nep-int New Economics Papers
on International Trade
Issue of 2016‒11‒27
37 papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. The Evolving Composition of Intra-EU Trade By Sandra M. Leitner; Manual Macias; Daniel Mirza; Olga Pindyuk; Iulia Siedschlag; Robert Stehrer; Roman Stöllinger; Zuzanna Studnicka
  2. Global Value Chains Participation and Productivity Gains for North African Firms By Davide Del Prete; Giorgia Giovannetti; Enrico Marvasi
  3. Policy Measurement and Multilateral Resistance in Gravity Models By Cipollina, Maria Pina; De Benedictis, Luca; Salvatici, Luca; Vicarelli, Claudio
  4. Global Value Chains and Changing Trade Elasticities By Byron Gangnes; Ari Van Assche
  6. Trade Liberalization, Division of Labor and Welfare under Oligopoly By Kenji Fujiwara; Keita Kamei
  7. Friendly fire - the trade impact of the Russia sanctions and counter-sanctions By Crozet, Matthieu; Hinz, Julian
  8. The Role of Newly Industrialized Economies in Global Value Chains By Dominik Boddin
  9. Israel's Open-Secret Trade By Lorenzo Rotunno; Pierre-Louis Vézina
  10. Bugs, tariffs and colonies: the political economy of the wine trade 1860-1970 By Giulia Meloni; Jo Swinnen
  11. Bugs, tariffs and colonies: the political economy of the wine trade 1860-1970 By Giulia Meloni; Jo Swinnen
  12. Variety and Quality in Trade Dynamics By Hamano Masashige
  13. Growth-enhancing effect of openness to trade and migrations: What is the effective transmission channel for Africa? By Dramane Coulibaly; Blaise Gnimassoun; Valérie Mignon
  14. Foreign Direct Investment and Value Added in Indonesia By Sjöholm, Fredrik
  15. Trade effects of the EU-Korea free trade agreement: A comparative analysis of expected and observed outcomes By Forizs, Virág; Nilsson, Lars
  16. US–COOL Retaliation: The WTO's Article 22.6 Arbitration By Chad P. Bown; Rachel Brewster
  17. Impact of hard and soft infrastructure: Evidence from the EU partners, North Africa and CEECs By Mathilde Maurel; Hugo Lapeyronie; Bogdan Meunier
  18. Has China Replaced Colonial Trade ? By Laurent Didier; Pamina Koenig
  19. Financial Globalization and Foreign Direct Investment By Steven Poelhekke
  20. Fair trade: global problems and individual responsibilities By Sarah C. Goff
  21. The Determinants of Foreign Direct Investment in Transition Economies: A Meta-Analysis By Masahiro Tokunaga; Ichiro Iwasaki
  22. Remittances and the Brain Drain: Evidence from Microdata for Sub-Saharan Africa By Bredtmann, Julia; Martínez Flores, Fernanda; Otten, Sebastian
  23. How Do Exporters Cope With Violence? Evidence from Political Strikes in Bangladesh By Reshad N. Ahsan; Kazi Iqbal;
  24. Extending Industry Specialization through Cross-Border Acquisitions By Laurent Frésard; Ulrich Hege; Gordon Phillips
  25. Trade Liberalization and Mortality: Evidence from U.S. Counties By Justin R. Pierce; Peter K. Schott
  26. The Dynamics of Multinational Activity: Evidence from U.S. Firms By Natalia Ramondo; Lindsay Oldenski; Stefania Garetto
  27. Trade Openness-Carbon Emissions Nexus: The Importance of Turning Points of Trade Openness for Country Panels By Shahbaz, Muhammad; Tavares, Samia; Ahmed, Khalid; Hammoudeh, Shawkat
  28. Are Commodity Price Booms an Opportunity to Diversify? Evidence from Resource-dependent Countries By Clement Anne
  29. Multilateral Trade Bargaining and Dominant Strategies By Kyle Bagwell; Robert W. Staiger
  30. US–COOL Retaliation: Foot-and-Mouth Disease and Argentina's Beef Exports: The WTO's US–Animals Dispute By Chad P. Bown; Jennifer A. Hillman
  31. International trade in services and inequalities: Empirical evaluation and role of tourism services By Petit, Sylvain
  32. The political economy of non-tariff measures for sustainable and inclusive world development By Cristina Herghelegiu
  33. Corruption, trade costs, and gains from tariff liberalization: evidence from Southern Africa By Sandra Sequeira
  34. Making US Trade and Investment Policies Work for Global Development By Robert Z. Lawrence; Terra Lawson-Remer
  35. The Costs and Benefits of Migration into the European Union: Debunking Contemporary Myths with Facts By Asongu, Simplice; Leke, Ivo
  36. Economics and Politics of International Investment Agreements By Horn, Henrik; Tangerås, Thomas
  37. Specialization Dynamics, Convergence, and Idea Flows By Liuchun Deng

  1. By: Sandra M. Leitner (The Vienna Institute for International Economic Studies, wiiw); Manual Macias; Daniel Mirza; Olga Pindyuk (The Vienna Institute for International Economic Studies, wiiw); Iulia Siedschlag; Robert Stehrer (The Vienna Institute for International Economic Studies, wiiw); Roman Stöllinger (The Vienna Institute for International Economic Studies, wiiw); Zuzanna Studnicka
    Abstract: Abstract Global trade in goods and services was severely hit by the economic crisis in 2008, which initiated a pronounced but short-lived trade collapse. Until 2011 trade flows recovered relatively quickly, but since then global trade in goods has been rather anaemic. This development is partly the result of the low dynamics of EU-related trade which accounts for a large share of global trade flows. Regarding intra-EU trade a strong increase in overall bilateral trade intensities is observed. The process of EU integration before the crisis and differentiated growth patterns of goods and services exports implied that exporting activities became slightly less concentrated across EU Member States. However, specialisation dynamics implied an increasing geographic clustering and specialisation of goods and services exports across Europe. These changes in the geographical patterns of intra-EU trade activities were mostly driven by changes in the patterns of trade in the medium-quality segment which can be interpreted as a ‘climbing up’ phenomenon of less advanced countries. Results from a gravity framework suggest a structural break of these trends after the crisis. Another aspect of the increasing trade intensity is the role and magnitudes of intra-firm trade and potential determinants thereof. However, research on this is hampered by a severe lack of data and only a few insights can be gained, mostly for extra-EU trade. Results based on foreign affiliates’ trade statistics (FATS) data indicate that intra-firm trade flows were responsible for more than half of total trade between the EU and the US in 2012. Results also suggest that intra-firm trade has been more resilient to the trade crisis despite the more difficult global environment for foreign direct investment and export activities. Based on a gravity approach, overall EU intra-firm trade is estimated to be lower, though these results need to be interpreted with caution. In a case study based on Irish firm-level data it is shown that intra-firm trade accounts for 30% of exports and 25% of imports.
    Keywords: EU trade, trade slowdown, trade specialisation and concentration, intra-firm trade
    JEL: F14 F15
    Date: 2016–11
  2. By: Davide Del Prete (IMT Lucca); Giorgia Giovannetti (University of Firenze); Enrico Marvasi (Politecnico di Milano)
    Abstract: This paper analyzes the participation of North African countries and Â…firms into Global Value Chains (GVCs) and its implications for competitiveness. First it shows that North African countries are not (yet) fully integrated into international production networks, although large part of their (low) trade is due to value added related upstream activities, and the importance of global linkages has been increasing over time. Then, it empirically investigates if and how the performance of North African Â…firms is affected by GVC participation. We fiÂ…nd that Â…firms that have had access to international supply chains perform better, showing further productivity gains over time. The ability to get such improvements however relies on speciÂ…fic characteristics, such as an adequate level of quality and compliance with international standards, along with specialized skills. Policies designed to support the latter represent then an important tool for linking developing countries to global production and trade, with possible positive consequences on their economic development.
    Keywords: global value chains, fiÂ…rm heterogeneity, North Africa, productivity
    JEL: F14 F15 L23 L25
    Date: 2016–11–14
  3. By: Cipollina, Maria Pina; De Benedictis, Luca; Salvatici, Luca; Vicarelli, Claudio
    Abstract: Over the past decade, the gravity equation has emerged as the empirical workhorse in international trade to study the ex-post effects of trade policies on bilateral trade. In this paper we are concerned with the issue of how the econometric specification and the policy measurement choices can affect the goal to obtain accurate estimates of the coefficient associated with bilateral trade policies within a theoretically-consistent model. The problem is even more serious when the policy treatment is approximated through dummies as it is still often the case in the literature. Using a Monte Carlo simulation analysis, this paper shows that the use of fixed effects to control for unobserved heterogeneity leads to biased estimates of the policy impact even when the policy is measured through a continuous variable. The bias highlighted by our results is the combination of measurement error about bilateral trade costs (or preferences) and the specification used to proxy multilateral resistance terms.
    Keywords: Gravity model; Multilateral trade resistance; Policy evaluation; Monte Carlo Analysis.
    JEL: C10 C50 F14
    Date: 2016–11
  4. By: Byron Gangnes (Department of Economics, University of Hawaii at Manoa; UHERO); Ari Van Assche (Department of International Business, HEC Montréal)
    Abstract: The trade collapse of 2008-2009 and the anemic trade growth since then raise the question of whether trade elasticities may be undergoing fundamental structural change. A potential source of such change is the spread of global value chains (GVCs), which have brought a marked increase in the use of intermediate goods and changes in the nature of trade competition. We review the recent literature on the impact of GVCs on measured trade elasticities and the ways in which their emergence may affect how we estimate and interpret trade responsiveness. We then draw out a few implications of recent research for global modeling.
    Keywords: Global value chains, trade elasticities
    JEL: C5 F14 F23
    Date: 2016–09
  5. By: Magdalena Olczyk (Gdansk University of Technology, Gdansk, Poland); Aleksandra Kordalska (Gdansk University of Technology, Gdansk, Poland)
    Abstract: The main objective of this paper is to assess the impact of selected determinants on both exports in value added and exports in gross terms for seven CEE economies, based on 13 manufacturing subsectors and for the period 1995-2011. The results of the analysis show a substantial decrease in domestic value added in a majority of the countries, especially in medium-high- and high-tech industries. For the seven CEE countries the impact of the main determinants (except vertical specialisation) are fairly similar when exports are measured in value added or in gross terms. The results indicate a greater impact of labour productivity and highly skilled employees on generating domestic value added in the manufacturing sector. CEE countries do not achieve comparative advantages of a capital-intensive nature in exports of manufactured products. Additionally, manufacturing in CEE countries does not serve a ‘carrier function’ for services to contribute to a country’s export performance.
    Keywords: gross exports, value added exports, CEE economies, manufacturing
    JEL: C23 F12 F14 F40 L60
    Date: 2016–09
  6. By: Kenji Fujiwara (Kwansei Gakuin University); Keita Kamei (Yamagata University)
    Abstract: Incorporating explicitly division of labor into a two-country gen- eral oligopolistic equilibrium model, we examine the firm productivity effect of trade liberalization and its welfare implication. We show that a tariff reduction increases the firm productivity of the trading indus- tries but decreases that of the non-trading industries. An expansion of the trading industries, in contrast, decreases the rm productivity of both the trading and non-trading industries. We then find that a tariff reduction necessarily reduces welfare while the welfare effect of expansion of trading industries is ambiguous.
    Keywords: General oligopolistic equilibrium, division of labor, firm productivity, welfare.
    JEL: F10 F12 L25
    Date: 2016–09
  7. By: Crozet, Matthieu; Hinz, Julian
    Abstract: Economic sanctions are a frequent instrument of foreign policy. In a diplomatic conflict, they aim to elicit a change in the policies of foreign governments by damaging their economy. However, sanctions are not costless for the sending economy, where domestic firms involved in business with the target countries might incur economic damages. This paper evaluates these costs in terms of export losses of the diplomatic crisis that started in 2014 between the Russian Federation and 37 countries, (including the United States, the EU, and Japan) over the Ukrainian conflict for the implicated countries. We first gauge the impact of the sanctions' regime using a structural gravity framework and quantify the trade losses in a general equilibrium counterfactual analysis. We estimate this loss at US$114 billion from 2014 until the end of 2015, with US$ 44 billion being borne by sanctioning Western countries. Interestingly, we find that the bulk of the impact stems from products that are not directly targeted by Russian retaliations (taking the form of an embargo on imports of agricultural products). This result suggests that most of the losses are not attributable to the Russian retaliation but to Western sanctions. We then investigate the underlying mechanism at the firm level using French customs data. Results indicate that neither consumer boycotts nor perceived country risk can account for the decline in exports of products that are not targeted by the Russian embargo. Instead, the disruption of the provision of trade finance services is found to have played an important role.
    Keywords: Sanctions,Trade,Foreign policy,Boycott,Embargo,Trade finance
    JEL: F51 F14 F13 F52
    Date: 2016
  8. By: Dominik Boddin
    Abstract: In light of increased vertical specialization and the dominance of trade in intermediates rather than final goods, this paper seeks to raise awareness of the limitations of traditional trade measures on a gross output basis. To do so, this paper uses the WIOD, a world input output table, as an alternative trade measure to analyze the role of six newly industrialized economies in global value chains. The differences between measures on a gross output basis and value added basis are striking. Export shares measured by both methods differed by more than 20 percent for some industries. These findings highlight the need for more sophisticated world input output data to form a better understanding of global trade dynamics and country interdependencies.
    Keywords: Newly industrializing economies;International trade;Industrialization;Economic data and statistics;Data analysis;Global Value Chains, Vertical Specialization, Newly Industrialized Economies
    Date: 2016–10–17
  9. By: Lorenzo Rotunno (Aix-Marseille University (Aix-Marseille School of Economics), CNRS, & EHESS); Pierre-Louis Vézina (King’s College London)
    Abstract: This paper uncovers and quantifies Israel’s exports to countries that ban trade with Israel. Israel exported a total of $6.4 billion worth of merchandise to boycott countries between 1962 and 2012, and most of this trade is illicit, i.e. not recorded by the importers. We find that electronic exports to Malaysia account for the lion’s share of this trade but it also includes a wide array of products from footwear to fruit and vegetables. Our estimates suggest Israel’s exports to these countries would be 10 times larger without the boycott. On top of providing further evidence on the unintended consequences of unilateral trade bans, this paper provides a case study on the role of politics in international trade.
    Keywords: trade policy, Israel, illegal trade
    JEL: F13 O17
    Date: 2016–10
  10. By: Giulia Meloni; Jo Swinnen
    Abstract: The 1860–1970 period is a particularly interesting period to study wine trade because of dramatic changes in the wine markets and trade over the course of a century. The dramatic changes in trade flows were caused by both “nature” and “men”. Mediterranean wine trade represented around 90% of global wine trade and France was the world’s leading exporter. The arrival of Phylloxera devastated French vineyards and stimulated Spanish and Italian wine exports. When French wine production recovered, French winegrowers pressured their government to intervene, resulting in high tariffs on Spanish and Italian wines and Greek raisins. The protectionist trade regime contributed to the bankruptcy of Greece and to the substitution of wine trade from Spain and Italy to France’s North African colonies. When Algeria, Morocco and Tunisia became independent, France imposed high wine tariffs, effectively killing their wine exports. The decline of the wine industry in North Africa coincided with the trade and policy integration of the South European wine exporters in the EEC—the predecessor of the EU.
    Date: 2016–10
  11. By: Giulia Meloni; Jo Swinnen
    Abstract: The 1860–1970 period is a particularly interesting period to study wine trade because of dramatic changes in the wine markets and trade over the course of a century. The dramatic changes in trade flows were caused by both “nature” and “men”. Mediterranean wine trade represented around 90% of global wine trade and France was the world’s leading exporter. The arrival of Phylloxera devastated French vineyards and stimulated Spanish and Italian wine exports. When French wine production recovered, French winegrowers pressured their government to intervene, resulting in high tariffs on Spanish and Italian wines and Greek raisins. The protectionist trade regime contributed to the bankruptcy of Greece and to the substitution of wine trade from Spain and Italy to France’s North African colonies. When Algeria, Morocco and Tunisia became independent, France imposed high wine tariffs, effectively killing their wine exports. The decline of the wine industry in North Africa coincided with the trade and policy integration of the South European wine exporters in the EEC—the predecessor of the EU.
    Date: 2016–10
  12. By: Hamano Masashige (Sophia University, Tokyo)
    Abstract: This paper provides a simple two-country DSGE model that includes endoge- nous determination of both the number of traded varieties and the traded products quality with heterogeneous firms. By introducing product quality explicitly, the theo- retical model sheds light on the cyclical properties of quality in international trade. We find that aggregate product quality of exports and imports are both negatively correlated with real exports and imports in the US data. Our model can replicate a wedge-shaped pattern of cross-correlations, together with a number of statistics on US trade dynamics. We also perform several impulse response analyses and find that trade liberalization induces quality downgrading of exports and imports, which negatively impacts consumer welfare.
    Keywords: product quality, product variety, firm entry, firm heterogeneity
    JEL: F12 F41 F43
    Date: 2016
  13. By: Dramane Coulibaly; Blaise Gnimassoun; Valérie Mignon
    Abstract: This paper investigates the growth-enhancing effect of openness to trade and to migration by focusing on African countries. Relying on robust estimation techniques dealing with both endogeneity and omitted variables issues, our results put forward the importance of accounting for the type of the partner country. We find evidence that while trade between Africa and industrialized countries has a clear and robust positive impact on Africa's standards of living, trade with developing countries fails to be growth-enhancing. Moreover, our findings show that migration has no significant effect on per capita income in Africa regardless of the partner. Finally, exploring the trade openness transmission channel, we establish that the growth-enhancing effect of Africa's trade with industrialized countries mainly occurs through an improvement in total factor productivity.
    Keywords: Trade, International migration, Income per person, Africa.
    JEL: F22 F4 O4 O55
    Date: 2016
  14. By: Sjöholm, Fredrik (Department of Economics, Lund University)
    Abstract: Foreign Direct Investment (FDI) has increased in importance over the last decades, globally as well as in Indonesia. We examine how such inflows of FDI affects value added in Indonesia. The effect is positive: foreign firms generate relatively high levels of value added and they also seem to have a positive impact on value added in local firms. Moreover, FDI contribute to a structural change of the economy towards more high-value added activities. High value added could lead to increased investments and higher tax revenues for the government. High value added could also benefit labor through higher wages, an effect that is empirically confirmed in Indonesia.
    Keywords: Foreign Direct Investment; Multinational Firms; Value Added; Industrial Development
    JEL: F23 F61 F63
    Date: 2016–11–18
  15. By: Forizs, Virág (DG Trade); Nilsson, Lars (DG Trade)
    Abstract: It is common that observers simply look at the bilateral trade figures following the introduction of a free trade agreement (FTA) and try assess whether the agreement has increased trade or not (since trying to assess what the level of trade would have been in the theoretical absence of the FTA is too complex). The present short note therefore compares the economic assessment of the negotiated outcome of the EU-Korea FTA, carried out for the European Commission by CEPII/ ATLASS, with observed data. Our results point to sound projections against observed data at the aggregate level and in the largest sectors such as Machinery as opposed to trade in less important sector.
    Keywords: International trade; EU; Korea; comparative analysis
    JEL: F13 F15
    Date: 2016–09–01
  16. By: Chad P. Bown (Peterson Institute for International Economics); Rachel Brewster (Duke Law School)
    Abstract: This paper examines the World Trade Organization's Article 22.6 arbitration report on the dispute over the United States' country of origin labeling (COOL) regulation for imported meat products. At prior phases of the legal process, a WTO Panel and the Appellate Body had sided with Canada and Mexico by finding that the US regulation had negatively affected their exports of livestock— cattle and hogs—to the US market. The arbitrators authorized Canada and Mexico to retaliate by over $1 billion against US exports—the second largest authorized retaliation on record and only the twelfth WTO dispute to reach the stage of an arbitration report. Our legal-economic analysis focuses on several issues in the arbitration report. First, the complainants requested that, to compute the permissible retaliation limit, the arbitrators consider a new formula that would include the effects of domestic price suppression. We present a simple, economics-based model to explain the arbitrators' rejection of this proposal. Second, we provide market context for the $1 billion finding. The arbitrators relied on the "trade effects" formula, which sets the retaliation limit as equivalent to the perceived loss of export revenue from the WTO violation. We argue that this amount was implausibly large, given the conditions in the US market for cattle and hogs during this period. We then describe the challenges facing arbitrators as they construct such estimates, including those likely to have arisen in this dispute.
    Keywords: WTO, dispute, arbitration, retaliation, regulation, nontariff barrier, remedies
    JEL: F13
    Date: 2016–11
  17. By: Mathilde Maurel (FERDI - Fondation pour les Etudes et Recherches sur le Développement International - FERDI, CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Hugo Lapeyronie (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Bogdan Meunier (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)
    Abstract: In this paper, we analyze how a set of slow moving determinants affect trade between the EU on one hand, and CEECs (Central and Eastern European countries) and African countries on the other hand, over the period 2005-2012. We focus on two sets of slow moving determinants, doing business institutions and logistical infrastructure, as well as embassies and ambassadors, by controlling for many other possible time-invariant trade cost determinants. Trade is disentangled for three types of goods: primary goods, parts and components and capital goods. Methodologically, we first derive dyadic country-pair fixed effects and in a second stage we correlate fixed effects with a set of influential factors. In our analysis, (i) we identify the beneficial effects of soft and hard infrastructure; (ii) we compare the latter with the benefit of opening an embassy and also compute the extra trade that would follow a move towards a better score of the trade facilitation and doing business indicators; and (iii) we show that a huge part of the missing bilateral trade fixed effect of North African countries is accounted for by soft and hard infrastructure, and that diplomatic activity is also a powerful driver of regional integration.
    Keywords: trade facilitation,regionalism ,Gravity
    Date: 2016–11–13
  18. By: Laurent Didier (CEMOI - Centre d'Économie et de Management de l'Océan Indien - Université de la Réunion - IAE - Institut d'Administration des Entreprises - Université de la Réunion); Pamina Koenig (Université de Rouen, PSE - Paris School of Economics, PSE - Paris-Jourdan Sciences Economiques - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - École des Ponts ParisTech (ENPC) - CNRS - Centre National de la Recherche Scientifique)
    Abstract: China is often suspected of taking over the extraordinary trade relationships that former colonies had within colonial empires. We detail the three reasons why China's trade flows with former colonies could exhibit unexpected levels after independence. Besides potential preferential bilateral relationships built after independence, the two expected determinants of trade flows are China's export capacity and the natural redirection caused by the increase in country pairs trade costs due to independence. We investigate and quantify the three reasons explaining the level of former colonies' trade flows with China. Using sequentially naive graphical representations and structural gravity equations, we show that methodological issues can be largely responsible for displaying and estimating abnormaly high trade levels between former colonies and China. We show that increased trade between these pairs of countries is the result of coinciding unilateral factors on each side which raise trade with all partners, instead of being driven by more intense bilateral preferences. We then measure the reorientation of trade flows from former colonies' metropoles towards China and show that independence has produced the expected redistribution: trade flows would be 15$\%$ lower with China, had former colonies not become independent.
    Keywords: colonial trade, gravity equation, China, multilateral resistance,bilateral effects
    Date: 2016–11
  19. By: Steven Poelhekke (VU University Amsterdam, The Netherlands)
    Abstract: This chapter provides a broad overview of the upward trends in financial globalization and foreign direct investment and asks whether and how financial globalization is linked with the foreign direct investment decisions of non-financial multinational enterprises. Several potential links and their empirical support in the recent literature are discussed: the elements of foreign direct investment that require (global) financial services; the role of trade credit; and the question whether banks follow their customers abroad. Finally, the effect of the recent financial crisis is discussed. It finds that financial globalization provides a reduction in broadly defined transaction costs which can boost both trade and foreign direct investment, at the costs of more exposure of the real economy to financial shocks.
    Keywords: foreign direct investment; financial globalization; banks
    JEL: F23 F36 F43 O40
  20. By: Sarah C. Goff
    Abstract: The topic of global trade has become central to debates on global justice and on duties to the global poor, two important concerns of contemporary political theory. However, the leading approaches fail to directly address the participants in trade and provide them with normative guidance for making choices in non-ideal circumstances. This paper contributes an account of individuals’ responsibilities for global problems in general, an account of individuals’ responsibilities as market actors, and an explanation of how these responsibilities coexist. The argument is developed through an extended case study of a consumer’s choice between conventional and fair trade coffee. My argument is that the coffee consumer’s choice requires consideration of two distinct responsibilities. First, she has responsibilities to help meet foreigners’ claims for assistance. Second, she has moral responsibilities to ensure that trades, such as between herself and a coffee farmer, are fair rather than exploitative.
    Keywords: fair trade; exploitation; responsibility; global justice; ethical consumerism
    JEL: L81
    Date: 2016–11–06
  21. By: Masahiro Tokunaga (Faculty of Business and Commerce, Kansai University); Ichiro Iwasaki (Institute of Economic Research, Hitotsubashi University)
    Abstract: In this paper, we conduct a meta-analysis of studies that empirically examine the relationship between economic transformation and foreign direct investment (FDI) performance in Central and Eastern Europe and the former Soviet Union over the past quarter century. More specifically, we synthesize the empirical evidence reported in previous studies that deal with the determinants of FDI in transition economies, focusing on the impacts of transition factors. We also perform meta-regression analysis to specify determinant factors of the heterogeneity among the relevant studies and the presence of publication selection bias. We find that the existing literature reports a statistically significant nonzero effect as a whole, and a genuine effect is confirmed for some FDI determinants beyond the publication selection bias.
    Keywords: foreign direct investment (FDI), FDI determinants, transition economies, meta-analysis, publication selection bias
    JEL: E22 F21 P33
    Date: 2016–11
  22. By: Bredtmann, Julia (RWI); Martínez Flores, Fernanda (RWI); Otten, Sebastian (RWI)
    Abstract: Research on the relationship between high-skilled migration and remittances has been limited by the lack of suitable microdata. We create a unique cross-country dataset by combining household surveys from five Sub-Saharan African countries that enables us to analyze the effect of migrants' education on their remittance behavior. Having comprehensive information on both ends of the migrant-origin household relationship and employing household fixed effects specifications that only use within-household variation for identification allows us to address the problem of unobserved heterogeneity across migrants' origin households. Our results reveal that migrants' education has no significant impact on the likelihood of sending remittances. Conditional on sending remittances, however, high-skilled migrants send significantly higher amounts of money to their households left behind. This effect holds for the sub-groups of internal migrants and migrants in non-OECD countries, while it vanishes for migrants in OECD destination countries once characteristics of the origin household are controlled for.
    Keywords: migration, remittances, skill level, brain drain, Sub-Saharan Africa
    JEL: F22 F24 O15
    Date: 2016–11
  23. By: Reshad N. Ahsan (Department of Economics, The University of Melbourne); Kazi Iqbal (Bangladesh Institute of Development Studies);
    Abstract: We examine the impact of widespread political strikes on the export-oriented garments industry in Bangladesh. To do so, we use the universe of political strikes and export transactions in Bangladesh during 2010 to 2013. These strikes represent uniquely targeted episodes of violence that allow us to identify its effect on exports through the transport disruption channel alone. Our results suggest that these strikes do not have a cumulative effect on a firm’s decision to export or the value of its exports. Instead, they increase the cost of transporting shipments to the port by 69 percent. Thus, our results identify an additional cost of political violence that has been underexplored in the literature. Further, our results suggest that ensuring that political violence only disrupts transportation and not production may be an effective way to shield exporters in other developing countries from the adverse effects of such violence.
    Keywords: Political Violence, Exports, Garments
    JEL: D74 F14 O14
    Date: 2016–10
  24. By: Laurent Frésard; Ulrich Hege; Gordon Phillips
    Abstract: We investigate the role of industry specialization in horizontal cross-border mergers and acquisitions. We find that acquirers from more specialized industries in a country are more likely to buy foreign targets in countries that are less specialized in these same industries. The role of industry specialization in foreign acquisitions is more prevalent when contracting inefficiencies and exporting costs limit arms' length relationships. The economic gains in cross-border deals are larger when specialized acquirers purchase assets in less specialized industries. These results are consistent with an internalization motive for foreign acquisitions, through which acquirers can apply localized intangibles on foreign assets.
    JEL: D22 D4 D53 G34 L1 L11
    Date: 2016–11
  25. By: Justin R. Pierce; Peter K. Schott
    Abstract: We investigate the impact of a large economic shock on mortality. We find that counties more exposed to a plausibly exogenous trade liberalization exhibit higher rates of suicide and related causes of death, concentrated among whites, especially white males. These trends are consistent with our finding that more-exposed counties experience relative declines in manufacturing employment, a sector in which whites and males are disproportionately employed. We also examine other causes of death that might be related to labor market disruption and find both positive and negative relationships. More-exposed counties, for example, exhibit lower rates of fatal heart attacks.
    JEL: F1 F13 F16 I1 I18 J08 J21 J6
    Date: 2016–11
  26. By: Natalia Ramondo (UCSD); Lindsay Oldenski (Georgetown University); Stefania Garetto (Boston University)
    Abstract: This paper examines how the activities performed by multinational firms change over time. Using a panel of US multinational firms over 25 years from the US Bureau of Economic Analysis, we classify affiliate sales as horizontal, vertical, or export platform based on their destination, and we trace the evolution of these three types of affiliate sales within firms over time. We establish two stylized facts. First, affiliate sales, both to the local market and to other countries, grow very little over the life cycle of the affiliate. Second, affiliates of U.S. multinational firms specialize in a core activity at birth, which persists as the main activity during the life cycle. Some diversification is observed later in life, particularly from horizontal to export activities. Informed by these facts, we propose a dynamic model of multinational production that is consistent with them. The model can be calibrated to shed light on the nature of the costs of multinational activity, which are essential ingredients to quantify the gains from openness arising from multinationals’ operations.
    Date: 2016
  27. By: Shahbaz, Muhammad; Tavares, Samia; Ahmed, Khalid; Hammoudeh, Shawkat
    Abstract: This paper explores the relationship between trade openness and CO2 emissions by incorporating economic growth as an additional and potential determinant of this relationship for three groups of 105 high, middle and low income countries. We apply the Pedroni (1999) and Westerlund (2007) panel cointegration tests and find that the three variables are cointegrated in the long run. Trade openness impedes environmental quality for the global, high income, middle and low income panels but the impact varies in these diverse groups of countries. The panel VECM causality results highlights a feedback effect between trade openness and carbon emissions at the global level and the middle income countries but trade openness Granger causes CO2 emissions for the high income and low income countries. Policy implications are also provided.
    Keywords: Trade Openness, CO2 Emissions, Causality
    JEL: Q5
    Date: 2016–11–09
  28. By: Clement Anne (CERDI - Centre d'études et de recherches sur le developpement international - Université d'Auvergne - Clermont-Ferrand I - CNRS - Centre National de la Recherche Scientifique)
    Abstract: The recent commodity price drop has renewed attention on the importance to diversify resource-dependent economies in particular to limit their exposure to commodity price volatility. While commodity price booms can be an opportunity to diversify the economy if managed properly, it remains an empirical question whether this has effectively been the case. Using a panel of 78 resource-dependent countries over 1970-2012 we tackle this question thanks to cointegration analysis, dynamic macro-panel estimators, as well as analyses of diversification outcomes during selected commodity price boom and bust episodes. While our econometric results evidence a stable and significant impact of commodity price booms on export concentration through a more concentrated mix of already exported products, this relationship includes both an increase in export concentration during commodity price booms and an increase in export diversification during commodity price drops. We also evidence a higher increase in export concentration during the 2000s commodity price booms than the 1970s, which explains the urging current need of most resource-dependent countries to diversify.
    Keywords: cerdi
    Date: 2016–10–14
  29. By: Kyle Bagwell; Robert W. Staiger
    Abstract: Motivated by GATT bargaining behavior and renegotiation rules, we construct a three-country, two-good general-equilibrium model of trade and examine multilateral tariff bargaining under the constraints of non-discrimination and multilateral reciprocity. We allow for a general family of government preferences and identify bargaining outcomes that can be implemented using dominant strategy proposals for all countries. In the implementation, tariff proposals are followed by multilateral rebalancing, a sequence that is broadly consistent with observed patterns identified by Bagwell, Staiger and Yurukoglu (2016) in the bargaining records for the GATT Torquay Round. The resulting bargaining outcome is efficient relative to government preferences if and only if the initial tariff vectors position the initial world price at its "politically optimal" level. In symmetric settings, if the initial tariffs correspond to Nash tariffs, then the resulting bargaining outcome is efficient and ensures greater-than-Nash trade volumes and welfares for all countries. We also highlight relationships between our work and previous research that examines strategy-proof rationing rules in other economic settings.
    JEL: D71 F02 F13
    Date: 2016–11
  30. By: Chad P. Bown (Peterson Institute for International Economics); Jennifer A. Hillman (Georgetown University Law Center)
    Abstract: This paper provides a legal-economic assessment of the WTO panel report in US–Animals, one of a growing list of WTO disputes due to problematic conditions under which an importing country closes and reopens its market after an infectious disease outbreak arising in an exporting country. The United States banned imports of beef from Argentina following a 2000 Argentine outbreak of highly contagious foot-and-mouth disease (FMD), a disease not found in the United States since 1929. The United States refused to relax its import ban, and Argentina filed a WTO dispute in 2012, more than six years after its last FMD outbreak. Our analysis starts with Argentina's claim that the gap between its first requests, in 2002, to restore its trading rights and no action by the United States as of 2012 constituted "undue delay." We rely on simple insights from economic research on asymmetric information problems—moral hazard and adverse selection—to describe the difficulties facing the World Organization for Animal Health (OIE) and the WTO's Sanitary and Phytosanitary (SPS) Agreement in dealing with problems like FMD. Such an environment creates disincentives for socially efficient behavior that were clearly realized in this episode. The exporting country has an incentive to hide information on outbreaks and report being disease-free too quickly, and the importing country has no incentive to quickly undertake the costly effort of conducting the necessary inspections to restore the exporter's market access. Finally, we address the panel report's treatment of alleged discrimination both across different FMD-impacted countries and across FMD-impacted and nonimpacted geographic zones within Argentina, and we touch on the report's shift in approach regarding the obligation of the United States to take into account the special needs of developing countries such as Argentina.
    Keywords: nontariff measure, OIE, standards, public health, trade policy
    JEL: F13
    Date: 2016–11
  31. By: Petit, Sylvain
    Abstract: This study investigates the impact of the international openness in tourism services trade on wage inequality between highly skilled, semi-skilled, and unskilled workers in the tourism industry. The sample covers 10 developed countries and expands over 15 years. A cointegrated panel data model and an error correction model were used to distinguish between the short- and long-run effects. The results are compared to those of openness of business services and manufactured goods. The findings point out that tourism increases wage inequality at the expense of the least skilled workers in the long run and the short run.
    Keywords: cointegrated panel model, error correction model, inequality, openness trade, trade of tourism services
    JEL: C23 D31 L83
    Date: 2016
  32. By: Cristina Herghelegiu (PSE - Paris School of Economics, PSE - Paris-Jourdan Sciences Economiques - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - École des Ponts ParisTech (ENPC) - CNRS - Centre National de la Recherche Scientifique)
    Abstract: Over the last decades, non-tariff measures (NTMs) have seen an important upsurge. However, little research has focused on the political economy of non-tariff protection, and the existing studies are mainly based on a single country or a specific type of measures. This paper seeks to fill the gap by empirically evaluating the determinants of NTMs in several countries, both developed and developing. Overall results show certain protectionist purposes behind the adoption of NTMs. This conclusion is reinforced for restrictive measures (i.e. subject to trade concerns), but does not hold for non-restrictive measures, suggesting the legitimate goal of several NTMs. Furthermore, transnational lobbying, defined as the influence exerted by national business groups during the Ministerial Conferences - the highest authority of the World Trade Organization (WTO) - increases the probability of adopting NTMs in both developed and developing countries.
    Keywords: Non-tariff Measures,Political Economy,International Trade,Lobbying
    Date: 2016–10–21
  33. By: Sandra Sequeira
    Abstract: This paper exploits quasi-experimental variation in tariffs in southern Africa to estimate trade elasticities. Traded quantities respond only weakly to a 30 percent reduction in the average nominal tariff rate. Trade flow data combined with primary data on firm behavior and bribe payments suggest that corruption is a potential explanation for the observed low elasticities. In contexts of pervasive corruption, even small bribes can significantly reduce tariffs, making tariff liberalization schemes less likely to affect the extensive and the intensive margins of firms' import behavior. The tariff liberalization scheme is, however, still associated with improved incentives to accurately report quantities of imported goods, and with a significant reduction in bribe transfers from importers to public officials.
    JEL: D73 F13 H83 O17 O19 O24
    Date: 2016–10
  34. By: Robert Z. Lawrence (Peterson Institute for International Economics); Terra Lawson-Remer (University of Bologna)
    Abstract: This Policy Brief reviews US trade and investment policy programs focused on global development, such as the Generalized System of Preferences and the African Growth and Opportunity Act, and concludes that many are not realizing their full potential. The authors discuss seven pragmatic but transformative initiatives that could build on past policy successes and help unlock development for the world’s poor. Their proposals include broadening the coverage of US trade preferences for less developed countries to more products, modifying preference terms to encourage product diversification and value addition, improving the conditionality mechanisms under which preferences are granted, and strengthening the links between investment frameworks and development policy objectives. Each of these proposals presents political considerations that must be taken into account if they are to be implemented.
    Date: 2016–11
  35. By: Asongu, Simplice; Leke, Ivo
    Abstract: The purpose of this study is to dispel some myths associated with migrants in order to improve socio-economic appraisal of the consequences of the recent surge of migrants into Europe. We argue that: (i) the concern about loss of Christian cultural values is lacking in substance because compared to a relatively near historical epoch or era, very few European citizens do go to Church in contemporary Europe; (ii) the threat to European liberal institutions is falsifiable and statistically fragile because it is not substantiated with significant evidence; (iii) the insignificant proportion of the Moslem population that is aligned with Islamic fundamentalism invalidates the hypothesis on importation of radical Islamic fundamentalism and (iv) the concern about social security burden is relevant only in the short-term because of Europe’s ageing population.
    Keywords: Migration; the European Union; Development
    JEL: F20 J61 J83 K31 O15
    Date: 2016–11
  36. By: Horn, Henrik (Research Institute of Industrial Economics (IFN)); Tangerås, Thomas (Research Institute of Industrial Economics (IFN))
    Abstract: This paper investigates the design and implications of international investment agreements. These are ubiquitous, potent and heavily criticized state-to-state treaties that protect foreign investment against host country policies. We show that optimal agreements cause national but not global underregulation ("regulatory chill"). The incentives to form agreements and their distributional consequences depend on countries’unilateral commitment possibilities and the direction of investment ‡ows. The bene…ts from agreements between developed countries accrue to foreign investors at the expense of the rest of society, but this is not the case for agreements between developed and developing countries.
    Keywords: Foreign direct investment; Expropriation; International investment agreements; Regulatory chill
    JEL: F21 F23 F53 K33
    Date: 2016–11–18
  37. By: Liuchun Deng (John Hopkins University)
    Abstract: This paper studies the dynamics of international trade from the perspective of knowledge spillover. Building into an idea-flow model the industry dimension, I integrate four channels of knowledge spillover: each firm could learn from domestic producers as well as foreign sellers, and learning is both intra- and inter-industry. The theoretical framework yields the law of motion of industry-level productivity across countries, capturing strong interdependence of evolution of comparative advantage. I calibrate the model to a large sample of countries. My quantitative results capture important patterns in the data: strong convergence in comparative advantage and substantial mobility in specialization. Based on the law of motion, my decomposition exercise suggests international and inter-industry channels play a major role in knowledge spillover. Various measures are proposed to identify the “key player”, that is, the country or country-industry pair that contributes most to global productivity growth, in the knowledge diffusion network. The calibrated model also suggests dynamic gains from trade are at least one-third of static gains from trade.
    Keywords: international trade; specialization dynamics; convergence; industrial productivity; comparative advantage; knowledge spillover; economic growth
    JEL: F10 F43 O33 O47
    Date: 2016–11

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