nep-int New Economics Papers
on International Trade
Issue of 2017‒09‒03
thirty papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. Trade and Investment in the Global Economy By Anderson, James E.; Larch, Mario; Yotov, Yoto
  2. Beyond EU-US Trade Dynamics: TTIP Effects Related to Foreign Direct Investment and Innovation By Jungmittag, Andre; Welfens, Paul J. J.
  3. How Exporting Firms Respond to Technical Barriers to Trade? By Hu, Cui; Lin, Faqin; Tan, Yong; Tang, Yihong
  4. Factors Influencing SMEs’ Engagement in Direct Exporting Activities By Mohamad D. Revindo; Christoper Gan
  5. The Three-Way Linkages between Export, Import and Economic Growth: New Evidence from Tunisia By Bakari, Sayef
  6. Firm Size and the Intensive Margin of Import Demand By Blaum, Joaquin; Lelarge, Claire; Peters, Michael
  7. The Role of Inbound Tourist Flows in Promoting Exports By Zouheir El-Sahli
  8. Quantitative Trade Models: Developments and Challenges By Pau Pujolas; Jack Rossbach; Timothy Kehoe
  9. Learning from abroad: Export versus foreign ownership By Kadri Männasoo; Heili Hein
  10. The analysis of borders effects in intra-African trade By Emilie Kinfack Djoumessi; Alain Pholo Bala
  11. National borders matter...where one draws the lines too By Vincent Vicard; Emmanuelle Lavallée
  12. Labor Clauses in Trade Agreements: worker protection or protectionism? By Carrère, Céline; Olarreaga, Marcelo; Raess, Damian
  13. FDI and Terrorism in the developing Asian countries: A panel data analysis By Kechagia, Polyxeni; Metaxas, Theodore
  14. The varying relevance of impact factors in gravity models: An explanation of the delayed development towards global trade By Bernard M. Gilroy; Nico Stöckmann
  15. Robust Determinants of Bilateral Trade By Marianne Baxter
  16. Slicing the Pie: Quantifying the Aggregate and Distributional Effects of Trade By Simon Galle; Andrés Rodríguez-Clare; Moises Yi
  17. Product Quality and Sustainability: The Effect of International Environmental Agreements on Bilateral Trade By Stefan Borsky; Andrea Leiter; Michael Pfaffermayr
  18. Aid for Trade and International Transactions in Goods and Services By Hoekman, Bernard; Shingal, Anirudh
  19. The Geography of NGO Activism against Multinational Corporations By Sophie Hatte; Pamina Koenig
  20. Goods-Market Frictions and International Trade By Andrew McCallum; Pawel Krolikowski
  21. Globalization and the Increasing Correlation between Capital Inflows and Outflows By Davis, J. Scott; Van Wincoop, Eric
  22. International Migration and Institutional Quality in the Home Country: It Matters Where You Go and How Long You Stay! By Minh Tran, Ngoc Thi; Cameron, Michael P.; Poot, Jacques
  23. The Labor Market Effects of Offshoring by U.S. Multinational Firms: Evidence from Changes in Global Tax Policies By Nicholas Sly; Lindsay Oldenski; Brian Kovak
  24. Accounting for Automation and Offshoring in International Macroeconomic and Employment Dynamics By Federico Mandelman
  25. Deepening integration for economic diversification in North and Central Asia By Richard Pomfret, Professor at the University of Adelaide School of Economics in Australia, Tiziana Bonapace and Hiroaki Ogawa of the ESCAP Subregional Office for North and Central Asia.
  26. Nationalism and economic openness: The cross-country evidence revisited By Vishesh Agarwal; Sadia Arfin; Robert Breunig; Samuel Weldeegzie; Tong Zhang
  27. Trade Integration and the Polarisation of Eco-Labelling Strategies By Vera Danilina
  28. Is Europe disintegrating? Macroeconomic divergence, structural polarization, trade and fragility By Claudius Gräbner; Philipp Heimberger; Jakob Kapeller; Bernhard Schütz
  29. Development of services sector for economic diversification and integration in North and Central Asia By Richard Pomfret from the University of Adelaide and Tiziana Bonapace from ESCAP Subregional Office for North and Central Asia.
  30. Globalisation and Inequality in a Dynamic Economy: An Axiomatic Analysis of Unequal Exchange By Roberto Veneziani; Naoki Yoshihara

  1. By: Anderson, James E. (Boston College); Larch, Mario (University of Bayreuth); Yotov, Yoto (Drexel University School of Economics)
    Abstract: We develop a dynamic multi-country trade model with foreign direct investment (FDI) in the form of non-rival technology capital. The model nests structural gravity sub-systems for FDI and trade, with accumulation/decumulation of physical and technology capital in transition to the steady state. The empirical importance of the FDI channel is demonstrated comparing actual aggregate cross-section data for 89 countries in 2011 to a hypothetical world without FDI. The gains from FDI amount to 9% of world's welfare and to 11% of world's trade, unevenly distributed among winners and losers. Net exports of FDI substitute for export trade in the results.
    Keywords: Foreign Direct Investment; Trade; Trade Liberalization; Capital Accumulation.
    JEL: F10 F43 O40
    Date: 2017–08–21
  2. By: Jungmittag, Andre (FH Frankfurt); Welfens, Paul J. J. (University of Wuppertal)
    Abstract: The international economic debate on the Transatlantic Trade and Investment Partnership (TTIP) has focused mainly on trade induced real income gains while the FDI related and innovation induced benefits have been largely neglected, although the EU and the US are leading FDI host countries and FDI source countries. Moreover, from a theoretical perspective a knowledge production function has to be considered in order to analyze FDI and innovation dynamics – and this can then be linked to output and economic growth, respectively. It is argued that such a Schumpeterian approach for an open economy is needed to understand deep integration dynamics while the standard CGE model used by Francois et al (2013) leads to an underestimation of deep integration projects such as TTIP. The panel data estimation of knowledge production functions for 20 EU countries between 2002-2012 shows clear empirical evidence that a rise of the number of researchers and of the FDI stock-GDP ratio (or related variables) will raise patent applications. Additionally, a higher per capita income – that could reflect trade related real income gains in the context of TTIP – also contributes to new knowledge and a fortiori to higher GDP. Time series data analysis for Germany indicates additionally that FDI induced higher innovation dynamics will raise output – combining trade benefits and FDI/innovation related real income gains plus transatlantic macroeconomic interdependency effects a real income gain of nearly 2% should be expected for Germany (and the EU): considerably higher than what the official TTIP report for the European Commission has suggested. The results also suggest positive employment effects.
    Keywords: knowledge production function, innovation, FDI, TTIP, empirical analysis, EU
    JEL: F14 F43 O30 O47 O52
    Date: 2017–08
  3. By: Hu, Cui; Lin, Faqin; Tan, Yong; Tang, Yihong
    Abstract: This paper investigates how Technical Barriers to Trade (TBT) affect firm export performance. The implementation of the “Children-Resistance” act (CR act) in the EU offers an ideal quasi-natural experiment to identify the causal effect of TBTs on firm performance. Using data on Chinese firms that export cigarette lighters between 2004 and 2008, empirical results show that firms that export to the EU not only adjust their product quality to meet the requirements in the CR act, but also upgrade their product quality in other dimensions. However, both the export value and export volume to the EU decline. At the same time, less productive exporters are forced to exit from the EU market. In addition, while the effect of the CR act on export quality is significant only in the implementation year, its impact on firm-level export scale last longer even after its implementation, which is referred to as a dynamic impact. Lastly, Heterogeneous effect of TBT is also documented.
    Keywords: Technical barriers to trade; Children-Resistant Act; Difference in differences
    JEL: D21 F13 F14
    Date: 2017–08
  4. By: Mohamad D. Revindo (Researcher, Institute for Economic and Social Research, Faculty of Economics, University of Indonesia, Jakarta); Christoper Gan (Professor in Accounting and Finance, Faculty of Agribusiness and Commerce Department of Finance and Business System Lincoln University New Zealand)
    Abstract: The benefits of trade liberalisation are not shared equally among countries and enterprises across the globe. Small and Medium-sized Enterprises (SMEs) in developing countries are less able to participate in export market than their large counterparts despite various export assistance provision by the government. This study aims to investigate the factors influencing Indonesian SMEs’ decision and ability to engage in direct exporting activities. The evidences were collected from 271 exporting SMEs and 226 non-exporting SMEs in seven provinces in Jawa, Madura, and Bali regions. Logistic regressions were used to identify the distinct characteristics of exporting SMEs. The findings show that the exporters differ from non-exporters in firm and owner characteristics, perceived export barriers, participation in government export assistances and network relationships. The policy and managerial implications of the findings are discussed
    Keywords: SMEs - Firm Internationalisation - Export Decision - Export Barriers - Indonesia
    JEL: F23 L25 M13 M16 O17
    Date: 2017–07
  5. By: Bakari, Sayef
    Abstract: This study investigates the nexus between exports, imports and economic growth in Tunisia using annual time series data for the period 1965 - 2016 by implementing cointegration analysis and vector error correction model. The empirical results show that in the long run (i) exports affect negatively on economic growth, (ii) imports have positive effect on economic growth, (iii) economic growth have positive effect on exports, and imports have positive effect on exports. However in the short run empirical results show that there is (i) bi-directional causal relationship between exports and economic growth, (ii) uni-directional causal relationship from exports to imports, (iii) uni-directional causal relationship from imports to economic growth. These results provide evidence that imports and exports are necessary in Tunisia's economy and are presented as an engine of growth since they cause economic growth in the short term. But exports are not carried out and treated with a solid and fair manner according to their negative effect on economic growth in the long run, which offer new insights into Tunisia’s openness policy for promoting economic growth.
    Keywords: Exports, Imports, Economic growth, Openness Policy, Tunisia.
    JEL: F0 F10 F11 F14 F43 O47 O55
    Date: 2017–08
  6. By: Blaum, Joaquin; Lelarge, Claire; Peters, Michael
    Abstract: We use French microdata to test an ubiquitous property of firm-based models of importing. When firm efficiency is factor neutral and input prices and qualities are common across firms, firm size should have no effect on expenditure shares on the different products and varieties sourced, holding the extensive margin constant. We show that this property is not supported by the data. Holding the sourcing strategy fixed, we find that larger firms (i) have lower import shares, (ii) concentrate their import spending on their top varieties and (iii) pay higher prices for their imported inputs. Our findings imply that input trade, through the intensive margin, is less beneficial for larger firms. Our results are consistent with a complementarity between firm productivity and input quality.
    Keywords: Firm Heterogeneity; firm size; non-homothetic; trade in intermediate inputs
    JEL: D21 D22 D24 F11 F12 F14
    Date: 2017–08
  7. By: Zouheir El-Sahli (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - CNRS - Centre National de la Recherche Scientifique - ECM - Ecole Centrale de Marseille)
    Abstract: While it is established that tourism benefits growth through increased employment and investments, it is not well understood whether tourism has an effect on exports. This paper explores exports as an additional channel through which tourism affects domestic economic activity. Using bilateral tourist and trade flows, I explore the causal effect of tourist flows on exports. To deal with endogeneity, I construct two instruments that I use on two different sets of exporters. The evidence points in the same direction. I find that tourism affects mainly the exports of differentiated products. Specifically, I find that tourism benefits the exports from non-OECD exporters of processed food products and this effect is only estimated for South-North trade with an elasticity close to 1. For European countries, the findings point in the same direction; tourism affects differentiated consumer products and processed food with elasticity close to 1, which adds plausibility to the earlier results. I also find a lagged effect for tourism mainly on the export of consumer goods (for the two samples) and processed food products (for European countries). The results suggest that exports is an additional channel through which tourism can stimulate domestic economic activity in the tourist destination.
    Keywords: tourism,globalization,trade,gravity,terrorism
    Date: 2017–05
  8. By: Pau Pujolas (McMaster University); Jack Rossbach (Georgetown University Qatar); Timothy Kehoe (University of Minnesota)
    Abstract: Applied general equilibrium (AGE) models, which feature multiple countries, multiple industries, and input-output linkages across industries in a Walrasian general equilibrium framework, have been the dominant tool for evaluating the impact of trade liberalization since the 1980s. We review and document shortcomings in the performance of AGE models in predicting the effects of past trade reforms across industries. We argue that to improve their performance in predicting the impact of trade reforms, existing models need to incorporate micro data on bilateral trade relations by industry and to better model how trade reforms lower bilateral trade costs. We use the least-traded-products methodology of Kehoe, Ruhl, and Rossbach (2015) to provide a guide on how improvements can be made.
    Date: 2017
  9. By: Kadri Männasoo; Heili Hein
    Abstract: Companies engaged in innovation and research and development (R&D) are often engaged in business on an international scale and their success is critically dependent on international R&D networking and the ability to absorb new knowledge. Foreign ownership, joint ventures and trade are among the channels that enable companies to learn from abroad. This brief analysis aims to describe these learning patterns and look for associations between R&D engagement and foreign interactions. Using data from eleven Central and Eastern European countries for the years 2007-2009 and 2012-2014 reveals that exporting is the only foreign channel that has a clear positive relationship with R&D engagement.
    Date: 2017–08–31
  10. By: Emilie Kinfack Djoumessi; Alain Pholo Bala
    Abstract: The study aims to analyze the border effects on intra-African trade through the use of a gravity specification based on the monopolistic competition model of trade introduced by Krugman (1980). The study used CEPII data on trade flows between African countries over the period 1980-2006. We accommodate for the significant number of zero trade flows between several African countries by using the Heckman correction method. The findings suggest that while the extent of market fragmentation is on average very high within the African continent, the border effects within SADC and ECOWAS are more in line with other international estimations. Whereas results indicate that border effects faced by intra-African trade are quite substantial: on average an African country trade 108 times more "with itself" than with another country on the continent. Border effects in SADC and ECOWAS are respectively about 5 and 3 times lower. The inclusion of the infrastructure indices contributes significantly to this result. Considering infrastructure is actually an interesting way to capture the effect of distribution networks which represent, along with imperfect information and localized tastes, relevant but generally omitted sources of resistance.
    Keywords: Intra-Africa Trade, Monopolistic Competition Model, Border Effect
    JEL: F12 F14 F15
    Date: 2017–08
  11. By: Vincent Vicard (Banque de France - Banque de France); Emmanuelle Lavallée (LEDa - Laboratoire d'Economie de Dauphine - Université Paris-Dauphine)
    Abstract: The fact that crossing a political border dramatically reduces trade flows has been widely documented in the literature. The increasing number of borders has surprisingly attracted much less attention. The number of independent countries has indeed risen from 72 in 1948 to 192 today. This paper estimates the effect of political disintegration since World War II on the measured growth in world trade. We first show that trade statistics should be considered carefully when assessing globalization over time, since the definition of trade partners varies over time. We document a sizeable resulting accounting artefact, which accounts for 17% of the growth in world trade since 1948. Second, we estimate that political disintegration alone since World War II has raised measured international trade flows by 9% but decreased actual trade flows (including inter-regional trade) by 4%.
    Abstract: De nombreux articles récents montrent que le passage d’une frontière politique réduit fortement les échanges. L’augmentation du nombre de frontières et ses conséquences pour le commerce international n’ont pas fait l’objet de la même attention dans la littérature. Le nombre d' Etats souverains a pourtant augmenté de 72 en 1948 à 192 aujourd’hui. Cet article estime l’effet de la désintégration politique sur la mesure de la croissance du commerce mondial depuis la seconde guerre mondiale. Notre analyse souligne d’abord que les statistiques commerciales doivent être traitées avec prudence lorsque l’on mesure l’évolution du degré de mondialisation, car la définition des partenaires commerciaux varie dans le temps. Il en résulte un biais statistique important, qui explique 17% de la croissance du commerce international depuis 1948. Nous montrons ensuite que l’augmentation du nombre d’ Etats souverains seule a entrainé une augmentation du commerce international mesuré de 9%, mais a en réalité diminué les échanges (incluant le commerce interrégional) de 4%.
    Keywords: Trade,Commerce,Frontières,Trade Statistics,Political Disintegration,Borders
    Date: 2017–06–27
  12. By: Carrère, Céline; Olarreaga, Marcelo; Raess, Damian
    Abstract: We explore the impact on bilateral trade flows of the inclusion of a labor clause (LC) in Trade Agreements (TAs). Using a gravity type framework, we find that the introduction of LCs has on average no impact on bilateral trade flows. However, there is some interesting heterogeneity. Exports of low-income countries benefit from the introduction of LCs in North-South trade agreements. Interestingly, the impact is stronger when accompanied by deep cooperation. On the other hand, stronger enforcement mechanisms, at best, marginally reinforce the impact of LCs. The results are clearly inconsistent with the idea that LC are set for protectionist reasons, casting doubt on the reluctance by low-income countries to include labor clauses in their trade agreements.
    Keywords: Free Trade Agreements; Gravity Equation; Labor Clauses
    JEL: F16
    Date: 2017–08
  13. By: Kechagia, Polyxeni; Metaxas, Theodore
    Abstract: Foreign Direct Investment (FDI) inflows are distributed among the geographical regions and play a crucial role on the social, political and financial condition of the recipient country. Certain areas manage to attract more FDI and therefore underdeveloped, developing and transition economies make efforts so as to absorb increased FDI inflows and to improve the political and socioeconomic conditions, focusing on the political stability, the external conflicts and the terrorist attacks. The purpose of the present paper is to empirically investigate and discuss the correlation between FDI inflows and terrorism in the developing Asian countries during the period 1996 – 2015. We aim at evaluating the impact of terrorism on the FDI inflows in the Asian developing economies, taking into consideration that they ranked first among the top FDI recipient countries in 2015, focusing on the cases of 5 countries of the region. We conduct a literature review on previous empirical studies and we present an empirical model to investigate the interaction between terrorist attacks and FDI inflows, using a panel data analysis. We argue that terrorism has a negative impact on the FDI inflows of the studied countries. The contribution of the essay refers to the fact that it includes both fatalities and injuries occurring from international terrorist attacks and it is not limited solely on the case of a single country.
    Keywords: Foreign Direct Investment, International Conflicts, Terrorism, developing countries, Asia
    JEL: F21 F51 O53 R11
    Date: 2017–06
  14. By: Bernard M. Gilroy (Paderborn University); Nico Stöckmann (Paderborn University)
    Abstract: Factors in uencing bilateral trade between OECD members vary over time. The change in the relevance of binary variables with progressive globalisation can be attributed to individuals' decisions. These are aggregated as utility functions of heterogeneous agents to justify the delay towards global trade.
    Keywords: Globalisation, Trade, Utility Function, Gravity Equation
    JEL: F14 D81
    Date: 2017–06
  15. By: Marianne Baxter (Boston University)
    Abstract: What are the policies and country-level conditions which best explain bilateral trade flows between countries? The beloved “gravity model” has had widespread empirical success, yet there is little guidance on which set of explanatory variables appropriately balances in-sample fit against out-of-sample prediction. Toward that end, this paper examines the problem of model selection, using modern empirical methods, in two steps. First, we use data from 1970 to 2000 as a baseline period to estimate the gravity model according three model selection methods – Lasso regularized regression, Bayesian Model Averaging, and Extreme Bound Analysis. We consider a wide variety of candidate variables commonly found in empirical gravity models. We find that about ¼ of commonly used variables found in empirical gravity equations are not robust. We explore the sensitivity of the prediction results to the specific regularization method and the choice of tuning parameters. We find surprising consistency in the set of variables selected by the various measured considered.
    Date: 2017
  16. By: Simon Galle; Andrés Rodríguez-Clare; Moises Yi
    Abstract: We develop a multi-sector gravity model with heterogeneous workers to quantify the aggregate and group-level welfare effects of trade. We estimate the model using the structural relationship between China-shock driven changes in manufacturing employment and average earnings across US groups defined by commuting zone and education. We find that the China shock increases average welfare but some groups experience losses as high as five times the average gain. Adjusted for plausible measures of inequality aversion, gains in social welfare are positive and only slightly lower than with the standard aggregation.
    JEL: F1
    Date: 2017–08
  17. By: Stefan Borsky (University of Graz); Andrea Leiter (University of Innsbruck); Michael Pfaffermayr (University of Innsbruck)
    Abstract: This paper addresses the impact of sustainability in production on international trade. In particular, it examines the effect of the International Tropical Timber Agreement (ITTA) on tropical timber trade. The empirical analysis is based on a gravity equation in a difference-in-difference setting, which is estimated by a panel Heckman's selection model. This accounts for the potentially systematic selection of trading partners into timber trade activity. We then conduct a comprehensive comparative static analysis solving the structural gravity model with and without the ITTA. This allows us to determine the trade impact of an ITTA induced increase in sustainability for participating as well as for third-countries. We find that countries participating in the ITTA exhibit a significant and substantial increase in trade intensity ranging from 4% to 6%. Furthermore, we observe that this effect is more pronounced for smaller member countries. Non-ITTA countries are confronted with reduced tropical timber flows.
    Keywords: Sustainable production standards; Product quality; Gravity equation; Panel sample selection
    JEL: Q27 F18 L15 O19 Q23
    Date: 2017–07
  18. By: Hoekman, Bernard; Shingal, Anirudh
    Abstract: The empirical literature on aid for trade (AfT) mainly considers its effects on merchandise trade and investment. In this paper we examine the relationship between AfT and trade in services as well as trade in goods over 2002-2015 in both aggregate and bilateral analysis. We observe complementarities between services AfT and merchandise trade, reflecting the fact that most AfT is aid allocated to services sectors that are important inputs into production and trade in goods. The analysis suggests that most categories of AfT are not associated with greater trade in services. Only AfT directed towards economic infrastructure, notably transport and energy, is robustly associated with higher volumes of services trade. Given the importance of services for many low-income countries and the growing potential to harness new technologies to expand services trade, the results suggest a greater focus on disaggregated analysis of different categories of AfT to better understand how AfT can do more to support trade in services. Of particular note is that AfT to bolster productive capacity is strongly associated with greater merchandise trade whereas no such relationship is observed for services trade, suggesting AfT efforts do more to target capacity weaknesses that constrain growth in services trade.
    Keywords: aid for trade; capacity-building; infrastructure; merchandise trade; services trade
    JEL: F10 F14 F35
    Date: 2017–08
  19. By: Sophie Hatte (UNIL - Université de Lausanne); Pamina Koenig (PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, Université de Rouen, PSE - Paris School of Economics)
    Abstract: Non-governmental organizations (NGOs) regularly denounce the behavior of multinational corporations throughout the world, however their motivations for choosing the targets of their campaigns remain largely unknown. Using a new and rich dataset listing activists' campaigns towards multinational firms, we reveal important regularities in the geography and internationalization of advocacy NGOs activity. For example, 49\% of US NGOs select a foreign target firm, however, 75\% of campaigns targeting foreign firms involve an action taking place in the country of the NGO. We build on these facts to analyze the country-level determinants of NGOs campaigns, and estimate a triadic gravity equation for campaigns, involving the NGO, firm and action countries. Our variables of interest are the bilateral links between the country pairs, measuring how well the audience of the NGO identifies to the target of the campaign. Our results reveal a campaigning bias towards home firms and firms originating from familiar countries.
    Keywords: microeconomy of globalization,NGOs campaigns,multinational firms,gravity equation
    Date: 2017–05
  20. By: Andrew McCallum (Federal Reserve Board); Pawel Krolikowski (Federal Reserve Bank of Cleveland)
    Abstract: We present a tractable framework that embeds goods-market frictions in a general equilibrium dynamic model with heterogeneous exporters and identical importers. These frictions arise because it takes time and expense for exporters and importers to meet. We show that search frictions lead to an endogenous fraction of unmatched exporters, alter the gains from trade, endogenize entry costs, and imply that the competitive equilibrium does not generally result in the socially optimal number of searching firms. Finally, ignoring search frictions results in biased estimates of the effect of tariffs on trade flows.
    Date: 2017
  21. By: Davis, J. Scott (Federal Reserve Bank of Dallas); Van Wincoop, Eric (University of Virgina)
    Abstract: The correlation between capital inflows and outflows has increased substantially over time in a sample of 128 advanced and developing countries. We provide evidence that this is a result of an increase in financial globalization (stock of external assets and liabilities). This dominates the effect of an increase in trade globalization (exports plus imports), which reduces the correlation between capital inflows and outflows. In the context of a two-country model with 14 shocks we show that the theoretical impact of financial and trade globalization on the correlation between capital inflows and outflows is consistent with the data.
    JEL: F3 F4
    Date: 2017–08–01
  22. By: Minh Tran, Ngoc Thi (University of Waikato); Cameron, Michael P. (University of Waikato); Poot, Jacques (University of Waikato)
    Abstract: International migrants are widely recognised as agents of institutional change in their home countries. However, the huge growth in temporary migration in recent years demands a fresh investigation of this phenomenon. Theoretically, a country's diaspora constitutes one of the four principal channels through which international migration may alter development. A core factor enabling the transnational influence of diasporas is their retained connection to home countries, which is plausibly contingent on the duration-of-stay in the host countries. This paper exploits the Database on Immigrants in OECD Countries to investigate the influence of diasporas living in OECD countries on institutional quality in their home countries, and takes into account the heterogeneity of diasporas' duration-of-stay composition. Instead of simply using immigrant numbers to measure the diaspora size, we calculate institutional-quality-adjusted immigrant stocks to allow for variations in institutional quality between host countries. Additionally, we utilize duration-of-stay in the host country as an indicator of the strength of interaction with the home country. Our cross-sectional and panel analyses find a significant positive impact of diasporas living in OECD countries on institutional quality in home countries. Remarkably, the diffusion of advanced institutions from developed host countries to home countries through the international migration channel is stronger with diasporas characterized by shorter duration-of-stay, i.e. with those who may be expected to still have stronger links with the home country.
    Keywords: institutional quality, international migration, diaspora, duration-of-stay
    JEL: F22 O15
    Date: 2017–08
  23. By: Nicholas Sly (Federal Reserve Bank of Kansas City); Lindsay Oldenski (Georgetown University); Brian Kovak (Carnegie Mellon University)
    Abstract: Estimating the causal effect of offshoring on domestic employment is notoriously difficult because of the inherent simultaneity of domestic and foreign affiliate employment decisions. We use a model of endogenous offshoring to characterize this simultaneity and to derive an instrumental variables strategy allowing us to estimate the impact of offshore hiring on domestic employment. Our IV strategy exploits variation in offshoring costs across countries, industries, and time that results from the implementation of bilateral tax treaties, and uses Bureau of Economic Analysis (BEA) firm-level data for U.S. multinationals across two decades. We confirm that new treaties are unrelated to existing employment trends, and proceed to estimate the effects of offshoring on U.S. employment within multinational firms, industry-wide, and within local labor markets. We find that a 10 percent increase in foreign affiliate employment increases domestic U.S. employment for existing multinational firms by 1.4 percent, consistent with increased scale of production following a decline in global production costs. However, industry-wide U.S. employment increases by only one-third as much, as the opening of new offshore production facilities generates substitution for workers that had been hired domestically. We estimate slightly larger effects for local labor markets, suggesting there are possible spillovers across industries in the same location. Throughout the analysis, OLS estimates, which fail to account for the simultaneity of domestic and offshore employment, are more than 3 times larger than the preferred IV estimates. Overall, our results indicate that greater offshore activity raises net employment by U.S. firms.
    Date: 2017
  24. By: Federico Mandelman (Federal Reserve Bank of Atlanta)
    Abstract: Employment in middle-skill occupations witnessed an outright decline in the US during the last three decades. Middle-skill workers specialize in routine labor tasks which are prone to be automated. In addition, these occupations do not usually require on-site interactions and thus may be offshored overseas. High-skill workers instead execute non-routine cognitive tasks while the low-skilled specialize in on-site service occupations that cannot be automated. Motivated by this evidence, I develop a stochastic growth model of international trade in tasks with the possibility of automation to account for the role of offshoring and computerization in the decline of middle-skill employment. A system based estimation approach which uses disaggregated employment data, trade-weighted international macroeconomic indicators, as well as, alternative proxies for automation and offshoring costs is implemented.
    Date: 2017
  25. By: Richard Pomfret, Professor at the University of Adelaide School of Economics in Australia, Tiziana Bonapace and Hiroaki Ogawa of the ESCAP Subregional Office for North and Central Asia. (United Nations Economic and Social Commission for Asia and the Pacific)
    Abstract: Ongoing economic stagnation in North and Central Asia since the collapse of global oil prices in mid-2014 reinforces the need to diversify the subregion’s economic growth engine beyond the resource based sectors. Economic growth performance in the subregional economies is often volatile, largely influenced by global prices for a few commodities. For example, oil and gas account for more than 90 per cent of the total export value in Azerbaijan and Turkmenistan and more than half in Kazakhstan and the Russian Federation. Similarly, more than half of Kyrgyzstan’s exports comprise gold, while copper ore and aluminium account for one third of the exports from Armenia and Tajikistan respectively. A more diversified economic base in resource-based economies also would help reduce economic volatility in countries that rely on workers’ remittances, such as Kyrgyzstan and Tajikistan where workers’ remittances (mainly from workers in the Russian Federation) are equivalent to about a quarter of their GDP. Despite an expected modest rebound in the near term, global oil prices are projected to remain relatively low for an extended period of time. In this regard, an effort to broaden the economic base of North and Central Asian economies in order to increase their economic resilience to external adverse shocks remains an urgent task.
  26. By: Vishesh Agarwal; Sadia Arfin; Robert Breunig; Samuel Weldeegzie; Tong Zhang
    Abstract: In this paper we examine the empirical relationship between economic openness and nationalism. We replicate and extend the cross-country analysis of Lan and Li (2015) using additional measures of nationalism and additional years of data from the World Values Survey. We fail to find the negative relationship between economic openness and nationalism that Lan and Li (2015) find, even when using the same data sources, years and sample of countries. When we expand the sample of countries and years of the data, we find no statistically significant relationship between economic openness and nationalism.
    Keywords: Nationalism, Economic Openness
    JEL: F14 F52 O17 O19 P26 P33
    Date: 2017–08
  27. By: Vera Danilina (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - CNRS - Centre National de la Recherche Scientifique - ECM - Ecole Centrale de Marseille)
    Abstract: Growing ecological concerns give rise to salient discussions of green policy impact within different social sciences domains. This research studies the outcomes of voluntary environmental labelling in autarky and upon trade integration in the presence of two types of heterogeneity, across countries and across producers. It investigates the impact of the two main types of eco-labels - multiple-criteria-based programmes (ISO Type I) and self-declared environmental claims (ISO Type II), both of which are simultaneously introduced due to the environmental concerns of consumers. The model illustrates the polarisation of eco-labels when the least productive firms tend to avoid green strategies, lower-middle productive and the most efficient firms are incentivized to greenwash, and the upper-middle productive firms choose trustful programmes. It also shows that voluntary green restrictions lead to substantial productivity effects in the market upon opening to international trade, conditionally, depending on the type of the labelling and the relative degree of environmental awareness across trading countries. The model predicts average market productivity losses and within segments productivity gains for the relatively more eco-concerned country, while the effects for the relatively less eco-concerned country are the opposite.
    Keywords: eco-labelling,firm heterogeneity,trade integration,voluntary environmental regulation,firms productivity
    Date: 2017–07
  28. By: Claudius Gräbner; Philipp Heimberger; Jakob Kapeller; Bernhard Schütz
    Abstract: This paper analyses economic developments in the Eurozone since its inception in 1999. In doing so, we document a process of economic divergence and polarization among those countries that joined the Eurozone during its first two years, which fits a typical ‘core – periphery’ pattern. We show how this polarization process first manifested in increasing current account imbalances before the crisis, before it translated unto the level of general macroeconomic development after the crisis. Empirically, we demonstrate how this divergence is tied to a ‘structural polarization’ in terms of the sectoral composition of Eurozone countries: specifically, the emergence of export-driven growth in core countries and debt-driven growth in the European periphery coincides with differences in technological capabilities and firm performance. Pushing for convergence within Europe requires the implementation of three intertwined policy programs: macroprudential financial regulation, active industrial policies aiming at a technological catch-up process in periphery countries, and progressive redistributional policies to sustain adequate levels of aggregate demand throughout the Eurozone.
    Keywords: polarization, European Monetary Union, industrial policy, financial regulation, growth trajectories
    JEL: B5 E6
    Date: 2017–08
  29. By: Richard Pomfret from the University of Adelaide and Tiziana Bonapace from ESCAP Subregional Office for North and Central Asia. (United Nations Economic and Social Commission for Asia and the Pacific)
    Abstract: A key medium-term policy challenge faced by North and Central Asian economies is to gain competitiveness beyond the export of primary commodities. Among other measures, doing so requires improving the services component of the production process, which in turn would facilitate structural diversification and enhance regional economic integration. These services, also known as backbone infrastructure services or producer services, have direct consequences for adding value in production processes. More than two decades after the end of the central planning system, the role of services in the subregion remains limited. While the share of services in GDP increased in most subregional economies between 1993 and 2013, activities often involve small-scale trading rather than the business services that are required in a modern economy or by those intending to participate in global value chains. Furthermore, lack of adequate data measurements significantly reduces policy-makers’ understanding of the role services play in economic diversification, as well as their capacity for evidence-based policymaking.
  30. By: Roberto Veneziani (School of Economics and Finance, Queen Mary University of London); Naoki Yoshihara (Department of Economics, University of Massachusetts Amherst)
    Abstract: An axiomatic analysis of the concept of unequal exchange (UE) between countries is developed in a dynamic general equilibrium model that generalises Roemer’s [22] economy with a global capital market. The class of UE definitions that satisfy three fundamental properties - including a correspondence between wealth, class and UE exploitation status - is completely characterised. It is shown that this class is nonempty and a definition of UE exploitation between countries is proposed, which is theoretically robust and firmly anchored to empirically observable data. The full class and UE exploitation structure of the international economy is derived in equilibrium.
    Keywords: Exploitation, Classes, Unequal exchange, International economy
    JEL: D63 F02 B51
    Date: 2017–08

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