|
on International Trade |
| By: | Haichao Fan; Yao Amber Li; Stephen R. Yeaple |
| Abstract: | This paper presents an analysis of the effect of China's entry into the WTO on the quality choices of Chinese exporters in terms of their outputs and their inputs. Using highly disaggregated firm-level data, we show that the quality upgrading made possible by China's tariff reductions was concentrated in the least productive Chinese exporters. These firms, which had been laggards in terms of quality prior to the tariff reduction, were the most aggressive in increasing the quality of their exports and their inputs and in redirecting their exports toward high income markets where demand for high quality goods is strong. Our empirical results are consistent with a simple model featuring scale effect and non-Hicks' neutral productivity that disproportionately affects the efficiency with which firms use intermediate inputs. This latter feature does not appear in workhorse models of firm heterogeneity and endogenous quality choice which provide a distorted view of the impact of trade liberalization on quality upgrading. |
| JEL: | F1 F10 F14 O3 |
| Date: | 2017–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:23690&r=int |
| By: | Lorenzo Caliendo; Luca David Opromolla; Fernando Parro; Alessandro Sforza |
| Abstract: | The economic effects from labor market integration are crucially affected by the extent to which countries are open to trade. In this paper we build a multi-country dynamic general equilibrium model with trade in goods and labor mobility across countries to study and quantify the economic effects of trade and labor market integration. In our model trade is costly and features households of different skills and nationalities facing costly forward-looking relocation decisions. We use the EU Labour Force Survey to construct migration flows by skill and nationality across 17 countries for the period 2002-2007. We then exploit the timing variation of the 2004 EU enlargement to estimate the elasticity of migration flows to labor mobility costs, and to identify the change in labor mobility costs associated to the actual change in policy. We apply our model and use these estimates, as well as the observed changes in tariffs, to quantify the effects from the EU enlargement. We find that new member state countries are the largest winners from the EU enlargement, and in particular unskilled labor. We find smaller welfare gains for EU-15 countries. However, in the absence of changes to trade policy, the EU-15 would have been worse off after the enlargement. We study even further the interaction effects between trade and migration policies and the role of different mechanisms in shaping our results. Our results highlight the importance of trade for the quantification of the welfare and migration effects from labor market integration. |
| JEL: | F1 F13 F16 F22 |
| Date: | 2017–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:23695&r=int |
| By: | Bagir, Yusuf |
| Abstract: | This paper analyzes the impact of presence of foreign missions on trade using Turkey’s unique expansion in its foreign mission network (37 new embassies in 8 years) as the source of variation in a dynamic panel data setting. The dependent variable is the trade between Turkey and 186 countries from 2006 to 2014. The results indicate that presence of an embassy increases export value by 27% and this increase comes mainly from volume effect. Categorizing goods by the Rauch (1999) classification shows that increase in differentiated goods exports explains almost all of the change in total export value. There is no statistically significant impact on the exports of homogeneous goods. Replication of the analysis for imports suggests that presence of an embassy leads to 70% increase in imports and this increase is entirely driven by the homogeneous goods imports. |
| Keywords: | International Economics, Foreign Missions, Turkey, International Trade, Embassy |
| JEL: | F0 F00 F1 F10 F14 H0 |
| Date: | 2017–08–17 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:80845&r=int |
| By: | Koester, Ulrich |
| Abstract: | The EU has signed new agreements with Ukraine, Moldavia, and Ukraine, the so-called Deep and Comprehensive Free Trade Agreement (DCFTA). This policy brief only focuses on Georgia to exemplify the mythology and some important specifics of the participating countries that differ somewhat, but are important for assessing the impact. The agreement with Georgia became effective in September 2016; therefore, accurate estimation of the quantified effects was delayed for some time. This policy brief focusses on the free trade agreement on agricultural products. Georgia benefits from trade preferences for import to the EU and the EU likewise from exports to Georgia. It is foreseen that tariffs will be abolished completely in the future, but at present it is only Georgia which has abolished tariffs for imports from the EU. The EU has only reduced the World Trade Organization (WTO) bounded rates and, in addition, it still applies the socalled entry price system and even quotas for imports of garlic. Effects on trade might be important because the EU still highly protects agricultural imports and thus the standard of living for the 50 percent of Georgians living mainly from farming may improve. The findings are that Georgia may gain in total, if traders live in Georgia. The gain results from both redirection of Georgian exports from other destinations and additional exports of Georgian products. These additional exports to the EU may be replaced by additional imports from low price suppliers on the world market. |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:iamopb:32e&r=int |
| By: | Andrista, Safira; Widodo, Tri |
| Abstract: | The ASEAN Economic Community (AEC) has been implemented since the beginning of 2016 and expected to be completed in 2025. The ASEAN member countries preserve their value and norms highly even in the condition of integrated ASEAN, particularly in state’s sovereignty, resulting “ASEAN Way” of integration. This research is conducted to compare the ASEAN Way of integration and theoretical kinds of economic integration (Balassa, 1961). Using GTAP 9 Migration database with 2007 and 2011 base year, the comparative examination of ASEAN Way of integration impact on ASEAN member countries divided into five scenarios: (1) implementation of the ASEAN Free Trade Area, (2) ASEAN customs union, (3) ASEAN Economic Community, (4) ASEAN common market and (5) fully liberalized ASEAN trade. The welfare gains of ASEAN member countries in (1) implementation of ASEAN free trade area is higher than (2) ASEAN customs union, and the welfare gains of ASEAN member countries in implementation of (3) ASEAN Economic Community is higher than (4) ASEAN common market. |
| Keywords: | Economic Integration, “ASEAN Way”, GTAP |
| JEL: | F02 F15 F53 |
| Date: | 2017–08–18 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:80880&r=int |
| By: | Johannes Schwarzer (Council on Economic Policies) |
| Abstract: | We revisit the "self-selection vs. learning-by-exporting (LBE)" debate with new evidence on a large panel of German firms of all economic sectors up to the 3-digit NACE level, between 1993-2014, and shed new light on the channels that foster export-induced productivity gains. In line with previous results, we find substantial pre-export differences in productivity between future exporters and domestic firms. Nevertheless, these pre-export differences remain constant over time and we find strong evidence against a conscious self-selection effect, in which firms would actively engage in increasing their productivity in temporal proximity to starting to export. In contrast, we find strong support for the learning-by-exporting hypothesis in both the manufacturing and the services sector. However, the learning effect is not progressive and more short-lived in the latter than in the former. We explain the different sectoral performances with significant differences in access to foreign markets, which is substantially lower and more concentrated within few firms in services. Furthermore, we show that across sectors, the size of the LBE effect depends on the level of within-sector competition. In line with basic microeconomic theory, productivity gains are higher for entrants into exporting, which operate in relatively uncompetitive domestic sectors, pointing to an important competitiveness channel for productivity gains. Our results suggest that the services sector offers the largest scope for productivity gains through trade policies aiming at facilitating market access. |
| Date: | 2017–02 |
| URL: | http://d.repec.org/n?u=RePEc:ceq:wpaper:1702&r=int |
| By: | Keith Head; Barbara J. Spencer |
| Abstract: | Large firms played a central role in the “new trade” models that became a major focus of trade economists in the early 1980s. Subsequent literature for the most part kept imperfect competition but jettisoned oligopoly. Instead, as the heterogeneous firms literature burgeoned in the 2000s, monopolistic competition quickly became established as the workhorse model. The use of oligopoly in trade models has been criticized for reasons that we argue are unpersuasive. Renewed incorporation of oligopolistic firms in international trade is warranted. Quantitative investigations of welfare effects of trade policy should again address the impact of such policies on the allocation of profits across countries. |
| JEL: | F12 F13 F14 L13 |
| Date: | 2017–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:23720&r=int |
| By: | Bouët, Antoine; Laborde Debucquet, David |
| Abstract: | In a context of rising protectionist rhetoric, this paper looks at the potential impact of trade wars initiated by a change in US trade policies. We show that such trade wars can hurt emerging countries and damage the global trading system without bringing gains for the United States. We use a static multicountry, multisector Armington trade model to evaluate 6 modalities of 3 potential trade wars—for a total of 18 scenarios—between the United States and China, between the United States and Mexico, and between the United States and both China and Mexico. We also determine and analyze the optimal noncooperative unilateral tariff that the US government can implement against all of its trading partners. In each case, we evaluate various forms of trade retaliation by the trading partner(s): the same level of import duty as the one imposed by the United States, a duty that minimizes welfare loss, a duty that minimizes terms-of-trade deterioration, a duty that generates the same amount of collected revenue, and finally, a Nash equilibrium. We conclude that there is no scenario in which the US government augments its domestic welfare or gross domestic product. There may be sectoral gains in value-added in the United States, but they are small and to the detriment of other sectors. Although losses for China are relatively small, potential losses for the Mexican economy are significant. There are also potential free riders of these trade wars, particularly in Central America. Finally, the way in which trade retaliations are designed matters greatly. |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:fpr:ifprid:1669&r=int |
| By: | Konstantins Benkovskis (Bank of Latvia); Benjamin Bluhm (European Central Bank); Elena Bobeica (European Central Bank); Chiara Osbat (European Central Bank); Stefan Zeugner (European Commission) |
| Abstract: | What drives external performance of countries? This is a recurring question in academia and policy. The factors underlying export growth are receiving great attention, as countries struggle to grow out of the crisis by increasing exports and as protectionist discourses take foot again. Despite decades of debates, it is still unclear what the drivers of external performance are and, importantly, which ones policy makers can influence. We use Bayesian Model Averaging in a panel setting to investigate the drivers of export market shares of 25 EU countries, considering a wide range of traditional indicators along with novel ones developed within the CompNet. We find that export market share growth is linked to different factors in the old and new EU Member States, with one exception: for both groups, competitive pressures from China have strongly affected export performance since the early 2000s. In the case of the old EU Member States, investment, the quality of institutions and liquidity available to firms also appear to play a role. For the new EU Member States, labour and total factor productivity are particularly important, while inward FDI matters more than domestic investment. Price competitiveness does not seem to play a very important role in either set of countries: relative export prices do show correlation with export performance for the new EU Member States, but only when they are adjusted for quality. Our results point to the importance of considering the "exporting stage" of a country when discussing export-enhancing policies. |
| Keywords: | export shares, competitiveness, Bayesian Model Averaging |
| JEL: | C23 C51 F14 O52 |
| Date: | 2017–08–10 |
| URL: | http://d.repec.org/n?u=RePEc:ltv:wpaper:201702&r=int |
| By: | Graham Gudgin (Centre for Business Research, University of Cambridge); Ken Coutts (Centre for Business Research, University of Cambridge); Neil Gibson (Ulster University Economic Policy Centre); Jordan Buchanan (Ulster University Economic Policy Centre) |
| Abstract: | The predictions of the Treasury, OECD and IMF for the long-term impact of Brexit remain influential. They provide an important context for the Brexit negotiations and underpin the belief of Scottish and Irish nationalists that Brexit strengthens their case for independence or Irish unity. Because these predictions have received limited scrutiny they are examined in detail in this paper. The bases of the predictions are similar for each of the three organisations. In each case estimates are made of the impact of Brexit on trade and on foreign direct investment. This is followed by an estimate of the knock-on effect on productivity. The OECD and IMF also include an assessment of the impact of lower migration. The aggregate impact of these factors is then fed into a macro-economic model to obtain a forecast for GDP. Much of the final impact depends on the estimate for trade which, in each case, is assessed using a ‘gravity model’. Because gravity models are inaccessible to the general public, they are explained here in comprehensible terms. In addition the Treasury’s gravity model results are replicated and examined in detail. Our conclusion is that different versions of the model give a range of results and that most versions give a smaller trade impact than that reported by the Treasury, OECD or IMF. In particular, equations which estimate the average impact of EU membership on exports of goods tend to over-predict UK exports to the EU. This implies that the average impact of EU membership applies less to the UK than to the other EU member states. The further implication is that these official predictions of the impact of Brexit are overly pessimistic. |
| Keywords: | Brexit; Gravity Model; H M Treasury; IMF; Trade: macroeconomic forecasts; OECD |
| JEL: | C54 E24 E44 H24 |
| Date: | 2017–08 |
| URL: | http://d.repec.org/n?u=RePEc:mde:wpaper:0077&r=int |
| By: | Stefan Kühn (International Labour Organization); Christian Viegelahn (International Labour Organization) |
| Abstract: | This paper studies the impact of foreign barriers to goods and services trade on domestic jobs that are directly or indirectly related to affected trade flows. Using the ILO’s recently published estimates of the number of jobs in global supply chains, the empirical analysis in this paper largely confirms predictions derived from a theoretical model closely calibrated to actual data from international input-output tables. First, it identifies a sizeable cross-border impact of barriers to manufacturing trade not only on manufacturing jobs, but also on services jobs. Second, service trade barriers affect the number of jobs in both services and manufacturing. Third, spill-over effects of trade policy in one sector to jobs in other sectors have become more important over time. With these findings, the paper provides evidence on the labour market consequences of the increased interconnectedness of countries and sectors through global supply chains, suggesting that trade policy can have significant external effects on foreign labour markets. |
| Date: | 2017–05 |
| URL: | http://d.repec.org/n?u=RePEc:ceq:wpaper:1705&r=int |
| By: | Marinov, Eduard |
| Abstract: | The paper aims at analysing if Bulgaria utilises the benefits of the participation in the Common Commercial Policy of the European Union (EU) by studying the dynamics of Bulgarian trade with countries which have concluded preferential trade agreements (PTAs) with the EU. Economic theory states that PTAs should increase the volume of bilateral trade between the parties. Becoming a Member State of the EU Bulgaria becomes a part of the Union’s Common Commercial Policy – both as being part of the EU Customs Union, as well as becoming a party of all EU trade agreements and negotiations. Hence one could expect Bulgarian trade with those countries that have PTAs with the EU to increase. The extent to which trade liberalization envisaged in different PTAs affects Bulgarian trade relations with the respective countries could be assessed either by the nominal increase of trade flows or by comparing this increase to the trade of the EU in general with these countries. The paper uses both approaches. The first section of the paper discusses the dynamics, the share of intracommunity trade and the commodity structure of Bulgaria’s trade in goods for the period of EU membership. The main section analyses trade relations with countries with which the EU has PTAs in force. The individual agreements, respectively the countries under review are selected based on the type of the agreements (the deepness of trade liberalization) and on the time they were concluded (before or after Bulgaria’s accession to the EU). Thus the agreements that are analysed are the Customs Union Agreement with Turkey (1995), the Free trade agreements (FTAs) with Chile (2003) and South Korea (2011) and the Stabilization and Association Agreements with FYR Macedonia (2004) and Albania (2009). |
| Keywords: | PTAs, Bulgarian international trade, European integration |
| JEL: | F13 F14 F55 |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:80947&r=int |
| By: | Bouët, Antoine; Metivier, Jeanne |
| Abstract: | Since the inception of the World Trade Organization (WTO) in 1995, member countries have been heavily relying on the organization's dispute settlement procedure (DSP). Exploiting a new database on WTO litigations between 1995 and 2014, this paper describes disputes initiated over this period and identifies potential sources of bias concerning the participation of developing countries. The analysis builds on three different models to determine country i's probability of initiating a dispute against country j. Either it depends only on the two countries' structure of trade, that is the number of products exported by i to j (a situation we refer to as the rules-based model), or it is also affected by country i's or country j's specific characteristics (the unilateral power-based model), or it is also affected by bilateral economic and trade relations between countries i and j (the bilateral power-based model). We find that country i's structure of trade with j plays an important role in explaining the probability that i initiates a dispute against j under the DSP. Furthermore, country i's legal capacity and both countries' political regimes also affect this probability. However, we do not find that bilateral relationships between i and j, such as participants' capacity to retaliate against each others have an impact on dispute initiation. |
| Keywords: | World Trade Organization (WTO), trade, international agreements, trade policies, |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:fpr:ifprid:1652&r=int |
| By: | Egger, Hartmut; Egger, Peter; Kreickemeier, Udo; Moser, Christoph |
| Abstract: | We set up a trade model with heterogeneous firms and a worker population that is heterogeneous in two dimensions: workers are either skilled or unskilled, and within each skill category there is a continuum of abilities. Workers with high abilities, both skilled and unskilled, are matched to firms with high productivities, and this leads to wage differentials within each skill category across firms. Self-selection of the most productive firms into exporting generates an exporter wage premium, and our framework with skilled and unskilled workers allows us to decompose this premium into its skill-specific components. We employ linked employer-employee data from Germany to structurally estimate the parameters of the model. Using these parameter estimates, we compute an average exporter wage premium of 5 percent. The decomposition by skill turns out to be quantitatively highly relevant, with exporting firms paying no wage premium at all to their unskilled workers, while the premium for skilled workers is 12 percent. |
| Keywords: | Exporter wage premium,Heterogeneous firms,Ability differences of workers,Positive assortative matching,Trade and wage inequality |
| JEL: | C31 F12 F15 J31 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:tudcep:1217&r=int |
| By: | Carmine Ornaghi (University of Southampton); Ilke Van Beveren (Statistics Netherlands); Stijn Vanormelingen (KU Leuven) |
| Abstract: | Advances in communication technology have led to a remarkable increase in the tradability of services, resulting in a substantial increase in offshoring of services over the last two decades. Research investigating how this surge in service offshoring affects employment, has been largely hampered by the paucity of suitable microdata. This paper tries to fill this gap by using a newly constructed database of Belgian firms that combines individual transaction-level data on international trade in goods and services with annual financial accounts. This unusually rich dataset allows us to produce fresh evidence on the impact of goods and service offshoring on total employment and employment by educational levels for both manufacturing industries and the service sectors. Our results show that: (i) goods offshoring has a positive impact on employment growth among workers with both low and high levels of education in the manufacturing industry but this effect disappears when controlling for scale effects; and (ii) service offshoring has a negative impact on employment growth among highly educated workers in the service sectors. This novel evidence suggests that globalization may threaten job security of higher educated workers too. |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:ceq:wpaper:1704&r=int |
| By: | Bouët, Antoine; Cosnard, Lionel; Laborde Debucquet, David |
| Abstract: | In the Malabo Declaration of June 2014, African countries committed to tripling the level of intra-African agricultural trade and services by 2025, fast-tracking the establishment of a Continental Free Trade Area, and adopting a continentwide common external tariff. To accomplish these goals, African countries will need to consistently and accurately measure their participation in international trade. This paper reviews the literature on the measurement and qualification of trade integration in Africa. Starting with a complete review of available indicators and methodologies, it develops a methodological toolbox for better evaluation of the actual level of trade integration on the continent and formulates recommendations for policy assessment. It recommends use of a diverse range of indicators and methodologies, reviewing indicators that have recently emerged from network analysis and indicators of trade in value added. The study concludes that Africa is characterized by weak trade integration, particularly with the rest of the world. The region’s small number of trading partners and low product diversification are also striking. Contrary to what can be concluded from some simple trade share indicators, the use of more refined indicators shows that intra-African trade is relatively high compared with trade with other continents. |
| Keywords: | trade, |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:fpr:ifprid:1667&r=int |
| By: | Imamoglu, Hatice |
| Abstract: | This paper investigates both the static and dynamic relationships between the development within the financial sector development and international trade openness with regard to the size of the underground economy in 20 EU (European Union) Countries. Panel data analysis will be conducted for the period 2006 to 2014, in order to examine the effect of the financial sector development and trade openness on the size of the underground economy. In addition to the static relationship framework, the Arellano-Bond Generalized Method of Moments econometric method will be applied to examine the dynamic framework between the variables. The main findings of this paper suggest that financial development has a significant impact on the size of the underground economy, and the existence of the negative correlation between the official GDP and the size of the underground economy is proven. In conclusion, the development within the financial sector is a significant contributor to the underground economy. |
| Keywords: | Financial Sector Development,International Trade Openness,Corruption Perception Index,Underground Economy,European Union Countries |
| JEL: | C23 E26 E44 E10 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ifwedp:201750&r=int |
| By: | Hinz, Julian |
| Abstract: | Economic determinants of economic integration agreements (EIAs) have received ample attention in the economic literature. Political motivations for such agreements have been mostly studied as functions of domestic politics or in the context of conflict. In this paper I suggest a different narrative. Economic integration could be used as an instrument of foreign policy, where political considerations influence the choice of contracting partners. I sketch a simple model that exhibits the proposed mechanism in which a big country chooses between alternatives for integration in terms of economic and political welfare gains, while the small country is indifferent between possible partners for integration. In the empirical part I use a novel dataset on political events to test the predictions of the model and find evidence for the hypothesis that there is more to economic integration than "just trade". Geopolitical considerations play a determining role in the choice of the contracting partner country and the depth of economic integration. |
| Keywords: | trade agreements,geopolitics,gravity equation,event data |
| JEL: | F13 F15 F51 F53 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ifwkwp:2085&r=int |
| By: | Alejandro Riaño (University of Nottingham); Fabrice Defever (City University of London and CEP) |
| Abstract: | This paper highlights a new stylized fact by documenting a great degree of heterogeneity in the distribution of export intensity across countries. Contrary to received wisdom from studies focusing on a single country, we show that export intensity distributions tend to exhibit modes at both ends of the support, a phenomenon that we refer to as `twin peaks'. Using a standard trade model with rm-destination specificc demand shifters we show that i) this feature directly results from heavy-tailed sale distributions ii) this feature (statistically) vanish for countries with large or small domestic market compared to their export market. Using publicly available firm-level data, we show that the model's structural parameters are easily estimated and can account for approximately 89 percent of cross-country variation in the distribution of export intensity. Our finding have many applications, notably with regards to volatility of firm's sales. |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed017:454&r=int |
| By: | Zegarra Pinto, José |
| Abstract: | SECO Working Paper 14/2017 by José Zegarra Pinto & Luwing Peche Loayza, PUCP |
| Abstract: | This paper develops an analysis of the impacts of the Agreement on Government Procurement (GPA) Principles and Rules on the Peruvian Public Procurement regulation, and Peruvian participation in the process of international standardisation of public procurement through signing different kinds of free trade agreements (FTAs). |
| Date: | 2017–08–14 |
| URL: | http://d.repec.org/n?u=RePEc:wti:papers:1087&r=int |
| By: | Ronald B. Davies; Zuzanna Studnicka |
| Abstract: | The UK's decision to leave the EU is surrounded by several studies simulating its potential effects. Alternatively, we examine expectations embodied in stock returns using a two-part estimation process. While most firms' prices fell, there was considerable heterogeneity in their relative changes. We show that this heterogeneity can be explained by the firm's global value chain, with heavily European firms doing relatively worse. For firms with few imported intermediates, this was partially offset by a greater Sterling depreciation. These changes were primarily in the first two days and highly persistent. Understanding these movements gives a better understanding Brexit's potential effects. |
| Keywords: | Global value chaine; Event study; Brexit |
| JEL: | F15 F23 G14 |
| Date: | 2017–05 |
| URL: | http://d.repec.org/n?u=RePEc:ucn:wpaper:201708&r=int |
| By: | Aygun Garayeva (Central Bank of the Republic of Azerbaijan); Gulzar Tahirova (Central Bank of the Republic of Azerbaijan) |
| Abstract: | The impact of institutional quality on the exchange rate-export relation is assessed in a panel of 33 countries and quarterly time period of 1991Q1- 2016Q3. Empirical estimation is conducted in 2 steps. As a first step, using panel DOLS, FMOLS and PMG estimation techniques, it is confirmed that a negative and significant relation between exchange rates and exports exists. The estimation suggests that in the countries under study, 1% appreciation of the real effective exchange rate leads to, approximately, 0.55% decrease in total exports on average, holding other variables constant. In a separate cross-sectional estimation using simple OLS, some empirical evidence has been found to prove that institutional quality positively affects the exchange rate elasticity of exports. Also it has been shown that in oil exporting countries institutional quality has a greater impact on exchange rate-export link, compared to oil importers. But these results are only weakly significant and are not robust to the use of other proxy variables. |
| Keywords: | exchange rates, exports, institutional quality, oil exporters, panel data |
| JEL: | F14 F31 D73 C31 C33 |
| Date: | 2017–08 |
| URL: | http://d.repec.org/n?u=RePEc:gii:giihei:heidwp16-2017&r=int |
| By: | Ekpo, Akpan H.; Effiong, Ekpeno L. |
| Abstract: | This paper investigates the relationship between a country's openness to trade and the effects of monetary policy on output growth and inflation in Africa. Theory suggest that monetary policy effectiveness is influenced by the degree of openness to international trade. We apply standard panel data techniques to annual data from the period 1990-2015 for a panel of 37 African countries, and find a strong significant relationship between openness and monetary policy effectiveness in Africa. The empirical results indicate that the effects of monetary policy on output growth and inflation increases and decreases respectively with higher levels of trade openness. Therefore, monetary authorities should place emphasis on the level of openness when designing their choice of optimal monetary policy. |
| Keywords: | Openness; Monetary Policy; Africa. |
| JEL: | C33 E52 F41 O55 |
| Date: | 2017–08 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:80847&r=int |
| By: | Luciano Lopez |
| Abstract: | This paper investigates the direction of Granger causality, if Granger causality there is, between Swiss bilateral official development aid and Swiss exports for a panel of 50 recipient countries over the period 1974-2013. To account for possible geographical effects, three specific group of recipient countries across the same period are considered, that is "Africa", "Latin America" and "Asia". To shed on light potential level effects, four other group of countries are considered according to the relative amount of aid, respectively exports, Switzerland has exchanged with a given recipient country across the all period. The former panel plus the seven specific group of countries and the fact that we test for Granger causality in both directions give us a total of 16 models. As a necessary first step, four different panel unit root tests are conducted on each series of all eight panels and results systematically indicate stationary series in levels. Then and to test for Granger causality, Dumitrescu-Hurlin Granger non-causality tests are conducted. Results indicate bidirectional Granger causality in all panels except for the "African" one where Granger causality seems to run only from exports to bilateral aid. This result is important in terms of policy implications, particularly for a donor country as Switzerland, since it implies that if aid towards a recipient country is cut, it is likely to cause Swiss export reductions to that same recipient country. |
| Keywords: | Aid, exports, unit root, Granger causality, panel datasets. |
| JEL: | C23 F35 |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:irn:wpaper:17-05&r=int |
| By: | Difei Geng (University of Arkansas-Fayetteville); Kamal Saggi (Vanderbilt University) |
| Abstract: | Under external reference pricing (ERP) the price that a government permits a firm to charge in its market depends upon the firm's prices in other countries. In a two-country (home and foreign) model where demand is asymmetric across countries, we show that home's unilaterally optimal ERP policy permits the home firm to engage in a threshold level of international price discrimination above which it is (just) willing to export. If the firm faces a price control abroad or bargains over price with the foreign government, an ERP policy can even yield higher home welfare than a direct price control. |
| Keywords: | External reference pricing policies, price controls, patented products, welfare. |
| JEL: | F1 D4 |
| Date: | 2017–08–16 |
| URL: | http://d.repec.org/n?u=RePEc:van:wpaper:vuecon-sub-17-00010&r=int |
| By: | Cols, Gilles; Rodríguez-Pose, Andrés |
| Abstract: | For the past quarter of a century, foreign direct investment (FDI) flows have grown exponentially across the world. Sub-Saharan Africa has, however, lagged behind and only lured on average a mere 2% of global FDI. The investment that the region attracts tends, moreover, to be concentrated in a number of commodity-rich countries. Natural resources and the size of national markets have generally been considered as the main drivers of FDI. The quality of local institutions has, by contrast, attracted less attention. This paper uses institutional data for 22 countries in order to demonstrate that the quality of governance plays a far from negligible and enduring role in the distribution of FDI in sub-Saharan Africa. It is shown that factors such as political stability, government effectiveness, lower corruption, voice and accountability, and the rule of law not only are more important determinants of FDI than the size of local markets, but also that their influence on the capacity of African countries to attract FDI is long-lasting. |
| Keywords: | foreign direct investment (FDI); good governance; institutions; markets; Natural resources; Sub-Saharan Africa |
| JEL: | F21 N57 O43 |
| Date: | 2017–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:12223&r=int |
| By: | Bawa, Siraj |
| Abstract: | This paper studies how optimal corporate tax rates differ when firm productivities are drawn from a lognormal distribution instead of a Pareto, the literature standard, in a model of monopolistic competition. Recent literature has demonstrated that lognormal distributions are a better fit for firm productivities; I not only find that this result holds in developing economies, but that the distributional choice has significant implications for the properties of the optimal corporate tax rates. I show this using an enhanced Melitz model with heterogeneous sectors subject to a framework of corporate taxation. This tax framework consists of a single economy-wide statutory tax that is augmented by a set of sector-specific depreciation allowance rates which distort the effective tax rate by sector. I find that using the Pareto distribution mutes a transmission channel between the corporate tax instruments and the equilibrium variables which leads to qualitative different policy implications compared to those obtained under the lognormal distribution. Additionally, my model can reconcile recent empirical studies that come to seemingly conflicting conclusions about the effects of statutory tax rates on export dynamics. I do this by showing that the level of the sector-specific tax rate determines whether or not changing the statutory tax rate will increase the probability of firms engaging in exporting. |
| Keywords: | Corporate tax policy, Melitz-Pareto, asymmetric sectors, trade and taxation. |
| JEL: | F12 H25 |
| Date: | 2017–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:80857&r=int |
| By: | Kate Hynes; Yum K. Kwan; Anthony Foley |
| Abstract: | This paper investigates the interdependence of foreign and domestic firms’ local linkage decisions and the extent to which they respond differently to variations in export intensity and productivity originating from each of the two groups of firms. Our empirical analysis, based on Irish data, uncovers an interesting asymmetric pattern in the local linkage dynamics of foreign and domestic firms. We find that local linkages of domestic firms tend to evolve independently of their foreign counterpart, and that they react almost instantaneously to exogenous events such as increases in export intensity or productivity. Local linkages of foreign firms, by contrast, react gradually to exogenous events and the impact works through the reverberating dynamics of the lagged linkages of both foreign and domestic firms. The Irish experience is instructive to policymakers in emerging markets who are naturally interested in the best way to maximize the value of FDI, in terms of benefits the latter brings about for sustainable economic development. |
| Keywords: | Local linkages; Multinationals; Foreign direct investment; Emerging markets |
| JEL: | F23 L22 |
| Date: | 2017–06 |
| URL: | http://d.repec.org/n?u=RePEc:ucn:wpaper:201712&r=int |
| By: | Abramson, Boaz (Stanford University); Shayo, Moses (The Hebrew University of Jerusalem) |
| Abstract: | International integration is not driven purely by economic considerations but may also be affected by identity politics. We propose a simple framework to study the effects of identity on integration, allowing identities themselves to be endogenous (a German citizen may identify as German but may also identify as European). We find that contrary to widespread intuitions, a robust union does not require that all members share a common identity. Furthermore, while national identication in the periphery leads to premature breakup, a common identity can sometimes lead to excessively large unions. Finally, a union is more fragile when periphery countries have high ex-ante status, whereas low-status countries are less likely to secede, even when between-country economic differences are large and union policies impose signicant hardship. Brexit is more likely than Grexit. |
| Keywords: | JEL Classification: |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:cge:wacage:334&r=int |
| By: | Eiji Yamamura (Seinan Gakuin University); Yoshiro Tsutsui (Konan University) |
| Abstract: | We investigated how childhood education and experiences helped to form noncognitive skills and later, trade policy preferences. We used individual-level data with approximately 10,000 observations collected July 2016. Using the instrumental variables (IV) method, with sporting experience and informal education in the childhood as exogenous IV, we found that (1) sporting experiences and informal education lead people to have positive subjective views about the role of group work, competition, reciprocity, patience, and generalized trust and (2) positive views about the role of group work, competition, reciprocity, patience, and generalized trust leads people to prefer the Trans-Pacific Strategic Economic Partnership Agreement (TPP). |
| Keywords: | Trade policy; Policy preferences; TPP; Informal school curriculum; Childhood sporting experience; Social capital |
| JEL: | F13 D83 I21 Z13 |
| Date: | 2017–08 |
| URL: | http://d.repec.org/n?u=RePEc:osk:wpaper:1725&r=int |
| By: | Robert A. Becker (Indiana University); Juan Pablo Rincón-Zapatero (Univesidad Carlos III de Madrid) |
| Abstract: | We reconsider the theory of Thompson aggregators proposed by Marinacci and Montrucchio. First, we prove a variant of their Recovery Theorem estabilishing the existence of extremal solutions to the Koopmans equation. Our approach applies the constructive Tarski-Kantorovich Fixed Point Theorem rather than the nonconstructive Tarski Theorem employed in their paper. We verify the Koopmans operator has the order continuity property that underlies invoking Tarski-Kantorovich. Then, under more restrictive conditions, we demonstrate there is a unique solution to the Koopmans equation. Our proof is based on $u_{0}-$ concave operator techniques as first developed by Kransosels'kii. This differs from Marinacci and Montrucchio's proof as well as proofs given by Martins-da-Rocha and Vailakis. |
| Keywords: | Recursive Utility, Thompson Aggregators, Koopmans Equation, Extremal Solutions, Concave Operator Theory |
| Date: | 2017–07 |
| URL: | http://d.repec.org/n?u=RePEc:inu:caeprp:2017007&r=int |
| By: | Barrot, Jean-Noël (MIT Sloan School of Management); Loualiche, Erik (MIT Sloan School of Management); Plosser, Matthew (Federal Reserve Bank of New York); Sauvagnat, Julien (Bocconi University) |
| Abstract: | We analyze the effect of import competition on household balance sheets from 2000 to 2007 using individual data on consumer finances. We exploit variation in exposure to foreign competition using industry-level shipping costs and initial differences in regions’ industry specialization. We show that household debt increased significantly in regions where manufacturing industries are more exposed to import competition. A one standard deviation increase in exposure to import competition explains 30 percent of the cross-regional variation in household leverage growth, and is mostly driven by home equity extraction. Our results highlight the distributive effects of globalization and their consequences for household finances. |
| Keywords: | trade; household finance; mortgages |
| JEL: | D14 G21 |
| Date: | 2017–08–15 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:821&r=int |
| By: | Assaf Razin; Efraim Sadka |
| Abstract: | We are motivated by the unique migration experience of Israel of a supply-side shock triggering skilled immigration and the concurrent decline in welfare-state redistribution. This paper develops a model, which can provide an explanation for the mechanism through which a supply-side shock triggering high-skill migration can also reshape the political-economy balance and the redistributive policies. The paper highlights the differences in the political-economy induced redistribution policies between the cases in which migrants participate in the electoral system and the case where they do not. When migrants are allowed to vote, and they take advantage of this right, then, following the shock, all income groups gain, except low skilled immigrants who lose. When migrants are not allowed to vote, or choose not to participate in elections, all income groups gain, except the skilled migrants who lose. |
| JEL: | F22 H0 |
| Date: | 2017–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:23713&r=int |
| By: | Thomas Drechsel (London School of Economics (LSE); Centre for Macroeconomics (CFM)); Silvana Tenreyro (London School of Economics (LSE); Centre for Macroeconomics (CFM); Centre for Economic Performance (CEP)) |
| Abstract: | Emerging economies, particularly those dependent on commodity exports, are prone to highly disruptive economic cycles. This paper proposes a small open economy model for a net commodity exporter to quantitatively study the triggers of these cycles. The economy consists of two sectors, one of which produces commodities with prices subject to exogenous international fluctuations. These fluctuations affect both the competitiveness of the economy and its borrowing terms, as higher commodity prices are associated with lower spreads between the country's borrowing rate and world interest rates. Both effects jointly result in strongly positive effects of commodity price increases on GDP, consumption and investment, and a negative effect on the total trade balance. Furthermore, they generate excess volatility of consumption over output and a large volatility of investment. The model structure nests various candidate sources of shocks proposed in previous work on emerging economy business cycles. Estimating the model on Argentine data, we find that the contribution of commodity price shocks to fluctuations in post-1950 output growth is in the order of 38%. In addition, commodity prices account for around 42% and 61% of the variation in consumption and investment growth, respectively. We find transitory productivity shocks to be an important driver of output fluctuations, exceeding the contribution of shocks to the trend, which is smaller, although not negligible. |
| Keywords: | Business cycles, Small open economy, Emerging markets, Commodity prices, Argentina's economy |
| JEL: | E13 E32 F43 O11 O16 |
| Date: | 2017–08 |
| URL: | http://d.repec.org/n?u=RePEc:cfm:wpaper:1723&r=int |
| By: | Kouni, Mohamed |
| Abstract: | The aim of this paper is to investigate the effect of high-skilled emigration on human capital investment in some middle-. Hence, we extend the Solow model by taking into account the net effect of high-skilled emigration. The theoretical result showed that if the ratio of the emigrant human capital on the resident human capital is inferior to critical level, and in the case of strong selectivity adopted, the high skilled emigration can generate an important quantitative brain gain as well as the possibility of qualitative brain gain. At the empirical level, new approximations are proposed. Then, based on these approximations a beta convergence model is re-estimated. The results showed that the emigration prospects have a positive and highly significant effect. The elasticity of the human capital investment with respect to emigration prospects varies from about 1.7% to about 2%. |
| Keywords: | Brain drain, human capital, development, instrumental variables-GMM method |
| JEL: | F22 J24 O15 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:78320&r=int |
| By: | Thomas Drechsel; Silvana Tenreyro |
| Abstract: | Emerging economies, particularly those dependent on commodity exports, are prone to highly disruptive economic cycles. This paper proposes a small open economy model for a net commodity exporter to quantitatively study the triggers of these cycles. The economy consists of two sectors, one of which produces commodities with prices subject to exogenous international fluctuations. These fluctuations affect both the competitiveness of the economy and its borrowing terms, as higher commodity prices are associated with lower spreads between the country's borrowing rate and world interest rates. Both effects jointly result in strongly positive effects of commodity price increases on GDP, consumption and investment, and a negative effect on the total trade balance. Furthermore, they generate excess volatility of consumption over output and a large volatility of investment. The model structure nests various candidate sources of shocks proposed in previous work on emerging economy business cycles. Estimating the model on Argentine data, we find that the contribution of commodity price shocks to fluctuations in post-1950 output growth is in the order of 38%. In addition, commodity prices account for around 42% and 61% of the variation in consumption and investment growth, respectively. We find transitory productivity shocks to be an important driver of output fluctuations, exceeding the contribution of shocks to the trend, which is smaller, although not negligible. |
| JEL: | E13 E32 F41 F43 O11 O16 |
| Date: | 2017–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:23716&r=int |