|
on International Trade |
| By: | Zoryana Olekseyuk |
| Abstract: | Ukraine's revolution, Russia's continued aggression in Eastern Ukraine and the annexation of Crimea have drawn the world community's attention. Being in a situation of political and economic crises with high external and public debt, Ukraine is now in receipt of urgent and necessary economic assistance from the US, the EU, as well as various international organizations such as the International Monetary Fund (IMF) and the World Bank. The EU aims to strengthen Ukraine by integrating it to its huge common market. The already signed and ratified Association Agreement/Deep and Comprehensive Free Trade Area (AA/DCFTA) gives Ukraine a chance to increase its competitiveness on the world markets, attract new investments and get better access to the European market. However, a large number of reforms as well as economic modernization of Ukraine is needed for the implementation of this new type of agreement which involves more than just bilateral import tariff elimination. It additionally envisages the harmonization of Ukraine's regulations on competition policy, state aid, public procurement, sanitary and phyto-sanitary measures, technical regulations and service trade liberalization. In this paper we conduct a comprehensive analysis of the DCFTA's potential effects. Therefore, we look not only at tariff and nontariff measures (trade facilitation and non-tariff barriers), but also at liberalization of barriers to foreign direct investments in services in order to consider the full implications of the DCFTA and stress the importance of FDI. The analysis is helpful in providing the parties with valuable information about the transitional impacts. Furthermore, this will help to resolve the misunderstandings concerning the implementation of the DCFTA during the ongoing consultations between Ukraine, Russia and the EU, which are planned due to Russia's concerns to be negatively affected by this agreement. Analyzing different potential FTAs between Ukraine and the EU, Emerson et al. [2006], Ecorys & CASE-Ukraine [2007] and Maliszewska et al. [2009] show that the DCFTA would have a stronger positive impact on Ukraine's welfare compared to the simple one (incorporating tariff reductions only) where the effects are small or even slightly negative. Movchan & Giucci [2011] find a positive welfare effect up to 11.8% from the DCFTA with the EU, while the customs union with Russia, Belarus and Kazakhstan is unfavorable with a welfare loss of up to 3.7%. In the most recent study Balistreri & Olekseyuk [2014] analyze the potential effects of the DCFTA by implementing the following trade structures for services and manufactured goods: a.) a standard specification of perfect competition based on the Armington [1969] assumption of regionally differentiated goods; b.) monopolistic competition among symmetric firms consistent with Krugman [1980]; and c.) a competitive selection model of heterogeneous firms consistent with Melitz [2003]. This study illustrates a novel result that there is little danger of deindustrialization dominating the overall welfare gains as the welfare results under monopolistic competition are substantially lower compared to the standard Armington structure. This occurs because Ukraine intensifies production and exports of agriculture and other sectors which it has a traditional comparative advantage in, while the increasing returns sectors (producing under monopolistic competition) shrink in the face of the EU based import competition. However, the majority of previous studies does not include the liberalization of barriers to FDI in services. According to Tarr [2012], it is important to have a modeling framework which allows for analysis of this kind of liberalization due to the growing importance of services trade and FDI in services. Summarizing the results from different studies he finds that liberalization of barriers against FDI in services yields welfare gains several times larger than the usual estimates from traditional CGE models, which focus on goods trade. This occurs due to the fact that a reduction or elimination of FDI barriers in services sectors (e.g. telecommunication, banking, insurance, transportation and other business services) improves domestic firms' access to high-quality services and, consequently, leads to a reduction of costs of doing business, increases firms' productivity and improves the economy's competitiveness on the world markets (e.g. Ruthherford & Tarr [2006], Jensen & Tarr [2011]). Regarding Ukraine, Jensen et al. [2005] indicate that the aggregate welfare gains from Ukraine's WTO accession are mainly driven by the FDI reforms. They find a welfare increase of 2.3% from the reduction of barriers that discriminate against foreign services providers, whereas the average welfare effect amounts to 4.7%. Moreover, Shepotylo & Vakhitov [2012] show a strong positive impact on the productivity of Ukrainian firms from better access to services and from services liberalization. In particular, a standard deviation increase in services liberalization is associated with a 9% increase in the total factor productivity. Following this literature, we contribute to the ongoing discussion by analyzing the DCFTA between Ukraine and the EU in the new modeling framework combining the latest developments in trade theory (i.e., Melitz [2003]) with explicit consideration of foreign direct investments in business services. For this purpose we extend the GTAP based multi-region general-equilibrium simulation model developed by Balistreri & Olekseyuk [2014] allowing for the presence of multinational firms providing business services in Ukraine. This means that while in manufacturing foreign firms supply Ukrainian markets only on a cross-border basis, business services can be supplied by foreign firms both operating in Ukraine (FDI case) and abroad (cross-border supply). Therefore, we take not only the traditional gains from trade into account, but also: a.) the additional gains from new varieties due to monopolistic competition; b.) the aggregate productivity growth due to within industry reallocation of resources (according to the Melitz trade structure); c.) the productivity growth of the manufacturing sectors due to increased access to business services. This framework gives us a chance to find out whether the FDI consideration can mitigate or even eliminate the deindustrialization impact found by Balistreri & Olekseyuk [2014]. As EU firms are strongly engaged in the FDI flows to Ukraine (77.6% of Ukrainian FDI inflows are coming from the EU member countries), we find that simulating the DCFTA in this framework leads to an increase of the number of EU varieties while increasing demand for workers in Ukraine, which mitigates the aforementioned deindustrialization impact. Thus, our analysis illustrates the importance of the FDI part of the agreement and, therefore, gives some guidelines for the future reforms. |
| Keywords: | Ukraine, EU, CIS, General equilibrium modeling, Impact and scenario analysis |
| Date: | 2015–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:ekd:008007:8391&r=int |
| By: | C. Veeramani (Indira Gandhi Institute of Development Research); Lakshmi A (Indira Gandhi Institute of Development Research); Prachi Gupta (Indira Gandhi Institute of Development Research) |
| Abstract: | We decompose India's export performance in manufactured products during 2000-2015 into changes at the intensive and extensive margins. India's performance, along different margins, is compared and contrasted with that of China. The results show that while China outperforms India at both the margins, the gap is particularly wide at the intensive margin. Decomposition of intensive margin along quantity and price margins shows that Chinese products are generally sold cheaper than Indian products. Higher price margin, however, has not translated into high intensive margin for India due to its abysmally low quantity margin. We examine different explanations for China's superior performance relative to India, along different margins, using a gravity model. Our results suggest that China's exchange rate policy was not the prime reason for its export success. Neither do we find that FDI inflows were significant in explaining the export performance gap between them. The results show that China's export relationship bias towards high-income partner countries holds the key in understanding its superior performance. This bias is a natural consequence of China's high degree of specialization in labor-intensive activities. India, by contrast, due to an idiosyncratic pattern of specialization, has failed to exploit its export potential in high income countries. |
| Keywords: | Manufactured exports, extensive margin, intensive margin, India, China, gravity model |
| JEL: | F10 F14 F15 |
| Date: | 2017–02 |
| URL: | http://d.repec.org/n?u=RePEc:ind:igiwpp:2017-002&r=int |
| By: | Loitongbam, Bishwanjit Singh |
| Abstract: | Until India fully implemented TRIPS in 2005, the Indian pharmaceutical industry had maintained a comparative advantage of cheap and skilled workers among developing economies. However, recent changes in regulatory environment have made the situation challenging for the industry. India seems to be losing its position in the global arena in both the production of bulk drugs and formulations. This paper investigates how TRIPS (implemented by partner countries) and Regional Trade Agreements (RTAs) influence Indian pharmaceutical product exports, using the Gravity Model. This analysis finds that TRIPS has negative effect on Indian pharmaceutical products exports. And RTAs increase pharmaceutical products exports. |
| Keywords: | TRIPS, RTA, Gravity Model, Indian Pharmaceutical Industry |
| JEL: | F13 F14 F6 F68 |
| Date: | 2016–03–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:75764&r=int |
| By: | Ikuo Kuroiwa (Institute of Developing Economies Japan External Trade Organization(IDE-JETRO)) |
| Abstract: | A country's participation in global value chains (GVCs) is increasingly becoming important as a strategy for economic development. However, participation in GVCs alone is not sufficient. Industrial deepening - or the formation of backward linkages by creating robust supplier bases - is necessary to sustain economic growth. This paper explores how the automotive value chain has evolved in Thailand since the 1990s. Trade in value-added analysis is applied to the Organisation for Economic Cooperation and Development's Inter-Country Input-Output data. Moreover, the concept of value chain mapping is introduced to illustrate upstream and downstream transactions of goods and services along the value chain. Results show that international linkages were strengthened because of the expanding production networks in Southeast Asia. On the other hand, domestic linkages and domestic content started to decline after a certain point. These results suggest that the benefits of specialisation and exchange have outweighed those of agglomeration in recent decades. |
| Keywords: | valu chain mapping, trade in value added, automotive value chain |
| JEL: | D57 F14 O53 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:era:wpaper:dp-2016-33&r=int |
| By: | Lee , Hyo-young (Center for International Commerce and Finance, Seoul National University) |
| Abstract: | This paper delves into the relationship between trade and competition, which has long been a subject largely untouched since the issue had been dropped from the multilateral trade agenda in 2003. The need to incorporate elements of competition policy into international trade rules has long been discussed in the context of making the international trade regime more effective. The issue has gained more attention as state-owned enterprises (SOEs) began to emerge as new influential players in the international market, competing with private enterprises on an unequal footing. A growing number of bilateral trade agreements have included chapters on competition policy, albeit with rules that do not have sufficient binding force for disciplining the business practices of state-owned enterprises. The recently concluded Trans-Pacific Partnership (TPP), however, has introduced innovative rules for disciplining the competitive practices of SOEs by integrating the existing WTO disciplines on subsidies with competition rules. In this article, "competitive neutrality", the fundamental principle underlying the SOE disciplines, is used as a framework of analysis for understanding the new disciplines and obligations in the SOE rules. Several legal issues and challenges are identified that are relevant for applying the new rules in the real world, and implications are derived for future rule-making involving other new trade issues. |
| Keywords: | Competition Policy; State-owned Enterprises; Subsidies; WTO; TPP |
| JEL: | K33 L32 L41 |
| Date: | 2017–02–27 |
| URL: | http://d.repec.org/n?u=RePEc:ris:kiepsp:2017_001&r=int |
| By: | Karishma Banga (University of Manchester) |
| Abstract: | With global value chains (GVCs) speedily gaining prominence in defining the prevalent economic context it has become vital to understand their implications on developing economies. This study examines the industry-level impact of linking into GVCs for the Indian labour market, spanning the period 1995-2011. Using methodologies of fixed effects and Generalized Method of Moments (GMM) estimations, it analyses the employment impact of foreign value added in output, foreign value added in exports (backward linkages) and domestic value added in exports of intermediate goods and services (forward linkages). The results show that while backward linkages in GVCs have negatively impacted employment in India, forward linkages did not have any statistically significant impact. The analysis includes manufacturing, services, agriculture and allied activities. |
| Date: | 2017–01 |
| URL: | http://d.repec.org/n?u=RePEc:ceq:wpaper:1701&r=int |
| By: | Fida Karam; Chahir Zaki (Cairo University) |
| Abstract: | The paper investigates the effects of wars on trade in the Middle East and North Africa (MENA) region. As a region, MENA faces considerable risk of conflicts. Using an augmented gravity model, we introduce a war variable and distinguish between different types of conflicts. We run a battery of sensitivity analysis tests to control for the endogeneity problem that may arise in our estimation. The results show that, in general, wars have a significantly negative impact on exports, imports and trade. Civil conflicts hinder exports, imports and trade significantly. The disaggregated version of the gravity model shows that non-state conflicts have a detrimental effect on bilateral trade flows in manufacturing and that none of the conflicts do affect trade in services. Finally, the outcome of the gravity model for manufacturing sectors has been used to compute ad-valorem equivalents of wars at the country level. We found that, on average, a conflict is equivalent to a tariff of 5% of the value of trade. More heterogeneity is observed at the sectoral level (where AVEs range from 4% to 65%). |
| Date: | 2015–08 |
| URL: | http://d.repec.org/n?u=RePEc:erg:wpaper:933&r=int |
| By: | Zhi Wang; Shang-Jin Wei; Xinding Yu; Kunfu Zhu |
| Abstract: | We develop a new set of country-sector level indicators of Global Value Chains (GVCs) characteristics in terms of average production length, and relative “upstreamness” on a production network, which we argue are better than the existing ones in the literature. We distinguish production activities into four types: those whose value added is both generated and absorbed within the country, those whose value-added crosses borders only once for consumption, those whose value added crosses borders only once for production, and those whose value added crosses borders more than once. Based on such an accounting framework, we further decompose total production length into different segments. Using these measures, we characterize cross-country production sharing patterns and their evolution for 56 sectors and 44 countries over 2000-2014. While the production chain has become longer for the world as a whole, there are interesting variations across countries and sectors. |
| JEL: | F14 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:23261&r=int |
| By: | TODO Yasuyuki; KASHIWAGI Yuka |
| Abstract: | This paper examines the characteristics of Japanese firms in global firm networks. For this purpose, we adopt methods developed in network science to large-scale datasets that contain information on production, shareholding, and patent co-holding of global networks, comparing Japanese firms with U.S., European, and Chinese firms. Our main conclusions are as follows. (1) Most Japanese firms are not located in any of the three types of global networks. (2) In any type of global network, while Japanese firms are densely connected with each other, they are not connected considerably with foreign firms, particularly those in the center of the global network. (3) We therefore conclude that the diversity of ties of Japanese firms is lacking. Because existing studies often find positive effects of diversified networks on performance, we suggest policies that can connect Japanese firms with foreign firms, such as promotion of exporting activities and foreign direct investment of small and medium enterprises, overseas mergers and acquisitions, international research collaboration, and free trade agreements. |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:eti:rpdpjp:17004&r=int |
| By: | Udo Broll (Technische Universita ?t Dresden, Germany); Soumyatanu Mukherjee (Indian Institute of Management Kozhikode); Rudra Sensarma (Indian Institute of Management Kozhikode) |
| Abstract: | This paper analyses, for the first time, trade responsiveness of the international firms (under nohedging possibilities) linked to both domestic and foreign markets simultaneously, with respect to the random fluctuations in foreign (spot) exchange rates. Uncertainties in the spot exchange rates impart production decisions of the firm. In sum, the firm’s elasticity of risk aversion with respect to the standard deviation (or the mean) of the firm’s end-period random profit determines the direction of the impact of exchange rate volatility on trade. The analytical model is quantitatively extended, using data from Indian service sector (non-financial) firms over 2004-2015, to empirically estimate the risk-aversion elasticities owing to the exchange rate shocks, for the first time. |
| Keywords: | Two-moment model; exports; imported intermediate inputs; exchange rate volatility;revenue risk; elasticities of risk aversion. |
| JEL: | D21 D81 F10 F31 |
| Date: | 2016–12 |
| URL: | http://d.repec.org/n?u=RePEc:iik:wpaper:212&r=int |
| By: | Scott French (School of Economics, UNSW Business School, UNSW) |
| Abstract: | I propose a method of moments estimator of revealed comparative advantage based on a flexible specification of trade flows that is consistent with a large class of gravity models of international trade. I show that this estimator has many desirable properties. It is theoretically consistent with the classical notion of Ricardian comparative advantage and is easily computed, even for very large samples. Statistical inference is straightforward, and it is closely related to a commonly-used estimator in the gravity literature that is known to be robust to various forms of heteroskedasticity and measurement error common to trade data. |
| Keywords: | Method of moments; pseudo-maximum likelihood; Poisson; Ricardian; RCA; index |
| JEL: | F10 F11 F14 C13 C21 C55 |
| Date: | 2017–02 |
| URL: | http://d.repec.org/n?u=RePEc:swe:wpaper:2017-05&r=int |
| By: | Quy-Toan Do (World Bank); Andrei A. Levchenko (University of Michigan, NBER, and CEPR) |
| Abstract: | We compare redistribution through trade restrictions vs. domestic lump-sum transfers. When preferences are non-homothetic, even domestic lump-sum transfers affect relative prices. Thus, contrary to the conventional wisdom, domestic lump-sum transfers are not necessarily superior to distortionary trade policy. We develop this argument in the context of food export bans imposed by many developing countries in the late 2000s. |
| Keywords: | trade restrictions, redistribution, non-homothetic preferences |
| JEL: | F13 Q17 O24 |
| Date: | 2017–03–06 |
| URL: | http://d.repec.org/n?u=RePEc:mie:wpaper:656&r=int |
| By: | Michael Kouparitsas (Treasury, Government of Australia); Linden Luo (Treasury, Government of Australia); Jazmine Smith (Treasury, Government of Australia) |
| Abstract: | This paper models both the supply and demand of Australian non-commodity exports. We derive long-run export demand relationships from first principles. On the demand side, the paper finds a relatively low substitution elasticity between Australian exports and a broad basket of foreign produced goods and services. So, for instance, if Australian export prices increase, overseas buyers are less likely to respond by purchasing the same goods and services from foreign competitors, and are instead more likely to respond by reducing their demand for the product – whether Australian or foreign-made. In other words, income effects trump substitution effects. This result is consistent with other Australian studies. On the supply side, our modelling assumes that Australian manufacturing and services exporters are price setters – an assumption consistent with existing literature. This means that if global input costs increase, Australian exporters are able to pass some of that increase onto their customers. Based on this assumption, our modelling suggests that labour costs are a larger contributor to Australia’s non commodity export prices than imported intermediate inputs costs. |
| Keywords: | NA |
| Date: | 2017–02 |
| URL: | http://d.repec.org/n?u=RePEc:tsy:wpaper:wpaper_tsy_wp_2017_1&r=int |
| By: | Gilberto Libânio (Cedeplar-UFMG); Sueli Moro (Cedeplar-UFMG); Anna Carolina Londe (Cedeplar-UFMG) |
| Abstract: | This paper examines the relationship between composition of exports and economic growth for a large set of countries, between 2000 and 2013, following the assumption that the technological structure of exports has important implications for economic development. The paper builds an index of exports quality, based on the classification by technological intensity: primary products, resource-based manufactures, low-tech, medium-tech and high-tech manufactures. Then, we estimate the relationship between quality of exports and economic growth by using panel data analysis. The results suggest that the export quality index is highly significant to explain economic growth. Between 2000 and 2008, booming demand for commodities benefited exporters of primary products and resource-based manufactures, and lower export quality is associated with higher rates of economic growth. For 2009-2013, in turn, results confirm what is expected by theory and suggest that export structures with higher technological content have brought about positive effects on economic performance. |
| Keywords: | exports, technology, economic growth, panel data. |
| JEL: | O11 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:cdp:texdis:td543&r=int |
| By: | Grégoire Garsous (OECD); Tomasz Kozluk (OECD) |
| Abstract: | Business has often been arguing against the introduction of a carbon tax because it would induce a pollution haven effect – reducing the competitiveness of domestic production and shifting both production and emissions to countries where fossil fuels are cheaper. In this paper, we shed light on such claims by estimating the effect of energy prices on one of the possible channels of the pollution haven effect - foreign direct investment (FDI). Using data for listed firms in 23 OECD countries, we find that the effect of higher domestic energy prices on firms’ outward stock of FDI has been significant and positive, but small in magnitude. This effect seems driven by more permanent shocks to energy prices, in particular by those coming from more stringent upstream environmental policies. |
| Keywords: | energy prices, environmental policies, FDI, pollution haven |
| JEL: | F21 Q41 Q58 |
| Date: | 2017–03–23 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:1379-en&r=int |
| By: | Christopher Hansman; Jonas Hjort; Gianmarco León; Matthieu Teachout |
| Abstract: | This paper studies the relationship between a firm’s organizational structure and output quality. The setting is a large manufacturing sector in Peru where plants produce a vertically differentiated but otherwise homogeneous product for export: fishmeal. We link customs data to plant level data on each shipment’s quality grade, transaction level data on supplies, and GPS measures of supplier (fishing boat) be- havior. We start by documenting a robust association between the quality grade of a firm’s exports and the share of its inputs that comes from vertically integrated suppliers at the time of production. To understand the source of this relationship, we first show that classical theories of the firm predict that, in incomplete contracts settings, owning productive assets upstream may help a subset of downstream manufacturers attempting to produce high quality output to incentivize quality-effort from the assets’ operators. This explanation finds empirical support: in a given supplier-plant pair, the supplier delivers higher quality inputs (fresher fish) when integrated, and does so comparatively more during periods when (i) the plant aims to produce high quality output, and/or (ii) exogenous variation in upstream production (plankton) conditions makes quality-effort more costly. Finally, we show that firms source more of their inputs from integrated suppliers when faced with firm-specific shocks to demand for high quality exports. These results document an overlooked motivation for vertical integration and that strategic changes in organizational structure help manufacturers in developing countries achieve export success. |
| Keywords: | vertical integration, quality upgrading, trade, Peru |
| JEL: | D2 O1 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:961&r=int |
| By: | Gabriel Felbermayr; Jasmin Gröschl; Thomas Steinwachs |
| Abstract: | The Schengen Agreement is an important milestone in the European integration process. The purpose is to facilitate the flow of goods, services, and persons across intra-European borders. How successful is it in achieving this goal? We apply an econometric gravity analysis to bilateral trade. Unlike earlier analysis, we acknowledge that Schengen treats di?erent country pairs di?erently, depending on their relative geographical location. Moreover, we find it crucial to carefully control for other elements of European integration such as membership in the customs union, the single market or the currency union, and to factor in countries' trade with themselves. Schengen has boosted trade by about 2.81% on average, on top of the EU's trade e?ects (equivalent to a drop in tari?s between 0.46 and 1.02 percentage points). Trade creation e?ects for services are stronger than for goods, but estimates feature larger parameter uncertainty. Peripheral countries benefit more than central ones. Other aspects of EU integration matter much more for trade than Schengen. |
| Keywords: | Trade Integration, European Integration, Schengen Agreement, Gravity |
| JEL: | F10 F15 N74 N94 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:era:wpaper:dp-2016-36&r=int |
| By: | Bakari, Sayef |
| Abstract: | The nexus between trade and economic growth in Germany has been widely debated given to the high economic status compared to most countries in the world. This paper investigates the relationship between exports, imports, and economic growth in Germany. In order to achieve this purpose, annual data were collected from the reports of World Bank for the periods between 1985 and 2015, was tested by using Augmented Dickey-Fuller (ADF) and Phillip-Perron (PP) stationary test, co integration analysis of Vector Auto Regression Model and the Granger-Causality tests. According to the result of the analysis, unit root tests show that economic growth, exports and imports series become stationary when first difference is considered. Also, it was determined by using co integration analysis of Vector Auto Regression Model that there is no relationship between the three variables in Germany. On the other hand, and according to the Granger-Causality tests, we defined that there is unidirectional causality between exports and imports and between exports and economic growth. In addition, we found that there is a strong evidence of bidirectional causality from import to economic growth. These results provide evidence that exports and imports, thus, are seen as the source of economic growth in Germany. |
| Keywords: | export, import, economic growth, Germany, Cointegration and Causality |
| JEL: | F1 F10 F14 |
| Date: | 2017–02–15 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:77404&r=int |
| By: | Kahanec, Martin; Guzi, Martin |
| Abstract: | The economic literature starting with Borjas (2001) suggests that immigrants are more flexible than natives in responding to changing sectoral, occupational, and spatial shortages in the labor market. In this paper, we study the relative responsiveness to labor shortages by immigrants from various origins, skills and tenure in the country vis-à-vis the natives, and how it varied over the business cycle during the Great Recession. We show that immigrants in general have responded to changing labor shortages across EU member states, occupations and sectors more fluidly than natives. This effect is especially significant for low-skilled immigrants from the new member states or with the medium number of years since immigration, as well as with high-skilled immigrants with relatively few (1-5) or many (11+) years since migration. The relative responsiveness of some immigrant groups declined during the crisis years (those from Europe outside the EU or with eleven or more years since migration), whereas other groups of immigrants became particularly fluid during the Great Recession, such as those from new member states. Our results suggest immigrants may play an important role in labor adjustment during times of asymmetric economic shocks, and support the case for well-designed immigration policy and free movement of workers within the EU. The paper provides new insights into the functioning of the European Single Market and the roles various immigrant groups play for its stabilization through labor adjustment during times of uneven economic development across sectors, occupations, and countries. |
| Keywords: | immigrant worker,labor supply,skilled migration,labor shortage,wage regression,Great Recession |
| JEL: | J24 J61 J68 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:33&r=int |
| By: | Hala El-Said; Mahmoud Al-Said; Chahir Zaki (Cairo University) |
| Abstract: | Limited resources and barriers to entry are critically higher for small and medium enterprises (SMEs) than for large companies. One of the reasons explaining why the resources of SMEs are scarce is their limited access to financial services. This, in turn, reduces their likelihood of exporting. With this in mind, using the census of SMEs done by the Central Bank of Egypt and the Egyptian Banking Institute (EBI), we try to examine the impact of access to finance on SMEs’ export performance. We measure the latter by the extensive margin that means the probability of becoming an exporter and the probability of serving several markets. We found a significant and positive impact on the probability of exporting and that of exporting to more than one destination from dealing with banks and having banking facilities. Thus, wider and more efficient financial services are likely to increase the number of exporters and boost exports diversification. |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:erg:wpaper:903&r=int |
| By: | Thilo Albers |
| Abstract: | The devaluations of the 1930s facilitated a faster recovery from the Great Depression in the countries depreciating, but their unilateral manner provoked retaliatory commercial policies abroad. This paper explores the importance of the retaliatory motive in French trade policy during the 1930s and its effects on trade. Relying on a novel dataset of bilateral tariff rates and a difference in differences approach, the quantification of the protectionist response suggests that retaliation was an important motive behind increasing tariffs. The resulting beggar-myneighbour penalty reduced trade to a similar degree that modern regional trade agreements foster trade. Furthermore, the analysis of contemporary newspapers reveals that the devaluations of the early 1930s triggered a lasting Anglo-French trade conflict marked by titfor-tat protectionist policies. Overall, the quantitative and qualitative results indicate that the unilateral currency depreciations came at a high price in political and economic terms. |
| Keywords: | Currency Manipulation; Great Depression; Tariff Retaliation; Beggar-my-neighbour Policies |
| JEL: | N0 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:wpaper:69925&r=int |
| By: | Rajesh Chakrabarti (Indian School of Business,Hyderabad); Krishnamurthy Subramanian (Indian School of Business,Hyderabad); Sesha Meka (Indian School of Business,Hyderabad); Kuntluru Sudershan (Indian Institute of Management, Kozhikode) |
| Abstract: | Though public infrastructure – physical and financial – is widely believed to play a critical role in attracting Foreign Direct Investment (FDI), identifying this effect remains a challenge. In this paper, we use unique data to identify this effect by exploiting purely cross-sectional variation among approximately 600 districts in India. We examine the effect of infrastructure in 2001 on cumulative FDI flows into the district during 2002-07. Using panel regressions that include state fixed effects, we employ a two-pronged identification strategy. First, we test by netting out average (and maximum) FDI inflows into surrounding districts. Second, we exploit variation among different sectors within a district depending upon the sector’s propensity to attract FDI. Since our variables vary primarily at the district level, these tests together control for all omitted variables at the district level. Surprisingly, we find that FDI inflows remain insensitive to changes in infrastructure till a threshold is reached; thereafter, FDI inflows increase steeply with an increase in infrastructure. |
| Keywords: | Infrastructure, FDI, India, District |
| URL: | http://d.repec.org/n?u=RePEc:iik:wpaper:130&r=int |
| By: | A.Kerem Cosar; Banu Demir |
| Abstract: | We quantify the effect of container technology on transport costs and trade by estimating the modal choice between containerization and breakbulk shipping using micro-level trade data. The model is motivated by novel facts that relate container usage to shipment, destination and firm characteristics. We find container transport to have a higher first-mile cost and a lower distance elasticity, making it cost effective in longer distances. At the median distance across all country pairs, the box decreases variable shipping costs between 16 to 22 percent. The box explains a significant amount of the global trade increase since its inception: a quantitative exercise suggests that Turkish and U.S. maritime exports would have been about two-thirds of what they are today in the absence of containers. |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:era:wpaper:dp-2016-37&r=int |
| By: | Barge-Gil, Andrés; López, Alberto; Núñez-Sánchez, Ramón |
| Abstract: | Using Spanish firrm-level data, we estimate productivity effects of spillovers from foreign multinationals to domestic firms in both manufacturing and service sectors. We find evidence of a positive productivity effect from multinationals on domestic firms operating in the same industry. Analyzing inter-industry linkages, we find evidence consistent with positive productivity spillovers from forward linkages (i.e., from suppliers to buyers) and negative productivity spillovers from backward linkages (i.e., from buyers to suppliers). Our main results hold when analyzing differences between multinational and domestic firms, and for periods of economic growth and recession, although some differences arise. Interestingly, we find evidence supporting a positive role of spillovers during the last recession period. |
| Keywords: | Multinational firms, FDI, spillovers, economic recession. |
| JEL: | F23 L53 O31 O33 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:77348&r=int |
| By: | Byeongwoo KANG (Institute of Innovation Research, Hitotsubashi University); Yukihito Sato (Inter-disciplinary Studies Center, Institute of Developing Economies (IDE-JETRO)); Yasushi UEKI (Economic Research Institute for ASEAN and East Asia (ERIA)) |
| Abstract: | Attracting highly skilled workers is a major element in the economic development of many countries, especially developing ones. However, workers generally move from developing countries to developed ones. Historical evidence indicates that Korean and Taiwanese firms scout for highly skilled (retired or soon-to-retire) Japanese workers to accrue, and catch up on, knowledge. Therefore, this paper investigates how these firms scout for highly skilled Japanese workers. Aiming to produce evidence rather than testing hypotheses, this paper gives practical information on firms in developing countries in attracting highly skilled workers to drive future growth. In addition, this paper provides insights into the international mobility of highly skilled workers from a developed country to developing countries, which has not been examined in the previous literature. |
| Keywords: | Highly skilled, Mobility, Japan, Republic of Korea, Taiwan |
| JEL: | F22 J61 O15 |
| Date: | 2017–02 |
| URL: | http://d.repec.org/n?u=RePEc:era:wpaper:dp-2016-31&r=int |
| By: | Assaf Razin |
| Abstract: | The paper links Israel’s brain drain to skill-based immigration policies, prevailing in the advanced economies. |
| JEL: | F22 H1 J11 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:23251&r=int |
| By: | Markus Brueckner; Joaquin Vespignani |
| Abstract: | This paper examines the relationship between trade uncertainty and income inequality. In countries where only a small share of the population is educated, an increase in trade uncertainty is associated with a significant increase in income inequality. As education of the population increases the relationship between trade uncertainty and income inequality becomes more muted. Trade uncertainty has no significant effect on income inequality in countries that are world leaders in education. Developing countries that want to reduce income inequality arising from trade uncertainty should therefore consider further improving their education system. |
| Keywords: | Trade Uncertainty, Inequality, Education |
| JEL: | F1 E2 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:acb:cbeeco:2017-648&r=int |
| By: | Noland , Marcus (Peter G. Peterson Institute for International Economics; East-West Center); Morrison , Charles E. (East-West Center) |
| Abstract: | The conference was held on July 25, 2014 co-organized by the Korea Institute for International Economic Policy (KIEP) and East-West Center (EWC) in Honolulu. The key factors of the conference was to shape the economic future of the major North Pacific countries and the importance of economic cooperation among them. Major topics to be addressed were (1) the macroeconomic performances and outlooks of China, the United States, Korea, and Japan, and the interrelationship among them, (2) the emerging multilateral economic architecture and its implications, with specific reference to the TPP, the RCEP, and China-Japan-Korea free trade prospects, and (3) the future of the North Korean economy and its implications for North Pacific cooperation. The main sessions of the conference covered 'Prospects for the region's economies', 'Pathways toward trade and investment integration in the North Pacific region', 'Assessing economic and social change in North Korea'. |
| Date: | 2015–05–15 |
| URL: | http://d.repec.org/n?u=RePEc:ris:kiepcp:2015_001&r=int |
| By: | Christoph E. Boehm; Aaron Flaaen; Nitya Pandalai-Nayar |
| Abstract: | We provide three new stylized facts that characterize the role of multinationals in the U.S. manufacturing employment decline, using a novel microdata panel from 1993-2011 that augments U.S. Census data with firm ownership information and transaction-level trade. First, over this period, U.S. multinationals accounted for 41% of the aggregate manufacturing decline, disproportionate to their employment share in the sector. Second, U.S. multinational-owned establishments had lower employment growth rates than a narrowly-defined control group. Third, establishments that became part of a multinational experienced job losses, accompanied by increased foreign sourcing of intermediates by the parent firm. To establish whether imported intermediates are substitutes or complements for U.S. employment, we develop a model of input sourcing and show that the employment impact of foreign sourcing depends on a key elasticity of firm size to production efficiency. Structural estimation of this elasticity finds that imported intermediates substitute for U.S. employment. In general equilibrium, our estimates imply a sizable manufacturing employment decline of 13%. |
| Keywords: | Multinational Firms, Offshoring, Outsourcing, Manufacturing Employment |
| JEL: | F14 F16 F23 |
| Date: | 2017–01 |
| URL: | http://d.repec.org/n?u=RePEc:cen:wpaper:17-22&r=int |
| By: | Vidya Sukumara Panicker (Indian Institute of Management Kozhikode); Sumit Mitra (Indian Institute of Management Kozhikode); Rajesh Srinivas Upadhyayula (Indian Institute of Management Kozhikode) |
| Abstract: | Even while studies have explored the influence of institutional investors on strategic decisions of a firm, the interaction between a firm’s ownership and board has not been sufficiently explored in the literature. We argue that owing to the unique institutional context of an emerging economy, corporate governance characteristics of a firm such as promoter ownership and board characteristics would influence the interest of institutional investors on strategic decisions of a firm. We employ a large sample study to evaluate the influence of institutional investors on a single firm strategy- internationalization. We find that promoter ownership and the presence of an institutional nominee member on board of directors positively moderate the relation between institutional investors and internationalization whereas board independence is insignificant as a moderator. Our findings emphasize the influence of ownership and certain board characteristics on the preferences of institutional investors. |
| Keywords: | promoter ownership, board nominee, board independence, institutional investors, internationalization, |
| Date: | 2016–12 |
| URL: | http://d.repec.org/n?u=RePEc:iik:wpaper:209&r=int |
| By: | Belke, Ansgar; Osowski, Thomas |
| Abstract: | Building on the growing evidence on the importance of large data sets for empirical macroeconomic modeling, we estimate a large-scale FAVAR model for 18 OECD member countries. We quantify the global effects of economic policy uncertainty shocks and check whether the signs, the magnitude, and the persistence profile are consistent with the literature on the real and financial sector effects of uncertainty. In that respect, we compare the impacts of a US and a Euro area uncertainty shock. According to our results, an increase in uncertainty has a strong negative impact on economic activity, consumer prices, equity prices and interest rates. Uncertainty shocks cause deeper recessions in Continental Europe (except Germany) than in Anglo- Saxon countries. This pattern is compatible with the view that continental Europe still suffers from institutions which prevent flexible markets. And US uncertainty shocks have a bigger impact than their European counterparts. Uncertainty does not only impact that country where the shock originates but also has large cross-border effects. In that respect, Switzerland turns out to be the most affected non-Euro area European country. We also find a high degree of synchronization among the responses of national variables to a (foreign) uncertainty shock, indicating evidence of an international business cycle. With respect to the responses of national long-term interest rates to an uncertainty shock, our results reveal a strong “North-South” divide within EMU with rates decreasing less significantly in the South. Another important result is that uncertainty shocks emerging in one region quickly raise uncertainty outside the region of origin which appears to be an important transmission channel of uncertainty. |
| Keywords: | Economic policy uncertainty,Europe,FAVAR analysis,large-scale econometric models,option value of waiting,uncertainty effects,international uncertainty spillovers,United States |
| JEL: | C32 F42 D80 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:35&r=int |
| By: | Buiter, Willem H. |
| Abstract: | This paper investigates the implications for the nominal exchange rate of a Border Tax Adjustment (BTA) when there is BTA neutrality. A border tax adjustment is a change from an origin-based system of taxation, that taxes exports but exempts imports to a destination-based system that taxes imports but exempts exports. Both indirect taxes (e.g. a VAT) and direct taxes (e.g. a cash-flow corporate profit tax) can be subject to a BTA. In the US, a BTA for the corporate profit tax is under discussion. There is BTA neutrality when the real equilibrium, including measures of profitability and competitiveness, of an open economy is unchanged when it moves from an origin-based to a destination-based tax. The conventional wisdom on the exchange rate implications of a neutral BTA is that the currency of the country implementing the BTA will strengthen (appreciate) by a percentage equal to the VAT or CPT tax rate. The main insight of this note is that this 'appreciation presumption' is not robust, even when all conditions for full BTA neutrality are satisfied. Indeed, plausible alternative assumptions about constancy (or stickiness) of nominal prices support a weakening (depreciation) of the currency by the same percentage as the tax rate. On the basis on the very patchy available empirical information, it is not possible to take a view with any degree of confidence on the implications of a BTA for the nominal exchange rate, even if full BTA neutrality prevailed. Whether BTA neutrality itself is a feature of the real world is also a disputed empirical issue. Therefore, buyer (or seller) beware. |
| Keywords: | border tax adjustment,neutrality,equivalence,exchange rate appreciation,nominal price and wage rigidities |
| JEL: | E31 E62 F11 F13 F41 H25 H87 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ifwedp:201710&r=int |
| By: | Chung , Chul (Korea Institute for International Economic Policy); Morrison , Charles E. (East-West Center); Thoma , Mark (University of Oregon - Department of Economics); Barfield , Claude E. (American Enterprise Institute (AEI)); Bark , Taeho (Seoul National University - Graduate School of International Studies); Cheong , Inkyo (Inha University); Cho , Yoonje (Sogang University - Institute of International and Area Studies); Greaney , Theresa M. (University of Hawaii - Department of Economics); Karacaovali , Baybars (University of Hawaii at Manoa - Department of Economics); Kim , Inchul (Sungkyunkwan University; Korea Trade-Investment Promotion Agency); Lee , Il Houng (Bank of Korea - Monetary Policy Department; Korea Institute for International Economic Policy); Lee , Jang Yung (Kim & Chang); Noland , Marcus (Peter G. Peterson Institute for International Economics; East-West Center); Roberts , Michael J. (North Carolina State University - Department of Agricultural & Resource Economics); Shan , Xiaotong (National Development and Reform Commission - International Cooperation Center); Wan , Ming (George Mason University - Schar School of Policy and Government); Wang , Yijiang (Cheung Kong Graduate School of Business); Wang , Yong (Peking University) |
| Abstract: | The conference was held on Dec 14-15, 2015 co-organized by the Korea Institute for International Economic Policy (KIEP) and East-West Center (EWC) in Honolulu. Participants from China, Japan, Korea and the United States discussed the economic future of the major North Pacific countries and the importance of economic cooperation among them. Major topics in each session were (1) Trade (2) Macroeconomic Perspectives and (3) Finance. The first topic, "Trade", related to the China'a trade strategy, China's Belt-Road Initiative, Korea's Eurasia Initiative, and the Trans-Pacific Partnership Agreement (TPP). The second topic, "Macroeconomic Perspectives", aimed to tackle global or regional economic problems through the understanding of the macreconomic policies of the emerging market economies, uncertainty in the economic conditions of the United States, China's New Economic Norms, and the struggle of the East Asian International Order. The third topic, "Finance", aimed to provide an analytical perspective over currency convertibility, unconventional monetary policies, and prospect of cooperation between Belt-Road Initiative and TPP in the global economic governance. The conference concluded with the major findings and policy implications from the earlier sessions, particularily, monetary policy response in emerging economies and the importance of strengthing the North Pacific cooperation were discussed. |
| Keywords: | TPP; Monetary Policy; North Pacific Cooperation |
| Date: | 2016–12–30 |
| URL: | http://d.repec.org/n?u=RePEc:ris:kiepcp:2016_002&r=int |
| By: | Dirk Willenbockel; S. Amer Ahmed - The World Bank; Delfin S. Go - The World Bank (Emeritus) |
| Abstract: | Policies to facilitate international migration and targets for reductions in remittance costs faced by migrant workers are set to be part of the emerging post-2015 development agenda. This is a recognition of significant linkages between international migration and the achievement of the post-2015 development goals, and is a response to the fact that total remittance flows to developing countries are already a multiple of international development assistance flows. Global demographic shifts over the coming decades are bound to magnify the economic incentives for South-North migration and reinforce the economic case for a reduction of existing barriers to international labor mobility. The domestic labor supply has already peaked in high-income countries as a whole. It is set to decline steadily over coming decades while hundreds of millions of new workers are projected to enter the labor force by 2030 in developing countries as a group. Moreover, given the considerable variety in demographic dynamics and labor productivity levels across developing regions, there is potentially also considerable scope for mutual gains from further South-South migration. Correspondingly, forward-looking assessments of the prospective economic impacts of future changes in policies toward cross-border migration flows deserve a high priority on the global development research agenda. Aims This study adopts a global dynamic computable general equilibrium simulation approach to provide a regionally differentiated quantitative assessment of the incremental economic benefits resulting from a marginal relaxation of existing restrictions on international migration flows. The simulation analysis will also assess the welfare impacts of a gradual reduction in remittance transaction costs to the target levels envisaged in the current draft proposal for the post-2015 sustainable development goals. This latter simulation scenario will take account of recent empirical estimates of the elasticity of remittances with respect to remittance costs reviewed in McKenzie and Yang (2014). The existing previous global CGE-model-based studies of gains from further international labor migration (e.g. Walmsley and Winters, 2005; World Bank, 2006; Walmsley et al., 2007) focus predominantly on South-North migration impacts. However, in terms of absolute headcount figures, the present observed extent of South-South migration is nearly as large as that of South-North migration (UNESA, 2012; Ratha and Shaw, 2007; Bakewell, 2009). Heterogeneity in demographic trends, as well as wage differentials across regions within the “Global South,” suggests non-trivial potential gains from further South-South migration. Thus, the present study includes a quantification of the potential gains from an incremental increase in South-South migration flows, starting from observed South-South migration patterns. The analytical framework is a modified version of the recursive dynamic global CGE model LINKAGE. An earlier version of this model has been used in an assessment of potential gains from further international migration reported in the World Bank Global Economic Prospects Report 2006. The new extended version of the model will be calibrated to the recent GMig2 extension of the GTAP 8.1 database, which contains the latest available model-consistent estimates of bilateral migration stocks, labor earnings and remittance flows at GTAP 8.1 regional aggregation level as described in Walmsley et al (2013). The construction of a dynamic baseline up to 2030 under the assumption of no changes in the stance of international migration policies will be based on the latest World Bank global economic projections including UNDESA population and labour force growth projections. As the latter already contain assumptions about the evolution of migration flows over the simulation horizon, it is important to back out these assumptions at the dynamic model calibration stage to arrive at a methodologically clean separation of changes in migration implicitly built into the baseline and changes in migration due to deviations from the baseline migration policy path. Attention to this important detail appears to have been neglected in respective previous modelling work. The existing CGE studies capture remittance effects and direct wage effects on origin countries, but largely ignore other sending country impact channels identified in the literature. These channels include in particular potential productivity impacts associated with return migration and potential brain gain effects arising from incentives to invest in human capital formation in the presence of expected future migration opportunities. As Kerr and Kerr (2011) emphasize, proper accounting for return migration is essential for determining the economic impacts for both origin and host countries, given the available evidence on the extent of return migration from the main host regions and existing empirical estimates of possible associated benefits for the home country (e.g. Mayr and Peri, 2008; Dustmann and Weiss, 2007, De Vreyer, Gubert and Robilliard, 2010). With respect to brain gain effects, recent econometric evidence seems to point to a “robust, positive and sizeable effect of skilled migration prospects on human capital formation in developing countries” (Beine, Docquier and Rapoport, 2010; see Docquier and Rapoport, 2012 for qualifications). The present study aims to incorporate these additional impact channels in a stylized form. In each case, the calibration of the respective new model parameters that govern the size orders of these effects will be based on a review of the pertinent recent empirical literature, so that the model-based simulation results can credibly inform ongoing controversial debates about the relative importance of these impact channels. Back-of-the-envelope calculations as well as previous model-based simulation studies suggest that the potential net benefits from reducing barriers to international labor mobility are large. As Clemens (2011) has put it, “(r)esearch on this question has been distinguished by its rarity and obscurity, but the few estimates we have should make economists’ jaws hit their desks”., as these benefits “may be much larger than those available through any other shift in a single class of global economic policy”. We do not expect that our new results - which will be based on more recent and better data and incorporates a wider range of impact channels – will overturn this broad conclusion. However, the attention to factors that could qualify the development impact of migration, such as the cost of remittances, will help marry the literature on the overall gains of migration to specific interventions. |
| Keywords: | Global, Developing countries, General equilibrium modeling |
| Date: | 2015–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:ekd:008007:8503&r=int |