Estimating the Macroeconomic Effects of Each Totalization Agreement

Totalization agreements coordinate the United States Social Security program with other countries’ comparable programs. We estimate each totalization agreement’s impact on a variety of bilateral trade outcomes. We find the impact is quite heterogeneous, both across agreements/countries and across sectors within a country. Moreover, we find agreements that entered into force more recently tend to increase total imports and decrease total exports by more than earlier agreements. We find no significant relationship between totalization agreements’ estimated impacts and economic indicators such as the trade complementarity index between the U.S. and the agreement countries. Finally, we find sectors where the U.S. has a larger revealed comparative advantage relative to the agreement country tend to experience a larger increase in exports following the totalization agreement. However, there is no significant relationship between revealed comparative advantage and the estimated impact on imports across sectors. In future work, we will investigate in more detail both the correlation between the heterogeneity across sectors within a country and the heterogeneity across countries, as well as the correlation between totalization agreements and the declining U.S. trade balance in the past few decades.