nep-int New Economics Papers
on International Trade
Issue of 2014‒02‒08
thirty-six papers chosen by
Luca Salvatici
Universita' di Roma 3

  1. Tariff reductions, trade patterns and the wage gap in a monopolistic competition model with vertical linkages By Francesco Di Comite; Antonella Nocco; Gianluca Orefice
  2. A League of Their Own: Services Exporters within Goods Exporters By Dincer, Nergiz; Tekin-Koru, Ayca
  3. Verti-zontal differentiation in export markets By DI COMITE, Francesco; THISSE , Jacques; ,
  4. Does economic integration increase trade margins? Empirical evidence from LAIAs countries By Luis Marcelo Florensa; Laura Márquez-Ramos; María Luisa Recalde; María Victoria Barone
  5. Investigating the Role of Extensive Margin, Intensive Margin, Price and Quantity Components on Turkey’s Export Growth during 1998-2011 By Türkcan, Kemal
  6. The Political Economy of FDI flows into Developing Countries: Does the depth of International Trade Agreements Matter? By Arslan Tariq Rana; Mazen Kebewar
  8. Multiproduct Firms, Export Product Scope, and Trade Liberalization: The Role of Managerial Efficiency By Larry Qiu; Miaojie Yu
  9. Estimating the bilateral impact of non-tariff measures (NTMs) By Michael Bratt; ;
  10. Approaches to Protection of Undisclosed Information (Trade Secrets): Background Paper By Mark F. Schultz; Douglas C. Lippoldt
  11. The Possible Effects of Transatlantic Trade and Investment Partnership and Trans-Pacific Partnership on Chinese Economy By Aslan, Buhara; Mavuş, Merve; Oduncu, Arif
  12. On the impact of oil price volatility on the real exchange rate–terms of trade nexus: Revisiting commodity currencies By Virginie Coudert; Cécile Couharde; Valérie Mignon
  13. Do Environmental Policies Hurt Trade Performance? By Jean-Louis Combes; Pascale Combes Motel; Somlanare Romuald KINDA
  14. Aeronautic Trade Delying Gravity, A French Regional Analysis By Fabien CANDAU; Serge REY
  15. The Fiscal Cost of Trade Liberalization By Julia Cagé; Lucie Gadenne
  16. That was then, this is now: Skills and Routinization in the 2000s By Consoli,Davide; Vona,Francesco; Rentocchini,Francesco
  17. Measuring the EU value added embodied in EU foreign exports by consolidating 27 national supply and use tables for 2000-2007 By Rueda-Cantuche, José M.; Oosterhaven, Jan; Bouwmeester, Maaike C.
  18. Proximity and scientific collaboration: Evidence from the global wine industry By Lorenzo Cassi; Andrea Morrison; Roberta Rabellotti
  19. Ethnic Diversity and Firms' Export Behavior By Parrotta, Pierpaolo; Pozzoli, Dario; Sala, Davide
  20. Preferential Market Access into the Chinese Market: How Good is it for Africa? By Co, Catherine Y.; Dimova, Ralitza
  21. The Relative Significance of EPAs in Asia-Pacific By KAWASAKI Kenichi
  22. What Determines Firms’ Innovation in Eastern Europe and Central Asia By Afandi, Elvin; Kermani, Majid
  23. Oil price shocks and global imbalances: Lessons from a model with trade and financial interdependencies By Jean-Pierre Allegret; Valérie Mignon; Audrey Sallenave
  24. CARBON TARIFFS REVISITED By Christoph Böhringer; André Müller; Jan Schneider
  25. Exchange-rate adjustment and macroeconomic interdependence between stagnant and fully employed countries By Yoshiyasu Ono
  26. China and the World economy: Wavelet spectrum analysis of business cycles By Pomenková, Jitka; Fidrmuc, Jarko; Korhonen, Iikka
  27. Paradise Lost: The Cost of Removing Tax and Trade Provisions from the Compact of Free Association By Samuel Rueckert Brazys
  28. Innovation, exports and technical efficiency in Spain By Diaz-Mayans, M.Angeles; Sánchez, Rosario/R
  29. Foreign direct investment, unionised labour markets and welfare By Arijit Mukherjee; Jiyun Cao
  30. Asymmetric exchange-rate exposure in BRIC countries By Dranev Yury; Maxim Babushkin
  31. The growth performance and prospects in the Euro area: a balance-of-payments approach By Carluccio Bianchi; Eleonora Lorenzini
  32. Motivation behind remittance from migrants: Evidence from Albania By Daichi Shimamoto
  33. Remittances, savings and return migration under uncertainty By DELPIERRE Matthieu; VERHEYDEN Bertrand
  34. State-to-State Dispute Settlements in International Investment Agreements (Japanese) By OBATA Kaoru
  35. Beyond FDI: The Influence of Bilateral Investment Treaties on Debt By Wasseem Mina
  36. Revisiting the nexus between currency misalignments and growth in the CFA Zone By Carl Grekou

  1. By: Francesco Di Comite; Antonella Nocco; Gianluca Orefice
    Abstract: In this paper we develop a three-country monopolistic competition model with variable elasticity of substitution and vertical linkages to study the impact of trade liberalization on trade creation, trade diversion and labor market outcomes. This framework allows us to identify a source of gain from trade often neglected in the literature: cost savings on capital investments. Our model is empirically motivated by the observation that trade liberalization stimulates trade between the integrating countries and diverts it away from third countries, but it is not associated with increases in exports towards the excluded countries. As for the labor market, trade liberalization is expected to: (i) lower unskilled employment in country-sectors with low export intensity and (ii) to increase the wage gap between skilled and unskilled workers. Trade liberalization is also expected to raise welfare. We test the model's predictions using a dataset on bilateral export flows from 17 OECD exporting countries towards 122 importing countries over the period 1996 to 2007. Our empirical analysis provides results in line with the theory and vindicates the inclusion of vertical linkages in future assessments of the impact of trade liberalization on trade flows, labor markets and welfare.
    Keywords: PTAs;Vertical linkages;Wage gap
    JEL: F12 F16 J31
    Date: 2014–01
  2. By: Dincer, Nergiz; Tekin-Koru, Ayca
    Abstract: This paper sheds light on the intertwined nature of goods and services exports at the firm level. In the literature, services are considered as inputs in the production of goods rather than objects of trade in themselves. However, many firms produce and trade services with goods. In this perspective, this paper offers a systematic analysis of services exports in Turkey, which constitutes a relevant developing country example, by using rich, firm-level data for the period 2003-2008. Our results indicate that not only services firms but also manufacturing firms export services. Firms exporting both goods and services are consistently bigger than firms exporting only goods or only services. However, goods exporting multinational firms in Turkey are larger than multinationals that export both goods and services. Goods exporters with a larger size, higher labor productivity and capital intensity are more likely to export services as well. Furthermore, having a wide spectrum of goods to export increases the odds in favor of becoming a services exporter.
    Keywords: Goods and services exporters, services exports, firm heterogeneity
    JEL: F10 F14
    Date: 2014–01
  3. By: DI COMITE, Francesco (Université catholique de Louvain, IRES, Belgium; European Commission, Sevilla); THISSE , Jacques (Université catholique de Louvain, CORE, Belgium; NRU Higher School of Economics, St Petersburg, Russia); ,
    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.
    Keywords: heterogeneous firms, heterogeneous consumers, horizontal differentiation, vertical differentiation, asymmetric preferences, monopolistic competition
    JEL: D43 F12 F14 L16
    Date: 2013–12–11
  4. By: Luis Marcelo Florensa (Instituto de Economía y Finanzas- Universidad Nacional de Córdoba, Córdoba, Argentina); Laura Márquez-Ramos (Department of Economics and Instituto de Economía Internacional, Universitat Jaume I, Castellón, Spain); María Luisa Recalde (Instituto de Economía y Finanzas- Universidad Nacional de Córdoba, Córdoba, Argentina); María Victoria Barone (Instituto de Economía y Finanzas- Universidad Nacional de Córdoba, Córdoba, Argentina)
    Abstract: This paper studies the effects of economic integration in Latin America on the margins of trade. The analysis is performed on bilateral exports of goods from eleven member countries of the Latin American Integration Association (LAIA) over the period 1962-2009. We distinguish the effects of different levels of integration on trade margins; different “timing” and different sectors. Our results provide evidence about the benefits of regional integration. Despite appearing to have contributed most to boosting exports of goods that were already exported rather than to diversification, regional trade integration is in line with LAIA members’ development and industrialization objectives.
    Keywords: Regional integration, extensive margin, intensive margin, LAIA, panel data
    JEL: F14 F15
    Date: 2014
  5. By: Türkcan, Kemal
    Abstract: Recent empirical research in international trade emphasizes the role of the extensive and intensive margin to the export growth. This paper examines the sources of export growth in Turkey. For this purpose, the study decomposes Turkey’s export growth into extensive and intensive margins by using two methodologies, the count method and the decomposition method of export growth shares. The intensive margin into price and quantity components is further decomposed in order to evaluate the role of changes in price and changes in quantity. Detailed bilateral trade data, BACI, from CEPII are employed to analyze Turkey’s export statistics with 209 countries at the HS-6 level over the period 1998–2011. Additionally, these methods are employed for different categories of goods (final goods and intermediate goods exports). The results suggest that the extensive margin, particularly geographic diversification, plays the most important role in Turkey’s total goods export growth. Further, the growth in Turkey’s total goods exports is mainly explained by quantity rather than price growth. The results further point out that growth in Turkey’s final goods was driven by price growth, whereas growth in intermediate goods exports was mainly explained by quantity growth. Yet the results also suggested that product and geographic diversification of Turkey’s exports have not been materialized at all so that opportunities to expand product range or expand into new markets will bring significant benefits in the form of stable, sustainable economic growth.
    Keywords: Turkey, export margins, product diversification, geographical diversification
    JEL: F12 F14 F15
    Date: 2014–01–30
  6. By: Arslan Tariq Rana (LEO - Laboratoire d'économie d'Orleans - CNRS : UMR7322 - Université d'Orléans); Mazen Kebewar (LEO - Laboratoire d'économie d'Orleans - CNRS : UMR7322 - Université d'Orléans)
    Abstract: There is considerable debate whether the domestic political institutions (specifically, the country's level of democracy) of the host developing country toward foreign investors are effective in establishing the credibility of commitments are still underway, researchers have also analyzed the effect of international institutions such as (GATT-WTO) membership and Bilateral Investment treaties (BIT) in their role of establishing the credibility of commitment to attract foreign investments. In addition, most recent studies have examined the effect of International Trade Agreements (TAs) on FDI flows as they contain separate investment chapters and dispute settlement mechanism, thus providing confidence to investor regarding the security of their investments. We argue that there are qualitative differences among various types of trade agreements and full-fledged trade agreements (FTA-CU) provide credibility to foreign investors and democracy level in the host country conditions this effect whereas the partial scope agreements (PSA) are not sufficient in providing credibility of commitments and not moderated by democracy. This paper analyses the impact of heterogeneous TAs, and their interaction with domestic institutions, on FDI inflows. Statistical analyses for 122 developing countries from 1970 to 2005 support this argument. The method adopted relies on fixed effects estimator which is robust to control endogeneity on a large panel dataset. The strict erogeneity of results by using a method suggested by Baier and Bergstrand (2007) and no feedback effect found in sample. The results state that (1) More the FTA-CU concluded, larger the amount of FDI inflows are attracted into the developing countries and PSA are insignificant in determining the FDI inflow; (2) FTA CU are complementary to democratic regime whereas the conditional effect of PSA with democracy on levels of FDI inflows is insignificant.
    Keywords: Foreign direct investment, free trade agreements, partial scope agreements, domestic institutions.
    Date: 2014–02–01
  7. By: Joana Reis (Faculdade de Economia do Porto); Rosa Forte (Faculdade de Economia do Porto)
    Abstract: The process of globalization of economies and markets has led firms to consider entry into foreign markets. Exporting is the simplest foreign market entry mode, but also the most common, not requiring high financial and human resources. Hence it is important to study the factors that can affect the firm’s export intensity, measure commonly used to assess the export performance. Several authors have studied the factors that influence the firm’s export performance, but few have addressed the relationship between industry characteristics and export intensity. Thus, the objective of the present study is to analyze the impact of industry characteristics (capital intensity, R&D intensity, labor productivity, export orientation, and concentration level) on the firm’s export intensity, seeking to add empirical evidence to this relatively neglected research area. Based on a sample of 1,425 Portuguese firms during the period 2008-2010, and using panel data estimation, the empirical results show that some industry characteristics (labor productivity, export orientation, concentration), as well as firm characteristics (labor productivity, size) are important determinants of a firm’s export intensity. In particular, we conclude that firm export intensity is positively affected by labor productivity (at industry and firm level), corroborating the idea that firms and governments need to direct their policies towards increased productivity in order to improve competitiveness in foreign markets.
    Keywords: Export performance, export intensity, Portuguese firms, industry characteristics
    JEL: L25 L69
    Date: 2014–02
  8. By: Larry Qiu (University of Hong Kong and Hong Kong Institute for Monetary Research); Miaojie Yu (Peking University)
    Abstract: This paper provides a theoretical and empirical analysis of the effects of one-sided tariff cuts on firms' export product scope. The theoretical model explicitly incorporates cost of management in addition to the commonly used production cost. Firms are heterogeneous in terms of managerial efficiency but homogenous in terms of production productivity. The analysis predicts that the home country's tariff cut reduces all home firms' export product scope, whereas in response to the foreign country's tariff cut, a home firm's export product scope expands (shrinks) if the firm's management cost is low (high). These predictions are supported by our empirical analysis based on data on Chinese firms from 2000 to 2006.
    Keywords: Multiproduct Firm, Management Cost, Managerial Efficiency, Export Product Scope, Trade Liberalization, China
    JEL: F12 F13 F15
    Date: 2014–02
  9. By: Michael Bratt; ;
    Abstract: The present paper seeks to estimate how the impact of NTMs on trade can vary across export-import pairs by adopting a Heckman two-stage procedure of a gravity model that includes so-called comparative advantage variables. These variables consist of factor endowments of each trading partner and serve to identify the country-specific effects of NTMs. Covering data for the early 2000s, regressions are run at the 6-digit level of the harmonised system and the estimated results are converted into ad-valorem equivalents (AVEs). The results suggest that a substantial amount of NTMs facilitate rather than impede trade, but that the overall impact on trade is nonetheless negative in the majority of cases. Furthermore, they underline the importance of conditioning conclusions on trading partners and products and demonstrate that the same NTM can have different – and even opposite – effects across exporting countries.
    Keywords: Bilateral trade flows, non-tariff measures, Heckman two-stage procedure
    Date: 2014–01
  10. By: Mark F. Schultz; Douglas C. Lippoldt
    Abstract: This paper takes stock of the available legal protection for trade secrets (undisclosed information) in a broad sample of countries. Drawing on national and international material, the paper develops and presents an indicator of the stringency of protection of trade secrets (the Trade Secrets Protection Index) and provides an assessment of variation in the available protection. The result is a finding that while the sample countries have some similarities, notably with respect to definition and scope of trade secrets, they have many more substantial dissimilarities with respect to implementation of protection for trade secrets. For example, differences are particularly pronounced in evidence gathering and discovery, protection of trade secrets during litigation, technology transfer requirements and the effectiveness of legal systems with respect to enforcement. This diversity is reflected in the wide range of scores in the Trade Secrets Protection Index. Such variation in the stringency of protection for trade secrets may influence firm-level decision-making and may have implications for some aspects of economic performance (in particular, in relation to innovation).
    Keywords: trade secrets, trade secrets protection index, intellectual property rights
    JEL: F13 O34
    Date: 2014–01–30
  11. By: Aslan, Buhara; Mavuş, Merve; Oduncu, Arif
    Abstract: The failure to advance the multilateral trade negotiations of the World Trade Organization (WTO) was a disruption for the international trading system. Alternatively, many countries have commenced to establish bilateral and regional Free Trade Agreements (FTA). Among those agreements the Transatlantic Trade and Investment Partnership (TTIP) and Trans-Pacific Partnership (TPP) are agreements with members from across the Atlantic and the Pacific respectively. This note focuses on the impacts of these agreements on Chinese economy under three scenarios. The effects of various scenarios on Chinese GDP and export are studied by using the Global Trade Analysis Project (GTAP) database and a general equilibrium model. To the best of our knowledge, we are the first to analytically analyze the economic impacts of the TTIP on Chinese economy. In all of the scenarios the TTIP is realized and China never becomes a member of it. In the first scenario the TPP is not realized. In the second scenario the TPP is realized and China is excluded from it. In the last scenario the TPP is realized and China is included in the initiative. The results suggest that when only TTIP is realized, Chinese economic variables are negatively affected. When both TTIP and TPP are realized and China is excluded, the combined damage in Chinese economy is higher than the damage of TTIP alone. On the other hand, inclusion of China in the TPP affects its economic variables positively despite the negative effects of the TTIP. In other words, positive impacts of participation of China in the TPP compensate for the negative impacts of the TTIP.
    Keywords: Free Trade Agreements, Transatlantic Trade and Investment Partnership, Trans-Pacific Partnership, China.
    JEL: F13 F15
    Date: 2014–02
  12. By: Virginie Coudert; Cécile Couharde; Valérie Mignon
    Abstract: The aim of this paper is to study the relationship between terms of trade and real exchange rates of commodity-producing countries on both the short and the long run. We pay particular attention to the dominant role played by oil among commodities by investigating the potential non-linear effect exerted by the situation on the oil market on the real exchange rate - terms of trade nexus. To this end, we rely on the panel smooth transition regression methodology to estimate the adjustment process of the real effective exchange rate to its equilibrium value depending on the volatility on the oil market. Considering a panel of 52 commodity exporters and 17 oil exporters over the 1980-2012 period, our findings show that while exchange rates are mainly driven by fundamentals in the low-volatility regime, they are mostly sensitive to changes in terms of trade when oil price variations exceed a certain threshold. The commodity-currency property is thus at play in the short run only for important variations in the oil price.
    Keywords: commodity currencies, oil price, non-linearity
    JEL: C23 F31 Q43
    Date: 2014
  13. By: Jean-Louis Combes (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I); Pascale Combes Motel (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I); Somlanare Romuald KINDA (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I)
    Abstract: This paper contributes to the controversial literature on the relationship between environmental policies and international trade. It provides new evidence about the effect of a gap in environmental policies between trading partners on trade flow on a sample of developed and developing countries over the 1980-2010 period. The paper innovates on two aspects. First, while previous studies have used partial measures of environmental regulations (input-oriented or output-oriented indicators), an index of a country's environmental policy is computed. This index is calculated as the difference between observed pollution levels and "structural" pollution i.e. pollution predicted by determinants of environmental degradation as identified and modelled in the literature. This index is therefore a measure of "revealed" efforts made by countries aiming at downsizing environmental degradation. Second, the effect of these revealed environmental policies is assessed on bilateral trade flows in a gravity model. A particular attention is paid to similarities in environmental policies. Our results show that a gap in domestic efforts towards environmental protection between trading partners has no effect on exports. Moreover, the results do not appear to be conditional on the level of development of the countries trading nor on the characteristics of exported goods (manufactured goods and primary commodities).
    Keywords: Trade;Environmental policies;Gravity Model
    Date: 2014–01–30
  14. By: Fabien CANDAU; Serge REY
    Abstract: Aeronautic Trade Delying Gravity, A French Regional Analysis
    Date: 2013–09
  15. By: Julia Cagé (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - École des Hautes Études en Sciences Sociales (EHESS) - École des Ponts ParisTech (ENPC) - École normale supérieure [ENS] - Paris - Institut national de la recherche agronomique (INRA)); Lucie Gadenne (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - École des Hautes Études en Sciences Sociales (EHESS) - École des Ponts ParisTech (ENPC) - École normale supérieure [ENS] - Paris - Institut national de la recherche agronomique (INRA))
    Abstract: This paper puts the recent evolution of tax revenues in developing countries in historical perspective. Using a novel dataset on total and trade tax revenues we compare the fiscal cost of trade liberalization in developing countries and in today's rich countries at earlier stages of development. We find that trade liberalization episodes led to larger and longer-lived decreases in total tax revenues in developing countries since the 1970s than in rich countries in the 19th and early 20th centuries. The fall in total tax revenues lasts more than ten years in half the developing countries in our sample.
    Keywords: Taxation and development ; Trade liberalization ; State capacity ; Tax and tariff reform
    Date: 2014–02
  16. By: Consoli,Davide; Vona,Francesco; Rentocchini,Francesco
    Abstract: We analyze changes in the skill content of occupations in US four-digit manufacturing industries between 1999 and 2010. Following a ‘task-based’ approach, we elaborate a measure of Non-Routine skill intensity that captures the effects of industry exposure to both technology and international trade. The paper adds to previous literature by focusing on both the determinants of demand for Non-Routine skills and their effects on industry productivity and wages. The key finding is that import competition from low-wage countries has been a strong driver of demand for Non-Routine skills during the 2000s. Both technology and imports from low-wage countries are associated with mild cross-industry convergence in skill intensity while imports from high and medium wage countries are at root of persistent heterogeneity across occupational groups. We also find that higher Non-Routine skill intensity has had at best a modest effect on productivity and wages, except for high-skill occupations.
    Keywords: Skills, Tasks, Routinization, Trade, technology
    JEL: F16 J21 J23 O33
    Date: 2014–01–23
  17. By: Rueda-Cantuche, José M.; Oosterhaven, Jan; Bouwmeester, Maaike C. (Groningen University)
    Abstract: This paper develops a method to consolidate national supply-use tables (SUTs) into a single supra-regional SUT. The method deals with mirror trade statistics problems, such as the different valuation of imports and exports, and it corrects for the double-counting of re-exports. To test the contribution of the various construction steps, the paper decomposes the EU value added that is embodied in the EU exports to third countries into seven components. When the national SUTs for the period 2000-2007 are used, neglecting intra-EU spillover and feedback effects between the 27 EU-members results in an underestimation of the embodied value added of 12-15%. Not consolidating the national tables leads to a further under-estimation of 11-16%. Both types of errors are substantial. With these underestimations removed, the exports to third countries still only explain around 11% of the EU27 GDP.
    Date: 2014
  18. By: Lorenzo Cassi; Andrea Morrison; Roberta Rabellotti
    Abstract: International collaboration among researchers is a far from linear and straightforward process. Scientometric studies provide a good way of understanding why and how international research collaboration occurs and what are its costs and benefits. Our study investigates patterns of international scientific collaboration in a specific field: wine related research. We test a gravity model that accounts for geographical, cultural, commercial, technological, structural and institutional differences among a group of Old World (OW) and New World (NW) producers and consumers. Our findings confirm the problems imposed by geographical and technological distance on international research collaboration. Furthermore, they show that similarity in trade patterns has a positive impact on international scientific collaboration. We also find that international research collaboration is more likely among peers, in other words, among wine producing countries that belong to the same group, e.g. OW producers or newcomers to the wine industry.
    Keywords: Proximity, International scientific collaboration, Wine industry, Gravity model, Scientometrics, Emerging countries
    Date: 2014–02
  19. By: Parrotta, Pierpaolo (Department of Economics); Pozzoli, Dario (KORA, Det Nationale Institut for Kommuners og Regioners Analyse og Forskning); Sala, Davide (Department of Business and Economics)
    Abstract: Selling internationally requires products that resonate with an international customer base and therefore an approach to markets that is in keeping with diverse cultures (i.e., relational capital). As emphasized by international business studies, this relational capital is in turn related to the successful teaming of a diverse workforce, as this process teaches employees to operate in multicultural environments. This knowledge becomes like an intangible asset to which firms can resort, also when engaging in international transactions. We explore this channel empirically, investigating the impact of workforce diversity on firms' exporting performances and find that ethnic diversity further justifies firms' different presence in international markets. Since hiring is not a random practice, and firms ultimately select into ethnically different labor forces, we exploit the EU enlargement of 2004 to instrument for the diversity of the pool of workers locally recruitable. Because migrants tend to settle where the attitude toward them is most favorable, we use the median voter's political ideology at firm's location to measure the hostility at time of settlement. This gives our instrument spatial variation besides time variation.
    Keywords: Ethnic diversity; export; EU enlargement; median-voter ideology
    JEL: D22 F14 F15 F16 J15
    Date: 2014–01–30
  20. By: Co, Catherine Y. (University of Nebraska at Omaha); Dimova, Ralitza (University of Manchester)
    Abstract: In 2005 China provided duty-free access to 190 items from 25 least developed sub-Saharan African (SSA) countries. Three years later duty-free access was extended to 454 items from 31 SSA LDCs. We find no evidence that China's preferential market access program for the least developed sub-Saharan African countries has helped these countries gain competitive edge over other exporters into the Chinese market. While there is evidence of decreased export bundle concentration and movement up the value chain for SSA countries involved in the program, the effect differs significantly across countries.
    Keywords: preferential market access, export diversity and sophistication, triple difference, China, sub-Saharan Africa
    JEL: F13 F14 O24
    Date: 2014–01
  21. By: KAWASAKI Kenichi
    Abstract: This paper analyzes the relative significance of regional Economic Partnership Agreements (EPAs) in Asia-Pacific. The economy-wide impacts of tariff removals and reductions in non-tariff measures (NTMs) are estimated by using a Computable General Equilibrium (CGE) model of global trade. The Trans-Pacific Partnership (TPP) and the Regional Comprehensive Economic Partnership (RCEP) are shown to complement each other rather than be competitors. The income gains of Asia-Pacific Economic Cooperation (APEC) economies as a whole account for 1.2 per cent of regional GDP by the TPP, 1.0 per cent by the RCEP, and 4.3 per cent by the Free Trade Area of the Asia-Pacific (FTAAP). Meanwhile, larger economic benefits are expected from NTMs reductions in addition to tariff removals. It is thus essential to reform domestic markets in order to enjoy greater economic benefits from international EPAs.
    Date: 2014–01
  22. By: Afandi, Elvin; Kermani, Majid
    Abstract: By employing a rich sample of firm-level data in seven Eastern Europe and Central Asian countries from Europe and Central Asia, our paper investigates core as well as some specific determinants of firm innovation. We find that the likelihood of engaging in innovation for a firm increases with its core socio-economic characteristics such as size, age, capacity utilization, domestic competition and foreign ownership. In addition to the estimates of these socio-economic covariates, the ultimate purpose of our study is to obtain more in-depth knowledge about the policy implacable factors for firm innovation that the countries could focus on. These policy-related factors are: (i) access to finance, (ii) human capital, and (iii) foreign trade. In this respect, our study finds that firm’s innovation increases with better financial inclusion, greater human capital and engagement in foreign trade. We argue that these analysis and results, coupled with inclusive and targeted policies, can be used to enrich the process of private sector innovation in the region’s countries.
    Keywords: Firm innovation, access to finance, human capital, foreign trade
    JEL: G0 J24 O31 P33
    Date: 2013–02–17
  23. By: Jean-Pierre Allegret; Valérie Mignon; Audrey Sallenave
    Abstract: The aim of this paper is to investigate oil price shocks’ effects and their associated transmission channels on global imbalances. To this end, we rely on a Global VAR approach that allows us to account for trade and financial interdependencies between countries. Considering a sample of 30 oil-exporting and importing economies over the 1980-2011 period, we show that the nature of the shock—demand-driven or supply-driven—matters in understanding the effects of oil price shocks on global imbalances. In addition, we evidence that the main adjustment mechanism to oil shocks is based on the trade channel, the valuation channel being at play only on the short run.
    Keywords: oil prices;global imbalances;global VAR
    JEL: C32 F32 Q43
    Date: 2014–01
  24. By: Christoph Böhringer (University of Oldenburg, Department of Economics); André Müller (Ecoplan, Bern, Switzerland); Jan Schneider (University of Oldenburg, Department of Economics)
    Abstract: Concerns about adverse impacts on domestic energy-intensive and trade-exposed (EITE) industries are at the fore of the political debate about unilateral climate policies. Tariffs on the carbon embodied in imported goods from countries without emission pricing appeal as a measure to reduce carbon leakage and protect domestic EITE industries. We show that the introduction of carbon tariffs can do more harm than good to domestic EITE industries. Two determinants drive the sign and magnitude of EITE impacts. Firstly, the composition of embodied emissions in goods: if a large share of embodied carbon is imported in intermediate inputs, industries might suffer from carbon tariffs. Secondly, the share of domestic output that is supplied to the export market: while carbon tariffs level the playing field on domestic markets, they increase the cost-disadvantage vis-à-vis competitors from abroad in foreign markets.
    Keywords: carbon tariffs, unilateral climate policy, multi-region input-output analysis, CGE
    JEL: Q58 D57 D58
    Date: 2014–01
  25. By: Yoshiyasu Ono
    Abstract: This paper presents a two-country two-commodity dynamic model with free international asset trade in which one country achieves full employment and the other suffers long-run unemployment. Own and spill-over effects of changes in policy, technological and preference parameters that emerge through exchange-rate adjustment are examined. Parameter changes that worsen the stagnant countryfs current account depreciate the home currency, expand home employment and improve the foreign terms of trade, making both countries better off. The stagnant countryfs foreign aid to the fully employed country also yields the same beneficial effects.
    Date: 2014–01
  26. By: Pomenková, Jitka (BOFIT); Fidrmuc, Jarko (BOFIT); Korhonen, Iikka (BOFIT)
    Abstract: We employ a wavelet spectrum analysis to study globalization and business cycles in China and G7 countries. The co-movement synchronization between G7 countries and China is shown to have undergone frequent and large changes during our sample period. The co-movements for business cycle frequencies are generally different from those for other frequencies, and synchronization with China’s business cycle differs as between G7 countries. In recent years Japan, Germany and Italy seem to have the closest synchronization at business-cycle frequency. We find a significant relationship between the time-varying wavelet measure of synchronization and trade only for business-cycle frequencies. The co-movements at longer frequencies are negatively related to trade, so that the overall co-movements and trade tend not to be significantly related.
    Keywords: globalization; business cycles; synchronization; trade; wavelet analysis
    JEL: E32 F15 F41
    Date: 2014–01–27
  27. By: Samuel Rueckert Brazys
    Abstract: Upon implementing the Compact of Free Association between the United States and the Federated States of Micronesia, the US Congress unilaterally stripped tax and trade provisions that would have encouraged investment in the Federated States of Micronesia. I quantify what was lost to the Federated States of Micronesia by arguing that the provisions would have made the Federated States of Micronesia an explicitly sanctioned tax haven through empirical estimates of the impact of tax havens on growth and a comparison of performance of similarly situated entities, the American Samoa and Commonwealth of the Northern Mariana Islands, which did have preferential access to the US market. The estimates suggest that the Federated States of Micronesia lost from $700 million to over $1 billion in gross domestic product from 1986 to 2001.
    Keywords: tax haven, trade, aid, development, FDI
    Date: 2013–12–19
  28. By: Diaz-Mayans, M.Angeles; Sánchez, Rosario/R
    Abstract: This paper analyses the relationship between exports, innovative activities and size and their effect over firms’ technical efficiency and then over their productivity. The analysis takes, also, into account other variables that could affect productivity as industrial sector, or firms’ financial conditions. We use a micro panel data set of Spanish manufacturing firms, during the period 2004–2009, to simultaneously estimate a stochastic frontier production function and the inefficiency determinants. The data source is published in the Spanish Industrial Survey on Business Strategies (Encuesta sobre Estrategias Empresariales, ESEE), collected by Fundación SEPI. Our results show that exporting firms are more efficient than non-exporting firms; and that small and medium-sized firms’ tent to be more efficient when they focus on international markets.
    Keywords: exports, firms, technical efficiency, productivity, innovative activities, R&D expenditures
    JEL: F14 L25 L60
    Date: 2014–01–27
  29. By: Arijit Mukherjee (School of Business and Economics, Loughborough University, UK); Jiyun Cao (The School of Economics, Nankai University, Tianjin, 300071, China)
    Abstract: We provide a new rationale for foreign direct investment (FDI). We show that, even in the absence of the usual benefits from FDI, a multinational firm prefers FDI to export in the presence of labour unions if the multinational firm is sufficiently technologically superior to that of its domestic counterpart and the domestic labour union charges a uniform wage under FDI. The raising rival’s cost motive creates the incentive for FDI in our analysis. FDI (compared to export) makes the domestic labour union better off but it makes the consumers, the domestic firm, the foreign labour union and the foreign country worse off, and it reduces domestic welfare if the multinational firm is sufficiently technologically superior to that of the domestic firm.
    Keywords: Foreign direct investment; Labour union; Welfare
    JEL: F23 J51
    Date: 2014–02
  30. By: Dranev Yury (National Research University Higher School of Economics); Maxim Babushkin (Ernst&Young)
    Abstract: This work contributes to the literature on exchange-rate exposure in emerging markets. We studied datasets of exchange-listed companies from four BRIC countries and discovered that exchange rate movements in the US dollar and euro affected more than 10% of these firms between 2003 and 2013. The most interesting finding of this research is that stock returns behaved differently with increasing and decreasing currency rates. For capturing the asymmetric relationship of stock and exchange rate movements, we applied a nonlinear dynamic model, which significantly improved our results compared to the empirical findings of simple versions of the Adler Dumas (1984) and Jorion (1990) models. We studied determinants of exposure to positive and negative currency movements separately. Although significant determinants in both cases were mostly similar, their weights were different. For example, the ratio of export sales was asymmetrically correlated to exchange rate exposures for all countries except Russia. For a better understanding of the sources of asymmetry in exchange rate exposure, we separately studied the positive and negative coefficients of currency exposure from the non-asymmetric model. This was never done before and natural in a way that determinants should affect positive and negative currency exposures differently. We found evidence of the contrasting impact of export sales and foreign debt in both cases.
    Keywords: exchange rate exposure, currency markets, stock returns, asymmetric model, emerging markets.
    JEL: G15 G17
    Date: 2014
  31. By: Carluccio Bianchi (Department of Economics and Management, University of Pavia); Eleonora Lorenzini (Department of Economics and Management, University of Pavia)
    Abstract: This paper aims to apply the balance of payments constrained-growth model to explain Euro area growth performance in the last forty years and to discuss likely prospects for the future. After a formal reconsideration of the long-run and short-run arguments supporting the validity of the Post-Keynesian approach to economic growth, a simplified and an extended version of the basic model are outlined. The application of these models to the Euro area experience shows that Thirlwall’s Law performs quite well in explaining growth in all decades under consideration. The fundamental reasons behind the recent unsatisfactory EMU growth experience, therefore, appear to be a decreasing export dynamics and a rising dependence on imports. Given current trends, the prospects for the future appear to be gloomy, unless structural reforms of the productive system are promoted in order to improve overall EMU competitiveness.
    Keywords: Growth, Euro area, Thirlwall’s Law, balance-of-payments constraint, import and export functions
    JEL: E12 F14 O40 O52
    Date: 2014–02
  32. By: Daichi Shimamoto (Graduate School of Economics, Osaka University, Japan. Research Fellow, Japan Society for the Promotion of Science, Japan.)
    Abstract: In Albania, remittance has been an important factor for the countryfs economic growth since the collapse of the countryfs communist regime in the early 1990s. In this paper, I investigated why migrants send remittance to their parents household. In the analysis, I considered four remittance motivations: altruistic, exchange, insurance, and inheritance motivations. To control sample selection of migration, I apply the Heckman sample selection model. The results suggest that migrants in Albania are driven to remit owing to a combination of altruistic, exchange, and inheritance motivations. Further, migration destination influences remittance amount, which implies that not only the local labor market and exchange rate at the final destination but also migration motivation factors affect remittance amount.
    Keywords: Migration, Remittance, Albania
    JEL: F22 F24 O52
    Date: 2014–02
  33. By: DELPIERRE Matthieu; VERHEYDEN Bertrand
    Abstract: Recent empirical evidence links migrant remittances and return migration, and stresses the impact of uncertainty on migrant decisions. Theoretical analyses of the motives for remittances generally neglect these features, and do not include alternative strategies such as savings, which potentially have very different implications for both migrants and origin countries. This paper presents a model of endogenous remittances, savings and return decisions under uncertainty. This setting, which applies to long-term international migration, addresses the following questions. Which migrant characteristics affect their remittance-saving portfolio decisions? How do these decisions interact with migration success and return plans? In our framework, migrants make remittance and saving decisions at an early stage of migration, when migration success and return options are uncertain. Over time, information about professional prospects is acquired, and conditionally on past decisions, migrants adjust their return plans. We show that migrants anticipating a large wage in the host country, or a relatively low risk of migration failure are less likely to remit and to return, and more likely to save. These results are in line with recent empirical evidence, such as the large share of non-remitting migrants, the fact that migrants facing higher risks are more likely to remit, and the potentially poor economic performance of returnees. Finally, we provide a rationale for the support by relatives in the sending country of low-skill, illegal migration.
    Keywords: Remittances; savings; risk; return migration
    JEL: D13 D80
    Date: 2014–02
  34. By: OBATA Kaoru
    Abstract: In operating international investment agreements (IIAs), the old bi-polar framework, where an investor deals with the host state with the support of his home state, has been replaced gradually by a triangle relationship. A home state does not necessarily have a community of interests with investors. In this context, state-to-state dispute settlements (SSDS) should be a subject for discussion along with investor-state dispute settlements (ISDS). When a home state claims damages sustained by individual investors, such claim would be nothing else than an exercise of diplomatic protection. Some confusion, however, has been observed in practice. We can find no state-to-state case where a state could claim its own interests as a capital-exporting state to implement IIAs. It probably would be because their interpretation of IIAs could be invoked against them in possible future arbitrations. Host states might use SSDS procedures more frequently. Through such steps, an interpretation of IIAs could be agreed upon between the state parties. In such a way, SSDS has functions that are distinct from those of ISDS, or the former could be mobilized to restrain the latter.
    Date: 2014–01
  35. By: Wasseem Mina (Department of Economics and Finance, College of Business and Economics, United Arab Emirates)
    Abstract: This paper examines theoretically and empirically the role of political risk guarantees, which bilateral investment treaties serve, in debt accumulation in low and middle income countries. The paper empirically finds that signed bilateral investment treaties with OECD countries have a positive influence on total and guaranteed debt accumulation, under system GMM and OLS estimation methodologies. Results suggest that the role of bilateral investment treaties extends beyond attracting FDI to international lending.
    Keywords: Debt; debt guarantees; political risk; default risk; bilateral investment treaties
    Date: 2013–12–03
  36. By: Carl Grekou
    Abstract: In this paper, we revisit the link between currency misalignments and economic growth by taking into account the foreign currency-denominated debt dynamics (except French Franc and euro) for the CFA zone countries over the period 1985-2011. Relying on a BEER approach and using panel cointegration techniques, we first derive currency misalignments. We then estimate a panel smooth transition growth equation that allows us to observe nonlinear impacts of misalignments on both economic growth and foreign currency-denominated debt dynamics. We find that the nonlinear impact of currency misalignments on growth through the competitiveness channel is mitigated by the foreign currency-denominated debt dynamics through a valuation effect.
    Keywords: Currency misalignments, CFA zone, debt, economic growth, panel smooth transition regression
    JEL: C33 E42 F3 F43
    Date: 2014

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