nep-int New Economics Papers
on International Trade
Issue of 2013‒12‒29
seventy papers chosen by
Luca Salvatici
Universita' di Roma 3

  2. Export or Merge? Proximity vs. Concentration in Product Space By Marc-Andreas Muendler
  3. Financial liberalization and the relationship-specificity of exports By Defever, Fabrice; Suedekum, Jens
  4. The Impact of Globalization and Technology Transfer on Manufacturing Employment and Skills in Ethiopia By Haile, Getinet Astatike; Srour, Ilina; Vivarelli, Marco
  5. The rise of the East and the Far East: German labor markets and trade integration By Dauth, Wolfgang; Findeisen, Sebastian; Suedekum, Jens
  6. Verti-zontal differentiation in export markets. By Di Comite, Francesco; Thisse, Jacques-François; Vandenbussche, Hylke
  7. Working Paper 191 - Do Firms Learn by Exporting or Learn to Export: Evidence from Senegalese Manufacturers’ Plants By Cisse Fatou; Ji Eun Choi
  8. Factor Proportions and the Growth of World Trade By Zymek, Robert
  9. Trade Liberalization and Wage Inequality: New Insights from a Dynamic Trade Model with Heterogeneous Firms and Comparative Advantage By Wolfgang Lechthaler; Mariya Mileva
  10. French firms exports during downturns: evidence from past crises. By Bellas, D.; Vicard, V.
  11. Risk or Resilience? The Role of Trade Integration and Foreign Ownership for the Survival of German Enterprises during the Crisis 2008-2010 By Wagner, Joachim; Gelübcke, John P. Weche
  12. The Real Exchange Rate and External Competitiveness in Egypt, Morocco and Tunisia By Brixiova, Zuzana; Égert, Balázs; Hadj Amor Essid, Thouraya
  13. Guest Workers in the Underground Economy By Slobodan Djajić, Alice Mesnard
  14. The Role of Product Innovation Output on Export Behavior of Firms By Tavassoli, Sam
  15. Working Paper 187 - The Real Exchange Rate and External Competitiveness in Egypt, Morocco and Tunisia By Brixiova Zuzana; Balázs Égert; Thouraya Hadj Amor Essid
  16. Templates for Trade: Change, Persistence and Path Dependence in U. S. and EU Preferential Trade Agreements By Ali Arbia
  17. Relationship between trade openness and economic growth of India: A time series analysis By Monojit, Chatterji; Sushil, Mohan; Sayantan Ghosh, Dastidar
  18. Who Else Benefits from CETA? Some Implications of Most-Favoured Nation Treatment By Lawrence Herman
  19. Emissions embodied in Chinese exports taking into account the special export structure of China By Matthias Weitzel; Tao Ma
  20. Externalities of national pharmaceutical policy when markets are integrated through parallel trade By Birg, Laura
  21. Commonalities and differences between production-related FDI (PFDI) and technology-related FDI (TFDI) in developed and emerging economies By Alvandi , Keyvan; Chaminade , Cristina; Lv, Ping
  22. Where do foreign affiliates of Spanish multinational firms locate in developing and transition economies? By Roberto Josep Martí; Maite Alguacil; Vicente Orts
  23. Pharmaceutical regulation at the wholesale level and parallel trade By Birg, Laura
  24. How Green are Exporters? By Sourafel Girma; Aoife Hanley
  25. Pharmaceutical cost-sharing systems and savings for health care systems from parallel trade By Birg, Laura
  26. The home bias of the poor: terms of trade effects and portfolios across the wealth distribution By Tobias Broer
  27. The relationship between slack resources and firms’ exporting behavior By Ine Paeleman; Catherine Fuss; Tom Vanacker
  28. More Open – Better Governed? Evidence from High- and Low-income Countries By Bergh, Andreas; Mirkina, Irina; Nilsson, Therese
  29. Information Frictions and the Law of One Price: “When the States and the Kingdom became United” By Steinwender, Claudia
  30. Growing outflows of technology-driven foreign direct investment from emerging economies and the implications for the international investment regime By Dantas, Eva; Meyer, Niclas; Stehnken, Thomas
  31. The Tradability of Services: Geographic Concentration and Trade Costs By Antoine Gervais; J. Bradford Jensen
  32. Political institutions and trade-evidence for the long-run relationship and causality By Krenz, Astrid
  33. Revenue Tariff Reform By James E. Anderson; J. Peter Neary
  34. Global Welfare Impact of China: Trade Integration and Technology Change By Jing Zhang
  35. Global sourcing of complex production processes By Schwarz, Christian; Suedekum, Jens
  36. The Effect of Trade Agendas on Regulatory Governance: When the EU Meets the Global South By Andrea C. Bianculli
  37. Competition, Markups, and the Gains from International Trade By Daniel Yi Xu
  38. FDI, Trade Costs and Regional Asymmetries By Darby, Julia; Ferrett, Ben; Wooton, Ian
  39. State Aid and Export Competitiveness in the EU By Mario Holzner; Roman Stöllinger
  40. Pricing to Market in the Krugman Model By Paolo Bertoletti; Federico Etro
  41. Matching and Sorting in a Global Economy By Grossman, Gene M.; Helpman, Elhanan; Kircher, Philipp
  42. Crop Failures and Export Tariffs By Pio Baake; Steffen Huck
  43. Sources of international investment data in the Longitudinal Business Database By Lynda Sanderson
  44. Assessing the exchange rate exposure of US multinationals By Crowley, Patrick; Habibdoust , Amir
  45. When Does FDI Have Positive Spillovers? Evidence from 17 Transition Market Economies By Gorodnichenko, Yuriy; Svejnar, Jan; Terrell, Katherine
  46. Estimating informal trade across Tunisia's land borders By Ayadi, Lotfi; Benjamin, Nancy; Bensassi, Sami; Raballand, Gael
  47. Importing, Productivity and Absorptive Capacity in Sub-Saharan African Manufacturing Firms By Neil Foster-McGregor; Anders Isaksson; Florian Kaulich
  48. Testing Finance-Led, Export-Led and Import-Led Growth Hypotheses on Four Sub-Saharan African Economies By Evans, Olaniyi
  49. Currency invoicing in Norwegian salmon export By Straume, Hans-Martin
  50. Cross-Border Banking, Bank Market Structures and Market Power: Theory and Cross-Country Evidence By Franziska Bremus
  51. Soviet foreign trade and the money supply By Nakamura , Yasushi
  52. Trade, structural transformation and growth in China By Ferreira, Pedro Cavalcanti; Santos, Marcelo Rodrigues; Silva, Leonardo Fonseca
  53. Productivity shocks and monetary policy in a two-country model By Jang, Tae-Seok; Okano, Eiji
  54. When Size Does Matter. Trends of SMEs Internationalization Strategies in Chinese Economy By Andrea Pontiggia; Tiziano Vescovi
  55. Migrant Remittances and Information Flows: Evidence from a Field Experiment By Batista, Catia; Narciso, Gaia
  56. What Remains of the Theory of Demand Management in a Globalising World? By Amit Bhaduri
  57. Currency Forecast Errors at Times of Low Interest Rates: Evidence from Survey Data on the Yen/Dollar Exchange Rate By MacDonald, Ronald; Nagayasu, Jun
  58. How Does the Exchange Rate Affect the Real Economy? A Literature Survey By Enzo Cassino; David Oxley
  59. Do corporate tax cuts increase investments? By Brandstetter, Laura; Jacob, Martin
  60. Current account sustainability in Sub-Saharan Africa: Does the exchange rate regime matter? By Issiaka Coulibaly; Blaise Gnimassoun
  61. Immigration Restriction and Long-Run Cultural Assimilation: Theory and Quasi-Experimental Evidence By Fausto Galli; Giuseppe Russo
  62. Cross-Country Spillovers from Fiscal Consolidations By Antoine Goujard
  63. Fiscal devaluation in a Monetary Union By Engler, Philipp; Ganelli, Giovanni; Tervala, Juha; Voigts, Simon
  64. Determinants of international mobility decision: The case-study of India By Hercog, Metka; Van de Laar, Mindel
  65. The Quality of Immigrant Source Country Educational Outcomes: Do they Matter in the Receiving Country? By Qing Li; Arthur Sweetman
  66. U.S. Border Enforcement and Mexican Immigrant Location Choice By Bohn, Sarah; Pugatch, Todd
  67. Product market integration, tax distortions and public sector size By Torben M. Andersen; Allan Sørensen
  68. National Identity and Immigrants’ Assimilation in France By Gabin Langevin; Pascaline Vincent
  69. Competition for FDI and profit shifting: On the effects of subsidies and tax breaks By De Feo, Giuseppe; Amergighi, Oscar
  70. MyGTAP Model: A Model for Employing Data from the MyGTAP Data Application-Multiple Households, Split Factors, Remittances, Foreign Aid and Transfers By Walmsley, Terrie; Peter Minor

  1. By: Donatella Baiardi (Dipartimento di Economia, Metodi Quantitativi e Strategie d’Impresa Università Bicocca, Milano); Carluccio Bianchi (Department of Economics and Management, University of Pavia); Eleonora Lorenzini (Department of Economics and Management, University of Pavia)
    Abstract: This paper investigates the relationships between export price and income elasticities, average unit values (AUVs) and market shares for the top world food exporters in the time period 1992-2011 using a panel data framework. Emerging countries and Spain show a high price elasticity unlike other advanced countries. Moreover, an inverse relationship between price elasticities and AUVs is found to exist. The overall analysis enables the conclusion that advanced countries can maintain a specialization in low-tech sectors only if high prices, as indicators of high quality, are accompanied by a rigid foreign demand and a satisfactory income elasticity of exports.
    Keywords: Clothing, Price elasticity, Income elasticity, Export Performance, Product Quality, Panel Granger causality
    JEL: F14 L66 Q17 C23
  2. By: Marc-Andreas Muendler
    Abstract: This paper proposes a proximity-concentration tradeoff in product space as a determinant of horizontal foreign direct investment (FDI). Firms that enter a foreign market by exporting are able to capture consumer surplus from introducing a differentiated product with characteristics that the incumbent cannot match. In relatively globalized product space, in contrast, consumers perceive an entrant's difference to existing products as less pronounced, so a consumer's virtual distance costs in product space are lower and a merger with an incumbent (horizontal FDI) offers pricing power that allows the entrant to extract consumer rent. Lower physical trade costs of shipping make Bertrand price competition fiercer in differentiated product space and can provide an additional incentive for a merger. A basic product space model with a linear Hotelling setup can therefore explain why FDI has become more frequent in recent periods in the presence of falling trade costs. Cross-border merger and acquisitions data support the model's prediction that horizontal FDI grows relatively faster than exports in differentiated goods industries, compared to homogeneous-goods industries.
    JEL: F12 F23 L12 L13
    Date: 2013–12
  3. By: Defever, Fabrice; Suedekum, Jens
    Abstract: We investigate the causal impact of equity market liberalizations on sectoral export performance across 91 countries (1980 - 1997). The increased availability of external finance has boosted trade of industries that intensively use relationship-specific inputs, and lowered exports of industries using standardized inputs. --
    Keywords: financial liberalization,credit constraints,relationship-specificity,international trade
    JEL: F14 F36 G20
    Date: 2013
  4. By: Haile, Getinet Astatike (University of Nottingham); Srour, Ilina (Università Cattolica del Sacro Cuore); Vivarelli, Marco (Università Cattolica del Sacro Cuore)
    Abstract: There is a dearth of research on the impact of technological change on employment in the context of least developed countries (LDCs) embarking on globalization, which enhances the prospect of direct technological imports or embodied technological transfer. Using a sample of 1,940 enterprises from Ethiopia over the period 1996-2004 and deploying System Generalized Method of Moments (GMM-SYS), this paper attempts to establish the nature of manufacturing employment in Ethiopia and the role played by trade and FDI in determining employment. The empirical results obtained lend support to globalization having a labour-augmenting effect, increasing total manufacturing employment. The two-equation dynamic framework implemented to analyse enterprise-level employment trends by skill level provides some evidence of skill-bias specific to enterprises with higher share of foreign ownership and those that that are located in the vicinity of the capital city. Exporters are not found to benefit from "learning by exporting".
    Keywords: technological change, trade, FDI, globalization, skills, employment, Ethiopia
    JEL: O33 F16 L60 O55 C33
    Date: 2013–12
  5. By: Dauth, Wolfgang; Findeisen, Sebastian; Suedekum, Jens
    Abstract: We analyze the effects of the unprecedented rise in trade between Germany and the East - China and Eastern Europe - in the period 1988 - 2008 on German local labor markets. Using detailed administrative data, we exploit the cross-regional variation in initial industry structures and use trade flows of other high-income countries as instruments for regional import and export exposure. We find that the rise of the East in the world economy caused substantial job losses in German regions specialized in import-competing industries, both in manufacturing and beyond. Regions specialized in export-oriented industries, however, experienced even stronger employment gains and lower unemployment. In the aggregate, we estimate that this trade integration has caused some 442,000 additional jobs in the economy and contributed to retaining the manufacturing sector in Germany. This is almost exclusively driven by the rise of Eastern Europe, not by China. We also conduct an analysis at the individual worker level, and find that trade had a stabilizing overall effect on employment relationships. --
    Keywords: International Trade,Import Competition,Export Opportunities,Local Labor Markets,Employment,China,Eastern Europe,Germany
    JEL: F16 J31 R11
    Date: 2013
  6. By: Di Comite, Francesco; Thisse, Jacques-François; Vandenbussche, Hylke
    Abstract: Many trade models of monopolistic competition identify cost efficiency as the main determinant of firm performance in export markets. To date, the analysis of demand factors has received much less attention. We propose a new model where consumer preferences are asymmetric across varieties and heterogeneous across countries. The model generates new predictions and allows for an identification of horizontal differentiation (taste) clearly distinguished from vertical differentiation (quality). Data patterns observed in Belgian firm-product level exports by destination are congruent with the predictions and seem to warrant a richer modelling of consumer demand.
    Date: 2013
  7. By: Cisse Fatou; Ji Eun Choi
    Abstract: The increasing number of literatures investigating on the impact of trade openness on firm efficiency has not yet provided a definite prediction on the direction of causality (Rodrik, 1988, 1992, and Tybout 1992). We investigate the relation between exporting and productivity on the Senegalese manufacturing sectors. Using a unique firm-level panel data for the period 1998-2011, we estimate productivity and exporting dynamics, controlling for other unobserved effects, using simultaneous functions based on Bigsten and al. (2002). Our results indicate the evidences of both self-selection of the most efficient firms enter into the export market and effect of Learning in the export market. Our findings suggest that workers’ qualification and access to Patents and Licences have a positive effect on the process of learning. Also, small firms particularly learn more from exporting. From a policy perspective, this evidence of learning-by-exporting suggests that Senegal has much to gain from promoting its manufacturing sector towards exporting by supporting domestic firms to overcome the barriers to enter into foreign market, particularly by investing on skilled workers and promote access to Patents and Licences as well as disseminating benefits arising from exporting to non-exporters.
    Date: 2013–12–19
  8. By: Zymek, Robert
    Abstract: Most of the expansion of global trade during the last three decades has been of the North-South kind - between capital-abundant developed and labour-abundant developing countries. Based on this observation, I argue that the recent growth of world trade is best understood from a factor-proportions perspective. I present novel evidence documenting that differences in capital-labour ratios across countries have increased in the wake of two shocks to the global economy: i) the opening up of China and ii) financial globalisation and the resulting upstream capital flows towards capital-abundant regions. I analyse their impact on specialisation and the volume of trade in a dynamic model which combines factor-proportions trade in goods with international trade in financial assets. Calibrating this model, I find that it can account for 60% of world trade growth between 1980 and 2007. It is also capable of predicting international investment patterns which are consistent with the data
    Keywords: Heckscher-Ohlin, international trade, China, financial globalisation,
    Date: 2013
  9. By: Wolfgang Lechthaler; Mariya Mileva
    Abstract: We develop a dynamic general equilibrium trade model with comparative advantage, heterogeneous firms, heterogeneous workers and endogenous firm entry to study wage inequality during the adjustment after trade liberalization. We find that trade liberalization increases wage inequality both in the short run and in the long run. In the short run, wage inequality is mainly driven by an increase in inter-sectoral wage inequality, while in the medium to long run, wage inequality is driven by an increase in the skill premium. Incorporating worker training in the model considerably reduces the effects of trade liberalization on wage inequality. The effects on wage inequality are much more adverse when trade liberalization is unilateral instead of bilateral or restricted to specific sectors instead of including all sectors
    Keywords: trade liberalization; wage inequality; adjustment dynamics
    JEL: E24 F11 F16 J62
    Date: 2013–12
  10. By: Bellas, D.; Vicard, V.
    Abstract: This paper makes use of detailed French firm level data on a quarterly basis to investigate the impact of past crises on exports and the margins of adjustment. We first detect crises periods using quantitative criteria and classify them into banking crises, currency crises, simultaneous banking and currency crises, and other crises. Our results underline the prevalence of the intensive margin of adjustment to large shocks, i.e. firms reducing their average sales per product while staying on the market. The extensive margin of trade is however dominant in currency crises. On average, a crisis reduces the growth rate of exports over six quarters. Finally, we show that exports overreact to demand variations during crises, and that the extensive margin is more responsive to demand. Other factors, not directly related to demand, mostly affect the intensive margin.
    Keywords: financial crisis, international trade, intensive and extensive margins.
    JEL: F14
    Date: 2013
  11. By: Wagner, Joachim (Leuphana University Luneburg & Centre of Excellence for Science (CESIS)); Gelübcke, John P. Weche (Leuphana University Luneburg, Germany)
    Abstract: This is the first study of the link between internationalization and firm survival during the 2008/2009 crisis in Germany, a country which was hit relatively lightly compared to other countries. Moreover, it is the first study which looks at the role of importing, exporting and FDI simultaneously in the context of a global economic recession. We use a tailor-made representative dataset that covers all enterprises from the manufacturing sector with at least 20 employees. Our most striking result is to demonstrate the disadvantage of exporting for the chances of survival of a firm during the crisis in western Germany. Importing instead reveals a positive correlation with survival and firms that both export and import do not show a different exit risk relative to non-traders. A plausible explanation is that in a global recession, deteriorating markets abroad cause demand losses for exporters and improved conditions on factor markets which result in an advantage for firms sourcing from factor markets abroad. Two-way traders do not show a link with exit risk, supporting the idea that they were able to outweigh their losses from exporting with their gains from importing, in what could be called an export{import hedge. Furthermore, we cannot support the hypothesis that foreign multinationals are more volatile during times of economic crisis.
    Keywords: ageing; firm survival; employer-employee matched data
    JEL: J14 L26 R12 R30
    Date: 2013–12–18
  12. By: Brixiova, Zuzana (African Development Bank); Égert, Balázs (OECD); Hadj Amor Essid, Thouraya (Monastir University)
    Abstract: Egypt, Morocco and Tunisia face challenges competing on the global markets, as shown by their relatively low and stagnant export shares. The limited export competitiveness has hampered external demand, growth and employment. Applying, for the first time to North Africa, the stock-flow approach to the real equilibrium exchange rate, this paper evaluates the countries' real exchange rate misalignments during the past three decades. While Egypt experienced periods of substantial misalignment, including in recent years, the exchange rates in Morocco and Tunisia have broadly reflected the underlying fundamentals. In all three countries structural factors are key to boosting exports, alongside of avoiding sizeable future misalignments. Intra-regional trade – both with North Africa and the rest of the continent – together with greater orientation to fast growing emerging markets could also raise countries' external competitiveness.
    Keywords: real exchange rate misalignment, stock-flow model, competitiveness, trade, employment, North Africa
    JEL: F3 F41 C5 O1
    Date: 2013–12
  13. By: Slobodan Djajić, Alice Mesnard (IHEID, The Graduate Institute of International and Development Studies, Geneva)
    Abstract: Guest-worker programs have been providing rapidly growing economies with millions of temporary foreign workers over the last couple of decades. With the duration of stay strictly limited by program rules in most of the host countries and wages paid to guest workers often set at sub-market levels, many of the migrants choose to overstay and seek employment in the underground economy. This paper develops a general-equilibrium model that relates the flow of guest workers transiting to the underground economy to the rules of the program, enforcement measures of the host country and market conditions facing migrants at home and abroad.
    Keywords: Temporary migration, undocumented workers, underground economy
    JEL: F22
    Date: 2013–12–19
  14. By: Tavassoli, Sam (Industrial Economics, Blekinge Institute of Technology, Karlskrona, Sweden and CIRCLE, Lund University, Sweden)
    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 timeinvariant 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: 2013–12–18
  15. By: Brixiova Zuzana; Balázs Égert; Thouraya Hadj Amor Essid
    Abstract: Egypt, Morocco and Tunisia face challenges competing on the global markets, as shown by their relatively low and stagnant export shares. The limited export competitiveness has hampered external demand, growth and employment. Applying, for the first time to North Africa, the stock-flow approach to the real equilibrium exchange rate, this paper evaluates the countries’ real exchange rate misalignments during the past three decades. While Egypt experienced periods of substantial misalignment, including in recent years, the exchange rates in Morocco and Tunisia have broadly reflected the underlying fundamentals. In all three countries structural factors are key to boosting exports, alongside of avoiding sizeable future misalignments. Intra-regional trade – both with North Africa and the rest of the continent – together with greater orientation to fast growing emerging markets could also raise countries’ external competitiveness.
    Date: 2013–12–19
  16. By: Ali Arbia
    Abstract: Over the last two decades, Preferential Trade Agreements (PTAs) proliferated through the international trading system. PTAs created a web of rules paralleling and extending the system of the World Trade Organization (WTO). PTAs are an increasingly dominant feature of the international trading system, adding to a steadily increasing complexity. Their content is rarely studied systematically across agreements, and the mechanisms leading to their genesis are little understood. It is typically assumed that actors like the European Union (EU) and the United States (U. S.) work off a template when negotiating PTAs. Some argue that this allows them, amongst others, to impose a regulatory regime. This working paper attempts to put this claim to the test. Using diffusion theory as framework, it analyzes PTAs signed by the EU, the U. S. and their regional trading partners. Understanding the use of templates will help negotiating parties to assess the margin of maneuver when negotiating PTAs with the EU and the U. S. as well as the rigidity of their mandate. The analysis is conducted on a regional and a domestic level using aggregated data on PTA content and a qualitative assessment of selected PTA provisions (anti-corruption, environment and cultural cooperation). The study finds that the flexibility of these mandates is considerable and that templates, if used at all, can change substantially over time.
    Keywords: international trade; trade policy; Europe Agreements
    Date: 2013–09–27
  17. By: Monojit, Chatterji; Sushil, Mohan; Sayantan Ghosh, Dastidar
    Abstract: The paper aims to examine the empirical relationship between trade openness and economic growth of India for the time period 1970-2010. Trade openness is a multi-dimensional concept and hence measures of both trade barriers and trade volumes have been used as proxies for openness. The estimation results from Vector Autoregressive method suggest that growth in trade volumes accelerate economic growth in case of India. We do not find any evidence from our analysis that trade barriers lower growth.
    Keywords: Trade openness, economic growth, India, time series analysis,
    Date: 2013
  18. By: Lawrence Herman
    Abstract: Investors from US and Mexico and other third-party countries will benefit from the Canada-EU trade deal when it comes to investing in Canada, according to a report released today by the C.D. Howe Institute. In “Who Else Benefits from CETA? Some Implications of Most-Favoured Nation Treatment,” respected trade lawyer Lawrence L. Herman concludes that investors from countries that have preferential trade agreements with Canada will be entitled to the same preferential benefits as EU investors under the Canada-EU trade deal. While the recently negotiated trade agreement between Canada and the European Union (EU) will provide greater market access for exports of goods, services and investments from each party to the other, an intriguing question is whether the trade pact will have beneficial side effects for Canada’s other trading partners, by virtue of the “Most-Favoured Nation” rule of international trade law. This E-Brief finds that under the terms of Canada’s WTO membership and Foreign Investment Protection Agreements (FIPAs), the answer is no. However, with respect to investors and investments from the United States, Mexico, Peru, Chile and others with which Canada has preferential trade agreements (PTAs), the answer is yes.
    Keywords: International Policy
    JEL: F13
    Date: 2013–12
  19. By: Matthias Weitzel; Tao Ma
    Abstract: Quantification of CO2 emissions embodied in China's trade is important for an informed debate on whom to blame for the recent rise in Chinese emissions or the calculation of border carbon adjustments. Applying input output techniques, we calculate these emissions in (1) a standard model, (2) a regionally disaggregated model, taking into account that export production is concentrated in more advanced and more emission efficient provinces and (3) in a model with export processing, taking into account that almost half of Chinese exports relies on a large share of imported intermediates and little domestic value and emissions added. We compare year 2007 emissions embodied for in Chinese exports in a unified framework. We also report emissions embodied in Chinese imports used for intermediate production of exports by combining calculations for China with data from global IO models. We find that both a model with 30 provinces (1730 Mt CO2) and a model accounting for export processing (1580 Mt) yield lower Chinese emissions embodied in exports compared to the standard model (1782 Mt). In the regional model, emissions are even lower (1522 Mt), if interprovincial trade is not taken into account
    Keywords: Emissions embodied in trade, China, input-output modelling, export processing, spatial disaggregation
    JEL: C67 F18 Q54
    Date: 2013–12
  20. By: Birg, Laura
    Abstract: This paper studies externalities of nationally determined cost-sharing systems, in particular coinsurance rates (patients pay a percentage of the price), under pharmaceutical parallel trade in a two-country model with a vertical distributor relationship. Parallel trade generates a price-decreasing competition effect in the destination country and a price-increasing double marginalization effect in the source country. An increase of the coinsurance rates in the destination country of the parallel import mitigates the double marginalization effect in the source country. An increase of the coinsurance rate in the source country reinforces the competition effect in the destination country. This may be a case for policy coordination in the European Union. --
    Keywords: externalities,spillovers,parallel trade,cost-sharing,coinsurance rates
    JEL: F12 I11 I18
    Date: 2013
  21. By: Alvandi , Keyvan (CIRCLE, Lund University); Chaminade , Cristina (CIRCLE, Lund University); Lv, Ping (University of Chinese Academy of Sciences, China)
    Abstract: This paper investigates commonalities and differences in firm level determinants of internationalization of production (production related investments or PFDI) and innovation (technology driven investments or TFDI) by Multinational Enterprises (MNEs). Our database is based on a cross country survey which includes firms within Automotive, Agro-processing and ICT sectors from both developing and advanced economies. Our results show that despite some differences, most of the determinants affect in a similar manner both the PFDI and TFDI which rather contradicts recent arguments claiming significant differences between the two. More interestingly however, we found that institutional determinants such as policies related to foreign direct investments play almost no role in internationalization process of firms while managerial (internal to the firm) determinants had a far greater impact.
    Keywords: Foreign direct investment; Multinationals; Globalization; offshoring; TFDI
    Date: 2013–12–20
  22. By: Roberto Josep Martí (Departament of Economics, Universitat Jaume I, Castellón, Spain); Maite Alguacil (Departament of Economics, Universitat Jaume I, Castellón, Spain); Vicente Orts (Departament of Economics, Universitat Jaume I, Castellón, Spain)
    Abstract: In this paper we examine how different host country characteristics affect the location decision of Spanish multinational firms in developing and transition countries, particular attention being paid to the sectoral composition of foreign direct investments (FDI). The estimation of a set of logit models allows us to consider different substitutability patterns among alternatives. The study focuses on a broad firm-level sample of 4,177 Spanish affiliates established in 52 countries over the period 1990 to 2010. The results suggest that Spanish FDI in developing and transition economies are driven by both market-seeking and efficiency-seeking factors. FDI is found to be positively related to the size of the market and negatively related to labor costs. The estimates also reveal that Spanish investment in developing and transition countries exhibit a pronounced agglomeration effect, although the intensity of these externalities depends on both the sort of activity and the nationality of competitors. Furthermore, our results show differences between manufactures and services in other local factors, such as human capital, macroeconomic instability, and financial risk, thereby confirming the idea that investors in each sector have different motivations for locating foreign affiliates in developing countries. The quality of infrastructures and institutions also appear to influence the location of FDI in these economies.
    Keywords: Location choice; Nested and Mixed Logit models; Developing and transition countries; Multinational firms
    JEL: F21 F23 R39
    Date: 2013
  23. By: Birg, Laura
    Abstract: This paper studies the effect of pharmaceutical regulation at the wholesale level, if markets are integrated by parallel trade, i.e. trade outside the manufacturer´s authorized distribution channel. In particular, maximum wholesale margins, a restriction of pricing by the intermediary, and mandatory rebates, a restriction of the pricing by the manufacturer, are analyzed with respect to their effect on drug prices, quantities, and public pharmaceutical expenditure. Maximum wholesale margins enhance the manufacturer´s ability to reduce competition from parallel trade in the destination country by increasing wholesale prices. In a symmetric equilibrium, maximum wholesale margins of both countries partly offset each other. Mandatory rebates may be a policy alternative, as they exhibit a reinforcing effect with respect to drug prices. --
    Keywords: parallel trade,regulation,maximum markups,spillovers,mandatory rebates
    JEL: F12 I11 I18
    Date: 2013
  24. By: Sourafel Girma; Aoife Hanley
    Abstract: There is a well-established theoretical and empirical literature that shows that exporters are more innovative than otherwise equivalent non-exporters. In this paper we ask whether this is also true when it comes to the effects of adopting greener production techniques. Using an instrumental variables strategy based on UK firm level data, we find robust evidence that exporters are more likely to report their innovation as having a ‘high/very high’ environmental effect
    Keywords: Environment and Trade, Technological Innovation
    JEL: Q56 Q55
    Date: 2013–12
  25. By: Birg, Laura
    Abstract: This paper analyzes the consequences of parallel trade on health care systems in a two-country model with a vertical distributor relationship. In particular, two cost-sharing systems - coinsurance and indemnity insurance - are compared with respect to changes in copayments and public health expenditure. Under both cost-sharing systems, parallel trade generates a price-decreasing competition effect in the destination country and a price-increasing double marginalization effect in the source country. In the destination country, copayments for patients decrease to a larger extent under indemnity insurance, whereas reductions of public health expenditure occur only under coinsurance. In the source country, copayments increase less under coinsurance, whereas health expenditure is reduced more under indemnity insurance. This illustrates that a harmonization of health care systems would not make sense. --
    Keywords: cost-sharing,parallel trade,coinsurance rates,indemnity insurance
    JEL: F12 I11 I18
    Date: 2013
  26. By: Tobias Broer (Stockholm University)
    Abstract: This paper documents how poorer and less educated US households hold a smaller fraction of foreign assets in their financial portfolio. This average home bias of the poor is partly due to a lower probability of participating in foreign asset markets, often attributed to fixed costs of market entry. However, portfolio shares also rise with wealth among those households that do hold foreign assets, which fixed participation costs cannot explain. I use a simple, standard two-country general equilibrium model to show that hedging of terms of trade movements and non-financial income risk, commonly employed to explain aggregate country-level home bias, also produces non-trivial heterogeneity in portfolios across wealth levels within countries that is in line with the evidence.
    Date: 2013
  27. By: Ine Paeleman (Ghent University); Catherine Fuss (National Bank of Belgium, Research Department; Université Libre de Bruxelles); Tom Vanacker (Ghent University; Vlerick Business school)
    Abstract: We use a unique longitudinal dataset that tracks the exporting behavior of Belgian manufacturing firms between 1997 and 2009. We ask how slack resources, including financial and human resource slack, influence firms’ exporting behavior. Our findings suggest that both types of slack resources have an inverted U-shaped relationship with the decision to export. This implies that higher levels of slack resources positively influence the likelihood of firms exporting, but too much slack negatively influences this likelihood. After controlling for the decision to export, we find no significant relationship between slack resources and export intensity. Nevertheless, we do find an inverted U-shaped relationship between slack resources and export diversity. Overall, this study provides new insight into how different types of slack resources influence different aspects of firms’ exporting behavior.
    Keywords: financial resources, human resources, slack and export
    JEL: F10 L20 O15 O16
    Date: 2013–12
  28. By: Bergh, Andreas (Research Institute of Industrial Economics (IFN)); Mirkina, Irina (IMT Institute for Advanced Studies); Nilsson, Therese (Research Institute of Industrial Economics (IFN))
    Abstract: Using World Bank data on institutional quality and the KOF Globalization Index, we examine over 100 countries from 1992 to 2010 to analyze the relationship between economic and social globalization and six measures of institutional quality. Theoretically, the incentives of elites to respond to globalization by improving institutions should differ between low-income and high-income countries. Empirically, increasing economic flows and social globalization are followed by improving institutions in rich countries, while the effect is the opposite for low-income countries. Previous findings of positive effects of trade on institutional quality are likely driven by rich countries.
    Keywords: Globalization; Institutional quality; Developing countries
    JEL: H83 O11
    Date: 2013–12–16
  29. By: Steinwender, Claudia
    Abstract: How do information frictions distort international trade? This paper exploits a unique historical experiment to estimate the magnitude of these distortions: the establishment of the transatlantic telegraph connection in 1866. I use a newly collected data set based on historical newspaper records that provides daily data on information flows across the Atlantic together with detailed, daily information on prices and trade flows of cotton. Information frictions result in large and volatile deviations from the Law of One Price. What is more, the elimination of information frictions has real effects: Exports respond to information about foreign demand shocks. Average trade flows increase after the telegraph and become more volatile, providing a more efficient response to demand shocks. I build a model of international trade that can explain the empirical evidence. In the model, exporters use the latest news about a foreign market to forecast expected selling prices when their exports arrive at the destination. Their forecast error is smaller and less volatile the more recent the available information. I estimate the welfare gains from information transmission through the telegraph to be roughly equivalent to those from abolishing a 6% ad valorem tariff.
    Date: 2013–12
  30. By: Dantas, Eva; Meyer, Niclas; Stehnken, Thomas
    Abstract: Drawing on expert interviews and secondary sources, this paper examines the implications of increasing outflows of technology-driven foreign direct investment (FDI) from emerging economies for the international investment regime. We focus on this issue from two angles: i) the possible changes in the international investment re-gime that are being driven by industrialised host countries as a reaction to increasing incoming FDI from emerging economies; and ii) the possible shifts in emerging econo-mies' policy stance on the international investment regime as a result of their growing role as home countries of FDI and the increasing clout of emerging multinationals. In relation to both angles we look at the specific implications for the international rules governing investment of growing outflows of FDI from emerging economies that are technology-driven. Our analysis of the existing evidence suggests that the growing flows of FDI and TFDI from emerging economies may be triggering changes in policy stances of both industrialized host countries and emerging home countries as regards international investment rules. This raises a number of interesting research questions to be further examined. --
    Date: 2013
  31. By: Antoine Gervais; J. Bradford Jensen
    Abstract: We develop a methodology for estimating the "tradability'' of goods and services using data on U.S. establishments. Our results show that the average service industry is less tradable than the average manufacturing industry. However, there is considerable within-sector variation in estimated tradability and many service industries are as tradable as manufacturing. Tradable service industries account for a significant share of economic activity and workers employed in those industries have relatively high average wages. Counterfactual analysis indicates that the potential welfare gains from policy liberalization in service trade are of the same order of magnitude as liberalization in the manufacturing sector.
    JEL: F1
    Date: 2013–12
  32. By: Krenz, Astrid
    Abstract: We examine the long-run effects of the political institutional framework, measured by the political risk component of the International Country Risk Guide, on trade. Our results suggest that an improved political institutional framework is both a cause and a consequence of increased trading activity. However, we find no significant relationship in case of exporting activity for the high-income countries and the countries that possess better political institutions. --
    Keywords: political institutions,trade,cointegration analysis
    JEL: F14 F55
    Date: 2013
  33. By: James E. Anderson; J. Peter Neary
    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 rules 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.
    JEL: F1 F13 H21
    Date: 2013–12
  34. By: Jing Zhang (University of Michigan)
    Abstract: This paper evaluates the global welfare impact of China's trade integration and technological change in a multi-country quantitative Ricardian-Heckscher-Ohlin model. We simulate two alternative growth scenarios: a balanced one in which China's productivity grows at the same rate in each sector, and an unbalanced one in which China's comparative disadvantage sectors catch up disproportionately faster to the world productivity frontier. Contrary to a well-known conjecture (Samuelson 2004), the large majority of countries experience significantly larger welfare gains when China's productivity growth is biased towards its comparative disadvantage sectors. This finding is driven by the inherently multilateral nature of world trade.
    Date: 2013
  35. By: Schwarz, Christian; Suedekum, Jens
    Abstract: We develop a theory of a firm in an incomplete contracts environment which decides on the complexity, the organization, and the global scale of its production process. Specifically, the firm decides i) how many intermediate inputs are simultaneously combined to a final product, ii) if the supplier of each input is an external contractor or an integrated affiliate, and iii) if that input is offshored to a foreign country. Our model leads to a rich set of predictions on the internal structure of multinational firms. In particular, it provides an explanation why many firms choose hybrid sourcing and have both outsourced and integrated suppliers. --
    Keywords: multinational firms,outsourcing,intra-firm trade,offshoring,vertical FDI
    JEL: F12 D23 L23
    Date: 2013
  36. By: Andrea C. Bianculli
    Abstract: This paper focuses on the significance of regulatory governance at the regional level. In doing so, it analyzes to what extent and how North-South negotiations give rise to particular forms of regulatory governance in the developing world. To what extent do these forms vary across policy areas? Which elements account for the observed differences and similarities? Empirically, the paper explores the negotiation process between the European Union (EU) and the Southern Common Market (Mercosur), which aims to promote trade liberalization on the one hand, and the harmonization of regulatory frameworks on the other. The focus is on the trade and cooperative agendas involved in trade facilitation and education. Findings suggest that the negotiation of North-South agreements impacts on the ways in which different forms of regulatory governance are expressed, but this varies among particular policy issues. Both the type of norm promoted and the capacity building mechanisms envisaged create a particular ideational and material context, all of which in turn affects the actor constellation - type of actor, specific role and network configuration - hence leading to different regulatory governance regimes among policy areas, yet within the same trade negotiation.
    Keywords: governance; regulatory politics; international trade
    Date: 2013–11–21
  37. By: Daniel Yi Xu (Duke University)
    Abstract: We develop a model of matching where participants have finite information processing capacity. The equilibrium of our model covers the middle ground between the equilibria of random matching and the directed search literatures and reproduces them as limiting cases. Our theory of targeted search generates a unique equilibrium which is changes in trade volume are not sufficient for determining the gains from trade.
    Date: 2013
  38. By: Darby, Julia; Ferrett, Ben; Wooton, Ian
    Abstract: We set up a trade model where three countries compete for an exogenous number of firms. Our innovation lies in the geography of the model. Of the three countries, one is the hub through which all trade takes place. First, we establish the natural geography of the region, which is given by the equilibrium distribution of industrial activity in the absence of taxes or subsidies. We then examine the implications for corporate taxes when the countries compete with each other to attract firms. We find that, even when all countries are the same size, the centrality of the hub gives it an advantage in tax setting, such that its equilibrium tax can be larger than that of the spokes and yet it still attracts a disproportionate share of industry. Thus geographic advantage in tax competition has a second dimension, centrality in addition to size.
    Keywords: corporate taxes, devolution, trade costs,
    Date: 2013
  39. By: Mario Holzner (The Vienna Institute for International Economic Studies, wiiw); Roman Stöllinger (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: Despite the proclaimed return of industrial policy (Wade, 2012) state aid provided by EU Member States remains at a historically low level. This is partly explained by the unique institutional arrangement in the EU which empowers the European Commission to monitor and restrict state aid activities of Member States. Making use of European state aid statistics over the period 1995-2011 we employ an augmented macroeconomic export function to investigate the relationship between state aid for the manufacturing sector and Member States’ export performance. With manufacturing value added exports serving as a proxy for export performance, our model suggests that a 10% increase in manufacturing aid increases exports by 0.67% for the average EU country. The result is confirmed by instrumental variable estimation. We also find that the impact of state aid on exports is increasing with government effectiveness leading to large differences in the leverage of aid expenditures to promote export performance across Member States.
    Keywords: industrial policy, state aid, value added exports, external competitiveness
    JEL: F13 L52
    Date: 2013–12
  40. By: Paolo Bertoletti (Department of Economics and Management, University of Pavia); Federico Etro (Department of Economics, University of Venice Ca' Foscari)
    Abstract: We examine the role of per capita income in closed and open economy models of monopolistic competition based on non-homothetic directly additive preferences a la Dixit-Stiglitz, as in Krugman (1979). In a closed economy with free entry income is always neutral on markups and firm size. In a two-country trade model without transport costs, markups are higher in the country with higher income if the elasticity of substitution is decreasing in consumption. Pricing to market also emerges with transport costs.
    Keywords: Pricing to market, Krugman model, Dixit-Stiglitz model
    JEL: D11 D43 L11 F12
    Date: 2013–12
  41. By: Grossman, Gene M.; Helpman, Elhanan; Kircher, Philipp
    Abstract: We develop a neoclassical trade model with heterogeneous factors of production. We consider a world with two factors, labor and .managers., each with a distribution of ability levels. Production combines a manager of some type with a group of workers. The output of a unit depends on the types of the two factors, with complementarity between them, while exhibiting diminishing returns to the number of workers. We examine the sorting of factors to sectors and the matching of factors within sectors, and we use the model to study the determinants of the trade pattern and the effects of trade on the wage and salary distributions. Finally, we extend the model to include search frictions and consider the distribution of employment rates.
    Keywords: heterogeneous labor, matching, sorting, productivity, wage distribution, international trade,
    Date: 2013
  42. By: Pio Baake; Steffen Huck
    Abstract: We analyse a stylized model of the world grain market characterized by a small oligopoly of traders with market power on both the supply and demand side. Crops are stochastic and exporting countries can impose export tariffs to protect domestic food prices. Our first results is that export tariffs are strategic complements and that for poor harvests equilibrium tariffs can explode (shedding some light on recent volatility in world food prices). We also show that the strategic interplay between governments of export countries and traders can give rise to a number of peculiar comparative statics. For example, it can be in the interest of traders to have poor harvests in one of the countries. Finally, we demonstrate that traders as well as consumers in import countries can benefit from cooperation between grain exporting countries.
    Keywords: Grain markets, food prices, export tariffs, oligopoly and oligopsony
    JEL: D43 F12 L13 Q17
    Date: 2013
  43. By: Lynda Sanderson (The Treasury)
    Abstract: The Longitudinal Business Database (LBD) links together firm-level data held by Statistics New Zealand from a combination of administrative and survey data sources. This linking has opened up a wide range of research opportunities. In many cases, there are now multiple sources of information on a single area of firms’ activities, often capturing different aspects or a different population, requiring a choice to be made about the most appropriate source of data for any given research question. This note outlines the available firm-level data sources for research on foreign direct investment, describes the data available, and sets out some of the opportunities and challenges for using these data for research purposes. It also provides detail on maintenance procedures for one of the core elements of the LBD, the Longitudinal Business Frame, which is applicable to a wide variety of firm-level research topics.
    Keywords: Foreign direct investment (FDI); Outward direct investment (ODI); Longitudinal Business Database
    JEL: C81 F21 F23
    Date: 2013–12
  44. By: Crowley, Patrick (College of Business, Texas A&M University, Corpus Christi); Habibdoust , Amir (University of Mazandaran, Faculty of Economics & Administrative Science, Babolsar, Iran)
    Abstract: This paper aims to examine the relationship between exchange rate movements and the stock return of firms at different time horizons by employing wavelet analysis. In particular, we use the maximum overlap discrete wavelet transform (MODWT) to decompose the exchange rate movement and the US firm's stock return over the period January 2006 to July 2012. The results reveal that at longer horizons not only does the number of firms which are exposed to exchange rate volatility increase but also the degree of exchange rate exposure increases. What is more, the sensitivity to exchange rate volatility is stronger at longer horizons for importing firms than for exporting firms, which shows an asymmetry in the usage of hedging strategies between importers and exporters.
    Keywords: discrete wavelet analysis; exchange rate volatility; hedging strategy
    JEL: C32 F23 F31
    Date: 2013–12–18
  45. By: Gorodnichenko, Yuriy (University of California, Berkeley); Svejnar, Jan (Columbia University); Terrell, Katherine (University of Michigan)
    Abstract: We use rich firm-level data and national input-output tables from 17 countries over the 2002-2005 period to test new and existing hypotheses about the impact of foreign direct investment (FDI) on the efficiency of domestic firms in the host country (i.e., spillovers). We document that backward linkages have a consistently positive effect on productivity of domestic firms while horizontal and forward linkages show no consistent effect. We also examine how the strength of spillovers varies by sector, FDI source, business environment (corruption, red tape, level of development), firm's distance to the technological frontier, education of workers, and other firm- and country-specific characteristics.
    Keywords: FDI, spillovers, transition economies, efficiency
    JEL: F23 M16 O16 P23
    Date: 2013–12
  46. By: Ayadi, Lotfi; Benjamin, Nancy; Bensassi, Sami; Raballand, Gael
    Abstract: This paper uses mirror statistics and research in the field to estimate the magnitude of Tunisia's informal trade with Libya and Algeria. The aim is to assess the scale of this trade and to evaluate the amount lost in taxes and duties as a result as well as to assess the local impact in terms of income generation. The main findings show that within Tunisian trade as a whole, informal trade accounts for only a small share (5 percent of total imports). However, informal trade represents an important part of the Tunisia's bilateral trade with Libya and Algeria, accounting for more than half the official trade with Libya and more than total official trade with Algeria. The main reasons behind this large-scale informal trade are differences in the levels of subsidies on either side of the border as well as the varying tax regimes. Tackling informal trade is not simply a question of stepping up the number of controls and sanctions, because differences in prices lead to informal trade (and to an increase in corruption levels among border officials) even in cases where the sanctions are severe. As local populations depend on cross-border trade for income generation, they worry about local authorities taking action against cross-border trade. At the same time, customs officials are concerned about the risk of local protests if they strictly enforce the tariff regimes in place. This issue will become even more significant if fuel prices in Tunisia rise again as a result of a reduction in the levels of domestic subsidies.
    Keywords: Transport Economics Policy&Planning,Trade Law,Economic Theory&Research,Trade Policy,Emerging Markets
    Date: 2013–12–01
  47. By: Neil Foster-McGregor (The Vienna Institute for International Economic Studies, wiiw); Anders Isaksson; Florian Kaulich
    Abstract: Our study extends the recent literature on the importer-productivity relationship to a firm-level dataset for sub-Saharan Africa. Using a cross-section sample of 3090 firms in 19 countries, we find that importers are more productive than non-importers. The observed importer premium is found to be robust to firm-specific characteristics and to a number of alternative estimation methods. Furthermore, we examine the importance of absorptive capacity in enhancing the benefits from importing. Using recently developed quantile threshold regression methods, we find that higher levels of absorptive capacity, as measured by human capital, are associated with a stronger relationship between importing and productivity.
    Keywords: importing, productivity, sub-Saharan Africa, absorptive capacity, human capital
    JEL: D24 F10 M20 L10
    Date: 2013–11
  48. By: Evans, Olaniyi
    Abstract: This study carries out an empirical examination of the finance-led, export-led and import-led growth hypothesis for four of the largest Sub-Saharan African economies namely South Africa, Nigeria, Ghana and Kenya. Within a multivariate Vector-Auto Regressive (VAR) framework, the concept of Granger causality is employed to determine the direction of causation between exports and output, duly taking into account the stationarity properties of the time series data. With further substantiation from impulse response function and variance decomposition, the empirical evidence shows (i) finance-led, export-led and import-led growth in South Africa and Kenya, (ii) finance-led and imports-led growth in Nigeria, and (iii) only finance-led growth in Ghana. These four Sub-Saharan African nations, with the help of reforms, have experienced expanding exports, increased financial development and accelerated GDP growth rates. Yet, these have yielded varying degrees of success. The agenda for economic growth is a long one in Sub-Saharan Africa. Reforms would require preconditions in the wider economic and political environment, without which they will be ineffective or even counterproductive.
    Keywords: exports, Sub-Saharan African, Granger causality, multivariate Vector-Auto Regressive (VAR), impulse response function, variance decomposition, finance-led, export-led and import-led growth hypothesis
    JEL: F22 F23 F41 F42 O24
    Date: 2013–12
  49. By: Straume, Hans-Martin (Department of Economics, University of Bergen)
    Abstract: The purpose of this paper is to examine the choice of currency for Norwegian salmon exporters. The choice of invoicing currency will affect prices in different markets as well as risk, factors that are becoming increasingly important as the supply chain for salmon is becoming more sophisticated, and more transactions mechanisms introduced. The results indicate that destination specific market characteristics have impacts as to the choice of invoicing strategy. Norwegian salmon exporters primarily invoice in the export market currency (47% of the exported quantity), but also use a vehicle currency and producer pricing (19%) in a significant number of transactions. Euro is the preferred vehicle currency (18%), closely followed by USD (16%). USD is the dominating invoicing currency for exports beyond Europe.
    Keywords: Invoicing currency; salmon; exchange rates; multinomial logit;
    JEL: F14 Q22
    Date: 2013–12–18
  50. By: Franziska Bremus
    Abstract: Patterns in cross-border banking have changed since the global financial crisis. This may affect domestic bank market structures and macroeconomic stability in the longer term. In this study, I theoretically and empirically analyze how different modes of cross-border banking impact bank concentration. I use a two- country general equilibrium model with heterogeneous banks developed by De Blas and Russ (2010) to grasp the effect of cross-border lending and foreign direct investment in the banking sector on bank market structures. The model suggests that both cross-border lending and bank FDI mitigate concentration. Empirical evidence from a linked micro-macro panel dataset of 18 OECD countries supports the theoretical predictions: higher volumes of bank FDI and of cross-border lending coincide with lower Herfindahl-indexes in bank credit markets.
    Keywords: Cross-border lending, bank foreign direct investment, bank market concentration, net interest margins
    JEL: E44 F41 G21
    Date: 2013
  51. By: Nakamura , Yasushi (BOFIT)
    Abstract: This study uses newly available data in a quantitative examination of the relationship between Soviet special foreign trade earnings (SFEs) and changes in the money supply. During the Soviet era, SFEs were effectively taxes on imports and exports. They generated as much as 7–15% of state budget revenues in the 1970s and 1980s. The results show that changes in net foreign assets and the money supply accounted for around 10% of SFEs. The remaining 90% of SFEs involve redistribution of existing domestic funds within a constellation of government agencies and state-owned enterprises. The lack of data precluded further exploration of this redistribution.
    Keywords: Soviet; foreign trade; money; state budget; flow of funds
    JEL: E66 N14 P33 P34
    Date: 2013–12–16
  52. By: Ferreira, Pedro Cavalcanti; Santos, Marcelo Rodrigues; Silva, Leonardo Fonseca
    Date: 2013–10
  53. By: Jang, Tae-Seok; Okano, Eiji
    Abstract: In this paper, we examine the effects of foreign productivity shocks on monetary policy in a symmetric open economy. Our two-country model incorporates the New Keynesian features of price stickiness and monopolistic competition based on the cost channel of Ravenna and Walsh (2006). In particular, in response to asymmetric productivity shocks, firms in one country achieve a more efficient level of production than those in another economy. Because the terms of trade are directly affected by changes in both economies’ output levels, international trade creates a transmission channel for inflation dynamics in which a deflationary spiral in foreign producer prices reduces domestic output. When there is a decline in economic activity, the monetary authority should react to this adverse situation by lowering the key interest rate. The impulse response function from the model shows that a productivity shock can cause a real depreciation of the exchange rate when economies are closely integrated through international trade.
    Keywords: cost channel; new Keynesian model; productivity shocks; terms of trade; two-country model
    JEL: E24 E31 J3
    Date: 2013–12
  54. By: Andrea Pontiggia (Dept. of Management, Università Ca' Foscari Venice); Tiziano Vescovi (Dept. of Management, Università Ca' Foscari Venice)
    Abstract: The strategies of internationalization have been one of hottest topics in managerial literature in the last decade. Interestingly to notice how deep and unexpected changes have challenged the mainstream of international management theories. This paper illustrates a framework and some preliminary results aim to comprehend how and why MMNEs (Medium-size Multinational Entreprise) internationalization strategies deviate from the more established strategies of multinational and global companies (MNC). We study a sample of Italian SMEs, analyzing the strategy choice and the governance models adopted in China businesses. Qualitative analysis highlights both the feasibility and sustainability of governance models (criteria and components) and forms (model execution and implementation). This paper investigates the specificities of SMEs: The adaptation process and, in some cases, the innovative governance forms analyzed in our sample of cases (described in the paper) are strongly affected by the following factors: first, the size does not fit the potential or actual dimension of market (size factor); Second, increasing difficulties to access to the countries? institutional externalities and strong reliance on the efficiency of markets in order to purchase product and services which they can not internalize (make or buy factor);. Third, negative effects of size preventing to reach arrangements with local and national government (government and local shareholders factor); Fourth, being part of the supply chain of larger firms (MNC) is a common entry mode in Chinese market. Last factor refers to the lack of resources (human, market and relational capital).
    Keywords: International Management, Emerging Economies and Markets, International Marketing Strategies, Small and Medium Enterprises.
    JEL: F23 M16 M31 D22 D21
    Date: 2013–12
  55. By: Batista, Catia (Universidade Nova de Lisboa); Narciso, Gaia (Trinity College Dublin)
    Abstract: Do information flows matter for remittance behavior? We design and implement a randomized control trial to quantitatively assess the role of communication between migrants and their contacts abroad on the extent and value of remittance flows. In the experiment, a random sample of 1,500 migrants residing in Ireland was offered the possibility of contacting their networks outside the host country for free over a varying number of months. We find a sizable, positive impact of our intervention on the value of migrant remittances sent. Our results exclude that the remittance effect we identify is a simple substitution effect. Instead, our analysis points to this effect being a likely result of improved information via factors such as better migrant control over remittance use, enhanced trust in remittance channels due to experience sharing, or increased remittance recipients' social pressure on migrants.
    Keywords: information flows, international migration, migrant networks, remittances, randomized control trial
    JEL: F22 J61 O15
    Date: 2013–12
  56. By: Amit Bhaduri
    Abstract: The paper explains a curious redirection of economic policies that uses the policy framework of Kalecki and Keynes only to undermine it. It does not negate their theory of demand management, but reformulates it to serve the powerful interests of finance in the era of financial globalisation. As a result accountability to finance rather than to the citizens becomes more important for democratic governments and credit rating dominates democratic performance.
    Keywords: aggregate demand, real and money wage, income distribution, trade war, shadow banks, endogenous money, credit rating
    JEL: E21 E42 E44 E62 F21 F51 G12 G15
    Date: 2013–12
  57. By: MacDonald, Ronald; Nagayasu, Jun
    Abstract: Using survey expectations data and Markov-switching models, this paper evaluates the characteristics and evolution of investors' forecast errors about the yen/dollar exchange rate. Since our model is derived from the uncovered interest rate parity (UIRP) condition and our data cover a period of low interest rates, this study is also related to the forward premium puzzle and the currency carry trade strategy. We obtain the following results. First, with the same forecast horizon, exchange rate forecasts are homogeneous among different industry types, but within the same industry, exchange rate forecasts differ if the forecast time horizon is different. In particular, investors tend to undervalue the future exchange rate for long term forecast horizons; however, in the short run they tend to overvalue the future exchange rate. Second, while forecast errors are found to be partly driven by interest rate spreads, evidence against the UIRP is provided regardless of the forecasting time horizon; the forward premium puzzle becomes more significant in shorter term forecasting errors. Consistent with this finding, our coefficients on interest rate spreads provide indirect evidence of the yen carry trade over only a short term forecast horizon. Furthermore, the carry trade seems to be active when there is a clear indication that the interest rate will be low in the future.
    Keywords: Currency forecast errors, uncovered interest parity, forward premium puzzle, carry trade, Markov-switching modelate,
    Date: 2013
  58. By: Enzo Cassino; David Oxley (The Treasury)
    Abstract: We examine the relationship between exchange rate movements and the real economy – an area that has been the focus of considerable debate in recent years. We consider different concepts of exchange rate equilibrium, and review recent evidence on whether the New Zealand dollar exchange rate reflects its fundamental determinants. We also review the theoretical and empirical evidence on the relationship between movements in the exchange rate and the resulting impacts on the wider economy. We conclude that the nature of the relationship between the movements in the exchange rate and the resulting adjustment in the real economy depends on the nature of the shocks that affect the economy. This has important policy implications as policymakers need to have a clear understanding of the nature of the shock when deciding on appropriate responses. In practice, however, it is often difficult for policymakers to identify accurately the types of shocks hitting the economy, especially in real time. While the New Zealand dollar exchange rate may be overvalued at present, the equilibrium value of the exchange rate may also have risen, possibly due to higher export commodity prices. Tradable sector output growth has declined since the mid-2000s, but within the tradable sector, activity in resource-based industries has risen strongly, while manufacturing output and exports of services has declined. This is consistent with “Dutch disease” effects, as higher commodity prices lead to a crowding out of non-commodity exports. Sensitivity to exchange rate movements also varies across New Zealand’s economic sectors and industries. The agricultural sector is relatively insensitive to exchange rate movements, while the manufacturing and service sectors are more vulnerable.
    Keywords: Exchange Rate Valuation; Fundamentals; Equilibrium; Economic Growth, Dutch Disease
    JEL: F31 F41 F43
    Date: 2013–12
  59. By: Brandstetter, Laura; Jacob, Martin
    Abstract: This paper studies the effect of corporate taxes on investment. Using firm-level data on German corporations, we investigate the 2008 tax reform that cut corporate taxes by 10 percentage points. We expect heterogeneous investment responses across firms, since firms with a foreign parent have more cross-country profit shifting opportunities than domestically owned firms. Using a matching difference-in-differences approach, we show that, following the corporate tax cut, domestically owned firms increased investments to a larger extent than foreign-owned firms. Our results imply that corporate tax changes can increase corporate investment but have heterogeneous investment responses across firms. --
    Keywords: Corporate taxation,Investment
    JEL: G31 H24 H25
    Date: 2013
  60. By: Issiaka Coulibaly; Blaise Gnimassoun
    Abstract: This paper aims at studying the sustainability of current accounts in Sub-Saharan Africa and determining whether this sustainability depends on the exchange rate regime. Relying on a formal theoretical framework and recent panel cointegration techniques, our findings show that current accounts have been globally sustainable in Sub-Saharan Africa countries over the 1980-2011 period. However, this sustainability has been lower for countries operating a fixed exchange rate regime or belonging to a monetary union. We also find that the difference in the level of sustainability could be explained by a higher persistence in the current account adjustment of countries operating under rigid exchange rate regimes.
    Keywords: Current account, Exchange rate regime, Panel cointegration tests, Sub-Saharan Africa
    JEL: F31 F33 C33
    Date: 2013
  61. By: Fausto Galli (Università di Salerno); Giuseppe Russo (Università di Salerno and CSEF)
    Abstract: We study the effect of restrictions to immigration on the cultural assimilation of the second generation. Our theoretical model shows that restrictive policies incentivize to permanent immigration individuals with a stronger taste for their original culture. Permanent immigration implies reproduction in the destination country and transmission of cultural traits to the second generation, which will therefore experience a more difficult assimilation. We test this prediction by using the 1973 immigration ban in Germany (Anwerbestopp) as a quasi-experiment, since it only concerned immigrants from countries outside the European Economic Community. Thus, our treatment group is given by the second generation of non-EEC immigrants. Our estimates show that the Anwerbestopp has reduced the cultural assimilation of this generation. This result is robust to several checks, including a triple differences analysis. We conclude that restrictive immigration policies may have unwanted consequences on the process of cultural assimilation.
    Keywords: return migration, cultural transmission, difference-in-differences
    JEL: D91 F22 J15 Z13
    Date: 2013–12–18
  62. By: Antoine Goujard
    Abstract: In many OECD countries, government debt reached levels over recent years that call for reduction over the medium to longer term to ensure public finance sustainability. This paper investigates the international transmission of fiscal consolidation shocks via trade flows. Using a measure of exogenous fiscal shocks in export markets, fiscal consolidation spillovers are found to slow domestic growth and decrease employment. When fiscal consolidation efforts are synchronised across partner countries, fiscal policies have large spillover effects on output. Spillovers of fiscal consolidations on growth are found to be initially larger between countries belonging to currency unions, though this larger impact vanishes over the medium term. Larger spillovers of fiscal consolidation coincide with stronger shifts in bilateral trade flows in currency unions in the short term, despite smaller adjustments in relative exchange rates. Spillovers of fiscal consolidation are also found to be more detrimental to domestic growth during economic downturns in export markets. Les répercussions internationales des consolidations fiscales Dans de nombreux pays de l’OCDE, la dette publique a récemment atteint des niveaux appelant sa réduction sur le moyen à long terme afin d’assurer la soutenabilité des finances publiques. Ce document étudie la transmission entre pays des chocs de politique fiscale par les flux commerciaux. Les politiques d’assainissement budgétaire dans les marchés d’exports apparaissent réduire la croissance domestique et l’emploi, lorsqu’une mesure exogène des politiques fiscales est utilisée. Si les efforts d’assainissement budgétaire sont synchronisés dans les pays partenaires, ceux-ci peuvent avoir des effets importants sur la croissance. Les répercussions des consolidations fiscales apparaissent initialement plus élevées entre les pays qui partagent la même monnaie, mais cet effet additionnel s’estompe sur le moyen terme. Les plus forts mouvements des flux commerciaux au sein des unions monétaires contribuent à ces effets externes plus importants à court terme bien que les ajustements des taux de changes réels soient plus faibles. Les consolidations fiscales dans les marchés d’exports apparaissent également avoir des répercussions plus importantes sur la croissance domestique lorsque les marchés d’exports sont en récession.
    Keywords: fiscal policy, fiscal consolidation, trade spillovers, international spillovers, effets externes, politique fiscale, intégration commerciale, assainissement budgétaire
    JEL: E23 E32 E62 F42
    Date: 2013–12–06
  63. By: Engler, Philipp; Ganelli, Giovanni; Tervala, Juha; Voigts, Simon
    Abstract: Between 1999 and the onset of the economic crisis in 2008 real exchange rates in Greece, Ireland, Italy, Portugal and Spain appreciated relative to the rest of the euro area. This divergence in competitiveness was reflected in the emergence of current account imbalances. Given that exchange rate devaluations are no longer available in a monetary union, one potential way to address such imbalances is through a fiscal devaluation. We use a DSGE model calibrated to the euro area to investigate the impact of a fiscal devaluation, modeled as a revenue-neutral shift from employers´ social contributions to the Value Added Tax. We find that a fiscal devaluation carried out in Southern European countries has a strong positive effect on output, but a mild effect on the trade balance of these countries. In addition, the negative effect on Central-Northern countries output is weak. --
    Keywords: fiscal devaluation,fiscal policy,euro area,currency union,current account
    JEL: E32 E62 F32 F41
    Date: 2013
  64. By: Hercog, Metka (UNU-MERIT / MGSoG); Van de Laar, Mindel (UNU-MERIT / MGSoG)
    Abstract: Faced with a situation in which countries compete for international students, it becomes especially important to understand students' preferences regarding migration behaviour. This paper looks at the determinants of international mobility intentions in the specific situation of Indian students in sciences and engineering. It uses data collected from a survey of students at five Indian universities, complemented by qualitative data from interviews. We looked at the role of students' personal and family background, university-related factors, their social network and preferences for living location in their motivations for moving abroad. The type of university and field of studies work as strong predictors for students' desire to move abroad. Whether a student plans a career in academia or wants to work in a company has a decisive influence on where they see themselves in the near future. Professional aspects are confirmed to be the most prominent in the decision-making regarding international mobility. People who place high importance on work-related factors are more mobile, while people who place higher importance on family-friendly environment and public safety prefer staying in India. International student mobility is clearly a family decision. Parents' support is crucial for moving abroad, in moral as well as in financial terms. Normally, obligations towards family are put in first place ahead of potential individual initiatives.
    Keywords: location choices, pull factors, higher education, student migration, India
    JEL: F22 J61 I23 J24
    Date: 2013–12–19
  65. By: Qing Li (McMaster University); Arthur Sweetman (McMaster University)
    Abstract: International test scores are used to proxy the quality of source country educational outcomes and explain differences in the rate of return to schooling among immigrants in Canada. The average quality of educational outcomes in an immigrant’s source country and the rate of return to schooling in the host country labour market are found to have a strong and positive association. However, in contrast to those who completed their education pre-immigration, immigrants who arrived at a young age are not influenced by this educational quality measure. Also, the results are not much affected when the source country’s GDP per capita and other nation-level characteristics are used as control variables. Together, these observations reinforce the argument that the quality of educational outcomes has explanatory power for labour market outcomes. The effects are strongest for males and for females without children.
    Keywords: Immigration, Quality of Education, Earnings
    JEL: I21 J31 J61
    Date: 2013–12
  66. By: Bohn, Sarah (Public Policy Institute of California); Pugatch, Todd (Oregon State University)
    Abstract: We provide the first evidence on the causal effect of border enforcement on the full spatial distribution of Mexican immigrants to the United States. We address the endogeneity of border enforcement with an instrumental variables strategy based on administrative delays in budgetary allocations for border security. We find that 1,000 additional border patrol officers assigned to prevent unauthorized migrants from entering a state decreases that state's share of Mexican immigrants by 21.9%. Our estimates imply that border enforcement alone accounted for declines in the share of Mexican immigrants locating in California and Texas of 11 and 6 percentage points, respectively, over the period 1994-2011, with all other states experiencing gains or no change.
    Keywords: unauthorized immigration, border enforcement, Mexico, residential location choice
    JEL: J15 J61
    Date: 2013–12
  67. By: Torben M. Andersen (Department of Economics and Business, Aarhus University); Allan Sørensen (Department of Economics and Business, Aarhus University; Department of Economics and Business, Aarhus University)
    Abstract: The implications of product market integration for public sector activities (transfers and public consumption) are considered in a standard setting. The analysis supports that a larger public sector (higher tax rate) tends to increase wages and worsen wage competitiveness. However, the implications of product market integration for the public sector are far from straightforward. The reason is gains-from-trade effects which tend to increase the tax base and decrease the opportunity costs of public consumption (marginal utility of private consumption falls). It follows that the retrenchment view that product market integration inevitable leads to a downward pressure on public sector activities does not get support in a standard setting. A particularly noteworthy ?finding is that a country with a large public sector (strong preferences for public consumption) may bene?fit more by integrating with a country with a smaller public sector (weak preferences for public consumption).
    Keywords: labour taxation, product market integration, public sector, policy spill-over
    JEL: H2 F1 J22
    Date: 2013–12–18
  68. By: Gabin Langevin (Université de Rennes 1, CREM CNRS UMR 6211, France); Pascaline Vincent (Université de Rennes 1, CREM CNRS UMR 6211, France)
    Abstract: Determination and changes of immigrants' identity resulting from intercultural contacts impact their socio-economic integration. To precisely assess individuals’ identity, we propose a continuous index which aims to overcome interpretation troubles faced by usual measures of ethnic identity. Then, we investigate the determinants of immigrants' ethnic identity in France. We compare our composite and continuous index exhibiting individuals' assimilation with a usual measure of ethnic identity – the national identity ("I feel French" dummy). We underline the importance of some sociodemographic characteristics in ethnic identity formation and detail immigrants' assimilation in France. We are thus able to show that cultural assimilation and national identity do not always coincide. It seems that the further the origin (in cultural terms), the higher the national identity, but the lower the assimilation. We also present evidence of second generations' identity convergence to natives’ one, either in terms of national identity (almost total commitment) or assimilation.
    Keywords: ethnicity, ethnic identity, first and second generation immigrants, integration, assimilation
    JEL: J15 D63 Z13
    Date: 2013–12
  69. By: De Feo, Giuseppe; Amergighi, Oscar
    Abstract: We investigate competition for FDI within a region when a foreign multinational rm can profitably exploit differences in statutory corporate tax rates by shifting taxable pro ts to lower-tax jurisdictions. In such framework we show that targeted tax competition may lead to higher welfare for the region as a whole than lump-sum subsidies when the difference in statutory corporate tax rates and/or their average is high enough. Tax competition is also preferable from an efficiency point of view (overall surplus) by changing the firm's investment decision when pro t shifting motivations induce the rm to locate in the (before tax) least pro table country.
    Keywords: Policy competition for FDI, Profit shifting, Tax discrimination,
    Date: 2013
  70. By: Walmsley, Terrie; Peter Minor
    Abstract: The GTAP standard model has proved a useful analysis tool and data source for over 20 years. The GTAP model has been updated overtime, but it maintains the structure of a single regional household, with income distributed into three components: government, private and savings-investment expenditures. There has been a need for a more detailed accounting system, especially as it relates to estimating the potential impacts of policies and global shocks on poverty, sustainable and inclusive growth. This paper presents an extension to the GTAP model and its accounting framework to implement distinct and multiple households, split factors of production, foreign aid and remittances, government and household transfer. The model and associated accounting links a household’s expenditure to factor incomes (through ownership shares) and taxes. Government expenditure is linked to taxes and foreign aid. The MyGTAP model provides the user more flexibility in: the treatment of government and household savings and spending; the selection of a linear expenditure systems (LES) or a constant difference of elasticities (CDE) demand function\s. The model is incorporated into a RunGTAP application which supports many of RunGTAP’s popular programs such as alter-tax, GTAPview and others. The introduction of a split regional household (which does not require splitting data for every region) supports economic analysis based on detailed households, government, factor income, remittances, foreign aid and income transfers. The code can be modified to include multiple regions with unique household structures. This paper documents the model and accounting framework for the use of data output from the MyGTAP data splitting program. It is intended to be used in tandem with a complimentary paper and programs found in:"MyGTAP Data Program: A Program for Customizing and Extending the GTAP Database", GTAP Working Paper No. 79, by Minor, Peter and Terrie Wamsley 2013.
    Date: 2013

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