nep-int New Economics Papers
on International Trade
Issue of 2018‒10‒15
34 papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. The Potential Macroeconomic and Sectoral Consequences of Brexit on Ireland By Christine Arriola; Caitlyn Carrico; David Haugh; Nigel Pain; Elena Rusticelli; Donal Smith; Frank van Tongeren; Ben Westmore
  2. Imported Intermediate Goods and Incomplete Exchange Rate Pass-Through into Export Prices By Firanchuk, Alexander
  3. Globalization, Government Popularity, and the Great Skill Divide By Cevat G. Aksoy; Sergei Guriev; Daniel S. Treisman
  4. Britain and Africa: heading for the Brexit rocks By Kohnert, Dirk
  5. Innovation, Knowledge Diffusion, and Globalization By Nelson Lind; Natalia Ramondo
  6. Unfolding the complexity of the global value chain: Strengths and entropy in the single-layer, multiplex, and multi-layer international trade networks By Luiz G. A. Alves; Giuseppe Mangioni; Francisco A. Rodrigues; Pietro Panzarasa; Yamir Moreno
  7. Collateral Damage? Labour Market Effects of Competing with China – at Home and Abroad By Cabral, Sónia; Martins, Pedro S.; Pereira dos Santos, João; Tavares, Mariana
  8. Barriers to trade in environmental goods: How Important they are and what should developing countries expect from their removal By Jaime DE MELO; Jean-marc SOLLEDER
  9. Migration, Political Institutions, and Social Networks By Batista, Catia; Seither, Julia; Vicente, Pedro C.
  10. How regional trade agreements deal with disputes concerning their TBT provisions? By Molina, Ana Cristina; Khoroshavina, Vira
  11. Skill, innovation and wage inequality: Can immigrants be the trump card? By Gouranga Gopal Das; Sugata Marjit
  12. Robots, Trade, and Luddism: A Sufficient Statistic Approach to Optimal Technology Regulation By Arnaud Costinot; Iván Werning
  13. What makes Real Estate Capital Flows: The case between China and the EU By Zhenyu Su
  14. Trading-off the Income Gains and the Inequality Costs of Trade Policy By Erhan Artuc; Guido Porto; Bob Rijkers
  15. The role of FDI in structural change: Evidence from Mexico By Escobar, Octavio; Mühlen, Henning
  16. Geography, Trade and Power-law Phenomena By Chang, Pao-Li; Hsu, Wen-Tai
  17. The paradox of tax competition: Effective corporate tax rates as a determinant of foreign direct investment in a modified neo-Kaleckian model By Woodgate, Ryan
  18. Chinese Competition and Product Variety of Indian Firms By Pavel Chakraborty; Michael Henry
  19. Is Austria’s Economy Locked-in in the CESEE Region? Austria’s Competitiveness at the Micro-level By Mahdi Ghodsi
  20. Skill of the Immigrants and Vote of the Natives: Immigration and Nationalism in European Elections 2007-2016 By Simone Moriconi; Giovanni Peri; Riccardo Turati
  21. The Nexus between Industrial Exports and Economic Growth in Tunisia: Empirical Analysis By Bakari, Sayef; Mabrouki, Mohamed; elmakki, asma
  22. Firms in international trade under undesirable background risk By Soumyatanu Mukherjee; Udo Broll
  23. Digital Trade and Market Openness By Javier López González; Janos Ferencz
  24. Economic impact of STEM immigrant workers By Baum, Christopher F; Lööf, Hans; Stephan, Andreas
  25. Assessing the Impact of Foreign Direct Investment on Domestic Manufacturing Firms’ Productivity: A Database for Portugal By Santos, Eleonora
  26. Remittances and Emigration Intentions: Evidence from Armenia By Aleksandr Grigoryan; Knar Khachatryan
  27. China's go out policy - a review on China's promotion policy for outward foreign direct investment from a historical perspective By Yushan Li
  28. The Economic Effect of Immigration Policies: Analyzing and Simulating the U.S. Case By Andri Chassamboulli; Giovanni Peri
  29. "Return migration from the United States to Britain, 1815-60" By John Killick
  30. Eliminating the Pass-Through: Towards FDI Statistics that Better Capture the Financial and Economic Linkages between Countries By Maria Borga; Cecilia Caliandro
  31. Does Immigration Decrease Far-Fight Popularity? Evidence from Finnish Municipalities By Jakub Lonsky
  32. Brain-Circulation Network: The Global Mobility of the Life Scientists By Luca Verginer; Massimo Riccaboni
  33. Globalization, Structural Change and Innovation in Emerging Economies : The Impact on Employment and Skills By Vivarelli, Marco
  34. Brexit: The lure of the Neoliberal Thought Collective By Jens Hoelscher; Peter Howard-Jones

  1. By: Christine Arriola; Caitlyn Carrico; David Haugh; Nigel Pain; Elena Rusticelli; Donal Smith; Frank van Tongeren; Ben Westmore
    Abstract: This paper provides estimates of the potential effects on exports, imports, production, factor demand and GDP in Ireland of an exit of the United Kingdom (UK) from the European Union (EU), focusing on trade and FDI channels. Owing to the high uncertainty regarding the final trade agreement between the negotiating parties, the choice has been made to assume a worst-case outcome where trade relations between the United Kingdom and EU are governed by World Trade Organization (WTO) most favoured nation (MFN) rules. In doing so, it provides something close to an upper bound estimate of the negative economic impact taking into account the potential for some firms to relocate to Ireland. Any final trade agreement that would result in closer relationships between the United Kingdom and the EU could reduce this negative impact. The simulations use two large-scale models: a global macroeconomic model (NiGEM) and a general equilibrium trade model (METRO). These models are used to quantify, both at the macroeconomic and the sectoral level, two key channels through which Ireland would be affected: trade and foreign direct investment. The simulation results highlight that the negative effect on trade could result in Ireland's GDP falling by 1½ per cent in the medium-term and around 2½ per cent in the long-term. The impacts are highly heterogeneous across sectors. Agriculture, food, and some smaller manufacturing sectors experience the largest declines in total gross exports at over 15%. By contrast, financial services exports increase slightly. The modelling suggests that any positive offsetting impact to the trade shock from increased inward FDI to Ireland is likely to be modest.
    Keywords: Brexit, computable general equilibrium model, European Union, foreign direct investment, international trade, Ireland, METRO model, NIGEM macroeconometric model, sectoral economic effects
    JEL: C10 C68 F13 F14 F47
    Date: 2018–10–11
  2. By: Firanchuk, Alexander
    Abstract: This paper analyses the effect of imported inputs and the exporting country share on the degree of exchange rate pass-through (ERPT) into export prices. I present a model where firms set variable markups under oligopoly competition and imported inputs affect marginal cost. It makes two predictions: (i) the imported input share reduces ERPT (ii) the exporting country share in a destination market increases ERPT. Using industry-level data, I test the hypotheses for 57 countries over the period 2000-2015. For trade between advanced economies, imported inputs reduce ERPT, but only in the case of producer currency movements. Controlling for exporting country share, the pass-through elasticity is 39% when imported inputs are not used, but 11% when the share of imported inputs in gross exports rises to one half.
    Keywords: exchange rate pass-through,export prices,global value chains
    JEL: F12 F14 F31 F41
    Date: 2018
  3. By: Cevat G. Aksoy; Sergei Guriev; Daniel S. Treisman
    Abstract: How does international trade affect the popularity of governments and leaders? We provide the first large-scale, systematic evidence that the divide between skilled and unskilled workers worldwide is producing corresponding differences in the response of political preferences to trade shocks. Using a unique data set including 118 countries and nearly 450,000 individuals, we find that growth in high skill intensive exports (of goods and services) increases approval of the leader and incumbent government among skilled individuals. Growth in high skill intensive imports has the opposite effect. High skill intensive trade has no such effect among the unskilled. To identify exogenous variation in international trade, we exploit the time-varying effects of air and sea distances on bilateral trade flows. Our findings suggest that the political effects of international trade differ with skill intensity and that skilled individuals respond differently from their unskilled counterparts to trade shocks.
    JEL: F16 P16
    Date: 2018–09
  4. By: Kohnert, Dirk
    Abstract: High-flying illusions on the part of the proponents and grim predictions on the part of the sceptics have characterised the controversy around Brexit. The article assesses five key issues at stake for post-Brexit relationships between Britain, the EU, and Africa: market access, foreign direct investment (FDI), aid, security, and the nature of the partnership. The analysis focuses on those sub-Saharan African countries that belong to the Commonwealth, as the British government’s vision of a “Global Britain” relies heavily on its reinforced cooperation with Commonwealth nations. The review of potential developments in these different policy fields shows that the expectations of Brexiteers and African politicians alike concerning an enhanced, partnership-like post-Brexit Commonwealth relationship are largely unfounded. Although the post-Brexit United Kingdom will increase African countries’ choices regarding preferred trading partners, it remains questionable whether London could offer something new that other global players with increasing interest in Africa, such as China, do not already have on their agenda.
    Keywords: UK, Brexit, EU, Africa, international trade, tariffs, aid, security, partnership
    JEL: F13 F2 F35 F54 G15 G2 N17 N47 N77 O17 P16 Z13
    Date: 2018–08
  5. By: Nelson Lind; Natalia Ramondo
    Abstract: We review a recent body of theoretical literature that links the creation and diffusion of knowledge and technology to openness. We analyze two channels through which the spread of new ideas occurs: international trade and the activity of multinational firms (multinational production). The unifying theme of our survey is methodological. We focus on quantitative general equilibrium models that treat productivities as Fréchet random variables—as in the model of trade in Eaton and Kortum (2002) (EK). We present models in the literature that extend the EK model of trade to innovation, diffusion, and multinational firms, and examine the implications for counterfactuals related to the gains from trade. We finalize with new directions for research.
    JEL: F1 O4
    Date: 2018–09
  6. By: Luiz G. A. Alves; Giuseppe Mangioni; Francisco A. Rodrigues; Pietro Panzarasa; Yamir Moreno
    Abstract: The worldwide trade network has been widely studied through different data sets and network representations with a view to better understanding interactions among countries and products. Here, we investigate international trade through the lenses of the single-layer, multiplex, and multi-layer networks. We discuss differences among the three network frameworks in terms of their relative advantages in capturing salient topological features of trade. We draw on the World Input-Output Database to build the three networks. We then uncover sources of heterogeneity in the way strength is allocated among countries and transactions by computing the strength distribution and entropy in each network. Additionally, we trace how entropy evolved, and show how the observed peaks can be associated with the onset of the global economic downturn. Findings suggest how more complex representations of trade, such as the multi-layer network, enable us to disambiguate the distinct roles of intra- and cross-industry transactions in driving the evolution of entropy at a more aggregate level. We discuss our results and the implications of our comparative analysis of networks for research on international trade and other empirical domains across the natural and social sciences.
    Date: 2018–09
  7. By: Cabral, Sónia (Banco de Portugal); Martins, Pedro S. (Queen Mary, University of London); Pereira dos Santos, João (Nova School of Business and Economics); Tavares, Mariana (Maastricht University)
    Abstract: The increased range and quality of China's exports is a major ongoing development in the international economy with potentially far-reaching effects. In this paper, on top of the direct effects of increased imports from China studied in previous research, we also measure the indirect labour market effects stemming from increased export competition in third markets. Our findings, based on matched employer-employee data of Portugal covering the 1991-2008 period, indicate that workers' earnings and employment are significantly negatively affected by China's competition, but only through the indirect 'market-stealing' channel. In contrast to evidence for other countries, the direct effects of Chinese import competition are mostly non-significant. The results are robust to a number of checks and also highlight particular groups more affected by indirect competition, including women, older and less educated workers, and workers in domestic firms.
    Keywords: international trade, labour market, matched employer-employee data, China, import competition
    JEL: F14 F16 J31
    Date: 2018–08
  8. By: Jaime DE MELO (Ferdi); Jean-marc SOLLEDER (Université de Genève)
    Abstract: Few developing countries have participated in the environmental goods agreement (EGA) negotiations to reduce barriers on trade in Environmental Goods (EGs). Reasons for this reluctance are first reviewed along with a comprehensive description of barriers to trade (tariffs and NTBs) on two lists of EGs used in negotiations comprised mostly industrial products (The APEC and WTO lists), and a third, a list of Environmentally Preferable Products (EPPs) more representative of the perceived interests of developing countries. The paper then revisits and extends the literature on the estimation of barriers to trade in EGs for these lists. These estimates are carried out with a structural gravity model and new data: (i) on bilateral (rather than MFN) tariffs, and; (ii) with a measure of regulatory overlap in bilateral trade to capture the often-observed pattern of greater bilateral trade among countries that share similar regulatory regimes. Results show that tariffs generally reduce the intensity of bilateral trade, often with little difference in statistical significance between the EG and non-EG group for each list. Regulatory harmonization, as captured by an increase in regulatory overlap is also estimated to be conducive to more intense bilateral trade.
    JEL: F18 Q56
    Date: 2018–09
  9. By: Batista, Catia (Universidade Nova de Lisboa); Seither, Julia (Universidade Nova de Lisboa); Vicente, Pedro C. (Universidade Nova de Lisboa)
    Abstract: What is the role of international migrants and, specifically, migrant networks in shaping political attitudes and behavior in migrant sending countries? Our theoretical framework proposes that migration might change individual social identities and thus stimulate intrinsic motivation for political participation, while it may also improve knowledge about better quality political institutions. Hence, international migration might increase political awareness and participation both by migrants and by other individuals in their networks. To test this hypothesis, we use detailed data on different migrant networks (geographic, kinship, and chatting networks), as well as several different measures of political participation and electoral knowledge (self-reports, behavioral, and actual voting measures). These data were purposely collected around the time of the 2009 elections in Mozambique, a country with substantial emigration to neighboring countries – especially South Africa - and with one of the lowest political participation rates in the region. The empirical results show that the number of migrants an individual is in close contact with via regular chatting significantly increases political participation of residents in that village – more so than family links to migrants. Our findings are consistent with both improved knowledge about political processes and increased intrinsic motivation for political participation being transmitted through migrant networks. These results are robust to controlling for self-selection into migration as well as endogenous network formation. Our work is relevant for the many contexts of South-South migration where both countries of origin and destination are recent democracies. It shows that even in this context there may be domestic gains arising from international emigration.
    Keywords: international migration, social networks, political participation, information, diffusion of political norms, governance
    JEL: D72 D83 F22 O15
    Date: 2018–08
  10. By: Molina, Ana Cristina; Khoroshavina, Vira
    Abstract: Our analysis covers 260 RTAs, of which 200 include at least one provision on TBT. We find that in general disputes on TBT provisions arising under RTAs are not treated differently from other type of RTA disputes. Fifteen per cent of RTAs with TBT provisions include provisions that apply exclusively to the resolution of TBT disputes and do so in general to favour the WTO dispute settlement mechanism over that of the RTA; only in one RTA - NAFTA - do the parties provide under some conditions for the exclusive use of the RTA DSM for certain types of TBT disputes. In the remaining RTAs, the parties do not provide for a specific way of dealing with TBT disputes and apply instead the general dispute settlement (DS) provisions under the RTA. Under the general DS provisions, the parties do not give exclusivity to one forum, with one exception EU-Chile RTA, but allow instead for the selection of the forum in case of jurisdictional overlapping and in accordance with certain rules. RTAs with such a forum-choice clause account for 55% of the RTAs with TBT provisions, while 24% do not provide for any guidelines in the case of jurisdictional overlapping, which can be problematic, and 5% do not have their own dispute settlement mechanism (DSM), so that in the event of a dispute over the same (or similar) obligation under the RTA and the WTO, the WTO DSM would be the only possible forum.
    Keywords: dispute settlement,regional trade agreements,non-tariff barriers,TBT
    JEL: F13 F15
    Date: 2018
  11. By: Gouranga Gopal Das; Sugata Marjit
    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.
    Date: 2018
  12. By: Arnaud Costinot; Iván Werning
    Abstract: Technological change, from the advent of robots to expanded trade opportunities, tends to create winners and losers. How should government policy respond? And how should the overall welfare impact of technological change on society be valued? We provide a general theory of optimal technology regulation in a second best world, with rich heterogeneity across households, linear taxes on the subset of firms affected by technological change, and a nonlinear tax on labor income. Our first results consist of three optimal tax formulas, with minimal structural assumptions, involving sufficient statistics that can be implemented using evidence on the distributional impact of new technologies, such as robots and trade. Our second result is a comparative static exercise illustrating that while distributional concerns create a rationale for non-zero taxes on robots and trade, the magnitude of these taxes may decrease as the process of automation and globalization deepens and inequality increases. Our final result shows that, despite limited tax instruments, technological progress is always welcome and valued in the same way as in a first best world.
    JEL: F11 F13 H0 H2 H21
    Date: 2018–09
  13. By: Zhenyu Su
    Abstract: International capital flows is a very common phenomenon of economic globalization and it plays an important role on promoting the world economy development rapidly. From the 90s of the 20th century, a large number of foreign investments poured into China, they made an important contribution to the China’s economy growth. By contrast, China’s foreign investments were kept the lower level during the same period. However, China’s foreign investments were rising obviously in recent years, and it has become an important component of Chinese government strategies. In 2015, the capital flows of global FDI were 1.47 trillion US dollars, and China’s FDI was 145.67 billion US dollars, it set a new record and the year-on-year growth raised 18.3%. The capital flows of China’s foreign investment exceeded Japan and became the world’s second largest foreign investor in 2015. China’s foreign investments are covering more than 188 countries and regions nowadays. At the end of 2015, the real estate industry investment was 33.49 billion US dollars, accounted on 3.1% of China’s FDI stock. The EU is the largest source and destination of FDI in the world measured by stocks and flows. On 21 November 2013 EU-China both sides announced the Launch of negotiations of a comprehensive EU-China Investment Agreement. The Agreement will provide for progressive liberalization of investment and the elimination of restrictions for investors to each other’s market. Investment flows between the EU and China also show vast untapped potential, especially when taking into account the size of our respective economics. China accounts for just 2%-3% of overall European investments abroad, whereas Chinese investments in Europe are rising. By the end of 2015, the total volume of EU’s direct investment into China was $103.14 billion. In 2015, the 28 EU countries’ actual investments into China was $6.51 billion, up 4.6% from a year earlier; China’s FDI into EU was $64.46 billion by the end of 2015, accounted on 5.9% of China’s total foreign investments stock. In the mainly invest industries that China invested into EU in 2015, real estate investments stock was $2.98 billion, accounted on 4.6% of China’s total investment stock.And this paper will select several important factors that determine real estate capital flows between the EU and China and use model to analyze them.
    Keywords: China; FDI; financial liberalization; international capital flows; Real Estate
    JEL: R3
    Date: 2018–01–01
  14. By: Erhan Artuc (The World Bank - DECTI); Guido Porto (FCE-UNLP); Bob Rijkers (The World Bank - DECTI)
    Abstract: This paper characterizes the trade-off between the income gains and the inequality costs of trade using survey data for 54 developing countries. Tariff data on agricultural and manufacturing goods are combined with household survey data on detailed income and expenditure patterns to estimate the first order effects of the elimination of tariffs on household welfare. We assess how these welfare effects vary across the distribution by estimating impacts on the consumption of traded goods, wage income, farm and non-farm family enterprise income, and government transfers. For each country, the income gains and the inequality costs of trade liberalization are quantified and the trade-offs between them are assessed using an Atkinson social welfare index. We find average income gains from liberalization in 44 countries and average income losses in 10 countries. Across countries in our sample, the gains from trade are 1.8 percent of real household expenditure on average. We find overwhelming evidence of a trade-off between the income gains (losses) and the inequality costs (gains), which arise because trade tends to exacerbate income inequality: 46 countries face a trade-off, while only 8 do not. These trade-offs are typically resolved in favor of lower tariffs. In the majority of developing countries, the prevailing tariff structure thus induces sizeable welfare losses.
    Date: 2018–10
  15. By: Escobar, Octavio; Mühlen, Henning
    Abstract: Foreign direct investment (FDI) flows to Mexico are substantial and play an important role in the Mexican economy since the mid-1990s. These investments reflect the activities of multinational firms that shape to some extent the economic landscape and sectoral structure in this host country. We illustrate that there is considerable variation in the amounts of FDI and structural change within the country and across time. Based on this, the paper's main purpose is to analyze whether there is a significant impact of FDI on structural change. We conduct an empirical analysis covering the period 2006-2016. We use the fixed-effects estimator where the unit of observation is a Mexican state for which we calculate structural change from the reallocation of labor between sectors. The results suggest that (if any) there is a positive effect from FDI on growth-enhancing structural change. This effect depends critically on the lag structure of FDI. Moreover, there is some evidence that the positive effect (i) arises from FDI flows in the industry sector and (ii) is present for medium- and low-skilled labor reallocation.
    Keywords: FDI,structural change,labor reallocation,Mexico,multinational firms,economic development
    JEL: F21 L16 O10 O54
    Date: 2018
  16. By: Chang, Pao-Li (School of Economics, Singapore Management University); Hsu, Wen-Tai (School of Economics, Singapore Management University)
    Abstract: This article provides a review on the theories of various power-law phenomena related to geography and trade. In particular, we focus our discussion on the gravity equation of trade flows, the power law in firm size, and the link between the two - highlighting the roles of geography and trade in the theoretical modeling. We also discuss how these two power-law phenomena may be related to other power-law phenomena, such as those in income, firm productivity and city size.
    Date: 2018–09–27
  17. By: Woodgate, Ryan
    Abstract: After demonstrating the empirical relevance of tax competition effects across OECD countries, we incorporate such effects into a Kaleckian model. Corporate tax rates are seen as affecting investment by the effect on the location of multinational enterprise (MNE) investment, not on the total size of worldwide MNE investment. Hence, unlike the neoclassical approach, in our analysis investment is not driven by tax rates affecting the cost of capital, which is objectionable from a post-Keynesian perspective. With this locational qualification in place, we augment a traditional neo-Kaleckian model with the effects of MNE investment and determine under what conditions a country's policymakers can stimulate demand by raising corporate tax rates (via the usual Kaleckian redistribution channel) or lowering tax rates (via the tax competition FDI channel). The result of this exercise shows that our model predicts countries of small economic size will be more likely to engage in tax competition. Moreover, if the usual Keynesian stability condition holds, we can show that the effect of higher corporate tax rates on demand is much more likely to be negative than positive. To see how an interdependent world system of corporate tax rates may interact and develop over time, we use a procedural-based simulation approach using the conditions derived from our modified neo-Kaleckian model to inform the behavioural rules of our simulated policymakers. The simulations show a propensity of corporate tax rates around the world to convergence and to fall in systems with realistic parameter ranges, offering an explanation for the empirical phenomenon of the so-called "race to the bottom" in corporate tax rates. The "bottom" is shown within our model to be a bad equilibrium, from which tax coordination is proposed as a means of escape.
    Keywords: tax competition,Kalecki,multinational enterprises,race to the bottom,simulation,foreign direct investment,policy coordination
    JEL: E11 E12 E62 F55 H25
    Date: 2018
  18. By: Pavel Chakraborty; Michael Henry
    Abstract: Using detailed firm-product-year data across manufacturing industries in India, and exploiting the exogenous nature of China's entry into the WTO in 2001, we investigate the link between the impact of import penetration from China on the product variety of Indian manufacturing firms. We find: (i) robust and significant effect of product drop, with the effect coming only from competitive pressure in the domestic market; (ii) evidence of product drop or 'creative destruction' is robust only for the lower-half of the size distribution; (iii) firms drop their peripheral/marginal products and concentrate on the core ones; and (iv) our result is most strong for firms producing intermediate goods. For an average Indian manufacturing firm, 10 percentage point increase in India's Chinese share of imports in the domestic market reduces the product scope of firms by 1.7-4.4%. In contrast, we find positive effects on product scope as when firms are importing intermediate goods. We also find evidence of significant productivity effects and within-firm factor reallocation. Our results are consistent to a battery of robustness checks and IV estimation.
    Keywords: Chinese Competition, Product Drop, Domestic Market, Small Firms
    JEL: F1 F14
    Date: 2018
  19. By: Mahdi Ghodsi (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: This paper analyses the competitiveness of Austrian manufacturing industries by comparing the performance of Austrian firms with the Western European firms using recent estimates of TFP across Wider Europe (EU-28 plus Western Balkans) during the period 2007-2015. According to the TFP estimates, Austrian firms with larger turnovers, and less employment, in regions with less regional-industrial concentration of labour have become more competitive in terms of TFP. Using firm’s TFP and other characteristics aggregated by industries across Wider Europe, a gravity model for exports is estimated. Results show that larger trade across countries in the sample is driven by intra-firm trade, better efficiency of industries in terms of simple average of TFP growth of firms and more allocation of capital to more efficient firms. Comparing the actual values of exports from Austria to CESEE with the predicted values of the gravity model, I found that since 2012 excessive exports were directed to Western Europe rather than to CESEE. In a robustness check using unilateral exports value, these interesting findings also confirmed that a potential Austrian lock-in effect in the CESEE region reversed and trade diverged to the more competitive market of Western Europe.
    Keywords: firm performance, total factor productivity (TFP), gravity model, exports performance, lock-in effect
    JEL: D22 D24 F14 F15 F23 L25
    Date: 2018–10
  20. By: Simone Moriconi; Giovanni Peri; Riccardo Turati
    Abstract: In this paper we document the impact of immigration at the regional level on Europeans’ political preferences as expressed by voting behavior in parliamentary or presidential elections between 2007 and 2016. We combine individual data on party voting with a classification of each party's political agenda on a scale of their "nationalistic" attitudes over 28 elections across 126 parties in 12 countries. To reduce immigrant selection and omitted variable bias, we use immigrant settlements in 2005 and the skill composition of recent immigrant flows as instruments. OLS and IV estimates show that larger inflows of highly educated immigrants were associated with a change in the vote of citizens away from nationalism. However the inflow of less educated immigrants was positively associated with a vote shift towards nationalist positions. These effects were stronger for non-tertiary educated voters and in response to non-European immigrants. We also show that they are consistent with the impact of immigration on individual political preferences, which we estimate using longitudinal data, and on opinions about immigrants. Conversely, immigration did not affect electoral turnout. Simulations based on the estimated coefficients show that immigration policies balancing the number of high-skilled and low-skilled immigrants from outside the EU would be associated with a shift in votes away from nationalist parties in almost all European regions.
    JEL: D72 I28 J61
    Date: 2018–09
  21. By: Bakari, Sayef; Mabrouki, Mohamed; elmakki, asma
    Abstract: This paper investigates the relationship between industrial exports and economic growth in Tunisia. In order to achieve this purpose, annual data for the periods between 1969 and 2015 were tested using the Johansen co-integration analysis of Vector Error Correction Model and the Granger-Causality tests. According to the result of the analysis, it was determined that there is a negative relationship between industrial exports and economic growth in the long run. Otherwise, and on the basis of the results of the Granger causality test, we noted the absence of a causal relationship between industrial exports and economic growth in the short term. These results provide evidence that industrial exports, thus, are not seen as the source of economic growth in Tunisia and suffer a lot of problems and poor economic strategy.
    Keywords: Industrial Export, Economic Growth, Cointegration, VECM, Causality, Tunisia.
    JEL: F10 F11 F13 F14 O55
    Date: 2018
  22. By: Soumyatanu Mukherjee; Udo Broll
    Abstract: This paper presents a mean-variance decision making approach in the context of a risk-averse exporting firm, for analysing its optimal production and exporting decision in the portfolio of sales towards domestic and foreign markets, under unfair background risk, such as greater chance of loss for the export credit insurance (possibly offered under non-proportional reimbursement), or unprecedented negative externalities imposed by the partner country’s government on the home country’s export policies. Then this paper traces out the comparative static responses of optimal export sales owing to the changes in distribution, size, or in the dependence structure of the background risk. Adaptation of the mean-variance decision-theoretic model helps obtaining all the results in terms of monotonicity and curvature properties of the marginal willingness of substitution between risk and return, with simple yet intuitive interpretations.
    Keywords: Exports; Unfair background risk; Decision under risk; Mean-variance model; Risk aversion.
    Date: 2018
  23. By: Javier López González; Janos Ferencz
    Abstract: This paper aims to provide policy makers with a broad overview of the issues that the digital transformation raises for trade with a view to informing how these might be reflected in trade policy design. It discusses how digitalisation has changed international trade and provides estimates of the impact of increased digital connectivity on trade. It shows that digitalisation is particularly important for trade in more complex manufactures and digitally deliverable services; that it helps parties better exploit benefits from trade agreements; and that it gives rise to new complementarities between goods and services. The paper also discusses some trade-related regulatory challenges. Engaging in digital trade in goods means paying attention to a broader range of supporting services, such as logistics or e-payments. Similarly, the ability to engage in trade in services, particularly those that are digitally delivered, is also, in part, affected by market access in ICT goods. The paper argues that making the most out of the digital transformation for trade requires approaching market openness more holistically, thinking about measures affecting goods, services and digital connectivity more jointly, and about measures affecting the full value chain, including the enablers of digital trade and tackling all these through greater international cooperation.
    Keywords: digital connectivity, digital trade, Digital transformation, e-commerce, gravity, market openness
    JEL: F13 F14 O33
    Date: 2018–10–08
  24. By: Baum, Christopher F (Boston College, DIW Berlin, and Centre of Excellence for Science and Innovation Studies (CESIS)); Lööf, Hans (Centre of Excellence for Science and Innovation Studies (CESIS), Royal Institute of Technology); Stephan, Andreas (Jönköping University, DIW Berlin, and Centre of Excellence for Science and Innovation Studies (CESIS))
    Abstract: STEM-focused industries are critical to the innovation-driven economy. As many firms are running short of STEM workers, international immigrants are increasingly recognized as a potential for high-tech job recruitment. This paper studies STEM occupations in Sweden 2011–2015 and tests hypotheses on new recruitment and the economic impact of foreign STEM workers. The empirical analysis shows that the probability that a new employee is a STEM immigrant increases with the share of STEM immigrants already employed, while the marginal effect on average firm wages is positively associated with the share of immigrant STEM workers. We also document heterogeneity in the results, suggesting that European migrants are more attractive for new recruitment, but non-EU migrants have the largest impact on wage determination.
    Keywords: STEM; migration; employment; wages; correlated random effects
    JEL: C23 J24 J61 O14 O15
    Date: 2018–10–04
  25. By: Santos, Eleonora
    Abstract: The lack of a database that integrates a significant number of the variables necessary to empirically investigate the existence of externalities from FDI in Portugal represents an important limitation in this area. This paper presents a new balanced panel dataset with a total of 5,045 manufacturing firms (domestic and foreign) for the period 1995-2007. We use multiple imputation in Stata 13.0 to construct a large dataset containing several indicators taken from AMADEUS, Quadros do Pessoal, EU Klems and OCDE databases, that allow us to congregate variables that measure three dimensions: total factor productivity; foreign presence and factors that may influence the productivity of domestic firms, such as indicators of firm efficiency and R&D activities. Our panel dataset provides a set of useful 15 indicators for the analysis of externalities from FDI in 4,685 domestic manufacturing firms. We perform correlation analysis by technological groups based on Pavitt’s Taxonomy. Results indicate that the foreign presence is positively and significantly correlated with the TFP growth. Moreover, the sign and magnitude of the coefficients for the control variables indicate that concentration, the stock of foreign knowledge and the technological gap potentially assist the TFP growth of domestic firms, but only in some technological groups.
    Keywords: firm-level data, productivity, FDI Externalities, Portugal
    JEL: F23 O30
    Date: 2017–09–30
  26. By: Aleksandr Grigoryan; Knar Khachatryan
    Abstract: In this paper we analyze the recent migration wave in Armenia, using household level representative data from 2011. We identify determinants of emigration intentions by estimating a bivariate probit model with endogenous remittances. The key finding is that remittances help potential migrants to ease the migration process, serving as a resource rather than as a contractual tool between migrants and non-migrants. Spatial factors dominate in the set of (community level) instruments driving remittances. When distinguishing the destination country for potential migrants, Post-Soviet versus Western countries (EU countries or USA), we find that the instruments identified for remittances are more relevant for individuals targeting the Post-Soviet area (mainly Russia). Nevertheless, remittances remain a significant resource for migrating to Western countries. In this case, we control for endogeneity of remittances using Lewbel’s (2012) methodology. Our findings suggest that the two pools of potential migrants differ crucially in the main set of skill characteristics: high-skilled potential migrants opt for Western countries (brain drain), while the low-skilled prefer Post-Soviet countries as a destination. In particular, English language knowledge and computer literacy increase the likelihood for migrating to Western countries, and individuals with those skills are less likely to migrate to Post-Soviet countries. Education is significant for the Post-Soviet model only, with a negative impact on migration intentions.
    Keywords: migration; remittances; intentions; development; households;
    JEL: F22 J11 O12
    Date: 2018–10
  27. By: Yushan Li (Institute of World Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences)
    Abstract: China became the second largest outward investor for first ever in 2015. The dominant role of Chinese “go out” policy on such rising OFDI is agreed by a growing number of literatures. This paper presents historical view of that policy and discuss how the government is helping Chinese MNEs to invest abroad. Overall, the “go out” policy has been through four stages, from the initiation, to the formalization, to the expansion and to the new era. As breakthroughs have been made, the regulatory framework is still cumbersome. Although the central government is working on simplification and deregulation, the latest change of the framework might be seen as a signal of centralization. While several challenges ahead, the dominant role of Chinese SOEs in OFDI and the market asymmetry between China and other countries are two problems that worries foreign investors the most.
    Keywords: China, go out policy, outward foreign direct investment, OFDI
    JEL: F21 F23 G18 G28 G38 P33
    Date: 2018–09
  28. By: Andri Chassamboulli; Giovanni Peri
    Abstract: In this paper we analyze the economic effects of changing immigration policies in a realistic institutional set-up, using a search model calibrated to the migrant flows between the US and the rest of the world. We explicitly differentiate among the most relevant channels of entry of immigrants to the US: family-based, employment-based and undocumented. Moreover we explicitly account for earning incentives to migrate and for the role of immigrant networks in generating job-related and family-related immigration opportunities. Hence, we can analyze the effect of policy changes in each channel, accounting for the response of immigrants in general equilibrium. We find that all types of immigrants generate higher surplus for US firms relative to natives, hence restricting their entry has a depressing effect on job creation and, in turn, on native labor markets. We also show that substituting a family-based entry with an employment-based entry system, and maintaining the total inflow of immigrants unchanged, job creation and natives' income increase.
    JEL: E24 F22 J64
    Date: 2018–09
  29. By: John Killick (University of Leeds)
    Abstract: "It has been conventional wisdom for many years that very few migrants—possibly only one per cent—returned to Europe in the sailing ship era because of the hardships of the voyage. Raymond Cohn summarized the best sources in his recent book. Mass Migration under Sail (2009), pp. 10-11, and concluded that migration ‘in virtually all cases was permanent’. The long and hazardous outward voyage made return unlikely, and often there was little to go back to. Nearly all migration historians agree with this low rate, but a minority have suggested there was a larger return migration. In particular, Wilbur Shepperson, Emigration and Disenchantment (1965) researched the biographical accounts of 50 returnees – including many famous names – Cobbett, Kemble, Nuttall, Trollope etc. to show what they thought of the US, and why they left. This is convincing as social analysis, but is too small a number for statistical conclusions. Shepperson shows how they came in many varieties – farmers, mechanics, professionals etc. – each with personal reasons for return, but it is arguable they were in the main a special literary group. The aim of this paper is to buttress Shepperson’s case from more mundane sources– first from the Cope packets which kept passenger lists from all their eastbound packets – about 25000 names over 50 years; Second by checking the British press for return passenger details more fully– which probably Shepperson was not able to do,- and thirdly from some British government reports in the mid and late 1850s, not yet thoroughly utilised. For this see the final section of Killick, ‘Transatlantic steerage fares’. My thesis is that the return migration was larger than previously thought, and was strongly tied to general trade and migration conditions. A small proportion of those attracted by the booms, fled immediately during the following financial crisis, and more in the subsequent depressions. This has implications for what we think about the transatlantic crossing pre steam. This was less arduous and horrific than often painted - the new packet ships after 1818 made return relatively easy, and even re-emigration possible. Similarly frequent returns suggest the Anglo-American contrast were less marked, and the economic gains from emigration less obvious than often suggested at least in the east. The social and political contrasts remained of course, and there were huge differences between groups."
    JEL: N00
  30. By: Maria Borga; Cecilia Caliandro
    Abstract: FDI plays a central role in managing global production networks, but FDI statistics also reflect other factors, including tax avoidance, that make it difficult to differentiate between FDI for “long-term” investments that serves as a source of growth and FDI that is purely financial and has little real economic impact as it merely passes through an economy. This latter FDI also obscures the ultimate sources and destinations of FDI. This paper addresses these challenges by developing a framework for consolidated FDI statistics based on the nationality of the MNE group that complements residency-based FDI statistics. While residency-based statistics are useful to identify where financial claims and liabilities are held, nationality-based statistics provide information on who makes the decisions, reaps the benefits, and bears the risk. Consolidated FDI statistics remove pass-through capital and are better for understanding ‘real’ financial integration between economies and for analysing the relationship between the financing of MNEs and their operations. While some countries produce separate FDI statistics for resident Special Purpose Entities (SPEs) to identify pass-through capital, we demonstrate that this only provides a partial view and that about one-quarter of the inward FDI positions in a selection of European countries reflects pass-through capital through non-SPEs.
    JEL: E01 F21
    Date: 2018–09
  31. By: Jakub Lonsky
    Abstract: Across Europe, far-right parties have made signi ficant electoral gains in recent years, posing aserious threat to the European integration process. Their anti-immigration stance is consideredone of the main factors behind their success. Yet, the causal evidence on how immigrationaffects far-right voting is still relatively scarce. Using data from Finland, this paper studiesthe effect of immigration on voting for the far-right Finns Party on a local level. Exploiting aconvenient setup for a shift-share instrument, I find that one percentage point increase in theshare of foreign citizens in municipality decreases Finns Party's vote share by 3.4 percentagepoints. A placebo test using pre-period data confi rms this effect is not driven by persistenttrends at the municipality level. The far-right votes lost to immigration are captured by the twopro-immigration parties. In addition, immigration is found to increase voter turnout while theprotest vote remains unaffected. Turning to potential mechanisms, the negative effect is onlypresent in municipalities with high initial exposure to immigrants. Moreover, I provide someevidence for welfare-state channel as a plausible mechanism behind the main result.
    Date: 2018–01
  32. By: Luca Verginer (IMT School for advanced studies); Massimo Riccaboni (IMT School for advanced studies)
    Abstract: Global mobility and migration of scientists is an important modern phenomenon with economic and political implications. As scientists become ever more footloose it is important to identify general patterns and regularities at a global scale. At the same time cities, and especially global cities, have become impor- tant loci of economic and scientific activity. Limiting research to international migration, would disregard the importance of local innovation systems. The analysis of the mobility and brain circulation patterns at global scale remains challenging, due to difficulties in obtaining individual level mobility data. In this work we propose a methodology to trace intercity and international mobility through bibliographic records. We reconstruct the intercity and international mobility network of 3.7 Million Life Scientists moving between 9,745 cities. We present several features of the extracted network, offer evidence that the international innovation system is marked by national borders and linguistic similarity and show that international mo- bility largely contributes to the scientific output of national research systems. Moreover we find evidence to suggest that global cities attract highly productive scientist early in their careers.
    Keywords: Network Analysis; Scientist Mobility; Brain Circulation; Global Cities; National Innovation Systems
    JEL: F22 J61 L65 O18 O15 O30 R12
    Date: 2018–10
  33. By: Vivarelli, Marco
    Abstract: This paper aims to provide a critical overview of the drivers that the relevant theoretical and empirical literature suggests being crucial in dealing with the challenges an emerging country may encounter in its attempts to further catch-up a higher income status, with a particular focus devoted to the implications for the domestic labor market. In the first part of the paper, attention will be focused on structural change, capability building and technological progress, trying to map - using different taxonomies put forward by the innovation literature - the concrete ways through which an emerging country can engage a successful catching-up, having in mind that developing countries are deeply involved into globalized markets where domestic innovation has to be complemented by the role played by international technology transfer. In the second part of the paper, the focus will be moved to the possible consequences of this road to catching-up in terms of employment and skills. In particular, the prescriptions by the conventional trade theory will be contrasted with a view taking into account technology transfer, labor-saving technological progress and skill-enhancing trade.
    Keywords: catching-up,structural change,globalization,capabilities,technological transfer
    JEL: O14 O33
    Date: 2018
  34. By: Jens Hoelscher (Department of Accounting, Finance and Economics, Bournemouth University); Peter Howard-Jones (Department of Accounting, Finance and Economics, Bournemouth University)
    Abstract: The neoliberal agenda has polarised societies and in consequence, the choices facing the UK electorate range from neoliberalism to left wing socialism. Empirical evidence already exists on the measurable effect of the increasing dominance of the neoliberal wing of the Conservative party, indicating the continuation of laissez faire, migration control, increasing inequality, a low tax low wage economy, stagnating income and deteriorating public services. The competing ideology will result in the nationalisation of the utilities and the railway system, the regulation of capital, necessitating some element of control to prevent flight, the deregulation of labour, increased taxation, particularly on corporations to repair the damage to infrastructure and public services, and provisions enacted to improve wealth distribution. Both these alternatives should be unappealing to the majority of the electorate. However, allied to the “first past the post†electoral system, in a post Brexit world, what has become the tribal nature of UK society will oscillate between two competing ideologies to the detriment of national welfare. The rationale for this phenomenon is little understood or accepted by the political elite. A plausible explanation is the cultural shift in progressive values towards a post industrial, technological, socially inclusive, multicultural society, built on increasing opportunities for tertiary education, which has threatened the perceived superiority of privilege enjoyed by the older post war generation of primarily white men.
    Keywords: European Union, Brexit; neoliberal; international production networks; imports; exports
    JEL: B E F G H
    Date: 2018–09

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