nep-int New Economics Papers
on International Trade
Issue of 2018‒04‒09
37 papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. Trade and Migration: A Quantitative Assessment By Luca David Opromolla; Fernando Parro; Alessandro Sforza; Lorenzo Caliendo
  2. On the Profitability of Trade Deflection and the Need for Rules of Origin By Gabriel Felbermayr; Feodora Teti; Erdal Yalcin
  3. Trust No One?: Security and International Trade By Jerónimo Carballo; Georg Schaur; Christian Volpe Martincus
  4. Posts as Trade Facilitators By Jerónimo Carballo; Georg Schaur; Christian Volpe Martincus
  5. The Gravity of Unit Prices By Ana Cecilia Fieler; Jonathan Eaton
  6. Do Investment Agreements Necessarily Cause Offshoring? The Canada-Peru Case By Stephanie Houle
  7. FDI and unemployment, a growth perspective By Stepanok, Ignat
  8. Transatlantic Divergences in Globalisation and the China Factor By Metivier, Jeanne; Di Salvo, Mattia; Pelkmans, Jacques
  9. Institutions, Trade and Development: A Quantitative Analysis By Cosimo Beverelli; Alexander Keck; Mario Larch; Yoto V. Yotov
  10. Austrian Outbound Foreign Direct Investment in Europe: A spatial econometric study By Fischer, Manfred M.; Pintar, Nico; Sargant, Benedikt
  11. Trade Liberalization and Economic Development: Evidence from China's WTO Accession By Andrei Potlogea; Wenya Cheng
  12. Global Banking, Trade, and the International Transmission of the Great Recession By Alexandra Born; Zeno Enders
  13. China-EU Leadership in Globalisation: Ambition and capacity By Hu, Weinian; Pelkmans, Jacques
  14. Is the WTO a World Tax Organization?; A Primer for WTO Rules for Policy Makers By Michael Daly
  15. Innovation and Trade Policy in a Globalizing World By Ufuk Akcigit
  16. The tale of two international phenomena: International migration and global imbalances By Dramane Coulibaly; Blaise Gnimassoun; Valérie Mignon
  17. Trade, Jobs, and E-commerce: Evidence from Korea By Lee, Kyu Yub; Bae, Chankwon; Lee, Sooyoung; Park, Ji Hyun; Yoo, Saebyul
  18. How Much Market Access? A Case study of Jordan’s Exports to the EU By Stéphanie BRUNELIN; Jaime DE MELO; Alberto PORTUGAL-PEREZ
  19. What Can We Learn about U.S.-China Trade Disputes from China’s Past Trade Retaliations? By Minghao Li; Wendong Zhang; Chad E. Hart
  20. Trade Liberalization Versus Protectionism: Are the Dynamic Welfare Implications Symmetric? By Michael Sposi; Ana Maria Santacreu
  21. Sector-Level Economies of Scale: Estimation Using Trade Data By Dave Donaldson; Arnaud Costinot; Andres Rodriguez-Clare; Dominick Bartelme
  22. Endogenous Border Times By Jerónimo Carballo; Alejandro Graziano; Georg Schaur; Christian Volpe Martincus
  23. The International Organization of Production in the Regulatory Void By Philipp Herkenhoff; Sebastian Krautheim
  24. Determinants of FDI in South Africa: Do macroeconomic variables matter? By Nandipha Dondashe; Andrew Phiri
  25. International Agreements, Economic Sovereignty and Exit By Martin Richardson; Frank Stähler
  26. The Effects of Exports on Employment in Korean Manufacturing: An Industry-level Analysis By Whang, Unjung; Lee, Sooyoung; Kim, Hyuk-Hwang; Kang, Youngho
  27. Oil windfalls might not be the problem in oil-producing countries: evidence from the impact of oil shocks on export diversification By Eric W. Djimeu; Luc-Désiré Omgba
  28. Trends in African Migration to Europe: Drivers Beyond Economic Motivations By Giménez Gómez, José M. (José Manuel); Walle, Yabibal M.; Zergawu, Yitagesu Zewdu
  29. The Effect of Attitudes toward Migrants on Migrant Skill Composition By Besart Avdiu
  30. Heterogeneity in Conformism, Firm Selection, and Home Bias By Sergey Kichko; Pierre M. Picard
  32. Investigating the Link between Foreign direct investment, Energy consumption and Economic growth in Argentina By Hlalefang Khobai; Nomahlubi Mavikela
  34. Global Migration in the 20th and 21st Centuries: the Unstoppable Force of Demography By Thu Dao; Frédéric Docquier; Mathilde Maurel; Pierre Schaus
  35. How tourist flows are affected by the introduction of the euro? By W. Addessi; B. Biagi; M.G. Brandano
  36. Japan's TPP Strategy By Kim, Gyu Pan
  37. The Second Era of Globalization Is Not yet Over: An Historical Perspective By Michael D. Bordo

  1. By: Luca David Opromolla (Banco de Portugal); Fernando Parro (Johns Hopkins University); Alessandro Sforza (LSE); Lorenzo Caliendo (Yale University)
    Abstract: We present a dynamic model of international migration and trade and use the model to quantify the trade, migration, and welfare effects of actual changes in migration and trade policy. Using the EU labor force survey for 23 countries we measure the flow of workers by nationality across countries before and after the EU 2004 enlargement. We exploit the timing variation of the migration policy to measure the change in migration costs. We then use our model to quantify the gains from the actual reductions in tariff and migration restrictions. We find that the gains from trade and migration are quite different. While all countries gain from trade, new member states (NMS) gain from international migration while not all EU countries gain. We show how the results depend crucially on the extent to which the migrants congest the use of local public services and factors. Our results shades new light to the study of the policy implications of migration and trade policy reforms.
    Date: 2017
  2. By: Gabriel Felbermayr; Feodora Teti; Erdal Yalcin
    Abstract: When two countries conclude a free trade agreement (FTA), they define rules of origin (RoOs) to determine whether a product is eligible for preferential treatment. RoOs exist to avoid that exports from third countries enter the FTA through the member with the lowest tariff (trade deflection). However, RoOs distort exporters’ sourcing decisions and burden them with red tape. Using a global data set, we show that, for 86% of global trade and 78% of bilateral product-level comparisons, trade deflection is not profitable because external tariffs are rather similar and transportation costs are non-negligible; in the presence of a deep FTA, deflection is significantly less profitable still. We find evidence for both ex post adjustment of external tariffs and ex ante selection effects. The pervasive and unconditional use of RoOs is, therefore, hard to rationalize.
    Keywords: trade deflection, rules of origin, external tariffs, free trade agreements
    JEL: F10 F13 F15
    Date: 2018
  3. By: Jerónimo Carballo; Georg Schaur; Christian Volpe Martincus
    Abstract: Security concerns in a context of increasingly segmented supply chains have led to stricter border control measures, which may potentially negatively affect international trade. Customs around the world have therefore implemented security-motivated certification programs to facilitate licit trade. These programs offer trustworthy trading firms, i.e., Authorized Economic Operators (AEOs), several advantages in the administrative processing of their shipments including less frequent physical inspections and expedited customs clearance. In this study we focus on Mexico's AEO Program NEEC. In particular, we evaluate the impact of this program by primarily carrying out differences-in-differences estimations on highly disaggregated firm-level data that cover the entire universe of export and import transactions of the country over the period 2009-2014. Estimation results suggest that NEEC has been associated with less physical inspections and shorter clearance times and has thereby favored increased firms' exports. Effects seem to be stronger on the frequency of shipments and on consumer goods, industrial inputs, and capital goods.
    Keywords: Customs Administration, Trading costs, Export Promotion, Export Performance, Foreign sales, Exports Growth, Exporting Firm, international trade, customs administration
    JEL: F10 F13 F14
    Date: 2016–06
  4. By: Jerónimo Carballo; Georg Schaur; Christian Volpe Martincus
    Abstract: In this paper, we examine an innovative postal export regime that involves both a streamlining of export procedures and provision of intermediation services to investigate how firms' react to changing trade costs and whether and how these firms learn. In so doing, we use a unique dataset that consists of the entire universe of Peru's export transactions over the period 1999-2014 including both regular shipments and postal shipments. We find that the new export mode has been associated with increased and more diversified regional exports, higher entry and exit rates, more export experimentation, and learning both within and across firms.
    Keywords: Trading costs, Export Market, Regional Exports, Export Sales, Export Performance, Foreign sales, Export Promotion, Exporting Firm, Exports Growth, Postal Exports, trade, integration
    JEL: F14 F13 F10
    Date: 2016–06
  5. By: Ana Cecilia Fieler (University of Pennsylvania); Jonathan Eaton (Pennsylvania State University)
    Abstract: Within finely-defined product categories, rich countries import and export varieties at higher unit prices. While these patterns suggest that rich and poor countries consume and produce different goods, we argue that unit prices are not informative about how income per capita influences the welfare effects of international trade shocks. The standard explanation for patterns of unit prices uses only one dimension of quality: Rich importers buy more expensive higher-quality goods, and rich exporters specialize in these goods. We show that this argument cannot explain the data—not even qualitatively. We develop a model with two dimensions of quality: One that is disproportionately valued by rich consumers, and one that is equally valued by everyone. The model explains data on unit prices very well, and it delivers a gravity equation for trade flows so that the welfare effects of foreign shocks follow Arkolakis, Costinot, Rodriguez-Clare (2012). Model parameters are recovered from data through simple OLS regressions. We present two extensions of the model. First, we allow for per-unit trade cost to rationalize the increasing relationship between unit prices and distance. Second, the model remains tractable when we introduce heterogeneity across sectors in the relationship between unit prices, and importer and exporter per capita income.
    Date: 2017
  6. By: Stephanie Houle
    Abstract: This paper studies firm offshoring behaviour following the Canada-Peru Foreign Investment Protection Agreement (FIPA) enactment in 2007. This is achieved by using confidential Statistics Canada firm tax filing microdata merged with raw firm-level import microdata. While in the aggregate data, there is a large increase in Foreign Direct Investment (FDI) by Canadian firms and a change in the composition of Canadian firm imports from Peru from raw unprocessed ore to manufactured metals, the microdata show that the change is not simply offshoring by individual firms. FDI into Peru was in mining as opposed to manufacturing. Moreover, firms that increased their Peru investment did not reduce their Canadian employment, nor were they the same firms with large increases in imports. Hence, these findings in the microdata show that the large increase in investment to Peru was not associated with offshoring of Canadian firms.
    Keywords: Investment Agreements, Multinational Firms, Offshoring, Foreign Direct Investment
    JEL: F13 F23 F53 L23
    Date: 2018–03
  7. By: Stepanok, Ignat (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany])
    Abstract: "North-South foreign direct investment (FDI) is frequently viewed as a process in which jobs relocate from the North to the South. I build a growth model with two asymmetric trading economies, the North where firms innovate and the South where Northern firms invest to take advantage of lower wages. Contrary to expectation, I find that lower FDI costs increase unemployment both in the North and in the South. There are two effects of FDI on unemployment, a direct positive one which contributes to the turnover of firms parallel to innovation. The indirect effect appears through innovation and growth: more FDI means higher innovation, this intensifies firm turnover and increases the unemployment rates in both countries even further. I solve the model analytically without trade costs and imitation of products in the South. For the version with trade costs and imitation I offer a numerical solution in which I also look at the effect of FDI on welfare and find a positive relation. In addition to FDI, I explore how intellectual property (IP) rights protection affects unemployment and welfare. Both are higher in a steady state with stricter IP protection." (Author's abstract, IAB-Doku) ((en))
    JEL: F12 F16 F23 F43 O31 O34
    Date: 2018–03–28
  8. By: Metivier, Jeanne; Di Salvo, Mattia; Pelkmans, Jacques
    Abstract: The EU and the United States are following divergent paths with regard to their respective trade policies. While the new administration of the United States has made some notably strong statements against further trade liberalisation, the EU continues to favour responsible globalisation. The EU has recently signed a series of free trade agreements (FTAs) as well as plurilateral agreements with its partners (especially, but not only, in East Asia). Consequently, the EU is strengthening its status as a global leader in the debate on economic openness. Conversely, the US has interrupted major negotiations with its trading partners and has renounced trade agreements, such as TPP and TTIP (at least for the time being). This paper provides some empirical economic and social guidance behind the recent policy divergence on globalisation between the US and the EU in general and vis-à-vis China in particular.
    Date: 2017–05
  9. By: Cosimo Beverelli; Alexander Keck; Mario Larch; Yoto V. Yotov
    Abstract: We propose and apply methods to quantify the impact of national institutions on international trade and development. We are able to identify the direct impact of country-specific institutions on international trade within the structural gravity framework. Our approach naturally addresses the prominent issue of endogenous institutions. The empirical analysis offers robust evidence that stronger institutions promote trade. A counterfactual analysis reveals that the changes in institutional quality in the poor countries in our sample between 1996 and 2006 have had, via their impact on imports from rich countries, significant and heterogeneous real GDP effects, varying between -5 and 5 percent. Our methods are readily applicable to identifying the impact of a wide range of country-specific variables on international trade.
    Keywords: institutional quality, international trade, development, structural gravity
    JEL: F13 F14 F16
    Date: 2018
  10. By: Fischer, Manfred M.; Pintar, Nico; Sargant, Benedikt
    Abstract: This paper focuses on Austrian outbound foreign direct investment (FDI, measured by sales of Austrian affiliates abroad) in Europe over the period 2009-2013, using a spatial Durbin panel data model specification with fixed effects, and a spatial weight matrix based on the first-order contiguity relationship of the countries and normalised by its largest eigenvalue. Third-country effects essentially enter the empirical analysis in two major ways: first, by the endogenous spatial lag on FDI (measured by FDI into markets nearby the host country), and, second, by including an exogenous market potential variable that measures the size of markets nearby the FDI host country in terms of gross domestic product. The question whether the empirical result is compatible with horizontal, vertical, export-platform or complex vertical FDI then depends on the sign and significance levels of both the coefficient of the spatial lag on FDI and the direct impact estimate of the market potential variable. The paper yields robust results that provide significant empirical evidence for horizontal FDI as the main driver of Austrian outbound FDI in Europe. This result is strengthened by the indirect impact estimate of the market potential variable indicating that spatial spillovers do not matter. (authors' abstract)
    Keywords: Foreign direct investment; panel econometrics; spatial econometrics; spatial Durbin model; fixed effects
    Date: 2016–04–19
  11. By: Andrei Potlogea (University of Edinburgh); Wenya Cheng (University of Manchester)
    Abstract: We study the effect of improvements in foreign market access brought by China’s WTO accession on Chinese local economies. We exploit cross-city variation in these improvements stemming from initial differences in sectoral specialization and exogenous cross-industry differences in US trade liberalization that originate from the elimination of the threat of a return to Smoot-Hawley tariffs for Chinese imports. We find that Chinese cities that experience greater improvement in their access to US markets following WTO accession exhibit faster population, output and employment growth as well as increased investment and FDI inflows. The benefits of WTO membership for Chinese local economies are augmented by significant local spillovers. These spillovers operate both from the tradable to the non-tradable sector and within the tradable sector. Within the tradable sector, spillovers are transmitted primarily via labor market linkages. We find important local demand linkages from the tradable to the nontradable sector. Most local service sectors benefit from trade liberalization. In particular, our evidence suggests that increased investment demand caused by trade liberalization drives financial sector growth. We find little effect of trade liberalization on local wages. Alongside our results on population and employment, this indicates that local labor supply elasticities are high in our setting. Our findings can be explained by a Lewis model of urbanization that combines geographic mobility with an abundant reserve of labor.
    Date: 2017
  12. By: Alexandra Born; Zeno Enders
    Abstract: The global financial crisis of 2007-2009 spread through different channels from its origin in the United States to large parts of the world. In this paper we explore the financial and the trade channel in a unified framework and quantify their relative importance for this transmission. Specifically, we employ a DSGE model of an open economy with an internationally operating banking sector. We investigate the transmission of the crisis via the collapse of export demand and through losses in the value of cross-border asset holdings. Calibrated to German data, the model predicts the trade channel to be twice as important for the transmission of the crisis than the financial channel. In the UK, the latter dominates due to higher foreign-asset holdings, which, at the same time, serve as an automatic stabilizer in case of plummeting foreign demand. The transmission via the financial channel triggers a much longer-lasting recession relative to the trade channel, resulting in larger cumulated output losses and a prolonged crisis particularly in the UK. Stricter enforcement of bank capital requirements would have deepened the initial slump while simultaneously speeding up the recovery. The effects of higher capital requirements depend on the way banks’ balance sheets adjust to this intervention.
    Keywords: financial crisis, international transmission, international business cycles, global banks
    JEL: F44 F41 E32
    Date: 2018
  13. By: Hu, Weinian; Pelkmans, Jacques
    Abstract: This CEPS Policy Insight attempts to offer a first verification of whether China and the EU are ready to exercise leadership in global trade and investment, not only in words but also in deeds that would underpin credibility for the world trading and investor community. A distinction is drawn between the ambition to exercise such leadership and the effective capacity to do so. The EU’s capacity to lead is not at issue, but, as is shown, it does face a few difficulties. The paper analyses China’s effective leadership capacity based on aspects of its energetic FTA strategy, investment protection agreements, the progress of its domestic market-oriented reforms (required for economic openness) and its record in negotiating the WTO plurilaterals. Some reflections on a possible joint leadership of the EU and China are offered in the conclusion.
    Date: 2017–05
  14. By: Michael Daly
    Abstract: This paper examines the extent to which World Trade Organization (WTO) rules impinge on policymakers’ freedom to formulate tax policies. It provides an overview of both the economic rationale for WTO rules concerning taxation and the provisions of the main WTO agreements concerning border taxes and internal taxes (direct as well as indirect). It also points out some tax anomalies and inconsistencies in these rules, and how the rules have evolved as a consequence of the interpretation of the WTO agreements by its Dispute Settlement Body and the latter’s rulings in connection with several disputes over taxes affecting trade. As WTO Members will undoubtedly want to avoid having their tax policies successfully challenged in the WTO, the paper provides some guidance concerning the design of tax policy.
    Date: 2016–03–29
  15. By: Ufuk Akcigit (University of Chicago)
    Abstract: We assess the role of import tariffs and R&D subsidies as policy responses to foreign technological competition. To this end, we build a general equilibrium growth model embedding a Ricardian framework of trade where firm innovation shapes endogenously the dynamics of technology and market leadership in a world with countries at differ- ent stages of development. Knowledge spillovers and decreasing returns to knowledge accumulation drive cross-country technological convergence. Firms’ R&D decisions are driven by the size of the market, the effort to escape competitive pressures, domestic and international business stealing, and technology spillovers. A calibrated version of the model reproduces the foreign technological catch-up the U.S. experienced by the 1970s and early 1980s. Accounting for transitional dynamics, we show that foreign technolog- ical acceleration hurts the U.S. welfare in the short and medium run through business stealing, but generates long-run benefits via higher quality of imported goods and higher domestic innovation in the U.S. induced by escape-competition effect. The model suggests that the introduction of Research and Experimentation Tax Credit in 1981 proves to be an effective policy response to foreign competition, generating substantial welfare gains. A counterfactual exercise shows that increasing trade barriers as an alternative policy re- sponse produces gains only in the very short run, leading to large losses in the medium and long run. Protectionist measures generate large dynamic losses from trade, distort- ing the impact of openness on innovation incentives and productivity growth.
    Date: 2017
  16. By: Dramane Coulibaly; Blaise Gnimassoun; Valérie Mignon
    Abstract: Following the dynamics of globalization, international migration has increased dramatically since the 1990s. Given that these migrations may obscure the natural demographic structure of nations, they are likely to explain a signifcant part of global imbalances. This paper tackles this issue by investigating the role played by international migration in the dynamics of global imbalances. To this end, we rely on an overlapping generations model to derive the theoretical relationship between international migration and current account position. Through a series of robust estimates, we empirically investigate this relationship by relying on a panel of 157 developed and developing countries over the period 1990-2014. Our results point to substantial effects of international migration. Specifcally, we show that an increase in migration improves national savings and the current account balance in the destination country, while it has opposite impacts in the origin country. These effects are particularly pronounced in developing economies, and attenuated by migrants' remittances.
    Keywords: International Migration;Current Account;Global Imbalances;Remittances
    JEL: F22 F32 O55 C33
    Date: 2018–03
  17. By: Lee, Kyu Yub (Korea Institute for International Economic Policy); Bae, Chankwon (Korea Institute for International Economic Policy); Lee, Sooyoung (Korea Institute for International Economic Policy); Park, Ji Hyun (Korea Institute for International Economic Policy); Yoo, Saebyul (Korea Institute for International Economic Policy)
    Abstract: This report explores the substitutability/complementarity between e-commerce activity and trade-in-goods/jobs. Although there is a possibility that e-commerce activity could substitute trade in goods and jobs, we found no such evidence in Korea. In other words, the data in Korea shows that e-commerce activity relates positively to trade in goods. At industry-level, e-commerce activity is positively related (at least, neutral depending on industries) to job growth and creation. At firm-level, e-commerce firms hire more workers than non-e-commerce ones. A caveat in interpreting the evidence we found is that the complementarity between e-commerce and trade/jobs can become stronger or weaker as e-commerce activity continues to grow in the future. Nonetheless, a lesson from the evidence we found is that new policies relating to e-commerce should be formulated in connec-tion with trade and jobs. For e-commerce and trade, we suggest that the government encourage firms (small-and-medium-sized firms in particular) to engage actively in cross-border e-commerce export, while it make efforts to streamline customs clearance processes for e-commerce to lower trade barriers. For e-commerce and jobs, we em-phasize the role of labor market polices with vocational training and retraining programs due to labor market reallocation arising from e-commerce.
    Keywords: Trade; Jobs; E-commerce
    Date: 2018–02–20
  18. By: Stéphanie BRUNELIN (FERDI); Jaime DE MELO (Ferdi); Alberto PORTUGAL-PEREZ (FERDI)
    Abstract: The value of preferential market access schemes has fallen sharply. Drawing on a relaxation announcement of July 2016 simplifying origin requirements for access to the EU that should help restore market access, thereby alleviating the refugee crisis in Jordan, this paper argues that a simplification of origin requirements is a straightforward way to restore preferential market access. The paper compares the performance of Jordanian exports to the EU and the US under their respective FTAs. It shows that Jordanian exports to the US have grown more rapidly than exports to the EU over the last fifteen years. The study documents lower utilisation of preferences in the EU than in the US, especially in Textiles and Apparel (T&A) in spite of non-negligible preferences. Three contributing factors are identified: (i) higher adjusted preferences for apparel in the US than in the EU; (ii) greater competition from other suppliers (mostly from LDCs) in the EU market than in the US market; (iii) a simpler origin requirement in the case of the Jordan-US FTA. Comparative evidence from the two FTAs and econometric estimates suggest that this should help restore market access for Jordanian exports to the EU. These estimates provide additional evidence that origin requirements suppress market access. Other pathways to simplify origin requirements are offered in conclusion.
    JEL: F12 F13 F15
    Date: 2018–02
  19. By: Minghao Li; Wendong Zhang (Center for Agricultural and Rural Development (CARD)); Chad E. Hart (Center for Agricultural and Rural Development (CARD))
    Abstract: With the United States exporting over $24.1 billion worth of agricultural and related products to China every year, it is difficult to overestimate the importance of the trade relationship. This is why the trade issues that are currently brewing between the United States and China are making stakeholders in the U.S. agricultural industry nervous, fearing that agricultural products will be the target for China’s retaliatory measures. Just last week, China announced that it may enact 15% tariff on ethanol and 25% tariff on pork products in response to the U.S. steel and aluminum tariffs. In this article, we hope to shed light on some key guiding principles of China’s potential actions in the future by analyzing previous agricultural trade retaliations involving the United States and other countries. We argue that China’s previous choices of retaliation targets follow three principles: targeting products that are proportional in trade value, targeting products that are substitutable, and targeting products that inflict economic and political cost. Since the U.S. steel and aluminum tariffs only affects about $3 billion-worth Chinese exports and U.S. soybean exports exceeds $12 billion, soybeans is not part of China’s response this round because of the proportional retaliation principle. However, U.S. soybean exports, despite its critical significance to China and difficulties to substitute or displace, might be brought into the trade drama if the new proposed tariff on $50 billion Chinese goods are enacted.
    Date: 2018–03
  20. By: Michael Sposi (Federal Reserve Bank of Dallas); Ana Maria Santacreu (St. Louis Fed)
    Abstract: We quantify changes in welfare that result from alternative trade reforms in an economy with endogenous capital accumulation. The dynamic welfare gains associated with a particular reduction in trade frictions are larger than the dynamic welfare losses associated with returning to the initial level of the frictions. This ``asymmetry'' occurs in the short-run, yet, permanently affects welfare. Three channels contribute to the size of the asymmetry: (i) the rate of capital depreciation, (ii) the responses of measured TFP and the marginal efficiency of investment to the trade shock, and (iii) the optimal response of the investment rate. Absent transitional dynamics, the gains from a trade liberalization are equal to the losses from returning to the initial trade frictions. The short-run asymmetries imply that the sequencing of trade reforms matters for welfare.
    Date: 2017
  21. By: Dave Donaldson (Stanford University); Arnaud Costinot (MIT); Andres Rodriguez-Clare (UC Berkeley); Dominick Bartelme (University of Michigan)
    Abstract: Sector-level economies of scale matter for economic development, industrial policy, and the consequences of trade liberalization. As of yet, however, the literature has not converged on a definitive answer regarding their existence and even less an estimate of their magnitude and variation across sectors. For example, most quantitative trade papers explicitly or implicitly assume that the sector-level scale elasticity is either zero or equal to the inverse of the trade elasticity. This paper develops a two-step strategy for estimating sector-level scale elasticities using bilateral trade data. First, a revealed preference approach is used to compute the productivity of each sector-country cell from observed bilateral trade flows. Second, a market access approach is used to construct demand shifters that vary across sector-country cells. The scale elasticity (a supply side parameter) is recovered from a regression of productivity on sector size using the constructed demand shifters as instrumental variables. Preliminary results suggest that economies of scale are positive but not as large as those implicitly imposed in many leading quantitative trade models.
    Date: 2017
  22. By: Jerónimo Carballo; Alejandro Graziano; Georg Schaur; Christian Volpe Martincus
    Abstract: We examine transaction-level Peruvian import data to show that firms are subject to significant costs of port-of-entry delays. At the transaction level, we observe the time it takes a shipment to clear each step in the entry process. Our theory shows conditions under which observed entry times are endogenous. As a result, total entry delays potentially lead to biased policy conclusions and non-informative efficiency rankings of countries' entry procedures. We make three empirical contributions that help unbundle sources for time costs in trade and border effects. First, we provide evidence that at least part of the total port-entry-time is endogenous. Second, we identify the effect of entry delays on imports based on exogenous necessary entry processing. Third, we provide evidence that trade costs due to entry delays are heterogeneous across firm types. New and large importers are more elastic with respect to entry delays. This information allows researchers and policymakers to interpret aggregate port of entry delay data and their costs across different types of firms.
    Keywords: Customs Administration, Trading costs, Exporting Firm, Trade Policy, Transport Costs, Importing Firm, entry delays, trade, customs, integration
    JEL: F14 F13 F10
    Date: 2016–06
  23. By: Philipp Herkenhoff; Sebastian Krautheim
    Abstract: Over the last decades, the internationalization of the value chain has allowed firms to exploit cross-country differences in environmental and labor regulation (and enforcement) in ways that have led to a large number of NGO campaigns and consumer boycotts criticizing ‘unethical’ practices. How do potential ‘unethical’ cost savings on the one hand and the threat to reputation and sales on the other interact with the international organization of production? In this paper we introduce North-South differences in regulation, a cost-saving ‘unethical’ technology and consumer boycotts into a standard property rights model of international production. Contracts are incomplete, so that a firm has limited control over both investments and (un)ethical technology choices of both foreign affiliates and suppliers along the value chain. We show that international outsourcing and ‘unethical’ production are linked through a novel unethical outsourcing incentive, for which we also provide empirical support: a high cost advantage of ‘unethical’ production in an industry and a low regulatory stringency in the supplier's country favor international outsourcing (as opposed to vertical FDI). We also provide a microfounded model of investment and pricing under incomplete contracts when the production technology is a credence characteristic of the final good and an NGO investigates firms and may initiate a consumer boycott.
    Keywords: multinational firms, international outsourcing, property rights theory of the firm, ethical production, labor standards, pollution, consumer boycotts, credence goods, NGOs
    JEL: D21 D23 F12 F23 J81 L22 L23 L31 L50 Q53
    Date: 2018
  24. By: Nandipha Dondashe (Department of Economics, Nelson Mandela University); Andrew Phiri (Department of Economics, Nelson Mandela University)
    Abstract: In this study we examine the macroeconomic determinants of FDI for the South African economy using data collected between 1994 and 2016 using the ARDL model for cointegration. The specific macroeconomic determinants which are used in the study are per capita GDP, the inflation rate, government size, real interest rate variable, and terms of trade. With the exception of inflation the remaining macroeconomic determinants employed in the study are positively and significantly related with FDI. However, in the short-run all variables are positively and significantly correlated with FDI. Collectively, these results have important implications for policymakers.
    Keywords: FDI, ARDL cointegration, Financial crisis, South Africa.
    JEL: C13 C22 C51 C52 F21
    Date: 2018–01
  25. 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.
    Keywords: international agreements, international cooperation, exit, sovereignty
    JEL: F02 F13 F51 F53
    Date: 2018
  26. By: Whang, Unjung (Korea Institute for International Economic Policy); Lee, Sooyoung (Korea Institute for International Economic Policy); Kim, Hyuk-Hwang (Korea Institute for International Economic Policy); Kang, Youngho (Soong-sil University)
    Abstract: This article begins with the question of what is the main reason why export growth does not lead to sufficient job creation, and examines the relationship between exports and employment from various perspectives. We applied the growth accounting method to decompose the changes in employment induced by exports into the scale and composition effects on employment, so that it captures the employment effect caused by the changes in the composition of export products. From this analysis, it can be seen that the reduction in the employment effect of exports is highly correlated with the changes in the composition of the export products toward less labor-intensive. From the empirical analysis using industry-level data, it is confirmed that the higher the capital intensity, the lower the export elasticity of employment. Another interesting founding is that the export elasticity of employment is higher when the export proportion of SMEs (or final consumption goods) is larger.
    Keywords: Exports; Domestic Employment
    Date: 2018–03–02
  27. By: Eric W. Djimeu; Luc-Désiré Omgba
    Abstract: This paper examines the factors behind export diversification in oil countries. Specifically, by investigating the impact of oil booms on export diversification through a difference-in-difference framework, this paper finds that the economy’s export structure before oil boom determines whether oil windfalls might affect the diversification process. Thus, an oil boom negatively affects export diversification only if countries initially exhibit low levels of diversification. In countries with a high level of diversification before the boom, an oil boom has no impact on diversification. These results are based on a large sample of 134 countries, and are robust to various sensitivity analyses. They are corroborated with data from the manufacturing sector, which show that oil booms only reduce diversification in countries with a small manufacturing sector prior to the boom. The results suggest that the initial constraints, which hampered the emergence of entrepreneurs’ class prior the boom, are key elements of the failure of a diversification process in resource rich countries.
    Keywords: Export diversification; Oil resources; Panel data
    JEL: F1 Q32 C23
    Date: 2018
  28. By: Giménez Gómez, José M. (José Manuel); Walle, Yabibal M.; Zergawu, Yitagesu Zewdu
    Abstract: The current migration and refugee crisis in Europe requires an understanding of the different migration drivers beyond the well-known economic determinants. In this paper, we view migration from a broader human security perspective and analyze the determinants of regular and irregular migration flows from Africa to Europe for the period 1990-2014. Our results show that, in addition to economic determinants, a combination of push and pull factors influence the migration decisions of individuals. In particular, rising political persecution, ethnic cleansing, human rights violations, political instability and civil conflicts in African source countries are all signi cantly associated with increased migration flows into European destination countries. Therefore, our results underscore the need for the EU and European countries to collaborate with the source countries, not only in terms of supporting economic development in the source countries, but also in promoting human security: human rights, democracy, peace and social stability. Keywords: International migration; asylum seeker; refugee crisis; human security; Poisson Pseudo-Maximum Likelihood. JEL classi fication: F22; O15
    Keywords: Migracions de pobles -- Àfrica, 32 - Política,
    Date: 2017
  29. By: Besart Avdiu
    Abstract: I investigate the effect of attitudes toward migrants on the average skill composition of immigrants in destination countries. A model is presented showing that negative attitudes toward migrants can reduce the average skill composition. The intuition for the result is that the highly skilled are more mobile and hence more sensitive to negative attitudes. To test the hypothesis, I use survey data on attitudes toward migrants as well as data on migrant stocks by education level and origin country. The empirical analysis is based on two classes of theoretical models and I find consistent evidence for the hypothesis that more positive attitudes increase the skill composition of immigrants. The results imply that general attitudes toward migrants can be relevant for policies seeking to attract highly skilled migrants.
    Keywords: international migration, high-skilled immigration, immigration attitudes
    JEL: F22 J15 J61
    Date: 2018
  30. By: Sergey Kichko (National Research University Higher School of Economics); Pierre M. Picard (Universite du Luxembourg)
    Abstract: This paper discusses the impact of conformism on product quality, firm selection, and trade patterns. It shows that when consumers have a higher degree of conformism and/or their distribution of conformism becomes more concentrated, the equilibrium average demand falls while product quality rises in a closed economy. In an international trade context, this strengthens the home consumption bias when consumers conform to the behavior of local people. The home bias is mitigated under globalization where individuals tend to conformto peopleworldwide. The paper also discusses the conditions under which conformism and conspicuousness are reconciled.
    Keywords: heterogeneity in conformism; product quality; firmheterogeneity; home bias.
    JEL: L11 F12
    Date: 2018
    Date: 2018
  32. By: Hlalefang Khobai (Department of Economics, Nelson Mandela University); Nomahlubi Mavikela (Department of Economics, Nelson Mandela University)
    Abstract: This paper investigates the relationship between energy consumption, foreign direct investment and economic growth in Argentina employing annual data covering the period from 1970 to 2016. To determine the long run relationship and the direction of causality among the variables, the Autoregressive Distributed Lag (ARDL) bounds testing approach and Vector Error Correction Model (VECM) technique are applied, respectively. The ARDL bounds tests suggested an existence of a long run relationship between energy consumption, foreign direct investments, economic growth and capital. More specifically, it was established that a 1% increase in foreign direct investments lead to a 0.013% increase in energy consumption, while a 1% increase in economic growth boots energy consumption by 0.35% in the long run. The VECM Granger-causality results suggested a unidirectional causality flowing from foreign direct investments and capital to energy consumption. A bidirectional causality flowing between energy consumption and economic growth was also established. This study brings a fresh perspective for the energy policy makers in Argentina.
    Keywords: Energy consumption, Foreign direct investment, Economic growth, ARDL, VECM, Argentina.
    JEL: O13 Q43
    Date: 2018–02
    Date: 2018
  34. By: Thu Dao (UCL IRES - Institut de recherches économiques et sociales - UCL - Université Catholique de Louvain, University of Bielefeld); Frédéric Docquier (UCL IRES - Institut de recherches économiques et sociales - UCL - Université Catholique de Louvain, FNRS - Fonds National de la Recherche Scientifique [Bruxelles], FERDI - Fondation pour les Etudes et Recherches sur le Développement International); Mathilde Maurel (CES - Centre d'économie de la Sorbonne - CNRS - Centre National de la Recherche Scientifique - UP1 - Université Panthéon-Sorbonne, FERDI - Fondation pour les Etudes et Recherches sur le Développement International); Pierre Schaus (UCL - Université Catholique de Louvain)
    Abstract: This paper sheds light on the global migration patterns of the past 40 years, and produces migration projections for the 21st century, for two skill groups, and for all relevant pairs of countries. To do this, we build a simple model of the world economy, and we parameterize it to match the economic and socio-demographic characteristics of the world in the year 2010. We conduct a backcasting exercise which demonstrates that our model fits the past trends in international migration very well, and that historical trends were mostly governed by demographic changes. We then describe a set of migration projections for the 21st century. In line with backcasts, our world migration prospects and emigration rates from developing countries are mainly governed by socio-demographic changes: they are virtually insensitive to the technological environment. As far as OECD countries are concerned, we predict a highly robust increase in immigration pressures in general (from 12 in 2010 to 17-19% in 2050 and 25-28%in 2100), and in European immigration in particular (from 15% in 2010 to 23-25% in 2050 and 36-39% in 2100). Using development policies to curb these pressures requires triggering unprecedented economic takeoffs in migrants countries of origin. Increasing migration is therefore a likely phenomenon for the 21st century, and this raises societal and political challenges for most industrialized countries.
    Keywords: international migration,migration prospects,world economy,inequality
    Date: 2018–03–26
  35. By: W. Addessi; B. Biagi; M.G. Brandano
    Abstract: International tourism demand has grown overtime and tourism now represents one of the most growing sector worldwide. International tourist arrivals reached 1,235 million in 2016 (UNWTO, 2017), and Europe with approximately 620 million international tourists, represents just over half the world's total (50%; UNWTO, 2017). In 2002 a unique currency was introduced in some EU countries. Many applied research focuses on the effect of the common currency policy on Eurozone trade flows (Micco et al., 2003; Faruquee, 2004; Flam and Nordstrom, 2006; Aristotelous, 2006; Baldwin, 2006; Bun and Klaassen, 2007; Frankel, 2010; Camarero et al., 2013; Sadeh, 2014). On the contrary, to date very few papers analyse the effect of this monetary policy on exchange in the service sector, and specifically on tourism flows (RÃ tz and Hinek, 2006; Gil-Pareja et al., 2007; Thompson and Thompson, 2010; De Vita, 2014; Santana-Gallego et al., 2010; 2016). The main aim of the present paper is to investigate whether and to what extent the introduction of euro affects tourist flows in a sample of European and non- European countries over the period 1995-2013. To do this, we apply a technique of policy evaluation named Synthetic control method (SCM henceforth) first proposed in a seminal work by Abadie and Gardeazabal in 2003. Using this methodology, we compare the post-euro tourism exchange trajectory of countries introducing the euro as common currency in 2002 (i.e. the treated unit) with the trajectory of countries not affected by the policy (i.e. non-treated countries).
    Keywords: tourism;synthetic control method;European countries;Bilateral flows.
    Date: 2018
  36. By: Kim, Gyu Pan (Korea Institute for International Economic Policy)
    Abstract: Since 2013 the Japanese government has actively engaged in Mega-FTA negotiations such as the TPP (Trans-Pacific Partnership), Japan-EU FTA, RCEP (Regional Comprehensive Economic Partnership), and China-Japan-Korea FTA. Particularly, Japan initiated the TPP 11 negotiations in the absence of the U.S., following U.S. President Donald Trump's announcement it would be exiting from the TPP in January 2017, and reached an agreement in principle in November 2017. The Japanese government envisions moving toward the conclusion of a final agreement in early March 2018. This research examines Japan's TPP strategy by focusing on the economic effects of the TPP and Japan's major issues of interest in the TPP agreement.
    Keywords: TPP; Japans Trade Policy
    Date: 2018–02–26
  37. By: Michael D. Bordo
    Abstract: The recent rise of populist anti-globalization political movements has led to concerns that the current wave of globalization that goes back to the 1870s may end in turmoil just like the first wave that ended after World War I. It is too soon to tell. The decline and then levelling off of trade and capital flows in recent years reflects the drastic decline in global real income during the Great Recession. Other factors at work include the slowdown in the growth rate of China and the reversal of the extended international supply chains developed in the 1990s, as well as increased financial regulation across the world after the crisis. This suggests either a pause in the pace of integration or more likely a slowing down, rather than a reversal.
    Keywords: Â
    Date: 2017–03

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