nep-int New Economics Papers
on International Trade
Issue of 2013‒12‒15
63 papers chosen by
Luca Salvatici
Universita' di Roma 3

  1. The Composition of Exports and Human Capital Acquisition By William W. Olney
  2. Trade Liberalization, Quality, and Export Prices By Fan, Haichao; Li, Yao Amber; Yeaple, Stephen
  3. Effects of Productivity and Import on Firm-Level Export By Jienwatcharamongkhol, Viroj
  4. EU Trade Preferences and Export Diversification By Persson, Maria; Wilhelmsson, Fredrik
  5. Trade-in-goods and trade-in-tasks: An integrating framework By Richard Baldwin; Frédéric Robert-Nicoud;
  6. Least-Developed Countries' Trade During the "Super-Cycle" and the Great Trade Collapse: Patterns and Stylized Facts By Escaith, Hubert; Tamenu, Bekele
  7. Input-Trade Liberalization, Export Prices and Quality Upgrading By Maria Bas; Vanessa Strauss-Kahn
  8. Time to ship during Financial Crisis By Nicolas Berman; José de Sousa; Philippe Martin; Thierry Mayer
  9. Firm Heterogeneity and Aggregate Welfare By Marc Melitz; Stephen Redding
  10. FTA and Export Platform Foreign Direct Investment: Evidence from Japanese firm level data By ITO Tadashi
  11. Internal Geography, International Trade, and Regional Specialization By A. Kerem Coşar; Pablo D. Fajgelbaum
  12. Comparative Advantage and Optimal Trade Policy By Arnaud Costinot; Dave Donaldson; Jonathan Vogel; Ivan Werning
  13. Geographic Proximity and the Pro-trade Effect of Migration: State-level Evidence from Mexican Migrants in the United States By Michael Good
  14. Redirecting International Trade: Contracts, Conflicts, and Institutions By Kokko, Ari; Söderlund, Bengt; Gustavsson Tingvall, Patrik
  15. Long term evolution of the bilateral Trade between China and Spain, 1988-2011 By Carrera Troyano, Miguel; De Diego Álvarez, Dorotea
  16. Relative Prices, Hysteresis, and the Decline of American Manufacturing By Douglas L. Campbell
  17. Innovation and Trade Policy Coordination: the Role of Firm Heterogeneity By Antonio Navas; Davide Sala
  18. The cost-of-living index with trade barriers By Thomas von Brasch
  19. Determinants of Internationalisation – Do they Differ among Sectors and Business Functions? Evidence from Firm-level Data By Spyros Arvanitis; Tobias Stucki; Heinz Hollenstein
  20. Sustaining Multilateral Trade Cooperation in a Multipolar World Economy By Bernard Hoekman
  21. Europe's Revolving Doors: Import Competition and Endogenous Firm Entry Institutions By Povilas Lastauskas
  22. Market Size, Competition, and the Product Mix of Exporters By Marc Melitz; Thierry Mayer; Gianmarco I.P. Ottaviano
  23. Foreign Direct Investment and Domestic Entrepreneurship: Blessing or Curse? By Danakol, Seçil Hülya; Estrin, Saul; Reynolds, Paul; Weitzel, Utz
  24. Credit constraints and exports: A survey of empirical studies using firm level data By Wagner, Joachim
  25. Production Cost Asymmetry, Minimum Access and Reciprocal Dumping By Abdessalem Abbassi; Lota D. Tamini; Ahlem Dakhlaoui
  26. The Possible Effects of Transatlantic Trade and Investment Partnership (TTIP) on Turkish Economy By Mavuş, Merve; Oduncu, Arif; Güneş, Didem
  27. Trade in Value Added: An East Asian Perspective By Inomata, Satoshi
  28. Trade-Diverting Free Trade Agreements, External Tari§s, and Feasibility By Baybars Karacaovali
  29. Are workers more vulnerable in tradable industries? By Eliasson, Kent; Hansson, Pär
  30. The World Bank Group Trade Strategy: Fit for Purpose? By Bernard M. Hoekman
  31. The Role of Product Innovation Output on Export Behavior of Firms By Tavassoli, Sam
  32. Multilateral Institutions and African Economic Integration By Bernard M. Hoekman
  33. Standards Harmonisation in ASEAN: Progress, Challenges and Moving Beyond 2015 By Simon PEETMAN
  34. Trade tariffs and self-enforcing environmental agreements By Thomas Eichner; Rüdiger Pethig
  35. Evolución de largo plazo del Comercio Intraindustrial de manufacturas de España, 1988-2011 By Carrera Troyano, Miguel; De Diego Álvarez, Dorotea
  36. The hidden costs of going global: insights from firms' entry into foreign markets By Alessandra Perri; Francesca Checchinato; Cinzia Colapinto
  37. Evolution of Machinery Production Networks: Linkage of North America with East Asia By Mitsuyo ANDO; Fukunari KIMURA
  38. Life after Bali: renewing the world trade negotiating agenda By Suparna Karmakar
  39. Why Isn’t India a Major Global Player? The Political Economy of Trade Liberalization By Jayanta Roy; Pritam Banerjee
  40. On the Impact of Oil Price Volatility on the Real Exchange Rate - Terms of Trade Nexus : Revisiting Commodity Currencies By Virginie Coudert; Cécile Couharde; Valérie Mignon
  41. Regional Comprehensive Economic Partnership: Reform Challenges and Key Tasks for the Philippines By Llanto, Gilberto M.; Ortiz, Ma. Kristina P.
  42. Foreign Owners and the Quality of Industrial Relations in Germany By Verena Dill; Uwe Jirjahn
  43. What Are the Opportunities and Challenges for ASEAN? By Mitsuyo ANDO; Fukunari KIMURA
  44. Neighbors and the Evolution of the Comparative Advantage of Nations: Evidence of International Knowledge Diffusion? By Bahar, Dany; Hausmann, Ricardo; Hidalgo, César A.
  45. The Six Major Puzzles in International Macroeconomics: Is there a Common Cause? By Maurice Obstfeld; Kenneth Rogoff; Ben Bernanke; Kenneth Rogoff
  46. Emerging market multinationals in the European Union – A location choice analysis By Hassan, Sohaib Shahzad; Jindra, Björn; Cantner, Uwe; Günther, Jutta
  47. Spillover versus Ownership: A Meta-Analysis of Transition Literature By Iwasaki, Ichiro; Tokunaga, Masahiro
  48. Trade Openness, Institutional Change and Economic Growth By Antonio Navas
  49. Whither the WTO? By Richard O. Cunningham
  50. Revenue Tariff Reform By Peter Neary; James E. Anderson
  51. Structural change, productivity growth and trade policy in Brazil By Firpo, Sergio; Pieri, Renan
  52. Acquiring Human Capital through the Generations by Migration By Smith, James P.; Delaney, Liam
  53. Regional Economic Links in Latin America: lessons from Asia and challenges from the regional links of other BRICS By Renato Baumann
  54. Correctly Analyzing the Balance of Payments Constraint on Growth By Arslan Razmi
  55. The Role of Economic Theory in WTO Arbitrations By Michele Ruta
  56. Internationalization of a Chinese "born glocal" brand: the case of Goodbaby By Francesca Checchinato; Lala Hu; Alessandra Perri; Tiziano Vescovi
  57. MIRAGE-e: A General Equilibrium Long-term Path of the World Economy By Lionel Fontagné; Jean Fouré; Maria Priscila Ramos
  58. What Drives the Global "Land Rush"? By Rabah Arezki; Klaus Deininger; Harris Selod
  59. Foreign family business and capital flight. The case for a fraud to fail By Giovanni Favero
  60. Reserves of Natural Resources in a Small Open Economy By Isaac Gross; James Hansen
  61. A ‘Manufacturing Imperative’ in the EU – Europe's Position in Global Manufacturing and the Role of Industrial Policy By Neil Foster-McGregor; Mario Holzner; Michael Landesmann; Johannes Pöschl; Robert Stehrer; Roman Stöllinger
  62. The Interaction between Globalization and Financial Development: New Evidence from Panel Co-integration and Causality Analysis By Kandil , Magda; Shahbaz, Muhammad; Nasreen, Samia
  63. The Macroeconomic Imbalance Procedure and Germany: When is a surplus an “imbalance”? By Gros, Daniel; Busse, Matthias

  1. By: William W. Olney (Williams College)
    Abstract: This paper investigates whether the composition of a country's exports affects educational attainment. A simple model shows how trade affects the relative wages of skilled and unskilled labor which in turn changes the incentives to go to school. These predictions are tested using data spanning forty years and over a hundred countries. The results confirm that exporting unskill-intensive goods depresses average years of schooling, while exporting skill-intensive goods increases years of schooling. Endogeneity is address by using bilateral trade data and the gravity model to identify variation in exports that is unrelated to domestic factors. The results provide insight into which types of exports are most beneficial for human capital formation and how trade can exacerbate initial differences in factor endowments across countries.
    Keywords: Exports; Education; Human Capital
    JEL: F14 F16 J24
    Date: 2013–11
  2. By: Fan, Haichao; Li, Yao Amber; Yeaple, Stephen
    Abstract: This paper presents theory and evidence from highly disaggregated Chinese data that tariff reductions induce a country's producers to upgrade the quality of the goods that they export. The paper first documents two stylized facts regarding the effect of trade liberalization on export prices and its relation with product differentiation. Next, the paper extends Melitz's (2003) model of trade with heterogeneous firms by introducing endogenous quality choice. The model predicts that a reduction in the import tariff induces an incumbent importer/exporter to increase the quality of its exports and to raise its export price in industries where the scope for quality differentiation is large while to lower its export price in industries where the scope for quality differentiation is small. The predictions are consistent with the stylized facts based on Chinese data and robust to various estimation specifications.
    Keywords: trade liberalization, tariff, quality, export price, quality upgrading
    JEL: F12 F14
    Date: 2013–11–01
  3. By: Jienwatcharamongkhol, Viroj (The Ratio Institute & Lund University)
    Abstract: There are several studies that find a positive effect of productivity on firm-level export, but little is known about the role of import. This paper fills this gap by looking at the interaction between import and productivity in influencing exports. The main hypothesis is that imports stimulate learning, which in turn means that the productivity effect on export is greater for firms with previous import experience. To test this, I examine whether productivity increases the probability to engage in exports and for existing exporters total value of exports when firms have imported from a period before. Using data of Swedish manufacturing firms from 1997-2006,I find that imports enhance productivity in promoting firm’s exports.
    Keywords: productivity; import; export; firm-level
    JEL: F12 F14 F41
    Date: 2013–12–04
  4. By: Persson, Maria (Research Institute of Industrial Economics (IFN)); Wilhelmsson, Fredrik (AgriFood Economics Centre)
    Abstract: Since at least the 1960s, the European Union (EU) has offered various kinds of non-reciprocal trade preferences for developing countries. Originally, these trade preferences had at least two policy goals: (i) to increase export volumes for developing countries and thereby boost their export earnings, and (ii) to facilitate export diversification. While extensive research has confirmed that the first of these goals is typically met, the second goal seems to have been largely forgotten by researchers as well as in policy circles. The aim of this paper is therefore to analyse the impact of the EU’s non-reciprocal trade preferences for developing countries on export diversification. Our estimation results suggest that some trade preference programs, such as the Generalised Scheme of Preferences (GSP), are associated with increasing ranges of export products. By contrast, preferences offered to Mediterranean countries typically have no significant effects, and African, Caribbean and Pacific (ACP) preferences actually have negative effects toward the end of our time period, suggesting that ACP countries may respond to preferences by specializing into fewer goods.
    Keywords: Export diversification; Non-reciprocal trade preferences; GSP; ACP; EU
    JEL: F13 F15 O24
    Date: 2013–11–27
  5. By: Richard Baldwin; Frédéric Robert-Nicoud;
    Abstract: We introduce a simple but flexible analytical framework in which both trade in goods and trade in tasks arise. We use this framework to provide versions of the gains-from-trade and the famous four HO theorems (Heckscher-Ohlin, factor-price-equalisation, Stolper-Samuelson, and Rybczynski) that apply to this environment. We extend our framework to accommodate monopolistic competition and two-way offshoring and to integrate theoretical results of the early offshoring literature.
    Date: 2013–10
  6. By: Escaith, Hubert; Tamenu, Bekele
    Abstract: LDCs' trade patterns changed in the past decade, thanks to the rebalancing of global demand towards large emerging countries and the resulting cycle of high international commodity prices. This process led to a wider geographical diversification of LDCs' exports but contributed also to a greater reliance on those highly priced commodities. Notwithstanding some progress in market and product diversification — including services — LDCs remain particularly vulnerable to external shocks. With the exception of 2006-2008, the LDCs as a group have systematically recorded a trade deficit. The 2008-2009 global crisis and the bumpy recovery which followed illustrate the volatility of the recent trends. In such a perspective, renewed efforts towards extensive product diversification are called for. Fostering diversification has been supported for many years by preferential market access to developed countries; more recently, emerging countries have also been granting such preferences to LDCs products. Preferential market access remains relevant, but is not sufficient to improve the supply-side capabilities. The new business model related to global value chains (GVC) offers new opportunities to LDCs for export diversification. But GVC participation cannot materialize without a proper trade environment. Some of the main obstacles for joining GVCs are the high transaction costs in importing the necessary inputs and exporting the processed goods. Active trade facilitation programmes, such as those identified during the Fourth Global Review of Aid for Trade in July 2013 offer new options to LDCs for joining GVCs. For those LDCs that have already been able to join these global production network, up-grading towards higher "value-added" activities requires more encompassing horizontal policies.
    Keywords: Least developed countries, trade and development, 2008-2009 global crisis; preferential market access; global value chains; trade facilitation
    JEL: F13 F14 O19 O24
    Date: 2013–12–04
  7. By: Maria Bas; Vanessa Strauss-Kahn
    Abstract: This paper explores the impact of input-trade liberalization on imported input and exported product prices. Using Chinese transaction data for 2000-2006, we capture causal effects between exogenous input tarif reductions and within firm changes in HS6 traded product prices. Identifcation is based on a quasi-natural experiment where some forms are exempt from paying tariffs and stand as a control group. Both imported input and export prices rise. The effect on export prices is specific to forms sourcing inputs from developed economies and exporting output to high-income countries. Results are consistent with a scenario within which forms exploit the input tariff cuts to access high-quality inputs in order to quality-upgrade their exports.
    Keywords: Firm heterogeneity, imported inputs, trade liberatization, export prices, quality upgrade, mark-up,
    JEL: F10 F12 F13
    Date: 2013–09
  8. By: Nicolas Berman (Centre d'économie de la Sorbonne); José de Sousa (Université Panthéon-Sorbonne - Paris I); Philippe Martin (Département d'économie); Thierry Mayer (Département d'économie)
    Abstract: We show that the negative impact of financial crises on trade is magnified for destinations with longer time-to-ship. A simple model where exporters react to an increase in the probability of default of importers by increasing their export price and decreasing their export volumes to destinations in crisis is consistent with this empirical finding. For longer shipping time, those effects are indeed magnified as the probability of default increases as time passes. Some exporters also decide to stop exporting to the crisis destination, the more so the longer time-to-ship. Using aggregate data from 1950 to 2009, we found that this magnification effect is robust to alternative specifications, samples and inclusion of additional controls, including distance. The form level predictions are also broadly consistent with French exporter data from 1995 to 2005.
    Keywords: Time-to-ship, Financial crises, international trade
    JEL: F10 G32
    Date: 2013–09
  9. By: Marc Melitz; Stephen Redding
    Abstract: We examine how firm heterogeneity influences aggregate welfare through endogenous firm selection. We consider a homogeneous firm model that is a special case of a heterogeneous firm model with a degenerate productivity distribution. Keeping all structural parameters besides the productivity distribution the same, we show that the two models have different aggregate welfare implications, with larger welfare gains from reductions in trade costs in the heterogeneous firm model. Calibrating parameters to key U.S. aggregate and firm statistics, we find these differences in aggregate welfare to be quantitatively important (up to a few percentage points of GDP). Under the assumption of a Pareto productivity distribution, the two models can be calibrated to the same observed trade share, trade elasticity with respect to variable trade costs, and hence welfare gains from trade (as shown by Arkolakis, Costinot and Rodriguez-Clare, 2012); but this requires assuming different elasticities of substitution between varieties and different fixed and variable trade costs across the two models.
    Date: 2013–01
  10. By: ITO Tadashi
    Abstract: This paper examines the choice of foreign direct investment (FDI) among four types—traditional horizontal FDI, traditional vertical FDI, export-platform horizontal FDI, and export-platform vertical FDI—focusing in particular on the recent phenomena of the export-platform type FDI. The theoretical discussion shows a prediction of the effect of free trade agreements (FTAs) on the FDI type chosen. The empirical discussion provides descriptive statistics which point to the growing importance of export-platform type FDI. It then shows supportive evidence for the model's prediction, using Japan's firm-level FDI data. More specifically, it is shown that regional trade agreements (RTAs), such as the Association of Southeast Asian Nations (ASEAN) or the North America Free Trade Agreement (NAFTA), drives horizontal export-platform-type FDI, whereas bilateral FTAs (Japan's economic partnership agreement in the context of the data used in this paper) in some cases induce vertical export-platform type FDI. The findings suggest some policy implications for FDI recipient countries. First, the obvious positive effect of an RTA on horizontal export-platform type FDI is an encouraging finding for countries forming them in that it leads to a reduction in production costs and a concomitant rise in production/consumption. Even more importantly, the finding is a testament to a rarely mentioned benefit of smaller countries joining RTAs. Second, the positive effect of a bilateral FTA between Japan and Malaysia on the vertical export-platform type FDI is also reassuring in the same reason of cost reduction and production/consumption increase.
    Date: 2013–12
  11. By: A. Kerem Coşar; Pablo D. Fajgelbaum
    Abstract: We introduce an internal geography to the canonical model of international trade driven by comparative advantages to study the regional effects of external economic integration. The model features a dual-economy structure, in which locations near international gates specialize in export-oriented sectors while more distant locations do not trade with the rest of the world. The theory rationalizes patterns of specialization, employment, and relative incomes observed in developing countries that opened up to trade. Our empirical analysis based on industry-level data from Chinese prefectures demonstrates that international trade is an important driver of industry location within China as the theory implies.
    JEL: F11 R12
    Date: 2013–12
  12. By: Arnaud Costinot; Dave Donaldson; Jonathan Vogel; Ivan Werning
    Abstract: The theory of comparative advantage is at the core of neoclassical trade theory. Yet we know little about its implications for how nations should conduct their trade policy. For example, should import sectors with weaker comparative advantage be protected more? Conversely, should export sectors with stronger comparative advantage be subsidized less? In this paper we take a first stab at exploring these issues. Our main results imply that in the context of a canonical Ricardian model, optimal import tariffs should be uniform, whereas optimal export subsidies should be weakly decreasing with respect to comparative advantage, reflecting the fact that countries have more room to manipulate prices in their comparative-advantage sectors. Quantitative exercises suggest substantial gains from such policies relative to simpler tax schedules.
    JEL: F10 F11 F13
    Date: 2013–12
  13. By: Michael Good
    Abstract: I estimate the effect that migrants have on international trade between states of current residence and states of origin. The pro-trade effect of migration has been thoroughly examined since the mid-1990s, connecting both destination countries with origin countries and destination sub-national divisions with origin countries, respectively. However, a recent emphasis on the importance of geographic proximity to the migration-trade link leads me to pose the questions of how localized the trade-enhancing effect of migrants actually may be and how proximity matters for this relationship. My analysis provides the first results as to the migration-trade nexus at the state level for both places of destination and origin, relying on a unique data set allowing the mapping of Mexican-born migrants' US states of residence to Mexican states of origin; this ensures a more precise measurement of both migrant networks and other potential determinants of international trade, including the distance and mass variables fundamental to the standard gravity model. In addition to an augmented gravity model, I employ generalized propensity scores in examining the potential of nonlinearities in the migration-trade relationship. Furthermore, I unmask the distinct levels of geographic proximity that a single migration estimate disguises, estimating statistically significant elasticities of exports to both in-state and neighboring-state migration. These figures are not only qualitatively but also quantitatively important, corresponding to partial contributions of $1984 (in-state) and $538 (neighboring-state) to annual exports between respective US and Mexican states associated with each average additional migrant.
    JEL: F1 F2 J6
    Date: 2013–12–08
  14. By: Kokko, Ari (Copenhagen Business School and Ratio); Söderlund, Bengt (Stockholm School of Economics and Ratio); Gustavsson Tingvall, Patrik (Ratio)
    Abstract: The global financial crisis has accelerated the redirection of trade towards new markets, outside the OECD area, where both demand patterns and the institutional environment differ from those in the OECD. This study provides an empirical examination of the consequences of this shift. Results suggest that weak institutions hamper trade and reduces the length of trade relations, especially for small firms. Furthermore, trade in industries that are characterized by a high degree of trade conflicts and that requires extensive relationship specific investments for trade to occur are comparatively difficult to redirect towards markets with weak institutions.
    Keywords: Exports; Offshoring; Trade; Institutions; Conflicts; Contracts
    JEL: F23 F55 K00 P48
    Date: 2013–12–04
  15. By: Carrera Troyano, Miguel; De Diego Álvarez, Dorotea
    Abstract: This paper offers the first results of an ongoing research project on the Intra Industry Trade (IIT) in Spanish trade using microdata from COMEXT database to calculate the levels of IIT in manufactures trade between 1988 and 2011. The analysis offers the figures of the long term evolution of the bilateral trade, the advantages and IIT between China and Spain, and also its distribution between horizontal and vertical IIT. Besides, the paper offers the sectorial levels of IIT.
    Keywords: Intra Industry Trade, China, Spain
    JEL: F14
    Date: 2013
  16. By: Douglas L. Campbell
    Abstract: This study uses new measures of real exchange rates to investigate the decline of American manufacturing employment in the early 2000s, comparing it to the smaller decline in the 1980s. I find that US manufacturing sectors with greater initial exposure to trade in the 1970s were disproportionately affected by the ensuing dollar appreciation in the 1980s, and that more open sectors in the 1990s also suffered comparative declines in output and employment when US unit labor costs appreciated relative to trading partners. Employment losses in both the 1980s and in the early 2000s were due to increased job destruction and suppressed job creation, and appear to exhibit hysteresis. Additionally, more open sectors experienced relative declines in shipments, value-added, investment, production worker wages, and total factor productivity as US relative unit labor costs in manufacturing rose. I explain the persistent effects of exchange rate movements on manufacturing using a Melitz model extension with sunk fixed costs, which leads to a dynamic gravity equation whereby shocks to trade have persistent effects that decay over time. The appreciation of US relative unit labor costs can plausibly more than two-thirds of the decline in manufacturing employment in the early 2000s.
    JEL: F10 F16 N60 L60
    Date: 2013–12–08
  17. By: Antonio Navas (Department of Economics, The University of Sheffield); Davide Sala (Department of Business and Economics, University of Southern Denmark)
    Abstract: Recent studies have concluded that R&D grants can induce firms to export and that exporting and innovating can be complementary activities at the firm level. Yet the trade literature has paid little attention to the scope of innovation policy as a stimulus to both trade and innovation. To investigate this question we rely on a general work-horse model of trade and firm heterogeneity with firm investments in R&D activities. The multiplicity of equilibria together with the interplay of innovation and trade policies uncover novel results. In particular, we show that the effects of either policy depend on the degree of protectionism in a country. Therefore, countries can respond differently to the same policy, and similarly to different policies. In such a context, different governments may face different degrees of freedom regarding how to achieve a given target. This finding leads us to discuss the issue of policy coordination.
    Keywords: innovation; innovation policy; heterogenous firms; technology adoption; trade policy
    JEL: F12 F13 F15 O32
    Date: 2013
  18. By: Thomas von Brasch (Statistics Norway)
    Abstract: The standard cost-of-living index hinges on the assumption that there is free trade. Applying it to situations where trade barriers are present yields biased results with respect to a true cost-of-living index. Import price indices are particularly vulnerable to this bias since many of the goods included in these indices are characterised by either explicit or implicit trade barriers. In this article I generalise the cost-of-living index to also allow for barriers to trade in the form of quantity constraints. Further, I develop an upper bound index to the true cost-of-living index when trade barriers are present. The upper bound index has an intuitive interpretation and it is easy to calculate. In the case of clothing imports to Norway the mean annual upper bound cost-of-living bias due to trade barriers is between 0.9 - 1.5 percentage points. It is also shown that average prices, which is often used in the literature, is not a measure of cost-of-living and the annual underestimation of how trade liberalisation has impacted inflation from using average prices was at least 0.8 percentage points.
    Keywords: Index numbers; Cost-of-living; Price level; Trade barriers
    JEL: C43 E31 F14
    Date: 2013–09
  19. By: Spyros Arvanitis (KOF Swiss Economic Institute, ETH Zurich, Switzerland); Tobias Stucki (KOF Swiss Economic Institute, ETH Zurich, Switzerland); Heinz Hollenstein (KOF Swiss Economic Institute, ETH Zurich, Switzerland)
    Abstract: The relevance of services FDI strongly increased over the last two decades. As goods and services differ with respect to important characteristics, one may expect that the determinants of internationalisation are not identical in manufacturing and the service sector. However, there is practically no firm-level research contrasting the two sectors in this respect. In order to fill this gap, we seek to identify for manufacturing and services, firstly, the determinants of a firm’s propensity to go international (exports and/or foreign direct investment) and, secondly, the factors determining the complexity of a firm’s direct foreign activities in terms of business functions. We find that an OLI-based model can be used to explain not only the propensity to go intenational but also differences between two specific forms of direct foreign investment for both the manufacturing and the service sector.
    Keywords: Manufacturing vs. services internationalisation, offshoring vs. exports, internationalisation of business functions, multinational companies, international business strategy
    JEL: F23
    Date: 2013–12
  20. By: Bernard Hoekman
    Abstract: The deadlock in the WTO Doha Round has been accompanied by an increased focus on the negotiation of preferential trade agreements, including so-called ‘mega-regionals’. This paper discusses possible implications for—and possible responses by—excluded countries that have little prospects of participating in most of the mega-regionals. A number of complementary avenues are identified through which such countries might attenuate the potential downsides of preferential trade liberalization among large countries, as well some proposals that would expand the scope to pursue cooperation on regulatory policies in the WTO as opposed to PTAs.
    Keywords: Multilateral cooperation, trade agreements, regional integration, developing countries, WTO
    JEL: F13 K32
    Date: 2013–12
  21. By: Povilas Lastauskas
    Abstract: The close relationship between politics and enterprises made the revolving door wide open and reinforced business influence on political decisions. The paper analyses relationship between firm entry institutions and import competition inside the EU. Though there is a clear tendency for entry and startup costs to decrease over time and particularly in space, I challenge the view that greater openness to trade automatically leads to improved firm entry institutions. My model enables calculating business entry impediments whereas lobbying game produces structural estimates of the counterfactual levels of trade, prices and earnings had no business obstacles existed. Conditions for active entry barriers are laid down in terms of extensive margin and asymmetries in technology and trade costs. Importantly, the model demonstrates that startling differences in firm regulation can be explained resorting to relative gains and losses accruing in a fully trading network as is the EU. More generally, understanding factors which affect imports is crucial for any model seeking to uncover ex ante welfare effects of trade
    Keywords: trade, entry institutions, firm heterogeneity, foreign competition
    JEL: C31 E02 F12 F14 F15 F55
    Date: 2013–09
  22. By: Marc Melitz; Thierry Mayer; Gianmarco I.P. Ottaviano
    Abstract: We build a theoretical model of multi-product firms that highlights how competition across market destinations affects both a firm's exported product range and product mix. We show how tougher competition in an export market induces a firm to skew its export sales towards its best performing products. We find very strong confirmation of this competitive effect for French exporters across export market destinations. Theoretically, this within firm change in product mix driven by the trading environment has important repercussions on firm productivity. A calibrated fit to our theoretical model reveals that these productivity effects are potentially quite large.
    Date: 2013–01
  23. By: Danakol, Seçil Hülya (Utrecht University); Estrin, Saul (London School of Economics); Reynolds, Paul (Aston University); Weitzel, Utz (Radboud University Nijmegen)
    Abstract: This paper explores the effects of foreign direct investment, measured by mergers and acquisitions, on domestic entrepreneurial entry. We use a micro‐panel of more than two thousand individuals disaggregated by industry in seventy countries including both developed and developing economies, 2000‐2009. The theory yields ambiguous predictions about the relationship between FDI and entrepreneurship; positive spillovers via dissemination of technology or negative because of crowding out. Our empirical analysis is conducted at three levels of aggregation. We find the relationship between FDI and domestic entrepreneurship in aggregate and intra‐industry to be negative. Policies need to consider how to counteract this effect.
    Keywords: foreign direct investment, entrepreneurship, new firm entry, spillovers
    JEL: F23 M13 L26
    Date: 2013–12
  24. By: Wagner, Joachim (Leuphana University Lueneburg and CESIS, Stockholm)
    Abstract: Business managers are well aware of the fact that credit constraints can hamper or even prevent exporting. Economists only recently started to incorporate these arguments in theoretical models of heterogeneous firms and to test the implications of these models econometrically with firm-level data. Starting with the pioneering study by Greenaway, Guariglia and Kneller (Journal of International Economics, 2007) a growing number of empirical papers looked at the links between financial constraints and export activities using data at the level of the firm. This paper presents a tabular survey of 32 empirical studies that cover 14 different countries plus five multi-country studies. The big picture can be summarized as follows: Financial constraints are important for the export decisions of firms – exporting firms are less financially constrained than non-exporting firms. Studies that look at the direction of this link usually report that less constraint firms self-select into exporting, but that exporting does not improve financial health of firms. The paper argues that the results at hand should not be considered as stylized facts that can guide policy makers in an evidence-based way and suggests a strategy to further improve our knowledge in this area.
    Keywords: Credit constraints; exports; empirical studies; literature survey
    JEL: F14
    Date: 2013–12–05
  25. By: Abdessalem Abbassi; Lota D. Tamini; Ahlem Dakhlaoui
    Abstract: In this article we propose a bilateral dumping model in which the minimum access level is endogenous. Regions compete with one another using Cournot conjectures and engage in interregional dumping as in Brander and Krugman’s (1983) reciprocal dumping model. International trade is hindered by restrictive Tariff rate Quota (TRQs). The model features two regions and one product. We derive the conditions under which it is optimal to observe interregional trade and those under which trade does not exist. The results show that the world price and the difference in production costs between regions play an important role in determining whether bilateral trade exists. In the presence of bilateral trade, the region with the largest market size will obtain the largest share of import volumes permitted under the minimum access system while in the absence of interregional trade, the distribution of import permits between regions will also depends on the product cost asymmetry. When only the most efficient region exports to the least efficient region, production costs asymmetry, transaction costs and world price level determine whether the smaller or larger region obtains the larger share of product import allowed under minimum access commitment. In all cases, we show that in a country like Canada, creation of “artificial barriers” to interprovincial trade of products under supply management system lowers the welfare of at least one of the regions, along with the global welfare.
    Keywords: Minimum access, reciprocal dumping, cost asymmetry
    JEL: F12 Q17 R12
    Date: 2013
  26. By: Mavuş, Merve; Oduncu, Arif; Güneş, Didem
    Abstract: Due to the World Trade Organization’s (WTO) deadlocked multilateral trade negotiations, many countries have started to establish Free Trade Agreements (FTA). In this context, the European Union (EU) and the United States (US) have decided to establish bilateral Transatlantic Trade and Investment Partnership (TTIP). This note focuses on the impacts of this partnership on Turkish economy. To the best of our knowledge, we are the first to analytically analyze the economic impacts of the TTIP on Turkey by differentiating according to Turkey’s inclusion in and exclusion from the TTIP. By using Global Trade Analysis Project (GTAP) database and a general equilibrium model, the effects of various scenarios on GDP is studied within the framework of four-regional-consolidation, the EU, the U.S., Turkey and rest of the world. Obtained results show that Turkey could be in a gain of 35 billion USD if Turkey is included in TTIP compared to if she is excluded from the TTIP. Moreover, Turkey’s inclusion in TTIP is not only in favor of Turkey but also in favor of the EU and the USA in terms of higher GDP growth rates.
    Keywords: TTIP, Turkey
    JEL: F13
    Date: 2013–12
  27. By: Inomata, Satoshi (Asian Development Bank Institute)
    Abstract: This paper aims to provide a non-technical explanation of the concept of trade in value added, with particular reference to East Asia. The trade in value added approach allows us to redefine the relationship between countries of origin and destination in international trade, and thereby addresses an important issue of measuring international trade in the face of growing production sharing among different countries. In contrast to the orthodox concept of trade balances based on foreign trade statistics, it focuses on the value added contents of a traded product, and considers each country’s contribution to the value added generation in a production process.
    Keywords: trade in value-added; input-output tables; factory asia; foreign trade statistics
    JEL: C67 F14 F15
    Date: 2013–12–11
  28. By: Baybars Karacaovali (Department of Economics, University of Hawaii at Manoa)
    Abstract: There has been a proliferation of preferential trade agreements within the last two decades. This paper analyzes the e§ects of free trade agreements (FTAs) on external tari§s in small economies where protection decisions are made politically. It extends the Grossman and Helpman (1995) model by determining tari§ rates endogenously instead of assuming they are Öxed during or after the formation of FTAs. We show that when an FTA is established, the tari§ rates that apply to non-members essentially decline. More importantly, we investigate the interaction between endogenous tari§ determination and the feasibility of an FTA. We Önd that the expectation of tari§ reductions under endogenous tari§s could make an otherwise feasible FTA if tari§s were Öxed become infeasible. However, if domestic import-competing sectors are relatively smaller and the government places a signiÖcant weight on political contributions relative to social welfare, an FTA with endogenous tari§s may be more likely to be feasible than an FTA assumed to Öx external tari§s.
    Keywords: Free trade agreements, political economy of trade policy, trade liberal- ization, feasibility.
    JEL: F13 F15
    Date: 2013–12
  29. By: Eliasson, Kent (Growth Analysis and Department of Economics, Umeå University); Hansson, Pär (Uppsala Center for Labor Studies)
    Abstract: Reduced trade barriers and lower costs of transportation and information have meant that a growing part of the economy has been exposed to international trade. In particular, this is the case in the service sector. We divide the service sector into a tradable and a non-tradable part using an approach to identify tradable industries developed by Jensen and Kletzer (2006). We examine whether the probability of displacement is higher and income losses after displacement greater for workers in tradable services and manufacturing (tradable) than in non-tradable services. We also analyze whether the probability of re-employment is higher for workers displaced from tradable services and manufacturing than from non-tradable services. We find that in the 2000s the probability of displacement is relatively high in tradable services in comparison to non-tradable services and manufacturing. On the other hand, the probability of re-employment is higher for those displaced from tradable services. The largest income losses are found for those who had been displaced from manufacturing. Interestingly, the income losses of those displaced from manufacturing seems mainly to be due to longer spells of non-employment, whereas for those displaced in tradable services lower wages in their new jobs compared to their pre-displacement jobs appears to play a larger role.
    Keywords: displacement COSTs; re-employment; earnings losses; tradable services
    JEL: F16 J62
    Date: 2013–12–09
  30. By: Bernard M. Hoekman
    Abstract: In 2011 the World Bank Group (WBG) issued a new trade strategy. This identifies the primary axes for WBG engagement and support activities and areas where action is likely to have the greatest positive impact in terms of helping developing countries to integrate further into the world economy and to benefit from global trade opportunities. This paper briefly discusses the rationale for the development of a strategy and some criticisms that have been directed at it, in particular the view that the strategy neglects to prioritize trade liberalization and as a result is less effective.
    Keywords: World Bank, trade, development, strategy, economic development, policy advice, development assistance
    JEL: F13 O19 O24
    Date: 2013–06
  31. By: Tavassoli, Sam (CSIR, Blekinge Inst of Technology)
    Abstract: This paper analyzes the role of innovation on the export behavior of firms. Using two waves of Swedish CIS data merged with register data on firm-specific characteristics. I estimate the influence of the innovation output of a firm on its export propensity and intensity, respectively. I find that the innovation output of firms (measured as sales due to innovative products) has a positive and significant effect on export behavior of firms. The results also show that it is indeed innovation output, rather than innovation input (innovative efforts), that matters for export behavior of firms. Specifically, innovation output leads to increase in later export propensity and intensity of firms. Moreover, there is also strong association of productivity and ownership structure of firms with export propensity and intensity of firms. The results are robust when unobserved time-invariant heterogeneity of firm and also potential endogeneity of innovation-export are taken into accounted.
    Keywords: Innovation output; innovation input; export propensity; export intensity
    JEL: F14 O31 O33
    Date: 2013–12–03
  32. By: Bernard M. Hoekman
    Abstract: A matter of long-standing policy concern is the limited extent to which many countries in Africa have been able to diversify their economies. The global phenomenon of supply chain trade in principle generates opportunities for specialization in processing activities and labour- or natural-resource intensive tasks that are part of international value chains. This paper discusses what role international organizations – in particular the global trade body, the WTO, and the multilateral financial institutions – have played in assisting efforts to enhance the ability of firms in Africa to participate in value chains by lowering trade costs, suggests some implications for trade governance at both the national and global level.
    Keywords: African economic integration, supply chains, international organizations, development assistance, trade costs
    Date: 2013–10
  33. By: Simon PEETMAN (Europian Advisory Services (EAS), Asia Office, Singapore)
    Abstract: Addressing technical barriers to trade is a key priority of ASEAN as part of trade facilitation in achieving the Single Market and Production Base under the ASEAN Economic Community in 2015 and building an effective and competitive Economic Community beyond 2015. Standards and conformance assessment measures, while seeking to ensure quality and safety of products for consumers should not become technical barriers to trade across the region as ASEAN liberalises its trading regime. A delicate balance needs to be achieved between the two to build a thriving economic region. The region has been undertaking efforts towards standards harmonisation in the ASEAN priority sectors of integration and in bringing about regulatory convergence taking into account the diversities that exist in the ten Member States. More needs to be done in this area for the region to stay competitive and enhance intra-ASEAN trade as well as external trade. This paper looks at how the regional grouping is addressing technical barriers to trade as part of ASEAN's trade integration agenda and what it should do going beyond 2015.
    Keywords: ASEAN, economic integration, technical barriers to trade, standards, conformance, conformity assessment, harmonisation, free trade area, trade facilitation, regulation, mutual recognition agreement, industry association, ACCSQ, PFPWG, EU, European Commission
    JEL: F10 F13 F15
    Date: 2013–11
  34. By: Thomas Eichner; Rüdiger Pethig
    Abstract: In the basic model of international environmental agreements (IEAs) (Barrett 1994, Rubio and Ulph 2006) extended by international trade, self- enforcing - or stable - IEAs may comprise up to 60% of all countries (Eichner and Pethig 2013). But these IEAs reduce total emissions only slightly compared to non-cooperation. Here we analyze the capacity of sign-unconstrained tariffs to enhance the size and performance of self-enforcing IEAs. We show that the size of stable IEAs shrinks when climate coalitions are Stackelberg leaders and set tariffs in addition to their cap-and-trade schemes. Surprisingly, these smaller IEAs reduce total emissions more effectively than the larger stable IEAs without tariffs. In the model with tariffs the signatory countries import fossil fuel and their tariff takes the form of a subsidy of fuel consumption and a tax on the production of the consumption good.
    Keywords: tariff, trade, self-enforcing environmental agreements, Stackelberg equilibrium
    JEL: C72 F18 Q50 Q58
    Date: 2013
  35. By: Carrera Troyano, Miguel; De Diego Álvarez, Dorotea
    Abstract: This paper presents the first results of an ongoing research project that work with the microdata from COMEXT database to calculate the levels of intra-industry trade in manufactures between 1988 and 2011. The analysis provides data on the long-term evolution of this phenomenon and its breakdown between vertical IIT and horizontal presenting also a shift-share analysis that allows making explicit the impact it has had the performance of the various sectors in total IIT: their CII level and their weight of each sector in the total  trade. Similarly, it provides the sectoral breakdown of IIT levels and various working hypotheses for future research.
    Keywords: Intraindustry Trade, Spain, Manufactures
    JEL: F14
    Date: 2013
  36. By: Alessandra Perri (Dept. of Management, Università Ca' Foscari Venice); Francesca Checchinato (Dept. of Management, Università Ca' Foscari Venice); Cinzia Colapinto (Dept. of Management, Università Ca' Foscari Venice)
    Abstract: Recent literature on strategic decision-making highlights the role of hidden costs, i.e. costs that firms are not able to predict ex-ante (Larsen et al., 2012). This paper analyses the hidden costs of going global, i.e. unanticipated costs that emerge in the implementation of market entry strategies. Foreign market entry requires firms to assess the potential attractiveness of different locations, select an appropriate entry mode, and organize their international value chain. When taking such decisions, firms can make evaluation mistakes. We propose that cultural distance is one factor that generates Òblind spotsÓ in a firmÕs strategic analysis, thus affecting its ability to evaluate the actual challenges of entering foreign markets. Firms can offset distance-driven hidden costs by building international experience and relational capability.
    Keywords: Hidden costs, estimation, internationalization, distance
    JEL: M16
    Date: 2013–11
  37. By: Mitsuyo ANDO (Keio University); Fukunari KIMURA (Economic Research Institute for ASEAN and East Asia (ERIA))
    Abstract: This paper investigates the developing pattern of machinery trade and the extent and depth of production networks in North America from the perspective of their links with East Asia in the last two decades. Our descriptive analysis based on the total value of trade and the extensive margin demonstrates the expanding fragmentation of production in North America with a strong connection of Mexico, in addition to the US, with East Asia, particularly in the electric machinery sector. Our quantitative analysis on the total value of trade as well as extensive and intensive margins verifies the existence of such a strong connection with East Asia for machinery imports by North America, where Mexico enhanced a bridging role between East Asia and the US. These results reflect the reduction in services link costs, the further evolution of production sharing in the US-Mexico nexus, and the strengthening competitiveness for production networks in East Asia.
    Keywords: the 2nd unbundling, fragmentation, agglomeration, free trade agreement (FTA), extensive margin
    JEL: F14 F15 F23 L23
    Date: 2013–11
  38. By: Suparna Karmakar
    Abstract: The crisis has contributed to a slowdown in global trade volumes, with trade virtually stagnant in the twelve months to July 2013. In this context, fruitful negotiations in the World Trade Organisationâ??s 9th Ministerial Conference in Bali are crucial to sustain the institutionâ??s credibility and prove that multilateral negotiations can still deliver success. WTO trade talks are the only ongoing trade liberalisation process that has development at its core. The Doha mini-package under consideration at Bali is a collection of watered-down but deliverable elements of a deal comprising agriculture, trade facilitation and special and differential treatment/less developed country concessions. Post-Bali, the WTO should aim to reverse the current disenchantment with multilateral trade negotiations. This means formulating a relevant trade negotiating agenda with an understanding of global value chains at its core. However, the transition to the new agenda requires a closure of the ongoing Round. The easiest way to conclude the Doha Round would be to select another discrete set of deliverables that fulfills the development commitment of the Doha Development Agenda, thus paving the way for a new Round.
    Date: 2013–12
  39. By: Jayanta Roy; Pritam Banerjee
    Abstract: The policy reforms initiated in India in the mid-1980s and expanded in 1991 helped support an expansion in India’s trade. Trade reforms since the mid-1990s have been piecemeal. This paper argues that without significant further reform and adoption of a focused trade strategy, the competitiveness of India’s industry will suffer, including in areas such as information technology and related services in which India has established a strong global niche. Critical building blocks of such strategic reforms include further reductions in tariffs, opening services sectors to foreign competition, serious initiatives to reduce trade transaction costs that prioritize integration into international supply-chains, and a greater focus on regional integration.
    Keywords: India, political economy, trade policy, economic development
    Date: 2013–11
  40. By: Virginie Coudert; Cécile Couharde; Valérie Mignon
    Abstract: The aim of this paper is to study the relationship between terms of trade and real exchange rates of commodityproducing Commodity currencies,countries on both the short and the long run. We pay particular attention to the dominant role played by oil among commodities by investigating the potential non-linear effect exerted by the situation on the oil market on the real exchange rate - terms of trade nexus. To this end, we rely on the panel smooth transition regression methodology to estimate the adjustment process of the real effective exchange rate to its equilibrium value depending on the volatility on the oil market. Considering a panel of 52 commodity exporters and 17 oil exporters over the 1980-2012 period, our findings show that while exchange rates are mainly driven by fundamentals in the low-volatility regime, they are mostly sensitive to changes in terms of trade when oil price variations exceed a certain threshold. The commodity-currency property is thus at play in the short run only for important variations in the oil price.
    Keywords: Commodity currencies;Oil price;Non-linearity
    JEL: C23 F31 Q43
    Date: 2013–12
  41. By: Llanto, Gilberto M.; Ortiz, Ma. Kristina P.
    Abstract: The ASEAN+6 countries are currently engaged in negotiation for a Regional Comprehensive Economic Partnership (RCEP). If successfully negotiated, RCEP will result into the world`s biggest trading bloc, 40 percent of world trade, that offers significant benefits to participating countries. The first round of negotiations was held in Brunei in May 2013. The second round was recently held in Brisbane, Australia in September 2013. Negotiations are expected to conclude in 2015. The focus of the RCEP negotiations will be on the following eight key areas: trade in goods, trade in services, investment, economic and technical cooperation, intellectual property, competition, dispute settlement, and other issues. The paper discusses some of the challenges facing the Philippines during the difficult period of negotiation and the necessary structural and institutional reforms that it has to take to ensure that it will benefit from RCEP. The paper calls the attention of policymakers to address critical constraints affecting the effective utilization of free trade agreements, growth, trade facilitation and customs administration, services liberalization, and investment incentives.
    Keywords: Philippines, rules of origin, customs administration, trade facilitation, services liberalization, Asian free trade agreements, Regional Comprehensive Economic Partnership, utilization rate of FTAs, investment incentive packages
    Date: 2013
  42. By: Verena Dill; Uwe Jirjahn
    Abstract: German works councils provide a highly developed mechanism for codetermination designed to increase trust and cooperation within firms. This study examines whether or not the functioning of works councils depends on the type of ownership. Comparing domestic- and foreign-owned firms in Germany, we find that works councils and managers in foreign-owned firms are less likely to cooperate. The finding fits the notion that the activities of foreign multinational companies can involve tensions with the institutional framework of the host country.
    Keywords: Corporate Globalization, Foreign Ownership, Works Council, Codetermination, Cooperation
    JEL: F23 J50 J53
    Date: 2013
  43. By: Mitsuyo ANDO (Keio University); Fukunari KIMURA (Economic Research Institute for ASEAN and East Asia (ERIA))
    Abstract: This paper attempts to investigate the features of development and restructuring patterns of regional production/distribution networks, mainly in machinery sectors, using finely disaggregated international trade data. More specifically, the paper first studies the developing patterns of machinery trade for the East Asian countries, then examines those patterns in terms of the extensive margin in order to investigate the extent and depth of the networks, and demonstrate how the networks and industrial shape are being restructured. The paper also presents some evidences on the expanding connectivity of production networks in East Asia from regional to global by shedding lights on the link between East Asia and Europe via CEE countries and concludes with policy implications on challenges in taking advantages of the mechanics of the 2nd unbundling for each ASEAN member state and ASEAN as a whole.
    Keywords: international production networks, machinery trade, East Asia, the extensive margin
    JEL: F14 F23 L23
    Date: 2013–11
  44. By: Bahar, Dany; Hausmann, Ricardo; Hidalgo, César A.
    Abstract: The literature on knowledge diffusion shows that knowledge decays strongly with distance. In this paper we document that the probability a product is added to a country’s export basket is, on average, 65% larger if a neighboring country is a successful exporter of that same product. For existing products, growth of exports in a country is 1.5 percent higher per annum if it has a neighbor with comparative advantage in these products. While these results could be driven by a common third factor that escapes our controls, they align with our expectations of the localized character of knowledge diffusion.
  45. By: Maurice Obstfeld; Kenneth Rogoff; Ben Bernanke; Kenneth Rogoff
    Abstract: The central claim in this paper is that by explicitly introducing costs of international trade (narrowly, transport costs but more broadly, tariffs, nontariff barriers and other trade costs), one can go far toward explaining a great number of the main empirical puzzles that international macroeconomists have struggled with over twenty-five years. Our approach elucidates J. McCallum's home bias in trade puzzle, the Feldstein-Horioka saving-investment puzzle, the French-Poterba equity home bias puzzle, and the Backus-Kehoe- Kydland consumption correlations puzzle. That one simple alteration to an otherwise canonical international macroeconomic model can help substantially to explain such a broad arrange of empirical puzzles, including some that previously seemed intractable, suggests a rich area for future research. We also address a variety of international pricing puzzles, including the purchasing power parity puzzle emphasized by Rogoff, and what we term the exchange-rate disconnect puzzle.' The latter category of riddles includes both the Meese-Rogoff exchange rate forecasting puzzle and the Baxter-Stockman neutrality of exchange rate regime puzzle. Here although many elements need to be added to our extremely simple model, we can still show that trade costs play an essential role.
  46. By: Hassan, Sohaib Shahzad; Jindra, Björn; Cantner, Uwe; Günther, Jutta
    Abstract: The European Union (EU) is one of the largest recipients of outward foreign direct investment (OFDI) from emerging economies. We apply a discrete choice model to analyze the location choice of emerging market firms in the EU27. In particular, we test to what extent these firms’ location choices are related to agglomeration economies and knowledge externalities because these have been suggested as potential sources for technological catching-up for emerging market firms. Our results indicate that emerging market firms’ location choices differ from the choices of other investors. Emerging market firms place, on average, a higher value on urbanization, diversification economies and sector-specific human resources. However, we find evidence for heterogeneity in the location choices of emerging market firms depending on the home region and the sector of investment.
    Keywords: Outward FDI, location choice, emerging economies, European Union, Spill-overs, Knowledge-seeking FDI
    JEL: F23
    Date: 2013–08–01
  47. By: Iwasaki, Ichiro; Tokunaga, Masahiro
    Abstract: In this paper, we conduct a meta-analysis of the literature that empirically examines the microeconomic impacts of foreign direct investment (FDI) in Central and Eastern Europe and the former Soviet Union. The meta-synthesis of estimates collected from relevant studies shows that both the effect size and the statistical significance of the indirect effect of FDI, namely the productivity spillover effect, are obviously lower than those of the direct effect caused by foreign participation in company management through ownership. Moreover, the meta-regression analysis reveals that, probably due to the presence of publication selection bias, previous studies have not yet provided empirical evidence of a non-zero productivity spillover effect in the region. Further research efforts are required to capture the true effect.
    Keywords: foreign direct investment (FDI), technology spillover, foreign ownership, meta-analysis, publication selection bias, Central and Eastern Europe, former Soviet Union
    JEL: D22 F21 F23 P33
    Date: 2013–11
  48. By: Antonio Navas (Department of Economics, The University of Sheffield)
    Abstract: This paper creates a theory of endogenous growth with endogenous institutional change to analyse the impact that trade openness has on economic growth through a change in institutions in pre-industrial societies. An elite (landowners) controlling the political power expropriates another social group (capitalists). This reduces investment in physical capital, the source of endogenous growth. The rival group (capitalists) can take a military action to expel the group in power. I study optimal expropriation, growth and institutional change under two scenarios, autarky and free trade. The simulation results suggest that for a vast majority of cases economies open to trade generally experience higher growth and earlier institutional change. This is the consequence of the fact that the elite reduces the expropriation rate when the economy opens up to trade. In addition, economies specialising in manufacturing products tend to grow more and introduce institutional change earlier. This is consistent with the divergent pattern in growth and institutions that Western European Economies were experiencing during the modern era and the industrial revolution.
    Keywords: trade; institutions; growth in the very long run
    JEL: F43 O43
    Date: 2013
  49. By: Richard O. Cunningham
    Abstract: This paper discusses the challenges that confront the WTO, inspired by the recent appointment of a new Director-General for the organization and various views that have been expressed by knowledgeable observers as to how these challenges should be addressed. The paper focuses in particular on the prescriptions expressed by Ambassador Robert Zoellick, a former United States Trade Representative, regarding what the Director-General should focus on, and lays out an alternative view of the path forward for the WTO and for sustaining multilateral cooperation on trade.
    Keywords: WTO, trade negotiations, multilateral trading system, developing countries, trade agreements
    Date: 2013–06
  50. By: Peter Neary; James E. Anderson
    Abstract: What kind of tariff reform is likely to raise welfare in situations where tariff revenue is important?� Uncertainty about specification and risk from imprecise parameter estimates of any particular specification reduce the credibility of simulation estimates.� A promising alternative is to develop rules which are robust with respect to such uncertainty.� We present sufficient conditions for a class of linear rule that guarantee welfare-improving tariff reform.� The rules span cones of welfare-improving tariff reforms consisting of convex combinations of (i) trade-weighted-average-tariff-preserving dispersion cuts; and (ii) uniform tariff cuts that preserve domestic relative prices among tariff-ridden goods.
    Keywords: Trade policy reform, Generalized mean and variance of tariffs, Tariff revenue, Piecemeal policy reform
    JEL: F13 H21
    Date: 2013–12–13
  51. By: Firpo, Sergio; Pieri, Renan
    Date: 2013–12–06
  52. By: Smith, James P. (RAND); Delaney, Liam (University of Stirling)
    Abstract: Our focus will be on the role of migration to the United States from a set of important European sending countries as a device for improving the human capital of the children and grandchildren of migrants as measured by their education. In this paper, we derive a new and conceptual more appropriate measure of the generational gains in schooling attributable to migration by taking into account the correct counter-factual – the generational education gains that would have taken place if these migrants had remained in their sending countries. We find that the two European countries where the descendants gained the most in terms of human capital are Italy and Poland.
    Keywords: human capital, education, migration
    JEL: I24 I25
    Date: 2013–11
  53. By: Renato Baumann
    Abstract: Since the early 1950s Latin American countries have made systematic efforts to foster regional transactions. Nevertheless, the indicators of relative importance of regional trade remain well below the corresponding figures in other regions. This paper argues that a process of integration should take into account the differences between what can be achieved by negotiating with closer neighbours and with geographically distant partners. Also, at present there is an increasing competition from Asian goods, which have negatively affected Latin American producers. Among the lessons from the recent Asian experience are the economic links among countries that have helped to improve competitiveness as well as to foster the degree of convergence of the GDP growth rates of the participating countries.
    Keywords: regional integration, productive complementarity, competitiveness and trade barriers
    Date: 2013–06
  54. By: Arslan Razmi (University of Massachusetts-Amherst)
    Abstract: The BPCG model provides an interesting hypothesis regarding economic growth. The main implication is that world demand places a constraint on individual country performance. I discuss this implication and argue that tests of the BPCG model have essentially been tests of the hypothesis that trade is balanced over the long run; a plausible hypothesis but one that need not hold mainly due to demand-side constraints. I then discuss the role of relative prices and investment, point out logical inadequacies in the traditional BPCG framework, and suggest an alternative theoretical framework to investigate its robustness. Our theoretical and empirical explorations contribute to reconciling evidence supporting the BPCG hypothesis with recent work that consistently ?nds an important role for the level of the real exchange rate and investment, independently of world demand growth.
    Keywords: Balance of payments-constrained growth model, accumulation, demand-led growth, real exchange rates, terms of trade.
    JEL: F41 F43 F32
    Date: 2013
  55. By: Michele Ruta
    Abstract: How can economic theory be useful in WTO arbitrations? Motivated by this question, this paper reviews the approach that is often used to determine the level of permissible retaliation in international trade disputes (the, so called, "trade effect" approach), and its implementation under specific policy scenarios (tariffs, quotas, subsidies). Through these examples, the paper argues that economic theory, in addition to quantitative economics, can play a useful role in assisting WTO arbitrators in understanding the pros and cons of the trade effect approach and in implementing this approach under different policy scenarios.
    Keywords: WTO Arbitrations, Economic Theory, Permissible Retaliation
    Date: 2013–03
  56. By: Francesca Checchinato (Dept. of Management, Università Ca' Foscari Venice); Lala Hu (Dept. of Management, Università Ca' Foscari Venice); Alessandra Perri (Dept. of Management, Università Ca' Foscari Venice); Tiziano Vescovi (Dept. of Management, Università Ca' Foscari Venice)
    Abstract: Chinese latecomer firms adopt internationalization strategies in order to gain the necessary resources and competences to compete in the local and global markets. In this process, different sectors are involved: not only in the electronic one (e.g. Haier and Huawei represent two successful cases), but also in other industries Chinese firms have achieved high competitiveness in the global scenario. In this paper, we analyze the case of Goodbaby, a Chinese baby strollersÕ manufacturer. This company has implemented its internationalization activities since the early 1990s, and it is now one of the main stroller manufacturers in the world and the leading brand in China. In order to analyze the brand awareness and purchase behavior in the local market, the empirical design used in this study encompasses the combination of the competitive analysis of strollersÕ brands in the Chinese market and a questionnaire to Chinese consumers. Our research shows that GoodbabyÕs history reflects the internationalization process of multinationals from emerging markets (EM-MNEs), while confirming GoodbabyÕs high competitiveness in a sector that was traditionally dominated by foreign brands. Some managerial implications will be discussed.
    Keywords: China, global, glocal, internationalization, Goodbaby
    JEL: M16 M30
    Date: 2013–11
  57. By: Lionel Fontagné; Jean Fouré; Maria Priscila Ramos
    Abstract: Thinking of how the relative sizes of countries and how the geography of world production and trade will be affected in the long run must be based on sound economic reasoning about the determinants of long term growth. It must also be embedded in a general equilibrium framework that takes account of the interactions among markets and sectors, as well as between countries. This paper takes stock of a three phase research project. The first step consists of deriving and estimating a three-factor (labour, capital, energy) macroeconomic growth model for a large set of individual countries, which fits two forms of technological progress (standard TFP and energy efficiency). The second step consists of recovering the sectoral detail with an energy-oriented Computable General Equilibrium model of the world economy calibrated to fit these projections. In a third step we confront the assumptions for our baseline to alternative scenarios.
    Keywords: CGE model;Dynamic Baseline;Growth model;Energy
    JEL: C53 C68 O44 O47 Q56
    Date: 2013–12
  58. By: Rabah Arezki; Klaus Deininger; Harris Selod
    Abstract: We review evidence regarding the size and evolution of the "land rush" in the wake of the 2007-2008 boom in agricultural commodity prices and study determinants of foreign land acquisition for large-scale agricultural investment. Using data on bilateral investment relationships to estimate gravity models of transnational land-intensive investments confirms the central role of agro-ecological potential as a pull factor but contrasts with standard literature insofar as quality of the destination country’s business climate is insignificant and weak tenure security is associated with increased interest for investors to acquire land in that country. Policy implications are discussed.
    Keywords: Land Acquisition, Large-Scale Agriculture, Foreign Investments, Agro-Ecological Potential, Land Availability, Land Governance, Property Rights
    JEL: F21 O13 Q15 Q34
    Date: 2013–08–15
  59. By: Giovanni Favero (Dept. of Management, Università Ca' Foscari Venice)
    Abstract: The research here proposed is a micro-analysis of a business ending in bankruptcy in the aftermaths of the first oil shock, concerning the Italian subsidiary of a German wareenamelling group established in the town of Bassano in 1925. Following the budget reports and the interviews with the former entrepreurs, the company flourished until the 1960s, when managerial and entrepreneurial successions emphasized the growing difficulties deriving from growing labour costs. A tentative reorganization of the company was hindered in 1968 by union resistance and political pressures for the preservation of employment levels. In 1975 the board of directors decided to declare bankruptcy as a consequence of the huge budget losses. However, a subsequent inquiry of the Italian tax authority discovered an accounting fraud concerning hidden profits in 1974 and 1975. The fraud disclosure shows how historical conditions could create the convenience for performance understatement not only for fiscal purposes, but also in order to make divestment possible. However, it is also used here as an element to argue that business sources and the story they tell should not be taken at their face value, and that a different reconstruction of the company's path to failure is possible. The literature concerning the missed recognition of opportunities is then mobilised in order to interpret the inconsistencies that emerge from the triangulation of business archives, press columns and interviews with union representatives and politicians. This allows to put back into perspective what results as an obsession of company management with labour costs, concealing the importance of other competitive elements, such as the increasing specialisation of the producers of home appliances. This 'refractive error' may be typical of businesses operating in (presumed) mature industries at international level, where wage differentials offer the opportunity to pursue quite literally exploitation much further.
    Keywords: Business history, foreign direct investments, family business, accounting fraud, corporate governance
    JEL: N84 G34 L21 F23
    Date: 2013–11
  60. By: Isaac Gross (Reserve Bank of Australia); James Hansen (Reserve Bank of Australia)
    Abstract: This paper studies the effect of a shock to resource prices in a small open economy where the stock of natural resources is responsive to exploration activity, and where extraction reduces the future availability of reserves. We show that the effects of a resource price shock on resource investment, labour utilisation and extraction are all amplified in the presence of endogenous reserves. We also find that spillovers to broader economic activity, including changes in domestic production, non-resource exports and consumption, are all greater in the presence of exploration activity. However, we find that incorporating endogenous reserves does not fundamentally change the effects of a resource price shock on key price measures including consumer prices, the real exchange rate and domestic interest rates.
    Keywords: natural resources; small open economy
    JEL: F41 Q33
    Date: 2013–12
  61. By: Neil Foster-McGregor (The Vienna Institute for International Economic Studies, wiiw); Mario Holzner (The Vienna Institute for International Economic Studies, wiiw); Michael Landesmann (The Vienna Institute for International Economic Studies, wiiw); Johannes Pöschl (The Vienna Institute for International Economic Studies, wiiw); Robert Stehrer (The Vienna Institute for International Economic Studies, wiiw); Roman Stöllinger (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: Summary Industrial policies in the EU have markedly shifted towards ‘horizontal’ measures and framework polices. The sustained de-industrialisation of several European economies and a general perception that countries with a strong manufacturing base emerged from the crisis in a strengthened position put the issue of industrial capacities back on the agenda. This process was paralleled by a renewed interest in specific industrial policies targeted at the manufacturing sector. Against this background, this report revisits some of the main arguments in favour of a manufacturing imperative and discusses them in a European context also showing the limitations and caveats of these arguments. It proceeds by identifying the main challenges ahead of European manufacturing given the structural changes that occurred in the EU over the period 1995 to 2011. It also provides an analysis of a number of industrial policy measures that are important in a European context such as state aid by EU Member States, public R&D support for firms and the role of initial vocational training systems as a potential ‘soft’ industrial policy tool. Based on the results of the analysis, the report summarises the policy implications and offers recommendation to master the major structural challenges that lie ahead of European industry.
    Keywords: industrial policy, state aid, innovation support, competitiveness, structural change
    JEL: F13 L52
    Date: 2013–10
  62. By: Kandil , Magda; Shahbaz, Muhammad; Nasreen, Samia
    Abstract: The paper studies the impact of globalization on financial development in a sample of 32 developed and developing economies over the period 1989-2012. Indicators of financial development include three banking indicators (private sector credit, domestic credit, and liquid liabilities) and three indicators of stock market development (value traded, turnover ratio and stock market capitalization), all relevant to GDP. Two panel estimation methodologies are under consideration: panel co-integration and panel VAR. The findings reveal that financial development affects economic growth and globalization positively. Globalization helps mobilize economic growth, but does not help financial development as it helps increase access to external financing. Quality institutions do not impact financial development although the latter increases incentives for better quality institutions in support of sustainable growth.
    Keywords: Financial development, globalization, cointegration
    JEL: F1
    Date: 2013–12–09
  63. By: Gros, Daniel; Busse, Matthias
    Abstract: In this new Policy Brief, CEPS Director Daniel Gros argues that the 13 November announcement of the European Commission that Germany is running an excessive current account surplus appears to be much ado about little. All the Commission can, and will, do is to start an ‘in depth analysis’. This might lead to strong political reactions and an enormous echo in the media. But nothing of concrete substance is likely to follow.
    Date: 2013–11

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