nep-int New Economics Papers
on International Trade
Issue of 2018‒11‒05
39 papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. Economic integration and bilateral FDI stocks: the impacts of NAFTA and the EU By Barrell, Ray; Nahhas, Abdulkader
  2. Exempted Sectors in Free Trade Agreements By Deardorff, Alan; Sharma, Rishi
  3. The Tariff Impact of Hard Brexit: Taking back Control Comes at a Price By Legge, Stefan; Lukaszuk, Piotr
  4. Recent US-China Tariff War: Opportunities for Indian Pharmaceutical Exports? By Chakraborty, Debashis; Maheshwari, Sourabh; Parashar, Sushil
  5. Indirect Trade and Direct Trade: Evidence from Japanese firm transaction data By ITO Tadashi; SAITO Yukiko
  6. Switzerland's Trade Policy: End of the FTA Road, Switch to the BTB Lane? By Legge, Stefan; Lukaszuk, Piotr
  7. The Effects of Export Diversification on Macroeconomic Stabilization : Evidence from Korea By Jinsoo Lee; Bok-Keun Yu
  8. Trade and Domestic Policies in Models with Monopolistic Competition By Alessia Campolmi; Harald Fadinger; Chiara Forlati
  9. A Ricardian Model of International Trade with Oligopolistic Competition By Zhou, Haiwen
  10. Outward Foreign direct investment and Firm-level Employment Dynamics in Japanese Manufacturing Firms By LIU Yang; NI Bin
  11. Modification of the Regulatory Impact Assessment (RIA) on Indonesia's trade, investment, and industrial incentive policies By Verico, Kiki
  13. Understanding Free Trade Attitudes: Evidence from Europe By Braml, Martin; Felbermayr, Gabriel
  14. International Competition and Adjustment: Evidence from the First Great Liberalization By Stéphane Becuwe; Bertrand Blancheton; Christopher M. Meissner
  15. Competitive Advantage in the Renewable Energy Industry: Evidence from a Gravity Model By Onno Kuik; FrŽdŽric Branger; Philippe Quirion
  16. The Effect of Exchange Rates on Chinese Trade: A Dual Margin Approach By Bin Qiu; Kuntal K. Das; W. Robert Reed
  17. Technological Trajectories and FDI: Top Bananas and Underdogs By Santos, Eleonora; Khan, Shahed
  18. Fragmentation and Gains from Trade By LAI, Edwin L.-C.; QI, Han (Steffan)
  19. Farewell to Agriculture? Productivity Trends and the Competitiveness of Agriculture in Central Asia By Gharleghi, Behrooz; Popov, Vladimir
  20. The impacts of institutional quality and infrastructure on overall and intra-Africa trade By Jiang, Yushi; Borojo, Dinkneh Gebre
  21. Can foreign aid dampen the threat of terrorism to international trade? Evidence from 78 developing countries By Asongu, Simplice; Leke, Ivo
  22. Trade, Market Imperfections and Labour Share By Dibyendu Maiti
  23. Trade and Domestic Production Networks By Felix Tintelnot; Ayumu Ken Kikkawa; Magne Mogstad; Emmanuel Dhyne
  24. KORUS Amendments: Minor Adjustments Fixed What Trump Called "Horrible Trade Deal" By Jeffrey J. Schott; Euijin Jung
  25. The implications of climate change on Germany’s foreign trade: A global analysis of heat-related labour productivity losses By Nina Knittel; Martin W. Jury; Birgit Bednar-Friedl; Gabriel Bachner; Andrea Steiner
  26. The Volatility and Cyclicality of Job Flows in German Exporters and Non-Exporters By Lindenthal, Volker
  27. Highly Skilled International Migration, STEM Workers, and Innovation By Anelí Bongersy; Carmen Díaz-Roldán; José L. Torres
  28. Low, High and Super Congestion of an Open-Access Resource: Impact under Autarky and Trade, with Aquaculture as Illustration By Schiff, Maurice
  29. China and the United States: Trade Conflict and Systemic Competition By C. Fred Bergsten
  30. Exporting Pollution By Itzhak Ben-David; Stefanie Kleimeier; Michael Viehs
  31. Impacts of Possible Chinese Protection on US Soybeans By Taheripour, Farzad; Wally Tyner
  32. Invoicing and Pricing-to-Market - A Study of Price and Markup Elasticities of UK Exporters By Corsetti, G.; Crowley, M.; Han, L.
  33. Estimating migration changes from the EU’s free movement of people principle By Hugo Rojas-Romagosa; Johannes Bollen
  34. Accounting for the Sources of the Recent Decline in Korea's Exports to China By Moon Jung Choi; Kei-Mu Yi
  35. Deriving the factor endowment--commodity output relationship for Thailand (1920-1927) using a three-factor two-good general equilibrium trade model By Yoshiaki Nakada
  36. La suppression des subventions aux exportations européennes de sucre : une évaluation en équilibre général calculable By Alexandre Gohin
  37. Gender Inequality in the Aftermath of Negative Trade Shocks: Evidence from the U.S By Ghosh, Ishan; Larch, Mario; Murtazashvili, Irina; Yotov, Yoto
  38. The Development of Foreign Direct Investment and Domestic Labor Demand of Corporate Groups in Japan (Japanese) By ARAKI Shota
  39. The role of education in promoting positive attitudes towards migration at times of stress By Francesca Borgonovi; Artur Pokropek

  1. By: Barrell, Ray; Nahhas, Abdulkader
    Abstract: This paper examines the factors affecting bilateral Foreign Direct Investment (FDI) stocks from 14 high income countries to 31 OECD countries over the period 1995-2015. We specifically emphasise the effect of regional trade agreements such as the European Union (EU) and the North American Free Trade Area (NAFTA) along with membership of the Currency Union. Our empirical analysis applies the generalised method of moments (GMM) estimator to a gravity model of bilateral FDI stocks. The findings imply that EU membership is a significant determinant of FDI even when we condition on the variables that follow from the application of the gravity model. We look at the effects of the North American Free Trade Area on within block FDI and find no similar effect. Our results suggest that European Integration has a large effect on FDI stocks, raising intra Single Market FDI noticeably. We note that the UK’s departure from the Single Market may reduce the stock of intra EU FDI by up to 30 per cent in the long run. In addition, the findings point that the UK has no labour market or competitive environment advantage above the rest of the EU in attracting FDI.
    JEL: C23 F14 F15
    Date: 2018–05–15
  2. By: Deardorff, Alan (Department of Economics, Colgate University); Sharma, Rishi (Department of Economics, Colgate University)
    Abstract: Almost all participants in free trade agreements (FTAs) exclude at least a few products or sectors from complete tariff removal on the exports of their FTA partners. The positive tariffs that remain within an FTA are often the highest tariffs that the countries apply on an MFN basis. It seems plausible that such exclusions may be chosen because the domestic producers of these products are viewed as especially vulnerable to competition from imports from the partner country. In brief, they are especially “sensitive sectors.†We develop this idea theoretically and then test it empirically on data from 37 countries in 240 importer-exporter pairs within FTAs. We find support for the sensitive-sector hypothesis only in the high-income countries. We find low-income countries, in contrast, to exempt sectors where bilateral tariff removal would be more likely trade diverting and therefore harmful. Our explanation for this, supported empirically, is not that they are following the advice of trade economists, but rather that they are avoiding loss of tariff revenue and also being influenced by the greater bargaining power of richer and/or larger partners in their FTAs.
    Keywords: sensitive sectors, exempted sectors, FTAs
    JEL: F13
    Date: 2018–10–21
  3. By: Legge, Stefan; Lukaszuk, Piotr
    Abstract: In the so-called Brexit Referendum of June 2016, the British people voted to leave the European Union. With no deal in sight yet, a plausible scenario is that the United Kingdom will start trading with all countries on the basis of WTO rules from April 2019 onward. This would imply that all UK imports and exports will be subject to most-favored-nation (MFN) duties. In the present paper, we examine the tariff impact of a hard Brexit and show that neither better trade agreements with non-European countries nor joining EFTA can compensate for worsened access to the EU market. Assuming that the UK will introduce tariffs according to the currently applied MFN schedule of the European Union, our findings reveal that both British exports and imports would face substantial tariffs. In total, we estimate a quadrupling of duties on UK imports to $21.1 billion and $13.9 billion on exports. Assuming imports from the EU and countries that currently have an FTA with the EU will not change, British Customs would collect an additional $300 million per week after a hard Brexit.
    Keywords: Brexit, FTA, Tariffs, Trade Policy, United Kingdom
    JEL: F14
    Date: 2018–10
  4. By: Chakraborty, Debashis; Maheshwari, Sourabh; Parashar, Sushil
    Abstract: The inception of World Trade Organization (WTO) in 1995 was expected to reduce trade barriers across member countries on one hand and facilitate growth though promotion of international trade in merchandise products and services on the other. The subsequent WTO-led reforms deepened the globalization wave. In recent times however, the world is witnessing a phase of ‘de-globalization’, with rise in trade barriers and inwardness. The recent increase in US tariffs on Chinese exports and countermeasures imposed by China are a case in point. In 2014 India has initiated the Make-in-India scheme for deepening industrialization and facilitating exports. The current paper evaluates the possible opportunities for expanding Indian pharmaceutical exports in the US market, given the increase in tariff against Chinese products with the help of select trade indices. The analysis portrays a modest opportunity for Indian pharmaceutical exports in the US market, based on their past performance. Only six products at HS 6-digit level, based on the six indicators, are found to be enjoying competitiveness in the US market. The paper concludes that facilitating R&D in pharma segment as well as expanding the coverage of mutual recognition of standards in US may be explored as possible steps for enhancing Indian exports.
    Keywords: India, US, Pharmaceutical trade, Trade indices, Trade policy, Make in India
    JEL: F10 F13
    Date: 2018–10–21
  5. By: ITO Tadashi; SAITO Yukiko
    Abstract: This paper attempts to establish stylized facts on direct and indirect trade and its impact on firm performance using firm transaction data of Japanese firms, with the special goal of shedding light on regional aspects and indirect exports/imports. The major findings are: 1) firms in regional areas are smaller in size than those in metropolitan areas, and firms in regional areas are less likely to participate in export or import, even after controlling for firm size; 2) direct and indirect exports and imports in terms of the number of firms, employees, sales values, and value-added represent 40%-70% of the regional economies; 3) indirect exporters in regional areas are likely to become direct exporters, which suggests the effects of learning in terms of procedures for conducting exporting, searching for customers, and gaining information on foreign markets, which is not the case for indirect importers; and 4) both newly started direct export/import firms and newly started indirect export/import firms tend to grow faster. In addition, the size of expansion is greater for direct export/import firms than for indirect ones, and is greater for firms in regional areas compared to metropolitan areas.
    Date: 2018–10
  6. By: Legge, Stefan; Lukaszuk, Piotr
    Abstract: Not being a member of the European Union, Switzerland has developed a vast network of 30 free trade agreements (FTA) with 40 partner countries, covering more than 80 percent of Swiss foreign trade. We examine this network and document how much Switzerland and its trading partners benefit from existing FTAs. Furthermore, this study analyzes possible gains from signing additional trade agreements as well as the tariff impact of a hard Brexit. The findings reveal that overall tariff reductions are substantial in absolute terms and balanced for Swiss exports and imports. The total amount of duties paid to Swiss Customs as well as foreign customs authorities is reduced by approximately 2 billion CHF annually. We conclude with the observation that there is limited scope for further tariff reductions, suggesting that a new focus on behind-the-border (BTB) measures is recommended.
    Keywords: FTA, Tariffs, Trade Policy, Switzerland
    JEL: F14
    Date: 2018–10
  7. By: Jinsoo Lee (KDI School of Public Policy and Management); Bok-Keun Yu (Economic Research Institute, The Bank of Korea)
    Abstract: This paper studies whether export diversification mitigated the negative effect of the global financial crisis on exports using the Korean case. Specifically, we use annual data on the exports of 24 Korean manufacturing industries from 2000 to 2016 and examine whether the negative effect of the crisis on exports was less prevalent in industries that were more diversified in terms of country and product. We also examine whether export competitiveness, measured by the revealed comparative advantage index by industry, had a mitigating effect on trade during the crisis. In order to study these issues, we use a panel regression with a fixed-effect model for 24 Korean manufacturing industries. From our empirical analysis, we find that country diversification weakened the negative impact of the global financial crisis on Korea¡¯s exports, but neither product diversification nor export competitiveness did so.
    Keywords: Export diversification, Global financial crisis, Macroeconomic stabilization
    JEL: E60 F10 F40
    Date: 2018–08–20
  8. By: Alessia Campolmi; Harald Fadinger; Chiara Forlati
    Abstract: We consider unilateral and strategic trade and domestic policies in single and multi-sector versions of models with CES preferences and monopolistic competition featuring homogeneous (Krugman, 1980) or heterogeneous firms (Melitz, 2003). We first solve the world-planner problem to identify the efficiency wedges between the planner and the market allocation. We then derive a common welfare decomposition in terms of macro variables that incorporates all general-equilibrium eects of trade and domestic policies and decomposes them into consumption and production-eciency wedges and terms-of-trade effects. We show that the Nash equilibrium when both domestic and trade policies are available is characterized by first-best-level labor subsidies that achieve production efficiency, and inefficient import subsidies and export taxes that aim at improving domestic terms of trade. Since the terms-of-trade externality is the only beggar-thy-neighbor motive, it remains the only reason for signing trade agreements in this general class of models. Finally, we show that when trade agreements only limit the strategic use of trade taxes but do not require coordination of domestic policies, the latter are set inefficiently in the Nash equilibrium in order to manipulate the terms of trade.
    Keywords: Heterogeneous Firms, Trade Policy, Domestic Policy, Trade Agreements, Terms of Trade, Efficiency, Tariffs and Subsidies
    JEL: F12 F13 F42
    Date: 2018–10
  9. By: Zhou, Haiwen
    Abstract: This paper studies a Ricardian model of international trade with a continuum of products in a general equilibrium model in which firms engage in oligopolistic competition. It provides a bridge between trade models based on perfect competition and models based on imperfect competition. Compared with a model based on perfect competition, the incorporation of fixed cost leads to the result that an increase of domestic labor may increase the relative wage of the domestic country.
    Keywords: Comparative advantage, Ricardian model, oligopolistic competition, increasing returns to scale, trade policy
    JEL: F10
    Date: 2018–10–08
  10. By: LIU Yang; NI Bin
    Abstract: The effects of overseas foreign direct investment (FDI) on domestic employment have drawn much academic and policy attentions. Most previous studies focused on the effect on net employment growth. However, the firm-level dynamic of "net employment growth = job creation - job destruction" means that the effects on job creation and destruction within firms are not clearly understood. For example, a positive effect on net employment growth could result from increasing job creation and decreasing job destruction, but it could also indicate decreasing job creation with a greater decrease in job destruction, for example. Furthermore, the mechanisms differ among effects on job creation and destruction. This study uses a unique dataset of Japanese firms' overseas activities to examine the individual effect of outward FDI on firm-level job creation and destruction, respectively. We found that investment in Asian countries has a positive impact on domestic job creation in Japan, whereas the impact of investment in European and North American countries is negative. In terms of job destruction, the impact is negative regardless of the FDI destination. The results are explained using the standard theory of job creation and destruction with FDI introduced.
    Date: 2018–10
  11. By: Verico, Kiki
    Abstract: This paper modifies the Regulatory Impact Assessment (RIA) method and applies it on Indonesia's trade, investment, and industrial incentive policies. First, it analyses the Indonesian Bilateral Trade Agreements (BTAs) utilizing trade and investment agreement. Indonesia currently has two BTAs in force. One, Indonesia – Japan Economic Partnership Agreement (IJEPA) and two, Indonesia – Pakistan Preferential Trade Agreement (IP-PTA). This paper found that the outcome expectation for trading partner depends on its GNI per capita. If the trading partner has GNI per capita higher than Indonesia’s then the highest expected outcome would be on the increasing FDI inflows from the trading partner. If its GNI per capita is lower than Indonesia's, then the highest foreseeable result would be on the rising net trade balance of Indonesia. Second, industrial sector incentive analysis by comparing RIA scores on all possible incentive policies. In this paper, the modified RIA found that firms prefer supply-side incentives such as government support on the Research and Development, patent and copyright protection than fiscal incentives such as the import duty-free or tariff rate protection.
    Keywords: Regulatory Impact Assessment; Public economics; Bilateral Trade Agreements; trade & investment; industrial incentive; RND & Innovation, Legal Institution, Indonesia
    JEL: F14 K23 O24 O30 P35 P45 P48
    Date: 2018–06–01
  12. By: Aleksandra Parteka (Gdansk University of Technology, Gdansk, Poland); Joanna Wolszczak-Derlacz (Gdansk University of Technology, Gdansk, Poland)
    Abstract: By using very rich individual-level data on workers from 28 European countries, we provide the first so extensive cross-country assessment of wage response to global production links within global value chains (GVCs) in the period 2005–2014. Unlike the other studies, we (i) address the importance of backward links in globally integrated production structures (capturing imports of goods and services required in any stage of the production of the final product); (ii) measure the occupational task profile of workers with new country-specific indices of routinisation; (iii) compare the impact of global production links on wages between workers from Western, Central–Eastern, and Southern Europe employed in manufacturing and non-manufacturing sectors; and (iv) account for direct and indirect dependence on GVC imports from developing and high-income countries. We consider the potential endogeneity problems. Our results suggest that global import intensity of production exhibits negative pressure on wages in Europe. This effect mainly concerns workers from Western Europe employed in manufacturing and is driven by production links with non-high-income countries. Our counterfactual estimates suggest that the effect for all of Europe is small, but the pressure of GVC imports on wages in Western Europe is not economically negligible, in particular when inputs are from less developed countries including China.
    Keywords: wages, global value chains, global import intensity of production, tasks, EU
    JEL: F14 F16 J31
    Date: 2018–10
  13. By: Braml, Martin; Felbermayr, Gabriel
    Abstract: Our paper contributes by demonstrating that public opinion on open-market policies is mainly shaped by ideology rather than by rational considerations and economic self-interest. Exploiting data on attitudes towards TTIP, Free Trade, Protectionism, and Globalization from the Eurobarometer, a comprehensive biannual survey across EU citizens, we find that individual preferences towards different trade policies can hardly be explained by variables that typically determine personal advantages of trade liberalization. Nevertheless, rational considerations follow expected patterns but are not overly relevant. Rather, we find trust variables and country-fixed-effects being predominant drivers of individual open-market attitudes. Our data also allow for a spatial analysis at the European NUTS-2 level. Performing a cross-country analysis, we find a causal relation between anti-Americanism and national TTIP approval rates. Macroeconomic performance variables contribute only to a minor extent in shaping regional and national preferences.
    Keywords: International Political Economy,Free Trade Attitudes,TTIP
    JEL: F13 F53
    Date: 2018
  14. By: Stéphane Becuwe; Bertrand Blancheton; Christopher M. Meissner
    Abstract: France and Great Britain signed the Cobden Chevalier treaty in 1860 eliminating import prohibitions and lowering tariffs with Britain. This policy change was unexpected by French industry and entirely free from lobbying efforts. A series of commercial treaties with other nations followed in the 1860s lowering tariffs with France’s largest trade partners. We study the dynamics of French trade patterns using product level exports and imports for France with all partners and at the bilateral level before and after these tectonic trade policy shocks. We find a significant rise in intra-industry trade in leading manufactured products. Cotton, woolen and silk cloth “held their ground,” rising imports being met with rising exports. Rather than shifting or destabilizing French patterns of specialization, liberalization allowed for an expansion of exports in differentiated products. The findings are consistent with the “smooth adjustment” hypothesis. The return to discussion of higher tariffs from 1878 should not be regarded as a backlash to international competition, but rather the outcome of anti-competitive protectionist lobbying.
    JEL: F13 F14 N7
    Date: 2018–10
  15. By: Onno Kuik (IVM, VU Amsterdam); FrŽdŽric Branger (CIRED); Philippe Quirion (CIRED, CNRS)
    Abstract: Pioneering domestic environmental regulation may foster the creation of new eco-industries. These industries could benefit from a competitive advantage in the global market place. This article examines empirical evidence of the impact of domestic renewable energy policies on the export performance of renewable energy products (wind and solar PV). We use a gravity model of international trade with a balanced dataset of 49 (for wind) and 40 (for PV) countries covering the period 1995-2013. The stringency of renewable energy policies are proxied by installed capacities. Our econometric model shows evidence of competitive advantage positively correlated with domestic renewable energy policies, sustained in the wind industry but brief in the solar PV industry. We suggest that the reason for the dynamic difference lies in the underlying technologies involved in the two industries.
    Keywords: Competitive Advantage, Gravity Model, Wind Industry, Solar PV Industry, Green Growth
    JEL: F14 K32 Q42
    Date: 2018–10
  16. By: Bin Qiu; Kuntal K. Das (University of Canterbury); W. Robert Reed (University of Canterbury)
    Abstract: Previous studies investigating the effect of exchange rate changes on a country’s exports have found little evidence that exchange rates matter. This “Exchange Rate Disconnect Puzzle” may stem from the fact that studies have mostly focused on aggregate data. Using HS- 6 digit product-level data for exports from China, we analyze the effect of real exchange rate as well as the volatility of real exchange rate of the Chinese RMB. By decomposing China’s exports into its “extensive” and “intensive” margins, we find that real exchange rate volatility has a significantly impact on overall Chinese exports that operate via both the extensive and the intensive margins of trade. Real exchange rate volatility increases the uncertainty and deters small and new firms from entering the market or force them to exit the market via the extensive margin. As less firms operate in the export market, the export share of the existing firms increase via the intensive margin. The overall effect of this volatility is slightly positive. We find that these effects are dominant for the sub sample of countries that are the minor trading partners of China compared to its major trading partners. We find weak evidence that real exchange rate depreciation affects China’s exports via the extensive margin.
    Keywords: Chinese Trade, Extensive Margin & Intensive Margin, Real Exchange Rate, Volatility
    JEL: F14 F31
    Date: 2018–10–01
  17. By: Santos, Eleonora; Khan, Shahed
    Abstract: Previous empirical evidence searching for externalities from Foreign Direct investment in Portugal showed mixed results. Using a new database containing 5,045 Portuguese manufacturing firms grouped by technological trajectories, we investigate the occurrence and magnitude of externalities from FDI in 1995-2007. We find both positive and negative externalities in scale-intensive and supplier-dominated industries. The magnitude of externalities is higher in the current period than in lagged periods. Because positive externalities outweigh the negative externalities, on the whole a 1% increase in foreign presence (measured by turnover) increases the Total Factor Productivity of domestic firms by 0.42 percentage points. Thus, the Investment Promoting Agency should attract foreign projects in those technological groups.
    Keywords: Technological Trajectories,Multinational Corporations,Productivity
    JEL: F23 L60 O3
    Date: 2018
  18. By: LAI, Edwin L.-C.; QI, Han (Steffan)
    Abstract: In this paper, we estimate the competitiveness of countries in intermediate goods and in final goods. We find that China’s competitiveness in both intermediate goods and final goods increased exceptionally rapidly during 1995-2011. We also find that the gains from trade of countries with strong comparative advantage in final goods can be substantially under-estimated if we do not separately take into account trade flows in intermediate goods and final goods. We also find that, during 1995-2011, the average increase in gains from intermediate goods trade across all countries in our sample is distinctly higher than the average increase in gains from final goods trade. This suggests that gains from trade due to international fragmentation of production is becoming more important over time relative to gains from trade in final goods.
    Keywords: fragmentation, gains in trade, global value chain, global sourcing
    JEL: F10 F11 F14 F17
    Date: 2018–10
  19. By: Gharleghi, Behrooz; Popov, Vladimir
    Abstract: Agricultural productivity in the Central Asian republics of the USSR stopped growing from the late 1970s and declined in the 1990s when the transition to the market occurred. As a result, most agricultural goods were uncompetitive on the both the domestic market and the world market, and the agricultural trade balance deteriorated as imports grew faster than exports. Although there have been a few success stories – cereals in Uzbekistan, meat production in Azerbaijan, oil seeds in Kazakhstan – the overall picture is not one of agriculture as the driving force of the region’s future growth. We argue, however, that the relative decline of agriculture is consistent with international experience. In ‘economic miracle’ countries, the share of agriculture fell faster than in other countries because the sector donated labour to the industrial sector, which was the engine of growth. The problem in Central Asia is not the slow growth of agricultural output, but the slow growth of productivity in agriculture, which fails to increase the competitiveness of agricultural products and leads to an inability of the rural population to move to more productive industrial activities.
    Keywords: Agriculture productivity, Central Asia, Competitiveness
    JEL: Q10 Q18
    Date: 2018–10
  20. By: Jiang, Yushi; Borojo, Dinkneh Gebre
    Abstract: The authors examine the impacts of quality of institutions, border and transport efficiency, physical and communication infrastructure on overall and intra-Africa trade covering 44 African countries and their 173 trade partners for the periods 2000-2014. Aggregate indicators are derived for quality of economic institutions, border and transport efficiency, physical and communication infrastructure using principal component analysis. The findings disclose that intra-Africa and overall Africa's trade robustly determined by quality of institutions, border and transport efficiency, physical and communication infrastructure. The estimates also indicate that the marginal effect of the quality of institutions, physical and communication infrastructure on trade flow appears to be increasing in GDP per capita. In contrast, the marginal effect of border and transport efficiency on trade decreases in GDP per capita. The authors compute simulation of improving each indicator to the best performer in the sample. The findings are robust to estimation method conducted to account for potential endogeneity.
    Keywords: Trade flow,transport efficiency,quality of institutions,physical and communication infrastructure,gravity model,African countries
    JEL: F1 F14
    Date: 2018
  21. By: Asongu, Simplice; Leke, Ivo
    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: F23 F35 F40 O40 Q34
    Date: 2018–01
  22. By: Dibyendu Maiti (Department of Economics, Delhi School of Economics)
    Abstract: This paper shows that, redistributing the cost-price margin between workers and firms, the trade affects distribute share of labour differently between the cases with and without union under heterogeneity. The ‘generalised oligopoly framework’ is applied to investigate the effect of trade on wage and labour share mainly through three channels - market size, strategic competition and specialisation. We find that market size and competition effects jointly raise both wage and labour share without heterogeneity and labour union. But, the degree of specialisation (or comparative advantage) arising out of heterogeneous productivity distribution across sectors between trading partners dampens both of them unambiguously with union, but not without union. An increase in domestic entry for competitive policy raises wage and cannot push upto the autarky level. Further, the rise of union wage may not necessarily be higher than that without union. An expression for labour share is derived from translog specification with additional terms capturing market imperfections for empirical verification. The results on cross-country data over 182 countries for a period of 1954 to 2014 confirm that the trade weakens bargaining position of workers and explains the declining labour share unambiguously.
    Keywords: Trade, Generalised Oligopoly, Market Imperfection, Labour Share
    JEL: D24 F16 L11
    Date: 2018–10
  23. By: Felix Tintelnot; Ayumu Ken Kikkawa; Magne Mogstad; Emmanuel Dhyne
    Abstract: We use Belgian data with information on domestic firm-to-firm sales and foreign trade transactions to study how international trade affects firm efficiency and real wages. The data allow us to accurately construct the domestic production network of the Belgian economy, revealing several new empirical facts about firms' indirect exposure to foreign trade through their domestic suppliers and buyers. We use this data to develop and estimate models of domestic production networks and international trade. We first consider a model of trade with an exogenous network structure, which gives analytical solutions for the effects of a change in the price of foreign goods on firms' production costs and real wages. To examine how gains-from-trade calculations change if buyer-supplier links are allowed to form or break in response to changes in the price of foreign goods, we next develop a model of trade with endogenous network formation. We take both models to the data and compare the empirical results to those we obtain using existing approaches. This comparison highlights the relevance of data on and modeling of domestic production networks in studies of international trade.
    JEL: E2 F14 L14
    Date: 2018–10
  24. By: Jeffrey J. Schott (Peterson Institute for International Economics); Euijin Jung (Peterson Institute for International Economics)
    Abstract: The amended Korea-US Free Trade Agreement (KORUS FTA)—quickly negotiated and signed in September 2018—involves only limited changes to the original pact. Schott and Jung assess what was changed as a result of the negotiations and, importantly, what was left off the agenda. The revised deal rectifies problems with Korean implementation of KORUS obligations, revises Korean auto regulations, and extends US import protection for trucks but does not address agricultural issues or rules of origin for autos and parts. On balance, the modest revisions will restrict, not enlarge, bilateral trade. While it has reduced short-term trade friction between Seoul and Washington, the KORUS amendment has not resolved the Trump administration’s fundamental concerns about bilateral trade in autos and parts. Korea remains vulnerable to new US trade protection in that sector.
    Date: 2018–11
  25. By: Nina Knittel (University of Graz, Austria); Martin W. Jury (University of Graz, Austria); Birgit Bednar-Friedl (University of Graz, Austria); Gabriel Bachner (University of Graz, Austria); Andrea Steiner (University of Graz, Austria)
    Abstract: We investigate climate change impacts transferred via foreign trade to Germany, a country which is heavily engaged in international trade. Specifically, we look at temperature changes and the associated labour productivity losses at a global scale until 2050. We assess the effects on Germany’s imports and exports by means of a global Computable General Equilibrium (CGE) model. To address uncertainty, we account for two Shared Socioeconomic Pathways (SSP2 and SSP3) and two Representative Concentration Pathways (RCP4.5 and RCP8.5) using projections from five global climate models. We find that average annual labour productivity for high intensity work declines by up to 31% (38% with the higher emission scenario) in South-East Asia and the Middle East by 2050 (relative to a 2050 baseline without climate change). As a consequence, Germany’s imports from regions outside Europe are lower by up to 2.4%, while imports from within Europe partly compensate this reduction. Also Germany’s exports to regions outside Europe are lower but total exports increase slightly due to higher exports to EU regions. Germany’s GDP and welfare, however, are negatively affected with a loss of up to -0.41% and -0.46%, respectively. The results highlight that overall positive trade effects for Germany constitute a comparative improvement rather than an absolute gain with climate change.
    Keywords: Heat stress; Climate change; Labour productivity shocks; International trade; Computable general equilibrium; Germany
    JEL: C68 I15 F18
    Date: 2018–10
  26. By: Lindenthal, Volker
    Abstract: This paper exploits the administrative IAB establishment dataset for Germany to investigate the volatility and cyclicality of job flows within exporters and non-exporters. On average, exporters face a lower employment volatility, which suggests a diversification of sales across markets. A closer look at the export share, however, reveals that the employment volatility is increasing in the export share for small firms, while it is decreasing for large firms. Thus, large firms gain from more diversification of a higher export share, while small firms face more volatility when exporting a higher share. Small exporters with an export share above one third are even more volatile than similar domestic producers. Although the lion's share of these employment fluctuations is of idiosyncratic nature and aggregate fluctuations play only a minor role, we document heterogeneity between exporters and non-exporters. Controlling for size, exporters are cyclically more sensitive than non-exporters. This result is in line with aggregate exports being highly pro-cyclical and suggest that exporters specialize in the production of goods and services that are more cyclical. The contribution of exporters to the variance of aggregate flows, however, is limited and only about one third, which corresponds approximately to their employment share.
    JEL: F16 E32
    Date: 2018
  27. By: Anelí Bongersy (Universidad de Málaga); Carmen Díaz-Roldán (Universidad de Castilla-La Mancha); José L. Torres (Universidad de Málaga)
    Abstract: This paper studies the implications of highly skilled labor international migration in a two-country Dynamic Stochastic General Equilibrium model. The model considers hree types of workers: STEM workers, non-STEM college educated workers, and non-college educated workers. Only high skilled workers can move internationally from the relative low productivity (sending) country to the high productivity (host) country. Aggregate productivity in each economy is a function of innovations, which can be produced only by STEM workers. The model predicts i) the existence of a wage premium of STEM workers relative to non-STEM college educated workers, ii) this wage premium is higher in the destination country and increases with positive technological shocks, iii) a reduction in migration costs increases output, wages and total labor in the destination country, with opposite effects in the country of origin, and iv) high skilled immigrants reduce skilled native labor and do not affect unskilled labor.
    Keywords: STEM workers; Migration; Dynamic Stochastic General Equilibrium models; Innovation
    JEL: F43 J61 O31
    Date: 2018–02
  28. By: Schiff, Maurice
    Abstract: Analysis of open-access common-property natural resource (NR) has occurred under “low” congestion (LC) – where 𝐴𝐶 and 𝑀𝐶 increase with output 𝑄 – and has for the most part ignored the more important congestion categories where 𝐴𝐶 (𝑀𝐶) is backward-bending (negative) and welfare and NR losses are significantly greater. This paper identifies two such categories, “high” (HC) and “super” (SC) congestion, and examines the impact of open access on steady-state welfare, NR, employment, output and price in a general equilibrium model. Main findings are: i) Welfare and NR costs (and optimal taxes) are a multiple or orders of magnitude greater under HC and (especially) SC than under LC, with trade further – and always – reducing an open-access exporter’s NR and welfare. These results are robust to alternative parameter values and functional forms and greatly increase the importance of regulation; ii) An optimal tax raises price and reduces output under autarky in the case of LC and HC but reduces price and raises output under SC, with significantly larger gains; iii) Studies conducted under LC show trade between open-access developing country C1 and regulated but otherwise identical C2 reduces C1’s welfare and both C1’s and global NR, and though the same holds under HC, the opposite holds under SC; iv) Trade between two open-access countries – say, a developing and an emerging one – with different externality (population) levels raises global output and welfare, improves NR’s global efficiency, raises (does not affect) its level, and reduces international inequality; and v) Emigration’s welfare gain is much larger under SC than under LC, especially if migration results in LC after migration. Application to other issues and policy implications are provided.
    Keywords: Open Access,natural resource,unexamined high congestion,autarky and trade,aquaculture
    JEL: D62 F18 Q22 Q27 Q56
    Date: 2018
  29. By: C. Fred Bergsten (Peterson Institute for International Economics)
    Abstract: The current trade war between the United States and China is a central dimension of the emerging Cold War between the two superpowers. The conflict also highlights and threatens to aggravate the contest for global economic leadership between the two countries, which ranges far beyond their disputes over trade balances and level playing fields. Bergsten analyzes the links between the immediate clash and the far more important systemic confrontation and offers three suggestions that could address the two problems simultaneously: First, China should join the current US-EU and US-EU-Japan initiatives to reform the rules of the World Trade Organization to effectively address the systemic issues central to the present trade conflict. Second, China should indicate an interest in joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, which probably would induce the United States to rejoin the arrangement and provide another venue to open markets and write new rules. Third, the United States and China should work together to reform the International Monetary Fund to shore up its financial resources and amend its governance structure to better reflect the evolving balance of international economic power.
    Date: 2018–10
  30. By: Itzhak Ben-David; Stefanie Kleimeier; Michael Viehs
    Abstract: Despite awareness of the detrimental impact of CO2 pollution on the world climate, countries vary widely in how they design and enforce environmental laws. Using novel micro data about firms’ CO2 emissions levels in their home and foreign countries, we document that firms headquartered in countries with strict environmental policies perform their polluting activities abroad in countries with relatively weaker policies. These effects are stronger for firms in high-polluting industries and with poor corporate governance characteristics. Although firms export pollution, they nevertheless emit less overall CO2 globally in response to strict environmental policies at home.
    JEL: N50 O13 Q56 R11
    Date: 2018–10
  31. By: Taheripour, Farzad; Wally Tyner
    Abstract: China is the world largest soybean importer and imported 93.5 Million Metric Tons (MMT) of soybeans in 2016, about 65% of global soybean imports. China imports soybeans mainly from Brazil, US, and Argentina. The shares of these three countries in China’s imports were about 44%, 42%, and 9% in 2016. Canada, Uruguay, and Russia also export soybeans to China. The shares of these countries in total Chinese soybean imports were about 2.1%, 1.9% and 0.5% in 2016, respectively.
    Date: 2018
  32. By: Corsetti, G.; Crowley, M.; Han, L.
    Abstract: In this paper, we provide novel micro evidence from UK customs transactions which supports the view that the currency in which exports and imports are invoiced is a good proxy for the currency in which firms set prices. First, we document that pricing to market, in the form of destination-specific markup adjustment, is substantial only for export shipments which are invoiced in the destination market's currency. Conversely, we find no destination-specific markup adjustments by firms that invoice a shipment in either their own currency or a vehicle currency. Second, we document that while the aggregate shares of invoicing currencies for the UK's exports and imports are stable over time,firms often change their invoicing currency; this practice is more pronounced for firms that use multiple invoicing currencies, are multi-product, and serve several destinations.
    Date: 2018–10–17
  33. By: Hugo Rojas-Romagosa (CPB Netherlands Bureau for Economic Policy Analysis); Johannes Bollen (CPB Netherlands Bureau for Economic Policy Analysis)
    Abstract: We estimate the impact of the free movement of people (FMP) principle on bilateral intra-EU migration stocks using a gravity model. Employing a combination of the World Bank and the UN’s global migration databases, with observations between 1960 and 2015, allows us to analyse the impact of the FMP for most EU member states. We find that implementing the FMP by an EU member state increased, on average, its stock of intra-EU migrants by 28%. The vast majority of intra-EU migration went to the old member states and we find that FMP had a substantial impact on migration originating from both old and new member states. The only exception is migration within new member states, which was negatively affected by FMP.
    JEL: F22 J61 R23
    Date: 2018–10
  34. By: Moon Jung Choi (Economic Research Institute, The Bank of Korea); Kei-Mu Yi (Economics Department, University of Houston)
    Abstract: Following a two-decade period of double-digit growth, South Korean exports to China have declined since 2013. We investigate the sources of this recent decline using two complementary methodologies, an accounting decomposition and a model-based decomposition. First, we decompose the changes in Korea's exports to China as a share of output into within-industry and between-industry effects using disaggregated industry-level data. Our results show that during the high export growth period of 1990-2009, the within effect dominated; in the export slowdown period of 2010-2014, the within effect contributed to the slowdown in that individual sectors, on net, exported a smaller fraction of their output to China. Second, we apply a dynamic multi-sector, multi-country general equilibrium model to decompose the shocks that cause the decline in Korea's exports to China. The results reveal that in 2013-2016 China experienced a sharp reduction in its desire to accumulate capital and to consume manufactured goods. All else equal, these forces would imply fewer imports by China from Korea of manufactured goods. Given that Korea's exports to China are highly concentrated in manufactured intermediate and capital goods, these shocks could, in principle, explain most of the decline in Korea's exports to China during this period.
    Keywords: Korea, China, Export decline, Shocks, Decomposition
    JEL: F1 F4 O53
    Date: 2018–08–14
  35. By: Yoshiaki Nakada
    Abstract: Feeny (1982, pp. 26-28) referred to a three-factor two-good general equilibrium trade model, when he explained the relative importance of trade and factor endowments in Thailand 1880-1940. For example, Feeny (1982) stated that the growth in labor stock would be responsible for a substantial increase in rice output relative to textile output. Is Feeny's statement plausible? The purpose of this paper is to derive the Rybczynski sign patterns, which express the factor endowment--commodity output relationship, for Thailand during the period 1920 to 1927 using the EWS (economy-wide substitution)-ratio vector. A 'strong Rybczynski result' necessarily holds. I derived three Rybczynski sign patterns. However, a more detailed estimate allowed a reduction from three candidates to two. I restrict the analysis to the period 1920-1927 because of data availability. The results imply that Feeny's statement might not necessarily hold. Hence, labor stock might not affect the share of exportable sector in national income positively. Moreover, the percentage of Chinese immigration in the total population growth was not as large as expected. This study will be useful when simulating real wage in Thailand.
    Date: 2018–10
  36. By: Alexandre Gohin (Économie et Sociologie Rurales - INRA - Institut National de la Recherche Agronomique)
    Abstract: Le secteur européen du sucre fait aujourd'hui face à de nombreux défis qui rendent une réforme de l'Organisation commune des marchés (OCM) sucre plus que jamais crédible. L'auteur examine les effets d'une suppression des exportations européennes de sucre sur le secteur agricole européen et plus généralement sur l'économie européenne. L'évaluation est menée à partir d'une modélisation quantitative offrant une représentation très fine de ce secteur et de sa politique. La principale originalité de la modélisation développée réside dans une formalisation explicite d'une possible subvention croisée de la production de sucre hors quotas par celle sous quotas et, ce, tant à la production de betterave que celle de sucre. A partir de cet outil d'analyse économique, sont examinées les conséquences d'une suppression (i) des exportations de sucre hors quotas, (ii) des exportations de sucre correspondant aux importations préférentielles, (iii) des exportations de sucre sous quotas et (iv) de l'ensemble de ces exportations. Sans réelle surprise, les résultats de ces différentes simulations dépendent fortement de l'hypothèse concernant l'existence/absence de subventions croisées. Si ces subventions croisées ne devaient pas exister, alors la production hors quotas est compétitive et l'actuelle OCM sucre génère essentiellement des rentes. Les pays du reste du monde n'ont alors pas de véritables gains à attendre d'une réforme de l'OCM du sucre. Si, à l'inverse, ces subventions croisées existent effectivement aux deux niveaux de la filière, alors les pays du reste du monde ont davantage d'intérêts à une réforme de l'OCM sucre ainsi que les autres secteurs agricoles européens. Deux options s'offrent aux acteurs de la filière sucre : la baisse des volumes de production avec maintien de la protection et la baisse des prix. Clairement, une stratégie de baisse des volumes de production préserve mieux les intérêts des producteurs européens (baisse des revenus de 1,3 milliard d'euros) et des pays ACP mais maintient des rentes, une pression externe pour de nouvelles réformes et entraîne une baisse significative de la production. A l'inverse, une stratégie de baisse des prix entraîne des fortes baisses de revenus des betteraviers/sucreries européennes (près de 4 milliards d'euros) et une baisse de la production plus limitée. Le travail montre également que dans cette deuxième option, il redevient primordial de définir clairement les objectifs de l'OCM sucre, notamment savoir si cette politique a vocation à soutenir les revenus de l'industrie du sucre.
    Keywords: Production et marchés,ORGANISATION COMMUNE DES MARCHES,sugar,acyl carrier protein,subvention à l'exportation,sucre,modèle d'équilibre général,acp
    Date: 2018–10–16
  37. By: Ghosh, Ishan (Drexel University); Larch, Mario (University of Bayreuth); Murtazashvili, Irina (Drexel University); Yotov, Yoto (Drexel University)
    Abstract: We study the differential post-layoff responses in labor market outcomes for men vs. women when unemployment is caused by international trade. Our paper is the first to capitalize on the richness and unique design of the U.S. Trade Act Participant Report database (in combination with the Trade Adjustment Assistance dataset) in order to analyze gender differentials. The analysis identifies trade-affected workers as an overlooked and vulnerable group with very pronounced gender gaps in earnings. Three main results stand out from our estimates. First, we find that the pre-layoff wage gap between men and women who have lost their jobs due to trade is very wide; a striking 30% premium for men, even after controlling for education, experience, race, and other demographic characteristics. Second, we establish that the success rate in finding employment for women who have been laid off because of trade is not significantly lower as compared to men, however we do observe significant differences across some states and some sectors. Third, our estimates reveal that the pre-layoff wage premium for men is completely eliminated upon re-employment. However, we attribute this result to wage compression. Finally, our data enable us to document a series of gender-related outcomes across demographic characteristics, retraining choices, geography, and sectors.
    Keywords: Gender Differentials; Wage Premium; Re-employment; International Trade
    JEL: F16 J01 J16
    Date: 2018–10–12
  38. By: ARAKI Shota
    Abstract: This paper focuses on Japanese corporate groups and investigates how the expansion of overseas activities by their parent firms affects the domestic employment and labor demand structure. Taking advantage of the rich micro-level data sets conducted by the Ministry of Economy, Trade and Industry ("Basic Survey of Business Structure and Activities" and "Basic Survey on Overseas Business Activities"), we find a positive effect of overseas activities on the amount of domestic employment. We find, however, a negative effect on the domestic blue-collar ratio of the corporate groups. Our result implies that Japanese corporate groups hire more people and reallocate the job composition when expanding the overseas activities.
    Date: 2018–10
  39. By: Francesca Borgonovi (OECD); Artur Pokropek (Joint Research Centre - European Commission)
    Abstract: The paper examines the role of education in shaping individuals’ attitudes towards migration in European countries using data from the 2012, 2014 and 2016 editions of the European Social Survey (rounds 6, 7 and 8). Results indicate that, despite the large influx of migrants experienced by many European countries in 2015, attitudes towards migration reported by 25-65 year olds did not vary significantly over the period considered. Education was strongly associated with individuals’ attitudes towards migration although the strength of the association and how the association changed over time varied greatly across countries. On average a difference of one standard deviation in educational participation is associated with a difference of 20% of a standard deviation in reported opposition to migration. Around three quarters of the association between education and opposition to migration can be explained by the lower economic threat, cultural threat and prejudice that individuals with higher educational participation experience.
    Date: 2018–11–05

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