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on International Trade |
| By: | J., Julio |
| Abstract: | We estimate that a hard Brexit (HB) would reduce UK agro-industrial-imports from the EU by around 50%. Following the dismantling of the Common Agricultural Policy (CAP) the UK Government has proposed to shift towards market-oriented agricultural policies and negotiating free trade agreements (FTAs) with interested countries. Assuming that the UK restores the previous level of agro industrial products, the paper estimates the net export gains that Mercosur could achieve in the UK market for different agro-industrial products. In the event of a Hard Brexit, and assuming that the Mercosur-EU negotiations are not completed before, Mercosur would then face two negotiations in Europe: with the EU27 and with the UK. We argue that failing Mercosur to give priority to talks with the UK, other countries are more than likely sign trade agreements and fill its import gap thus creating additional trade diversion effects against the Mercosur. We offer back-of-the-envelope estimates indicating that under such an FTA, Mercosur could double its agro-industrial exports to the UK. These significant export gains are concentrated in a group of products that are now highly protected by the CAP. |
| Keywords: | Brexit, Mercosur, trade diversion, trade institutions, agro-industrial trade, Common Agricultural Policy, free trade agreement |
| JEL: | D4 F13 F14 F15 F17 F5 F51 F53 F55 |
| Date: | 2019–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:94885&r=all |
| By: | Filippo Bontadini (Science Policy Research Unit (SPRU) University of Sussex, UK; OFCE-SciencesPo, Nice) |
| Abstract: | This paper investigates whether trade specialisation explains economies’ trade performance within a Global Value Chain (GVC) context. We consider trade specialisation in natural resources, high and low tech manufacturing and business services, before and after the financial crisis. The aimed contribution of this paper is to shed light on the effects of trade specialisation as measured in domestic value added embodied in exports rather than gross exports. We add to the literature on GVCs by: (i) studying the role of the domestic productive structure in countries’ trade specialisation and performance, (ii) accounting for the rate of changes in trade specialisation as affecting GVC performance. We employ Balassa indexes based on value added flows in a GMM dynamic panel framework. We find that trade specialisation in low-tech manufacturing and natural resources have a negative impact on value added exported by countries. High-tech manufacturing and knowledge intensive services exhibit a positive effect during the crisis period. We discuss these findings in relation to the recent debates on the role of manufacturing and premature de-industrialisation in developing countries. |
| Keywords: | Global Value Chains, Trade Specialisation, KIBS, Input-Output. |
| JEL: | F14 |
| Date: | 2019–06 |
| URL: | http://d.repec.org/n?u=RePEc:sru:ssewps:2019-10&r=all |
| By: | Joaquim Guilhoto; Geoffrey Hewings; Nick Johnstone; Colin Webb; Norihiko Yamano |
| Abstract: | Drawing on the 2018 update of OECD’s Inter-Country Input-Output (ICIO) database, this paper explores the evolution of trade in value added (TiVA) between 2005 and 2015. Changes in international production systems are examined with particular attention given to four key sectors heavily integrated into global value chains (GVCs): Textiles and Apparel; Chemicals; ICT and Electronics; and, Motor Vehicles. Some insights into the roles played by services sectors and non-residents’ expenditure and, the employment and environmental impacts of GVCs, are also provided.Considerable heterogeneity across countries and regions is revealed, particularly for East and Southeast Asian where China plays a key role. Services are increasingly important for manufactured exporting activities as well as for countries wishing to “upgrade” their activities to higher value added stages of production. Taking a consumption perspective suggests that national efforts to mitigate greenhouse gas (GHG) emissions could be affected by international outsourcing of production. |
| Keywords: | CO2 Emissions Embodied in Trade, Inter-Country Input-Output, International Trade, Trade in Employment, Trade in Value Added |
| JEL: | F14 F15 F16 F18 R15 C67 |
| Date: | 2019–08–06 |
| URL: | http://d.repec.org/n?u=RePEc:oec:stiaaa:2019/04-en&r=all |
| By: | Tibor Lalinsky; Jaanika Merikull |
| Abstract: | We investigate how adopting the euro affects exports using firm-level data from Slovakia and Estonia. In contrast to previous studies, we focus on countries that adopted the euro individually and had different exchange rate regimes prior to doing so. Following the New Trade Theory we consider three types of adjustment: firm selection, changes in product varieties and changes in the average value of the exports that compose the exports of individual firms. The euro effect is identified by a difference in differences analysis comparing exports by firms to the euro area countries with exports to the EU countries that are not members of the euro area. The results highlight the importance of the transaction costs channel related to exchange rate volatility. We find the euro has a strong pro-trade effect in Slovakia, which switched to the euro from a floating exchange rate, while it has almost no effect in Estonia, which had a fixed exchange rate to the euro prior to the euro changeover. Our findings indicate that the euro effect manifested itself mainly through the intensive margin and that the gains in trade were heterogeneous across firm characteristics. |
| Keywords: | international trade, common currency areas, euro adoption, transaction costs, Slovakia, Estonia, firm-level data |
| JEL: | F14 F15 |
| Date: | 2019–01–23 |
| URL: | http://d.repec.org/n?u=RePEc:eea:boewps:wp2018-10&r=all |
| By: | Filippo Bontadini (Science Policy Research Unit (SPRU) University of Sussex, UK; OFCE-SciencesPo, Nice) |
| Abstract: | This paper investigates the association between buyer-supplier international trade relationships and supplier’s product upgrading. We proxy the suppliers’ upgrading with a measure of product sophistication. We first propose a measure of power in the trade relationship, combining the dependence of each firm onthe trading partner and their market shares. Using transaction data from Colombia, we next estimate if the measure of power relationship predicts a supplier’s export sophistication, the probability of adding a new product in the trading relationship, and that of increasing export sophistication. We find that suppliers that are highly dependent on buyer’s imports are more likely to fall into a specialisation trap in low sophistication products. Buyers with large market shares trade in sophisticated products, therefore with little margin for upgrading; suppliers with large market shares are more likely to introduce new products, but trade pairs where the buyer depends on the supplier are more likely to upgrade. We further test whether these relationships hold across different destination countries, finding in particular that buyers dominating the market in the US tend to import low-sophistication products and make it harder for suppliers to upgrade. We contribute to the recent literature on buyer-supplier relationships by explicitly including a measure of power into our analysis. In doing this, we also offer further support and complement the qualitative evidence put forward by the literature on governance in global value chains (GVCs). |
| Keywords: | Global Value Chains, Buyer-Supplier relationships, Power, Trade. |
| JEL: | F14 D22 L14 L25 |
| Date: | 2019–06 |
| URL: | http://d.repec.org/n?u=RePEc:sru:ssewps:2019-11&r=all |
| By: | Priyaranjan Jha (Department of Economics, University of California-Irvine); Antonio Rodriguez-Lopez (Department of Economics, University of California-Irvine) |
| Abstract: | This paper introduces a framework to study the impact of trade liberalization on wage inequality and welfare in the presence of monopsonistic labor markets. The interaction of firm heterogeneity in productivity with idiosyncratic preferences of workers for working at different firms generates between-firm wage inequality for workers with identical skills. The degree of monopsony power is captured by the elasticity of firm-level labor supply, with a lower elasticity implying more wage-setting power by the firm. With more productive firms paying higher wages, monopsony power dampens the impact of firm heterogeneity on the allocation of market shares and allows lower productivity firms to survive. In a closed economy this increases inequality, but in an open economy high levels of monopsony power inhibit exporting, which may reduce inequality by compressing wages on the right side of the distribution. Nevertheless, inequality in the open economy is always higher than in autarky. Monopsony power reduces social welfare (for empirically plausible values of the labor supply elasticity) and the gains from trade. |
| Keywords: | Monopsonistic labor market; Wage inequality; Trade liberalization |
| JEL: | F12 F13 F16 |
| Date: | 2019–07 |
| URL: | http://d.repec.org/n?u=RePEc:irv:wpaper:192001&r=all |
| By: | Teodora Borota; Fabrice Defever; Giammario Impullitti |
| Abstract: | In this paper, we document large heterogeneity in innovation policy and performance between old and new EU member states, and present firm-level evidence on the close link between foreign direct investment (FDI) spillovers and eastern European _firms' innovation. Guided by these facts and motivated by the pressing debate on further EU integration, we build a two-region endogenous growth model to analyse the gains from innovation policy cooperation in an economic union. The two regions, the West (the old members) and the East (the new post-2004 members), feature firms competing in innovation for market leadership, are integrated via free trade and costly technology transfer via FDI and have different innovation performance and policy. Calibrating the model to reproduce key features of the EU economy, we compare the outcomes of an East-West R&D subsidy war with a cooperation scenario with unified subsidy across regions, and obtain three main results. First, we find that the dynamic gains spurring from the impact of cooperation on the economy's growth rate are sizable and substantially larger than the static gains obtained internalising the strategic motive for subsidies. Second, our model suggests that the presence of FDI and multinational production alleviates the strategic motive and increases the gains from cooperation. Third, separating FDI and innovation policy generates larger gains from cooperation, a policy complementarity driven by the knowledge spillovers carried by FDI. |
| Keywords: | Optimal innovation policy, growth theory, international policy coordination, EU integration, FDI spillovers |
| JEL: | O41 O31 O38 F12 F42 F43 |
| Date: | 2019–08 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1640&r=all |
| By: | Mandal, Biswajit; Ghosh, Sujata |
| Abstract: | Effects of different reformatory policies have always been a pulsating concern for the researchers and policy makers. Considering this concern, this paper attempts to check various effects of reformatory policies such as labor market reform, tariff cut, change in subsidy, bureaucratic reform in a typical small open economy comprising of both formal and informal sectors. It has been found that the implications of labor market reform and tariff liberalization for factor prices and wage disparity are distinctly opposite. However, skilled labor of the economy benefits from both labor market reform and export subsidy. Next we extend the basic model to bring in related corruption in the informal sector for its illegal nature. This calls for the existence of a sector which helps hassle free informal production. There we find that unskilled workers lose owing to both bureaucratic reform and labor market reform. Nevertheless, though traditionally labor market reform is supposed to harm workers, wage disparity gets ameliorated whereas tariff reform leads to worsening of it. |
| Keywords: | International Trade,Wages,General Equilibrium,Economic Policy,Informal Sector,Extortion |
| JEL: | F1 J31 D5 F11 D73 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:367&r=all |
| By: | Gene M. Grossman; Phillip McCalman; Robert W. Staiger |
| Abstract: | What incentives do governments have to negotiate "new trade agreements," i.e., agreements that constrain not only governments' choices of tariffs, but also their domestic regulatory policies? We focus on horizontal product standards, i.e., those that impose requirements along a horizontal dimension of product differentiation. We introduce differences in ideal products across countries and consider cases in which product choices do not and do confer externalities on other national consumers. In addition to characterizing the features of the optimal new trade agreement in each environment, we ask whether detailed negotiations about regulatory rules are needed for global efficiency or whether an "old trade agreement" augmented by some "policed decentralization" of regulatory procedures can achieve the same outcomes. |
| JEL: | F02 F12 F13 |
| Date: | 2019–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:26132&r=all |
| By: | Milena Kern; Jörg Pätzold; Hannes Winner (WIFO) |
| Abstract: | Trade in services is often hampered by domestic administrative barriers, even when countries are members of the same regional trade agreement. We exploit a large reform in the European Union (the EU Service Directive) aimed at reducing such administrative hurdles in cross-border service provision to estimate its effects on service trade. We employ a difference-in-difference strategy and a Pseudo Poisson Maximum Likelihood (PPML) panel approach to estimate gravity equations with multiple fixed effects. On average, the reform increased intra-EU trade in targeted services between a lower bound of 27 percent and an upper bound of 55 percent, translating into an overall welfare increase between 0.35 and 1.04 percent. This effect of the reform on service trade is corroborated by several robustness and placebo checks. Finally, a disaggregated analysis reveals significant differences between countries and service sectors. |
| Date: | 2019–07–30 |
| URL: | http://d.repec.org/n?u=RePEc:wfo:wpaper:y:2019:i:584&r=all |
| By: | Anabel Gonzalez (Peterson Institute for International Economics); Nicolas Veron (Peterson Institute for International Economics) |
| Abstract: | The combination of China's rapid rise and unique economic system, and of the increasingly aggressive and disruptive US trade policy, is putting the global rules-based trade and economic system under unprecedented and possibly vital threat. The European Union has critical interests at stake in the current escalation, even as it has so far been comparatively spared from US trade policy belligerence and China's reactions. In this context, the European Union should adopt an independent and proactive stance, building up on recent efforts and going beyond them. While in the past the European Union has been unambiguously closer to the United States than to China, it now has shared interests and differences with both countries. It does not currently have to make a general choice of one against the other. And like many other jurisdictions around the world, it should aim at defending its continuing ability not to make such a general choice, even as this stance will generate tensions with both. The recent China-EU summit success illustrates the credibility of this approach, and the objectives stated in its conclusions should be delivered upon. The European Union, even more than the United States or China, has a strategic interest in the preservation of the global rules-based order embodied by the World Trade Organization (WTO). It must take leadership for steering WTO reform and modernization, working closely with broadly aligned third countries such as Japan and other players. It should expand its outreach beyond its immediate negotiating counterparts in both the United States and China, and specifically work at a better understanding of China on the part of its (EU- and member state-level) leading officials. While strengthening its domestic policy instruments to address new challenges, such as the screening of foreign direct investment for security purposes, it must also resist its own temptations of protectionism and economic nationalism. In support of these objectives, the European Union should prepare itself for difficult decisions, which may involve revising some of its current red lines in international trade negotiations. Conversely, the European Union should stand firm on principles such as refusing one-sided agreements and rejecting abusive recourse to national security arguments in trade policies. In working with the European Council and the European Commission, the European Parliament will have a critical role to play in steering the European Union through these challenging times. |
| Keywords: | China, European Parliament, European Union, investment, tariffs, trade policy, trade confrontations, trading blocs, United States, World Trade Organization |
| JEL: | F13 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:iie:wpaper:wp19-13&r=all |
| By: | Donaubauer, Julian; Kannen, Peter; Steglich, Frauke |
| Abstract: | Inspired by a recent and ongoing debate about whether foreign direct investment (FDI) represents a blessing for or an impediment to economic, social, and political development in FDI host countries this paper addresses two issues: Does the presence of foreign investors impact the occurrence of petty corruption? If so, what are the main underlying mechanisms? Geocoding an original firm-level dataset and combining it with georeferenced household survey data, this is a first attempt to analyze whether the presence of foreign investors is associated with changes in local corruption around foreign-owned production facilities in 19 Sub-Saharan African countries. Applying an estimation strategy that explores the spatial and temporal variation in the data, we find strong and consistent evidence that the presence of foreign firms increases bribery among people living nearby. When examining two potential channels, we find no support that FDI-induced economic activity leads to more corruption. In contrast, the results provide evidence that FDI affects corruption via norm transmission. |
| Keywords: | FDI,corruption,georeferenced data,Sub-Saharan Africa |
| JEL: | D1 F21 F23 O12 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:kcgwps:16&r=all |
| By: | Fariñas, José C.; Martín-Marcos, Ana; Velázquez, Francisco J. |
| Abstract: | This paper offers an empirical assessment of the scope elasticity of multinational activity at the world level. By scope elasticity, we refer to the relationship between the productivity of the parent firm and the probability of operating in a given foreign market through subsidiaries with the same main activity. Elasticities are estimated for a baseline cross-section of 36 countries that represent 74% of total outward FDI investment at the world level. At the aggregate level, results indicate quite consistently, through various estimation methods, that a 10% increase in productivity of the parent firm increases the probability in a range between 0.8-1.5%. Elasticities for manufacturing more than double the elasticities for the service sector. The paper also explores the heterogeneity of scope elasticities across home countries and sectors. This heterogeneity is related to differences across bilateral home-host country characteristics such as the size of the potential host market, bilateral distance, average tariff, institutional quality of host countries and other factors. The signs attached to these factors are in general consistent with the predictions of models of firm heterogeneity and FDI activity. Once heterogeneity and survey biases are controlled, scope elasticities reduce somewhat. |
| Keywords: | Foreign Direct Investment, Scope Elasticity of Multinational Corporations, Productivity. |
| JEL: | F23 L25 M16 |
| Date: | 2019–05–30 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:94990&r=all |
| By: | Chletsos, Michael; Roupakias, Stelios |
| Abstract: | Using a global dataset of over 100 developed and developing countries, we attempt to identify the nexus between immigration and the economic performance of countries, as proxied by export sophistication. To isolate causal effects, we use instruments obtained from a pseudo-gravity model of bilateral immigration in the spirit of Frankel and Rose (2002). Employing an extensive set of institutional, demographic, climate and disease controls, we find that countries with high immigrant concentrations tend to exhibit lower performance. |
| Keywords: | Immigration, Gravity Model, Instrumental variables, Economic complexity |
| JEL: | C26 F14 F22 O19 |
| Date: | 2019–07–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:94994&r=all |
| By: | El-Haddad, Amirah |
| Abstract: | The structural transformation of countries moves them towards more sophisticated, higher-value products. Network analysis, using the Product Space Methodology (PSM), guides countries towards leading export sectors. The identification process rests on two pillars: (1) available opportunities, that is, products in the product space that the country does not yet export which are more sophisticated than its current exports; and (2) the stock of a country’s accumulated productive knowledge and the technical capabilities that, through spillovers, enable it to produce slightly more sophisticated products. The PSM points to a tradeoff between capabilities and complexity. The methodology identifies very basic future products that match the two countries’ equally basic capabilities. Top products are simple animal products, cream and yogurt, modestly sophisticated plastics, metals and minerals such as salt and sulphur for Egypt; and slightly more sophisticated products such as containers and bobbins (plastics) and broom handles and wooden products for Tunisia, which is the more advanced of the two countries. A more interventionist approach steers the economy towards maximum sophistication, thus identifying highly complex manufactured metals, machinery, equipment, electronics and chemicals. Despite pushing for economic growth and diversification, these sectors push urban job creation and require high-skill workers, with the implication that low-skilled labour may be pushed into unemployment or into low-value informal jobs. A middle ground is a forward-looking strategy that takes sectors’ shares in world trade into account. This approach identifies medicaments in the chemicals sector; seats (e.g. car and aeroplane seats) in the “other highly manufactured” sector; inflated rubber tyres in the chemicals community (plastics and rubber); containers, bobbins and packages of plastics also in the plastics and rubber section; and articles of iron and steel in the metals sector for Egypt. The top product for Tunisia is furniture in the highly manufactured and special purpose goods community, followed by three products in plastics and rubber in the chemicals community, and finally three machinery sectors. |
| Keywords: | Strukturwandel, wirtschaftliche Entwicklung und Beschäftigung |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:diedps:252018&r=all |
| By: | Adjemian, Michael K.; Smith, Aaron; He, Wendi |
| Abstract: | In 2018, China retaliated to U.S. trade action by levying a 25% retaliatory tariff on U.S. soybean exports. That tariff shifted market preferences so that Chinese buyers favored Brazilian soybeans. We use the relative price of a substitute (RPS) method to estimate that the resulting trade disruption effectively drove a wedge into the world soybean market, lowering U.S. prices at Gulf export locations by $0.65/bu on average for about five months, and increasing Brazilian prices by about $0.95/bu, compared to what would have been observed without the tariff in place. It is likely that the impact of China’s tariff on producers and purchasers of soybeans across the United States was heterogeneous and affected by local factors like transportation infrastructure, storage capacity, and crush facility proximity. |
| Keywords: | Agricultural and Food Policy, Demand and Price Analysis, International Relations/Trade |
| Date: | 2019–07 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea19:292089&r=all |
| By: | Stephan Klasen (University of Goettingen / Germany); Inmaculada Martínez-Zarzoso (University of Goettingen / Germany); Felicitas Nowak-Lehmann D. (University of Goettingen / Germany); Matthias Bruckner (United Nations Development Committee) |
| Abstract: | In this paper, we examine the extent to which developing countries export more as a result of being officially labelled as an LDC and consequently being eligible for a range of unilateral trade preferences. We estimate a gravity model of trade over the period of 1970 to 2013, in which identification is achieved by exploiting the particularities and asymmetries of ‘inclusion’ and ‘graduation’ criteria from LDC status. The main results show that inclusion in the official LDC list is associated with substantially higher exports. This is particularly the case for LDCs that also export manufactured and industrial goods and started to play a significant role after 1990. In addition, we evaluate the impact of developed countries’ trade preferences on the exports of LDCs and the effectiveness of the trade preference schemes of the EU, the US, Canada, Japan, Australia, New Zealand, Norway and Turkey to better understand the mechanism at play. Unilateral preference regimes are, on average, not always beneficial in terms of increased export values for beneficiary developing countries but do have an impact on some sectors. They are mostly beneficial for agricultural goods and a few for manufactured goods, including textiles. As far as individual preference schemes are concerned, positive and statistically significant effects are found for the GSP schemes of Canada and Turkey. The positive effect of LDC status, however, is statistically significant and sizable even when controlling for trade preference schemes suggesting that other benefits of that status play a role in promoting exports. |
| Keywords: | least developed countries, trade preferences, gravity model, generalized system of preferences |
| JEL: | F10 |
| Date: | 2018–02–22 |
| URL: | http://d.repec.org/n?u=RePEc:got:iaidps:235&r=all |
| By: | Sanghyun Hong; W. Robert Reed (University of Canterbury); Bifei Tian; Tingting Wu; Gen Chen |
| Abstract: | This study uses meta-analysis to analyze 557 estimates from 35 studies that estimate the effect of inward FDI on entrepreneurial activity. We address two questions: (i) Does FDI lead to greater entrepreneurial activity in host countries? (ii) What factors are responsible for the different estimates across studies? In addressing these questions, we make two methodological contributions. We extend the new Andrews-Kasy meta-analysis estimators (Andrews & Kasy, 2019) to allow for explanatory variables, and we develop a nested framework of multiple meta-analysis models that allows for testing between models and model selection. We estimate that, across all studies, the average estimated effect of FDI on entrepreneurship is positive but small in size, and statistically insignificant. In contrast, the average effect from studies that control for endogeneity is negative and statistically significant. |
| Keywords: | Meta-analysis, FDI, Entrepreneurship |
| JEL: | L26 F21 C10 |
| Date: | 2019–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:cbt:econwp:19/06&r=all |
| By: | Li, Yifan; Miao, Zhuang |
| Abstract: | The effect of exchange rate movement on trade has been studied widely for a long history. Most literatures focus on its impacts on firms' export performances, and the performances usually refer to the intensive and extensive margins of export. Adding to the existing studies, we explore how firms adjust their imports in response to varying levels of exchange rate volatility using Chinese customs data. Our contributions include three points: (i) we are the first one to test this issue using the Chinese firm level data; (ii) besides the intensive and extensive margins, we also detect how firms adjust the number of import varieties; and (iii) our study detects the role of financial constraints on the effect of the exchange rate risk. Our empirical estimations find that firms reduce their import value, varieties, and import probability from the origin country with relatively high level of exchange rate volatility. The last finding is different from the existing literature. |
| Keywords: | Exchange Rate Volatility; Import Performance; Firm-level Evidences; China |
| JEL: | F14 F31 |
| Date: | 2019–06–15 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:95088&r=all |
| By: | Ayuma Ken Kikkawa; Yuan Mei; Pablo Robles Santamarina |
| Abstract: | This paper assesses the impact of the North American Free Trade Agreement on Mexican manufacturing plants’ prices and markups. We distinguish between Mexican goods that are exported and those sold domestically, and decompose their prices separately into markups and marginal costs. We then analyze how these components were affected by reductions in Mexican output tariffs, intermediate input tariffs, and U.S. tariffs. We find that declines in these tariffs led to significant reductions in the marginal costs of Mexican products. However, prices of exported goods slightly increased as exporters increased their markups in response to declines in U.S. tariffs. |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7700&r=all |
| By: | Holger Breinlich; Elsa Leromain; Dennis Novy; Thomas Sampson |
| Abstract: | We study the impact of the 2016 Brexit referendum on UK foreign direct investment. Using the synthetic control method to construct appropriate counterfactuals, we show that by March 2019 the Leave vote had led to a 17% increase in the number of UK outward investment transactions in the remaining EU27 member states, whereas transactions in non-EU OECD countries were unaffected. These results support the hypothesis that UK companies have been setting up European subsidiaries to retain access to the EU market after Brexit. At the same time, we find that the number of EU27 investment projects in the UK has declined by around 9%, illustrating that being a smaller economy than the EU leaves the UK more exposed to the costs of economic disintegration. |
| Keywords: | Brexit, foreign direct investment, synthetic control method |
| JEL: | F15 F21 F23 |
| Date: | 2019–07 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1637&r=all |
| By: | Mohammed, Mikidadu |
| Abstract: | The recent U.S. trade policy shift has reignited interest about the macroeconomic effects of import tariffs. This paper examines the impacts of import tariff shocks on U.S. macroeconomic performance using quarterly data from 1989-2017. Relying upon the estimation of structural VAR model with sign restrictions, the results suggest that tariff shocks on net-imported vital intermediate input, such as steel, trigger stagflationary tendencies as characterized by short-run increase in inflation and unemployment and decline in real output. |
| Keywords: | import tariff shocks,steel,stagflation,structural VAR |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:esprep:201013&r=all |
| By: | Uchenna R. Efobi (Covenant University, Ota, Ogun State, Nigeria); Simplice A. Asongu (Yaoundé, Cameroon); Ibukun Beecroft (Covenant University, Ota, Ogun State, Nigeria) |
| Abstract: | This paper examines the effect of foreign aid in the terrorism-FDI nexus while considering the extent of domestic corruption-control (CC). The empirical evidence is based on a sample of 78 developing countries. The following findings are established: the negative effect of terrorism on FDI is apparent only in countries with higher levels of CC; foreign aid dampens the negative effect of terrorism on FDI only in countries with high levels of CC. The result is mixed when foreign aid is subdivided into its bilateral and multilateral components. Our findings are in accordance with the stance that bilateral aid is effective in reducing the adverse effect of terrorism on FDI. Multilateral aid also decreases the adverse effect of other forms of terrorism that can neither be classified as domestic nor as transnational. Policy implications are discussed. |
| Keywords: | Conflict; Developing countries; Foreign investment; Foreign aid; Terrorism |
| JEL: | D74 F21 F35 |
| Date: | 2018–01 |
| URL: | http://d.repec.org/n?u=RePEc:abh:wpaper:18/049&r=all |
| By: | Yu Ri KIM; TODO Yasuyuki |
| Abstract: | Political connection may facilitate firms' exporting activities particularly in developing countries, because politically connected firms may be more likely to receive informational and financial support, allowing them to overcome barriers to export. We test this hypothesis using a unique, firm-level dataset from traditional apparel and textile clusters in the Red River Delta Region in Northern Vietnam. We find that political connection of certain types increases the chance of receiving valuable information or financial support from the government. Moreover, those firms which have access to information from the government have higher chances of being direct exporters. However, firms which receive financial support from the government are not necessarily engaged in exporting activities. Although politically connected firms are more willing to export, they do not necessarily engage in more exporting activities than firms without such connections. These results suggest that the misallocation of information and financial resources to politically connected but insufficiently productive firms leads to a failure in the promotion of exporting activities. In contrast, political connection increases the chance of importing materials and parts, possibly because high productivity is necessary for exporting, but not importing. |
| Date: | 2019–07 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:19049&r=all |
| By: | Sami Bensassi (University of Birmingham); Joachim Jarreau (PSL Université Paris-Dauphine, PSL Research University, IRD, LEDa, DIAL, Paris, France.) |
| Abstract: | What factors explain the persistence and pervasiveness of corruption in certain parts of the world? In West Africa, many day-to-day transactions require the payment of bribes. Quantitative evidence on these bribes and their determinants is scarce. This paper sheds light on the level and the frequency of bribe payments in informal cross-border trade. It examines how bribes depend on the trade regime and on market structure. We rely on data from a survey of traders in Benin to estimate the determinants of bribe payments. We exploit variations in the trade regime across Benin's borders, as well as changes in trade restrictions over time and variations in route availability across space and time. We nd that reductions in trade barriers help to lower bribes, but do not eliminate them, with bribes remaining frequent in liberalized trade regimes. These results suggest that collusive corruption - used to circumvent regulations and taxes - coexists with coercive corruption, where ocials use their monopoly power to extract transfers from traders. |
| Keywords: | Informal trade, corruption, trade policy. |
| JEL: | O17 F14 F15 |
| Date: | 2019–06 |
| URL: | http://d.repec.org/n?u=RePEc:dia:wpaper:dt2019-08&r=all |
| By: | Hakan Yilmazkuday (Department of Economics, Florida International University) |
| Abstract: | The reduction in international trade has been more than the reduction in economic activity during the 2008 financial crisis, against the one-to-one relationship between them implied by standard trade models. This so-called the great trade collapse (GTC) has been investigated extensively in the literature resulting in alternative competing stories as potential explanations. By introducing and estimating a dynamic stochastic general equilibrium model using eighteen quarterly series from the U.S., including those that represent the competing stories, this paper evaluates the contribution of each story to GTC. The results show that retail inventories have contributed the most to the collapse and the corresponding recovery, followed by protectionist policies, intermediate-input trade, and trade finance. Productivity and demand shocks have played negligible roles. |
| Keywords: | Trade Collapse, Inventories, Intermediate Inputs, Trade Finance, Protectionist Policies |
| JEL: | E32 F12 F41 |
| Date: | 2019–08 |
| URL: | http://d.repec.org/n?u=RePEc:fiu:wpaper:1902&r=all |
| By: | Bajzik, Jozef; Havranek, Tomas; Irsova, Zuzana; Schwarz, Jiri |
| Abstract: | A key parameter in international economics is the elasticity of substitution between domestic and foreign goods, also called the Armington elasticity. Yet estimates vary widely. We collect 3,524 reported estimates of the elasticity, construct 34 variables that reflect the context in which researchers obtain their estimates, and examine what drives the heterogeneity in the results. To account for inherent model uncertainty, we employ Bayesian and frequentist model averaging. We present the first application of newly developed non-linear techniques to correct for publication bias. Our main results are threefold. First, there is publication bias against small and statistically insignificant elasticities. Second, differences in results are best explained by differences in data: aggregation, frequency, size, and dimension. Third, the mean elasticity implied by the literature after correcting for both publication bias and potential misspecifications is 3. |
| Keywords: | Armington; trade elasticity; meta-analysis; publication bias; Bayesian model averaging |
| JEL: | C83 D12 F14 |
| Date: | 2019–07–12 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:95031&r=all |
| By: | Inmaculada Martínez-Zarzoso (University of Goettingen / Germany); Adriana Peluffo (Universidad de la República (Uruguay)); Ernesto Silva (Universidad de la República (Uruguay)) |
| Abstract: | Innovation and export decisions are closely interlinked. Both activities contribute to firm performance in various ways: exporting provides a wider market to sell products, while innovation provides new and better products to supply those markets and/or more efficient ways to reduce costs. The connection of innovation and exporting is of major interest to developing countries aiming to achieve higher growth and wellbeing given that foreign markets are both a new challenge and a source of knowledge for firms. This study analyzes whether different types of innovation affect export behavior at the firm level for an unbalanced panel of Uruguayan manufacturing firms. Logistic regression and matching with difference-in-differences (MDID) techniques are applied to data from 2003 to 2012. Using logit models we find that previous innovation increases the probability of exporting. Unlike other studies, productivity-enhancing (or cost-reducing) innovation shows a stronger correlation than product innovation pointing out that price competition is more important than quality competition for Uruguayan products in foreign markets. Furthermore, using MDID we establish a direct causal link from innovation to exporting. Finally, we analyze export intensity by means of Tobit models. We find that innovation fosters export intensity. Overall, the findings indicate that active innovation policies along with other export promotion policies help to promote firms’ participation in foreign markets. |
| Keywords: | product innovation, process innovation, exporting |
| JEL: | F14 D21 C23 O31 O33 |
| Date: | 2018–11–06 |
| URL: | http://d.repec.org/n?u=RePEc:got:iaidps:238&r=all |
| By: | Kohler, Wilhelm; Wrona, Jens |
| Abstract: | We revisit Grossman and Rossi-Hansberg's (2008) famous result, that under certain conditions offshoring of low-skilled labor tasks raises the domestic wage for low-skilled workers. Our re-examination features a less benign environment where Rybczynski-type reallocation of factors to absorb offshoring-induced job displacement is ruled out. We allow for simultaneous offshoring of both skilled and unskilled labor, and we derive new results on the role of factor-bias in offshoring, identifying conditions under which offshoring has a "lifiting-all-boats" effect benefitting all workers. Extending our analysis to a frictional labor market with equilibrium unemployment due to costly matching, we demonstrate that under these same conditions offshoring is also associated with rising employment. |
| Keywords: | Offshoring,Trade in Tasks,Wages,Unemployment,Search and Matching |
| JEL: | F11 F16 J64 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:dicedp:320&r=all |
| By: | Willem THORBECKE |
| Abstract: | Tariffs and trade wars threaten East Asian economies. Exchange rate appreciations would be less disruptive than protectionism. This paper reports dynamic ordinary least squares findings indicating that appreciations in Asian supply chain countries reduce exports and increase imports. However, despite large current account surpluses, there has been little exchange rate appreciation outside of China. Modified Frankel-Wei (1994) regressions indicate that Asian countries focus on the U.S. dollar in their implicit currency baskets. These high weights on the dollar imply that regional exchange rates are in a Nash Equilibrium. No Asian country wants its exchange rate to appreciate against the dollar for fear of losing price competitiveness relative to its neighbors. A better equilibrium would occur if they assigned more weight to regional currencies and less to the dollar. This would facilitate a concerted appreciation of Asian currencies against the dollar. |
| Date: | 2019–06 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:19046&r=all |
| By: | Takano, Keisuke |
| Abstract: | This paper investigates empirically the interrelationship between the update of risk perception of expected disaster through the actual disaster damage and the change in the spatial distribution of inter-firm transactional networks (supply chains) around the hazardous area of the expected Nankai Trough Earthquake after the Great East Japan Earthquake from 2009 to 2017. By adopting the propensity score matching and the difference-in-difference (-indifferences) method, this study estimates the effects of tsunami damage on the magnitude of the spatial dispersion of the supply chain network stemmed from risk perception. The results show that the existence of suppliers in the Nankai Trough area per se did not or marginally lead to the supply chain dispersion regardless of the size of firms, while the supply chains of medium-size firms who had suppliers in both the Nankai Trough area and the damaged area of the Great East Japan Earthquake was spatially dispersed after 2011. |
| Keywords: | Interregional trade, Supply chain, Disaster risk, Spatial pattern, Diversity |
| JEL: | R11 R12 Q54 |
| Date: | 2019–06 |
| URL: | http://d.repec.org/n?u=RePEc:hit:tdbcdp:e-2019-01&r=all |
| By: | Zouri, Stéphane |
| Abstract: | This paper identifies the determinants of synchronization of business cycles in ECOWAS because it allows decision-makers to better target their economic policies. It is relevant given the willingness of ECOWAS heads of state to create a single currency by 2020. Indeed, conducting actions in the direction of the synchronization of business cycles is important because the asymmetries of the cycles observed within a monetary union determine its sustainability. Unlike previous studies in this area, it is innovative as it takes into account international financial integration. In addition, it proposes new measures to increase the quality of results. Finally, it takes into account the structure of trade by analyzing inter-regional links. The results show that bilateral trade and financial openness are determinants of the synchronization of business cycles in the region. However, they show that, trade channel dominates financial openness channel. In addition, the results show that the weakness of intra-community trade doesn’t constitute a barrier to monetary union. |
| Keywords: | business cycles, trade intensity, financial integration, ECOWAS. |
| JEL: | E32 F15 F36 O55 |
| Date: | 2019–07–22 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:95275&r=all |
| By: | Alexios Anagnostopoulos (Stony Brook University); Orhan Erem Atesagaoglu (Istanbul Bilgi University; University of Cambridge); Elisa Faraglia (University of Cambridge; CEPR); Chryssi Giannitsarou (University of Cambridge; CEPR) |
| Abstract: | We develop a theoretical framework in order to investigate the link between two recent trends: (i) the rise in cross-country stock market correlations over the past three decades, and (ii) the increase in global foreign direct investment (FDI) positions over the same period. Our objective is twofold: first, we investigate empirically the channel through which the rise in global stock market correlations is associated with the observed increase in global FDI. Second, we develop a two-country stochastic asset pricing model with multinational firms that allows us to quantify the extent to which the recent rise in global FDI can account for the observed increase in cross-country stock market comovement. Calibrating three versions of the model (financial autarky, incomplete markets and complete markets) to the US and the rest-of-the-world, we find that a permanent inrcease in FDI positions, as observed from mid 1990s to mid 2000s, leads to substantial increase in cross-country stock market comovements. Increases in FDI alone can account for approximately one third of the observed increase in stock market correlations. We also discuss the role of portfolio diversification and, more generally, asset market integration. |
| JEL: | G12 G15 F21 F23 F44 |
| Date: | 2019–07 |
| URL: | http://d.repec.org/n?u=RePEc:cfm:wpaper:1912&r=all |
| By: | Guo, Baoping |
| Abstract: | This study derived the solution of general trade equilibrium for the 2×2×2 Trefler Hicks-Neutral HOV Model (Trefler, 1993), which incorporates productivities different across countries. This is the first theoretical result of price-trade equilibrium under factor price non-equalization. The non-equalized factor price at the equilibrium is with two useful properties. The first one is that the equilibrium price (world commodity price and two sets of localized factor price) are the functions of world effective factor endowments so that it remains the same when the allocation of equivalent factor endowments changes. The second property is that the equilibrium factor prices ensure gains from trade for countries participating in trade. A new logic explored from this study is that the world effective factor endowments determine world commodity price and local factor rewards of all countries. |
| Keywords: | Factor content of trade; factor price non-equalization; General equilibrium of trade; Integrated World Equilibrium; IWE |
| JEL: | F10 F15 |
| Date: | 2019–05–17 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:95015&r=all |
| By: | Sangyup Choi (Yonsei University); Davide Furceri (IMF); Chansik Yoon (Princeton University) |
| Abstract: | While foreign direct investment is known to be the most stable type of capital flows, it may be particularly susceptible to heightened uncertainty due to its higher fixed costs than that of other types of capital flows. We investigate the effect of higher policy uncertainty on FDI inflows in 16 host countries using the OECD bilateral FDI panel dataset and the economic policy uncertainty index from 1985 to 2013. The bilateral structure of these data enables us to disentangle the host country factors affecting FDI inflows from the source country factors, thereby obtains a cleaner causal identification of the higher domestic policy uncertainty effect largely immune to endogeneity issues. To alleviate further endogeneity problems, we use the election timing data as an instrument. We find that domestic policy uncertainty in a host country robustly reduces the FDI inflows. As regards the channel through which policy uncertainty affects FDI inflows, the institutional quality and financial development of the host country are key to mitigating this adverse impact of policy uncertainty. |
| Keywords: | Economic policy uncertainty; FDI inflows; Elections; Institutional quality; Financial development. |
| JEL: | F21 F32 F42 |
| Date: | 2019–07 |
| URL: | http://d.repec.org/n?u=RePEc:yon:wpaper:2019rwp-144&r=all |
| By: | Meng, Xin; Xue, Sen |
| Abstract: | Over the past two decades, more than 160 million Chinese rural workers have migrated to cities to work. They are separated from their familiar rural networks to work in an unfamiliar, and often hostile environment. Many of them thus face significant mental health challenges. This paper is the first to investigate the extent to which migrant social networks in host cities can mitigate these adverse mental health effects. Using a unique longitudinal survey data of Rural-to-Urban Migration in China (RUMiC), we find that network size matters significantly for migrant workers. Our preferred IV estimates suggest that one standard deviation increase in migrant city networks, on average, reduces the measure of mental health problem by 0.47 to 0.66 of a standard deviation. Similar effects are found among less educated, those working longer hours, and those without access to social insurance. The main channel of the network effect is through boosting confidence and reducing anxiety of migrants. |
| Keywords: | Mental Health,Social Networks,Migration,China |
| JEL: | I12 I15 J61 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:370&r=all |
| By: | Joseph I. Uduji (University of Nigeria, Nsukka, Nigeria); Elda N. Okolo-Obasi (University of Nigeria, Nsukka, Nigeria); Simplice A. Asongu (Yaoundé, Cameroon) |
| Abstract: | This paper adds to the gender discourse in sustainable African tourism development from the corporate social responsibility (CSR) perspective. Specifically, we examine the impact of CSR on the development of rural women in cultural tourism. A total of 600 rural women were sampled across the Niger Delta. Results from the use of a logit model indicate a significant relationship between CSR and cultural tourism development in oil host communities in Nigeria. This implies that CSR of a multinational oil company (MOC) is a critical factor for sustaining cultural tourism. The findings suggest increased female participation in General Memorandum of Understanding (GMoU) interventions of MOC and the need to pay close attention to which extent the participation of rural women in the GMoU projects may be limited by cultural and traditional obstacles. |
| Keywords: | Gender inequality, sustainable cultural tourism, corporate social responsibility, multinational oil companies, logit model, Nigeria |
| JEL: | F20 H20 M14 O11 R10 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:agd:wpaper:19/042&r=all |