nep-int New Economics Papers
on International Trade
Issue of 2017‒03‒05
fifty papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. A method for estimating global trade in value added within agriculture and food value chains By Jared Greenville; Kentaro Kawasaki; Raphaël Beaujeu
  2. Multilevel Analysis of Free Trade Agreements and Foreign Direct Investment in the Asia Pacific Region By KEIDA Masayuki; TAKEDA Yosuke
  3. Accumulating trade costs and competitiveness in global value chains By Diakantoni, Antonia; Escaith, Hubert; Roberts, Michael; Verbeet, Thomas
  4. How policies shape global food and agriculture value chains By Jared Greenville; Kentaro Kawasaki; Raphaël Beaujeu
  5. Bilateral Trade Agreements and Trade Distortions in Agricultural Markets By Cornelius Hirsch; Harald Oberhofer
  6. The impact of China's WTO accession on internal migration By Giovanni Facchini; Maggie Y. Liu; Anna Maria Mayda; Minghai Zhou
  7. Tariffs, FDI with technology transfer and welfare in segmented factor markets By Soumyatanu Mukherjee
  8. The revised WTO Agreement on Government Procurement (GPA): Key design features and significance for global trade and development By Anderson, Robert D.; Müller, Anna Caroline
  9. Plurilateral trade agreements: An escape route for the WTO? By Adlung, Rudolf; Mamdouh, Hamid
  10. Characterizing Global and Regional Manufacturing Value Chains: Stable and Evolving Features By Zhi Wang; Shang-Jin Wei; Xinding Yu and Kunfu Zhu
  11. Value Added in Motion: Determinants of Value Added Location within the EU By Lionel Fontagné; Gianluca Santoni
  12. Signing a Bilateral Investment Treaty - A tradeoff between investment protection and regulation By Li, Chen
  13. Value Added in Motion: Modelling World Trade Patterns at the 2035 Horizon By Lionel Fontagné; Jean Fouré
  14. Trade and the Size Distribution of Firms: Evidence from the German Empire. By Biermann, Marcus
  15. Will America Trigger a Global Trade War? By Uri Dadush
  16. Assessment of the Effect of the EAC Common External Tariff Sensitive Products List on the Performance of Domestic Industries, Welfare, Trade and Revenue By Shinyekwa, Isaac; Katunze, Miriam
  17. Trade in services: Opening markets to create opportunities By Bernard Hoekman
  18. Has the CETS list of products for the EAC generated intra-export trade By Shinyekwa, Isaac; Katunze, Miriam; Munu, Martin Luther
  19. What Do We Really Know about Offshoring? Industries and Countries in Global Production Sharing By Gordon H. Hanson
  20. Trade protection and productivity differentials between multinationals and local firms in Vietnamese manufacturing By Thuyen, Truong Thi Ngoc; Jongwanich, Juthathip; Ramstetter, Eric D.
  21. Global productions sharing and local entrepreneurship in developing countries: Evidence from Penang export hub, Malaysia By Prema-chandra Athukorala
  22. Migration, Labor Tasks and Production Structure in Europe By Stefania Borelli; Giuseppe De Arcangelis; Majlinda Joxhe
  23. The Evolution of World Trade from 1995 to 2014 : A Network Approach By Cepeda, Fredy; Gamboa, Freddy; Leon Rincon, Carlos; Rincon, Hernan
  24. CO2 embedded in trade: trends and fossil fuel drivers By Sylvain Weber; Reyer Gerlagh; Nicole A. Mathys; Daniel Moran
  25. Learning, Prices, and Firm Dynamics By Paulo Bastos; Daniel A. Dias; Olga A. Timoshenko
  26. International Trade and Intertemporal Substitution By Leibovici, Fernando; Waugh, Michael E.
  27. Expropriation Risk and FDI in Developing Countries: Does Return of Capital Dominate Return on Capital? By M. Akhtaruzzaman; Nathan Berg; Christopher Hajzler
  28. Global integration and world migration By Stark, Oded
  29. Corporate social responsibility in international trade and investment agreements : implications for states, business and workers By Peels, Rafael.; Echeverria M., Elizabeth.; Aissi, Jonas.; Schneider, Anselm.
  30. An Anatomy of the Global Trade Slowdown based on the WIOD 2016 Release By Timmer, Marcel P.; Los, Bart; Stehrer, Robert; de Vries, Gaaitzen J.
  31. Capital Accumulation and Dynamic Gains from Trade By Ravikumar, B.; Santacreu, Ana Maria; Sposi, Michael J.
  32. Industrialisation and the Big Push in a Global Economy By Wrona, Jens; Kreickemeier, Udo
  33. Global Value Chains in Low and Middle Income Countries By Victor Kummritz; Bastiaan Quast
  34. All We Need is Love? Trade-Adjustment, Inequality and the Role of the Partner By Huber, Katrin Stephanie; Winkler, Erwin
  35. Efficiency, innovation, and imported inputs: determinants of export performance among Indian manufacturing firms By Marco Grazzi; Nanditha Mathew; Daniele Moschella
  36. Policy Brief : Imported Inputs and Product Innovation By Voeten, Jaap; Bos, Marijke; Vannoorenberghe, Gonzague
  37. The Impact of Tax Treaties and Repatriation Taxes on FDI Revisited By Harendt, Christoph; Dreßler, Daniel; Overesch, Michael
  38. The long-term impact of trade with firm heterogeneity By Guzman Ourens
  39. From Labor to Cash Flow? The Abolition of Immigration Restrictions and the Performance of Swiss Firms By Jan Ruffner; Michael Siegenthaler
  40. Tourism global value chains and Africa By Jack Daly; Gary Gereffi
  41. OECD taxonomy of measures affecting trade in government procurement processes By Julien Gourdon; Véronique Bastien; Laurence Folliot-Lalliot
  42. Trade, finance or policies: what drives the cross-border spill-over of business cycles? By Montinari, Letizia; Stracca, Livio
  43. Global supply chain dynamics and labour governance : implications for social upgrading By Lee, Joonkoo.
  44. Stymied Ambition: Does a Lack of Economic Freedom Lead to Migration? By Renner, Laura; Meierrieks, Daniel
  45. China–Australia Economic Cooperation and the Belt and Road Initiative By Dong Dong Zhang
  46. Integration or Outsourcing: Combining Ex Ante Distortions and Ex Post Inefficiencies By Nowak, Verena
  47. The role of US based FDI flows for global output dynamics By Florian Huber; Manfred M. Fischer; Philipp Piribauer
  48. Migration when social preferences are ordinal: Steady state population distribution, and social welfare By Stark, Oded
  49. Value Added in Motion: Macroeconomic Implications of Energy Price Trajectories By Lionel Fontagné; Jean Fouré; Gianluca Santoni
  50. Openness and Growth: Is the Relationship Non-Linear? By Rangan Gupta; Lardo Stander; Andrea Vaona

  1. By: Jared Greenville; Kentaro Kawasaki (OECD); Raphaël Beaujeu
    Abstract: Global Value Chains (GVCs) have transformed production across a broad range of goods and services worldwide. Although the development of GVCs has occurred in agro-food sectors alongside other sectors, less is known about the trade that occurs within agro-food GVCs due to limited information on flows of trade in value added. This study develops an approach to calculate disaggregated indicators of GVC participation in agro-food sectors in both developed and developing countries. Specifically, the approach exploits the Global Trade Analysis Project (GTAP) database to construct an inter-country input-output (ICIO) table for the year 2011. The resulting ICIO is used to compute indicators of GVC participation based on the concept of vertical specialisation – forward and backward participation – across 20 agro-food sectors in 70 countries and/or regions. Estimates of domestic value added in exports and final demand or agro-food products, including the contribution of all industries, are also presented.
    Keywords: agriculture, global value chains, GTAP, multi-regional input output
    JEL: F14 F60 Q17
    Date: 2017–02–27
  2. By: KEIDA Masayuki; TAKEDA Yosuke
    Abstract: This paper seeks to investigate the linkage between free trade agreements (FTAs) and firms' foreign direct investment (FDI), with a focus on firm size. As small and medium-sized enterprises (SMEs) face relatively higher costs when utilizing FTAs, responses to effective FTAs are expected to vary across firms with different scales. A large-scale database is utilized for making multi-level analyses to this effect. The Poisson regression analysis shows that the intensity to undertake initial FDIs becomes stronger under the existence of an FTA (after controlling for the gravity factors of gross domestic product (GDP) and distance). A multi-level analysis reveals that (1) larger-scale initial FDIs are undertaken in FTA-partner countries; (2) the profit margin of firms established after the coming-into-effect of an FTA tends to be higher; and (3) the profit margin of those firms grouped under the service (non-manufacturing) sector tends to be higher. As for the service sector, the degree of restriction (measured by the Hoekman Index under an FTA) is not statistically significant, while the existence of FTAs is significant. Thus, a sunk cost associated with undertaking FDIs, which is deemed to be rather neutral to the degree of investment regulation, could be a critical factor in the conduct of FDIs. As a policy implication, reduction of such sunk costs (e.g., through information sharing of best practices among potential investors) could be an indispensable policy focus for making FTAs effective in terms of content.
    Date: 2017–02
  3. By: Diakantoni, Antonia; Escaith, Hubert; Roberts, Michael; Verbeet, Thomas
    Abstract: Trade costs such as applied tariffs, transportation and insurance costs are amplified as they pass through the multiple production steps associated with modern supply chains. This so-called "cascade effect" arises since trade costs accumulate as intermediate goods are imported and then re-exported further downstream, going through different processing nodes before reaching the final consumer. Moreover, the financial impact of these trade costs is magnified in the "trade in tasks" rationale which governs global value chains (GVCs). Specialised processing firms need to recoup the associated trade cost applying to the full value of the good from the smaller fraction of value-added created at each consecutive productive stage. This large relative weight of transaction expenses on the profitability of individual business operations explains why trade along GVCs is particularly exposed to trade costs. The paper reviews the implications of trade costs on competitiveness at industry, national and global levels. The financial implications of trade costs at firm and sectoral level are based on trade in value-added data for 2011. The multilateral welfare effects of reducing discrete trade costs are identified using a network analysis approach, which goes beyond the traditional bilateral dimension of international trade and identifies where trade facilitation investment would have the highest social returns from a GVC perspective. The authors conclude that while the direct benefits of trade facilitation will be proportionally higher for those countries that are not well integrated into international trade because of their high trade costs, the global benefits of trade facilitation investments will also be high if they are undertaken by key traders that lie at the core of global value chains
    Keywords: Global Value Chains,trade in value-added,international input-output analysis,trade costs,trade facilitation,competitiveness,effective rate of protection
    JEL: C67 F13 F14 F23 F61
    Date: 2017
  4. By: Jared Greenville; Kentaro Kawasaki (OECD); Raphaël Beaujeu
    Abstract: Global value chains (GVCs) have changed the nature of production and specialisation around the world, including in agriculture and food sectors. This study takes an in-depth look at the landscape of agro-food GVCs and explores the factors that influence GVC participation by making use of a newly developed database on trade in value added for 20 agro-food sectors derived from the Global Trade Analysis Project (GTAP) database. The study also explores the benefits of GVC participation, viewed through the lens of domestic value added creation and employment, with a focus on the policy factors that influence these benefits. The study points to considerable variation in GVC participation across agro-food sectors, driven not only by product characteristics but also by policy factors related to trade and investment, the agricultural enabling environment and policies influencing service markets. The study shows that for agro-food sectors, trade barriers act as a tax on exports, reducing the domestic value added created from participation in agro-food GVCs.
    Keywords: agriculture, global value chain, GTAP, multi-regional output
    JEL: F14 F60 Q17
    Date: 2017–02–27
  5. By: Cornelius Hirsch (Austrian Institute of Economic Research (WIFO)); Harald Oberhofer (Department of Economics, Vienna University of Economics and Business; Austrian Institute of Economic Research (WIFO))
    Abstract: Agricultural support levels are at a crossroad with reduced distortions in OECD countries and increasing support for agricultural producers in emerging economies over the last decades. This paper studies the determinants of distortions in the agricultural markets by putting a specific focus on the role of trade policy. Applying various different dynamic panel data estimators and explicitly accounting for potential endogeneity of trade policy agreements, we find that an increase in the number of bilateral free trade agreements exhibits significant short- and long-run distortion reducing effects. By contrast, WTO's Uruguay Agreement on Agriculture has not been able to systematically contribute to a reduction in agriculture trade distortions. From a policy point of view our findings thus point to a lack of effectiveness of multilateral trade negotiations.
    Keywords: Agricultural distortions, WTO, bilateral trade agreements, panel data
    JEL: C23 C26 F13 F14
    Date: 2017–02
  6. By: Giovanni Facchini (University of Nottingham, CEPR, CES-Ifo, CReAM, GEP, and LdA); Maggie Y. Liu (Georgetown University); Anna Maria Mayda (Georgetown University, CEPR, IZA and LdA); Minghai Zhou (University of Nottingham, Ningbo China)
    Abstract: In this paper we focus on the changes in internal migration flows triggered by China’s 2001 entry into the World Trade Organization (WTO). We use a difference-in-difference empirical specification based on variation across Chinese prefectures before and after 2001. We relate changes in internal migration rates to the reduction in trade policy uncertainty faced by Chinese exporters to the U.S., as measured by the normal-trade relations (NTR) gap (Handley and Limao 2013, Pierce and Schott 2015). We find that Chinese prefectures facing a larger decline in their average NTR-gap experience a greater increase in internal migration. Our results also show that the impact on skilled and unskilled internal migration rates is consistent with the average skill intensity of export industries of a prefecture.
    Keywords: Immigration Policy, Trade Policy, Political
    JEL: F22 J61
    Date: 2017–02–24
  7. By: Soumyatanu Mukherjee (Indian Institute of Management Kozhikode)
    Abstract: This paper, using a three-sector full employment general equilibrium model with segmented domestic factor markets, shows that policy of import restriction using tariffs can be beneficial for a small, open developing economy compared to the policy of import liberalisation, opposite to the conventional results. Also inflows of foreign-owned capital to an export sector within the export processing zone (EPZ) of the economy coupled with labour-augmenting type technology transfer can lead to welfare amelioration, even without the existence of segmentation in labour market. So these seemingly counterintuitive theoretical results support recent empirical findings suggesting that trade restrictions can promote growth and attract FDI for the developing countries, even when foreign capital enters one specific export sector of the economy
    Keywords: Tariff; foreign capital; export processing zones; technology transfer; informal sector; economy
    JEL: F11 F16 F21
    Date: 2016
  8. By: Anderson, Robert D.; Müller, Anna Caroline
    Abstract: The WTO's plurilateral Agreement on Government Procurement ("the GPA" or "the Agreement") is an important ongoing success story for the Organization. In March 2012, the GPA Parties completed a comprehensive revision of the Agreement, encompassing both its text and coverage (market access commitments). The revised GPA, the negotiating processes that led to its adoption and coming into force, and the continuing gradual broadening of its membership are of therefore interest for the evolution of the international trading system. The GPA's successful renegotiation, the continuing growth of its membership and its vitality as an instrument of public policy were not achieved through happenstance. The paper discusses a number of specific design features of the GPA that clearly facilitated the successful conclusion of the renegotiation and that, as such, may in the future be relevant to other areas of global trade liberalization. In addition to the Agreement's plurilateral nature, of particular interest are the approach taken with respect to application of the most-favored-nation (MFN) principle in the Agreement; the GPA's continuing strong emphasis on principles of reciprocity in market access concessions; and its approach to special and differential treatment for developing countries, in all of which it differs from approaches that are widely used in other WTO Agreements. Apart from the above, the GPA revision is important for the merging of trade and good governance concerns that it exemplifies. As discussed in the paper, the themes of governance and the sound management of public resources that are treated in the revised Agreement were not afterthoughts to the renegotiation; rather, they permeated the revised text and received focused attention from the Parties in their own right. As well, the GPA has direct implications for investment policy and for domestic economic reforms, and is an important tool of e-commerce. And, the revision has made possible very significant synergies between the GPA and other international instruments and activities in reducing barriers to participation and strengthening governance in public procurement markets. For all these reasons, the revised Agreement is likely to have a wider impact than meets the eye, and well merits the support and attention that it has received from the participating WTO Member governments.
    Keywords: Corruption,Developing Country,E-Commerce,International Trade Agreements,MFN,Plurilateral agreements,Public Economics,Public Works,Trade Agreements
    JEL: F1 F5 H5 H57 H72 K2 O1 O24
    Date: 2017
  9. By: Adlung, Rudolf; Mamdouh, Hamid
    Abstract: There are essentially two types of plurilateral trade agreements (PAs) among WTO Members, an exclusive and an open variant. While the benefits of the former agreements are shared among participants only, the latter are implemented on an MFN-basis, thus profiting non-signatories as well. The most prominent examples are the Information Technology Agreement (1996) and the Fourth and Fifth Protocols under the GATS (1997) on telecom and financial services, respectively. To preclude "free riding", their entry into force was made contingent on the participation of a "critical mass" of countries. The respective benchmarks, usually market shares of some 80% or more, are quite challenging, however. To promote more widespread use of plurilaterals, given the plethora of pressing policy concerns, whether investment-, competition- or labour-related, and the persistent stalemate in the Doha Round negotiations, the conclusion of exclusive agreements is thus being (re-)considered in ongoing policy discussions. This article takes a sceptical view, since any such PA would need to be agreed by consensus among all 160-odd WTO Members. It may prove more rewarding to further explore the potential of open agreements to address policy concerns among interested Members either in the form of co-ordinated improvements of their current schedules or, if not covered by existing treaty frameworks, as "WTO-extra" understandings.
    Keywords: WTO,Doha Round,plurilateral agreements,critical mass
    JEL: F13 F15 F53
    Date: 2017
  10. By: Zhi Wang (United States International Trade Commission); Shang-Jin Wei (Asia Development bank); Xinding Yu and Kunfu Zhu (University of International Business and Economics)
    Abstract: Since the extent of offshoring and production sharing varies by sector and country, we develop measures of GVCs in terms of length, intensity, and location of participation at the levels of country, country-sector, and bilateral sector, and distinguish among pure domestic, directly traded, and indirectly traded production activities. Using these measures, we characterize cross-country production sharing patterns and GVC related trade activities for 35 sectors and 40 countries over 17 years. We find that the production chain for the world as a whole has become longer. While the relative ranking of the length at the Sector level is stable across countries, the average length for a given country-sector, of both the domestic and international components, and their participation and position in GVCs in general, do evolve significantly over time. The results contribute to a better understanding of features of global value chains and patterns of participation by individual country-sectors.
    Keywords: Production length, Position and Participation in Global Value Chains
    JEL: F1 F6
    Date: 2017–02–23
  11. By: Lionel Fontagné (PSE (Paris 1) and CEPII); Gianluca Santoni (CEPII)
    Abstract: In this paper we approach the determinants of value added location across European countries, from the recent developments to the 2035 horizon. In the first part of the paper, using detailed trade data, we show how competitiveness, demand and export composition have shaped the market shares of European countries, hence the location of production in Europe. Variance and covariance analysis point to the specificity of two countries: the overall market share development seems to be significantly affected by aggregate demand conditions in Germany and Italy. We then turn to trade in value added and observe that bigger countries tend to report a higher share of domestic value added because they can count on more efficient national value chains or a higher diversity of goods upstream. Interestingly, such evidence does not apply to Germany, or Poland, which exhibit a more dynamic insertion in international value chains. In the second part of the paper, we present the main prospects for the allocation of labour (i.e. migration), value added and the macro-economic effects of energy prices across European countries up to year 2035. The projections presented in the paper aim to summarize the main results obtained by other researchers within the "Value Added in Motion (VAM)" project.
    Keywords: Export competitiveness, trade performance, trade patterns after the global crisis
    JEL: F10 F14 F40 C43
    Date: 2017–02–24
  12. By: Li, Chen
    Abstract: We develop a theoretical model of bilateral investment treaties (BITs) to analyze their effects on firm profits and government welfare with heterogeneous firms. We explicitly model the trade-off between attracting foreign direct investment (FDI) and protecting the government's scope to regulate. We show that BITs can improve overall efficiency by internalizing externalities, but with firms gaining at the government's expense. The efficiency improvement does not hold for less profitable industries. We also show that attracting new FDI through a BIT may decrease welfare, while the protection of existing FDI unambiguously raises it. We propose redesigning BITs by including a tax on firm profits, in order to redistribute gains from a BIT such that both firms and the government see a Pareto improvement. In an empirical exercise, we estimate the expected annual cost for Germany resulting from an EU-US BIT to be $27mn, and the compensating profit tax to be 0.5%.
    JEL: F21 F23 F53
    Date: 2016
  13. By: Lionel Fontagné (PSE (Paris 1) and CEPII); Jean Fouré (CEPII)
    Abstract: We address in this paper the future geography of production, migration and energy at the world level, and the consequences for the largest European countries. We take scant account of the wide range of possible evolutions of the world economy in terms of technological progress and diffusion, education, demography including migrations and finally energy price and efficiency. Taking a 2035 horizon, we examine how world trade patterns will be shaped by the changing comparative advantages, demand, and capabilities of different regions, and what will be the implications in terms of location of value added at the sector and country level. We combine a convergence model fitting three production factors (capital, labour and energy) and two factor-specific productivities, alongside a dynamic CGE model of the world economy calibrated to reproduce observed elasticity of trade to income. Each scenario involves three steps. First, we project growth at country level based on factor accumulation, demography and migration, educational attainment and efficiency gains, and discuss uncertainties related to our main drivers. Second, we impose this framework on the CGE baseline. Third, we implement trade policy scenarios (tariffs as well as non-tariff measures in goods and services), in order to get factor allocation across sectors from the model as well as demand and trade patterns.
    Keywords: Growth, Macroeconomic Projections, Dynamic Baselines
    JEL: E23 E27 F02 F17 F47
    Date: 2017–02–24
  14. By: Biermann, Marcus
    Abstract: What is the effect of trade on the size distribution of firms? We collect historical data between 1882 and 1907 from the German Empire to address this question. Our data allow us to match three data sets according to the same geographic boundaries: industry census data, railway trade data and waterway trade data. The key finding is that trade liberalization impacts the firm size distribution heterogeneously across three size categories. We find evidence of a stark shift in employment share from small and medium firms towards larger firms and from small firms towards medium and large firms in firm share. A “Bartik” instrument is proposed to argue that the correlations described are indeed causal. A model of intra-industry trade sheds light on the economic mechanism at play. Comparative statics reveal that further economic integration captured by a fall in transport costs increases average firm size.
    JEL: F12 F15 F14
    Date: 2016
  15. By: Uri Dadush
    Abstract: The new Trump administration is openly protectionist. The President called for “America First” and for “Buy American, Hire American” in his inaugural speech and his subsequent actions dispelled any remaining doubt that he meant what he said during the election campaign. As promised, he has withdrawn from the Trans-Pacific Partnership, an agreement among twelve countries across three continents that took nearly 10 years to negotiate. He has threatened American companies that invest abroad with punitive taxes and tariffs. He has signed an executive order to build a wall along the Mexican border, and he has threatened Mexico to impose a tax on its exports to the United States to pay for it. At the same time, he has ordered his team to initiate renegotiation of NAFTA, which he considers “a very bad deal”. Mr. Trump’s protectionist sentiments are not new: his many calls to refute “bad trade deals” date back to the 1980s.
    Date: 2017–02
  16. By: Shinyekwa, Isaac; Katunze, Miriam
    Abstract: The paper aims to establish whether the protection given to the list of sensitive products since 2005 has increased the regional capacity of the East African Community (EAC) to produce, reduced the importation of the same products from the rest of the world, increased intra-EAC trade, and/or improved welfare. This paper adopts two analytical approaches: a trends analysis of intra-EAC exports and the SMART WITS analytical framework. The results demonstrate a significant increase in intra-EAC export trade after 2005, although Partner States performance is not uniform, with Kenya dominating the other member states. Imports of the same products from outside the EAC region increased by an even larger factor. This increase implies that the demand for sensitive products exceeds the intra-EAC regional supply, resulting in a deficit that is met by imports from the rest of the world. Notwithstanding the growth in intra-EAC exports of the sensitive list products, there is a deficiency in the regional capacity to produce within the bloc. The total welfare effect is equivalent to US $3.1 billion; however, this amount is disproportionately distributed, with Kenya being the main beneficiary. It is recommended that the EAC review the CET sensitive products list considering the negative effects it is likely to have on manufacturing and on consumption welfare, that they design and formulate strategies to support the development of regional supply capacities to enhance the production of products in the sensitive list and that they develop a rational framework that is empirically based to determine which commodities should be included or excluded from the list.
    Keywords: Sensitive, Product, CET, Welfare, Trade, Revenue, Intra-EAC, Consumer/Household Economics, Demand and Price Analysis, Industrial Organization, International Relations/Trade, Labor and Human Capital, Production Economics,
    Date: 2016–10
  17. By: Bernard Hoekman
    Abstract: This paper reviews the role of services in development and growth, the potential role of trade in services as a driver of the productivity performance of sectors that use services as inputs, and the links between services policies and domestic trade costs. Barriers to trade in services have direct as well as indirect effects on cross-border trade and investment, but research suggests that the extent to which countries will benefit from open services regimes and regional integration of services markets depends on complementary efforts to improve economic governance and regulatory regimes.
    Date: 2017
  18. By: Shinyekwa, Isaac; Katunze, Miriam; Munu, Martin Luther
    Abstract: The study, aimed at establishing whether the protection given to the list of sensitive products since 2005: has increased the EAC regional capacity to produce, reduced the importation of the same products from the rest of the world, increased intra-EAC trade, and improved welfare. Results suggest that although intra-EAC trade increased since 2005, the imports of the same products from outside the region even increased more creating a huge negative trade balance. This suggests that there is deficiency in regional capacity to produce these products within the bloc, therefore effective protection was not adequately achieved by the high tariffs imposed on the sensitive list of products.
    Keywords: Industrial Organization, Institutional and Behavioral Economics, International Relations/Trade, Labor and Human Capital, Marketing, Political Economy,
    Date: 2016–08
  19. By: Gordon H. Hanson (UC San Diego and NBER)
    Abstract: Theories of offshoring model how firms divide production stages across borders. Empirical work on the phenomenon has long been hampered by a paucity of cross-country data on special- ization within industries. In standard trade sources, we observe ows of goods between countries at the product level, but not the specific tasks that countries perform in manufacturing these products. The literature has consequently developed an inventive arsenal of indirect measures of industry fragmentation. In this paper, I turn to data on trade in assembly services a labor- intensive task that typically occurs at the end of the production chain to document which industries and countries are engaged in this common form of global production sharing. Trade in assembly services is prominent in just a handful of sectors, including apparel, electronics, footwear, furniture, toys, and transportation equipment. Data for the United States prior to the post-1980 growth in trade with developing countries reveal that most oshoring industries are relatively intensive in the employment of very low-wage labor, exhibit relatively wide variation in the wages paid to their employees, and use capital relatively unintensively. These industries tend to be less likely to hire workers in occupations that are intensive in routine tasks. Offshoring thus appears to be most prominent in sectors for which firms have a strong incentive to divide production between high-wage and low-wage countries and in which the automation of routinized jobs oer few opportunities to reduce labor intensity. Countries that specialize in manufacturing tend to cycle through offshoring industries as they accumulate capital, starting out in apparel, footwear, and toys and later moving into electronics and electrical machinery. These industry dynamics are most pronounced in labor-abundant East Asia. They are not present in the resource-abundant countries that specialize in primary commodities.
    Date: 2017–02–21
  20. By: Thuyen, Truong Thi Ngoc; Jongwanich, Juthathip; Ramstetter, Eric D.
    Abstract: This paper investigates the how effective protection and firm ownership affected firm productivity in Vietnam during 2005-2010. In labour-intensive industries and industries with intermediate labour intensity, the level of effective protection in an industry had a significantly negative effect on firm productivity. Multinational enterprise (MNE) joint ventures (JVs) and state-owned enterprises (SOEs) had consistently higher productivity than private firms, with productivity usually being highest in JVs. Wholly-foreign MNEs (WOs) also had significantly higher productivity than private firms in 2005-2007, but lower productivity than JVs or SOEs, and in 2008-2010, WO-private differentials were insignificant. In capital-intensive industries, the pattern of productivity differentials (highest in JVs, followed by SOEs, WOs, and private firms) was similar in the earlier period, but not in the latter period or when all years were included in the sample. The level of effective protection also did not have a significant, independent effect on firm productivity in capital-intensive industries.
    Keywords: MNEs, trade policy, productivity, ownership mode, MNEs, trade policy, productivity, ownership mode
  21. By: Prema-chandra Athukorala
    Abstract: This papers examines opportunities and policy options for developing countries to promote engagement of local firms in global production networks. The paper begins with a stage-setting overview of the ongoing process of global production sharing and the emerging opportunities local firm’s engagement. It then undertakes an illustrative case study of the export hub in the state of Penang in Malaysia. Forging operational links between multinational enterprises (MNEs), which set up assembly plants in Penang, and local firms was an integral part of the export-led development strategy of the state. This policy emphasis was instrumental in fostering a domestic supplier network around the operations of the MNE subsidiaries. A number of local firms, which emerged de novo through production sharing have become global players in their own right, with production bases in a number of other countries.
    Keywords: globalisation, trade policy, multinational enterprises, global production networks
    JEL: F21 F23 O24 O53
    Date: 2017
  22. By: Stefania Borelli (Sapienza University of Rome); Giuseppe De Arcangelis (Sapienza University of Rome); Majlinda Joxhe (CREA, Université du Luxembourg)
    Abstract: This paper assesses the effect of the immigration on the production structure in a selection of European countries in 2001-2009 with a task-based approach. The inflow of immigrants represents an increase in the relative supply of manual-physical (or simple) tasks, hence favoring simple-task intensive sectors. We use a new OECD dataset, PIAAC, to calculate the index of simple-task intensity at the country-industry level. The analysis confirms that the increase in migration stocks caused a positive impact on the value added of sectors that use more intensively simple tasks. These effects are more intense when considering countries as Italy and Spain characterized by a recent, rapid and intense inflow of migrants. Endogeneity issues are discussed and instruments based on a gravity approach are used in estimation.
    Keywords: Rybczynski Effect, International Migration, PIAAC, Gravity Equation
    JEL: F22 C25
    Date: 2017
  23. By: Cepeda, Fredy; Gamboa, Freddy; Leon Rincon, Carlos (Tilburg University, Center For Economic Research); Rincon, Hernan
    Abstract: This paper employs network analysis to study world trade from 1995 to 2014. We focus on the main connective features of the world trade network (WTN) and their dynamics. Results suggest that countries’ efforts to attain the benefits of trade have resulted in an intertwined network that is increasingly dense, reciprocal, and clustered. Trade linkages are distributed homogeneously among countries, but their intensity (i.e. their value) is highly concentrated in a small set of countries. The main connective features of the WTN were not affected by the 2007-2008 international financial crisis. However, we find that the crisis marks a turning point in the evolution of the WTN from a two-group (led by the US and Germany) to a three-group (led by the US, Germany, and China) hierarchical structure; gravity models of international trade may explain this evolution. Furthermore, we find that WTN’s connective features do not conform to a linear aggregation of sectorial trade networks.
    Keywords: world trade; network analysis; graph; minimal spanning tree
    JEL: F10 F14 D85
    Date: 2017
  24. By: Sylvain Weber (University of Neuchâtel); Reyer Gerlagh (Tilburg University); Nicole A. Mathys (Federal Office for Spatial Development and University of Neuchâtel); Daniel Moran (Norwegian University of Science and Technology)
    Abstract: The amount of CO2 embedded in trade has substantially increased since 1990. We study the trends and some drivers over the period 1995-2009. We find that traded goods tend to have higher emission-intensities compared to average final demand. The second finding is that independently of sector structure, dirty countries tend to specialize in emissionintensive sectors. This finding suggests a comparative advantage mechanism for CO2 and lends support to the hypothesis that trade liberalization tends to increase global emissions. The third finding is that, on average, emission-intensive countries have shifted from trade deficits to surpluses, so a larger share of goods is now produced in emission-intensive countries, consequently increasing global emissions. Finally, our analysis points to coal abundance as an important driver for high levels of both domestic emissions per value added and Sector specialization into emission-intensive sectors. Hence coal abundance is an important driver of net CO2 exports.
    Keywords: CO2 embedded in trade, fossil fuel
    Date: 2017–02–21
  25. By: Paulo Bastos; Daniel A. Dias; Olga A. Timoshenko
    Abstract: We document new facts about the evolution of firm performance and prices in international markets, and propose a theory of firm dynamics emphasizing the interaction between learning about demand and quality choice to explain the observed patterns. Using data from the Portuguese manufacturing sector, we find that: (1) firms with longer spells of activity in export destinations tend to ship larger quantities at lower prices; (2) older exporters tend to use more expensive inputs; (3) revenue growth within destinations (conditional on initial size) tends to decline with market experience; and (4) input prices and quantities tend to increase with revenue growth within firms. We develop a model of endogenous input and output quality choices in a learning environment that is able to account for these patterns. Counterfactual simulations reveal that minimum quality standards on traded goods reduce welfare by lowering entry in export markets and reallocating resources from old and large towards young and small firms.
    Keywords: Learning about demand ; Prices ; Product quality ; Firm dynamics ; Quality standards
    JEL: F12 F14 L11 O14
    Date: 2017–02–08
  26. By: Leibovici, Fernando (Federal Reserve Bank of St. Louis); Waugh, Michael E. (New York University and NBER)
    Abstract: This paper studies the role of international trade delivery lags and variation in the intertemporal marginal rate of substitution in accounting for puzzling features of cyclical fluctuations of international trade volumes. Our insight is that, because international trade is time-intensive, variation in the rate at which agents are willing to substitute across time affects how trade volumes respond to changes in output and prices. We calibrate our model to match key features of U.S. data and discipline the variation in the intertemporal marginal rate of substitution using asset price data. We find that our model is quantitatively consistent with U.S. cyclical import fluctuations.
    JEL: E3 F1 F41
    Date: 2016–06–01
  27. By: M. Akhtaruzzaman; Nathan Berg; Christopher Hajzler
    Abstract: Previously reported effects of institutional quality and political risks on foreign direct investment (FDI) are mixed and, therefore, difficult to interpret. We present empirical evidence suggesting a relatively clear, statistically robust, and intuitive characterization. Institutional factors that affect the likelihood of an abrupt and total loss of foreigners’ capital (i.e., return of capital) dominate those that affect rates of return conditional on a strictly positive terminal investment value (i.e., return on capital). A one-standarddeviation reduction in expropriation risk is associated with a 72 per cent increase in FDI, which is substantially larger than the effects of any other dimensions of institutional quality simultaneously controlled for in our empirical models of FDI inflows. This evidence is consistent with the predictions of a standard theory of FDI under imperfect contract enforcement. We show in the context of a simple model with endogenous expropriation that, when there is a binding threat of expropriation, foreign investors can become unresponsive to differences in other dimensions of institutions and political risk, and may even reduce optimal investment as these institutions improve.
    Keywords: Development economics, International financial markets
    JEL: D23 F21 F23
    Date: 2017
  28. By: Stark, Oded
    Abstract: This paper explores the following chain of conjectures: rising use of the internet, the widespread access to global information, and intensified communication between regions and countries brought about, for example, by intensified trade links bring about expansion of people's social space and their set of comparators; this expansion increases people's stress and strengthens their inclination to resort to migration as a means of reducing this heightened stress. Other things held constant, the expansion of people's social space intensifies their inclination to move across geographical space.
    Keywords: Expansion of social space,Relative deprivation,Migration
    JEL: A12 A14 B41 D01 F15 F22 J61 O15 Z13
    Date: 2017
  29. By: Peels, Rafael.; Echeverria M., Elizabeth.; Aissi, Jonas.; Schneider, Anselm.
    Abstract: This paper assesses the reference to CSR commitments in trade and investment agreements and finds that CSR language is relatively weak in terms of obligation, precision and delegation. Emphasising the potential to use the mechanisms that are provided in these agreements to activate and follow-up CSR commitments, it looks at what the implications could be for states, business and workers, and the potential ILO involvement.
    Keywords: corporate social responsibility, government policy, trade agreement, economic agreement, investment
    Date: 2016
  30. By: Timmer, Marcel P.; Los, Bart; Stehrer, Robert; de Vries, Gaaitzen J. (Groningen University)
    Date: 2016
  31. By: Ravikumar, B. (Federal Reserve Bank of St. Louis); Santacreu, Ana Maria (Federal Reserve Bank of St. Louis); Sposi, Michael J. (Federal Reserve Bank of Dallas)
    Abstract: We compute welfare gains from trade in a dynamic, multicountry model with capital accumulation. We examine transition paths for 93 countries following a permanent, uniform, unanticipated trade liberalization. Both the relative price of investment and the investment rate respond to changes in trade frictions. Relative to a static model, the dynamic welfare gains in a model with balanced trade are three times as large. The gains including transition are 60 percent of those computed by comparing only steady states. Trade imbalances have negligible effects on the cross-country distribution of dynamic gains. However, relative to the balanced-trade model, small, less-developed countries accrue the gains faster in a model with trade imbalances by running trade deficits in the short run but have lower consumption in the long-run. In both models, most of the dynamic gains are driven by capital accumulation.
    Keywords: Welfare gains from trade; Dynamic gains; Capital accumulation; Trade imbalances
    JEL: E22 F11 O11
    Date: 2017–02–27
  32. By: Wrona, Jens; Kreickemeier, Udo
    Abstract: Is it possible to escape from a poverty trap through international trade? To answer this question, we extend Murphy et al.’s (1989b) famous “Big Push” model towards a global economy. In general oligopolistic equilibrium, firms choice between a traditional CRS and a modern IRS technology results in three different equilibria, featuring no, incomplete, or complete industrialisation across a continuum of sectors. With labour being sufficiently scarce, multiple equilibria exist, and the economy may end up trapped in an incompletely industrialised low-welfare equilibrium as firms fail to coordinate their technology choices. Since the adoption of the modern technology is impeded by tougher competition through international trade, the vicious circle of poverty is aggravated by the forces of globalisation.
    JEL: F12 O14 F43
    Date: 2016
  33. By: Victor Kummritz (IHEID, The Graduate Institute of International and Development Studies, Geneva); Bastiaan Quast (IHEID, The Graduate Institute of International and Development Studies, Geneva)
    Abstract: Global Value Chains (GVCs) can provide new means for developing economies to industrialise. To fully seize these opportunities, it is necessary to comprehensively measure both the intensity and type of countries’ GVC integration patterns to better understand the relationship between GVCs and development. In this paper, we apply the new R package decompr to recent OECD input-output data with extended country coverage to analyse the integration patterns of developing economies in a more detailed way. We provide evidence that trends in GVCs are increasingly driven by developing countries. In addition, we show that while per capita GDP does not predict the intensity of GVC integration well, it determines the type of integration. High-income countries mainly export intermediates into GVCs and serve as markets of final demand. In contrast, developing economies join GVCs mostly in the assembly stage. However, there is evidence that developing countries have begun to shift their participation from the production of final to intermediate goods, moving upstream in GVCs and out of assembly.
    Keywords: Global Value Chains, Trade in Value Added, Export Decomposition
    JEL: E01 F13 F14 F23 L14
    Date: 2016–01–12
  34. By: Huber, Katrin Stephanie; Winkler, Erwin
    Abstract: We examine the impact of Germany’s trade integration with China and Eastern Europe from 1993 through 2008 on earnings inequality between households. We especially focus our attention on the role of assortative mating for the magnitude of this impact. Our analysis demonstrates that the trade shock worked towards an increase of earnings inequality, both in the short and in the medium run. Moreover, we illustrate that mating has become increasingly assortative in Germany, especially among low-skilled workers. The results of a counterfactual experiment reveal that this surge in the assortativeness of mating might deepen the negative impact of future trade shocks on earnings inequality between households and might consequently also reduce potential gains from trade.
    JEL: F16 J12 J31
    Date: 2016
  35. By: Marco Grazzi; Nanditha Mathew; Daniele Moschella
    Abstract: This paper investigates the determinants of export behavior among Indian manufacturing firms, focusing in particular on the role of technology, cost and imported intermediate inputs. Our evidence suggests that innovation, in particular R&D, positively affects both firmsù probability to export and firmsù export volumes. We also find that imported intermediate inputs, incorporating foreign technology, play an important role in expanding export activities of firms. On the other hand, we find that higher productivity or lower unit labour costs are not systematically associated with the probability to enter export market, but they do positively affect export volumes.
    Keywords: Export behavior, Innovation, Imported Inputs, Trade policy, India
    Date: 2017–02–28
  36. By: Voeten, Jaap (Tilburg University, School of Economics and Management); Bos, Marijke (Tilburg University, School of Economics and Management); Vannoorenberghe, Gonzague (Tilburg University, School of Economics and Management)
    Date: 2016
  37. By: Harendt, Christoph; Dreßler, Daniel; Overesch, Michael
    Abstract: We revisit the effects of double tax treaties on foreign direct investment. Previous empirical studies provide somewhat counterintuitive results suggesting insignificant or even negative effects of tax treaties. Using a rich firm-level dataset provided by the German Central Bank we analyze the investment impact of double tax treaties and repatriation taxes between more than 3,000 country pairs. Whereas we do not find a significant effect of tax treaties on overall investment, we show that repatriation taxes have an adverse effect on fixed assets and a positive effect on financial assets. The latter supports the assumption that firms defer profit distribution to avoid taxes. Correspondingly, we also find that revenue reserves increase in repatriation taxes.
    JEL: F23 H25 H32
    Date: 2016
  38. By: Guzman Ourens (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) and FNRS)
    Abstract: After the emergence and development of heterogeneous firm trade models, some (most notably Arkolakis, Costinot and Rodriguez-Clare 2012, ACR) have argue that a family of these models (e.g. a Melitz-type model with Pareto distributed firms) do not add to the evaluation of welfare effects of freer trade. In this paper we expand that model in two directions: we introduce a very simple growth mechanism and we allow for asymmetric countries. Introducing simple dynamics in the heterogeneous firm model adds new static and dynamic effects to the well-known decrease in prices that increases welfare in the static model. The constant level of nominal expenditure is affected as firm selection changes the average value of firms which modifies consumers' resource constraint. The growth rate of real consumption is also affected by firm selection since greater average efficiency means a larger amount of resources are required to create a new variety. Country asymmetry yields differentiated results between countries. We provide a welfare formula comparable to that in ACR to show how the new mechanisms can interplay in our model and highlight the effects of firm heterogeneity in this context. In all cases net welfare results depend on parameter values which highlights how much welfare evaluations depend on region's characteristics.
    Keywords: firm heterogeneity; expanding varieties; asymmetric countries; welfare
    JEL: F12 F15 H32 O40
    Date: 2017–02–24
  39. By: Jan Ruffner (KOF Swiss Economic Institute, ETH Zurich, Switzerland); Michael Siegenthaler (KOF Swiss Economic Institute, ETH Zurich, Switzerland)
    Abstract: What is the effect of opening the labor market to foreign workers on the success of firms? We address this question by analyzing how firms in Switzerland were affected by the introduction of the free movement of persons with the European Union (EU) countries. This immigration reform granted all EU workers free access to the Swiss labor market. Our firm-level panel data models exploit the exceptional facts that the reform incidentally affected firms at different time periods and had a stronger effect on firmsclosetotheborder. We find that the Reform increased employment, skill intensity, and sales of incumbent firms, especially for those that relied heavily on foreign workers and had reported that they suffered from skill shortages before the reform. In these firms, the reform also increased labor productivity. We explain these effects through the higher innovation performance of incumbent firms and the reallocation of economic activity into highly affected regions, as evidenced by the entry of new establishments and by the changes in establishment size within multi-establishment firms.
    Date: 2016–12
  40. By: Jack Daly; Gary Gereffi
    Abstract: As Africa continues to attract record numbers of international arrivals, there are industry undercurrents that influence the continent’s participation in tourism value chains. African tourism is characterized by high foreign demand, which elevates the position of global lead firms and increases leakages of tourism spending out of local economies. This paper identifies some of the variance that can be seen in different regions and countries across the continent, highlighting the policy interventions that can be implemented to increase efficiency and facilitate economic upgrading.Keywords: services, informal sector, economic growth, structural change, Tanzania, tourism
    Keywords: tourism, Africa, global value chains
    Date: 2017
  41. By: Julien Gourdon; Véronique Bastien; Laurence Folliot-Lalliot
    Abstract: This paper develops a taxonomy of government procurement (GP) measures to provide a basis for further analysis. It aims to undertake a more comprehensive, albeit not exhaustive, collection of GP barriers across countries, and to develop a classification system of GP measures to facilitate further data collection and analysis. The output is a taxonomy of different GP measures, policies and procedures which can impact cross-border public procurement.
    Keywords: government procurement, GPA, international trade, public good government agreement, regulation
    JEL: F13 F53 H41 H57 K20
    Date: 2017–03–02
  42. By: Montinari, Letizia; Stracca, Livio
    Abstract: In this paper we investigate how income growth rates in one country are affected by growth rates in partner countries, testing for the importance of pairwise country links as well as characteristics of the receiving country (trade and financial openness, exchange rate regime, fiscal variables). We find that trade integration fosters the spill-over of business cycles, both bilaterally and as a country characteristic (trade openness). Results for financial integration are mixed; financial links as pairwise country characteristic are either insignificant or negatively signed (indicating a dampening of cross country spill-overs), but financial openness as characteristic of the receiving country amplifies spill-overs. We find no evidence for a role of the exchange rate regime. Finally, we find that higher government spending and debt reduces countries’ vulnerability to foreign business cycles, presumably through the effect of automatic stabilisers. JEL Classification: F1, F3, F41, F44
    Keywords: FDI, financial integration, gravity, growth spillovers, multi-country models, trade integration
    Date: 2017–01
  43. By: Lee, Joonkoo.
    Abstract: This paper examines how the emergence and change of the fragmented cross-national production system affects social upgrading in developing countries, focusing on the impact of private governance on labour conditions and workers’ rights. It also discusses the role of private voluntary standards in governing labour relations in GSCs, and their limitations and tensions with buyers’ purchasing practices.
    Keywords: value chains, globalization, governance, workers rights, labour standards, social development
    Date: 2016
  44. By: Renner, Laura; Meierrieks, Daniel
    Abstract: This contribution investigates the relationship between economic freedom and international migration. We argue that higher levels of economic freedom in the source countries of migration may discourage migration by generating more economic security, providing more economic opportunities and stimulating overall economic activity. Using a panel dataset on migration from 91 developing and emerging to the 20 most attractive OECD destination countries for the 1980-2010 period, we find that more economic freedom at home discourages high-skilled migration but does not matter to low-skilled migration. The negative association between economic freedom and skilled emigration also holds when we estimate dynamic-panel models that allow for endogeneity in the economic freedom-migration nexus. Our findings thus suggest that high-skilled individuals are especially responsive to the economic incentives arising from higher levels of economic freedom.
    JEL: F22 J61 J60
    Date: 2016
  45. By: Dong Dong Zhang
    Abstract: China’s Belt and Road Initiative (BRI) relates to the overarching agenda for cooperation between Australia and China based on their shared interest in an open global economic system and reforms that promote the effectiveness of participation in the international market. These interests should guide the approach to regional and global cooperation. The BRI offers a framework for deepening cooperation through a process of open regionalism that promotes : policy cooperation on economic issues of importance to both countries; the exploration of priorities for investment to enhance connectivity; trade and direct investment; the deepening of financial links; and the expansion of people-to-people exchanges.
    JEL: F02 F21 F55
    Date: 2017–02
  46. By: Nowak, Verena
    Abstract: Final good production often requires a firm's headquarter services and a foreign supplier's manufacturing input. With incomplete contracts, firms that decide whether to choose integration or outsourcing of this supplier do not only have to consider the ex ante investment incentives that influence the own and the supplier's underinvestment problem. Instead, firms also have to take into account the risk that the supplier cribs the knowledge and ex post becomes a competitor for the final good. With exogeneous risk of ex post inefficiencies associated with one particular organizational form, this organizational form becomes less likely. However, considering the supplier's incentives to become a competitor, integrated supplier have a higher risk of ex post inefficiencies. Hence, the consideration of ex post inefficiencies makes outsourcing more likely.
    JEL: D23 D86 L22
    Date: 2016
  47. By: Florian Huber (Department of Economics, Vienna University of Economics and Business); Manfred M. Fischer (Department of SocioEconomics, Vienna University of Economics and Business); Philipp Piribauer (Oesterreichisches Institut für Wirtschaftsforschung)
    Abstract: This paper uses a global vector autoregressive (GVAR) model to analyze the relationship between FDI inflows and output dynamics in a multi-country context. The GVAR model enables us to make two important contributions: First, to model international linkages among a large number of countries, which is a key asset given the diversity of countries involved, and second, to model foreign direct investment and output dynamics jointly. The country-specific small-dimensional vector autoregressive submodels are estimated utilizing a Bayesian version of the model coupled with stochastic search variable selection priors to account for model uncertainty. Using a sample of 15 emerging and advanced economies over the period 1998:Q1 to 2012:Q4, we find that US outbound FDI exerts a positive long-term effect on output. Asian and Latin American economies tend to react faster and also stronger than Western European countries. Forecast error variance decompositions indicate that FDI plays a prominent role in explaining GDP fluctuations, especially in emerging market economies. Our findings provide evidence for policy makers to design macroeconomic policies to attract FDI inflows in the respective countries.
    Keywords: FDI-output relationship, cross-country spillovers, transmission of external shocks, Bayesian global vectorautoregressive model
    JEL: C30 E52 F41 E32
    Date: 2017–02
  48. By: Stark, Oded
    Abstract: This paper adds three dimensions to the received literature: it models migration when the individuals’ preferences regarding their relative income are ordinal, it works out the resulting spatial steady state distribution of the individuals, and it shows that the aggregate of the individuals’ migration choices in the spatial steady state distribution sums up to the social optimum. This finding does not apply when the individuals’ preferences regarding their relative income are cardinal. We highlight the importance of the assumption about the nature of the individuals’ social preferences (whether ordinal or cardinal) to studying and predicting their migration behavior, and to elucidating the consequences of that behavior for social welfare.
    Keywords: Ordinal preferences, Distaste for low relative income, An ordinal measure of income relative deprivation, Interregional migration, Steady state spatial distribution, Social Welfare, Labor and Human Capital, C61, C62, D50, D60, D62, I31, R13, R23, Z13,
    Date: 2017–02
  49. By: Lionel Fontagné (PSE (Paris 1) and CEPII); Jean Fouré (CEPII); Gianluca Santoni (CEPII)
    Abstract: Taking a 2035 horizon, we examine how world energy consumption and emission patterns will be shaped by the changing demand and technological capabilities of different regions. We combine a convergence model fitting three production factors (capital, labour and energy) and two factor-specific productivities, along with a dynamic CGE model of the world economy. We consider three possible “worlds†with very different energy scarcity, and how Copenhagen pledges change economic agents’ calculus in each of these three situations. We find that the most dramatic changes in terms of location of value added are to be expected from the intrinsic differences among the three considered “worlds†, not so much in terms of economic impact of environmental pledges.
    Keywords: Growth, Macroeconomic Projections, long run, global economy
    JEL: E23 E27 F02 F47
    Date: 2017–02–24
  50. By: Rangan Gupta (Department of Economics, University of Pretoria, South Africa); Lardo Stander (Department of Economics, University of Pretoria, South Africa); Andrea Vaona (Department of Economics, University of Verona, Italy and Kiel Institute for the World Economy, Germany)
    Abstract: Using a novel, augmented two–sector endogenous growth model appropriate for a small, open economy characterised by human capital accumulation and productive government expenditure, we analyse the nature of the relationship between openness and economic growth. In the augmented form, external openness enters the human capital accumulation function directly. Productive government expenditure also affects human capital accumulation, but relies on seigniorage revenue to finance the productive expenditure where seigniorage revenue is itself dependent on the level of openness. Specifically, the findings indicate two, opposing effects of openness on growth – a direct effect of openness on growth through the knowledge spillovers that affect human capital accumulation, and an indirect effect of decreasing seigniorage revenue on growth through decreasing productive government expenditure on human capital. We discuss conditions under which the resultant openness–growth curve can be concave or convex, but do not specify theoretical functional forms or values to unknown parameters in the model to provide a concise theoretical result. Rather, drawing samples of exact model–match countries over a sample period of 1980–2011, we rely on a semi–parametric, data–driven empirical approach augmented with a restricted cubic spline regression function to provide empirical impetus to the theoretical outcomes reported. We show that the relationship between openness and growth is non–linear and specifically, inverted U–shaped. The result suggests that openness can only have a positive impact on the growth-rate until a certain threshold–level, beyond which, the effect is negative.
    Keywords: Openness, seigniorage, knowledge spillovers, semi–parametric estimation, spline regression
    JEL: C14 C61 E21 O42
    Date: 2017–01

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