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on International Trade |
| By: | Eduardo Morales; Gloria Sheu; Andrés Zahler |
| Abstract: | Exporting firms continuously change export destinations. We present reduced-form evidence indicating firms are more likely to export to countries that are geographically close to their previous destinations. This evidence for path dependence in exports is robust to controlling for firm-country specific unobservable determinants of export choices that might be correlated over time and space. Accordingly, we develop a model of export dynamics in which firms' exports in each market may depend on: (a) how similar this market is to the firm's home country (gravity), and (b) how similar it is to other countries to which the firm has previously exported (extended gravity). Given the large number of possible export paths from which forward-looking firms may choose, estimation approaches based on discrete choice models are computationally infeasible. Instead, we use a moment inequality approach. We conclude that extended gravity effects may reduce the cost of entering an export market by up to 40%. |
| JEL: | F14 L65 |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:19916&r=int |
| By: | Bulent Unel; Elias Dinopoulos |
| Abstract: | This study proposes a simple theory of trade with endogenous firm productivity, occupational choice, and income inequality. Individuals with different managerial talent choose to become self-employed entrepreneurs or workers. Entrepreneurs enhance firm productivity by investing in managerial capital. The model generates three income classes: low-income workers facing the prospect of unemployment; middle-income entrepreneurs managing domestic firms; and high-income entrepreneurs managing global firms. A reduction in per-unit trade costs raises productivity of global firms, reduces productivity of domestic firms, and worsens personal income distribution by generating labor-market polarization. A reduction in fixed exporting costs reduces productivity of every firm and has an ambiguous effect on personal income distribution. Trade-liberalization policies raise unemployment and improve welfare. |
| URL: | http://d.repec.org/n?u=RePEc:lsu:lsuwpp:2014-04&r=int |
| By: | Ryan Monarch |
| Abstract: | This paper uses confidential U.S. Customs data on U.S. importers and their Chinese exporters toinvestigate the frictions from changing exporting partners. High costs from switching partners can affect the efficiency of buyer-supplier matches by impeding the movement of importers from high to lower cost exporters. I test the significance of this channel using U.S. import data, which identifies firms on both sides (U.S. and foreign) of an international trade relationship, the location of the foreign supplier, and values and quantities for the universe of U.S. import transactions. Using transactions with China from 2003-2008, I find evidence suggesting that barriers to switching exporters are considerable: 45% of arm’s-length importers maintain their partner from one year to the next, and one-third of all switching importers remain in the same city as their original partner. In addition, importers paying the highest prices are the most likely to change their exporting partner. Guided by these empirical regularities, I propose and structurally estimate a dynamic discrete choice model of exporter choice, embedded in a heterogeneous firm model of international trade. In the model, importing firms choose a future partner using information for each choice, but are subject to partner and location-specific costs if they decide to switch their current partner. Structural estimates of switching costs are large, and heterogeneous across industries. For the random sample of 50 industries I use, halving switching costs shrinks the fraction of importers remaining with their partner from 57% to 18%, and this improvement in match efficiency leads to a 12.5% decrease in the U.S.-China Import Price Index. |
| JEL: | F23 F14 L14 D21 |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:cen:wpaper:14-08&r=int |
| By: | Hayakawa, Kazunobu; Kimura, Fukunari |
| Abstract: | This paper empirically investigates how far free trade agreements (FTAs) successfully lower tariff rates and non-tariff barriers (NTBs) for manufacturing industries by employing the bilateral tariff and NTB data in a time series for countries around the world. We find that FTAs under GATT Article XXIV and the Enabling Clause contribute to reducing tariff rates by 2.1% points and 1.5% points, respectively. In the case of NTBs, their respective impacts are 6.6% points and 5.7% points. Membership in the World Trade Organization (WTO) does not contribute greatly to reducing tariff rates but does play a significant role in reducing NTBs. These results provide important implications for the literature on numerical assessments of FTAs. |
| Keywords: | International trade, Trade policy, Tariff, Non-tariff barriers, Free Trade Agreement (FTA) |
| JEL: | F10 F13 F15 |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:jet:dpaper:dpaper446&r=int |
| By: | Antonio Baez (Faculty of Economics, University of Barcelona) |
| Abstract: | The objective of this paper is to examine whether informal labor markets affect the flows of Foreign Direct Investment (FDI), and also whether this effect is similar in developed and developing countries. With this aim, different public data sources, such as the World Bank (WB), and the United Nations Conference on Trade and Development (UNCTAD) are used, and panel econometric models are estimated for a sample of 65 countries over a 14 year period (1996-2009). In addition, this paper uses a dynamic model as an extension of the analysis to establish whether such an effect exists and what its indicators and significance may be. While the results shows that informal labor markets are significant and do positively affect the flow of FDI, these effects are felt up to a certain level of informality, above which the effect becomes negative. The results are similar for developed and developing countries and are robust to several checks. |
| Keywords: | Foreign Direct Investment, Informal labor markets, Institutions. JEL classification: F16, F23, J8, M5 |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:ira:wpaper:201404&r=int |
| By: | Antoine Gervais; J. Bradford Jensen |
| Abstract: | We develop a methodology for estimating the “tradability” of goods and services using data on U.S. establishments. Our results show that the average service industry is less tradable than the average manufacturing industry. However, there is considerable within-sector variation in estimated tradability and many service industries are as tradable as manufacturing. Tradable service industries account for a significant share of economic activity and workers employed in those industries have relatively high average wages. Counterfactual analysis indicates that the potential welfare gains from policy liberalization in service trade are of the same order of magnitude as liberalization in the manufacturing sector. |
| Keywords: | Service sector, international trade, imperfect competition, microdata, trade liberalization. |
| JEL: | F1 |
| Date: | 2014–03 |
| URL: | http://d.repec.org/n?u=RePEc:cen:wpaper:14-03&r=int |
| By: | Kuboniwa, Masaaki |
| Abstract: | This paper amends Kuboniwa (2014). We present a proof of a fundamental theorem on the relationship between trade balances in value added and gross terms in a general model with many countries and many sectors: the total sum of a country’s trade balances with all other countries measured in value added equals that in gross terms. This theorem implies that the total sum of differentials between balances in value added and those in gross terms equals zero. Using an aggregated World Input-Output data (WIOD) of Groningen University with eight countries (BRICs, the USA, the EU, Japan and the rest of the world (ROW)) and 20 sectors for 2010, we show an empirical evidence of the theorem. |
| Keywords: | trade in value added, gross trade, input-output |
| JEL: | F1 C67 D57 R15 |
| Date: | 2014–01 |
| URL: | http://d.repec.org/n?u=RePEc:hit:hituec:600&r=int |
| By: | Lin Ma |
| Abstract: | How does globalization affect the income gaps between the rich and the poor? This paper presents a new piece of empirical evidence showing that access to the global market, either through exporting or through multinational production, is associated with a higher executive-to-worker pay ratio within the firm. It then builds a model with heterogeneous firms, occupational choice, and executive compensation to model analytically and assess quantitatively the impact of globalization on the income gaps between the rich and the poor. The key mechanism is that the “gains from trade” are not distributed evenly within the same firm. The compensation of an executive is positively linked to the size of the firm, while the wage paid to the workers is determined in a country- wide labor market. Any extra profit earned in the foreign markets benefits the executives more than the average worker. Counterfactual exercises suggest that this new channel is quantitatively important for the observed surge in top income shares in the data. Using the changes in the volume of trade and multinational firm sales, the model can explain around 33 percent of the surge in top income shares over the past two decades in the United States. |
| Keywords: | E25 F12 F62 J33 |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:cen:wpaper:14-07&r=int |
| By: | Rajeev Dehejia; Arvind Panagariya |
| Abstract: | The impact of trade liberalization on accelerated manufacturing growth has been widely studied in the literature. What has gone unappreciated is that liberalization has also been accompanied by accelerated services growth. Using firm-level data from India, we find a positive spillover from manufacturing growth stimulated by trade and other liberalization to gross value added, wages, employment, and worker productivity in services, especially large urban firms and in service sectors whose output is used as a manufacturing input. We find that improved access to inputs via trade liberalization led to increased gross value added and worker productivity in capital-intensive service sectors. |
| JEL: | O14 P21 |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:19923&r=int |
| By: | Nils Herger (Study Center Gerzensee, Switzerland); Steve McCorriston (Department of Economics, University of Exeter) |
| Abstract: | By using data on cross-border acquisitions (CBAs), this paper explores the distribution of the strategies pursued when multinational enterprises integrate a foreign subsidiary into their organizational structure. Based on a measure of vertical relatedness, each of the 165,000 acquisitions in our sample covering 31 source and 58 host countries can be classified as horizontal, vertical, or conglomerate. Three novel features of CBAs are highlighted. First, horizontal and vertical CBAs are relatively stable over time. Second, substantial parts of CBAs involve conglomerate acquisitions. Third, the wave-like growth of CBAs arises primarily from changes in conglomerate activity, which responds to international valuation differences between financial markets. |
| Keywords: | Cross-Border Acquisitions, Multinational Firm, Horizontal Merger, Vertical Merger, Conglomerate Merger |
| JEL: | F15 F21 F23 F33 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:exe:wpaper:1402&r=int |
| By: | Andrey Kaukin (Gaidar Institute for Economic Policy); Georgy Idrisov (Gaidar Institute for Economic Policy) |
| Abstract: | The paper contains the results of theoretical development and empirical verification of spatial gravity model of Russian trade. The authors conclude that the spatial variables and especially the location of the state border checkpoints have a significant effect on the volume and routes of Russian imports. |
| Keywords: | international trade, gravity model, border checkpoints |
| JEL: | F1 F2 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:gai:wpaper:0088&r=int |
| By: | Rossana Mastrandrea; Tiziano Squartini; Giorgio Fagiolo; Diego Garlaschelli |
| Abstract: | In economic and financial networks, the strength (total value of the connections) of a given node has always an important economic meaning, such as the size of supply and demand, import and export, or financial exposure. Constructing null models of networks matching the observed strengths of all nodes is crucial in order to either detect interesting deviations of an empirical network from economically meaningful benchmarks or reconstruct the most likely structure of an economic network when the latter is unknown. However, several studies have proved that real economic networks are topologically very different from networks inferred only from node strengths. Here we provide a detailed analysis for the World Trade Web (WTW) by comparing it to an enhanced null model that simultaneously reproduces the strength and the number of connections of each node. We study several temporal snapshots and different aggregation levels (commodity classes) of the WTW and systematically find that the observed properties are extremely well reproduced by our model. This allows us to introduce the concept of extensive and intensive bias, defined as a measurable tendency of the network to prefer either the formation of new links or the reinforcement of existing ones. We discuss the possible economic interpretation in terms of trade margins. |
| Keywords: | Network reconstruction, null models, Maximum Entropy ensembles, Complex networks, World Trade Web, trade margins |
| Date: | 2014–02–18 |
| URL: | http://d.repec.org/n?u=RePEc:ssa:lemwps:2014/06&r=int |
| By: | Schäffler, Johannes (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]); Hecht, Veronika (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]); Moritz, Michael (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]) |
| Abstract: | The attractiveness for the location of multinational firms is seen as a crucial issue for the development and prosperity of regions. This article focuses on a two-country relationship and deals with the regional distribution of German multinational firms and their affiliates in the Czech Republic. A new dataset established by the IAB covers information on the basic population of cross-border foreign direct investment (FDI) projects, thereby exceeding the number of observations in previously used databases by far. On the basis of 3,894 FDI projects the regional determinants of German cross-border investments in the Czech Republic are analysed for both the home and the host country. Alternative specifications of the gravity model are used in order to investigate the regional distribution of common investment projects that are calculated as a combination of a headquarters in a German spatial planning region and an affiliate in a Czech NUTS 3 region. Concerning the explanatory variables a distinction is made between three groups of factors: first, market size and agglomeration features of the regions; second, attributes representing the distance between the headquarters in Germany and the affiliates in the Czech Republic; and third, regional labour market characteristics. While the findings are generally in line with theoretical expectations, differences emerge between manufacturing FDI and services FDI. |
| JEL: | F23 R12 F15 |
| Date: | 2014–02–24 |
| URL: | http://d.repec.org/n?u=RePEc:iab:iabdpa:201403&r=int |
| By: | Sasatra, Sudsawasd; Santi, Chaisrisawatsuk |
| Abstract: | Using panel data of 57 countries during the period of 1995-2012, this study investigates the impact of intellectual property rights (IPR) processes on productivity growth. The IPR processes are decomposed into three stages, innovation process, commercialization process, and IPR protection process. Our results suggest that better IPR protection is directly associated with productivity improvement only in developed economies. In addition, the contribution of IPR processes on growth through foreign direct investment (FDI) appears to be very limited. Only FDI inflows in developed countries which help to create a better innovative capability lead to a higher growth. And in connection with FDI outflows, only IPR protection and commercialization processes are proven to improve productivity in the case of developing countries, particularly when the country acts as the investing country. |
| Keywords: | Developing countries, Developed countries, Intellectual property, Foreign investments, Productivity, International business enterprises, Foreign Direct Investment (FDI), Intellectual property rights, Productivity growth |
| JEL: | F23 O34 |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:jet:dpaper:dpaper444&r=int |
| By: | Ben Zissimos (Department of Economics, University of Exeter) |
| Abstract: | This paper develops a new model of trade policy under dictatorship and democratization. The paper makes two contributions. One is to provide a deeper understanding of the relationship between political institutions and economic performance by studying the endogenous interaction between the form of government and trade policy. If a ruling elite own a factor that is scarce then democratization goes hand in hand with trade liberalization and an increase in economic efficiency, as argued by classical scholars. But if the elite own an abundant factor then democratization is accompanied by an increase in protectionism and a reduction in e¢ ciency. The paper also characterizes the circumstances under which a dictatorship can use trade policy to forestall democratization. The paper?s second contribution is to show how trade policy can be manipulated to maintain the status quo in the face of world price shocks, thus opening the door to a re-examination of trade policy responses to technology shocks. The model is used to explain an interesting episode of trade policymaking between 1815 and 1846, during which time Britain substantially liberalized trade while Prussia, on the other side of the grain market, signi?cantly increased protectionism. It is also used to shed light on the wide-spread imposition of export restrictions in response to the 2007-08 food crisis. |
| Keywords: | Efficiency, institutions, protectionism, social con?ict, trade policy. |
| JEL: | D30 D74 F11 F13 P14 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:exe:wpaper:1403&r=int |
| By: | Felbermayr, Gabriel (University of Munich); Impullitti, Giammario (University of Nottingham); Prat, Julien (CREST) |
| Abstract: | Increasing wage inequality between similar workers plays an important role for overall inequality trends in industrialized societies. To analyze this pattern, we incorporate directed labor market search into a dynamic model of international trade with heterogeneous firms and homogeneous workers. Wage inequality across and within firms results from their different hiring needs along their life cycles and the convexity of their adjustment costs. The interaction between wage posting and firm growth explains some recent empirical regularities on firm and labor market dynamics. Fitting the model to capture key features obtained from German linked employer-employee data, we investigate how falling trade costs and institutional reforms interact in shaping labor market outcomes. Focusing on the period 1996-2007, we find that neither trade nor key features of the Hartz labor market reforms account for the sharp increase in residual inequality observed in the data. By contrast, inequality is highly responsive to the increase in product market competition triggered by domestic regulatory reform. |
| Keywords: | wage inequality, international trade, directed search, firm dynamics, product and labor market regulation |
| JEL: | F12 F16 E24 |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp7960&r=int |
| By: | Ando, Asao; Meng, Bo |
| Abstract: | This paper presents a framework for an SCGE model that is compatible with the Armington assumption and explicitly considers transport activities. In the model, the trade coefficient takes the form of a potential function,and the equilibrium market price becomes similar to the price index of varietal goods in the context of new economic geography (NEG). The features of the model are investigated by using the minimal setting, which comprises two non-transport sectors and three regions. Because transport costs are given exogenously to facilitate study of their impacts, commodity prices are also determined relative to them. The model can be described as a system of homogeneous equations, where an output in one region can arbitrarily be determined similarly as a price in the Walrasian equilibrium. The model closure is sensitive to formulation consistency so that homogeneity of the system would be lost by use of an alternative form of trade coefficients. |
| Keywords: | Econometric model, Economic geography, Transportation, Trade theory, SCGE (Spatial Computable General Equilibrium) model, Armington assumption, Transport sector |
| JEL: | C67 C68 R15 |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:jet:dpaper:dpaper447&r=int |
| By: | Gregory Clark; Kevin Hjortshøj O'Rourke; Alan M. Taylor |
| Abstract: | Many previous studies of the role of trade during the British Industrial Revolution have found little or no role for trade in explaining British living standards or growth rates. We construct a three-region model of the world in which Britain trades with North America and the rest of the world, and calibrate the model to data from the 1760s and 1850s. We find that while trade had only a small impact on British welfare in the 1760s, it had a very large impact in the 1850s. This contrast is robust to a large range of parameter perturbations. Biased technological change and population growth were key in explaining Britain’s growing dependence on trade during the Industrial Revolution. |
| JEL: | F11 F14 F43 N10 N70 O40 |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:19926&r=int |
| By: | J. Bradford Jensen; Dennis P. Quinn; Stephen Weymouth |
| Abstract: | We use the case of a puzzling decline in U.S. firm antidumping (AD) filings to explore how firm-level economic heterogeneity within U.S. industries influences political and regulatory responses to changes in the global economy. Firms exhibit heterogeneity both within and across industries regarding foreign direct investment. We propose that firms making vertical, or resource-seeking, investments abroad will be less likely to file AD petitions. Hence, we argue, the increasing vertical FDI of U.S. firms (particularly in countries with undervalued currencies) makes trade disputes far less likely. We use firm level data to examine the universe of U.S. manufacturing firms and find that AD filers generally conduct no intrafirm trade with filed-against countries. Among U.S. MNCs, the number of AD filings is negatively associated with increases in the level of intrafirm trade for large firms. In the context of currency undervaluation, we confirm the existing finding that undervaluation is associated with more AD filings. We also find, however, that high levels of related-party imports from countries with undervalued currencies significantly decrease the numbers of AD filings. Our study highlights the centrality of global production networks in understanding political mobilization over international economic policy. [192] |
| Date: | 2014–01 |
| URL: | http://d.repec.org/n?u=RePEc:cen:wpaper:14-04&r=int |
| By: | Pisit, Puapan |
| Abstract: | This paper examines the overall and sectoral economic impact of foreign direct investment (FDI) on the Thai economy using the economic data from 2005-2013. In assessing the overall economic impact, it is found that FDI has contributed positively to Thailand's economic growth. However, when analyzing the sectoral details, the empirical results indicate that FDI has a varying impact on the productive sectors in Thailand. Out of the 9 sub-sectors covered by this study, 5 sub-sectors (manufacturing, construction, financial, wholesale, retail trade, and agriculture) show strong statistically-significant positive effects of FDI on the relevant sector's value-added output. Based on these findings, it is suggested that policy-makers, including the Board of Investment, should aim to promote FDI with special consideration of the sectoral impact that would enable Thailand's FDI promotion policies to be more productive and beneficial for the Thai economy. |
| Keywords: | Thailand, Foreign investments, Foreign Direct Investment (FDI), Investment Promotion |
| JEL: | F21 F23 |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:jet:dpaper:dpaper443&r=int |
| By: | Christian Gehrke (University of Graz) |
| Abstract: | In an influential paper entitled “David Ricardo’s Discovery of Comparative Advantage”, which was published in HOPE (Vol. 34, 2002), Roy J. Ruffin attempted to reconstruct the circumstances of Ricardo’s discovery of the law of comparative advantage. Ruffin’s article has inspired a number of further contributions (see, e.g., Aldrich 2004, Maneschi 2004, 2008, Ruffin 2005, Morales-Meoqui 2011) on the precise nature, logical structure, and analytical significance of Ricardo’s formulation of the law of comparative advantage in international trade theory. The present paper shows that Ruffin’s reconstruction of Ricardo’s discovery of the law of comparative advantage, and in particular his interpretation of Ricardo’s letters to Malthus and James Mill of October 1816, encounters a number of serious problems. When the context of Ricardo’s statements is properly taken into account, and the premises and implications of Ruffin’s hypothesis, according to which those statements refer to international prices, are carefully scrutinized, his novel interpretation is seen to lack plausibility. Moreover, it is shown that Ruffin’s contention that modeling assumptions and analytical results of neoclassical trade theory such as “factor price equalization”, the “Lerner symmetry theorem”, or the “Stolper-Samuelson theorem” can be discerned in Ricardo’s chapter “On Foreign Trade” cannot be sustained. |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:grz:wpaper:2014-02&r=int |
| By: | Catia Batista (Nova University of Lisbon); Janis Umblijs (Ragnar Frisch Centre for Economic Research, Oslo, Norway) |
| Abstract: | Do migrants send remittances as a way of obtaining insurance? While this motive is theoretically suggested in the literature, the question of identifying this relationship empirically has only begun to be explored. Using a unique representative survey of 1500 immigrants in the Greater Dublin Area, Ireland, we find a positive and signicant relationship between risk aversion and remittance behavior. Risk-averse individuals are more likely to send remittances home and are, on average, likely to remit a higher amount, after controlling for a broad range of individual and group characteristics. Consistent with a purchase of self insurance motive to remit, we also provide evidence of more remittances sent by risk averse immigrants facing higher wage risks and remitting to individuals with more financial resources. |
| Keywords: | Migration, Risk Aversion, Remittances, Insurance |
| JEL: | D81 F22 F24 J01 J08 J15 J61 |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:crm:wpaper:1408&r=int |
| By: | Dong, Baomin; Fu, Shihe; Gong, Jiong; Fan, Hanwen |
| Abstract: | This paper develops a signaling theory where brain drain as well as the opposite of brain drain, a phenomenon we call “lame-drain” can result. In particular, we assume there are three types of agents according to their intrinsic abilities; education (with endogenous intensity) consists of two stages: undergraduate and graduate. There are two types of jobs: entry level and managerial. It is shown that under some circumstances the equilibrium is semi-pooling where the medium type chooses to work after undergraduate education while (a fraction of) both high and low types pursue graduate studies at home and abroad. Some high and low ability students return to work in the indigenous country in equilibrium. However, our model differs from the traditional brain drain models in that some low ability agents also go abroad in equilibrium and work in the host country after graduation, resulting in the recipient country hiring low ability agents, a phenomenon we call lame-drain. We then provide empirical evidence that lame-drain is indeed happening using U.S. Census data. |
| Keywords: | Brain Drain; Lame Drain; Signalling |
| JEL: | C72 F22 J61 |
| Date: | 2014–02–14 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:53825&r=int |
| By: | MIYAKAWA Daisuke; HOSONO Kaoru; UCHINO Taisuke; ONO Arito; UCHIDA Hirofumi; UESUGI Iichiro |
| Abstract: | This paper investigates the effect of financial shocks on firms' exports. To circumvent endogeneity problems, we utilize the natural experiment provided by the Great Hanshin-Awaji Earthquake in 1995. Using a unique firm-level dataset, we single out the effect of exogenous financial shocks on firms' exports by focusing on exports of firms that were not directly damaged by the earthquake but that transacted with damaged banks as their main banks. Our main findings are twofold. First, as for the extensive margins of exports, the probabilities of starting exports or of expanding export destination areas were smaller for undamaged firms that transacted with a damaged main bank than for that transacted with an undamaged main bank. Second, as for the intensive margins of exports, undamaged firms that transacted with a damaged main bank had a lower export-to-sales ratio than that transacted with an undamaged main bank. These findings lend support to the existence of the financial constraint on firm exports. |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:14010&r=int |
| By: | Anukriti, S (Boston College); Kumler, Todd J. (Columbia University) |
| Abstract: | This paper shows that trade policy can have significant intergenerational distributional effects across gender and social strata. We compare women and births in rural Indian districts more or less exposed to tariff cuts. For low socioeconomic status women, tariff cuts increase the likelihood of a female birth and these daughters are less likely to die during infancy and childhood. On the contrary, high-status women are less likely to give birth to girls and their daughters have higher mortality rates when more exposed to tariff declines. Consistent with the fertility-sex ratio trade-off in high son preference societies, fertility increases for low-status women and decreases for high-status women. An exploration of the mechanisms suggests that the labor market returns for low-status women (relative to men) and high-status men (relative to women) have increased in response to trade liberalization. Thus, altered expectations about future returns from daughters relative to sons seem to have caused families to change the sex-composition of and health investments in their children. |
| Keywords: | trade liberalization, India, gender, sex ratio, child mortality, fertility |
| JEL: | F13 I15 J12 J13 J16 J82 O15 O18 O19 O24 |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp7969&r=int |
| By: | Yu-Fu Chen; Holger Görg; Dennis Görlich; Hassan Molana; Catia Montagna; Yama Temouri |
| Abstract: | The conventional wisdom is that increasing globalisation requires a reduction in the provision of the welfare state among industrialised countries as the distortions resulting from this type of expenditure undermine international competitiveness and the ability of countries to attract and/or retain industries. However, there are empirical observations and theoretical models that are not in line with this conventional wisdom -- see for instance Molana and Montagna (2006) and Goerg, Molana and Montagna (2009). We will carry out an empirical study using multi-country data for selected OECD countries to investigate the link between two aspects of globalisation, namely international competitiveness and foreign direct investment, and the size of government expenditure on social policies. The paper will also take into account theoretical arguments and empirical evidence from related studies. |
| Keywords: | Challenges for welfare system, Globalisation, Welfare state |
| JEL: | F15 H11 H50 |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:feu:wfewop:y:2014:m:2:d:0:i:54&r=int |
| By: | Sandro Montresor (University of Bologna); Antonio Vezzani (JRC-IPTS) |
| Abstract: | The paper investigates the extent to which outward FDI affect the MNC's capacity of entering (and remaining in) the club of top R&D world investors, benefiting from performance gains in both financial and economic markets. By merging the European Industrial Research and Innovation Scoreboard with the fDi Markets dataset, we find supporting evidence. Increasing the number of FDI projects helps firms overcome the discontinuities that, in the distribution of R&D expenditures, separate the group of the largest world R&D investors from the top of them. The same is true for the number of FDI projects in R&D, which are also more important than greater FDI portfolios in becoming a top R&D spender. Furthermore, unlike FDI in general, more FDI in R&D guarantee firms to remain in this top club of firms as it increases their capacity of resisting competition for a place among the top R&D spenders. Results at the extensive margin (i.e. the number of FDI projects) are confirmed with respect to the scale of FDI projects (i.e. at the intensive margin). However, increasing their size is not enough to become one of the highest ranking R&D firms. Policy implications about the support to R&D internationalisation are drawn accordingly. |
| Keywords: | Foreign Direct Investments (FDI), Multinational Corporations (MNC), Research & Development (R&D). |
| JEL: | O32 F23 O33 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:ipt:wpaper:201401&r=int |
| By: | NAKATOMI Michitaka |
| Abstract: | 1. The World Trade Organization (WTO) General Agreement on Trade in Services (GATS) negotiation has not resulted in any major achievements since the Telecommunication and Financial Services Agreements concluded in 1997 due to a lack of momentum in the Doha Round, concerns about free-riding, and free trade agreement (FTA) competition. In the stalemate in the Round, TISA, together with FTAs, have been promoted as a strong tool for liberalization and rulemaking in services. 2. Trade in Services Agreement (TISA) is a plurilateral initiative among like-minded countries aiming at high level liberalization and rulemaking in services. Japan needs to be involved fully in it since this framework has the potential to form global rules directly, create new business opportunities for Japan, and serve as a leverage in individual FTAs to protect Japanese interests. 3. Although the legal structure of TISA is to be discussed, defining TISA as an FTA is problematic since it may lead to an arbitrary interpretation of Article 5 of GATS, furthermore, the scenario for globalizing it involving developing members is not clear, economic welfare problem exists, and it does not match the horizontal nature of services regulations. In light of global rulemaking, TISA should be developed based on the idea of participation of members forming critical mass and the extension of benefits of the agreement to non-participants on a most-favored nation (MFN) basis. 4. Sectoral agreement as exemplified in the Telecommunication and Financial Services Agreements is a useful tool to develop GATS that is capable of incorporating the characteristics of various sectors. Sectoral approach should be developed in TISA aiming at global rules. Japan is encouraged to table sectoral proposals actively in such areas as retail and distribution, manufacturing related services, culture related services, environment related services, and cross border data flows in TISA. |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:eti:rpdpjp:14002&r=int |
| By: | Comola, Margherita (Paris School of Economics); Mendola, Mariapia (University of Milan Bicocca) |
| Abstract: | This paper provides the first direct evidence on the determinants of link formation among immigrants in the host society. We use a purposely-designed survey on a representative sample of Sri Lankan immigrants living in Milan to study how migrants form social links among them and the extent to which this network provides them with material support along three different dimensions: accommodation, credit, job-finding. Our results show that both weak and strong ties are more likely to exist between immigrants who are born in close-by localities at origin. The time of arrival has a U-shaped effect: links are more frequent between immigrants arrived at the same time, and between long-established immigrants and newcomers. Once the link is formed, material support is provided mainly to relatives while early migrant fellows are helpful for job finding. |
| Keywords: | Sri Lanka, networks, migration, Milan |
| JEL: | J15 D85 C45 |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp7981&r=int |
| By: | Joseph P. Byrne; Dimitris Korobilis; Pinho J. Ribeiro |
| Abstract: | An expanding literature articulates the view that Taylor rules are helpful in predicting exchange rates. In a changing world however, Taylor rule parameters may be subject to structural instabilities, for example during the Global Financial Crisis. This paper forecasts exchange rates using such Taylor rules with Time Varying Parameters (TVP) estimated by Bayesian methods. In core out-of-sample results, we improve upon a random walk benchmark for at least half, and for as many as eight out of ten, of the currencies considered. This contrasts with a constant parameter Taylor rule model that yields a more limited improvement upon the benchmark. In further results, Purchasing Power Parity and Uncovered Interest Rate Parity TVP models beat a random walk benchmark, implying our methods have some generality in exchange rate prediction. |
| Keywords: | Exchange Rate Forecasting; Taylor Rules; Time-Varying Parameters; Bayesian Methods. |
| JEL: | C53 E52 F31 F37 G17 |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:gla:glaewp:2014_03&r=int |
| By: | Maarten VAN DIJCK; Tom TRUYTS |
| Abstract: | After 1875, cheap grain from the United States and Russia flooded the European markets. Many countries like Germany, France, and Sweden turned to agricultural trade protection, while others, like the UK and Denmark, held on to a free trade position. Belgium adopted a middle position, leaving its grain markets open but protecting animal husbandry, dairy production, and the processing of foodstuffs. The econometric analysis of the votes of Belgian Members of Parliament on four proposals to install protectionist measures on agricultural trade seeks to identify which economic or political interests explain the Belgian policy option. |
| Date: | 2014–01 |
| URL: | http://d.repec.org/n?u=RePEc:ete:ceswps:ces14.02&r=int |
| By: | Andri Chassamboulli; Giovanni Peri |
| Abstract: | A key controversy in US immigration reforms is how to deal with undocumented workers. Some policies aimed at reducing them, such as increased border security or deportation will reduce illegal immigrants as well as total immigrants. Other policies, such as legalization would decrease the illegal population but increase the legal one. These policies have different effects on job creation as they affect the firm profits from creating a new job. Economists have never analyzed this issue. We set up and simulate a novel and general model of labor markets, with search and legal/illegal migration between two countries. We then calibrate it to the US and Mexico labor markets and migration. We find that policies increasing deportation rates have the largest negative effect on employment opportunities of natives. Legalization, instead has a positive employment effect for natives. This is because repatriations are disruptive of job matches and they reduce job-creation by US firms. Legalization instead stimulates firms' job creation by increasing the total number of immigrants and stimulating firms to post more vacancies some of which are filled by natives. |
| JEL: | E24 J15 J64 |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:19932&r=int |
| By: | Schiff, Maurice (World Bank) |
| Abstract: | With the 1967 reform, Canada's immigration policy changed from a country-preference system to a points system. The latter provides points according to applicants' education level but abstracts from the quality of their education. This paper considers the points system, the country-preference system, as well as a system that includes both educational quantity and quality and is termed the "𝑞2 points system." It focuses on the policies' impact on immigrants' average productive human capital â the product of educational quality and quantity â or skill level, 𝑆𝑥 (for policy 𝑥). It shows, among others, that i) 𝑆𝑥 is greater under the 𝑞2 system than under the points system (𝑆𝑞 > 𝑆ℎ); ii) a switch from a points system to a 𝑞2 system results in a human capital gain or net brain gain for Country 1 (the high-education quality country) and a loss or net brain drain for Country 2; iii) 𝑆𝑥 is greater under the country-preference system than under the points system (𝑆𝑝 > 𝑆ℎ); iv) whether 𝑆𝑥 is greater under the 𝑞2 or the country-preference system is ambiguous, with 𝑆𝑞 >( |
| Keywords: | points system, country-preference system, education quantity-quality system, Canadian immigration policy, human capital impact |
| JEL: | F22 I20 |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp7955&r=int |
| By: | Mouhoud, El Mouhoub; Margolis, David; Miotti, Luis; Oudinet, Joël |
| Abstract: | This article analyses the distributional impact of international migration across two regions of Algerian emigration (Nedroma and Idjeur) using an original survey we conducted of 1,200 households in 2011. The non-parametric technique of DiNardo, Fortin and Lemieux (1996) is used to analyse the effects of remittances on the distribution of household incomes. The analysis is then deepened with a parametric model, which allows for the estimation of counterfactual household income and the calculation of the impact of migration on the distribution of household income. Remittances, and especially foreign pensions, decrease the Gini index by nearly 4 % for the two Algerian regions combined, with the effect in Idjeur being twice as large as Nedroma. At the same time, they help reduce poverty by nearly 13 percentage points. Remittances have a strong positive impact on very poor families in Idjeur but much less in Nedroma, where poor families suffer from a “double loss” due to the absence of their migrants and the fact that the latter do not send money home. |
| Keywords: | Transferts de fonds; Migration; Inégalités; Pauvreté; Algérie; Remittances; Migration; Poverty; Inequality; Algeria; |
| JEL: | F24 O15 O55 |
| Date: | 2014–01 |
| URL: | http://d.repec.org/n?u=RePEc:dau:papers:123456789/12589&r=int |
| By: | Vincent BODART (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)); Jean-François CARPANTIER (University of Luxembourg, CREA) |
| Abstract: | While most of the literature on the determination of real exchange rates is focused on the role of standard macroeconomic variables, there exists however a few papers that are more concerned by the impact of factors which are usually considered to play a key role in the process of economic development, like demography or inequality. In the present paper, we extend this small branch of the literature by exploring the relationship between labor skills and real exchange rates over the long-run. Using panel regressions covering 22 countries over the period 1950-2010, we find that labor skills are indeed a structural determinant of real exchange rates, with a permanent increase of the skilled-unskilled labor ratio leading to a long-run appreciation of the real exchange rate. This findings is robust to the inclusion of several control variables, like those used in traditional analyses of real exchange rates. |
| Keywords: | Real exchange rate, human capital, skills, Balassa-Samuelson effect |
| JEL: | C23 F31 F41 I25 |
| Date: | 2014–02–12 |
| URL: | http://d.repec.org/n?u=RePEc:ctl:louvir:2014005&r=int |