nep-int New Economics Papers
on International Trade
Issue of 2014‒07‒13
34 papers chosen by
Luca Salvatici
Universita' di Roma 3

  1. Trade, Innovation and Productivity: A Quantitative Analysis of Europe By Crespo, Aranzazu
  2. Illegal Trade in Natural Resources: Evidence from missing ports By Pierre-Louis Vezina
  3. Trade in intermediate goods and the division of labor By Soo, Kwok Tong
  4. Quality, Trade, and Exchange Rate Pass-Through By Natalie Chen; Luciana Juvenal
  5. The Quest for Non-Resource-Based FDI: Do Taxes Matter? By Tidiane Kinda
  6. The effects of international politics on oil-exporting developing countries By Kashcheeva, Mila; Tsui, Kevin K.
  7. Multi-Product Firms, Endogenous Sunk Costs, and Gains from Trade through Intra-Firm Adjustments By Irlacher, Michael
  8. Is aid for trade effective? A quantile regression approach By Martinez-Zarzoso, Inmaculada; Nowak-Lehmann D., Felicitas; Rehwald, Kai
  9. Determinants of International Tourism By Alexander Culiuc
  10. What Economists Should Know About International Goods Trade Data By Peter Egger; Yvonne Wolfmayr
  11. Impacts of Regional Trade Agreements(RTAs) on Food Security: A Case of ASEAN Free Trade Agreement By H. M. S. P. Herath; Cao Liang; Chen Yongbing
  12. Globalization and Wage Convergence: Mexico and the United States By Gandolfi, Davide; Halliday, Timothy J.; Robertson, Raymond
  13. Trade Integration and Business Cycle Synchronization: A Reappraisal with Focus on Asia By Romain A Duval; Kevin C. Cheng; Kum Hwa Oh; Richa Saraf; Dulani Seneviratne
  14. The domestic segment of global supply chains in China under state capitalism By Tang, Heiwai; Wang, Fei; Wang, Zhi
  15. The Network Origins of Economic Growth By Dürnecker, Georg; Meyer, Moritz; Vega-Redondo, Fernando
  16. The Wind of Change: Maritime Technology, Trade and Economic Development By Pascali, Luigi
  17. Export Spillovers from Global Shocks for the Middle East and Central Asia By Alberto Behar; Jaime Espinosa-Bowen
  18. Firm Dynamics and Residual Inequality in Open Economies By Gabriel Felbermayr; Giammario Impullitti; Julien Prat
  19. Multi-Product Offshoring By Eckel, Carsten; Irlacher, Michael
  20. Study of Non-Notified Trade Agreements to the World Trade Organization: The Case of Asia and Pacific Region By Hamanaka, Shintaro
  21. European Productivity, Innovation and Competitiveness: The Case of Italy By Andrew Tiffin
  22. Why do oil importers diversify their import sources politically? : evidence from U.S. firm-level data By Kashcheeva, Mila; Tsui, Kevin K.
  23. Islands in trade: Disentangling distance from border effects By Groizard, José Luis; Marques, Helena; Gallego Santana, Maria
  24. Female Brain Drains and Women's Rights Gaps : A Gravity Model Analysis of Bilateral Migration Flows By Maryam Naghsh Nejad; Andrew T. Young
  25. Safe-Haven Korea? - Spillover Effects from UMPs By Jack Ree; Seoeun Choi
  26. Does Openness Matter for Financial Development in Africa? By Antonio David; Montfort Mlachila; Ashwin Moheeput
  27. Small and Medium-Sized Enterprises in Global Markets: A Differential Approach for Services? By Iza Lejárraga; Humberto López Rizzo; Harald Oberhofer; Susan Stone; Ben Shepherd
  28. Regional Policy and FDI Location – an Overview of the Larger New EU Member States By Gabor Hunya
  29. Impact of terrorism on FDI flows to Pakistan By Haider, Murtaza; Anwar, Amar
  30. Les IDE dans les pays d’Europe centrale et orientale : une approche gravitationnelle By Miriam Brahim; Khaled Guesmi; FrédéricTeulon
  31. Indivisibilities in the Ricardian model of trade By Soo, Kwok Tong
  32. The environmental implications of Russia's accession to the world trade organization By Bohringer, Christoph; Rutherford, Thomas F.; Tarr, David G.; Turdyeva, Natalia
  33. World Input-Output Network By Federica Cerina; Zhen Zhu; Alessandro Chessa; Massimo Riccaboni
  34. Cross-Border M&As and Innovative Activity of Acquiring and Target Firms By Joel Stiebale

  1. By: Crespo, Aranzazu
    Abstract: This paper proposes a trade model with heterogeneous firms that decide not just whether and how much to export but also whether and how much to innovate. Incorporating both the extensive and intensive margins of trade and innovation leads to different possible equilibria. Depending on how costly trade is relative to innovation, medium-productivity firms may either export without innovating, innovate without exporting, do both or do neither. The impact of trade on aggregate productivity and welfare depends crucially on the equilibrium the economy is in. When lowering the variable costs of trade, the welfare effects arising from reallocating market shares across firms may be non-negligible, and when lowering the fixed cost of trade, aggregate productivity need not always increase. After calibrating the model to five European countries, we show that the different equilibria are plausible, and provide quantitative evidence that supports the predictions of our theory.
    Keywords: Process Innovation, Firm Heterogeneity, Trade Policy
    JEL: F12 F13 O24 O31
    Date: 2012–10
  2. By: Pierre-Louis Vezina
    Abstract: Countries restrict the export of natural resources to lower domestic prices, stimulate downstream industries, earn rents on international markets, or on environmental grounds. This paper provides empirical evidence of evasion of such export barriers. Using tools from the illicit trade literature, I show that exports of minerals, metals, or wood products are more likely to be missing from the exporter's statistics if they face export barriers such as prohibitions or taxes. Furthermore, I show that this relationship is significantly higher in countries with high levels of corruption and bribes at customs. The results have implications for the design of trade policies and environmental protection.
    Keywords: natural resources, illegal trade, trade barriers
    JEL: F13 O17 O19
    Date: 2014
  3. By: Soo, Kwok Tong
    Abstract: This paper develops a model of international trade based on the division of labor and comparative advantage. Labor is used to produce traded intermediate inputs which are used in the production of traded final goods. Large countries gain relatively more from comparative advantage than from the division of labor, while the opposite is true for small countries. Large countries export a smaller share of final goods and a larger share of intermediate goods than small countries. These predictions find supportive evidence in the data.
    Keywords: Division of labor; Comparative advantage; gains from trade; intermediate goods trade
    JEL: F11
    Date: 2014–07–02
  4. By: Natalie Chen; Luciana Juvenal
    Abstract: This paper investigates theoretically and empirically the heterogeneous response of exporters to real exchange rate fluctuations due to product quality. Our model shows that the elasticity of demand perceived by exporters decreases with a real depreciation and with quality, leading to more pricing-to-market and to a smaller response of export volumes to a real depreciation for higher quality goods. We test the proposed theory using a highly disaggregated Argentinean firm-level wine export dataset between 2002 and 2009 combined with experts wine rankings as a measure of quality. The model predictions find strong support in the data and the results are robust to different measures of quality, samples, specifications, and to the potential endogeneity of quality.
    Keywords: Exchange rates;Agricultural exports;Producer prices;Real effective exchange rates;External shocks;Economic models;Exchage rate pass-through, pricing-to-market, quality, unit values, exports, firms
    Date: 2014–03–12
  5. By: Tidiane Kinda
    Abstract: Using manufacturing and services firm-level data for 30 sub-Saharan African (SSA) countries, this paper shows that taxation is not a significant driver for the location of foreign firms in SSA, while other investment climate factors, such as infrastructure, human capital, and insitutions, are. By analyzing disaggregate FDI data, the paper establishes that, while there is considerable contrast in behavior between vertical FDI (foreign firms producing for export) and horizontal FDI (foreign firms producing for local markets), taxation is not a key determinant for either type of FDI. Horizontal FDI is attracted to areas with higher trade regulations, highlighting interest in protected markets. Furthermore, horizontal FDI is affected more by financing and human capital constraints, and less by infrastructure and institutional constraints, than is vertical FDI.
    Keywords: Taxes;Sub-Saharan Africa;Foreign direct investment;Human capital;Infrastructure;Developing countries;foreign ownership, tax incentives, foreign capital, foreign investors, host country, mnes, external financing, foreign investments, host countries, foreign companies, investment climates, medium-sized firms, medium-sized enterprises, foreign participation, investment decisions, fixed investment, international investment, credit markets, market access, market size, multinational enterprises
    Date: 2014–01–27
  6. By: Kashcheeva, Mila; Tsui, Kevin K.
    Abstract: International politics affects oil trade. But does it affect the oil-exporting developing countries more? We construct a firm-level dataset for all U.S. oil-importing companies over 1986-2008 to examine how these firms respond to changes in "political distance" between the U.S. and her trading partners, measured by divergence in their UN General Assembly voting patterns. Consistent with previous macro evidence, we first show that individual firms diversify their oil imports politically, even after controlling for unobserved firm heterogeneity. We conjecture that the political pattern of oil imports from these individual firms is driven by hold-up risks, because oil trade is often associated with backward vertical FDI. To the extent that developing countries have higher hold-up risks because of their weaker institutions, the political effect on oil trade should be more significant in the developing world. We find that oil import decisions are indeed more elastic when firms import from developing countries, although the reverse is true in the short run. Our results suggest that international politics can affect oil revenue and hence long-term development in the developing world.
    Keywords: Developing countries, United States, International trade, Exports, Petroleum industry, International relations, Foreign investments, Energy resources, International politics, FDI-based imports, Hold-up risk, Energy security
    JEL: F13 F51 F59 Q34
    Date: 2014–03
  7. By: Irlacher, Michael
    Abstract: In this paper, I investigate welfare gains associated with trade induced intra-firm adjustments of multi-product firms. To disentangle the welfare gains, I split up the R&D portfolio of a multi-product firm into three different channels: i) product innovation, ii) investments in the degree of product differentiation, and iii) process innovation. Trade integration enables firms to exploit economies of scale as innovation requires upfront development costs and encourages firms to spend more on R&D. I derive the indirect utility function and show that consumers bene.t from this behavior through a larger product range (love of variety) which is also more differentiated (love of diversity). Furthermore, a larger market is associated with technology upgrading. The resulting cost savings are passed on to consumers, leading to welfare gains from lower prices.
    Keywords: International Trade; Multi-Product Firms; Gains from Trade; R&D; Cannibalization Effect; Product Differentiation
    JEL: F12 L25
    Date: 2014–06–25
  8. By: Martinez-Zarzoso, Inmaculada; Nowak-Lehmann D., Felicitas; Rehwald, Kai
    Abstract: This paper investigates whether Aid for Trade (AfT) improves export performance, i.e. does AfT lead to greater exports? Using panel data and panel quantile regression, our results suggest that overall AfT disbursements promote the export of goods and services mainly for the .50 and .75 quantiles. Our results also show that for some types of AfT this effect essentially vanishes at the lower tail of the conditional distribution of exports. Hence, countries that export more in volume are those benefiting most from AfT. We also investigate which types of AfT are effective. In particular, we find that aid used to build production capacity is effective. This type of aid is associated with higher exports for almost all quantiles, with the effect increasing at the upper tail of the conditional distribution. Aid used to build infrastructure is also found to affect exports at the upper tail of the distribution. In contrast, aid for trade policy and aid disbursed for general budget support (an untargeted type of aid) are not associated with greater export levels. This finding holds true irrespective of the quantile. --
    Keywords: development aid,North-South trade,aid for trade,panel data,aid effectiveness
    JEL: F10
    Date: 2014
  9. By: Alexander Culiuc
    Abstract: The paper estimates the impact of macroeconomic supply- and demand-side determinants of tourism, one of the largest components of services exports globally, and the backbone of many smaller economies. It applies the gravity model to a large dataset comprising the full universe of bilateral tourism flows spanning over a decade. The results show that the gravity model explains tourism flows better than goods trade for equivalent specifications. The elasticity of tourism with respect to GDP of the origin (importing) country is lower than for goods trade. Tourism flows respond strongly to changes in the destination country’s real exchange rate, along both extensive (tourist arrivals) and intensive (duration of stay) margins. OECD countries generally exhibit higher elasticties with respect to economic variables (GDPs of the two economies, real exchange rate, bilateral trade) due to the larger share of business travel. Tourism to small islands is less sensitive to changes in the country’s real exchange rate, but more susceptible to the introduction/removal of direct flights.
    Keywords: Tourism;OECD;Pacific Island Countries;Small states;Bilateral trade;Real effective exchange rates;Economic models;International Tourism, Gravity model, Real exchange rate, Small islands
    Date: 2014–05–12
  10. By: Peter Egger (WIFO); Yvonne Wolfmayr (WIFO)
    Abstract: The analysis of bilateral trade flows features prominently in empirical research in international economics. Various different international statistical sources are available for researchers and commonly used. Unfortunately, the data happen to differ quite substantially across the different sources. It is the task of this project to identify those differences, quantify them, and track their origin and to demonstrate the consequences of differences in the data for estimation of fundamental relationships such as the gravity equation. We find the largest discrepancies in a comparison of UN and OECD databases to the IMF and Eurostat trade data. In the most extreme cases the differences to reported trade flows in other data sources amount to as much as 40 billion $ in measured export flows and to as much as 50 billion $ in bilateral "mirrored imports". Most importantly we find that these differences carry over to econometric results in applications of the gravity model, one of the workhorses of empirical trade research. Parameters of key variables such as log bilateral distance, common borders, common language, or a colonial relationship dummy variable vary substantially and do not even have a stable sign when using one database versus the other. Hence, heterogeneous reporting standards across data sources and the inhomogeneous sample coverage have a non-trivial impact on the quantifications of trade costs in empirical research.
    Keywords: bilateral trade flows, statistical discrepancies, data sources, gravity model
    Date: 2014–06–30
  11. By: H. M. S. P. Herath; Cao Liang; Chen Yongbing
    Abstract: Discriminatory trade liberalization policies are becoming more popular among world economies. Countries are motivated to enter for regional trade agreements to capture faster economic growth for alleviating poverty. In developing economies like most of the member countries of the Association of South East Asian Nations (ASEAN), a sizeable portion of people are suffering from poverty by exposing them to food insecurity. Low level of income and low productivity of agricultural sector have augmented the severity of food insecurity of those people. Discriminatory trade liberalization policies are expected to reduce poverty and strengthen the food security. The objective of this paper is to examine the effect of ASEAN Free Trade Agreement (AFTA) on food security of its member countries. The multiple regression analysis in panel data was employed to disentangle the impacts of trade liberalization on food securit y with use of regional trade agreement dummy variable. The finding of the study supports that AFTA has influenced positively on food security of its member nations. After the formation of AFTA, the level of per-capita daily dietary energy supply of the member countries has been increased moderately over time.
    Date: 2014–07
  12. By: Gandolfi, Davide (Macalester College, Minnesota); Halliday, Timothy J. (University of Hawaii at Manoa); Robertson, Raymond (Macalester College, Minnesota)
    Abstract: Neoclassical trade theory suggests that factor price convergence should follow increased commercial integration. Rising commercial integration and foreign direct investment followed the 1994 North American Free Trade Agreement between the United States and Mexico. This paper evaluates the degree of wage convergence between Mexico and the United States between 1988 and 2011. We apply a synthetic panel approach to employment survey data and a more descriptive approach to Census data from Mexico and the US. First, we find no evidence of long-run wage convergence among cohorts characterized by low migration propensities although this was, in part, due to large macroeconomic shocks. On the other hand, we do find some evidence of convergence for workers with high migration propensities. Finally, we find evidence of convergence in the border of Mexico vis-à-vis its interior in the 1990s but this was reversed in the 2000s.
    Keywords: migration, labor-market integration, factor price equalization
    JEL: F15 F16 J31 F22
    Date: 2014–06
  13. By: Romain A Duval; Kevin C. Cheng; Kum Hwa Oh; Richa Saraf; Dulani Seneviratne
    Abstract: This paper reexamines the relationship between trade integration and business cycle synchronization (BCS) using new value-added trade data for 63 advanced and emerging economies during 1995–2012. In a panel framework, we identify a strong positive impact of trade intensity on BCS—conditional on various controls, global common shocks and country-pair heterogeneity—that is absent when gross trade data are used. That effect is bigger in crisis times, pointing to trade as an important crisis propagation mechanism. Bilateral intra-industry trade and trade specialization correlation also appear to increase co-movement, indicating that not only the intensity but also the type of trade matters. Finally, we show that dependence on Chinese final demand in value-added terms amplifies the international spillovers and synchronizing impact of growth shocks in China.
    Keywords: Trade integration;Asia;China;Business cycles;Economic growth;Spillovers;Developed countries;Emerging markets;Cross country analysis;Trade, Value Added, Business Cycle Synchronization, Spillovers, Asia.
    Date: 2014–04–03
  14. By: Tang, Heiwai; Wang, Fei; Wang, Zhi
    Abstract: This paper proposes methods to incorporate firm heterogeneity in the standard input-output table-based approach to portray the domestic segment of global value chains in a country. The analysis uses Chinese firm census data for the manufacturing and service sectors, along with constrained optimization techniques. The conventional input-output table is split into sub-accounts, which are used to estimate direct and indirect domestic value added in exports of different types of firms. The analysis finds that in China, state-owned enterprises and small and medium domestic private enterprises have much higher shares of indirect exports and ratios of value-added exports to gross exports compared with foreign-invested and large domestic private firms. Based on input-output tables for 2007 and 2010, the paper finds increasing value-added export ratios for all firm types, particularly for state-owned enterprises. It also finds that state-owned enterprises are consistently more upstream while small and medium domestic private enterprises are consistently more downstream within industries. These findings suggest that state-owned enterprises still play an important role in shaping China's exports.
    Keywords: Economic Theory&Research,Free Trade,Microfinance,Trade Policy,Investment and Investment Climate
    Date: 2014–06–01
  15. By: Dürnecker, Georg; Meyer, Moritz; Vega-Redondo, Fernando
    Abstract: In this paper, we propose a new approach to represent a country's outward orientation. Prior work mostly uses indicators of aggregate trade intensity, trade policy or trade restrictiveness. Our approach offers a broader perspective as it measures a country's level of integration not only by its set of direct trade connections with the rest of the world but also through the full architecture of its second, third, and all other higher-order connections. We apply our methodology to a sample of 167 countries spanning the period from 1962 to 2009 and perform a Bayesian modelaveraging analysis on the determinants of growth. We find a prominent positive effect of integration on a country's level of per capita income, while the aforementioned traditional measures of outward orientation display only a secondary, largely insignificant, weight. This, we argue, highlights the network basis of economic growth and adds a novel perspective to the notion of economic openness. We also perform several sensitivity checks and conclude that our baseline findings are extremely robust to different data input and alternative assumptions about the computation of country integration.
    Keywords: Globalization , Trade Integration , Economic Growth , Network Analysis , Dynamic Panel Model , Bayesian Model Averaging
    JEL: C11 D85 F15 O40
    Date: 2014
  16. By: Pascali, Luigi (Department of Economics, University of Warwick)
    Abstract: The 1870-1913 period marked the birth of the first era of trade globalization. How did this tremendous increase in trade affect economic development? This work isolates a causality channel by exploiting the fact that the steamship produced an asymmetric change in trade distances among countries. Before the invention of the steamship, trade routes depended on wind patterns. The introduction of the steamship in the shipping industry reduced shipping costs and time in a disproportionate manner across countries and trade routes. Using this source of variation and a completely novel set of data on shipping times, trade, and development that spans the great majority of the world between 1850 and 1900, I find that 1) the adoption of the steamship was the major reason for the first wave of trade globalization, 2) only a small number of countries that were characterized by more inclusive institutions benefited from globalization, and 3) globalization exerted a negative effect on both urbanization rates and economic development in most other countries. Key words: Steamship ; Gravity ; Globalization JEL classification: F1 ; F15 ; F43 ; O43
    Date: 2014
  17. By: Alberto Behar; Jaime Espinosa-Bowen
    Abstract: This paper quantifies the effect of realized and potential global growth disappointments on export volumes from the Middle East, North Africa, the Caucasus, and Central Asia. Estimates of export elasticities with respect to trading partner GDP indicate non-oil export volumes are relatively responsive while service exports are less responsive. Downward revisions to global GDP growth for 2011–14 have impeded export performance, and the possibility of disappointing GDP growth in Europe and emerging markets presents further downside risks for exports. The Maghreb countries are particularly sensitive to developments in Europe, while CCA countries are more susceptible to growth in the BRICS.
    Keywords: External shocks;Middle East and Central Asia;Spillovers;Exports;Economic models;Gravity model, exports, spillovers, trade, Middle East, North Africa, Caucasus, Central Asia
    Date: 2014–05–09
  18. By: Gabriel Felbermayr; Giammario Impullitti; Julien Prat
    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 ï¬rms and homogeneous workers. Wage inequality across and within ï¬rms results from their different hiring needs along their life cycles and the convexity of their adjustment costs. The interaction between wage posting and ï¬rms’ growth process allows us to explain some recent empirical regularities on ï¬rm 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 ï¬rm dynamics and aggregate labor market outcomes. Focusing on the period 1996-2007, we ï¬nd 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 deregulation reforms.
    Keywords: Wage Inequality, International Trade, Directed Search, Firm Dynamics, Product and Labor Market Regulation
    Date: 2014
  19. By: Eckel, Carsten; Irlacher, Michael
    Abstract: In this paper, we incorporate offshoring of labor-intensive goods in a model with multi-product firms, and explore its implications in partial and general oligopolistic equilibrium. We identify important aspects of this phenomenon and argue that improvements in offshoring opportunities can affect the geographic organization of a firm and its product range. Multi-product firms internalize supply linkages (flexible manufacturing) and demand linkages (cannibalization effect). In partial equilibrium, we find that more products are produced offshore on a larger scale and firms expand their product range with better prospects for offshoring. We identify the cannibalization effect as an important transmission mechanism within multi-product firms and show that the latter effect hits domestic labor demand in addition to the well-known relocation effect. Interestingly in general equilibrium these effects lead to adjustments in domestic factor prices and may cause a partial re-relocation of product lines.
    Keywords: Multi-Product Firms; Cannibalization Effect; Product Range; Efficiency-seeking Offshoring; General Oligopolistic Equilibrium.
    JEL: F12 F23 L23
    Date: 2014–06–25
  20. By: Hamanaka, Shintaro (Asian Development Bank)
    Abstract: “Cast light and evil will go away.” This is the basic idea of the transparency exercise of regional trade agreements (RTAs) at the World Trade Organization (WTO). Information sharing on RTAs is critically important because monitoring is impossible without it. In order for us to see not only good but also evil RTAs, a light called “notification requirement” should reach them. In reality, however, it is too optimistic to assume that the light reaches all RTAs. There seem to be many ghosts living in the dark; no information on ghosts can be shared and none can confirm if they are really ghosts. This paper attempts to reveal those RTAs upon which the WTO fails to shed the light of the transparency exercise. While many studies have pointed out that there are many non-notified RTAs as a reservation in conducting analysis of RTAs, this is the first scholarly attempt to identify the comprehensive picture of non-notified RTAs, with an emphasis on the Asia and the Pacific. Because information on all RTAs notified to the WTO is included in the WTO RTA Database, gathering information on non-notified trade agreements is the key to understanding the universe of trade agreements.
    Keywords: non-notified RTAs; transparency; Committee on Regional Trade Agreements(CRTA); notification; World Trade Organization (WTO); systemic issues
    JEL: F15 F53
    Date: 2014–05–01
  21. By: Andrew Tiffin
    Abstract: In Italy, price-based competitiveness measures are not always an accurate predictor of trade outcomes. This paper offers a more comprehensive assessment of Italian competitiveness, focusing on the role of innovation and the evolution of Italy’s export market share. Overall, Italy maintains a high-quality export mix, and the adaptability of small-scale specialized firms is still a source of strength. But, small firm size is becoming less of an asset, and even the most innovative sectors are weighed down by the structural barriers that have depressed productivity more broadly. Italy’s future competitiveness will depend on full implementation of a comprehensive structural-reform agenda.
    Keywords: Global competitiveness;Italy;Exports;Productivity;Labor costs;Italy, competitiveness, exports, shift share analysis, CMSA
    Date: 2014–05–09
  22. By: Kashcheeva, Mila; Tsui, Kevin K.
    Abstract: International politics affects oil trade. But why? We construct a firm-level dataset for all U.S. oil-importing companies over 1986-2008 to examine what kinds of firms are more responsive to change in "political distance" between the U.S. and her trading partners, measured by divergence in their UN General Assembly voting patterns. Consistent with previous macro evidence, we first show that individual firms diversify their oil imports politically, even after controlling for unobserved firm heterogeneity. We conjecture that the political pattern of oil imports from these individual firms is driven by hold-up risks, because oil trade is often associated with backward vertical FDI. To test this hold-up risk hypothesis, we investigate heterogeneity in responses by matching transaction-level import data with firm-level worldwide reserves. Our results show that long-run oil import decisions are indeed more elastic for firms with oil reserves overseas than those without, although the reverse is true in the short run. We interpret this empirical regularity as that while firms trade in the spot market can adjust their imports immediately, vertically-integrated firms with investment overseas tend to commit to term contracts in the short run even though they are more responsive to changes in international politics in the long run.
    Keywords: United States, International trade, International relatiolns, Petroleum industry, Imports, Foreign investments, Energy resources, International politics, FDI-based imports, Hold-up risk, Energy security
    JEL: F13 F51 F59 Q34
    Date: 2014–02
  23. By: Groizard, José Luis; Marques, Helena; Gallego Santana, Maria
    Abstract: There is a well-established literature on border effects covering trade between regions separated by a land border; however that literature has not so far considered the case of regions separated by a sea border. Whilst the former is typically studied as a political border that affects adjacent regions belonging to different countries and can be reduced by free trade agreements, the latter is a geographical border that affects regions within the same country and cannot be reduced in a similar way. Both types of borders produce similar effects upon trade, calling for a modification of the trade cost function to reflect the fixed cost caused by the need to pay fees and taxes, as well as the time-loss inefficiency, related to the existence of the border. However, in the case of the sea border that fixed cost is due to the use of two modes of transport (road and sea typically). The empirical strategy used to estimate the island effect proceeds in two steps. First an augmented gravity model is estimated for mainland and island regions; then a Blinder-Oaxaca decomposition is applied to the gravity estimation results in order to disentangle the distance and border effects for those regions, net of all other factors controlled for in the gravity estimations. Results show that island regions are at a substantial disadvantage compared to continental regions, which is due more to the lack of adjacency imposed by the sea border rather than to the higher average distance. --
    Keywords: gravity equation,border effects,panel data,Spain,regional trade
    JEL: F15 C23
    Date: 2014
  24. By: Maryam Naghsh Nejad (Institute for the study of labor (IZA), Schaumburg-Lippe-Strasse); Andrew T. Young (West Virginia University, College of Business and Economics)
    Abstract: In this paper we model the migration decisions of high-skilled women as a function of the benefits associated with moving from an origin with relatively low women´s rights to a destination with a relatively high women´s rights. However, the costs faced by women are decreasing in the level of women´s rights provided. The model predicts a non-linear relationship between the relative levels of women's rights in destination versus origin countries (the women's rights gap) and the gender gap in high-skilled migration flows (the female brain drain ratio). In particular, starting from large values of the women´s rights gap (where women´s rights are very low in the origin) decreases in the gap may be associated with increases in the female brain drain ratio. However, starting from lower levels of the gap the relationship is positive: a greater gain in women´s rights moving from origin to destination is, all else equal, associated with a greater likelihood of migration. Using a cross section of over 3,000 bilateral migration flows across OECD and non-OECD countries and the women's rights indices from the CIRI Human Rights Dataset, we report evidence consistent with the theory. A statistically significant and nonlinear relationship exists between women's rights gaps and female brain drain ratios. The evidence is particularly strong for the case of women's political rights.
    Keywords: female brain drain, high skilled female migration, bilateral migration flows, women's rights, institutional quality, gravity models
    JEL: F22 J11 J61 J16 O17 O43
    Date: 2014–03
  25. By: Jack Ree; Seoeun Choi
    Abstract: We examine how Korea’s capital flows and trade have been affected by the quantitative easing (QE) of the United States and the quantitative and qualitative easing (QQME) of Japan. Korea is an intriguing case due to its borderline position between advanced and emerging market country groups, and the common perception that Korea competes fiercely with Japan in the world market for trade. We find that QE had little direct impact on capital flows to Korea, and tapering is unlikely to cause capital outflows from it owing to partial safe-haven behavior of capital flows to Korea. We also find that the exchange rate spillover from QQME to Korea has been limited both on trade and capital flow fronts.
    Keywords: Spillovers;Korea, Republic of;Capital flows;Monetary policy;Japan;United States;Trade integration;Exports;Exchange rates;Economic integration;Unconventional monetary policy, spillover, capital flow, trade
    Date: 2014–04–03
  26. By: Antonio David; Montfort Mlachila; Ashwin Moheeput
    Abstract: This paper analyzes the links between financial and trade openness and financial development in Sub-Saharan African (SSA) countries. It is based on a panel dataset using methods that tackle slope heterogeneity, cross-sectional dependence and non-stationarity, important econometric problems that are often ignored in the literature. The results do not point to a general direct robust link between trade and capital account openness and financial development in SSA, once we control for other factors such as GDP per capita and inflation. But there is some indication that trade openness is more important for financial development in countries with better institutional quality. The findings might be due to a number of factors including distortions in domestic financial markets, relatively weak institutions and/or poor financial sector supervision. Thus, African policy makers should be cautious about expectations regarding immediate gains for financial development from greater international integration. Such gains are more likely to occur through indirect channels.
    Keywords: Development;Sub-Saharan Africa;Trade liberalization;Capital account liberalization;Economic integration;Econometric models;Financial Development, Trade Openness, International Financial Integration, sub-Saharan Africa
    Date: 2014–06–09
  27. By: Iza Lejárraga; Humberto López Rizzo; Harald Oberhofer; Susan Stone; Ben Shepherd
    Abstract: This study empirically investigates key restrictions to the internationalisation of small and medium-sized enterprises (SMEs) in manufacturing and across different types of services. The study explores the extent to which binding constraints faced by SMEs producing goods may differ from small firms operating in services sectors and takes stock of how existing policy initiatives address some of these differences. Our results suggest that while firm size clearly influences the trade performance of SMEs in manufacturing, it is an ambiguous predictor of export performance in the case of small-sized services firms. The findings show that firm size influences the choice of export channel and that small firms rely more on indirect and agglomeration networks. Finally, the results point to a strong degree of firm-level heterogeneity across services activities and enterprise size. It would seem that incorporating sectoral and size heterogeneity into existing policies might be desirable to address key constraints for SMEs.
    Keywords: trade, services, small and medium-sized enterprises, internationalisation, SMEs, trade in services
    JEL: F14 L8
    Date: 2014–07–03
  28. By: Gabor Hunya (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: Summary The paper compares three countries (Hungary, Poland and Romania) in terms of the number of greenfield FDI projects and of GDP by NUTS-2 sub-country regions. We discuss whether the particular regions received a smaller or larger share of projects than their share in GDP. Then we outline the regional and investment policy tools applied in each of the countries, looking at their possible impact on the location choice of investors. The investigation reveals significant regional gaps in attracting new FDI projects and a dominance of the capital cities. Regional discrepancies between NUTS-2 regions in terms of per capita GDP have become marginally smaller in recent years but were mainly unrelated to the location of new foreign investments. State aid for large investments, industrial parks and special economic zones has been among the most powerful tools directing the location choice of new FDI projects.
    Keywords: FDI, industrial location, regional policy, FDI policy
    JEL: F21 F23 R30 R38 R58
    Date: 2014–03
  29. By: Haider, Murtaza; Anwar, Amar
    Abstract: This study explores the adverse impacts of terrorism on the net Foreign Direct Investment (FDI) flows to Pakistan. Since 2003, terrorist violence has killed over 52,000 individuals in Pakistan. The unrelenting violence has substantially increased investment and security risks. This study uses time series econometrics to develop theoretically and empirically sound estimates for the impact of terrorism on FDI flows. This study has found that an increase in terrorist violence reduces FDI. Furthermore, the disaggregated analysis by individual sectors explores the nuances in considerations for FDI, where some sectors are affected while others remain immune to terrorism-related risks.
    Keywords: Foreign Direct Investment; Terrorism; Pakistan; ARMAX Model
    JEL: D74 F23 N45
    Date: 2014–07–07
  30. By: Miriam Brahim; Khaled Guesmi; FrédéricTeulon
    Abstract: This paper explores the relationship between economic indicators and inward foreign direct investment (FDI) in the Central and Eastern Europe countries. We estimate a gravity model of FDI for ten countries covering the period 1993- 2010, employing the Seemingly Unrelated Regressions Method. The results indicate that european inward investments are driven by the value of GDPs and the geographical distance. We find that institution stability, control of corruption, government effectiveness, and private sector policies are important factors driving FDI. The market size, the risk, the technological intensity, the geographic proximity and the privatization method explain a great part of bilateral FDI to the applicant countries.
    Keywords: Gravity model, FDI flows, Central and Eastern Europe countries (CEECs), Transition economies.
    Date: 2014–06–27
  31. By: Soo, Kwok Tong
    Abstract: This paper develops a Ricardian model of trade in which there are indivisibilities in both production and consumption. Indivisibilities give rise to new results compared to the standard model with perfectly divisible production and consumption. Production indivisibility may result in complete specialisation even in autarky, while consumption indivisibility may result in consumption heterogeneity even amongst ex ante identical consumers. Indivisibilities lead to efficiency losses relative to the perfectly divisible case.
    Keywords: Ricardian model; CES preferences; indivisible production; indivisible consumption
    JEL: F11
    Date: 2014–07–02
  32. By: Bohringer, Christoph; Rutherford, Thomas F.; Tarr, David G.; Turdyeva, Natalia
    Abstract: This report investigates the environmental impacts of Russia's accession to the World Trade Organization. A 10-region, 30-sector model of the Russian economy is developed. The model is innovative and more accurate empirically in that it contains foreign direct investment, imperfectly competitive sectors, and endogenous productivity effects triggered by World Trade Organization accession along with environmental emissions data in Russia for seven pollutants that are tracked for all 30 sectors in each of the 10 regions. The decomposition analysis shows that despite the fact that World Trade Organization accession allows Russia to import better technologies and reduce pollution from the"technique effect,"on balance World Trade Organization accession alone will increase environmental pollution in Russia through a shift toward dirty industries (the"composition effect") and the expansion of output with its associated increase in pollution ("scale effect"). The paper assesses the costs of three types of environmental regulations to reduce carbon dioxide emissions by 20 percent. The paper simultaneously implements a central case scenario with each of the carbon dioxide emission reduction policy initiatives. The analysis finds that the welfare gains of World Trade Organization accession are large enough to pay for the costs of any of the three environmental abatement policies, while leaving a net welfare gain. But the political economy implications are that the non-market-based policies are more costly and the command and control policy, which is not well targeted, is very costly. Based on a constant returns to scale model, the estimated welfare gains are insufficient to finance the costs of environmental regulation.
    Keywords: Environmental Economics&Policies,Climate Change Mitigation and Green House Gases,Climate Change Economics,Economic Theory&Research,Environment and Energy Efficiency
    Date: 2014–06–01
  33. By: Federica Cerina; Zhen Zhu; Alessandro Chessa; Massimo Riccaboni
    Abstract: Economic systems, traditionally analyzed as almost independent national systems, are increasingly connected on a global scale. Only recently becoming available, the World Input-Output Database (WIOD) is one of the first efforts to construct the multi-regional input-output (MRIO) tables at the global level. By viewing the world input-output system as an interdependent network where the nodes are the individual industries in different economies and the edges are the monetary goods flows between industries, we study the network properties of the so-called world input-output network (WION) and document its evolution over time. We are able to quantify not only some global network properties such as assortativity, clustering coefficient, and degree and strength distributions, but also its subgraph structure and dynamics by using community detection techniques. Over time, we detect a marked increase in cross-country connectivity of the production system, only temporarily interrupted by the 2008-2009 crisis. Moreover, we find a growing input-output regional community in Europe led by Germany and the rise of China in the global production system. Finally, we use the network-based PageRank centrality and community coreness measure to identify the key industries and economies in the WION and the results are different from the one obtained by the traditional final-demand-weighted backward linkage measure.
    Date: 2014–07
  34. By: Joel Stiebale
    Abstract: This paper analyzes the effects of cross-border mergers and acquisitions (M&As) on the innovation of European firms. The results indicate a considerable increase in post-acquisition innovation in the merged entity. This is mainly driven by inventors based in the acquirer's country, while innovation in the target's country tends to decline. The asymmetry of effects between acquiring and target firms increases with pre-acquisition differences in knowledge stocks, indicating a relocation of innovative activities to more efficient usage within multinational firms. Instrumental variable techniques as well as a propensity-score matching approach indicate that the effect of cross-border M&As on innovation is causal.
    Keywords: Multinational Enterprises, Mergers and Acquisitions, Innovation
    Date: 2014

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