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on International Trade |
| By: | Natalia Ramondo (UCSD); Felix Tintelnot (University of Chicago); Andreas Moxnes (University of Oslo); Anna Gumpert (University of Munich) |
| Abstract: | This paper provides new evidence on the dynamics of multinational firms and exporters based on firm-level panel data for Norway, France, and Germany. First, exit rates for new exporters almost triple the ones for new affiliates of multinational firms, while multinational firms with previous export experience show the lowest exit rates. Second, new affiliates of multinational firms have flatter sales growth profiles than exporters. Finally, firms that transition from exporting to FDI are larger than continuing multinational firms. We show that a simple dynamic extension of a model in which firms choose to serve a foreign market through exports or affiliate sales facing a "proximity-concentration tradeoff", as in Helpman, Melitz, and Yeaple (2004), captures these patterns quali- tatively. We show that quantitatively the model goes a long way in explaining the dynamic patterns observed in the data. |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed016:124&r=int |
| By: | Mayer, Thierry; Melitz, Marc J; Ottaviano, Gianmarco |
| Abstract: | We document how demand shocks in export markets lead French multi-product exporters to re-allocate the mix of products sold in those destinations. In response to positive demand shocks, those French firms skew their export sales towards their best performing products; and also extend the range of products sold to that market. We develop a theoretical model of multi- product firms and derive the specific demand and cost conditions needed to generate these product-mix reallocations. Our theoretical model highlights how the increased competition from demand shocks in export markets - and the induced product mix reallocations - induce productivity changes within the firm. We then empirically test for this connection between the demand shocks and the productivity of multi-product firms exporting to those destinations. We find that the effect of those demand shocks on productivity are substantial - and explain an important share of aggregate productivity fluctuations for French manufacturing. |
| JEL: | F1 |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:11389&r=int |
| By: | Ishido, Hikari |
| Abstract: | This paper examines the determinants of foreign direct investment (FDI) under free trade agreements (FTAs) from a new institutional perspective. First, the determinants of FDI are theoretically discussed from a new institutional perspective. Then, FDI is statistically analyzed at the aggregate level. Kernel density estimation of firm-size reveals some evidence of "structural changes" after FTAs, as characterized by the investing firms' paid-up capital stock. Statistical tests of the average and variance of the size distribution confirm this in the case of FTAs with Asian partner countries. For FTAs with South American partner countries, the presence of FTAs seems to promote larger-scale FDIs. These results remain correlational instead of causal, and more statistical analyses would be needed to infer causality. Policy implications suggest that participants should consider "institutional" aspects of FTAs, that is, the size matters as a determinant of FDI. Future work along this line is needed to study "firm heterogeneity." |
| Keywords: | Foreign investments, International trade, International agreements, Foreign direct investment, Trade in services, Free trade agreements, ASEAN countries, Location choice |
| JEL: | F14 F15 F21 |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=RePEc:jet:dpaper:dpaper608&r=int |
| By: | Sugita, Yoichi; Teshima, Kensuke; Seira, Enrique |
| Abstract: | This paper uses the opening of the US textile/apparel market for China at the end of the Multifibre Arrangement in 2005 as a natural experiment to provide evidence for positive assortative matching of Mexican exporting firms and US importing firms by their capability. We identify three findings for liberalized products by comparing them to other textile/apparel products: (1) US importers switched their Mexican partners to those making greater preshock exports, whereas Mexican exporters switched their US partners to those making fewer preshock imports; (2) for firms who switched partners, trade volume of the old partners and the new partners are positively correlated; (3) small Mexican exporters stop exporting. We develop a model combining Becker-type matching of final producers and suppliers with the standard Melitz-type model to show that these findings are consistent with positive assortative matching but not with negative assortative matching or purely random matching. The model indicates that the findings are evidence for a new mechanism of gain from trade. |
| Keywords: | International trade, Apparel industry, Textile industry, Firm heterogeneity, Assortative matching, Two-sided heterogeneity, Trade liberalization |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=RePEc:jet:dpaper:dpaper610&r=int |
| By: | Jeffrey J. Schott (Peterson Institute for International Economics); Cathleen Cimino-Isaacs (Peterson Institute for International Economics); Euijin Jung (Peterson Institute for International Economics) |
| Abstract: | The Trans-Pacific Partnership (TPP), signed in February 2016 between the United States and 11 countries in the Asia-Pacific, is the most comprehensive trade deal ever negotiated between developed and developing countries. To be sure, the TPP is not yet ratified and US implementing legislation in particular faces significant resistance. Despite strong protectionist undercurrents in the US political debate, however, the TPP merits congressional approval because of its impetus to trade and economic growth, its innovative rules governing areas such as digital trade, state-owned enterprises (SOEs), and environmental policies, and its positive impact on strategic relations with important US allies. This Policy Brief assesses how the TPP is likely to shape bilateral and regional trade initiatives in the Asia-Pacific and set precedents for new multilateral trade initiatives. Given the large economic footprint of TPP countries, the TPP will affect the economies of both participating and nonparticipating countries alike and influence the trade talks in the Asia-Pacific region in which they are engaged. TPP precedents also could contribute to the revival of multilateral trade negotiations in the World Trade Organization. |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=RePEc:iie:pbrief:pb16-8&r=int |
| By: | Yu Sheng (Crawford School of Public Policy) |
| Abstract: | This paper uses the GTAP Static model to predict the potential impact of economic growth in China on bilateral trade between China and Australia in 2025, under three different scenarios representing the business-as-usual, the successful reform and the stagnation cases respectively. The results show that exports from Australia to China will continue to increase in both absolute and relative terms, irrespective of which economic growth path China takes, partly due to the strong complementary relationship of production between the two countries. The results also indicate that education service exports will become a new engine of bilateral trade in addition to agricultural and mineral products. Furthermore, comparing the results obtained from the three scenarios shows how successful reform will bring more benefits to both China and Australia in trade, which provides useful insights for policy making to facilitate bilateral economic relationship. |
| JEL: | E17 F17 F43 |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=RePEc:eab:tradew:25672&r=int |
| By: | Michele Imbruno; Tobias Ketterer |
| Abstract: | This paper investigates whether importing intermediate goods improves firm-level environmental performance in a developing country, using data from the Indonesian manufacturing sector. We build a simple theoretical model showing that trade integration of input markets entails energy efficiency improvements within importers relative to non-importers. To empirically isolate the impact of firm participation in foreign intermediate input markets we use ‘nearest neighbour’ propensity score matching and difference-in-difference techniques. Covering the period 1991-2005, we find evidence that becoming an importer of foreign intermediates boosts energy efficiency, implying beneficial effects for the environment. |
| Date: | 2016–06 |
| URL: | http://d.repec.org/n?u=RePEc:lsg:lsgwps:wp244&r=int |
| By: | Vandenbussche, Hylke; Viegelahn, Christian |
| Abstract: | This paper documents the within firm reallocation of inputs and outputs as a result of a trade policy shock on the input side. A unique firm-nput level dataset for India with information on different raw material inputs used in production, enables us to identify firms with imported inputs subject to trade policy. To guide the empirics, we first develop a back-bone model of heterogeneous firms that source inputs from abroad. We find that affected firms engage in input reallocation and lower their use of protected inputs by 25-40%, relative to other inputs. Especially large firms and multi-output firms skew their input use towards unprotected inputs. To identify the output reallocation ensuing trade protection on inputs, we develop a firm level input-output correspondence. Firms reduce their sales of outputs made of protected inputs on average by 50-80%, relative to sales of other outputs. We find a firm level decrease in markups, suggesting that the cost of imported inputs is only partially passed through to output prices. Thus, this paper documents a new channel through which trade protection negatively impacts input-using firms. |
| Keywords: | Firm level data; Importers; Input Reallocation; Multi-Product; trade policy |
| JEL: | C23 F13 F14 L41 |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:11395&r=int |
| By: | John Kealey; Pau S. Pujolas; Cesar Sosa-Padilla |
| Abstract: | This paper considers whether a fairly well-established empirical relationship between liberalized trade and firm productivity growth is sensitive to the choice of an identification strategy for production function estimation. We estimate the productivity of Colombian manufacturing plants using the methods of Levinsohn and Petrin (2003), Ackerberg, Caves, and Frazer (2006), and Gandhi, Navarro, and Rivers (2012), and at times come to surprisingly different conclusions about the country's experience with trade policy reform during the 1980s. Results from a quantile regression model and a productivity growth decomposition exercise tend to vary as we experiment with different specifcations of the production function. Research that is concerned with the short and medium-term impact of trade liberalization on domestic manufacturing industries should therefore pay close attention to issues of robustness to alternative strategies for estimating the productivity of firms. |
| Keywords: | Trade liberalization, production function estimation |
| JEL: | F1 C14 |
| Date: | 2016–06 |
| URL: | http://d.repec.org/n?u=RePEc:mcm:deptwp:2016-08&r=int |
| By: | Damijan, Jože; Kostevc, Črt; Marek, Philipp; Rojec, Matija |
| Abstract: | This paper focuses on the effect of foreign presence in the services sector on the productivity growth of downstream customers in the manufacturing sector in six EU new member countries in the course of their accession to the European Union. For this purpose, the analysis combines firm-level information, data on economic structures and annual national input-output tables. The findings suggest that services FDI may enhance productivity of manufacturing firms in Central and Eastern European (CEE) countries through vertical forward spillovers, and thereby contribute to their competitiveness. The consideration of firm characteristics shows that the magnitude of spillover effects depends on size, ownership structure, and initial productivity level of downstream firms as well as on the diverging technological intensity across sector on the supply and demand side. The results suggest that services FDI foster productivity of domestic rather than foreign controlled firms in the host economy. For the period between 2003 and 2008, the findings suggest that the increasing share of services provided by foreign affiliates enhanced the productivity growth of domestic firms in manufacturing by 0.16%. Furthermore, the firms' absorptive capability and the size reduce the spillover effect of services FDI on the productivity of manufacturing firms. A sectoral distinction shows that firms at the end of the value chain experience a larger productivity growth through services FDI, whereas the aggregate positive effect seems to be driven by FDI in energy supply. This does not hold for science-based industries, which are spurred by foreign presence in knowledge-intensive business services. |
| Keywords: | production,cost,capital,total factor and multifactor productivity,capacity,economic integration |
| JEL: | D24 F15 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:iwhdps:iwh-5-15&r=int |
| By: | Gauselmann, Andrea; Noth, Felix |
| Abstract: | In our analysis, we consider the distribution of decision power over financing and investment between MNEs' headquarters and foreign subsidiaries and its influence on the foreign affiliates' financial restrictions. Our research results show that headquarters of multinational enterprises have not (yet) moved much decision power to their foreign subsidiaries at all. We use data from the IWH FDI Micro Database which contains information on corporate governance structures and financial restrictions of 609 enterprises with a foreign investor in Hungary, Poland, the Czech Republic, Slovakia, Romania and East Germany. We match data from Bureau van Dijk's AMADEUS database on financial characteristics. We find that a high concentration of decision power within the MNE's headquarter implicates high financial restrictions within the subsidiary. Square term results show, however, that the effect of financial constraints within the subsidiary decreases and finally turns insignificant when decision power moves from headquarter to subsidiary. Thus, economic policy should encourage foreign investors in the case of foreign acquisition of local enterprises to leave decision power within the enterprise and in the case of Greenfield investment to provide the newly established subsidiaries with as much power over corporate governance structures as possible. |
| Keywords: | corporate governance,financial restrictions,multinational firms,European post-transition economies |
| JEL: | F23 G11 G34 R11 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:iwhdps:iwh-3-15&r=int |
| By: | Terada-Hagiwara, Akiko (Asian Development Bank); Villlaruel, Mai Lin (Asian Development Bank); Edmonds, Christopher (Asian Development Bank) |
| Abstract: | This paper investigates the role of “absorptive capacity” to manage unexpected shocks to their real economy, with a focus on small, open, natural resource-dependent economies. A quarterly panel data series for 45 countries is constructed, including 23 developing Asian countries for empirical investigation. For the entire sample, the analysis finds that absorptive capacity, choice of exchange rate regime, presence of wealth funds, level of foreign reserves, or degree of resource dependency alone, does not matter when real shocks are introduced to output. However, levels of absorptive capacity or ability to use resource windfalls effectively, and foreign reserves begin to matter when the sample is restricted to resource-dependent countries. Case studies from Papua New Guinea and Timor-Leste support this claim highlighting the challenges they face with a sudden influx of natural resource revenues when capacity to effectively use fiscal revenues is limited. |
| Keywords: | absorptive capacity; economic growth; natural resources; real exchange rate; terms of trade |
| JEL: | F14 F43 H11 |
| Date: | 2016–06–21 |
| URL: | http://d.repec.org/n?u=RePEc:ris:adbewp:0487&r=int |
| By: | Robert Basedow; Celine Kauffmann |
| Abstract: | Good Regulatory Practices encompassing the use of regulatory impact assessments, stakeholder engagement and ex post evaluation are a critical tool in the hands of governments to ensure that regulation achieves its objectives. Over the past several years, attention has grown for the trade costs of regulatory divergence. Diverging regulation may increase the costs to trade goods and services across borders. While regulatory divergence is often the result of diverging national public policy objectives, it may be the undesired result of rule-making ignoring the international regulatory environment and interconnectedness of our societies and economies. Good Regulatory Practices provide governments with tools, processes and strategic approaches that can help them identify and evaluate the trade impacts of their regulatory action. The paper reviews the theoretical and practical contribution of GRP to mainstreaming international trade considerations in regulatory decision-making and to addressing regulatory divergence. It does so by reviewing the relevant academic literature, GRP guidelines of a number of OECD members and examples of how GRP and in particular regulatory impact assessments are used to consider the trade impacts of regulation. Building on the available evidence, the paper discusses how decision-makers may enhance the use of GRP to address international trade considerations in regulatory policy-making. |
| Keywords: | regulatory impact assessment, good regulatory practices, stakeholder engagement, ex post evaluation, regulatory policy |
| JEL: | F10 H11 K2 K4 |
| Date: | 2016–07–20 |
| URL: | http://d.repec.org/n?u=RePEc:oec:govaah:4-en&r=int |
| By: | Sara Formai (Bank of Italy); Filippo Vergara Caffarelli (Bank of Italy) |
| Abstract: | This work analyses the effect of the global sourcing of intermediate goods on productivity growth. To identify the impact of global sourcing, we employ the methodology proposed in a different context by Rajan and Zingales (1998). In particular we interact the length and the width of sectoral production chains with a measure of the intensity of countries’ intermediate imports. We find evidence indicating that off-shoring significantly increases labour productivity and total factor productivity at the sector level in countries that rely on global sourcing. The driver of total factor productivity growth depends on the structure of the global value chain that intermediates are sourced from: long chains trigger technology improvements while wide chains cause a reallocation of resources towards more productive firms within the same sector. |
| Keywords: | productivity growth, global sourcing, global value chains |
| JEL: | D24 F62 F66 |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:wptemi:td_1075_16&r=int |
| By: | Baziki, Selva B. (Central Bank of Turkey); Ginja, Rita (Uppsala University); Borota Milicevic, Teodora (Uppsala University) |
| Abstract: | This paper provides new evidence on the reallocation of workers across firms and industries with different technologies in response to increased import competition from developing countries. Using employer-employee matched data for the Swedish manufacturing sector, we find increased assortative matching of workers in ICT (information and communication technologies) intensive industries, that is, high(low)-wage workers sort into high(low)-wage firms. Industries with low ICT intensity do not exhibit these sorting patterns. A labour market matching model explains the increased assortative matching in ICT intensive industries in response to stronger import competition through an increase in the relative demand for qualified workers. |
| Keywords: | wage inequality, employment dynamics, assortative matching, import competition, technological change |
| JEL: | F16 J63 O33 |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp10034&r=int |
| By: | Francois de Soyres (Toulouse School of Economics) |
| Abstract: | This paper studies the relationship between international trade and business cycle synchronization. Using data from OECD countries, I find substantive support for the role of trade in inputs, monopolistic pricing and the extensive margin of trade in synchronizing GDP fluctuations. Then, I build a model of international trade in intermediates with heterogeneous firms and monopolistic competition. Quantitative explorations show that the model is able to replicate 85% of the empirical relationship between trade in inputs and GDP comovement, making a significant step toward solving the "trade comovement puzzle". Finally, I clarify the role of the ingredients and show that markups and extensive margin adjustments create a link between domestic productivity and foreign technological shocks. |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed016:157&r=int |
| By: | Mukunoki, Hiroshi |
| Abstract: | In a three-country oligopoly model, this paper analyzes a country's decisions concerning antidumping (AD) action against two foreign countries and the relationship between those decisions and regional trade agreements (RTAs). An RTA intensifies product-market competition in the markets of member countries and lowers product prices, while it raises export prices of goods subject to tariff reductions. This effect widens the dumping margin of the non-member firm and narrows the dumping margin of the member firm. If the government is more concerned with domestic firm profit in its AD decision, the RTA may invoke the member's AD action against the nonmember. If the governments attach a sufficiently high value on social welfare, however, the RTA may promote the AD action against the member. If the governments' weight on the domestic firm's profit is neither high nor low, an RTA may block the AD actions against both countries. |
| Keywords: | International trade, International agreements, Preferential trade liberalization, Antidumping, International oligopoly |
| JEL: | F12 F13 F15 L13 |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=RePEc:jet:dpaper:dpaper611&r=int |
| By: | Rene Belderbos; Leo Sleuwaegen; Dieter Somers; Koen De Backer |
| Abstract: | With the emergence of global value chains (GVCs), production processes are increasingly fragmented and dispersed across different countries. Although many MNEs still exhibit an important ‘home bias’ in their global innovation activities, a growing number of firms have offshored R&D and innovative activities to foreign locations. Is the more recent offshoring of R&D and innovation linked to the prior waves of manufacturing offshoring? The fear in OECD economies is that because of co-location effects between production and innovative activities, the loss of certain manufacturing/assembly activities may result in a loss of innovative capabilities (R&D, design, etc.) in the longer-term. The offshoring of R&D and innovation within GVCs poses new challenges to economic policy in OECD and emerging economies. For example, how can countries attract inward R&D investments by foreign MNEs? Should outward R&D investments by MNEs be a concern for the countries in which the MNEs are headquartered? |
| Date: | 2016–07–12 |
| URL: | http://d.repec.org/n?u=RePEc:oec:stiaac:30-en&r=int |
| By: | Alan V. Deardorff (University of Michigan) |
| Abstract: | This paper examines the effects of a fall in the price of an imported good in a region of a country that is specialized in producing that good. The context is a Òlumpy countryÓ model in which factors are unable to move between locations, although in this case I assume that only labor is immobile, and that the other factor, capital, is perfectly mobile between regions. With mobile capital, the lumpy-country equilibrium can be anywhere in the factor-price equalization set, but my focus is on a region that initially produces only one good, on the border of that set. When the price of that good falls due to import competition, it would be possible for both factors to reallocate partially into production of the other good, but I assume instead that some capital simply leaves the region, so that it continues to produce only the same good that it did before. The result of this is a fall in the real wage of labor, just as under Stolper-Samuelson assumptions. I then look at production also of a non-traded good, and find that the same import competition that cheapened the traded good also cheapens the nontraded good. The result is that the region shrinks, losing capital and producing less of both goods unless the substitution in favor of the nontraded good expands its consumption out of a smaller income. |
| Keywords: | import competitionl Lumpy country |
| JEL: | F1 F11 F2 |
| Date: | 2016–07–08 |
| URL: | http://d.repec.org/n?u=RePEc:mie:wpaper:653&r=int |
| By: | Li, Yuan; Bolton, Kierstin; Westphal, Theo |
| Abstract: | "One Belt, One Road" is an extensive and complex initiative whose potential effect and influence are still currently pending for answers. This paper addresses the following research question: What is the effect of the New Silk Road intercontinental railways on the trade between China and its trading partners in Central Asia and Europe? We focus on nine railway lines connecting Europe and China, which started operations between 2011 and 2015. The countries´ trade patterns with railway connections to China are then compared to the countries without railway connections to China. We find the intercontinental railways have a positive effect on China´s exports to its trading partners in Central Asia and Europe, especially concerning exports of manufactured goods, machinery and transport equipment, and miscellaneous manufactured articles. Moreover, the intercontinental railways have a positive effect on China´s imports of food and live animals from its trading partners. |
| Keywords: | One Belt,One Road,trade,transportation cost,weapons of the rich,everyday forms of policy influence |
| JEL: | F02 F14 R4 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:udedao:1092016&r=int |
| By: | Mihaela Simionescu (Institute for Economic Forecasting of the Romanian Academy) |
| Abstract: | The main objective of this study is to measure the impact of the British exist from the European Union on foreign direct investment (FDI) projects. Unlike previous studies, the research does not take into account the bilateral FDI flows. Instead, the analysis focus on FDI projects and new jobs and safeguarded jobs related to FDI projects. Using Poisson models on panel data over 2012 to 2015 and for regions from the entire world, the results indicate that the Brexit significantly and negatively affects the new jobs created in FDI projects. This expectation generates problems on labour markets. England policies should create a more flexible labour market and a stronger orientation towards other countries outside the Europe. |
| Keywords: | foreign direct investment, FDI, Brexit, labour market |
| JEL: | C51 C53 F21 |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=RePEc:sko:wpaper:bep-2016-07&r=int |
| By: | Steven ONGENA (University of Zurich, Swiss Finance Institute, and CEPR); Shusen QI (Tilburg University); Fengming QIN (Shandong University) |
| Abstract: | We analyze the impact of foreign bank presence on foreign direct investment (FDI) in China. The connection between the two could be particularly relevant for an emerging economy like China because the supply of financial services provided by banks may act as a constraining factor. Foreign bank presence may then enable and foster FDI and not simply result from it. Our estimates demonstrate that FDI across regions in China is increasing in the existing network of regional branches of foreign banks, which itself is driven (and, therefore, instrumented) by the timing of the regional phasing out of the local limits for foreign banks on local currency business. The effect of foreign bank presence on FDI is particularly strong for some specific sectors (farming, manufacturing, construction, transportation, wholesale/retail trade and real estate) if those sectors are importantly represented in the source economies. |
| Keywords: | Foreign direct investment, foreign bank presence, China |
| JEL: | G21 F21 |
| URL: | http://d.repec.org/n?u=RePEc:chf:rpseri:rp1413&r=int |
| By: | Kamal Saggi (Vanderbilt University) |
| Abstract: | This paper surveys the literature on international trade and the protection of intellectual property rights (IPRs) in the global economy. The discussion is organized around the major questions in the field. How does openness to trade affect national incentives for patent protection? What is the rationale for international coordination over patent policies? Given that countries are highly asymmetric with respect to their technological capabilities, what incentives do lagging countries have for enforcing IPRs and what are the consequences of requiring them to do so? To what extent do empirical studies support the major arguments for and against the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS)? Finally, can the structure of TRIPS -- both in terms of the core obligations it imposes on WTO members and the flexibilities that it provides them with respect to exhaustion policies and the use of compulsory licensing -- be reconciled with existing models of IPR protection in the global economy? |
| Keywords: | intellectual property rights, TRIPS, WTO, innovation, trade, foreign direct investment, imitation, patent protection, welfare, exhaustion policies, compulsory licensing. |
| JEL: | F1 O3 |
| Date: | 2016–07–19 |
| URL: | http://d.repec.org/n?u=RePEc:van:wpaper:vuecon-sub-16-00014&r=int |
| By: | Alicia García-Herrero; Jianwei Xu |
| Abstract: | See also the event "China-Russia relations and their impact on Europe" held on 21 June 2016. EU countries are complementary to Russia on the Chinese market. However, Chinese exports are increasingly relevant substitutes for EU exports on the Russian market. This means that an increase in China-Russia economic cooperation should have a negative impact on European exports. The authors simulate a scenario in which trade tariffs between Russia and China are eliminated, which is found to reduce EU exports to Russia. Finally, a more granular approach to the question analyses which sectors in Europe will be more affected by the increasing economic links between China and Russia, and finds that electronic machinery, equipment and machinery, and nuclear reactors will be particularly affected. Such findings obviously show quickly China is moving up the ladder in terms of export structure and how strategically important it is for Europe to continue upgrading its industry to compete at the highest level of that ladder. |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=RePEc:bre:wpaper:15748&r=int |
| By: | Yuke Li; Tianhao Wu; Nicholas Marshall; Stefan Steinerberger |
| Abstract: | The gravity equation has been successful in establishing a connection between the amount of trade between two countries, their respective gross domestic products and "distance" (a complex notion including geographical, historical, linguistic and sociological components). We take the inverse route and show that it is possible to construct a meaningful 'distance' without any external information simply from knowing the bilateral trade volumes between countries. The main tool is a non-standard interpretation of trade flows data as a set of high-dimensional points and the use of mathematical tools to perform dimensionality reduction. This may have further applications for problems in long-term economic analysis, cartel detection and others. |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1607.05235&r=int |