nep-int New Economics Papers
on International Trade
Issue of 2018‒06‒11
thirty-two papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. Economic Integration and Bilateral FDI stocks: the impacts of NAFTA and the EU By Ray Barrell; Abdulkader Nahhas
  2. The Impact of Trade Agreements on World Export Prices By Lisandra Flach; Fabian Gräf
  3. From micro to macro: Demand, supply, and heterogeneity in the trade elasticity By Maria Bas; Thierry Mayer; Mathias Thoenig
  4. Peeling Away the Layers: Impacts of Durable Tariff Elimination By Arevik Gnutzmann-Mkrtchyan; Christian Henn
  5. Trade Policies and Integration of the Western Balkans By Oliver Reiter; Robert Stehrer
  6. The Impact of Immigration on Firm-Level Offshoring By Olney, William W.; Pozzoli, Dario
  7. The Gravity Equation in International Trade: an Explanation By Thomas Chaney
  8. Tariff Bindings and the Dynamic Formation of Preferential Trade Agreements By James Lake; Moise Nken; Halis Murat Yildiz
  9. The costs of trade protectionism: evidence from Spanish firms and non-tariff measures By Dmitri Kirpichev; Enrique Moral-Benito
  10. Institutions and Export Heterogeneity By Xinpeng Xu
  11. Pre-Feasibility Study of Sabah-North Kalimantan Cross-Border Value Chains By Lord, Montague; Chang, Susan
  12. One way to the top : How services boost the demand for goods By Andrea Ariu; Florian Mayneris; Mathieu Parenti
  13. Taking the Skill Bias out of Global Migration By Costanza Biavaschi; Michal Burzynski; Benjamin Elsner; Joël Machado
  14. Structural Change and Global Trade By Logan T. Lewis; Ryan Monarch; Michael J. Sposi; Jing Zhang
  15. Offshoring and Innovation Capabilities: Evidence from Swedish Manufacturing By Baum, Christopher F; Lööf, Hans; Perez, Luis; Stephan, Andreas
  16. Factors Affecting Variation in SMES' Export Intensity By Mohamad D. Revindo; Christopher Gan
  17. Labor union and firm fs relocation: A general oligopolistic equilibrium model analysis By Hosaki Sano
  18. The Impact of Exports on Innovation: Theory and Evidence By Philippe Aghion; Antonin Bergeaud; Matthieu Lequien; Marc J. Melitz
  19. Competitiveness at the Country-Sector Level: New Measures Based on Global Value Chains By Marczak, Martyna; Beissinger, Thomas
  20. The Effect of Exports in SACU Countries: An Empirical Analysis Using Panel Data By Sunde, Tafirenyika; Ogbokor, Cyril A.
  21. West Kalimantan Integrated Border Area Development By Lord, Montague; Chang, Susan
  22. Korea's Engagement Opportunities with the African Consumer Market through Industrial Zones By Park, Youngho; Jung, Jae Wook; Kim, Yejin
  23. Labor Market Imperfections, Markups, and Productivity in Multinationals and Exporters By Sabien DOBBELAERE; KIYOTA Kozo
  24. Foreign Capital and Domestic Productivity in the Czech Republic By Mojmir Hampl; Tomas Havranek
  25. Do House Prices Sink or Ride the Wave of Immigration? By Larkin, Matthew P.; Askarov, Zohid; Doucouliagos, Chris; Dubelaar, Chris; Klona, Maria; Newton, Joshua; Stanley, T. D.; Vocino, Andrea
  26. Growing against the background of colonization? Chinese labor market and FDI in a historical perspective By Wang, Hao; Fidrmuc, Jan; Tian, Yunhua
  27. 한·중 FTA를 활용한 중국 산둥성과의 경제협력 확대방안 (A Research on Expansion of Economic Cooperation with Shandong Province in China Through Utilizing the Korea-China FTA) By lee, Sanghun; Kim, Joo Hye
  28. The U.S.-China Trade Balance and the Theory of Free Trade: Debunking the Currency Manipulation Argument By Anwar Shaikh; Isabella Weber
  29. Exploring Brexit with dynamic spatial panel models : some possible outcomes for employment across the EU regions By Fingleton, Bernard
  30. ASEAN Economic Community: Theoretical versus Practical Economic Integration By Setyastuti, Rini; Adiningsih, Sri; Widodo, Tri
  31. Market integration from measurement to economic analysis: a survey of the recent literature By Federico, Giovanni
  32. The macroeconomic determinants of migration By Lewis, John; Swannell, Matt

  1. By: Ray Barrell (Centre for Macroeconomics (CFM); Brunel University London; London School of Economics and Political Science (LSE)); Abdulkader Nahhas (Brunel University London; Derby University)
    Abstract: This paper examines the factors affecting bilateral Foreign Direct Investment (FDI) stocks from 14 high income countries to 31 OECD countries over the period 1995-2015. We specifically emphasise the effect of regional trade agreements such as the European Union (EU) and the North American Free Trade Area (NAFTA) along with membership of the Currency Union. Our empirical analysis applies the generalised method of moments (GMM) estimator to a gravity model of bilateral FDI stocks. The findings imply that EU membership is a significant determinant of FDI even when we condition on the variables that follow from the application of the gravity model. We look at the effects of the North American Free Trade Area on within block FDI and find no similar effect. Our results suggest that European Integration has a large effect on FDI stocks, raising intra Single Market FDI noticeably. We note that the UK’s departure from the Single Market may reduce the stock of intra EU FDI by up to 30 per cent in the long run. In addition, the findings point that the UK has no labour market or competitive environment advantage above the rest of the EU in attracting FDI.
    Keywords: Regional trade agreements, Multinational firms, Foreign direct investment, Generalised method of moments, Gravity equation, Dynamic panel data model
    JEL: F14 F15 F21 C23
    Date: 2018–05
  2. By: Lisandra Flach; Fabian Gräf
    Abstract: This paper uncovers new stylized facts on the relation between economic integration and world trade prices. Using export price data combined with data on 32 WTO (World Trade Organization) accessions by developing countries and hundreds of new PTAs (Preferential Trade Agreements), we show that a country’s membership in trade agreements is associated with an increase in export prices of differentiated goods. For WTO, this effect is captured by the developing countries that were subject to rigorous WTO accession procedures. We also exploit the importance of the depth of an PTA and of its different provisions. Whereas the effect of the depth per se is not significant, individual provisions evoke distinct effects on prices. In particular, we find that PTAs with provisions on investments are associated with higher export prices. The results are consistent with recent theoretical models that relate competition to the innovation behavior of firms.
    Keywords: export prices, WTO membership, PTAs, product quality
    JEL: F13 F14
    Date: 2018
  3. By: Maria Bas (Centre d'Etudes Prospectives et d'Informations Internationales); Thierry Mayer (Département d'économie); Mathias Thoenig (Centre Universitaire d'Informatique)
    Abstract: Models of heterogeneous firms with selection into export market participation generically exhibit aggregate trade elasticities that vary across country-pairs. Only when heterogeneity is assumed Pareto-distributed do all elasticities collapse into a unique elasticity, estimable with a gravity equation. This paper provides a theory-consistent methodology for quantifying country-pair specific aggregate elasticities when moving away from Pareto, i.e. when gravity does not hold. Combining two firm-level customs datasets for which we observe French and Chinese individual sales on the same destination market over the 2000–2006 period, we are able to estimate all the components of the bilateral aggregate elasticity: i) the demand-side parameter that governs the intensive margin and ii) the supply side parameters that drive the extensive margin. These components are then used to calculate theoretical predictions of bilateral aggregate elasticities over the whole set of destinations, and how those elasticities decompose into different margins. Our predictions fit well with econometric estimates, supporting our view that micro-data is a key element in the quantification of aggregate trade elasticities.
    Keywords: Trade elasticity; Firm-level data; Heterogeneity; Gravity; Pareto; Log-normal
    JEL: F1
    Date: 2017
  4. By: Arevik Gnutzmann-Mkrtchyan; Christian Henn
    Abstract: We demonstrate that durable MFN tariff elimination affects trade patterns through several layers, which generates non-linear impacts. First, complete tariff elimination results in a large additional trade gains over and above tariff reductions. Second, commitment to durable tariff elimination, through WTO bindings, further boosts both imports and exports of ITA members. The unique setting of the WTO Information Technology Agreement (ITA) allows us to identify these effects of non-discriminatory trade policies because (i) ITA constitutes a quasi-natural experiment as several “passive” signatories joined it as an unavoidable part of pursuing of a larger policy objective, and (ii) ITA's partial coverage of the IT sector provides a natural control group for cross-product identification. Commitments under the ITA spurned development of a downstream IT export sector in “passive” signatories.
    Date: 2018–05–10
  5. By: Oliver Reiter (The Vienna Institute for International Economic Studies, wiiw); Robert Stehrer (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: Based on a newly constructed multi-country input-output table including all European countries, we estimate the economic effects of the EU accession countries entering the ‘Stabilisation and Association Agreement’ (SAA) with the EU and the potential effects of joining the European Single Market applying a structural gravity framework. The results point towards strong positive effects on trade for the SAA countries, but only small effects for the EU Member States. Conducting a counterfactual analysis, the paper gives an indication of the magnitude of the positive impacts on GDP for these countries. In addition, a detailed industry breakdown of these effects is provided.
    Keywords: structural gravity, modelling, EU accession, Western Balkans, multi-country input-output table
    JEL: C54 C67 F13 F14 F15 F17
    Date: 2018–05
  6. By: Olney, William W. (Williams College); Pozzoli, Dario (Copenhagen Business School)
    Abstract: This paper studies the relationship between immigration and offshoring by examining whether an influx of foreign workers reduces the need for firms to relocate jobs abroad. We exploit a Danish quasi-natural experiment in which immigrants were randomly allocated to municipalities using a refugee dispersal policy and we use the Danish employer-employee matched data set covering the universe of workers and firms over the period 1995-2011. Our findings show that an exogenous influx of immigrants into a municipality reduces firm-level offshoring at both the extensive and intensive margins. The fact that immigration and offshoring are substitutes has important policy implications, since restrictions on one may encourage the other. While the multilateral relationship is negative, a subsequent bilateral analysis shows that immigrants have connections in their country of origin that increase the likelihood that firms offshore to that particular foreign country.
    Keywords: immigration, offshoring
    JEL: F22 F16 J61 F23
    Date: 2018–04
  7. By: Thomas Chaney (Département d'économie)
    Abstract: The gravity equation in international trade states bilateral exports are proportional to economic size, and inversely proportional to geographic distance. While the role of size is well understood, that of distance remains mysterious. I offer an explanation for the role of distance: If (i) the distribution of firm sizes is Pareto, (ii) the average squared distance of a firm’s exports is an increasing power function of its size, and (iii) a parameter restriction holds, then the distance elasticity of trade is constant for long distances. When the firm size distribution follows Zipf’s law, trade is inversely proportional to distance.
    JEL: F1
    Date: 2017
  8. By: James Lake (Department of Economics, Southern Methodist University); Moise Nken (Department of Economics, Ryerson University, Toronto, Canada); Halis Murat Yildiz (Department of Economics, Ryerson University, Toronto, Canada)
    Abstract: We show that multilateral tari§ binding liberalization substantially impacts the nature and extent of Preferential Trade Agreement (PTA) formation. First, it shapes the nature of forces constraining expansion of Free Trade Agreements (FTAs). The constraining force is a free riding incentive of FTA non-members under relatively high bindings but an exclusion incentive of FTA members under relatively low bindings. Second, multilateral tari§ binding liberalization shapes the role played by PTAs in the attainment of global free trade. Initially, tari§ binding liberalization leads to Custom Union (CU) formation in equilibrium but in a way that undermines the pursuit of global free trade. However, further tari§ binding liberalization leads to FTA formation in equilibrium and in a way that facilitates the attainment of global free trade. Our theoretical analysis also has implications regarding recent empirical discussions over the relative merits of FTAs versus CUs.
    Date: 2018–05
  9. By: Dmitri Kirpichev (CEMFI); Enrique Moral-Benito (Banco de España)
    Abstract: The rise in non-tariff protectionist measures has been associated to the weakness in global trade over the last few years. We investigate the effect of non-tariff barriers (NTBs) on exports growth over the period 2009-2013 using administrative data at the firm-product-destination level in Spain. According to our findings, non-tariff protectionist measures significantly reduce exports growth at the product-destination level. Moreover, NTBs also hinder exports growth at the firm level and negatively affect other firm outcomes such as productivity growth. In contrast, the impact of liberalizing non-tariff measures is not statistically significant.
    Keywords: protectionism, non-tariff measures, firm level data
    JEL: F10 F30 F40 G15 G21 G32
    Date: 2018–05
  10. By: Xinpeng Xu (Hong Kong Polytechnic University)
    Abstract: Multinational firms in a source country often expand or diversify their businesses by exporting to other destination countries. Institution has been identified in the literature to be important in affecting exports. This paper examines how contracting institutional strengths or weaknesses in source as well as destination countries influence export decisions of multinational firms. Our results show that competitive advantages of multinational firms in exports of both homogeneous and heterogeneous goods are eroded by weak contracting institutions in their source countries. We also find that weak contracting institutions in the destination countries exert significant negative impacts on heterogeneous exports but not on homogeneous exports.
    Keywords: Institution; Export Heterogeneity; International Trade.
    Date: 2018–04
  11. By: Lord, Montague; Chang, Susan
    Abstract: This study maps the optimal configuration of North Kalimantan–Sabah cross-border trade and investment in goods and services; and, concurrently, it provides a preliminary (pre-feasibility) design of a border area development plan for the two territories. The options for moving project proposals forward are elaborated in sufficient detail and contain the needed concrete measures that will permit the overall collaboration program to move through subsequent stages of development into the final implementation and operational phases.
    Keywords: sabah, Malaysia, North Kalimantan, Kalimantan, Indonesia, Feasbility, Pre-Feasibility, Project Appraisal, Appraisal, trade, cross-border, value chain, value chains
    JEL: F1 F14 F17
    Date: 2018–10–01
  12. By: Andrea Ariu (LMU Munich, IFO and CESifo, Germany; CRENOS, Italy.); Florian Mayneris (Université du Québec à Montréal and Université Catholique de Louvain.); Mathieu Parenti (Université Libre de Bruxelles: ECARES and CEPR Belgium.)
    Abstract: In this paper, we take advantage of a uniquely detailed dataset on firm-level exports of both goods and services to show that demand complementarities between services and goods enable firms to boost their manufacturing exports by also providing services. The positive causal effect of services accounts for up to 25% of the manufacturing exports of bi-exporters (i.e. the firms that export both goods and services), and 12% of overall goods exports from Belgium. We find that by associating services with their goods, bi-exporters increase both the quantities and the prices of their goods. To rationalize these findings, we develop a new model of oligopolistic competition featuring one-way complementarity between goods and services, product differentiation, and love for variety. By supplying services with their goods, firms increase their market share, and hence their market power and markup. The model then shows that exporting services acts as a demand shifter for firms, increasing the perceived quality of their products. Going back to the data, we find strong confirmation for this mechanism.
    Keywords: van Zeeland, Kemmerer, Federal Reserve System, financial crisis, banking reform
    JEL: F10 F14 L80
    Date: 2018–03
  13. By: Costanza Biavaschi (Norwegian University of Science and Technology (NTNU) and IZA); Michal Burzynski (University of Luxembourg); Benjamin Elsner (University College Dublin, IZA and CReAM); Joël Machado (Luxembourg Institute for Socio-Economic Research (LISER))
    Abstract: Global migration is heavily skill-biased, with tertiary-educated workers being four times more likely to migrate than workers with a lower education. In this paper, we quantify the global impact of this skill bias in migration. Based on a quantitative multi-country model with trade, we compare the current world to a counterfactual with the same number of migrants, where all migrants are neutrally selected from their countries of origin. We find that most receiving countries benefit from the skill bias in migration, while a small number of sending countries is significantly worse off. The negative effect in many sending countries is completely eliminated — and often reversed — once we account for remittances and additional migration-related externalities. In a model with all our extensions, the average welfare effect of skill-biased migration in both OECD and non-OECD countries is positive.
    Keywords: migration, skill selection, global welfare
    JEL: F22 O15 J61
    Date: 2018–05–22
  14. By: Logan T. Lewis; Ryan Monarch; Michael J. Sposi; Jing Zhang
    Abstract: Services, which are less traded than goods, rose from 50 percent of world expenditure in 1970 to 80 percent in 2015. Such structural change restrained "openness"—the ratio of world trade to world GDP—over this period. We quantify this with a general equilibrium trade model featuring non-homothetic preferences and input-output linkages. Openness would have been 70 percent in 2015, 23 percentage points higher than the data, if expenditure patterns were unchanged from 1970. Structural change is critical for estimating the dynamics of trade barriers and welfare gains from trade. Ongoing structural change implies declining openness, even absent rising protectionism.
    Keywords: Globalization ; Structural change ; International trade
    JEL: F41 L16 O41
    Date: 2018–04–10
  15. By: Baum, Christopher F (Boston College and DIW Berlin); Lööf, Hans (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Perez, Luis (University of Minnesota); Stephan, Andreas (Jönköping International Business School (JIBS) & Centre of Excellence for Science and Innovation Studies (CESIS))
    Abstract: This paper examines the impact of global value chains on rms' innovation capabilities. Using the United Nations Broad Economic Categories (BEC) system to identify offshoring-related intermediate imports, we study contracting out production over the period 2001-2014 from about 7,000 mainly small Swedish manufacturing frms to six different destinations and test hypotheses on improvements and outcomes of innovation capabilities. Our empirical fndings show that the strategy to participate in global value chains increases frms' innovative capability regardless of frms' technology intensity. The results are robust to a wide set of controls and in line with predictions in recent models of directed technical change.
    Keywords: Innovation Capabilities; Technical Change; Skill Premium; Panel Data
    JEL: F14 L23 O22 O32
    Date: 2018–06–01
  16. By: Mohamad D. Revindo (Research Associate, Institute for Economic and Social Research, Faculty of Economics and Bussiness , University of Indonesia, Jakarta); Christopher Gan (Professor in Accounting and Finance, Faculty of Agribusiness and Commerce, Department of Finance and Business System, Lincoln University, New Zealand)
    Abstract: Small and Medium-sized Enterprises (SMEs) are more constrained to participate in export market than their large counterparts despite various export assistance provision by the government. Extant literature on SME internationalization mostly focus more on how non-exporting SMEs can become exporters than on how exporting SMEs can sustain and expand their export. This study aims to investigate the factors affecting SMEs’ export intensity with reference to the case of Indonesia. Fractional-logit regressions were used to identify the influence of export-exhibiting factors, export-inhibiting factors, and firm and owner characteristics on SMEs’ export intensity. The evidences were collected from 497 SMEs in seven provinces in Jawa, Madura and Bali regions. The findings show that SMEs’ export intensity is affected by some firm characteristics including firm age and total employees. Export intensity is also affected by some exhibiting factors including owners’ overseas and MNC/exporting firm work experience, central government agencies’ assistance, network relationships with non-government actors, location, export market of choices and years of exporting. By contrast, export intensity is adversely affected by perceived difficulties in overcoming informational and human resources barriers, distribution, logistics and promotional barriers, financial barriers, foreign government barriers, procedural barriers and price barriers. The policy and managerial implications of the findings are discussed.
    Keywords: SMEs — internationalization — export intensity — export barriers — Indonesia
    JEL: F23 L25 M13 M16 O17
    Date: 2018–05
  17. By: Hosaki Sano (Graduate School of Economics, Osaka University)
    Abstract: This paper presents a multi-sector general oligopolistic equilibrium trade model. We investigate how a country fs labor union structure affects a mobile firm fs location decision. We propose a model in which there is international trade and firm mobility between a partial unionized country and a nonunionized country. When the proportion of unionized sectors is low, the welfares of the two countries are equal; otherwise, the unionized country fs welfare is lower. Compared to the case with no firm mobility, the difference in welfare is larger when the proportion of the unionized sectorsis sufficiently large.
    Keywords: labor union, international trade, general oligopolistic equilibrium
    JEL: F15 F16 L13
    Date: 2018–05
  18. By: Philippe Aghion; Antonin Bergeaud; Matthieu Lequien; Marc J. Melitz
    Abstract: This paper investigates the effect of export shocks on innovation. On the one hand a positive shock increases market size and therefore innovation incentives for all firms. On the other hand it increases competition as more firms enter the export market. This in turn reduces profits and therefore innovation incentives particularly for firms with low productivity. Overall the positive impact of the export shock on innovation is magnified for high productivity firms, whereas it may negatively affect innovation in low productivity firms. We test this prediction with patent, customs and production data covering all French manufacturing firms. To address potential endogeneity issues, we construct firm-level export proxies which respond to aggregate conditions in a firm's export destinations but are exogenous to firm-level decisions. We show that patenting robustly increases more with export demand for initially more productive firms. This effect is reversed for the least productive firms as the negative competition effect dominates.
    JEL: D12 F13 F14 F41 O30 O47
    Date: 2018–05
  19. By: Marczak, Martyna (University of Hohenheim); Beissinger, Thomas (University of Hohenheim)
    Abstract: We propose the so-called domestic "embodied unit labor costs" (EULC) at the country-sector level as a new cost-related basis for measures of international competitiveness. EULC take into account that a sector's labor costs constitute only a small share of its total cost which to a large extent consist of expenses for intermediate goods from other sectors. In line with a simple Leontief-type model, the proposed measure is constructed as a weighted average of unit labor costs of all domestic sectors contributing to the final goods of a specific sector. The contribution is expressed in value-added terms and takes global supply chains into account. We also show how EULC can be consistently calculated for sectoral aggregates such as the tradable goods sector. Based on EULC we propose the "embodied real effective exchange rate" (EREER) at the country-sector level as a new competitiveness indicator where the relevance of trading partners is quantified by an appropriate value-added measure. The chosen value-added concept replaces gross exports traditionally used as the weight basis in effective exchange rates. Using the World Input-Output Database (WIOD) we employ the proposed indicators to shed new light on changes in cost competitiveness at the sectoral level for Germany, and compare the empirical evidence with selected other euro area countries.
    Keywords: unit labor costs, real effective exchange rate, global supply chains, input-output analysis, sectoral analysis, international competitiveness, WIOD, Germany
    JEL: J30 C67 E01 F16 F23
    Date: 2018–04
  20. By: Sunde, Tafirenyika; Ogbokor, Cyril A.
    Abstract: Simultaneity bias is an issue that does arise in most cases when all variables in a model are interdependent. The study responds to this challenge by employing panel data models to analyse the effects of exports in SACU countries. The study applies stationary data estimation techniques to a sample of five (5) SACU countries over the period 1980-2016. The study finds that exports positively and significantly affect GDP per capita in SACU region. In addition, the fixed effects and random effects models show that heterogeneity effects are significant, while the time effects are not significant in explaining the GDP per capita in the SACU region. This implies that country differences such as institutional, political and economic policy systems, among others, not included in the models are significant in explaining GDP per capita in SACU region. Finally, the study finds that SACU countries are enjoying increasing returns to scale. On the policy front, it should be noted that the long-standing trade liberalization and trade openness agendas of SACU have had a significant impact on economic growth and this has led to an upsurge in exports. Therefore, the SACU region must focus more on structural transformation which involves moving their specialisation patterns to more sophisticated goods and services to bolster their comparative advantage in international markets which affect economic growth through exports.
    Keywords: GDP per capita; exports; panel models; pooled model; fixed effects model; random effects model; SACU
    JEL: F1 F4 F43
    Date: 2018–01–31
  21. By: Lord, Montague; Chang, Susan
    Abstract: This study identifies concrete and high-impact projects that will advance implementation of an integrated border area development program for West Kalimantan. This part of the study determines what the integrated border economic area should look like. The process involves carrying out a scoping study in the province and, based on those findings, preparing a concept report on program design and how it should be prepared and implemented.
    Keywords: West Kalimantan, Indonesia, trade, cross-border, value chain, value chains, project appraisal, appraisal, industry analysis, pre-feasibility, concept paper, ship building, rubber, palm oil, eco-tourism
    JEL: F10 F13 F14
    Date: 2018–02–22
  22. By: Park, Youngho (Korea Institute for International Economic Policy); Jung, Jae Wook (Korea Institute for International Economic Policy); Kim, Yejin (Korea Institute for International Economic Policy)
    Abstract: Unlike previous discussions on Africa that have focused on its commodities, recent focus has shifted to the potential of Africa's consumer market. Africa's remarkable economic growth and a population of 12 billion, which continues to expand in line with urbanization, has encouraged the development of the middle-income class. The increasing number of modern retail stores and supermarkets in the major cities illustrate the growth of Africa's consumer market. Yet, Africa's consumer market remains fragmented because of the poor logistical infrastructure, complex trade regulations, and political hostilities that limit trade between countries. As a result, inter-Africa trade remains at 12% of Africa's total trade while that of Western Europe and the Asia Pacific is at 61% and 39% respectively. Moreover, the majority of manufactured goods are imported because there is a lack of skills, equipment and knowledge as well and land ownership issues among other factors. The influx of cheap imported goods across a wide range of industries covering textiles, plastics, machinery, electronics, construction materials and others have also hindered the growth of the manufacturing sector in Africa because of its low cost competitiveness. Despite the merits of engaging with Africa, the trade volume between Korea and Africa has remained minuscule because of geographical and logistical barriers. Against this background, utilizing industrial zones in Africa would be an effective way for Korea to engage directly with the African consumer market. Eastern Africa, Ethiopia in particular, should be prioritized as an entry point because of its relative political stability, improving business environment and intensity of intra-regional trade. In terms of focus industries, although agriculture, textiles and minerals are the most consumed and exported items yet in Africa, Korea should prioritize production of machinery, petro-chemical products and non-mineral goods because better competitiveness in these areas.
    Keywords: Korea; African consumer market; industrial zones
    Date: 2018–03–26
  23. By: Sabien DOBBELAERE; KIYOTA Kozo
    Abstract: This paper examines the links between a firm's internationalization status and the type and degree of market imperfections in product and labor markets. We develop a framework for modelling heterogeneity across firms in terms of (i) product market power (price-cost markups), (ii) labor market imperfections (workers' bargaining power during worker-firm negotiations or firm's degree of wage-setting power), and (iii) revenue productivity. We apply this framework to analyze whether the pricing behavior of firms in product and labor markets differs across firms that engage in different forms of internationalization using an unbalanced panel of 7,458 manufacturing firms over the period 1994-2012 in Japan. Engagement in international activities is found to matter for determining not only the type of imperfections in product and labor markets but also the degree of imperfections. Clear differences in behavior between firms that serve the foreign market through either exporting or foreign direct investment (FDI) are observed. Exporters are more likely to be characterized by imperfect competition in the product market whereas the opposite holds for multinationals. Exporters are more likely to share rents based on the bargaining power of workers whereas a firm's wage-setting power seems to generate wage dispersion across firms with foreign subsidiaries.
    Date: 2018–05
  24. By: Mojmir Hampl (Czech National Bank, Na prikope 28, 115 03 Prague 1, Czech Republic); Tomas Havranek (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nabrezi 6, 111 01 Prague 1, Czech Republic; Czech National Bank, Na prikope 28, 115 03 Prague 1, Czech Republic)
    Abstract: In this paper we take stock of the evidence concerning the effect of foreign direct investment (FDI) on the productivity of locally owned firms in the Czech Republic. To this end, we collect 332 estimates previously reported in journal articles, working papers, and PhD theses. We find that the mean reported externality arising for domestic firms due to the presence of foreign firms (the “FDI spillover”) is zero. There is no evidence of publication bias, i.e., no sign of selective reporting of results that are statistically significant and show an intuitive sign. Nevertheless, we find that the overall spillover effect is positive and large when more weight is placed on estimates that conform to best-practice methodology. Our results suggest that, as of 2018, a 10-percentage-point increase in foreign presence is likely to lift the productivity of domestic firms by 11%. The effect is even larger for joint ventures, reaching 19%.
    Keywords: Foreign direct investment, productivity, spillovers, meta-analysis
    JEL: C83 F23
    Date: 2018–05
  25. By: Larkin, Matthew P. (Deakin University); Askarov, Zohid (Deakin University); Doucouliagos, Chris (Deakin University); Dubelaar, Chris (Deakin University); Klona, Maria (Deakin University); Newton, Joshua (Deakin University); Stanley, T. D. (Deakin University); Vocino, Andrea (Deakin University)
    Abstract: The sharp rise in international migration is a pressing social and economic issue, as seen in the recent global trend towards nationalism. One major concern is the impact of immigration on housing. We assemble a comprehensive database of 474 estimates of immigration's impact on house prices in 14 destination countries and find that immigration increases house prices, on average. However, attitudes to immigrants moderate this effect. In countries less welcoming to immigrants, house price increases are more limited.
    Keywords: immigration, house prices, attitudes, meta-regression
    JEL: F22 R31
    Date: 2018–04
  26. By: Wang, Hao; Fidrmuc, Jan; Tian, Yunhua
    Abstract: This article investigates how the legacy of colonization shapes the impact of inward FDI on employment in the Chinese labor market. The analysis utilizes provincial panel on overall employment and employment in the service sector during 2006-15. We find that inward FDI significantly promotes employment and that this relationship is stronger in regions once colonized by Western countries. Conversely, regions with a legacy of Japanese colonization display a weaker, and even negative, relationship between FDI and employment. These findings are robust to controlling for the length and intensity of colonization, as well as for endogeneity of FDI.
    JEL: F21 F54 O15
    Date: 2018–05–30
  27. By: lee, Sanghun (Korea Institute for International Economic Policy); Kim, Joo Hye (Korea Institute for International Economic Policy)
    Abstract: 본 연구는 한·중 FTA를 활용하여 중국의 지방, 특히 산둥성과 경제협력을 확대할 수 있는 방안에 대해 분석하였다. 이를 위해 산둥성의 대외개방 및 국제협력 현황과 정책, 한·산둥성 간 경제협력, FTA를 활용한 중국의 대외경제협력 사례에 대해 분석하였다. 아울러 협력 패러다임의 전환, 무역 및 투자의 협력 방향, 산업협력과 관련한 정책적 시사점을 제시하였다. Considering that Shandong province is the most active in economic cooperation with Korea and has already been conducting economic cooperation with Korea for a long time, Korea should formulate plans to utilize Shandong as a base area for expanding the performance of the Korea-China FTA, and further develop a successful cooperation model. This requires a transition to a cooperation paradigm that fits the new economic environment. Labor-intensive manufacturing and SMEoriented cooperation need to be rapidly shifted to high-tech industries, high-tech and service-oriented cooperation in accordance with the demand for cooperation and policy directions of Shandong Province. The trade and FDI of Shandong Province are mostly concentrated in low-tech industries, putting the region somewhat at odds with the policy direction of the Shandong provincial government, which is currently pursuing industrial advancement. On the other hand, the trade and investment between Korea and Shandong is centered on high-tech industries with a high level of technology, which is in line with the advanced industrial structure and export structure of Shandong Province. In recent years, the Shandong provincial government has been pursuing various cooperation pilot policies like the Korea-China industrial complexes and demonstration zone for Korea-China local economic cooperation. These policy changes are in line with Korea’s demand to promote its economic cooperation with China to a new level with the conclusion of the Korea-China FTA. In the future, Korea should use Shandong as a base and test bed for economic cooperation with China, and expand the cooperation achievements and models in Shandong Province to all regions of China.
    Keywords: Shandong; Korea-China FTA; economic cooperation
    Date: 2018–05–20
  28. By: Anwar Shaikh (Department of Economics, New School for Social Research); Isabella Weber (Institute of Management Studies, Goldsmiths University of London)
    Abstract: The U.S.-China trade imbalance is commonly attributed to a Chinese policy of currency manipulation. However, empirical studies failed to reach consensus on the degree and kind of RMB misalignment. We argue that this is not a consequence of poor measurement but of theory. The conventional principle of comparative advantage suggests real exchange rates will adjust so as to balance trade. Therefore, the persistence of trade imbalances tend to be interpreted as arising from currency manipulation. In contrast, the Smithian-Harrodian theory explains trade imbalances as the outcome of free trade and sees unequal real competitiveness as the root cause of the U.S.-China trade imbalance.
    JEL: F10 F31 F32
    Date: 2018–05
  29. By: Fingleton, Bernard
    Abstract: Starting with a reduced form derived from standard urban economics theory, this paper estimates the possible job-shortfall across UK and EU regions using a time-space dynamic panel data model with a Spatial Moving Average Random Effects (SMA-RE) structure of the disturbances. The paper provides a logical rational for the presence of spatial and temporal dependencies involving the endogenous variable, leading to estimates based on a dynamic spatial Generalized Moments (GM) estimator proposed by Baltagi, Fingleton and Pirotte (2018). Given state-of-the art interregional trade estimates, the simulations are based on a linear predictor which utilizes different regional interdependency matrices according to assumptions about interregional trade post-Brexit.
    Keywords: Brexit; Interregional trade; Urban economics theory; Panel data; Spatial lag; Spatio-temporal lag; Dynamic; Spatial moving average; Prediction; Simulation.
    JEL: C23 C33 C53 E27 F10 J21 R12
    Date: 2018–05–06
  30. By: Setyastuti, Rini; Adiningsih, Sri; Widodo, Tri
    Abstract: ASEAN countries have committed achieving the ASEAN Economic Community (AEC) with the timeline set at 2015. Policy measures are being implemented based on the AEC Blueprint agreed upon 2007. However, concerns have been expressed that the regional integration project’s 2015 deadline will be missed due to an overly ambitious timeline and there are wide development gap in this region. This article critically reviews the progress that has been made, some of the potential problems, and suggests the next step for the AEC.
    Keywords: ASEAN, integration, potential problems, AEC
    JEL: F14 F17
    Date: 2018–05–17
  31. By: Federico, Giovanni
    Abstract: This paper surveys the literature on market integration. It builds on a previous survey on the integration of European markets (Federico 2012), extending the discussion to integration of markets in Asia and across oceans, and dealing also with the literature on causes and effects of integration. It argues that a lot of progress has been made, but still we are far from a comprehensive view of the issue. The most pressing needs are the definition of an implementable method to assess gains from integration and the collection of new data, most notably on products and areas other than cereals in Europe and on trade costs.
    Keywords: Development; market integration
    Date: 2018–04
  32. By: Lewis, John (Bank of England); Swannell, Matt (Bank of England)
    Abstract: We estimate a gravity model of the determinants of migration flows using pairwise data from around 160 origin countries to 35 advanced economy destinations over the period 1990–2013. When we interact the various explanatory variables with freedom of movement we find that the elasticities of migration with respect to macroeconomic variables are not constant across country pairs. Under freedom of movement, the response to macroeconomic variables is stronger, and the response to distance and historical migrant stocks is weaker. However, the elasticity with regard to linguistic and historical variables does remain constant. Alongside macro variables commonly used in the literature, we also find a significant role for expected GDP growth. Migration flows are higher to destinations with stronger expected GDP growth, and from origins with weaker expected GDP growth. In addition, greater labour market flexibility in destination countries is associated with higher inward migration.
    Keywords: Migration; macroeconomics; common correlated effects; multilateral resistance
    JEL: C23 E00 F22
    Date: 2018–05–25

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