nep-int New Economics Papers
on International Trade
Issue of 2016‒04‒23
33 papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. Exports, Exchange Rates, and Productivity: An analysis of the Japanese manufacturing sectors By KATO Atsuyuki
  2. Stability of complementarity between Japanese FDI and import of intermediate goods : agglomeration effects and parent-firm heterogeneity By Ito, Tadashi; Matsuura, Toshiyuki; Yang, Chih-Hai
  3. Caloric unequal exchange in Latin America and the Caribbean By Fander Falconi; Jesus Ramos-Martin; Pedro Cango
  4. Product Standards and Margins of Trade: Firm-Level Evidence Product Standards and Margins of Trade: Firm-Level Evidence By Lionel Fontagné; Gianluca Orefice; Roberta Piermartini; Nadia Rocha
  5. Expanding Multinationals - Conglomerate M&A and Activity-Basket Proximity By Anna Ray
  6. The March of the Techies: Technology, Trade, and Job Polarization in France, 1994-2007 By James Harrigan; Ariell Reshef; Farid Toubal
  7. The Empirical Landscape of Trade Policy By Bown, Chad P.; Crowley, Meredith
  8. Painful Birth of Trade Under Classical Monopolistic Competition By Igor Bykadorov; Andrea Ellero; Stefania Funari; Sergey Kokovin; Pavel Molchanov
  9. Trade Liberalization and Industrial Productivity: Evidence from Pakistan By Ahmed, Gulzar; Arshad Khan, Muhammad; Afzal, Muhammad
  10. Trade in parts and components across Europe By Richard Frenscha; Jan Hanousekb; Evzen Kocenda
  11. Estimating Border Effects: The Impact of Spatial Aggregation By Coughlin, Cletus C.; Novy, Dennis
  12. The Heckscher-Ohlin-Samuelson Model and the Cambridge Capital Controversies By Kurose, Kazuhiro; Yoshihara, Naoki
  13. Gains from Variety? Product Differentiation and the Possibility of Losses from Trade under Cournot Oligopoly with Free Entry By Collie, David R.
  14. The Topology of African Exports: emerging patterns on spanning trees By Tanya Ara\'ujo; M. Ennes Ferreira
  15. Contractual Imperfections and the Impact of Crises on Trade: Evidence from Industry-Level Data By Castellares, Renzo; Salas, Jorge
  16. Fickle product mix: exporters adapting their product vectors across markets By Lionel Fontagné; Angelo Secchi; Chiara Tomasi
  17. Convergence or Divergence in Future? Comparative Analysis between the WTO SCM Agreement and the Agreement on Agriculture By Minju Kim
  18. What Determines Firm-level Export Capacity? Evidence from Portuguese firms By Ana Gouveia; Ana Luisa Correia
  19. Growth Patterns and Trade Imbalances in the EMU. A Global Value Chain Analysis By Stefan Ederer; Peter Reschenhofer
  20. The role of corporate financial structure in the export propensity of manufacturing firms By Miravitlles, Paloma; Mora, Toni; Achcaoucaou, Fariza
  21. On Behavioral Macroeconomics, Globalization, and Economic Growth By Rosas-Martinez, Victor H.
  22. Rising Wages, Yuan Appreciation and China’s Processing Exports By Yuqing Xing
  23. FDI in R&D: An Introspection By Pohit, Sanjib; Biswas, Pradip
  24. Choice of Invoice Currency in Japanese Trade: Industry and commodity level analysis By ITO Takatoshi; KOIBUCHI Satoshi; SATO Kiyotaka; SHIMIZU Junko
  25. What is the relation between foreign aid and trade? By Gachet, Adrian Nicholas
  26. Who Disapproves of TTIP? Multiple Distrust in Companies and Political Institutions By Hans Pitlik
  27. Global migration revisited : short-term pains, long-term gains, and the potential of south-south migration By Ahmed, S. Amer; Go,Delfin Sia; Willenbockel,Dirk Andreas
  28. Bilateral Investment Treaties and Investor State Disputes By Umakrishnan Kollamparambil
  29. Two-sided Heterogeneity and Trade By Andrew B. BERNARD; Andreas MOXNES; Karen Helene ULLTVEIT-MOE
  30. Using Foreign Direct Investment to Upgrade and Diversify Exports from Morocco: Opportunities and Challenges in Comparative Perspective By Theodore H. Moran
  31. Transnational Theory, Global World: Theory Matters, Not Geography By Phoebe Gardner
  32. European Green Tech FDI in China: The Role of Culture By Katiuscia Vaccarini; Francesca Spigarelli; Ernesto Tavoletti
  33. Effects of fiscal consolidation on exports in Ukraine By Vdovychenko, Artem; Zubrytskyi, Artur

  1. By: KATO Atsuyuki
    Abstract: This paper examines the effects of exchange rate changes and productivity on manufacturing exports. Using the dataset of Japanese manufacturing firms during the period 2002-2012, we discuss whether exchange rate fluctuations deter export activities and whether productivity and markup differences affect them. For this study, we estimate both firm specific productivity and markups by the production function based approaches and incorporate them into the Heckman sample selection model. Our results show exchange rates are important factors to affect firm-level exports as a whole while temporal aggregation should be carefully considered. In addition, this study also reveals that productivity and markups give different impacts on firm-level exports across industries. In the transportation equipment industry, the negative effects of appreciation on exports are partly mitigated by higher productivity. Markups are positively related to exports in the electronics industry while negatively related in the transportation equipment. Neither productivity nor markup absorbs the impact of exchange rate changes in the machinery industry. Those findings imply that stability of exchange rates is very important while the effective trade policy may vary across industries following their trade structure.
    Date: 2016–03
  2. By: Ito, Tadashi; Matsuura, Toshiyuki; Yang, Chih-Hai
    Abstract: This paper examines the duration of intermediate goods imports and its determinants for Japanese affiliates in China. Our estimations, using a unique parent-affiliate-transaction matched panel dataset for a discrete-time hazard model over the 2000–2006 period, reveal that products with a higher upstreamness index, differentiated goods, and goods traded under processing trade are less likely to be substituted with local procurement. Firms located in more agglomerated regions with more foreign affiliates tend to shorten the duration of imports from the home country. For parent-firm characteristics, multinational enterprises that have many foreign affiliates or longer foreign production experience import intermediate goods for a longer duration.
    Keywords: East Asia, Japan, China, International trade, Imports, Foreign investments, FDI, Trade duration, Intermediate goods, Agglomeration
    JEL: F14
    Date: 2016–03
  3. By: Fander Falconi (Facultad Latinoamericana de Ciencias Sociales, Ecuador); Jesus Ramos-Martin (Facultad Latinoamericana de Ciencias Sociales, Ecuador); Pedro Cango (Facultad Latinoamericana de Ciencias Sociales, Ecuador)
    Abstract: The existence of unequal exchange between rich and poor countries is being demonstrated in the literature for some time, explained by differences in labour costs that reflected in the prices of traded goods. In recent years, research has also demonstrated that the lack of inclusion of the environmental impacts in prices of traded goods reflected an ecologically unequal exchange. This paper contributes to the discussion with the new coined concept of caloric unequal exchange that reflects the deterioration of terms of trade for food in terms of calories. Using last FAO data available, exports and imports from and to Latin America and the Caribbean are analysed for the period 1961 through 2011 in volume, value and calories and for different groups of products. The conclusion is reached that although calories exported by the region to the rest of the world are more expensive that those imported, the ratio is deteriorating over time. This trend is found to be different depending on the partner involved. In all cases, the region is helping the rest of the world in improving their diets at a lower cost. This result confirms the loss of natural funds such as soil and nutrients, which can be seen as a de-capitalisation of exporting countries. A side result is that globalisation is homogenising diets over time, concentrating most of food consumption in a reduced number of products, and therefore increasing interdependency among countries and affecting food security. This new debate is found to be useful for designing trade and development policies in the countries analysed.
    Keywords: Caloric unequal exchange, Latin America, terms of trade, food
    JEL: F14 F18 N56 Q57
    Date: 2016–04
  4. By: Lionel Fontagné (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics, CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique); Gianluca Orefice (Centre d'Etudes Prospectives et d'Informations Internationales); Roberta Piermartini (WTO); Nadia Rocha (WTO)
    Abstract: This paper considers the heterogenous trade effects of restrictive Sanitary and Phyto-Sanitary (SPS) measures on exporters of different sizes, and the channels via which aggregate exports fall: firm participation, export values and pricing strategies. We do so by matching a detailed panel of French firm exports to a new database of SPS regulatory measures that have been raised as of concern in the dedicated committees of the WTO. By using specific trade concerns to capture the restrictiveness of product standards, we focus only on standards that are perceived as trade barriers. We analyze their effects on three trade-related outcomes: (i) the probability to export and to exit the export market (the firm-product extensive margin), (ii) the value exported (the firm-product intensive margin), and (iii) export prices. We find that SPS concerns discourage the presence of exporters in SPS-imposing foreign markets. We also find a negative effect of SPS imposition on the intensive margins of trade. These negative effects SPS are attenuated in larger firms.
    Keywords: International trade,firm heterogeneity,multi-product exporters,non-tariff barriers *
    Date: 2015–09
  5. By: Anna Ray (Sciences Po Paris)
    Abstract: This paper analyzes how multinational firms (MNEs) expand the spectrum of their activities via Mergers & Acquisitions (M&A). While international trade studies systematically focus on horizontal versus vertical motives for foreign direct investment (FDI), I document that over 46% of both domestic and cross-border M&A deals done worldwide by MNEs areconglomerate, i.e., neither horizontal nor vertical. Literature to date fails to explain this puzzling stylized fact. What are conglomerate M&A and what are their drivers? Why do MNEs acquire firms in industries distinct from their own? The present study argues that conglomerate M&A represent a tool for multinationals to expand the spectrum of their activities towards industries that are closely related to their own range of occupations. The approach looks at MNEs from a multi-product perspective. It introduces a series of measures of "distance" between firms based on their respective activity-baskets. These are built relying on industry task intensities and the product space tools. The results show that despite the absence of direct horizontal or vertical linkages, conglomerate M&A appear to occur between firms relatively closely related in terms of their activity-mix. Further, the study investigates how the shape of activity basket of corporate group evolves with the acquiror’s subsequent transactions. The degree of compactness of corporate activity decreases over time. MNEs also seem to expand their activity mostly radially, towards multiple direction, rather than linearly.
    Keywords: Foreign direct investment, Mergers and acquisitions, Multinationals, Conglomerate M&A, Multiproduct firms, Product space, Task content
    JEL: F21 F23
  6. 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
  7. By: Bown, Chad P.; Crowley, Meredith
    Abstract: This paper surveys empirically the broad features of trade policy in goods for 31 major economies that collectively represented 83 percent of the world's population and 91 percent of the world's GDP in 2013. We address five questions: Do some countries have more liberal trading regimes than others? Within countries, which industries receive the most import protection? How do trade policies change over time? Do countries discriminate among their trading partners when setting trade policy? Finally, how liberalized is world trade? Our analysis documents the extent of cross-sectional heterogeneity in applied commercial policy across countries, their economic sectors, and their trading partners, over time. We conclude that substantial trade policy barriers remain as an important feature of the world economy.
    Keywords: antidumping; MFN; non-tariff barriers; preferences; quantitative restrictions; safeguards; Tariffs; temporary trade barriers
    JEL: F02 F13 F14 F15 F3 H21 H23 H25 K33 L5 N4 N70
    Date: 2016–04
  8. By: Igor Bykadorov (National Research University Higher School of Economics); Andrea Ellero (Ca Foscari University of Venice - Department of Management); Stefania Funari (Ca Foscari University of Venice - Department of Management); Sergey Kokovin (National Research University Higher School of Economics); Pavel Molchanov (National Research University Higher School of Economics)
    Abstract: In the standard Krugman (1979) non-CES trade model, several asymmetric countries typically lose from increasing trade costs. However, all countries transiently benefit from such increase at the moment of closing trade, under almost-prohibitive trade costs (i.e., near autarky, which is possible only under non-CES preferences). In other words, during trade liberalization the first step from autarky to trade is necessarily harmful. Our explanation rests on market distortion and business destruction effects.
    Keywords: Trade gains, monopolistic competition, variable elasticity of substitution, free trade, autarky.
    JEL: F12 L13 D43
  9. By: Ahmed, Gulzar; Arshad Khan, Muhammad; Afzal, Muhammad
    Abstract: This study examines the impact of trade liberalization on industrial productivity for a panel of twenty seven 3-digit manufacturing industries in Pakistan over the period 1980-2006. Following Olley and Pack’s (1996) Control Function Approach (CFA) we deal with the endogeneity arises from unobserved productivity shocks. Using a variant of Cobb-Douglas production function, in the first step we estimate output elasticities. We find positive output elasticities with respect to labor, capital and raw materials for the pre-trade liberalization period (1981-1995) and post-trade liberalization period (1996-2006). For the pre-liberalization, we observed positive output elasticity with respect to energy, while it turns out to be negative in the post-liberalization period; probably due to energy crisis in Pakistan. In the second stage, we estimate total factor productivity (TFP) and examine the impact of trade liberalization on TFP for pre-and post-trade liberalization regimes. The results reveal that trade liberalization proxied by excise duty has positive but negligible impact on TFP in the pre-as well as post-liberalization periods. On the other hand, effective rate of protection exerts large negative impact on TFP in the post-liberalization than the pre-liberalization period.
    Keywords: Trade Liberalization, Endogeneity and Production Function, Industrial Panel Data
    JEL: C33 D24 F13 L60
    Date: 2015–08–15
  10. By: Richard Frenscha (Department of Economics, University of Regensburg); Jan Hanousekb (CERGE-EI, Charles University); Evzen Kocenda (Institute of Economic Studies, Charles University)
    Abstract: Based on the factor-proportion gravity framework we build a model that identifies driving forces for trade in parts and components. We test our model empirically by using a detailed and large European data set. We show that trade in parts and components is driven by relative supply-side country differences, proxied by wages and capital labor ratios. The pattern is compatible with models of incomplete specialization and trade. We take our results as evidence for the existence of international East-West production networks in Europe, driven by trade-offs between wages, capital labor ratios and coordination costs. Our results also reveal that (i) in response to stronger relative wage differences trade in parts and components across Europe is predominantly realized along the extensive margin but (ii) potential to intensify the trade and international production network in new EU members is not exhausted yet.
    Keywords: International trade, production networks, gravity model, panel data, European Union
    JEL: C23 F14 F23
    Date: 2016–04
  11. By: Coughlin, Cletus C.; Novy, Dennis
    Abstract: Trade data are typically reported at the level of regions or countries and are therefore aggregates across space. In this paper, we investigate the sensitivity of standard gravity estimation to spatial aggregation. We build a model in which initially symmetric micro regions are combined to form aggregated macro regions. We then apply the model to the large literature on border effects in domestic and international trade. Our theory shows that larger countries are systematically associated with smaller border effects. The reason is that due to spatial frictions, aggregation across space increases the relative cost of trading within borders. The cost of trading across borders therefore appears relatively smaller. This mechanism leads to border effect heterogeneity and is independent of multilateral resistance effects in general equilibrium. Even if no border frictions exist at the micro level, gravity estimation on aggregate data can still produce large border effects. We test our theory on domestic and international trade flows at the level of U.S. states. Our results confirm the model's predictions, with quantitatively large effects.
    Keywords: Borders; Geography; Gravity; Heterogeneity; Home Bias; Modifiable Areal Unit Problem (MAUP); Spatial Attenuation; Trade Costs
    JEL: F10 F15 R12
    Date: 2016–04
  12. By: Kurose, Kazuhiro (Graduate School of Economics and Management, Tohoku University); Yoshihara, Naoki (Department of Economics, University of Massachusetts, Amherst)
    Abstract: This paper examines the validity of the factor price equalisation theorem (FPET) in relation to capital theory. Additionally, it presents a survey of the literature on Heckscher–Ohlin–Samuelson (HOS) models that treat capital as a primary factor, beginning with Samuelson (1953). Furthermore, this paper discusses the Cambridge capital controversy, which contends that marginal productivity theory does not hold when capital is assumed to be as a bundle of reproducible commodities instead of as a primary factor. Consequently, it is shown that under this assumption, the FPET does not hold, even when there is no reversal of capital intensity. This paper also demonstrates that the recent studies on the dynamic HOS trade theory generally ignore the di¢ culties posed by the capital controversies and are thereby able to conclude that the FPET holds even when capital is modelled as a reproducible factor. Our analysis suggests that there is a need for a basic theory of international trade that does not rely on factor price equalisation and a model that formulates capital as a bundle of reproducible commodities.
    Keywords: factor price equalisation, capital as the bundle of reproducible commodities, reswitching of techniques, capital reversing.
    JEL: B51 D33 F11
    Date: 2016
  13. By: Collie, David R. (Cardiff Business School)
    Abstract: In a free-entry Cournot oligopoly model with a quadratic utility function that yields differentiated products, it is shown that there are losses from trade when the trade cost is close to the prohibitive level. Although the total number of varieties increases, there is a reduction in consumer surplus. This occurs because trade leads to an increase in imported varieties where consumer surplus is low due to the high trade cost and a decrease in domestically-produced varieties where consumer surplus is high. This result is in contrast with results from the free-entry Cournot oligopoly models with homogeneous products of Brander and Krugman (1983) and Venables (1985); the monopolistic competition models such as Krugman (1980) and Venables (1987), and heterogeneous firm models such as Melitz (2003) and Melitz and Ottaviano (2008).
    Keywords: Gains from Trade; Trade Liberalisation; Free Entry; Cournot Oligopoly; Product Variety
    JEL: F12
    Date: 2016–04
  14. By: Tanya Ara\'ujo; M. Ennes Ferreira
    Abstract: This paper is a contribution to interweaving two lines of research that have progressed in separate ways: network analyses of international trade and the literature on African trade and development. Gathering empirical data on African countries has important limitations and so does the space occupied by African countries in the analyses of trade networks. Here, these limitations are dealt with by the definition of two independent bipartite networks: a destination share network and\ a\ commodity share network. These networks - together with their corresponding minimal spanning trees - allow to uncover some ordering emerging from African exports in the broader context of international trade. The emerging patterns help to understand important characteristics of African exports and its binding relations to other economic, geographic and organizational concerns as the recent literature on African trade, development and growth has shown.
    Date: 2016–01
  15. By: Castellares, Renzo (Banco Central de Reserva del Perú); Salas, Jorge (International Monetary Fund)
    Abstract: We build a simple trade model in which: (i) exporters are paid after delivery of the goods, and (ii) complementarity exists between procyclical contract enforcement at the importing-country level and contractual vulnerability at the industry level. In the model, an adverse aggregate shock in the importing country generates a disproportionate decline in imports in more contractually vulnerable industries. Using disaggregated bilateral trade data for more than 100 countries, we find robust support for the model’s predictions. Our empirical approach exploits the variation in the occurrence of recessions and financial crises across countries from 1989 to 2006, and the variation in contractual dependence across manufacturing industries. The estimated amplification effects of contractual dependence on sectoral imports are statistically significant and economically important. Our analysis uses different industry measures of contractual vulnerability, including measures of product complexity and a novel indicator of uncollectible credit sales.
    Keywords: Trade, recessions, financial crises, contract enforcement, default risk, industry-level data
    JEL: F1 F41 G01 G32
    Date: 2016–04
  16. By: Lionel Fontagné (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics, CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique); Angelo Secchi (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics, CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Chiara Tomasi (Università di Trento - Dipartimento di Economia e Management)
    Abstract: This paper analyzes how multi-product firms adjust their exported product-mix across destinations. Using cross sections of Italian and French data, we show that firms do not follow a rigid ordering in their product mix exported in different markets but rather they adapt their choices to better match with country characteristics. By using metrics based on export shares and on sequences of product names we provide new insights on the extent a firm’s products portfolio changes across destinations that go beyond simple rank correlations. Demand asymmetries, market structure heterogeneity and differential abilities to match unit values of products supplied by competitors emerge as three significant factors in explaining the variety-country variability observed in firms’ export patterns. Our results resist when we control for a firm’s choice of not exporting an available product to a given destination, an explicit choice likely to contain relevant information
    Keywords: multi-product, multi-country firms, product vectors, demand and concentration
    Date: 2014–12
  17. By: Minju Kim
    Abstract: The World Trade Organization (WTO) has treated agricultural subsidies as exceptional. Under the General Agreement on Tariffs and Trade (GATT) 1994, subsidies are in general regulated under the Agreement on Subsidies and Countervailing Measures (the SCM Agreement) while agricultural subsidies are regulated under the Agreement on Agriculture (the AoA). This paper delves into the historical backgrounds of diverging regulatory patterns of the two by referring to the legal documents from the ITO Havana Charter in 1948 to the GATT 1994. Along with the historical review, rationales for justifying the exceptional status of agricultural products are thoroughly examined. This paper concludes that convergence of the SCM Agreement and the AoA is required in the long-run for strengthening the legal consistency and fairness of the WTO subsidies regime.
    Keywords: WTO; Subsidies; Agreement on Subsidies and Countervailing Measures; the Agreement on Agriculture; Convergence.
    JEL: Y8
    Date: 2015–10
  18. By: Ana Gouveia (Gabinete de Planeamento, Estratégia, Avaliação e Relações Internacionais / Office for Economic Policy and International Affairs - Ministério das Finanças / Ministry of Finance); Ana Luisa Correia
    Abstract: Internationalization of firms is an indicator of their competitiveness. Using a dataset that covers all Portuguese non-financial corporations, we assess, at micro level, what are the key factors that explain the export capacity of individual firms (and thereby of increased competitiveness). From a public policy perspective, we show that policies to promote innovation and investment have a positive impact on the firm-level probability of exporting. Also, younger firms are more prone to export and there are learning effects from the export activity. The reduction of barriers to competition in internal markets is also important to promote firms’ internationalization.
    Keywords: Keywords: Internationalization; Competitiveness; Barriers; Exports
    JEL: D22
    Date: 2015–07
  19. By: Stefan Ederer (WIFO); Peter Reschenhofer (WIFO)
    Abstract: This paper assesses whether or to what extent the macroeconomic imbalances, which emerged in the "North" and "South" of the European Monetary Union before the financial and economic crisis of 2008-09, are symmetric. First, we show that the imbalances stemmed from different growth patterns and quantify the contributions of foreign and domestic demand to GDP growth in the EMU countries. Second, we calculate bilateral exports and imports between all EU countries, applying the concept of "trade in value added", and discuss their role in the emergence of trade surpluses and deficits. Third, we quantify to what extent an increase in domestic demand in the North and a decrease in the South would support the elimination of these imbalances. Finally, we calculate a hypothetical scenario in which final demand expands to such extent that all intra-EMU trade is balanced. We thereby evaluate whether or to what extent the macroeconomic imbalances can be eliminated by demand adjustments in the EMU countries.
    Keywords: European Monetary Union, macroeconomic imbalances, global value chains, input-output analysis
    Date: 2016–01–21
  20. By: Miravitlles, Paloma; Mora, Toni; Achcaoucaou, Fariza
    Abstract: The aim of this study is to analyse the impact of corporate financial structure on a firm's export propensity, especially that of small and medium-sized enterprises (SMEs). The paper contributes to the literature concerned with the relationship between exports and financial constraints from the perspective of firm heterogeneity. Specifically, it explores, by firm size, the link between firms' export propensity and their financial health and ownership concentration. By means of a multivariate probit model applied to a sample of 8,019 Spanish manufacturing firms drawn from the Iberian Balance Sheet Analysis System, this paper provides firm-level evidence for SMEs of a positive link between export propensity and ownership concentration, although if shareholder concentration is very high it can be counterproductive. Other positive effects on the export propensity of SMEs caused either by internal factors (export initial conditions, performance and liquidity) or by external characteristics (regional and sector spillover effects) are also identified.
    Keywords: export propensity,small and medium-size enterprises (SMEs),capital structure,financial constraints,ownership structure
    JEL: F14 G32
    Date: 2016
  21. By: Rosas-Martinez, Victor H.
    Abstract: We assess theoretically the effect of forming a free trade union on the total production of a nation, where such effects are caused by the absorption of technologies. A popular metaphor describes the people as crabs in a bucket because when one crab tries to scape, the others pull it down avoiding a possible way out for all of them. Given this knowledge, posteriorly and independently of the income inequality levels, we extend our analyses to consider the effect of envy in a macroeconomic level on the total production, and draw the implications which this phenomenon has on the formation of free trade unions. We make strategic policy recommendations to allow the achievement of a globalization that benefits each member nation, where we show that the great trade union might have to start with gradual and charitable subregional agreements.
    Keywords: International Trade; Technological Absorption; Behavioral Macroeconomics; Economic Growth; Trade Policy
    JEL: O11 O24
    Date: 2015–06–18
  22. By: Yuqing Xing (National Graduate Institute for Policy Studies)
    Abstract: This study investigates the impacts of rising wages and the appreciation of the yuan on the structure of China’s exports. China’s exports are classified here as ordinary exports (OE) and two distinctive groups of processing exports, pure assembly exports (PAE) and mixed assembly exports (MAE). The data analyzed here are derived from panel data covering China’s bilateral PAE and MAE trade with more than 100 trading partners from 1993 to 2013. Estimates of fixed effect models show that wage increases and the appreciation of the yuan reduced the proportion of assembly exports in China’s bilateral exports. Specifically, for a 1% increase in Chinese manufacturing wages, the share of PAE in China’s bilateral exports is expected to fall 1.6 percentage points and that of MAE to decrease by 1.1 percentage points; a 1% nominal appreciation of the yuan against the US dollar would be expected to lower PAE and MAE trade volume by 2.4 and 2.1 percentage points, respectively. The empirical results imply that rising wages and cumulative appreciation of the yuan have eroded China’s comparative advantage in the assembly of products for international markets, resulting in substantial contraction of processing exports. The analysis provides a supply-side explanation for the fall of China’s export growth.
    Date: 2016–04
  23. By: Pohit, Sanjib; Biswas, Pradip
    Abstract: Of late, India has emerged as an attractive destination of foreign direct investment (FDI). Along with it, multinationals have been investing significantly in research and development in India. In this context, this paper makes an attempt to analyze salient features of FDI in R&D and makes an assessment of the gains from R&D initiatives of MNCs in India. To be specific, the paper attempts to demystify the FDI flows in R&D with a view to understand whether this type of flows would help in raising the innovation potential of India. We find that there has been a rise FDI in R&D in India. However, the rise has not been commensurate only with rise in Core R&D activities. Rather, more than 50% of the inflows in R&D by MNCs have come for non-core R&D activities. This will not help in promoting innovation culture in India and make India a global manufacturing hub.
    Keywords: FDI, R&D, Core R&D, India, Manufacture, Non-core R&D
    JEL: F23
    Date: 2016–04–15
  24. By: ITO Takatoshi; KOIBUCHI Satoshi; SATO Kiyotaka; SHIMIZU Junko
    Abstract: This paper develops the estimation method of the choice of invoice currency at a detailed commodity level by using the export and import price indices published by the Bank of Japan (BOJ). The new evidence is presented on the industry and commodity level differences of the invoice currency choice from 2000 to 2015. It is found that highly differentiated products such as production machinery equipment tend to be invoiced in yen in Japanese exports. While the recent increase in Japanese imports of electronics products has likely increased the share of yen-invoiced imports, the share of U.S. dollar invoicing is larger than that of yen invoicing. Despite growing economic interdependence between Japan and Asia, the U.S. dollar is still a dominant invoice currency in Japanese trade.
    Date: 2016–03
  25. By: Gachet, Adrian Nicholas
    Abstract: This essay will discuss the relationship between foreign aid and trade. Major scholars on both topics often find two outcomes: 1) trade openness is commonly part of the constitution of “good” policies that promotes effectiveness of foreign aid, hence endorses growth (Burnside and Dollar, 2000). Furthermore there is a a great amount of literature about trade promoting growth directly (Frankel and Romer,1999;Wacziarg andWelch, 2008; Sachs andWarner,1995). 2) Foreign aid does not promote growth by its own (Easterly,2003; Denizer et al,2014) thus, probably, if trade promotes growth, foreign aid does not have a significant “indirect” effect on trade. This essay will discuss if foreign aid correlates with trade. The result suggests that for a set of developing countries between 1990-2013,foreign aid correlates positively with future trade; e.g foreign aid applied yesterday will be positively correlated with today’s trade. It is important to mention that I am not looking for causal relations, just a correlation (as an exercise) that can help to visualize how both variables relate across the selected developing countries and time.
    Keywords: Trade, aid, endogeneity
    JEL: F1 F13 F35
    Date: 2016–04
  26. By: Hans Pitlik (WIFO)
    Abstract: In 2013, EU and USA initiated a new political dialogue regarding a further deepening of bilateral trade and investment relations, the TTIP (Transatlantic Trade and Investment Partnership). In some EU member countries, anti-TTIP street protests and political activists received substantial support. The paper is concerned with the drivers of public support or disapproval of TTIP. In particular, we focus on the role of (dis-)trust in companies and in political institutions for attitude formation concerning economic regulation. We use data from a Eurobarometer Survey conducted in November 2014 to assess the determinants of individual approval or disapproval of TTIP by European citizens. By means of a mixed-level logit regression it can be shown that disapproval is highly correlated with a lack of trust in European institutions and in large companies. Our results moreover indicate that anti-TTIP political activism has a strong impact on TTIP-related preferences.
    Keywords: trust, institutions, European Union, free trade, TTIP
    Date: 2016–03–08
  27. By: Ahmed, S. Amer; Go,Delfin Sia; Willenbockel,Dirk Andreas
    Abstract: This paper re-examines the development implications of international migration focusing on two issues: how the costs and benefits of migration change over time, and the significance of South-South migration for development. First, the analysis finds that although greater migration could push down the wages of native workers of advanced countries in the short run, these wages eventually recover. This pattern would be mostly caused by the beneficial effect of additional labor on the real returns on capital and fostering faster capital formation. Additional South-North migration could favor capital income recipients and reduces labor income in host regions in the short run. In contrast, in sending countries, capital owners could experience lower incomes while wages rise. Globally, the welfare gains of new migrants could be expected to exceed the losses of old migrants by a wide margin. The remaining natives in sending countries could enjoy a net increase in remittances as well as an increase in labor income, although income from capital might decline. Second, in a hypothetical scenario with lower South-South migration, the implied losses of remittance income could lead to substantially lower welfare in developing countries. Although the wage differentials among developing countries tend to be smaller relative to their wage differentials with high-income countries, South-South migrants make substantial contributions to remittances.
    Keywords: Banks&Banking Reform,Economic Theory&Research,Labor Policies,Remittances,Population Policies
    Date: 2016–04–11
  28. By: Umakrishnan Kollamparambil
    Abstract: Bilateral Investment treaties have been a source of political controversy in recent years because of the alarming increase in the investor state dispute settlement cases. Against this backdrop, the paper analyses the issues with diffused reciprocity imbibed in BITs leading to the unequal distribution of rights and obligations between developed and developing countries. The hypotheses developed within this analytical framework that a) BITS increases the risk of litigation and b) BITs negatively impacts on the net benefits of countries, are tested empirically using multivariate regression models using country pooled and panel data. Our conclusions are that the investors initiate higher number of cases against countries with BITs. Moreover, the net benefits accruing to countries are seen to be substantially lower for countries with BITs. Our findings support the growing view that a re-look at the traditional BITs model is warranted with a focus to evolve a new generation foreign investment policy framework that together with promoting foreign investment will also enable regulation of investment in keeping with host country public policy.
    Keywords: Bilateral investment treaties, Investor-State Disputes, ICSID
    JEL: K33 F20 F5
    Date: 2016
  29. By: Andrew B. BERNARD; Andreas MOXNES; Karen Helene ULLTVEIT-MOE
    Abstract: This paper develops a multi-country model of international trade that provides a simple micro-foundation for buyer-seller relationships in trade. We explore a rich dataset that identifies buyers and sellers in trade and establish a set of basic facts that guide the development of the theoretical model. We use predictions of the model to examine the role of buyer heterogeneity in a market for firm-level adjustments to trade shocks, as well as to quantitatively evaluate how firms' marginal costs depend on access to suppliers in foreign markets.
    Date: 2016–03
  30. By: Theodore H. Moran
    Abstract: Developing countries that manage to upgrade and diversify their export profile grow more rapidly and achieve greater welfare gains than countries that simply export larger volumes of what they have traditionally produced. This discussion paper examines what market imperfections and other impediments make the task of using FDI for structural transformation so difficult. Drawing on country case studies from Malaysia, Costa Rica, the Czech Republic, and South Africa, the paper identifies best practices for making progress, on the one hand, and examining impediments that lead to failure, on the other. This study has been prepared to serve as the basis for a workshop at which on-the-ground practitioners in Morocco can view their country’s efforts at structural transformation in light of similar experiences elsewhere. The objective is to highlight accomplishments and raise questions about future obstacles for Morocco’s aerospace sector, for the automotive cluster in Tangier Med, for OCP, and for investment promotion via the Moroccan Agency in Charge of Promoting Foreign Direct Investment .
    Keywords: Foreign Direct Investment, diversification, structural transformation, exports, growth, market failures, Morocco, Aerospace Cluster, Automotive Hub, competitiveness
    Date: 2016–03
  31. By: Phoebe Gardner
    Abstract: The tools designed to analyse a globalising world ought to be specifically designed to address problems presented by that global world, rather than settling for those engineered for the century prior. The study of International Relations (IR) is dominated by mainstream problem-solving International Relations Theory (IRT), which tends to describe rather than explain phenomena. Analysis is hindered by dependence upon rigid concepts such as the nation-state and the balance of power. However, IR has witnessed an analytical shift toward concepts that utilise culture by engaging with the discipline’s strength: its interdisciplinary nature. Unfortunately, recruiting non-Western and alternative perspectives has become equated to an exercise designed to simply tickoff a certain amount of nation-states from a quota. In this sense, IRT ought to aspire to be transnational in nature, in order to effectively engage with problems presented by the global world in which it exists. Therefore, as this article suggests, in pursuing alternative cultural perspectives, it is the integrity of the theory itself that matters, rather than the geographical origin.
    Keywords: International Relations Theory, Critical Theory, Transnational Approach, Non-Western Approach, Cultural Perspectives, Power-Knowledge Relations.
    JEL: Y8
    Date: 2015–10
  32. By: Katiuscia Vaccarini (University of Macerata); Francesca Spigarelli (University of Macerata); Ernesto Tavoletti
    Abstract: The purpose of this paper is to investigate to what extent culture and language affect European foreign direct investments (FDI) in mainland-China. It provides an in-depth analysis on the perception of European and Chinese identity and the role played by language in fostering or hampering FDI, along with culture. Design/methodology/approach: our research questions are contextualized and timely/spacely bound through a multiple case study panel of six European companies, which entered the Chinese green tech market through FDI. We used quantitative and qualitative approaches and a three-phase data collection process, based on a specific protocol. Findings: findings suggest that European investors emphasize "intra-Europe" differences rather than a "European collective (id)entity". They have more awareness of the intra-China differences in the post-entry rather than the pre-entry period. The cultural factor goes along with the language dimension, which, in specific cases, is perceived as a higher hurdle than culture. However, by adopting a cognitive and social psychological viewpoint, language and culture are not stand-alone dimensions and intersect with each other. They both contribute to the concept of identity. Research limitation/implication: the analytical generalisation out of our multiple case study is limited to a specific industry and to specific home and target economic areas. Practical implications: our research offers an in-depth insight about the role and the perception of culture of European companies investing in China mainland. This study is not only addressed to academics and scholars, but also to managers who want to approach the market and policy makers.
    Keywords: green tech FDI, Europe, China, cultural distance, psychic distance
    Date: 2016–01
  33. By: Vdovychenko, Artem; Zubrytskyi, Artur
    Abstract: The question of Ukraine's economic recovery after several years of rapid decline is closely connected to the reform of its fiscal policy. Because Ukraine is a country with a small, open economy, exports may be one of the drivers of economic recovery. Monetary policy over the past decades had, for various reasons, a limited impact on the dynamics of exports, while today, a long period of unsustainable fiscal policy forces the government to carry out fiscal consolidation. Adding together all these facts, we can state the importance of studying the influence of fiscal balance parameters on the exports of Ukraine. Using the gravity model, we conclude that fiscal consolidation has a positive effect on Ukraine's exports with a lag of several years. We also find that the effect of fiscal consolidation on exports is mainly due to the correction of the exchange rate. The stimulating effect of fiscal consolidation takes place on an intensive margin of exports; exposing serious structural problems in the Ukrainian economy.
    Keywords: structural budget balance, exports, gravity model, fixed effects, random effects, fiscal consolidation, monetary policy, and exchange rate.
    JEL: F10 H32 H62
    Date: 2016–01

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.