nep-int New Economics Papers
on International Trade
Issue of 2015‒10‒17
28 papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. Offshoring and Skill-upgrading in French Manufacturing: A Heckscher-Ohlin-Melitz View By Carluccio, Juan; Cuñat, Alejandro; Fadinger, Harald; Fons-Rosen, Christian
  2. How Firms Export: Processing vs. Ordinary Trade with Financial Frictions By Manova, Kalina; Yu, Zhihong
  4. Foreign direct investment and technology spillovers in low and middle-income countries : a comparative cross-sectoral analysis By Jacob J.; Sasso S.
  5. Does institutional quality matter for trade? Institutional conditions in a sectoral trade framework By Álvarez, Inmaculada C.; Barbero, Javier; Rodriguez-Pose, Andres; Zofio, Jose L.
  6. The Role of Physical and Financial Constraints in Export Dynamics By Crespo, Aranzazu; Muñoz-Sepulveda, Jesus A.
  7. Implications of a Philippine-US Free Trade Agreement on Trade in Goods: An Indicator Approach By Manzano, George N.; Martin, Kristine Joy
  8. Depreciations without Exports?: Global Value Chains and the Exchange Rate Elasticity of Exports By Swarnali Ahmed; Maximiliano Appendino; Michele Ruta
  9. Readiness of the Philippine Agriculture and Fisheries Sectors for the 2015 ASEAN Economic Community: A Rapid Appraisal By Clarete, Ramon L.; Villamil, Isabela Rosario G.
  10. Exporting firm dynamics and productivity growth: Evidence from China By Xiaobing, Huang; Xiaolian, Liu
  11. A Coasian model of international production chains By Fally,Thibault; Hillberry,Russell Henry
  12. Heterogeneous agrifood firms, agricultural prices and access to foreign markets By Léo Le Mener
  13. Exchange Rate Volatility and Grain Trade: A Gravity Model Analysis at the Sectoral Level By Steinbach, Sandro
  14. Production Externalities, Environmental Taxes, and the Gains from Trade By Soham Baksi; Michael Benarroch
  15. Knowledge Spillovers through FDI and Trade: Moderating Role of Quality-Adjusted Human Capital By Muhammad Ali; Uwe Cantner; Ipsita Roy
  16. Export Spillover and Export Performance in China By Hu, Cui; Tan, Yong
  17. The time varying effect of oil price shocks on euro-area exports By Marianna Riggi; Fabrizio Venditti
  18. Decomposing the trade-environment nexus for Malaysia: What do the technique, scale, composition and comparative advantage effect indicate? By Ling, Chong Hui; Ahmed, Khalid; Muhamad, Rusnah binti; Shahbaz, Muhammad
  20. Economic Institutions and the Location Strategies of European Multinationals in their Geographical Neighbourhood By Andrea Ascani; Riccardo Crescenzi; Simona Iammarino
  21. Multinationals Stockpiling Cash: Exploring a Commodity Boom By Erwin Hansen; Rodrigo Wagner
  22. Offshoring and the Geography of Jobs in Great Britain By Luisa Gagliardi; Simona Iammarino; Andrés Rodríguez-Pose
  23. Is Organic Agriculture and Fair Trade Certification a way out of Crisis? Evidence from Black Pepper Farmers in India By Parvathi, Priyanka; Waibel, Hermann
  24. Analysis of Factors Constraining the Competitiveness of Sesame Export in the Sudan By Abdel Karim, Imad Eldin Elfadil
  25. The role of networks for migration flows - an update By Michel Beine
  26. The output effects of commodity price volatility: Evidence from exporting countries By Hachula, Michael; Hoffmann, Sebastian
  27. Endogenous Trade, Nontraded Goods and Real Exchange Rate Variations By Hernández Marco A.
  28. TTIP: Warum ein Investitionsschutzabkommen wünschenswert ist By Markus Fredebeul-Krein;

  1. By: Carluccio, Juan; Cuñat, Alejandro; Fadinger, Harald; Fons-Rosen, Christian
    Abstract: We present a factor-proportions trade model in which heterogeneous firms can offshore intermediate inputs subject to fixed offshoring costs. In the skill-abundant country, high-productivity firms offshore a larger range of labor-intensive inputs to the labor-abundant countries than low-productivity firms. Differently from the traditional versions of factor-proportions trade theory, Heckscher-Ohlin forces operate at the within-industry level, leading to endogenous variation in skill intensity across firms that is positively correlated with firm productivity. Using French firm-level data for the years 1996 to 2007, we provide empirical support for the factor proportions channel through which offshoring to labor-abundant countries affects the firm-level skill intensities of French manufacturers.
    Keywords: firm-level factor intensities; Heckscher-Ohlin; heterogeneous firms; offshoring
    JEL: F11 F12 F14
    Date: 2015–10
  2. By: Manova, Kalina; Yu, Zhihong
    Abstract: The fragmentation of production across borders allows firms to make and export final goods, or to perform only intermediate stages of production by processing imported inputs for re-exporting. We examine how financial frictions affect companies’ choice between processing and ordinary trade – implicitly a choice of production technology and position in global supply chains – and how this decision affects performance. We exploit matched customs and balance-sheet data from China, where exports are classified as ordinary trade, import-and-assembly processing trade (processing firm sources and pays for imported inputs), and pure-assembly processing trade (processing firm receives foreign inputs for free). Value added, profits and profitability rise from pure assembly to processing with imports to ordinary trade. However, more profitable trade regimes require more working capital because they entail higher up-front costs. As a result, credit constraints induce firms to conduct more processing trade and pure assembly in particular, and preclude them from pursuing higher value-added, more profitable activities. Financial market imperfections thus impact the organization of production across firms and countries, and inform optimal trade and development policy in the presence of global production networks.
    Keywords: China; credit constraints; global value chain; heterogeneous firms; processing trade; trade regime
    JEL: F10 F13 F14 F23 F34 G32
    Date: 2015–10
  3. By: Ehrich, Malte; Hess, Sebastian
    Abstract: Recent empirical studies argue that the implementation of quality standards among agricultural exporters has the character of a fixed cost. However, this can be misleading if fixed costs are only understood in terms of required investments. Instead, we argue that standard adoption is the result of exporting countries’ private and public organisations managing to solve the standard implementation problem. We demonstrate that a newly developed theoretical approach to the role of problem solving in the production process can be interpreted as a model of a country’s ability to implement foreign trade standards. Predictions of this model are tested within a gravity framework: we compare the institutional characteristics of countries that successfully export fruit and vegetables to the EU (as a high standard market) against characteristics of countries that serve all markets. Results indicate that institutional characteristics like government effectiveness, regulatory quality and law enforcement are more relevant for exports to markets with relatively high standards than for overall exports.
    Keywords: Agricultural trade, food standards, organisations, institutional quality, International Relations/Trade, Labor and Human Capital,
    Date: 2015
  4. By: Jacob J.; Sasso S. (UNU-MERIT)
    Abstract: In this paper we analyse the trends in Foreign Direct Investment FDI flows worldwide across sectors and across value-chain activities, with a particular focus on low- and middle-income countries in comparison with advanced countries. We begin by discussing the growing fragmentation of global production and the opportunities this presents to todays developing countries for benefiting from FDI. Our review of the literature on knowledge spillovers via FDI indicates that spillovers typically occur along the value chain, from foreign firms to their local suppliers or clients but not to their competitors, and that tapping into the technological resources of foreign firms is not an automatic process but hinges on a few host-economy characteristics. Our analysis of worldwide FDI flows during 2008-2013 indicates the growing importance of countries outside the traditional industrialised world, accounting for nearly half of inward greenfield FDI projects. While FDI flows into industrialised economies and emerging industrial economies take place mainly in high- or medium-tech manufacturing, other developing countries and least developed countries tend to attract FDI in medium- and low-tech manufacturing. When we examine FDI flows across value-chain activities, we find that emerging economies are attracting increasingly more knowledge-based FDI, with China and India hosting the highest number of FDI projects in innovation activities. Finally, our analysis suggests that - especially in the manufacturing sector - Multinational Enterprises MNEs tend to invest more in countries where domestic technological efforts are higher, pointing to the importance of indigenous technological capacities in attracting FDI in the first place, but also in ensuring that these investments generate knowledge spillovers that are crucial for technological catching up by developing countries.
    Keywords: International Investment; Long-term Capital Movements; Macroeconomic Analyses of Economic Development; Technological Change: Choices and Consequences; Diffusion Processes;
    JEL: F21 O11 O33
    Date: 2015
  5. By: Álvarez, Inmaculada C.; Barbero, Javier; Rodriguez-Pose, Andres; Zofio, Jose L.
    Abstract: This article examines the extent to which national institutional conditions affect bilateral sectoral trade flows, as well as whether the conditioning role of institutions for trade has been waxing or waning with time. Based on a new trade theory foundation that allows us to model bilateral trade flows at sectoral level, we derive the associated gravity equation and analyse bilateral trade flows of 186 countries for the period 1996-2012, with a total of 125,703 observations. The results indicate that both the institutional conditions at destination and the institutional distance between the countries involved in trade are relevant factors in determining the overall volume and composition of bilateral trade. They also show, however, that their sway on trade flows is only a fraction of that of other more traditional determinants of trade, notably geographical distance, with the exception of trade in the service sector, where institutional quality is of paramount importance. Finally and contrary to expectations, the magnitude of institutional quality for trade has not waxed over the last few years. If anything, it has waned and the resource boom of the 2000s is to be blamed for this evolution.
    Keywords: gravity equation; institutional quality; international trade; public policy
    JEL: D02 F10 K4 Z18
    Date: 2015–10
  6. By: Crespo, Aranzazu; Muñoz-Sepulveda, Jesus A.
    Abstract: How do firms' sales interact across markets? Recent empirical work has suggested that foreign and domestic sales are substitutes for firms facing financial and physical capacity constraints. Using a large Spanish firm-level database for the period 1990-2011, we study the interconnections between exports and domestic sales. We provide a new measure to determine if firms face physical constraints based on the capacity utilization of the firm, and document that it is independent of firm fundamentals such as value added and productivity. Then, we built a theoretical framework consistent with the empirical facts presented where firms are heterogeneous across capacity and productivity. A firm facing a binding capacity constraint faces a trade-off between selling on the domestic market or the foreign market, and raises prices in order to take advantage of access to new markets. We establish the prevalence of these anomalous firms, and demonstrate that capacity constrained firms substitute sales across locations.
    Keywords: Export dynamics, Firm heterogeneity, Capacity constraints, Financial constraints, Market access
    JEL: F12 F14 L11 L13
    Date: 2015
  7. By: Manzano, George N.; Martin, Kristine Joy
    Abstract: The Trans-Pacific Partnership (TPP) is a regional free trade agreement (FTA) initiated by the United States (US) and is presently being negotiated among 11 countries. With the Philippines negotiating in many fronts at the global scene, such as its engagement in the ASEAN Economic Community and in the forthcoming European Union-Philippine FTA, among others, the invitation to join the TPP is another opportunity worth studying. Departing from the prevalence of computable general equilibrium models in estimating the effects of the TPP on prospective partners, this study will use an alternative methodology, the Sussex framework. It aims to complement the existing works of other researchers in the field. This paper furthermore will focus on analyzing the (1) possible impact on Philippine-US trade in goods in joining the TPP agreement as well as the (2) probable negative effects that could befall the country if it were not a member of the TPP once the agreement is completed. More specifically, to analyze the impact of the TPP on Philippine-US trade in goods, the study will model the TPP as a collection of bilateral US-TPP partner FTAs. The relevant indicators generated from the series of bilateral FTAs will then be interpreted in the context of how these would impact on the Philippines as a third, nonpartner country.
    Keywords: Philippines, free trade agreements (FTAs), Trans-Pacific Partnership, Philippine-US trade, Sussex framework
    Date: 2015
  8. By: Swarnali Ahmed; Maximiliano Appendino; Michele Ruta
    Abstract: This paper analyzes how the exchange rate elasticity of exports has changed over time and across countries and sectors, and how the formation of Global Value Chains (GVCs) has affected this relationship. Using a panel framework covering 46 countries over the period 1996-2012, we first find evidence that the elasticity of manufacturing export volumes to the Real Effective Exchange Rate (REER) has decreased over time. We then examine whether the formation of supply chains has affected this elasticity using different measures of GVC integration. Intuitively, as countries are more integrated in global production processes, a currency depreciation only improves competitiveness of a fraction of the value of final good exports. In line with this intuition, we find evidence that the rise of GVC participation explains on average 40 percent of the fall in the elasticity and that corrections of the REER for GVC participation do not present the same decreasing pattern in elasticity.
    Date: 2015–09–23
  9. By: Clarete, Ramon L.; Villamil, Isabela Rosario G.
    Abstract: The ASEAN Economic Community (AEC) transforms the ASEAN region into a single market and production base by 2015. This promotes greater competition for the Philippine agriculture and fisheries (A&F) sectors. With the country`s A&F sector lagging behind its neighboring ASEAN countries, there are fears that local industries will be displaced. The Global Trade Analysis model suggests an increase in both imports and exports as an impact of tariff reforms. The sectors ready for integration include mangoes, bananas, and pineapples. For the coconut sector, intensification of planting, replanting, and product diversification are needed to enhance and maintain supply. Production increase for perishable commodities, such as onions and meats, entails the need for lower power costs. With corn as a potential export commodity, cultivation areas are being expanded and agricultural policies are being aligned with the policies of the ASEAN Free Trade Agreement. To reap the benefits from the AEC, several measures must be performed, i.e., diversification and product quality upgrading. Public support must focus on providing adequate infrastructure, general services, research and development, and extension programs. Particularly, this paper recommends modernizing the country`s value chains in the A&F sector to effectively mobilize A&F exports into the ASEAN market. This is done by creating industry road maps to equip major stakeholders knowledge on market opportunities; organizing the value chains and effectively assisting their various participants to comply with international trade product standards, processes, and regulations; building capability for effectively managing the risk of disputes among value chain participants; and promoting the cooperation among farmers, small and medium enterprises, and large enterprises within these agro-based value chains.
    Keywords: Philippines, ASEAN Economic Community (AEC), value chain, agriculture and fisheries, tariff reforms
    Date: 2015
  10. By: Xiaobing, Huang; Xiaolian, Liu
    Abstract: This paper analyzes the reallocation effects generated by dynamics of exporting firms adopting DOPD productivity decomposition. The authors select the exporting firm samples from the dataset of Annual Surveys of Industrial Production for the period from 2005 to 2009. The study indicates that the surviving ability of exporters is weak, and that firm turnover is turbulent. The reallocation effects generated by firm dynamics contributes almost half of productivity improvement. It mainly originates from between-firm effects, rather than firm turnover effects, with the entry effects being negative. This suggests that there is market misallocation, which maybe caused by uneven regional development, industrial monopoly or state-owned enterprises.
    Keywords: exporting firms,firm dynamics,productivity growth,reallocation effect,China
    JEL: F14 D40 D22 D24
    Date: 2015
  11. By: Fally,Thibault; Hillberry,Russell Henry
    Abstract: International supply chains require the coordination of numerous activities across multiple countries and firms. This paper develops a theoretical model of supply chains in which the measure of tasks completed within a firm is determined by parameters that define transaction costs and the cost of coordinating more activities within the firm. The structural parameters that govern these costs explain variation in supply chain length as well as cross-country variation in gross-output-to-value-added ratios. The structural parameters are linked to comparative advantage along and across supply chains. The paper provides an analytical treatment of trade and welfare responses to trade cost change in a simple two-country model. To explore the model's implications in a richer setting, the model is calibrated to match key observables in East Asia, and the calibrated model is used to evaluate implications of changes in model parameters for trade, welfare, the length of supply chains, and countries'relative position within them.
    Keywords: Free Trade,Economic Theory&Research,Trade Policy,Emerging Markets,Labor Policies
    Date: 2015–10–06
  12. By: Léo Le Mener
    Abstract: We analyze how a change in agricultural input price impacts the selection process and market shares in foreign markets for firms in the final agrifood good sector. To do so we develop a model with heterogeneous firms and intermediate good where input use is technologically constrained. We show that the effect of input price depends on labor productivity and fixed costs. Moreover, we show that a decrease in input price in all countries can decrease the probability to enter foreign markets, through export or horizontal foreign direct investment (HFDI). Finally, we show that the decrease of the intermediate good price always increases the share of HFDI relative to export, even if it can modify the HFDI-Export trade-off in favor of HFDI or export.
    Keywords: Horizontal Foreign Direct Investment, exports, firm heterogeneity, processing sectors, agricultural prices
    JEL: F12 L11 Q18
    Date: 2015
  13. By: Steinbach, Sandro
    Abstract: There has been a controversy among economists on whether exchange rate volatility has a negative effect on trade. We will investigate this issue by making use of a sectoral gravity model of global grain trade. Our identification strategy carefully addresses endogeneity issues present in earlier studies. Using a long panel, we are able to show that exchange rate volatility has a negative impact on bilateral export trade flows. The magnitude of this effect can vary widely, depending on the market under study, which is an indicator for substantial heterogeneity among sectors.
    Keywords: Agricultural and Food Policy, International Relations/Trade, Grain trade, exchange rate volatility, sectoral gravity model,
    Date: 2015
  14. By: Soham Baksi; Michael Benarroch
    Abstract: We analyze the effects of environmental taxation on the pattern of and gains from trade in a two-country Ricardian framework, where production in a polluting sector (e.g. manufacturing) adversely affects productivity in an environmentally sensitive sector (e.g. agriculture). The two countries differ in terms of their production technology so that the productivity loss suffered by the environmentally sensitive sector is higher in the dirtier country. When the countries do not pursue any environmental policy, the dirtier country has a comparative advantage in the polluting good and exports that good in the trading equilibrium. If preference for the polluting good is low, the dirtier country loses from trade while its trading partner gains. Global gains from trade are also negative as the market determined pattern of trade is inefficient. Introduction of a unilateral pollution tax by the dirtier country can enable it to reverse the pattern of trade and the distribution of the gains from trade, such that international trade becomes welfare-improving for that country as well as globally. The conventional pollution haven result may get reversed in the presence of cross-sectoral externalities, as each country has an incentive to set the tax such that it exports the good that is more preferred by consumers.
    Keywords: Ricardian model, Production externality, Pollution tax
    JEL: Q56 F18
    Date: 2015–10
  15. By: Muhammad Ali (School of Economics and Business Administration, Friedrich-Schiller-University Jena); Uwe Cantner (School of Economics and Business Administration, Friedrich-Schiller-University Jena); Ipsita Roy
    Abstract: The paper extends the findings of Coe and Helpman (1995) model of R&D spillovers by considering foreign direct investment (FDI) as a channel for knowl- edge spillovers in addition to imports. Deeper insights on the issue are provided by examining inter-relationship between knowledge spillovers from imports and inward FDI. Moreover, human capital is added to the discussion as one of the appropri- ability conditions for knowledge spillovers. However, in comparison to most studies that rely on physical, monetary or indicator-based measures of human capital, the current study proposes a quality-based indicator of human capital that allows for better comparison of human capital stock across countries. Quality adjusted hu- man capital is derived by weighting human capital data based on average years of schooling using journal publications in science and technology and patent ap- plications. Using cointegration estimation method on 20 European countries from 1995 to 2010, the direct effects of FDI-related as well as import-related spillovers on domestic productivity are confirmed. Furthermore, a strong complementary rela- tionship is found between knowledge spillovers through the channels of imports and inward FDI implying strong joint effect on domestic productivity. When consider- ing quality-adjusted human capital, countries with better human capital are found to benefit not only from direct productivity effects, but also from absorption and transmission of international knowledge spillovers through imports and inward FDI. Finally, technological distance with the frontier does not appear to play a role in the absorption of knowledge spillovers.
    Keywords: Knowledge spillovers, foreign direct investment, international trade, human capital
    JEL: F14 I25 J24
    Date: 2015–10–08
  16. By: Hu, Cui; Tan, Yong
    Abstract: This paper examines the local export spillover effect on firm-level decisionsto start exporting (the extensive margin) and export volume (the intensive margin) by exploiting a unique dataset of Chinese export firms. Based on a gravity-type equation estimated at firm level, we find thatboth nearby products anddestination specific exporterspositivelyinfluence the individual decisions of firmsto start exporting and their exportvolumes. Several methods are used to verify the robustness of these results. The results imply that the local export spillover lowers both the fixed and variable cost of exporting. In addition, we find that the effect of export spillover on exporting that is both product and destination specificis stronger than it is on exporting that iseither product or destination specificalone, but not both. Small and multi-product firmsare more likely to be influenced by the spillover effect in their decisionsto start exporting, and less likely to be influenced in theirexport volumes. Geographically, local export spillover effect is strongest on firms located in the same city;its effect on firms located in the same province but in different citiesranks second in terms of strength. This result indicates that the effect oflocal export spillover exhibits spatial decay in China.
    Keywords: Export spillover; Extensive margin; Intensive margin
    JEL: F10 R12
    Date: 2015–10–08
  17. By: Marianna Riggi (Bank of Italy); Fabrizio Venditti (Bank of Italy)
    Abstract: In this paper we provide novel evidence on changes in the relationship between the real price of oil and real exports in the euro area. By combining robust predictions on the sign of the impulse responses obtained from a theoretical model with restrictions on the slope of the oil demand and oil supply curves, we identify oil supply and foreign productivity shocks in a time varying VAR with stochastic volatility. We find that from the 1980s onwards the relationship between oil prices and euro area exports has become less negative conditional on oil supply shortfalls and more positive conditional on foreign productivity shocks. Using the theoretical model we show that our empirical findings can be accounted for by (i) stronger trade relationship between the euro area and emerging economies (ii) a decrease in the share of oil in production and (iii) increased competitive pressures in the product market.
    Keywords: oil prices, VAR, time-varying parameters, exports
    JEL: C32 E3 F14
    Date: 2015–09
  18. By: Ling, Chong Hui; Ahmed, Khalid; Muhamad, Rusnah binti; Shahbaz, Muhammad
    Abstract: This paper investigates the impact of trade openness on CO2 emissions using time series data over the period of 1970QI-2011QIV for Malaysia. We disintegrate the trade effect into scale, technique, composition and comparative advantage effects to check the environmental consequence of trade at four different transition points. To achieve the purpose, we have employed ADF and PP unit root tests in order to examine the stationary properties of the variables. Later, the long-run association among the variables is examined by applying ARDL bounds testing approach to cointegration. Our results confirm the presence of cointegration. Further, we find that scale effect has positive and technique effect has negative impact on CO2 emissions after threshold income level and form inverted-U shaped relationship – hence validates the environmental Kuznets curve hypothesis. Energy consumption adds in CO2 emissions. Trade openness and composite effect improve environmental quality by lowering CO2 emissions. The comparative advantage effect increases CO2 emissions and impairs environmental quality. The results provide the innovative approach to see the impact of trade openness in four sub-dimensions of trade liberalization. Hence, this study attributes more comprehensive policy tool for trade economists to better design environmentally sustainable trade rules and agreements.
    Keywords: Trade, Environment, Malaysia
    JEL: O1
    Date: 2015–10–05
  19. By: Aouinait, Camille
    Abstract: Since a few decades, both developed and developing countries are facing increasing burdens on environmental resources, institutional, political and economic changes. The liberalization is most seen as positive to enhance farmers and smallholders’ incomes at first. Switzerland is under pressure regarding the trade of commodities. The imported products have lower prices than indigenous products. This might induce a lower competitiveness of the sector. Therefore, the market dynamics could change and so the behavior of the market players; farmers, transformers, wholesalers and retailers.
    Keywords: Trade liberalization, swiss fruit production, competitiveness, prices, Agribusiness, Agricultural and Food Policy,
    Date: 2015
  20. By: Andrea Ascani; Riccardo Crescenzi; Simona Iammarino
    Abstract: This paper investigates how the location behaviour of Multinational Enterprises (MNEs) is shaped by the economic institutions of the host countries. The analysis covers a wide set of geographically proximate economies with different degrees of integration with the ‘Old’ 15 European Union (EU) members: New Member States, Accession and Candidate Countries, as well as European Neighbourhood Policy (ENP) countries and the Russian Federation. The paper aims to shed new light on the heterogeneity of MNE preferences for the host countries’ regulatory settings (including labour market and business regulation), legal aspects (i.e. protection of property rights and contract enforcement) and the weight of the government in the economy. By employing data on 6,888 greenfield investment projects, the randomcoefficient Mixed Logit analysis here applied shows that, while the quality of the national institutional framework is generally beneficial for the attraction of foreign investment, MNEs preferences over economic institutions are highly heterogeneous across sectors and business functions.
    Keywords: Multinational Enterprises, Economic Institutions, Location Choice, European Union
    JEL: F23 P33 L20 R30
    Date: 2015–07
  21. By: Erwin Hansen; Rodrigo Wagner
    Abstract: This paper explores how affiliates of multinational corporations save liquidity when facing a transitory cash-flow shock. For this a panel is first built of non-publicly traded copper mines in South America between 2001 and 2012, most of them set up as Foreign Direct Investment (FDI). This industry offers a peculiar advantage as a laboratory for social science when exploring cash-flow sensitivity: given time to build, investment decisions depend on the expectations of the long-run price of copper, while current cash flows depend only on the spot commodity¿s price. Although a robust effect of cash flow on current capital expenditures is not found, a much clearer picture is observed of the effects of transitory earnings on cash stockpiling: out of every extra dollar in cash, between 20 and 50 cents end up as extra cash holdings, especially among the most financially constrained firms. This was salient in the aggregate, since average cash holdings tripled as a share of assets during the commodity boom. The findings support financial theories remarking the salience of cash as a buffer stock for liquidity of financially constrained firms. Although the reinvestment of multinationals' earning is considered Foreign Direct Investment in the Balance of Payments, at least in the short run, a significant fraction of it does not constitute new investment in the National Accounts, since it remains among current rather than fixed assets.
    Keywords: Investment, Financial Crises & Economic Stabilization, Finance, Multinationals, Cash Holdings, Investment, Current Account Deficits
    Date: 2015–07
  22. By: Luisa Gagliardi; Simona Iammarino; Andrés Rodríguez-Pose
    Abstract: This paper investigates the impact of the offshoring of production activities on domestic jobs in Great Britain. The paper considers both the spatial heterogeneity across local labour markets and variations in the intensity of outward flows of investments abroad (OFDI) across industries in order to shed new light on the job creation/destruction implications of offshoring. The results suggest that offshoring may generate significant job losses in routine occupations in areas that have been more exposed to the relocation of production abroad, regardless of whether the relocation has been to developed or developing/emerging countries. Offshoring to developing/emerging countries has, by contrast, a positive effect on the generation of non-routine jobs. Efficiency gains accruing from the international reorganization of production increase in the long-run, with compensation mechanisms operating through growth of employment in higher value added activities at home. Overall, our results uncover important spatial and interpersonal inequalities in job creation, which provide new challenges for public policy.
    Keywords: Offshoring, local labour markets, job creation and destruction, routine and non-routine occupations
    JEL: F21 J42 J23 J24
    Date: 2015–10
  23. By: Parvathi, Priyanka; Waibel, Hermann
    Abstract: This article examines the impact of a joint organic and fair trade certification on productivity and material costs based on data collected from 277 smallholder black pepper farmers in India. We estimate a multinomial endogenous switching regression along with a counterfactual analysis to ascertain the effects of certification. Our results indicate that certified farmers have higher yields. Counterfactual study shows that conventional farmers can increase their yields by 35% with less than half the costs by venturing into organic and fair trade networks. Further, treatment and transitional heterogeneity effects reveal that a joint organic and fair trade certification has the strongest effect on productivity for the less successful farmers.
    Keywords: Impact evaluation, Eendogenous Switching Regression, Organic Farming, Fair Trade, Crop Production/Industries, Environmental Economics and Policy, Productivity Analysis,
    Date: 2015
  24. By: Abdel Karim, Imad Eldin Elfadil
    Abstract: The paper analyzed sesame export performance and competitiveness and its main constraints in Sudan. Vector error correction model was applied using data from 1970-2014. The results showed that low yield, area variation and unstable fluctuating exchange rate are the main factors affecting sesame export earnings in the long run, and area variation in the short run. Improvement of sesame yield and stabilized exchange rate will have positive impact on sesame export value in the long run, while expansion of area under sesame production could have negative influence on sesame export value due to Sudan large share of sesame export in the world market. In order to improve foreign exchange earnings from sesame export, Sudan should address the problem of low yield, area variation and fluctuating exchange rate especially in the long run. The paper recommends adopting economic policies that lead to improvement of sesame yield, control of area under sesame production and to stabilize exchange rate of Sudanese currency.
    Keywords: Sesame export, Competitiveness, Constraints, Sudan, Agricultural and Food Policy, Crop Production/Industries, International Relations/Trade, Land Economics/Use, Production Economics, Productivity Analysis,
    Date: 2015–10–08
  25. By: Michel Beine (CREA, Université de Luxembourg)
    Abstract: This paper covers the literature on the role migrants networks in explaining aggregate migration flows between countries. We first provide a small review of the literature and the issues at stake. We then provide an update of the estimates of the network elasticities using the dataset on migration stocks and flows from Ozden et al. (2011). Using micro-founded gravity models, we estimate the network elasticities and discuss the key driving mechanisms explaining their size as well the variation in the amplitude across categories of destination and over time. We emphasize the specific role of family immigration policies. To that purpose, we cover briefly the recent experience of four receiving countries to highlight the importance of these policies in explaining part of the observed network elasticities.
    Keywords: F22, O15, R11, R15
    Date: 2015
  26. By: Hachula, Michael; Hoffmann, Sebastian
    Abstract: Empirical evidence indicates that high oil price volatility has a dampening effect on output in countries that import commodities. Many countries, however, gain important revenues from commodity exports. This paper investigates the output effects of commodity price volatility in commodity exporting countries accounting for both oil and non-oil commodities. To that aim, we construct country specific commodity price indices for a sample of oil and non-oil commodity exporters. We find a significant negative impact of price volatility on real output for oil exporters. Our results for exporters of other commodities, however, suggest that the volatility effect is a peculiar feature of oil and not generalizable to a broad basket of commodities.
    Keywords: commodity price uncertainty,commodity exporters,VAR-MGARCH-in-mean
    JEL: C32 O13 Q43
    Date: 2015
  27. By: Hernández Marco A.
    Abstract: This paper evaluates whether a macroeconomic trade model, where the decision of trade and the Balassa-Samuelson effect are endogenous, can explain recent empirical facts about the importance of nontraded goods prices in real exchange rate variations better than a standard Balassa-Samuelson model, where nontraded goods are exogenously determined. The model is modified and calibrated to an asymmetric equilibrium that allows the steady state of the model to match some of the US-Mexico relationships quite well. The results suggest an importance of nontraded goods in real exchange rate volatility closer to the empirical evidence. In addition, the model replicates the findings that nontraded prices exhibit higher volatility than the real exchange rate and that these prices are negatively correlated with traded goods prices.
    Keywords: Real Exchange Rate; Endogenous Trade; Firm Heterogeneity; Firm Dynamics
    JEL: F12 F31 F41
    Date: 2015–07
  28. By: Markus Fredebeul-Krein;
    Date: 2015–02

This nep-int issue is ©2015 by Luca Salvatici. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.