nep-int New Economics Papers
on International Trade
Issue of 2016‒10‒02
thirty-two papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. Optimal Trade Policy and Production Location By Ayako Obashi
  2. Information and Communication Technology (ICT) and International Trade: Evidence from Turkey. By Burcu Ozcan; Hiranya Nath
  3. Trade liberalization and employment effects in Indian manufacturing: An empirical assessment By Sunitha Raju; BIBEK RAY CHAUDHURI; MRIDULA SAVITRI MISHRA
  4. Trade patterns in the 2060 world economy By Jean Chateau; Lionel Fontagné; Jean Fouré; Åsa Johansson; Eduardo Olaberría
  5. Prospects for Taiwan’s Participation in the Trans-Pacific Partnership By Jeffrey J. Schott; Cathleen Cimino-Isaacs; Zhiyao Lu; Sean Miner
  6. Why Do Estimates of the EMU Effect On Trade Vary so Much? By Rose, Andrew K
  7. How you export matters: the disassortative structure of international trade By Joseph, Andreas; Osbat, Chiara
  8. Cardiac Arrest or Dizzy Spell: Why is World Trade So Weak and What can Policy Do About It? By David Haugh; Alexandre Kopoin; Elena Rusticelli; David Turner; Richard Dutu
  9. Why Do Estimates of the EMU Effect On Trade Vary so Much? By Andrew K. Rose
  10. Impact of services trade on India’s economic growth and current account balance: evidence from post-reform period By Mini P. Thomas
  11. Reserves and trade jointly determine exposure to food supply shocks By Philippe Marchand; Joel A Carr; Jampel Dell’Angelo; Marianela Fader; Jessica A Gephart; Matti Kummu; Nicholas R Magliocca; Miina Porkka; Michael J Puma; Zak Ratajczak; Maria Cristina Rulli; David A Seekell; Samir Suweis; Alessandro Tavoni; Paolo D’Odorico
  12. Trade Liberalization and Wage Inequality in the Indian Manufacturing Sector By Furuta, Manabu
  13. The impact of regional trade agreements on agrifood trade flows: The role of rules of origin By Marilyne Huchet Bourdon; Chantal Le Mouël; Mindourewa Peketi
  14. Are stricter investment rules contagious?: host country competition for foreign direct investment through international agreements By Eric Neumayer; Peter Nunnenkamp; Martin Roy
  15. Participation of Turkey in Global Value Chains: An Analysis Based on World Input Output Database By Ceren Gündoğdu; Dürdane Şirin Saracoğlu
  16. The Impact of the COMESA-EAC-SADC Tripartite Free Trade Agreement on the South African Economy By L. Walters; H.R. Bohlmann; M.W. Clance
  17. Dissecting the effect of credit supply on trade: evidence from matched credit-export data By Daniel Paravisini; Veronica Rappoport; Philipp Schnabl; Daniel Wolfenzon
  18. Renewable energy trade within Regional Comprehensive Economic Partnership (RCEP) countries: an exploratory analysis By Kaliappa Kalirajan; Yichang Liu
  19. Regulatory Entry Barriers, Rent-Shifting and the Home Market Effect By Tobal Martín
  20. Conditional linkages between iron ore exports, foreign aid and terrorism By Simplice Asongu; Jacinta C. Nwachukwu
  21. Migrants’ location choice: the role of migration experience By Chernina, Eugenia M.
  22. Globalization adn the Environmental Impact of Sectoral FDI By Nadia Doytch; Merih Uctum
  23. The Effects of FDI on Innovation Systems in Hungarian Regions: Where is the Synergy Generated? By LENGYEL, BALÁZS; LEYDESDORFF, LOET
  24. What constitutes a compensation free regulation of foreign-owned property in international law? Some thoughts on the protection of foreign investment against expropriations, the states' right to regulate, arbitrators and TTIP By Gildeggen, Rainer; Willburger, Andreas
  25. Incentives to Tax Foreign Investors By Sharma, Rishi
  26. Taxing and Subsidizing Foreign Investors By Sharma, Rishi
  27. Globalization, Inequality and Welfare By Pol Antràs; Alonso de Gortari; Oleg Itskhoki
  28. Methods for regionalizing input-output tables By Szabó, Norbert
  29. Eurasian Economic Union: Russia’s New Foreign Policy in the South Caucasus By Samir Balakishi
  30. Understanding the weakness in global trade - What is the new normal? By IRC Trade Task Force; Cabrillac, Bruno; Al-Haschimi, Alexander; Babecká Kucharčuková, Oxana; Borin, Alessandro; Bussière, Matthieu; Cezar, Raphael; Derviz, Alexis; Dimitropoulou, Dimitra; Ferrara, Laurent; Gächter, Martin; Gaulier, Guillaume; Hukkinen, Juhana; Keeney, Mary; Lodge, David; Mancin, Michele; Marsilli, Clement; Martínez-Martin, Jaime; Mroczek, Wojciech; Muck, Jakub
  31. Globalization and Chinese Growth: Ends of Trends? By Frankel, Jeffrey
  32. Migration, poverty and equality By Andersen, Lykke E.

  1. By: Ayako Obashi (Faculty of Business Administration Toyo University)
    Abstract: This paper studies the role of trade policies in a theoretical framework considering the firm’s global production operation subject to trade costs. The production location potentially depends on a combination of trade costs, inclusive of trade barriers, imposed on different stages of the production process. Meanwhile, the trade policy decision of a government alters trade costs, and thereby affects the firm’s location decision on whether to offshore the production base and the sourcing decision on whether and which intermediate inputs to source domestically or import from abroad. A government might care about the impact of its trade policy choice on the locations of the firm’s global production activities in order to better exploit its market power over world prices with trade policy intervention. The paper features the assembly-relocation effect and the production-chain effect to explain incentives behind the Nash trade policy intervention with cross-border un-bundling of production processes: first, a government sometimes would use an import tariff and/or export tax as a way to shift the location of the final assembly in its favor, forcing an inefficient location, so that, conditional on the assembly relocation, it can maximize its ability to manipulate the terms of trade. Second, a rise in the tariff/tax on inputs could push up the world price of the final good through the production chain.
    JEL: F15 F53
    Date: 2016–09
  2. By: Burcu Ozcan (Department of Economics, Firat University, Elazig, Turkey); Hiranya Nath (Department of Economics and International Business, Sam Houston State University)
    Abstract: This study analyzes the impacts of information and communication technology (ICT) on international trade between Turkey and its trading partners. Based on an extended panel gravity model, the effects of four ICT indices on Turkish bilateral exports and imports are examined with static and dynamic panel data models for the period 2000-2014. The sample includes 35 countries that import Turkish goods and 34 countries that export goods to Turkey. The results indicate that ICT has positive and significant impacts on both Turkish import and export volumes. Additionally, ICT has a larger effect on imports than on exports. Among ICT indices, ICT access has the largest effect on exports while ICT skills have the strongest impact on imports. In contrast, ICT use has the least impact on both Turkish exports and imports. These results are robust to alternative specifications and estimation methods. Based on these results, some policy implications can be derived. For instance, Turkey may develop strategic trading partnerships with countries that have high levels of ICT endowments, in order to increase its overall trade.
    Keywords: : Information and Communication Technology; international trade; trade costs; gravity model; panel data models
    JEL: F10 F14 O30
    Date: 2016–09
    Abstract: The purpose of the study is to examine the impact of international trade on manufacturing employment in India over 2004-2011. The theoretical literature suggests that trade affects the demand for labour through scale, composition and process effects. Since India is largely a labourabundant country, its comparative advantage rests in labour intensive manufacturing. However, the study finds that since the onset of reforms, production and trade specialisation has been biased towards capital-intensive production and, therefore has failed to absorb the vast pool of labour resources. The study finds that in general the labour demand elasticity has fallen in the global economic crisis period except for skilled workers. The export orientation has a relatively greater impact on employment, especially for skilled workers in the crisis period. The overall impact was negative during the crisis. The survey of selected manufacturing firms shows that trade costs are higher for labour-intensive firms.
    Keywords: Trade liberalization, Manufacturing employment, Panel data.
    JEL: L60 F10 F14 F15 F16 F66
    Date: 2016
  4. By: Jean Chateau (OECD - OECD); Lionel Fontagné (PSE - 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); Jean Fouré (CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique); Åsa Johansson (OECD - OECD); Eduardo Olaberría (OECD - OECD)
    Abstract: This paper presents long-term trade scenarios for the world economy up to 2060 based on a modelling approach that combines aggregate growth projections for the world with a detailed computable general equilibrium sectoral trade model. The analysis suggests that over the next 50 years, the geographical centre of trade will continue to shift from OECD to non-OECD regions reflecting faster growth in non-OECD countries. The relative importance of different regions in specific export markets is set to change markedly over the next half century with emerging economies gaining export shares in manufacturing and services. Trade liberalisation, including gradual removal of tariffs, regulatory barriers in services and agricultural support, as well as a reduction in transaction costs on goods, could increase global trade and GDP over the next 50 years. Specific scenarios of regional liberalisation among a core group of OECD countries or partial multilateral liberalisation could, respectively, raise trade by 4% and 15% and GDP by 0.6% and 2.8% by 2060 relative to the status quo. Finally, the model highlights that investment in education has an influence on trade and high-skill specialisation patterns over the coming decades. Slower educational upgrading in key emerging economies than expected in the baseline scenario could reduce world exports by 2% by 2060. Lower up-skilling in emerging economies would also slow down the restructuring towards higher value-added activities in these emerging economies.
    Keywords: General equilibrium trade model,long-term trade and specialisation patterns,trade liberalisation
    Date: 2015–11
  5. By: Jeffrey J. Schott (Peterson Institute for International Economics); Cathleen Cimino-Isaacs (Peterson Institute for International Economics); Zhiyao Lu (Peterson Institute for International Economics); Sean Miner (Peterson Institute for International Economics)
    Abstract: Taiwan has long faced declining competitiveness due to both slow domestic economic reforms and discrimination from nonparticipation in many free trade agreements in the Asia-Pacific region, which have caused (or threatened) trade and investment diversion. Participating in the Trans-Pacific Partnership (TPP) could mitigate much of the discrimination faced by Taiwanese exporters and investors in Asia-Pacific markets. To join, Taiwan would need to undertake significant policy reforms to meet TPP requirements for liberalization of goods, services, investment, and other areas including the environment and intellectual property rights (IPRs). In some areas Taiwan’s existing bilateral agreements with China and TPP members New Zealand and Singapore have significant gaps with TPP standards, while others should not be as difficult to bridge. The Briefing also considers the status of US-Taiwan trade and investment relations and outstanding bilateral irritants, including concerns over agricultural market access and animal health and safety regulations, Taiwanese foreign direct investment restrictions and approval process, IPRs, and exchange rate policy. Resolving these issues will be critical for US support for Taiwan’s TPP participation.
    Date: 2016–09
  6. By: Rose, Andrew K
    Abstract: Larger data sets, with more countries and a longer span of time, exhibit systematically larger effects of European monetary union on trade. I establish this stylized fact with meta-analysis and confirm it by estimating a plain-vanilla gravity model. I then explain this finding by examining systematic biases in "multilateral resistance to trade" manifest in time-varying country fixed effects; bias grows as the sample is truncated by dropping small poor countries.
    Keywords: common; country; currency; exports; Gravity; meta; monetary; panel; span; union
    JEL: F14 F33
    Date: 2016–09
  7. By: Joseph, Andreas; Osbat, Chiara
    Abstract: The local network structure of international trade relations offers a new dimension for understanding a country’s competitive position vis-á-vis its trade partners and competitors, supporting economic policy analysis. We introduce two network measures that can be used to analyse comparative advantage and price competitiveness, called relative export density and export price assortativity, respectively. The novelty of these measures is that they consider the embedding of a country into its local trade environment. They are computed based on unit values and sector concentrations at a highly granular level and they help to uncover general patterns of the global organisation of international trade. Countries have a strong tendency to arrange their exports to form local monopolies by focusing on products and markets, usually - but not exclusively - where they have a price advantage. Price (dis)assortativity turns out to be an important factor for export growth, even after controlling for a large set of macroeconomic and structural determinants. This effect is particularly strong for catching-up CESEE countries, with potential implications for industrial policy. The relationship between the two export assortativity metrics for different groups of countries and for varying technological content of exports indicates a tipping point in a country’s development from price-driven competition to non-price factors. JEL Classification: F14, F63, D85
    Keywords: external imbalances, global financial crisis, international capital flows, monetary
    Date: 2016–09
  8. By: David Haugh; Alexandre Kopoin; Elena Rusticelli; David Turner; Richard Dutu
    Abstract: World trade growth was rapid in the two decades prior to the global financial crisis but has halved subsequently. There are both structural and cyclical reasons for the slowdown. A deceleration in the rate of trade liberalisation post 2000 was initially obscured by the ongoing expansion of global value chains and associated rapid emergence of China in the world economy. Post the financial crisis global value chains started to unwind and, possibly associated with this, Chinese and Asian trade weakened markedly. These structural changes were compounded by insipid demand due to anaemic growth of global investment, as well as intra-euro area trade, both of which are trade intensive. The slowdown in world trade growth post crisis, if sustained, will have serious consequences for the medium-term growth of productivity and living standards. Trade policy has significant potential to reinvigorate trade growth but the political environment for reforms is difficult, with a growing polarisation of OECD electorates into pro- and anti- globalisation supporters. Further trade and investment policy liberalisation should be introduced as part of a wider package of structural reforms to spread the benefits of freer trade and investment more widely. Arrêt cardiaque ou crise passagère : Pourquoi le commerce mondial est-il si faible et que peut faire la politique économique pour le relancer ? Le commerce mondial a cru rapidement au court des deux décennies qui ont précédé la crise financière de 2008. Mais sa croissance a été divisée par deux depuis. Des facteurs à la fois structurels et conjoncturels expliquent ce changement. Le ralentissement de la libéralisation du commerce mondial après 2000 a été masqué par l’expansion des chaines de valeur mondiale et l’insertion rapide de la Chine dans le commerce international. Après la crise, les chaines de valeur mondiale se sont détendues et le commerce Chinois et asiatique a ralenti, les deux phénomènes étant peut-être liés. Ces changements structurels ont été aggravés par une faible demande due à une croissance anémique de l’investissement international et du commerce intra-européen, les deux étant une source importante d’échanges commerciaux. S’il perdure, ce ralentissement de la croissance du commerce mondial aura des conséquences fâcheuses pour la croissance de la productivité et du niveau de vie. La politique commerciale dispose d’un potentiel pour relancer cette croissance, mais l’environnement politique actuel est peu favorable du fait d’une polarisation croissance au sein de l’électorat des pays de l’OCDE entre partisans de la globalisation et ceux plus sceptiques sur ses bienfaits. Une politique plus volontariste en matière de libéralisation des échanges et de l’investissement devrait être mise en place dans le cadre d’un plan global de reformes structurelles.
    Keywords: trade policy, global value chains, world trade, Slowdown, GVCs, Ralentissement, politique commerciale, chaînes de valeur mondiales, Commerce mondial
    JEL: F01 F02 F13 F14 F15 F17 F21 F62
    Date: 2016–09–23
  9. By: Andrew K. Rose
    Abstract: Larger data sets, with more countries and a longer span of time, exhibit systematically larger effects of European monetary union on trade. I establish this stylized fact with meta-analysis and confirm it by estimating a plain-vanilla gravity model. I then explain this finding by examining systematic biases in “multilateral resistance to trade” manifest in time-varying country fixed effects; bias grows as the sample is truncated by dropping small poor countries.
    JEL: F14 F33
    Date: 2016–09
  10. By: Mini P. Thomas (Assistant Professor, Dept. of Economics and Finance, Birla Institute of Technology and Science (BITS) Pilani - Hyderabad Campus, India)
    Abstract: Economic Growth and External Stabilisation (defined in terms of Current Account Balance as a percentage of GDP) is a top priority for policy-makers, while laying out the macroeconomic framework for Indian economy. Government of India had targeted for an average GDP growth rate of 9 percent and a Current Account Deficit (CAD) below 2.5 percent of GDP during the five-year period from 2012-2017. However, the actual CAD of Indian economy widened to 4.2% of GDP in 2011-12, and further reached a historic high CAD of 4.7 percent of GDP in 2012-13. Given such a scenario, this paper aims to estimate the impact of services trade on India’s Economic Growth and Current Account Balance, during the post-reform period from 1990-91 to 2011-12. Facilitated by economic globalisation, domestic liberalization, and technological advances which resulted in increasing international fragmentation of the production process, India’s services trade began growing rapidly post 1991. With the help of Thirlwall’s Balance of Payments Constrained Growth Model and ARDL approach to cointegration, this study estimates and establishes the crucial role of services trade in achieving the policy objectives of economic growth and external stabilisation simultaneously for Indian economy. This study also examines the impact of services exports on India’s economic growth, by comparing the latest officially published input-output table of India for 2007-08, with that of 1993-94. Among the major services in India’s export basket, construction, transport and business services are found to exhibit strongest backward linkages, and hence can act as engines of export-led growth. Role of services imports in India’s export-led growth and the import content going into production of India’s services exports is analysed using the TIVA database for 1995 and 2008, which have implications for India’s external stabilisation. Foreign value added content in India’s services exports is found to be highest in case of business services, transport services and telecommunications.
    Keywords: Services Trade, Current Account Deficit, Economic Growth, Backward Linkages
    JEL: F14 F32 F43 C67
    Date: 2016–09
  11. By: Philippe Marchand; Joel A Carr; Jampel Dell’Angelo; Marianela Fader; Jessica A Gephart; Matti Kummu; Nicholas R Magliocca; Miina Porkka; Michael J Puma; Zak Ratajczak; Maria Cristina Rulli; David A Seekell; Samir Suweis; Alessandro Tavoni; Paolo D’Odorico
    Abstract: While a growing proportion of global food consumption is obtained through international trade, there is an ongoing debate on whether this increased reliance on trade benefits or hinders food security, and specifically, the ability of global food systems to absorb shocks due to local or regional losses of production. This paper introduces a model that simulates the short-term response to a food supply shock originating in a single country, which is partly absorbed through decreases in domestic reserves and consumption, and partly transmitted through the adjustment of trade flows. By applying the model to publicly-available data for the cereals commodity group over a 17 year period, we find that differential outcomes of supply shocks simulated through this time period are driven not only by the intensification of trade, but as importantly by changes in the distribution of reserves. Our analysis also identifies countries where trade dependency may accentuate the risk of food shortages from foreign production shocks; such risk could be reduced by increasing domestic reserves or importing food from a diversity of suppliers that possess their own reserves. This simulation-based model provides a framework to study the short-term, nonlinear and out-of-equilibrium response of trade networks to supply shocks, and could be applied to specific scenarios of environmental or economic perturbations.
    Keywords: food systems; resilience; food crises
    JEL: N0 L81
    Date: 2016–09–14
  12. By: Furuta, Manabu
    Abstract: This study analyzes the effect of reduction in input and output tariffs on the intra-plant wage inequality in India, which is one of the most unskilled labor abundant countries, for the period 2000 to 2007. We find that a reduction in output tariff increases the wage inequality, whereas a reduction in input tariff does not have any statistically significant effect on wage inequality. These results suggest that the Stolper-Samuelson effect works in the Indian manufacturing sector where unskilled labor-intensive industries were protected the most prior to trade liberalization. We also examine the effect of the increased demand for skilled workers by the modern service sector, which has been the driving force of recent economic growth in India. The increased demand raises the wage inequality in manufacturing implying that skill-biased technological change in modern service sector has an indirect effect on wage inequality in this sector.
    Keywords: trade liberalization, wage inequality, India, the Stolper- Samuelson effect, skill biased technical change, tariff
    JEL: F14 F63 F66 J31 O24 O53
    Date: 2016–09–24
  13. By: Marilyne Huchet Bourdon; Chantal Le Mouël; Mindourewa Peketi
    Abstract: In this paper we provide an assessment of the impacts of Regional trade agreements (RTAs) on agricultural trade, putting emphasis on the role of rules of origin (RO) which are always part of these agreements. We distinguish trade in raw agricultural products and trade in processed food products. Our sample includes 180 countries over four time periods: 2001, 2004, 2007 and 2011. We consider the main trade agreements involving major world exporting countries of agricultural commodities and food products. Using a gravity model, we introduce dummies for controlling for the multilateral resistance terms and we use the Poisson-Pseudo Maximum Likelihood (PPML) estimation method to deal with zero trade flows. Econometric results globally confirm that RTAs have a positive impact on trade between member countries, a negative or a non significant direct impact of RO, a negative or a non significant cross impact of RTAs and RO. Our estimation results globally support a significant non linear impact of RTAs, its positive effect on trade between members decreasing with the degree of restrictiveness of involved RO. As expected, our results suggest that trade in food products is more sensitive to RTAs and their RO than trade in agricultural products. Contrary to expectations, our estimation results do not support clear differentiated impact of RTAs and involved RO on North to South and South to North agrifood exports. Finally, our results suggest that RO matter regarding the trade impacts of RTAs.
    Keywords: regional trade agreements, rules of origin, agricultural trade, food trade, developing countries, gravity, poisson-pseudo maximum likelihood
    JEL: F14 Q17
    Date: 2016
  14. By: Eric Neumayer; Peter Nunnenkamp; Martin Roy
    Abstract: We argue that competitive diffusion is a driver of the trend toward international investment agreements (IIAs) with stricter investment rules, namely defensive moves of developing countries concerned about foreign direct investment (FDI) diversion in favor of competing host countries. Accounting for spatial dependence in the formation of bilateral investment treaties (BITs) and preferential trade agreements (PTAs) that contain investment provisions, we find that the increase in agreements with stricter provisions on investor-state dispute settlement and pre-establishment national treatment is a contagious process. Specifically, a developing country is more likely to sign an agreement with weak investment provisions if other developing countries that compete for FDI from the same developed country have previously signed agreements with similarly weak provisions. Conversely, contagion in agreements with strong provisions exclusively derives from agreements with strong provisions that other FDI-competing developing countries have previously signed with a specific developed source country of FDI.
    Keywords: bilateral investment treaties; preferential trade agreements; investment provisions; competition for FDI; spatial dependence
    JEL: F21 F53
    Date: 2016–09–25
  15. By: Ceren Gündoğdu (Republic of Turkey Ministry of Economy 06530 Ankara, Turkey); Dürdane Şirin Saracoğlu (Department of Economics, METU)
    Abstract: This study examines the trends in Turkey’s participation in Global Value Chains (GVCs), particularly through backward integration (i.e. vertical specialization-VS or the foreign content of value added in exports) between 1995 and 2011 utilizing the World Input Output Database (WIOD), and this is the first attempt to adopt WIOD for analyzing VS in Turkish exports at sectoral and trade partner dimensions. The findings show that Turkey’s VS has increased between 1995 and 2011. Considering the sectoral trends in manufacturing with respect to technological classification, especially in the 2000’s, Turkey’s VS share in mid-high and high-tech sectors has increased faster than that in mid-low as well as low tech sectors. At individual partner level, Germany, China, Italy and France play important roles in VS of Turkish exports. Although Germany sustained the largest contribution to Turkey’s VS up to 2010, in 2010 China became the top contributing country; however this contribution is chiefly in a low-tech industry such as textiles, thus is not necessarily conducive to Turkey’s upgrading her position in GVCs. In that respect, integration into the GVCs through technology-intensive sectors via the technology imported from developed countries might better help improve Turkey’s position in the world markets.
    Keywords: Global Value Chains; Backward participation; Vertical Specialization; WIOD; Turkey
    JEL: F10 F13 F60
    Date: 2016–09
  16. By: L. Walters; H.R. Bohlmann; M.W. Clance
    Abstract: This paper analyses the effects of the COMESA-EAC-SADC Tripartite Free Trade Agreement (TFTA) on the South African economy using a global Computable General Equilibrium (CGE) model. Simulation results show that South Africa’s economy gains from the implementation of the trade agreement with GDP rising by more than 1 per cent relative to the baseline. This win in overall economic activity occurs on the back of a terms of trade increase and a surge in regional trade, which allows for higher levels of both exports and imports. The boost to exports stimulates local industries, whilst relatively cheaper imports lead to welfare gains for local consumers. Increased trade and industry activity causes higher demand for endowments, including skilled and unskilled labour, capital and land, pushing up wages and capital rentals.
    Keywords: Computable General Equilibrium (CGE) Modelling, Free Trade Agreement, South Africa
    JEL: C68 F13 O55
    Date: 2016–09
  17. By: Daniel Paravisini; Veronica Rappoport; Philipp Schnabl; Daniel Wolfenzon
    Abstract: We estimate the elasticity of exports to credit using matched customs and firm-level bank credit data from Peru. To account for non-credit determinants of exports, we compare changes in exports of the same product and to the same destination by firms borrowing from banks differentially affected by capital-flow reversals during the 2008 financial crisis. We find that credit shocks affect the intensive margin of exports, but have no significant impact on entry or exit of firms to new product and destination markets. Our results suggest that credit shortages reduce exports through raising the variable cost of production, rather than the cost of financing sunk entry investments.
    JEL: F3 G3
    Date: 2015–01
  18. By: Kaliappa Kalirajan; Yichang Liu
    Abstract: Though the availability of cost effective and potentially efficient renewable energy technologies is a necessary condition for the promotion of green growth nationally and internationally, it is the intended nationally determined contributions (INDC) to make use of such technologies is crucial. International trade in low carbon renewable energy goods provides an effective way of achieving INDCs nationally, even when individual countries may not have sufficient infrastructure readily available to them to fulfill INDCs. It is in this context, examination of whether renewable energy goods exports have been flowing without constraints in the Asian region and whether the RCEP regional cooperation mooted by the ASEAN can potentially facilitate minimizing those constraints at the regional level. The short answers to those questions are no and yes respectively. The answer is no mainly due to the existing institutional rigidities of which the major one is the non-tariff measures. The answer is yes mainly due to the possibility of improving the technical cooperation in producing renewable energy goods and consultations in removing non-tariff barriers through the effective functioning of RCEP..
    Keywords: paddy/rice value chain, profit margins of paddy/tice, market structure, Sri Lanka
    JEL: F14 F18 Q27
    Date: 2016
  19. By: Tobal Martín
    Abstract: I modify a standard model of the home market to introduce entry barriers that create local rents. The existence of rents has relevant implications. First, the home market effect magnifies. Second, when countries are sufficiently unequal in size and rents are sufficiently large, a trade costs reduction reduces the small country's welfare. Third, entry barriers increase the large country's market size and may surprisingly increase its welfare. Fourth, a unilateral increase in import tariffs shifts foreign rents to the home country. This rent shifting effect intensifies the standard production relocation motive for trade policy intervention.
    Keywords: Rent Shifting;Home Market Effect;Production Relocation Effect
    JEL: F12 F13
    Date: 2016–09
  20. By: Simplice Asongu (Yaoundé/Cameroun); Jacinta C. Nwachukwu (Coventry University, UK)
    Abstract: We employ interactive quantile regressions to assess conditional linkages between foreign aid, iron ore exports and terrorism from a panel of 78 developing countries for the period 1984-2008. The following main findings are established. First, it is primarily in the countries with the highest level of iron ore exports that terrorism affects exports. Second, bilateral aid has an impact on iron ore exports, while the evidence for such a relationship between multilateral aid and iron ore exports is limited. Third, there is limited support for the main hypothesis motivating this line of inquiry, notably that foreign aid can be used to mitigate a potentially negative effect of terrorism on resource exports. The results suggest that bilateral aid is more relevant at mitigating the negative effects of domestic and total terrorism on iron ore exports.
    Keywords: Exports, Foreign Aid; Terrorism; Natural Resources; Development
    JEL: F40 F23 F35 Q34 O40
    Date: 2016–04
  21. By: Chernina, Eugenia M. (Centre for Labour Market Studies (CLMS) at Higher School of Economics, Moscow)
    Abstract: This paper studies how the previous destination choices by household members might affect current choice by labor migrants from Tajikistan in Russia. We use 2007 and 2009 waves of Tajikistan Living Standards Survey combined with Rosstat regional statistics to analyze the effect of 2007 household migration experience and receiving regions’ characteristics on 2008-2009 migrants’ location choice within Russia. Our results suggest that there exists inertia in migrants’ choices: previously chosen destinations largely define future ones. This inertia results in quickly weakening effect of labor market conditions on migrants’ choice with migration experience.
    Keywords: labor migration, international migration, destination choice, location choice, Tajikistan, Russia
    JEL: J61
    Date: 2016–08
  22. By: Nadia Doytch (Brooklyn College and Graduate Center, CUNY); Merih Uctum (Brooklyn College and Graduate Center, CUNY)
    Abstract: We analyze the environmental impact of capital inflows and investigate the halo effect (FDI improves the environment). We control for the type of FDI inflows, the EKC (Environmental Kuznets Curve) effect and country income level, and find (i) a differential industry effect: while total foreign investment in aggregate has a negative effect on all countries, this can be traced in particular to capital flows to manufacturing and nonfinancial services sectors.; (ii) an income inequality effect: foreign investment flowing into poorer countries has harmful effects on environment consistent with the race-to-the bottom argument, while capital flowing to richer countries has a beneficial effect and supports the halo effect; (iii) the EKC effect depends on the sector absorbing the FDI and again income level of the country. We show that studies relying only on firm level or aggregate data, miss the sectoral spillovers, and thus may lead to misleading conclusions.
    Keywords: Sectoral FDI, environmental spillovers, dynamic panel
    JEL: F21 Q5
    Date: 2016–08–24
    Abstract: In this study, we show how internationalization and foreign-owned firms influence synergies in the regional innovation systems of Hungary. We first distinguish three innovation system functions (knowledge exploitation, knowledge exploration, and organizational control) operating in regions and study their interactions using entropy statistics. The functions and their interactions are measured by analysing the distribution of firms in terms of geographical location, organizational size (number of employees), technologies (NACE codes of the OECD), and ownership (foreign versus domestic share in registered stock) in the 2005. Synergy is defined as mutual information among the three dimensions; a fourth dimension is added in order to bring internationalization (FDI) into the model. The factor is relevant since the four-dimensional model explains the GDP contributions to regional development in Hungary, whereas the three-dimensional model does not. We find that regional innovation systems in Hungary are self-organized differently, in relation to a relatively small number of foreign firms. These firms have a large positive effect on synergy in regions between the Hungarian capital and the Austrian border. However, FDI has negative effects on domestic synergy in the lagging eastern and southern provinces of the country.
    Keywords: regional innovation systems, innovation system function, synergy, entropy, foreign firms
    JEL: B52 O18 P25 R12
    Date: 2015–07
  24. By: Gildeggen, Rainer; Willburger, Andreas
    Abstract: This article intends to help understand the debate about TTIP by focusing on the specific issue of how TTIP may regulate investment protection of foreign-owned property. It gives an overview of the international law of expropriations of and other interferences with foreign-owned property for public welfare objectives such as public health and safety, environmental protection, public morals, the promotion and protection of cultural diversity and human rights, and asks whether such interferences require the payment of compensation. It also describes the role arbitrators played in the development of the international law concerning the taking of foreign-owned property. With this legal background in mind it elaborates that TTIP investment protection rules and dispute settlement provisions may be an indicator on what TTIP really is: an instrument for the benefit of the citizens in Europe and the United States or a means to outplace national interests and democracy in favor of multinational enterprises. The article expresses the hope that the protection of foreign-owned property will not be regulated in the TTIP agreement and that the settlement of investment disputes between investors and states will not be put into the hands of arbitrators but of the judges of the country where the taking took place.
    Keywords: investment protection,expropriation,right to regulate,international law,arbitration,TTIP
    Date: 2016
  25. By: Sharma, Rishi (Department of Economics, Colgate University)
    Abstract: This paper shows that a small country can have incentives to tax inbound FDI even in a setting with perfect competition and free entry. While firms make no aggregate profits worldwide due to free entry, they make taxable profits in foreign production locations because their costs are partly incurred in their home countries. These profits are not perfectly mobile because firm productivity varies across locations. Consequently, the host country does not bear the entire burden of a tax on foreign firms, giving rise to an incentive to impose taxes. The standard zero optimal tax result can be recovered in this model under an apportionment system that ensures zero economic profits in each location.
    Keywords: international taxation, foreign direct investment, firm heterogeneity, tax competition
    JEL: H87 H25 F23
    Date: 2016–01–01
  26. By: Sharma, Rishi (Department of Economics, Colgate University)
    Abstract: Many countries impose taxes on foreign investors while also having in place targeted subsidies and tax incentives that are designed to attract them. This paper shows that such a policy can be optimal from the standpoint of a host country. The government has an incentive to tax inframarginal firms because they are relatively immobile. It also has an incentive to subsidize marginal firms because the economic activity generated by such a subsidy can increase domestic wages in excess of the fiscal cost of the subsidy. These tax and subsidy policies improve host country welfare at the expense of foreigners. This analysis is thus able to provide an explanation for why tax coordination efforts can simultaneously entail reduced taxes and subsidies on foreign firms.
    Keywords: international taxation, foreign direct investment, firm heterogeneity, tax competition
    JEL: H87 H25 F23
    Date: 2016–01–01
  27. By: Pol Antràs; Alonso de Gortari; Oleg Itskhoki
    Abstract: This paper studies the welfare implications of trade opening in a world in which trade raises aggregate income but also increases income inequality, and in which redistribution needs to occur via a distortionary income tax-transfer system. We provide tools to characterize and quantify the effects of trade opening on the distribution of disposable income (after redistribution). We propose two adjustments to standard measures of the welfare gains from trade: a ‘welfarist’ correction inspired by the Atkinson (1970) index of inequality, and a ‘costly-redistribution’ correction capturing the efficiency costs associated with the behavioral responses of agents to trade-induced shifts across marginal tax rates. We calibrate our model to the United States over the period 1979-2007 using data on the distribution of adjusted gross income in public samples of IRS tax returns, as well as CBO information on the tax liabilities and transfers received by agents at different percentiles of the U.S. income distribution. Our quantitative results suggest that both corrections are nonnegligible: trade-induced increases in inequality of disposable income erode about 20% of the gains from trade, while the gains from trade would be about 15% larger if redistribution was carried out via non-distortionary means.
    JEL: D3 D6 F1 F6 H2
    Date: 2016–09
  28. By: Szabó, Norbert
    Abstract: The present paper introduces the most common methods of regionalizing national input-output tables. First we describe the different groups of methods based on our review of the international literature regarding regionalization. Then we focus on particular methods that can be applied for Hungarian counties highlighting their advantages and disadvantages and synthetize the empirical results of them again based on the literature. On the basis of these experiences we attempt to create a complex method fitted to the available Hungarian regional data. For better understanding in the end we apply our method on an illustrative example consisting of three regions with hypothetical sectors and data.
    Keywords: input-output table, regionalization, interregional trade
    JEL: P33 P45 R00 R15
    Date: 2015–07
  29. By: Samir Balakishi (School of Sociology, Politics and International Studies (SPAIS), University of Bristol)
    Abstract: Russian President Putin is seeking political and especially economic alliances to reduce and counterbalance the influence of the European Union and the United States in the post-Soviet space. He is therefore determined to cement Moscow’s hegemonic status in the near abroad, particularly in the South Caucasus. In order to achieve that strategic purpose, he has created the Eurasian Economic Union, as an alternative to the EU, since the EEU is under Russia’s domination. As a result of this initiative, Russia, Belarus and Kazakhstan signed an agreement to create the EEU in 2011. Then, on 29 May 2014, they assembled again in Moscow and signed a new treaty to form the EEU. This agreement became fully operational on 1 January 2015. Moscow has been pressurising Armenia, Georgia and Azerbaijan, as well as other CIS members, to join the EEU. Russia’s main interests in the South Caucasus are to control the region strategically and to inhibit or dominate the export of oil and gas from the Caspian Sea basin to the West along the Transcaucasian energy corridor to counteract the increase in recent years in relations between the South Caucasus countries and the West. Therefore, this new alliance is progressively playing an important role in Russian foreign economic policy towards Armenia, Georgia and Azerbaijan. Whilst Armenia – which has been extremely dependent economically on Russia – joined the EEU, Azerbaijan declined to do so once in the past. In Georgia, especially during Saakashvili’s period since he was a keen proponent of NATO enlargement and EU membership, the EEU has declined in popularity. Moreover, joining the EEU would undermine economic independence and prosperity in the South Caucasian countries and could also prevent the West from having access to the region.
    Keywords: Eurasian Economic Union; Hegemonic Stability Theory; Armenia; Azerbaijan; Georgia; Energy.
    Date: 2016–08
  30. By: IRC Trade Task Force; Cabrillac, Bruno; Al-Haschimi, Alexander; Babecká Kucharčuková, Oxana; Borin, Alessandro; Bussière, Matthieu; Cezar, Raphael; Derviz, Alexis; Dimitropoulou, Dimitra; Ferrara, Laurent; Gächter, Martin; Gaulier, Guillaume; Hukkinen, Juhana; Keeney, Mary; Lodge, David; Mancin, Michele; Marsilli, Clement; Martínez-Martin, Jaime; Mroczek, Wojciech; Muck, Jakub
    Abstract: Global trade has been exceptionally weak over the past four years. While global trade grew at approximately twice the rate of GDP prior to the Great Recession, the ratio of global trade to GDP growth has declined to about unity since 2012. This paper assesses to what extent the change in the relationship between global trade and global economic activity is a temporary phenomenon or constitutes a lasting change. It finds that global trade growth has been primarily dampened by two factors. First, compositional factors, including geographical shifts in economic activity and changes in the composition of aggregate demand, have weighed on the sensitivity of trade to economic activity. Second, structural developments, such as waning growth in global value chains, a rise in non-tariff protectionist measures and a declining marginal impact of financial deepening, are dampening the support from factors that boosted global trade in the past. Notwithstanding the particularly pronounced weakness in 2015 that is assessed to be mostly a temporary phenomenon owing to a number of country-specific adverse shocks, the upside potential for trade over the medium term appears to be limited. The “new normal” for global trade can therefore be expected to look broadly similar to the weakness observed over recent years on average. In this sense, buoyant trade dynamics in the 1990s and early 2000s may have been what was exceptional, rather than the slowdown over recent years. JEL Classification: F10, F13, F14, F15
    Keywords: frictions in global trade, global trade slowdown, global value chains, protectionism, trade elasticity
    Date: 2016–09
  31. By: Frankel, Jeffrey (Harvard University)
    Abstract: Two big questions look somewhat different than they did 10 or 20 years ago. First: would the long-term trend of globalization continue? Contrary to all predictions, trade growth has slowed markedly since the Global Financial Crisis of 2008-09. But the feared increase in protectionism did not materialize, so one must look elsewhere for explanations. Two likely factors behind the slowdown in trade are a maturing of global supply chains and a slowdown in trade-intensive physical investment. Second, would the rapid growth of emerging market economies (EMEs) continue, and which ones? Most EMEs recovered strongly in 2010-11, but now seem to be slowing down in a more long-lasting way. For both these issues the role of China is crucial, since it now carries so much weight in the global economy. Breathless reports in 2014 that the Chinese economy had overtaken the US economy as the world?s largest (measured by Purchasing Power Parity) were followed rapidly in 2015 by breathless reports that its economy was failing. That China has slowed down from past growth rates of 10% to a more moderate rate of 7% or lower should not have come as a surprise. It is part of a natural process of long-term convergence and involves a "rebalancing" of the economy from manufacturing into services that is desirable, even if it means a loss of export markets for some others. The open question is whether the Chinese transition to a more moderate and sustainable growth path will take the form of a hard landing or a soft landing.
    Date: 2016–06
  32. By: Andersen, Lykke E.
    Abstract: The scale of inequality around the world is almost unfathomable. The average inhabitant of Norway, Qatar and Switzerland earns more in one day than what the average inhabitant of Malawi and Burundi earns in an entire year1. If you get pregnant in Sierra Leone, you are 300 times more likely to die from pregnancy related causes than if you get pregnant in Sweden2. If you are born in Angola or the Central African Republic, you are 50 times more likely to die within your first year of life than if you are born in Singapore. Currently, about 60% of the variation in income across the globe is explained by country citizenship alone, while parental income class within the country where you were born explains another 20% (Milanovic, 2011). This means that at least 80% of the variation in income (and other income related factors) is already determined by birth, leaving less than 20% to be determined by a person's own effort, ingenuity, planning, determination, risk-taking and passion. Thus, the world is not just a place of huge inequality of outcomes, but also of huge inequality of opportunity. Inequality is becoming an increasingly concerning issue and recently 176 countries agreed that one of the Sustainable Development Goals for the next 15 years should be to "reduce inequality within and among countries." One of the specific targets associated with this goal is to "facilitate orderly, safe, regular and responsible migration and mobility of people, including through the implementation of planned and well-managed migration policies."
    Date: 2016

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