nep-int New Economics Papers
on International Trade
Issue of 2014‒02‒02
fifty-four papers chosen by
Luca Salvatici
Universita' di Roma 3

  1. Icebergs versus Tariffs: A Quantitative Perspective on the Gains from Trade By Jung, Benjamin; Felbermayr, Gabriel; Larch, Mario
  2. Trade and the Firm-Internal Allocation of Workers to Tasks By Koch, Michael; Egger, Hartmut
  3. Trade Integration and the Fragility of Trade Relationships: A Product Level Perspective By Nitsch, Volker; Besedes, Tibor
  4. Exports Margins in Austria’s Export Growth By Türkcan, Kemal
  5. Risk or Resilience? The Role of Trade Integration and Foreign Ownership for the Survival of German Enterprises during the Crisis 2008-2010 By Joachim Wagner; John P. Weche Geluebcke
  6. U.S. Multinationals and Preferential Market Access By Matschke, Xenia; Blanchard, Emily
  7. Externalities of national pharmaceutical policy when markets are integrated through parallel trade By Birg, Laura
  8. International Trade and Unemployment: A Quantitative Framework By Heid, Benedikt; Larch, Mario
  9. Does Bilateral Trust Affect International Movement of Goods and Labor? By Spring, Eva; Grossmann, Volker
  10. Trade policy instruments over time By Bown, Chad P.
  11. Imports of intermediate inputs and country size By Amin, Mohammad; Islam, Asif
  12. Intra-national Trade Costs: Measurement and Aggregation By Delina E. Agnosteva; James E. Anderson; Yoto V. Yotov
  13. Changes in Global Trade Patterns and Women's Employment in Manufacturing: an Analysis over the Period of Asianization and De-industrialization By Burca Kizilirmak; Emel Memis; Sirin Saracoglu; Ebru Voyvoda
  14. The political economy of trade and migration:Evidence from the U.S. Congress By Steinhardt, Max; Conconi, Paola; Facchini, Giovanni; Zanardi, Maurizio
  15. Restoring the Product Variety and Pro-competitive Gains from Trade with Heterogeneous Firms and Bounded Productivity By Robert C. Feenstra
  16. Trade in Value Added Revisited: A Comment on R. Johnson and G. Noguera, Accounting for Intermediates: Production Sharing and Trade in Value Added By Kuboniwa, Masaaki
  17. Exporter Dynamics, Firm Size and Growth, and Partial Year Effects By Andrew B. Bernard; Renzo Massari; Jose-Daniel Reyes; Daria Taglioni
  18. Measuring multi-membership in economic integration and its trade-impact. A comparative study of ECOWAS and SADC By Sylvanus Kwaku Afesorgbor; Peter A.G. van Bergeijk
  19. China’s Regional and Bilateral Trade Agreements By Chunding Li; Jing Wang; John Whalley
  20. Acquisitions by Multinationals and Trade Liberalization By Ray Chaudhuri, A.
  21. Supply Chains and the Internalization of SMEs: Evidence from Italy By Giorgia Giovannetti; Enrico Marvasi; Marco Sanfilippo
  22. EU-Armenia trade liberalization:A poverty and social impact analysis By Mushegh Tumasyan; Karine Harutyunyan; Yelena Manukyan; Armen Grigorian
  23. Trade and Interdependence in a Spatially Complex World By Michal Fabinger
  24. Offshoring Domestic Jobs By Wrona, Jens; Egger, Hartmut; Kreickemeier, Udo
  25. Asymmetric Entry Equilibrium in a Symmetric Trading Oligopoly Model By T.Huw Edwards
  26. Environmental Aspects of a Potential Philippines-European Union Free Trade Agreement By La Viña, Antonio G.M.; Barcenas, Lai-Lynn Angelica B.; Lesaca, Carla; Bobadilla, Liezel
  27. Technology transfers, foreign investment and productivity spillovers: evidence from Vietnam By Carol Newman; John Rand; Theodore Talbot; Finn Tarp
  28. A Multi-sectorial Assessment of the Static Harrod Foreign Trade Multiplier By Trigg, Andrew; Ricardo , Araujo
  29. Trading Tasks: A Dynamic Theory of Offshoring By Benz, Sebastian
  30. An Analysis of the Philippine Offensive and Defensive Interests in the Non-agricultural Sector: Inputs to the Philippines-European Union Free Trade Agreement By Manzano, George N.
  31. Retailers as agents: why parallel trade does not work By Stähler, Frank; Maskus, Keith
  32. Product Innovation and Trade Credit Demand and Supply: Evidence from European Countries By Nielen, Sebastian
  33. Dealing with an error correction model when trade balances are trend-stationary By Manuel Cantavella-Jordá
  34. Room to move: why some industries drive the trade-specialization nexus and others do not By Bos J.W.B.; Zhang L.
  35. Local Transmission of Trade Shocks By Ferdinando Monte
  36. Trade, Technologies and the Talent Organization By Schymik, Jan
  37. Macroeconomic Consequences of Terms of Trade Episodes, Past and Present By Tim Atkin; Mark Caputo; Tim Robinson; Hao Wang
  38. Cross-Border Price Effects of Mergers and Acquisitions -- A Quantitative Framework for Competition Policy By Breinlich, Holger; Nocke, Volker; Schutz, Nicolas
  39. Prospects for a Philippines-European Union Free Trade Agreement: Implications for Agriculture By Briones, Roehlano M.; Galang, Ivory Myka R.
  40. Regional Implications of Financial Market Development: Credit Rationing, Trade, and Location By Seidel, Tobias; von Ehrlich, Maximilian
  41. Global Sourcing: Towards an Empirical Test of the Hold-up Model By Kohler, Wilhelm; Smolka, Marcel
  42. Do immigrants take or create residents jobs? Quasi-experimental evidence from Switzerland By Siegenthaler, Michael; Basten, Christoph
  43. Remittances and vulnerability in developing countries By Giulia Bettin; Andrea Filippo Presbitero; Nikola Spatafora
  44. Carbon Leakage with Structural Gravity By Aichele, Rahel
  45. FDI, terrorism and the availability heuristic for U.S. investors before and after 9/11 By Bos J.W.B.; Frömmel M.; Lamers M.A.J.
  46. Fiscal Devaluation in a Monetary Union By Philipp Engler; Giovanni Ganelli; Juha Tervala; Simon Voigts
  47. The Trans-Atlantic Slave Trade and Local Political Fragmentation in Africa By Nonso Obikili
  48. The Potential Impacts of a Free Trade Agreement with the European Union on the Philippine Fisheries Sector By Israel, Danilo C.
  49. Credit Ratings and Cross-Border Bond Market Spillovers By Zabel, Michael; Böninghausen, Benjamin
  50. FDI and International Income Divergence By Schwab, Jakob
  51. Explaining the German trade surplus: An analysis with an estimated DSGE model By Vogel, Lukas; Kollmann, Robert; Ratto, Marco; Roeger, Werner; In 't Veld, Jan
  52. Lobbying and the Power of Multinational Firms By Polk, Andreas; Schmutzler, Armin; Müller, Adrian
  53. Transfer Behaviour in Migrant Sending Communities - Evidence from Kyrgyzstan By Steiner, Susan; Chakraborty, Tanika; Mirkasimov, Bakhrom
  54. Determinants of real exchange rates: An empirical investigation By Kakkar, Vikas; Yan, Isabel

  1. By: Jung, Benjamin; Felbermayr, Gabriel; Larch, Mario
    Abstract: We derive a simple equation for the welfare gains from trade when tariffs are liberalized or iceberg trade costs fall. Covering various one-sector trade models that may or may not feature extensive margins and imperfect competition, we generalize the analysis of Arkolakis, Costinot and Rodriguez-Clare (2012) to encompass revenue-generating import tariffs. Our formula permits easy quantification based on countries' observed degrees of openness, their tariff revenues, and gravity elasticities. We show analytically that an analysis based on iceberg costs necessarily underestimates the welfare gains from trade relative to autarky. Our quantitative exercise for 41 countries suggests that the bias can be numerically significant. For countries with relatively high status quo tariffs, our formula predicts 30-60\% larger gains from trade than the icebergs only approach. --
    JEL: F10 F11 F12
    Date: 2013
  2. By: Koch, Michael; Egger, Hartmut
    Abstract: This paper looks inside the firm and investigates how trade alters the matching of worker-specific abilities and task-specific requirements. The outcome of this matching depends on how firms organize their recruitment process and how much they invest into the screening of applicants. In the open economy, the most productive firms start exporting. They increase their market share and therefore find it attractive to increase their screening investment, which improves the matching outcome. Things are different for non-exporters, whose market share shrinks in the open economy, lowering their incentive to invest to screen applicants. Due to this asymmetric response, access to trade raises the dispersion of labor productivity between heterogeneous producers, while at the same time increasing the average quality of worker-task matches and thus economy-wide labor productivity. The productivity-enhancing effect of endogenous adjustments in the firm-internal allocation of workers to tasks points to a so far unexplored channel through which gains from trade can materialize. --
    JEL: F12 F16 L23
    Date: 2013
  3. By: Nitsch, Volker; Besedes, Tibor
    Abstract: We investigate the effect of economic integration agreements on the stability of international trade at the 4 digit SITC level. Using annual trade data for over 180 countries from 1962 to 2005 we examine how economic integration agreements affect the length of trade relationships, the volume at the start of new trade relationships, and how quickly trade grows within a relationship. We find evidence of an interesting dichotomy which highlights the relevance of transaction costs for exports. While economic integration increases the length of trade relationships which started prior to the agreement, it reduces the length of those started after the agreement. Similarly, economic integration increases the growth rate of relationships which started prior to the agreement, but decreases the growth rate of those that started after the agreement. With respect to starting size of trade relationships, economic integration lowers initial transaction volumes. --
    JEL: F15 F14 F13
    Date: 2013
  4. By: Türkcan, Kemal
    Abstract: Recent empirical research in international trade emphasizes the role of the extensive and intensive margin as determinants of countries’ trade patterns. Considering the case of Austria, the present paper uses detailed bilateral export data with 215 partner countries over the period 1998-2011, differentiated by product categories where we distinguish between total goods, final goods and intermediate goods, in order to calculate the contribution of the extensive and intensive margins to Austria’s export performance. Intensive margin are further decomposed into price and quantity margins in order to evaluate the role of to changes in price (quality) and changes in quantity. Unlike previous studies that have mainly used a single approach for the decomposition of exports into its margins, the present paper uses three alternative methods: i) the count method, ii) the decomposition method of export shares proposed by Hummels and Klenow (2005), and iii) the decomposition method of export growth rates by Bingzhan (2011). Results show that the intensive margin is key driver of Austria’s export growth across each product category. Additionally, the results indicate that the growth in the intensive margin of Austria’s exports is mainly explained by quantity growth.
    Keywords: Austria, export margins, geographical and product diversification
    JEL: F12 F14 F15
    Date: 2014–01–21
  5. By: Joachim Wagner (Leuphana University Lueneburg, Germany); John P. Weche Geluebcke (Leuphana University Lueneburg, 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: Exports, imports, foreign ownership, rm survival, economic crisis, Germany
    JEL: F23 L60
    Date: 2013–12
  6. By: Matschke, Xenia; Blanchard, Emily
    Abstract: This paper examines the relationship between offshoring activity by U.S. multinational firms and the structure of U.S trade preferences. We combine firm level panel data on U.S. foreign affiliate activity from the U.S. Bureau of Economic Analysis (BEA) with detailed measures of U.S. trade preferences from the U.S. International Trade Commission (USITC) to create a three-way panel that spans 80 industries, 184 countries, and ten years (1997-2006). Consistent with existing theory, we find that offshoring multinational activity and preferential market access are positively and consistently correlated, both in the pooled sample and within countries, industries, and years. Using both instrumental variables and simultaneous equations approaches to address the likely endogeneity of export-oriented foreign investment, we find that each 1 billion in U.S. foreign affiliate exports to the U.S. from a particular industry and country is associated with roughly a 3.5 percentage point increase in the rate of preferential duty free access. Restricting attention to the Generalized System of Preferences (GSP), the dollar-for-dollar influence of multinational affiliate sales on preferential market access declines by roughly a third for the overall sample, but rises by more than an order of magnitude when we restrict attention to potentially GSP eligible countries. --
    JEL: F13 F21 F15
    Date: 2013
  7. 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, i.e. trade outside the manufacturer's authorized distribution channel, 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. --
    JEL: F12 I11 I18
    Date: 2013
  8. By: Heid, Benedikt; Larch, Mario
    Abstract: Quantifying the welfare effects of trade liberalization is a core issue in international trade. Existing frameworks assume perfect labor markets and therefore ignore the effects of aggregate employment changes for welfare. We develop a quantitative trade framework which explicitly models labor market frictions. To illustrate, we assess the effects of trade and labor market reforms for 28 OECD countries. Welfare effects of trade agreements are magnified when accounting for employment changes. While employment and welfare increase in most countries, some experience higher unemployment and lower welfare. Labor market reforms in one country have small positive spillover effects on trading partners. --
    JEL: F16 F13 F14
    Date: 2013
  9. By: Spring, Eva; Grossmann, Volker
    Abstract: Trust in the citizens of a potential partner country may affect the decision to trade with or to migrate to a foreign country. This paper employs panel data to examine the causal impact of such bilateral trust on international trade and migration patterns. We apply instrumental variables (IV) approaches that capture the exogenous variance of bilateral trust separately with various indicators of genetic ("somatic") distance between country-pairs. These indicators work equally well at the first stage. However, second-stage results very much depend on the exact measure employed as instrument. We conclude that there is little evidence that bilateral trust affects international movements of goods and labor. Moreover, we highlight the potential fragility of IV estimations even when the instruments seem plausible on theoretical grounds and when standard statistical tests confirm their validity. --
    JEL: F10 F22 Z10
    Date: 2013
  10. By: Bown, Chad P.
    Abstract: This paper surveys political-economic research on the variety of instruments that governments use to conduct international trade policy. It presents key insights on the relationships between instruments such as tariffs, quotas, voluntary export restraints, and other nontariff barriers, as well as the ebb and flow of the national use of temporary trade barriers such as antidumping, countervailing duties, and safeguards. The survey examines trends in use of these trade policy instruments over recent history; and it reviews the major theoretical and empirical explanations behind, and interrelationships between, their uses. Finally, the paper highlights potential institutional impacts of the General Agreement on Tariffs and Trade (GATT) and subsequent World Trade Organization (WTO) on choice of policy instruments, as well as how multilateral, unilateral, and preferential tariff liberalization may introduce political-economic shocks and affect incentives over time for how governments rely on different instruments.
    Keywords: Free Trade,Trade Law,Trade Policy,International Trade and Trade Rules,Economic Theory&Research
    Date: 2014–01–01
  11. By: Amin, Mohammad; Islam, Asif
    Abstract: The paper analyzes the relationship between country size and the use of imported intermediate inputs by firms in 76 developing countries. Recent evidence indicates that the use of imported inputs can have a large, positive effect on productivity and growth, thus motivating a better understanding of the determinants of foreign inputs. The results confirm that, as is the case with exports, use of imported intermediate inputs is much higher at the extensive and intensive margins in small relative to large countries. The results for imported inputs are comparable in magnitude with those for exports.
    Keywords: Economic Theory&Research,Trade Policy,Free Trade,Achieving Shared Growth,Science Education
    Date: 2014–01–01
  12. By: Delina E. Agnosteva; James E. Anderson; Yoto V. Yotov
    Abstract: We develop and apply a procedure to flexibly estimate intra-national border barriers and intra-regional trade costs. Bilateral border barriers very significantly depress Canadian inter-provincial trade for some pairs, though the overall effect is rather small. Bilateral distance imposes much larger inter-provincial trade costs. Contiguity between provinces accounts for little. Intra-regional trade cost variation affects relative bilateral costs and trade flows, and alters comparative statics except in a neutral case rejected by the data. Consistent trade cost aggregation procedures are developed and applied for groups of regions and/or sectors.
    JEL: F1 R1
    Date: 2014–01
  13. By: Burca Kizilirmak (Department of Economics, Ankara University); Emel Memis (Department of Economics, Ankara University); Sirin Saracoglu (Department of Economics, METU); Ebru Voyvoda (Department of Economics, METU)
    Abstract: The purpose of this study is to explore the employment effects of changes in manufacturing output resulting from changes in trade patterns over the period 1995-2006. For 30 countries (21 OECD and 9 non-OECD countries) we estimate the changes in embodied labor content due to trade using the factor-content analysis by breaking up the sources of these changes between the trade with the North, the South and China. We also decompose changes in employment into its components as changes within and across sectors. Our results present a net negative impact of trade on total employment in 30 countries over the period of analysis (despite employment gains in 17 countries). In all countries (except for Philippines and Republic of Korea) trade with China has a negative impact on total employment with a stronger negative effect on women’s employment. Employment losses in the South due to surge in imports from China are coupled with declining exports to the North as many countries in the North shift their imports to emerging economies in Asia. Decomposition results indicate that decline in the share of women’s employment is mainly due to shifts between sectors rather than within sector changes. Changes in women’s employment are still highly dependent on the movements in ‘traditional’ manufacturing sectors including food, textiles and wearing apparel.
    Keywords: North-South trade, decomposition analysis, factor content analysis, gender bias.
    JEL: F16 J16 J21
    Date: 2014–01
  14. By: Steinhardt, Max; Conconi, Paola; Facchini, Giovanni; Zanardi, Maurizio
    Abstract: Over the last decades, the United States has become increasingly integrated in the world economy. Very low trade barriers and comparatively liberal migration policies have made these developments possible. What drove US congressmen to support the recent wave of globalization? While much of the literature has emphasized the differences that exist between the political economy of trade and migration, in this paper we find that important similarities should not be overlooked. In particular, our analysis of congressional voting between 1970 and 2006 suggests that economic drivers that work through the labor market play an important role in shaping representatives' behavior on both types of policies. Representatives from more skilled-labor abundant districts are more likely to support both trade liberalization and a more open stance vis-a-vis unskilled immigration. Still, important systematic differences exist: welfare state considerations and network effects have an impact on the support for immigration liberalization, but not for trade; Democratic lawmakers are systematically more likely to support a more open migration stance than their Republican counterparts, and the opposite is true for trade liberalization. --
    JEL: F22 H00 J61
    Date: 2013
  15. By: Robert C. Feenstra
    Abstract: The monopolistic competition model in international trade offers three sources of gains from trade that do not arise in competitive models: expansion in product variety; a pro-competitive reduction in the markups charged by firms; and the self-selection of more efficient firms into exporting. Recent literature on trade with heterogeneous firms has emphasized the third of these effects, and the first two effects are ruled out when using a Pareto distribution for productivity with a support that is unbounded above. The goal of this paper is to restore a role for product variety and pro-competitive gains from trade by using a bounded Pareto distribution for productivity.
    JEL: F12
    Date: 2014–01
  16. By: Kuboniwa, Masaaki
    Abstract: In light of growing intermediate goods trade, Johnson and Noguera (2012) developed theoretical and empirical research on the new concept of trade in value added in place of gross trade. However, they did not deal with the relationship between the new value added trade balance and the gross trade balance. Presented here is that in the case of two countries and many sectors the new value added trade balance always equals the gross trade balance. We verify this proposition by using an international input-output data compiled by Groningen University. In the case with three countries (China, the USA and the rest of the world; ROW) and many sectors, the China-USA trade balance or the USA-China imbalance measured in value added for 2010 is 23.5% smaller than that in gross terms, whereas the China-ROW trade balance in value added is 94% larger than that in gross terms.
    Keywords: trade in value added, gross trade, input-output tables, global supply chain
    JEL: F1 C67 D57 R15
    Date: 2014–01
  17. By: Andrew B. Bernard; Renzo Massari; Jose-Daniel Reyes; Daria Taglioni
    Abstract: Two otherwise identical firms that enter the same market in different months, one in January and one in December, will report dramatically different annual sales for the first calendar year of operations. This partial year effect in annual data leads to downward biased observations of the level of activity upon entry and upward biased growth rates between the year of entry and the following year. This paper examines the implications of partial year effects using Peruvian export data. The partial year bias is very large: the average level of first-year exports of new exporters is understated by 65 percent and the average growth rate between the first and second year of exporting is overstated by 112 percentage points. This paper re-examines a number of stylized facts about firm size and growth that have motivated rapidly expanding theoretical and empirical literatures on firm export dynamics. Correcting the partial year effect eliminates unusually high growth rates in the first year of exporting, raises initial export levels, and shifts 10 percent of market entrants from below to above the median size. Revisiting an older set of facts on firm size and growth, the paper finds that correcting for partial year biases reduces the number of small firms in the firm size distribution and weakens the negative relationship between firm growth and firm size.
    JEL: C81 D22 F14 L11
    Date: 2014–01
  18. By: Sylvanus Kwaku Afesorgbor (Department of Economics and Business, Aarhus University, Denmark); Peter A.G. van Bergeijk (International Institute of Social Studies of Erasmus University, The Hague, Netherlands)
    Abstract: One of intriguing aspects of African Regional Trade Agreements (RTAs) is the extent of multi-membership, where many Africa countries are members of more than one RTA. Using a gravity model for 25 countries and the years 1980-2006 we measure the extent of multi-membership and compare its impact in two major African Regional blocs, ECOWAS and SADC. We find that the impact of multi-membership critically depends on the characteristics of the multi-membership of regional integration initiatives. We find a positive impact if an additional membership complements the integration process of the original regional integration initiative: overlapping memberships had a much stronger and significant positive effect on bilateral trade within ECOWAS compare to an insignificant impact within SADC.
    Keywords: Multi-membership, Regional Economic Integration, Gravity Model, ECOWAS, SADC
    JEL: F1 F15
    Date: 2014–01–23
  19. By: Chunding Li; Jing Wang; John Whalley
    Abstract: China has been increasingly active on the regional trade agreement front over since WTO Accession occurred in 2001. These agreements, unlike the US and EU cases, follow no template form of agreement but vary substantially one among the others and are in part an attempt to customize agreements to partner prior agreements. There are presently 12 concluded agreements, 6 under negotiation, and four others under consideration. These concluded are in the main with smaller countries. Those in prospect are with major trading areas (US, Japan, Korea, and India). All are driven in part by China’s needs for export access to fuel continuing export lead growth, but other elements enter including using regional agreements to offset unwelcome elements of multilateral arrangements (such as the non-market economy labelling), and attempting to put in place via RTA building blocks an Asian trading hub. Outstanding issues not centrally addressed by these agreements include anti-dumping duties, and investment and competition issues.
    JEL: F15
    Date: 2014–01
  20. By: Ray Chaudhuri, A. (Tilburg University, Center for Economic Research)
    Abstract: Abstract This paper develops a theoretical framework where a multinational firm (MNE) is allowed to acquire or sell a productive asset in multiple segmented asset markets. The asset is used to produce a final good which can be sold in multiple countries, with segmented product markets, undergoing trade liberalization. I explicitly model the asset markets as well as the product markets. The paper identifies initial conditions in terms of the MNEs pre-liberalization asset holdings across different segmented markets as a crucial factor for determining whether merger waves are triggered by trade liberalization. The more asymmetric the pre-liberalization asset holdings of the MNE across the multiple segmented markets, the more likely that trade liberalization induces an international merger wave that may harm consumers by raising product prices in multiple markets.
    Keywords: acquisitions;multinational firms;endogenous mergers;cross-border mergers;trade liberalization
    JEL: F23 L12 L41 F13
    Date: 2014
  21. By: Giorgia Giovannetti (Dipartimento di Scienza per l'Economia e l'Impresa); Enrico Marvasi (Dipartimento di Scienza per l'Economia e l'Impresa); Marco Sanfilippo
    Abstract: This paper explores the relevance of supply chains participation on firms’ probability to internationalize. It studies whether being part of a supply chains and/or of an international network increases the likelihood to enter international markets also for smaller and less productive firms. Our results support the view that belonging to a supply chain increases small firms’ probability of exporting as well as the intensive margin of trade. However, supply chain participation does not seem to affect the extensive margin, computed as the number of foreign markets served, coherently with the view that structural limits given by the size matter. The paper also explores the possibly differential effect of the supply chain for subcontractors and firms that produce their own-branded products and shows that the latter benefit more from integration.
    JEL: F12 F24 F21
    Date: 2013
  22. By: Mushegh Tumasyan; Karine Harutyunyan; Yelena Manukyan; Armen Grigorian
    Abstract: This study set out to analyze the socioeconomic impact of increased trade liberalization between Armenia and the EU within the framework of Eastern Partnership initiative. In addition to a quantitative assessment of the potential impact of trade liberalization on the economic situation and poverty in Armenia, the study involves evaluations of existing foreign trade regimes and regulatory systems. Results of the analysis reveal that a simple free trade agreement or tariff liberalization will not result in significant socioeconomic benefits for Armenia. This is mainly caused by the already liberal trade regimes between Armenia and the EU. Armenia is already included in the Generalized System of Preferences in trade with the EU, yet the potential of this facility is not yet fully utilized. Armenia has relatively small and concentrated foreign exports which are limited by existent production capabilities and the current level of industrial development. Therefore, verification of a deep and comprehensive Free Trade Agreement (DCFTA) which implies harmonization of the partner countries’ trade- and production-related legislation with EU standards is not feasible in the medium term. Enforcement of such standards on the domestic market – i.e. on production and imports – could paralyze the Armenian economy and most likely result in negative social consequences. If initial institutional and legislative harmonization is the matter, no direct economic and social benefits are to be expected for Armenia, as no structural changes will occur in the ability of Armenian producers to enter the EU market and the Armenian private sector will continue to be in non-compliant with EU standards. To this end, regional economic integration of Armenia with the EU is of great importance to long-term development of the country. However, it will only be economically justifiable and generate a positive social impact if the process that leads to such integration is based on development and harmonization of the capacities of domestic producers and enterprises. Therefore, the policy priority should move away from trade liberalization towards industrial development.
    Keywords: Trade Liberalization; Free Trade Agreement; CGE; EU; Armenia; Poverty Analysis; Social Impact Analysis
    JEL: F15 F12 F16 I32 C68
    Date: 2013
  23. By: Michal Fabinger (Pennsylvania State University)
    Abstract: This paper presents an analytic solution framework applicable to a wide variety of general equilibrium international trade models, including those of Krugman (1980), Eaton and Kortum (2002), Anderson and van Wincoop (2003), and Melitz (2003), in multi-location cases. For asymptotically power-law trade costs and in the large-space limit, it is shown that there are parameter thresholds where the qualitative behavior of the model economy changes. In the case of the Krugman (1980) model, the relevant parameter is closely related to the elasticity of substitution between different varieties of goods. The geographic reach of economic shocks changes fundamentally when the elasticity crosses a critical threshold: below this point shocks are felt even at long distances, while above it they remain local. The value of the threshold depends on the approximate dimensionality of the spatial configuration. This paper bridges the gap between empirical work on international and intranational trade, which frequently uses data sets involving large numbers of locations, and the theoretical literature, which has analytically examined solutions to the relevant models with realistic trade costs only for the case of very few locations.
    Date: 2013
  24. By: Wrona, Jens; Egger, Hartmut; Kreickemeier, Udo
    Abstract: We set up a two-country general equilibrium model, in which heterogeneous firms from one country (the source country) can offshore routine tasks to a low-wage host country. The most productive firms self-select into offshoring, and the impact on welfare in the source country can be positive or negative, depending on the share of firms engaged in offshoring. Each firm is run by an entrepreneur, and inequality between entrepreneurs and workers as well as intragroup inequality among entrepreneurs is higher with offshoring than in autarky. All results hold in a model extension with firm-level rent sharing, which results in aggregate unemployment. In this extended model, offshoring furthermore has non-monotonic effects on unemployment and intra-group inequality among workers. The paper also offers a calibration exercise to quantify the effects of offshoring. --
    JEL: F12 F16 F23
    Date: 2013
  25. By: T.Huw Edwards (School of Business and Economics, Loughborough University)
    Abstract: While there are now considerable literatures on both oligopolistic and mo- nopolistically competitive market structures in trade, asymmetry is rarely exam- ined except where it reects some underlying heterogeneity. Following Melitz, 2003, economists have come to see dierences in rms' entry decisions are now typically seen as evidence of rm heterogeneity and xed entry costs. In addi- tion, there is supporting evidence that rms which engage in trade are seen as larger and more ecient (Bernard and Jensen, 1995; Baldwin and Gu, 2003) than their non-trading rivals. While there is considerable evidence that rm asymmetry can be a causal factor of dierent trading behaviour, there is nevertheless scope for caution. After all, where does the heterogeneity stem from? If there are scale economies at the rm level - why should not greater size and eciency therefore be seen as potentially consequential to the market entry decision, rather than the reverse? Evidence of greater size or eciency prior to starting exporting (Lileeva and Treer, 2010) is not, of itself, sucient to discount this possibility, given that what matters is the intent of a rm to become an exporter (which may long predate actual market entry). In this short note we show that the market entry decision of rms, partic- ularly in industries intensive in research and development (R&D) activity, is absolutely characteristic of the sort of problem where initially symmetric games may have asymmetric (and sometimes, if we restrict ourselves to pure strategy games, only asymmetric) equilibria. In this regard, one should consider past papers on discontinuous games by Dasgupta and Maskin (1986) and Amir et al (2010). Also Fey (2011).
    Keywords: Trade, oligopoly, market entry
    JEL: F12 L13
    Date: 2014–01
  26. By: La Viña, Antonio G.M.; Barcenas, Lai-Lynn Angelica B.; Lesaca, Carla; Bobadilla, Liezel
    Abstract: This paper focuses on the environmental aspects of a potential Philippines-European Union Free Trade Agreement (PH-EU FTA). Potential environmental issues in the negotiation of such an FTA (if at all undertaken) are identified to better prepare the Philippine negotiating panel and equip them with information and analysis to make well-informed positions on such issues. It looks at the interaction between the multilateral trade regime--the World Trade Organization (WTO) principally--and multilateral environmental agreements, reviews the Philippine approach to environment-related trade measures, and looks at Philippine practice and implementation of environmental agreements from a trade perspective. EU policies on trade, environment, and development are also discussed to anticipate what could be EU positions during the FTA negotiations with the Philippines. The paper ends with the following conclusions and recommendations: (1) The EU will most likely push for more harmonization of the FTA provisions with WTO rules. On the sustainable development front, the EU would push for including sustainable development principles into all levels and in cross-cutting policy areas; (2) The Philippines can expect the EU to come up with a strong position on sustainable development, expecting the Philippines to make concrete commitments to principles of sustainable development; (3) Philippine sustainable development goals are not inconsistent with the EU. However, the Philippines in the FTA negotiations would be best served to emphasize poverty reduction and financial and technical support from its EU partners.
    Keywords: Philippines, trade and sustainable development, multilateral environmental agreements, trade and environment, Philippine practice of international environmental law, conflict between trade and environment
    Date: 2014
  27. By: Carol Newman (Institute for International Integration Studies, Trinity College Dublin and Department of Economics, Trinity College Dublin); John Rand (Department of Food and Resource Economics, University of Copenhagen); Theodore Talbot (Department of Economics, University of Copenhagen); Finn Tarp (UNU-WIDER, Helsinki and Department of Economics, University of Copenhagen)
    Abstract: This paper provides new evidence on the relationship between foreign direct investment (FDI) and the productivity of domestic firms. Using a specially designed survey on a sample of over 7,500 manufacturing firms in Vietnam we uncover some of the mechanisms that explain productivity spillovers from FDI through vertical linkages along the supply chain. Our results suggest that domestic firms experience more productivity spillovers through forward linkages from foreign-input suppliers to domestic input users than through backward linkages from foreign customers to domestic producers of inputs. Productivity externalities from upstream sectors are associated with joint venture foreign investors while downstream sectors experience direct technology transfers from upstream wholly foreign owned investors. Spillovers from FDI through backward linkages are also detected but only when competition from imported intermediates is controlled for and are associated with innovations and technology investments made by firms.
    Keywords: Foreign direct investment, productivity spillovers, technology transfers, absorptive capacity, Vietnam
    JEL: D22 F21 O12 O3
  28. By: Trigg, Andrew; Ricardo , Araujo
    Abstract: With this inquiry we seek to develop a multi-sectorial version of the static Harrod foreign trade multiplier, by showing that indeed it can be derived from an extended version of the Pasinettian model of structural change to international trade. This new version highlights the connections between balance of payment and the level of employment and production. It is also shown that departing from this disaggregated version of the Harrod foreign multiplier we can arrive at the aggregated version thus proving the consistency of our analysis. By following this approach we go a step further in establishing the connections between the Structural Economic Dynamic and Balance-of-Payments Constrained Growth approaches.
    Keywords: structural economic dynamics; foreign trade multiplier; balance-of-payments constrained growth.
    JEL: F12 O19
    Date: 2014–01–14
  29. By: Benz, Sebastian
    Abstract: This paper is a dynamic extension of the well-known theory of trade in tasks. In my model, a firm's offshoring decision is governed by production cost savings, but also considers potential imitation risk. I show that such a consideration reduces the level of offshoring compared to a static optimization and that adjustment of offshoring volume with respect to changes in offshoring costs or labor endowment is characterized by overshooting and subsequent movement toward a steady state. Moreover, I find that offshoring affects wages via more channels than are apparent in static models. More precisely, I identify a short-run intertemporal profit effect and a long-run composition effect, both of which depend on the endogenous rate of product imitation. These effects can reverse well-known static wage effects from offshoring, such as the labor supply effect and productivity effect. The dynamic adjustment predicted by this model has important implications for empirical strategies seeking to identify a meaningful correlation of offshoring and relative wages. --
    JEL: F12 F16 J31
    Date: 2013
  30. By: Manzano, George N.
    Abstract: In drawing up the negotiating stance of the Philippines in light of the Philippines-European Union (PH-EU) free trade agreement (FTA), it is important to articulate its offensive and defensive interests. Indications of the offensive and defensive interests can be gleaned from standard measures of competitiveness as well as complementarities of the partners. However, in operational terms, negotiators would require analysis that is carried out at more specific tariff levels. This paper proposes the framework to generate different offensive and defensive lists of commodities in the non-agricultural sector as input to the Philippine negotiators. Because the criteria that is used in generating the offensive and defensive lists is purely economic in nature, the negotiators are expected to weigh in the political and non-economic criteria to determine the final lists for negotiations in the PH-EU FTA.
    Keywords: Philippines, trade, free trade agreements (FTAs), trade policy, Philippine manufacturing, offensive interest
    Date: 2014
  31. By: Stähler, Frank; Maskus, Keith
    Abstract: Legalized parallel trade implies that an original manufacturer cannot control a retailer in a foreign country once the latter has ordered its sales quantity and has compensated the former. This paper endogenizes the role of the retailer as an agent who has private information on the perceived quality of the good in the foreign country. Paradoxically, if parallel trade is permitted there will be no such trade in the only equilibrium, in which the manufacturer offers a smaller volume to the retailer than in the case where it is not permitted. This outcome makes both the original producer and foreign consumers worse off. --
    JEL: F13 F15 F12
    Date: 2013
  32. By: Nielen, Sebastian
    Abstract: This study addresses the relationship between product innovation and the demand and supply of trade credit. Theoretical as well as empirical studies are used to derive the hypothesis of a positive link between product innovation and trade credit demand and supply. Using a sample covering SMEs from 24 European countries this relationship is tested empirically. Basically the estimation results confirm that introducing a product innovation is positively related with demand and provision of trade credit for SMEs. Innovative firms have a higher probability to face credit constraints and therefore have a higher probability to demand for trade credit. On the other hand suppliers have an incentive to provide trade credit especially to innovative customers because they have an easier access to information about the growth potential of innovative SMEs compared to banks. --
    JEL: G32 O31 L20
    Date: 2013
  33. By: Manuel Cantavella-Jordá (Department of Economics and Instituto de Economía Internacional, Universitat Jaume I, Castellón, Spain)
    Abstract: The present research shows how one can deal with stationary plus trend trade balance variables in a trade model where the rest of the variables contain a unit root. Data are used in a monthly and a quarterly basis from January 1980 to June 2011 and applied to four countries (Germany, France, Italy and United Kingdom). It is proved that an error correction mechanism suits better in terms of both econometrics and economics when detrending trade balances once they have been verified to have a deterministic trend.
    Keywords: Trade model, difference stationary process, trend stationary process, error correction mechanism
    JEL: C32 F10 F31
    Date: 2014
  34. By: Bos J.W.B.; Zhang L. (GSBE)
    Abstract: In this paper, we investigate which industries drive the trade-specialization nexus in the European Union over the 1997-2006 period. We follow Melitz (2003), and argue that industries need 'room to move' in order for increasing trade openness to translate into increased specialization. Our paper finds that the true drivers of the trade-specialization nexus are productive firms, who benefit from the increase in trade-openness and can appropriate resources from less productive firms. This causes the industry in which they operate to expand, at the expense of other industries, in which there is no room to make such moves. We argue and find that the potential for reallocation in industries determines whether there is a trade-specialization nexus; in industries with little potential for reallocation, increased trade openness has no or a negative effect on that industry's share of total value added. As a result, the trade-specialization nexus is driven by a small number of industries, who nevertheless have a significant impact on concentration patterns.
    Keywords: Cooperative Games;
    JEL: C71
    Date: 2013
  35. By: Ferdinando Monte (Johns Hopkins University, Carey Business School)
    Abstract: This paper studies theoretically and empirically the geographic transmission of trade shocks over the territory of a country. Increases in labor demand in a location raise local wages and draw workers away from employment in neighboring locations: those locations experience a reduction in labor supply and an increase in prevailing wages even if not initially affected, or not engaged in the production of tradeable goods; adjustment in their wages affect in turn other close-by locations. In addition, increases in prevailing wages in a location affect all the industries producing there: other locations active in the same industries gain then market shares and experience an increase in labor demand even when they are far apart. I develop a model capable of incorporating realistic geographic features and isolate theoretically the different components of this diffusion. The model is general enough to also allow the study of transmission of localized immigration and productivity shocks. I estimate its main components with data on US commuting patterns and sectoral employment. I illustrate the impact of reductions in trade frictions in a sector on locations active and inactive in it, and the consequences of productivity growth on nominal wages of workers vs. real wages of residents. The model delivers insights on the consequences of ignoring commuting ?flows in analyses of local labor markets.
    Keywords: trade, commuting, local labor markets, geography
    JEL: F16 J61
    Date: 2014–01
  36. By: Schymik, Jan
    Abstract: This paper introduces the theory of firm organization under moral hazard into an equilibrium model of international trade with heterogeneous talents and technologies. The model is able to explain how the allocation of power and the provision of financial incentives inside firms varies within and across industries. Variation in the value of outside options triggers owners to choose different levels of firm organization and financial incentives. While incentive compensation and centralized decision-making are substitutes for human capital scarce firms, human capital intensive firms use incentive compensation and the delegation of power as complements to keep their managers participating. Trade liberalizations and skill-biased technological changes affect the distribution of outside options and thus let firms reorganize and provide different financial incentives. Trade integrations may lead firms to endogenously choose organizations with powerful managers and consequently managerial entrenchment arises in the most productive firms. --
    JEL: F12 L22 D23
    Date: 2013
  37. By: Tim Atkin (Reserve Bank of Australia); Mark Caputo (Reserve Bank of Australia); Tim Robinson (Reserve Bank of Australia); Hao Wang (Reserve Bank of Australia)
    Abstract: The early 21st century saw Australia experience its largest and longest terms of trade boom. This paper places this recent boom in a long-run historical context by comparing the current episode with earlier cycles. While similarities exist across most episodes, current macroeconomic policy frameworks and settings are quite different to those of the past. This mitigated the broader macroeconomic consequences of the upswing and as the terms of trade decline may do likewise.
    Keywords: commodity prices; terms of trade; macroeconomic policy
    JEL: E30 E60 N17
    Date: 2014–01
  38. By: Breinlich, Holger; Nocke, Volker; Schutz, Nicolas
    Abstract: Decisions of national competition authorities have important effects on other jurisdictions. We provide a framework to quantify the domestic and cross-border effects of mergers, and to draw conclusions for the coordination of national merger policies. We develop a two-country model with many sectors. In each sector, producers vary in terms of their marginal costs, and are engaged in Cournot competition. We allow for profitable mergers to take place subject to the non-violation of a given national competition policy. Because of trade costs and perceived differences in qualities between domestic and foreign products, mergers may have different consumer surplus effects in the home and the foreign country. We calibrate the model using data for the year 2002 for 167 manufacturing sectors in the U.S. and Canada. We choose parameters to match relevant moments in the data, including industry sales, concentration ratios and trade flows. We find that in the majority of industries a merger approval policy based on domestic consumer surplus is too restrictive from the viewpoint of the neighboring country. We also show that adopting a supra-national policy that approves a merger if and only if it increases the sum of consumer surplus in the two countries would lead to significant gains for U.S. consumers but hurt consumers in Canada. These results highlight the difficulties in coordinating national competition policies in a way acceptable to all participating countries. --
    JEL: F12 L44 L13
    Date: 2013
  39. By: Briones, Roehlano M.; Galang, Ivory Myka R.
    Abstract: This study examines the impact of a potential Philippines-European Union (EU) free trade agreement (FTA) on the agricultural sector. Static analysis indicates that potential gains to the agricultural sector of the Philippines are limited, primarily owing to the low size of initial agricultural trade with EU (compared to other trading partners), as well as moderate to low tariff and other trade barriers to EU products entering the country. CGE analysis confirms that the overall impact of bilateral tariff elimination leads to an overall increase in agricultural output, accompanied by a decline in price; hence, there is an increase in consumption of agricultural products. Impact on poverty is likewise positive, with improvements biased to the poorer households. By subsector, the largest output gains are projected for seaweeds and sugarcane, with 0.80 percent and 0.50 percent, respectively; increased access on EU markets are favorable for Filipino exporters of seaweeds, other fiber crops, tobacco leaf, forestry, ornamental plants, raw coffee, abaca, and cocoa. Meanwhile, the subsectors that are on the losing side (as shown by declining output) are cattle, raw rubber, chicken, and hogs. Fears about the negative repercussions of a Philippines-EU FTA on the poor turn out to be unfounded. Poverty incidence declines, and more so in rural than in urban areas. The greater decrease in poverty gap and squared poverty gap, compared with poverty incidence, implies that those who belong to households below the poverty threshold get the most benefits. It would seem that expectations of large benefits from a Philippines-EU FTA will not be found in agriculture, but elsewhere. Conversely, the agricultural sector does not face significant harm from a Philippines-EU FTA, even one involving sensitive products. Relaxation of trade barriers to EU even for sensitive products is warranted; not only would consumers gain (though minimally), but such a negotiation stance may serve as a powerful bargaining chip for gaining concessions on other areas.
    Keywords: computable general equilibrium (CGE), Philippines, agriculture, free trade area, impact assessment
    Date: 2014
  40. By: Seidel, Tobias; von Ehrlich, Maximilian
    Abstract: We develop a heterogeneous-fi rms model with trade in goods, labor mobility and credit constraints due to moral hazard. Mitigating fi nancial frictions reduces the incentive of high-skilled workers to migrate to one region such that an unequal distribution of industrial activity becomes less likely. Hence, financial market development has opposite regional implications as trade liberalization. While the former leads to more dispersion of economic activity across space, the latter tends to drive clustering. We provide empirical evidence for this hypothesis by combining industry-region variation in the spatial concentration of economic activity with information on the access to credit and the dependence on external finance. Our estimates for 20 European countries and eleven industries con firm that fi nancial market development mitigates the clustering of economic activity. --
    JEL: F12 F36 R11
    Date: 2013
  41. By: Kohler, Wilhelm; Smolka, Marcel
    Abstract: We use Spanish firm-level data to test the hold-up model of global sourcing proposed by Antr s & Helpman (2004). We propose a novel representation of the model which guides us in bringing the theory to the data. We estimate a discrete choice model of firms' sourcing behavior, separately for the location choice and the ownership choice of sourcing. We find that a firm's productivity interacts with an industry's headquarter intensity in governing both dimensions of sourcing in the way suggested by the Antras-Helpman model. In addition, estimated ``ex ante sourcing premia'' of firms lend brought support to the idea that firms self-select into sourcing activities. --
    JEL: F12 F23 F14
    Date: 2013
  42. By: Siegenthaler, Michael; Basten, Christoph
    Abstract: We estimate the causal effect of immigration on unemployment, employment and wages of resident employees in Switzerland, whose foreign labor force has increased by 32.8% in the last ten years. To address endogeneity of immigration into different labor market cells, we develop new variants of the shift-share instrument that exploit only that part in the variation of immigration which can be explained by migration push-factors in the source countries. While OLS estimates suggest that immigrants have crowded out natives, our quasi-experimental results reveal that immigration has in fact reduced unemployment and increased employment of residents in the last decade. --
    JEL: F22 J21 J61
    Date: 2013
  43. By: Giulia Bettin (Universit… Politecnica delle Marche, MoFiR); Andrea Filippo Presbitero (International Monetary Fund, Universit… Politecnica delle Marche - MoFiR); Nikola Spatafora (The World Bank)
    Abstract: This paper examines how international remittances are affected by structural characteristics, macroeconomic conditions, and adverse shocks in both source and recipient economies. We exploit a novel, rich panel data set, covering bilateral remittances from 103 Italian provinces to 107 developing countries over the period 2005-2011. We find that remittances are negatively correlated with the business cycle in recipient countries, and increase especially strongly in response to adverse exogenous shocks, such as natural disasters or large declines in the terms of trade. Remittances are also positively correlated with economic conditions in the source province. Nevertheless, in the presence of similar negative shocks to both source and recipient economies, remittances remain counter-cyclical with respect to the recipient country.
    Keywords: Business Cycle, Gravity Model, Remittances, Shocks, Vulnerability
    JEL: F33 F34 F35 O11
    Date: 2014–01
  44. By: Aichele, Rahel
    Abstract: The future international climate policy architecture will most likely consist of partial climate policy initiatives like the EU's Emission Trading System. Trade integration threatens to undermine these systems' environmental effectiveness by shifting emissions to other countries. We estimate a gravity model based on 103 countries and use it to simulate several such climate policy experiments. The model's parameters are structurally linked to empirical estimates, i.e. bilateral trade costs and the elasticity of substitution are consistent with the data. Unlike previous empirical work, the approach allows to quantify emission relocation in general equilibrium. With trade liberalization experiments, the model also allows to deliver a perspective on environmental aspects of hypothetical FTA formation. We find that an EU emission allowance price of 15 US-$ suffi ces to bring the EU on track for its Kyoto target but also leads to emission relocations of about 10% of the EU's emission savings. --
    JEL: F18 F47 Q54
    Date: 2013
  45. By: Bos J.W.B.; Frömmel M.; Lamers M.A.J. (GSBE)
    Abstract: We record the existence of an availability heuristic that is reflected in disaster myopia of U.S. investors and exists prior to the attacks of 9/11. We argue that this is fueled by an aggregate experience hypothesis effect, resulting in a pronounced increase in the sensitivity of U.S. stock prices to terrorist attacks on foreign soil. After 9/11, stock prices react proportionally to the size of an attack and the share of FDI stock held in the region by the sector in which firms operate. This effect, non-existent prior to 2002, has become increasingly strong in recent years.
    Keywords: Empirical Studies of Trade; Information and Market Efficiency; Event Studies; International Financial Markets;
    JEL: F14 G14 G15
    Date: 2013
  46. By: Philipp Engler; Giovanni Ganelli; Juha Tervala; Simon Voigts
    Abstract: Between 1999 and the onset of the economic crisis in 2008 real ex-change 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 eect on output, but a mild effect on the trade balance of these countries. In addition, the negative eect on `Central-Northern countries' output is weak.
    Keywords: Fiscal Devaluation, Fiscal Policy, euro area, currency union, current account
    JEL: E32 E62 F32 F41
    Date: 2014–01
  47. By: Nonso Obikili
    Abstract: I examine the possibility that the trans-Atlantic slave trades influenced the political institutions of villages and towns in precolonial Africa. Using anthropological data, I show that villages and towns of ethnic groups with higher slave exports were more politically fragmented during the precolonial era. I use instrumental variables to show that the relationship is at least partly causal. I argue this fragmentation is important for relative economic development because it still influences political institutions today. I support this argument by using more contemporary data to show that areas with higher precolonial political fragmentation have a higher incidence of bribery.
    Keywords: Trans-Atlantic, Slave trade, Poltical
    Date: 2014
  48. By: Israel, Danilo C.
    Abstract: This study assessed the likely economic, distributional, and fisheries resource impacts of a potential free trade agreement (FTA) between the Philippines and European Union (EU) on the fisheries sector of the former. The study used secondary data from institutional sources and results and findings of past studies. Among others, the study found that a) the elimination of tariffs will likely increase fisheries outputs and exports as well as help reduce poverty in the fisheries sector and the general population; b) the elimination of tariffs will likely diversify the currently limited country destinations and number of exported fisheries products of the Philippines to the EU; c) other than tariffs, there are nontariff measures (NTMs) that significantly impede freer flow of fisheries products from the Philippines to the EU that need to be considered; d) some participants in the Philippine fisheries sector will gain from an FTA while others will lose but the net benefits to the sector and economy is not known; and e) increase in fisheries exports due to the FTA will likely worsen fisheries resource overexploitation although the inflow of cheaper imported fish will tend to reduce the overexploitation. The study concludes, among others, that if a Philippines-EU FTA materializes it should not only reduce or eliminate tariffs in fisheries products but also the NTMs. It also argued that the government should provide safety nets for the fisheries participants who are going to be disadvantaged by the FTA and implement the needed resource and environmental management that will allow sustainable exploitation of fisheries resources even with increased trade.
    Keywords: Philippines, fisheries trade, Philippine fisheries sector, Philippines-EU free trade agreement, fisheries tariffs, fisheries nontariff measures, economic, distributional, and resource impacts
    Date: 2014
  49. By: Zabel, Michael; Böninghausen, Benjamin
    Abstract: This paper studies spillovers across sovereign debt markets in the wake of sovereign rating changes. To this end, we use an extensive dataset covering all announcements by the three major agencies (Standard & Poor's, Moody's, Fitch) and daily sovereign bond market movements of up to 74 developed and emerging countries between 1994 and 2011. On the basis of an explicit counterfactual and controlling for important dimensions of the announcement environment, we nd asymmetric reactions to upgrades and downgrades. While there is strong evidence of negative spillover e ects in response to sovereign downgrades, positive spillovers from upgrades are much more limited. Our results also suggest that negative spillover e ects are more pronounced for countries within the same region. This does not appear to be due to (measurable) fundamental linkages and similarities, such as trade, which turn out to be strikingly insigni cant. --
    JEL: G15 F36 G28
    Date: 2013
  50. By: Schwab, Jakob
    Abstract: I incorporate imperfect capital markets in a standard neoclassical model of economic growth to analyze the long run effect of capital market globalization for develping countries. In autarky, domestic savings are invested and Solow-type growth emerges. In contrast, when a country that lags behind in the growth process opens up to international capital markets, FDI flows in. This lowers returns to investment and thus the possibility of domestic agents to build up capital. Although short term benefits in terms of increased wage rates occur, the wedge between the returns to investment and savings that is constantly reaped by foreign investors is foregone for domestic agents in the long run and - compared to the autarky case - national income is lower. --
    JEL: F21 F43 O16
    Date: 2013
  51. By: Vogel, Lukas; Kollmann, Robert; Ratto, Marco; Roeger, Werner; In 't Veld, Jan
    Abstract: The paper estimates a structural model to analyse the drivers of Germany's external surplus since the start of EMU. The analysis suggests that the most important factors behind the build-up of Germany's external surplus have been the disappearance of country risk premia in the context of EMU, which has led to the convergence of interest rates in the euro area, strong growth in emerging economies with the associated increase in the demand for German exports, exogenous changes in savings behaviour and wage moderation/labour market reform in Germany. Germany's trade surplus has reduced net exports in the rest of the euro area and the rest of the world alike, but spillover for GDP is likely to be positive. --
    JEL: F41 C54 F32
    Date: 2013
  52. By: Polk, Andreas; Schmutzler, Armin; Müller, Adrian
    Abstract: Can multinational firms exert more power than national firms by influencing politics through lobbying? To answer this question, we analyze the extent of national environmental regulation when policy is determined in a lobbying game between a government and firm. We compare the resulting equilibrium regulation levels, outputs and welfare for national and multinational firms, depending on such parameters as the potential environmental damages, transportation costs and the influence of the firm. For low transportation costs, output and pollution of a national firm is always as least as high as for a multinational; this changes for high transportation costs and intermediate damage parameters. When there is no lobbying, welfare levels are always higher with multinationals than with national firms. However, the existence of lobbying may reverse this ordering. --
    JEL: D72 F23 L51
    Date: 2013
  53. By: Steiner, Susan; Chakraborty, Tanika; Mirkasimov, Bakhrom
    Abstract: Private transfers between households in developing countries have been extensively studied and shown to be economically important as mechanisms of risk sharing and income redistribution. We argue that migration and remittances have the potential to modify the prevalent transfer behaviour in migrant-sending communities. A priori, it is indeterminate whether migration and remittances strengthen or weaken the degree of private transfers. We use data from a detailed household survey in Kyrgyzstan, designed by the authors, to empirically study the effect of migration and remittances on both monetary and non-monetary transfers. We find that migrant households provide more monetary transfers and receive more non-monetary transfers compared with non-migrant households, particularly in rural areas. Furthermore, we find that the transfer of non-monetary help, in the form of labour, takes place only in the presence of labour constraints within the household. We argue that distinguishing between the nature of transfers, monetary or non-monetary, is important in the context of the vast literature investigating private transfer motives. --
    JEL: F22 O12 I30
    Date: 2013
  54. By: Kakkar, Vikas (BOFIT); Yan, Isabel (BOFIT)
    Abstract: The large and persistent deviations of nominal exchange rates from their purchasing power parities comprise a key stylized fact in international economics. This paper sheds light on these persistent deviations by combining two disparate strands of empirical work. The first strand focuses on real economic shocks such as sectoral technology shocks suggested by the celebrated Balassa-Samuelson model, whereas the second strand emphasizes monetary shocks which create persistent effects on both the real interest rate and the real exchange rate. We also hypothesize a third factor which may affect real exchange rates – shocks to the global financial system, which we proxy by the real price of gold. Although each factor in isolation has limited explanatory power, we find that these three factors in conjunction can successfully explain the medium to long run move-ments in 14 bilateral U.S. dollar real exchange rates from 1970 to 2006. The three factors are sectoral total factor productivity differentials, real interest rate differentials, and the real price of gold, representing real shocks, monetary shocks, and shocks to the global financial system, respectively. We document evidence suggesting that bilateral U.S. dollar real ex-change rates are cointegrated with these three factors.
    Keywords: purchasing power parity; Balassa-Samuelson model; cointegration
    JEL: F31 F41
    Date: 2014–01–08

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