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on International Trade |
| By: | Dominik Boddin; Horst Raff; Natalia Trofimenko |
| Abstract: | This paper uses micro-data from the World Bank Enterprise Surveys 2002-2006 to investigate how foreign ownership affects the likelihood of manufacturers in developing countries to export and/or import. Applying propensity score matching to control for differences across firms in terms of labor productivity and other characteristics, we find that foreign ownership is an economically important and statistically significant determinant of the likelihood that a firm will export and/or import. Foreign ownership raises the propensity to export by over 17 and the propensity to import by more than 13 percentage points. The effects are even bigger for the lowest-income countries |
| Keywords: | international trade, multinational enterprise, foreign direct investment, foreign ownership, development, intermediation |
| JEL: | F12 F14 F23 O19 |
| Date: | 2015–03 |
| URL: | http://d.repec.org/n?u=RePEc:kie:kieliw:1995&r=int |
| By: | W. Steingress |
| Abstract: | Market size matters for exporters if firms must recover fixed costs. This paper uses the relationship between the extensive margins of exports and destination market size to evaluate whether fixed costs operate at the firm or at the product level. If fixed costs are at the firm level, multi-product firms have a cost advantage and dominate international trade. If fixed costs are at the product level, many firms export different varieties of the same product. Using detailed product level data from 40 exporting countries to 180 destination markets, the results indicate that entry barriers operate at the product level. Looking at firm entry within products across time and destinations, I find evidence of spillover effects that reduce fixed costs for product market rivals, increase firm en- try and augment export revenues. The efficiency gains in production through lower product fixed costs outweigh the competition effects from more firm entry. Trade policies encouraging product entry, such as advertising products in destination markets through export promotion agencies, would result in more firm entry and generate higher export revenues. |
| Keywords: | Fixed costs, spillovers, market size. |
| JEL: | F12 F14 F23 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:544&r=int |
| By: | Michele Imbruno |
| Abstract: | This paper highlights the crucial role played by international access to intermediate inputs to explain firm-level performance, via two channels simultaneously: trade and FDI. We develop a simple theoretical model showing that trade integration of input market entails an efficiency improvement within firms able to import (gains from input switching) and an efficiency decline within other firms (losses from domestic input availability). At the same time, FDI integration of input market implies non-importers’ efficiency enhancement (gains from input switching) and some ambiguous effects on importers’ efficiency (due to additional losses from foreign input availability). Using firm-level data from the Chinese manufacturing sector over the period 2002-2006, we find some results coherent with our theoretical predictions. |
| Keywords: | Heterogeneous firms, Trade liberalization, FDI, Intermediate inputs, Productivity JEL Classification: F12, F14, F23 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:not:notgep:15/04&r=int |
| By: | A. Berthou; L. Fontagné |
| Abstract: | We estimate the elasticity of extra-EU French firm-level exports with respect to applied tariffs, a variable trade cost. We propose a methodology controlling for unobserved firm characteristics driving selection in exports market and for the usual resistance terms. Results confirm a significant negative impact of tariffs on firm-level exports, with one fifth of this impact falling on the induced adjustment in the exporters' product mix. When controlling for this adjustment and focusing on the core exported products, the elasticity of the product-destination firm-level exports with respect to applied tariffs is estimated at about -2.5. |
| Keywords: | International trade, firm heterogeneity, multi-product exporters, trade elasticity. |
| JEL: | F12 F15 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:543&r=int |
| By: | OECD |
| Abstract: | Regional Trade Agreements (RTAs) are key instruments to governing international trade, and reflect a balance between political and economic objectives. The level of liberalisation in the agriculture sector can differ substantially across negotiated agreements, and even across products within the same agreement. This paper synthesises the results of the analyses found in previous OECD studies on the agricultural component of some 53 RTAs. It identifies those components that can be trade constraining and explores ways in which future RTAs can facilitate trade. It finds that market access could be improved under an RTA by removing limitations on tariff concessions, harmonising rules of origin, limiting the use of special safeguards to those allowed by the WTO-AoA, prohibiting export subsidies and other export restrictions except as permitted by Article XI of WTO_GATT, and implementing core SPS principles. |
| Keywords: | agriculture, tariff elimination, SPS measures, regional trade agreements, safeguards |
| JEL: | F1 F13 Q10 Q23 |
| Date: | 2015–03 |
| URL: | http://d.repec.org/n?u=RePEc:oec:agraaa:79-en&r=int |
| By: | Tobias D. Ketterer |
| Abstract: | This paper provides evidence that the reduction in bound MFN tariffs is significantly larger for products with initially high tariff levels. These findings highlight the sensitivity of the PTA-external tariff question to the inclusion of initial tariffs, putting into perspective the previously identified stumbling block in a European context. Using micro-level trade and tariff data, we also find evidence that the type of trading partner, as well as the consideration of current or anticipated trade preferences matters. |
| Keywords: | Regionalism, Preferential Trade Agreements, External tariff liberalisation, European Union. JEL classification: F13, F14 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:not:notgep:15/03&r=int |
| By: | Jérôme Héricourt; Clément Nedoncelle |
| Abstract: | In this paper, we study how firm-level export performance is affected by Real Exchange Rate (RER) volatility and investigate the way this effect is shaped by firm size and more specifically, the number of destinations. Our empirical analysis relies on a French firm-level database that combines balance-sheet and product-destination-specific export information over the period 1995-2009. More specifically, we show that export performance is affected by both bilateral and multilateral real exchange rate volatility (that is, the weighted volatility of all other destinations served by firms), the latter embodying the existence of third-market effects. Besides, we find that firm size and the number of destinations seem to exacerbate the impacts of both bilateral and multilateral RER volatilities on export performance: firms tend to reallocate exports away from destinations characterized by higher, relative RER volatility, and are even more prone to do so when the scope of possible reallocations is extended. Our results suggest that more destination-diversified firms are better able to handle exchange rate risks, with significant implications for exports at the macro level: a very simple empirical exercise shows that aggregate exports would have been 6.6% larger if all firms had been able to reallocate exports across sufficiently numerous destinations. |
| Keywords: | Exchange rate volatility;multi-destination exporters;hedging;reallocation |
| JEL: | F14 F31 L25 |
| Date: | 2015–03 |
| URL: | http://d.repec.org/n?u=RePEc:cii:cepidt:2015-03&r=int |
| By: | Kilinc, Zubeyir; Mavuş, Merve; Oduncu, Arif |
| Abstract: | The trade volume and diversity of the products traded between Korea and Turkey have been increasing since early 2000s. On top of this, the enthusiasm of the countries in exploring new opportunities led them to start the negotiations on signing a free trade agreement in 2010. The process was finalized in 2012. The agreement foresees that all of the trade tariffs on industrial products and most of the tariffs on agricultural products will be removed in seven and ten years, respectively. To the best of our knowledge, this study is the first one that investigates possible economic impacts of this agreement on Korean and Turkish economies. It employs a computable general equilibrium model and uses the Global Trade Analysis Project database. It finds that the agreement will benefit both parties in terms of GDP and export. In particular, total gains of Korea and Turkey would be as high as 0.129 and 0.054 percent of their respective GDPs. Finally, the exports of Korea might increase by up to 0.139 percent where that of Turkey might increase by 0.164 percent. |
| Keywords: | Computable General Equilibrium (CGE) Analysis, Free Trade Agreements (FTA), Global Trade Analysis Project (GTAP), Korea, and Turkey |
| JEL: | F10 F14 |
| Date: | 2015–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:63277&r=int |
| By: | Victor Kummritz (Graduate Institute of International and Development Studies - Centre for Trade and Economic Integration) |
| Abstract: | Global Value Chains (GVCs) have become a central topic in trade and development policy but little is known about their actual impact on economic performance because data availability has been limited. Using a new unique set of Inter- Country Input-Output tables with extensive country coverage, I look at the relationship between GVC participation and domestic value added at the industry-level to determine if and for whom GVCs are beneficial. I show that GVC participation is positively related to domestic value added along the value chain. However, this effect is only significant for middle- and high-income countries. Deriving novel source/destination country-specific indicators, I present evidence on theoretical transmission channels between GVCs and domestic value added that explain these results. More specifically, I find support for productivity enhancing effects through cost savings when richer countries source from low-wage countries. In contrast, low- and middle-income countries only benefit from technology upgrading and spillovers if they have sufficient levels of absorptive capacity. |
| Keywords: | Global Value Chains, International Trade, Economic Development |
| JEL: | F13 F14 F15 |
| Date: | 2015–03–19 |
| URL: | http://d.repec.org/n?u=RePEc:gii:giihei:heidwp02-2015&r=int |
| By: | Eduard Marinov (VUZF University) |
| Abstract: | African countries and their regional economic communities are trying to achieve integration through free trade, creation of customs unions and organization of common markets. International trade is a means for acquisition of fixed assets, equipment, materials and processed goods that are critical to economic growth. In this regard, African countries and the institutions of their integration entities must work to expand the volume of total trade, as well as the trade flows between each other, using the means of trade liberalization. The paper analyses the dynamics of trade flows and the trends in trade patterns of African countries and regional economic communities with special focus on intraregional and intra-continental trade. The study presents the main import and export destinations both in continental and global terms thus outlining the trends in African countries’ and Regional economic communities’ direction of trade for the period 2003-2012 and trying to draw some conclusions on the realization of potential benefits of integration. |
| Keywords: | African integration, Regional economic communities, African trade |
| JEL: | F15 N17 |
| Date: | 2014–12 |
| URL: | http://d.repec.org/n?u=RePEc:sek:iacpro:0901864&r=int |
| By: | Zhan QU; Horst Raff; Nicolas Schmitt |
| Abstract: | The paper develops a simple theoretical model of inventory control in global supply chains. It identifies a role for intermediaries in managing inventory, and shows that inserting an intermediary as an additional link in a supply chain is profitable when demand volatility is high. It also provides conditions under which the intermediary handling inventory is located in the exporting versus the importing country. Trade liberalization in the form of less lumpy trade is shown to expand the role of export and import intermediaries but to have potentially negative effects on the volume of international trade and social welfare in the importing country |
| Keywords: | international trade, supply chain, inventory, intermediation, lumpy trade |
| JEL: | F12 F23 L22 |
| Date: | 2015–03 |
| URL: | http://d.repec.org/n?u=RePEc:kie:kieliw:1993&r=int |
| By: | Hye-Young Lee (Sungkyunkwan University) |
| Abstract: | This paper examines the impact of political economic sensitivities of the trade regime among politically asymmetric countries. Our concerns focus on the effects of firm’s lobbying activity in each country, not only tariff setting, but also on the trade regime's decision, especially considering the countries’ asymmetries in political economic sensitivities. We derive the following conclusion from our oligopolistic political economy model. If the country has a greater political bias, then the domestic government prefers to participate in unilateral trade regime or bilateral trade regimes. However, if the country’s political factor is insignificant, then the government prefers to carry out complete free trade. These results imply that Korea-China-Japan FTA negotiation could be accelerated when three countries’ political sensitivities are larger. Moreover, China, which has the greatest political sensitivity, would be more likely to participate in Korea-China-Japan FTA. We find that the sharp contrast between these results and the previous literature stems mainly from the asymmetries of political economic sensitivities when domestic governments determine the political tariff and trade regime. |
| Keywords: | Political Economic Sensitivities; Trade Regime; Lobbying; Strategic Trade Policy |
| Date: | 2014–12 |
| URL: | http://d.repec.org/n?u=RePEc:sek:iacpro:0903024&r=int |
| By: | Tomas Havranek; Zuzana Irsova |
| Abstract: | National borders reduce trade, but most estimates of the border effect seem puzzlingly large. We show that major methodological innovations of the last decade combine to shrink the border effect to a one-third reduction in international trade flows worldwide. The border effect varies across regions: it is substantial in emerging countries, but relatively small in OECD countries. For the computation we collect 1,271 estimates of the border effect reported in 61 studies, codify 32 aspects of study design that may influence the estimates, and use Bayesian model averaging to take into account model uncertainty in meta-analysis. Our results suggest that methods systematically affect the estimated border effects. Especially important is the level of aggregation, measurement of internal and external distance, control for multilateral resistance, and treatment of zero trade flows. We find no evidence of publication bias. |
| Keywords: | Bayesian model averaging, bilateral trade, borders, gravity, meta-analysis, publication selection bias |
| JEL: | F14 F15 |
| Date: | 2015–03 |
| URL: | http://d.repec.org/n?u=RePEc:cnb:wpaper:2015/01&r=int |
| By: | Hacer Simay Karaalp (Pamukkale University, Department of Labour Economics and Industrial Relations); Sevcan GüneÅŸ (Pamukkale University, Department of Economics) |
| Abstract: | As a result of international trade liberalization policies, what is the effect of increasing volume of trade between developed and developing countries on wages of the countries have been the subject of many studies. The goods composition of international trade between developed and developing countries, also called north-south trade, consists of technology and capital-intensive exports goods of developed countries where skilled labor used and labour intensive, light industry and agricultural exports goods of developing countries where unskilled labor is intensively used. Stolper Samuelson Theorem, based on the Heckscher–Ohlin Model, stated that factor incomes between two open economies would convergence through the increasing volume of trade. In this context, many empirical studies in the literature revealed that trade lead to increase and decrease income inequality. In this study, the relationship between Turkey’s top five manufacturing exports sectors to EU-15 which are manufacture of motor vehicles, wearing apparel, textiles, electrical equipments and food products and total manufacturing and wages are analyzed by employing a time series unit root, the Johansen cointegration and Granger causality tests for the period of 2005:Q1-2014:Q1. Data for the individual exports (Million U.S. Dollars) are provided from TurkStat (Turkish Statistical Institute) according to the ISIC Rev.4 classification and the gross wages-salaries index which is used as a proxy for real wages, were also taken from TurkStat according to the NACE Rev.2 classification. According to the findings, test results revealed a uni-directional long-run and short-run relationship between exports of labour intensive products of Turkey such as manufacture of wearing apparel, textiles and food products. While the increase of exports leads to increase the real wages of manufacture of wearing apparel, textiles, food products and total manufacturing in the long-run, exports also affected real wages in the manufacture of wearing apparel and food in the short-run. |
| Keywords: | Exports, Manufacturing Sectors, Granger Causality test, Turkey |
| JEL: | F14 J31 C32 |
| Date: | 2014–10 |
| URL: | http://d.repec.org/n?u=RePEc:sek:iacpro:0702207&r=int |
| By: | Camila Casas; Federico J. Díez; Alejandra González |
| Abstract: | We study the relationship between total factor productivity (TFP) and exporting decisions for Colombian manufacturing firms during 2005-2013. We find that productivity increases a firm's probability of being an exporter, and that exporters have higher productivity, with a premium as high as 85 percent. These findings are robust to several TFP measures. Moreover, we find that not all exporters are equal: firms that export continuously, that export a greater number of products, and/or that export to a larger number of destinations tend to be more productive. We do not find, however, any relationship between productivity and the type of destination or exported product. Finally, we find evidence that future exporters have an ex ante productivity advantage, and (weaker) evidence of TFP increasing after a firm becomes an exporter. |
| Keywords: | Productivity, exporters, productivity premium, openness. |
| JEL: | F14 L22 L60 |
| Date: | 2015–03–27 |
| URL: | http://d.repec.org/n?u=RePEc:col:000094:012678&r=int |
| By: | Andrzej Cieslik (University of Warsaw) |
| Abstract: | In this paper we study the choice between exporting and foreign direct investment (FDI) in the Cournot duopoly framework. First, we identify the conditions necessary for exporting and FDI, depending on costs of exporting and the cost of foreign investment. Then, we discuss various proximity-concentration tradeoffs. Finally, we demonstrate that six possible types of equilibriums may emerge depending on various combinations of the key parameters of the model. These equilibriums include: a monopoly FDI equilibrium, a monopoly exporting equilibrium, a domestic monopoly equilibrium, a duopoly FDI equilibrium, a duopoly exporting equilibrium, and no entry equilibrium. |
| Keywords: | exporting, foreign direct investment, proximity-concentration tradeoff |
| JEL: | F23 |
| Date: | 2015–03 |
| URL: | http://d.repec.org/n?u=RePEc:pes:wpaper:2015:no11&r=int |
| By: | Yu Hao; Yi-Ming Liu |
| Abstract: | Since the reform and opening up in 1978, China's Foreign Direct Investment (FDI) and foreign trade have grown rapidly. At the same time, China's Carbon Dioxide (CO2) emissions surged and China has become the world's biggest CO2 emitter. The purpose of this paper is to investigate the relationship between FDI, foreign trade and Carbon Dioxide emissions in China. Using a two-equation model adapted from Halkos and Paizanos (2013), the total impact of FDI on emission is divided into the direct and indirect impacts and estimated accordingly. The results suggest that the increase in per capita FDI helps to inhibit the growth of China's per capita CO2 emissions. Concretely, the dominating direct effect of FDI on carbon emissions is negative and the indirect effect is positive. However, for foreign trade, both direct and indirect effects on CO2 emissions are insignificant after taking consideration of potential endogeneity and introducing dynamics. |
| Keywords: | Foreign Direct Investment, Panel Data, CO2 Emissions, Direct and indirect impacts |
| JEL: | Q47 Q54 |
| Date: | 2014–09–02 |
| URL: | http://d.repec.org/n?u=RePEc:biw:wpaper:72&r=int |
| By: | Marti, Josep; Alguacil, Maite; Orts, Vicente |
| Abstract: | In this paper we investigate how the different characteristics of European multinational firms affect their decision to locate in different foreign markets. Considering the existence of n geographically separated markets with different attributes, in terms of entry or fixed costs, variable production costs and the market potential, our theoretical model shows that both firm and country characteristics determine the location of multinational firms. The model reveals that given the characteristics of the countries, the decision to enter a specific country in order to serve all markets globally will depend on all the sources of a firm’s heterogeneity. In the empirical analysis, we drawn on a dataset comprised of harmonized and detailed firm-level data across European countries for 2008 (EFIGE dataset). The results obtained confirm that firms’ international location decision reflects the underlying dissimilarities of European multinational firms, including the specific industry in which they operate. More specifically, our estimations show that among European firms investing in non-European countries, only the most productive firms invest in Latin America and those that decide to enter North America are more productive than firms that locate in China and India. However, we find that this ranking may vary across industries, depending not only on TFP, but also on the years of establishment and the firms’ human capital and R&D intensity. |
| Keywords: | multinational firms, firm heterogeneity, location choices, European FDI |
| JEL: | D24 F14 F21 F23 |
| Date: | 2015–03–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:63178&r=int |
| By: | Roberto Antonietti (University of Padova); Raffaello Bronzini (Bank of Italy); Giulio Cainelli (Unicversity of Padova) |
| Abstract: | This paper investigates empirically whether inward greenfield foreign direct investment (FDI) is related to greater sectorial innovation in the host Italian provinces. We combine several sources of data to estimate panel count models, regressing the annual number of patents in each province and industry against a series of lagged FDI variables. Our results show that a positive relationship between FDI and local patenting emerges only for services. In particular, we find that greater inward FDI in services positively influences local patenting activity in knowledge-intensive business services. These results are robust to endogeneity and the inclusion of province controls and fixed effects. |
| Keywords: | inward greenfield FDI, innovation, patents, research and development, panel count models |
| JEL: | F14 F23 O31 C23 |
| Date: | 2015–03 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:wptemi:td_1006_15&r=int |
| By: | Ahmet Ay (Selcuk University); Mehmet Mucuk (Selcuk University); Mustafa Gerçeker (Selcuk University) |
| Abstract: | Foreign trade is playing a major role in Turkey’s economic development and prosperity. For this reason it is required to provide diversification of export products for obtaining the expected return on foreign trade. The aim of this study is to analyse the developments in Turkey’s foreign trade diversification. In this context Gini-Hirschman concentration method was made use of and concentration coefficients were calculated for import and export on the basis of both country and product making use of the concentration made. Statistical findings obtained on product basis have revealed that although diversification of products exported increased in both periods this increase did not realize at the expected rate. On the other hand, the change in the diversification of products imported is bigger than export but change occurred in the direction of decrease in diversification rather than in the direction of increase. Country based concentration decreased in terms of both export and import. |
| Keywords: | Export, Import, Concentration |
| Date: | 2014–12 |
| URL: | http://d.repec.org/n?u=RePEc:sek:iacpro:0902945&r=int |
| By: | James Lake (Southern Methodist University); Maia K. Linask (University of Richmond) |
| Abstract: | Governments, especially in developing countries, routinely practice binding overhang (i.e. setting applied tariffs below their binding WTO commitments) and frequently move the applied tariff for a given product up and down over the business cycle. Indeed, counter to conventional wisdom, applied tariffs are pro-cyclical in developing countries. We explain this phenomenon using a dynamic theory of lobbying. The government is captured by import-competing industries (or exporters), whose applied tariff concessions in response to lobbying threats by exporters (import-competing industries) cause fluctuations in applied tariffs and, thus, binding overhang. Applied tariffs are pro-cyclical when the government is captured by import-competing industries because these industries concede lower tariffs to exporters during recessions given recessions lower the opportunity cost of lobbying and thereby generate a stronger lobbying threat. |
| Keywords: | Binding overhang, lobbying, tariff bindings, applied tariffs |
| JEL: | C73 D72 F13 |
| Date: | 2015–02 |
| URL: | http://d.repec.org/n?u=RePEc:smu:ecowpa:1503&r=int |
| By: | Falvey R.; Foster-McGregor N. (UNU-MERIT) |
| Abstract: | Bilateral Investment Treaties BITs have become increasingly popular as a means of encouraging FDI from developed to developing countries. We adopt a matched difference-in-difference estimation to deal with the problem of endogeneity when estimating the effects of BITs on inward FDI. Our results indicate that forming a BIT with a developed country approximately doubles FDI inflows and stocks to developing countries on average, with a significant part of this arising from the development of new FDI relationships. The effects of BIT formation on FDI tend to increase with the size and similarity of the host and source economies and BITs may be complementary to institutional quality in the host country. |
| Keywords: | Single Equation Models; Single Variables: Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; International Investment; Long-term Capital Movements; |
| JEL: | C21 F21 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:unm:unumer:2015010&r=int |
| By: | Francesco Bogliacino; Dario Guarascio; Mario Pianta |
| Abstract: | In this article we extend the model developed by Bogliacino and Pianta (2013a, 2013b) on the link between R&D, innovation and economic performance, considering the impact of innovation of export success. We develop a simultaneous three equation model in order to investigate the existence of a ‘virtuous circle’ between industries’ R&D, share of product innovators and export market shares. We investigate empirically – at the industry level – three key relationships affecting the dynamics of innovation and export performance: first, the capacity of firms to translate their R&D efforts in new products; second, the role of innovation as a determinant of export market shares; third, the export success as a driver of new R&D efforts. The model is tested for 38 manufacturing and service sectors of six European countries over three time periods from 1995 to 2010. The model effectively accounts for the dynamics of R&D efforts, innovation and international performances of European industries. Moreover, important differences across countries emerge when we split our sample in a Northern group – Germany, the Netherlands and the United Kingdom – and a Southern group – France, Italy and Spain. We find that the ‘virtuous circle’ between innovation and competitiveness holds for Northern economies only, while Southern industries fail to translate innovation efforts into export success. |
| Keywords: | Export, R&D, Innovation, Three Stages Least Squares, Europe. |
| JEL: | F12 F14 O31 O33 O52 |
| Date: | 2015–03–19 |
| URL: | http://d.repec.org/n?u=RePEc:col:000178:012653&r=int |
| By: | Ronald B. Davies (University College Dublin); Julien Martin (Université du Québec à Montréal); Mathieu Parenti (Université Catholique de Louvain); Farid Toubal (Ecole Normale Supérierure de Cachan) |
| Abstract: | This paper analyzes the transfer pricing of multinational firms. We propose a simple framework in which intra-firm prices may systematically deviate from arm’s length prices for two motives: i) pricing to market, and ii) tax avoidance. Multinational firms may decide not to avoid taxes if the risk to be sanctioned is high compared to the tax gap. Using detailed French firm-level data on arm’s length and intra-firm export prices, we find that both mechanisms are at work. The sensitivity of intra-firm prices to foreign taxes is reinforced once we control for pricing-to-market determinants. Most importantly, we find almost no evidence of tax avoidance if we disregard exports to tax havens. Back-of-the-envelope calculations suggest that tax avoidance through transfer pricing amounts to about 1% of the total corporate taxes collected by tax authorities in France. The lion’s share of this loss is driven by the exports of 450 firms to ten tax havens. As such, it may be possible to achieve significant revenue increases with minimal cost by targeting enforcement. |
| Keywords: | Transfer pricing; Tax haven; Pricing to market |
| JEL: | F23 H25 H25 H32 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:btx:wpaper:1501&r=int |
| By: | Iamsiraroj, Sasi; Doucouliagos, Hristos |
| Abstract: | FDI is seen widely as a vital source of investment, technology transfer, and growth. The factors that attract FDI have been a longstanding source of debate. The authors present a comprehensive assessment of the accumulated evidence on one factor, the success of economic growth in attracting FDI. Meta-regression analysis is applied to 946 estimates from 140 empirical studies. The authors show that there is a robust positive correlation between growth and FDI. Significantly larger correlations are established for single country case studies than with cross-country analysis. It also appears that growth is slightly more correlated with FDI in developing countries. |
| Keywords: | economic growth,FDI,meta-regression analysis |
| JEL: | O24 F21 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ifwedp:201518&r=int |
| By: | Riccardo Cristadoro (Bank of Italy); Leandro D’Aurizio (Bank of Italy) |
| Abstract: | We look at business survey data on Italian internationalized firms’ characteristics and performances since the outbreak of the 2008 crisis until 2012. Among Italian firms with 20 employees or more, an increasing share (from 7.1 to 13.2% between 2006 and 2011) owns a foreign productive unit. The main reason for locating units in advanced countries is to be close to outlet markets, this remains true for internationalization in developing countries (where nearly half of such units were located), even though in this case the search for lower costs becomes more important. Italian multinationals are on average more productive and profitable, even when compared to exporting firms not operating abroad. More specifically, the productivity gap compared to these latter firms is 15 percent, closely aligned with that measured by Helpman at al. (2004) on a sample of US firms. Since 2008, internationalized firms’ operating profit was above the average, as well as their planned expansion both in Italy and abroad. In firms’ opinion, the support by Italian public institutions to expand their foreign activity is generally not effective. |
| Keywords: | internationalization, competitiveness, firm performance, economic crisis |
| JEL: | F1 F23 C12 C21 |
| Date: | 2015–03 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:opques:qef_261_15&r=int |
| By: | Zhan QU; Horst Raff; Nicolas Schmitt |
| Abstract: | We analyze in this paper determinants of voluntary knowledge transfer from foreign investors to their local suppliers in 19 Sub- Saharan African countries using data from the 2010 Africa Investor Survey by UNIDO. We argue that not all backward linkages entail the same potential for spillovers since not all local sourcing activities by multinationals involve a transfer of knowledge to suppliers. Our findings support the idea that foreign investor´s heterogeneity and country environment are key factors shaping the spillover potential of backward linkages. Local management autonomy and the long-term nature of local procurement contracts are positively associated with the transfer of knowledge. Also sourcing strategies that seek to meet local market requirements, to optimize value chain efficiency and that respond to social responsibility commitments are more likely to involved a transfer of knowledge to suppliers. Additionally, host country institutional quality and institutional distance relative to the origin country of the MNE are relevant determinants of the degree of knowledge transfer. Investment policies that merely focus on promoting larger shares of locally sourced inputs might fail to get the most of FDI positive externalities. Instead, quality linkages that involve a transfer of knowledge should be promoted over quantity linkages |
| Keywords: | knowledge transfer, global value chains, institutional distance, supplier upgrading, Sub-Saharan Africa |
| JEL: | F23 O33 |
| Date: | 2015–03 |
| URL: | http://d.repec.org/n?u=RePEc:kie:kieliw:1994&r=int |
| By: | Jean-Michel Benkert |
| Abstract: | We study the bilateral trade problem put forward by Myerson and Satterthwaite (1983) under the assumption that agents are loss-averse. We use the model developed by Kőszegi and Rabin (2006, 2007) to find optimal mechanisms for the minimal subsidy, revenue maximization and welfare maximization problem. In both, welfare and revenue maximizing mechanisms, the designer induces less trade in the presence of loss-aversion. Intuitively, the designer is providing the agents with partial insurance. Moreover, the designer optimally provides the agents with full insurance in the money dimension, i.e. she offers deterministic transfers. Another implication of loss-aversion is that it increases the severity of the impossibility problem, that is, the minimal subsidy needed to induce materially efficient trade is higher. All results display robustness to the exact specification of the reference point. We also provide some general mechanism design results. |
| Keywords: | Bilateral trade, loss-aversion, mechanism design, deterministic transfers |
| JEL: | C78 D02 D03 D82 D84 |
| Date: | 2015–03 |
| URL: | http://d.repec.org/n?u=RePEc:zur:econwp:188&r=int |
| By: | Crescenzi R.; Pietrobelli C.; Rabellotti R. (UNU-MERIT) |
| Abstract: | This paper contributes to the current debate in both Economic Geography and International Business on the nature and strategies of Multinational Enterprises MNEs from emerging countries EMNEs. The paper fills a very relevant gap in the existing literature by shedding new light on the location strategies of EMNEs at the national and regional level, looking at their investment drivers and systematically comparing them with those of multinationals from advanced countries AMNEs. The empirical analysis looks at the location choices of MNEs in the European Union EU-25 regions and unveils that EMNEs follow distinctive location strategies. Their attraction into large regional markets is similar to AMNEs as well as their irresponsiveness to efficiency seeking motives. Conversely, the most knowledge-intensive investments of EMNEs respond mainly to two attraction factors strategic assets in the form of local technological dynamism and the agglomeration of foreign investments in the same business functions. In addition, both the national and the regional levels are simultaneously relevant to EMNEs decisions. |
| Keywords: | International Investment; Long-term Capital Movements; Multinational Firms; International Business; Technological Change: Choices and Consequences; Diffusion Processes; Size and Spatial Distributions of Regional Economic Activity; Regional Development Planning and Policy; |
| JEL: | F21 F23 O33 R12 R58 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:unm:unumer:2015009&r=int |
| By: | Lourdes Gabriela Daza Aramayo (Center for Latin American Studies, University of Economics in Prague) |
| Abstract: | This paper focuses on the identification of the variables determining the attractiveness of foreign direct investment in Latin America, represented by 17 countries over a period of time from 1996 to 2011. It considers variables traditionally not taken into account, such as the tax rate and institutional factors, which have revealed important explanatory variables also traditionally considered as GDP, inflation, population, the share of GDP by sector, the income level, etc. According to the analysis in this paper and the results obtained, it is very clear that institutional factors such as the size of the economy and the population have an influence in attracting FDI flows. The institutional quality is determinative for the attraction of foreign direct investment to these countries. Property rights, monetary freedom and investment freedom, are institutional indicators of great relevance as explanatory factors for attracting foreign direct investment, while government expenditures follows to a lesser degree. |
| Keywords: | Foreign Direct Investment, FDI attractiveness, FDI determinants, theories of FDI, Latin America |
| JEL: | N46 F21 P45 |
| Date: | 2014–07 |
| URL: | http://d.repec.org/n?u=RePEc:sek:iefpro:0401923&r=int |
| By: | Elzbieta Janton-Drozdowska (Adam Mickiewicz University in Poznan); Maria Majewska (Adam Mickiewicz University in Poznan) |
| Abstract: | The aim of this work was to present the similarities between the components of competitiveness and investment attractiveness as two complementary categories, and to show the role of new locational advantages in determining the level of investment attractiveness of a country. The other objective of this paper was to provide a comparative analysis of Central and Eastern European countries in terms of their investment attractiveness. Thus this paper was organized as follows: the first part of the paper focused on a country competitiveness and the traditional and new location advantages that determine its investment attractiveness in view of direct investment inflows in the light of M. Porter’s model of a diamond, an eclectic paradigm of J. H. Dunning and new growth theories. The second part presented the results of investment attractiveness analysis including selected countries of CEE in the years 1995-2013. Comparing the investment attractiveness of Central and Eastern European countries shows that rather a narrow group of countries attract a greater amount of FDI and many more countries have experienced a decline in FDI. Therefore, the research results allow the conclusion that Central and Eastern Europe reduced its investment attractiveness over the past years. This means that the majority of Central and Eastern European countries are becoming less successful in attracting FDI, and therefore in shaping the environment in which foreign companies wish to conduct their business. |
| Keywords: | investment attractiveness, Central and Eastern European countries |
| JEL: | F21 O33 O52 O57 |
| Date: | 2015–03 |
| URL: | http://d.repec.org/n?u=RePEc:pes:wpaper:2015:no13&r=int |
| By: | Thomas Bernhardt; Ruth Pollak |
| Abstract: | Recent decades have witnessed an increasing integration of developing countries into global value chains (GVCs). This growing participation in global production sharing has raised hopes for economic upgrading within such value chains. However, globalization has intensified international competition, and achieving economic upgrading is not an easy task. Moreover, the social consequences of participating in GVCs are not always positive; however, they have received considerably less attention in the literature. This paper suggests a simple and parsimonious approach to measuring economic and social upgrading (and downgrading) in GVCs. Applying this parsimonious methodology and using quantitative secondary data, we analyze how widespread upgrading has been in four selected manufacturing GVCs: apparel, wood furniture, automotive, and mobile phones. We also investigate to what extent downgrading is part of the reality and undertake a comparative analysis across GVCs, regions and country groups (developing vs. developed countries). We find that the promise of industrial upgrading through participation in GVCs does not materialize for everyone. Indeed, economic upgrading has taken place in just over a quarter of the countries in our sample, among them mainly developing countries. Finally, we examine the relationship between economic performance and social performance in the different GVCs to investigate whether or not economic upgrading is typically associated with social upgrading. While patterns differ across GVCs, we find that economic upgrading is more likely to occur simultaneously with social upgrading than without, and vice versa. Our analysis, thus, suggests that economic upgrading is conducive to, but not sufficient for, social upgrading to occur. |
| Keywords: | global value chains, economic upgrading, social upgrading, apparel, automotive, mobile phones, wood furniture |
| JEL: | F14 O19 O57 |
| Date: | 2015–03 |
| URL: | http://d.repec.org/n?u=RePEc:wsr:wpaper:y:2015:i:150&r=int |
| By: | Farai Manwa (Southern Cross University) |
| Abstract: | It has been widely documented that the world is classified into at least two economic systems of developed and developing countries according to average GDP levels. The arising research question then is why has development been more proliferate in certain regions of the world and are there any strategies that might enhance growth in poorer regions? Whilst economic growth theory does not give a definitive solution to the problem neoclassical growth and endogenous growth theory provide clues to the necessary variables required for growth. Empirical studies show incongruity on the effects of trade liberalisation on economic growth. Furthermore, to the best of our knowledge, no studies have examined the impact of trade liberalisation within Southern African Customs Union (SACU) countries. In an effort to partially remedy this neglect we empirically estimate the dynamic causal relationships between economic growth and several trade liberalisation measures whilst controlling for growth factors. Study data is derived from the World Bank, Bruegel, and Penn World Tables national accounts data. Employing the Bounds Testing Autoregressive Distributed Lag (ARDL) Approach to Cointegration, we quantify for the first time the relationship between trade liberalisation and economic growth in the SACU countries over a time frame ranging from 1980 to 2011. |
| Keywords: | Trade Liberalisation, Economic Growth, SACU, Bounds Testing Autoregressive Distributed Lag (ARDL) Approach to Cointegration |
| JEL: | F14 F00 F43 |
| Date: | 2014–10 |
| URL: | http://d.repec.org/n?u=RePEc:sek:iacpro:0801962&r=int |