nep-int New Economics Papers
on International Trade
Issue of 2015‒12‒08
forty-four papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. Tariff Reductions, Entry, and Welfare: Theory and Evidence for the Last Two Decades By Caliendo, Lorenzo; Feenstra, Robert; Romalis, John; Taylor, Alan M.
  2. EC-Seal Products: The Tension between Public Morals and International Trade Agreements By Paola Conconi; Tania Voon
  3. Decompr: Global Value Chain Decomposition In R By Victor Kummritz; Bastiaan Quast
  4. Assessing European Firms’ Exports and Productivity Distributions: The CompNet Trade Module By Antoine Berthou; Emmanuel Dhyne; Matteo Bugamelli; Ana-Maria Cazacu; Calin-Vlad Demian; Peter Harasztosi; Tibor Lalinsky; Jaanika Meriküll; Filippo Oropallo; Ana Cristina Soares
  5. Australia-Thailand Trade: An analysis of competitiveness and the effects of the bilateral FTA By M.A.B Siddique; Rahul Sen; Sadhana Srivastava
  6. Networks of value added trade By João Amador; Sónia Cabral
  7. Factor Price Differences in a General Equilibrium Model of Trade and Imperfect Competition By Koska, Onur A.; Staehler, Frank
  8. Internalizing Global Value Chains: A Firm-Level Analysis By Laura Alfaro; Pol Antras; Davin Chor; Paola Conconi
  9. Less developed countries´ policy space in the emerging governance regime to food safety: Uruguayan trade negotiations to access high quality meat markets By Lucía Pittaluga Fonseca; Cristina Zurbriggen
  10. Exports, imports, FDI and GDP in the Republic of Korea: 1980-2014 By Julen Berasaluce; José Romero
  11. Testing The Core-competency Model of Multi-Product Exporters By Beata Javorcik; Peter Neary; Carsten Eckel; Leonardo Iacovone
  12. Dragons, Giants, Elephants and Mice: Evolution of the MFN Free Rider Problem in the WTO Era By Ludema, Rodney D; Mayda, Anna Maria; McClure, Jonathan C. F.
  13. Trade, Migration and Regional Income Differences: Evidence from China By Xiaodong Zhu; Trevor Tombe
  14. Can Selective Immigration Policies Reduce Migrants' Quality? By Bertoli, Simone; Dequiedt, Vianney; Zenou, Yves
  15. Competition and Quality Upgrading in Export Markets: The case of Peruvian Apparel Exports By Castellares, Renzo
  16. What?s left for the WTO ? By Bown,Chad P.
  17. Quality Screening and Trade Intermediaries: Evidence from China By Sandra Poncet; Meina Xu
  18. Time Zones and FDI with Heterogeneous Firms By Kikuchi, Toru; Marjit, Sugata; Mandal, Biswajit
  19. Export Destinations and Plant Heterogeneity: Evidence from Thai Manufacturing By Srithanpong Thanapol
  20. International Trade in General Oligopolistic Equilibrium By Peter Neary
  21. Testing the Heckscher-Ohlin-Vanek Theory with a Natural Experiment By Assaf Zimring
  22. Deconstructing the gains from trade: selection of industries vs. reallocation of workers By Stefano Bolatto; Massimo Sbracia
  23. International trade and the division of labour By Kwok Tong Soo
  24. ASEAN's Leadership in the Regional Comprehensive Economic Partnership By Yoshifumi Fukunaga
  25. Managing the Minerals Sector: Implications for Trade from Peru and Colombia By Jane Korinek
  26. Trade as a Collective Action Problem By Namasaka, Martin
  27. Exchange Rate Bands of Inaction and Play-Hysteresis in Greek exports to the Euro Area, the US and Turkey – Sectoral Evidence By Ansgar Belke; Dominik Kronen
  28. The effect of trade on agglomeration within regions By Carolina Guevara
  29. Exploring the Links between Bilateral and Regional Trade Agreements and Merchandise Trade By Felix Barbalet; Jared Greenville; Wayne Crook; Paul Gretton; Robert Breunig
  30. Global Engagement and Returns Volatility By Sourafel Girma; Sandra Lancheros; Alejandro Riaño
  31. On Wage Inequality, Trade and Technology: Theory and Empirics By Alokesh Baura; Priyanta Ghosh
  32. Imported Inputs, Quality Complementarity, and Skill Demand By Nico Voigtlaender; Diego Saravia
  33. Impact of EU’s agricultural and fisheries policies on the migration of third country nationals to the EU By Alan Matthews;
  34. Identifying, estimating and correcting the biases in WTO rules on public stocks. A proposal for the post-Bali food security agenda By Galtier, F.
  35. A Search and Learning Model of Export Dynamics By Marcela Eslava; James Tybout; David Jinkins; C. Krizan; Jonathan Eaton
  36. Sector Specific Inflow of capital, Non-Traded sector and an Increase in Real Exchange Rate By Mandal, Biswajit; Biswas, Anindya
  37. The Gravity of High Skilled Migration Policies By Mathias Czaika; Christopher R Parsons
  38. The Internet, Cross-Border Data Flows and International Trade By Joshua Paul Meltzer
  39. Porter vs Krugman: History, Analysis and Critique of Regional Competiveness By Psofogiorgos, Nikolaos - Alexandros; Metaxas, Theodore
  40. The Role of Services in Enhancing Indian Manufacturing Exports: A Firm Level Analysis, 2000-01 to 2011-12 By Sonia Mukherjee
  41. Patent Protection and the Industrial Composition of Multinational Activity: Evidence from U.S. Multinational Firms By Olena Ivus; Walter Park; Kamal Saggi
  42. Government Size, Institutions, and Export Performance among OECD Economies By Bournakis, Ioannis; Tsoukis, Christopher
  43. Differential games approach to trade with exhaustible resources By Anton Bondarev; Phemelo Tamasiga
  44. International Trade, Migration and Unemployment – The Role of Informal Sector By Marjit, Sugata; Mandal, Biswajit

  1. By: Caliendo, Lorenzo; Feenstra, Robert; Romalis, John; Taylor, Alan M.
    Abstract: Tariffs have fallen significantly around the globe over the last two decades. Yet very little is known about the trade, entry, and welfare effects generated by this unprecedented shift in trade policy. We use a heterogeneous-firm quantitative trade model to study the effects of observed changes in trade policy. Importantly, in our model, tariffs affect the entry decision of firms across markets, a channel that has been unduly overlooked in the literature. We first show how trade policy influences entry and selection of firms into markets. We then use a new tariff dataset, and apply a 189-country, 15-sector version of our model, to quantify the trade, entry, and welfare effects of trade liberalization over the period 1990–2010. We find that the impact on firm entry was larger in Advanced relative to Emerging markets; that more than 90% of the gains from trade are a consequence of the reductions in MFN tariffs (the Uruguay Round); that PTAs have not contributed much to the overall gains from trade; and that, with the exception of a few Emerging and Developing countries, most countries do not gain much (and some lose) from a move to complete free trade under zero tariffs.
    Keywords: bilateralism; gains from trade; input- output linkages; monopolistic competition; multilateralism; trade policy
    JEL: F10 F11 F12 F13 F15 F17
    Date: 2015–11
  2. By: Paola Conconi; Tania Voon
    Abstract: The dispute in EC – Seal Products raises fundamental questions about the relationship between publicmorals and international trade. Can WTO members impose trade restrictions based on moral or ethicalconcerns? Under what conditions can these concerns trump existing trade liberalization commitments?The dispute was filed in 2009 by Canada and Norway against the EU, which in the same year had bannedseal products from being imported and placed on its market. According to the EU, the policy wasintroduced in response to European moral outrage at the inhumane killing of seals. The EU seal regimeincluded a series of exceptions. In particular, it allowed imports of seal products hunted by Inuit or otherindigenous communities, as well as imports of seal products processed and re-exported by EU producers.This article discusses the Appellate Body’s ruling in EC – Seal Products and some of the key legal andeconomic issues raised by this dispute.
    Date: 2015–09
  3. By: Victor Kummritz (IHEID, The Graduate Institute of International and Development Studies, Geneva); Bastiaan Quast (IHEID, The Graduate Institute of International and Development Studies, Geneva)
    Abstract: Global Value Chains have become a central unit of analysis in research on international trade. However, the complex matrix transformations at the basis of most Value Chain indicators still constitute a significant entry barrier to the field. The R package decompr solves this problem by implementing the algorithms for the analysis of Global Value Chains as R procedures, thereby simplifying the decomposition process. Two methods for gross export flow decomposition using Inter-Country Input-Output tables are provided. The first method concerns a decomposition based on the classical Leontief (1936) insight. It derives the value added origins of an industry's exports by source country and source industry, using easily available gross trade data. The second method is the Wang-Wei-Zhu algorithm, which splits bilateral gross exports into 16 value added components. These components can broadly be divided into domestic and foreign value added in exports. Using the results of the two decompositions, decompr provides a set of Global Value Chain indicators, such as the now standard Vertical Specialisation ratio. This article summarises the methodology of the algorithms, describes the format of the input and output data, and exemplifies the usefulness of the two methods on the basis of a simple example data set.
    Keywords: Global Value Chains, Trade in Value Added, Export Decomposition
    JEL: E01 F13 F14 F23 L14
    Date: 2015–01–17
  4. By: Antoine Berthou; Emmanuel Dhyne; Matteo Bugamelli; Ana-Maria Cazacu; Calin-Vlad Demian; Peter Harasztosi; Tibor Lalinsky; Jaanika Meriküll; Filippo Oropallo; Ana Cristina Soares
    Abstract: This paper provides a new cross-country evaluation of competitiveness, focusing on the linkages between productivity and export performance among European economies. We use the information compiled in the Trade module of CompNet to establish new stylized facts regarding the joint distributions of the firm-level exports performance and productivity in a panel of 15 countries, 23 manufacturing sectors during the 2000’s. We confirm that exporters are more productive than non-exporters. However, this productivity premium is rising with the export experience of firms, with permanent exporters being much more productive than starters. At the intensive margin, we show that both the level and the growth of firm-level exports rise with firm productivity, and that the bulk of aggregate exports in each country are made by few highly productive firms. Finally, we show that during the crisis, the growth of exports by high productive firms sustained the current account adjustment of European “stressed” economies. This last result confirms that the shape of the productivity distribution within each country can have important consequences from the point of view of the dynamics of aggregate trade patterns.
    JEL: F10 F14
    Date: 2015
  5. By: M.A.B Siddique (Business School, University of Western Australia); Rahul Sen (Auckland University of Technology); Sadhana Srivastava (Auckland University of Technology)
    Abstract: This paper analyses bilateral trade between Australia and Thailand over the period 1990-2011 with special emphasis on the trade competitiveness of these two nations and the possible role played by the Thailand-Australia Free Trade Agreement (TAFTA) that entered into force in 2005. Trade competitiveness is measured with the aid of standard techniques used in the literature such as the revealed comparative advantage index, the cosine index of trade similarity, net exports ratio and constant market share analysis (CMS), while the impact of TAFTA is estimated through an export-demand model. The findings of the paper suggest that the composition of bilateral trade has changed significantly since the 1990s. The changes reflect shifts in the production structures of each economy, which are indicative of long-term economic structural changes. It is evident that the Thai-Australian trade relationship has undergone further adjustment since the establishment of the TAFTA. However, the changes in trade patterns are not necessarily due to TAFTA but, rather, part of a long term trend. The export demand model finds a significant positive impact of the TAFTA only on Australian exports to Thailand, but not vice-versa. The strongest trade link between the two countries has been the export of automotive vehicles from Thailand to Australia. By CMS analysis the findings indicate that Thailand’s export competitiveness significantly contributed to the remarkable growth of exports to Australia experienced over the period. On the other hand, Australia’s exports competitiveness to Thailand has suffered; the main reason being that Australia enjoys competitiveness in commodities, which are not in big demand in Thailand.
    Date: 2015
  6. By: João Amador; Sónia Cabral
    Abstract: Global Value Chains (GVCs) became the paradigm for the production of most goods and services around the world. Therefore, linkages among countries can no longer be adequately assessed through standard bilateral gross trade flows and new methods of analysis are needed. In this paper, we apply visualisation tools and measures of network analysis on value-added trade flows in order to understand the nature and dynamics of GVCs. The paper uses data on the bilateral foreign value added in exports from the World Input-Output Database (WIOD) for the period 1995-2011 and, in each period, the GVC is represented as a directed network of nodes (countries) and edges (value added flows). The analysis is extended beyond total trade flows with a view to discussing the distinct roles of goods and services in GVCs. Moreover, the differences between Germany, the US, China and Russia as major suppliers of value added in GVCs are also examined.
    JEL: C67 D85 F14 F15
    Date: 2015
  7. By: Koska, Onur A.; Staehler, Frank
    Abstract: Except for the famous Dornbusch-Fischer-Samuelson (DFS) models, most general equilibrium models of trade rely on factor price equalization. The DFS models demonstrate the gains from trade without factor price equalization under perfect competition. This paper employs a general equilibrium model of oligopolistic competition which implies distortions both at the intensive and extensive margin. If factor prices do not equalize, imperfect competition will not reverse the specialization pattern. However, mutual gains from trade are not guaranteed, but one country may be worse off by trade.
    Keywords: Oligopolistic competition, general equilibrium, international trade, factor price differences
    JEL: D50 F12
    Date: 2015–02–11
  8. By: Laura Alfaro; Pol Antras; Davin Chor; Paola Conconi
    Abstract: In recent decades, technological progress in information and communication technology andfalling trade barriers have led firms to retain within their boundaries and in their domesticeconomies only a subset of their production stages. A key decision facing firms worldwide is theextent of control to exert over the di↵erent segments of their production processes. Building onAntr`as and Chor (2013), we describe a property-rights model of firm boundary choices alongthe value chain. To assess the evidence, we construct firm-level measures of the upstreamness ofintegrated and non-integrated inputs by combining information on the production activities offirms operating in more than 100 countries with Input-Output tables. In line with the model’spredictions, we find that whether a firm integrates upstream or downstream suppliers dependscrucially on the elasticity of demand for its final product. Moreover, a firm’s propensity tointegrate a given stage of the value chain is shaped by the relative contractibility of the stageslocated upstream versus downstream from that stage. Our results suggests that contractualfrictions play an important role in shaping the integration choices of firms around the world.
    Keywords: global value chains; sequential production; incomplete contracts
    JEL: F14 F23 D23 L20
    Date: 2015–09
  9. By: Lucía Pittaluga Fonseca (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía); Cristina Zurbriggen (Universidad de la República (Uruguay). Facultad de Ciencias Sociales. Instituto de Ciencia Política)
    Abstract: This paper examines two case studies from Uruguay which involve international trade negotiations to set high quality meat (beef and sheep) standards in order to access high income markets. Both cases include the intervention of the various actors of the international governance regime to food safety (multilateral actors, like the Codex, the OIE or the WTO, as well as bilateral actors, like the Europe Union or the U.S.). They also involve the Uruguayan government, its animal health agencies and the local private sector from the whole meat value chain. These two case studies illustrate quite accurately how a less developed country can increase its national policy space in the context of the emerging experimentalist transnational governance regime in food safety. They contribute to show that without the creation of local capabilities, such as the meat traceability policy in Uruguay, a voice-instead-of-silence strategy from less developed countries in order to impact on the international regulation framework of food safety is hardly possible.
    Keywords: international trade negotiations, innovation, traceability, experimentalist governance, food safety
    JEL: F53
    Date: 2015–10
  10. By: Julen Berasaluce (El Colegio de México); José Romero (El Colegio de México)
    Abstract: In this paper, we have set up an empirical analysis of the economic growth in Korea between 1980 and 2015, in order to identify the potential relationships between relevant variables. We chose to study Korea because is a country notable for applying industrial policies. We compare the export-led growth versus growth-driven exports hypotheses, we also compare the contribution of FDI to economic growth hypothesis versus its opposite, the idea that a rapid economic growth attracts FDI; we also compare other opposing hypotheses. A four-variable vector autoregression (VAR) is used to study the relationships between trade, foreign direct investment (FDI) and economic growth using quarterly data from 1980 to 2014. We estimated the Granger causality/Block exogeneity test, and calculated the Impulse Response Functions and Variance Decomposition. The main findings are that the three tests confirm the growth-driven exports hypothesis, as well as that FDI has no effect on economic growth or exports. We consider that these results for Korea have a significant relevance for Latin America and other regions that are searching for policies to enhance economic growth.
    Keywords: South Korea, VAR, industrial policy, exports, imports, FDI, growth
    JEL: C32 F14 F21
    Date: 2015–12
  11. By: Beata Javorcik; Peter Neary; Carsten Eckel; Leonardo Iacovone
    Abstract: Abstract: We review the implications of the "core competence" model of multi-product firms, including the “market-size paradox”: for most countries, the world market is much larger than the home market, while the costs of accessing foreign markets are relatively low; hence the model predicts that most domestic firms should export more of their core products than they sell domestically; yet, in practice, we do not observe this. Extending the model to allow for investment in export market penetration resolves the puzzle, and Mexican data confirm its predictions: in particular,only the largest firms exhibit the dominance of exports over home sales.
    Keywords: Core competence model, Export market penetration costs, Flexible manufacturing, Multi-product firms.
    JEL: F12
    Date: 2015–12–02
  12. By: Ludema, Rodney D; Mayda, Anna Maria; McClure, Jonathan C. F.
    Abstract: Ludema and Mayda (2009, 2013) show that existing MFN tariff rates are inefficiently high, because the MFN free rider problem impairs the ability of countries to internalize the terms-of-trade effects of tariff reductions during multilateral trade negotiations. In this paper, we examine the evolution of the free rider problem from 1993 to 2012 by investigating changes in one of its main determinants, namely, the concentration of MFN exporters. We find evidence of an average increase in exporter concentration, which would suggest that negotiated tariffs would decrease if the Doha round were completed. We also decompose changes in exporter concentration into three channels: the accession of new members to the WTO, the formation of new PTAs and the changes in trade flows. The main determinant of the average increase in exporter concentration is the formation of new PTAs, which provides empirical evidence of a “building-bloc” effect of PTAs working through terms-of-trade effects. In addition, the (potential) amelioration of the free rider problem in 1993-2012 is most pronounced for low-tech products whose exports have become more concentrated due to the growth of emerging economies.
    Keywords: building-bloc effect; free-rider problem; MFN; PTAs; terms-of-trade effects
    JEL: F1 F5
    Date: 2015–11
  13. By: Xiaodong Zhu (University of Toronto); Trevor Tombe (University of Calgary)
    Abstract: International trade is closely related to within-country trade and migration. To study these interrelationships, we develop a novel general equilibrium model of internal and external trade with migration, featuring both trade and migration frictions. We estimate these frictions using unique data on China's trade and migration; the costs are high, but declined after 2000. We quantify the consequences of lower trade costs (international and internal) and migration costs on welfare, internal migration, and regional income differences. External trade liberalization increases China's trade, but only modestly increases welfare while increasing regional income differences. Internal trade liberalization has large welfare gains and reduces regional income differences. Migration cost reductions dramatically increase migration and lower regional income differences but -- surprisingly -- only modestly increase trade and aggregate welfare, mainly because the migration costs remain very high. In a counterfactual exercise in which we lower the migration costs in China to the levels similar to those in the US, we find very large increases in both trade and aggregate welfare. Our results suggest internal reforms dominate external trade liberalization as a source of aggregate welfare gains and improvements in regional income inequality.
    Date: 2015
  14. By: Bertoli, Simone (CERDI, University of Auvergne); Dequiedt, Vianney (CERDI, University of Auvergne); Zenou, Yves (Stockholm University)
    Abstract: Destination countries can adopt selective immigration policies to improve migrants' quality. Screening potential migrants on the basis of observable characteristics also influences their self-selection on unobservables. We propose a model that analyzes the effects of selective immigration policies on migrants' quality, measured by their wages at destination. We show that the prevailing pattern of selection on unobservables influences the effect of an increase in selectivity, which can reduce migrants' quality when migrants are positively self-selected on unobservables. We also demonstrate that, in this case, the quality-maximizing share of educated migrants declines with the scale of migration.
    Keywords: migrants' quality, self-selection, selective policies
    JEL: F22 J61
    Date: 2015–11
  15. By: Castellares, Renzo (Banco Central de Reserva del Perú)
    Abstract: This paper uses the exponential growth in Chinese exports from 2001 to 2006 to evaluate the effects of a competition shock from a low-wage competitor on exporters from a developing country. In particular, this research considers heterogeneous quality upgrading strategies of Peruvian apparel firms in response to an influx of low-cost Chinese apparel goods. Using firm-level data from Peruvian customs and a survey of Peruvian manufactures, I find that more productive firms upgrade their product quality to differentiate them from low-cost and low-quality Chinese apparel goods. Conversely, less productive Peruvian firms, which are not able to increase their quality, react by reducing their prices. Finally, I also find evidence that the average quality of Peruvian apparel products increase during 2001 to 2007.
    Keywords: Trade, competition, quality, trade finance
    JEL: F14 O14 O30
    Date: 2015–11
  16. By: Bown,Chad P.
    Abstract: Suppose that when addressing the question of ?what?s left for the WTO?,? tariff negotiators relied not on the agenda established in 2001 but instead on the terms-of-trade theory of trade agreements to identify negotiating priorities. This paper uses the lens of the terms-of-trade theory to investigate three areas in which it is frequently alleged that currently applied tariffs remain ?too high?; the implication being that the WTO?s job performance to date is incomplete. This includes applied tariffs for countries that are not members of the WTO, applied MFN tariffs for WTO members that are unbound, and applied MFN tariffs for WTO members set in the presence of large amounts of tariff binding overhang. These are almost exclusively the domain of developing countries? own trade policies and they are collectively important; 3.5 billion people currently live in countries in which the WTO has had minimal effect for one of these three reasons. This paper builds upon recent developments in the empirical literature to present evidence?some direct, some indirect?that sheds light on each area. It then identifies specific needs for additional research to clarify policy implications for the future role of the WTO in the ever-changing international trading system.
    Keywords: Free Trade,Trade and Services,Economic Theory&Research,World Trade Organization,Trade Law
    Date: 2015–12–02
  17. By: Sandra Poncet; Meina Xu
    Abstract: We examine the quality-screening role played by intermediaries in international trade, exploiting export data at the product level for Chinese exporters. We uncover substantial heterogeneity among intermediaries, and distinguish two kinds: generalized and specialized intermediaries. We find strong evidence of a quality-verification role for specialized intermediaries: they are more prevalent in products with greater quality dispersion among local exporters and export goods of higher quality than do generalized intermediaries. Our results suggest that specialized intermediaries have the capacity to reduce the incidence of quality problems.
    Keywords: Intermediaries;International Trade;Quality screening;Product differentiation;China
    JEL: F13 F14 O25 R11
    Date: 2015–10
  18. By: Kikuchi, Toru; Marjit, Sugata; Mandal, Biswajit
    Abstract: Based on Helpman et al. (2004) we propose a simple two-country (Home and Foreign) model with heterogeneous firms to capture the role of FDI via utilizing time zone differences. Two countries are located in different time zones and there is no overlap in daily working hours. It will be shown that productivities of the firms undertaking FDI are higher than the productivities of non-FDI firms. Although the results look quite similar with Helpman et al. (2004), the direction of service trade flow is totally different: Foreign subsidiaries of high- productivity firms serve the Home market.
    Keywords: Time Zones, FDI, Heterogeneous Firms
    JEL: F12
    Date: 2015–02
  19. By: Srithanpong Thanapol (Graduate School of Business and Commerce, Keio University)
    Abstract: Using plant-level data from the 2007 Industrial Census of Thailand, this paper examines and adds new evidence on the relationship between export destinations and plant characteristics, including both productivity and profitability aspects. Our analysis proceeds in three steps. First, we give a detailed comparison of how plant heterogeneity is associated with export destinations by several tests. Second, we extend the analysis using OLS (Ordinary Least Squares) and probit estimations to provide further evidence. Third, multinomial logistic estimation is applied to analyze the choice of export destinations and plant heterogeneity. We uncover evidence supporting recent theories in exporting and firm heterogeneity. Among Thai exporters to various export destinations, for productivity and input intensity aspects, the results show that exporters to Asian countries (especially, ASEAN countries, Chinese-based countries and Japan) are the most productive groups of exporters and are relatively more material- and capital-intensive on average. For the profitability aspect, exporters to ASEAN and Chinese-based countries generally exhibit the highest total sales and sale profits. However, exporters to Japan have the highest rate of profit. We also find that plants with high productivity are more likely to choose to export to the US, the EU, and Japan and ASEAN countries, respectively. Plants with high input intensity are more likely to export to ASEAN countries. Distinguishing difference between plants exporting to top export destinations and destinations that are not, we clearly observe that there exists strong heterogeneity among plants exporting to different type of markets in Thai manufacturing.
    Keywords: Export Destinations, Plant Heterogeneity, Productivity, Profitability, Thailand Cognitive and Non-cognitive Abilities
    JEL: F10 F14 D21
    Date: 2015–11–01
  20. By: Peter Neary
    Abstract: Abstract This paper presents a new model of oligopoly in general equilibrium and explores its implications for positive and normative aspects of international trade. Assuming“continuum-Pollak" preferences, the model allows for consistent aggregation over a continuum of sectors, in each of which a small number of home and foreign firms engage inCournot competition. I show how competitive advantage interacts with comparative advantage to determine resource allocation, and, specializing to continuum-quadraticpreferences, I explore the model's implications for the gains from trade, for the distribution of income between wages and profits, and for production and trade patterns ina two-country world.
    Keywords: “Continuum-Pollak" preferences, Continuum-quadratic preferences, GOLE (General Oligopolistic Equilibrium),Market integration,Trade and income distribution
    JEL: F10 F12
    Date: 2015–12–02
  21. By: Assaf Zimring (Cornerstone Research)
    Abstract: This paper uses the historical episode of the near-elimination of commuting from the West Bank into Israel, which caused a large and rapid expansion of the local labor force in the West Bank, to test the predictions of the Heckscher-Ohlin-Vanek (HOV) mode of trade. I use variation between districts in the West Bank to test these predictions, and find strong support for them: Wage changes were not correlated with the size of the shock to the district labor force (Factor Price Insensitivity); Districts that received larger influx of returning commuters shifted production more towards labor intensive industries (Rybczynski effect); And on the consumption side, the data are consistent with the assumption of identical homothetic preferences, which, combined with the production results, supports the Heckscher-Ohlin-Vanek theorem on the factor content of trade.
    Keywords: Heckscher-Ohlin, factor prices, Rybczynski effect, international trade, natural experiment, West Bank
    JEL: F11 F16 J31
    Date: 2015–11
  22. By: Stefano Bolatto (University of Bologna); Massimo Sbracia (Bank of Italy)
    Abstract: In a Ricardian model with general distributions of industry efficiencies, the welfare gains from trade can be decomposed into a selection and a reallocation effect. The former is the change in average efficiency due to the selection of industries that survive international competition. The latter is the rise in the weight of exporting industries on total production owing to the reallocation of workers from non-exporting industries. Measuring the two effects is difficult in the general case, but the calculations become much simpler when using Fréchet-distributed efficiencies, providing easily quantifiable model-based measures of the two effects. The selection (reallocation) effect appears to be most significant when welfare gains are small (large).
    Keywords: comparative advantage; selection effect; reallocation effect
    JEL: F10 F11 F40
    Date: 2015–11
  23. By: Kwok Tong Soo
    Abstract: This paper develops a model of international trade based on the division of labour under perfect competition. International trade, by eliminating the duplication of coordination costs, leads to a greater variety of intermediate goods, each produced at a larger scale than in autarky. The greater variety of intermediate inputs implies greater division of labour and hence gains from trade. Similarly to models of international trade under imperfect competition, the volume of trade depends on the relative sizes of the trading partners. Extending the model to two factors of production yields the additional result that if the two countries are sufficiently similar in their relative endowments, then both factors of production can experience gains from trade.
    Keywords: Division of labour, intermediate goods trade, trade liberalisation
    JEL: F11 F15
    Date: 2015
  24. By: Yoshifumi Fukunaga
    Abstract: Association of Southeast Asian Nations (ASEAN) centrality was one of the biggest motivations for ASEAN's proposal of the Regional Comprehensive Economic Partnership (RCEP) in 2011. In order to gain both politically and economically, ASEAN should play proactive roles in the RCEP negotiation as the driver of substance. ASEAN has already started exercising its influence over the substances of ASEAN + 1 free trade agreements (FTAs). In order to further strengthen its leadership in the RCEP, ASEAN should utilise the ASEAN Economic Community (AEC) as the model for RCEP. AEC has achieved a much deeper level of integration than the existing ASEAN + 1 FTAs by setting high ambitions with processes to induce reform initiatives of member states. By using familiar AEC measures, ASEAN can create a single and common position despite the large development gaps among its member states. If modelled after AEC, the RCEP will enforce ASEAN's reform efforts.
    Keywords: ASEAN centrality;ASEAN Economic Community;Regional Comprehensive Economic Partnership;ASEAN + 1 FTAs;Trans-Pacific Partnership
    Date: 2014–11–24
  25. By: Jane Korinek
    Abstract: Managing and regulating the extractive industries can pose substantial challenges to minerals-rich countries. Aiming to overcome the “resource curse”, some countries attempt to generate greater gains from their natural resources by using trade policy instruments such as export restrictions. Others look to create a balanced regulatory framework to maximise gains from sustainable extraction and minimise the negative spillover effects. Colombia and Peru have aimed to do the latter. This study examines their experiences as regards some aspects of the management of their extractive industries. In particular, it examines the design of the tax system as it applies to non-renewable resources, the reform of the distribution of revenues from the sector, and strategies for tackling illegal mining. These policy areas are important to ensure that the extraction of natural resources benefits the economies and societies of the two Andean nations.
    Keywords: corruption, trade policy, mining, extractive industries, export restrictions
    JEL: O13 O24 O54 Q32 Q34 Q37
    Date: 2015–12–02
  26. By: Namasaka, Martin
    Abstract: This article concerns the question whether free trade can be seen as a collective action problem. More specifically, I investigate whether one key characteristic of collective action is present in the case of trade: a common interest. I argue that while states at an aggregate level might have such a common interest, this does not automatically mean that governments will advance this interest in practice. Whether they will depends on accountability mechanisms within the state. I will show that within various accountability systems, there are reasons why governments will not advance the aggregate state interest. This opens up the floor to a more power-driven perspective on trade. I will first elaborate briefly on how the theory of collective action can be applied to trade and why states should have a common interest in free trade. Secondly, I will investigate why democratic and autocratic regimes respectively, might not advance this common interest. This will lead to my argument of viewing trade from a power perspective.
    Keywords: Regional Trade, Collective Action, Integration
    JEL: D7 D78 F1 F13 F15 F16 O1 O19
    Date: 2015–12–01
  27. By: Ansgar Belke; Dominik Kronen
    Abstract: In this paper a non-linear model is applied, where suddenly strong spurts of exports occur when changes of the exchange rate go beyond a zone of inaction, which we call “play” area – analogous to mechanical play. We implement an algorithm describing path-dependent play-hysteresis into a regression framework. The hysteretic impact of real exchange rates on Greek exports is estimated based on the period from 1995Q1 to 2014Q4. Looking at some of the main export partners of Greece, the euro area, Turkey and the US, and some of its most im-portant tradeable sectors we identify significant hysteretic effects for a part of the Greek ex-ports. We find that Greek export activity is characterized by “bands of inaction” with respect to changes in the real exchange rate and calculate the further real depreciation needed to trig-ger a spurt in Greek exports. To check for robustness we (a) estimate Greek export equations for a limited sample excluding the recent financial crisis, (b) use export weight instead of de-flated nominal exports as the dependent variable, (c) employ a political uncertainty variable as a determinant of the width of the area of weak reaction. Overall, we find that those specifica-tions which take uncertainty into account display the best goodness of fit. In other words: the option value of waiting dominates the real exchange rate effect on Greek exports.
    Keywords: real depreciation; Greece; play-hysteresis; modelling techniques; switching/spline regression; export demand
    JEL: F14 C51
    Date: 2015–09
  28. By: Carolina Guevara (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon St Etienne,F-69130 Ecully, France, Université Jean Monnet, Saint-Etienne, F-42000, France)
    Abstract: This paper assesses for the first time the effect of regional trade openness on agglomeration within regions, using regional data on the trade of Colombia. The results of the panel model show that the effect of trade is sufficiently strong to shape the spatial configuration, a structure that rarely changes. The effect varies across regions. On the one hand, trade enhances spatial agglomeration within regions with large home market and location advantages. On the other hand, trade induces dispersion within regions that lack access to international trade or historical advantage. These results hold when controlling for the natural course of agglomeration (regions-pecific time trends), congestion effects in main cities and road infrastructure within regions.
    Keywords: Trade openness, spatial concentration, intra-inequality, congestion, cities, economic geography
    JEL: R12 F10 O54
    Date: 2015
  29. By: Felix Barbalet; Jared Greenville; Wayne Crook; Paul Gretton; Robert Breunig
    Abstract: Over 200 bilateral and regional trade agreements are currently in force, yet their impact remains a topic of debate. We analyse effects of 27 agreements that are of particular importance for Australia on the value of merchandise trade flows using data from 1970 up to the global financial crisis in 2008. We show that preferential trade agreements generally increase trade between members but that there are often offsetting negative effects on trade with non-signatories. In contrast to regional trading blocs and bilateral accords, agreements more oriented towards open trade principles have a positive impact on all trade flows of member nations.
    Keywords: Free trade agreements;gravity model;merchandise trade
    Date: 2015–08–17
  30. By: Sourafel Girma; Sandra Lancheros; Alejandro Riaño
    Abstract: This paper uses high-frequency data for publicly-listed Japanese manufacturing firms over the period 2000 to 2010 to show that a greater reliance on foreign market sales increases the conditional volatility of firms’ stock returns. The two margins of global engagement we consider, namely, exports and sales via foreign affiliates, have both a positive and economically significant effect on firm-level volatility, although an increase in the intensity of sales through foreign affiliates has a stronger effect on volatility than a similar change in firms’ export intensity. We also uncover evidence consistent with the notion that firms’ need to use external finance to cover the substantial costs involved in reaching foreign consumers is an important channel through which firms’ participation in international markets increases their exposure to economic uncertainty.
    Keywords: Volatility, Stock Returns, Exports, FDI, External Finance Dependence, Japan
    Date: 2015
  31. By: Alokesh Baura (Centre for International Trade and Development,Jawaharlal Nehru University); Priyanta Ghosh (Centre for International Trade and Development,Jawaharlal Nehru University)
    Date: 2015
  32. By: Nico Voigtlaender (UCLA); Diego Saravia (Banco Central de Chile)
    Abstract: This paper analyzes how access to imported inputs affects firms in developing countries, where domestically produced high-quality inputs are relatively costly. We build an O-Ring type model with quality complementarity across input tasks, ranking tasks by their qualitysensitivity. Because high-quality inputs are relatively cheap in international markets, firms use these instead of domestic inputs for quality-sensitive production steps. This substitution effect lowers the demand for domestic input quality (such as skilled labor), while it raises output quality. At the same time, the complementarity effect increases the return to quality in the remaining domestic tasks. This raises output quality further; it also increases the demand for domestic input quality (skills), counterbalancing the first effect. To provide evidence for this mechanism, we match high-resolution data from Chilean customs to a large firm-level panel for the period 1992-2005. In line with the model's predictions, importers use ceteris paribus a lower share of skilled workers, while their skill demand increases significantly with the quality of imports.
    Date: 2015
  33. By: Alan Matthews (Department of Economics, Trinity College Dublin);
    Abstract: This paper examines the possible impact of the EU’s common agricultural policy (CAP) and its common fisheries policy (CFP) (particularly its external dimension) on the migration of third country nationals to the EU. First, the expected impacts of both policies are discussed taking into account that both policies have undergone considerable changes in recent years. Data on irregular migration (as an imperfect proxy for economic migration driven mainly by ‘push’ factors) are used to identify those countries which are the principal sources of irregular migrants to the EU. The likely contribution of the CAP and CFP to these migration flows is discussed. For both policies, detailed case-study work in individual countries would be necessary to discover if either policy does have discernible effects and, if so, the nature of those effects.
    Keywords: EU common agricultural policy, EU common fisheries policy, migration
    JEL: F22 Q18 Q22
    Date: 2015–12
  34. By: Galtier, F.
    Abstract: In this paper, we analyze the WTO rules that specify how to estimate the subsidy provided to farmers by public stocks. We identify three biases in these rules: - Bias B1, resulting from using a fixed past unit value of import or export as external reference price, instead of the current price cost of imports or exports. - Bias B2, resulting from using the procurement price of the public stock instead of the price prevailing on the domestic market to estimate the price support received by the farmers who sell their production on the domestic market. - Bias B3, resulting from using the national production instead of the marketed share of national production, by this way ignoring farmer self-consumption. The effect of these three biases on the estimated subsidy varies with the country but, on average, WTO rules lead to overestimate the subsidy by a factor 2 to more than 300, depending on the modalities of public stock interventions and other parameters. This means that in the most favorable scenarios, the estimated subsidy is (on average) twice the real subsidy. The effect of these biases on country compliance proves to be huge: many countries have an estimated subsidy above their maximum allowed level (even with very light public stock interventions), just because the subsidy provided by public stocks is overestimated by WTO rules. This result challenges the widespread idea that almost all countries comply with WTO rules on public stocks. We also test the effect of correcting only some of the biases. It appears that doing this would not allow eliminating the biases in country compliance. An implication of this is that expressing the fixed external reference price (FERP) in US dollar, correcting it with the country inflation rate or replacing it by the average unit value of imports or exports over the last five years (as proposed by several experts and WTO Members) would not be enough to remove the bias on country compliance. There is therefore a need to correct all the three biases, what can be done in a rather simple way, as is shown at the end of the paper. ....French Abstract : Dans cet article, nous analysons les règles de l’OMC qui définissent comment estimer la subvention procurée par les stocks publics aux producteurs agricoles. Nous identifions trois biais dans ces règles : - le biais B1, qui résulte du fait d’utiliser comme prix extérieur de référence la valeur unitaire des importations ou des exportations au cours d’une période fixe passée, au lieu d’utiliser le coût de revient actuel des importations ou des exportations. - le biais B2, qui résulte du fait d’utiliser le prix d’achat du stock public (au lieu du prix en vigueur sur le marché domestique) pour estimer la subvention reçue par les agriculteurs qui vendent leur production sur le marché domestique. - le biais B3, qui résulte du fait d’utiliser la production nationale au lieu de la part commercialisée de cette production (ignorant par la même l’autoconsommation des producteurs). L’effet de ces trois biais sur la subvention estimée diffère selon les pays mais, en moyenne, les règles de l’OMC conduisent à surestimer la subvention d’un facteur 2 à plus de 300, selon les modalités d’intervention des stocks publics et d’autres paramètres. Cela signifie que, dans les scénarios les plus favorables, la subvention estimée représente le double de la subvention réelle. L’effet de ces biais sur la conformité des pays avec leurs engagements à l’OMC se révèle être très important: beaucoup de pays ont une subvention estimée au-dessus du plafond autorisé (même avec des interventions de faible ampleur), simplement parce que la subvention est surestimée par les règles de l’OMC. Ceci remet en cause l’idée très répandue selon laquelle presque tous les pays seraient en règles vis-à-vis de leurs engagements sur les stocks publics et le soutien interne. Nous avons également testé les effets d’une correction partielle des biais B1, B2 et B3. Il s’avère que cette correction partielle ne permet pas d’éliminer le biais sur la conformité des pays avec leurs engagements à l’OMC. Ceci implique notamment qu’exprimer le prix fixe extérieur de référence (FERP) en dollar US, que le corriger par le taux d’inflation du pays ou que le remplacer par la moyenne de la valeur unitaire des importations ou des exportations au cours des cinq années précédentes (comme proposé par différents experts et pays Membres) ne serait pas suffisant pour corriger le bais sur la conformité des pays avec leurs engagements. Il est donc nécessaire de corriger les trois biais, ce qui peut être fait d’une manière assez simple, comme nous le montrons à la fin de l’article.
    JEL: Q18 Q11 F1
    Date: 2015
  35. By: Marcela Eslava (Universidad de Los Andes); James Tybout (Pennsylvania State University); David Jinkins (Copenhagen Business School); C. Krizan (U.S. Bureau of the Census); Jonathan Eaton (Brown University)
    Abstract: Customs record data reveal a number of patterns in relationships Colombian firms have with their U.S. buyers. We interpret these patterns in terms of a continuous-time model in which heterogeneous sellers search for buyers in a market. Success in selling to a buyer reveals information to the seller about the appeal of her product in the market, affecting her incentive to search for more buyers. Fit using the method of simulated moments, the model replicates key patterns in the customs records and allows us quantify several types of trade costs, including the search costs of identifying potential clients and the costs of maintaining business relationships with existing clients. It also allows us to estimate the effect of previous exporting activity on the costs of meeting new clients, and to characterize the cumulative effects of learning on firms' search intensities. Finally, we use our fitted model to explore the effects of these trade costs and learning effects on aggregate export dynamics
    Date: 2015
  36. By: Mandal, Biswajit; Biswas, Anindya
    Abstract: This paper attempts to look at the effect of inflow of foreign capital only in the exportable sector on the factor prices and real exchange rate of the concerned economy. In doing so we frame a blend of Heckscher-Ohlin and Specific Factor model of trade which is popularly known as H-O nugget. We show that consequent upon an inflow of capital specific to exportable sector both the non-traded good production and return to the factor specific to non-traded good are reduced while the exportable production expands. The effect of such an inflow on real exchange rate is unambiguous and it increases.
    Keywords: Foreign capital inflow, Real exchange rate, Developing economies
    JEL: F21 F31
    Date: 2015–01
  37. By: Mathias Czaika (International Migration Institute); Christopher R Parsons (Business School, The University of Western Australia)
    Abstract: Despite the almost ubiquitously held belief among policy makers that immigration policies aimed at attracting high-skilled workers meet their desired aims, academics continue to debate their efficacy. This paper presents a comprehensive assessment on the effectiveness of such policies. We combine a unique new data set of annual bilateral high-skilled immigration labour flows for 10 OECD destinations between 2000 and 2012, with new databases comprising both unilateral and bilateral policy instruments, to examine which types, and combinations, of policies are most effective in attracting and selecting high skilled workers using a micro-founded gravity framework. Points-based systems are much more effective in attracting and selecting high-skilled migrants in comparison with requiring a job offer, labour market tests or working in shortage listed occupations. Financial incentives yield better outcomes in ‘demand-driven’ systems than when combined with points-based systems however. Offers of permanent residency, while attracting the highly skilled, overall reduce the human capital content of labour flows since they prove more attractive to non-high skill workers. Bilateral recognition of diploma and social security agreements, foster greater flows of high skilled workers and improve the skill selectivity of immigrant flows. Conversely, double taxation agreements deter high skilled migrants, although they do not alter the overall skill selectivity. Higher skilled wages increase the number and skill selectivity of labour flows, whereas higher levels of unemployment exert the opposite effects. Migrant networks, contiguous borders, common language and freedom of movement, while encouraging greater numbers of high skilled workers, exert greater effects on non-high skilled workers, thereby reducing the skill content of labour flows. Greater geographic distances however, while deterring both types of workers, affect the high skilled less, thereby improving the selection on skills. Our results are robust to a variety of empirical specifications, accounting for destination specific amenities, multilateral resistance to migration and the endogeneity of immigration policies.
    Date: 2015
  38. By: Joshua Paul Meltzer
    Abstract: The Internet and the free flow of data across borders is becoming a key platform for international trade. Digital products can be sold online and the Internet provides opportunities for business to use the Internet to manage global supply chains, communicate with customers and access IT in the cloud. At the same time, governments are restricting the Internet in ways that reduce the ability of businesses and entrepreneurs to use the Internet as a place for international commerce and limit the access of consumers to goods and services. This article discusses the importance of the Internet and cross-border data flows for international trade. It proposes steps that governments should take to apply existing international trade rules and norms and identifies where new trade rules are required to further support the Internet and cross-border data flows and drivers of international commerce and trade.
    Keywords: trade;Internet;data;investment;cross-border data flows;trade law;WTO;FTA
    Date: 2015–12–17
  39. By: Psofogiorgos, Nikolaos - Alexandros; Metaxas, Theodore
    Abstract: The subject of this study is to determine the competitiveness through an interdisciplinary approach of the theories of the new economic geography and regional economy. This article describes in detail the theory of competitiveness, which is defined differently by many authors, with particular emphasis on opposing views of Michael Porter and Paul Krugman. One of the first writers who stressed the importance of the geographical position was Michael Porter. In his model, the author emphasizes that the geographical concentration of firms enhances productivity, innovation and export sector. Following this theory, many authors have focused on the research of the "location problem ", which led to better connection of economics and geography. The result of these activities is the new guidelines that have been developed, such as the new theory of economic geography and regional economy. The new economic geography is mainly related to the Nobel prized, Paul Krugman, whose theories often conflict with those of Porter. This study initially sets out the views of both authors, in terms of competitiveness and then attempts to make a comparative analysis between the theories they developed.
    Keywords: Michael Porter, Paul Krugman, Regional Competitiveness
    JEL: R11 R19 R38
    Date: 2015–12
  40. By: Sonia Mukherjee (Centre for International Trade and Development,Jawaharlal Nehru University)
    Abstract: In this paper, we try to examine and assess the contribution of services towards India’s manufacturing exports at the firm level. In other words, the role of services in shaping the international competiveness of the Indian Manufacturing Sector at the firm level is examined. Services are instrumental in connecting to the world market and can help firms to differentiate their products. However, only bits and pieces of the relation between services and exports have been analyzed in the earlier literature. Most of the earlier studies relating to services have explored the link between services and Total Factor Productivity. The relation between services and exports has not been explored at the firm level in case of India. This also gives a justification for conducting the present study. With now firm level databases available, it allows us to explore this part in details. For exploring this link, the firm level data was collected from the Centre for Monitoring of The Indian Economy (Prowess Database) for the years 2000-01 to 2011-12. The Manufacturing firms had used different types of services according to their needs and the expenditure for the all the different services were not the same. The expenses incurred by the manufacturing firms for services like business services, repairs and maintenance, Professional services, Research & Development and others etc. were added together to get total expenses on the services variable. Two alternative econometric methods (Panel Regression method and Tobit model) were used in our study. The findings confirm that services have contributed to enhanced export competitiveness of the Indian manufacturing firms. The paper looks at the firm specific factors like firm size, age, previous years export performance, group versus non-group, labor productivity and services that affected the export performance of the Indian manufacturing firms. The overall results show that the firm specific factors such as firm size, extent of use of services, group versus non-group firms, and previous years export performance played a positive role in improving the Indian manufacturing exports.
  41. By: Olena Ivus (Queen's University); Walter Park (American University); Kamal Saggi (Vanderbilt University)
    Abstract: Using data on U.S. firms' technology licensing to local agents in developing countries, this paper examines the impact of patent protection on internal and arms-length technology transfer. The effects of protection vary across products according to their complexity. Consistent with theories of internalization, we find that patent reforms enable local firms to attract more arms-length technology transfer, especially of simple products which are relatively easy to imitate. Affiliated licensing also rises among simple products, but falls among complex products. The results withstand several robustness checks, including controlling for endogeneity by using colonial origin as an instrument, and are equally strong whether patent protection is measured by its intensity or by the timing of reforms. The results have significance for patent policy in the developing world, where access to knowledge is critical. Through arms-length technology contracts, proprietary knowledge diffuses beyond firm boundaries, enabling local agents to access not only the protected technology but also know-how.
    Keywords: International Technology Transfer, Licensing, Developing Countries, Product Complexity, Intellectual Property Rights, and Imitation Risk
    JEL: O3 F2
    Date: 2015–12–02
  42. By: Bournakis, Ioannis; Tsoukis, Christopher
    Abstract: With a panel of 18 OECD countries, 1980-2005, we investigate the determinants of export performance, in particular the effects of the size of government and institutional features. In a model of endogenous extent of domestically-produced goods, government size has a non-linear effect on export performance; the export-maximising size of government (tax receipts) is around 40-45% of GDP; the best size of productive government spending is around 16% of GDP. Product market and labour market-related rigidities affect negatively the export performance both on their own and via a negative effect on the effectiveness of R&D and slow down the speed of adjustment. Among traditional variables, relative unit labour cost, R&D shares in GDP, TFP growth and human capital show up significantly and with the expected signs.
    Keywords: Export shares, government size, institutions, unit labour cost, competitiveness
    JEL: E02 F14 F41
    Date: 2015–11
  43. By: Anton Bondarev; Phemelo Tamasiga (University of Basel)
    Abstract: The paper presents a model of world economy with two countries where one of them dubbed home sells the exhaustible resource to final producers in both countries,  which compete at the final goods market. The interaction between final producers is reached via the sticky price mechanics, whereas price continuously adjusts to produced final product quantities. Production technology in both countries includes the resource as an essential input plus the variety of intermediate products. We demonstrate how opening up to trade of the exhaustible resource may be beneficial for the home economy by promoting technical change and capital accumulation via increased resource rents and relative factor prices movements. This leads to the increase in social welfare due to taste for variety and fosters structural change in the home country.
    Keywords: structural change, resource economics, international trade, differential games
    JEL: F1 L16 Q37 C6 C7
    Date: 2014
  44. By: Marjit, Sugata; Mandal, Biswajit
    Abstract: This paper provides an elaborate general equilibrium framework by including informal economic activities in a model of trade, migration and unemployment. Existence of informal activities is critical in generating positive employment effects of liberal trade policies. Following a tariff cut informal wage increases and rate of unemployment goes down under reasonable conditions. Next we generalize the benchmark model to capture the phenomenon of sequential migration: from agriculture to urban informal sector, and then to urban formal sector. The paper also extends the benchmark model to include both informal intermediate and final good.
    Keywords: International Trade; Employment; Informal Wage; General Equilibrium.
    JEL: D5 F1 J31 O17
    Date: 2015–02

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