nep-int New Economics Papers
on International Trade
Issue of 2014‒11‒12
27 papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. The Euro Effect on Bystanders By Gullstrand , Joakim; Olofsdotter, Karin
  2. Not all Free Trade Agreements have the same Advantages By Zylkin, Thomas
  3. Modeling Firm Heterogeneity in International Trade: Do Structural Effects Matter? By Roberto Roson; Kazuhiko Oyamada
  4. Temporary Expats for Export: Firm-Level Evidence By Graneli, Anna; Lodefalk, Magnus
  5. Determinants of Vietnam’s exports: Application of the Gravity Model By Nguyen, Huy Quynh
  6. Foreign Direct Investment, Source Country Heterogeneity and Management Practices By Heyman, Fredrik; Nor, Pehr-Johan; Hammarberg, Rickard
  7. Structural Change in Turkish External Trade: Evidence from BEC Sectors By Erdal Ozmen; Mehmet Duygu Yolcu-Karadam
  8. From Selling Goods to Selling Services: Firm Responses to Trade Liberalization By Holger Breinlich; Anson Soderbery; Greg C. Wright
  9. Residual exports and domestic demand: an empirical analysis By Muñoz Sepúlveda, Jesús A.
  10. Does trade openness affect manufacturing growth at the Indian state level? By Ghosh Dastidar, Sayantan; Veeramani, C
  11. Introducing Melitz-Style Firm Heterogeneity in CGE Models: Technical Aspects and Implications By Roberto Roson; Kazuhiko Oyamada
  12. Foreign Direct Investment and Foreign Portfolio Investment in the contemporary globalized world: should they be still treated separately? By Humanicki, Marcin; Kelm, Robert; Olszewski, Krzysztof
  13. Did China Tire Safeguard Save U.S. Workers? By Chung, Sunghoon; Lee, Joonhyung; Osang, Thomas
  14. Still different after all these years. Extensive and intensive margins of exports in East and West German manufacturing enterprises By Joachim Wagner
  15. Strategic Trade Policies in International Rivalry When Competition Mode is Endogenous By Choi, Kangsik; Lee, Ki-Dong; Lim, Seonyoung
  16. Effect of consuming imported cultural goods on tolerance for immigrants from trade partners: Case of Japanese anime in Korea. By Yamamura, Eiji; Shin, Inyong
  17. The Effects of European Integration on the Stability of International Trade: A Duration Perspective By Besedes, Tibor
  18. Islam, Inequality and Pre-Industrial Comparative Development By S. Michalopoulos; A. Naghavi; G. Prarolo
  19. Trade in Tasks and the Organization of Firms By Marin, Dalia; Schymik, Jan; Tarasov, Alexander
  20. Entry of Foreign Multinational Firms and Productivity Growth of Domestic Firms: An Empirical Analysis Based on the Firm-Level Data Underlying the Basic Survey on Business Structure and Activities(in Japanese) By Keiko ITO
  21. International Trade, Unemployment, and Firm Owners in a General Equilibrium with Oligopoly By Kamei, Keita
  22. Services Trade Restrictiveness Index (STRI): Financial Services By Dorothée Rouzet; Hildegunn Kyvik Nordås; Frederic Gonzales; Massimo Geloso Grosso; Iza Lejárraga; Sébastien Miroudot; Asako Ueno
  23. Strategic Trade Policies with Endogenous Choice of Competition Mode under a Vertical Structure By Choi, Kangsik; Lim, Seonyoung
  24. Exports and Domestic Demand Pressure: a Dynamic Panel Data Model for the Euro Area Countries By Elena Bobeica; Paulo Soares Esteves; António Rua; Karsten Staehr
  25. Impact of import liberalisation on poverty: a dynamic computable general equilibrium and microsimulation analysis for Ghana By Obeng, Camara Kwasi
  26. In name only: Are free trade zones assisting capitalism or criminals and crony capitalists? By Roger Bate
  27. Industrial Policy in Indonesia: A Global Value Chain Perspective By Tijaja, Julia; Faisal, Mohammad

  1. By: Gullstrand , Joakim (Department of Economics, Lund University); Olofsdotter, Karin (Department of Economics, Lund University)
    Abstract: This paper investigates trade effects of the euro focusing on the impact on bystanders. A common currency is expected to lower both variable and fixed trade costs, inducing increased trade flows between currency-union members on both intensive and extensive margins of trade. While this trade-creating effect has gained attention in recent work using firm-level data, few studies have looked on the possible trade-diverting effect for firms remaining outside. In this paper, we use data for Swedish manufacturing firms covering the 1997-2006 period in order to assess the potential trade-diverting effects of the euro on Swedish exports. We consider variations in the impact of the euro taking both firm, industry and export-market characteristics into account. Our results suggest that there are some trade-diverting effects on the intensive margin but that these negative effects of the euro on trade flows are asymmetric and only valid for core markets within the Eurozone.
    Keywords: euro; trade diversion; exports; heterogeneous firms
    JEL: F10
    Date: 2014–09–12
  2. By: Zylkin, Thomas (School of Economics)
    Abstract: Using NAFTA as an illustrating example, I show that heterogeneity in the effects of free trade agreements (FTAs) both within and across agreements is not very well understood. Not only has NAFTA reduced trade frictions significantly more than other FTAs, but each NAFTA member country has enjoyed larger gains in access to the other two markets in some sectors over others. Most notably, I observe a crucial role for reductions in unobservable non-tariff barriers in determining these patterns. I then show these overlooked sources of heterogeneity have important first order implications for both prices and welfare in general equilibrium. Using tariffs to project welfare for example not only greatly underestimates the overall welfare gains for all three countries - Mexico's in particular - but also overstates the benefits for U.S. producers. I also use a novel measure of the gains from specialization to show that these first order differences can in turn be amplified into even larger differences in more intricate welfare calculations.
    Keywords: Free Trade Agreements; International Trade; Gravity
    JEL: F13 F14 F15
    Date: 2014–08–28
  3. By: Roberto Roson; Kazuhiko Oyamada
    Abstract: This paper analyzes the qualitative properties of a multisectoral, multiregional computable general equilibrium model where some industries include heterogeneous firms as in Melitz (2003). The model, formulated according to Roson and Oyamada (2014), adds endogenous productivity effects to a standard Walras-Ricardian framework. We argue that the inclusion of such effects changes the magnitude and distribution of welfare benefits obtainable by reductions in trade barriers, due to of comparative advantages. We illustrate the point through a numerical example, in which alternative model formulations are assessed. A standard neoclassic GE model, a basic Melitz model and a hybrid model are then compared. The three model versions are all calibrated with the same data set and an identical simulation experiment (a 50% reduction of transport costs between two regions) is carried out in the three cases. The results show that the hybrid model displays the largest welfare gains, as it combines Ricardian comparative advantages with Melitz average productivity improvements. However, they also show that new effects, not present in the original Ricardo and Melitz frameworks, are at a work..
    Keywords: Computable General Equilibrium Models, Melitz, Firm Heterogeneity, International Trade.
    JEL: C63 C68 D51 D58 F12 L11
    Date: 2014
  4. By: Graneli, Anna (National Board of Trade); Lodefalk, Magnus (Örebro University School of Business)
    Abstract: We analyze the relation between temporary expats in firms and exports. Temporary expats are positively associated with exports. The within-firmdestination- country link with export intensity is substantially larger for services than for merchandise and for exports of heterogeneous services and merchandise than for exports of homogeneous products. Additionally, the association with exports is stronger for temporary than for permanent expats. Furthermore, our evidence suggests that temporary expats are positively related to exports by assisting firms in overcoming informal trade barriers. Overall, our findings suggest the importance of the temporary movement of persons for providing firms with up-to-date links to export markets.
    Keywords: Expats; temporary movement of persons; migration; networks; firm trade
    JEL: D80 F10 F20 J60
    Date: 2014–10–06
  5. By: Nguyen, Huy Quynh
    Abstract: The success of exports in Vietnam has become a driving force for economic growth since the reform in 1986. The paper uses data from 2001 to 2004 to estimates the gravity model for Vietnam’s exports with the random effect estimation. The empirical results show that the bilateral trade of Vietnam has positive relationship with the country’s GDP and importing countries’ GDP. Furthermore, it has a negative relationship with distance from Vietnam to trading partners. These results are the same as the previous studies of the gravity model. Particularly, foreign direct investment, border effects and exchange rate play a significant role in promoting exports of Vietnam. Besides, the deepened integration into the region and world market also has significant impacts on expanding exports of Vietnam. Therefore, these factors have contributed to explaining the success in exports of Vietnam over the past few years.
    Keywords: Gravity model, exports , determinants of exports
    JEL: F14 F15
    Date: 2014–10–10
  6. By: Heyman, Fredrik (Research Institute of Industrial Economics (IFN)); Nor, Pehr-Johan (Research Institute of Industrial Economics (IFN)); Hammarberg, Rickard (Research Institute of Industrial Economics (IFN))
    Abstract: This paper examines whether and, if so, why source country heterogeneity exists in foreign direct investment (FDI). Using detailed data on all Swedish firms for the period from 1996 to 2009, we find statistical evidence that affiliate performance differs systematically across source countries. For instance, affiliates of US multinational enterprises (MNEs) are, on average, approximately three times more productive than affiliates headquartered in the Nordic countries. One possible explanation for these discrepancies is differences in organization practices across source countries. Using new firm-level data from the World Management Survey to estimate a global index of the quality of management practices for MNEs with headquarters in our source countries of interest, we find that source country heterogeneity in affiliate performance is highly correlated with differences in management practices.
    Keywords: Multinational firms; FDI; Management practices; Firm performance
    JEL: F21 F23 L10 M10
    Date: 2014–09–25
  7. By: Erdal Ozmen (Department of Economics, METU); Mehmet Duygu Yolcu-Karadam (Department of Economics, METU)
    Abstract: This study investigates export and import dynamics of Turkey in the context of the main Broad Economic Classification (BEC) sectors. Our results suggest that the trade equations do not remain stable when an endogenously estimated regime change is taken account. According to our results, consistent with the elasticity pessimism literature, real exchange rate elasticities of exports and imports are considerably low in absolute value. Exports and imports are basically determined by world real output and domestic real income, respectively, with substantially high elasticities. Consistent with the fact that Turkish integration to global value chains has substantaily increased during the post-2000 period especially in intermediate and capital goods sectors, the real exchange elasticities of exports and imports decrease (in absolute value) during the recent period. Our results suggesting that the external income elasticity of exports, for all sectors, is substantially higher than the domestic income elasticity of imports support that the Houthakker and Magee findings still remains a puzzle even under case of the higher participation in the global value chains.
    Keywords: current account deficits, exports, global value chains, imports, real exchange rates, trade elasticity, Turkey.
    JEL: F1 F4
    Date: 2014–11
  8. By: Holger Breinlich; Anson Soderbery; Greg C. Wright
    Abstract: In the face of trade liberalization domestic firms are often forced out of the market, whereas others adapt and survive. In this paper we focus on a new channel of adaptation, namely the shift toward increased provision of services in lieu of goods production. We exploit variation in EU trade policy to show that lower manufacturing tariffs cause firms to shift into services provision and out of goods production. Additionally, we find that a successful transition is strongly associated with higher firm-level R&D stocks whereas higher physical capital stocks slow the shift into services provision.
    Keywords: Services trade, trade liberalization
    JEL: F12 F15 F23
    Date: 2014–09
  9. By: Muñoz Sepúlveda, Jesús A.
    Abstract: This paper analyzes and quantifies the impact of exporter status on domestic sales. It is widely assumed that exporters sell in domestic markets more volume than non-exporters. In addition, non-persistent exporting firms have on average higher volumes of domestic sales in those years in which they are involved in export activities. This paper contributes to this literature by using data from a representative sample of Spanish manufacturing firms (Encuesta Sobre Estrategias Empresariales) over the period 1990-2011. By applying a difference-in-difference approach, results confirm that exporters have on average larger domestic sales (volumes and growth rates) than non-exporters. Additionally, a fixed and random effects model is also applied to measure the impact of exporter status on domestic sales, considering only exporting firms. Results suggest that exporter status increases domestic sales volumes, although it significantly reduces growth. We will refer to this deceleration as residual exports. The amount of the effect varies depending on firms’ persistence in export markets.
    Keywords: Residual exports, domestic sales, difference-in-difference, fixed and random effects
    JEL: F10 F14
    Date: 2014–09–04
  10. By: Ghosh Dastidar, Sayantan; Veeramani, C
    Abstract: On the whole, manufacturing growth in India failed to accelerate in spite of widespread trade reforms undertaken since the early 1990s. However, the picture is mixed if we look at the sub-national level. This paper attempts to examine the determinants of manufacturing performance at the state-level in a panel model framework for the time period 1988-2007. One aspect, which makes this paper distinct from other empirical exercises in this field, is the consideration of trade openness of the states as one of the determinants of manufacturing performance in addition to the other usual control variables such as infrastructure, access to credit, human capital and labour market environment. Data on trade is not available at the Indian state level. We therefore construct two proxies for trade openness, one relating to exports volume and the other related to tariff barriers, for the Indian states in our sample. In line with the conventional view, trade barriers have a negative impact on manufacturing growth whereas trade volumes have a positive impact. However, openness has no impact on registered manufacturing in India. We argue that it is the flexibility of the unregistered sector (due to lack of rigid labour laws) which helps it take advantage of trade openness.
    Keywords: Manufacturing growth, Trade openness, Indian states, Panel data model
    JEL: F10 F13 O14 O24
    Date: 2014–09–26
  11. By: Roberto Roson; Kazuhiko Oyamada
    Abstract: This paper discusses which changes in the architecture of a standard CGE model are needed in order to introduce effects of trade and firm heterogeneity à la Melitz. Starting from a simple specification with partial equilibrium, one primary production factor and one industry, the framework is progressively enriched by including multiple factors, intermediate inputs, multiple industries (with a mixture of differentiated and nondifferentiated products), and a real general equilibrium closure. Therefore, the model structure is gradually made similar to a full-fledged CGE. Calibration techniques are discussed, and a number of changes from the original Melitz’s assumptions are also proposed. It is argued that the inclusion of industries with heterogeneous firms in a CGE framework does not simply make the Melitz model “operational”, but allows accounting for structural effects that may significantly affect the nature, meaning and implications of the model results.
    Keywords: Computable General Equilibrium Models, Melitz, Firm Heterogeneity, International Trade
    JEL: C63 C68 D51 D58 F12 L11
    Date: 2014
  12. By: Humanicki, Marcin; Kelm, Robert; Olszewski, Krzysztof
    Abstract: Foreign direct investment (FDI) and foreign portfolio investment (FPI) have been long considered as distinct and independent forms of international capital flows, but in the globalized world there are reasons to treat them as interconnected phenomena. This paper analyzes the mutual relationship between FDI and FPI and attempts to answer the question whether they complement or substitute for each other from a foreign investor’s point of view. Firstly, the paper describes the main characteristics of FDI and FPI in terms of a trade-off between their volatility and profitability. Secondly, it provides a literature review on the determinants of these two types of foreign investment. Finally, we analyse the long-run and short-run relationships between FDI and FPI running VECM regressions on data for Poland. Our research suggests that these two forms of foreign investment are substitutes. To be more specific, in economically stable periods FDI tends to dominate over FPI, but during insecurity and economic distress, both in source and host countries, FPI starts to gain importance.
    Keywords: foreign direct investment, foreign portfolio investment, emerging market economies, cointegration
    JEL: F21 F41 O1
    Date: 2013–11
  13. By: Chung, Sunghoon; Lee, Joonhyung; Osang, Thomas
    Abstract: It has been well documented that trade adjustment costs to workers due to globalization are signiï¬cant and that temporary trade barriers have been progressively used in many countries, especially during periods with high unemployment rates. Consequently, temporary trade barriers are perceived as a feasible policy instrument for securing domestic jobs in the presence of increased globalization and economic downturns. However, no study has assessed whether such temporary barriers have actually saved domestic jobs. To overcome this deï¬ciency, we evaluate the China-speciï¬c safeguard case on consumer tires petitioned by the United States. Contrary to claims made by the Obama administration, we ï¬nd that total employment and average wages in the tire industry were unaffected by the safeguard using the ‘synthetic control’ approach proposed by Abadie et al. (2010). Further analysis reveals that this result is not surprising as we ï¬nd that imports from China are completely diverted to other exporting countries partly due to the strong presence of multinational corporations in the world tire market.
    Keywords: China Tire Safeguard, Temporary Trade Barriers, Trade Diversion, Synthetic Control Method
    JEL: F13 F14 F16
    Date: 2014–06
  14. By: Joachim Wagner (Leuphana University Lueneburg, Germany)
    Abstract: This paper uses a new tailor-made data set to investigate the differences in extensive and intensive margins of exports in manufacturing firms from East Germany and West Germany. It documents that these margins do still differ in 2010, 20 years after the re-unification of Germany. West German firms outperform East German firms at all four margins of exports – they have a larger propensity to export, export a larger share of total sales, export more goods and export to a larger number of countries. All these differences are large from an economic point of view. A decomposition analysis shows that in 2010 between 59 percent and 78 percent of the difference in margins can be explained by differences in firm characteristics. Most important here is the higher human capital intensity and (to a much lesser extent) the larger share of old firms in West Germany compared to East Germany.
    Keywords: Export margins, East Germany, West Germany, decomposition analysis
    JEL: F14
    Date: 2014–10
  15. By: Choi, Kangsik; Lee, Ki-Dong; Lim, Seonyoung
    Abstract: We investigate government subsidy policies in which a home firm and a foreign firm choose to strategically set prices or quantities in a third market. We show that even though each firm can earn higher profits under Cournot competition than under Bertrand competition regardless of the nature of goods, choosing Bertrand competition is the dominant strategy for both firms. This can lead each firm to face a prisoners' dilemma in equilibrium. We also show that from the aspects of governments under subsidy regime, Cournot competition is more efficient than Bertrand competition when the goods are substitutes, and vice versa when the goods are complements. However, trade liberalization such as via free trade agreements brings about a change in the competition mode from Bertrand competition to Cournot competition if goods are substitutes. On the other hand, if goods are complements, there are no such a change in the competition mode and Bertrand competition prevails the market. Hence, a move toward free trade among countries increases not only profits of firms but also the welfare of both countries irrespective of the nature of goods.
    Keywords: Subsidy, Cournot, Bertrand, Social Welfare, Prisoners' Dilemma.
    JEL: F12 F13 L13
    Date: 2014–11–06
  16. By: Yamamura, Eiji; Shin, Inyong
    Abstract: Amount of consuming imported goods is thought to influence consumer’s view and attitude toward the country which export the goods. This paper examines effect of viewing Japanese animation on attitude towards Japan in Korea. Major findings are that the more frequently adult Korean view Japanese animation, the more they are likely to accept Japanese as colleagues at work after controlling for endogeneity bias by using instrumental variables. This implies that, through consuming imported cultural goods, people learned the labor quality of the trade partner, which reduces the information asymmetry about the labor quality of the exported country. Consequently, people come to accept the labor force from the trade partner in the labor market. Labor market becomes more open to migrant from the exported countries. The modern cultural goods such as Japanese animation representing “Cool Japan†have the externality in the labor market of its imported country.
    Keywords: Anime; Immigrants; Work place; Neighbor; Trade; Externality; Cool Japan.
    JEL: D12 D74 F16 Z11 Z18
    Date: 2014–09–05
  17. By: Besedes, Tibor
    Abstract: I examine the effects European integration has had on intra-EU trade relationships between 1962 and 2005. I find that the stability of intra-EU trade relationships as reflected by their duration has been negatively affected by the persistent integration with duration decreasing and the hazard of trade ceasing increasing. The 1986 and 1995 expansions as well as the creation of the economic union in 1999 reduced the hazard, but not by a large enough magnitude to offset the increased hazard due to earlier integration actions. On the whole, intra-EU relationships have become shorter. This is largely due to the reduction in trade costs brought about by integration, which has enabled a plethora of short and previously cost-prohibitive relationships. This conclusion is supported by the tremendous growth of new relationships under the various incarnations of the European Union.
    Keywords: eu enlargement, economic integration, duration of trade
    JEL: F13 F14 F15
    Date: 2014–09–22
  18. By: S. Michalopoulos; A. Naghavi; G. Prarolo
    Abstract: This study explores the interaction between trade and geography in shaping the Islamic economic doctrine and in turn the comparative development of the Muslim world. We build a model where an unequal distribution of land quality in presence of trade opportunities conferred differential gains from trade across regions, fostering predatory behavior from the poorly endowed ones. We show that in such an environment it was mutually beneficial to institute an economic system of income redistribution featuring direct income transfers in return for safe passage to conduct trade. A commitment problem, however, rendered a merely static redistribution system unsustainable. Islam added a set of dynamic redistributive rules that were self-enforcing under large gains from trade and high proportions of arid land. While such principles fostered the expansion of trade within the Muslim world they limited the accumulation of wealth by the commercial elite, shaping the economic trajectory of Islamic lands in the preindustrial era.
    JEL: O10 O13 O16 O17 O18 F10 Z12
    Date: 2014–10
  19. By: Marin, Dalia; Schymik, Jan; Tarasov, Alexander
    Abstract: We incorporate trade in tasks à la Grossman and Rossi-Hansberg (2008) into a small open economy version of the theory of firm organization of Marin and Verdier (2012) to examine how offshoring affects the way firms organize. We show that the offshoring of production tasks leads firms to reorganize with a more decentralized management, improving the competitiveness of the offshoring firms. We show further that the offshoring of managerial tasks relaxes the constraint on managers but toughens competition, and thus has an ambiguous impact on the level of decentralized management and CEO wages of the offshoring firms. In sufficiently open economies, however, managerial offshoring unambiguously leads to more decentralized management and to larger CEO wages. We test the predictions of the model based on original firm level data we designed and collected of 660 Austrian and German multinational firms with 2200 subsidiaries in Eastern Europe. We find that offshoring firms are 33.4% more decentralized than non-offshoring firms. We find further that the average fraction of managers offshored reduces the level of decentralized management by 3.1%, but increases the level of decentralized management by 4% in industries with a level of openness above the 25th percentile of the openness distribution. Lastly, we find that one additional offshored manager lowers CEO wages relative to workers by 4.9%.
    Keywords: international trade with endogenous organizations; the rise of human capital; theory of the firm; multinational firms; CEO pay
    JEL: F12 F14 L22 D23
    Date: 2014–10
  20. By: Keiko ITO
    Abstract: This paper examines whether and how the entry of foreign multinational firms affects the productivity growth of domestically-owned firms, i.e., foreign direct investment (FDI) spillover effects, using a large-scale Japanese firm-level dataset including a large number of services firms. The results suggest that foreign presence in a particular industry does not generate positive spillover effects and both in manufacturing and service sector industries in fact tends to negatively affect the productivity growth of domestically-owned firms. Moreover, the negative FDI spillover effect tends to be larger in the service than in the manufacturing sector, implying that there may be systematic differences in FDI spillover effects between these sectors. However, the negative spillover effects are smaller for firms catching up towards the productivity frontier than for other firms, and in the long run, their productivity growth is positively associated with foreign presence in the same industry. Nevertheless, the overall effect of inward FDI is still negative and further investigation on which factors lead to positive FDI spillovers is desirable. A possible interpretation of these results is that foreign entry increases the productivity gap between firms with high productivity growth and other firms. If this interpretation is correct, the results suggest that to raise macro-level productivity growth, the promotion of inward FDI should be accompanied by policies to encourage firms with low productivity growth to accelerate their productivity growth or to force them to exit from the market.
    Date: 2013–01
  21. By: Kamei, Keita
    Abstract: This paper incorporates the efficiency wage model of Shapiro and Stiglitz (1984) into a general oligopolistic equilibrium model of Neary (2009). We show that the pro-competitive effect stemming from trade liberalization increases the real wage of employees and relaxes the non-shirking condition. Therefore, the unemployment rate improves. Using numerical analysis, we show that, if firm productivity is sufficiently low, trade liberalization improves the utility of firm owners.
    Keywords: Efficiency wages; Unemployment; International trade; General equilibrium with oligopoly (GOLE); Cournot competition
    JEL: J64
    Date: 2014–01–05
  22. By: Dorothée Rouzet; Hildegunn Kyvik Nordås; Frederic Gonzales; Massimo Geloso Grosso; Iza Lejárraga; Sébastien Miroudot; Asako Ueno
    Abstract: This paper presents the services trade restrictiveness indices (STRIs) for financial services. The STRIs are composite indices taking values between zero and one, zero representing an open market and one a market completely closed to foreign services providers. The indices are calculated for 40 countries, the 34 OECD members and Brazil, China, India, Indonesia, Russia and South Africa. The STRIs capture de jure restrictions. This report presents the first vintage of indicators for commercial banking and insurance services and captures regulations in force in 2013. The scores in commercial banking range between 0.06 and 0.55, with a sample average of 0.19. The scores in insurance services range between 0.05 and 0.63, with a sample average of 0.20. The results are mainly driven by restrictions on market entry, where significant impediments remain in the form of foreign equity limits, restrictions on legal form, discriminatory licensing criteria and restrictions on cross-border transactions. Barriers to competition, including regulation of products and prices and preferential treatment granted to state-owned financial institutions, also make a substantive contribution to the index values. The paper presents the list of measures included in the indices, the scoring and weighting system for calculating the indices and an analysis of the results.
    Keywords: trade policy, bank, trade in services, services trade restrictions, regulation, insurance, regulatory reform, services liberalisation
    JEL: F13 F14 F21 G21 G22 G28 L88
    Date: 2014–11–04
  23. By: Choi, Kangsik; Lim, Seonyoung
    Abstract: This paper examines the endogenous choice of competition mode with strategic export policies in vertically related markets. We show that (i) regardless of the nature of goods, choosing Bertrand competition is the dominant strategy for downstream firms, which leads downstream firms to face a prisoners' dilemma; (ii) the optimal export intervention can be a subsidy under Bertrand competition; and (iii) when the choice of competition mode is delegated to upstream firms or to the upstream firm on country and the downstream firm in the other country, multiple equilibria (quantity-price and price-quantity competitions) can be sustained except those for which goods are sufficiently close complements. With the exception of such a case, Bertrand competition can be sustained with this delegation of competition mode choice. Thus, a conflict of interest between downstream and upstream firms may or may not occur, as social welfare depends on who chooses the competition mode and the degree of imperfect complementarity. This contrasts with the result under free trade, which shows that there is no conflict of interests between upstream and downstream firms with Cournot (Bertrand) competition when the goods are substitutes (complements) in equilibrium.
    Keywords: Choice of Cournot and Bertrand, Subsidy, Vertical Structure, Delegation, Welfare.
    JEL: F10 F12 L13
    Date: 2014–10–04
  24. By: Elena Bobeica; Paulo Soares Esteves; António Rua; Karsten Staehr
    Abstract: The paper investigates the link between domestic demand pressure and exports by considering an error correction dynamic panel model for eleven euro area countries over the last two decades. The results suggest that there is a statistically signi?cant substitution e¤ect between domestic and foreign sales. Furthermore, this relationship appears to be asymmetric, as the link is much stronger when domestic demand falls than when it increases. Weakness in the domestic market translates into increased e¤orts to serve markets abroad, but, conversely, during times of boom, exports are not negatively a¤ected by increasing domestic sales. This reorientation towards foreign markets was particularly important during the crisis period, and thus could represent a new adjustment channel to strong negative domestic shocks. The results have important policy implications, as this substitution effect between domestic and external markets might allow the euro area countries under stress to improve their trade outcomes with a relatively small downward pressure on domestic prices.
    JEL: C22 C50 F16
    Date: 2014
  25. By: Obeng, Camara Kwasi
    Abstract: Incidence of poverty for Ghana has reduced from about 52% in 1991/92 to 28.5% in 2005/06. This is a remarkable drop in the incidence of poverty, but the current level is still high. Equally high are the levels of the depth and severity of poverty. This means that any policy pursued by the country must aim at further reducing the incidence, depth and severity of poverty. A number of policies and programmes have been implemented to reduce extreme in Ghana. On such policy, liberalisation of import trade has been implemented extensively in the country even though its long run contribution to poverty reduction is not clear in the trade literature. Therefore, this study examined the long run impact of import liberalization on the incidence, depth and severity of poverty at the national and household levels. The investigation was carried out using a recursive dynamic computable general equilibrium and a microsimulation model calibrated to the 2005 Social Accounting Matrix (SAM) of Ghana. In spite of the strong criticism against import liberalisation as being anti-growth and poverty enhancing, the results showed that the net effect of import liberalisation leads to reduction in the incidence, depth and severity of poverty at the national and household levels in the long run. However, the benefits of import liberalisation accrue more to urban households than rural households. This finding is due to the fact that urban households, generally, are net consumers of imported goods and services than rural households. In addition, the urban areas have the necessary economic infrastructure and so are economically vibrant, thereby offering huge opportunities for people to participate in international trading activities. The study recommends that import liberalisation must continue to be part of the poverty alleviation strategy of government for Ghana Post 2015 and that government focuses poverty alleviation policies more in the rural areas.
    Keywords: Import Liberalization, Tariff Revenue, Poverty, SAM, CGE, Microsimulation, Ghana
    JEL: F1 F13 F14 O5
    Date: 2014–08–29
  26. By: Roger Bate (American Enterprise Institute)
    Abstract: Free trade zones possess many attributes of capitalist economies and can attract foreign companies, foreign investment in domestic companies, industrial production, and wealth generation. However, such zones are also troubling; they can produce several negative results including a strong mafia presence, massive counterfeit operations, tax evasion, money laundering, and even terror financing.
    Keywords: China, Hezbollah, Counterfeit pharmaceuticals, Free Trade zone
    JEL: F
    Date: 2013–10
  27. By: Tijaja, Julia (ASEAN Secretariat); Faisal, Mohammad (Center of Reform on Economics Indonesia)
    Abstract: The gains of a country from participating in global value chains (GVCs) will depend on the productive activities taking place in its jurisdiction and their linkages to the domestic economy. Lead firms’ decision on where to locate and how to coordinate production activities is influenced, among others, by industrial policies. On the one side, policy space provides governments with some leverage in guiding economic activities and influencing development outcomes. On the other hand, policy risks have the potential to adversely affect the outcomes. This study focuses on industrial policies in Indonesia, using the mineral sector as a mini case study. The case study assesses the Indonesian Government’s recent effort to boost domestic value addition in the sector. This paper argues that the effectiveness of government policies in maximizing the gains from GVC participation depends not only on policy design, but also on policy consistency and coherence, effective implementation, and coordination.
    Keywords: industrial policy; Indonesia; global value chain; upgrading
    JEL: L52 L70 O25
    Date: 2014–10–01

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General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.