nep-int New Economics Papers
on International Trade
Issue of 2015‒04‒25
thirty papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. Trade agreements and enforcement : evidence from WTO dispute settlement By Bown,Chad P.; Reynolds,Kara Marie
  2. Trade liberalization, FDI inflows, Environmental quality and Economic growth: A comparative analysis between Tunisia and Morocco By hakimi, Abdelaziz; Hamdi, Helmi
  3. The Magnitude and Distance Decay of Trade in Goods and Services: New Evidence for European Countries By Martijn J. Burger; Mark Thissen; Frank G. van Oort; Dario Diodato
  5. Trade between China and the Netherlands: a Case Study of Globalization By Frank A.G. den Butter; Raphie Hayat
  6. Could the proposed WTO Special Safeguard Mechanism protect farmers from low international prices? By Jayanthi Thennakoon; Kym Anderson
  7. Rags in the High Rent District: the Evolution of Quota Rents in Textiles and Clothing By Joseph Francois; Julia Woerz
  8. Restructuring the International Textile Production and Trade Network. The Role of Italy and Portugal. By Marlies Schütz; Nicole Palan
  9. Does Access to Foreign Markets shape Internal Migration? Evidence from Brazil By Laura Hering; Rodrigo Paillacar
  10. Technology Import, R and D Spillover and Export: A Study of Automobile Sector in India By Santosh K. Sahu; K. Narayanan
  11. The Gravity of Resources and the Tyranny of Distance By Peter E Robertson; Marie-Claire Robitaille
  12. Participation of Developing Countries in Global Value Chains: Implications for Trade and Trade-Related Policies By Przemyslaw Kowalski; Javier Lopez Gonzalez; Alexandros Ragoussis; Cristian Ugarte
  13. Former Foreign Affiliates: Cast Out and Outperformed? By Beata Javorcik; Steven Poelhekke
  14. Modelling Bi-lateral Forest Product Trade Flows: Experiencing Vertical and Horizontal Chain Optimization By Craig Johnston; G. Cornelis van Kooten
  15. Skill upgrading, wage gap and international trade: firm-level evidence for Italian manufacturing firms By Irene Iodice; Chiara Tomasi
  16. Explaining the International Mobility of Chinese Workers, 1992-2012 By ZHANG Hongyong
  17. Eurozone Imbalances: Measuring the Contribution of Expenditure Switching and Expenditure Volumes 1990-2013 By Enno Schröder
  18. Measuring the EU value added embodied in EU foreign exports by consolidating 27 national supply and use tables for 2000-2007 By Bouwmeester, Maaike C.; Oosterhaven, Jan; Rueda-Cantuche, Jos
  19. Trade Reform and Regional Dynamics: Evidence From 25 Years of Brazilian Matched Employer-Employee Data By Rafael Dix-Carneiro; Brian K. Kovak
  20. Trade Linkages and Business Cycle Co-movement: An Empirical Analysis of Africa and its Main Trading Partners using Global VAR By Emilie Chanceline Kinfack and Lumengo Bonga-Bonga
  21. Functional and Sectoral Division of Labour within Central and Eastern European Countries: Evidence from Greenfield FDI By Teodora Dogaru; Martijn Burger; Bas Karreman; Frank van Oort
  22. A Global Trade Model for the Euro Area By Modugno, Michele; D'Agostino, Antonello; Osbat, Chiara
  23. Labour Market Effects of International Fragmentation of Production; Evidence from a Survey and Case Studies in the Dutch Industry By Ebel Berghuis; Frank A.G. den Butter
  24. Behavioral characteristics of applied general equilibrium models with an Armington-Krugman-Melitz encompassing module By Oyamada, Kazuhiko
  25. Targeted carbon tariffs. Carbon leakage and welfare effects By Christoph Böhringer; Brita Bye; Taran Fæhn; Knut Einar Rosendahl
  26. Managing Transaction Costs in International Production; Evidence on Entrepreneurship from Case Studies in The Netherlands By Ebel Berghuis; Frank A.G. den Butter
  27. The Global Economic Implications of Freer Skilled Migration By Rod Tyers; Iain Bain
  28. International Technology Diffusion of Joint and Cross-border Patents By Chia-Lin Chang; Michael McAleer; Ju-Ting Tang
  29. Second-Best Carbon Taxation in the Global Economy: The Green Paradox and Carbon Leakage Revisited By van der Ploeg, Frederick
  30. El comercio de cabotaje del vino de Jerez en el siglo XIX: un análisis cuantitativo By Luis Cárdenas del Rey; Andrea Carrera; Laura Vitriago Valdivielso

  1. By: Bown,Chad P.; Reynolds,Kara Marie
    Abstract: This paper examines the implications of the terms-of-trade theory for the determinants of outcomes arising under the enforcement provisions of international agreements. Like original trade agreement negotiations, the paper models formal trade dispute negotiations as potentially addressing the terms-of-trade externality problem that governments implement import protection above the globally efficient level so as to shift some of the policy's costs to trading partners. The approach is to extend earlier theoretical models of trade agreement accession negotiations to the setting of enforcement negotiations in order to guide the empirical assessment. The paper uses instrumental variables to estimate the model on trade volume outcomes from World Trade Organization (WTO) disputes over 1995?2009. The evidence is consistent with theoretical predictions that larger import volume outcomes are associated with products that have smaller increases in foreign exporter-received prices (terms-of-trade losses for the importer) as a result of the dispute, larger pre-dispute import volumes, larger import demand elasticities, and smaller foreign export supply elasticities. Dispute settlement outcome differences are also explained by variation in institutionally-motivated measures of retaliation capacity and the severity of the free-rider problem associated with foreign exporter concentration.
    Date: 2015–04–20
  2. By: hakimi, Abdelaziz; Hamdi, Helmi
    Abstract: The aim of this research is to investigate the economic impacts of the trade liberalization on the environmental quality in Tunisia and Morocco. Specifically, the paper inspects whether liberalization of the trade sector has harmed the quality of the environment in both countries. To this end, we conduct various econometric models: a VECM and cointegration techniques for single country case study and a Panel VECM and Panel cointegration when using data of both country as a group. We also include a dummy variable in each model to see the real impact of trade liberalization for both countries. In the empirical section, we found bidirectional causality between FDI and CO2. This implies that the nature of FDI inflows to Morocco and Tunisia are not clean FDI. These results show that trade liberalization has a negative impact on environmental. The paper concludes that although trade liberalization boosted the economies of both countries by creating new employment opportunities, liberalization has harmed the environment.
    Keywords: Trade liberalization, FDI, environmental quality
    JEL: G28 O11 O19
    Date: 2015–04–20
  3. By: Martijn J. Burger (Erasmus University Rotterdam); Mark Thissen (Netherlands Environmental Assessment Agency (PBL), The Hague, the Netherlands); Frank G. van Oort (Utrecht University); Dario Diodato (Utrecht University, the Netherlands)
    Abstract: Using a newly assembled, consistent and disaggregated dataset (12 goods and 7 services) on internal and bilateral trade for 25 European countries, we analyse the difference between trade in goods and services. The measurement of both trade in goods and trade in services is improved over earlier research, allowing us to compare trade in goods and services in a coherent and systematic way. First, our dataset is made consistent with the domestic demand and production and the total exports and imports at the sector and product level. Second, we explicitly control for re-exports. We find that, although goods are more often bilaterally traded than services, the volume of bilateral trade in services does not attenuate less with distance than the volume of bilateral trade in goods. Published in <A href="">Spatial Economic Analysis</A>.
    Keywords: services, goods, trade costs, Europe
    JEL: F10 F14
    Date: 2014–03–07
  4. By: Giorgia Giovannetti (Dipartimento di Scienze per l'Economia e l'Impresa); Enrico Marvasi (Dipartimento di Scienze per l'Economia e l'Impresa)
    Abstract: This paper offers a firm level perspective of global value chain participation in the food industry. Exploiting a very rich and original dataset, based on a 2011 survey of 25,090 Italian firms operating in manufacturing and related services, we characterize the food industry, describing its main strengths and weaknesses, and analyze the links between the probability to export and the value chain participation. Stylized facts on food global value chains and the Italian food industry are singled out. Italian food processing firms offer an ideal setting to study whether entering a value chain helps the internationalization of small, often high quality, firms. Italy is well known for gourmet food, but is despecialized, since it has a substantial trade deficit in the sector. Food processing firms are very small, on average with less than seven workers, and when in value chain, their distribution is skewed towards downstream activities, with a much lower share of subcontractors than of own-branded and final firms. After having described and characterized the sector, we estimate the probability to export of food processing firms and the role of value chains. Our results show that participating in a value chain significantly increases the probability to export. This is particularly true for small firms in the industrial food value chain and for firms positioned downstream. Participating in distribution chains, for instance being able to sell products through large supermarkets, also significantly contributes to internationalization. Our results have important implications in terms of trade policy: tariffs and other protection measures are cumulative when intermediate inputs are traded across borders multiple times. Hence, protection can end up in a significantly higher cost of the finished good. This shows the importance to “think value chain” when discussing trade policy.
    Keywords: Global Value Chain, Heterogeneous firms, Export, Internationalization, Food
    JEL: F12 F14 F21
    Date: 2015
  5. By: Frank A.G. den Butter (VU University Amsterdam); Raphie Hayat (KPMG Corporate Finance, Amsterdam)
    Abstract: See also F.A.G. den Butter, R. Hayat (2013), Trade between China and the Netherlands: a case study of trade in tasks, <I>Journal of Chinese Economic and Foreign Trade Studies</I>, 6(3), 178-191. <P> During the last decades, the growth of trade between China and the Netherlands has been larger than the increase in bilateral trade flows between China and most other countries. Using a time series based gravity model, this paper investigates the main determinants of this increase. The empirical analysis indicates that, apart from GDP growth, Dutch in-house offshoring to China is a major determinant of Dutch import growth from China. Dutch firms tend to offshore production in-house when the asset specificity of the traded inputs is high and offshore via the market when this asset specificity is low. Controlling for these product types also reveals that transport costs are more important for trade in homogeneous and reference priced goods than for trade in differentiated goods
    Keywords: international trade; transaction costs; offshoring; foreign direct investments; asset specificity; gravity model
    JEL: F14 L16 L23
  6. By: Jayanthi Thennakoon; Kym Anderson
    Abstract: This paper offers an empirical analysis of the proposal by some developing countries for an agricultural Special Safeguard Mechanism (SSM) in the World Trade Organization. It draws on political economy and market theory to demonstrate that the loss-averting domestic producer benefits that proponents believe the SSM would offer agricultural-importing developing countries may be illusory, insofar as agricultural-exporting countries also seek to avert producer losses. By way of illustration, the paper then uses time series data to analyse past government responses to fluctuations in the world's rice markets. The results suggest that the proposed SSM would deliver at most only a small fraction of the loss-averting benefits that have been advertised by the proponents of the SSM. Since the analysis applies to upward as well as downward spikes in international prices, it underscores the importance of strengthening multilateral disciplines on both import and export trade interventions to reduce beggar-thy-neighbor unilateral trade policy responses to food price fluctuations.
    Keywords: WTO safeguards, SSM, food security, rice market volatility
    JEL: F13 F15 F17 Q17
    Date: 2014
  7. By: Joseph Francois (Erasmus Universiteit Rotterdam); Julia Woerz (WIIW, Vienna)
    Abstract: We develop a mixed complementarity programming (MCP) based estimating framework for non-tariff barriers (NTBs) to examine the evolution of market access conditions in the textile and clothing sectors, working with a panel of bilateral trade data on textile and clothing trade, underlying bilateral tariffs, and the country-pair coverage of quotas under the WTO's Agreement on Textiles and Clothing (ATC). Our estimating framework takes advantage of the panel nature of trade data when calculating export tax equivalents while allowing for inequality constraints on the quota premium estimates. We also introduce Gaussian quadrature for estimating goodness of fit for regression-based NTB measures based on residual fitting.
    Keywords: NTB estimation; Gaussian quadrature; ATC; MFA; import quotas
    JEL: F13 C15
  8. By: Marlies Schütz; Nicole Palan
    Abstract: Production and trade processes in the textile industry have been undergoing tremendous changes in structure due to both changes in technology (i.e. increased mechanization and automation processes) and in the institutional environment (i.e. the assignment of the WTO treaty in 1994). This paper studies the restructuring process in the textile industry from the perspective of two major textile producing countries in the EU15, i.e. Italy and Portugal between the two years 1995 and 2009. As a starting point, a detailed descriptive analysis of the global distribution of the textile industry and changes therein is provided. By means of two international textile trade networks (ITTNs), showing (1) trade in value added and (2) trade in labour, we next discuss spatial trade patterns and changes therein. Focusing on the ITTNs, we then figure out how these countries’ textile industries were affected in terms of specialisation patterns, movements along the global value chain and vertical specialisation. Combining the merits of a multiregional I/O-framework with network analysis both qualitative and quantitative aspects of the experienced restructuring process are figured out. This paper contributes to a better understanding of changes in national economic structures resulting from changes in the institutional and technological change without masking the international context.
    Keywords: International trade network, concentration, textile industry, structural change, network analysis, multiregional input-output model
    JEL: C67 F14 O12
    Date: 2015–04
  9. By: Laura Hering (Erasmus University Rotterdam, the Netherlands); Rodrigo Paillacar (University of Cergy-Pontoise, France)
    Abstract: This paper investigates how internal migration is a affected by Brazil's increased integration into the world economy. We analyze the impact of regional differences in access to foreign demand on sector-specific bilateral migration rates between the Brazilian states for the years 1995 to 2003. Using international trade data, we compute a foreign market access indicator at the sectoral level, which is exogenous to domestic migration. A higher foreign market access is associated with a higher local labor demand and attracts workers via two potential channels: higher wages and new job opportunities. Our results show that both channels play a significant role in internal migration. Further, we find a heterogeneous impact across industries according to their comparative advantage on the world market. However, the impact of market access is robust only for low-educated wor kers. This finding is consistent with the fact that Brazil is exporting mainly goods that are intensive in unskilled labor.
    Keywords: Regional migration, international trade, market access, Brazil
    JEL: F16 R12 R23
    Date: 2014–07–07
  10. By: Santosh K. Sahu (Madras School of Economics); K. Narayanan (Department of Humanities and Social Sciences, Indian Institute of Technology Bombay, Powai, Mumbai)
    Abstract: We examine the importance of a firm’s R and D activity, technology import and intra-sectoral R and D spillovers on the decision to export and export intensity using firm level panel data for the Indian automobile sector from 2000-2014. R and D and technology import activities are found to be important determinants of export activity. There is evidence that R and D spillovers exert positive effects on firms’ export intensity and decision to export. In addition to these results, firm age and size are nonlinearly related to export decision and export intensity. Energy efficiency plays important role in export behavior for firms that are continuously exporting and those who are exporting at least for one year.
    Keywords: Decision to export, Export intensity, Indian automobile sector, R and D intensity, Technology import intensity
    JEL: L10 L21 L22 L62
    Date: 2015–02
  11. By: Peter E Robertson (Business School, University of Western Australia); Marie-Claire Robitaille (The University of Nottingham, Ningbo China)
    Abstract: Falling transport costs and the rise of global production networks have reshaped world trade. But endowments still determine production locations for fuels and minerals. Moreover, because they are often bulky or dicult to store, unit transport costs for natural resources may still be very large. To what extent, therefore, does geography remain an important determinant of comparative and absolute advantage in these markets? We estimate gravity models and show that some minerals and fuels, particularly Iron Ore and Gas, have very high elasticities of trade with respect to distance. We then consider counterfactuals, how trade would di er if location advantages were eliminated. We nd that for a few resource intensive countries, distance barriers have a large impact of their market share and are equivalent to a 70-100% ad valorem export tax relative to an average country. Similar implicit subsidies apply for a large number of well located countries.
    Date: 2015
  12. By: Przemyslaw Kowalski; Javier Lopez Gonzalez; Alexandros Ragoussis; Cristian Ugarte
    Abstract: Although global value chains (GVCs) are often considered a defining feature of the current wave of globalisation, little is known about: i) what drives GVC participation; ii) what the benefits associated to growing participation are; or iii) how developing countries engage and benefit from GVCs. This paper tackles these questions empirically. The evidence indicates there are important benefits to be had from wider participation in terms of enhanced productivity, sophistication and diversification of exports. Structural factors, such as geography, size of the market and level of development are found to be key determinants of GVC participation. Trade and investment policy reforms as well as improvements of logistics and customs, intellectual property protection, infrastructure and institutions can, however, also play an active role in promoting further engagement. A more in-depth analysis of GVC participation and policy context in five developing sub-regions in Africa, the Middle East and Asia highlights key differences and similarities, and can be a starting point for policy makers in the regions to assess their countries’ GVC engagement and to consider policy options.
    Keywords: trade policy, investment, global value chains, intermediate inputs, Middle East and North Africa, GVCs, upgrading, West and Central Africa, South East Asia, developing countries, regional trade agreements, East and Southern Africa, South Asia
    JEL: F1 F2
    Date: 2015–04
  13. 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
  14. By: Craig Johnston; G. Cornelis van Kooten
    Abstract: This paper serves to document the REPA Forest Trade Model – a global model of forest trade that consists of ten products across two horizontal layers in a vertical chain. The model includes 20 regions: Five Canadian regions (Atlantic Canada, Central Canada, Alberta, BC Interior and BC Coast), three U.S. regions (South, North and West), China, Japan, Rest of Asia, Chile, Rest of Latin America, Australia, New Zealand, Finland, Sweden, Russia, Rest of Europe, and the Rest of the World. The underlying economic theory upon which the model is built is discussed in detail; we demonstrate that changes in region-level forest management policies (e.g., related to harvests) and/or trade policies have a larger impact on income transfers among regions and agents than they have on global welfare. The objective function and constraints to the quadratic programming implementation of the model are developed, and the method used to calibrate the model to existing bilateral trade flows via positive mathematical programming is discussed. Finally, the data sources and actual data are provided, as are the corrections to shipping and handling costs needed to calibrate the model.
    Keywords: Forest trade modeling; vertical chains; welfare measurement; mathematical programming; model calibration
    JEL: C61 D60 F17 Q23 Q27 Q42
    Date: 2014–08
  15. By: Irene Iodice; Chiara Tomasi
    Abstract: This paper aims at investigating the evolution of the employment and wage structure of Italian manufacturing firms in the early 2000s. The work analyzes whether skills and wage movements have been taken place between or within sectors, and within sector, between or within firms. We show that most of the changes are reported within firms and that the rise in the share of skilled workers in the wage bill is due to an increase in the relative demand for skilled labor. The analysis reveals that the relative price of the skilled factor does not adjust positively: the wage premium inside firms indeed falls. The results also suggest that while the relative number of hours worked by skilled workers within firms rises, the hourly wage premium falls. The drop in the hourly wage premium is even larger than that in the annual wage gap. Finally, we observe that the within-firm skill upgrading is strongly and significantly related to trade activities. On the contrary, a firm's change in wage premium is uncorrelated to its level of commitment to international exposure.
    Keywords: heterogeneous firms, wage premium, skill upgrading, international trade
    Date: 2015–04–20
  16. By: ZHANG Hongyong
    Abstract: Using unique panel data on the temporary movement of Chinese workers to 186 economies during 1992-2012, I investigate the patterns and determinants of labor mobility in the services trade. I estimate a gravity model of labor mobility in two categories, namely, overseas labor services and overseas contracted projects. I find that distance (proxy for migration costs) and income are not the most important determinants of the latter. For overseas contracted projects, the dispatch of workers is not driven by their pure economic aims but by the Chinese government's policies and strategies such as its overseas project promotion policy. Furthermore, I employ propensity score matching with the difference-in-difference estimation method to investigate the impact of this policy upon labor mobility. The results show that the policy of promoting overseas contracted projects has causal and strong positive effects on labor mobility in construction-related sectors.
    Date: 2015–04
  17. By: Enno Schröder (Institute for New Economic Thinking, 300 Park Avenue South, New York, NY 10010; Department of Economics, New School for Social Research)
    Abstract: This paper introduces a decomposition of the trade ratio. The dynamics of the trade ratio are composed of contributions from expenditure switching, from the terms of trade, and from relative expenditure (i.e. the ratio of foreign to domestic expenditure). Country-specific, dynamically tradeweighted indicators of foreign expenditure are constructed for use in the application of the decomposition to 11 euro area countries in 1990-2013. Over 1999-2007, Germany and Spain shared the same pattern of expenditure switching; the slack in German expenditure translated into trade surpluses and the boom in Spain into deficits; expenditure was being switched away from domestic output towards foreign output in every country except Austria, Greece, and Ireland; and the magnitude of this unfavorable switching was largest in Finland, France, and Italy.
    Keywords: External adjustment, expenditure switching, competitiveness, decomposition, Euro area
    JEL: F14 F32 F41 F43
    Date: 2015–04
  18. By: Bouwmeester, Maaike C.; Oosterhaven, Jan; Rueda-Cantuche, Jos (Groningen University)
    Abstract: This paper develops a method to consolidate national supply-use tables (SUTs) into a single supra-regional SUT. The method deals with mirror trade statistics problems, such as the different valuation of imports and exports, and it corrects for the double-counting of re-exports. To test the contribution of the various construction steps, the paper decomposes the EU value added that is embodied in the EU exports to third countries into seven components. When the national SUTs for the period 2000-2007 are used, neglecting intra-EU spillover and feedback effects between the 27 EU-members results in an underestimation of the embodied value added of 12-15%. Not consolidating the national tables leads to a further under-estimation of 11-16%. Both types of errors are substantial. With these underestimations removed, the exports to third countries still only explain around 11% of the EU27 GDP.
    Date: 2014
  19. By: Rafael Dix-Carneiro (Duke University); Brian K. Kovak (Carnegie Mellon University)
    Abstract: We empirically study the dynamics of labor market adjustment following the Brazilian trade reform of the 1990s. We use variation in industry-specific tariff cuts interacted with initial regional industry mix to measure trade-induced local labor demand shocks, and then examine regional and individual labor market responses to those one-time shocks over two decades. Contrary to conventional wisdom, we do not find that the impact of local shocks is dissipated over time through wage-equalizing migration. Instead, we find steadily growing effects of local shocks on regional formal sector wages and employment for 20 years. This finding can be rationalized in a simple equilibrium model with two complementary factors of production, labor and industry-specific factors such as capital, that adjust slowly and imperfectly to shocks. Next, we document rich margins of adjustment induced by the trade reform at the regional and individual level. Workers initially employed in harder hit regions face continuously deteriorating formal labor market outcomes relative to workers employed in less affected regions, and this gap persists even 20 years after the beginning of trade liberalization. Negative local trade shocks induce workers to shift out of the formal tradable sector and into the formal nontradable sector. Non-employment strongly increases in harder-hit regions in the medium run, but in the longer run, non-employed workers eventually find re-employment in the informal sector. Working age population does not react to these local shocks, but formal sector net migration does, consistent with the relative decline of the formal sector and growth of the informal sector in adversely affected regions.
    Keywords: Local labor markets, Trade liberalization, Transitional dynamics
    JEL: F14 F16 J6
    Date: 2015–01
  20. By: Emilie Chanceline Kinfack and Lumengo Bonga-Bonga
    Abstract: This paper assesses the extent of trade linkages and shock transmission between African economies and its main trading partners, namely China, Europe and the United States (US). Using the global vector autoregressive (GVAR) model, the paper investigates how shock transmission between Africa and its main trading partners evolves over the periods before and after the 1990s. Moreover, the paper assesses the extent of business cycle synchronization between Africa and the three trading partners during the same periods. The results suggest that before 1990s, Europe had significant trade linkages with Africa in that shocks to imports and exports in Europe impacted positively on exports and imports in Africa, respectively. However, after the 1990s, Europe’s influence has reduced in favour of China. The results also suggested that the period of significant and strong trade linkages between Africa and China corresponds to the synchronization of their business cycles. This is not the case with Africa and the Euro area as well as Africa and the US, where trade linkage did not translate into business cycle synchronization. Moreover, the results indicate that the US remains the source of contagion for African economies.
    Keywords: Trade linkages, GVAR model, business cycle synchronization, Africa
    JEL: C32 C51 F44
    Date: 2015
  21. By: Teodora Dogaru (A Coruna University, Spain); Martijn Burger (Erasmus University Rotterdam); Bas Karreman (Erasmus University Rotterdam, ERIM); Frank van Oort (Utrecht University, the Netherlands)
    Abstract: In this paper, we analyse the sectoral and functional division of labour in Central and Eastern European (CEE) regions within the convergence debate. By analysing the investment decisions of multinational corporations in 49 NUTS-2 regions across 6 European CEE countries (Poland, Czech Republic, Slovakia, Hungary, Romania, and Bulgaria), we show that capital city regions not only receive more greenfield FDI but also attract a larger variety of investments in terms of sectors and functions. Capital cities are more likely to host higher-end sectors and functions, which provides an explanation for the existing regional disparities within CEE countries. These results highlight the importance of functional and sectoral divisions of labour in the view of regional profiling and contribute to the recent EU Cohesion Policy debate. Forthcoming in <A href="">Tijdschrift voor economische en sociale geografie</A>.
    Keywords: regional disparities, Central and Eastern Europe, greenfield FDI
    JEL: F23 R12 R58
    Date: 2014–03–28
  22. By: Modugno, Michele (Board of Governors of the Federal Reserve System (U.S.)); D'Agostino, Antonello (European Stability Mechanism); Osbat, Chiara (European Central Bank)
    Abstract: We propose a model for analyzing euro area trade based on the interaction between macroeconomic and trade variables. First, we show that macroeconomic variables are necessary to generate accurate short-term trade forecasts; this result can be explained by the high correlation between trade and macroeconomic variables, with the latter being released in a more timely manner. Second, the model tracks well the dynamics of trade variables conditional on the path of macroeconomic variables during the great recession; this result makes our model a reliable tool for scenario analysis. Third, we quantify the contribution of the most important euro area trading partners (regions) to the aggregate extra euro area developments: we evaluate the impact of an increase of the external demand from a specific region on the extra euro area trade.
    JEL: C38 F17 F47
    Date: 2015–02–27
  23. By: Ebel Berghuis (Windesheim Business School, Zwolle, The Netherlands); Frank A.G. den Butter (VU University Amsterdam)
    Abstract: In this era of globalisation the traditional Ricardian theory of trade in products governed by comparative advantages is replaced by a modern theory of trade in tasks. Tasks are outsourced to those places in the world where the lower production costs outweigh the additional transaction costs associated with coordinating the tasks. The labour market consequences of this outsourcing of tasks is a major concern, both for the country that outsources tasks and for the country to which tasks are outsourced. This paper discusses the labour market effects of outsourcing in the Netherlands using a survey amongst human research officers and in depth-interviews with the strategic management of seven industrial companies. The interviews and survey make clear that a major motive for outsourcing is to organise production in such a way that total production costs are minimized. More outsourcing requires more coordination but the reduction of costs due to producing at a cheap location outweigh the increase in transaction costs so that total production costs fall and productivity increases. However, it brings about a change in the composition of jobs in the outsourcing country: less workers are engaged in sheer production jobs, but more workers have transaction jobs. The net effect on total employment is uncertain, but our survey and interviews show that outsourcing should not necessarily be associated with a loss of jobs.
    Keywords: Globalization, labour market, transformation jobs, transaction jobs, outsourcing, managing transaction costs, new institutional economics.
    JEL: F14 J21 J24 L23 M11
    Date: 2013–09–10
  24. By: Oyamada, Kazuhiko
    Abstract: This paper explore how simulation results change with different choice of trade specification, and the strength of preference for traded variety by economic agent differs, utilizing two types of three-region, three-sector AGE model that includes the Armington-Krugman-Melitz Encompassing module based on Dixon and Rimmer (2012). Simulation experiments reveal that: (1) the Melitz-type specification does not always enhance effectiveness of a certain policy change more than the one obtained with the Krugman-type, especially when economic agents' preference for traded variety is not so strong; (2) there are likely to be points where the volumes of effects obtained with the Melitz-type exceed the ones with the Krugman-type; and (3) the preference of the producers, those who are in the sectors that exhibit increasing returns to scale, for traded variety might be the engine of explosive effects as suggested by Fujita, et al. (2000).
    Keywords: Econometric model, Economics, Applied general equilibrium, Monopolistic competition, Firm heterogeneity, Love of variety
    JEL: C63 C68 D58 F12 L11
    Date: 2015–03
  25. By: Christoph Böhringer; Brita Bye; Taran Fæhn; Knut Einar Rosendahl (Statistics Norway)
    Abstract: Climate effects of unilateral carbon policies are undermined by carbon leakage. To counteract leakage and increase global cost-effectiveness carbon tariffs can be imposed on the emissions embodied in imports from non-regulating regions. We present a theoretical analysis on the economic incentives for emission abatement of producers subjected to carbon tariffs. We quantify the impacts of different carbon tariff designs by an empirically based multi-sector, multi-region CGE model of the global economy. We find that firm-targeted tariffs can deliver much stronger leakage reduction and higher efficiency gains than tariff designs operated at the industry level. In particular, because the exporters are able to reduce their carbon tariffs by adjusting emissions, their competitiveness and the overall welfare of their economies will be less randomly and less adversely affected than in previously studied carbon tariff regimes. This beneficial distributional impact could facilitate a higher degree of legitimacy and legality of carbon tariffs.
    Keywords: carbon leakage; border carbon adjustment; carbon tariffs; computable general equilibrium (CGE)
    JEL: Q43 Q54 H2 D61
    Date: 2015–03
  26. By: Ebel Berghuis (Windesheim Business School, Zwolle, The Netherlands); Frank A.G. den Butter (VU University Amsterdam)
    Abstract: This era of globalisation is characterized by an ongoing international fragmentation of production where the supply chain is split up in more and more parts. The traditional Ricardian theory of trade in products governed by comparative advantages is replaced by a modern theory of trade in tasks. This trend requires new entrepreneurial skills in the organisation of production. Tasks are outsourced to those places in the world where the lower production costs outweigh the additional transaction costs associated with the fragmentation of production. This managing of transaction costs, which we label transaction management, has become a major entrepreneurial skill in transaction economies like the Netherlands. It is determinant for the "make or buy" and location decisions. This paper investigates the practice of transaction management by using data from in-depth interviews with seven companies in the Netherlands which are actually engaged in this modern way of org anising production. It shows that the various ways of coping with transaction costs in the organisation of production play an important role in the strategic decision making of the internationally operating entrepreneurs. However, transaction costs are only intuitively dealt with in organising production. Therefore it seems that support from more formal argumentation, based on the theories of transaction cost economics and new institutional economics, is warranted.
    Keywords: Fragmentation of production, outsourcing, managing transaction costs, new institutional economics
    JEL: F14 L23 L24 M11 M16
    Date: 2013–09–10
  27. By: Rod Tyers (Business School, University of Western Australia and Research School of Economics, Australian National University); Iain Bain (KPMG Sydney)
    Abstract: Trade and technology driven increases in skill premia in the older industrial regions since the 1980s have raised the spectre of “skill shortages”, one consequence of which has been freer migration of skilled and professional workers from developing regions. The links between demographic change, migration flows and economic growth are here explored using a demographic sub-model that is integrated within an otherwise standard model of the global economy in which regional households are disaggregated by age and gender. New matrices of global migration flows are developed and disaggregated by skill level to support this modelling. Skilled migration flows are assumed to be motivated by real wage differences to an extent that is variably constrained by immigration policies. A uniform relaxation of these constraints is shown to have most effect on labour markets in the traditional migrant destinations, Australia, Western Europe and North America, where it restrains the skill premium and substantially enhances GDP growth. Skill premia are raised and GDP growth slowed, however, in regions of origin, and particularly in South Asia, where the wage gap with the West is particularly high. On average, therefore, global wage inequality is exacerbated by expanded skilled migration.
    Date: 2015
  28. By: Chia-Lin Chang (National Chung Hsing University, Taiwan); Michael McAleer (Erasmus University Rotterdam, The Netherlands, Complutense University of Madrid, Spain); Ju-Ting Tang (National Chung Hsing University, Taiwan)
    Abstract: With the advent of globalization, economic and financial interactions among countries have become widespread. Given technological advancements, the factors of production can no longer be considered to be just labor and capital. In the pursuit of economic growth, every country has sensibly invested in international cooperation, learning, innovation, technology diffusion and knowledge. In this paper, we use a panel data set of 40 countries from 1981 to 2008 and a negative binomial model, using a novel set of cross-border patents and joint patents as proxy variables for technology diffusion, in order to investigate such diffusion. The empirical results suggest that, if it is desired to shift from foreign to domestic technology, it is necessary to increase expenditure on R&D for business enterprises and higher education, exports and technology. If the focus is on increasing bilateral technology diffusion, it is necessary to increase expenditure on R&D for higher education and technology.
    Keywords: International Technology Diffusion, Exports, Imports, Joint Patent, Cross-border Patent, R&D, Negative Binomial Panel Data
    JEL: F14 F21 O30 O57
    Date: 2013–07–22
  29. By: van der Ploeg, Frederick
    Abstract: Unilateral second-best carbon taxes are analysed in a two-period, two-country model with international trade in final goods, oil and bonds. Acceleration of global warming resulting from a future carbon tax is large if the price elasticities of oil demand are large and that of oil supply is small. The fall in the world interest rate weakens this weak Green Paradox effect, especially if intertemporal substitution is weak. Still, green welfare rises if the fall in oil supply and cumulative emissions is strong enough. If the current carbon tax is too low, the second-best future carbon tax is set below the first best to mitigate adverse Green Paradox effects. Unilateral second-best optimal carbon taxes exceed the first-best taxes due to an import tariff component. The intertemporal terms of trade effects of the future carbon tax increase current and future tariffs and those of the current tax lower the current tariff. Finally, carbon leakage and globally altruistic and unilateral second-best optimal carbon taxes if non-Kyoto oil importers do not price carbon or price it too low are analysed in a three-country model of the global economy.
    Keywords: asset tax; carbon leakage; global altruism; Green Paradox; intertemporal terms of trade; second best; tax incidence; unburnt fossil fuel; unilateral carbon taxes
    JEL: D62 D90 H22 H23 Q31 Q38 Q54
    Date: 2015–04
  30. By: Luis Cárdenas del Rey; Andrea Carrera; Laura Vitriago Valdivielso
    Abstract: In this paper, we tackle the most relevant aspects of the evolution in the market for sherry wine by studying the coastal trade in the region of Cadiz during the period 1857-1900. We develop a database using the information contained in the Estadísticas Generales del Comercio de Cabotaje en España (General Statistics of Coastal Trade in Spain) over the second half of the nineteenth century. We use these data to divide the period into different phases, in order to study the major historical features of the domestic market of sherry. Then we formulate a series of hypotheses to be tested empirically. In particular, we investigate the causal links between the dynamics of coastal trade and exports, as well as major historical events such as the outbreak of phylloxera or the global crisis of the late twentieth century. We find empirical evidence to support our hypotheses by estimating econometric time-series models.
    Keywords: Jerez wine, coastal trade, economic history, XIX century, business cycle, time-series models
    JEL: C22 E32 N53 N73
    Date: 2015–04

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