nep-int New Economics Papers
on International Trade
Issue of 2017‒10‒29
forty-six papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. International Trade and Domestic Production Networks By FUJII Daisuke
  2. Can developing countries gain from defying comparative advantage? Distance to comparative advantage, export diversification and sophistication, and the dynamics of specialization By Pauline LECTARD; Eric ROUGIER
  3. International Trade, Quality Sorting and Trade Costs: The Case of Cognac By Charlotte Emlinger; Viola Lamani
  4. Export Promotion through SOEs and Countervailing Duties (Japanese) By YOMOGIDA Morihiro
  5. All Shook Up: International Trade and Firm-level Volatility By Mine Senses; Andrei Zlate; Christopher Kurz
  6. India's trade linkage with BRCS: An econometric study By Wani, Mr. Nassir Ul Haq; Dhami, Dr. Jasdeep Kaur; Sidana, Dr. Neeru
  7. Slamming the door on trade policy discretion? The WTO Appellate Body's ruling on market distortions and production costs in EU-Biodiesel (Argentina) By Crowley, M.; Hillman, J.
  8. Free Falling Terms of Trade Despite Industrialization: The Case of Bangladesh By Bernhard G. Gunter; Valeria Vargas Sejas
  9. Technology, Market Structure and the Gains from Trade By Impullitti, Giammario; Licandro, Omar; Rendahl, Pontus
  10. The view from space: Theory-based time-varying distances in the gravity model By Hinz, Julian
  11. Firm Innovation under Import Competition from Low-Wage Countries By Ujjayant Chakravorty; Runjuan Liu; Ruotao Tang
  12. Legal enforcement and Global Value Chains: micro-evidence from Italian manufacturing firms By Antonio Accetturo; Andrea Linarello; Andrea Petrella
  13. International Trade and Labor Market Discrimination By Emami Namini, Julian; Chisik, Richard
  14. Engel's Law in the Global Economy: Demand-induced Patterns of Structural Change, Innovation, and Trade By Matsuyama, Kiminori
  15. Offshoring and Firm Overlap By Stella Capuano; Hartmut Egger; Michael Koch; Hans-Jörg Schmerer
  16. Friends Without Benefits? New EMU Members and the "Euro Effect" on Trade By Alina Mika; Robert Zymek
  17. Why Do Trade Finance Gaps Persist: Does it Matter for Trade and Development? By Marc Auboin; Alisa DiCaprio
  18. Reorganise, Replace or Expand? The role of the supply-chain in first-time exporting By Spray, J.
  19. Parallel Imports and Repair Services By ISHIKAWA, Jota; MORITA, Hodaka; MUKUNOKI, Hiroshi
  20. Financial Frictions and Export Dynamics in Large Devaluations By Michal Szkup; Fernando Leibovici; David Kohn
  21. New Zealand and Indian Trade in Agricultural and Manufactured Products: An Empirical Analysis By Sayeeda Bano; Frank Scrimgeour
  22. Cultural Distance and International Trade in Services: A Disaggregate View By Harms, Philipp; Shuvalova, Daria
  23. Keeping the Devil in the Details: A Feasible Approach to Aggregating Trade Distortions By Vlad Manole; Will Martin
  24. Why export promotion efforts failed to deliver? Assessment of the export incentives and their implementation in Ethiopia By Mulu Gebreyesus; Ashagrie Demile
  25. Regulatory Chill and the Effect of Investor State Dispute Settlements By Janeba, Eckhard
  26. Migration and investment: a business cycle perspective By Fusshoeller, Chantal; Balleer, Almut
  27. Legal Issues Arising from the Feed-in Tariff of Renewable Energy: Controversial issues in investor-state dispute settlement (Japanese) By TAMADA Dai
  28. Trade in unhealthy foods and obesity: Evidence from Mexico By Osea Giuntella
  29. Pampered Bureaucracy, Political Stability, and Trade Integration By Caleb Stroup; Benjamin Zissimos
  30. Hate at First Sight? Dynamic Aspects of the Electoral Impact of Migrations: The Case of the UK and Brexit By Fabrizio Patriarca; Rama Dasi Mariani; Eugenio Levi
  31. Afghanistan and China Trade Relationship By Tahiri, Noor Rahman
  32. Two Great Trade Collapses: The Intewar Period & Great Recession Compared By Kevin Hjortshøj O'Rourke
  33. Determinants of FDI in Afghanistan: An Empirical Analysis By Wani, Mr. Nassir Ul Haq; Rehman, Mr. Noor
  34. Geographical Advantage: Home Market Effect in a Multi-Region World By Matsuyama, Kiminori
  35. Back on track? A macro-micro narrative of Italian exports By Matteo Bugamelli; Silvia Fabiani; Stefano Federico; Alberto Felettigh; Claire Giordano; Andrea Linarello
  36. Current Migration Phenomenon and Labor Productivity in Christian Perspective By Adrian Gh. Paul
  37. The Currency Union Effect: A PPML Re-assessment with High-Dimensional Fixed Effects By Mario Larch; Joschka Wanner; Yoto V. Yotov; Thomas Zylkin
  38. Everything all the time? Entry and Exit in U.S. Import Varieties By Miklós Koren; Roc Armenter
  39. Dynamic Trade, Endogenous Institutions and the Colonization of Hong Kong: A Staged Development Framework By T. Terry Cheung; Theodore Palivos; Ping Wang; Yin-Chi Wang; Chong K. Yip
  40. M&As, Investment and Financing Constraints By Wößner, Nicole; Stiebale, Joel
  41. Brexit - balancing trade and mobility? By Forslid, Rikard; Nyberg, Sten
  42. Migration and Its Consequences By Ivan Vasile Ivanoff
  43. The Role of Migration and Culture in the Developing of Society By Samuiel Balc
  44. Global Migration: A Managerial “Cultural†Perspective By Nelu Burcea
  45. Effects of Emigration on Rural Labor Markets By Agha Ali Akram; Shyamal Chowdhury; Ahmed Mushfiq Mobarak
  46. Modeling Fluctuations in the Global Demand for Commodities By Kilian, Lutz; Zhou, Xiaoqing

  1. By: FUJII Daisuke
    Abstract: This paper considers a model of international trade with a domestic interfirm production network, which gives rise to the emergence of indirect exporters. These indirect exporters do not export but supply goods and services to exporters, and hence, their value added is exported indirectly. Using the data of Japanese interfirm transaction networks and international trade, the features of indirect exporters are investigated. More than half of firms are connected to foreign markets within two transaction links, and manufacturing and wholesale sectors account for the largest shares of both direct and indirect exporters. A strict ordering of many variables such as sales or employment exists in direct, 1st-degree indirect, 2nd-degree indirect, and non-exporters. A significant and positive propagation effect is confirmed. Shocks to exporters, whether positive or negative, propagate to their domestic suppliers and decay as they travel through supply chains. The 1st-degree indirect exporters receive 2%-3% additional sales growth and 1%-1.5% for 2nd-degree indirect exporters. If a firm supplies to an intense exporter, the magnitude is larger. This suggests the importance of tracing indirect value-added exporters when considering the effect of trade liberalizations on firm size distributions or industry dynamics.
    Date: 2017–10
  2. By: Pauline LECTARD; Eric ROUGIER
    Abstract: Since the 1990’s, developing countries have tried to promote export diversification and sophistication, notably by attracting vertical FDI and by supporting the emergence of new industries whose factor content is distant from the country’s endowment. We investigate whether defying comparative advantage has prompted a more sophisticated and diversified export basket in a large panel of countries over the period 1992-2012. We find that developing countries that defy their comparative advantage tend to export more manufactured items and manufacturing goods that are more sophisticated. As for export diversification, the impact is heterogeneous across development levels: although defying comparative advantage seems to help diversify the export baskets of middle-income and resource-rich countries, it tends to concentrate those of lower-income economies. Moreover, we find that the impact of the distance to comparative advantage on productive transformation is strongly conditioned by the size of FDI stocks and by the country’s specialization in the lower added-value productive tasks of global value chains (GVCs). More specifically, our results suggest that defying comparative advantage by attracting FDI may be a dangerous strategy in the long-term since it tends to bring only partial and artefact industrialization, with manufacturing exports increasing while the manufacturing value-added actually decreases.
    Keywords: Trade specialization, export diversification, export sophistication, distance to comparative advantage, FDI
    JEL: F14 F21 O14
    Date: 2017
  3. By: Charlotte Emlinger; Viola Lamani
    Abstract: This paper tests empirically the validity of the Alchian and Allen effect, using an original dataset of French Cognac exports by quality designations. More specifically we estimate the impact of trade costs on the share and relative price of high quality Cognac. The definition of quality, based on the minimum time in oak of the youngest eau-de-vie used in creating the blend, is subject to regulations and is constant and objective, which makes the case of Cognac particularly relevant to analyze the impact of different trade costs on the quality mix. Our estimation proceeds in two parts. First, we investigate to what extent distance and customs duties impact the Cognac quality mix from 1996 to 2013. Second, we assess the impact of a variation in trade costs, through the adoption of containerization, on the quality mix of Cognac exports between 1969 and 2013. Our results confirm the Alchian and Allen effect. We show that: (i) per-unit trade costs increase the share of high-quality Cognac and have the opposite impact on its relative price; (ii) ad-valorem charges impact negatively the share of high-quality Cognac and have a positive impact on its relative price.
    Keywords: Quality Mix;Luxury Product;Distance;Tariffs
    JEL: F10 F13 F14
    Date: 2017–10
  4. By: YOMOGIDA Morihiro
    Abstract: This paper examines the effects of countervailing duties on export promotion through state-owned enterprises (SOEs) by using a simple model of international oligopoly. When an SOE provides an intermediate good to a final good producer, the government may induce the SOE to lower its price of the intermediate good for promoting export of the final good. Under free trade in the final good, this paper shows that the government controls the objective of the SOE so that it promotes the export of the final good by inducing the SOE to lower its intermediate good price below its marginal cost. When the SOE's lowering of the intermediate good price is regarded as a subsidy to the final good producer, a trade partner's government could impose a countervailing duty on the final good import. Under a situation in which the trade partner imposes the optimal countervailing duty on the import of the final good when the SOE lowers its intermediate good price below an appropriate level, this paper examines whether or not the optimal countervailing duty could prevent such export promotion through the SOE. Based on the results obtained in the analysis, this paper derives implications for the recent conflicts on countervailing duties and SOEs between the United States and China.
    Date: 2017–10
  5. By: Mine Senses (Johns Hopkins University); Andrei Zlate (Federal Reserve Bank of Boston); Christopher Kurz (Board of Governors)
    Abstract: Despite the large theoretical literature on the macroeconomic dynamics arising from international trade, there is little theoretical research that rationalizes the relationship between a firm's trading patterns and its volatility. Our paper attempts to fill this gap by exploring the relationship between firms' exporting and importing status and firm-level volatility in a dynamic, stochastic, general equilibrium model. We augment the framework with heterogeneous firms and endogenous exporting from Ghironi and Melitz (2005) to allow for international input sourcing. In this framework, we examine the firm-level volatility generated by the model for a cross-section of firm types, which are defined to reflect the rich heterogeneity in firms' international activities. In line with recent empirical evidence on the link between a firm's trade status and its volatility, the model predictions are: (1) Exporters display lower volatility than non-exporters, whereas importers display higher volatility that non-importers. (2) Firms that trade for longer durations display lower volatility than firms switching in and out of international trade. (3) Firms that export to uncorrelated foreign markets are less volatile, whereas firms importing from uncorrelated foreign suppliers are more volatile.
    Date: 2017
  6. By: Wani, Mr. Nassir Ul Haq; Dhami, Dr. Jasdeep Kaur; Sidana, Dr. Neeru
    Abstract: India has put stress on enhancing trade relations with BRCS (Brazil, Russia, China and South Africa) economies, from the recent past. As a result India’s export to BRCS’s economies has been momentous. From the modeling exercise of this paper, the price and import elasticities of export flows attract a great deal of attention because of its significant implications on India’s export earnings from BRCS. Time series data ranging from 2000-2014 has been taken into consideration and to avoid non-stationarity issue on their level, DF and ADF test have been applied at level and first difference. In connection to the model results, Phillips-Hansen’s Fully Modified (FM) Method has been employed to get the estimated value of price and import elasticity of export demand for India. The results advocate that India’s export are appreciably prejudiced by BRCS economic growth and are very price competitive in the BRCS market. In other words, the depreciation of Indian rupee will be helpful for expanding India’s exports to BRCS.
    Keywords: BRCS, DF, ADF, FM and India.
    JEL: F1 F14 F18
    Date: 2016–11–10
  7. By: Crowley, M.; Hillman, J.
    Abstract: This paper presents a legal-economic analysis of the Appellate Body's decision in EU-Biodiesel (Argentina) that the WTO's Anti-Dumping Agreement (ADA) does not permit countries to take into account government-created price distortions of major inputs when calculating antidumping duties. In this case, the EU made adjustments to the price of biodiesel's principal input - soybeans - in determining the cost of production of biodiesel in Argentina. The adjustment was made based on the uncontested finding that the price of soybeans in Argentina was distorted by the existence of an export tax scheme that resulted in artificially low soybean prices. The Appellate Body found that the EU was not permitted to take tax policy-induced price distortions into account in calculating dumping margins. We analyze the economic rationale for Argentina's export tax system, distortions in biodiesel markets in Argentina and the EU, and the remaining trade policy options for addressing distorted international prices. We also assess whether existing subsidies disciplines would be more effective in addressing this problem and conclude that they would not.
    Keywords: WTO, anti-dumping, export tax, cost adjustment, government distortion, subsidy
    JEL: F13 F53
    Date: 2017–10–05
  8. By: Bernhard G. Gunter (American University and Bangladesh Development Research Center (BDRC)); Valeria Vargas Sejas (Bangladesh Development Research Center (BDRC))
    Abstract: Considering Bangladesh’s successful industrialization, Bangladesh’s sharply deteriorating terms of trade (ToT) are a puzzle for the original Prebisch-Singer hypothesis. The Prebisch-Singer hypothesis suggested that countries exporting primary products will experience deteriorating ToT, while countries exporting manufacturing goods will experience ToT improvements. This paper provides an empirical review of Bangladesh’s ToT from 1980 to 2013. It reviews the theoretical literature explaining the Prebisch-Singer hypothesis and uses econometric analyses to determine some of the key factors for Bangladesh’s ToT deterioration. It shows that exchange rate devaluations and increases in export quantity have a negative impact on the ToT, while improvements in export quality have some positive impact on the ToT. In the case of Bangladesh, the problem however is that export quality has been decreasing, contributing to sharply falling ToT. The key policy implication is that export promotion policies need to be refined, focusing also on export quality, not only export quantity
    Keywords: terms of trade, export quality, industrialization, Bangladesh
    Date: 2017–09
  9. By: Impullitti, Giammario; Licandro, Omar; Rendahl, Pontus
    Abstract: We study the gains from trade in an economy with oligopolistic competition, firm heterogeneity, and innovation. Oligopolistic competition together with free entry make markups responsive to firm productivity and trade costs. Lowering trade costs reduces markups on domestic sales but increases markups on export sales, as firms do not pass the entire reduction in trade costs onto foreign consumers. Nevertheless, the downward pressure dominates and the average markup declines, deterring firms from entering the market and leading to higher market concentration. Neither the increased concentration nor the incomplete pass-through of trade costs to export markups are strong enough to compensate for the increase in competition on domestic sales. Thus the overall effect of trade on markups is pro competitive and a key source of the associated welfare gains. In addition to markups, selection and innovation provide additional channels through which the trade-induced effect on competition impacts welfare. In a quantitative exercise, we decompose the total gains from trade into these three contributing channels; we find that innovation plays a small but non-negligible role, while the main component is equally split between the pro-competitive and the selection channel.
    Keywords: Endogenous Market Structure; Endogenous Markups; Gains from trade; Heterogeneous Firms; Innovation; oligopoly
    JEL: F12 F13 O31 O41
    Date: 2017–10
  10. By: Hinz, Julian
    Abstract: I compute distances used in the gravity model of international trade that improve the existing measures along multiple lines and help remedy the border puzzle by up to 50%. I derive a trade cost aggregation that is agnostic to the underlying gravity framework while taking into account the economic geography of countries. Using this method I compute bilateral and internal country distances, making use of nightlight satellite imagery for information on the economic geography of countries.
    JEL: F10 F14
    Date: 2017
  11. By: Ujjayant Chakravorty; Runjuan Liu; Ruotao Tang
    Abstract: In recent years, manufacturing firms in the United States have faced increasing import competition from low-wage countries, especially China. Does this competition hurt or help innovation by firms? This paper studies the effect of the surge in imports from China on innovation in the US manufacturing sector. We combine patent, firm and trade data during 1990-2006 for US publicly-listed firms in the Compustat dataset. We find consistent evidence that Chinese import competition had a positive effect on firm innovation, as measured by citation-weighted patent applications. This positive effect persists when we instrument import competition in the US by using Chinese import penetration in the United Kingdom. Next we investigate this relationship between import competition and innovation by considering industry and firm heterogeneity. We find that firms in low-tech industries and those with a lower degree of product differentiation show a significant positive response to import competition. Firms with a higher capital intensity and lower labor productivity also exhibit a greater response. These results are shown to be robust to a variety of measures for import penetration and innovation.
    Keywords: import competition, innovation, international trade, manufacturing firms, patents
    JEL: F10 F14 O31 O32
    Date: 2017
  12. By: Antonio Accetturo (Bank of Italy); Andrea Linarello (Bank of Italy); Andrea Petrella (Bank of Italy)
    Abstract: In this paper we study the relationship between the quality of contract enforcement and firms' participation in Global Value Chains. Using new data on Italian manufacturing firms' supply of customized inputs to other firms and variations in law enforcement in courts across Italy, we find that firms located in courts with longer trial lengths are less likely to supply customized intermediate inputs to foreign firms. The effects are stronger for firms operating in contract-intensive industries. Our results are confirmed when we use a spatial regression discontinuity design that compares the probability of supplying customized inputs for firms that are located on different sides of a court border, and are therefore characterized by different trial lengths.
    Keywords: Global Value Chain, Judiciary Efficiency, Italy
    JEL: F10 F14 L14
    Date: 2017–10
  13. By: Emami Namini, Julian; Chisik, Richard
    Abstract: We embed a competitive search model with labor market discrimination into a two-sector, two-country framework in order to analyze how labor market discrimination and international trade interact. Discrimination reduces the matching probability and output in the differentiated-product sector so that the country with more discriminatory firms has a comparative advantage in the simple sector. Trade liberalization reinforces the negative effect of discrimination in the more discriminatory country.
    JEL: F16 J71
    Date: 2017
  14. By: Matsuyama, Kiminori
    Abstract: Endogenous demand composition across sectors due to nonhomothetic demand (Engel's Law) affects i) sectoral compositions in employment and in value-added, ii) variations in innovation rates and in productivity change across sectors, iii) intersectoral patterns of trade across countries, and iv) migration of industries from rich to poor countries. This paper offers a unifying perspective on how economic growth and globalization affects the patterns of structural change, innovation and trade across countries and across sectors in the presence of Engel's Law. To this end, we develop a two-country model of directed technological change with a continuum of sectors under nonhomothetic preferences, which is rich enough to capture all these effects as well as their interactions. Among the main messages is that globalization amplifies, instead of reducing, the power of endogenous domestic demand composition differences as a driver of structural change.
    Keywords: Factor price convergence; Implicit (direct and indirect) additivity; Isoelastically nonhomothetic CES; Leapfrogging; log-supermodularity; Monotone comparative statics; The Linder effect; The Schmookler effect; Trade patterns reversal; Vernon's product cycle hypothesis
    JEL: O11 O19 O33
    Date: 2017–10
  15. By: Stella Capuano; Hartmut Egger; Michael Koch; Hans-Jörg Schmerer
    Abstract: We set up a model of offshoring with heterogeneous producers that captures two empirical regularities of German offshoring firms. There is selection of larger, more productive firms into offshoring. However, the selection is not sharp, and offshoring and non-offshoring firms coexist over a wide range of the revenue distribution. An overlap of offshoring and non-offshoring firms emerges in our model because, in contrast to textbook models of trade with heterogeneous producers, we allow firms to differ in two technology parameters thereby decoupling the offshoring status of a firm from its revenues. In an empirical analysis, we employ firm-level data from Germany to estimate key parameters of the model and show that ignoring the overlap lowers the estimated gains from offshoring by more than 50 percent and, at the same time, exaggerates substantially the importance of the extensive margin for explaining the evolution of German offshoring over the last 25 years.
    Keywords: offshoring, heterogeneous firms, firm overlap, quantitative trade model, extensive and intensive margins of offshoring
    JEL: F12 F14 L11
    Date: 2017
  16. By: Alina Mika; Robert Zymek
    Abstract: We re-visit the evidence about the trade benefits of European Monetary Union (EMU), focusing on the experience of countries which adopted the common currency since 2002. Based on “state of the art†gravity estimations for the period 1992-2013, we reach three main conclusions. First, estimates from an appropriately specified and estimated gravity equation provide no evidence of a euro effect on trade flows among early euro adopters up to the year 2002. Second, this finding is robust to extending the sample period to incorporate data up to 2013, covering five additional euro accessions. Third, while there is no robust evidence of a euro effect, there is evidence that intra-EU trade flows have expanded faster than the global average during the 2002-2013 period. Using the functional form of a theory-consistent gravity equation, we perform pseudo out-of-sample forecasts of trade flows for recent euro joiners. In line with our estimation results, we show that pseudo forecasts of the change in trade flows after euro accession, assuming no euro effect, outperform forecasts based on the expectation of a significantly positive effect. This suggests that euro accession countries should not expect a significant boost to their trade from joining EMU.
    Keywords: euro, trade, gravity, poisson
    JEL: F14 F15 F17 F33
    Date: 2017
  17. By: Marc Auboin; Alisa DiCaprio
    Abstract: Trade finance shortfalls now appear regularly. Does this matter for trade expansion and economic development in developing countries? Global trade finance has resumed following the 2009 global financial crisis. However, the pattern of recovery has been uneven across countries and categories of firms. The recovery has been robust for the main routes of trade and for large trading companies. By contrast, access to trade finance remains costly and scarce in countries which have the strongest potential for trade expansion. The policy response to this problem depends on whether this represents a market failure, or a new global equilibrium. We introduce new data from a global survey of firms to argue that real shortfalls are exacerbated by perception gaps in a way that has enabled market failures to persist. This has troubling implications most directly through its effect on the ability for small firms to benefit from the reallocation of production and investment within global supply chains.
    Keywords: international financial institutions, coherence, G-20, financial crisis, trade and development, trade finance, economic development
    JEL: F13 F34 F36 O19 G21 G32
    Date: 2017
  18. By: Spray, J.
    Abstract: Modern trade theory models exporting as paying a fixed-cost in order to access a larger market. This simplification ignores an essential component of the export process: how does the decision to export cause firms to alter their supply-chains? In this paper I demonstrate that first-time exporting not only leads to growth in exporter output and productivity, but also influences the supply-chain in three main ways depending on the exporters size. First, new exporters replace unproductive suppliers with more productive domestic suppliers. Second, new exporters replace existing suppliers with imported alternatives. Third, exporting leads to pecuniary spillovers passed onto domestic suppliers, observed in higher revenue productivity. I use a unique, high-frequency Government of Uganda value-added tax administrative dataset motivated by a simple matching model to provide the first evidence on these effects. The model is identified by exploiting a natural experiment of a reduction in international transportation costs.
    Keywords: Learning by Exporting, Supply-chains, VAT data, Development and Trade
    Date: 2017–10–17
  19. By: ISHIKAWA, Jota; MORITA, Hodaka; MUKUNOKI, Hiroshi
    Abstract: This study explores the effect of parallel imports on both domestic and foreign countries when the producer may refuse to provide repair and maintenance services for parallel imported units, or charge higher prices for those services. This service discrimination makes it possible for the producer to weaken intra-brand competition and reduce the degree of price convergence between countries. If this is the case, both the positive effect of parallel imports on consumers in the destination country and the negative effect on the producer and consumers in the source country become weaker. If the quality of the good depends on the producer’s investment, permitting parallel imports in the presence of the service discrimination could lower the quality, because lower quality leads to a larger price gap between countries. As a result, it is possible that prices increase, consumers lose, and welfare deteriorates in both countries. This negative welfare effect is more likely to emerge as the liberalization of trade in goods proceeds. The prohibition of service discrimination recovers the positive welfare effect.
    Keywords: parallel imports, service discrimination, goods quality, welfare, trade liberalization
    Date: 2017–10
  20. By: Michal Szkup (The University of British Columbia); Fernando Leibovici (Federal Reserve Bank of St. Louis); David Kohn (Universidad Catolica de Chile)
    Abstract: We study the role of financial frictions and balance-sheet effects in accounting for the dynamics of aggregate exports in large devaluations. We investigate a small open economy with heterogeneous firms and idiosyncratic productivity shocks, where firms face financing constraints and debt can be denominated in domestic or foreign units. In our model, a real depreciation affects firms through two channels. On the one hand, it increases the returns to selling internationally, making exporting more profitable. On the other hand, it tightens the borrowing constraint by increasing the value of foreign-denominated debt relative to firms’ net worth. We calibrate the model to match key features from plant-level data and use it to quantify the importance of these channels. We find that financial frictions slow down the response of aggregate exports, and foreign-denominated debt amplifies this effect by decreasing firms’ net worth on impact. However, we find that these channels can only explain a small fraction of the dynamics of exports observed in the data. While financial frictions and balance-sheet effects distort production and investment decisions, exports are significantly less affected as firms reallocate sales across markets in response to the change in the real exchange rate. We document the importance of cross-market reallocation for export dynamics using firm-level data from Mexico’s devaluation in 1994.
    Date: 2017
  21. By: Sayeeda Bano (University of Waikato); Frank Scrimgeour (University of Waikato)
    Abstract: This study examines and presents a model of manufactured and agricultural exports from New Zealand to India and the world and from India to New Zealand. Our findings show that a country’s population, GDP, GDP per capita and exchange rate are important causal factors that influence both New Zealand’s and India’s agricultural and manufactured exports. Our findings also demonstrate that New Zealand agricultural exports are highly elastic with respect to average population, showing that a one percent increase in the average population/or market size can increase New Zealand agricultural exports to India by six percent. This is contrary to the conventional wisdom about low elasticity pessimism with respect to agricultural products. These results have policy implications in the context of trade negotiations between New Zealand and India at the bilateral level and the Regional Comprehensive Economic Partnership (RCEP) in which both New Zealand and India are participating.
    Keywords: international trade; agricultural exports; manufactured exports; India-New Zealand Free Trade Agreement FTA; RCEP
    JEL: F01 F02 F10 F13 F14 Q1
    Date: 2017–10–27
  22. By: Harms, Philipp; Shuvalova, Daria
    Abstract: We estimate the effect of “cultural distance” on bilateral trade in services. Our measure of cultural distance is based on scores that reflect individuals’ attitudes towards hierarchies, initiative, competition, uncertainty etc. Controlling for other standard ingredients of gravity equations, we show that cultural distance has a negative effect on services trade. However, the strength and sign of this effect differs across various aspects of cultural distance and for various types of services.
    JEL: F14
    Date: 2017
  23. By: Vlad Manole; Will Martin
    Abstract: We analyze the properties of tariff revenue and expenditure aggregators - tariff aggregators that keep expenditure, respectively tariff revenue constant. We derive key theoretical properties of these tariff aggregators, and under certain assumptions, develop closed-form solutions, promoting the use of these tariff aggregators in empirical research.
    Keywords: tariff aggregators, expenditure aggregator, tariff revenue aggregator
    JEL: F1
    Date: 2016–03
  24. By: Mulu Gebreyesus (Ethiopian Development Research Institute); Ashagrie Demile (Ethiopian Development Research Institute)
    Abstract: This paper examines the effectiveness of the existing export incentives in reducing the anti-export bias and encouraging exports; both in terms of their sufficiency and implementation related obstacles. We used a qualitative method and triangulated different data sources and interviews with different actors in the sector. The study reveals that the incentives provided for exporters are insufficient to motivate the private sector engage in exports. Firms that produce for domestic market have almost comparable incentives through investment promotion. The additional incentives provided for exporters are, thus, mediocre in comparison not only to the challenges associated with exporting and anti-export bias created by the existing policies but also to the investment incentives that are available for all investors including firms producing for domestic market. More importantly, the study found that the effectiveness of the export incentives is substantially constrained by the lack of efficient export bureaucracy and coordination problem. This has made difficult to ensure exporters have access even to the limited level of export incentives and encouraging diversion and rent seeking by the private sector. All these suggest that overcoming the incentive administration hurdles would reward the government’s effort in promoting export in addition to making the export inventive attractive relative to the investment incentive.
    Keywords: Ethiopia, Manufacturing sector, Effectiveness of Export incentives
    Date: 2017–07
  25. By: Janeba, Eckhard
    Abstract: Legal conflicts between multinational firms and host governments are often decided by international arbitration panels known as Investor State Dispute Settlements (ISDS). Critics fear that ISDS favors multinational firms, and make s governments reluctant to adopt appropriate policies (regulatory chill). I develop an economic model to analyze regulatory chill and show under which conditions a move to ISDS is beneficial.
    JEL: F23 F53 H25
    Date: 2017
  26. By: Fusshoeller, Chantal; Balleer, Almut
    Abstract: This paper addresses the dynamic effects of a migration inflow on the host country. In particular, we focus on the role of skill composition and investment behaviour of migrants and show how these affect labour supply and investment behaviour of natives and, hence, the adjustment path of the economy to various shocks in a real business cycle model. We quantify these effects for the recent refugee inflow into the German economy in 2014 and 2015.
    JEL: E13 E32 F22
    Date: 2017
  27. By: TAMADA Dai
    Abstract: This paper aims at analyzing several cases of investor-State dispute settlement (ISDS) which relate to the feed-in tariff (FIT) of the renewable energy sector, for the purpose of extracting the legal issues involved in them. On the basis of this analysis, it will bring some implications toward Japan, both from the investors' viewpoint and the host-State's perspective. First, in European and North American countries, there have been many cases in which foreign investors (claimants) submitted disputes, against the host-States, before the ISDS concerning the operation and abolishment of the FIT system. In particular, the main topic is to allege a violation of the fair and equitable treatment (FET) obligation stipulated in the applicable international investment agreement. Second, in cases against Spain, the Tribunal either admitted a breach of FET ( Eiser case) or did not ( Charanne case and Isolux case). The same applies in the cases against Canada. These situations require us to analyze the reason why there has been a difference of conclusions. Third, on the basis of the above analysis, it will become possible to evaluate the modified FIT law of Japan (2016) and present some implications about it.
    Date: 2017–10
  28. By: Osea Giuntella
    Abstract: This paper investigates the effects of trade in food on obesity in Mexico. We classifyMexican food imports from the U.S. into healthy and unhealthy and match thesewith anthropometric and food expenditure survey data. We exploit variation acrossMexican states in their exposure to food imports from the U.S.. We fi nd that imports ofunhealthy foods signi cantly contribute to the rise of obesity in Mexico. The empiricalevidence also suggests that unhealthy food imports may widen health disparitiesbetween education groups. By linking imports to food expenditure and obesity, thepaper sheds light on an important channel through which globalization may affecthealth.
    Date: 2017–01
  29. By: Caleb Stroup; Benjamin Zissimos
    Abstract: This paper examines the effect of trade integration and comparative advantage on one of a country’s institutions, which in turn inuences its economic efficiency. The environment we explore is one in which a country’s lower classes may revolt and appropriate wealth owned by a ruling elite. The elite can avert revolution by incentivizing a potentially productive middle class to sink their human capital into a relatively unproductive bureaucracy. Thus the bureaucracy serves as an institution through which the elite can credibly commit to make transfers to the rest of society, but in the process this reduces economic efficiency. Trade integration alters the relative value of the elite’s wealth. This alters the lower classes’ incentive to revolt on the one hand and the elite’s incentive to subsidize participation in the inefficient bureaucracy on the other. Therefore, the interaction between a country’s comparative advantage and an inefficient economic institution determines whether trade integration increases or reduces economic efficiency. The econometric findings support the model’s main prediction.
    Keywords: efficiency, institutions, property rights, social unrest, trade integration
    JEL: D30 D74 F10 O12 P14
    Date: 2017
  30. By: Fabrizio Patriarca (Sapienza University of Rome); Rama Dasi Mariani (Sapienza University of Rome); Eugenio Levi (Sapienza University of Rome)
    Abstract: Recent studies provide evidence that immigration has a significant positive effect on the vote for parties with anti-immigration agendas. However, this result does not emerge if we apply the same empirical analysis to the UK, whether in the case of Brexit, or if we consider support for Ukip or the political intentions expressed in the BES survey. To account for this and other fragmented evidence in the literature on personal attitudes towards immigration, we formulate the hypothesis that the increase in anti-immigration views resulting from an increased number of immigrants in a neighbourhood is a temporary effect. Different underlying mechanisms may be at the root of such negative short-run effects, such as material concerns about the adjustment cost of new migration flows, or prejudicial attitudes, both denoting a “hate at first sight” effect. We build an econometric strategy to test for the existence of such a short-run effect in the case of Brexit and then assess the robustness of our result using a panel of the vote for Ukip and individual data from the BES survey. The evidence robustly supports our hypothesis and provides a basis for further analysis.
    Keywords: Immigration, Voting, Political Economy, Brexit, Biased attitudes
    JEL: P16 J61 D72 D83
    Date: 2017–10
  31. By: Tahiri, Noor Rahman
    Abstract: Purpose: the purpose of the study is describe the trade relationship of China and Afghanistan. China, most populous and rapidly growing industrial country of the world, has shown its strong political, economic and security-based interests in Afghanistan. Afghanistan is rich in terms of natural reserves. China is trying to gain access to these natural resources like Aynak copper and oil reserves, providing economic aid and thus improving political relations. Shanghai Cooperation Organization (SCO) is playing a part in addressing security problems of Afghanistan and China is observer while Afghanistan is a member of SAARC. On the other hand, Afghan government is appreciating and taking this greater role in a positive sense because it is bringing modesty in their relations from bilateral partnership to strategic partnership.
    Keywords: Host country growth, FDI, Capital formation
    JEL: A12 C82 F1
    Date: 2017–08–06
  32. By: Kevin Hjortshøj O'Rourke (All Souls College, University of Oxford)
    Abstract: Preliminary version of a paper prepared for IMF-BNM-IMFER Conference on Globalization in the Aftermath of the Crisis and the IMF Economic Review. The research on which this paper is based was in part funded by the European Research Council under the European Union's Seventh Framework Programme (FP7/2007-2013) / ERC grant agreement no. 249546. The paper draws on many collaborations, and I am extremely grateful to my co-authors: Miguel Almunia, Agustin Bénétrix, Roberto Bonfatti, Alan de Bromhead, Barry Eichengreen, Alan Fernihough, Ronald Findlay, William Hynes, David Jacks, Markus Lampe, Gisela Rua, and Jeffrey Williamson. The usual disclaimer applies.
    Date: 2017–10–23
  33. By: Wani, Mr. Nassir Ul Haq; Rehman, Mr. Noor
    Abstract: Purpose: The purpose of this study is to describe the major FDI determinants that show capital flow in Afghanistan and to investigate impact of FDI determinants on economy of Afghanistan in particular. Design/methodology/approach: This Research look into whether FDI determinants influence FDI based in Afghanistan by taking time series data using OLS, over the period of 2005-2015. Findings: The relation of FDI with a few FDI determinants including total debt service, total external debt, gross domestic production and gross fixed capital formation contain a strong positive result on economic growth in Afghanistan; at the same time as the relation of FDI with Inflation contain a negative effect. Research limitations/implications: The restrictions of the study are basically the enlargement of data which cannot be found continuous for 2015 completely for all variables. Originality/value: The objective of this research is to define the main FDI determinants that show capital flow in Afghanistan and to explore impact of FDI determinants on economy of Afghanistan in particular. Secondary objective is the quantify FDI determinants to suggest some policies through which FDI can improve in Afghanistan.
    Keywords: Host country growth, Capital formation, Inflation, FDI
    JEL: F1 F14 F18
    Date: 2017–04–10
  34. By: Matsuyama, Kiminori
    Abstract: This paper proposes a theoretical framework, which allows us to study the effects of geographical factors on the distribution of industries across many regions. The geographical feature of each region is summarized by a proximity matrix, whose elements measure the closeness between every pair of regions and depend on the parameters representing the transport and other costs of using a variety of trade routes. A change in these costs of trade affects the distribution of industries by amplifying the geographical advantages and disadvantages of regions. Through a series of examples, we demonstrate how this framework can be used not only to examine the effects of an improvement in transport infrastructure, but also to address some problems from economic history, regional economic integration, and the north-south division, and discuss some geopolitical issues.
    Keywords: A Multi-region Model of Costly Trade in Differentiated Goods; Convergence versus Divergence; Geographical Advantages and Disadvantages; Home Market Effect; monopolistic competition; Proximity Matrix; Regional Economic Integration; Trade Routes; Uneven Development
    JEL: F12 F15 O11 R12
    Date: 2017–10
  35. By: Matteo Bugamelli (Bank of Italy); Silvia Fabiani (Bank of Italy); Stefano Federico (Bank of Italy); Alberto Felettigh (Bank of Italy); Claire Giordano (Bank of Italy); Andrea Linarello (Bank of Italy)
    Abstract: We provide an in-depth analysis of Italy’s export performance relative to the other main euro-area countries over the last two decades, using both macro and micro data. We argue that the relatively unsatisfactory performance of Italian goods exports until the eve of the 2008-09 crisis is the result of the interplay between the appreciation of the real effective exchange rate, the initial specialization in types of production that were particularly exposed to increasing competition from low-wage countries, and the size distribution of exporters, skewed towards small firms. Since 2010 signs of structural improvement have emerged, alongside cyclical factors, in connection with a shift in the specialization of exports towards sectors that are less exposed to competitive pressures and particularly effective in activating domestic value added. Moreover, the selection process triggered by the exceptional difficulties encountered by micro and small firms both before and during the global financial crisis might have structurally strengthened the population of Italian exporters, making it more resilient to negative shocks and more capable of keeping pace with external demand.
    Keywords: exports, competitiveness, specialization, firm size
    JEL: F14 L11 L60
    Date: 2017–10
  36. By: Adrian Gh. Paul (North University Center, Baia Mare)
    Abstract: It is often stated that Europe was born in the year AD 325, in Nicaea, with the first Ecumenical Council of the Christian Church, which formulated the fundamental dogma on God and gave the continent a genuine model of faith. In this paper I will focus on the phenomenon of migration from a religious perspective. A special emphasis will be placed on the Orthodox Christian perspectives on labor, productivity, and the general values that characterize Europe as a Christian continent.
    Keywords: Migration, productivity, communion, unity, Love, Solitary, solidarity, community.
    Date: 2016–08
  37. By: Mario Larch; Joschka Wanner; Yoto V. Yotov; Thomas Zylkin
    Abstract: Recent work on the effects of currency unions (CUs) on trade stresses the importance of using many countries and years in order to obtain reliable estimates. However, for large samples, computational issues limit choice of estimator, leaving an important methodological gap. To address this gap, we unveil an iterative PPML estimator which flexibly accounts for multilateral resistance, pair-specific heterogeneity, and correlated errors across countries and time. When applied to a comprehensive sample with more than 200 countries trading over 65 years, these innovations flip the conclusions of an otherwise rigorously-specified linear model. Our estimates for both the overall CU effect and the Euro effect specifically are economically small and statistically insignificant. The effect of non-Euro CUs, however, is large and significant. Notably, linear and PPML estimates of the Euro effect increasingly diverge as the sample size grows.
    Keywords: currency unions, PPML, high-dimensional fixed effects
    JEL: C13 C21 F10 F15 F33
    Date: 2017
  38. By: Miklós Koren (Central European University); Roc Armenter (Federal Reserve Bank of Philadelphia)
    Abstract: We propose a new theory of the extensive margin of trade based on a standard random-utility, discrete choice model for import demand. Crucially, there are only a finite number of independent purchase decisions each period. Whereas traditional demand systems predict market shares, our model yields instead the probability that a purchase for a given good is supplied by any given country. The model has a rich set of predictions regarding the extensive margin across goods, countries, and time. The model naturally reconciles two commanding observations in the data: there is a large fraction of varieties that are not traded yet the entry and exit rates of commodities are very high. We purse an exhaustive evaluation of the model's quantitative performance with data on U.S. imports at the HS10 product level over the period 1990-2001. The model reproduces faithfully the cross-section distribution of varieties traded per product along several dimensions. Regarding dynamic facts, the model is spot on with its predictions on the net change, gross entry and exit of commodities, both by count and weighted by value; as well as survival probabilities and hazard rates. We briefly explore the model's implications for price changes, using NAFTA as a case study, and welfare gains from new varieties.
    Date: 2017
  39. By: T. Terry Cheung; Theodore Palivos; Ping Wang; Yin-Chi Wang; Chong K. Yip
    Abstract: To explore the interplays between trade and institutions, we construct a staged development framework with multi-period discrete choices to study the colonization of Hong Kong, which served to facilitate the trade of several agricultural and manufactured products, including opium, between Britain and China. Based on the historical data and documents that we collected from limited sources, we design our dynamic trade model to capture several key features of the colonization process and use it to characterize the endogenous transition from the pre-Opium War era, to the post-Opium War era and then to the post-opium trade era, which span the period 1773-1933. We show that while the low opium trading cost and the high warfare cost initially postponed any military action, the high valuation of the total volume of bilateral trade, the rising opium trading cost and the anticipated increase in the demand for opium eventually led the British government to declare the Opium Wars, legalizing opium trade via the colonial Hong Kong. We also show that, in response to a drastic drop in opium demand and a rising opium trading cost, it became optimal for the British government to abandon opium trade soon after the founding of the Republic of China.
    JEL: E02 E65 F54 O11
    Date: 2017–10
  40. By: Wößner, Nicole; Stiebale, Joel
    Abstract: We use a panel data set of European firms to analyze the effects of domestic and international M&As on target firms' investment and financial constraints. Combining propensity score matching with a difference-in-differences estimator, our results show that upon acquisition, target firms obtain better access to external finance, are characterized by higher levels of tangible and intangible assets, and display lower dependence of investments and cash savings to the availability of internal funds.
    JEL: G34
    Date: 2017
  41. By: Forslid, Rikard; Nyberg, Sten
    Abstract: Control over borders and access to the common market are key issues in the Brexit negotiations. We explore a sequential model, where the UK can commit to mobility, and the EU may constrain trade to dissuade future secession, or to punish the UK. The model highlights the importance of whether the EU views trade and labor mobility as substitutes, in line with standard trade theory, or as complements, as suggested by EU statements about inseparable freedoms. In the former case, the UK can attain its preferred mobility with impunity. Mobility and trade restrictions are higher in the latter case. While the EU's bargaining position hinges on a willingness to constrain trade, the EU does not benefit from strengthen this, say by fueling resentment about Brexit. The sequence of moves is clearly important. Our model implies that the UK moving first is optimal for both parties. This sequence is also in line with the phased approach guiding the negotiations. With uncertainty about preferences, the EU benefits from claiming to have complements preferences, irrespective of its true preferences. Uncertainty harms the UK. Nevertheless, it is worse off moving second, despite the EU's preferences then being revealed. Also, if the EU has substitute preferences it could gain from committing to complement preference behavior. Finally, we discuss the scope for efficient bargaining taking the inefficient equilibrium points as points of departure. We note that contributions to the EU budget could potentially substitute for trade restrictions, thereby contributing to a more efficient outcome.
    Keywords: Brexit; Immigration; sequential game; Trade
    JEL: F15 F22 F55
    Date: 2017–10
  42. By: Ivan Vasile Ivanoff (Valahia University of Targoviste)
    Abstract: Migration, as a social phenomenon, has an especially complex character and can be analyzed from the point of view of the state which is the source of the migration as well as from the point of view of the state which is the destination of the migration. Its causes are especially complex but the economic ones are determinant and are fundamentally different of the causes which determine the population to seek refuge in case of armed conflict. The effects of the migration are equally complex and can be analyzed from the point of view of the source states as well as from the point of view of the destination states. This study conducts an applied analysis of the phenomenon regarding a territorial and administrative division from Romania.
    Keywords: migration, immigration, emigration, refugee, exodus, causes, consequences, Brexit.
    Date: 2016–08
  43. By: Samuiel Balc (Baptist Theological Institute in Bucharest)
    Abstract: The frequency and the size of the migrating movements of population over the historical eras have always been an impressive phenomenon. Voluntarily or forced, people have changed their place of living and work inside and outside the borders of their own countries, hoping to realize some aspirations, hoping in new opportunities or new assurances. The research made in the sphere of historical demography proves the influence of demographical variations, provoked by the phenomenon of migration on the historical development of society through interactions between economic, political and cultural factors. As a result of migration, the pluralistic society is more and more evident, regardless of what part of the world we are talking about. The modern human needs to cope with an avalanche of information, costumes, convictions and religions, that are not specific to the place in which he lives. The cultures that were characteristic to a people or to a geographical place are frequently crossing paths, coexisting in the same society and putting a lot of pressure on the formation of the individual.
    Keywords: migration, culture, society, globalization, change.
    Date: 2016–08
  44. By: Nelu Burcea (Athenaeum University in Bucharest)
    Abstract: This paper focuses on the reality of migration from the perspective of the United Nations. By surveying a UN report provided by the Department of Economic and Social Affairs of the United Nations, this paper attempts to offer a managerial perspective on the cultural aspects of migration, as effected by the involvement of the United Nations in handling this global crisis. Particularly, this study focuses on raising the cultural question about the managerial methods used by the UN in calibrating this reality within the framework of the historical and territorial perspective of the phenomenon itself. The findings of this study are relevant in the context of developing new tactics for managing migration, applicable to specific international institutions and geographic areas.
    Keywords: migration, culture, management, statistics, international, United Nations DESA.
    Date: 2016–08
  45. By: Agha Ali Akram; Shyamal Chowdhury; Ahmed Mushfiq Mobarak
    Abstract: Rural to urban migration is an integral part of the development process, but there is little evidence on how out-migration transforms rural labor markets. Emigration could benefit landless village residents by reducing labor competition, or conversely, reduce productivity if skilled workers leave. We offer to subsidize transport costs for 5792 potential seasonal migrants in Bangladesh, randomly varying saturation of offers across 133 villages. The transport subsidies increase beneficiaries’ income due to better employment opportunities in the city, and also generate the following spillovers: (a) A higher density of offers increases the individual take-up rate, and induces those connected to offered recipients to also migrate. The village emigration rate increases from 35% to 65%. (b) This increases the male agricultural wage rate in the village by 4.5-6.6%, and the available work hours in the village by 11-14%, which combine to increase income earned in the village, (c) There is no intra-household substitution in labor supply, but primary workers within households earn more during weeks in which many of their village co-residents moved away. (d) The wage bill for agricultural employers increases, which reduces their profit, with no significant change in yield. (e) Food prices increase by 2.7% on net, driven by an increase in the price of (fish) protein, and offset by (f) a decrease in the price of non-tradables like prepared food and tea. Seasonal migration subsidies not only generate large direct benefits, but also indirect spillover benefits by creating slack in the village-of-origin labor market during the lean season.
    JEL: J43 J61 O1 O18 R13 R23
    Date: 2017–10
  46. By: Kilian, Lutz; Zhou, Xiaoqing
    Abstract: It is widely understood that the real price of globally traded commodities is determined by the forces of demand and supply. One of the main determinants of the real price of commodities is shifts in the demand for commodities associated with unexpected fluctuations in global real economic activity. There have been numerous proposals for quantifying global real economic activity. We discuss which criteria a measure of global real activity must satisfy to be useful for modeling commodity prices, we examine which of the many alternative measures in the literature are most suitable for applied work, and we explain why some popular measures are inappropriate for modeling commodity prices. Given these insights, we reexamine in detail the question of whether global real economic activity has declined since 2011 and by how much. Drawing on a range of new evidence, we show that the global commodity price boom of the 2000s appears to have been largely transitory. Our analysis has important implications for the design of structural models of commodity markets, for the analysis of the transmission of commodity price shocks to commodity-importing and exporting economies, and for commodity price forecasting.
    Keywords: Commodity market; demand; global economy; international business cycle; leading indicators; oil price; real economic activity
    JEL: F44 Q11 Q31 Q41 Q43
    Date: 2017–10

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