nep-int New Economics Papers
on International Trade
Issue of 2016‒08‒14
twelve papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. Examining The Impact of ASEAN-China Free Trade Agreement on Indonesian Manufacturing Employment By Koon Peng Ooi
  2. Product Mix and Firm Productivity Responses to Trade Competition By Thierry Mayer; Marc J. Melitz; Gianmarco I.P. Ottaviano
  3. Grounded by Gravity: A Well-Behaved Trade Model with Industry-Level Economies of Scale By Konstantin Kucheryavyy; Gary Lyn; Andrés Rodríguez-Clare
  4. The Impact of Agricultural and Trade Policies on Price Transmission in Central Asia By Bobokhonov, Abdulmajid; Pokrivcak, Jan; Rajcaniova, Miroslava
  5. The Role of Private Standards for Manufactured Food Exports from Developing Countries By Ehrich, Malte; Mangelsdorf, Axel
  6. The Economics and Politics of Refugee Migration By Christian Dustman; Francesco Fasani Fasani; Tommaso Frattini; Luigi Minale; Uta Schӧnberg
  7. The Road to International Currency: Global Perspective and Chinese Experience By Liu, Tao; Wang, Xiaosong
  8. Capital Flight and Foreign Direct Investment in Africa: An Investigation of the Role of Natural Resource Endowment By Leonce Ndikumana; Mare Sarr
  9. Contract (in)completeness, product quality and trade – evidence from the food industry By Fałkowski, Jan; Curzi, Daniele; Olper, Alessandro
  10. The Volatility of the International Price and the Trinidad and Tobago Export Price of Cocoa By Pemberton, Carlisle; De Sormeaux, Afiya; Patterson-Andrews, Hazel
  11. Global Value Chains, Large-Scale Farming, and Poverty: Long-Term Effects in Senegal By VAN DEN BROECK, Goedele; SWINNEN, Johan; MAERTENS, Miet
  12. No Pain, No Gain: The Effects of Exports on Effort, Injury, and Illness By David Hummels; Jakob Munch; Chong Xiang

  1. By: Koon Peng Ooi
    Abstract: There are very few studies that explicitly examine the costs and benefits of participating in regional trade agreements (henceforth RTAs), especially for developing countries. This is an important research question given that many developing countries are currently involved in negotiating RTAs, such as the Trans-Pacific Partnership (TPP), the Regional Comprehensive Partnership Agreement (RCEP) and the Pacific Alliance. This paper attempts to address this gap in the trade literature by analyzing the impact of the ASEAN-China Free Trade Agreement (ACFTA) on Indonesian manufacturing employment. It finds that even though the increase in the preference margin for China decreases employment by 2.60% (80,000 jobs lost), the reciprocal increase in the preference margin for Indonesia increases employment by 0.81% (25,000 jobs created) in export-oriented industries. These results highlight that the trade-off in an RTA is not merely between improving long-run productivity and increasing short-run unemployment in import-competing industries, as conventional trade literature may suggest. Within employment, there is a further trade-off between the contraction of import-competing industries and the expansion of export-oriented industries. Further, plant-level analysis reveals that these employment changes are attributed equally to job creation and job destruction. In addition, there is no evidence that the ACFTA increased the rate of job reallocation. Finally, this paper also shows that the impact of trade liberalization differs according to plant and worker characteristics. In Indonesia, large domestic plants are more severely affected by import competition than small plants or foreign plants. However, they are also the only ones that leveraged on the reduction in trading partner’s tariff rates and expand. In terms of workers, I find that employment changes are more volatile for production workers than non-production workers.
    Keywords: Trade Policy; Economic Integration; Trade and Labour Market Interactions
    JEL: F15 F16 J21
    Date: 2016
  2. By: Thierry Mayer; Marc J. Melitz; Gianmarco I.P. Ottaviano
    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: D24 F12
    Date: 2016–07
  3. By: Konstantin Kucheryavyy; Gary Lyn; Andrés Rodríguez-Clare
    Abstract: Although economists have long been interested in the implications of Marshallian externalities (i.e., industry-level external economies of scale) for trading economies, the large number of equilibria that they typically imply has kept such externalities out of the recent quantitative trade literature. This paper presents a multi-industry trade model with industry-level economies of scale that nests a Ricardian model with Marshallian externalities as well as multi-industry versions of Krugman (1980} and Melitz (2003). The behavior of the model depends on two industry-level elasticities: the trade elasticity and the scale elasticity. We show that there is a unique equilibrium if the product of the trade and scale elasticities is weakly lower than one in all industries. The welfare analysis reveals that if this condition is satisfied then all countries gain from trade, even when the scale elasticity varies across industries. The presence of scale economies tends to lower the gains from trade except if the country specializes in industries with relatively high scale elasticities. On the other hand, scale economies amplify the gains from trade liberalization except if it leads to reallocation towards industries with relatively low scale elasticities.
    JEL: F10
    Date: 2016–08
  4. By: Bobokhonov, Abdulmajid; Pokrivcak, Jan; Rajcaniova, Miroslava
    Abstract: This paper investigates the market integration between international and domestic markets in the case of two-transition countries namely Tajikistan and Uzbekistan. More specifically, our study aims to understand the extent and speed of price transmission from international to local market. We have used cointegration techniques to analyse the price transmission mechanism, such as a vector error correction model (VEC). We have found strong cointegration evidences between world market and domestic market of Tajikistan while no cointegration was observed in case of Uzbekistan. Tajikistan has liberal trade while Uzbekistan frequently used protectionist trade policy.
    Keywords: price transmission, market integration, agricultural trade, food prices, Tajikistan and Uzbekistan, Demand and Price Analysis, Q1,
    Date: 2016–07
  5. By: Ehrich, Malte; Mangelsdorf, Axel
    Abstract: The effect of food standards on agricultural trade flows remains unclear. We contribute to the debate with a unique dataset that contains the number of food processing firms of 88 countries from 2008 to 2013 that are certified with the International Featured Standard (IFS). Based on a theoretical framework that combines Melitz-type firm heterogeneity with quality upgrading, we estimate a gravity-model using the one-year lag of IFS as well as modern grocery distribution as an Instrument to address potential endogeneity. We find that IFS increases c.p. bilateral exports on average of seven agricultural product categories in both specifications. However, the effect remains only for upper- and middle-income countries once we separate by income and turns even negative for low income countries in the IV-specification. Hence, whereas IFS increases exports on average, it has a trade-impeding effect for low-income countries. Therefore, private standards are not a sufficient development policy tool to integrate low-income countries to the world trading system without being accompanied by other measures.
    Keywords: Agricultural trade, private food standards, manufactured food, gravity model, International Development, International Relations/Trade, F14, F18, F19,
    Date: 2016–08–04
  6. By: Christian Dustman (University College London); Francesco Fasani Fasani (Queen Mary); Tommaso Frattini (Università degli Studi di Milano); Luigi Minale (Universidad Carlos III de Madrid); Uta Schӧnberg (University College London)
    Abstract: This paper provides a comprehensive review and analysis of refugee migration, with emphasis on the current refugee crisis. After first reviewing the institutional framework laid out by the Geneva Convention for Refugees, we demonstrate that, despite numerous attempts at developing a common European asylum policy, EU countries continue to differ widely in interpretation and implementation. We then describe key features of the current refugee crisis and document the overall magnitudes and types of refugee movements, illegal border crossings, and asylum applications to EU member states. We next turn to the economics of refugee migrations, contrasting economic and refugee migrants, discussing the trade-offs between long-term asylum and temporary protection, and highlighting the economic advantages of increasingly coordinating the different national asylum policies. Finally, we illustrate the economic integration of past refugee migrants to EU countries and conclude with several policy recommendations.
    Keywords: asylum policy, asylum seekers, refugee crisis
    JEL: F22 J15 J61
    Date: 2016–08
  7. By: Liu, Tao; Wang, Xiaosong
    Abstract: This paper studies the international currency use in financial transaction, with SWIFT dataset from 2011 to 2013. A currency becomes international when used outside of its issuing country, and advances to international vehicle currency if used among nonresidents. We estimate a gravity model to explain the geographical distribution of international currency use. For major currencies, higher level of integration and stable macroeconomic environment increase their international use. Specifically, trade and portfolio investment are more helpful in raising the direct use, while FDI has stronger effect in promoting the vehicle use. For RMB, trade improves the intensity of its global use, and FDI increases the number of its user. The policy effect on RMB internationalization is significant only for direct use. Additionally, major currencies experience death of distance, whereas RMB use is decreasing in geographical distance, implying its role to be more regional during this period. We recommend outward FDI by private Chinese firms to increase the vehicle use of RMB and make it truly international.
    Keywords: RMB internationalization, gravity model, policy effect, death of distance
    JEL: F33 F36 G15
    Date: 2016–07
  8. By: Leonce Ndikumana (Department of Economics and Political Economy Research Institute, University of Massachusetts at Amherst); Mare Sarr (School of Economics, University of Cape Town)
    Abstract: This paper aims to provide theoretical and empirical insights into the puzzling simultaneous rise in foreign direct investment inflows in Africa and capital flight from the continent over the past decades. It specifically explores two questions: is FDI a potential driver of capital flight? Is natural resource endowment a possible channel for the capital flight-FDI link? The econometric analysis is based on 32 African countries over the period 1970-2013 using dynamic panel data estimation methods. Three important findings emerge from the analysis. First, while there is no robust evidence that capital flight is fueled by annual FDI inflows (there is no equivalent to debt-fueled capital flight), there is a positive relationship between the stock of FDI and capital flight. Second, natural resource endowment is directly related positively to capital flight and resource endowment is associated with a stronger FDI stock-capital flight link, especially in the case of oil. Third, high-quality institutions somehow weaken the link between FDI and capital flight, although they do not completely eliminate the relationship. The results point to potential gains from improvements in institutional quality in African countries through minimizing the contribution of FDI and natural resources to capital flight.
    Keywords: capital flight; foreign direct investment; natural resources; Africa
    JEL: F3 O16 O55
    Date: 2016
  9. By: Fałkowski, Jan; Curzi, Daniele; Olper, Alessandro
    Abstract: As the recent contributions to the literature show, institutional differences are an important source of comparative advantage. Yet our understanding of the exact mechanisms through which institutions affect trade flows is still rather limited. In this paper, focusing on food sector, we examine a particular channel through which this effect may occur. Using detailed country-product data, we focus on the relationship between the quality of contracting institutions and product quality, which is commonly perceived as a key feature of how countries specialise in production. In line with the existing theoretical arguments, we find that product quality improvements, which can proxy for an adoption of more advanced technologies, are associated with products made in countries-industries characterised by less contractual incompleteness and characterised by greater initial level of technological complementarities between intermediate inputs.
    Keywords: contracting institutions, product quality, technology adoption, trade, food industry, Agribusiness, Industrial Organization, F14, L15, O17, O33, Q17,
    Date: 2016–07–17
  10. By: Pemberton, Carlisle; De Sormeaux, Afiya; Patterson-Andrews, Hazel
    Abstract: Cocoa prices are known to be volatile and this volatility has been known to affect the cocoa industry. This paper first examines the volatility of the international cocoa price and compares this volatility to the international price of coffee. The measure of volatility that is used is the moving standard deviation. The paper then measures the volatility of the export price of cocoa from Trinidad and Tobago and concludes by discussing how price volatility affects the marketing of tropical commodities like cocoa.
    Keywords: Cocoa prices, price volatility, Agribusiness, Agricultural and Food Policy, Agricultural Finance, Crop Production/Industries, Farm Management, Food Consumption/Nutrition/Food Safety, Food Security and Poverty, Labor and Human Capital, Land Economics/Use, Livestock Production/Industries, Political Economy, Production Economics, Productivity Analysis,
    Date: 2015–10
  11. By: VAN DEN BROECK, Goedele; SWINNEN, Johan; MAERTENS, Miet
    Abstract: This paper is the first to present panel data evidence on the longer-term impact of expansion of global value chains and large-scale export-oriented farms in developing countries. Using panel data from two survey rounds covering a seven-year period and fixed effects regression, we estimate the longer-term income effects of wage employment on large-scale farms in the rapidly expanding horticultural export sector in Senegal. In addition to estimating average income effects, we estimate heterogeneous income effects using fixed effects quantile regression. We find that poverty and inequality reduced much faster in the research area than elsewhere in Senegal. Employment in the horticultural export sector significantly increases household income and the income effect is strongest for the poorest households. Expansion of the horticultural export sector in Senegal has been particularly pro-poor through creating employment that is accessible and creates substantial income gains for the poorest half of the rural population. These pro-poor employment effects contrast with insights in the literature on increased inequality from rural wage employment.
    Keywords: globalisation, high-value supply chains, rural wage employment, quantile regression, panel data, long-term effects, Agricultural and Food Policy, Agricultural Finance, Community/Rural/Urban Development, Consumer/Household Economics, Food Security and Poverty,
    Date: 2016–07–27
  12. By: David Hummels; Jakob Munch; Chong Xiang
    Abstract: Increased job effort can raise productivity and income but put workers at increased risk of illness and injury. We combine Danish data on individuals’ health with Danish matched worker-firm data to understand how rising exports affect individual workers’ effort, injury, and illness. We find that when firm exports rise for exogenous reasons: 1. Workers work longer hours and take fewer sick-leave days; 2. Workers have higher rates of injury, both overall and correcting for hours worked; and 3. Women have higher sickness rates. For example, a 10% exogenous increase in exports increases women’s rates of injury by 6.4%, and hospitalizations due to heart attacks or strokes by 15%. Finally, we develop a novel framework to calculate the marginal dis-utility of any non-fatal disease, such as heart attacks, and to aggregate across multiple types of sickness conditions and injury to compute the total utility loss. While the ex-ante utility loss for the average worker is small relative to the wage gain from rising exports, the ex-post utility loss is much larger for those who actually get injured or sick.
    JEL: F1 F6 I1 J2 J3
    Date: 2016–07

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