nep-int New Economics Papers
on International Trade
Issue of 2016‒12‒04
37 papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. Machinery production networks in Latin America: a quantity and quality analysis By Mateus Silva Chang
  2. POLICY MEASUREMENT AND MULTILATERAL RESISTANCE IN GRAVITY MODELS By Maria Cipollina; Luca De Benedictis; Luca Salvatici; Claudio Vicarelli
  3. Trade Liberalization, Divison of Labor and Welfare under Oligopoly By Kenji Fujiwara; Keita Kamei
  4. Trade Liberalization and the Great Labor Reallocation By Yuan Zi
  5. Wage Inequality and Skill Supplies in a Globalised World By Lorenzo Rotunno; Adrian Wood
  6. Export competition issues after Nairobi: The recent World Trade Organization agreements and their implications for developing countries: By Díaz-Bonilla, Eugenio; Hepburn, Jonathon
  7. Mapping agricultural value chains with international input-output data By Kuroiwa, Ikuo
  8. Global Trade Flows: Revisiting the Exchange Rate Elasticities. By M. Bussière; G. Gaulier; W. Steingress
  9. The Surprising Instability of Export Specializations By Diego Daruich; William Easterly; Ariell Reshef
  10. Israel's Open-Secret Trade By Lorenzo Rotunno; Pierre-Louis Vézina
  11. Foreign Direct Investment and Value Added in Indonesia By Sjöholm, Fredrik
  12. Cumulative economic impact of future trade agreements on EU agriculture By Pierre Boulanger; Hasan Dudu; Emanuele Ferrari; Mihaly Himics; Robert M'barek
  13. ICT Dynamics and Regional Trade Bias in Asia: Theory and Empirical Aspects By Tony Irawan; Paul J.J. Welfens
  14. The Legacies of Slavery in and out of Africa By Bertocchi, Graziella
  15. Evaluating Asian FTAs: What do Gravity Equation Models Tell Us? By Sunder Ramaswamy; Abishek Choutagunta; Santosh K. Sahu Author-Workplace-Assistant Professor, Madras School of Economics
  16. Особенности оценивания гравитационных моделей международной торговли By Shumilov, Andrei
  17. The growth of multinational firms in the Great Recession By Alviarez, Vanessa; Cravino, Javier; Levchenko, Andrei A.
  18. Cumulative economic impact of future trade agreements on EU agriculture, Extended summary By Pierre Boulanger; Hasan Dudu; Emanuele Ferrari; Mihaly Himics; Robert M'barek
  19. China’s Belt and Road Initiative: Can Europe Expect Trade Gains? By Alicia Garcia-Herrero; Jianwei Xu
  20. The Global Diffusion of Ideas By Ezra Oberfield; Francisco Buera
  21. Foreign Direct Investment and Sustainable Development. A Regional Approach for Romania By Mihaela Simionescu
  22. North Korea's economic integration and growth potential By Jong-Wha Lee; Ju H. Pyun
  23. Extended Gravity By Gloria Sheu; Andres Zahler; Eduardo Morales
  24. Trade and the Environment: New Methods, Measurements, and Results NBER Working Paper No. 22636 By M. Scott Taylor
  25. Trade Liberalization and Mortality : Evidence from U.S. Counties By Justin R. Pierce; Peter K. Schott
  26. The Global Trade Slowdown and Its Implications for Emerging Asia : a speech at "CPBS 2016 Pacific Basin Research Conference," sponsored by the Center for Pacific Basin Studies at the Federal Reserve Bank of San Francisco, San Francisco, California, November 18, 2016. By Powell, Jerome H.
  27. Quantitative Impact of Reducing Barriers to Skilled Labor Immigration: The Case of the US H-1B Visa By Hyun Lee
  28. Trading across Borders in Online Auctions By Elena Krasnokutskaya
  29. Innovation and Export-market Participation in Canadian Manufacturing By Dar-Brodeur, Afshan; Baldwin, John R.; Yan, Beiling
  30. Foreign Competition and Domestic Innovation: Evidence from U.S. Patents By Autor, David; Dorn, David; Hanson, Gordon; Pisano, Gary; Shu, Pian
  31. Immigrants and Firms' Outcomes: Evidence from France By Cristina Mitaritonna; Gianluca Orefice; Giovanni Peri
  32. Causes of the Global Trade Slowdown By Logan T. Lewis; Ryan Monarch
  33. Qualitätswettbewerb, Produktinnovationen und Schumpetersche Prozesse in internationalen Märkten By Paul J.J. Welfens
  34. Social networks and the intention to migrate By Miriam Manchin; Sultan Orazbayev
  36. Long-range growth: economic development in the global network of air links By Filipe Campante; David Yanagizawa-Drott
  37. Internacionalización de las pymes: innovación para exportar By Frohmann, Alicia; Mulder, Nanno; Olmos, Ximena; Urmeneta, Roberto

  1. By: Mateus Silva Chang (Graduate School of Economics, Keio University)
    Abstract: This paper investigates the effects that the increase in import of machinery parts and components and changes in the suppliers' composition had in the trade of final products and parts and components inside Latin America. In our analysis we consider these effects according to two dimensions: a quantity one that captures if there was an intensification of trade, and a quality one that captures changes in the sophistication of the traded goods. The research employs disaggregated trade data obtained from the UN Comtrade for 17 Latin American countries between 1996 and 2011. We find evidences that an increase in import of parts and components from Latin America had positive impacts on the quantity dimension, while increases in imports from the East Asian region, in special China and Hong Kong, had positive effects on the quantity dimension, nurturing the expansion of machinery production networks inside Latin America, and positive effects on the quality dimension, increasing the sophistication of the products traded inside Latin America. On the opposite side, imports from United States and Canada had negative quantity effects.
    Keywords: Machinery Trade, Fragmentation, International Production Networks, Latin America
    JEL: F14 F15 F23
    Date: 2016–10–17
  2. By: Maria Cipollina (University of Molise); Luca De Benedictis (University of Macerata); Luca Salvatici (University Roma Tre); Claudio Vicarelli (ISTAT)
    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: C13 C14 F10
    Date: 2016
  3. By: Kenji Fujiwara (School of Economics, Kwansei Gakuin University); Keita Kamei (Faculty of Literature and Social Sciences,Yamagata University)
    Abstract: Incorporating explicitly division of labor into a two-country general oligopolistic equilibrium model, we examine the effects of trade liberalization on firm productivity and welfare. We show that a tariff reduction increases the firm productivity of the trading industries but decreases that of the non-trading industries. An expansion of the trading industries, in contrast, decreases the firm 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: 2016–11
  4. By: Yuan Zi (IHEID, Graduate Institute of International and Development Studies, Geneva)
    Abstract: The extent to which a country can benefit from trade openness crucially depends on its ease of reallocating resources. However, we know little about the role of domestic frictions in shapingthe effects of trade policies. I address this question by analyzing the impact of tariff reductions on the spatial allocation of labor in China, and how this impact depends on migration frictions that stem from China's household registration system (hukou). I first provide reduced-form evidence that input trade liberalization has induced significant spatial labor reallocation in China, with a stronger effect in regions with less hukou frictions. Then, I construct and estimate a quantitative spatial model with input-output linkages and hukou frictions to examine the general equilibrium effects of tariff reductions and perform counterfactuals. The quantitative exercise shows that trade liberalization increases China's welfare by 0.63%. Abolishing the hukou system leads to a direct welfare improvement of 1.51%. Additionally, it increases gains from tariff reductions by 2% and alleviates its negative distributional consequences. In this process, I develop a novel measure of migration frictions associated with the hukou system.
    Keywords: input trade liberalization, spatial labor reallocation, hukou frictions, migration
    JEL: F11 F13 F16 R23 O15
    Date: 2016–11–08
  5. By: Lorenzo Rotunno (AMSE - Aix-Marseille School of Economics - CNRS - Centre National de la Recherche Scientifique - AMU - Aix Marseille Université - ECM - Ecole Centrale de Marseille - EHESS - École des hautes études en sciences sociales); Adrian Wood (Department of International Development, University of Oxford)
    Abstract: We investigate empirically how the relative wages of skilled and unskilled workers vary with their relative supplies in open economies. The investigation is based on a Heckscher-Ohlin model that is more general than the canonical version and related to recent advances in trade theory. Our results bridge the gap between trade economists and labour economists in views on the role of national labour markets in wage determination when countries trade. As labour economists believe, relative wages are sensitive to variation in skill supplies in open economies. As trade economists believe, however, this sensitivity decreases with openness to trade.
    Keywords: Heckscher-Ohlin,trade and wages,wage inequality,labour markets
    Date: 2016–09
  6. By: Díaz-Bonilla, Eugenio; Hepburn, Jonathon
    Abstract: This paper reviews, from the perspective of developing countries, the recent agreement reached at the 10th WTO Ministerial at Nairobi related to export competition, including exports subsidies, food aid, export credits and guarantees, and state trading enterprises (STEs). The legal and economic aspects of the agreement are examined, and the relevance of banning agricultural export subsidies are noted. This eliminates some of the worst-case scenarios, if agricultural world prices continue to soften and the important margin of export subsidies still allowed under the WTO framework was to be used. But given the relatively longer transition period for some relevant products before export subsidies are completely banned, the paper argues for continued monitoring of the potential use of this instrument. The paper also discusses the other components of export competition, looking into the legal and economic aspects. Some suggestions about continuous work on transparency and monitoring of current practices, and further disciplines are also presented.
    Keywords: trade, developing countries, international agreements, international trade, international trade policies, export subsidies, food aid, export credits, export promotion, credit policies, prices, World Trade Organization (WTO),
    Date: 2016
  7. By: Kuroiwa, Ikuo
    Abstract: In recent years, the analysis of trade in value added has been explored by many researchers. Although they have made important contributions by developing GVC-related indices and proposing techniques for decomposing trade data, they have not yet explored the method of value chain mapping—a core element of conventional value chain analysis. This paper introduces a method of value chain mapping that uses international input-output data and reveals both upstream and downstream transactions of goods and services induced by production activities of a specific commodity or industry. This method is subsequently applied to the agricultural value chain of three Greater Mekong Sub-region countries (i.e., Thailand, Vietnam, and Cambodia). The results show that the agricultural value chain has been increasingly internationalized, although there is still room for obtaining benefits from GVC participation, especially in a country such as Cambodia.
    Keywords: Input-output tables, International trade, Agriculture, Agricultural economies, Value chain mapping, Trade in value added, Agricultural value chains
    JEL: C67 F14 Q17
    Date: 2016–11
  8. By: M. Bussière; G. Gaulier; W. Steingress
    Abstract: This paper contributes to the debate on exchange rate elasticities by providing a set of price and quantity elasticities for 51 advanced and emerging market economies. Specifically, we report for each of these countries the elasticity of trade prices and trade quantities on the export and on the import side, as well as the reaction of the trade balance. To this aim, the paper uses a large database of highly disaggregated bilateral trade flows, covering 5000 products and more than 160 trading partners. We present a range of estimates using standard regression techniques combined with generated repressors that aim to address key omitted variable biases, relating in particular to unobserved marginal costs and competitor prices in the importing market. We also subject our results to a battery of robustness checks that leave the main findings broadly unchanged. Overall, all countries in our sample satisfy the Marshall-Lerner conditions, suggesting that exchange rate changes can play an important role in addressing global trade imbalances.
    Keywords: exchange rates, trade elasticities, exchange rate pass-through, competitiveness
    JEL: C51 F14 F31 F33 F41
    Date: 2016
  9. By: Diego Daruich; William Easterly; Ariell Reshef
    Abstract: We study the instability of hyper-specialization of exports. We have two main findings. (1) Specializations are surprisingly unstable: Export ranks are not persistent, and new top products and destinations replace old ones. Measurement error is unlikely to be the main or only determinant of this pattern. (2) Source-country factors are not the main explanation of this instability: Only 20% of the variation in export growth can be explained by variation in comparative advantage (source-by-product factors), while another 20% of the variation in export growth can be explained by variation in bilateral (source-by-destination) factors. The high share of product, destination, and product-by-destination factors, diminishes the emphasis on the nations where the exports originate. The high share of idiosyncratic variance (residual at the source-product-destination level of variation) of about 30%, also indicates the difficulty to predict export success using source country characteristics. These findings suggest that export performance depends, to a greater extent than previously appreciated, on forces that are outside the realm of national export promotion and industrial policies.
    JEL: F1 F14 F63 O1 O24
    Date: 2016–11
  10. By: Lorenzo Rotunno (AMSE - Aix-Marseille School of Economics - CNRS - Centre National de la Recherche Scientifique - AMU - Aix Marseille Université - ECM - Ecole Centrale de Marseille - EHESS - École des hautes études en sciences sociales); 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
    Date: 2016–10
  11. By: Sjöholm, Fredrik (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: 2016–11–22
  12. By: Pierre Boulanger (European Commission – JRC); Hasan Dudu (European Commission – JRC); Emanuele Ferrari (European Commission – JRC); Mihaly Himics (European Commission – JRC); Robert M'barek (European Commission – JRC)
    Abstract: This report presents potential effects of twelve free trade agreements (FTAs) under the current EU FTA agenda. It sheds some light on relatively balanced cumulated impacts in terms of trade, production and price for the EU agricultural sector as a whole, while quantifying also the market development for specific agricultural sectors. Different from a forecast exercise, it compares a conservative and an ambitious FTA scenario with a business as usual (reference) scenario.
    Keywords: CGE, modelling, trade, agriculture, EU
    JEL: C68 F11 F17 Q17
    Date: 2016–11
  13. By: Tony Irawan (Department of Economics, Faculty of Economics and Management, Bogor Agricultural University, Indonesia); Paul J.J. Welfens (Europäisches Institut für Internationale Wirtschaftsbeziehungen (EIIW))
    Abstract: ICT Markets in Asia are characterized by the strong role of sectoral foreign direct investment (FDI) inflows, namely from the US on the one hand, and from the EU on the other. Trade flows (determined here by examining trade flows as a percentage of total merchandise exports) differ in terms of regions: Southeast Asia, East Asia, Southern Africa, EU27 and North America; e.g., Southeast Asia recorded a fairly strong rise in intra-regional trade (relative to total merchandise trade). Also, the trade flows of Asian countries are biased with regard to the regions; the share of interregional trade of Asia’s regions with the EU and North America have increased over time. In some Asian regions, trade in intermediate goods has decreased over time. Bavaria’s regional ICT networks are interesting to consider in light of this finding. The panel data presented sheds new light on the benefits of regional R&D spending.
    Keywords: Techno-globalization, international trade, MNEs, Asia
    JEL: F2 H3 O1 O3
    Date: 2016–10
  14. By: Bertocchi, Graziella
    Abstract: The slave trades out of Africa represent one of the most significant forced migration experiences in history. In this paper I illustrate their long-term consequences on contemporaneous socio-economic outcomes, drawing from my own previous work on the topic and from an extensive review of the available literature. I first consider the influence of the slave trade on the"sending" countries in Africa, with attention to their economic, institutional, demographic, and social implications. Next I evaluate the consequences of the slave trade on the "receiving" countries in the Americas. Here I distinguish between the case of Latin America and that of the United States. Overall, I show that the slave trades exert a lasting impact along several contemporaneous socio-economic dimensions and across diverse areas of the world.
    Date: 2016–11
  15. By: Sunder Ramaswamy (Visiting Distinguished Professor of Economics,Madras School of Economics); Abishek Choutagunta (Madras School of Economics, Chennai); Santosh K. Sahu Author-Workplace-Assistant Professor, Madras School of Economics
    Abstract: This research evaluates the performance of free trade agreements by analyzing the determinants of trade flows of Asian economies for a panel of thirty-one countries during 2007-2014 using a Gravity model. The estimated results suggest that certain Free Trade Agreements (FTAs) negatively contribute to trade flows across the region and that GDP and population, among other factors, can explain the total trade flows. The study also finds that trade costs which uses distance as a proxy, has a significant and negative effect on trade. The results are in-line with the expectations which can be drawn by looking at trends of trade flows in Asia and thus, a case is made for smoothening trade-flows across the region by reducing tariff and non-tariff barriers; pumping in investments on transport infrastructure, and improving productivity of the partners as a whole which has positive effects on GDP and thus trade..
    Keywords: International Trade Flows, Gravity Model, Asia, PPML Classification- F13, F14, C23
  16. By: Shumilov, Andrei
    Abstract: This paper surveys the gravity models of trade estimation methodology, which has been substantially enriched in recent decades due to the emergence of theoretically founded modifications of the gravity equation. Alternative techniques to account for structural multilateral resistance terms in specifications both on cross-section and panel data are examined. Common errors in gravity modeling associated with atheoretical calculations of bilateral trade and economic size variables are analyzed. Ways to consistently estimate gravity models under heteroscedastic errors and in the presence of zero trade flows are discussed. An overview of coefficient estimates for the most important international trade factors ob-tained in different applications is given.
    Keywords: gravity models of trade; trade costs; multilateral resistance; econometric estimators
    JEL: C1 F1 F14
    Date: 2016
  17. By: Alviarez, Vanessa; Cravino, Javier; Levchenko, Andrei A.
    Abstract: Using a large firm-level dataset, this paper studies multinational firms' performance during the Great Recession. Foreign multinationals grew faster than local firms outside of the crisis, but slower during the crisis. Industry and size differences between domestic and foreign-owned firms account for much of this slowdown. However, multinationals from different countries performed differently during the crisis. The paper then assesses the role of multinationals in the global recession using a quantitative model. Had multinationals' relative performance remained unchanged during the crisis, the median country's aggregate growth would have been 0.12% higher, with a range of -0.13 to 0.5% across countries.
    Keywords: great recession; multinational firms
    JEL: F23 F44
    Date: 2016–11
  18. By: Pierre Boulanger (European Commission – JRC); Hasan Dudu (European Commission – JRC); Emanuele Ferrari (European Commission – JRC); Mihaly Himics (European Commission – JRC); Robert M'barek (European Commission – JRC)
    Abstract: This extended summary presents the main findings of the potential effects of twelve free trade agreements (FTAs) under the current EU FTA agenda. It sheds some light on relatively balanced cumulated impacts in terms of trade, production and price for the EU agricultural sector as a whole, while quantifying also the market development for specific agricultural sectors. In contrast to a forecasting exercise, it compares a conservative and an ambitious FTA scenario with a business as usual (reference) scenario.For the full set of results and analysis, please see the JRC Science for Policy report: Boulanger, P., Dudu, H., Ferrari, E., Himics, M., and M'barek, R.; Cumulative economic impact of future trade agreements on EU agriculture; EUR 28206 EN; doi:10.2788/194880
    Keywords: Trade, EU, general equilibrium model, partial equilibrium model
    JEL: C68 F11 Q17
    Date: 2016–11
  19. By: Alicia Garcia-Herrero (NATIXIS; Department of Economics, Hong Kong University of Science and Technology; Institute for Emerging Market Studies, Hong Kong University of Science and Technology); Jianwei Xu (Beijing Normal University)
    Abstract: The Belt and Road initiative, recently embarked on by China, aims to improve cross-border infrastructure in order to reduce transportation costs across a massive geographical area between China and Europe. We estimate how much trade might be created among Belt and Road countries as a consequence of the reduction in transportation costs (both railway and maritime) and find that European Union countries, especially landlocked countries, should benefit considerably. This is also true for Eastern Europe and Central Asia and, to a lesser extent, south-east Asia. In contrast, if China were to seek to establish a free trade area within the Belt and Road region, EU member states would benefit less, while Asia would benefit more. Xi Jinping’s current vision for the Belt and Road, centred on improving transport infrastructure, is very good news for Europe as far as trade creation is concerned.
    Keywords: China, Belt & Road initiative, infrastructure, international economic system
    Date: 2016–11
  20. By: Ezra Oberfield (Princeton University); Francisco Buera (Federal Reserve Bank of Chicago)
    Abstract: We provide a tractable theory of innovation and technology diffusion to explore the role of international trade in the process of development. We model innovation and diffusion as a process involving the combination of new ideas with insights from other industries or countries. We provide conditions under which each country’s equilibrium frontier of knowledge converges to a Frechet distribution, and derive a system of differ- ential equations describing the evolution of the scale parameters of these distributions, i.e., countries’ stocks of knowledge. In particular, the growth of a country’s stock of knowledge depends only on its trade shares and the stocks of knowledge of its trading partners. We use the framework to quantify the contribution of bilateral trade costs to cross-sectional TFP differences, long-run changes in TFP, and individual post-war growth miracles.
    Date: 2016
  21. By: Mihaela Simionescu (Institute for Economic Forecasting of the Romanian Academy.)
    Abstract: In this paper, the relationship between foreign direct investment (FDI) in Romania and economic and social development as part of sustainable development is analyzed. The research is based on a regional approach, some panel vector-autoregressive models being proposed for evaluating the influence of FDI on economic growth and on relative poverty rate in the Romanian regions during 2005-2014. Two types of analyses were proposed: one that includes all the 8 regions and one that excludes Bucuresti-Ilfov region from study, because it is an outlier with respect to FDI weight in total FDI and to economic growth. Indeed, if the Bucuresti-Ilfov region is included, FDI generated economic growth in Romania, but if this region is excluded, in the rest of the country, FDI had a negative impact on economic growth. In the seven regions of Romania, excepting Bucuresti-Ilfov one, FDI did not diminish the poverty rate.
    Keywords: sustainable development, FDI, economic growth, poverty rate
    JEL: C51 C53 E22
    Date: 2016–11
  22. By: Jong-Wha Lee; Ju H. Pyun
    Abstract: This paper analyzes the future growth potential of the North Korean economy, conditional on economic reform and integration with South Korea. The growth projections based on cross-country evidence show that, if North Korea embarks on substantial policy reforms toward a market-oriented and open economy, it could achieve higher economic growth in the long run. Using an empirical gravity model of trade and direct investment, we forecast that, when the two Koreas pursue economic integration and cooperation without military conflicts, North Korea’s trade with South Korea can increase significantly, that is, up to 36 percent of North Korea's gross domestic product (GDP) and its foreign direct investment (FDI) flows from South Korea up to 6 percent of GDP. Overall, by promoting trade and FDI integration with South Korea, North Korea can boost its GDP growth by about 3 percentage points per year. Combined with a market-oriented reform, which can bring an additional boost to GDP growth, the North Korean economy could grow by about 4.7 percent per year over the next decades. Conversely, if more rigid sanctions imposed on North Korea become effective, its trade and investment will decrease and its GDP growth rate is expected to fall by approximately 2 percentage points per year.
    Keywords: Economic growth, trade, foreign direct investment, integration, North Korea
    JEL: P27 P33 O11
    Date: 2016–11
  23. By: Gloria Sheu (US Department of Justice); Andres Zahler (Diego Portales University); Eduardo Morales (Princeton University)
    Abstract: Exporting firms often enter foreign markets that are similar to previous export destinations. We develop a dynamic model in which a firm’s exports in each market may depend on how similar it is to its home country (gravity) and to its previous export destinations (extended gravity). Given the large number of export paths from which forward-looking firms may choose, we use a moment inequality approach to structurally estimate our model. We conclude that extended gravity reduces firms’ cost of foreign market entry by 27% to 40%.
    Date: 2016
  24. By: M. Scott Taylor (University of Calgary)
    Abstract: We review recent research linking international trade to the environment, with a focus on new results and methods. The review is given structure by a novel decomposition linking changes in emissions to changes in productive activity at the plant, firm, industry, and national levels. While some new results have emerged from the application of a Melitz-style approach to trade and the environment, its full potential has not yet been exploited. We discuss existing empirical and theoretical work, introduce three new hypotheses, and suggest paths for future researchers to follow.
    Date: 2016–12–01
  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 over-represented. 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.
    Keywords: International Trade ; Mortality ; Trade Policy ; Unemployment
    Date: 2016–11
  26. By: Powell, Jerome H. (Board of Governors of the Federal Reserve System (U.S.))
    Date: 2016–11–18
  27. By: Hyun Lee (University of Connecticut)
    Abstract: In this paper, I develop a novel two-country general equilibrium model of immigration and return migration with incomplete markets and heterogeneous agents. I use the model to quan-tify the short-run and the long-run macroeconomic impacts of permanently doubling the US H-1B visa quota. In the short-run, I find huge endogenous increase in visa application by less talented skilled foreigners, which increases the probability of obtaining the H-1B visa by only 11 percentage points. In the long-run, US experiences a modest gain in output per capita. Most importantly, I find that there exists a sizable mass of US native skilled workers who—despite the decrease in their equilibrium wage—gain in welfare because of their accumulated capital holdings. Furthermore, I highlight the importance of including return migration in a quantita-tive model of international labor mobility by showing that shutting down return migration in my model results in overestimating the magnitude of the welfare changes by more than sixfold for certain cohorts. JEL Classification: E13, E24, F22, O11, J61 Key words: Immigration, heterogeneous agent model, H-1B visa quota, welfare, transition path, human capital, return migration
    Date: 2016–11
  28. By: Elena Krasnokutskaya (Johns Hopkins University)
    Abstract: We invoke the insights from the auction literature to study international trade in services using data from an online market for programming support. We find that the observed clustering of trade between countries can be rationalized through a model featuring endogenous sorting of sellers heterogeneous in quality and costs across projects offered by buyers who differ in willingness to pay for quality and outside options. We extend a single auction entry model to a setting where sellers choose among multiple projects available for bid. This plays an important role in explaining the data and understanding the effects of various trade policies.
    Date: 2016
  29. By: Dar-Brodeur, Afshan; Baldwin, John R.; Yan, Beiling
    Abstract: This paper asks whether research and development (R&D) drives the level of competitiveness required to successfully enter export markets and whether, in turn, participation in export markets increases R&D expenditures. Canadian non-exporters that subsequently entered export markets in the first decade of the 2000s are found to be not only larger and more productive, as has been reported for previous decades, but also more likely to have invested in R&D. Both extramural R&D expenditures (purchased from domestic and foreign suppliers) and intramural R&D expenditures (performed in-house) increase the ability of firms to penetrate export markets. Exporting also has a significant impact on subsequent R&D expenditures; exporters are more likely to start investing in R&D. Firms that began exporting increased the intensity of extramural R&D expenditures in the year in which exporting occurred.
    Keywords: Business performance and ownership, Manufacturing, Research and development, Science and technology
    Date: 2016–11–28
  30. By: Autor, David; Dorn, David; Hanson, Gordon; Pisano, Gary; Shu, Pian
    Abstract: Manufacturing is the locus of U.S. innovation, accounting for more than three quarters of U.S. corporate patents. The rise of import competition from China has represented a major competitive shock to the sector, which in theory could benefit or stifle innovation. In this paper we empirically examine how rising import competition from China has affected U.S. innovation. We confront two empirical challenges in assessing the impact. We map all U.S. utility patents granted by March 2013 to firm-level data using a novel internet-based matching algorithm that corrects for a preponderance of false negatives when using firm names alone. And we contend with the fact that patenting is highly concentrated in certain product categories and that this concentration has been shifting over time. Accounting for secular trends in innovative activities, we find that the impact of the change in import exposure on the change in patents produced is strongly negative. It remains so once we add an extensive set of further industry- and firm-level controls. Rising import exposure also reduces global employment, global sales, and global R&D expenditure at the firm level. It would appear that a simple mechanism in which greater foreign competition induces U.S. manufacturing firms to contract their operations along multiple margins of activity goes a long way toward explaining the response of U.S. innovation to the China trade shock.
    Keywords: China; firms; import competition; innovation; patents; Trade
    Date: 2016–11
  31. By: Cristina Mitaritonna; Gianluca Orefice; Giovanni Peri
    Abstract: In this paper we analyze the impact of an increase in the local supply of immigrants on firms’ outcomes, allowing for heterogeneous effects across firms according to their initial productivity. Using micro-level data on French manufacturing firms spanning the period 1995-2005, we show that a supply-driven increase in the share of foreign-born workers in a French department (a small geographic area) increased the total factor productivity of firms in that department. Immigrants were prevalently highly educated and this effect is consistent with a positive complementarity and spillover effects from their skills. We also find this effect to be significantly stronger for firms with low initial productivity and small size. The positive productivity effect of immigrants was also associated with faster growth of capital, larger exports and higher wages for natives. Highly skilled natives were pushed towards firms that did not hire too many immigrants spreading positive productivity effects to those firms too. Because of stronger effects on smaller and initially less productive firms, the aggregate effects of immigrants at the department level on average productivity and employment was small.
    JEL: E25 F22 J15 J61
    Date: 2016–11
  32. By: Logan T. Lewis; Ryan Monarch
    Abstract: This note analyzes the striking slowdown in world trade in recent years. After documenting key features of this slowdown, we assess its causes, including to what extent it reflects recent cyclical weakness in global growth versus underlying long-term structural shifts in the world economy.
    Date: 2016–11–10
  33. By: Paul J.J. Welfens (Europäisches Institut für Internationale Wirtschaftsbeziehungen (EIIW))
    Abstract: An analysis of the international trade structures of OECD countries shows that between these countries primarily high-tech products are traded; moreover, since 2006 the share of imports in the GDP of China has reduced, which in turn indicates the new capabilities of China, i.e. that Chinese firms are capable of producing high quality products with a growing share of national value-added inputs. The result of this, with a broad international focus, is the finding that competition in terms of quality, product innovations and Schumpeterian dynamics play an increasingly important role in the context of international markets. This gives rise to the particular interest in an analysis of the role of lead markets and quality-competition, respectively, on the one hand, on the other hand macroeconomic perspectives should be demonstrated, which indicate product innovations in a new way and appear to be relevant for an assessment of stability policy. Furthermore, the economic policy implications will be discussed.
    Keywords: Macroeconomic Policy, Export, Trade, Innovation, Research, Development
    JEL: E6 F10 O3 O32
    Date: 2016–10
  34. By: Miriam Manchin (University College London); Sultan Orazbayev (University College London)
    Abstract: Using a large survey spanning several years and more than 150 countries, we examine the importance of social networks in influencing individuals’ intention to migrate domestically or internationally. We distinguish close social networks (composed of friends and family) and broad social networks (composed of same-country residents with intention to migrate), both at home and abroad. We find that social networks abroad are important driving forces of migration intentions, more important than work-related aspects or income. In addition, we find that close social networks abroad with remittances matter significantly more than those without remittances as the individuals become more educated, indicating that networks might work through different channels for individuals with different level of education. On other hand, we find that having stronger close social networks at home reduces the likelihood of migration intentions.
    Keywords: intention to migrate, social networks, local migration, international migration, remittances
    JEL: F22 F24 R23 O15
    Date: 2016–12–01
  35. By: Nadav Ben-Zeev (BGU); Evi Pappa (UAB, BGSE, and CEPR); Alejandro Vicondoa (European University Institute, Florence, Italy)
    Keywords: Terms-of-Trade Shocks, Small Open Economy DSGE Models
    JEL: E32
    Date: 2016
  36. By: Filipe Campante; David Yanagizawa-Drott
    Abstract: We study the impact of international long-distance flights on the global spatial allocation of economic activity. To identify causal effects, we exploit variation due to regulatory and technological constraints which give rise to a discontinuity in connectedness between cities at a distance of 6000 miles. We show that these air links have a positive effect on local economic activity, as captured by satellite-measured night lights. To shed light on how air links shape economic outcomes, we first present evidence of positive externalities in the global network of air links: connections induce further connections. We then find that air links increase business links, showing that the movement of people fosters the movement of capital. In particular, this is driven mostly by capital flowing from high-income to middle-income (but not low-income) countries. Taken together, our results suggest that increasing interconnectedness generates economic activity at the local level by inducing links between businesses, but also gives rise to increased spatial inequality locally, and potentially globally.
    Keywords: Globalization, air travel, connections, economic activity, local development, cities, business links, FDI, convergence, spatial inequality
    JEL: F15 F21 F23 F63 O11 O18 O19 O47 R11 R12 R40
    Date: 2016–11
  37. By: Frohmann, Alicia; Mulder, Nanno; Olmos, Ximena; Urmeneta, Roberto
    Abstract: La inserción internacional de las pequeñas y medianas empresas (pymes) tiene impactos positivos en su nivel de productividad, en la incorporación de innovación, en la calidad del empleo y en el nivel de sus salarios. La internacionalización de las pymes es crucial para la diversificación productiva, la cual a su vez impulsa el desarrollo económico, por ello, desarrollar mejores políticas y herramientas de apoyo a la internacionalización de estas empresas es un aporte para un desarrollo más inclusivo.
    Date: 2016–11

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