|
on International Trade |
| By: | Shah, Mumtaz Hussain |
| Abstract: | The significance of a crucial WTO accession agreement component, that is, Trade Related Investment Measures (TRIMs) agreement in increasing Sub-Saharan African developing country’s appeal for investors from abroad is assessed over here. Conventional FDI location determinants like macroeconomic stability, market size, infrastructure, trade openness and economic development are also considered. Utilising yearly data for 38 Sub-Saharan developing nations over the time period from 1988 to 2015 in a panel form, the researcher found that removal of market distortions through TRIMs, sound macroeconomic management, infrastructure availability, liberalisation of investment and trade regime have plausible significant effects on FDI inflows. Contrary to the empirical FDI literature economic development is found to be insignificant and market size sensitive to the addition of explanatory variables, especially, WTO led TRIMs. Time invariant features such as language, geographical location and sea access cannot be evaluated as fixed effect panel estimation technique does not support them. |
| Keywords: | FDI, WTO, TRIMs, Panel Data and Sub-Saharan Economies |
| JEL: | C23 F13 F14 F15 F21 F23 K33 |
| Date: | 2017–01–30 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:82009&r=int |
| By: | ITO Koji; Ivan DESEATNICOV; FUKAO Kyoji |
| Abstract: | Recent research has emphasized the importance of global value chains (GVCs) in inter-country linkages and international production fragmentation. Several initiatives have attempted to construct multi-country input-output tables (MIOTs) to analyze these trends. However, heterogeneity in export and domestic activities among firms within the same industry may cause biases in analyses that rely on MIOTs. This paper has two main objectives. First, we use matched employer-employee data for Japan to split output in each industry in Japan's manufacturing sector in the Organisation for Economic Co-operation and Development (OECD) Inter-Country Input-Output (ICIO) table into output for export or domestic sale. Second, using our split ICIO table, we compute trade in value added (TiVA) indicators to examine the participation of Japanese manufacturing plants in GVCs and compare our results with the OECD-WTO TiVA indicators. Our estimates suggest that Japan's forward participation in GVCs is lower than in the original OECD-WTO TiVA indicators when we take plant heterogeneity within industries into account. We infer that this result is due to higher cross-border production fragmentation as well as the large presence of multinational companies and intra-industry trade in the manufacturing sector. |
| Date: | 2017–10 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:17117&r=int |
| By: | James E. Anderson; Mario Larch; Yoto V. Yotov |
| 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 subsystems for FDI and trade, with accumulation/decumulation of phyisical 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 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6625&r=int |
| By: | SEKINE Takemasa |
| Abstract: | Article XVII was included in the General Agreement on Tariffs and Trade (GATT) with a view to prevent state trading enterprises (STEs, which may encompass state-owned enterprises, SOEs), not Members themselves, from transactions that impede international free trade, by requiring those enterprises to act in accordance with "commercial considerations." This provision was contemplated to take a central role in regulating the behavior of STEs/SOEs under GATT and the World Trade Organization (WTO). However, this provision, for a long time, was regarded as insufficient in fulfilling its purpose, and its performance record was also poor. Against this backdrop, some attempts have emerged in recent WTO accession documents and free trade agreements (FTAs) to introduce WTO-plus provisions, although they do not fundamentally depart from the basic principle of Article XVII GATT. This paper investigates individual WTO accession documents, FTAs mainly concluded by the United States and the European Union, and the Trans-Pacific Partnership (TPP) Agreement in order to reveal the aforementioned trend, and elucidates how SOE-related disciplines are developing. The major advancements form Article XVII GATT are the isolation of commercial consideration from the non-discrimination principle and the expansion of the scope of such concept. |
| Date: | 2017–11 |
| URL: | http://d.repec.org/n?u=RePEc:eti:rdpsjp:17069&r=int |
| By: | Lorenzo Caliendo; Luca David Opromolla; Fernando Parro; Alessandro Sforza |
| Abstract: | The economic effects from labor market integration are crucially affected by the extent to which countries are open to trade. In this paper we build a multi-country dynamic general equilibrium model with trade in goods and labor mobility across countries to study and quantify the economic effects of trade and labor market integration. In our model trade is costly and features households of different skills and nationalities facing costly forward-looking relocation decisions. We use the EU Labour Force Survey to construct migration ows by skill and nationality across 17 countries for the period 2002-2007. We then exploit the timing variation of the 2004 EU enlargement to estimate the elasticity of migration ows to labor mobility costs, and to identify the change in labor mobility costs associated to the actual change in policy. We apply our model and use these estimates, as well as the observed changes in tariffs, to quantify the effects from the EU enlargement. We find that new member state countries are the largest winners from the EU enlargement, and in particular unskilled labor. We find smaller welfare gains for EU-15 countries. However, in the absence of changes to trade policy, the EU-15 would have been worse off after the enlargement. We study even further the interaction effects between trade and migration policies and the role of different mechanisms in shaping our results. Our results highlight the importance of trade for the quantification of the welfare and migration effects from labor market integration. |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6600&r=int |
| By: | Alessandria, George; Avila, Oscar |
| Abstract: | We study Colombia’s trade integration over a 30 year period through the lens of GE model in which non-exporters have access to a risky exporting technology and exporters must invest in accumulating a better exporting technology. Our model is calibrated to match the producer and exporter lifecycles and yields a novel estimate of the various costs of exporting. We find the upfront costs of starting to export are much lower than in previous analyses but that this technology is quite risky in that most firms that incur the cost do not end up with an export opportunity. We also find that for existing exporters, expanding exports requires sustained export-specific investments. We then examine the transition following Colombia’s 89-91 trade reform. We show that the relationship between the firm-level export intensity and aggregate export intensity disciplines the changes in technology and policy accounting for this integration. We find that a common decline in tariffs can account for about 75 percent of the growth in exports as a share of manufacturing sales. We attribute the remaining 25 percent to an increase in the success of investments in export market access. About 10 percent of the increase in trade is accounted for by the endogenous accumulation of an improved exporting technology by existing exporters. These changes in policy and exporting technology boost welfare by about 7.1 percent. The transition following the reforms is characterized by an overshooting of output and consumption, with consumption peaking 15 years after the policy. Further tariff reductions are expected to increase welfare another 6.2 percent. |
| Keywords: | Comercio internacional, Economía, Investigación socioeconómica, Productividad, Sector privado, Sector productivo, |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:dbl:dblwop:1101&r=int |
| By: | Hanwei Huang; Jiandong Ju; Vivian Z. Yue |
| Abstract: | This paper studies how changes in factor endowment, technology, and trade costs jointly determine the structural adjustments, which are defined as changes in distributions of production and exports. We document the structural adjustments in Chinese manufacturing firms from 1999 to 2007 and find that production became more capital-intensive while exports did not. We structurally estimate a Ricardian and Heckscher-Ohlin model with heterogeneous firms to explain this seemingly puzzling pattern. Counterfactual simulations show that capital deepening made Chinese production more capital-intensive, but technology changes that biased toward the labor-intensive sectors and trade liberalizations provided a counterbalancing force. |
| Keywords: | structural adjustments, comparative advantage, heterogeneous firm |
| JEL: | F12 L16 |
| Date: | 2017–11 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1508&r=int |
| By: | Lawless, Martina; Morgenroth, Edgar |
| Abstract: | This paper looks at the transport patterns of Irish international trade. In particular, we examine how trade flows in weight differ from those measured by value and the implications that this has for transport mode and cost. In an environment of uncertainty relating to the impact of Brexit, the much larger share of the UK in total Irish export volumes (tonnages) compared to values signals possible significant impacts on transport and also on costs if increased customs procedures are introduced. We also look at the use of the UK as a land-bridge for Irish trade further afield, finding that a considerable percentage of Irish trade uses this transport option. |
| Date: | 2017–10 |
| URL: | http://d.repec.org/n?u=RePEc:esr:wpaper:wp573&r=int |
| By: | Shah, Mumtaz Hussain |
| Abstract: | In this study an attempt is made to gauge the importance of prudent macro-economic management in the location choice decision of foreign direct investors. Moreover, infrastructure availability, market size, trade liberalisation and economic development are also considered, for a set of forty three African developing countries using annual data from 1990 to 2015. The results show that better infrastructure, liberalised investment and trade regimes have significant effects on FDI inflows to the African nations. Conjectured with the host market theory hypothesis, the size of the host market positively affects inward FDI. Moreover, prudent management of macro-economy and healthy business policies manifested through stable macroeconomic indicators increases the ability of the African developing countries included in the study to receive additional Foreign Direct Investment. These findings are insensitive to the use of different proxies used for the control variables. |
| Keywords: | FDI, African Developing Countries, Macroeconomic Stability, Market Size, Domestic Market Liberalisation, Infrastructure availability. |
| JEL: | C23 F13 F14 F21 F23 |
| Date: | 2016–12–30 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:82014&r=int |
| By: | William F. Lincoln; Andrew H. McCallum; Michael Siemer |
| Abstract: | The collapse of international trade surrounding the Great Recession has garnered significant attention. This paper studies firm entry and exit in foreign markets and their role in the post-recession recovery of U.S. exports using confidential microdata from the U.S. Census Bureau. We find that incumbent exporters account for the vast majority of the decline in export volumes during the crisis. The recession also induced a missing generation of exporters, with large increases in exits and a substantial decline in entries into foreign markets. New exporters during these years tended to have larger export volumes, however, compensating for the decline in the number of exporting firms. Thus, while entry and exit were important for determining the variety of U.S. goods that were exported, they were less important for the trajectory of aggregate foreign sales. |
| Keywords: | Business cycles ; Entry ; Exit ; Exports ; Financial crisis ; Firm dynamics ; Great recession ; Recession |
| JEL: | F10 F40 E32 E44 J2 |
| Date: | 2017–11–03 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2017-108&r=int |
| By: | Shah, Mumtaz Hussain |
| Abstract: | This research paper studies the likely effect of financial development on inward Foreign Direct Investment (FDI) in Middle East and North African (MENA) nations. Making use of yearly data for ten MENA developing countries from 1988 to 2015, the study finds significant positive influence of financial development on overseas investors’ investment decision. The empirically established FDI determining factors such as market size, development level, trade liberalisation, macroeconomic stability, trade agreements, bilateral investment treaties and infrastructure & skilled labour availability, were also taken into consideration. Moreover, to sift purely the effect of financial development devoid of any time variant phenomenon equally affecting all the MENA nations I have also controlled for a time trend. Hence, it is expected that the results of the research shall be free of any omitted variable bias. Using various proxies for financial development through random effects panel estimation method the findings of the study suggests that financial development is a robust predictor of FDI inflows in the MENA region. |
| Keywords: | Financial Development, FDI, MENA Countries and Panel Data. |
| JEL: | C33 F21 F23 O11 O16 |
| Date: | 2016–10–30 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:82013&r=int |
| By: | ISHIKAWA, Jota; TARUI, Norio |
| Abstract: | Trade barriers due to transport costs are as large as those due to tariffs. This paper incorporates the transport sector into a standard model of international trade and studies the effects of trade and industrial policies. Transport firms need to commit to a shipping capacity sufficient for a round trip, with a possible imbalance of shipping volumes in two directions. This imbalance is known as the “backhaul problem.” As transport firms attempt to avoid this problem, a tariff in one sector may affect other independent import and/or export sectors. In particular, domestic tariffs may backfire: domestic exports may also decrease, harming domestic export sectors and the domestic economy. This finding contributes to the literature on how import liberalization may generate a positive effect on the liberalizing country’s exports by identifying a new channel through endogenous changes in transport costs given the backhaul problem. |
| Keywords: | Transport sector, transport cost, backhaul problems, international shipping, tariffs |
| JEL: | F12 F13 R40 |
| Date: | 2017–10 |
| URL: | http://d.repec.org/n?u=RePEc:hit:hiasdp:hias-e-57&r=int |
| By: | Jérôme Héricourt; Clément Nedoncelle |
| Abstract: | Based on a large French firm-level database that combines information on balance-sheet and destination-specific export values and volumes over the period 1995-2009, this article investigates how heterogeneous exporters react to real exchange-rate volatility. We find that strongly multi-destination firms tend to reduce both their export values and volumes to a destination that face higher exchange-rate volatility, while firms serving only a few destinations increase their market share. This result is robust to various specifications, samples, potential omitted variables, as well as hedging strategies, and is not specific to multinational firms. We also show that, following an exchange-rate volatility shock in a given country, export values and volumes to all other destinations served increase with the number of destinations served by the firm. These results are consistent with models under uncertainty, where the risk increases with firm size, and risk-averse behavior is equivalent to a preference for diversification. Therefore, this paper proposes an additional potential explanation for the macro puzzle of the muted reaction of aggregate exports to exchange-rate volatility. Since big multi-destination firms, which account for the bulk of aggregate exports, minimize their overall risk exposure by diverting their exports from high- to low-volatility markets, this contributes to exports at the macro level remaining unchanged in the main. |
| Keywords: | Real Exchange Rate Volatility, Multi-destination Exporters, Diversification, Aggregation |
| Date: | 2017–05 |
| URL: | http://d.repec.org/n?u=RePEc:cpm:docweb:1620&r=int |
| By: | David J. Kuenzel (Economics Department, Wesleyan University) |
| Abstract: | The institutional underpinnings and trade effects of the WTO have been extensively scrutinized in the literature. There is, however, relatively little known about the economic effects of members’ communications outside of official negotiations and dispute proceedings. One of the WTO’s core missions is to ensure and further transparency of its members’ trade policies through regular reviews by its Trade Policy Review Mechanism (TPRM). This paper considers whether communications between members through the TPRM lead to subsequent changes in bilateral trade flows. To examine this question, I construct a detailed dataset on submitted trade policy concerns during TPRM proceedings going back to 1989. The results indicate substantial heterogeneity in the trade effects of submitted trade policy concerns. Positive trade responses are more likely to occur when (i) the receiver of the concern has less market power, (ii) the submitter is more willing to engage in WTO disputes with the reviewed member to challenge controversial trade policies, and (iii) few concerns have been communicated to the importing country before. |
| Keywords: | GATT/WTO, Trade Policy Review Mechanism, Trade Flows |
| JEL: | F13 F14 F53 |
| Date: | 2017–10 |
| URL: | http://d.repec.org/n?u=RePEc:wes:weswpa:2017-006&r=int |
| By: | A. Kerem Cosar; Banu Demir Pakel |
| Abstract: | We quantify the effect of container technology on transport costs and trade by estimating the modal choice between containerization and breakbulk shipping using micro-level trade data. The model is motivated by novel facts that relate container usage to shipment, destination and firm characteristics. We find container transport to have a higher first-mile cost and a lower distance elasticity, making it cost effective in longer distances. At the median distance across all country pairs, the box decreases variable shipping costs between 16 to 22 percent. The box explains a significant amount of the global trade increase since its inception: a quantitative exercise suggests that Turkish and U.S. maritime exports would have been about two-thirds of what they are today in the absence of containers. |
| Keywords: | containerization, globalization, transportation, trade |
| JEL: | F10 F14 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6311&r=int |
| By: | Jane Kelsey |
| Abstract: | Digital technology offers exciting new opportunities and advances for ASEAN member states, individually and as a region. The benefits have so far been captured by first movers, especially in the United States. ASEAN countries need time and flexibility to develop their own digital industrialization strategies that can harness the potential gains and minimize the risks, and regulate accordingly. This paper explains how that opportunity would be foreclosed by a new normative framework on electronic commerce and cross-border services that is being systematically advanced by developed countries on behalf of their globally dominant digital industries. Starting with the Trans-Pacific Partnership Agreement, the template is being promoted through a network of mega-regional trade and investment agreements, including the Regional Comprehensive Economic Partnership and potentially the World Trade Organization. Instead of delivering a digital dividend to ASEAN countries, this model of e-commerce could impede their development, create negative fiscal and employment consequences, and leave them dependent on an oligopoly of private corporations that control the global digital infrastructure and mass data. ASEAN member states will need to resist those proposals if they are to maintain their regulatory sovereignty and the policy space to capitalize on the 21st century digital revolution. |
| Keywords: | e-commerce, ASEAN, mega FTAs, WTO, RCEP |
| Date: | 2017–10 |
| URL: | http://d.repec.org/n?u=RePEc:era:wpaper:dp-2017-10&r=int |
| By: | Eppinger, Peter S. |
| Abstract: | Major technological advances have recently spurred a new wave of offshoring in services, which used to be non-tradable. Should service workers in developed countries worry about their jobs? Trade theory has given a nuanced answer to this question, suggesting that efficiency gains from offshoring may counteract direct job losses, which leaves the predicted net effect ambiguous. This paper investigates the employment effects of service offshoring in a newly combined and exceptionally detailed panel dataset, covering almost the entire universe of German firms' service imports over the years 2002-2013. It exploits firm-specific export supply shocks by partner countries and service types as an instrumental variable to find that service offshoring has increased firm employment. In line with the canonical trade in tasks model, the employment gains are greater in firms with higher initial levels of service offshoring. |
| Keywords: | service offshoring,employment,firm-level data,service trade,trade in tasks |
| JEL: | F16 F14 J23 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:tuewef:103&r=int |
| By: | Häußermann, Johann Jakob |
| Abstract: | In 'Fairness in Practice – A Social Contract for a Global Economy' (2012) Aaron James proposes a substantial normative framework for a theory of fairness in the global economy. Based on a distinctive methodology of interpretive constructivism, James argues for an internal justification of fairness requirements in the field of international trade, and consequently defends three basic egalitarian principles of fairness. However, Mathias Risse and Gabriel Wollner, among others, have criticized James’s view for multiple reasons. In the following article, I will first engage with their critique, contending that their arguments do not prove that James’s view should be dismissed. Instead, I will introduce a new proposal, arguing that it is rather by a notion of differential treatment of countries that James’s account should be complemented. Taking into account all the relevant differences between countries, the concept of differential treatment allows for the provision and establishment of equal participation as a basis for considerations of fairness. To this end, I shall therefore propose an additional fourth principle of fairness called Equal Participation. I argue that it is necessary to significantly expand James’s contractualist and practice-dependent foundations, in order to reconcile crucial methodological concerns and to render James’s formulations applicable to current debates on free trade agreements. The article will conclude with an exploration of the applicability of this new approach to current trade policy issues, illustrating not only its practicability but also the urgent need for normative considerations in the context of international trade agreements. |
| Keywords: | International Trade,Free Trade Agreements,Fairness,Special and Differential Treatment,Constructivism,Aaron James |
| JEL: | D63 F13 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:esprep:170695&r=int |
| By: | Charlie Joyez (Université Paris-Dauphine, PSL Research University,IRD, LEDa, DIAL) |
| Abstract: | This paper develops a network approach of French multinationals' host countries network. It reveal and describe the expansion pattern of multinational firms through their affiliates, identifying core destinations, centralization degree of the network, and favorite countries linkages. The main results are in line with previous findings on foreign investment decision, location choices and gradual pattern. Further findings appear when looking at the network structure over time, showing an increasing geographical dispersion of affiliates. In addition, building directed networks allows us to observe upstream and downstream stages of internationalization. I later examine separately top productive firms network from least productive ones, and show the sensitivity of network structure to firm heterogeneity. |
| Keywords: | Network analysis; Weighted directed networks; Foreign direct investment; Multinational Firms; Firm heterogeneity; |
| JEL: | F23 L14 C45 |
| Date: | 2017–10 |
| URL: | http://d.repec.org/n?u=RePEc:dia:wpaper:dt201708&r=int |
| By: | Kohn, David; Leibovici, Fernando; Szkup, Michal |
| Abstract: | We investigate the extent to which financial frictions shape the aggregate effects of a trade liberalization through their impact on aggregate total factor productivity (TFP) and capital misallocation. We study a small open economy populated with heterogeneous entrepreneurs who differ in their productivity and are subject to financing constraints. Individuals choose whether to be workers or entrepreneurs, and entrepreneurs choose whether to export or not. We show how financial frictions distort these decisions and aggregate TFP. We calibrate the model to match key features of Chilean plant-level data and use it to quantify the TFP losses due to misallocation. We then investigate how the presence of financial constraints affects the output and TFP gains from trade liberalization. We find that lowering trade barriers has a stronger positive effect in less financially developed economies. The higher profits that result from trade liberalizations allow firms to accumulate assets and relax their credit constraint, which is particularly valuable in economies where firms are severely constrained. |
| Keywords: | Economía, Emprendimiento, Investigación socioeconómica, Productividad, Sector productivo, Comercio, Finanzas, |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:dbl:dblwop:1106&r=int |
| By: | Charlie Joyez (Université Paris-Dauphine, PSL Research University,IRD, LEDa, DIAL) |
| Abstract: | The traditional Grossman-Hart-Moore (GHM) property right theory of the ?rm does not consider shared ownership as an optimal solution because of the incentive loss it would be responsible for. This paper examines the rationale for speci?c cases of shared ownership: International Joint Ventures (JVs), with heterogeneous ?rms in various host-countries. Speci?cally, we built a theoretical model that extends the Antr`as & Helpman (2008) integration dilemma under partially incomplete contracts to international joint-ventures. These turn to be the optimal ownership structure in two different cases. Speci?cally, for medium-productive ?rms when the most productive would opt for full integration. More interestingly JVs turns to be the optimal ownership choice, even for most productive ?rms in countries with lower quality of contractual institutions. The model insists then on the interaction between ?rm-level and country-level parameters, with higher productivity giving increasing access to higher ownership share in countries with stronger contractual enforceability. |
| Keywords: | Property Right Theory; Asset Ownership; Shared Ownership; International Joint Ventures. |
| JEL: | D23 L24 |
| Date: | 2017–10 |
| URL: | http://d.repec.org/n?u=RePEc:dia:wpaper:dt201709&r=int |
| By: | Onelie B. Nkuna |
| Abstract: | This paper looks at intra-SADC (Southern African Development Community) Foreign Direct Investment (FDI) and focuses on Mauritius and South Africa’s outward FDI. Data from 1999 to 2010 are collated and qualitative analyses conducted. The study reveals that Mauritius’ outward FDI was mainly in the service sector and largely went to Madagascar, Seychelles and Mozambique, which were also the country’s main trading partners, except for Botswana. Meanwhile, South African investments were mainly in Mauritius, Tanzania and Mozambique, while the country’s main trading partners were Botswana, Zambia, Zimbabwe, Swaziland and Angola. The study also found the following to be potential drivers of Mauritian and South African outward investments, and hence intra-SADC FDI flows: geographical proximity, market access, liberalized markets, stable macroeconomic and political environment, natural resource availability, and policy and institutional framework. Graphical analyses and simple correlations reveal that trade and FDI are positively correlated for Mauritius and South Africa’s outward investment, suggestive of a complementarity relationship. |
| Date: | 2017–10 |
| URL: | http://d.repec.org/n?u=RePEc:aer:rpaper:rp_341&r=int |
| By: | Roa Mónica; Molina Danielken |
| Abstract: | In this paper we use manufacturing data on Colombian exports and bank financing to estimate the credit elasticity of exports. The data allows us to construct a supply side instrumental variable for the credit of manufacturers that we use to address a possible reverse causality problem. We find that access to credit produces a significant increase in the revenue of exporters, explained by the positive effect of credit on the trade margins. Likewise, we find that across manufacturers, the impact of credit on the margins varies by firm size. Medium-sized manufacturers use credit to increase their market reach, market penetration and product mix. The largest manufacturers use credit to increase their market reach, while the smallest manufacturers use it to expand their product mix. |
| Keywords: | International Trade;Export Margins and Bank Financing |
| JEL: | F14 G21 |
| Date: | 2017–10 |
| URL: | http://d.repec.org/n?u=RePEc:bdm:wpaper:2017-19&r=int |
| By: | Thomas Sampson |
| Abstract: | This paper reviews the literature on the likely economic consequences of Brexit and considers the lessons of the Brexit vote for the future of European and global integration. Brexit will make the United Kingdom poorer because it will lead to new barriers to trade and migration between the United Kingdom and the European Union. Plausible estimates put the costs to the United Kingdom at between 1 and 10 percent of income per capita. Other European Union countries will also suffer economically, but their estimated losses are much smaller. Support for Brexit came from a coalition of less-educated, older, less economically successful and more socially conservative voters. Why these voters rejected the European Union is poorly understood, but will play an important role in determining whether Brexit proves to be merely a diversion on the path to greater international integration or a sign that globalization has reached its limits. |
| Keywords: | Brexit, European Union, trade agreements, quantitative trade models, globalization |
| JEL: | F10 F50 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6668&r=int |
| By: | Mohammad Reza Farzanegan; Mai Hassan |
| Abstract: | This study examines the economic globalization and the shadow economy nexus in Egypt. Using time series data from 1976 to 2013, the impulse response analysis shows that the response of the shadow economy in Egypt to positive shocks in economic globalization is negative and statistically significant for the first three years following the shock. This finding is obtained by controlling for several intermediary channels in globalization-shadow economy nexus such as education, government spending, industrial production, and labor force participation. Our results show the importance of promoting economic globalization by reducing the costs of doing business and trade in dealing with sizable shadow economy in Egypt. |
| Keywords: | shadow economy, globalization, VAR model, impulse responses, Egypt |
| JEL: | C53 F15 F40 O53 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6424&r=int |
| By: | Ourens, Guzmán |
| Abstract: | This paper documents that growth in the extensive margin is on average lower in the agricultural sector than in other activities. We introduce this new fact into a simple model of trade to show its relevance for regions specialized in the lagging sector. Diversity-loving consumers endogenously reduce the share of their expenditure devoted to that sector. The region specialized in it receives a decreasing share of world income, which results in diverging income and welfare trajectories with respect to the rest of the world. Appropriating a decreasing share of world value pushes downward the relative wage of the agricultural re- gion and lowers the price of its exports relative to that of its imports, resulting in terms of trade deterioration. This result, supported by empirical evidence, separates our theoretical results from those obtained in a similar model of un- even output growth between sectors. We present empirical evidence for the main testable results of the model. Our model is the first replicating these facts with- out the need of heterogeneous consumers or products, nor resorting to political or institutional explanations. |
| Keywords: | diversification, agricultural economies, growth, welfare |
| Date: | 2017–11 |
| URL: | http://d.repec.org/n?u=RePEc:cpm:docweb:1704&r=int |
| By: | Eiji Fujii |
| Abstract: | An empirical measure of trade openness is defined as the ratio of total trade to GDP, and represents a convenient variable routinely used for cross-country studies on a variety of issues. However, the effects that the crude measure captures remain ambiguous, making it difficult to interpret the empirical results. Drawing on several strands of the literature, this study examines the informational content of the trade openness measure using intranational and international data. We find that, even for fully integrated economies within a country, trade openness is approximately half as variable as it is for segmented diverse countries around the world. The information it conveys is better characterized as the extent of the economic remoteness and idiosyncratic distribution of sectoral production. The cross-country variation of trade openness derives more from the variability in GDP than trade. |
| Keywords: | trade openness, specialization, gravity model, market integration, price deviations, remoteness |
| JEL: | F40 F14 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6656&r=int |
| By: | Nurhaliq, Puteri; Masih, Mansur |
| Abstract: | Many previous empirical studies focused mainly on the effect of export expansion while ignoring the potential contribution of import substitution in developing economic growth especially for the case of emerging countries. This paper attempts to investigate the relationship between trade and economic growth emphasising the role of import and export in Malaysia over the period 1970 to 2014. The study treats the impact of export and import separately to allow the possibility of asym-metric influences on economic growth by adopting recent time series modelling. The study used Granger Causality test and Variance Decomposition (VDC) method to analyse the influences of trade improvement on growth development. This is important in providing evidence whether growth is driven mainly by trade activities or whether there is a reciprocal impact between trade and growth. The result confirms the existence of bidirectional long run relationship between growth and export and between growth and import, suggesting that singular focus on export from previous study tends to be misleading. This is crucial from the policy point of view in developing strategies to enhance growth. If export drives the economic growth, policy should be directed more towards export orientation and likewise for import. |
| Keywords: | Export orientation, import substitution, Malaysia |
| JEL: | C22 C58 F13 |
| Date: | 2016–06–15 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:82113&r=int |
| By: | Guillou, Sarah; Treibich, Tania (General Economics 2 (Macro)) |
| Abstract: | The objective of this paper is to show that part of the fixed cost of firms' trade expansion is due to the acquisition of new internal capabilities (e.g. technology, production processes or skills), which imply a costly change in the firm's internal labor organisation. We investigate the relationship between a firm's structure of labor, in terms of relative number of managers, and the scope of its export portfolio, in terms of product-destination varieties. The empirical analysis is based on a matched employer-employee dataset covering the population of French firms from tradable sectors over the period 2009-2014. Our analysis suggests that market expansion, and in particular export diversification, is associated with a change in the firm's workforce composition, namely an increase in the number of managerial layers and in the ratio of managers. We show how these results are consistent with a simple model where the complexity of a firm's operations increases in the number of product-destination couples exported, and where managers' role is to address the unsolved problems arising from such increased complexity of operations. |
| JEL: | F16 E24 C14 D22 |
| Date: | 2017–10–31 |
| URL: | http://d.repec.org/n?u=RePEc:unm:umagsb:2017026&r=int |
| By: | Sarah Guillou (OFCE-Sciences PO Paris, France); Tania Treibich (Maastricht University and Sant'Anna school of Advanced Studies) |
| Abstract: | The objective of this paper is to show that part of the fixed cost of firms’ trade expansion is due to the acquisition of new internal capabilities (e.g. technology, production processes or skills), which imply a costly change in the firm’s internal labor organisation. We investigate the relationship between a firm’s structure of labor, in terms of relative number of managers, and the scope of its export portfolio, in terms of product-destination varieties. The empirical analysis is based on a matched employer- employee dataset covering the population of French firms from tradable sectors over theperiod 2009-2014. Our analysis suggests that market expansion, and in particular export diversification, is associated with a change in the firm’s workforce composition, namely an increase in the number of managerial layers and in the ratio of managers. We show how these results are consistent with a simple model where the complexity of a firm’s operations increases in the number of product-destination couples exported, and where managers’ role is to address the unsolved problems arising from such increased complexity of operations. |
| Keywords: | Export diversification, Managers, Occupations, Employer-Employee data. |
| JEL: | F16 E24 C14 D22 |
| Date: | 2017–10–09 |
| URL: | http://d.repec.org/n?u=RePEc:fce:doctra:1722&r=int |
| By: | Scott L. Baier; Amanda Kerr; Yoto V. Yotov |
| Abstract: | We review and interpret the main theoretical developments in the gravity literature from its very early, a-theoretical applications to the latest structural contributions. We also discuss challenges and implement methods to estimate empirical gravity equations. We finish with a presentation and examples of numerical simulations with the structural gravity model. Throughout the analysis we attempt to emphasize the links and importance of transportation costs for the trade literature and we outline avenues where we believe interdisciplinary contributions between the international trade and transportation economics fields will be most valuable. |
| Keywords: | structural gravity, estimation, simulation, transportation costs |
| JEL: | F10 F43 O40 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6357&r=int |
| By: | Ben Shepherd (Developing Trade Consultants) |
| Abstract: | Development of manufacturing activity will be a key component of Ethiopia’s development program over the next decade, and probably well beyond. As the country remains relatively capital scarce, the focus is necessarily on light manufacturing, which covers sectors or activities that are relatively labor intensive. Although Ethiopia is the second most populous country in Africa, its low level of per capita income means that the domestic market remains very small by international standards. This factor is one important reason that GVC participation is attractive. GVCs are focused on global markets, and so offer the potential for serving much larger world markets for intermediates or final consumption goods. Although there is clearly scope for higher incomes within Ethiopia to support and grow domestic demand, the opportunities offered by the world market are much greater, which makes increased GVC participation a potentially attractive option for Ethiopia, building on the experiences of countries like China and Vietnam. |
| Date: | 2017–10 |
| URL: | http://d.repec.org/n?u=RePEc:etd:wpaper:018&r=int |
| By: | Koen Breemersch (University of Leuven); Jože P. Damijan (University of Ljubljana); Jozef Konings (Nazarbayev University) |
| Abstract: | This paper explores the effects of offshoring, technology and Chinese import competition on labor market polarization in European countries. We find that polarization occurs mostly as a result of polarization within individual industries, while the reallocation of employment away from less polarized industries towards more highly polarized industries also contributed to a lesser extent. In manufacturing, within-industry polarization is mostly associated with technological change, but we also find some tentative evidence that Chinese import competition contributed as well. In other private industries outside of manufacturing, technological change and offshoring are the most relevant forces affecting within-industry polarization. The process of between-industry polarization is driven by widespread deindustrialization in developed countries. We find that Chinese import competition contributed to the decline of employment in the less polarized manufacturing industries. Differences in labor market institutions only explain a limited amount of cross-country variation in the association of polarization and the three forces we consider. |
| JEL: | E24 F14 F16 J23 J31 L60 O47 |
| Date: | 2017–10–31 |
| URL: | http://d.repec.org/n?u=RePEc:oec:elsaab:197-en&r=int |
| By: | Ronald B. Davies; Zuzanna Studnicka |
| Abstract: | The UK’s decision to leave the EU is surrounded by several studies simulating its potential effects. Alternatively, we examine expectations embodied in stock returns using a two-part estimation process. While most firms’ prices fell, there was considerable heterogeneity in their relative changes. We show that this heterogeneity can be explained by the firm’s global value chain, with heavily European firms doing relatively worse. For firms with few imported intermediates, this was partially offset by a greater Sterling depreciation. These changes were primarily in the first two days and highly persistent. Understanding these movements gives a better understanding Brexit’s potential effects. |
| Keywords: | global value chain, event study, Brexit |
| JEL: | F15 F23 G14 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6478&r=int |
| By: | Gustavo Canavire-Bacarreza; Luis Castro Peñarrieta |
| Abstract: | This paper analyzes the effect of stronger Intellectual Property Rights (IPR) on the entry modes chosen by MNEs in the Chilean market. MNEs can choose between exporting, introducing Foreign Direct Investment (FDI) and licensing to a domestic firm in Chile. We use plant-level data for the 2001–2007 and exploite the exogenous reform of IPR in Chile in 2005 to examine the effect of the change in IPR on the overall foreign presence in Chile, controlling for the activities of industries where high levels of technology transfer and imitation are important factors. The main results show that stronger IPR change the mode of entry chosen by MNEs. In this case, FDI is replaced by licensing. This is explained by Chile’s high absorptive capacity during this period. Moreover, we test whether this effect differs across high-tech and low-tech industries and conclude that the displacement of FDI is less severe in high-tech industries. |
| Keywords: | Technology Licensing, Productivity, Spillovers, Chile |
| JEL: | O34 O44 C5 K2 |
| Date: | 2017–10–30 |
| URL: | http://d.repec.org/n?u=RePEc:col:000122:015808&r=int |
| By: | Lurong Chen |
| Abstract: | Cross-border e-commerce has been a major development trend of international trade and globalization. In the next 5-10 years, the top three fastest-growing markets in the world-India, Indonesia, and Malaysia-will all come from Asia. Connectivity is the cornerstone of e-commerce development. E-commerce supporting connectivity aims to ease free information flow, logistics, free cash flow, and seamless links between the virtual and physical parts of e-commerce network. Accordingly, policy efforts include: increasing the supply of public goods to improve connectivity infrastructure in both physical world and cyberspace; establishing rules and regulations to ensure dynamics and competition of online marketplace; improving connectivity-derived services to generate more value added; prioritizing smartphone economy and Internet financial innovation, and collaboration in the region-wide E-commerce supporting environment. |
| Keywords: | digital economy, e-commerce, connectivity, developing Asia |
| Date: | 2017–11 |
| URL: | http://d.repec.org/n?u=RePEc:era:wpaper:dp-2017-11&r=int |
| By: | Klau, Arne |
| Abstract: | Many developing countries still levy tariffs on mosquito nets, thereby discouraging their use and contributing to the spread of diseases such as malaria and dengue. Focusing on sub-Saharan Africa, the paper shows to which extent such tariffs are in place and, based on existing elasticity figures, calculates the cost of this policy. It is estimated that tariffs on insecticide-treated bed nets have reduced demand by some US$ 7 million between 2011 and 2015, equivalent to around 3.1 million bed nets. This has contributed to some 2.9 million malaria cases and over 5,000 fatalities during this period. The paper discusses various policy implications of this finding, including whether tariff concessions (e.g. for local relief organizations) are more effective than a general zero-tariff policy. It is argued that concessions give rise to a process that is bureaucratic and only partially compensatory for the cost incurred. The introduction of a new six-digit tariff line specifically for mosquito nets with HS 2017 will facilitate a zero-tariff policy on bed nets. By the same token, policy makers should address remaining non-tariff barriers that affect the importation of anti-malarial products. |
| Keywords: | malaria,tariffs,public health,trade policy,development |
| JEL: | I15 I18 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:wtowps:ersd201714&r=int |
| By: | von Hagen, Dominik; Pönnighaus, Fabian Nicolas |
| Abstract: | We show that corporate taxation systems regarding foreign dividends and capital gains across 49 countries differ in many aspects, contradicting the requirements for capital ownership neutrality and indicating that ownership patterns are distorted. Consequently, a national tax policy maker may ask which taxation system improves the position of its multinational entreprises in bidding for foreign targets. To address this question, we develop a theoretical model on the impact of foreign dividends and capital gains taxation on cross-border M&A prices from the acquirer's perspective and theoretically compare different taxation systems. In a next step, we empirically validate our model in a regression analysis on a large cross-border M&A data set. Based on this analysis, we find that foreign dividends taxation rather than capital gains taxation impacts M&A prices. Finally, we provide tax policy suggestions. |
| Keywords: | International taxation,Repatriation taxes,Capital gains taxes,Lock-in effect,Multinational entities,Cross-border M&As |
| JEL: | F23 G34 H25 H26 H32 H73 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:17040&r=int |
| By: | Sharif M. Hossain (National Graduate Institute for Policy Studies, Tokyo, Japan / Department of Economics, Jagannath University, Dhaka, Bangladesh); Nobuhiro Hosoe (National Graduate Institute for Policy Studies, Tokyo, Japan) |
| Abstract: | Bangladesh, being a labor-abundant country, benefits from foreign direct investment (FDI) as it is considered as a supplement to domestic investment for this capital-scarce economy. We examine how the benefits of increased FDI in the ready-made garments (RMG) sector are transmitted and shared among households with different characteristics, and the appropriate government policies to mitigate adverse distributional problems, if any, created from the increased FDI. To address these issues, we develop a computable general equilibrium model for Bangladesh that describes competition between local firms and multinational enterprises (MNEs) in the RMG sector and the distributional impacts of FDI among households. Our simulation results demonstrate that an increase in FDI promotes both output and exports in the RMG sector. However, because of the competition between MNEs and domestic firms, the output of domestic firms would fall slightly. Scrutinizing the welfare effects among household groups, we find that the benefits of FDI-induced growth would affect all household groups unevenly. We also demonstrate that the benefits could be shared equitably among household groups with skill development programs targeted at the adversely affected household groups. |
| Date: | 2017–10 |
| URL: | http://d.repec.org/n?u=RePEc:ngi:dpaper:17-10&r=int |
| By: | Cigdem Börke Tunali; Jan Fidrmuc; Nauro F. Campos |
| Abstract: | The vast literature on the effects of immigration on wages and employment is plagued by likely endogeneity and aggregation biases. Ours is among the first papers to address both of these issues by means of causality analysis and by accounting for human capital endowments. Our analysis confirms the previous finding of limited effect of immigration on unemployment and wages in aggregate analysis. We do find, however, evidence of distributional effects when accounting for human capital of non-migrants. |
| Keywords: | immigration, unemployment, wages, UK, European Union |
| JEL: | F22 J21 J61 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6452&r=int |
| By: | Rikard Forslid; Sten Nyberg |
| 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, trade, sequential game |
| JEL: | F15 F22 F55 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6718&r=int |