nep-int New Economics Papers
on International Trade
Issue of 2014‒05‒24
39 papers chosen by
Luca Salvatici
Universita' di Roma 3

  1. The sectoral pro-trade effects of ethnic networks within a Ricardian model of trade By Mauro Lanati
  2. Enlargement of Economic Framework in Southeast Asia and Trade Flows in the Lao People’s Democratic Republic By Suvannaphakdy, Sithanonxay; Tang, Hsiao Chink; DiCaprio, Alisa
  3. Intellectual Property Rights and International Trade of Agricultural Products By Mercedes Campi; Marco Duenas
  4. Trade in Unemployment By Céline CARRERE; Marco FUGAZZA; Marcelo OLARREAGA; Frédéric ROBERT-NICOUD
  5. Exporters and Shocks: Dissecting the International Elasticity Puzzle By Doireann Fitzgerald; Stefanie Haller
  6. Two-Sided Heterogeneity and Trade By Andrew B. Bernard; Andreas Moxnes; Karen Helene Ulltveit-Moe
  7. An Empirical Analysis of Trade-Related Redistribution and the Political Viability of Free Trade By James Lake; Daniel L. Millimet
  8. Globalization and Technology Transfer in Ethiopia: Their Impact on Domestic Employment and Skills By Getinet Haile; Ilina Srour; Marco Vivarelli
  9. Exports and Capacity Constraints: A smooth transition regression model for six euro-area countries By Belke, Ansgar; Oeking, Anne; Setzer, Ralph
  10. Innovation, Product-Cycle Trade, and the Cross-Country Distribution of Income By Scott French
  11. Export Destinations and Input Prices By Paulo Bastos; Joana Silva; Eric Verhoogen
  12. Developing Countries Exports Survival in the OECD: Does Experience Matter? By Céline CARRERE; Vanessa STRAUSS-KAHN
  13. Extensive Margins of Imports and Profitability: First Evidence for Manufacturing Enterprises in Germany By Wagner, Joachim
  14. Are automotive Global Production Networks becoming more global? Comparison of regional and global integration processes based on auto parts trade data By Vincent FRIGANT; Martin ZUMPE
  15. The Investment Version of the Asian Noodle Bowl: The Proliferation of International Investment Agreements By Chaisse, Julien; Hamanaka, Shintaro
  16. Bank Linkages and International Trade By Galina Hale; Christopher Candelaria; Julián Caballero; Sergey Borisov
  17. Preferentialism in Trade Relations: Challenges for the World Trade Organization By Low, Patrick
  18. Capital goods trade and economic development By Mutreja, Piyusha; Ravikumar, B.; Sposi, Michael J.
  19. Smoothing the adjustment to trade liberalization By Wolfgang Lechthaler; Mariya Mileva
  20. Foreign Land Deals in Africa: Implications for Agricultural Trade By Ogundipe, Adeyemi; Akinyemi, Opeyemi; Ogundipe, Oluwatomisin
  21. Brexit or Fixit? The Trade and Welfare Effects of Leaving the European Union By G.I.P. Ottaviano; Joao Paulo Pessoa; Thomas Sampson; John Van Reenen
  22. Firm Heterogeneity, International Trade and Credit Market Imperfection By Hamid Beladi; Avik Chakrabarti; Sugata Marjit
  23. Why do Countries enter into Preferential Agreements on Trade in Services? Assessing the Potential for Negotiated Regulatory Convergence in Asian Services Markets By Sauvé, Pierre; Shingal, Anirudh
  24. TTIP and its Effects on Austria. A Critical Literature Survey By Fritz Breuss
  25. Welfare and Environmental Effects of Subsidies and Tariffs in North-South Trade in Renewable Energy Equipment By Wei, Wenjie
  26. Impacts of Asia’s Rise on African and Latin American Trade: Projections to 2030 By Anderson, Kym; Strutt, Anna
  27. Long run forecasts of Australia’s terms of trade By Jared Bullen; Michael Kouparitsas; Michal Krolikowski
  28. Determinants and Impediments of FDI inflows in Ethiopia- A Firm Level Investigation By Teka, Henok Gebremedhin
  29. Exports and real exchange rates in a small open economy By Alvaro Brunini; Gabriela Mordecki; Lucía Ramírez
  30. How Does Foreign Direct Investment Measure Real Investment by Foreign-owned Companies? Firm-level Analysis By Leino, Topias; Ali-Yrkkö, Jyrki
  31. How well does foreign direct investment measure real investment by foreign-owned companies? – Firm-level analysis By Leino, Topias; Ali-Yrkkö , Jyrki
  32. Transaction costs and trade liberalization: An empirical perspective from the MERCOSUR agreement By Valdes, Rodrigo
  33. Reflections on Finalizing an Economic Partnership Agreement : The EAC with the EU By Jaime de MELO; Julie REGOLO
  34. Regionalization vs. Globalization By Hideaki Hirata; M. Ayhan Kose; Chris Otrok
  35. Climate Variability and International Migration: The Importance of the Agricultural Linkage By Ruohong Cai; Shuaizhang Feng; Mariola Pytliková; Michael Oppenheimer
  36. Financial liberalization, disaggregated capital flows and banking crisis: Evidence from developing countries By BOUKEF JLASSI, NABILA; HAMDI, HELMI
  37. Terms of Trade and Fiscal Sustainability when the Sovereign Exploits a Natural Resource By Marcelo P. Oviedo; Leandro Andrian
  38. A consistent measure of aggregate import substitution By LIN, Ko Min; PLASMANS, Joseph; HSU, Song-ken
  39. The Impact of Wheat Export Market Deregulation upon Wheat Growers in Victoria’s Western Wimmera By O'Keeffe, Patrick

  1. By: Mauro Lanati
    Abstract: This paper investigates the trade migration link within a Ricardian model` a la Eaton and Kortum (2002) and it quantifies the pro-trade effects of immigrants for 18 manufactur- ing sectors in a sample of 19 OECD countries. The results are robust across different econometric specifications and they indicate pulp, paper, paper products, printing and publishing as the sector where immigration has the greatest impact on trade. The analy- sis shows that accounting for ethnic networks in the trade share equation has important implications for the estimation of trade cost elasticity parameter across all manufacturing sectors. By following a two-step approach to estimate trade cost elasticity at sector level where q is proportional to the effect of wages on exporter fixed effects, I find that in total manufacturing q decreases by 1.03 when ethnic networks are included among the determinants of trade. This drop of trade cost elasticity approximately corresponds - on average - to a welfare gain of 4.16% of national income.
    Keywords: migration; trade cost elasticity; gravity model; trade share equation.
    JEL: F10 F11 F14 F22
    Date: 2014–03–01
  2. By: Suvannaphakdy, Sithanonxay (Asian Development Bank); Tang, Hsiao Chink (Asian Development Bank); DiCaprio, Alisa (Asian Development Bank)
    Abstract: Using an unbalanced panel dataset of bilateral exports from 1992 to 2009, this paper assesses the potential trade impacts of the expansion of the Association of Southeast Asian Nations (ASEAN) to ASEAN+3 and ASEAN+6 on the Lao People’s Democratic Republic (Lao PDR). It finds that bilateral exports are positively related to the overall bilateral country size and similarity in country size, but inversely related to the relative factor endowment differences, transportation costs, and import tariffs. Simulation results show that the formation of free trade agreement (FTA) between ASEAN and the Plus-6 economies (the People’s Republic of China, Japan, and the Republic of Korea in East Asia; and the other three economies of Australia, India, and New Zealand) can increase bilateral trade between the Lao PDR and ASEAN+6 by $1 billion, and ASEAN+3 by $981 million. Nonetheless, trade balance of the Lao PDR is likely to worsen in both the ASEAN+3 and ASEAN+6 FTAs because they stimulate more imports than exports.
    Keywords: East Asia; trade flow; gravity model; Lao PDR
    JEL: C33 F14 F15
    Date: 2014–04–01
  3. By: Mercedes Campi; Marco Duenas
    Abstract: This paper studies the eect of strengthening intellectual property rights (IPRs) after the signing of the TRIPS on agricultural trade and bilateral trade links, for the period 1995-2011. It uses data of agricultural exports and an index of intellectual property (IP) protection that considers specicities of this sector, for a set of 60 economies that allows to study possible divergent results for developed and developing countries. The estimates show that stronger IPRs systems aect negatively total exports and imports of agricultural products, especially for developing countries. At a more disaggregated level, we found heterogeneous results depending on the sub-sectors, but the correlation is negative for most of them. The eect on trade links was investigated using a gravity model and we found that an increase in the IP protection levels is expected to have ambiguous eects depending on the sub-sector and level of development of trading country partners. The increase of IP protection of the exporter and the importer was investigated separately and, in some cases, asymmetric eects were found.
    Keywords: Intellectual Property Rights; International Trade; Agriculture; Gravity Model
    Date: 2014–05–13
  4. By: Céline CARRERE (Université de Genève); Marco FUGAZZA (FERDI); Marcelo OLARREAGA (FERDI); Frédéric ROBERT-NICOUD (FERDI)
    Abstract: We embed a model of the labor market with sector-specific search-and-matching frictions into a Ricardian model with a continuum of goods to show that trade liberalization causes higher unemployment in countries with comparative advantage in sectors with strong labor market frictions and leads to lower unemployment in countries with comparative advantage in sectors with weak labor market frictions. We test this prediction in a panel dataset of 97 countries during the period 1995-2009 and find that the data supports the theoretical prediction. Our results also help reconciliate the apparently contradicting evidence in the empirical literature on the impact of trade on unemployment.
    JEL: F10 F13 F16
    Date: 2014–05
  5. By: Doireann Fitzgerald (Federal Reserve Bank of Minneapolis); Stefanie Haller (University College Dublin)
    Abstract: Aggregate exports are not very responsive to real exchange rates, though they re- spond strongly to trade liberalizations, a fact sometimes referred to as the International Elasticity Puzzle. We use micro data on firms and exports for Ireland to dissect the puzzle. Our identification strategy uses within-firm-year cross-market variation in real exchange rates and tariffs to identify the responses of export participation, export rev- enue and the product dimension of exporting to these variables. We show that (i) the weak response of export revenue of long-time market participants to real exchange rates is key to the behavior of aggregate exports, (ii) export participation also responds less to real exchange rates than to tariffs, but this alone cannot explain the puzzle; and (iii) the revenue response of long-time market participants cannot be accounted for by product entry responses. Hence any model that can successfully account for the puzzle needs to match the intensive margin responses of exporting firms.
    Keywords: firm exports, tariffs, exchange rates, international elasticity puzzle
    Date: 2014–04–17
  6. By: Andrew B. Bernard; Andreas Moxnes; Karen Helene Ulltveit-Moe
    Abstract: Empirical studies of firms within industries consistently report substantial heterogeneity in measures of performance such as size and productivity. This paper explores the consequences of joint heterogeneity on the supply side (sellers) and the demand side (buyers) in international trade using a novel transaction-level dataset from Norway. Domestic exporters as well as foreign importers are explicitly identified in each transaction to every destination. The buyer-seller linked data reveal a number of new stylized facts on the distributions of buyers per exporter and exporters per buyer, the matching among sellers and buyers and the variation of buyer dispersion across destinations. The paper develops a model of trade with heterogeneous importers as well as heterogeneous exporters where matches are subject to a relation-specific fixed cost. The model matches the stylized facts and generates new testable predictions emphasizing the importance of importer heterogeneity in explaining trade patterns.
    JEL: F10 F12 F14
    Date: 2014–05
  7. By: James Lake (Southern Methodist University); Daniel L. Millimet (Southern Methodist University)
    Abstract: Even if free trade creates net welfare gains for a country as a whole, the associated distributional implications can undermine the political viability of free trade. We show that trade-related redistribution increases the political viability of free trade in the US. We do so by assessing the causal effect of expected redistribution associated with the US Trade Adjustment Assistance program on US Congressional voting behavior on eleven Free Trade Agreements (FTAs) between 2003 and 2011. We find that a one standard deviation increase in redistribution leads to more than a 3% point increase in the probability of voting in favor of an FTA for the median representative. In addition, a one standard deviation decrease in redistribution across the entire US would have precluded passage of two of the eleven FTAs in our sample.
    Keywords: Free Trade Agreements, Trade Adjustment Assistance, Political Economy, Redistribution
    JEL: F13 H50 J65
    Date: 2014–05
  8. By: Getinet Haile (University of Nottingham, UK); Ilina Srour (Università Cattolica del Sacro Cuore, Milano and Piacenza); Marco Vivarelli (DISCE, Università Cattolica del Sacro Cuore, Milano and Piacenza)
    Abstract: There is a dearth of research on the impact of technological change on employment in the context of least developed countries (LDCs) embarking on globalization, which enhances the prospect of direct technological imports or embodied technological transfer. Using a sample of 1,940 enterprises from Ethiopia over the period 1996–2004 and deploying System Generalized Method of Moments (GMM-SYS), this paper attempts to establish the nature of manufacturing employment in Ethiopia and the role played by trade and FDI in determining employment. The empirical results obtained lend support to globalization having a labour–augmenting effect, increasing total manufacturing employment. The two-equation dynamic framework implemented to analyse enterprise-level employment trends by skill level provides some evidence of skill-bias specific to enterprises with higher share of foreign ownership and those that that are located in the vicinity of the capital city. Exporters are not found to benefit from "learning by exporting"
    Keywords: Employment, skills, globalization, FDI, trade, technological change, Ethiopia
    JEL: O33 F16 L60 O55 C33
    Date: 2014–04
  9. By: Belke, Ansgar; Oeking, Anne; Setzer, Ralph
    Abstract: The significant gains in export market shares made in a number of vulnerable euro-area crisis countries have not been accompanied by an appropriate improvement in price competitiveness. This paper argues that, under certain conditions, firms consider export activity as a substitute for serving domestic demand. The strength of the link between domestic demand and exports is dependent on capacity constraints. Our econometric model for six euro-area countries suggests domestic demand pressure and capacity-constraint restrictions as additional variables of a properly specified export equation. As an innovation to the literature, we assess the empirical significance through the logistic and the exponential variant of the non-linear smooth transition regression model. We find that domestic demand developments are relevant for the short-run dynamics of exports in particular during more extreme stages of the business cycle. A strong substitutive relationship between domestic and foreign sales can most clearly be found for Spain, Portugal and Italy, providing evidence of the importance of sunk costs and hysteresis in international trade.
    Date: 2014–05
  10. By: Scott French (School of Economics, Australian School of Business, the University of New South Wales)
    Abstract: This paper develops a quantitative, multi-country model of endogenous growth, international trade, and international knowledge flows in order to understand how access to both foreign products and technologies, together, influences innovation incentives and the world distribution of income. An endogenous product cycle arises in equilibrium, in which innovative countries engage in both horizontal and vertical research, while others far from the technological frontier specialize in learning about and applying research previously conducted abroad. The effect of trade barriers on the level and dispersion of income across countries is found to be larger than would be predicted by a static trade model, and the effect of access to international knowledge flows is also quantitatively important and dependent on trade flows. For instance, halving the cost of learning reduces income dispersion by 23%, while doing so after eliminating asymmetric international trade barriers reduces income dispersion by only 10%.
    Keywords: Income differences, Trade, Endogenous growth, Product cycle, Innovation, Productivity, Technology diffusion
    JEL: F11 F12 F14 O19 O31 O33 O40
    Date: 2014–05
  11. By: Paulo Bastos; Joana Silva; Eric Verhoogen
    Abstract: This paper examines the extent to which the destination of exports matters for the input prices paid by firms, using detailed customs and firm-product-level data from Portugal. We use exchange-rate movements as a source of variation in export destinations and find that exporting to richer countries leads firms to charge more for outputs and pay higher prices for inputs, other things equal. The results are supportive of the hypothesis that an exogenous increase in average destination income leads firms to raise the average quality of goods they produce and to purchase higher-quality inputs.
    JEL: F1 L1 O1
    Date: 2014–05
  12. By: Céline CARRERE (University of Geneva); Vanessa STRAUSS-KAHN (FERDI)
    Abstract: This paper focuses on developing countries that export for the first time to the OECD and obtains several important results on export dynamic, linking exports experience and exports survival. Using product level data at the SITC 5 digit level for 114 developing countries on the 1962-2009 period, we show that prior exports experience obtained in non-OCDE markets increases survival in the OECD market. The effect of experience depreciates however rapidly with time: gaining experience for more than two years is worthless. Moreover, a break in export experience prior to entering the OECD reduces the benefit on survival. Geographic export dynamic reveals that experience is acquired in neighbor, easy to access markets before reaching more distant, richer partners and ultimately serving the OECD. Where the experience is acquired does not however matter for survival.
    JEL: C41 F10 F14 O50
    Date: 2014–05
  13. By: Wagner, Joachim (Leuphana University Lueneburg and CESIS, Stockholm)
    Abstract: This paper uses a tailor-made newly available data set for enterprises from manufacturing industries in Germany to investigate for the first time the links between the extensive margins of imports (the number of imported goods and the number of countries imported from) and firm profitability. While both extensive margins are highly positively linked with firm productivity, profits are not higher in firms that import more goods and from more countries. This demonstrates that productivity advantages of importers are eaten up by extra costs related to buying more goods in more countries.
    Keywords: Imports; intensive margins; profitability; Germany
    JEL: F14
    Date: 2014–05–20
  14. By: Vincent FRIGANT; Martin ZUMPE
    Abstract: In this paper, we examine the evolution of international exchanges of auto parts over the 2000-2012 period. The first part of our study proposes an analysis of the organisation of automotive supply chains based on the global production networks framework. We give details about this approach by stating the nature of trade flows that occur in these networks, and by highlighting the importance of intra-firms flows. The second part poses the question of reasons for an eventual increase of intercontinental flows at the expense of intra-continental flows. In the third part, we evaluate the assumptions made in this context. On the basis of Chelem data about auto parts exchanges, we examine in a comparative way the evolution of intra-continental and intercontinental flows for nine zones of regional integration that cover the world’s entire set of countries. Our results highlight the heterogeneity of situations and of trajectories in the different zones. We explain this state of affairs by the history and the trajectory of the industrial actors, by institutional opportunities/constraints, and by the balance of power between the industries engaged in the setting up of automotive production networks.
    Keywords: Global Production Networks; Automotive; Auto parts industry; Globalisation; Regionalisation; International economics
    JEL: F14 F15 F23 R12 L62
    Date: 2014
  15. By: Chaisse, Julien (The Chinese University of Hong Kong); Hamanaka, Shintaro (Asian Development Bank)
    Abstract: While there is an extensive amount of literature on the noodle bowl of agreements in Asia, the majority of studies exclusively focus on trade (in goods). So far, little emphasis has been placed on the proliferation of international investment treaties (IIAs). Given the significance of IIAs, it is ideal to tackle them extensively as well. Investment chapters under free trade agreements (FTAs) and bilateral and plurilateral investment treaties constitute IIAs. There are more than 1,000 IIAs in Asia. The noodle bowl of FTAs usually results in more options for traders and even can bring unexpected preferences for third parties. These outcomes are all welfare-enhancing, but the literature has overemphasized the effect of complicated rules of origins and other issues. On the other hand, the story of the proliferation of IIAs and the investment noodle bowl is totally different, and as such would lead to inconsistency across IIAs and bring legal interpretation problems as well as the proliferation of unexpected investor-state disputes. This paper aims to provide a detailed reading of recent advances in Asian investment rulemaking and a finer appreciation of how rules in Asian IIAs have evolved in response to stimuli. While existing studies mainly deal with the interpretation and application of the IIAs in which the rules are given, this study deals in turn with the development of rules, including investment protection. The main objective of the paper is to describe and provide an exhaustive mapping of the recent Asian experiences in investment rule-making through regional and bilateral agreements, providing a detailed analytical account of key dimensions of investment treaties. This comprehensive study offers insights on the possible make-up of future attempts at embedding comprehensive investment norms into the regional (such as the Trans-Pacific Partnership) and/or WTO architecture.
    Keywords: bilateral investment treaty (BIT); free trade agreement (FTA); foreign direct investment (FDI); noodle bowl; investor–state dispute (ISD)
    JEL: F21 F51 F53 F55
    Date: 2014–04–01
  16. By: Galina Hale; Christopher Candelaria; Julián Caballero; Sergey Borisov
    Abstract: This paper shows that bank linkages have a positive effect on international trade. A global banking network (GBN) is constructed at the bank level, using individual syndicated loan data from Loan Analytics for 1990-2007. Network distance between bank pairs is computed and aggregated to country pairs as a measure of bank linkages between countries. Data on bilateral trade from IMF DOTS are used as the subject of the analysis and data on bilateral bank lending from BIS locational data are used to control for financial integration and financial flows. Using a gravity approach to modeling trade with country-pair and year fixed effects, the paper finds that new connections between banks in a given country-pair lead to an increase in trade flow in the following year, even after controlling for the stock and flow of bank lending between the two countries. It is conjectured that the mechanism for this effect is that bank linkages reduce export risk, and four sets of results that support this conjecture are presented.
    Keywords: Integration & Trade
    Date: 2013–12
  17. By: Low, Patrick (Asian Development Bank Institute)
    Abstract: This paper argues that preferential trade agreements (PTAs) and the World Trade Organization (WTO) are not substitutes, and while PTAs are without doubt here to stay, dispensing with a multilateral venue for doing business in trade matters is not a serious option. It is therefore necessary to seek out better accommodation between PTAs and the WTO than has been apparent to date. The law of the General Agreement on Tariffs and Trade (GATT)/WTO has systematically fallen short in imposing discipline on discriminatory reciprocal trade agreements, while procedural requirements, such as notifications, have been partially observed at best, and dispute settlement findings have tended to reinforce existing weaknesses in the disciplines. One approach to remedying this situation is to explore a different kind of cooperation—that of soft law. A soft law approach to improving coherence and compatibility between the WTO and PTAs may hold some promise, but the option also has its pitfalls.
    Keywords: World Trade Organization; Preferential Trade Agreements; coherence; soft law; trade dispute settlement
    JEL: F10 F50 K30
    Date: 2014–05–08
  18. By: Mutreja, Piyusha (Syracuse University); Ravikumar, B. (Federal Reserve Bank of St. Louis); Sposi, Michael J. (Federal Reserve Bank of Dallas)
    Abstract: Almost 80 percent of capital goods production in the world is concentrated in 10 countries. Poor countries import most of their capital goods. We argue that international trade in capital goods has quantitatively important effects on economic development through two channels: (i) capital formation and (ii) aggregate TFP. We embed a multi country, multi sector Ricardian model of trade into a neoclassical growth model. Barriers to trade result in a misallocation of factors both within and across countries. We calibrate the model to bilateral trade flows, prices, and income per worker. Our model matches several trade and development facts within a unified framework. It is consistent with the world distribution of capital goods production, cross-country differences in investment rate and price of final goods, and cross-country equalization of price of capital goods and marginal product of capital. The cross-country income differences decline by more than 50 percent when distortions to trade are eliminated, with 80 percent of the change in each country’s income attributable to change in capital. Autarky in capital goods results in an income loss of 17 percent for poor countries, with all of the loss stemming from decreased capital.
    JEL: E22 F11 O11 O4
    Date: 2014–05–16
  19. By: Wolfgang Lechthaler; Mariya Mileva
    Abstract: We use a dynamic general equilibrium trade model with comparative advantage, heterogeneous firms, heterogeneous workers and endogenous firm entry to analyze economic policy to compensate the losers of trade liberalization and to reduce the ensuing wage inequality. We consider several instruments of economic policy: a wage tax to redistribute income between skilled and unskilled workers; sector-specific consumption taxes and profit taxes to affect inter-sectoral wage inequality; sector-specific firm entry subsidies, worker sector-migration subsidies and training subsidies to speed up the adjustment process. We find that the re-distributional and efficiency effects of these instruments differ very much. Probably the most potent tool to reduce the wage inequality after trade liberalization are training subsidies. Although the policy also generates inefficiencies because too many workers are trained, the costs of these inefficiencies are relatively low.
    Keywords: Trade liberalization, wage inequality, adjustment dynamics, re-distribution
    JEL: E24 F11 F16 J62
    Date: 2014–05
  20. By: Ogundipe, Adeyemi; Akinyemi, Opeyemi; Ogundipe, Oluwatomisin
    Abstract: This study investigates the implications of foreign land deals in Africa especially with regard to agricultural trade. It is motivated essentially by large scale foreign deals of land in Africa, Latin America, Central Asia and Southeast Asia that have been reported in recent years. One of the driving forces has been attributed to the presumed availability of land in these regions. This study employs data sourced from World Development Indicators and World Governance Indicators on key variables such as arable land per person, agricultural land as percentage of land area, net food import, regulatory quality, among others (1995-2010) on selected African countries where instances of foreign land deals have been reported. The study formulates empirical models that draw from institutional development theory, which is estimated using the Generalized Method of Moments (GMM). The study found LSFLDs to impact negatively on agricultural export in selected countries, the indexes of institutional framework used were found to be significant; likewise, agricultural land becomes highly significant with relative larger magnitude when interacted with institutional indexes. This therefore implies that as more agricultural land is acquired, agricultural export tends to dwindle and incidences of food insecurity are heightened. The preliminary investigation suggests the need for controlling the issue of massive foreign land deals through viable institutional framework, which can be engendered by building sound legal and procedural measures that will protect local rights and take into account the aspirations of local farmers and the welfare of citizenry.
    Keywords: Agricultural exports, Food security; Institutional quality; Land deals
    JEL: F21 Q15 Q18 R52
    Date: 2013–12–17
  21. By: G.I.P. Ottaviano; Joao Paulo Pessoa; Thomas Sampson; John Van Reenen
    Abstract: Since a speech by the Prime Minister in January 2013 , the Conservative party has been committed to holding a referendum on the UK's membership of the European Union (EU) in 2017. So this is a good moment to consider what would be the likely economic effects on the UK from such a move (commonly called 'Brexit').Eurosceptics emphasise greater national sovereignty from Brexit while Europhiles tend to focus on the importance of ever greater unity to reduce the risks of the political conflicts that ravaged Europe in the first half of the twentieth century. These are important matters, but this analysis focuses on the more mundane (but quantifiable) economic issues, especially trade. The costs and benefits of the UK leaving the EU are complex. Losses due to trade alone could be very substantial. Even under very optimistic assumptions, the sum of the static and dynamic trade losses would be almost 2.2% of GDP. More pessimistic calculations would lead to a long-term loss of almost a tenth of national income. The dream of splendid isolation may turn out to be a very costly one indeed.
    Keywords: Trade, European Union, welfare
    JEL: F13 F17
    Date: 2014–05
  22. By: Hamid Beladi (The University of Texas, San Antonio); Avik Chakrabarti (University of Wisconsin, Milwaukee); Sugata Marjit (Centre for Studies in Social Sciences, Calcutta)
    Abstract: We build up a simple Ricardian trade model with imperfection in the market for credit which affects the pattern of production. Workers/entrepreneurs are endowed with different levels “capital†and need to borrow to produce the credit intensive good. We argue that in such a framework identical countries may gain from trade without the assumption of comparative advantage. Such a trade will be based on fragmentation. Firms with strong internal cash flow will enter the credit intensive sector. Among those the weaker ones will like to deal in fragments and the richer ones will vertically integrate. Later we generalize our framework where prices and interest rate are determined simultaneously. We also argue why fragmentation may lead to greater efficiency in the presence of credit constraints.
    Date: 2014–01–15
  23. By: Sauvé, Pierre (World Trade Institute, University of Bern, Switzerland); Shingal, Anirudh (World Trade Institute, University of Bern, Switzerland)
    Abstract: More than half of the World Trade Organization (WTO)-notified services trade agreements (STAs) in effect since 2008 have involved at least one (South or Southeast) Asian trading partner. Drawing on Baier and Bergstrand’s (2004) determinants of preferential trade agreements and using the World Bank’s database on the restrictiveness of domestic services regimes (Borchert 2012), we examine the potential for negotiated regulatory convergence in Asian services markets. Our results suggest that countries within Asia that are more remote from the rest of the world and that have similar economic sizes, greater differences in relative factor endowments compared to the rest of the world, common legal origins, high levels of preexisting trade, and restrictive services regulations are more likely candidates for regulatory convergence. Our empirical model successfully predicts 10 of the 14 STAs negotiated during 2008–12 and 88 of the 89 dyads within Asia that lack an STA.
    Keywords: PTAs; services; regulation; regulatory convergence; Asia
    JEL: F10 F13 F15
    Date: 2014–04–01
  24. By: Fritz Breuss (WIFO)
    Abstract: With a comprehensive Trade and Investment Agreement, called Transatlantic Trade and Investment Partnership (TTIP) the European Union and the USA aim at creating the world's largest free trade area. It should help to stimulate growth and create new jobs. All TTIP studies so far forecast positive trade, welfare and employment effects on both sides of the Atlantic (in various sizes). However, these foreseen gains are not realised now but only after a long period of adjustment. The TTIP hence is not able to overcome the current economic crisis. The estimated welfare gains vary strongly according to the method applied: CGE models come up with modest welfare gains between ½ and 1 percent of GDP; estimations with gravity equations, however, predict great gains (5 percent increase of real GDP per capita in the EU and 13.4 percent in the USA). The results for Austria (1.7 percent GDP growth in CGE models to 2.7 percent in gravity approaches) are somewhat in between these extremes. The results concerning the effects of third countries are politically explosive. Gravity studies indicate extraordinarily large losses in trade (trade diversion) and welfare. This could challenge the acceptance of TTIP at the WTO. Above all, NGOs and the interested public are increasingly sceptical about the seemingly lack of transparency of the TTIP negotiations. Therefore, the European Commission in spring 2014 paused the negotiations and launched public online consultation on investor protection in TTIP.
    Date: 2014–05–12
  25. By: Wei, Wenjie
    Abstract: A two-country, three-good general equilibrium model is developed to examine the welfare and environmental effects for countries (North and South) of demand subsidies (a feed-in tariff) to renewable energy equipment, as well as tariffs on renewable energy equipment imports. Both North and South renewable energy equipment producers engage in Cournot duopoly competition with a homogeneous product in both countries. Both countries also produce polluting fossilfuel- generated electricity and a numeraire good. We show, inter alia, that an endogenous Northern import tariff is increasing in (independent of) a Northern (Southern) feed-in tariff premium, even if the North government does not internalize any pollution harm. A Northern feed-in tariff premium may hurt domestic environment due to a rebound effect and it may also hurt Southern welfare.1
    Keywords: Renewable energy equipment, Environmental goods, Environmental subsidies, Trade and environment, Feed-in tariff, Pollution, North-South Trade 􀀀, International Relations/Trade, Resource /Energy Economics and Policy, F12, F18, H23, Q58,
    Date: 2014
  26. By: Anderson, Kym; Strutt, Anna
    Abstract: Rapid growth in Asia’s emerging economies has boosted export earnings of resource-rich economies over the past decade. Will those high growth rates continue, and how will structural changes in Asia alter the relative importance of their imports of primary products? This paper projects production and trade patterns of Africa and Latin America to 2030 under various growth and policy scenarios in Asia, using the GTAP model of the global economy. We compare a projection assuming relatively conservative economic growth in China and India with a projection in which those economies continue to grow rapidly (albeit slower than in the previous decade). We then compare our conservative growth baseline with two alternative scenarios: one assumes Africa and Latin America choose to invest more in public agricultural R&D to take advantage of Asian import growth; the other assumes China and India dampen that growth by restricting their imports of key foodgrains. The final section summarizes the results and draws out policy implications for Latin America and Africa.
    Keywords: Global economy-wide model projections, Asian economic growth and structural change, booming sector economics, food security, International Relations/Trade, D58, F13, F15, F17, Q17,
    Date: 2014–01
  27. By: Jared Bullen (Treasury, Government of Australia); Michael Kouparitsas (Treasury, Government of Australia); Michal Krolikowski (Treasury, Government of Australia)
    Abstract: Australia’s terms of trade rose significantly over the eight years to 2011 12 following a period of relative constancy over the preceding 40 years. Australian Government fiscal projections from the 2010 11 Budget to the 2013 14 Budget, assumed that beyond the near term forecast period the terms of trade would fall by 20 per cent over the subsequent 15 years. This approach was silent on when the expected decline would end and the level at which the terms of trade would eventually settle. This paper details the projection methodology underlying the terms of trade projection assumption in the 2013 14 MYEFO. In contrast to the earlier approach it provides guidance on the timing of the end of the current expected decline and the associated long run level of the terms of trade. The centrepiece of the new approach is detailed price and volume forecasting modules for Australia’s major export categories, including global demand and supply models for the three major bulk commodities (iron ore, metallurgical coal and thermal coal). Based on this methodology, Australia’s terms of trade are expected to fall at a more rapid rate than previously predicted in the 2013 14 Budget from 2012 13 to 2017 18 and remain reasonably constant thereafter at a level roughly equal to that recorded in 2006 07. As noted in the 2013 14 MYEFO, there are a number of downside risks to this outlook including uncertainty around the global economy, the nominal exchange rate and non-bulk commodity price forecasts. Applying prudent judgement to the model’s outcome results in a long-run terms of trade that settles at the level observed in 2005 06 by 2019 20.
    Keywords: Confidence commodity prices, production cost, mining boom
    JEL: Q00 F17 E37
    Date: 2014–05
  28. By: Teka, Henok Gebremedhin
    Abstract: From a neo liberalist’s perspective FDI triggers technology spillovers, assists human capital formation, contributes to international trade integration, helps to create a more competitive business environment and enhances enterprise development. This will contribute to higher economic growth, which is the most potent tool for poverty alleviation. To realize these benefits, many African countries including Ethiopia, have liberalized their trade regime and attempted to create an investment friendly climate through improving their infrastructures and adjusting microeconomic instabilities. Ethiopia has shown significant increase in FDI inflows, though it accounts among the least share (as a percentage of GDP) in sub-Saharan Africa, after the adoption of liberalization measures with the fall of Derg regime in 1990’s. Therefore, this paper seeks to examine the determining factors of FDI inflow and potential factors that hinder it. Accordingly, sample of foreign firms based in the capital Addis Ababa and the nearby cities, and public servants of EIA were taken to collect information. The empirical results derived from the study shows that domestic and regional market seeking, political and social stability and investment incentives were found as the main determinants of FDI. Whereas, exchange rate volatility, corruption, and lack of clear policies and regulatory impediments were identified as the three main factors that have the potential to deter foreign investment in Ethiopia.
    Keywords: FDI, Ethiopia, Determinants, Impediments
    JEL: E6 E60 F41
    Date: 2014–05–14
  29. By: Alvaro Brunini (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía); Gabriela Mordecki (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía); Lucía Ramírez (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía)
    Abstract: This paper analyzes the relationship between exports and real exchange rate (RER) of six Uruguayan export products: beef, leather, dairy, chemical, metallurgical and plastics, selected for their importance in total exports during 1993-2011. We considered the sectoral RER and used the Johansen cointegration methodology to adjust the models. No evidence was found of a long-term relationship between sectoral exports and its sectoral RER. However, we found a long-term relationship between beef exports and cattle slaughter, which shows the high supply dependence of these exports, with an elasticity of 2.7. We also found a long-term relationship between dairy exports and the international price of skim milk, with a price-elasticity close to one. For metallurgical industry exports, the results show a long-term relationship with Argentinean GDP - main destination of those sales - with an income-elasticity of 1.7. In the case of the chemical industry, we found and elasticity near to one in relation to chemical imports, due to the fact that Uruguay must import the raw material for this industry. Finally, for plastic exports we found a cointegration vector with plastic imports and the sectoral RER, showing the importance of relative prices between exports and imports, and not only for exports.
    Keywords: exports, sectoral real exchange rate, cointegration
    JEL: C22 F31 F41
    Date: 2013–12
  30. By: Leino, Topias; Ali-Yrkkö, Jyrki
    Abstract: We study how Foreign Direct Investment (FDI) measures gross fixed capital formation in foreign-owned companies. Our data include firm-level information on FDI inflows and real investment (Gross Fixed Capital Formation) by foreign-owned companies located in Finland. Our results suggest that the recorded annual inflows of FDI poorly measure annual real investments in foreign-owned companies. Since the beginning of the global recession in 2008, FDI has significantly underestimated real investments by foreign companies in Finland. We seek to explain these findings by describing Finnish FDI target enterprises and subgroups and the nature of their FDI flows from several perspectives. We show how FDI target enterprises use other sources of funding in addition to FDI, and how a few large transactions, often related to cross-border mergers and acquisitions, can explain a great deal of the recorded annual FDI flows. We also describe how Finland’s FDI figures increasingly consist of funds that merely pass through the FDI enterprises and subgroups, arguably with little or no real economic linkage to the Finnish economy, and present a calculation method for estimating such pass-through funding.
    Keywords: foreign direct investment, fixed investment, GFCF, measure, measurement, passthrough, inward, firm-level
    JEL: F21 F23 E22
    Date: 2014–05–15
  31. By: Leino, Topias (Bank of Finland); Ali-Yrkkö , Jyrki (The Research Institute of the Finnish Economy)
    Abstract: We study Foreign Direct Investment (FDI) as a measure of real investment (gross fixed capital formation) in foreign-owned companies. Our data include firm-level information on FDI in-flows and real investment of foreign-owned companies located in Finland. Our results suggest that the recorded annual inflows of FDI do not constitute an accurate measure of annual real investments in foreign-owned companies. Since the beginning of the global recession in 2008, FDI inflows have significantly underestimated real investments in foreign companies in Finland. We seek to explain these findings by describing Finnish FDI target enterprises and subgroups and the nature of their FDI flows from several perspectives. We show how FDI target enterprises use other sources of funding, in addition to FDI, and how a few large transactions, often related to cross-border mergers and acquisitions, can explain a great deal of the recorded annual FDI flows. We also describe how Finland’s FDI stock and flow data increasingly consist of funds that merely pass through the FDI enterprises and subgroups, arguably with little or no real economic linkage to the Finnish economy, and we present a method for estimating such pass-through funding.
    Keywords: foreign direct investment; gross fixed capital formation; investment; measurement; pass-through investments
    JEL: E22 F21 F23
    Date: 2014–05–15
  32. By: Valdes, Rodrigo
    Keywords: Agribusiness, Financial Economics,
    Date: 2014
  33. By: Jaime de MELO (Ferdi); Julie REGOLO (FERDI)
    Abstract: This paper appraises the likely effects of the EPA agreement the EAC is about to sign with the EU. Customs data are used to estimate the revenue and welfare effects of finalizing an EPA agreement. The estimates show that because of exemptions, estimates from the usual approach of relying on statutory are cut in half.While the gains to consumers and producers would not completely offset the loss in revenues , they are very small contributing only to 0.1% of initial (total) import expenditures for Rwanda and of 0.2% for Uganda. The paper then discusses the benefits that would occur if the long and complex EU-EAC protocol on Rules of Origin were simplified and made more compatible with the multilateral trading system. An inclusion of Services would have been desirable and the time table for tariff reduction in the EAC should be shortened.
    JEL: F13 O19
    Date: 2014–04
  34. By: Hideaki Hirata; M. Ayhan Kose; Chris Otrok
    Abstract: Both global and regional economic linkages have strengthened substantially over the past quarter century. We employ a dynamic factor model to analyze the implications of these linkages for the evolution of global and regional business cycles. Our model allows us to assess the roles played by the global, regional, and country-specific factors in explaining business cycles in a large sample of countries and regions over the period 1960–2010. We find that, since the mid-1980s, the importance of regional factors has increased markedly in explaining business cycles especially in regions that experienced a sharp growth in intra-regional trade and financial flows. By contrast, the relative importance of the global factor has declined over the same period. In short, the recent era of globalization has witnessed the emergence of regional business cycles.
  35. By: Ruohong Cai (Princeton University); Shuaizhang Feng (Shanghai University of Finance and Economics, , Chinese University of Hong Kong); Mariola Pytliková (VSB-Technical University Ostrava, KORA, The Danish Institute of Local Governmental Research); Michael Oppenheimer (Princeton University)
    Abstract: While there is considerable interest in understanding the climate-migration relationship, particularly in the context of concerns about global climatic change, little is known about underlying mechanisms. We analyze a unique and extensive set of panel data characterizing annual bilateral international migration flows from 163 origin countries to 42 OECD destination countries covering the last three decades. We find a positive and statistically significant relationship between temperature and international outmigration only in the most agriculture-dependent countries, consistent with the widely-documented adverse impact of temperature on agricultural productivity. In addition, migration flows to current major destinations are especially temperature-sensitive. Policies to address issues related to climate-induced international migration would be more effective if focused on the agriculture-dependent countries and especially people in those countries whose livelihoods depend on agriculture.
    Keywords: International migration, Climate variability, Agricultural productivity
    Date: 2014–05
    Abstract: The aim of this paper is to examine whether or not financial liberalization has triggered banking crises in developing countries. We focus in particular on the role of capital inflows as their volatilities threat economic stability. In the empirical model, based on Panel Logit estimation, we use the two common financial liberalization indicators (de facto and dejure) for a panel of 58 developing countries for the period from 1984 to 2007. Unlike the previous studies, this paper reveals that both indicators of financial liberalization did not trigger banking crises in our sample.
    Keywords: Banking Crises, Financial Liberalization, Capital Flows, Developing Countries
    JEL: F32 F33 F34 F36 F41 G01 G11 G15 G18
    Date: 2013
  37. By: Marcelo P. Oviedo; Leandro Andrian
    Abstract: When it comes to assess the sustainability of fiscal policy and public debt in Andean countries, two idiosyncratic facts of fiscal revenues have to be considered. First, fiscal revenues coming from natural resources represent up to 44% of total fiscal revenues, producing a strong correlation between terms of trade and the overall fiscal balance, ranging from 0.79 in Ecuador to 0.90 in Peru. Second, in most of Andean countries, it is the sovereign who exploits the natural resource by its own and who extends transfers to the private sector according to the results of that exploitation. Under these conditions, terms-of-trade shocks that could threaten the sustainability of a prevailing fiscal policy affect the fiscal balance through both direct and indirect mechanisms. A highly useful tool to discern the final effect of these and other shocks on the sustainability of fiscal policy is a general equilibrium model. This paper offers such a tool which is proven to be an appropriate resource for future evaluations of fiscal policy in Andean countries. Calibrations of the model to Peru and Colombia are used to explore variants of fiscal reactions that these two countries could have employed to withstand the effects of the negative terms-of-trade shock that Latin America experienced in 2009.
    Keywords: Production & Business Cycles, Natural Resources Management, Fiscal Policy
    Date: 2013–12
  38. By: LIN, Ko Min; PLASMANS, Joseph; HSU, Song-ken
    Keywords: -
    Date: 2014–05
  39. By: O'Keeffe, Patrick
    Abstract: This research seeks to understand the impacts of the deregulation of export wheat marketing in Victoria’s western Wimmera. The dismantling of the single desk for wheat exports, operated by the Australian Wheat Board, was finalised in June 2008. In the five years since, no studies have specifically sought to understand from growers how they have been impacted by deregulation. This paper addresses this gap in the literature. To appreciate what these changes have meant, this research conducted semi-structured interviews with 23 wheat farmers based around the western Victorian town of Kaniva. Quantitative and qualitative analysis of these interviews revealed the growers were intensely opposed to the deregulation of the export wheat market. Fundamentally, this shift has resulted in growers having to market their own grain, ensuring that the success of their business was heavily reliant upon their effectiveness in an area in which they had no skills or experience. As a result, this research found that, firstly, growers cited financial costs as being the most significant impact of deregulation, and secondly, the impacts of deregulation were most intensely felt by farmers on properties of between 2,000 and 4,000 acres. In addition, participants in this study frequently described how this policy shift had left them politically disenfranchised.
    Keywords: Crop Production/Industries, Political Economy,
    Date: 2014

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