nep-int New Economics Papers
on International Trade
Issue of 2014‒11‒22
twenty-six papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. Are global trade negotiations behind a fragmented world of "gated globalization"? By James Lake; Santanu Roy
  2. Trade, Migration and Integration – Evidence and Policy Implications By Hatzigeorgiou, Andreas; Lodefalk, Magnus
  3. Outward foreign direct investment and domestic performance : In search of a causal link By Emmanuel Dhyne; Selen Sarisoy Guerin
  4. Productivity Spillovers in the Russian Federation: The Case of Chemical Market By Kuzyaeva, Anastasia; Didenko, Alexander
  5. Brazilian Role in the Global Value Chains By Joaquim José Martins Guilhoto; Denise Imori
  6. Global Value Chains: A View From the Euro Area By João Amador; Rita Cappariello; Robert Stehrer
  7. Rethinking the Twin Deficits By Constantine, Collin
  8. Outward FDI and company performance in CEECs By Damijan, Jože; Kostevc, Crt; Rojec, Matija
  9. Former Foreign Affiliates: Cast Out and Outperformed? By Beata Javorcik; Steven Poelhekke
  10. Lender Banks' Provision of Overseas Market Information: Evidence from Japanese small and medium-sized enterprises' export dynamics By INUI Tomohiko; ITO Keiko; MIYAKAWA Daisuke
  11. How can trade unionism affect welfare consequences of trade and investment reforms in a developing economy? By Chaudhuri, Sarbajit
  12. Trade, Sectorial Reallocation, and Growth By Wang, Pengfei; Xie, Danyang
  13. Supply-side barriers to cross-border e-commerce in the EU Digital Single Market By Melisande Cardona; Bertin Martens
  14. Services Trade Restrictiveness Index (STRI): Telecommunication Services By Hildegunn Kyvik Nordås; Massimo Geloso Grosso; Frédéric Gonzales; Iza Lejárraga; Molly Lesher; Sébastien Miroudot; Asako Ueno; Dorothée Rouzet
  15. Illegal Immigration and Fiscal Competition By Bandyopadhyay, Subhayu; Pinto, Santiago
  16. Should the host economy invest in a new industry? The roles of FDI spillovers, development level, and heterogeneity of firms By Huu Thanh Tam Nguyen; Ngoc-Sang Pham
  17. When firms and industries matter: understanding the sources of productivity growth By Ulf Lewrick; Lukas Mohler; Rolf Weder
  18. Climate Change, Trade, and Competitiveness: Climate Trade Performance of India, SAARC and Asia Pacific Region By Dinda, Soumyananda
  19. Escaping to the East? Relocation of business activities to and from Hungary, 2003–2011 By Magdolna Sass; Gábor Hunya
  20. Strategic Subsidy Policies with Endogenous Choice of Competition Mode By Lim, Seonyoung; Choi, Kangsik
  21. Rent Sharing with Footloose Production. Foreign Ownership and Wages Revisited. By Balsvik, Ragnhild; Sæthre, Morten
  22. Effects of Reducing Tariffs in The Democratic Republic of Congo(DRC): A CGE Analysis By Jean Luc Erero, Daniel Djauhari Pambudi & Lumengo Bonga-Bonga
  23. Services Trade Restrictiveness Index (STRI): Audio-visual Services By Hildegunn Kyvik Nordås; Iza Lejárraga; Sébastien Miroudot; Frederic Gonzales; Massimo Geloso Grosso; Dorothée Rouzet; Asako Ueno
  24. Value Chains and Global Inequalities: Plantain, Contract Farming, and Vulnerability of the Small-Scale Farmers in Colombia (Discussion Paper) By Baquero Melo, Jairo
  25. Foreign direct investment in duopoly: When is it optimal to invest abroad? By Hebert Dawid; Benteng Zou
  26. Endogenous Labor Supply and International Trade By AGO Takanori; MORITA Tadashi; TABUCHI Takatoshi; YAMAMOTO Kazuhiro

  1. By: James Lake (Southern Methodist University); Santanu Roy (Southern Methodist University)
    Abstract: In a simple model where global trade negotiations precede sequential Free Trade Agreement (FTA) formation, we show that global tariff negotiations can prevent global free trade: FTA formation can yield global free trade in the absence of global tariff negotiations, but global free trade never emerges when global tariff negotiations precede FTA formation. Global negotiations can prevent global free trade precisely because they are successful in eliciting concessions from negotiating countries. Moreover, global tariff negotiations can produce a fragmented world of "gated globalization" where some countries form FTAs eliminating tariff barriers among themselves while outsiders continue facing higher tariffs.
    Keywords: Free Trade Agreement, global free trade, multilateralism, tariff complementarity, binding overhang
    JEL: C73 F12 F13
    Date: 2014–10
  2. By: Hatzigeorgiou, Andreas (Lund University); Lodefalk, Magnus (Örebro University School of Business)
    Abstract: This paper takes departure in the unique position taken by Swedish policymakers recently in giving explicit emphasis to migration as a tool for increasing trade. We attempt to put this position to empirical scrutiny. Our results demonstrate that migrants spur exports, especially along the extensive product margin of trade and for differentiated products, but with no significant impact on imports. This suggests that for small open economies with many immigrants being refugees, the aim of using migration to facilitate trade may only be effective with respect to exports. This paper also contributes to the literature on trade and migration by exploiting data on gender and age, which allow us to draw inferences on the underlying impact channels. We adopt an instrumental variable approach to address the endogeneity issue due to potential reverse causality. The pattern of results is consistent with the hypothesis that migration mainly reduces fixed trade costs derived from information and trust friction across migrant host and source countries. Importantly, the results imply that policymakers may be able to promote trade by improving immigrants’ labor market integration rather than being restricted to more liberal immigration policies, which is generally more controversial.
    Keywords: Trade; migration; gravity model; trade COSTs; networks; information; trust; trade policy
    JEL: F10 F14 F22
    Date: 2014–07–31
  3. By: Emmanuel Dhyne (Research Department - National Bank of Belgium and Université de Mons); Selen Sarisoy Guerin (Corresponding author, Trinity College Dublin)
    Abstract: The aim of this paper is to examine causal effects of outward foreign direct investment activities of corporations that start expanding abroad on a large number of domestic performance indicators. Our results indicate that there is no evidence in our data to show that FDI has statistically significant impact on productivity, employment and output. The only statistically significant result indicates that FDI causes positive growth in export intensity. On the other hand when we restrict our sample to Belgian manufacturing firms only, we do find that switching to OFDI causes a positive growth in TFP. This effect is coupled with an increase in wages and exports. On the other hand, we do not find any statistically significant evidence that internationalization of Belgian firms causes loss of employment for the unskilled worker as in other studies
    Keywords: multinational firms; propensity score matching, difference-in-differences
    JEL: F23 D21 C14
    Date: 2014–10
  4. By: Kuzyaeva, Anastasia; Didenko, Alexander
    Abstract: Over the last decades, much attention has been drawn to the question of productivity variation across countries. The differences in cross-country productivity could be explained by both foreign and domestic innovation. In order to estimate the influence of the former, the international transfer of technology should be considered. Foreign direct investment (FDI) and international trade are suggested to be major conduits of international technology transfer. The present paper aims to extend the current empirical literature by determining the effect and the source of productivity spillover in Russia on the example of chemical industry. In order to find out the existence of FDI and international trade productivity spillover we applied the methodology developed by Ericson and Pakes (1995) and Olley and Pakes (1996). The econometric model was tested on the companies from chemical industry for the period 2007-2012. The empirical results show that FDI and international trade productivity spillovers are present in Russian chemical industry. The size of FDI spillovers is economically more important than imports-related spillovers. Based on the empirical results, we may predict that Russian accession to the World Trade Organization in 2012 should result in productivity growth. However, further research on this topic will be possible when the statistical data is available for several years after annexation.
    Keywords: FDI, chemical industry, technology transfer, productivity spillover, international trade
    JEL: D24 F13 L65
    Date: 2014–09
  5. By: Joaquim José Martins Guilhoto; Denise Imori
    Abstract: In recent past, the global value chains have increasingly become more pervasive in the productive processes around the world and thus decisively affect how each country is integrated in a reshaped global economy. Understanding the role of the economies in the global value chains can help national and local governments to develop more effective responses to the challenges that are imposed by globalization. The present paper focuses Brazil, whose rate of economic openness is generally considered low compared to other large emerging countries such as China. The paper analyzes such topic with the viewpoint that products and services are now made in global value chains and that ‘trade in value added’ might be a better approach for the measurement of international trade. Thus, our main goals are 1) evaluating how the Brazilian participation in the global value chains has evolved in the last two decades; 2) analyzing the trade relationships of Brazil with other economies, especially those composing the BRIC group of countries. In order to do so, we apply the WIOD's series of world input-output table (in the period of 1995-2011), and the 2005 IDE’s BRICs international input-output table. Our results show that the Brazilian trade in value added has been quite limited, but exhibits an increasing trend following the global upsurge of trade in value added. With respect to sectoral roles, the mining and metallurgical activities generated large shares of the Brazilian exports to value added, especially to China.
    Keywords: global value chains; trade in value added; input-output analysis
    JEL: F02 F14 C67
    Date: 2014–10–29
  6. By: João Amador; Rita Cappariello; Robert Stehrer
    Abstract: This paper describes the main features of Global Value Chains (GVCs) in the euro area taken as a whole and compares with other large trade players like the US, China and Japan. In addition, the perspective of individual euro area countries is considered, with a focus on intra euro area linkages. The analysis relies primarily on the concept of foreign value added in exports, as a way to assess the pervasiveness of GVCs, it covers the period 2000-2011 and bases on the World Input-Output Database (WIOD). The paper finds that GVCs are important for the euro area as whole and they have rebounded after the great trade collapse. Moreover, there is a strong relevance of regional production linkages in Europe, with Germany playing a key role.
    JEL: F1 F14 F15
    Date: 2014
  7. By: Constantine, Collin
    Abstract: This article reexamines the thesis that fiscal deficits cause trade deficits and challenges this explanation of the twin deficits with the following propositions. Differences in competitiveness among nations do not lead to balanced trade. Using a Eurozone case study, the article discusses the nexus between competitiveness and the trade balance. Secondly, the author proposes that causality runs from trade deficits to fiscal deficits when the free trade-balanced trade theory is overthrown, and finally, the article overturns the argument that austerity works.
    Keywords: twin deficits, competitiveness, free trade, Eurozone, austerity
    JEL: E62 F15 F32 F34 F41
    Date: 2014
  8. By: Damijan, Jože (University of Ljubljana, LICOS, VIVES and Institute for Economic Research, Ljubljana); Kostevc, Crt (University of Ljubljana and Institute for Economic Research, Ljubljana); Rojec, Matija (University of Ljubljana, Institute for Economic Research, Ljubljana, and Institute of Macroeconomic Analaysis and Development, Ljubljana)
    Abstract: Using a large sample of micro data we investigate what kind of CEECs-9 (Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Poland, Romania, Slovakia and Slovenia) firms tend to invest abroad, and what is the impact of outward FDI on their productivity. We find that firms with outward FDI tend to be larger and more productive, i.e. the best firms tend to self-select into outward FDI. There is also a positive effect of outward FDI on productivity growth of investing firms from CEECs, but this effect is driven exclusively by the subsamples of Czech and Romanian firms, while the impact in other countries is substantially less pronounced. In addition, the positive effect does not appear to be long lasting as it is only statistically significant a year after the investment was made, while employing longer lags yielded positive but insignificant correlations. We also find the heterogeneity of effects by different host-country markets, i.e. investments by CEECs firms into either Western European or other CEECs yielded an above average effect on productivity growth of investing firms, investments into other parts of Europe did not significantly impact the growth of productivity, while North American subsidiaries were even negatively correlated with productivity growth.
    Keywords: FDI; cross-country comparisons; emerging economies; productivity growth; micro-data
    JEL: C30 F23 O47 O57
    Date: 2014–10–24
  9. By: Beata Javorcik (University of Oxford, United Kingdom); Steven Poelhekke (VU University Amsterdam, the Netherlands)
    Abstract: The literature has documented a positive effect of foreign ownership on firm performance. But is this effect due to a one-time knowledge transfer or does it rely on continuous injections of knowledge? To shed light on this question we focus on divestments, that is, foreign affiliates that are sold to local owners. To establish a causal effect of the ownership change we combine a difference-in-differences approach with propensity score matching. We use plant-level panel data from the Indonesian Census of Manufacturing covering the period 1990-2009. We consider 157 cases of divestment, where a large set of plant characteristics is available two years before and three years after the ownership change and for which observationally similar control plants exist. The results indicate that divestment is associated with a drop in total factor productivity accompanied by a dec line in output, markups as well as export and import intensity. The findings are consistent with the benefits of foreign ownership being driven by continuous supply of headquarter services from the foreign parent.
    Keywords: divestment, foreign direct investment, Indonesia and productivity
    JEL: F23
    Date: 2014–07–24
  10. By: INUI Tomohiko; ITO Keiko; MIYAKAWA Daisuke
    Abstract: This paper examines how Japanese firms' export decision is affected by the availability of information on export markets, focusing on whether the availability of such information has a different impact on the export decision between large firms and small and medium-sized enterprises (SMEs). In contrast to existing studies which solely focus on information sharing among firms, we are interested in the role of firms' lender banks as an additional source of information. Specifically, using a unique dataset containing information not only on firms' export activities but also on their lender banks' exposure to other exporting firms as well as the lender banks' own overseas activities, we find that information provisions by lender banks positively affect SMEs' decision to start exporting and the range of destinations to which they export. Such information provisions from lender banks also reduce the likelihood that exporter firms exit from export markets. The export-to-sales ratio of exporter firms, however, is not affected by such information provisions. We also find that the importance of the information provisions by lender banks on SMEs' export decision crucially depends on the type of products (i.e., differentiated or homogeneous) produced in the industries to which the firms belong. These results imply that information on foreign markets provided by lender banks substantially reduces the fixed entry costs associated with starting exporting and entering new export markets as well as firms' costs associated with continuing to export.
    Date: 2014–10
  11. By: Chaudhuri, Sarbajit
    Abstract: This paper explains the existence of intersectoral wage differential in a developing economy in terms of trade union behavior in the formal sector industry and analyzes its role in predicting the outcomes of trade and investment reforms on welfare. It provides theoretical explanations of certain real life phenomena e.g. why the developing countries are yearning for foreign capital despite the standard immiserizing result and why these countries are not reducing the tariff rates beyond certain levels although they have chosen free trade as their development strategy.
    Keywords: Labour market imperfection, trade union behavior, foreign capital, trade liberalization, general equilibrium.
    JEL: D58 F13 F21 J51 O1 O17
    Date: 2014–09–30
  12. By: Wang, Pengfei; Xie, Danyang
    Abstract: This paper introduces sectorial heterogeneity in TFPs in a growth model to generate new insights on trade, sectorial reallocation, and economic growth. The rate of overall economic growth in this model is a simple average of sectorial growth in a closed economy, but will depend on trade parameters in an open economy as openness to trade shifts resources toward fast-growing sectors. We find that the overall growth rate is unambiguously higher as the number of trading partners increases. These conclusions survive even after trade cost is introduced. Nevertheless, trade share and growth rate may not move in the same direction as trade liberalization is pursued or as the number of trading partners increases. This finding may explain why the existing empirical evidence concerning this relationship between growth and trade share remains inconclusive.
    Keywords: Heterogeneous Sectors, International Trade, Growth
    JEL: F12 R13
    Date: 2014–09
  13. By: Melisande Cardona (European Commission – JRC - IPTS); Bertin Martens (European Commission – JRC - IPTS)
    Abstract: Between 2009 and 2012 the percentage of online consumers in the EU who made online purchases in another EU Member State increased from 8 to 11 per cent, below the target of 20 per cent put forward in the EU Digital Agenda. Both, subjective perceptions on the consumer side or objective barriers on the supply side can play a role. This study uses a mystery shopping survey to measure the relative importance of supply side barriers. While 97 per cent of domestic orders lead to a successful shipment, we find that suppliers accepted to ship only 48 per cent of all cross-border online orders. This high failure rate may overstate the ordinary consumer experience because of the artificiality of the mystery shopping trade patterns. We therefore focus on the factors that drive success and failure. A shared language between buyer and supplier countries increased and size of the goods decreased the chances of success. Goods that are subject to geographical sales restrictions (vertical agreements) between producers, wholesalers and retailers are the least likely to be available for online cross-border orders. This may indicate that restrictions in competition in offline markets are spilling over to online markets and prevent the realization of some of the benefits of e-commerce. We conclude that regional integration in digital markets is constrained by the lack of integration in traditional bricks & mortar markets.
    Keywords: online trade, e-commerce, cross-border trade, barriers to trade, vertical constraints in online markets
    Date: 2014–10
  14. By: Hildegunn Kyvik Nordås; Massimo Geloso Grosso; Frédéric Gonzales; Iza Lejárraga; Molly Lesher; Sébastien Miroudot; Asako Ueno; Dorothée Rouzet
    Abstract: This paper presents the services trade restrictiveness indices (STRIs) for telecommunications. 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 telecommunications and captures regulations in force in 2013. The scores range between 0.06 and 0.61, with a sample average of 0.22. Barriers to competition, reflecting inadequate regulation of incumbents with significant market power, and state ownership in some countries make the largest contribution to the index value, followed by restrictions on foreign entry. 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: telecommunications, services trade, services trade restrictions, regulation
    JEL: F13 F14 K33 L96
    Date: 2014–11–04
  15. By: Bandyopadhyay, Subhayu (Federal Reserve Bank of St. Louis); Pinto, Santiago (Federal Reserve Bank of Richmond)
    Abstract: This paper examines illegal immigration in a spatial context. Consider two countries: a source and a host of illegal immigration. Both countries produce the same good employing labor. There are legal restrictions to the movement of labor across countries. The host country consists of two regions (jurisdictions or states). These two regions share their borders with the source country. The host country controls illegal immigration using two alternative policy instruments: (i) it devotes resources to stop illegal immigrants at the border preventing them from entering the country; and (ii) it allocates resources to internal enforcement. Enforcement levels, both internal and border, may a priori differ by regions. The paper compares the provision of enforcement chosen by a federal government in the host country to the levels that would prevail under different allocation of responsibilities between the federal and regional governments in deciding border and internal enforcement levels.
    Keywords: illegal immigration; fiscal competition; border enforcement; internal enforcement.
    JEL: D72 D78 F21 F23
    Date: 2014–10–24
  16. By: Huu Thanh Tam Nguyen (University of Evry Val d’Essonne, EPEE & Economics Department); Ngoc-Sang Pham (CES, University Paris I Pantheon-Sorbonne)
    Abstract: We consider a small open economy with two productive sectors (an old and a new). There are two types of firms in the new industry: a well planted multinational firm and a potential domestic firm. Our framework highlights a number of results. First, in a poor country with low return of training and weak FDI spillovers, the domestic firm does not exist in the new industry requiring a high fixed cost. Second, once the host economy has the capacity to create the new firm, the productivity of the domestic firm is the key factor allowing it to enter into the new industry, and even eliminate the multinational firm. Interestingly, in some cases where FDI spillovers are strong, the country should invest in the new industry, but not train specific workers. Last, credit constraints and labor/capital shares play important roles in the competition between the multinational firm and the domestic one.
    Keywords: FDI spillovers, investment in training, heterogeneous firms, entry cost
    JEL: F23 F4 O3
    Date: 2014
  17. By: Ulf Lewrick; Lukas Mohler; Rolf Weder
    Abstract: This paper presents a framework to assess the relative importance of three key sources of productivity growth that research on international trade focuses on: (i) inter-industry specialisation; (ii) intra-industry reallocation of resources across heterogeneous firms, including firm entry and exit; and (iii) technological progress. Detailed data on Swiss manufacturing firms illustrate how the framework can be empirically applied. Based on this example, we find that intra-industry reallocations are the most important source of growth in aggregate total factor productivity, reflecting in particular the productivity growth of large, incumbent firms and the entry of new firms. That said, inter-industry specialisation and general technological progress remain important supplementary sources of growth in Swiss manufacturing.
    Keywords: Growth, total factor productivity, inter-industry trade, intra-industry trade
    Date: 2014–10
  18. By: Dinda, Soumyananda
    Abstract: This paper examines trade performance of climate friendly goods using some trade indices for India and other Asian countries during 2002 - 2008. Climate friendly goods (CFG) are those goods which have less harmful to environment. Paper identifies India’s performance in CFG trade with other Asian nations. Most of the countries in Asia are importers of climate friendly goods and technologies. The Comparative advantage analyses indicate that Hong Kong, China, and Japan have comparative advantage in the production of CFG goods and are net exporters of such products. The competitiveness measures also show that China, Hong Kong and Japan, and Asia Pacific region are major exporter of CFG during 2002-2008. Competitiveness of India, China and South Korea has improved in 2008. Pakistan, Sri-Lanka, and India prefer to trade in CFG regionally and have shown interest in production and trade of clean coal technologies (CCT). SAARC countries have developed expertise in the production of CCT. India and Pakistan enjoy comparative advantage in CCT trade. Few regions have comparative advantage in Solar Photovoltaic Systems (SPVS) and Energy Efficient Lighting (EEL). China is performing better than other in EEL. Japan, China, Malaysia and Macao show good in 2008 for SPVS. Japan, Philippines, China, Hong Kong and South Korea have a comparative advantage in production of other climate friendly items in 2008.
    Keywords: Competitiveness, trade performance, Climate friendly goods, CFG, Clean Coal Technology, CCT, Energy Efficient Lighting, EEL, Solar Photovoltaic System, SPVS, Wind Energy, Wind Technology, Asia, India, SAARC, ASEAN, Asia Pacific, Japan, China, Sri Lanka, Pakistan, Thailand, Malaysia, Macao, Hong Kong, South Korea, RCA, cleaner technology, climate trade
    JEL: C1 C13 F1 F14 F18 O1 O11 O14 Q2 Q27 Q5 Q56
    Date: 2011–04–18
  19. By: Magdolna Sass (Institute of Economics, Centre for Economic and Regional Studies Hungarian Academy of Sciences); Gábor Hunya (The Vienna Institute for International Economic Studies)
    Abstract: While the increased frequency of relocation of productive capacities to lower wage countries from developed economies has given rise to discussions concerning job losses and de-industrialisation, developments in the host countries of relocation have been widely neglected. Hungary, together with other new EU member countries, is one of the net beneficiary countries of relocation especially from the developed EU-15 countries. Macro-data can be used only to a limited extent to describe the complex phenomenon of relocation; case study evidence and company level analysis can shed light on details and short-term changes. We compiled a comprehensive relocation database in Hungary for the nine-year period between 2003 and 2011. In this paper we analyse this database and compare the results with those of the literature. We shed light on details concerning the nationality of relocating companies, the sectors and foreign locations affected and the job creation/loss impact. Finally we discuss the effects of the recent crisis when the number of greenfield investment projects declined, but the number of relocations to Hungary increased.
    Keywords: relocation, Hungary, multinational corporations, offshoring, offshore outsourcing, crisis
    JEL: F21 F23
    Date: 2014–02
  20. By: Lim, Seonyoung; Choi, Kangsik
    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 leads 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. For this, from the aspects of firms, the Cournot equilibrium could be Pareto superior (inferior) with government's intervention of subsidy policy when the goods are substitutes (complements). Thus, the conflict of interests between governments and firms occur when goods are complements. Hence, our result may justify that when the goods are substitutes, a general principle is that the incentive to intervene in the international trade is greater under Cournot competition than under Bertrand competition.
    Keywords: Subsidy, Cournot, Bertrand, Social Welfare, Prisoners' Dilemma.
    JEL: F12 F13 L13
    Date: 2014–10–24
  21. By: Balsvik, Ragnhild (Dept. of Economics, Norwegian School of Economics and Business Administration); Sæthre, Morten (Dept. of Economics, Norwegian School of Economics and Business Administration)
    Abstract: We present a bargaining model of wage and employment determination, where we show that foreign acquisitions might hurt the bargaining outcome of powerful unions by giving the fi rm a credible threat to move production abroad. Using detailed data on fi rms and workers in manufacturing, including information on union membership and foreign ownership, we fi nd, in line with the predictions of our model, that foreign acquisitions negatively impact the outcome of workers in highly unionized plants.
    Keywords: Foreign acquisitions; trade unions; wages.
    JEL: F23 J30 J51
    Date: 2014–09–16
  22. By: Jean Luc Erero, Daniel Djauhari Pambudi & Lumengo Bonga-Bonga
    Abstract: In this paper, the effects of reducing tariffs are analysed through a Computable General Equilibrium (CGE) model of the DRC. The specific DRC Formal-Informal Model (DRCFIM) is a multi-sectoral computable general equilibrium model that captures the observed structure of the DRC’s formal and informal economies, as well as the numerous linkages or transmission channels connecting their various economic agents, such as investors, firms, traders, and the government. The parameters of the CGE equations are calibrated to observed data from a social accounting matrix (SAM). In particular, this study draws the attention of policy makers to a different employment outcome when tariff reduction is taken into consideration. Tariff reduction increases formal employment and output but hurts informal producers. It considerably increases the output and employment of the formal sector by raising import competition without providing further opportunities for the informal sector to access foreign export markets. Nonetheless, it induces productivity improvements when local producers survive import competition by seeking importing input-saving technologies and production practices. These findings highlight the importance of differentiating between the formal and informal sector impacts of the DRC’s socioeconomic policies.
    Keywords: informal sector, CGE model, Democratic Republic of Congo
    JEL: C68 D58 E26 F16
    Date: 2014
  23. By: Hildegunn Kyvik Nordås; Iza Lejárraga; Sébastien Miroudot; Frederic Gonzales; Massimo Geloso Grosso; Dorothée Rouzet; Asako Ueno
    Abstract: This paper presents the services trade restrictiveness indices (STRIs) for motion pictures, television and broadcasting and sound recording. 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 audio-visual services and captures regulations in force in 2013. The scores range between 0.06 and 0.72 for motion pictures, 0.07 to 0.78 for television and broadcasting, and between 0.05 and 0.37 for sound recording. The sample averages are 0.18 for motion pictures, 0.28 for television and broadcasting and 0.16 for sound recording. Limitations on foreign entry, including foreign equity limits contribute to about two thirds of the index values in television and broadcasting. In motion pictures screen quotas contribute to the indices in many of the countries with scores above average. Sound recording, i.e. music, is the most open of the three audio-visual services sectors where limitations on movement of people account for more than 40% of the index value. 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: services trade, copyrights, motion pictures, sound recording, services trade restrictions, regulation, television broadcasting
    JEL: F13 F14 K33 L82
    Date: 2014–11–04
  24. By: Baquero Melo, Jairo
    Abstract: The plantain is an important agricultural product worldwide. It is the staple food of millions of people, and represents a source of incomes for farmers participating in the international trade. In Colombia, the exportation plantain is chiefly harvested by small-scale farmers. However, they are in a position of vulnerability, facing several risks. Firstly, the obstacles to access the global markets, and the competition with the trader companies. Secondly, the volatility of prices and the exchange rate, which produce unequal effects on them. Thirdly, the environmental risks associated with windstorms and tree diseases. Amid the economic liberalization, the small-scale farmers lack a permanent governmental support to cope with those risks. And the international cooperation is unable to support all the growers. Thus, the small-scale farmers have created organizations to raise their demands, amid nationwide peasant protests against the Free Trade Agreements.
    Keywords: value chains, plantain, globalization, inequalities, small-scale farmers
    JEL: O24 Q1 Q15 Q17 Q56
    Date: 2014–10–07
  25. By: Hebert Dawid (Department of Business Administration and Economics and Institute of Mathematical Economics, Bielefeld University); Benteng Zou (CREA, Université de Luxembourg)
    Abstract: In this paper, we analyze optimal foreign direct investment of a firm which operates in a duopolistic market. We characterize certain technology spillover threshold and show that for a speed of transfer below this threshold, there is a unique locally asymptotic stable steady state with a positive capital stock in the developing country. Furthermore, this threshold exposes what level of technology should take as foreign direct investment.
    Keywords: foreign direct investment, technology spillovers, optimal control
    JEL: F21 D92 C61
    Date: 2014
  26. By: AGO Takanori; MORITA Tadashi; TABUCHI Takatoshi; YAMAMOTO Kazuhiro
    Abstract: It is assumed in new trade theory and new economic geography that the supply of labor is fixed, which is not true in real labor markets. We develop a model of new trade theory by incorporating an elastic labor supply and analyze the impacts of technological progress on the equilibrium outcomes of working hours and economic welfare. We first show that the labor supply curve is backward bending. We then show that working hours in developed countries are longer in the first stages of development, but shorter in the second stages of development.
    Date: 2014–10

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