nep-int New Economics Papers
on International Trade
Issue of 2018‒09‒17
forty papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. Adapting to within-country export barriers: Evidence from the Japan 2011 Tsunami By Masashige Hamano; Wessel N Vermeulen
  2. Advanced tariff aggregation in global trade models: dismantling tariffs on the Swiss beef market By Himics, Mihaly; Listorti, Giulia; Tonini, Axel
  3. Impact of AIFTA on Agriculture Trade Creation & Trade Diversion: Gravity Model Analysis By Jagdambe, S.
  4. Measuring the Impact of Agricultural Production Shocks on International Trade Flows By Ferguson, Shon Martin; Gars, Johan
  5. The Trade Effects of the Brexit Announcement Shock By Douch, Mustapha; Edwards, T.Huw; Soegaard, Christian
  6. Analysing EU dairy exports: indicators of non-tariff measures and gravity By Sanjuan, Ana Isabel; Rau, Marie-Luise; Oudendag, Diti; Himics, Mihaly
  7. Russian food embargo and the lost trade By Angela Cheptea; Carl Gaigné
  8. A quantitative analysis of the effects of China-Pakistan Economic Corridor on Pakistan and China By Wei, X.; Ali, T.; Huang, J.
  9. Cumulative economic assessment of future trade agreements on the EU agriculture By Boulanger, Pierre; Dillen, Koen; Dudu, Hasan; Ferrari, Emanuele; Himics, Mihaly; M'Barek, Robert; Philippidis, George
  10. Quality, Variable Markups, and Welfare: A Quantitative General Equilibrium Analysis of Export Prices By Stephen Yeaple
  11. Foreign Direct Investment in New Member State of the EU and Western Balkans: Taking Stock and Assessing Prospects By La-Bhus Fah Jirasavetakul; Jesmin Rahman
  12. Relationship-specificity, incomplete contracts, and the pattern of trade: a comment on the role of natural resources By Raúl Bajo-Buenestado
  13. Perish or prosper: Trade patterns for highly perishable products By Vårdal, Erling; Asche, Frank; Straume, Hans-Martin
  14. The Exposure of U.S. Manufacturing Industries to Exchange Rates By Willem Thorbecke
  15. Redistributing the Gains From Trade Through Progressive Taxation By Mike Waugh
  16. Weight gains from trade in foods: Evidence from Mexico By Osea Giuntella; Matthias Rieger; Lorenzo Rotunno
  17. Resource discoveries and FDI bonanzas; An illustration from Mozambique By Gerhard Toews; Pierre-Louis Vezina
  18. Currency Unions, Trade, and Heterogeneity By Natalie Chen; Dennis Novy
  19. Reserve Accumulation, Foreign Direct Investment, and Economic Growth By Hidehiko Matsumoto
  20. On The Emerging Challenges in the Services Industry: Trade and Investment By Florian A. Alburo
  21. Can foreign aid dampen the threat of terrorism to international trade? Evidence from 78 developing countries By Simplice Asongu; Ivo Leke
  22. Britain & Africa: heading for the Brexit rocks By Kohnert, Dirk
  23. The Macroeconomic Impact of NAFTA Termination By Joseph Steinberg
  24. Market Fundamentals And International Grain Price Volatility By Santeramo, Fabio Gaetano
  25. The Hardships of Long Distance Relationships: Time Zone Proximity and Knowledge Transmission within Multinational Firms By Bahar, Dany
  26. Estimating Bargaining-related Tax Advantages of Multinational Firms By Egger, Peter; Strecker, Nora; Zoller-Rydzek, Benedikt
  27. The Export Competitiveness Of The EU Dairy Industry By Hoerl, Mandy; Hess, Sebastian
  28. Global silver: bullion or specie? Supply and demand in the making of the early modern global economy By Irigoin, Alejandra
  29. Assessing the Effectiveness of Environmental Provisions in Regional Trade Agreements: An Empirical Analysis By Inmaculada Martínez-Zarzoso
  30. Euro Area and U.S. External Adjustment: The Role of Commodity Prices and Emerging Market Shocks By Massimo Giovannini; Stefan Hohberger; Robert Kollmann; Lucas Vogel; Marco Ratto; Werner Roeger
  32. The impacts of domestic political economic structures on sustainable trade agreements between asymmetric countries By Jisoo Son
  33. Implications Of Changing Aflatoxin Standards For EU Border Controls On Nut Imports By Taghouti, Ibtissem1; Garcia-Alvarez-Coque, Jose Maria; Martinez-Gomez, Victor
  34. A MODEL FOR DATA CONSOLIDATION OF THE FISH MARKET IN CAPRI By Chang, Chiao-Ya; Witzke, Heinz-Peter; Latka, Catharina
  35. Bilateral De-Jure Exchange Rate Regimes and Foreign Direct Investment: A Gravity Analysis By Philipp Harms; Jakub Knaze
  36. Dealing with Illegal Immigration: the Role of Informality, Taxation and Trade By Carmen Camacho; Fabio Mariani; Luca Pensieroso
  37. Who Voted for Brexit? Individual and Regional Data Combined By Alabrese, Eleonora; Becker, Sascha O.; Fetzer, Thiemo; Novy, Dennis
  38. Long run analysis of trade openness on economic growth for Pakistan; Evidence from standard and optimal time series tests By Fahad Israr; Miguel Rocha de Sousa
  39. Estimates of the Inflation Effect of a Global Carbon Price on Consumer, Investment, Export, and Import Prices By Andersson, Fredrik N.G.
  40. Somatic Distance, Trust and Trade By Jacques Melitz; Farid Toubal

  1. By: Masashige Hamano; Wessel N Vermeulen
    Abstract: How is a firm's ability to export affected by changes in domestic trade costs? In particular we focus on the interation between firms and ports to answer how strongly exports from one ports are affected by changes in the cost of exporting at neighbouring ports? To answer these questions we extend the standard trade model with heterogeneous firms to have a multiple port structure where exporting is subject to port specific local transportation costs and port specific fixed export costs as well as international bilateral trade costs. We derive a gravity equation with multiple ports and show that gravity distortion due to firms heterogeneity is conditional on port comparitive advantage and resulting substitution of export across differentiated ports. We present evident of the substitution effect using the 2011 Great East Japan Earthquake and following tsunami, which suggest that about 50% of the exports was substituted to other ports following the disaster.
    Keywords: firm heterogeneity, entensive margins, transportation costs, fixed costs, natural disasters
    JEL: F14 O18 R1
    Date: 2017
  2. By: Himics, Mihaly; Listorti, Giulia; Tonini, Axel
    Abstract: Two tariff aggregation extensions to global trade models are proposed, taking advantage of international trade data at the tariff line level. The proposed methods correct for typical biases in tariff aggregation. Firstly, they take into account the substitution effects in an optimal consumption bundle at the tariff line level. Secondly, they also deal with the “water” in tariffs, i.e. the imperfect transmission of tariff cuts to domestic prices. Finally, they model Tariff Rate Quotas explicitly. The aggregators are tested for Swiss tariff dismantling scenarios towards imported EU beef products, after implementing them in a partial equilibrium model of the agricultural sector.
    Keywords: Agricultural and Food Policy
    Date: 2017–08–28
  3. By: Jagdambe, S.
    Abstract: The prime objective of the paper is to estimate the trade creation and trade diversion effect of ASEAN-India Free Trade Agreement (AIFTA) on member’s agricultural trade. The model includes 50 countries with five major FTAs and estimated with panel data regression over the period 2005-2014. We used OLS (Ordinary Least Square) and PPML (Poisson Pseudo-Maximum Likelihood) estimation method to accomplish the above-said objective. The PPML method deals with hetroskedasticity bias encountered as usual OLS method. Further, the paper has included two dummy variables Time and Country-specific effect which control the endogeneity bias in explanatory variables. The paper found that PPML results are more promising than the conventional method (OLS). Further, estimate reveals purely trade creation effect for AIFTA, MERCOSURE, and EU_15 under time fixed effect model. Under the time and country fixed effect model; AIFTA, SAPTA, and NAFTA found trade creation. In contrast, the paper also noticed purely trade diversion effect for SAPTA and EU_15 and MERCOSURE under time fixed and time and country fixed effect model respectively. The study noted that FTAs are not hampering but positively associated with the free multilateral trade.
    Keywords: Agricultural and Food Policy, International Relations/Trade
    Date: 2018–07
  4. By: Ferguson, Shon Martin; Gars, Johan
    Abstract: The purpose of this study is to measure the sensitivity of trade volumes and trade unit values to agricultural production shocks. We derive a gravity model of trade with two new features. First, the model assumes perfectly in- elastic supply, which captures the short-run nature of year-to-year production shocks and has important implications for levels of regression coecients and how they can be used to measure the elasticity of substitution. Second, the presence of per-unit trade costs implies that, in percentage terms, unit values based on importing country data (including trade costs) should react less to production shocks than unit values based on exporting country data (exclud- ing trade costs). Using bilateral trade ow data for a large sample of countries and agricultural commodities we nd empirical support for the predictions of the model, with relatively high substitutability between varieties of crops dif- ferentiated by country of origin and quantitatively large per-unit trade costs. Our framework provides a new method for measuring substitution elasticities and per-unit trade costs using international trade data. Furthermore, our results suggest that trade frictions or substitution with other goods diminish the role of international trade as way of coping with production volatility.
    Keywords: Agribusiness
    Date: 2017–08–28
  5. By: Douch, Mustapha (Aston University, UK); Edwards, T.Huw (Loughborough University, UK); Soegaard, Christian (University of Warwick, UK.)
    Abstract: The unexpected vote for Leave in the Brexit referendum of June 2016 has introduced a classic case of a ‘renegotiation period’ for trade agreements, where no formal barriers have been imposed, but trade is affected by policy uncertainty. We analyse the effects upon bilateral trade between the UK and 14 EU and 14 non-EU trading partners, using a Synthetic Control Method (SCM), with the Brexit vote seen as a country-specific treatment effect upon the United Kingdom. Our main findings are that, after the exchange rate changes, UK exports have been lower than those of the ’synthetic Britain’, with only a modest difference between exports to EU and to non-EU countries. Robustness checks suggest that this is not attributable to short-term sluggishness in responding to a fall in Sterling. Imports from the EU have declined a little, while those from non-EU countries have if anything declined more. However, there is some evidence that UK consumers may be turning towards Commonwealth countries.
    Keywords: Anticipation ; policy uncertainty ; Brexit ; synthetic control method
    JEL: F02 F13 F15
    Date: 2018
  6. By: Sanjuan, Ana Isabel; Rau, Marie-Luise; Oudendag, Diti; Himics, Mihaly
    Abstract: In the prospect of on-going EU trade negotiations, we investigate non-tariff measures (NTMs) on key EU dairy exports markets. After combining latest publicly available NTM datasets, we calculate frequency and coverage ratios in order to take stock of existing measures. Subsequently, we quantify the NTM impact on EU dairy exports by a gravity estimation. In our model, we explicitly single out SPS and TBT measures and find that they dominate the negative trade effect. Our results underline the need to address NTM issues in EU trade negotiations to secure potential export markets.
    Keywords: Agribusiness
    Date: 2017–08–28
  7. By: Angela Cheptea; Carl Gaigné
    Abstract: We analyse the impact of the Russian food embargo on European and Russian trade patterns using a triple-difference estimation strategy. We quantify the effects on the value of trade, the trade price of products covered by the ban, and the new trade flows generated by the ban. Our results point to an average e 125 million loss in monthly EU28 exports to Russia due to the ban (with Lithuania, Poland, and Germany bearing the largest losses). However, only 45% of the drop in EU28 exports of banned products to Russia would be due to the ban. In addition, EU products banned from the Russian market were sold elsewhere at lower prices. The reorientation of EU exports to other markets translated into selling larger amounts to old trade partners, as well as in accessing new markets. EU member states were unevenly affected by the ban. Germany and Poland compensated their large losses on the Russian market by a strong increase in exports to other trade partners (mostly intra-EU), at the expense of other EU countries, such as France and Denmark.
    Keywords: international trade, Russian embargo, trade diversion
    JEL: F13 F14 F17
    Date: 2018
  8. By: Wei, X.; Ali, T.; Huang, J.
    Abstract: China is investing huge funds into Pakistan’s transport infrastructure under China Pakistan Economic Corridor. Both countries stand to benefit from these developments via improved trade and lower export prices. We use a global economics models (GTAP) to assess the effects of transport infrastructure by developing several policy scenarios in 2025. Our results show that both Pakistan and China will get positive effects in terms of GDP growth and welfare. The effects are particularly significant on Pakistan. In terms of mutual trade, Pakistan’s net exports of agricultural commodities to China will increase more than the exports non-agricultural commodities. On the other hand, non-agricultural exports from China will improve significantly to Pakistan. Due to changing trade relations, there will be some adjustment in Pakistan’s production structure. Pakistan could experience some leveling of income due to slight increase in rural incomes. The expected benefits can only be realized by speedy and smooth implementation of the projects under CPEC.
    Keywords: Agricultural and Food Policy, International Relations/Trade
    Date: 2018–07
  9. By: Boulanger, Pierre; Dillen, Koen; Dudu, Hasan; Ferrari, Emanuele; Himics, Mihaly; M'Barek, Robert; Philippidis, George
    Abstract: This paper presents potential effects of twelve free trade agreements (FTAs) under the current EU FTA agenda. With the help of two economic simulation models (the global CGE MAGNET and PE AGLINK), it sheds some light on relatively balanced cumulated impacts in terms of trade, production and price for the EU agricultural sector as a whole while quantifying also the market development for specific agricultural sectors. It compares a conservative and an ambitious FTA scenario with a business as usual (reference) scenario.
    Keywords: Agribusiness, Agricultural and Food Policy, Marketing
    Date: 2017–08–28
  10. By: Stephen Yeaple (Pennsylvania State University)
    Abstract: Modern trade models attribute the dispersion of prices across countries to physical and man-made barriers to trade, to the pricing-to-market by heterogeneous producers, and to differences in the quality of output offered by firms. This paper analyzes a quantitative general equilibrium model that incorporates all three of these mechanisms. Estimating the model parameters from Chinese firm-level trade data, we find that our model that incorporates per unit trade costs imply lower gains from trade relative to standard models because these costs are a greater burden to the most productive firms. We also show that changes in specific trade costs induce larger shifts in import prices than do changes in ad valorem trade costs that equivalently restrict trade. The results highlight the importance of modelling "Washington Apples" effects in quantitative trade models.
    Date: 2018
  11. By: La-Bhus Fah Jirasavetakul; Jesmin Rahman
    Abstract: FDI has played a strong role in the export-led growth of eastern European countries that are now members of the European Union (EU). Largely sourced from advanced Europe, FDI inflows were motivated by the intention to pursue new markets and cost efficiency. Over time, foreign investment has restructured the exports sector in these countries in favor of products that are considered more technology-intensive. As these countries face skills shortage and rising wages, what is needed for FDI to continue playing a strong role? Can the Western Balkan countries, who are not yet EU members and have in recent years stepped up financial incentives and policy initiatives to court investors, emulate the experience? This paper takes stock of the FDI experience of both these groups and tries to estimate their potential gains from additional policy efforts.
    Date: 2018–08–21
  12. By: Raúl Bajo-Buenestado
    Abstract: In his seminal paper, (2007) finds that countries with good contract enforcement have a comparative advantage and, therefore, specialize in exporting goods for which relationship- specific investments are most important. We argue that this result cannot be extrapolated to all industries: there is substantial heterogeneity regarding the effect of contract enforcement on exports. In particular, we empirically demonstrate that there is a disconnection between judicial quality and exporting in relationship-specific natural resource related industries. Due to the lack of input factor mobility, for such industries, the quality of contract enforcement cannot explain the pattern of trade, but rather other factors that are widely discussed in the literature. We discuss some relevant implications of this disconnection between judicial quality and relationship-specific industries in terms of the natural resource curse and the impact of natural resources trade on economic development.
    Keywords: Natural resources; International trade; Contract enforcement; Resource curse; Replication study
    JEL: C21 F14 K12 O13 Q00
    Date: 2018–02
  13. By: Vårdal, Erling; Asche, Frank; Straume, Hans-Martin
    Abstract: Trade with highly perishable agricultural products like fresh fish has increased substantially. The perishability of these products appears to challenge conventional wisdom when it comes to food trade, which emphasizes the importance of large shipments to reduce transportation costs. In this paper, gravity models and several margins of trade are estimated for the trade with fresh salmon, a highly perishable product. The results indicate that increased geographical distance have a larger negative effect than what is generally reported. Most interestingly, the number of exporters and the shipment frequency increase while there is little impact on shipment size when trade increase.
    Keywords: Agribusiness, Agricultural and Food Policy
    Date: 2017–08–28
  14. By: Willem Thorbecke
    Abstract: Safe asset demand and currency manipulation increase the dollar and the U.S. current account deficit. Deficits in manufacturing trade cause dislocation and generate protectionism. Dynamic OLS results indicate that U.S. export elasticities exceed unity for automobiles, toys, wood, aluminum, iron, steel, and other goods. Elasticities for U.S. imports from China are close to one or higher for footwear, radios, sports equipment, lamps, and watches and exceed 0.5 for iron, steel, aluminum, miscellaneous manufacturing, and metal tools. Elasticities for U.S. imports from other countries are large for electrothermal appliances, radios, furniture, lamps, miscellaneous manufacturing, aluminum, automobiles, plastics, and other categories. For U.S. exports and especially for U.S. imports from China, trade in more sophisticated products are less sensitive to exchange rates. Stock returns on many of the sectors with high export and import elasticities also fall when the dollar appreciates. Several manufacturing industries are thus exposed to a strong dollar. Policymakers could weaken the dollar and deflect protectionist pressure by promoting the euro, the yen, and the renminbi as alternative reserve currencies.
    Keywords: Exports, Imports, Elasticities, Exchange rate exposure
    JEL: F12 F41
    Date: 2018–03
  15. By: Mike Waugh (New York University)
    Abstract: Should a nation’s tax system become more progressive as it opens to trade? Does opening to trade change the benefits of a progressive tax system? We answer these question within a standard incomplete markets model with frictional labor markets and Ricardian trade. Consistent with empirical evidence, adverse shocks to comparative advantage lead to labor income loses for import-competition-exposed workers; with incomplete markets, these workers are imperfectly insured and experience welfare losses. A progressive tax system is valuable as it substitutes for imperfect insurance and redistributes the gains from trade. However, it also reduces the incentives to work and for labor to reallocate away from comparatively disadvantaged locations. We find that progressivity should increase with openness to trade and that progressivity is an important tool to mitigate the negative consequences of globalization.
    Date: 2018
  16. By: Osea Giuntella; Matthias Rieger; Lorenzo Rotunno
    Abstract: In this paper, we investigate the effects of trade in foods on obesity in Mexico. To do so, we match data on Mexican food imports from the U.S. with anthropometric and food expenditure data. Our findings suggest that exposure to food imports from the U.S. explains four percent of the rise in obesity prevalence among Mexican women between 1988 and 2012. Pro-obesity effects are more pronounced in areas receiving more unhealthy food imports. We also find that food imports may widen health disparities between education groups. By linking trade flows to obesity, the paper sheds light on an important channel through which globalisation may affect health.
    JEL: I10 I12
    Date: 2018–08
  17. By: Gerhard Toews; Pierre-Louis Vezina
    Abstract: This paper examines the effect of giant oil and gas discoveries on foreign direct investment in developing economies. Across countries, we document a 58% increase in non-resource extraction FDI in the 2 years following a giant discovery, an event which is unpredictable due to the uncertainty of exploration. This effect is driven by a 30% increase in the number of projects and a 16% increase in targeted sectors. Mozambique's recent FDI boom provides a telling confirmation of this mechanism. Using project-level FDI data combined with multiple waves of household surveys and rm censuses we estimate that each FDI job results in 6.2 additional local jobs, linking the gas-driven FDI bonanza in Mozambique to widespread job creation.
    Keywords: Natural resources, investment, local multiplier
    JEL: F21 F23 Q32 Q33
    Date: 2017
  18. By: Natalie Chen (Warwick University); Dennis Novy (University of Warwick)
    Abstract: What is the effect of currency unions on international trade? This paper offers a new approach. We rely on a translog gravity equation that predicts variable trade cost elasticities, both across and within country pairs. 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 model, 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 such as the euro.
    Date: 2018
  19. By: Hidehiko Matsumoto (University of Maryland)
    Abstract: This paper develops a quantitative small-open-economy model to assess the optimal pace of foreign reserve accumulation by developing countries. The model features endogenous growth with foreign direct investment (FDI) entry and sudden stops of capital inflows to incorporate benefits of reserve accumulation. Reserve accumulation depreciates the real exchange rate and attracts FDI, which endogenously promotes productivity growth. When a sudden stop happens, the government uses accumulated reserves to prevent a severe economic downturn. The calibrated model shows that two factors are the key determinants of the optimal pace of reserve accumulation: the elasticity of the foreign borrowing spread with respect to debt, and the entry cost for FDI. The model suggests that these two factors can explain a substantial amount of the cross-country variation in the observed pace of reserve accumulation.
    Date: 2018
  20. By: Florian A. Alburo (School of Economics, University of the Philippines Diliman)
    Abstract: The paper examines recent technology enablers as these affect the services sector and are seen to be analogous to developments taking place as Industry 4.0. After briefly summarizing these, we argue that there are important implications to services, particularly their international trade, in terms of challenges to investment, regulation, policy, regional cooperation, and regional agreements, among others. Some of the possible adjustments arising out of these developments are outlined - in the manufacturing sector and in the services (and their trade).
    Keywords: trade and investment
    Date: 2018–08
  21. By: Simplice Asongu (Yaoundé/Cameroun); Ivo Leke (Saskatoon, Canada)
    Abstract: The study investigates whether development assistance can be used to crowd-out the negative effect of terrorism on international trade. The empirical evidence is based on a panel of 78 developing countries for the period 1984-2008 and Quantile Regressions. The following main findings are established. First, bilateral aid significantly reduces the negative effect of transnational terrorism on trade in the top quantiles of the trade distribution. Second, multilateral aid also significantly mitigates the negative effect of terrorism dynamics on trade in the top quantiles of the trade distributions. It follows that it is primarily in countries with above median levels of international trade that development assistance can be used as an effective policy tool for dampening the adverse effects of terrorism on trade. Practical implications are discussed.
    Keywords: Exports; Foreign Aid; Terrorism; Development
    JEL: F40 F23 F35 Q34 O40
    Date: 2018–01
  22. By: Kohnert, Dirk
    Abstract: High-flying illusions on the part of the proponents and grim predictions of the sceptics characterize the controversy about Brexit. The article analyses five issues at stake for the Post-Brexit relationships between Britain, the EU and Africa with a focus on the Commonwealth Sub-Saharan Africa: market access, FDI, aid, security and partnership . The British government’s vision of a ‘Global Britain’ relies heavily on a reinforced co-operation with Commonwealth nations. However, most likely this would be possible only at the expense of the poor in Africa and elsewhere. Concerning security cooperation with Africa, London apparently exaggerated its defence input in order to enhance its bargaining position with the EU. It will be crucial for both the EU and the UK to find post-Brexit agreements to stem irregular migration and the growth of jihadist groups and terrorism. In a nutshell, the analysis of these different policy fields shows that expectations of Brexiteers and African politicians alike concerning an enhanced, partner-like Post-Brexit Commonwealth relationship are largely unfounded.
    Keywords: Brexit,UK,Africa,EU,tariff policy,international trade,security,partnership
    JEL: F13 F2 F35 F54 F36 G15 G2 H26 N17 N47 N77 O17 P16 Z13
    Date: 2018
  23. By: Joseph Steinberg (University of Toronto)
    Abstract: U.S. president Trump’s administration has threatened to leave the North American Free Trade Agreement, and policymakers need answers about the effects that will materialize if this threat is carried out. How much would each country and industry gain or lose? Would trade imbalances within the region diminish? What would be the short-run costs of adjusting to new production and expenditure patterns? I use a dynamic general equilibrium model with a detailed input-output production structure and endogenous, time-varying trade elasticities to provide quantitative answers to these questions. If NAFTA is terminated, trade between NAFTA members will fall dramatically, particularly in sectors like agriculture where tariffs trade elasticities are high, and production in the transportation sector would decline. The macroeconomic and welfare consequences of NAFTA termination, however, are minor, and trade imbalances in the region would not decline.
    Date: 2018
  24. By: Santeramo, Fabio Gaetano
    Abstract: Several studies, focused on the understanding of price volatility determinants in agricultural commodity markets, revealed that the joint influence of a plethora of causes is able to generate market instability. We investigate the contribution of endogenous and exogenous factors to global price volatility of four major grain (wheat, rice, corn, barley), adopting a Seemingly Unrelated Regression Equations model. We analyze global volatility, to conclude on short-run and long-run dynamics of markets instability. Our paper builds on existing literature by proposing a richer set of determinants of grain price volatility.
    Keywords: Industrial Organization
    Date: 2017–08–29
  25. By: Bahar, Dany (Brookings Institution)
    Abstract: Using a unique dataset on worldwide multinational corporations with precise location of headquarters and affiliates, I present evidence of a trade-off between distance to the headquarters and the knowledge intensity of the foreign subsidiary's economic activity, emerging from dynamics related to the proximity-concentration hypothesis. This trade-off is strongly diminished the higher the overlap in working hours between the headquarters and its foreign subsidiary. In order to rule out biases arising from confounding factors, I implement a regression discontinuity framework to show that the economic activity of a foreign subsidiary located just across the time zone line that increases the overlap in working hours with its headquarters is, on average, about one percent higher in the knowledge intensity scale. I find no evidence of the knowledge intensity and distance trade-off weakening when a non-stop flight exists between the headquarters and the foreign subsidiary. The findings suggest that lower barriers to real-time communication within the multinational corporation play an important role in the location strategies of multinational corporations.
    Keywords: multinational firms, multinational corporations, knowledge, location, proximity concentration hypothesis, FDI
    JEL: F23 L22 L25
    Date: 2018–07
  26. By: Egger, Peter; Strecker, Nora; Zoller-Rydzek, Benedikt
    Abstract: The effective corporate profit tax rates (ETRs) of multinational enterprises (MNEs) differ from those of national enterprises (NEs). In this paper, we argue that the bargaining power of MNEs is an important factor in explaining these differences beyond profit shifting. First, larger and more profitable firms are more valuable for various reasons (in terms of absolute tax revenues, employment, etc.) for tax authorities. Thus, in threatening to move their operations to other jurisdictions, larger firms may be able to extract greater deductions. This potential bargaining advantage of larger firms may result in a regressive ETR schedule. As MNEs tend to be larger and more profitable than NEs, they may pay lower ETRs for merely size-related reasons. Second, MNEs face arguably lower costs to relocate their business (or profits) to foreign countries with a lower tax rate than NEs. This enhances their bargaining position even further when negotiating tax deductions. To quantify the importance of bargaining in the tax gap between MNEs and NEs, it is elemental to rigorously condition on the determinants of MNE status, profit taxation, as well as possible profit-shifting activities. To that end, we use French firm-level data and entropy balancing of the joint determinants of MNE status (including the possibility of profit shifting) and a firm's ETR. Empirically, we find that the empirical regressivity of the French tax schedule reduces French MNEs' ETRs by 2.52 percentage points on average due to their larger size, while the relocation threat of the same firms reduces their ETR by 3.58 percentage points relative to comparable NEs. The former is a tax advantage that any firm (MNE or NE) of the same size could obtain, while the latter is specific to MNEs and beyond the reach of NEs.
    Keywords: Profit taxation; Multinational firms; Entropy balancing.
    JEL: C2 F2 H2
    Date: 2018–08
  27. By: Hoerl, Mandy; Hess, Sebastian
    Abstract: The European Union’s dairy industry has become increasingly export oriented and consequently the income of EU dairy farmers depends partly on their dairy processing firms’ ability to successfully market dairy products in extra-EU markets. The export competitiveness of the EU dairy industry was examined on the basis of various indicators in order to identify structural determinants of export market success for a panel of EU country exports. Dynamic GMM panel results highlight the importance of innovation and investment for export competitiveness in world markets. The number of dairy products with protected geographical indication per country had no statistically significant effect.
    Keywords: Industrial Organization
    Date: 2017–08–29
  28. By: Irigoin, Alejandra
    Abstract: In the early modern period the world economy gravitated around the expansion of long distance commerce. Together with navigation improvements silver was the prime commodity which moved the sails of such trade. The disparate availability of, and the particular demand for silver across the globe determined the participation of producers, consumers and intermediaries in a growing global economy. American endowments of silver are a known feature of this process; however, the fact that the supply of silver was in the form of specie is a less known aspect of the integration of the global economy. This chapter surveys the production and export of silver specie out of Spanish America, its intermediation by Europeans and the re-export to Asia. It describes how the sheer volume produced and the quality and consistency of the coin provided familiarity with, and reliability to the Spanish American peso which made it current in most world markets. By the 18th century it has become a currency standard for the international economy which grew together with the production and coinage of silver. Implications varied according to the institutional settings to deal with specie and foreign exchange in each intervening economy. Generalized warfare in late 18th century Europe brought down governance in Spanish America and coinage fragmented along with the political fragmentation of the empire. The emergence of new sovereign republics and the end of minting as known meant the cessation of the silver standard that had contributed to the early modern globalization.
    Keywords: silver specie; international currency; international trade; monetary capacity; currency trade; global Smithian growth; early modern global economy
    JEL: E42 E44 E5 N10 N20 P5
    Date: 2018–09–01
  29. By: Inmaculada Martínez-Zarzoso
    Abstract: This report aims to test whether the inclusion of environmental provisions in Regional Trade Agreements (RTAs) has contributed to the improvement of environmental quality among the Parties to these agreements through empirical modelling and analysis. Three indicators are considered as a proxy for environmental quality: concentrations of suspended particulate matter less than 2.5 microns (PM2.5), sulphur dioxide (SO2) and nitrogen oxide (NOx).
    Keywords: environment policy, environmental provisions, free trade agreements, Regional trade agreements, trade and environment, trade policy
    JEL: F13 F18 Q56 Q58 R11
    Date: 2018–09–12
  30. By: Massimo Giovannini; Stefan Hohberger; Robert Kollmann; Lucas Vogel; Marco Ratto; Werner Roeger
    Abstract: The trade balances of the Euro Area (EA) and of the US have improved markedly after the Global Financial Crisis. This paper quantifies the drivers of EA and US economic fluctuations and external adjustment, using an estimated (1999-2017) three-region (US, EA, rest of world) DSGE model with trade in manufactured goods and in commodities. In the model, commodity prices reflect global demand and supply conditions. The paper highlights the key contribution of the post-crisis collapse in commodity prices for the EA and US trade balance reversal. Aggregate demand shocks originating in Emerging Markets too had a significant impact on EA and US trade balances. The broader lesson of this paper is that Emerging Markets and commodity shocks are major drivers of advanced countries’ trade balances and terms of trade.
    Keywords: EA and US external adjustment, commodity markets, emerging markets
    Date: 2018–08
  31. By: Gafarova, Gulmira; Perekhozhuk, Oleksandr; Glauben, Thomas
    Abstract: This study explores whether Kazakh and Russian wheat exporters use their privileges of being important players in the South Caucasus countries to exercise market power. We use a three-stage least squares (3SLS) estimation for systems of simultaneous equations and Zellner’s seemingly unrelated regression (SUR) thmethods for our residual demand elasticity (RDE) analysis. The results show that Kazakh exporters are able to exercise market power only in the Georgian wheat market, while Russian exporters are able to do so in both the Armenian and Georgian markets. Neither country is able to exercise market power in the Azerbaijani wheat market. Further, Kazakh and Russian wheat exporters constrain each other’s market powers in Azerbaijan and Georgia. Similarly, Ukrainian exporters are able to intervene to Kazakh and Russian exporters’ market powers in the Azerbaijani and Georgian wheat markets, but not in the Armenian market.
    Keywords: Industrial Organization
    Date: 2017–08–28
  32. By: Jisoo Son (Sungkyunkwan University)
    Abstract: This paper examines how the domestic political economic structures influence the bargaining power of small economies facing market dominant large trade partner. Through the analysis of the incentive compatibility conditions of small economies and large economies facing different political stances of domestic interest groups, we demonstrate that when the politically influential interest groups of large economies take the political stance supporting free trade regime, small economies? bargaining power can be improved. This result stems from the reduced equilibrium transfer from small economies to keep the trade equilibrium as a stable equilibrium due to the pro-free trade political pressures imposed by the interest groups of large economies. This result provides good theoretical insights on why most small economies are so eager to keep close connection with the interest groups in large economies
    Keywords: Stable trade agreement, Domestic political interest groups, Bargaining power of small economies, equilibrium transfer to satisfy incentive compatibility conditions
    JEL: F51 F53
    Date: 2018–07
  33. By: Taghouti, Ibtissem1; Garcia-Alvarez-Coque, Jose Maria; Martinez-Gomez, Victor
    Abstract: Due to the toxic effect of Aflatoxin (AF), the European Union has implemented strict standards regarding its maximum acceptable levels in tree nuts and peanuts. This paper evaluates the impact of changes in AF standards, a lessening of the maximum residue levels on the frequency of border controls. To do that, a count data model was proposed and estimated to test the determinants of border controls on EU imports of these products, based on political economy considerations, past alerts, path dependence effects and other scientific and economic variables. The revision of these standards has involved changes in controls and border refusals as measured by notifications at the Rapid Alert System for Food and Feed. Changes in AF standards are estimated to have significant impact on the frequency of border controls.
    Keywords: Food Consumption/Nutrition/Food Safety
    Date: 2017–08–29
  34. By: Chang, Chiao-Ya; Witzke, Heinz-Peter; Latka, Catharina
    Abstract: Economic fish and aquaculture modelling is still at the beginning. The lack of a comprehensive and consistent data set for the production and trade of fish and other fishery products has restrained the modelling attempts so far. Here we show a methodology for filling the present data gaps and for overcoming existent inconsistencies to create a database that may support modelling of the fish sector, illustrated at the case of the fish module in the CAPRI model. We avoid double counting with respect to fishmeal and fish oil production and trade by disentangling the available data from key statistical sources relying on a minimization of normalized least squares. The presented data correction procedure and the resulting database may furthermore be of value for other models of global fish markets analyzing the importance of fishery and aquaculture products for global food security. The impact of the data correction procedure is demonstrated for the most relevant fish and fishery products producing and trading countries, comparing the resulting consolidated to the initial data.
    Keywords: Agribusiness, Agricultural Finance
    Date: 2018–09–01
  35. By: Philipp Harms (Johannes Gutenberg-University); Jakub Knaze (Johannes Gutenberg-University)
    Abstract: This paper uses a newly constructed dataset on bilateral de-jure exchange rate regimes to estimate the effect of expected exchange rate volatility on foreign direct investment (FDI). The new dataset accounts for the fact that officially pegging to one currency is uninfor- mative about the exchange rate regime prevailing vis-à-vis other currencies, and it allows characterizing bilateral exchange rate regimes based on countries' ex-ante announcements rather than ex-post observations. We present a simple model that suggests that announced exchange rate stability enhances bilateral FDI ows. The empirical evidence we provide o ers some support to this claim: countries that are linked by a non- oating exchange rate regime seem to attract significantly more FDI from each other. In particular, rela- tionships with no separate legal tender like currency unions are most favorable to FDI in both developed and developing countries. Moreover, we find substantial differences between developing and developed countries, with the effect of announced exchange rate stability being much stronger for the former group than for the latter.
    Keywords: Exchange rate regimes, Foreign direct investment, Gravity equation
    Date: 2018–08–24
  36. By: Carmen Camacho (PARIS SCHOOL OF ECONOMICS and CNRS); Fabio Mariani (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)); Luca Pensieroso (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))
    Abstract: We develop a two-good, three-sector model of a small open economy with illegal immigration and both formal and informal production. In this framework, we explore the consequences of fiscal policy and trade openness for illegal immigration and the shadow economy. We find that (i) the effect of trade openness on illegal immigration crucially depends on the degree of substitutability between native and illegal labor in the informal sector, (ii) the reach of fiscal policy goes beyond its traditional domain: fiscal instruments can be effectively used as immigration policy tools.
    Keywords: Illegal immigration; Informal sector; Shadow economy; Taxation; Immigration policy; Globalisation; Open economy
    JEL: O17 F22 J61
    Date: 2018–05–20
  37. By: Alabrese, Eleonora; Becker, Sascha O.; Fetzer, Thiemo; Novy, Dennis
    Abstract: Previous analyses of the 2016 Brexit referendum used region-level data or small samples based on polling data. The former might be subject to ecological fallacy and the latter might suffer from small-sample bias. We use individual-level data on thousands of respondents in Understanding Society, the UK's largest household survey, which includes the EU referendum question. We find that voting Leave is associated with older age, white ethnicity, low educational attainment, infrequent use of smartphones and the internet, receiving benefits, adverse health and low life satisfaction. These results coincide with corresponding patterns at the aggregate level of voting areas. We therefore do not find evidence of ecological fallacy. In addition, we show that prediction accuracy is geographically heterogeneous across UK regions, with strongly pro-Leave and strongly pro-Remain areas easier to predict. We also show that among individuals with similar socio-economic characteristics, Labour supporters are more likely to support Remain while Conservative supporters are more likely to support Leave.
    Keywords: aggregation; Ecological Fallacy; European Union; populism; Referendum; UK
    JEL: D72 I10 N44 R20 Z13
    Date: 2018–08
  38. By: Fahad Israr (Department of Economics, Universidade de Évora, Portugal); Miguel Rocha de Sousa (Department of Economics; Center for Research in Advanced Studies in Management and Economics (CEFAGE); Research Center in Political Science (CICP); Universidade de Évora, Portugal)
    Abstract: This study examines the long run effect of trade openness on economic growth for Pakistan using annual data for the period 1972-2016. The long run model is estimated using several standard and optimal single equation estimates. The standard long run elasticities provide significant positive long run effects of trade openness on economic growth. The autoregressive distributive lag model optimal estimate by accommodating structural break in the series validate the cointegration among variables providing weak or no support for the long run effect of trade openness on economic growth. The estimate of the model using generalized method of moments technique and its rolling window estimation overwhelms the evidence of weak or no support by providing significantly positive long run effects of trade openness on economic growth. The results appear to support the new growth theories for Pakistan in which increasing openness helps domestic economy to grow.
    Keywords: Trade openness; Economic growth; ARDL; Structural breaks; GMM
    JEL: F43 O11 O53
    Date: 2018
  39. By: Andersson, Fredrik N.G. (Department of Economics, Lund University)
    Abstract: This paper considers the potential inflation effects of a global carbon price on consumer prices, investment prices, export prices, and import prices. We estimate the effects under three different scenarios. The results clearly indicate that the inflation effects in developed countries of a 100 USD/ton carbon price are small. For developing countries, the inflation effect is larger and potentially too large for it to be politically feasible to introduce a global carbon price. However, a simple adjustment of the price based on the price level in each country equalizes the inflation effects across all countries, whereby a global carbon price is more likely to be implemented.
    Keywords: carbon price; inflation; consumer prices; export prices; imports prices; investment prices; monetary policy
    JEL: E31 E52 Q54 Q58
    Date: 2018–09–04
  40. By: Jacques Melitz; Farid Toubal
    Abstract: Somatic distance, or differences in physical appearance, proves to be extremely important in the gravity model of bilateral trade in conformity with results in other areas of economics and outside in the social sciences. This is also true independently of survey evidence about bilateral trust. These findings are obtained in a sample of the 15 members of the European Economic Association in 1996. Robustness tests also show that somatic distance, as well as co-ancestry, has a more reliable influence on bilateral trade than the other cultural variables. The article finally discusses the interpretation and breadth of application of these results.
    Keywords: Somatic Distance;Cultural Interactions;Co-ancestry;Trust;Language;Bilateral Trade
    JEL: F10 F40 Z10
    Date: 2018–09

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