nep-int New Economics Papers
on International Trade
Issue of 2018‒02‒19
39 papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. Undoing Europe in a New Quantitative Trade Model By Gabriel Felbermayr; Jasmin Katrin Gröschl; Inga Heiland
  2. The Interconnections Between Services and Goods Trade at the Firm-Level By Andrea Ariu; Holger Breinlich; Gregory Corcos; Giordano Mion
  3. Implications of Trade policies in segmented factor markets – A general equilibrium approach By Soumyatanu Mukherjee; Shreya Banerjee
  4. What will Brexit mean for the British and euro-area economies? A model-based assessment of trade regimes By Massimiliano Pisani; Filippo Vergara Caffarelli
  5. Asymmetric Cultural Proximity and Greenfield FDI By Matteo Fiorini; Giorgia Giovannetti; Mauro Lanati; Filippo Santi
  6. Tariffs and Non-Tariff Measures: Substitutes or Complements. A Cross Country Analysis By Ronen, Eyal
  7. Mind the (current account) gap By Joy, Mark; Lisack, Noemie; Lloyd, Simon; Reinhardt, Dennis; Sajedi, Rana; Whitaker, Simon
  8. Financial constraints, institutions, and foreign ownership By Alquist, Ron; Berman, Nicolas; Mukherjee, Rahul; Tesar, Linda
  9. Goods and factor market integration: a quantitative assessment of the EU enlargement By Caliendo, Lorenzo; Opromolla, Luca David; Parro, Fernando; Sforza, Alessandro
  10. Does Yuan Appreciation Weaken the Increase in Exporters due to Trade Liberalization? Evidence from Chinese Firm-Product Data By Zhe Chen; Yoshinori Kurokawa
  11. Quantifying the Trade Effects of NTMs: A Review of the Empirical Literature By Ronen, Eyal
  12. Estimating the Trade and Welfare Effects of Brexit: A Panel Data Structural Gravity Model By Harald Oberhofer; Michael Pfaffermayr
  13. N-S Trade with Weak Institutions By James E. Anderson
  14. The determinants of German exports: An analysis of intra- and extra-EMU trade By Heinze, Henriette
  15. How Necessary? A Comparison of Legal and Economic Assessments GATT Dispute Settlements under: Article XX(b), TBT 2.2 and SPS 5.6 By Ronen, Eyal; Dawar, Kamala
  16. Global trade finance, trade collapse and trade slowdown: a Granger causality analysis By Đào, T.K.; van Bergeijk, P.A.G.
  17. Country of origin effect and perception of Romanian consumers By Clipa, Cătălin-Ioan; Danilet, Magdalena; Clipa, Anca-Maria
  18. Non-discriminatory Trade Policies in Structural Gravity Models Evidence from Monte Carlo Simulations By Richard Sellner
  19. Aid in Modulating the Impact of Terrorism on FDI: No Positive Thresholds, No Policy By Simplice Asongu; Uchenna R. Efobi; Ibukun Beecroft
  20. FDI, Global Value Chains, and Local Sourcing in Developing Countries By Vito Amendolagine; Andrea Presbitero; Roberta Rabellotti; Marco Sanfilippo; Adnan Seric
  21. Crucial Materials? How Export Restrictions Upstream Boost Manufacturing Exports Downstream By Eva Wichmann
  22. A missing link in the analysis of global value chains: cross-border flows of intangible assets, taxation and related measurement implications By Thomas S. Neubig; Sacha Wunsch-Vincent
  23. The Anatomy of a Trade Collapse: The UK, 1929-33 By Alan de Bromhead; Alan Fernihough; Markus Lampe; Kevin Hjortshøj O'Rourke
  24. U.S. immigration reform and the migration dynamics of Mexican males By Altangerel, Khulan; van Ours, Jan
  25. Labor Heterogeneity and the Pattern of Trade By Cebreros Zurita Carlos Alfonso
  26. The Euro's effect on trade: An analysis of “old" and “new" EMU members. By Isaac Mensah
  27. Current account imbalances: Possibilities for Trade Policy Action under the Auspices of the WTO – a German Perspective By Alm, Bastian; Weins, Sebastian
  28. Globalization and Income Inequality Revisited By Florian Dorn; Clemens Fuest; Niklas Potrafke
  29. Export market shares – a trivial concept? By Klaus Vondra1
  30. Optimal export policy with upstream price competition By Tomomichi Mizuno; Kazuhiro Takauchi
  31. How will Brexit Affect Tax Competition and Tax Harmonization? The Role of Discriminatory Taxation By Clemens Fuest; Samina Sultan
  32. Immigration and Electoral Support for the Far Left and the Far Right By Anthony Edo; Yvonne Giesing; Jonathan Öztunc; Panu Poutvaara
  33. China’s Impacts on SSA through the Lens of Growth and Exports By Yibin Mu; Chu Wang; Dong Frank Wu
  34. Regionalism in Latin America. Navigating in the Fog. By van Klaveren, Alberto
  35. Intangible assets and transactions within multinational enterprises: implications for national economic accounts By Dylan G. Rassier
  36. Intangible assets and value capture in global value chains: the smartphone industry By Jason Dedrick; Kenneth L. Kraemer
  37. What induces firms to license foreign technologies? International survey evidence By Dohse, Dirk; Goel, Rajeev K.; Nelson, Michael A.
  38. Measuring the income to intangibles in goods production: a global value chain approach By Wen Chen; Reitze Gouma; Bart Los; Marcel P. Timmer
  39. International Agreements, Economic Sovereignty and Exit By Martin Richardson; Frank Stähler

  1. By: Gabriel Felbermayr; Jasmin Katrin Gröschl; Inga Heiland
    Abstract: We employ theory-grounded sectoral gravity models to estimate the effects of various steps of European product market integration on trade flows. We embed these estimates into a static Ricardian quantitative trade model featuring 43 countries and 50 goods and services sectors. Paying attention to the role of non-tariff trade barriers and of intra- and international value added networks, we simulate lower bounds to the trade, output, and welfare effects of different disintegration scenarios. Bootstrapping standard errors, we find statistically significant welfare losses of up to 23% of the 2014 baseline, but we also document a strong degree of heterogeneity across EU insiders. Effects on EU outsiders are often insignificant. The welfare effects from the Single Market dominate quantitatively, but the gains from Schengen and Eurozone membership are substantial for many countries as well. Percentage losses are more pronounced for more central EU members, while larger and richer countries tend to lose less. The effects of income transfers reveal some surprising patterns driven by terms-of-trade adjustments.
    Keywords: Structural gravity, European trade integration, general equilibrium, quantitative trade models.
    JEL: F13 F14 F17
    Date: 2018
  2. By: Andrea Ariu (University of Geneva, Switzerland; McDonough Business School, Georgetown University, USA and CRENOS, Italy); Holger Breinlich (School of Economics, University of Nottingham, UK; CEP, UK; CEPR, UK); Gregory Corcos (CREST; Economics Department, Ecole polytechnique); Giordano Mion (Department of Economics, University of Sussex, UK; CEP, UK; CEPR, UK and CESifo, Germany)
    Abstract: In this paper we study how international trade in goods and services interact at the firm level. Using a rich dataset on Belgian firms during the period 1995-2005, we show that: i) firms are much more likely to source services and goods inputs from the same origin country rather than from different ones; ii) increases in barriers to imports of goods reduce firm-level imports of services from the same market, and conversely. We build upon a discrete-choice model of goods and services input sourcing that can reproduce these facts to design our econometric strategy and use the estimated model for counterfactual analysis. In particular, we look at the quantitative impact of reductions in goods and services barriers between the US and the EU. Our findings have important implications for the design of trade policy. They suggest that a liberalization of service trade can have quite direct and sizable effects on goods trade and vice-versa, and that jointly liberalizing goods and services trade brings about substantial complementarities.
    Keywords: Trade in Services; Trade in Goods; Complementarity; Firm-level Analysis;Discrete Choice Models
    JEL: F10 F13 F14 L60 L80
    Date: 2017–07–16
  3. By: Soumyatanu Mukherjee; Shreya Banerjee
    Abstract: This paper, using a three sector full-employment general equilibrium model with segmented domestic factor markets, explains how and under what conditions a policy of import restriction using tariffs can be beneficial for a small, open economy compared to the import liberalisation policy, contrary to the conventional results. Also, inflows of foreign-owned capital to an export sector within the economy’s export processing zone coupled with labour-augmenting type technology transfer, with protected import-competing sector, can improve national income, even without any distortion in the formal sector labour market. This simple application of competitive trade models establishes the fact that trade restrictions can promote growth and attract FDI for the developing countries, even when foreign capital enters one specific export sector of the economy.
    Keywords: tariff; foreign capital; segmented factor markets; general equilibrium.
    Date: 2018
  4. By: Massimiliano Pisani (Bank of Italy); Filippo Vergara Caffarelli (Bank of Italy)
    Abstract: This paper evaluates the macroeconomic effects on the UK and the euro area of an increase in trade tariffs associated with Brexit, by simulating a dynamic general equilibrium model of the UK, the euro area, and the rest of the world (RW). Our results are as follows: first, the imposition of tariffs reduces UK exports and economic activity by a non-negligible amount; second, the macroeconomic costs for the UK are reduced if it decides unilaterally not to increase tariffs on imports from the euro area and to reduce those on imports from the RW; third, the macroeconomic costs are particularly high if the lower UK trade openness resulting from the imposition of tariffs reduces the UK’s total factor productivity; and fourth, Brexit has negative, but quite limited, effects on euro-area economic activity.
    Keywords: Brexit, DSGE models, tariffs
    JEL: C54 F13 F15
    Date: 2018–01
  5. By: Matteo Fiorini (RSCAS (European University Institute)); Giorgia Giovannetti (University of Florence and RSCAS (European University Institute)); Mauro Lanati (RSCAS (European University Institute)); Filippo Santi (University of Florence)
    Abstract: This paper investigates the role of asymmetric cultural proximity (CP) on greenfield foreign direct investment (FDI). We build a conceptual framework that explicitly accounts for cultural attractiveness as an asymmetric dimension within a broad notion of CP. We revisit the existing supply/origin-side theories of bilateral FDI to derive a gravity equation suited for testing the impact of (i) the attractiveness of destination's culture for citizens in the origin country, and (ii) the attractiveness of origin's culture for individuals in the destination economy. While the role of the former direction of CP is well understood in the literature, we propose new mechanisms to rationalize that of the latter. We use exports and imports of cultural goods to proxy for the two directions of asymmetric and time-dependent CP in the same empirical specification. The econometric analysis confirms a positive role of asymmetric CP as a determinant of Greenfield FDI. Moreover, it suggests a stronger investment effect of the origin's culture attractiveness for the destination country. Finally, it provides support for the mechanisms proposed in the theoretical discussion.
    Keywords: Cultural proximity; Greenfield FDI; Cultural trade; Gravity model
    JEL: F14 F21 F23 Z10
    Date: 2018–01–29
  6. By: Ronen, Eyal
    Abstract: Alongside the global tariff liberalization, a growing body of evidence demonstrates the rise in the use of non-tariff measures (NTMs), which suggests a substitution effect between these two import policy instruments. Yet, detailed economic data reveals that in countries with lower tariff rates (developed countries), the use of NTMs is significantly lower compared to developing countries, which implies a possible complementary effect between tariffs and NTMs across nations. Using a dataset of Kee, Nicita and Olarreaga (2009) on ad valorem tariff equivalents of NTMs, at a very disaggregated product level, this paper explores the determinants of NTMs and their substitutability/complementarity relations with tariff barriers. While exploiting the country variation, it demonstrates the decreasing trend of substitutability between the two import policy instruments with the rise in economic development. In particular, a significant complementarity correlation exists between the two trade measures among the wealthiest nations, implying a stronger commitment to freer trade.
    Keywords: Non-Tariff Measures, Technical Barriers to Trade, WTO
    JEL: F13 F14 F53
    Date: 2017–02
  7. By: Joy, Mark (Bank of England); Lisack, Noemie (Bank of England); Lloyd, Simon (Bank of England); Reinhardt, Dennis (Bank of England); Sajedi, Rana (Bank of England); Whitaker, Simon (Bank of England)
    Abstract: There is substantial evidence that openness to trade raises economic growth and boosts living standards. But trade liberalisation has been asymmetric, focused on goods rather than services trade. The decline in goods trade barriers may have favoured countries specialising in goods, like China, Germany and Japan, allowing them to increase exports relative to imports, and contributing to their persistent current account surpluses. By contrast, countries like the United States and the United Kingdom, who specialise in the services sector where trade is more restricted, have been running persistent deficits. This pattern of persistent surpluses and deficits in these key countries has proven hard to explain in the International Monetary Fund’s External Balance Assessment methodology. This paper suggests that asymmetric trade liberalisation is one overlooked explanation. We demonstrate how realistic additions to textbook economic models allow trade policy to have persistent effects on current account imbalances. We also find empirical support for significant quantitative effects. These results suggest that liberalising services trade, levelling up to the liberalisation seen in goods trade, could reduce excess global imbalances by around 40%. Moreover it could contribute to higher and more inclusive global growth.
    Keywords: Comparative advantage; Current account; Global imbalances; Services trade policy; Trade liberalisation
    JEL: F13 F14 F15 F32
    Date: 2018–01–24
  8. By: Alquist, Ron; Berman, Nicolas; Mukherjee, Rahul; Tesar, Linda
    Abstract: This paper examines how external finance dependence, financial development, and institutions influence brownfield foreign direct investment (FDI). We develop a model of cross-border acquisitions in which the foreign acquirer's choice of ownership structure reflects a key trade-off between easing target credit constraints and the costs of operating in an environment of low institutional quality. Using a dataset of cross-border acquisitions in emerging markets, we find evidence supporting the central predictions of the model that: (i) a foreign firm is more likely to fully acquire a target firm in sectors that are more reliant on external finance, or in countries with lower financial development/higher institutional quality; (ii) the level of foreign ownership in partially foreign-owned firms is insensitive to institutional factors and depends weakly on financial factors; (iii) the share of foreign acquisitions in all acquisition activity is also higher in external finance dependent sectors, or financially underdeveloped/high institutional quality countries; and (iv) sectoral external finance dependence accentuates the effect of country-level financial development and institutional quality. The theory and empirical evidence provide insight into the interaction between the financial, institutional and technological determinants of North-South brownfield FDI.
    Keywords: Foreign direct investment; foreign ownership; cross-border mergers and acquisitions; financial development; external finance dependence; institutional quality; emerging markets.
    JEL: F21 F23 G34 L24 L60
    Date: 2018–01
  9. By: Caliendo, Lorenzo; Opromolla, Luca David; Parro, Fernando; Sforza, Alessandro
    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 equi- librium model with trade in goods and labor mobility across countries to study and quantify the economic effects of trade and labor market integration. In our model trade is costly and features households of different skills and nationalities facing costly forward-looking relocation decisions. We use the EU Labour Force Survey to construct migration flows by skill and na- tionality across 17 countries for the period 2002-2007. We then exploit the timing variation of the 2004 EU enlargement to estimate the elasticity of migration flows to labor mobility costs, and to identify the change in labor mobility costs associated to the actual change in policy. We apply our model and use these estimates, as well as the observed changes in tariffs, to quantify the effects from the EU enlargement. We find that new member state countries are the largest winners from the EU enlargement, and in particular unskilled labor. We find smaller welfare gains for EU-15 countries. However, in the absence of changes to trade policy, the EU-15 would have been worse off after the enlargement. We study even further the interaction effects between trade and migration policies and the role of different mechanisms in shaping our results. Our results highlight the importance of trade for the quantification of the welfare and migration effects from labor market integration
    Keywords: international trade; factor mobility; market integration; EU enlargement; welfare
    JEL: E24 F13 F16 F22 J61 R13
    Date: 2017–08–01
  10. By: Zhe Chen; Yoshinori Kurokawa
    Abstract: Using Chinese firm-product data from 2000 to 2006, this paper empirically tests whether the appreciation (depreciation) of China's yuan weakens (strengthens) the effect of trade liberalization on the extensive margin of China's exports to 170 countries. Based on regressions, we have four main empirical findings. First, reductions in tariffs, charged by China's trade partners, increased China's exporter numbers and export value/quantity per exporter at the product level, whereas the appreciation (depreciation) of China's yuan caused a decrease (increase)--the effect of exchange rates is larger than that of tariffs in all cases. Second, reductions in tariffs, charged by trade partners, increased the entry and exit of China's exporters, and yuan appreciation (depreciation) decreased (increased) them. Third, the effects of tariffs and exchange rates are significantly different between processing and ordinary trade firms. Fourth, the significance of the effects is greater if the export destinations are non-OECD countries.
    Date: 2018–02
  11. By: Ronen, Eyal
    Abstract: In recent years, the imposition of Non-Tariff Measures (NTMs) has increased rapidly both in quantity and importance. This development, with its considerable economic impact, particularly within the area of global trade, has prompted numerous scholars to explore the direction and magnitude of the trade effects of NTMs. Moreover, increased efforts are being placed on further exploring the determinants behind the use of NTMs, as well as their policy implications. The current paper aims to survey the empirical trade literature, in order to uncover the available responses to major questions regarding the trade effects of NTMs, principally of TBT and SPS measures. Among the questions posed are: (1) How do specific types of NTMs affect imports and exports? (2) Are developing countries more sensitive to NTMs? (3) Are small-medium sized firms more adversely affected by NTMs? (4) How are particular sectors/products affected by NTMs? And, (5) Do Harmonization and Mutual Recognition necessarily impact trade positively?
    Keywords: Non-Tariff Measures, Technical Barriers to Trade, Sanitary and Phytosanitary
    JEL: F13 F14 Q17
    Date: 2017–09
  12. By: Harald Oberhofer (Department of Economics, Vienna University of Economics and Business; Austrian Institute of Economic Research); Michael Pfaffermayr (University of Innsbruck; Austrian Institute of Economic Research)
    Abstract: This paper proposes a new panel data structural gravity approach for estimating the trade and welfare effects of Brexit. The suggested Constrained Poisson Pseudo Maximum Likelihood Estimator exhibits some useful properties for trade policy analysis and allows to obtain estimates and confidence intervals which are consistent with structural trade theory. Assuming different counterfactual post-Brexit scenarios, our main findings suggest that UKs (EUs) exports of goods to the EU (UK) are likely to decline within a range between 7.2% and 45.7% (5.9% and 38.2%) six years after the Brexit has taken place. For the UK, the negative trade effects are only partially offset by an increase in domestic goods trade and trade with third countries, inducing a decline in UKs real income between 1.4% and 5.7% under the hard Brexit scenario. The estimated welfare effects for the EU are negligible in magnitude and statistically not different from zero.
    Keywords: Constrained Poisson Pseudo Maximum Likelihood Estimation, Panel Data, International Trade, Structural Gravity Estimation, Trade Policy, Brexit
    JEL: F10 F15 C13 C50
    Date: 2018–01
  13. By: James E. Anderson
    Abstract: States with weak institutions (South) can lose from institutional response to trade with North. A Ricardian model of trade subject to predation characterizes the case. South labor earns equal returns in production and predation. Institutions are needed for security improvement because equilibrium predation is invariant to globalization and productivity rises, contrary to casual intuition. Enforcement reduces predation with terms of trade effects that typically imply opposing North-South interests. Trade also incentivizes institutional regime change to counter or control predation. North para-state institutions gain by promoting corrupt South institutions – Mafias or their state equivalents – over welfarist South states.
    JEL: F13 F16 O17 O19
    Date: 2018–01
  14. By: Heinze, Henriette
    Abstract: Since the early 2000s German exports and net exports have grown persistently, generating huge current account surpluses. These surpluses have added to immense current account imbalances within and outside the European Monetary Union (EMU). Contributing to the economic policy debate of whether it is foreign demand or 'world-beating' price competitiveness driving German exports, the present paper econometrically investigates the determinants of German intra- and extra-EMU exports for the period 1995 to 2014. The longterm relationship between real exports, foreign activity and the real effective exchange rate is estimated using different explanatory variables in an error correction framework. The results show that German exports are very sensitive to foreign activity. Germany has benefited from growth dynamics of trading partners and high income elasticities of demand for German exports indicate strong non-price competitiveness. With regard to exchange rate effects, we do not detect a significant impact of the real exchange rate on intra-EMU exports. However, our estimations provide a stable relationship between the real exchange rate and extra-EMU exports. We calculate that the real exchange rate only explains 12% to 25% of our predicted export growth. Moreover, taking into account quantity and price effects caused by changes in the real exchange rate, we observe contrary effects on real and nominal exports. Thus, for the German economy it cannot simply be concluded that the real exchange rate is the indicator to focus on in explaining German export success.
    Keywords: German exports,current account imbalances,competitiveness,single equation error correction model
    JEL: C22 E12 F14 F41 F43
    Date: 2018
  15. By: Ronen, Eyal; Dawar, Kamala
    Abstract: This paper identifies the legal and economic assessments applied to resolve WTO disputes requiring an assessment of the contribution of the measure to the objective pursued, along with identifying any reasonably available alternatives. It focuses on disputes encompassing an interpretation of GATT Article XX (b), Sanitary and PhytoSanitary Agreement (SPS) Article 5.6 and the Technical Barriers to Trade (TBT) Agreement Article 2.2. This narrow focus is because the WTO DSB has opined that there are no significant differences between the tests developed under Art. XX(b) of the GATT 1994 and Art. 5.6 of the SPS Agreement, nor that any aspect of the Art. XX(b) jurisprudence relating to the interpretation of the term "necessary" would be inapplicable to Art. 2.2 of the TBT Agreement. This provides an opportunity to compare the legal and economic assessments applied in disputes falling under these provisions. This paper identifies no significant differences between the legal tests relating to the interpretation of the term "necessary". A WTO Panel is under no obligation to quantify the measure's contribution to the objective pursued and 'a risk may be evaluated either in quantitative or qualitative terms'. However, the same cannot be said for the economic assessments determining whether the necessity of the contribution of the contested measure. After setting out the legal tests, the paper identifies those economic assessments undertaken to resolve disputes involving these three different GATT/WTO provisions. The paper finds that quantitative economic models are rarely employed in WTO dispute cases. The lack of coherent guidelines for assessing the economic dimensions of a dispute in a transparent and robust manner potentially undermines the effectiveness and the reputation of WTO Dispute Settlement Body (DSB) recommendations.
    Keywords: Dispute Settlement, SPS, Technical Barriers to Trade, WTO
    JEL: F13 F18 F53 K33 Q17
    Date: 2016–10
  16. By: Đào, T.K.; van Bergeijk, P.A.G.
    Abstract: This research paper provides a causality assessment on the linkage between declines in world trade finance and the world trade collapse in the period following the Financial Crisis of 2008 and 2009 as well as the ensuing global trade slowdown. The paper performs Granger Causality tests on two time series: World trade (volume data acquired from the CPB World Trade Monitor) and World trade finance (transaction data acquired from SWIFT), using global monthly data from January 2007 to May 2017. In the short run, Granger causality always runs one-way from world trade finance to world trade. We always find two-way Granger causality for lags longer than two years. Importantly Granger causality never runs one-way from world trade to world trade finance. Given the short-term nature of trade finance, we conclude that world trade finance Granger-causes world trade.
    Keywords: world trade, world trade collapse, world trade slow-down, trade finance, Granger causality, financial crisis, SWIFT
    JEL: F10 F34 F40 G01 G21
    Date: 2018–01–29
  17. By: Clipa, Cătălin-Ioan; Danilet, Magdalena; Clipa, Anca-Maria
    Abstract: In the context of globalization, international trade has become more intense. This exploratory research aims to identify the Romanian consumers' perception of the country of origin (COO). In the present research, we analysed two perspectives of the effect of the country of origin: political economy and marketing. The positive impact of campaigns to encourage the purchase of domestic products has not yet been confirmed for the decision-makers. On the other hand, in order to achieve a successful marketing strategy, it is essential to know the consumer’s perception of the COO effect. The research data was collected through a survey conducted on a sample of 250 respondents from the North-East Region of Romania. The results confirm that the effect of the home country has a moderate impact on purchases and the COO effect is more associated with certain product categories. The average COO effect on quality perception is greater than the COO's average effect on purchasing intent.
    Keywords: Country of origin effect; buy national; product category; consumer perception
    JEL: F14 M21 M31
    Date: 2017–01
  18. By: Richard Sellner
    Abstract: This paper provides Monte Carlo simulation evidence on the performance of methods used for identifying the effects of non-discriminatory trade policy (NDTP) variables in structural gravity models (SGM). The benchmarked methods include the identification strategy of Heid, Larch & Yotov (2015) that utilizes data on intra-national trade flows and three other methods that do not rely on this data. Results indicate that under the assumption of a data generating process that conforms with SGM theory, data on intra-national trade flows is required for identification. The bias of the three methods that do not utilize this data, is a result of the correlation between the NDTP variable and the collinear fixed effects. The MC results and an empirical application demonstrate the severity of this bias in methods that have been applied in previous empirical research.
    Keywords: Structural Gravity Model, Non-discriminatory Trade Policies, Monte Carlo Simulation
    JEL: C31 F10 F13
    Date: 2017–12
  19. By: Simplice Asongu (Yaoundé/Cameroun); Uchenna R. Efobi (Covenant University, Nigeria); Ibukun Beecroft (Covenant University, Nigeria)
    Abstract: We investigate how foreign aid dampens the effects of terrorism on FDI using interactive quantile regressions. The empirical evidence is based on 78 developing countries for the period 1984-2008. Bilateral and multilateral aid variables are used, while terrorism dynamics entail: domestic, unclear, transnational and total number of terrorist attacks. The main finding is that foreign aid cannot be used as a policy tool to effectively address a hypothetically negative effect of terrorism on FDI. The positive threshold we cannot establish is important for policy makers because it communicates a cut-off point at which foreign aid completely neutralizes the negative effect of terrorism on FDI. From the conditioning information set, we also establish for the most part that the effects of GDP growth, infrastructural development and trade openness are an increasing function of FDI. Policy implications are discussed.
    Keywords: FDI; Foreign aid; Terrorism; Quantile regression
    JEL: C52 D74 F23 F35 O40
    Date: 2017–01
  20. By: Vito Amendolagine; Andrea Presbitero; Roberta Rabellotti; Marco Sanfilippo; Adnan Seric
    Abstract: The local sourcing of intermediate products is one the main channels for foreign direct investment (FDI) spillovers. This paper investigates whether and how participation and positioning in the global value chains (GVCs) of host countries is associated to local sourcing by foreign investors. Matching two firm-level data sets of 19 Sub-Saharan African countries and Vietnam to country-sector level measures of GVC involvement, we find that more intense GVC participation and upstream specialization are associated to a higher share of inputs sourced locally by foreign investors. These effects are larger in countries with stronger rule of law and better education.
    Date: 2017–12–21
  21. By: Eva Wichmann
    Abstract: This paper shows both theoretically and empirically how raw material rich countries use export restrictions upstream to give manufacturing sectors downstream a competitive advantage. For young and relatively small industries this can be seen as a type of infant industry protection that takes advantage of the global value chain. Estimating a fixed effect model, I provide evidence that export restrictions on industrial raw materials upstream help promote manufacturing exports downstream.
    Keywords: Export Restrictions, International Trade, Competitive Advantage, Resource Rich, Manufacturing, Metals, Minerals
    JEL: F12 F14 L25 L61 L71 Q3
    Date: 2017–12
  22. By: Thomas S. Neubig; Sacha Wunsch-Vincent
    Abstract: Understanding cross-border flows of disembodied knowledge, often associated with intellectual property (IP), is essential to analyzing how modern economies operate. This paper documents how available data to document these IP flows are distorted by various factors, including tax planning by multinational enterprises. It finds that tax-induced mismeasurement could be more than 35%, and greater for individual countries particularly high-tax-rate countries.
    Date: 2017–11
  23. By: Alan de Bromhead; Alan Fernihough; Markus Lampe; Kevin Hjortshøj O'Rourke
    Abstract: A recent literature explores the nature and causes of the collapse in international trade during 2008 and 2009. The decline was particularly great for automobiles and industrial supplies; it occurred largely along the intensive margin; quantities fell by more than prices; and prices fell less for differentiated products. Do these stylised facts apply to trade collapses more generally? This paper uses detailed, commodity specific information on UK imports between 1929 and 1933, to see to what extent the trade collapses of the Great Depression and Great Recession resembled each other. It also compares the free trading trade collapse of 1929-31 with the protectionist collapse of 1931-3, to see to what extent protection, and gradual recovery from the Great Depression, mattered for UK trade patterns. Deflation was a feature of the 1930s trade collapse, and after 1931 protectionism made the UK's trade collapse geographically unbalanced. Many other features of the two trade collapses are remarkably similar, however. Both took place along the intensive rather than the extensive margin; the same types of goods were particularly badly hit in both instances; and prices of differentiated durable manufactured goods barely fell on either occasion.
    JEL: F14 N74
    Date: 2018–01
  24. By: Altangerel, Khulan (Tilburg University, School of Economics and Management); van Ours, Jan (Tilburg University, School of Economics and Management)
    Abstract: The 1986 US Immigration Reform and Control Act (IRCA) was directed at tackling the problem of growing unauthorized migration through legalization of unauthorized immigrants, increasing border security and sanctioning employers who hired unauthorized immigrants. Our paper investigates how the IRCA affected the migration dynamics of male Mexican immigrants focusing on their age of onset of migration and the duration of their first trip. We find that the IRCA reduced unauthorized migration to the US while it does not seem to have had a significant effect on the return rate from the US to Mexico of undocumented male immigrants.
    Date: 2017
  25. By: Cebreros Zurita Carlos Alfonso
    Abstract: This article combines data on trade flows with a novel construction of the distribution of skill in the population, based on the results from the International Adult Literacy Survey of the OECD, to evaluate the empirical importance of the distribution of talent as a determinant of the sectoral pattern of trade. It is found that both the mean and standard deviation of the distribution of skills are significant determinants of the pattern of trade. According to the results, cross-country differences in the distribution of skills explain more of the sectoral pattern of trade than differences in capital stocks and differences in indicators of a country's institutional framework.
    Keywords: comparative advantage;labor force composition;factor endowments;human capital
    JEL: F12 F14 F16 J82
    Date: 2018–01
  26. By: Isaac Mensah
    Abstract: This paper provides new empirical evidence of the “euro effect” on bilateral trade by allowing for a heterogeneous impact on "new" and “old” EMU members. By applying a Poisson estimator and focusing on a sample of 38 countries, our results show a statistically insignificant euro's effect on bilateral exports. However, disaggregating this effect, we report a relatively large euro's effect on bilateral trade for the "new" EMU countries. We also and no evidence of trade diversion, thus corroborating existing evidence. These results are robust to a number of sensitivity checks and, especially, to the use of a larger sample of countries.
    Keywords: Gravity model, Bilateral exports, Euro, Poisson estimator
    JEL: F4 F14 F15 F33 C33
    Date: 2017–12
  27. By: Alm, Bastian; Weins, Sebastian
    Abstract: Since 2011, Germany has consistently been the country posting the largest current account surpluses in the world. In recent years, this has led to a number of calls from economists and policy-makers in and outside Germany, and from international institutions and organisations, asking the Federal Government to take action to reduce the surplus. These calls have tended to focus on recommendations for action to strengthen private and public-sector investment and real wage growth in Germany. As current account imbalances have long become a global phenomenon, we would like to open a discussion on how this issue could be dealt with under multilateral trade policy.
    Keywords: Current account balance,German current account surplus,Trade policy,WTO
    JEL: F13 F32 F40
    Date: 2018
  28. By: Florian Dorn; Clemens Fuest; Niklas Potrafke
    Abstract: This paper re-examines the link between globalization and income inequality. We use data for 140 countries over the period 1970–2014 and employ an IV approach to deal with the endogeneity of globalization measures. We find that the link between globalization and income inequality differs across different groups of countries. There is a robust positive relationship between globalization and inequality in the transition countries including China and most countries of Middle and Eastern Europe. In the sample of the most advanced economies, neither OLS nor 2SLS results show any significant positive relationship between globalization and inequality. We conclude that institutions providing income insurance and education, which characterize most advanced economies but are less developed in transition economies, may have moderated effects of globalization on income inequality.
    Keywords: Globalization, income inequality, redistribution, instrumental variable estimation, panel econometrics, development levels, transition economies, China
    JEL: D31 D63 F02 C26 H11 H20
    Date: 2018
  29. By: Klaus Vondra1
    Abstract: The European Commission and euro area central banks use different methods to calculate export market shares and rely on different data sources to do so. Thus, the resulting evidence varies considerably over time, prompting different economic policy conclusions with respect to the development of export competitiveness – which is an undesirable fact. This paper presents methods and data sources used to derive export market shares with a view to explaining these differences. We conclude that the export market share concept is trivial only at a first glance because it can be implemented in a number of ways none of which would appear to be the single best practice.
    Keywords: Export market shares, conceptual and data differences
    JEL: F14 F40 H12
    Date: 2017–04
  30. By: Tomomichi Mizuno (Graduate School of Economics, Kobe University); Kazuhiro Takauchi (Faculty of Business and Commerce, Kansai University)
    Abstract: We constructed a third-market model with a vertical trading structure in which input suppliers engage in the homogeneous price competition `a la Dastidar (1995). We show that in the case of downstream Bertrand competition, a non-monotonic export policy may appear, that is, the optimal export policy can change like a tax–subsidy–tax as the degree of product-substitutability rises. We also show that when the number of domestic input suppliers is at an intermediate level, the conventional result in which the optimal policy is an export subsidy (tax) if downstream is Cournot (Bertrand) rivalry remains. We further discuss welfare comparisons between downstream Cournot and Bertrand cases.
    Keywords: Upstream price competition; Export subsidy/tax; Non-monotonic policy; Product substitutability
    JEL: F12 F13 L13 D43
    Date: 2018–02
  31. By: Clemens Fuest; Samina Sultan
    Abstract: This paper develops a model of tax competition with three countries, which initially form a union where countries refrain from using different tax rates in different sectors of the economy. We study the impact of one country leaving the union. We show that the introduction of discriminatory taxation in one country increases tax policy heterogeneity within the remaining union. Moreover, the incentives for the two remaining countries to harmonize their tax rates decline. We discuss these results in the context of the debate about the tax policy implications of Brexit.
    Keywords: International taxation, tax competition, preferential tax regimes
    JEL: H20 H73
    Date: 2018
  32. By: Anthony Edo; Yvonne Giesing; Jonathan Öztunc; Panu Poutvaara
    Abstract: Immigration has become one of the most divisive political issues in the United States, the United Kingdom, France and several other Western countries. We estimate the impact of immigration on voting for far-left and far-right parties in France, using panel data on presidential elections from 1988 to 2012. To derive causal estimates, we instrument more recent immigration flows by past settlement patterns in 1968. We find that immigration increases support for far-right candidates and has no robust effect on far-left voting. The increased support for far-right candidates is driven by low-skilled immigrants from non-Western countries.
    Keywords: Voting, immigration, political economy
    JEL: D72 F22 J15 P16
    Date: 2017
  33. By: Yibin Mu; Chu Wang; Dong Frank Wu
    Abstract: The analysis of China’s impacts on the 44 SSA countries reveals that: (i) after joining the WTO in 2001, China has started to impact significantly on SSA growth: one-percent increase in China’s GDP per capita leads to 0.02 percent increase on the SSA’s GDP per capita; (ii) oil and investment-goods exporters benefit more from China’s growth; (iii) compared to China’s consumption, its investment growth acts as a more important channel in influencing SSA; (iv) exports to China, highly linked to China’s growth, is an important indicator for SSA’s exports. Our results call for SSA countries to be well prepared for China’s rebalancing given its growing economic influence and to proactively search a sustainable way to continuously enhance productivity.
    Keywords: Asia and Pacific;Development;Exports;Growth, China Economy, SSA, General, Macroeconomic Analyses of Economic Development
    Date: 2017–12–22
  34. By: van Klaveren, Alberto
    Abstract: SECO Working Paper 25/2017 by Alberto van Klaveren
    Abstract: The more recent waves of regionalism in Latin America have been associated, respectively, with structuralist, neo-liberal and post-liberal economic and political experiments in the region. Structuralist realism was inaugurated in the 1950s and somehow survived until the 1970s, open regionalism followed in the 1980s and 1990s, and was replaced, to a certain extent, during the next decade by post-liberal regionalism. However, the limits, if not demise, of post-liberal experiments in the most important economies of Latin America, pose the question of the future of regionalism? In this changing situation, this paper explores several questions that arise about the future of regionalism in Latin America.
    Date: 2018–02–09
  35. By: Dylan G. Rassier
    Abstract: Transactions involving intangible assets within multinational enterprises impose challenges for national economic accountants. In light of the challenges, recent research at the United States Bureau of Economic Analysis aims to identify areas for improving the treatment of multinational enterprises in national economic accounts. This paper summarizes the work and demonstrates implications for gross domestic product – the most widely cited measure in national economic accounts – of the United States.
    Date: 2017–11
  36. By: Jason Dedrick; Kenneth L. Kraemer
    Abstract: This report uses data on individual smart phones as well as industry data to identify which smartphone firms capture the most value. It finds that Apple captures most of the industry profits, thanks to its high prices, large profit margins and the volume of iPhone sales worldwide. Apple’s success is explained as a result of its ability to develop its own intellectual property (IP) and take advantage of IP created by suppliers through a strategy of selling only a few models at high prices compared to competitors.
    Date: 2017–11
  37. By: Dohse, Dirk; Goel, Rajeev K.; Nelson, Michael A.
    Abstract: The paper provides firm-level insights into the drivers of foreign technology licensing from the perspective of the licensee, using data across 114 nations. Drawing on the theoretical foundations related to knowledge spillovers, results show that manufacturing firms with own R&D capabilities were more likely to license foreign technologies, as were larger firms and those situated in the nations' main business city. Greater literacy facilitated foreign technology licensing, while overall economic prosperity of a nation did not have a significant impact. Interestingly, higher domestic interest rates, related to capital costs and to overall monetary policy, induced firms to license technology from abroad. Finally, some institutions like greater economic freedom aided technology licensing, while others like strong patent protection were not found to have a sizable impact.
    Keywords: technology licensing,R&D,firm size,location,taxes,informal competition
    JEL: L24 O33 O57
    Date: 2018
  38. By: Wen Chen; Reitze Gouma; Bart Los; Marcel P. Timmer
    Abstract: Today’s production processes are fragmented across countries and industries. Intangibles play an important role, but their measurement is elusive. This paper proposes a new empirical framework to measure factor incomes in production that spans industries and countries.
    Date: 2017–11
  39. By: Martin Richardson; Frank Stähler
    Abstract: We develop a model in which it is uncertainty about the future domestic policy environment that both makes international cooperation attractive and induces the possibility of a nation reneging on such an international agreement. We show, in a fairly general setting in which the likelihood of exit is affected by the degree of cooperation, that the possibility of exit reduces the optimal degree of initial cooperation. “Full” cooperation will never be optimal, and the optimal degree of cooperation will never be such as to “squeeze out” any possibility of exit. However, an increase in global uncertainty may imply an increase in cooperation when exit risks are already large to begin with.
    JEL: F02 F13 F51 F53
    Date: 2017–02

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