|
on International Trade |
| By: | Alexander-Nikolai Sandkamp |
| Abstract: | With over 1,600 measures in force in 2017, antidumping (AD) duties constitute a frequently used trade defence instrument. Theory predicts that, unlike normal tariffs, AD duties raise producer prices. However, empirical evidence remains inconclusive. This paper exploits the EU enlargement of 2004 as a natural experiment. Following their accession to the EU, the new member states inherited the Union’s AD duties. Under plausible assumptions, these duties are exogenous to new members’ trade shocks. In line with theoretical considerations, the paper shows that AD duties raise producer prices, but only for imports originating from countries with Market Economy Status (MES). Import prices from non-MES countries remain unchanged, while quantities fall by more. Furthermore, this paper presents evidence that the trade dampening effects. |
| Keywords: | Antidumping, trade, European Union, market economy status |
| JEL: | F13 F14 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ifowps:_261&r=int |
| By: | Giri, Rahul (International Monetary Fund); Yi, Kei-Mu (University of Houston); Yilmazkuday, Hakan (Florida International University) |
| Abstract: | This paper assesses the quantitative importance of including sectoral heterogeneity in computing the gains from trade. Our framework draws from Caliendo and Parro (2015) and Alvarez and Lucas (2007) and has sectoral heterogeneity along five dimensions, including the elasticity of trade to trade costs, the value-added share, and the input-output structure. The key parameter we estimate is the sectoral trade elasticity, and we use the Simonovska and Waugh (2014) simulated method of moments estimator with micro price data. Our estimates range from 2.97 to 8.94, considerably lower than those obtained with the Eaton and Kortum (2002) price-based method. Our benchmark model is calibrated to 21 OECD countries and 20 sectors. We compute the gains from trade in our benchmark model, and in several re-calibrated versions of the model in which we eliminate one or more sources of sectoral heterogeneity. Our main result is that sectoral heterogeneity does not always lead to an increase in the gains from trade. There are two reasons for this. First, the magnitudes of our estimated sectoral trade elasticities are relatively high, while the magnitude of our estimated aggregate trade elasticity is low. All else equal, this will lead to higher gains for the aggregate, one-sector model. Second, the sectors with low trade elasticities (hence, implying high gains from trade) are not the sectors with low value-added shares and with high initial trade shares (which would magnify the gains). Hence, the sectoral heterogeneity in our calibrated model does not exert complementary gains from trade effects. |
| Keywords: | gains from trade; estimated trade elasticities; simulated method of moments; sectoral heterogeneity; international price dispersion; multi-sector trade |
| JEL: | F10 F11 F14 F17 |
| Date: | 2018–03–07 |
| URL: | http://d.repec.org/n?u=RePEc:fip:feddgw:341&r=int |
| By: | Eliasson, Kent (Growth Analysis); Hansson, Pär (Örebro University School of Business); Lindvert, Markus (Growth Analysis) |
| Abstract: | Multinational enterprises (MNE) have been highly instrumental in the processes leading to the increased fragmentation of production within global value chains. We examine the relationship between relative demands for skills, non-routine or non-offshorable tasks in Swedish MNE parents (onshore) and their employment shares in affiliates abroad (offshore), as well as the impact on relative demand in Swedish enterprises at home when establishing an affiliate abroad. The period of study is 2001 to 2013, a period of expansion for Swedish MNEs, particularly in low-income countries such as China. Our instrumental variable estimates suggest that there is a causal relationship of increased employment shares in affiliates abroad (offshore) on higher relative demand for skills and non-routine tasks in the parents at home (onshore) and that the impact of such offshore employment changes onshore is non-negligible. Furthermore, we estimate the relationships between absolute employment onshore (skilled and less-skilled labor) and employment in affiliates offshore (high- and low-income countries). Increased employment in affiliates in lowincome countries is negatively related to the employment of less-skilled workers in manufacturing MNE parents (substitute), whereas increased employment in affiliates in high-income countries is positively related to the employment of both skilled and lessskilled workers in service at MNE parents (complement). |
| Keywords: | multinational enterprises; relative labor demand; offshoring; skill upgrading; non-routine; offshorable tasks |
| JEL: | F14 F16 F23 J23 J24 |
| Date: | 2018–06–12 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:oruesi:2018_009&r=int |
| By: | Réka Juhász; Claudia Steinwender |
| Abstract: | This paper studies how information and communication technology (ICT) improvements affect trade along the value chain and international technology diffusion. We examine the impact of a revolutionary technology, the roll-out of the global telegraph network, on the 19th century cotton textile industry. First, we show that connection to the telegraph disproportionately increased trade in intermediate goods relative to final goods. We document that this was due to differences in codifiability; that is, the extent to which product specifications could be communicated at a distance using only words (and thus by sending telegrams) as opposed to inspecting a sample of the product. Second, adoption of the telegraph also facilitated international technology diffusion through the complementary mechanisms of importing machinery and acquiring knowledge of the production process and local demand through importing intermediates. These results shed light on how ICT facilitates the formation of global value chains and the diffusion of frontier technology. |
| JEL: | F14 N7 O14 O33 |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24590&r=int |
| 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: | 2018–02 |
| URL: | http://d.repec.org/n?u=RePEc:spo:wpmain:info:hdl:2441/3pucspchqi8kcpk743av62v2va&r=int |
| By: | Chen, Natalie; Novy, Dennis |
| Abstract: | How do trade costs affect international trade? This paper offers a new approach. We rely on a flexible gravity equation that predicts variable trade cost elasticities, both across and within country pairs. We apply this framework to the effect of currency unions on international trade. While we estimate that currency unions are associated with a trade increase of around 38 percent on average, we find substantial underlying heterogeneity. Consistent with the predictions of our framework, we find effects around three times as strong for country pairs associated with small import shares, and a zero effect for large import shares. Our results imply that conventional homogeneous currency union estimates do not provide helpful guidance for countries considering to join a currency union. Instead, countries need to take into account the distribution of their trade shares to assess the impact of trade costs. |
| Keywords: | Currency Unions; euro; Gravity; Heterogeneity; Trade Costs; Trade Elasticity; Translog. |
| JEL: | F14 F15 F33 |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:12954&r=int |
| By: | Alicia García-Herrero; Thibault Marbach; Jianwei Xu |
| Abstract: | China’s increasingly important role in the global economy has transformed the nature of global competition and reshaped international trade. Meanwhile, the European Union has long been the most important power in global trade and continues to run a very large trade surplus. We address whether China is an increasingly relevant competitor for Europe in third markets, and in particular in Latin America. More specifically, we empirically estimate the elasticity of substitution between European exports and Chinese exports to Latin American economies (ie how their exports to Latin America respond to the changes in relative exporting prices). Our results show that the degree of competition between China and the EU in Latin America has increased over time. Before 2007, China and the EU competed less with each other, partly reflecting the fact that China was mainly exporting low-quality products. However, the elasticity of substitution has increased since 2007, reflecting China’s ascent up the value-added chain. We also look at competition between China and the EU in the key EU sectors that export to Latin America. We find that China-EU competition is fiercer in electrical machinery and road vehicles. This finding should be a wake-up call to Europe in its quest to remain competitive at the global level. |
| Date: | 2018–06 |
| URL: | http://d.repec.org/n?u=RePEc:bre:wpaper:26150&r=int |
| By: | Johannesson, Louise (Research Institute of Industrial Economics (IFN)) |
| Abstract: | The dispute settlement mechanism (DSM) is today the most active dispute resolution forum in the world. However, its success has also led to increased processing time of disputes, which, in turn, increases the cost of using the World Trade Organization (WTO) as a way to resolve trade conflicts. I investigate whether the DSM can be improved by introducing a permanent panel of judges, to replace the current ad hoc system of appointing new judges for each dispute. I find mixed results, but one aspect that could speed up the process is that permanent judges develop established work relations and working methods. |
| Keywords: | WTO; Dispute settlement; WTO panel; Trade disputes; Delays |
| JEL: | F13 K41 |
| Date: | 2018–06–05 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iuiwop:1219&r=int |
| By: | Lionel Nesta (Observatoire français des conjonctures économiques); Stefano Schiavo (Observatoire français des conjonctures économiques) |
| Abstract: | The paper investigates the impact of import competition on rent-sharing between firms and employees. First, by applying recent advances in the estimation of price-costs margins to a large panel of French manufacturing firms for the period 1993–2007,we are able to classify each firm into labor- and product-market regimes based on the presence/absence of market power. Second, we concentrate on firms that operate in an efficient bargaining framework to study the effect of import penetration on workers’ bargaining power. We find that French imports from other OECD countries have a negative effect on bargaining power, whereas the impact of imports from low wage countries is more muted. By providing firm-level evidence on the relationship between international trade and rent sharing, the paper sheds new light on the effect of trade liberalization on the labor market. |
| Keywords: | Firm heterogeneity; Import competition; Mark-up; Wage bargaining |
| JEL: | F14 F16 J50 |
| Date: | 2018–04 |
| URL: | http://d.repec.org/n?u=RePEc:spo:wpmain:info:hdl:2441/2d13t3kn6v8mop0no1md4bjn1i&r=int |
| By: | Gouranga Gopal Das (Department of Economics, Hanyang University.); Sugata Marjit (Centre for Studies in Social Sciences, Calcutta(CSSSC).) |
| Abstract: | With the ensuing immigration reform in the US, the paper shows that targeted skilled immigration into the R&D sector that helps low-skilled labor is conducive for controlling inequality and raising wage. Skilled talent-led innovation could have spillover benefits for the unskilled sector while immigration into the production sector will always reduce wage, aggravating wage inequality. In essence, we infer: (i) if R&D inputs contributes only to skilled sector, wage inequality increases in general; (ii) for wage gap to decrease, R&D sector must produce inputs that goes into unskilled manufacturing sector; (iii) even with two types of specific R&D inputs entering into the skilled and unskilled sectors separately, unskilled labor is not always benefited by high skilled migrants into R&D-sector. Rather, it depends on the importance of migrants’ skill in R&D activities and intensity of inputs. Inclusive immigration policy requires inter-sectoral diffusion of ideas embedded in talented immigrants targeted for innovation. |
| Keywords: | H1B, Immigration, Innovation, Wage gap, Skill, R&D, Policy, RAISE Act |
| JEL: | F22 J31 O15 |
| Date: | 2018–05–22 |
| URL: | http://d.repec.org/n?u=RePEc:qld:uq2004:594&r=int |
| By: | Jaewon Jung (Université de Cergy-Pontoise, THEMA) |
| Abstract: | This paper develops a new CGE model incorporating a Roy-like worker assignment in which heterogeneous workers endogenously sort into different technologies based on their comparative advantage. The model predicts significantly higher welfare-improving effects of trade liberalization due to technology-upgrading mechanism. |
| Keywords: | Technology upgrading, Heterogeneous firms/workers, Roy model, Computable general equilibrium (CGE), Gains from trade. |
| JEL: | C68 D58 F16 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:ema:worpap:2018-06&r=int |
| By: | CHUN, Hyunbae; HUR, Jung; SON, Nyeong Seon |
| Abstract: | Recently multinational enterprises (MNEs) originating from Asian countries such as China and Korea have rapidly expanded their global operations, but the employment effect of these MNEs in their home countries has rarely been studied. Using Korean firm–plant matched data over 2008–2013, we examine the effects of MNEs on domestic plant turnover and job growth. We find that Korean MNEs are more likely than non–MNEs to not only close down their domestic manufacturing plants but also open new plants. Along with active plant turnover, Korean MNEs exhibit greater active job reallocation across their domestic manufacturing plants within firms; however, this does not result in net job loss. This suggests that Korean MNEs participating in Factory Asia restructured their domestic manufacturing bases rather than hollowing them out. |
| Keywords: | Employment, Job Reallocation, Multinational Enterprise, Plant Birth, Plant Death |
| JEL: | F23 L23 |
| Date: | 2018–06 |
| URL: | http://d.repec.org/n?u=RePEc:hit:hiasdp:hias-e-71&r=int |
| By: | Ben Yahmed, Sarra; Bombarda, Pamela |
| Abstract: | We study how trade liberalization affects formal employment across gender. We propose a theoretical mechanism to explain how male and female formal employment shares can respond differently to trade liberalization through labor reallocation across tradable and non-tradable sectors. Using Mexican data over the period 1993-2001, we find that tariff cuts increase the probability of working formally for both men and women within 4-digit manufacturing industries. The formalization of jobs within tradable sectors is driven by large firms. Constructing a regional tariff measure, we find that regional exposure to trade liberalization increases the probability of working formally in the manufacturing sector for both men and women, and especially for men. However in the service sectors, the probability of working formally decreases for low-skilled women. |
| Keywords: | formal and informal labor,gender,trade liberalization,Mexico |
| JEL: | F11 F16 O17 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:18028&r=int |
| By: | Ender Demir (Istanbul Medeniyet University, Istanbul, Turkey); Giray Gozgor (Istanbul Medeniyet University, Istanbul, Turkey); Rangan Gupta (Department of Economics, University of Pretoria, Pretoria, South Africa); Huseyin Kaya (Istanbul Medeniyet University, Istanbul, Turkey) |
| Abstract: | Using a classical gravity model, this paper examines the effects of geopolitical risks on trade flows, from 18 exporter emerging economies into 164 importer countries, for the period of 1985 to 2013. We use the new index of geopolitical risks (GPR index) and to the best of our knowledge, it is the first paper in the literature that considers the new GPR index in a gravity model. The paper implements the fixed-effects (FE), the random-effects (RE), the Hausman-Taylor (HT), and the Poisson Pseudo-maximum Likelihood (PPML) estimations. The findings indicate that geopolitical risks negatively affect the trade flows. The paper also discusses the potential policy implications. |
| Keywords: | geopolitical risks, trade flows, international trade, gravity model, emerging economies, panel data estimation techniques |
| JEL: | F51 F14 F17 D74 D81 C33 |
| Date: | 2018–06 |
| URL: | http://d.repec.org/n?u=RePEc:pre:wpaper:201835&r=int |
| By: | Carlo Ciccarelli (DEF & CEIS,University of Rome "Tor Vergata"); Alberto Dalmazzo (University of Siena,); Daniela Vuri (DEF & CEIS,University of Rome "Tor Vergata") |
| Abstract: | Protectionist policies are often considered or even implemented as a reaction to increasing globalization. This is not new in history. This paper uses the introduction of import duties on sugar in the late nineteenth century Italy to measure the impact of protectionism on migration out flows at the time of the first globalization. Both for climate reasons and the nature of the soil, the cultivation and processing of sugar beets was geographically concentrated in a small area, leading de facto to a regional protectionist policy. Our theoretical model illustrates how a tariff that favours local producers may affect residents' incentives to migrate abroad. The predictions of the model are tested with the synthetic control method which uses the variation in sugar cultivation across areas to estimate the effect of interest. Our results show that protectionism effectively reduced the relative incentive to migrate away from sugar-producing areas. |
| Keywords: | protectionism, regional economics, migrations, 19th century Italy. |
| JEL: | N93 J4 C23 |
| Date: | 2018–06–08 |
| URL: | http://d.repec.org/n?u=RePEc:rtv:ceisrp:437&r=int |
| By: | Juan Carluccio; Alejandro Cuñat; Harald Fadinger; Christian Fons-Rosen |
| Abstract: | Using French manufacturing firm-level data for the years 1996 -2007, we uncover a novel set of stylized facts about offshoring behavior: (i) Low-productivity firms ("non-importers") obtain most of their inputs domestically. (ii) Medium-productivity firms offshore skill-intensive inputs to skill-abundant countries and are more labor intensive in their domestic production than non-importers. (iii) Higher-productivity firms additionally offshore labor-intensive inputs to labor-abundant countries and are more skill intensive than non-importers. We develop a model in which heterogeneous firms, subject to fixed costs, can offshore intermediate inputs of different skill intensities to countries with different skill abundance. This leads to endogenous within-industry variation in domestic skill intensities. We provide econometric evidence supporting the factor-proportions channel through which reductions in offshoring costs to labor-abundant countries have signicantly increased firm-level skill intensities of French manufacturers. |
| Keywords: | offshoring, heterogeneous firms, firm-level factor intensities, skill upgrading, Heckscher-Ohlin |
| JEL: | F11 F12 F14 |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_018_2018&r=int |
| By: | Anna Maria Mayda; Giovanni Peri; Walter Steingress |
| Abstract: | In this paper we study the impact of immigration to the United States on the vote for the Republican Party by analyzing county-level data on election outcomes between 1990 and 2010. Our main contribution is to separate the effect of high-skilled and low-skilled immigrants, by exploiting the different geography and timing of the inflows of these two groups of immigrants. We find that an increase in the first type of immigrants decreases the share of the Republican vote, while an inflow of the second type increases it. These effects are mainly due to the local impact of immigrants on votes of U.S. citizens and they seem independent of the country of origin of immigrants. We also find that the pro-Republican impact of low-skilled immigrants is stronger in low-skilled and non-urban counties. This is consistent with citizens' political preferences shifting towards the Republican Party in places where low-skilled immigrants are more likely to be perceived as competition in the labor market and for public resources. |
| JEL: | F22 J61 |
| Date: | 2018–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24510&r=int |
| By: | Zandile Zezethu (Department of Economics, Nelson Mandela University); Andrew Phiri (Department of Economics, Nelson Mandela University) |
| Abstract: | Much emphasis has been placed on attracting FDI into Burkina Faso as a catalyst for improved economic growth within the economy. Against the lack of empirical evidence evaluating this claim, we use data collected from 1970 to 2017 to investigate the FDI-growth nexus for the country using the ARDL bounds cointegration analysis. Our empirical model is derived from endogenous growth theoretical framework in which FDI may have direct or spillover effects on economic growth via improved human capital development as well technological developments reflected in urbanization and improved export growth. Our findings fail to establish any direct or indirect effects of FDI on economic growth except for FDI’s positive interaction with export-oriented growth, albeit being constrained to the short-run. Therefore, in summing up our recommendations, political reforms and the building of stronger economic ties with the international community in order to raise investor confidence, which has been historically problematic, should be at the top of the agenda for policymakers in Burkina Faso. |
| Keywords: | Per capita GDP, Convergence, unit root tests, nonlinearities, structural breaks, BRICS Emerging economies |
| JEL: | C13 C32 C51 F21 O40 |
| Date: | 2018–06 |
| URL: | http://d.repec.org/n?u=RePEc:mnd:wpaper:1823&r=int |
| By: | Jens Wrona |
| Abstract: | This paper identifies a “border” effect in the absence of a border. The finding that trade between East- and West-Japan is 23.1 to 51.3 percent lower than trade within both country parts, is established despite the absence of an obvious east-west division due to historical borders, cultural differences or past civil wars. Post-war agglomeration processes, reflected by the contemporaneous structure of Japan’s business and social networks, rather than cultural differences, induced by long-lasting historical shocks, are identified as an explanation for the east-west bias in intra-Japanese trade. |
| Keywords: | border effects, gravity equation, intra-national Trade, Japan |
| JEL: | F14 F15 F12 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7056&r=int |
| By: | Christian K. Darko (University of Birmingham); Giovanni Occhiali (Fondazione Eni Enrico Mattei and Overseas Development Institute); Enrico Vanino (London School of Economics) |
| Abstract: | This study uses firm level data on 19 Sub-Saharan Africa countries between 2004 and 2016 to provide a rigorous analysis on the impact of Chinese import competition on productivity, skills, and performance of firms., We measure import competition and ports accessibility at the city-industry level to identify the relevance of firms’ location in determining the impact of Chinese imports competition. To address endogeneity concerns, a time-varying instrument for Chinese imports based on the interaction between an exogenous geographic characteristic and a shock in transportation technology is developed. The results show that imports competition has a positive impact on firm performance, mainly in terms of productivity catch-up and skills upgrading. Of particular interest is the finding that the effects of import competition from China are stronger for more remote firms that have lower port accessibility, an indication that Chinese imports in remote areas improves productivity of laggard firms, employment, and intensity of skilled workers. Our findings indicate that African firms are improving their performance as a consequence of the higher Chinese import intensity, mainly through direct competition and the use of higher quality inputs of production sourced from China. |
| Keywords: | Import Competition, Productivity Catch-up, Trade Infrastructure, Skills, Employment, Sub-Saharan Africa, China |
| JEL: | F16 R11 J21 J24 |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2018.14&r=int |
| By: | Varian, Brian |
| Abstract: | In the Edwardian era, the British Dominions adopted policies of imperial preference, amid a period of rising imports from the United States and industrial Continental Europe. Hitherto, there has been no econometric assessment of whether these policies produced an intra-Empire trade diversion, as intended. This paper focuses on New Zealand’s initial policy of imperial preference, codified in the Preferential and Reciprocal Trade Act of 1903. New Zealand’s policy was unique insofar as it extended preference to only certain commodities. Using a commodity panel regression, this paper exploits the cross-commodity variation in the extension of preference, but finds no statistically significant effect of preference on either the Empire share or, specifically, the British share of New Zealand’s imports. This finding is corroborated by an alternative empirical approach involving propensity-score matching. |
| Keywords: | Imperial preference; tariffs; trade; empire; Britain; New Zealand |
| JEL: | H1 N25 P48 |
| Date: | 2018–06 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:wpaper:88298&r=int |
| By: | Helble, Matthias (Asian Development Bank Institute); Ali, Zulfiqar (Asian Development Bank Institute); Lego, Jera (Asian Development Bank Institute) |
| Abstract: | While several studies have traced the development of various intergovernmental organizations (IGOs), charting their growth and influence in international affairs, and assessing their prospects, few if any have compared IGOs across various fields. We take a closer look at three different policy fields to better understand the current architecture of global governance, the centrality of IGOs, the role of new and other actors, as well as the strengths and weaknesses of this “new” architecture. We find that, first, the emergence of new private players has significantly eroded the centrality of IGOs such that the course of global governance in health, trade, and development finance has changed irreversibly. Second, regional arrangements have overtaken global ones and nonstate actors have assumed more prominent roles. Third, this multiplicity of powerful players has led to some positive outcomes but also greater inefficiencies and redundancies. Fourth, developed countries have been pivotal in eroding the centrality of IGOs, but developing countries are taking on a greater role in global governance. Fifth, the new architecture can be described as one of diversification in global health governance, fragmentation in global trade, and variation in multilateral development finance. Global governance in the 21st century is thus characterized by a proliferation of actors and a decentralization of authority, an erosion of IGO centrality accompanied by a greater role for nonstate actors, developing countries, and by increased regionalism. Depending on the sector of governance, its inherent aims, and the nature of the actors involved, the new architecture may be one of variation, fragmentation, or diversification. While this new architecture is complex and might possibly lead to inefficiencies and redundancies, it allows a greater number of actors to participate, making it more representative of the current world order and making it possible to mobilize more resources to promote development. |
| Keywords: | global development; global governance; global health; global trade; multilateral development banks; public–private partnerships; regional cooperation |
| JEL: | F13 F53 F55 P45 |
| Date: | 2018–02–09 |
| URL: | http://d.repec.org/n?u=RePEc:ris:adbiwp:0806&r=int |
| By: | Barbara Annicchiarico (DEF and CEIS, Università di Roma "Tor Vergata"); Enrico Marvasi (Politecnico di Milano,) |
| Abstract: | We extend the protection for sale model of Grossman and Helpman (1994) by introducing a general model of monopolistic competition with variable markups and incomplete pass-through. We show that the structure of protection emerging in the political equilibrium not only depends on the weight attached by the government to consumer welfare when making its policy decision, but also on the degree of market power of firms and on the terms-of-trade variations due to the degree of pass-through. Our results highlight the importance of demand characteristics in shaping the structure of protection and are consistent with the occurring of protectionism also in unorganized industries. |
| Keywords: | Protection for Sale; Monopolistic Competition; Incomplete Pass-Through; Endogenous Markups. |
| JEL: | F12 F13 |
| Date: | 2018–06–08 |
| URL: | http://d.repec.org/n?u=RePEc:rtv:ceisrp:435&r=int |
| By: | Agnès Bénassy-Quéré; Matthieu Bussière; Pauline Wibaux |
| Abstract: | The debate on trade wars and currency wars has re-emerged since the Great recession of 2009. We study the two forms of non-cooperative policies within a single framework. First, we compare the elasticity of trade flows to import tariffs and to the real exchange rate, based on product level data for 110 countries over the 1989-2013 period. We find that a 1 percent depreciation of the importer's currency reduces imports by around 0.5 percent in current dollar, whereas an increase in import tariffs by 1 percentage point reduces imports by around 1.4 percent. Hence the two instruments are not equivalent. Second, we build a stylized short-term macroeconomic model where the government aims at internal and external balance. We find that, in this setting, monetary policy is more stabilizing for the economy than trade policy, except when the internal transmission channel of monetary policy is muted (at the zero-lower bound). One implication is that, in normal times, a country will more likely react to a trade "aggression" through monetary easing rather than through a tariff increase. The result is reversed at the ZLB. |
| Keywords: | tariffs;exchange rates;trade elasticities;protectionism |
| JEL: | F13 F14 F31 |
| Date: | 2018–06 |
| URL: | http://d.repec.org/n?u=RePEc:cii:cepidt:2018-08&r=int |
| By: | Mihnea Constantinescu (Bank of Lithuania); Aurelija Proskute (Bank of Lithuania) |
| Abstract: | In this paper we offer a unique firm-level view of the empirical regularities underlying the evolution of the Lithuanian economy over the period of 2000 to 2014. Employing a novel data-set, we investigate key distributional moments of both the financial and real characteristics of Lithuanian firms. We focus in particular on the issues related to productivity, firm birth and death and the associated employment creation and destruction across industries, firm sizes and trade status (exporting vs. non-exporting). We refrain from any structural modeling attempt in order to map out the key economic processes across industries and selected firm characteristics. We uncover similar empirical regularities as already highlighted in the literature: trade participation has substantial benefits on firm productivity, the 2008 recession has had a cleansing effect on the non-tradable sector, firm birth and death are highly pro-cyclical. The richness of the dataset allows us to produce additional insights such as the change in the composition of assets and liabilities over the business cycles (tilting both liabilities and assets towards the short-term) or the increasing share of exporting firms but the constant share of importing ones since 2000. |
| Keywords: | productivity, firm dynamism, job creation and destruction, firm heterogeneity, Lithuanian economy |
| JEL: | D22 D24 E30 J21 J24 J30 L11 L25 |
| Date: | 2018–05–14 |
| URL: | http://d.repec.org/n?u=RePEc:lie:dpaper:7&r=int |
| By: | Akosah, Nana; Mireku, Providence; Omane-Adjepong, Maurice |
| Abstract: | We assess Ghana’s trade competitiveness against its major trading partners. In doing so, we compute the real effective exchange rate (REER) index using total trade weighted for the period 2006-2012. The paper further evaluates the volatility of REER and the extent to which variations are ascribed to either the relative price or nominal exchange rate. The findings indicate annual appreciation of the REER in 2001, 2003-2006, 2008, 2010-2011 and 2015-2016. In contrast, real depreciation was recorded for the periods 2002, 2007, 2009 and 2012-2014. These developments in the REER largely mirrored trends in Ghana’s trade balance and supports the notion that real depreciation (appreciation) improves (worsens) trade balance (trade competitiveness). We further observed a strong positive pass-through of nominal exchange rate to real exchange rate, while the impact from price differentials was relatively small. This finding suggests that despite the perceived moderate pass-through of nominal depreciation to domestic prices, dynamics in the nominal exchange rate remain critical for Ghana’s trade competitiveness. Consequently, this paper assigns higher priority to nominal exchange rate stability to attain the desired level of real exchange rate alongside moderating volatilities in other macroeconomic variables. |
| Keywords: | Effective Exchange Rate, Price Differentials, Trade Competitiveness, Ghana |
| JEL: | E52 F13 F14 F31 |
| Date: | 2017–12 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:86641&r=int |
| By: | Head, Keith; Mayer, Thierry |
| Abstract: | This paper estimates the role of country/variety comparative advantage in the decision to offshore assembly of more than 2000 models of 197 car brands headquartered in 23 countries. While offshoring in the car industry has risen from 2000 to 2016, the top five offshoring brands account for half the car assembly relocated to low-wage countries. We show that the decision to offshore a particular car model depends on two types of cost (dis)advantage of the home country relative to foreign locations. The first type, the assembly costs common to all models, is estimated via a structural triadic gravity equation. The second effect, model-level comparative advantage, is an interaction between proxies for the model's skill and capital intensity and headquarter country's abundance in these factors. |
| Keywords: | cars; Gravity; offshoring |
| JEL: | F1 |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:12940&r=int |
| By: | Juan A. Mañez (Department of Applied Economics II (Economic Structure) and ERI-CES, University of Valencia, Spain); Rafael Moner Colonques (Department of Economic Analysis and ERI-CES, University of Valencia, Spain); Juan A. Sanchis (Department of Economic Structure, University of Valencia, Avda. dels Tarongers s/n, 46022 Valencia (Spain).); Jose J. Sempere-Monerris (Department of Economic Analysis and ERI-CES, University of Valencia, Spain and CORE, UCL, Louvain-la-Neuve, Belgium) |
| Abstract: | This paper explores the links between firms R&D investment decisions, and firms decisions on how much to sell at home and abroad in a heterogeneous-firm international oligopoly. The model provides analytical results that yield four testable hypotheses, which are empirically checked with data from the Spanish Survey on Business Strategies (ESEE) for the period 1992-2013. Our results confirm that exporters invest in R&D four times more than non-exporters in relative terms (Hypothesis H1). Our estimates confirm that past R&D intensity has a positive and significantly different effect on domestic and export outputs by exporters and that the effect on the rate of growth of exports is larger (H2). Econometric evidence suggests a positive and significant effect of appropriability on domestic sales, while a positive but non-significant effect on exports; thus partially confirming hypothesis H3. Finally, R&D efficiency measured as the propensity to obtain a patent or utility model is found to have a positive and significant effect on the rate of growth of exports, which confirms H4. |
| Keywords: | International oligopoly, R&D, exports, knowledge spillovers. |
| Date: | 2018–07 |
| URL: | http://d.repec.org/n?u=RePEc:eec:wpaper:1807&r=int |
| By: | Udabah, Sylvester; Okolo, Chimaobi |
| Abstract: | As the large exporter of crude oil, Nigeria heavily depends on oil earnings to fund economic activities. The country also rely heavily on imports of consumables, both oil and non oil consumables. Nigerias vulnerability to crude oil price shock at the international oil market exposes the nation to certain negative shocks. The study investigated the dynamics of crude oil price and exchange rate volatilities and its implication on the cost of living in Nigeria. Structural Generalized Autoregressive Conditional Heteroscedasticity (S-GARCH) was employed to measure the influence of crude oil price volatility on the exchange rate fluctuation as well as their influence on the consumer price index. Oil price and exchange rate volatilities did not significantly pass-through to the consumer price index in Nigeria. However, information on previous volatilities proved a significant determinant of current volatilities. The media should be significantly utilized as a strategic tool to better predict and manage oil price and exchange rate volatilities in Nigeria. Government should further reconsider allowing the importation of certain consumable goods which are also produced in Nigeria, while boosting domestic production and export. |
| Keywords: | cost of living, exchange rate, oil price, pass-through, volatilities. |
| JEL: | E31 F13 F31 F41 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:86509&r=int |
| By: | Löchel, Horst; Nawaz, Fahad |
| Abstract: | The so-called Belt & Road initiative of China is the largest and most comprehensive global economic activity of our times. It consists on a land as well as a sea channel that covers more than 60 countries in Asia and Europe, around 65 % of the world population, one-third of world's GDP, and 25 % of global trade. Although the project is still in a very early stage it is worth starting a scientific based judgment of its impact and success perspective. This paper aims to kick-off such a discussion by conducting a feasibility study including economic as well as political factors. In order to reduce the complexity of the task the overall project is disaggregated by its six economic corridors plus the sea channel, which are evaluated by the same categories and summarized to an overall result. Our analysis shows that for more than half of the corridors a successful implementation is highly likely, for two the feasibility is judged as medium, and only for one it turns out that a success is unlikely mainly due to political reasons. |
| JEL: | F02 F15 F21 F53 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:fsfmwp:226&r=int |
| By: | Alan Duncan (Bankwest Curtin Economics Centre, Curtin University); Mark N Harris (School of Economics and Finance, Curtin University); Astghik Mavisakalyan (Bankwest Curtin Economic Centre, Curtin University); Toan Nguyen (Bankwest Curtin Economic Centre, Curtin University) |
| Abstract: | This paper compares immigration flows in response to changes in labour market conditions to provide an assessment of Australia’s selective immigration policies. We find employer sponsored immigration varied in line with changes in regional wages, with immigrants being drawn to states with greater wage grown. In contrast, evidence does not support this trend for points-based immigrants. We account for the endogeneity bias by exploiting differences in the impact of exogenous commodity price fluctuations on regional wages. A complimentary analysis of a points-based immigration policy reform in 2012 further highlights the role of employers in alleviating the apparent misallocation of points-based immigrants. |
| Keywords: | skilled immigration, location choice, immigration policy |
| JEL: | J21 J61 R23 |
| Date: | 2018–04 |
| URL: | http://d.repec.org/n?u=RePEc:ozl:bcecwp:wp1802&r=int |
| By: | Giorgos Galanis (Goldsmiths, University of London); Ashok Kumar |
| Abstract: | This paper presents a novel understanding of the changing governance structures in global supply chains. Motivated by the global garment sector, we develop a geographical political economy dynamic model which reflects the interaction between bargaining power and distribution of value among buyer and producer firms. We find that the interplay between these two forces, in combination with the spatial specificities of global production, are necessary and sufficient to drive governance structures towards an intermediate position regarding their level of explicit coordination and power asymmetry. |
| Keywords: | Global value chains, global production networks, uneven development, disequilibrium dynamics, monopsony power |
| JEL: | D02 D43 E32 R10 |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:pke:wpaper:1804&r=int |