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on International Trade |
| By: | Wanyu Chung |
| Abstract: | What determines the currency denomination of international trade? This is the first paper to consider in theory and data how exporters' dependence on imported inputs affects their choice of invoicing currency. My model predicts that exporters more dependent on foreign currency-denominated inputs are more likely to use foreign currency for pricing. Using a novel dataset that covers all UK trade transactions with non-EU countries, I provide firm-level evidence by matching import and export data and relate exporters' invoicing currency choice to their import behavior. I find considerable support for the model's predictions, and these findings have strong implications for the variation of exchange rate pass-through across industries. |
| Keywords: | Invoicing Currency, Exchange Rate Pass-through, Trade in Intermediate Goods JEL Classification: F1, F31, F41 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:not:notgep:14/11&r=int |
| By: | Prema-chandra Athukorala |
| Abstract: | This paper documents and analyzes emerging trade patterns in Asia, with special reference to the implications of global production sharing with a view to informing the policy debate on forming the Regional Comprehensive Economic Partnership (RCEP). The analysis reveals that the degree of dependence of RCEP countries on this new form of global division of labour is much larger compared to Europe and North America. Global production sharing has certainly strengthened economic interdependence among the countries in the region, but the dynamism of the regional cross-border production networks depends inexorably on global, rather than regional, trade in final goods. The findings of this paper make a strong case for a global, rather than a regional, approach to trade and investment policy making. |
| Keywords: | Free trade agreement, regional economic cooperation, ASEAN, global production sharing, trade patterns |
| JEL: | F13 F14 F13 O53 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:pas:papers:2014-16&r=int |
| By: | Durevall, Dick (Department of Economics, School of Business, Economics and Law, Göteborg University); van der Weide, Roy (Development Economics Research Group, The World Bank, Washington DC, The United States) |
| Abstract: | This paper shows how a developing country, Lao PDR, imports high glutinous rice prices by exporting its staple food to neighboring countries, Vietnam and Thailand. Lao PDR has extensive export controls on rice, generating a sizable difference between domestic and international prices. Controls are relaxed after good harvests, leading to a surge in exports early in the season and rapidly rising prices later in the year. There is thus a strong case for removal of trade restrictions since they give rise to price spikes, keep the long-term price of glutinous rice low, and thereby hinder increases in income from agriculture. Although this is a case study of Lao PDR, the findings may equally apply to other developing countries that export their staple food. |
| Keywords: | exports; food prices; free trade; rice prices; rice markets; sticky rice; welfare |
| JEL: | F15 Q11 Q17 Q18 |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:gunwpe:0607&r=int |
| By: | Breinlich, Holger; Soderbery, Anson; Wright, Greg C. |
| 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: | 2014–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10116&r=int |
| By: | Thierry Mayer (Département d'économie); Marc J. Melitz (Department of Economics); Gianmarco Ottaviano (Università di Bologna) |
| Abstract: | We build a theoretical model of multi-product firms that highlights how competition across market destinations affects both a firm's exported product range and product mix. We show how tougher competition in an export market induces a firm to skew its export sales toward its best performing products. We find very strong confirmation of this competitive effect for French exporters across export market destinations. Theoretically, this within-firm change in product mix driven by the trading environment has important repercussions on firm productivity. A calibrated fit to our theoretical model reveals that these productivity effects are potentially quite large. |
| JEL: | D21 D24 F13 F14 F41 L11 |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:spo:wpmain:info:hdl:2441/6g0gsihsjmn5snc9pb0jo6hhp&r=int |
| By: | Chang Pao-Li (Singapore Management University) |
| Abstract: | This paper develops a theory on the complementarity in institutional qualities between the home and host countries in bilateral FDI. Firms `born' in countries with poorer institutions tend to invest more in informal institutions to mitigate political risk. The marginal advantage of higher informal institution endowment is bigger when the political risk at the FDI destination is higher. Thus, all else being equal, the ranking of the MNE's home institutions predicts the ranking of the institutional qualities of their FDI destinations. I find robust empirical evidence for this theoretical prediction using bilateral FDI for 219 economies during year 2001-2010. |
| Keywords: | Foreign Direct Investment; Informal Institution; Political Risk; Gravity Equation; Tobit |
| JEL: | C21 C23 C24 F21 F23 |
| Date: | 2014–10 |
| URL: | http://d.repec.org/n?u=RePEc:siu:wpaper:20-2014&r=int |
| By: | Jose Cesar Cruz Jr.; Antonio Carlos Diegues Jr.; Vinicius Stringhini Onofre; Amanda Brito Andriotta |
| Abstract: | According to the United Nations Conference on Trade and Development (UNCTAD, 2012), after China officially joined the World Trade Organization, at the end of 2001, its share on world's exports increased from 4.34%, in 2001, to 10.50%, in 2011. At the same period, China's share on world's imports increased almost 150% - from 3.84% to 9.53%. The increase in international trade happened at the same time China's industrial sector changed the composition of its Gross Value of Production (GVP) towards products that use more scale and differentiated technologies, while natural resources and labor intensive products lost their share in total GVP (Diegues; Angeli, 2011). Most of researches in the field agree that China's economic growth is related somehow to its fast industrialization process on the last two decades, as a consequence of the transition process towards a more market oriented economy. In addition to that, it is also agreed that the exchange rate depreciation has played a major whole while setting up China as one of the most important players in the international market. Trade relations between Brazil and China have intensified in recent decades while caused changes in the list of imported and exported products of the country. In this context, the present study aimed to analyze the evolution of imports and exports of Brazil ? China between 2000 and 2011. Two different forms of sectorial analysis were analyzed which allowed the identification of the most significant exported sectors. The sectorial analysis was performed following two criteria: (i) technological intensity and (ii) types of technology. The study used import and export data between Brazil and China provided by the Brazilian Ministry of Development, Industry and Foreign Trade. It was found that the trade between Brazil and China has become more intense in the most recent years mainly because the Brazilian exports have been more focused on commodities and natural resource-based products. Chinese exports to Brazil, on the other hand, are more concentrated in products of high and medium-high-technology, based mainly on differentiated technology and scale, but with a wider range of products compared to the Brazilian exports. We conclude that a regressive specialization of Brazilian exports to China has been happening probably as a result of both the direct and indirect trade effects between the countries. Key-words: China; Brazil; trade; specialization |
| JEL: | P23 P45 P52 |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa14p1590&r=int |
| By: | Andrea Fracasso; Martina Sartori; Stefano Schiavo |
| Abstract: | The aim of the paper is to investigate the main determinants of the bilateral virtual water ‘flows’ associated with international trade in agricultural goods across the Mediterranean basin. Virtual water refers to the volume of water used in the production of a commodity or a service. The exchange of water as embedded in traded goods brings about the so-called virtual water ‘trade’. We consider the bilateral gross ‘flows’ of virtual water in the area and study what export-specific and import-specific factors are significantly associated with virtual water ‘flows’. We follow a sequential approach. Through a gravity model of trade, we obtain a “refined” version of the variable we aim to explain, one that is free of the amount of flows due to pair-specific factors affecting bilateral trade flows and that fully reflects the impact of country-specific determinants of virtual water ‘trade’. A number of countryspecific potential explanatory variables is presented and tested. To identify the variables that help to explain the bilateral ‘flows’ of virtual water, we adopt a model selection procedure based on model averaging. Our findings confirm one of the main controversial results in the literature: larger water endowments do not necessarily lead to a larger ‘export’ of virtual water, as one could expect. We also find some evidence that higher water irrigation prices reduce (increase) virtual water ‘exports’ (‘imports’). |
| Keywords: | virtual water ‘trade’, Mediterranean countries, Bayesian model averaging, weighted average least square. |
| JEL: | F18 Q25 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:bcu:iefewp:iefewp75&r=int |
| By: | John C. Beghin (Center for Agricultural and Rural Development (CARD)); Jean-Christophe Bureau; Alexandre Gohin |
| Abstract: | We assess the impact of a potential TTIP bilateral free trade agreement on the EU and US bio-economies (feedstock, biofuels, by-products, and related competing crops) and major trade partners in these markets. The analysis develops a multi-market model that incorporates bilateral trade flows (US to EU, EU to US, and similarly with third countries) and is calibrated to OECD-FAO baseline for 2013–2022 to account for recent policy decisions. The major policy reforms from a TTIP involve tariff and TRQ liberalization and their direct contractionary impact on US sugar supply, EU biofuel production, and indirect negative effect on US HFCS production. EU sugar and isoglucose productions expand along with US ethanol and biodiesel and oilseed crushing. EU sugar would flow to the US, US biofuels and vegetable oil to the EU. We further quantify nontariff measures (NTM) affecting these trade flows between the EU and the US. EU oilseed production contracts, and EU crushing expands with improving crushing margins following reduced NTM frictions. Our analysis reveals limited net welfare gains with most net benefits reaped by Brazil and not the two trading partners of the TTIP. |
| Keywords: | TTIP, bilateral trade agreement, biofuel, ethanol, biodiesel, sugar, nontariff measure JEL Codes: F13, Q17, Q42, Q48 |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:ias:cpaper:14-wp552&r=int |
| By: | Vinicius Vale; Fernando Perobelli |
| Abstract: | Nowadays, an important debate in the international economies is the problem of greenhouse gas emissions and climate change related. Discussions begin to gain the world with the signature of the Kyoto Protocol (1997), where an international agreement was reached to reduce global emissions. However, in this context of mitigation, many controlling policies are based on reducing domestic emissions of GHG, which ignores, for example, CO2 emissions embodied in international trade. Moreover, given sudden expansion and globalization of world economies, pollution embodied in trade flows becomes important for measurement of responsibilities, because the use of final goods and production inputs that a country need not necessarily produced by itself, leading to a growing concern about the problem of carbon leakage. Thus, many studies have taken into consideration the estimated emissions embodied in international trade through, for example, the input-output analysis. In this context, this paper seeks to make an empirical investigation on the responsibility for emissions and international trade. We use data from WIOD, where the data structure consists of Input-Output Tables for 40 countries (27 EU countries and 13 other selected countries) plus the "Rest of the World" for the period 1995 to 2009. Furthermore, the production side is disaggregated into 35 productive sectors. Finally uses atmospheric emissions of CO2 for the same 40 countries selected and RoW. The overall aim is to measure emissions embodied in international trade and to analyze the interactions in terms of sectors and regional, from such countries. We propose the following specific aims: a) to observe, through CO2 emissions in international trade, if there is a concentration of emissions and if this behavior is maintained over the years (1995-2009), b) measure CO2 emissions embodied in production and consumption, c) measure the CO2 emissions embodied in exports and imports of each country and thus verify if the international trade has been used as a way to reduce emissions by countries, d) construction carbon balance for each country. The methodology used involves input-output techniques for calculating carbon emissions embodied in international trade. Thus, aggregate indicators for different countries are obtained, such as coefficients of intensity of CO2 emissions. Moreover, trade balances global CO2 emissions embodied in international trade are calculated and the major net exporters and net importers of CO2 emissions in the world economy are identified. Moreover, these indicators represent the empirical basis for the discussion on the responsibility for emissions, being possible, for example, to make a discussion of responsibilities between producer and consumer countries for environmental impacts. Finally, Miyazawa multipliers are calculated, a methodology that approach the issues of feedback loop between countries, through the decomposition of the Leontief inverse matrix in sub-matrices. |
| Keywords: | CO2 emissions; International trade; Multi-regional input-output model; |
| JEL: | C67 D57 Q53 Q54 Q56 |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa14p855&r=int |
| By: | Carrère, Céline; Strauss-Kahn, Vanessa |
| Abstract: | This paper focuses on developing countries that export for the first time to the OECD and obtains several important results on export dynamic, linking exports experience and exports survival. Using product level data at the SITC 5 digit level for 114 developing countries on the 1962-2009 period, we show that prior exports experience obtained in non-OCDE markets increases survival in the OECD market. The effect of experience depreciates however rapidly with time: gaining experience for more than two years is worthless. Moreover, a break in export experience prior to entering the OECD reduces the benefit on survival. Geographic export dynamic reveals that experience is acquired in neighbor, easy to access markets before reaching more distant, richer partners and ultimately serving the OECD. Where the experience is acquired does not however matter for survival. |
| Keywords: | developing countries; duration of export; experience and learning; survival analysis |
| JEL: | C41 F10 F14 O50 |
| Date: | 2014–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10059&r=int |
| By: | Uduak Akpan (Association of African Young Economists); Salisu Isihak; Simplice Anutechia Asongu (Association of African Young Economists) |
| Abstract: | This study employs panel analysis to examine the determinants of foreign direct investment (FDI) in Brazil, Russia, India, China, and South Africa (BRICS) and Mexico, Indonesia, Nigeria, and Turkey (MINT) using data for eleven years i.e. 2001 – 2011. First, it uses pooled time-series cross sectional analysis to estimate the model on determinants of FDI for three samples: BRICS only, MINT only, and BRICS and MINT combined; then, random effects model is also employed to estimate the model for BRICS and MINT combined. The results show that market size, infrastructure availability, and trade openness play the most significant roles in attracting FDI to BRICS and MINT while the roles of availability of natural resources and institutional quality are insignificant. Given that FDI inflow to a country has the potential of being mutually beneficial to the investing entity and host government, the challenge is on how BRICS and MINT can sustain the level of FDI inflow and ensure it results in economic growth and socio-economic transformation. To sustain the level of FDI inflow, governments of BRICS and MINT need to ensure that their countries remain attractive for investment. BRICS and MINT also need to ensure that their economies absorb substantial skills and technology spillovers from FDI inflow to promote sustainable long-term economic growth by investing more in their human capital. The study is significant because it contributes to literature on determinants of FDI by extending the scope of previous studies which often focus only on BRICS. |
| Keywords: | FDI, determinants, fast-growing economies, BRICS, MINT |
| Date: | 2014–07 |
| URL: | http://d.repec.org/n?u=RePEc:aay:wpaper:14_014&r=int |
| By: | Sacchidananda Mukherjee (National Institute of Public Finance and Policy, New Delhi, India); Debashis Chakraborty (Indian Institute of Foreign Trade, New Delhi, India); Julien Chaisse (Centre for Financial Regulation and Economic Development (CeFRED), The Chinese University of Hong Kong, china) |
| Abstract: | The positive influence of subsidies on merchandise exports is well known from trade theory literature. However, the empirical evidence on the relationship remains ambiguous. The current study conducts a panel data empirical analysis over 1990–2011 for 140 countries to understand the relationship between their overall budgetary subsidies and aggregate merchandise export inclination. The empirical results of this article lead to three major findings. Firstly, overall budgetary supports in all countries, irrespective of their income level, are positively related with aggregate merchandise export expressed as percentage of GDP. However, the low-income countries witness lesser success vis-à-vis their developed counterparts. Secondly, merchandise imports, FDI inward movement and contribution of the industrial sector in the economy positively influence merchandise export inclination, which partially explains the former result. Thirdly, the importance of government budgetary subsidy reporting procedure on merchandise exports is also emphasized. The findings underline the importance of concluding the Doha Round Negotiations of WTO in general and disciplining of subsidies in particular in no uncertain terms. |
| Keywords: | budgetary subsidy, exports, trade policy, WTO. |
| Date: | 2014–03 |
| URL: | http://d.repec.org/n?u=RePEc:ift:wpaper:1422&r=int |
| By: | Levchenko, Andrei A. (University of Michigan); Zhang, Jing (Federal Reserve Bank of Chicago) |
| Abstract: | We estimate productivities at the sector level for 72 countries and 5 decades, and examine how they evolve over time in both developed and developing countries. In both country groups, comparative advantage has become weaker: productivity grew systematically faster in sectors that were initially at greater comparative disadvantage. These changes have had a significant impact on trade volumes and patterns, and a non-negligible welfare impact. In the counterfactual scenario in which each country's comparative advantage remained the same as in the 1960s, and technology in all sectors grew at the same country-specific average rate, trade volumes would be higher, cross-country export patterns more dissimilar, and intra-industry trade lower than in the data. In this counterfactual scenario, welfare is also 1.6% higher for the median country compared to the baseline. The welfare impact varies greatly across countries, ranging from −1.1% to +4.3% among OECD countries, and from −6% to +41.9% among non-OECD countries. |
| Keywords: | technological change; sectoral TFP; Ricardian models of trade; welfare |
| JEL: | F11 F43 O33 O47 |
| Date: | 2014–10–07 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedhwp:wp-2014-12&r=int |
| By: | Hamanaka, Shintaro (Asian Development Bank) |
| Abstract: | At the Ninth Ministerial Conference of the World Trade Organization (WTO) held in Bali on 3–6 December 2013, the ministers agreed upon the WTO Agreement on Trade Facilitation (ATF). This paper assesses the level of ambition of the ATF from two angles. First, the use of softening language in each provision is examined. Second, the final agreement is compared against the draft text prepared before the Bali conference. Then, the paper considers the likely legal, economic, capacity-building, and reform-inducing impacts of the ATF. |
| Keywords: | Agreement on Trade Facilitation (ATF); Capacity building; assistance; obligation; best endeavor |
| JEL: | F13 F53 F55 |
| Date: | 2014–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:ris:adbrei:0138&r=int |
| By: | Patryk Skowron; Mariusz Karpiarz; Agata Fronczak; Piotr Fronczak |
| Abstract: | In this paper, we investigate the statistical features of the weighted international-trade network. By finding the maximum weight spanning trees for this network we make the extraction of the truly relevant connections forming the network's backbone. We discuss the role of large-sized countries (strongest economies) in the tree. Finally, we compare the topological properties of this backbone to the maximum weight spanning trees obtained from the gravity model of trade. We show that the model correctly reproduces the backbone of the real-world economy. |
| Date: | 2014–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1412.1618&r=int |
| By: | Pomfret, Richard (University of Adelaide, Australia); Sourdin, Patricia (University of Adelaide, Australia) |
| Abstract: | An increasingly important part of international trade consists of fragmentation of the production process, with differing tasks in the global value chain (GVC) being undertaken in different locations. The paper traces the origins of the GVC phenomenon, attempts to measure the significance of GVCs, and analyzes why some countries participate in GVCs while others do not. GVCs rely on timely delivery of parts and components at every stage, with no unnecessary costs to crossing borders. West and Central Asian countries have been nonparticipating because their economies are characterized by high costs of doing business, obtrusive border controls, and other obstacles. Governments may be reluctant to undertake necessary reforms, and wary of the potential for increased volatility and inequality that sometimes accompany GVC participation. However, the cost of non-participation is falling behind in economic prosperity. Import-substituting industrialization is no longer a serious option, because no country with an integrated car or computer industry can hope to be competitive with goods produced along efficient GVCs. |
| Keywords: | global value chains; Central Asia; connectivity |
| JEL: | F14 O53 |
| Date: | 2014–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:ris:adbrei:0142&r=int |
| By: | UCHINO Taisuke |
| Abstract: | To elucidate the relationship between the great trade collapse of 2008-09 and financial shocks, existing literature has focused on the channel of trade credit. Because exporting activities are more working-capital dependent than domestic sales, firms may reduce their exports when their banks' ability to provide trade credit is deteriorated by financial shocks. Based on the above-mentioned hypothesis, this paper aims to investigate whether adverse shocks to banks explain Japan's export collapse during the crisis. To this end, I construct bank-firm matched data by utilizing the Basic Survey of Japanese Business Structure and Activities conducted by the Ministry of Economy, Trade, and Industry. The panel data analyses of this paper, in which firm-, year-, destination-, and industry-fixed effects are fully controlled for, demonstrate that the growth rate of exports was significantly lower for firms with unhealthy banks, and this tendency was strengthened during the crisis. However, it also comes to light that exports by financially affected firms account for only a small part of Japan's total exports, and the industry- and destination-common-effects explain the large parts of the decline. Putting the empirical results of this paper together, the existence of a trade credit channel is empirically supported, but its impact was quantitatively minor in explaining Japan's export collapse. |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:eti:rdpsjp:14053&r=int |
| By: | Georg Hirte; Christian Lessmann |
| Abstract: | We study the effect of international trade and freeness of trade on interregional inequality within countries. While most studies focus on single countries and only some use a small panel of countries, we use the two largest databases available to examine these issues. One database is provided by Gennaioli et al. (2013) and covers 105 countries with 1569 regions in 2005. The second data base is collected by Lessmann (2011) and covers 56 countries with 835 sub-national regions for the period 1980-2009. We estimate a model derived from a structural economic geography approach where interregional inequality depends on weighted trade shares and trade costs and where we can derive an aggregate freeness of trade measure. These measures are instrumented based on constructed trade shares and trade costs fitted from a gravity panel model of bilateral trade, that is also derived from the NEG model. We use data on 208 countries for the period 1948--2006 to estimate bilateral trade and bilateral freeness of trade. The results are used to construct proxies for trade to GDP and aggregate freeness of trade of a country. Next, we carry out cross section analyses on the huge data base of Gennailoli et al. (2013) where we use the constructed proxies as instruments. IV estimates provide ambiguous evidence that both a higher trade to GDP ratio and a higher freeness of trade raise interregional inequality. Applying the same approach to the Lessmann data confirms the findings also for his selection of countries. We take this as sign that the Lessmann data do not suffer from a selection bias in comparison to the Gennaioli et al. data. This raises our confidence that using the Lessmann data in a panel approach provides general findings. FE, Panel IV and dynamic panel regressions confirm our findings concerning the trade to GDP ratio. In contrast these within estimates do not provide significant results for the freeness of trade. Because the latter is an indicator for integration in the world markets, we conclude that more integration neutralizes the negative interregional distribution effects of the increase in trade. This implies, so our policy conclusion, that the negative impact of trade on inequality could be reduced by raising trade with countries that are highly integrated in the world market and characterized by a high freeness of trade. |
| Keywords: | Regional inequality; trade; gravity model; panel data; new economic geography |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa14p304&r=int |
| By: | Pascha, Werner |
| Abstract: | The paper deals with how to enhance economic integration between Korea and the EU, particularly in the field of electric mobility. Taking note of the Framework Agreement (FA), the free trade agreement (FTA) and the first two years of the agreement in action, potentials and challenges for further cooperation are discussed. The competitive strengths of Korean automobile makers and parts suppliers in Emobility serve as a basis to derive the European interest in closer cooperation, also considering how the EU and its members already act in the policy sphere of E-mobility. Three areas for an intensified cooperation are suggested: Carefully observing trade and FDI access, following up on the FTA agreement, standardization efforts as part of the multilateral efforts to reform the harmonization of regulation, and supporting cooperation among multi-level actors within the EU and Korea. |
| Keywords: | European Union,(South) Korea,Free Trade Agreement,Electric mobility,E-mobility,Industrial cooperation,Standardization,Harmonization,Regulation,Subsidies |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:udedao:982014&r=int |
| By: | Mostafa Beshkar (Indiana University) |
| Keywords: | Arbitration, Liability Rule, Property Rule, Safeguards, WTO |
| JEL: | F13 K33 |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:inu:caeprp:2014004&r=int |
| By: | Auer, Raphael; Chaney, Thomas; Sauré, Philip |
| Abstract: | We examine firm's pricing-to-market decisions in vertically differentiated industries featuring a large number of firms that compete monopolistically in the quality space. Firms sell goods of heterogeneous quality to consumers with non-homothetic preferences that differ in their income and thus their marginal willingness to pay for quality increments. We derive closed-form solutions for the pricing game under costly international trade, thus establishing existence and uniqueness. We then examine how the interaction of good quality and market demand for quality affects firms' pricing-to-market decisions. The relative price of high quality goods compared to that of low quality goods is an increasing function of the income in the destination market. When relative costs change, the rate of exchange rate pass-through is decreasing in quality in high income countries, yet increasing in quality in low-income countries. We then document that these predictions receive empirical support in a dataset of prices and quality in the European car industry. |
| Keywords: | exchange rate pass-through; intra-industry trade; monopolistic competition; pricing-to-market; vertical differentiation |
| JEL: | E3 E41 F12 F4 L13 |
| Date: | 2014–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10053&r=int |
| By: | Dario Guarascio (Sapienza University of Rome); Mario Pianta (Department of Economics, Society & Politics, Università di Urbino "Carlo Bo"); Francesco Bogliacino (Universidad Nacional de Colombia) |
| Abstract: | In this article we extend the model developed by Bogliacino and Pianta (2013a, 2013b) on the link between R&D, innovation and economic performance, considering the impact of innovation of export success. We develop a simultaneous three equation model in order to investigate the existence of a ‘virtuous circle’ between industries’ R&D, share of product innovators and export market shares. We investigate empirically – at the industry level – three key relationships affecting the dynamics of innovation and export performance: first, the capacity of firms to translate their R&D efforts in new products; second, the role of innovation as a determinant of export market shares; third, the export success as a driver of new R&D efforts. The model is tested for 38 manufacturing and service sectors of six European countries over three time periods from 1995 to 2010. The model effectively accounts for the dynamics of R&D efforts, innovation and international performances of European industries. Moreover, important differences across countries emerge when we split our sample in a Northern group – Germany, the Netherlands and the United Kingdom – and a Southern group – France, Italy and Spain. We find that the ‘virtuous circle’ between innovation and competitiveness holds for Northern economies only, while Southern industries fail to translate innovation efforts into export success. |
| Keywords: | Export, R&D, Innovation, Three Stages Least Squares,Europe |
| JEL: | F12 F14 O31 O33 O52 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:urb:wpaper:14_07&r=int |
| By: | Hans G Jensen; Kym Anderson |
| Abstract: | When prices spike in international grain markets, national governments often reduce the extent to which that spike affects their domestic food markets. Those actions exacerbate the price spike and international welfare transfer associated with that terms of trade change. Several recent analyses have assessed the extent to which those policies contributed to the 2006-08 international price rise, but only by focusing on one commodity or using a back-of-the envelope (BOTE) method. This paper provides a more-comprehensive analysis using a global economy-wide model that is able to take account of the interactions between markets for farm products that are closely related in production and/or consumption, and able to estimate the impacts of those insulating policies on grain prices and on the grain trade and economic welfare of the world's various countries. Our results support the conclusion from earlier studies that there is a need for stronger WTO disciplines on export restrictions. |
| Keywords: | Domestic market insulation, Distorted incentives, International price transmission, Commodity price stabilization |
| JEL: | F14 Q17 Q18 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:pas:papers:2014-14&r=int |
| By: | Theodore H. Moran (Peterson Institute for International Economics) |
| Abstract: | Multinational corporations account for 80 percent of all transfers of goods and services across borders, either within their own affiliate transactions or through networks with independent providers. As a result, the term supply chains is rapidly becoming the new norm in discussing the spread of trade and investment around the globe. From the point of view of developing countries, however, the ability to link host economies into international supply chains is anything but normal. There are important market failures and tricky obstacles that inhibit creation of supply chains in emerging markets. This working paper identifies the most important market failures and impediments that hinder the spread of supply chains in developing economies--with findings quite at variance with much conventional wisdom--and examines how some host governments have been successful in overcoming these obstructions. The evidence provides a useful perspective on the debate about the need for something that might be called industrial policy for countries that want to use foreign direct investment (FDI) to diversify and upgrade their production and export base. A sample of six diverse case studies--chosen because they offer detailed information about information asymmetries, market failures, and coordination externalities--shows clearly that developing country authorities should not merely sit back and wait to see what international market forces bring to them. The public sector "support" that is needed takes the form of creating effective investment promotion agencies and funding industrial parks, reliable infrastructure, and vocational training with curricula designed by companies that wish to employ the graduates. These interventions surely qualify as a kind of industrial policy, and definitely cost public money. This approach might be called light-form industrial policy to harness FDI to development and generate backward linkages as deep as possible into the host economy. This light-form industrial policy contrasts with policies that target specific domestic industries for special government support and protection while excluding foreign investment altogether from the targeted industries or subjecting foreign firms therein to performance requirements in the form of domestic content mandates, joint venture mandates, and/or other technology-sharing pressures. This latter approach could be called heavy-form industrial policy. Country experiences, including evidence from China, reveal counterproductive outcomes from the imposition of explicit performance requirements on foreign investors. To a certain extent, emerging market hosts can carry out policy interventions on their own. But the evidence presented here shows that external support is often crucial to success. Contemporary policy discourse often implies, indeed sometimes assumes, that with the explosion of international private sector investment flows there is less need for developed country donors and multilateral financial institutions to support growth and development programs--as opposed to pure poverty reduction programs--especially in middle-income emerging markets. But the evidence introduced in this working paper shows that there is a vital role for external donors, including the aid agencies of developed countries, the World Bank Group, and the regional development banks, to work with host country governments to improve the functioning of markets so that emerging countries can better harness FDI for development. |
| Keywords: | foreign investment, trade, supply chains, development, World Bank, development assistance, industrial policy |
| JEL: | F16 F23 O25 |
| Date: | 2014–10 |
| URL: | http://d.repec.org/n?u=RePEc:iie:wpaper:wp14-12&r=int |
| By: | Tobias Brändle; Andreas Koch |
| Abstract: | This paper analyses the potentials of jobs to be offshored or outsourced. We use four waves of the BIBB/BAuA Survey on Qualification and Working Conditions in Germany and employ a large set of potential determinants of offshoring and outsourcing derived from the literature. Applying the datadriven method of principal component analysis, we provide two indicators that measure both the offshoring potentials (cross-country geographical relocation) and the outsourcing potentials (organisational relocation) at the level of jobs, occupations, tasks, or industries. Our results show significant variation in the determinants of both dimensions. In addition to the direct contribution, our paper provides two indicators that can be used to further investigate the economic effects of job offshorability. |
| Keywords: | Outsourcing, International Trade, Offshoring, Trade in Tasks |
| JEL: | D23 F16 J24 O33 |
| Date: | 2014–10 |
| URL: | http://d.repec.org/n?u=RePEc:iaw:iawdip:110&r=int |
| By: | Marco de Pinto (Institute for Labour Law and Industrial Relations in the EU, University of Trier); Jörg Lingens (University of Muenster) |
| Abstract: | We analyze the effects of unionization on the decision of a firm to either produce at home or abroad. We consider a model in which home and foreign workers are perfect substitutes and firms have an informational advantage concerning their productivity. The union offers wage-employment contracts to induce truthtelling. Because of a firm's productivity dependent outside option (producing abroad), the problem is characterized by countervailing incentives. We find that, under fairly mild assumptions on the distribution of firm's productivity, the overstating incentive always dominates. The equilibrium contract offered by the union is then characterized by overemployment. Besides its effect on the intensive margin, the union also affects the extensive margin (i.e. de-location). The union forces firms to de-locate because this narrows the possibility to overstate productivity which then saves rent payments to the firm. |
| Keywords: | trade unions, information asymmetry, open economy, countervailing incentives, de-location |
| JEL: | J51 F2 D82 |
| Date: | 2014–12 |
| URL: | http://d.repec.org/n?u=RePEc:iaa:dpaper:201412&r=int |
| By: | Plank, Leonhard; Staritz, Cornelia |
| Abstract: | Regional suppliers still play an important role in the global apparel industry. By studying the experience of Romania's apparel sector, the paper highlights, first, the importance of multiscalar institutional, macro and policy contexts in analyzing the articulation of and up- and downgrading experiences in global production networks. These include the Multi-Fibre Arrangement, EU trade agreements and accession, the global economic crisis, and the specific institutional and policy context of post-Socialism. Second, the paper stresses the existence of diverse, non-linear and uneven up- and downgrading trajectories and of reactive adaptation rather than pro-active firm strategies. This questions the ideal upgrading account often portrayed in chain and network research. |
| Keywords: | Romania,apparel,global production networks,trade policy,upgrading,downgrading |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:oefsew:50&r=int |
| By: | Dachs, Bernhard; Zahradnik, Georg |
| Abstract: | This paper asks if – and how – the global financial crisis of 2008/09 has affected overseas R&D activities of multinational enterprises (MNEs). Based on a data set of OECD countries, we find that the share of MNEs on total business R&D expenditure decreased for the first time since 2001 in many countries. Data for 2011 indicate that R&D internationalisation is picking up again, but has not yet reached pre-crisis levels. The impact of the crisis on foreign-owned firms may be explained by their higher export intensity, more demand-driven R&D, the concentration of MNE activity in R&D intensive manufacturing industries, and a smaller effect of public R&D support provided via stimulus packages after 2007. The crisis led to a modest re-location of MNE R&D activity from the European Union to emerging economies. The shares of the European Union on total overseas R&D activities of US firms indeed decreased between 2007 and 2011, while shares of emerging economies increased; however, in absolute terms, the gains of emerging economies only small and rather a continuation of a trend which started well before 2008. |
| Keywords: | global financial crisis, multinational enterprises, internationalisation, R&D, innovation, foreign-owend firms |
| JEL: | F23 O30 O33 |
| Date: | 2014–12 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:60641&r=int |
| By: | Jürgen Bitzer (Carl von Ossietzky University Oldenburg); Erkan Gören (Carl von Ossietzky University Oldenburg and Aarhus University); Sanne Hiller (Ruhr-University Bochum and Aarhus University) |
| Abstract: | This paper explores the role of immigrant employees for a firm’s capability to absorb international knowledge. Using matched employer-employee data from Denmark for the years 1999 to 2009, we are able to show that non-Danish employees contribute significantly to a firm’s economic output through their ability to access international knowledge. The immigrants’ impact increases if they come from technological advanced countries, have a high educational level, and are employed in high skilled positions. However, the latter does not hold for immigrant managers. |
| Keywords: | R&D Spillovers, Absorptive Capacity, Firm-Level Analysis, Foreign Workers, Immigrants |
| JEL: | D20 J82 L20 O30 |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:lue:wpaper:323&r=int |
| By: | Alberto Bagnai (Department of Economics, Gabriele d'Annunzio University); Christian Alexander Mongeau Ospina (Italian Association for the Study of Economic Asymmetries) |
| Abstract: | We develop a medium-sized annual macroeconometric model of the Italian economy. The theoretical framework is the usual AS/AD model, where the demand side is specified along Keynesian lines, and the supply side adopts a standard neoclassical technology, with Harrod neutral technological progress. The empirical specification consists of 140 equations, of which 29 stochastic, with 55 exogenous variables. The model structure presents some distinct features, among which the disaggregation of the foreign trade block in seven trade partner regions (thus representing the bilateral imports and exports flows in function of the regional GDP and of the bilateral real exchange rates), and the explicit modelling of the impact of labour market reforms on the wage setting mechanism (which explains the shift in the Phillips curve observed over the last two decades). The model is conceived for the analysis of the medium- to long-run developments of the Italian economy, and as such it adopts econometric methods that allow the researcher to quantify the structural long-run parameters. The equation are estimated over a large sample of annual data (1960-2013), using cointegration techniques that take into account the possible presence of structural breaks in the model parameters. The model overall tracking performance is good. We perform some standard policy experiments in order to show the model’s response to usual shocks: an increase in public expenditure, an exchange rate devaluation, a slowdown in world demand, and an increase in oil prices. The shocks are evaluated by ex post simulation and their impact tracked over a five-year span. The dynamic multipliers appear to be consistent with the economic intuition. |
| Keywords: | Model construction and estimation, Simulation methods, Quantitative policy modeling, Keynesian model, Fiscal policy, Empirical studies of trade, Open economy macroeconomics, Macroeconomic issues of monetary unions, Forecasting and simulation. |
| JEL: | C51 C53 C54 E12 E62 F14 F41 F47 |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:ais:wpaper:1405&r=int |
| By: | Marinov, Eduard |
| Abstract: | Regional integration is often viewed as a way to support development and economic growth in developing countries through the related with it benefits to trade and welfare. Economic integration theory goes through two development stages each of which addresses the political and economic context relevant for its time. The first stage is regarded as classic theory or static analysis and includes the traditional theories of economic integration that explain the possible benefits of integration. The second stage includes the new economic integration theories that are often referred to as dynamic analysis of economic arrangements. Besides these two, there is a third type of integration theories that deals with the effects, benefits and constrains of the economic integration arrangements of developing and least developed countries because in most cases, theories of economic integration and its benefits – of dynamic ones, but even more of static ones, are not fully applicable to integration agreements among developing and least developed countries. The current paper tries to come up with a conclusion on what parts of classic and new integration are applicable to the integration arrangement among developing countries and tries to summarize these theories in three main groups – general economic, market-related and trade-related factors and effects. |
| Keywords: | Economic Integration Theory, Developing Countries Integration |
| JEL: | F00 F50 F55 |
| Date: | 2014–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:60321&r=int |
| By: | Marta Antonelli; Martina Sartori |
| Abstract: | The concept of virtual water refers to the volume of water used in the production of a commodity or a service. The concept was identified by the geographer Tony Allan in the early 1990s, to draw attention on the global economic processes that ameliorate local water deficits in the MENA region and elsewhere. Since its inception, the virtual water concept has inspired a flourishing literature on how to address global water resource scarcity vis-à-vis commodity production and consumption in a variety of disciplines, but also has been the object of a number of critiques. Against this backdrop, the aim of the study is, first, to conduct a thorough review of the conceptual definition of the concept, its critics and applications. Secondly, to analyse its theoretical underpinnings and, in particular, its relationship with economic theory. The study argues that, despite not being a policy tool itself, the virtual water concept can reveal aspects related to production, consumption and trade in goods which monetary indicators do not capture. Its potential as an indicator for informing decision-making in water management and policy, as well as commodity trade policy, still has to be fully unfolded. |
| Keywords: | virtual water, water footprint, green and blue water, water scarcity and security, water policy, international trade. |
| JEL: | F18 Q25 Q56 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:bcu:iefewp:iefewp74&r=int |