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on International Trade |
| By: | Aichele, Rahel; Heiland, Inga |
| Abstract: | In the 2000s, China's WTO entry constituted a major trade shock. In this paper, we analyze its eff ects on trade and value chains. The fragmentation of the global value chain makes it hard to disentangle who produces for whom. Value added trade contains this information. We build a multi-sector gravity model of the Eaton and Kortum (2002) type with inter-sectoral linkages that gives rise to a gravity equation for value added trade flows. As in Koopman et al. (forthcoming), exports can be decomposed into value added exports, exports of foreign value added and double counting. We construct a panel database of value added trade for 40 countries and the years 1995-2009 from the World Input-Output database. With WIOD and tariff data, we estimate the gravity model's key parameters. The simulation then hypothetically sets tari s w.r.t. China back to their pre-accession levels. We find that China's WTO entry strengthend the Asian production network. Chinese value added in exports reduced and increasingly foreign value added - most prominently from Japan and Korea - is assembled and exported. |
| JEL: | F13 F14 F17 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc14:100424&r=int |
| By: | Cai, Songfeng; Zhang, Yaxiong; Meng, Bo |
| Abstract: | This paper uses a GVC (Global Value Chain)-based CGE model to assess the impact of TTIP between the U.S. and the EU on their main trading partners who are mainly engaged at the low end in the division system of global value chains, such as BRICS countries. The simulation results indicate that in general the TTIP would positively impact global trade and economies due to the reduction of both tariff and non-tariff barriers. With great increases in the US–EU bilateral trade, significant economic gains for the U.S. and the EU can be expected. For most BRICS countries, the aggregate exports and GDP suffer small negative impacts from the TTIP, except Brazil, but the inter-country trade within BRICS economies increases due to the substitution effect between the US–EU trade and the imports from BRICS countries when the TTIP commences. |
| Keywords: | Brazil, India, China, Russia, United States, Europe, International trade, Economic conditions, Trade policy, TTIP, BRICS, GVC, NTBs, Spillover |
| JEL: | C68 D58 F13 |
| Date: | 2015–01–09 |
| URL: | http://d.repec.org/n?u=RePEc:jet:dpaper:dpaper485&r=int |
| By: | Misa OKABE (Faculty of Economics, Wakayama University) |
| Abstract: | The number of bilateral and plurilateral free trade agreements (FTAs) in East Asia has increased rapidly after the 2000s behind the world trend of RTAs. Many studies tackled the challenge of figuring out the impact of FTAs in this region by applying various methodologies. The first half of this paper reviews empirical studies of ex-post evaluation of FTAs in East Asia. A look at earlier studies on the impact of the ASEAN Free Trade Area (hereafter AFTA), the first regional FTA in this region revealed that few studies found robust trade creation effects of AFTA in the 1990s. However, since the 2000s, several studies using detailed trade and tariff data on products or sectors indicate that tariff elimination under AFTA promoted regional trade among ASEAN countries. Recent studies also show tariff elimination is not necessarily the most important measure to promote trade in goods in the case of AFTA. Liberalisation measures--such as reduction of non-tariff measures, trade facilitation and coordination of rules of origin, and improvement of FTA usability--are more important measures to facilitate trade between members other than tariff elimination. Likewise, with regard to bilateral FTAs in East Asia, some ex-post evaluation studies show that these FTAs positively impact trade at some extent. These studies show that the positive impacts are brought not only by tariff elimination under the FTAs but also by other liberalisation measures. The latter half of this paper discusses a basic empirical analysis on the impact of five ASEAN+1 FTAs which have not yet been sufficiently investigated because of shortage of data. We found that trade creation effects of ASEAN-China FTA (ACFTA) and ASEAN-Korea FTA (AKFTA) appear in industrial supplies and capital goods between members. Also, trade in consumption goods is facilitated under ACFTA. On the other hand, the impact of ASEAN-Japan FTA (AJCEP) is not revealed in many cases. These results suggest that these regional FTAs potentiate the positive impact on trade when production and sales networks among members have already been developed. At the same time, the newer FTAs whose members are the same as precedent FTAs should set tariff elimination and other liberalisation measures at more liberalised level than precedent FTAs. From the perspective of effectiveness, the newer regional FTA in this region, such as the Regional Comprehensive Economic Partnership, needs to have a higher level of liberalisation and more inexpensive procedures for members to utilize said FTA than the existing ASEAN+1 FTAs in this region. |
| Keywords: | ASEAN Free Trade Area, ASEAN+1FTAs, RCEP |
| JEL: | F13 F14 F15 |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:era:wpaper:dp-2015-01&r=int |
| By: | Jaime Rafael Ahcar (PSL, Université Paris-Dauphine,LEDa, IRD UMR DIAL, 75016 Paris, France); Jean-Marc Siroën (PSL, Université Paris-Dauphine,LEDa, IRD UMR DIAL, 75016 Paris, France) |
| Abstract: | Regional trade agreements (RTAs) have surged in a context of stalled multilateral trade negotiations. Their impact on trade have been well documented while scant attention have been paid to empirical studies exploring their heterogeneity in the scope of deep integration. We intend in this paper to determine if deeper RTAs promote trade more effectively than less ambitious agreements. We proceed to generate credible indicators of deep integration exploiting two recently available data sets from WTO and WTI-DESTA, and then we test their significance in a gravity model for International Trade. We find that deeper agreements with provisions inside or outside WTO’s domains increase trade more than shallow ones. Treating additive indicators as factor variables, as well as our innovative use of Multiple Correspondence Analysis MCA to get distilled indicators of deep integration allow us to give a new insight on this phenomenon and to confirm recent findings on the field of deep integration. _________________________________ Les accords commerciaux régionaux (ACR) ont proliféré alors même que les négociations multilatérales ne parvenaient pas à progresser. Leur impact sur le commerce a été bien documenté mais peu d’attention a été portée aux études empiriques qui exploraient l’hétérogénéité d’accords plus ou moins “profonds”. Le but de cet article est de déterminer si des ACR plus profonds promeuvent le commerce plus efficacement que les accords moins ambitieux. Nous commençons par créer des indicateurs pertinents d’intégration profonde à partir de deux bases de données récentes construites par l’OMC et par WTI-DESTA. Puis nous testons leur signification dans un modèle de gravité. Nous trouvons ainsi que les accords plus profonds incluant des dispositions se situant dans ou hors les compétences de l’OMC, accroissent davantage le commerce que les accords superficiels. Nous utilisons des indicateurs additifs ainsi que des indicateurs construits à partir de l’analyse des correspondances multiples (ACM), afin d’obtenir des indicateurs synthétiques et confirmer les résultats obtenus récemment sur les effets de l’intégration profonde sur le commerce. |
| Keywords: | Deep integration, gravity model, regional trade agreements, trade liberalization, international trade, intégration profonde, modèle de gravité, accords commerciaux régionaux, libéralisation du commerce. |
| JEL: | F14 F15 F53 F55 |
| Date: | 2014–12 |
| URL: | http://d.repec.org/n?u=RePEc:dia:wpaper:dt201425&r=int |
| By: | Cristea, Anca D. |
| Abstract: | Communication is a real barrier to organizing international production as it hinders knowledge transmission. This paper provides evidence to suggest that a way in which multinational firms economize on costly information transfers is by using skilled foreign workers, since local talent can substitute for knowledge inputs from the headquarters. Combining U.S. data on headquarter service exports with information on communication costs and skill endowments by country, I find that while communication costs decrease the export of headquarter services to foreign affiliates, the effect becomes weaker in the average educational attainment of foreign workers. The sensitivity of headquarter service exports to communication barriers at low levels of skill endowment has important implications for the geography of multinational production, as well as for policies aimed at improving communication infrastructure. |
| Keywords: | headquarter services; services trade; intra-firm trade; communication costs; telecommunication; knowledge transfers |
| JEL: | F1 |
| Date: | 2015–01–15 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:61950&r=int |
| By: | Jean Paul Rabanal (Ball State University); Olga A. Rabanal (Ball State University) |
| Abstract: | China’s role in the global economy has grown tremendously over the past two decades, significantly altering the nature of world markets. In this paper, we study the impact of Chinese supply and demand shocks to the international markets on Peruvian firm-product exports across destinations from 2000 to 2011. In particular, the demand shock has been notably absent from literature on the recent impact of China. We present evidence using both channels, focusing primarily on within firm-product and across destinations specification. The results indicate that for most part, an increase in Chinese supply and demand has had a significant and positive effect on Peruvian firm exports. From the supply side, this suggests that firms are either (i) concentrating on markets where competition is tougher, (ii) increasing R&D efforts to enhance the productivity as well as the competitiveness, (iii) benefiting from a comparative advantage in certain sectors that helps mitigate the competition presented by Chinese exporters, or (iv) a combination of these three explanations. From the demand side, this indicates that firms are possibly redirecting their exports from other markets to China. |
| Keywords: | Competition, Demand, Trade, Firm-heterogeneity, Peru, China |
| JEL: | F14 L25 |
| Date: | 2015–02 |
| URL: | http://d.repec.org/n?u=RePEc:apc:wpaper:2015-030&r=int |
| By: | Schluep, Isabelle; De Gorter, Harry |
| Keywords: | International Relations/Trade, |
| URL: | http://d.repec.org/n?u=RePEc:ags:iaae00:197221&r=int |
| By: | Michael Peters (London School of Economics); Claire Lelarge (INSEE); Joaquin Blaum (Brown University) |
| Abstract: | Trade in intermediate inputs raises firm productivity as it enables producers to access both better and novel inputs of production. The question is: by how much? This paper develops a framework to answer this question. We explicitly allow for (i) firms sourcing from multiple countries, (ii) heterogeneity in the quality of these varieties, (iii) heterogeneity of fixed costs at the firm level and (iv) non-homothetic import demand. We provide direct evidence that all these aspects are empirically important. Our main results are as follows. First, we derive a simple formula, which is a consistent estimator for the distribution of productivity gains of past liberalization episodes and can be implemented in readily available firm-level data. In particular, the formula only requires knowledge of firms' domestic expenditure share and the elasticity of substitution between domestic and foreign varieties, which we obtain via production function estimation and exogenous variation in import spending. Secondly, we show that to perform counterfactual policy analysis the full model needs to be estimated. With homothetic demand, this is possible using simple linear econometric techniques. When non-homotheticities are allowed for, we need to take into account the entire non-linear structure of the theory. For the population of French importers, we find that the average firm-level gains relative to autarky are XX% [estimation in progress]. A 10% reduction in trade barriers increases firm productivity by XX% [estimation in progress] on average. |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed014:1034&r=int |
| By: | Chernoff, Alex W. |
| Abstract: | In this paper I use farm-level data from the Quebec dairy industry to estimate the relationship between productivity and participation in the Commercial Export Milk (CEM) program (2000-2003). Under the CEM program farmers could sell milk without production quota and faced a farm price that was approximately half of the domestic price under supply management. I find a positive correlation between participation in the CEM program and farm-level total factor productivity (TFP). I then use a difference-in-difference research design with inverse propensity weights to test for causality in the relationship between participation in the CEM program and TFP. I find evidence of a positive and statistically significant effect in two of four regression specifications. A number of economists have argued that the Canadian dairy industry could benefit from trade liberalization through export market growth and returns to scale in production. My results suggest that trade liberalization would also lead to additional productivity and welfare gains from farm-level selection and the direct effects from exposure to a competitive pricing environment. |
| Keywords: | Firm heterogeneity, Trade liberalization, Productivity, Agriculture, Supply Manage- ment, International Relations/Trade, Public Economics, D24, F14, Q18, |
| Date: | 2015–01–16 |
| URL: | http://d.repec.org/n?u=RePEc:ags:iats14:197182&r=int |
| By: | Mike Waugh (New York University); Laura Veldkamp (NYU Stern); Isaac Baley (New York University) |
| Abstract: | This paper studies the effect of reductions in information asymmetry - information globalization - on international risk sharing and trade flows. Information frictions are often invoked to explain low levels of international trade beyond those that measured trade frictions (tariffs, transportation costs, etc.) can explain. Using a relatively standard two-country general equilibrium model with asymmetric information about aggregate productivity, we find that more precise information about foreign productivity shocks reduces trade and international risk sharing. In other words, information frictions behave in the exact opposite manner as a standard trade cost. |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed014:1097&r=int |
| By: | Rutzer, Christian |
| Abstract: | How shifts in the economic leadership between countries can occur has been widely debated not only since the recent catch up of China in several sectors. However, there is no adequate theoretical model analyzing this question in the light of trade liberalization. This paper is the first one to address productivity leapfrogging between two countries using a heterogeneous firms trade framework. In the model, firms' R&D investments determine their expected productivity draw. In one country firms face lower R&D costs. Before trade liberalization, the sector productivity and the competition intensity is higher in this country. However, when trade liberalization occurs, fiercer competition can more than offset the investment advantage. Hence, firms from the disadvantaged country may invest relatively more in R&D than firms from the advantaged country. Consequently, the laggard country can become the leader in terms of sector productivity after trade liberalization. The results of the model highlight open markets in combination with innovations by firms as the necessary requirement for leapfrogging between two countries. |
| JEL: | F12 F13 F10 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc14:100313&r=int |
| By: | Simplice Asongu (Yaoundé/Cameroun); Oasis Kodila-Tedika (Kinshasa, Democratic Republic of Congo) |
| Abstract: | This paper examines FDI determinants in the BRICS and MINT throughout the conditional distributions of FDI for the period 2001-2011. An instrumental variable quantile regression estimation strategy is employed based on the intuition that, the determinants are contingent on initial or existing FDI levels. The following are some of the findings established. First, FDI benefits of GDP growth are more apparent in nations with higher initial levels of FDI. Second, real GDP output would more positively influence FDI in countries where initial levels of FDI are higher. Hence, the market-seeking purposes increases FDI with a larger magnitude in Higher FDI countries. Third, the impact of trade openness has a Kuznets shape for Gross FDI and increasing tendency for Net FDI. The impact of political stability is only significant for Gross FDI in increasing order. |
| Keywords: | Foreign direct investment; Emerging countries; Quantile regression |
| JEL: | C52 F21 F23 |
| Date: | 2015–02 |
| URL: | http://d.repec.org/n?u=RePEc:agd:wpaper:15/003&r=int |
| By: | Dinçer, Gönül |
| Abstract: | The share of BRICS countries in the world trade is significantly rising for more than a decade and it was approximately 3 % in 1980, 6 % in 2000 and 16 % in 2013 in the total world imports. The same rising pattern of BRICS is also being seen in Turkey’s trade since early 2000s. In this study, the imports of Turkey from BRICS are analyzed using an augmented gravity model over the period 2002-2012. The results indicate that the basic gravity variables are consistent with the theory. Furthermore, R&D expenditures in Turkey is negatively correlated with Turkey’s imports from BRICS countries whereas R&D expenditures in BRICS countries are positively correlated. |
| Keywords: | International Trade, the Gravity Model, Panel Data Analysis, BRICS, Turkey |
| JEL: | C33 F10 F14 |
| Date: | 2014–10–11 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:61979&r=int |
| By: | Sanchez-Martin, Miguel Eduardo; de Pinies, Jaime; Antoine, Kassia |
| Abstract: | The main focus of the paper is the measurement of the potential for externalities related to foreign direct investment. A series of novel proxies are drawn from the Enterprise Survey database of the World Bank-IFC and tested against hypotheses considered in the foreign direct investment literature. Using these proxies, an econometric assessment of the determinants of backward linkages in developing economies is presented. The results show that export-oriented foreign direct investment, wholly owned subsidiaries (as opposed to joint ventures), and foreign owned firms relying on foreign technologies are less likely to develop links with domestic companies. In addition, the analysis finds that some sectors (food, wood, auto, and auto-parts) are more prone than others (textiles and electronics) in developing backward linkages. Apart from the type of foreign direct investment and sector-specific characteristics, the size of the host economy matters. Foreign owned subsidiaries in most service oriented Caribbean islands buy a low percentage of inputs from domestic firms. This may be because in small islands there are not enough local suppliers with sufficient quality and capacity to meet the demands of multinationals. However, the paper presents the case of the Dominican Republic, the largest economy in the Caribbean, which has struggled to develop backward linkages because of the relative isolation of special economic zones from the rest of the economy. |
| Keywords: | Foreign Direct Investment,Economic Theory&Research,Banks&Banking Reform,E-Business,Microfinance |
| Date: | 2015–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:7185&r=int |
| By: | Mike Waugh (New York University) |
| Abstract: | This paper shows that new trade models with different micro-level margins--estimated to fit the same moments in the data--imply lower trade elasticities and, hence, larger welfare gains from trade relative to models without these margins. The key feature of the estimation approach is to focus on common moments where new micro-level margins, such as an extensive margin or variable markups, alter the mapping from the data to the estimate of the trade elasticity. We find that the introduction of an extensive margin as in Eaton and Kortum (2002) or Melitz (2003) increases the welfare cost of autarky by up to 50 percent relative to Armington or Krugman (1980) which feature no extensive margin. Variable markups in Bernard, Eaton, Jensen, and Kortum (2003) further increase the welfare cost of autarky by 50 percent relative to Eaton and Kortum (2002) which features perfect competition. |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed014:953&r=int |
| By: | Schymik, Jan; Marin, Dalia; Tarasov, Alexander |
| Abstract: | We incorporate trade in tasks l a Grossman and Rossi-Hansberg (2008) into the international trade theory of fi rm organization of Marin and Verdier (2012) to examine how off shoring aff ects the way fi rms organize. We test the predictions of the model based on firm level data of 660 Austrian and German multinational firms with 2200 subsidiaries in Eastern Europe and we show that the data are consistent with the theory. We fi nd that o ffshoring of production tasks leads firms to reorganize to more decentralized management improving competitiveness of offshoring firms. We show further that offshoring of skilled managers relaxes the 'war for talent' constraint but toughens competition and thus has an ambiguous impact on the level of decentralization and CEO wages of offshoring firms. In sufficiently open economies, however, managerial offshoring unambiguously leads to more decentralized management. |
| JEL: | F10 F23 L22 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc14:100633&r=int |
| By: | Heid, Benedikt |
| Abstract: | What are the welfare and employment consequences of preferential trade agreements (PTAs) for developing and emerging countries? Standard quantitative models of international trade which are generally used to assess the impact of PTAs assume full employment and hence abstract from (net) employment effects. This paper presents a quantitative framework to study the welfare and employment effects of PTAs taking into account the key feature of labor markets in emerging economies: A large share of workers is employed in the informal sector which is characterized by low productivity and hence lower wages than those in the formal part of the economy. To illustrate, I apply this framework to a set of 13 Latin American and Caribbean countries to evaluate observed trade liberalization episodes since 1950, taking into account the general equilibrium trade diversion and income effects of PTAs which have been neglected in the literature so far. |
| JEL: | F16 F13 O17 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc14:100376&r=int |
| By: | Herzer, Dierk |
| Abstract: | In recent years, the increase in international trade has sparked a debate about the impact of international trade on population health. To date, however, there has been very little econometric research on the relationship between these two variables. This paper examines the long-run relationship between trade openness and population health for a sample of 74 countries over five decades, from 1960 to 2010. Using panel time-series techniques, it is shown that international trade in general has a robust positive long-run effect on health, as measured by life expectancy and infant mortality. This effect tends to be greater in countries with lower development levels, higher taxes on income, profits, and capital gains, and less restrictive business and labor market regulations. The results also show that long-run causality runs in both directions, suggesting that increased trade is both a consequence and a cause of increased life expectancy. |
| JEL: | O11 F40 I12 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc14:100441&r=int |
| By: | Gassebner, Martin; Egger, Peter |
| Abstract: | Earlier work established the notion that international terrorism harms international trade. This evidence was based on annual data with responses in the same year as attacks and incidents and on empirical models which ignored general equilibrium effects. We provide evidence that, if at all, international terrorism displays effects on bilateral and multilateral trade only in the medium run (more than one-and-a-half years after an attack/incident). The findings in this paper suggest that the purely economic short-run impact of international terror on trade is negligible. This does not mean that terror is unimportant. However, its effects should not be looked for in the purely economic domain or in the short run but in economic outcome in the long run and in the disruption of humanitarian and social wellbeing both of which cannot be grasped when looking at economic activity alone. |
| JEL: | F14 F52 D74 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc14:100279&r=int |
| By: | Jose L. Fillat (Federal Reserve Bank of Boston); Stefania Garetto (Boston University) |
| Abstract: | This paper starts by unveiling a strong empirical regularity: multinational corporations exhibit higher stock market returns and earning yields than non-multinational firms. Within non-multinationals, exporters exhibit higher earning yields and returns than firms selling only in their domestic market. To explain this pattern, we develop a real option value model where firms are heterogeneous in productivity, and have to decide whether and how to sell in a foreign market where demand is risky. Selling abroad is a source of risk exposure to firms: following a negative shock, they are reluctant to exit the foreign market because they would forgo the sunk cost that they paid to enter. Multinational firms are the most exposed due to the higher costs they have to pay to invest. The calibrated model is able to match both aggregate US export and foreign direct investment data, and the observed cross-sectional differences in earning yields and returns. |
| Keywords: | Multinational firms, option value, cross-sectional returns |
| JEL: | F12 F23 G12 |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:bos:wpaper:wp2015-001&r=int |
| By: | Magrini, Emiliano; Morales-Opazo, Cristian; Balie, Jean |
| Keywords: | Crop Production/Industries, International Relations/Trade, |
| Date: | 2014–12 |
| URL: | http://d.repec.org/n?u=RePEc:ags:iats14:197193&r=int |
| By: | Baake, Pio; Huck, Steffen |
| Abstract: | We analyze a stylized model of the world grain market characterized by a small oligopoly of traders with market power on both the supply and demand side. Crops are stochastic and exporting countries can impose export tariffs to protect domestic food prices. We show that export tariffs are strategic complements and that poor harvests can lead to a sharp increase in equilibrium tariffs. Due to the strategic interplay between the governments of exporting countries, traders can gain from a poor harvest in one of the countries. Furthermore, consumers in import countries can benefit from cooperation between grain exporting countries. |
| JEL: | D43 F12 L13 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc14:100569&r=int |
| By: | Bühler, Stefan; Burghardt, Dirk |
| Abstract: | This paper studies the effect of trade facilitation on vertical firm structure using plant-level data from Switzerland. Based on the Business Census and the Input-Output table, we first calculate a binary measure of vertical integration for all plants registered in Switzerland. We then estimate the effect of a Mutual Recognition Agreement with the European Union on the plants' probability of being vertically integrated. Adopting a difference-in-differences approach, we find that this policy change reduced the treated plants' probability of being vertically integrated by about 10 percent. Our results are consistent with recent work in international trade theory. |
| JEL: | D23 F10 L22 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc14:100335&r=int |
| By: | Ávalos, Eloy |
| Abstract: | This paper presents an analysis of Ricardo - Torrens model of comparative advantage. The contribution of this work is to make explicit the productive structure of the economy under analysis with the help of input-output matrix and the theoretical assumption of a Leontief technology system, which will clearly explain the potential benefits of international trade. |
| Keywords: | Technological coefficient, Leontief technology, comparative advantage, international trade |
| JEL: | F00 F10 |
| Date: | 2014–05–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:62258&r=int |
| By: | Görg, Holger; Kersting, Erasmus |
| Abstract: | We investigate the financial implications of a multinational firm's choice between outsourcing and integration from the perspective of the supplier. Using a simple model, we explore the extent to which an integrated supplier's access to finance, as well as its sources of funding, change relative to a firm supplying a multinational at arm's-length. The model predicts that integrated firms have better access to finance and cover a larger share of their costs using internal funds. Furthermore, improvements in a host country's level of financial development have less of an impact on the financial situation of integrated suppliers. We present empirical evidence from firm-level data for over 60 countries broadly supporting the predictions. |
| JEL: | F23 G32 F20 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc14:100281&r=int |
| By: | Koen Jochmans (Département d'économie) |
| Abstract: | Empirical models for panel data frequently feature fixed effects in both directions of the panel. Settings where this is prevalent include student-teacher interaction, the allocation of workers to firms, and the import-export flows between countries. Estimation of such fixed-effect models is difficult. We derive moment conditions for models with multiplicative unobservables and fixed effects and use them to set up generalized method of moments estimators that have good statistical properties. We estimate a gravity equation with multilateral resistance terms as an application of our methods. |
| Date: | 2015–02 |
| URL: | http://d.repec.org/n?u=RePEc:spo:wpmain:info:hdl:2441/75dbbb2hc596np6q8flqf6i79k&r=int |
| By: | Cristea, Anca D.; Nguyen, Daniel X. |
| Abstract: | Using a firm-level panel dataset covering the universe of Danish exports between 1999 and 2006, we find robust evidence for profit shifting by multinational corporations (MNC) through transfer pricing. Our triple difference estimation method corrects for a downward bias in previous studies. The bias results from MNCs adjusting their arm's length prices to obscure the extent of their transfer price manipulations. Our identification strategy exploits the movement in export prices to a destination in response to: (1) the establishment of a foreign affiliate by an exporter to that destination, and (2) a change in the foreign corporate tax rates. Once owning an affiliate in a country with a corporate tax rate lower than in the home country, Danish multinationals reduce the unit values of their exports there between 5.7 to 9.1 percent, on average. This reduction corresponds to $141 million in underreported export revenues in year 2006, which translates into a loss in tax income equal to 3.24 percent of Danish MNCs' tax returns. |
| Keywords: | corporate tax, transfer pricing, arm's length principle, triple difference, foreign ownership |
| JEL: | D23 F23 H25 |
| Date: | 2013–12–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:61922&r=int |
| By: | Koch, Michael |
| Abstract: | This paper sets up a heterogeneous firms model, where production consists of a continuum of tasks that differ in complexity. Firms hire low-skilled and high-skilled workers to perform these tasks. How firms assign workers to tasks depends on factor prices for the two skill types and the productivity advantage of high-skilled workers in the performance of complex tasks. I study the firms assignment problem under two labor market regimes, which capture the polar cases of fully flexible wages and a binding minimum wage for low-skilled workers. Since the minimum wage lowers the skill premium, it reduces the range of tasks performed by high-skilled workers, which increases firm-level productivity and reduces the mass of active firms. Whereas trade does not affect the firm-internal assignment of workers to tasks, it reduces the range of tasks produced by high-skilled workers within firms and thereby lowers firm-level productivity, if low-skilled wages are fixed by a minimum wage. In this case trade leads to higher per-capita income for both skill types and thus to higher welfare in the open than in the closed economy, whereas inequality between the two skill types decreases. |
| JEL: | F12 F16 F10 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc14:100337&r=int |
| By: | Øglend, Atle (UiS); Osmundsen, Petter (UiS); Kleppe, Tore Selland (UiS) |
| Abstract: | This paper investigates the economic value of trade when prices of transportation services are endogenous to cross-market price spreads. This is relevant for liquefied natural gas (LNG) exports. LNG transportation capacity is limited in the short-run, and long lead-times are involved in extending the transportation infrastructure. We establish empirically that LNG transportation costs have been endogenous to regional gas prices spreads. As such, transportation service providers have been able to capture part of the price spread. We proceed to develop a method to value LNG exports under conditions of endogenous transportation costs and market integration. We use this method to quantify the effect of endogenous transportation costs on the value of LNG exports from the US to Japan. Our analysis shows that when transportation costs are correctly treated as endogenous, the LNG export benefit can drop by as much as 20-50% relative to the case of exogenous cost. |
| Keywords: | LNG; natural gas; export; trade policy |
| JEL: | F13 Q27 Q48 |
| Date: | 2015–02–09 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:stavef:2015_005&r=int |
| By: | Brink, Lars |
| Keywords: | International Relations/Trade, |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:ags:iats14:197158&r=int |
| By: | C. Fred Bergsten (Peterson Institute for International Economics); Cathleen Cimino (Peterson Institute for International Economics); Gary Clyde Hufbauer (Peterson Institute for International Economics); J. Bradford Jensen (Peterson Institute for International Economics); Sean Miner (Peterson Institute for International Economics); Theodore H. Moran (Peterson Institute for International Economics); Jeffrey J. Schott (Peterson Institute for International Economics) |
| Abstract: | The United States and China are among the world's largest trading nations. They serve as the destination and source of the world's largest flows of foreign direct investment, and they participate in regional economic arrangements on trade and investment in the Asia-Pacific region and other parts of the world. Yet when it comes to direct investment in each other's economies, China and the United States are among the world's underperformers. The successful conclusion of the negotiation of a US-China bilateral investment treaty (BIT) could change this situation. In this PIIE Briefing, experts examine prospects for a US-China BIT now that negotiations have revived after a hiatus following the 2008 election of President Barack Obama, whose economic team had other economic priorities upon taking office. After spending its first years holding internal debates about trade deals, the administration completed an internal US government review of investment issues in 2012 and resumed talks with China in 2013. The essays in this study focus on recent developments that could inform and possibly set precedents for the investment pact. They also examine issues that pose challenges to a successful negotiation. Jeffrey J. Schott and Cathleen Cimino analyze the recent China-Japan-Korea investment pact and compare it with investment provisions that the United States has developed in its model BIT. Sean Miner and Gary Clyde Hufbauer discuss how a US-China BIT should address US concerns in China regarding subsidies, unfair advantages for state-owned enterprises, and uneven application of competition policy. J. Bradford Jensen analyzes the potential for increased trade in business services. Hufbauer, Miner, and Theodore H. Moran analyze review procedures of the Committee on Foreign Investment in the United States (CFIUS). In a concluding overview, C. Fred Bergsten assesses the broader context of US-China economic relations. |
| Date: | 2015–02 |
| URL: | http://d.repec.org/n?u=RePEc:iie:piiebs:piieb15-1&r=int |
| By: | Dawe, David; Morales-Opazo, Cristian; Balie, Jean; Pierre, Guillaume |
| Keywords: | Agricultural and Food Policy, Crop Production/Industries, International Relations/Trade, Marketing, |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:ags:iats14:197175&r=int |
| By: | Alberto González Pandiella |
| Abstract: | The constant market share analysis framework is used to decompose changes in Spain’s share of the global market for goods exports into competitiveness and structural effects (i.e. the impact of specialisation, either in product or geographical terms) over 1996-2013. As other high-income countries, Spain has experienced competitive pressures from China and other emerging economies that have resulted in a loss of global market share. Nevertheless, the loss has been smaller than in other European advanced economies, thanks to better competitiveness. By contrast, the structure of geographic markets to which Spain exports, with a large-weight on relatively slow-growing areas and a small weight on fast-growing emerging countries, has exerted a negative impact on Spanish exports. In the same vein, the product structure, focused on relatively slow growing product lines, has not been conducive to better export performance either. This Working Paper relates to the 2014 OECD Economic Survey of Spain (http://www.oecd.org/eco/surveys/economic-survey-spain.htm).<P>Une analyse des parts de marché constantes des exportations de biens espagnols<BR>Une analyse en parts de marché constantes est utilisé pour décomposer l'évolution de la part de l'Espagne du marché mondial de exportations de marchandises en deux facteur, la compétitivité et les effets structurels ( l'impact de spécialisation , soit en produit ou termes géographiques ), sur 1996-2013 . Comme d'autres pays à revenu élevé, l'Espagne a connu des pressions concurrentielles en provenance de Chine et d'autres économies émergentes qui ont abouti à une perte de part de marché mondiale. Néanmoins, la perte a été plus faible que dans les autres économies avancées européennes, grâce à une meilleure compétitivité. En revanche, la structure des marchés géographiques auxquels Espagne exporte, avec un grand poids sur les zones à croissance relativement lente et un petit poids sur les pays émergents à croissance rapide, a exercé un impact négatif sur les exportations espagnoles. Dans la même veine, la structure du produit, axée sur des gammes de produits de lente croissance, n'a pas été propice à une meilleure performance à l'exportation. Ce Document de travail se rapporte à l’Étude économique de l’OCDE de l’Espagne, 2014 (http://www.oecd.org/fr/eco/etudes/etude -economique-espagne.htm). |
| Keywords: | Spain, competitiveness, manufacturing, exports, structure effect, trade specialization, technological content, market share effect, constant market share, effet de la structure, spécialisation du commerce, produits manufacturiers, parts de marché constantes, contenu technologique, effet de part de marché, exportation, compétitivité, Espagne |
| JEL: | F14 F43 L6 O52 |
| Date: | 2015–02–11 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:1186-en&r=int |
| By: | Agya Adi, ATABANI; Friday Ogbole, OGBOLE |
| Abstract: | This study focuses on the impact of foreign Direct Investment (FDI) on the economic growth of China via selected sector of the economy. The time frame used is from 1995 to 2010. Times series data drawn from the primary, secondary and tertiary sectors of the economy are used for the analyses. Ordinary least Square multiple linear regression Econometrics models are specified and estimated using E-views statistical software (version7). The Kwiatkowski-Philips-Schmidt-Shin (SPSS) unit root tests for stationary indicates that the variables are stationary at level. The result indicate that there is a negative relationship between FDI and Economic Growth in the primary sector but show a positive relationship in both the secondary and tertiary sectors. However, the aggregate FDI and economic growth shows a positive relationship. We recommend (1) FDI attracting economic policies with greater attention to the secondary and tertiary sectors of the economy; (2) FDI attracting economic policies should pay more emphasis on the secondary sector at the early stage of such policies as this sector exerts growth enhancing spillover effects on other sectors and industries is the economy; (3) Economic policies that de-emphasise FDI into the primary sector as this may exert negative influence on economics growth; (4) Human resource capacity building economic policies that would take advantage of technology transfers and managerial skills acquisition occasioned by such FDI, moreso that some corporations technically deprive the host economies ready access to their advance technologies. |
| Keywords: | Foreign Indirect Investment, Sectoral and Aggregate impact, Economic growth in China. |
| JEL: | O4 |
| Date: | 2013–12–15 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:62166&r=int |
| By: | Marinov, Eduard |
| Abstract: | Regional integration is often viewed as a way to support development and economic growth in developing countries through the related with it benefits to trade and welfare. There is a clear distinction between the integration processes among developed countries where mainly the classic static and dynamic effects described by classic and new integration theory are sought, and those among developing and least developed countries – where the reasoning, the expected benefits and the clear constrains to the participation in integration arrangements are different. The current paper tries to come up with a conclusion on what parts of classic and new integration are applicable to the integration arrangement among developing countries and tries to summarize these theories in three main groups – general economic, market-related and trade-related factors and effects. |
| Keywords: | Economic Integration Theory, Developing Countries Integration |
| JEL: | F15 F55 |
| Date: | 2014–12 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:62291&r=int |
| By: | Thomas Dietz (University of Muenster - Institute of Political Science & ZenTra); Marius Dotzauer (University of Muenster - Institute of Political Science) |
| Abstract: | The aim of this paper is to explore the political dimensions of investment arbitration. What drives the structures and rules of this institution of private-transnational dispute settlement? To define political dimensions and develop the basis of a political explanation of investment arbitration, we reconstruct the conflict about investor-state dispute settlement (ISDS) in the negotiations on the Transatlantic Trade and Investment Partnership (TTIP). We argue that the competing interests of different actors shape the design of the institution. Investment arbitration has become politicized. On a horizontal dimension, interest groups argue about the risks and benefits of arbitration. On a vertical dimension, government authorities struggle to balance national sovereignty and global interests. We indicate a political process, defined by the configuration of the horizontal and the vertical dimension, which drives the emergence and development of investment arbitration. |
| Keywords: | Arbitration, investor-state dispute settlement, TTIP, politicization, distributional conflicts |
| JEL: | F13 F15 F21 K33 P16 |
| Date: | 2015–02 |
| URL: | http://d.repec.org/n?u=RePEc:zen:wpaper:48&r=int |
| By: | Pelipas, Igor; Tochitskaya, Irina; Vinokurov, Evgeny |
| Abstract: | Despite current political headwinds, there is need for a timely expert assessment of the comprehensive economic integration between the European Union (EU) and the emerging Eurasian Economic Union (EEU). This report constitutes a preliminary methodological study. It starts off by offering a general understanding of the possible scope and limits of EU-EEU economic integration. It surveys the available literature on the various impacts that may arise if regional trade and investment agreements come into force. The report examines the use of computable general equilibrium models for assessment of the economic impact of integration agreements. It also analyses econometric methods used to study regional integration; and it discusses the applicability and constraints of other methods used to evaluate the effects of regional commercial agreements. The report presents a brief analysis of the methodology of assessing the impact of lifting non-tariff barriers. |
| Keywords: | economic integration, regional integration, European Union, Eurasian Economic Union, non-tariff barriers, Europe, Eurasia, Russia |
| JEL: | F13 F15 F5 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:61858&r=int |
| By: | Yalcin, Erdal; Heiland, Inga |
| Abstract: | In this paper we analyze the impact of public export credit guarantees on firms' exports. Earlier studies show that export credit guarantees stimulate exports, employment, and value added. Furthermore, there is evidence at the aggregate level that financial market imperfections are key to understanding the beneficial effects of this policy instrument. We use monthly firm-level survey data combined with official transaction-level data on covered exports of German firms to analyze in detail the hypothesis that the positive effects are due to mitigated financial constraints. Considering exporter and importer characteristics, as well as transaction-specific characteristics, we shed light on the particular sources of financing constraints that can be alleviated by the policy instrument. We find that positive effects are stronger at times when refinancing conditions for the private sector are tight. Furthermore, our results indicate that small firms and firms with little liquid means benefit more, and that the public guarantees matter especially for contracts involving large values at risk. Our analysis contributes to a better understanding of the interplay between export credit guarantees and financial market imperfections, which is crucial for an efficient policy design. |
| JEL: | F12 F36 G28 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc14:100478&r=int |