soon with the latest data.
alashkar.pages.iu.edu/GlobalTariff...
February 11, 2025 at 8:37 PM
I’ve created a dashboard that projects potential GDP losses for countries if ongoing tariff escalations trigger a global trade war.
I’ll be updating it soon with the latest data.
alashkar.pages.iu.edu/GlobalTariff...
I’ll be updating it soon with the latest data.
alashkar.pages.iu.edu/GlobalTariff...
7/8: Finally, the impact will be devastating for smaller nations that rely heavily on imports.
Malta, for example, could lose up to 15% of its GDP in a global tariff war scenario.
Malta, for example, could lose up to 15% of its GDP in a global tariff war scenario.
February 2, 2025 at 7:49 PM
7/8: Finally, the impact will be devastating for smaller nations that rely heavily on imports.
Malta, for example, could lose up to 15% of its GDP in a global tariff war scenario.
Malta, for example, could lose up to 15% of its GDP in a global tariff war scenario.
6/8: The stakes are higher today than during past trade wars (like Smoot-Hawley) due to globally integrated supply chains and higher trade volumes.
My estimates shows that the potential economic damage from a global tariff war doubled during the 2000-2014 period alone.
My estimates shows that the potential economic damage from a global tariff war doubled during the 2000-2014 period alone.
February 2, 2025 at 7:49 PM
6/8: The stakes are higher today than during past trade wars (like Smoot-Hawley) due to globally integrated supply chains and higher trade volumes.
My estimates shows that the potential economic damage from a global tariff war doubled during the 2000-2014 period alone.
My estimates shows that the potential economic damage from a global tariff war doubled during the 2000-2014 period alone.
4/8: The US could lose about 1% of its real GDP. This loss is significant but still lower than many circulating estimates.
Also, a tariff war would not lead to autarky, which is why this estimate does not mirror the “gains from trade” estimated by Costinot & Rodriguez-Clare.
Also, a tariff war would not lead to autarky, which is why this estimate does not mirror the “gains from trade” estimated by Costinot & Rodriguez-Clare.
February 2, 2025 at 7:49 PM
4/8: The US could lose about 1% of its real GDP. This loss is significant but still lower than many circulating estimates.
Also, a tariff war would not lead to autarky, which is why this estimate does not mirror the “gains from trade” estimated by Costinot & Rodriguez-Clare.
Also, a tariff war would not lead to autarky, which is why this estimate does not mirror the “gains from trade” estimated by Costinot & Rodriguez-Clare.