nep-int New Economics Papers
on International Trade
Issue of 2016‒04‒09
twenty-six papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. Concerns Related to the Internationalisation of State-Owned Enterprises: Perspectives from regulators, government owners and the broader business community By Sara Sultan Balbuena
  2. International Trade and Productivity: The Role of Industry and Export Destination By Shevtsova, Yevgeniya
  3. Food trade, Biodiversity Effects and Price Volatility By Cecilia Bellora; Jean-Marc Bourgeon
  4. Impact of European Food Safety Border Inspections on Agri-Food Exports: Evidence from Chinese Firms By Lionel Fontagné; Anne-Célia Disdier; Matthias Beestermöller
  5. Do Free Trade Agreements Increase The New Goods Margin? Evidence from Korea By Sang-Wook (Stanley) Cho
  6. Good Jobs, Bad Jobs: What's Trade Got To Do With It? By Lake, James; Millimet, Daniel L.
  7. Global Firms By Andrew B. Bernard; J. Bradford Jensen; Stephen J. Redding; Peter K. Schott
  8. The Purpose of Trade Agreements By Gene M. Grossman
  9. The Political Economy of Services Trade Agreements By Fiorini, Matteo; Lebrand, Mathilde
  10. Aptitudes of Pakistani Rice Industry with Respect to Global Trade By Jafar, Rana Muhammad Sohail; Rabnawaz, Ambar; Hussain, Safdar; Ahmed, Wasim; Zhuang, Peifen
  11. Measuring Openness to Trade By Waugh, Michael E.; Ravikumar, B.
  12. The labor content of exports database By Cali,Massimiliano; Francois,Joseph; Hollweg,Claire Honore; Manchin,Miriam; Oberdabernig,Doris Anita; Rojas Romagosa,Hugo Alexander; Rubinova,Stela; Tomberger,Patrick
  13. Trade, Finance and Endogenous Firm Heterogeneity By Bonfiglioli, Alessandra; Crinò, Rosario; Gancia, Gino A
  14. International Shocks and Domestic Prices: How Large Are Strategic Complementarities? By Mary Amiti; Oleg Itskhoki; Jozef Konings
  15. The March of the Techies: Technology, Trade, and Job Polarization in France, 1994-2007 By James Harrigan; Ariell Reshef; Farid Toubal
  16. Trade and Geopolitics By Ben Li; Penglong Zhang
  17. Government Corruption and Foreign Direct Investment Under the Threat of Expropriation By Christopher Hajzler; Jonathan Rosborough
  18. Does the Type of Neighbor Matter?: Evidence of heterogeneous Export Spillovers on Domestic Companies in Mexico By Cardoso-Vargas, Carlos-Enrique
  19. The Effect of Offshoring on Skill Premiums: Evidence from Japanese Matched Worker-Firm Data By Masahiro Endoh
  20. Determinants of Foreign Direct Investment By Liew, Siew-Ling
  21. Friends Without Benefits? New EMU Members and the “Euro Effect†on Trade By Alina Mika; Robert Zymek
  22. Heterogeneous consumers and trade patterns in a monopolistically competitive setting By Alexander Osharin; Valery Verbus
  23. Impact of foreign direct investment (FDI) on domestic investment in Republic of Croatia By Ivanović, Igor
  24. Prozessqualitäten in der WTO: Ein Vorschlag für die reliable Messung von moralischen Bedenken By Sonntag, Winnie; Spiller, Achim
  25. Quantifying the productivity e ects of global value chains By Sara Formai; Filippo Vergara Caffarelli; ;
  26. Big History, Global Corporations, Virtual Capitalism By Richard L. Nolan

  1. By: Sara Sultan Balbuena
    Abstract: The rise in state-owned enterprises (SOEs) as growing actors in international trade and investment has received renewed attention in recent years, not least due to controversy that has arisen over SOE foreign investments. This has raised the profile of these issues with policy makers and tilted much of the public debate in one direction. Some concerns revolve around the intentions of these companies, or any potential competitive distortions that could be caused by them which would differentiate them from privately-owned enterprises operating under like circumstances. With a view to keeping the trade and investment environment open, this paper draws attention to particular perceptions of concerns or challenges that arise when SOEs internationalise. Although perceptions are not verifiable facts, they reveal important trends that may inform the debate and shape future government policies towards foreign trade and investment by SOEs. The information in the report is primarily drawn from findings emerging from a three-part perception-based OECD survey addressed to public officials responsible for enterprise ownership, competition enforcement, investment regulation and trade policy in addition to departments of government with broader responsibility for the enterprise and competition landscape, and/or cross-border trade and investment regulation.
    Keywords: trade policy, state-owned enterprises, investment policy, international investment, competition, competitive neutrality, corporate governance
    JEL: F21 F23 G3 G30 G38 G39 L32 L33
    Date: 2016–04–06
  2. By: Shevtsova, Yevgeniya
    Abstract: The study explores the productivity effect associated with all types of firm’s export decisions across destinations. Using micro data on Ukrainian manufacturing firms operating during 2000-2005, I show that high-tech firms experience stronger productivity shocks associated with changes in their export status. Low-tech firms, instead, experience productivity improvements only when entering advanced export markets and are, on average, significantly less sensitive to changes in their export status. The results also show that firms’ characteristics, including productivity, not only improve the firm’s ability to self-select into exporting, but also increase its ability to penetrate a larger number of export markets.
    Keywords: exports; TFP; destination specific learning-by-exporting effect, export diversification, system GMM
    JEL: D24 F14 L25
    Date: 2015–10–10
  3. By: Cecilia Bellora; Jean-Marc Bourgeon
    Abstract: Biotic factors such as pests create biodiversity effects that increase food production risks and decrease productivity when agriculture specializes. Under free trade, they reduce the specialization in food production that otherwise prevails in a Ricardian two-country setup. Pesticides allow farmers to reduce biodiversity effects, but they are damaging for the environment and for human health. When regulating farming practices under free trade, governments face a tradeoff: they are tempted to restrict the use of pesticides compared to under autarky because domestic consumption partly relies on imports and thus depends less on them, but they also want to preserve the competitiveness of their agricultural sector on international markets. Contrary to the environmental race-to-the-bottom tenet, we show that at the symmetric equilibrium under free trade restrictions on pesticides are generally more stringent than under autarky. As a result, trade increases the price volatility of crops produced by both countries, and, depending on the intensity of the biodiversity effects, of some or all of the crops that are country-specific.
    Keywords: Agricultural Trade;Food Prices;Agrobiodiversity;Pesticides
    JEL: F18 Q17 Q18 Q56
    Date: 2016–03
  4. By: Lionel Fontagné; Anne-Célia Disdier; Matthias Beestermöller
    Abstract: The cost of complying with a sanitary standard is certain. However, such regulatory measure introduces an element of uncertainty for exporting firms in relation to border rejections. Shipments may fail to pass inspections and may be refused entry into the importing country. This risk is shaped by variance in the quality of the exported product, and the stringency of the border controls. Large developing countries are over-represented in import refusals and may be targeted by inspectors. We examine how the risk of rejection at European borders on safety grounds is affecting Chinese agri-food exporters. We combine information from the European Rapid Alert System for Food and Feed with Chinese firm-level export data by product, destination and year for the period 2000-2011. We show that information externalities and reputation effects are important. Border rejections amplify the turnover among firms at the extensive margin of trade. This risk is curbing small Chinese exporters and resulting in a concentration of Chinese exports from big and more productive exporters.
    Keywords: Food Safety;Border Inspections;Import Refusals;Uncertainty;Firm Heterogeneity
    JEL: F14 L25 Q17 Q18
    Date: 2016–03
  5. By: Sang-Wook (Stanley) Cho (School of Economics, UNSW Business School, UNSW)
    Abstract: This paper analyzes the role of the new goods margin, or the extensive margin in the growth of trade between Korea and countries which it signed free trade agreement with. Using the methodology initiated by Kehoe and Ruhl (2013), I look at the set of least-traded goods (or “new” goods) that constitute the bottom decile of trade value, and measure its growth rate between 1995 and 2013, a period during which various bilateral trade agreements came into effect. On average, these new goods account for 26 percent of Korea’s exports and 31 percent of Korea’s imports after the free trade agreement. When compared to a control group of main trade partners with no FTAs, I find that FTA had more impact on the growth of new goods in imports rather than in exports. This may be due to the fact that Korea’s tariff barriers were relatively higher than its FTA partner countries. Despite growth in extensive margin, the main avenue of growth in trade came from growth in intensive margin.
    Keywords: Free trade agreement, Extensive margin, Intensive margin, Korea
    JEL: F13 F14
    Date: 2016–02
  6. By: Lake, James (Southern Methodist University); Millimet, Daniel L. (Southern Methodist University)
    Abstract: Using US local labor markets between 1990 and 2010, we analyze the heterogeneous impact of rising trade exposure on employment growth of 'good' and 'bad' jobs. Three salient findings emerge. First, rising local exposure to import competition, via falling US tariffs or rising Chinese import penetration, reduces (increases) employment growth of bad (good) jobs. Conversely, improved local access to export markets, via falling foreign tariffs, increases (reduces) employment growth of bad (good) jobs. Second, falling US tariff protection is substantially more important, economically and statistically, than rising Chinese import penetration. Third, globalization generates occupational polarization but not job polarization.
    Keywords: trade liberalization, China, local labor markets, job polarization, occupational polarization
    JEL: F13 J21 J31
    Date: 2016–03
  7. By: Andrew B. Bernard; J. Bradford Jensen; Stephen J. Redding; Peter K. Schott
    Abstract: Research in international trade has changed dramatically over the last twenty years, as attention has shifted from countries and industries towards the firms actually engaged in international trade. The now-standard heterogeneous firm model posits a continuum of firms that compete under monopolistic competition (and hence are measure zero) and decide whether to export to foreign markets. However, much of international trade is dominated by a few "global firms," which participate in the international economy along multiple margins and are large relative to the markets in which they operate. We outline a framework that allows firms to be of positive measure and to decide simultaneously on the set of production locations, export markets, input sources, products to export, and inputs to import. We use this framework to interpret features of U.S. firm and trade transactions data and highlight interdependencies across these margins of firm international participation. Global firms participate more intensively along each margin, magnifying the impact of underlying differences in firm characteristics, and explaining their dominance of aggregate international trade.
    Keywords: firm heterogeneity, international trade, multinationals, multi-product firms
    JEL: L11 L21 L25 L60
    Date: 2016–04
  8. By: Gene M. Grossman
    Abstract: This paper reviews the literature on governments' motivations for negotiating and joining international trade agreements. I discuss both normative explanations for trade agreements and explanations based on political-economy concerns. Most of the paper focuses on the purpose of multilateral agreements, but I do discuss briefly the reasons we might see governments forming preferential or regional trade agreements that exclude some countries.
    JEL: F13 F53 K33
    Date: 2016–03
  9. By: Fiorini, Matteo; Lebrand, Mathilde
    Abstract: This paper studies the determinants of liberalization commitments in the context of trade in services used as intermediate inputs. Compared to goods, services inputs are mostly complementary to other factors of production and non-tradable. We build a theoretical trade policy framework in which (i) foreign investment as a way to contest a market for non-tradable services can be restricted by the government and (ii) the role of services as complementary inputs explains unilateral commitment to services trade liberalization. Commitment helps governments to avoid political pressures that would result in protectionist measures leading downstream producers to inefficiently reduce their production. In addition we provide new results on the influence of lobbying by both national firms and foreign multinationals. We discuss how the bargaining power of the government, the size of national services sectors and the difference in valuation between national and foreign contributions affect the willingness of the government to sign a services trade agreement.
    Keywords: Services Trade, Trade Agreements, FDI, Lobby
    JEL: D43 F13 F21 L80
    Date: 2016
  10. By: Jafar, Rana Muhammad Sohail; Rabnawaz, Ambar; Hussain, Safdar; Ahmed, Wasim; Zhuang, Peifen
    Abstract: Economy of Pakistan based on agriculture, owing to the export of agricultural commodities is major source of foreign exchange earnings. Export of rice play a vital role in country’s economy. However, trade policies influenced the performance of agricultural sector, as there are some gaps of technical advancement in system, financial irregularity, as well as other constitutional regulatory factors. Pakistan is following three years Strategic Trade Policy Framework (STPF) since 2009, to enhance the performance and efficiency of trade sector. Since last few years, trade of rice is decreasing due to traditional markets, energy crises and lack of research and development in agricultural sector. Thus, Pakistan has lost its more than 30% share from Gulf market via rice export during previous three decades. The transaction cost to imports is significantly lower than the exportation, which is negatively affecting the competitiveness of country’s exports. So, it's prior need to pay attention in the export chain sector, to approach the Europeans markets for encouraging trade performance of rice sector, as well as, improve the reforms in trade policies to compete in the international market for maximum foreign exchange revenues.
    Keywords: Trade strategies, Export competition, Rice export
    JEL: L1
    Date: 2015
  11. By: Waugh, Michael E. (New York University); Ravikumar, B. (Federal Reserve Bank of St. Louis)
    Abstract: In this paper we derive a new measure of openness—the trade potential index—that quantifies the potential gains from trade as a simple function of data. Using a standard multicountry trade model, we measure openness by a country’s potential welfare gain from moving to a world with frictionless trade. In this model, a country’s trade potential depends on only the trade elasticity and two observable statistics: the country’s home trade share and its income level. Quantitatively, poor countries have greater potential gains from trade relative to rich countries, while their welfare costs of autarky are similar. This leads us to infer that rich countries are more open to trade. Our trade potential index correlates strongly with estimates of trade costs, while both the welfare cost of autarky and the volume of trade exhibit correlate weakly with trade costs. Thus, our measure of openness is informative about the underlying trade frictions.
    Date: 2016–03–01
  12. By: Cali,Massimiliano; Francois,Joseph; Hollweg,Claire Honore; Manchin,Miriam; Oberdabernig,Doris Anita; Rojas Romagosa,Hugo Alexander; Rubinova,Stela; Tomberger,Patrick
    Abstract: This paper develops a novel methodology to measure the quantity of jobs and value of wages embodied in exports for a large number of countries and sectors for intermittent years between 1995 and 2011. The resulting Labor Content of Exports database allows the examination of the direct contribution of labor to exports as well as the indirect contribution via other sectors of the economy for skilled and unskilled labor. The analysis of the new data sets documents several new findings. First, the global share of labor value added in exports has been declining globally since 1995, but it has increased in low-income countries. Second, in line with the standard Hecksher-Ohlin trade model, the composition of labor directly contained in exports is skewed toward skilled labor in high-income countries relative to developing countries. However, that is not the case for the indirect labor content of exports. Third, manufacturing exports are a key source of labor demand in other sectors, especially in middle- and low-income countries. And the majority of the indirect demand for labor spurred by exports is in services sectors, whose workers are the largest beneficiaries of exporting activities globally. Fourth, differences in the labor value added in exports share across developing countries appears to be driven more by differences in the composition of exports rather than in sector labor intensities. Finally, average wages typically increase rapidly enough with the process of economic development to more than compensate the loss in jobs per unit of exports. The paper also includes the necessary information to build the Labor Content of Exports database from the original raw data, including stata do-files and matlab files, as well as descriptions of the variables in the data set.
    Keywords: Banks&Banking Reform,Economic Theory&Research,Trade Policy,Labor Policies,Labor Markets
    Date: 2016–03–28
  13. By: Bonfiglioli, Alessandra; Crinò, Rosario; Gancia, Gino A
    Abstract: We study how financial frictions affect firm-level heterogeneity and trade. We build a model where productivity differences across monopolistically competitive firms are endogenous and depend on investment decisions at the entry stage. By increasing entry costs, financial frictions lower the exit cutoff and hence the value of investing in bigger projects with more dispersed outcomes. As a result, credit frictions make firms smaller and more homogeneous, and hinder the volume of exports. Export opportunities, instead, shift expected profits to the tail and increase the value of technological heterogeneity. We test these predictions using comparable measures of sales dispersion within 365 manufacturing industries in 119 countries, built from highly disaggregated US import data. Consistent with the model, financial development increases sales dispersion, especially in more financially vulnerable industries; sales dispersion is also increasing in measures of comparative advantage. These results can be important for explaining the effect of financial development and factor endowments on export sales.
    Keywords: Financial Development; Firm Heterogeneity; International Trade
    JEL: F12 F14
    Date: 2016–03
  14. By: Mary Amiti; Oleg Itskhoki; Jozef Konings
    Abstract: How strong are strategic complementarities in price setting across firms? In this paper, we provide a direct empirical estimate of firm price responses to changes in prices of their competitors. We develop a general framework and an empirical identification strategy to estimate the elasticities of a firm’s price response to both its own cost shocks and to the price changes of its competitors. Our approach takes advantage of a new micro-level dataset for the Belgian manufacturing sector, which contains detailed information on firm domestic prices, marginal costs, and competitor prices. The rare features of these data enable us to construct instrumental variables to address the simultaneity of price setting by competing firms. We find strong evidence of strategic complementarities, with a typical firm adjusting its price with an elasticity of 35% in response to the price changes of its competitors and with an elasticity of 65% in response to its own cost shocks. Furthermore, we find substantial heterogeneity in these elasticities across firms, with small firms showing no strategic complementarities and a complete cost pass-through, while large firms responding to their cost shocks and competitor price changes with roughly equal elasticities of around 50%. We show, using a tightly calibrated quantitative model, that these findings have important implications for shaping the response of domestic prices to international shocks.
    JEL: D22 E31 F31
    Date: 2016–03
  15. By: James Harrigan; Ariell Reshef; Farid Toubal
    Abstract: Using administrative employee-firm-level data on the entire private sector from 1994 to 2007, we show that the labor market in France has polarized: employment shares of high and low wage occupations have grown, while middle wage occupations have shrunk. During the same period, the share of hours worked in technology-related occupations ("techies") grew substantially, as did imports and exports, and we explore the causal links between these trends. Our paper is among the first to analyze polarization in any country using firm-level data, and we show how polarization occured within firms, but mostly due to changes in the composition of firms (between firms). Motivated by the fact that technology adoption is mediated by technically qualified managers and technicians, we use a new measure of the propensity of a firm to adopt new technology: its employment share of techies. Using the subsample of firms that are active over the whole period, we show that firms with more techies in 2002 saw greater polarization, and grew faster, from 2002 to 2007. Offshoring reduced employment growth. Among blue-collar workers in manufacturing, importing caused skill upgrading while exporting caused skill downgrading. To control for the endogeneity of firm-level techies and trade in 2002, we use values of techies and trade from 1994 to 1998 as instruments. We conclude that technological change, mediated through techies, is an important cause of polarization in France. Firm-level trade had important effects in manufacturing.
    JEL: D3 F1 F16 J2 O3
    Date: 2016–03
  16. By: Ben Li (Boston College); Penglong Zhang (Boston College)
    Abstract: Since the Age of Discovery, the world has grown integrated economically while remaining disintegrated politically as a collection of nation states. The nation-state system is robust because borders, as state dividers, interact with economic integration to absorb shocks. We build a tractable general equilibrium model of international trade and national borders in the world. Over a longer time horizon, declining trade costs alter trade volumes across states but also in- centivize states to redraw borders, causing states to form, change, and be dissolved. Our model offers rich implications for global geopolitics, including political geography, its interplay with natural geography, state-size distribution, and the frequency and nature of military disputes. These implications are supported by historical data.
    Keywords: nation state, geopolitics, endogenous borders, military disputes, trade costs
    JEL: N40 F50
    Date: 2016–03–15
  17. By: Christopher Hajzler; Jonathan Rosborough
    Abstract: Foreign investment is often constrained by two forms of political risk: expropriation and corruption. We examine the role of government corruption in foreign direct investment (FDI) when contracts are not fully transparent and investors face the threat of expropriation. Using a novel dataset on worldwide expropriations of FDI over the 1990–2014 period, we find a positive relationship between the extent of foreign investor protections and the likelihood of expropriation when a country’s government is perceived to be highly corrupt, but not otherwise. We then develop a theory of dynamic FDI contracts under imperfect enforcement and contract opacity in which expropriation is a result of illicit deals made with previous governments. In the model, a host-country government manages the FDI contract on behalf of the public, which does not directly observe government type (honest or corrupt). A corrupt type is able to extract rents by encouraging hidden investments in return for bribes. Opportunities for corrupt deals arise from the distortions in the optimal contract when the threat of expropriation is binding. Moreover, a higher likelihood of the government being corrupt increases the public’s temptation to expropriate FDI, magnifying investor risk. The model predicts that expropriation is more likely to occur when the share of government take is low and following allegations of bribes to public officials, and it suggests an alternative channel through which corruption reduces optimal foreign capital flows.
    Keywords: Development economics, Economic models, International topics
    JEL: F23 F21 F34
    Date: 2016
  18. By: Cardoso-Vargas, Carlos-Enrique
    Abstract: This document examines whether the agglomeration of foreign processing firms (PCS) assembling imported inputs to make export products favors the incorporation to the export activity or market expansion of domestic companies. Similarly this situation is evaluated by considering ordinary foreign firms (ORD) or not manufactured processed products and non-local hybrid companies (HBR) that act in both regimes of commerce. The theoretical framework guiding the empirical evaluation is based on a simple model inspired by Melitz (2003), which is evaluated by means of a conditional logit model with panel data. The findings show evidence that the concentration of these types of foreign companies increases the probability that domestic companies show a presence in certain markets. Notwithstanding, these export spillovers widely heterogeneous in virtue of the fact that their existence and sphere of influence are associated with their specificity in terms of country or product, as well as with the regime of commerce and the technological capacity used by domestic companies vis-à-vis neighboring foreign companies.
    Keywords: international trade, agglomeration externalities, heterogeneity firms
    JEL: F13 F14 F21
    Date: 2016–02–27
  19. By: Masahiro Endoh (Faculty of Business and Commerce, Keio University)
    Abstract: This study estimates the effect of offshoring on workers' hourly wages and annual income in Japan by constructing matched worker-firm data. I use two sets of dummies to take into account two aspects of worker skills: field of skills and level of skills. Interestingly, the estimated scale of impact from offshoring and exports on hourly wages and annual income of male low-skilled workers is statistically insignificant in Japan. Regarding skill premiums, offshoring increases wage premium for higher level of skill as well as that for science-oriented knowledge and administrative tasks. Interestingly, exports decrease these skill premiums, meaning the increase of both offshoring and exports partially offsets their effect on skill premiums. In addition, it is observed that the uneven gendered effects of trade on hourly wage are leveled out to some degree by the adjustment of working hours and bonuses. These findings imply that the shock of international transaction in a particular firm is mitigated by its internal labor market.
    Keywords: Offshoring, Skill premium, Matched worker-firm data, Labor demand, Japanese labor market
    JEL: F16 J23 J31
    Date: 2016–03–08
  20. By: Liew, Siew-Ling
    Abstract: A foreign direct investment (FDI) is an investment made by a company or entity based in one country, into a company or entity based in another country. According to Demirhan and Masca (2008), FDI has significantly grow due to several factors, namely rapid technological progress, emergence of globally integrated production and marketing networks, existence of bilateral investment treaties, recommendations from multilateral development banks, and positive indication from developing countries that attracts FDI into the country.
    Keywords: Literature review, foreign direct investment, economic growth
    JEL: F0
    Date: 2016–04–02
  21. By: Alina Mika; Robert Zymek
    Abstract: We re-visit the evidence about the trade benefits of European Monetary Union (EMU), focusing on the experience of countries which adopted the common currency since 2002. Based on “state of the art†gravity estimations for the period 1992-2013, we reach three main conclusions. First, estimates from an appropriately specified and estimated gravity equation provide no evidence of a euro effect on trade flows among early euro adopters up to the year 2002. Second, this finding is robust to extending the sample period to incorporate data up to 2013, covering five additional euro accessions. Third, while there is no robust evidence of a euro effect, there is evidence that intra-EU trade flows have expanded faster than the global average during the 2002-2013 period. Using the functional form of a theory-consistent gravity equation, we perform pseudo out-of-sample forecasts of trade flows for recent euro joiners. In line with our estimation results, we show that pseudo forecasts of the change in trade flows after euro accession, assuming no euro effect, outperform forecasts based on the expectation of a significantly positive effect. This suggests that euro accession countries should not expect a significant boost to their trade from joining EMU.
    Keywords: euro, trade, gravity, poisson
    JEL: F14 F15 F17 F33
    Date: 2016–02–02
  22. By: Alexander Osharin (National Research University Higher School of Economics); Valery Verbus (National Research University Higher School of Economics)
    Abstract: The paper considers a two-country trade model of monopolistic competition featuring the heterogeneity of consumer preferences both within and across countries. The incorporation of heterogeneity into a traditional monopolistic competition setting is achieved by assuming different elasticities of substitution in the CES utility function for different consumers. The proposed setup expands on the traditional model of trade by demonstrating a richer set of country specific effects. The key question analysed in the paper is how consumer heterogeneity and trade liberalization affect markups and wages in different countries. Unlike the canonical CES-model of trade, where markups in different countries are constant and identical to each other, our model, by taking consumer heterogeneity into account, provides different markups across countries, incorporating both heterogeneity and trade specifics. The model also predicts that the larger of two countries engaged in costly trade may have a wage rate higher than, lower than or equal to that of the smaller one, depending on the general equilibrium conditions. This finding is in contrast to that of the canonical setting, where the larger country under costly trade always has a higher wage rate.
    Keywords: heterogeneous consumers; monopolistic competition; CES utility function; international trade, markups, wages
    JEL: F12 D43 L13
  23. By: Ivanović, Igor
    Abstract: The aim of this paper is to investigate how foreign direct investment (FDI) affects domestic investment in the Republic of Croatia. More precisely, the general purpose of this study is to determine the impact of net inflow of foreign capital on domestic investment in order to gain a clearer picture about the sensitivity and efficiency of domestic investment. After parsing domestic investment and FDI in Croatia, according to Croatian Bureau of Statistics and the Croatian National Bank, a historical overview of their movement from 1995 to 2014 was analyzed. In the following an overview and comparison of studies from around the world which deal with similar topic was made. In the empirical part; domestic gross fixed capital formation, changes in domestic stocks, net FDI and GDP growth rate was used as variables. Quarterly time series data ranging from the Q1 2001 to Q4 2014 were processed with the subset VAR (vector autoregressive) econometric model. The results shows that FDI have negative influence on domestic investment in the Republic of Croatia with time lag.
    Keywords: foreign direct investment; gross investment; crowding out/in effect; subset VAR; investment efficiency
    JEL: F21
    Date: 2015–11–25
  24. By: Sonntag, Winnie; Spiller, Achim
    Abstract: Im Jahr 2014 hat das WTO-Schlichtungsgremium (Appellate Body) einen vielbeachteten Schiedsspruch zum Importverbot der EU für Robbenprodukte getätigt. Das verhängte Importverbot für Robbenprodukte wurde auf Grundlage des Art. XX (a) GATT grundsätzlich gerechtfertigt. Damit wurde erstmals der Schutz der öffentlichen Sittlichkeit als Begründung für eine tierschutzbezogene Handelsbeschränkung anerkannt. Diese Entscheidung eröffnet als Präzedenzfall Optionen für supranationale Maßnahmen für weitere Produkte, deren Herstellungsprozess auf moralische Bedenken der Gesellschaft trifft. Denkbar wären hier z. B. eine verpflichtende Kennzeichnung bzw. ein Importverbot für Produkte aus besonders tierwohlkritischen Produktionsformen. Allerdings bleibt in der Forschung bisher weitgehend unklar, wann eine Gefährdung der sittlichen Ordnung besteht. Der vorliegende Beitrag thematisiert deshalb die Frage, wie die moralischen Bedenken (moral concerns) einer Gesellschaft gemessen werden können. Hierzu wird eine Messmethode konzeptionell vorgestellt, die eine valide und reliable Messung der moralischen Bedenken einer Gesellschaft erlaubt. Das Ziel ist ein auf WTO-Ebene einsetzbares, wissenschaftlich fundiertes und vertrauenswürdiges Instrument (Scale) zur Messung des Besorgnisgrades von Gesellschaften in Bezug auf Tierschutzfragen zu entwickeln.
    Abstract: In 2014, the WTO's Dispute Settlement Body accepted the EU import ban on seal products. The EU banned the importation and sale of seal products under the justification of Article XX (a) GATT. Thereby, the EU import ban is the first WTO case in which the Appellate Body accepted a trade restriction based on the moral concerns of EU citizens with regard to the inhuman killing of seals. This discussion may offer opportunities for mandatory labelling or import bans on other products from production systems which violate public ethical beliefs and morality. However, in recent research there is a lack of clarity in the determination of when public morality is seriously endangered and needs to be protected. Therefore, the present paper deals with the question of how to measure the moral concerns of a society in a valid and reliable manner. Although it is important to identify and verify if public morality is really compromised, it must also be ensured that this instrument is not just used as a form of protectionism. The paper introduces a measuring method which allows a reliable and valid measurement of public concern within a particular society. The objective of this work is to develop a trustworthy WTO-wide science-based tool (a scale) for the measurement of the degree of public concern with respect to animal welfare topics.
    Keywords: Moralische Bedenken,Tierhaltung,Prozessstandards,EC-Seal Products,WTO,moral concerns,animal husbandry,process standards
    Date: 2016
  25. By: Sara Formai; Filippo Vergara Caffarelli; ;
    Abstract: This work analyses the relationship between international fragmentation of production and productivity growth. To identify the impact of fragmentation on productivity growth,we employ the methodology proposed in a different context by Rajan and Zingales (1996). In particular we interact the length and the width of sectoral production chains with a measure of countries' involvement in international fragmentation of production. We find evidence indicating that off-shoring increases labour productivity and total factor productivity in the externalising country.
    Date: 2015–12–11
  26. By: Richard L. Nolan (Harvard Business School)
    Abstract: Homo sapiens has mastered its environment so thoroughly that, for the first time in history, a small minority of the population is capable of creating enough food and fuels to support not only itself, but a growing majority of the 6 billion people now living on earth. This unparalleled abundance is allowing our species to develop, distribute, and profit from innovation in nearly every corner of civilization. Now key elements of the modern world such as the speed and connectedness of digital communication, the dynamic movement of capital, and changing nature of political boundaries are propelling capitalism into a new form that can be characterized as "virtual capitalism." And global corporations in their size and global influence are leading the embodiment of virtual capitalism into the modern world.
    Date: 2016–03

This nep-int issue is ©2016 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.