nep-int New Economics Papers
on International Trade
Issue of 2015‒06‒20
29 papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. Trade Intermediation, Financial Frictions, and the Gains from Trade By Jackie M.L. Chan
  2. Welfare ranking of alternative export tariffs revisited By Anomita Ghosh; Rupayan Pal
  3. RTAs' Proliferation and Trade-diversion Effects: Evidence of the "Spaghetti Bowl" Phenomenon By Zakaria Sorgho
  4. Evaluation of the effects of the FTAEUM on bilateral trade and investment By Carlos Serrano Herrera; Alma Martinez Morales; Arnulfo Rodriguez Hernandez; Saide Aranzazu Salazar
  5. Minimum quality standards and exports By Birg, Laura; Voßwinkel, Jan S.
  6. The Impact of Cross-border E-commerce on International Trade By Ayoub yousefi
  7. Zone de libre échange de la sadc et économie de la RDCongo :Création de commerce et Bien-être? By Nlemfu Mukoko, Jean Blaise; Wabenga Yango, James
  8. Ownership structure and firm export performance. Evidence from Slovenian microdata By Kostevc, Crt
  9. France’s international insertion strategy in globalization in long run perspective 1836-1938 By MEISSNER Christopher; BECUWE Stéphane; BLANCHETON Bertrand
  10. Is the WTO passe ? By Bagwell,Kyle; Bown,Chad P.; Staiger,Robert W.
  11. The Political Economy of Trade and Labor Mobility in a Ricardian World By Sebastian Galiani; Gustavo Torrens
  12. The Political Economy of European Integration By Enrico Spolaore
  13. Formulas for failure ? were the Doha tariff formulas too ambitious for success ? By Laborde,David; Martin,William J.
  14. Globalization: A Woman's Best Friend? Exporters and the Gender Wage Gap By Esther Ann Bøler; Beata Javorcik; Karen Helene Ulltveit-Moe
  15. The Effects of Greenfield FDI and Cross-border M&As on Total Factor Productivity By Ashraf, Ayesha; Herzer, Dierk; Nunnenkamp, Peter
  16. International Trade and the Environment: New Evidence on CO2 Emissions By Vinicius A. Vale; Fernando S. Perobelli, Ariaster B. Chimeli
  17. Exporting and Plant-Level Efficiency Gains:It’s in the Measure By Alvaro Garcia-Marin; Nico Voigtländer
  18. The Impact of Double Tax Treaties on Foreign Direct Investments: Evidence from Turkey’s Outward FDIs By Sava Çevik; Mehmet Okan Ta
  19. The Effects of Greenfield FDI and Cross-Border M&As on Government Size By Ashraf, Ayesha
  20. Monitoring the Implementation of Services Trade Reform towards an ASEAN Economic Community By Philippa DEE
  21. Exporters and Wage Inequality during the Great Recession - Evidence from Germany By Wolfgang Dauth; Hans-Joerg Schmerer; Erwin Winkler
  23. Multinational Firms and International Business Cycle Transmission By Javier Cravino; Andrei A. Levchenko
  24. How Important Are Terms Of Trade Shocks? By Schmitt-Grohé, Stephanie; Uribe, Martín
  25. North Africa - Working paper - Trade Volume and Economic Growth in the MENA Region: Goods or Services? By AfDB AfDB
  26. Impact of electricity prices on foreign direct investment: Evidence from the European Union By Bartekova E.; Ziesemer T.H.W.
  27. North Africa - Working paper - Does foreign direct investment improve welfare in North African countries? By AfDB AfDB
  28. Choice of foreign R&D entry mode and impact on firm performance: A firm-level analysis for Switzerland and Austria By Hollenstein, Heinz; Berger, Martin
  29. Norwegian Rhapsody? The Political Economy Benefits of Regional Integration By Campos, Nauro F; Coricelli, Fabrizio; Moretti, Luigi

  1. By: Jackie M.L. Chan (Stanford University)
    Abstract: This paper develops a heterogeneous firm model of international trade with trade intermediation and financial frictions. Indirect exporting through intermediaries entails lower fixed costs but larger variable costs, and thus intermediaries alleviate financial frictions which magnify the fixed cost of exporting. The model finds strong empirical support in firm-level data on indirect exports for 118 countries as well as country-level data on entrepôt trade through Hong Kong for over 50 countries. Financially more constrained exporting firms and financially less developed countries are more likely to use trade intermediaries. Both of these effects are stronger in financially more vulnerable industries. Calibrating a two-country version of the model in general equilibrium for China and US reveals important gains from trade intermediation. When indirect exporting is eliminated from China, welfare, exports, and the share of exporting firms fall by 0.24%, 18%, and 59% respectively.
    Keywords: intermediaries, indirect exports, financial constraints, gains from trade, Hong Kong.
    JEL: F10 F14 F36 G20
    Date: 2015–06
  2. By: Anomita Ghosh (Indira Gandhi Institute of Development Research); Rupayan Pal (Indira Gandhi Institute of Development Research)
    Abstract: This paper revisits the welfare ranking of tariff revenue maximizing export tariff and welfare maximizing export tariff in an imperfectly substitutable network goods oligopoly. The results are often strikingly different and opposite to the ones obtained from a similar comparison in non-network goods oligopoly.
    Keywords: Network externalities, differentiated product, oligopoly, export-rivalry, trade policy
    JEL: F12 F13 L13 D21
  3. By: Zakaria Sorgho
    Abstract: This paper investigates the trade-diversion effects of regional trade agreements (RTAs), so-called “Spaghetti bowl” Phenomenon (SBP), in multilateral trade. The SBP is due to the proliferation of RTAs. Thus, I investigate the relationship between the number of RTAs concluded by a country and the additional trade value attributed to an RTA. Using bilateral trade data in a sample of 119 countries, from 1995 to 2012, my main finding reveals a negative trade-effect between them, confirming the existence of SBP multilateral trade. However, results could not conclude evidence of a negative effect of overlapping RTAs, involving the existence of SBP, within North-North, North-South or South-South trade. But, the additional trade value attributed to an RTA concluded with EU countries or US seems to confirm significantly a trade-diversion effect because of the number of RTAs signed by these countries.
    Keywords: Regional Trade Agreements, Spaghetti Bowl Phenomenon, Gravity equation, Trade diversion
    JEL: F11 F12 F15
    Date: 2015
  4. By: Carlos Serrano Herrera; Alma Martinez Morales; Arnulfo Rodriguez Hernandez; Saide Aranzazu Salazar
    Abstract: The Free Trade Agreement between the EU and Mexico represented the elimination of tariffs for an extensive group of goods and of restrictions on foreign direct investment. After fifteen years of its implementation, this document presents an estimation of its impact and analyses the further benefits from an extension including agricultural products not covered so far
    Keywords: Economic Analysis, Europe, Mexico, Research, Working Paper
    JEL: F14 F23
    Date: 2015–05
  5. By: Birg, Laura; Voßwinkel, Jan S.
    Abstract: This paper studies the interaction of a minimum quality standard and exports in a vertical product differentiation model when firms sell global products. If exante quality of foreign firms is lower (higher) than the quality of exporting firms, a mild minimum quality standard in the home market hinders (supports) exports. The minimum quality standard increases quality in both markets. A welfare maximizing minimum quality standard is always lower under trade than under autarky. A Minimum quality standard reduces profits for the exporting firm. It increases domestic welfare, but reduces welfare in the export market.
    Keywords: minimum quality standard,vertical differentiation,exports
    JEL: F12 L13 L50
    Date: 2015
  6. By: Ayoub yousefi (King's University College at Western University, Canada)
    Abstract: This study investigates whether the growing cross-border electronic commerce (CBEC) increases the volume of international trade or merely replaces the traditional mode of physical delivery. We carry out a comparative analysis of trade on Digitizable Products (DP) by developed and developing countries. The study suggests that developing countries have in the recent past penetrated into developed countries’ markets and made up for the fall in their share of world Total trade as well as trade in DP. As a result, electronic delivery of digital products promises benefitting developing countries by gaining deeper access to international markets. This is, in part, due to massive Internet penetration and its continued subscription growth. In addition, digitization of information products is taking place at an ever increasing rate which makes it easier to preserve, access and distribute it through the Internet. Granger causality tests suggest that causality runs form export of Digitizable products to the export of Total products for the group of developing countries, China, Hong Kong and Singapore. The results are in line with our earlier descriptive assessment. This result provides foundation for empirical estimation of the impact of CBEC on the volume of international trade. The paper suggests that given its current magnitude, market efficiency, and growth trajectory, CBEC offers an ‘additional’ basis for explaining the flow of international trade, particularly out of developing countries. As a policy implication, we argue that in the transition period e-commerce creates specific challenges as well as new opportunities for businesses and economies around the world. To facilitate growth of CBEC, nations need to adopt new arrangements at the national and international levels. At the national level, governments should provide support and encourage competition and innovation. Governments should also cooperate at the international level though institutions such as WTO, UNCTAD, and EU to enhance security of the Internet and promote fair and transparent operations of e-commerce.
    Keywords: E-Commerce, Cross-border-E-Commerce, International Trade, Granger Causality Test.
    JEL: F14 O30 O57
  7. By: Nlemfu Mukoko, Jean Blaise; Wabenga Yango, James
    Abstract: This work examines implications of joining the SADC Free Trade Agreement on the D.R.Congo economy, within computable general equilibrium framework. This objective passes by the analysis of the Congolese economy features through the 2005 social accounting matrix, empiric support of our model, on which is simulated the removing of 85% import tariffs. The results give an idea on the expected effects on trade creation and welfare, as well as the needed adjustment to the Congo capacity to fully participate in exchanges within this Free Trade Area.
    Keywords: Computable general equilibrium, Free Trade Agreement, Trade Creation and Welfare
    JEL: D58 D63 F13 F15
    Date: 2011–02
  8. By: Kostevc, Crt (University of Ljubljana)
    Abstract: This paper combines two very distinct strands of literature, firm-level trade analysis and studies on the impact of ownership structure. I explore the effects firm ownership structure has on its engagement with external trade using data for the population of Slovene enterprises between 2005 and 2013. The estimates indicate that concentrated firm ownership is more conducive to firms being exporters or becoming first-time exporters. Even after controlling for firm type, age, ownership type and ownership stability, firms with a larger ownership share held by the top five owners are more likely to become first-time exporters. While the association between the concentration of ownership and exporting status is slightly more ambiguous, overall the evidence favors concentrated ownership. Interestingly, the otherwise robust finding that foreign ownership improves the probability of exporting is restricted to limited-liability companies, while joint-stock companies show no association between lagged foreign ownership and export participation.
    Keywords: Ownership structure; ownership stability; ownership type; exporting
    JEL: F14 G32
    Date: 2015–06–09
  9. By: MEISSNER Christopher; BECUWE Stéphane; BLANCHETON Bertrand
    Abstract: Using a new long term database on French foreign trade at a high level of disaggregation the paper deepened France’s international specializations, comparative advantages and exports concentration. At the beginning of the period, France appears to have espoused a Ricardian model of trade, exporting few textiles products in large quantities. The decreasing of the degree of specialization from 1860 to WWI calling into question dynamic Ricardian model expectations about an increasing of French exports concentration. The decline of exports concentration is correlated with chronic deficit of its balance of trade during Belle Epoque. We observe the same phenomena during the major part of interwar particularly after 1927.
    Keywords: specialization, comparative advantage, exports concentration, first globalization.
    JEL: F N73
    Date: 2015
  10. By: Bagwell,Kyle; Bown,Chad P.; Staiger,Robert W.
    Abstract: The WTO has delivered policy outcomes that are very different from those likely to emerge out of the recent wave of preferential trade agreements (PTAs). Should economists see this as an efficient institutional hand-off, where the WTO has carried trade liberalization as far as it can manage, and is now passing the baton to PTAs to finish the job? This paper surveys a growing economics literature on international trade agreements and argues on this basis that the WTO is not passé. Rather, and subject to some caveats, this survey of research to date suggests that the WTO warrants strong support while a more cautious view of PTAs seems appropriate.
    Keywords: Free Trade,Economic Theory&Research,Trade Policy,Trade Law,Emerging Markets
    Date: 2015–06–12
  11. By: Sebastian Galiani; Gustavo Torrens
    Abstract: We explore the political economy of trade and labor mobility in a Ricardian world. We combine a Ricardian economy with a simple international political economy model as a basis for the determination of trade and labor mobility policies. We show that free trade can induce partial convergence, divergence or even a reversal of fortune in terms of the well-being of workers in every country, while free trade and free labor mobility lead to full convergence. We also show that free trade and no labor mobility is a Nash equilibrium of the political game, but free trade and free labor mobility is not. Thus, in a Ricardian world, the lack of convergence in levels of well-being across countries can be attributed to an international political equilibrium that blocks free labor mobility. We verify our main results under several variants of a Ricardian economy, including different assumptions about the set of goods, preferences and the number of countries involved. We also study two extensions of our model in which free trade and at least partial labor mobility is a Nash equilibrium of the political game. One extension introduces increasing returns to scale while the other an extractive elite.
    JEL: F13 F22
    Date: 2015–06
  12. By: Enrico Spolaore
    Abstract: This paper discusses the process of European institutional integration from a political-economy perspective, linking the long-standing political debate on the nature of the European project to the recent economic literature on political integration and disintegration. First, we introduce the fundamental trade-off between economies of scale associated with larger political unions and the costs from sharing public goods and policies among more heterogeneous populations, and examine the implications of the trade-off for European integration. Second, we describe the two main political theories of European integration - intergovernmentalism and functionalism - and argue that both theories capture important aspects of European integration, but that neither view provides a complete and realistic interpretation of the process. Finally, we critically discuss the actual process of European institutional integration and its limits, from its beginnings after World War II to the current crisis.
    JEL: F02 F15 F5 H41 H56 H77
    Date: 2015–06
  13. By: Laborde,David; Martin,William J.
    Abstract: This paper views tariff-cutting formulas as a potential solution to the free-rider problem that arises when market opening is negotiated bilaterally and extended on a most-favored-nation basis. The negotiators in the Doha Agenda chose formulas that are ideal from an economic efficiency viewpoint in that they most sharply reduce the highest and most economically-costly tariffs. When the political support that gave rise to the original tariffs is considered, however, this approach appears to generate very high political costs per unit of gain in economic efficiency. The political costs associated with the formulas appear to have led to strong pressure for many, complex exceptions, which both lowered and increased uncertainty about members? market access gains. Where tariff cuts focus on applied rates, it seems likely that a proportional cut rule would reduce the political costs of securing agreements. However, detailed examination of the Doha proposals with their product exceptions suggests that negotiators are likely to find cuts with exceptions politically attractive but economically costly when cuts are based on bound tariffs with different degrees of binding overhang.
    Keywords: Free Trade,Agribusiness,Debt Markets,Markets and Market Access,International Trade and Trade Rules
    Date: 2015–06–11
  14. By: Esther Ann Bøler; Beata Javorcik; Karen Helene Ulltveit-Moe
    Abstract: While the impact of globalization on income inequality has received a lot of attention, little is known about its effect on the gender wage gap (GWG). This study argues that there is a systematic difference in the GWG between exporting firms and non-exporters. By the virtue of being exposed to higher competition, exporters require greater commitment and flexibility from their employees. If commitment is not easily observable and women are perceived as less committed workers than men, exporters will statistically discriminate against female employees and will exhibit a higher GWG than non-exporters. We test this hypothesis using matched employer-employee data from the Norwegian manufacturing sector from 1996 to 2010. Our identification strategy relies on an exogenous shock, namely, the legislative changes that increased the length of the parental leave that is available only to fathers. We argue that these changes have narrowed the perceived commitment gap between the genders and show that the initially higher GWG observed in exporting firms relative to non-exporters has gone down after the changes took place.
    Keywords: Exporters, Globalization, Gender Wage Gap
    JEL: F10 F14 F16 J16
    Date: 2015–06
  15. By: Ashraf, Ayesha; Herzer, Dierk; Nunnenkamp, Peter
    Abstract: We examine the effects of greenfield FDI and cross-border mergers and acquisitions (M&As) on total factor productivity (TFP) in developed and developing host countries of FDI. Using panel data for up to 123 countries over the period from 2003 to 2011, we find that greenfield FDI has no statistically significant effect on TFP while M&As have a positive effect on TFP in the total sample. Greenfield FDI and M&As both appear to be ineffective in increasing TFP in the sub-sample of developing countries. In contrast, M&As have a strong and positive effect on TFP in the sub-sample of developed countries.
    Keywords: greenfield FDI; cross-border mergers and acquisitions; total factor productivity
    JEL: F21 F23 O47
    Date: 2014–08–03
  16. By: Vinicius A. Vale; Fernando S. Perobelli, Ariaster B. Chimeli
    Abstract: This paper investigates the mechanics of international trade and CO2 emissions in two blocs of countries (“North” and “South”) by analyzing data from the World Input-Output Database. We use and adapt the Miyazawa technique to estimate the linkages between international trade and the environment at a global scale, a contribution that to our best knowledge has not yet appeared in the literature. Our results suggest that both the North and the South have become less pollution intensive (technique effect) over the years. Interestingly and in contrast to much of the literature, we also find support to the hypothesis that the South has specialized in relatively more pollution intensive activities (composition effect).
    Keywords: CO2 Emissions; International Trade; Input-Outout tables; Miyazawa Multiplier
    JEL: Q56 Q53 F18 C67
    Date: 2015–06–10
  17. By: Alvaro Garcia-Marin; Nico Voigtländer
    Abstract: While there is strong evidence for productivity-driven selection into exporting, the empir- ical literature has struggled to identify export-related efficiency gains within plants. Previous research typically derived revenue productivity (TFPR), which is downward biased if more ef- ficient producers charge lower prices. Using a census panel of Chilean manufacturing plants, we compute plant-product level marginal cost as an efficiency measure that is not affected by output prices. For export entrants, we find within-plant efficiency gains of 15-25%. Be- cause markups remain relatively stable after export entry, most of these gains are passed on to customers in the form of lower prices, and are thus not reflected by TFPR. These results are confirmed when we use tariffs to predict the timing of export entry. We also find size- able efficiency gains for tariff-induced export expansions of existing exporters. Only half of these gains are reflected by TFPR, due to a partial rise in markups. Our results thus suggest that gains from trade are substantially larger than previously documented. Evidence suggests that a complementarity between exporting and investment in technology is an important driver behind these gains.
    Date: 2015–06
  18. By: Sava Çevik (Selcuk University, Faculty of Economics and Administrative Sciences, Department of Economics); Mehmet Okan Ta (Selcuk University, Faculty of Economics and Administrative Sciences, Department of Economics)
    Abstract: Double tax treaties (DTT) are mainly signed to overcome the problem of international double taxation and to coordinate national tax systems in bilateral or multilateral economic interactions. However, one more reason to engage in DTTs is to facilitate international economic flows for capital especially and to attract foreign capital. To increase foreign direct investment (FDI) is a desirable policy goal for both developing and developed countries. In order to examine whether DDTs have significant impact on FDIs, this paper analyzes Turkey’s outward FDI stocks to 71 host countries over the period of 2001-2012. In analyses, we use Turkey’s FDI stock toward the host countries as dependent variable. In addition a number of control variables, we analyze the impact of a dummy of presence of DTTs and the age of treaty. As the estimation technique, we mainly use fixed effect estimators and regressions with panel-corrected standard errors (PCSE) to handle heteroskedasticity and autocorrelation, in addition to some other specifications for robustness aims. After controlling for various determinants of bilateral FDI stocks, the study’s results show that DTTs are indeed positively associated with foreign investment toward the host country from Turkey. This finding supports policy considerations on the impact of DTTs on FDIs. The results hold for various of specifications.
    Keywords: double tax treaties, foreign direct investments, international double taxation
    JEL: H87 F21 H25
  19. By: Ashraf, Ayesha
    Abstract: This study examines the effects of greenfield FDI and cross-border mergers and acquisitions (M&As) on government size in host countries of FDI. Using panel data for up to 135 countries for the period from 2003-2012, the study specifically tests the compensation hypothesis, suggesting that by increasing economic insecurity, economic openness leads to larger government size. It is found that greenfield FDI increases labour market volatility and thereby economic insecurity while M&As are not significantly associated with labour market volatility. The main results of this study are that greenfield FDI has a robust positive effect on government size, while M&As have no statistically significant effect on government size in the total sample of developed and developing countries, as well as in the sub-samples of developed and developing countries.
    Keywords: greenfield FDI; cross-border M&As; government size
    JEL: E62 F21 F23
    Date: 2015–06–02
  20. By: Philippa DEE (The Australian National University)
    Abstract: This paper assesses the extent to which the Association of Southeast Asian Nations (ASEAN) Framework Agreement on Services (AFAS) is helping ASEAN member states achieve their ASEAN Economic Community (AEC) goal of free flow of services in the region. Even after eight rounds of services trade negotiations, the trade commitments lag actual practice. Thus, if the AFAS process is to do a better job of driving real reform, it will need to be more closely linked to the domestic policy development processes in each member country. One strategy would be to switch from a positive list approach to a negative list approach to negotiations. This could be the ‘game changer’; it would require a major policy review, and thereby allow countries to develop an overall services trade strategy anchored within the domestic policy development process. Other desirable changes would be a ratchet mechanism, whereby any future domestic reforms would be automatically bound into AFAS schedules, and a mechanism to ensure that whenever mode 3 commitments are made, the appropriate mode 4 commitments are also made. Supporting changes are also needed to domestic regulatory environments. For example, some ASEAN members need to improve the quality and enforcement of their prudential regulation if they are to make further progress in opening up their financial markets to foreign participation. Finally, it is critical to have regulatory frameworks that are conducive to contestability more generally, so that when foreign companies do enter the market, they do not have an unnatural AFAS-induced advantage over domestic new entrants. Thus, the key to making further real progress towards a free flow of services in the region is to focus on domestic regulatory improvement more generally.
    Keywords: ASEAN Framework Agreement on Services, AFAS, services trade policy, services trade commitments, regulatory policy, regulatory environment, actual practice
    JEL: F13 F15
    Date: 2015–05
  21. By: Wolfgang Dauth; Hans-Joerg Schmerer; Erwin Winkler
    Abstract: We analyze the evolution of the exporter wage premium (EWP) during the Great Recession and the resulting impact on wage inequality in Germany. Our results show that the EWP declined sharply between 2007 and 2008 and stagnated afterwards. This pattern is due to exporters starting to adjust their wage-setting one year earlier than non-exporters, likely due to the sharp decrease of foreign orders starting in late 2007. Finally, our decomposition shows that the fall of the EWP had a notable negative and persistent eect on wage inequality.
    Keywords: exporter wage premium, wage-inequality, Great Recession, international trade, matched employer-employee data
    JEL: F16 J31
    Date: 2015–04
  22. By: Natalia Victorovna Kuznetsova, Natalia Alexandrovna Vorobeva (School of Economics and Management, Far Eastern Federal University, Russia)
    Abstract: The paper examines the problem of global integration processes in regions of Africa, Asia and Russia. Based on migration flows, estimation of integration indexes, we investigate the historical integration development of these regions and identify the important features for future international cooperation and integration. This article presents the preliminary results of the gravity model that we constructed using the features of Asia-Pacific region. We concluded that differences and similarities in sectoral structure of GDP do not influence increasing of mutual trade between countries and its partners. It evaluates the potential benefits for Asia-Pacific region by expanding the market for export industries worldwide.
    Keywords: global integration process, gravity model, ASEAN, Asia-Pacific Region, economy of North-East Asia, integration process of South Africa
    JEL: R11
    Date: 2015–03
  23. By: Javier Cravino (University of Michigan and NBER); Andrei A. Levchenko (University of Michigan, NBER, and CEPR)
    Abstract: We investigate how multinational firms contribute to the transmission of shocks across countries using a large firm-level dataset that contains ownership information for 8 million firms in 34 countries. We use these data to document two novel empirical patterns. First, foreign affiliate and headquarter sales exhibit strong positive comovement: a 10% growth in the sales of the headquarter is associated with a 2% growth in the sales of the affiliate. Second, shocks to the source country account for a significant fraction of the variation in sales growth at the source-destination level. We propose a parsimonious quantitative model to interpret these findings and to evaluate the role of multinational firms for international business cycle transmission. For the typical country, the impact of foreign shocks transmitted by all foreign multinationals combined is non-negligible, accounting for about 10% of aggregate productivity shocks. On the other hand, since bilateral multinational production shares are small, interdependence between most individual country pairs is minimal. Our results do reveal substantial heterogeneity in the strength of this mechanism, with the most integrated countries significantly more affected by foreign shocks.
    Keywords: international business cycle comovement, multinational firms
    JEL: F23 F44
  24. By: Schmitt-Grohé, Stephanie; Uribe, Martín
    Abstract: According to conventional wisdom, terms of trade shocks represent a major source of business cycles in emerging and poor countries. This view is largely based on the analysis of calibrated business-cycle models. We argue that the view that emerges from empirical SVAR models is strikingly different. We estimate country-specific SVARs using data from 38 poor and emerging countries and find that terms-of-trade shocks explain only 10 percent of movements in aggregate activity. We then build a fully-fledged, open economy model with three sectors, importables, exportables, and nontradables, and use data from each of the 38 countries to obtain country-specific estimates of key structural parameters, including those defining the terms-of-trade process. In the estimated theoretical business-cycle models terms-of-trade shocks explain on average 30 percent of the variance of key macroeconomic indicators, three times as much as in SVAR models.
    Keywords: business cycles.; nontradable goods; real exchange rates; Terms of trade
    JEL: E32 F41 F44
    Date: 2015–06
  25. By: AfDB AfDB
    Date: 2015–02–19
  26. By: Bartekova E.; Ziesemer T.H.W. (UNU-MERIT)
    Abstract: In the course of recent years growing concerns over increasing energy prices have emerged in the context of maintaining Europes international competitiveness. In particular, rising electricity price differentials adversely affect firms total production costs and ultimately impact their investment decisions. Nonetheless, electricity prices as locational determinants of foreign direct investment FDI have received little attention in the literature so far. We address this gap by including electricity prices in the traditional framework of FDI analysis and examine the impact of price variation on net FDI inflows in countries of the European Union EU. We use a panel of 27 countries for a period of 2003 - 2013 and system generalised method of moments GMM as method of estimation. The main findings of the paper confirm that besides tax rates, unit labour costs and competitive disadvantage in secondary education, also electricity prices contribute to eroding competitiveness of the countries. Yet, the effect of electricity prices does not seem to be uniform across the EU. In fact, southwestern countries tend to be more adversely affected than north-eastern, both in the short and long run.
    Keywords: International Investment; Long-term Capital Movements; Economywide Country Studies: Europe; Energy and the Macroeconomy;
    JEL: F21 O52 Q43
    Date: 2015
  27. By: AfDB AfDB
    Date: 2015–04–29
  28. By: Hollenstein, Heinz; Berger, Martin
    Abstract: The study seeks to identify the determinants of a firm's foreign entry mode choice and the impact of mode selection on firm performance for the specific case of R&D - a topic so far not investigated in entry mode research. Separate estimates of a Heckman selection model for Austria and Switzerland, based on comparable firm-level data and variable specification, show for both countries that the OLI model is well-suited to explain not only the propensity to investing abroad in R&D but also the respective choice between equity-based and non-equity governance modes. Moreover, it turns out, but only for Swiss companies, that foreign R&D raises (domestic) firm performance with a larger impact in case of equity-based governance. The differences between the two countries primarily reflect the much higher degree of R&D internationalisation of Switzerland.
    Keywords: internationalisation of R&D,foreign R&D entry mode choice,international R&D cooperation
    JEL: F23 L24 O32
    Date: 2015
  29. By: Campos, Nauro F; Coricelli, Fabrizio; Moretti, Luigi
    Abstract: This paper investigates whether joint economic and political integration leads to larger economic benefits than just economic integration. The identification strategy rests on the fact that Norway, at the time of the 1995 Enlargement of the European Union (EU), had successfully completed negotiations and fulfilled all accession requirements, taken membership in the European Economic Area (with full access to the Single Market), but decided in a referendum to reject full-fledged EU membership. Using the differences-in-differences and synthetic control methods with regional data, we find substantial politically driven economic benefits from EU membership: if Norway had joined the EU in 1995, productivity levels between 1995 and 2001 would have been 6% higher on average.
    Keywords: European Union; labor productivity; political economy benefits; regional data; synthetic counterfactual method
    JEL: C33 F15 F43 O52
    Date: 2015–06

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