nep-int New Economics Papers
on International Trade
Issue of 2018‒11‒26
43 papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. The not-so-generalized effects of the Generalized System of Preferences By Ornelas, Emanuel; Ritel, Marcos
  2. WTO and sustainable development: concept, possibilities of delivering development goals, effects. By Wanda DUGIEL
  3. Determinants of West African international agricultural trade By Mancal, A.; Barros, G.
  4. Preferential Trade Agreements and Global Sourcing By Grant Bickwit; Emanuel Ornelas; John L. Turner
  5. Competitiveness of the Polish meat industry against selected European Union countries within the framework of transatlantic trade By Karolina Pawlak
  6. Impact of the Russian agricultural import ban on the Serbian pork exports and domestic price development along the pork value chain By Duric, I.; Glauben, T.; Zaric, V.
  7. The effects of foreign direct investment on regional growth and productivity By Park, Jaegon
  8. Importing Inequality: Trade Liberalization, Technology, and Women's Employment By Yoko Oishi; Dainn Wie
  9. Can Smart Policies Reconcile Singapore's Green Economy with Sand Imports from Southeast Asia? By Hübler, Michael; Pothen, Frank
  10. China-US Trade War: a 21st Century Thucydides Trap? By Yuqing Xing
  11. Organizing Global Supply Chains: Input Cost Shares and Vertical Integration By Berlingieri, Guiseppe; Pisch, Frank; Steinwender, Claudia
  13. Globalization and the Jobs Ladder By Davidson, Carl; Heyman, Fredrik; Matusz, Steven; Sjöholm, Fredrik; Zhu, Susan Chun
  14. Border Tax Adjustments and Tariff-Tax Reforms with Consumption Pollution By Nikos Tsakiris; Panos Hatzipanayotou; Michael S. Michael
  15. Investor-State vs. State-State Dispute Settlement By Horn, Henrik
  16. The Heckscher—Ohlin—Samuelson Trade Theory and the Cambridge Capital Controversies: On the Validity of Factor Price Equalisation Theorem By Kurose, Kazuhiro; Yoshihara, Naoki
  17. Skill of the Immigrants and Vote of the Natives: Immigration and Nationalism in European Elections 2007-2016 By Simone Moriconi; Giovanni Peri; Riccardo Turati
  18. Where Has the Rum Gone? Firms’ Choice of Transport Mode under the Threat of Maritime Piracy By Alexander-Nikolai Sandkamp; Shuyao Yang
  19. 25 Years Single Market: Which Trade and Growth Effects? By Fritz Breuss
  20. Robots, Trade, and Luddism: A Sufficient Statistic Approach to Optimal Technology Regulation By Costinot, Arnaud; Werning, Iván
  21. Highly Skilled International Migration, STEM Workers, and Innovation By Anelí Bongers; Carmen Díaz-Roldán; José L. Torres
  22. The agricultural competitiveness of the CIS countries in international trade By Mizik, T.; Torok, A.; Jambor, A.; Kovacs, S.; Sipos, L.
  23. The Role of Institutions and Immigrant Networks in Firms' Offshoring Decisions By Moriconi, Simone; Peri, Giovanni; Pozzoli, Dario
  24. Aid, Terrorism, and Foreign Direct Investment: Empirical Insight Conditioned on Corruption Control By Uchenna R. Efobi; Simplice A. Asongu; Ibukun Beecroft
  25. Average income, income inequality and export unit values By Hélène Latzer; Florian Mayneris
  26. Capital Market Integration and Gender Inequality By Komura, Mizuki; Ogawa, Hikaru
  27. The Effects of Trade Exposure on Marriage and Fertility Choices: Evidence from Brazil By Braga, Breno
  28. India's Outward Foreign Direct Investment: Growth Drivers By Leena Ajit Kaushal
  29. Transfer Pricing and the Arm's Length Principle under Imperfect Competition By Jay Pil Choi; Taiji Furusawa; Jota Ishikawa
  30. Quantifying the regional impact of export controls in Southern African maize markets By Davids, T.; Meyer, F.; Westhoff, P.
  31. North Korea: Sanctions, Engagement, and Strategic Reorientation By Noland, Marcus
  32. Unequal Gains, Prolonged Pain: A Model of Protectionist Overshooting and Escalation By Blanchard, Emily; Willmann, Gerald
  33. Regional Divergence and Import Competition By Javier Quintana González
  34. Determinants of Foreign Direct Investment in Gulf Cooperation Council (GCC) Region By Majed Alharthi
  36. Carbon neutral global value chains: demand or desire? - Consumers willingness to pay for a carbon neutrality label on specialty coffee in Germany By Birkenberg, A.
  37. Measuring Competitiveness in a World of Global Value Chains By Tamim Bayoumi; Maximiliano Appendino; Jelle Barkema; Diego A. Cerdeiro
  38. Impact of the Brexit vote announcement on long-run market performance By Wael Bousselmi; Patrick Sentis; Marc Willinger
  39. Learning to Import from Your Peers By Bisztray, Marta; Koren, Miklós; Szeidl, Adam
  40. An Acceleration Mechanism of Within-Country Inequality by Globalization By Harashima, Taiji
  41. The cost of transporting cereals in West Africa By Mercier, Stephanie
  42. Do Globalization, Deregulation and Financialization Imply a Convergence of Contemporary Capitalisms? By Robert Boyer
  43. The Contribution of Foreign Migration to Local Labor Market Adjustment By Michael Amior

  1. By: Ornelas, Emanuel; Ritel, Marcos
    Abstract: We use an empirical gravity equation approach to study how nonreciprocal trade preferences (NRTPs), enacted mainly through the Generalized System of Preferences, affect the exports of the beneficiary nations. In line with existing studies, the average trade effect stemming from nonreciprocal preferences is highly unstable across specifications. However, once we allow for heterogeneous effects, results become robust and economically important. Specifically, NRTPs have a strong effect on the exports of beneficiaries when they are members of the World Trade Organization and are very poor. Not-so-poor beneficiaries also expand foreign sales, but only if they are not WTO members. For all others, the average export effects of NRTPs are mute.
    Keywords: Gravity Equation; GSP; nonreciprocity; trade policy; trade preferences
    JEL: F13 F14 F15 F55 O19 O24
    Date: 2018–09
  2. By: Wanda DUGIEL (Warsaw School of Economics)
    Abstract: The aim of this article is to examine the following issues: what will be the effects of the World Trade Organization (WTO) implementation of the goals of sustainable development objectives for developed and developing countries, and whether the goals of sustainable development formulated by the UN will enable further liberalization of international trade in the WTO.The implementation of the UN Resolution 2015: "Transforming our world: the 2030 Agenda for Sustainable Development" by the developed and developing countries is very difficult and runs very slowly. The postulate included in the Agenda 2030 about the necessity of countries' withdrawal from the use of some tools of trade policy, in particular export subsidies still in agricultural trade, was important. The use of export subsidies by developed countries has been a source of conflicts in international trade for many years. Developing countries emphasized losses due to competitive prices of agricultural products offered by developed countries on the international market.The objectives of sustainable development take into account the need to include the WTO in activities that will reduce the level of poverty in the world. These objectives remain in line with the WTO objectives as set out in the preamble to the WTO Agreement. WTO activities for economic development have not produced the expected results. The Doha Development Round was supposed to lead to accelerated economic development of developing countries. The goals of the Doha Round of 2001 have not been achieved. The decision to eliminate export subsidies in agricultural trade adopted by the WTO in 2015 at the Ministerial Conference in Nairobi will not have a clear impact on the benefits for all developing countries or emerging economies with the potential to increase their share in international trade. An increase in prices for agricultural commodities on the international market may limit price competitiveness on agricultural commodities of exporting countries, including Brazil, China and India. Some of the least developed countries belong to net importers in agricultural trade.The implementation of the other WTO sustainable development objectives will depend on the functioning of the special and differential treatment principle. The question of the interests of developing countries in complying with environmental protection standards, which will affect international trade, is controversial. Many developing countries will oppose the adoption of regulations supporting the trade in goods produced in accordance with environmental standards, in particular after the US withdrawal from the Paris climate agreement.
    Keywords: international trade, World Trade Organization, developed countries, developing countries
    JEL: F13
    Date: 2018–11
  3. By: Mancal, A.; Barros, G.
    Abstract: Agricultural production is clearly an important component of West African international trade, especially of its non-extractive exports. And the improved trade performance of the countries is one of the most important pillars of the regional economic integration process. Thus, the purpose here is to identify determinants of West African international trade flows. For this purpose, the expanded Structural Gravity model was used. The overall pattern of international agricultural transactions in this region is dominated by extra-regional transactions and there are differences between intra- and extra-regional determinants. In global transactions, flows are higher among member countries of the Economic Community of West African States (ECOWAS) and the West African Economic and Monetary Union (WAEMU) does not significantly affect those flows. On the other hand, ECOWAS does not have a significant impact on intra-regional agricultural trade and flows are greater among WAEMU member countries. Geographical distance has no significant effect on West African extra-regional international agricultural trade. Commercial agricultural production of the region s countries is focused on extra-regional trade, which is justified by the regional divergence between supply and demand. In order to increase intra-regional international agricultural transactions, expanding regional agroindustrialization is essential to ensure convergence between supply and demand. Acknowledgement :
    Keywords: International Relations/Trade
    Date: 2018–07
  4. By: Grant Bickwit; Emanuel Ornelas; John L. Turner
    Abstract: We study how a preferential trade agreement (PTA) affects international sourcing decisions, aggregate productivity and welfare under incomplete contracting and endogenous matching. Contract incompleteness implies underinvestment. That inefficiency is mitigated by a PTA, because the agreement allows the parties in a vertical chain to internalize a larger return from the investment. This raises aggregate productivity. On the other hand, the agreement yields sourcing diversion. More efficient suppliers tilt the tradeoff toward the (potentially) beneficial relationship-strengthening effect; a high external tariff tips it toward harmful sourcing diversion. A PTA also affects the structure of vertical chains in the economy. As tariff preferences attract too many matches to the bloc, the average productivity of the industry tends to fall. When the agreement incorporates "deep integration" provisions, it boosts trade flows, but not necessarily welfare. Rather, "deep integration" improves upon "shallow integration" if and only if the original investment inefficiencies are serious enough. On the whole, we offer a new framework to study the benefits and costs from preferential liberalization in the context of global sourcing.
    Keywords: regionalism, hold-up problem, sourcing, trade diversion, matching, incomplete contracts
    JEL: F13 F15 D23 D83 L22
    Date: 2018–10
  5. By: Karolina Pawlak (Poznan University of Life Sciences, Faculty of Economics and Social Sciences, Department of Economics and Economic Policy in Agribusiness)
    Abstract: The aim of the paper was to assess the competitive capacity of the Polish meat industry in trade with the US in relation to major EU producers of meat and meat preparations. Referring both to the growth and trade theories in research on international competitiveness and based on the methodological approach proposed by Wijnands, van der Meulen and Poppe (2006) to estimate the competitive capacity of the meat industry in the analysed countries the study used a set of economic and trade indicators appropriately adapted to the requirements of the analysis of bilateral relations. The indexes based on the market and trade shares included shares in exports to the target market and indexes of relative trade advantage, while the applied economic indexes included the real value added and its share in the total value added of the food industry and real labour productivity. The time frame for the analyses covered the years 2007-2016. The study is based on data from the European Statistical Office (Eurostat). Summing up the analyses it may be stated that in the years 2007-2016 the competitive position of the Polish meat industry in trade with the US in comparison to the leading EU producers of meat and meat preparations was strengthened both thanks to an improved trade position (measured by the share in the EU exports to the US market and relative trade advantages) as well as economic indicators connected with an increase importance of the analysed sector in the generation of real value added of the food industry and labour productivity.
    Keywords: competitiveness, meat industry, market share, relative trade advantage, real value added, labour productivity, Poland, the EU countries, the US market
    JEL: F14 L66 Q13
    Date: 2018–10
  6. By: Duric, I.; Glauben, T.; Zaric, V.
    Abstract: In this paper, we analyze the effects of the Russian agricultural import ban in 2014, i.e. sudden access of the Serbian pork traders to the Russian market, on price and margin developments along the Serbian pork value chains. We use a regime-switching long-run price transmission model to investigate possible changes in market integration between Serbian and Russian pork markets, and at the same time identify if their newly established trade relation affect already existing integration of the Serbian market with the EU. Furthermore, we use the price transmission model to assess the effects of surge in Serbian pork export on transmission of price changes along the pork value chains. Our results indicate a significant improvement of market integration between Serbia and Russia after 2014 characterized by 80% reduction in transaction costs and almost complete transmission of price changes from the Serbian market towards Russian pork market. Also, the results of the domestic price effects indicate complete transmission of price changes from processors towards retailers after 2014, which means that Serbian consumers bore the biggest burden of significant domestic pork price changes caused by the surge in pork exports. Acknowledgement : This study was conducted within the DAAD PPP Serbien project, financially supported by the German Academic Exchange Service (DAAD).
    Keywords: International Relations/Trade
    Date: 2018–07
  7. By: Park, Jaegon
    Abstract: To promote regional economic growth in the current global environment, nations have begun methodically combining internal assets with external capabilities. Against this backdrop, this paper demonstrates how foreign direct investment (FDI) — a major channel for participating in the global production network — influences regional economic development. Its key findings are as follows: 1) Korea has reached the stage where outbound overseas investments outpace inbound FDI, 2) FDI in Korea is heavily concentrated in a handful of regions and in particular the Seoul capital region, 3) inbound FDI has a statistically significant positive impact on regional growth and productivity and 4) outbound foreign investment weighs negatively on regional growth and productivity. The paper concludes by arguing the necessity of utilizing a global perspective in regional policymaking.
    Date: 2018–11
  8. By: Yoko Oishi (Asian Development Bank Institute); Dainn Wie (National Graduate Institute for Policy Studies, Tokyo, Japan)
    Abstract: In this paper, we investigate the impact of trade liberalization on the demand for female workers using Indonesia fs tariff reduction in the 1990s and 2000s as a natural experiment. This paper utilizes variation in output and input tariffs to examine two different channels through which trade liberalization affects female employment: import competition and imported technology. We find that a 10%-point reduction in output and input tariffs hurt women fs employment by 0.5% point and 4.5% point, respectively, in light industries in the 1990s. We show that output tariffs affect women fs employment in a competitive industry, while input tariffs increase firms f utilization of foreign inputs instead of domestic inputs. We also find that output tariffs encourage women fs employment in heavy industry, while input tariffs have hurt women fs employment in heavy industry since 2000. Our results suggest that there exists a race between gender inequality in education and imported technology in developing countries.
    Date: 2018–11
  9. By: Hübler, Michael; Pothen, Frank
    Abstract: This article tries to increase public awareness of a crucial but rarely discussed global challenge by introducing a novel economic analysis: drawing on insights from various disciplines, it studies policies regulating sand extraction and trade. While sand is essential for construction and land reclamation worldwide, its extraction causes severe ecological damage in oceans, in rivers and on beaches and thus has high social costs. To derive solutions to this paramount global challenge, this article focuses on sand exports from developing countries in Southeast Asian to Singapore as a prominent example. It evaluates output, export and import taxes as the means to reduce sand extraction and trade. To this end, it utilizes an Eaton and Kortum type trade model within a general equilibrium framework. Overall, an output tax can reduce sand extraction to a large extent, while the economic costs are small for Singapore and slightly positive for the Southeast Asian sand exporters. As a novel policy, the sand tax can be implemented as a Sand Extraction Allowances Trading Scheme (SEATS). This policy can help sustainably balance Singapore’s economic growth with Southeast Asia’s economic development.
    Keywords: Sand extraction, trade policy, Singapore, Eaton-Kortum trade model
    JEL: F13 Q02
    Date: 2018–11
  10. By: Yuqing Xing (National Graduate Institute for Policy Studies, Tokyo, Japan)
    Abstract: This paper provides a comprehensive analysis of the on-going China-US trade war, similar to the Thucydides Trap in terms of competing for global economic dominance. It analyzes what the US attempts to achieve through the trade war and why China has been refusing the reciprocal trade relations urged by President Trump. It also identifies social and economic changes in American society, which motivate President Trump to impose punitive tariffs on Chinese goods. It emphasizes that the trade war is asymmetric and China will definitely suffer more losses than the US if the trade war escalates further. At the end of the paper, it suggests that, to avoid the devastating result of the Thucydides Trap, China should further open its domestic market to American companies and actively pursue negotiations with the US for resolving the dispute.
    Date: 2018–11
  11. By: Berlingieri, Guiseppe; Pisch, Frank; Steinwender, Claudia
    Abstract: We study whether and how the technological importance of an input – measured by its cost share – is related to the decision of whether to “make” or “buy” that input. Using detailed French international trade data and an instrumental variable approach based on selfconstructed IO tables, we show that French multinationals vertically integrate those inputs that have high cost shares. A stylized incomplete contracting model with both ex ante and ex post inefficiencies explains why: technologically more important inputs are “made” when transaction cost economics type forces (TCE; favoring integration) overpower property rights type forces (PRT; favoring outsourcing). Additional results related to the contracting environment and headquarters intensity consistent with our theoretical framework show that both TCE and PRT type forces are needed to fully explain the empirical patterns in the data.
    Keywords: Vertical integration, supply chains, direct requirements, input output relationship, intrafirm trade
    JEL: F10 F14 L16 L23 O14
    Date: 2018–11
  12. By: Andrzej Cieœlik (University of Warsaw, Faculty of Economic Sciences, Department of Macroeconomics and International Trade, Warsaw, Poland); Aleksandra Parteka (Gdansk University of Technology, Gdansk, Poland)
    Abstract: This paper addresses the lack of connection between theory and empirics in most export diversification–economic development studies. We provide a Ricardian-based theoretical explanation of countries’ relative export variety as a function of the level of technology and country size assessed with respect to the rest of the world. Relative export diversification is an outcome of two forces: a relative productivity change (technological progress) and a relative country size change (labour force growth). The model predictions are confirmed in a sample of 132 countries (1988–2014), including 53 low-income countries, for which we measure export variety using product-level trade data. The influence of technology differences on export variety is: (i) stronger than is the effect of cross-country differences in size and (ii) non-linear, driving diversification at the beginning of the development process. The results are robust to the measurement of export variety, the inclusion of control variables, and estimation methods.
    Keywords: export variety, export diversification, Ricardian model, economic development
    JEL: F11 F14 F43 O40 O11
    Date: 2018–10
  13. By: Davidson, Carl (Department of Economics, Michigan State University); Heyman, Fredrik (Research Institute of Industrial Economics, Stockholm); Matusz, Steven (Department of Economics, Michigan State University); Sjöholm, Fredrik (Department of Economics, Lund University); Zhu, Susan Chun (Department of Economics, Michigan State University)
    Abstract: Globalization might affect the mix of jobs available in an economy and the rate at which workers gain skills. We develop a model in which firms differ in terms of productivity and skills and use the model to examine how globalization affects the wage distribution and the career path of workers as they move up the jobs ladder. There are two types of skills that determine a worker’s productivity in the model: the ability to work with the appropriate technology and the ability to facilitate international commerce. Workers imperfectly acquire these skills on the job. Firms cannot costlessly observe the skills embodied in a worker but can observe each potential recruit’s employment history. In equilibrium, firms self-select into groups that use different networks to fill vacancies. Our results indicate that although falling trade costs may result in greater wage inequality, if trade costs are initially high, it can also lead to a wider path up the jobs ladders and less time spent in entry level jobs. The key assumptions and predictions are confirmed in data on recruitments and job mobility in Sweden.
    Keywords: Job Ladders; Globalization; Wages; Inequality; Export
    JEL: F10 F20 J30
    Date: 2018–11–12
  14. By: Nikos Tsakiris; Panos Hatzipanayotou; Michael S. Michael
    Abstract: We develop a model of a small open economy, where pollution per unit of consumption between domestically produced and imported quantities of the same good differs. We show that the first-best policy combination calls for consumption taxes on all polluting goods, and Border Tax Adjustment (BTA) measures, i.e., tariffs or import subsidies. We identify conditions under which well known tariff-tax reform policies for developing economies, such as a consumer-price-neutral piecemeal reform of a trade and a consumption tax, and a consumer-price-neutral reform of all trade and consumption taxes improve welfare. We also evaluate whether a consumer-price-neutral reform of a tariff and a consumption tax is superior to a reform of a tariff alone.
    Keywords: Consumption generated Pollution; Optimal Taxation; Border Tax Adjustments; Trade and Consumption Tax Reforms
    JEL: F13 F18 H20 H21
    Date: 2018–11
  15. By: Horn, Henrik (Research Institute of Industrial Economics (IFN))
    Abstract: International investment agreements have provoked intense criticism in the policy debate during recent years. Particularly contentious has been their "ISDS" mechanisms, which enable investors to litigate against host countries. This paper examines whether host countries would be better off with state-state dispute settlement (SSDS), as often alleged, assuming that SSDS cause political/diplomatic litigation costs that are not present with ISDS. Two separate reasons why host countries might benefi t from SSDS are identi fied, but neither provides a convincing argument for host countries to move to SSDS. The paper concludes that host countries should reduce the stringency of their agreements, rather than introduce imperfections in the dispute settlement systems to reduce their bite.
    Keywords: ISDS; Expropriation; International investment agreements; Regulatory chill
    JEL: F21 F23 F53 K33
    Date: 2018–11–14
  16. By: Kurose, Kazuhiro; Yoshihara, Naoki
    Abstract: This paper examines the validity of the factor price equalisation theorem (FPET) in relation to capital theory. First, it presents a survey of the literature on Heckscher—Ohlin—Samuelson (HOS) models that treat capital as a primary factor, beginning with Samuelson (1953). In addition, by consulting the Cambridge capital controversies, this paper observes that the validity of the FPET relies crucially on this setting. It does no longer hold whenever capital is assumed to be a bundle of reproducible commodities. This paper also refers to the recent literature on the dynamic HOS trade theory and argues that such studies ignore the difficulties posed by the capital controversies. It thereby concludes that the FPET holds even when capital is modelled as a reproducible factor. In conclusion, the paper suggests the necessity of reconstructing basic theories of international trade without relying on the FPET.
    Keywords: factor price equalisation, global univalence, capital as a bundle of reproducible commodities, reswitching of techniques, capital reversing
    JEL: B51 D33 F11
    Date: 2018–10
  17. By: Simone Moriconi (IÉSEG School of Management and LEM); Giovanni Peri (University of California, Davis); Riccardo Turati (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))
    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.
    Keywords: Immigration, Nationalism, Elections, Europe
    JEL: D72 I28 J61
    Date: 2018–09
  18. By: Alexander-Nikolai Sandkamp; Shuyao Yang
    Abstract: Despite a general agreement that piracy poses a significant threat to maritime shipping, empirical evidence regarding its economic consequences remains scarce. This paper takes a step towards filling the gap by combining firm-level Chinese customs data with information on pirate attacks to investigate how exporting firms respond to maritime piracy. It finds that overall exports along a particular shipping route fall following an increase in pirate activity. In addition, piracy induces firms to switch from ocean to air shipping, while the remaining ocean shipments become larger.
    Keywords: Trade, transport, China, piracy
    JEL: F14 F19 N70 R41
    Date: 2018
  19. By: Fritz Breuss (WIFO)
    Abstract: The EU Single Market and the Maastricht Treaty are now aged 25. In this short history many events marked the way: the creation of EMU in 1999, the introduction of the euro in 2002, and the great EU enlargement starting in 2004. And lastly – for the first time – with the Brexit a reverse of the process of European integration takes place. The recession of 2009 and the Euro crisis in 2010 led to a setback in the economic development in the EU. A quarter of a century invites to look back about the achievements. How much trade and economic growth could be created by the Single Market plus euro plus EU enlargement? These questions are treated here with the help of a consistent integration model. Embedded into an endogenous growth model approach growth and trade effects for EU and EFTA countries are estimated. It turns out that (taking also into account GATT liberalisation) the European integration added to per-capita GDP 0.5 percentage point to EU 28 countries but only 0.2 percentage point to EFTA countries. Trade openness increased by 0.9 percentage point of GDP in EU 28 and by 0.3 percentage point in EFTA countries.
    Keywords: European Integration, Single Market, Maastricht Treaty, Model simulations
    Date: 2018–11–15
  20. By: Costinot, Arnaud; Werning, Iván
    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.
    Date: 2018–09
  21. By: Anelí Bongers (Department of Economics, University of Málaga); Carmen Díaz-Roldán (Department of Economics, University of Castilla-La Mancha); José L. Torres (Department of Economics, University of 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 three 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 e¤ects in the country of origin, and iv) high skilled immigrants reduce skilled native labor and do not a¤ect unskilled labor.
    Keywords: STEM workers; Migration; Dynamic Stochastic General Equilibrium models; Innovation
    JEL: F43 J61 O31
    Date: 2018–11
  22. By: Mizik, T.; Torok, A.; Jambor, A.; Kovacs, S.; Sipos, L.
    Abstract: The competitiveness of agriculture in international trade is a relatively understudied field in the literature, especially in Central Asia. The aim of the paper is to analyse the comparative advantage patterns in the agriculture of the Commonwealth of Independent States. Results suggest that agriculture still plays an important role in the region and the majority of countries are net food importers. Moldova, Kyrgyzstan and Armenia had the highest Balassa indices with cereals as leading export products and Belarus, Ukraine and Azerbaijan are also having some comparative advantage at the same time. Based on trade performances, several country groups were set up. Armenia, Kyrgyzstan and Moldova showed similar characteristics, while Russia with Kazakhstan as well as Belarus with Ukraine demonstrated similarity. Comparative advantages, however, have not turned out to be persistent according to stability and duration tests as survival chances fell significantly from 2000-2003 to 2012-2015. Acknowledgement : This work was supported by the National Research, Development and Innovation Office [grant number 119669, Competitiveness of Agriculture in International Trade: A Global Perspective ]. The authors gratefully acknowledge the financial support.
    Keywords: International Relations/Trade
    Date: 2018–07
  23. By: Moriconi, Simone (Università Cattolica del Sacro Cuore); Peri, Giovanni (University of California, Davis); Pozzoli, Dario (Copenhagen Business School)
    Abstract: The offshoring of production by multinational firms has expanded dramatically in recent decades, increasing these firms' potential for economic growth and technological transfers across countries. What determines the location of offshore production? How do countries' policies and characteristics affect the firm's decision about where to offshore? Do firms choose specific countries because of their policies or because they know them better? In this paper, we use a very rich dataset on Danish firms to analyze how decisions to offshore production depend on the institutional characteristics of the country and firm-specific bilateral connections. We find that institutions that enhance investor protection and reduce corruption increase the probability that firms offshore there, while those that increase regulation in the labor market decrease such probability. We also show that a firm's probability of offshoring increases with the share of its employees who are immigrants from that country of origin.
    Keywords: offshoring, product market, labor regulations, networks, fixed start-up costs
    JEL: F16 J38 J24
    Date: 2018–10
  24. By: Uchenna R. Efobi (Covenant University, Ota, Ogun State, Nigeria); Simplice A. Asongu (Yaoundé, Cameroon); Ibukun Beecroft (Covenant University, Ota, Ogun State, Nigeria)
    Abstract: This paper examines the effect of foreign aid in the terrorism-FDI nexus while considering the extent of domestic corruption-control (CC). The empirical evidence is based on a sample of 78 developing countries. The following findings are established: the negative effect of terrorism on FDI is apparent only in countries with higher levels of CC; foreign aid dampens the negative effect of terrorism on FDI only in countries with high levels of CC. The result is mixed when foreign aid is subdivided into its bilateral and multilateral components. Our findings are in accordance with the stance that bilateral aid is effective in reducing the adverse effect of terrorism on FDI. Multilateral aid also decreases the adverse effect of other forms of terrorism that can neither be classified as domestic nor as transnational. Policy implications are discussed.
    Keywords: Conflict; Developing countries; Foreign investment; Foreign aid; Terrorism
    JEL: D74 F21 F35
    Date: 2018–01
  25. By: Hélène Latzer (Université Paris 1-Sorbonne, CNRS and CEREC, Université Saint-Louis (Belgium)); Florian Mayneris (Université du Québec)
    Abstract: This paper analyses the relationship between a country’s income distribution and its exports’ unit values. Using bilateral export flows, we not only confirm the positive association between a country’s average income and its export unit values, but further identify a heterogeneous relationship with income inequality: we find a greater income spread to be associated with higher exports unit values in the case of poor countries only. These results are robust to the inclusion of controls for other determinants of export unit values, as well as to the use of alternative measures of income inequality and of the quality index. We finally show that this heterogeneous relationship between income inequality and export unit values along the average income dimension is consistent with models emphasizing the role of the composition of local demand in determining the comparative advantage of countries in terms of quality.
    Keywords: Income distribution, Export Unit Values, Product quality, Trade, Home market effect
    JEL: F12 L15 O15
    Date: 2018–10–15
  26. By: Komura, Mizuki (Musashi Unniversity); Ogawa, Hikaru (University of Tokyo)
    Abstract: This study explores the effects of globalization on gender inequality. Specifically, we depict that, in terms of capital market integration, globalization alters the gender gap in wage rates through changes in labor demand for capital-intensive sectors. Consequently, globalization leads to opposite effects on the couple's labor supply and fertility decisions in capital-importing and capital-exporting countries, via changes in the bargaining positions of men and women. Moreover, by considering the properties of the industrial structures of capital-importing and capital-exporting countries, our result shows that globalization induces empirically observed declines in fertility rates throughout the world.
    Keywords: globalization, capital market integration, gender inequality, domestic production
    JEL: F15 F21 J12 J13 J16
    Date: 2018–10
  27. By: Braga, Breno (Urban Institute)
    Abstract: This paper investigates the effect of a large economic shock on marriage and fertility choices. I exploit the 1990's trade liberalization in Brazil, which created exogenous negative labor market shocks to regions most exposed to foreign competition. While trade liberalization had a positive impact on reducing the price of consumer goods in Brazil, it also negatively impacted employment in previously protected industries, affecting men more than women. I find that young women living in regions more exposed to international competition are less likely to have children. Most effects persist for 20 years after trade liberalization. I use causal mediation analysis to show that declines in the employment rate of young men is an important driver of changes in fertility outcomes of young women. Changes in women's employment opportunities are not a mediator for the effect of trade exposure on fertility. There is no evidence of changes in marriage rates across regions exposed to trade liberalization.
    Keywords: marriage rates, fertility, trade liberalization
    JEL: F16 J12 J13 J21 J23
    Date: 2018–10
  28. By: Leena Ajit Kaushal (Management Development Institute (MDI) Gurgaon)
    Abstract: Robust inward and outward flow of direct investments signals ever-increasing integration of an economy with the global world. The emergence of outward foreign direct investment from the developing countries has gathered significant interest from research scholars. Overseas investments encourage economic co-operation between home and the host countries. Over the past two decades India has been in the limelight for its ever rising overseas investments and integration with global world. The study aims to identify country-specific macroeconomic growth drivers that encouraged Indian overseas investments since 1991 till 2015 using Dunning?s OLI framework. The results substantiate significant impact of country-specific growth drivers on Indian overseas investments.
    Keywords: Overseas investment, foreign direct investment (FDI), India, Growth , Drivers
    JEL: F40 F23
    Date: 2018–10
  29. By: Jay Pil Choi; Taiji Furusawa; Jota Ishikawa
    Abstract: This paper analyzes incentives of a multinational enterprise to manipulate an internal transfer price to take advantage of corporate-tax differences across countries under both monopoly and oligopoly. We examine “cost plus” and “comparable uncontrollable price” as two alternative implementations of the so-called arm’s length principle (ALP) to mitigate this problem. Tax-induced foreign direct investment (FDI) may entail inefficient internal production. We show how the mechanisms behind such inefficient FDI differ between alternative implementation schemes of the ALP and explore implications of the ALP for welfare and dual sourcing incentives. We also develop a novel theory of vertical foreclosure as an equilibrium outcome of strategic transfer pricing.
    Keywords: foreign direct investment, multinational enterprise, corporate tax, transfer pricing, arm’s length principle, vertical foreclosure
    JEL: F12 F23 H26 L12 L13 L51 L52
    Date: 2018
  30. By: Davids, T.; Meyer, F.; Westhoff, P.
    Abstract: Despite well-researched benefits and stated policy goals of increasing intra-regional trade, African policy makers continue to rely on export controls in an effort to keep prices at tolerable levels. Within the Southern African region, Zambia has been particularly prone to such policy action, typically in the maize sector, which has strong connotations to food security. Against the backdrop of drought-induced supply shortages of white maize in Southern Africa in 2016, this study applied a partial equilibrium model with bilateral trade flows to simulate the impact on prices and trade flow of imposing export controls in Zambia relative to an open trade scenario. The goal of reducing prices for domestic consumers was achieved at the expense of producers, who lose the market-induced price increase that would offset some revenue loss if trade was allowed to flow freely. Contrary to most previous literature on Zambian export controls, the impact of Zambian policy was also related to neighbouring markets, highlighting higher prices, reduced consumption and changes to typical trade flows. Price increases in neighbouring countries supported area expansion in subsequent years, inducing a shift in production towards these countries and highlighting the detrimental impact of trade control policies on long term production growth. Acknowledgement :
    Keywords: International Relations/Trade
    Date: 2018–07
  31. By: Noland, Marcus
    Abstract: This paper examines the roles that sanctions, and inducements might play in resolving the North Korea problem. It finds that while the “maximum pressure” narrative is plausible, the evidence to substantiate it is thin. Likewise, the North Korean regime is aware of the potentially constraining (or even destabilizing) political implications of cross-border economic integration and has acted to structure engagement in ways to blunt its transformative impact. Maximizing the transformative possibilities of engagement will require conscious planning by North Korea’s partners. Multilateral guidelines and voluntary codes on corporate conduct could be used to anchor this process, but they will only be effective if there is greater political commitment to such norms than has been witnessed to date. Without such commitments, engagement risks enabling North Korea’s doctrine of the parallel development of weapons of mass destruction and the economy.
    Keywords: North Korea, sanctions, labor standards, voluntary codes, special economic zones
    JEL: F51 J47 J8 P33
    Date: 2018–10
  32. By: Blanchard, Emily; Willmann, Gerald
    Abstract: We develop a model of democratic political responses to macroeconomic shocks in the short and long run. We show that when economic adjustment is slower than potential political change, exogenous changes in the global marketplace can trigger populist surges in favor of distortionary economic policies. Applied to trade policy, our model demonstrates that an exogenous terms-of-trade improvement or skill-biased technological change will lead to a spike in protectionism that blunts the younger generation's incentive to acquire education. In the long run, the initial surge in protectionism will gradually diminish if and only if education enables less-skilled workers to catch up with the overall economy. The more unequal the initial distribution of human capital, the greater and longer-lasting the protectionist backlash will be: unequal gains, prolonged pain. Evidence on key data markers suggested by the model exhibits patterns consistent with recent populist support for Brexit and Trump.
    Keywords: Dynamic Political Economy; education; Endogenous Tari; Human Capital; Overlapping Generations; Overshooting; populism; protectionism
    JEL: D7 E6 F5
    Date: 2018–09
  33. By: Javier Quintana González (Bocconi University)
    Abstract: For the last decades, regions in the United States have been diverging. More skill-intensive regions have experienced a higher wage and skill premium growth and have become even more skill-intensive. In this paper, I show that this may be driven in part by trade with China. One of the main findings of this paper is that the consequences on local labor markets of higher income competition are highly heterogeneous. In particular, I focus on how consequences of imports from Chinese manufacturers are different depending on the share of college-educated workforce in the regions. Conditional to be exposed to the same level of import competition, effects in terms of wages and growth of college-educated population growth are especially negative for less educated regions. However, this finding does not mean just an attenuation of negative effects for some educated areas. Instead, I find that import competition has net positive effects among more college-educated regions. Indeed, among more skill-intensive regions, a greater exposure to import competition attracts college-educated workers and increases college-wages and skill premium; whereas it has opposite effect among less skill-intensive regions.
    Keywords: international trade; import competition; regional inequality; college premium; internal migration; skill sorting; factor mobility
    JEL: F14 F16 I24 J24 J31 R12
    Date: 2018–11
  34. By: Majed Alharthi (King Abdulaziz University)
    Abstract: This study aims to find the main determinants of foreign direct investment (FDI) in Gulf Cooperation Council (GCC) Region using a panel data from 1996-2016. The GCC region is facing new economic reforms as a result of low oil prices when oil is the main product of GDP in GCC. In addition, GCC impose tax in 2018 that would affect economy negatively due to lowering in purchase power. Based on lower prices of oil, Saudi Arabia released a plan called Vision 2030. This vision was announced in 26 April 2016 by Crown Prince Mohammad bin Salman. The main reason behind this vision is to diversify economy. The FDI is one of the most important indicators to realize this diversity of economy. In this study, the data was collected through the United Nations Conference of Trade and Development, World Bank and International Monetary Fund (IMF) databases. The data was analyzed through fixed-effects model and random-effects model. The GDP is found to have a significant and positive impact on FDI. The Arab Spring affected the FDI negatively and significantly through the period of the study.
    Keywords: foreign direct investment; Gulf Cooperation Council; Vision 2030
    Date: 2018–10
  35. By: Groznykh Rogneda (Ural Federal University); Igor Drapkin (Ural Federal University); Oleg Mariev (Ural Federal University)
    Abstract: In the modern literature there is no consensus on the effects arising in countries as a result of hosting major sports events, namely the Olympic Games, FIFA World Cup and UEFA European Championship. This paper focuses on two aspects of the major sports events effects in the hosting country: on economic growth and foreign direct investment inflows. The estimated database includes indicators for all countries that hosted major sport events during 1970?2015. This paper confirms the hypotheses of positive effects both on economic growth and foreign direct investment in the hosting countries. Positive significant effects are found not only during the period of preparation to the event, but (what is more important) during the 4 to 12 year period after the event.
    Keywords: major sports events, economic growth, foreign direct investment inflows, the Olympic Games, FIFA World Cup, UEFA European Championship, effects of hosting major sports events, Solow model
    JEL: L83 O11 O19
    Date: 2018–10
  36. By: Birkenberg, A.
    Abstract: The agri-food sector generates between 20-30% of global greenhouse gas emissions. A recent attempt to address an increasing demand for climate change mitigation in global value chains is the use of strict and high quality climate labels. However, very little is known on consumer s preferences and attitudes towards climate labels in the agri-food sector and even less on synergistic effects of climate labels in coexistence with other labels. This study examines the world s first coffee, certified as carbon neutral and consumer preferences. It investigates the willingness to pay (WTP) of German consumers for carbon neutral labels on coffee and potential synergistic effects when carbon neutral certification is combined with uncertified direct trade claims or a Fair Trade certificate. A discrete choice experiment based on a Mixed Logit Model was used to determine consumer s WTP and focus group discussions were conducted to understand the rationales. A marginal WTP of 1.70 for a carbon neutral label was identified on a 250g package of specialty coffee. A positive synergistic effect was found for the combination of a carbon neutral label with direct trade claims. Further, without according information, consumers often perceived coffee as a natural product that is not generating any emissions. Acknowledgement : We kindly acknowledge the contributions of Manuel Narjes, Bettina Reiser and Regina Birner who substantially developed and improved the research. We are also thankful for the scholarship provided by the FAZIT foundation in Germany.
    Keywords: Consumer/Household Economics
    Date: 2018–07
  37. By: Tamim Bayoumi; Maximiliano Appendino; Jelle Barkema; Diego A. Cerdeiro
    Abstract: All common real effective exchange rate indexes assume trade is only in final goods, despite the growing presence of global supply chains. Extending effective exchange rate indexes to include such intermediate goods can imply radically different effective exchange rate weights, depending on the relative substitutability of goods in final demand and in production. Unfortunately, the effect of these shifts in weights are difficult to identify empirically because the two currencies most affected—the dollar and the renminbi—have moved closely together. As the renminbi becomes more flexible, however, it will be important to determine which assumptions are the most realistic.
    Date: 2018–11–01
  38. By: Wael Bousselmi; Patrick Sentis; Marc Willinger
    Abstract: We examine how the Brexit announcement influenced the long-run market performance of British and European listed firms. Using daily data and a sample composed of 3,015 European listed firms (805 UK and 2,210 non-UK), we find that, over a 12-month horizon, the Brexit announcement negatively affected the long-run market performance of UK firms (regardless of their business activities) and European non-British (non-UK hereafter) firms that conduct most of their business activities within the British area. We also provide evidence that, after the Brexit announcement, analysts’ earnings forecasts and the realized accounting decreased and the return volatility increased for UK firms.
    Keywords: Brexit, Macroeconomic news, Financial market, Buy-and-hold, Event study.
    Date: 2018–11
  39. By: Bisztray, Marta; Koren, Miklós; Szeidl, Adam
    Abstract: We use firm-level data from Hungary to estimate knowledge spillovers in importing through fine spatial and managerial networks. By identifying from variation in peers' import experience across source countries, by comparing the spillover from neighboring buildings with a cross-street placebo, and by exploiting plausibly exogenous firm moves, we obtain credible estimates and establish three results. (1) There are significant knowledge spillovers in both spatial and managerial networks. Having a peer which has imported from a particular country more than doubles the probability of starting to import from that country, but the effect quickly decays with distance. (2) Spillovers are heterogeneous: they are stronger when firms or peers are larger or more productive, and exhibit complementarities in firm and peer productivity. (3) The model-implied social multiplier is highly skewed, implying that targeting an import-encouragement policy to firms with many and productive neighbors can make it 26% more effective. These results highlight the benefit of firm clusters in facilitating the diffusion of business practices.
    Keywords: Imports; manager networks; peer effects; social multiplier; spatial spillovers
    JEL: D22 F14 R32
    Date: 2018–09
  40. By: Harashima, Taiji
    Abstract: This paper examines the possibility that the increases in within-country economic inequality that were observed in many countries since the 1980s were caused by deepening globalization through uneven capital accumulation across households by constructing a model based on the concept of sustainable heterogeneity. The model indicates that unless a government strengthens social welfare measures appropriately as globalization deepens (i.e., increases transfers from more-advantaged households to less-advantaged households), the level of within-country economic inequality will continue to increase. This result indicates the recent increases in within-country economic inequality may have been caused at least partially by the inaction of governments in the face of increasing globalization.
    Keywords: Capital accumulation; Globalization; Inequality; Social welfare; Sustainable heterogeneity
    JEL: D31 D63 I30
    Date: 2018–11–01
  41. By: Mercier, Stephanie
    Abstract: This study examines transportation alternatives for moving cereals into position for storage under the West African Food Security Regional Reserve agreed to by the Economic Community of West African States (ECOWAS) in 2013, for which cereals were first procured in 2017. It describes the reserve’s management structure and rules for procuring commodities, both types of cereals and preferred sourcing for those purchases. The study identified countries within the 15-nation ECOWAS region where the desired types of cereals are available, and recent sources for imported rice, which is a preferred staple food in ECOWAS member countries even though the region is far from self-sufficient in this commodity. Despite the poor quality of roads and commercial trucks in much of West Africa and the official and unofficial barriers to movement of products across national borders, surface transportation of cereal shipments is determined to be the most economical mode of transportation for servicing the stockholding facilities of the regional reserve for goods originating within the continent. Significant investments are scheduled to be made in railroads that cross national borders within West Africa, as well as in infrastructure for river transport, including inland port facilities and improving navigable channels in key regional river systems, but those modes are not yet viable alternatives to road transport for most of the West Africa region.
    Keywords: WEST AFRICA; AFRICA SOUTH OF SAHARA; AFRICA; grain foods; food prices; food security; food production; cereal crops; transport infrastructure; cereals; food stocks; transport; Economic Community of West African States (ECOWAS); West African Food Security Regional Reserve
    Date: 2018
  42. By: Robert Boyer (PJSE - Paris-Jourdan Sciences Economiques - ENS Paris - École normale supérieure - Paris - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, IDA - Institut des Amériques - M.E.N.E.S.R. - Ministère de l'Éducation nationale, de l’Enseignement supérieur et de la Recherche)
    Abstract: Distinctive political compromises prevailed and explained various brands of capitalism observed from WWII to the early 1990s. Is this key finding by régulation research been still valid given the wide diffusion of common structural changes since the 2000s: slow productivity in the industrialized world, overwhelming impact of finance, rise of inequalities within many Nation-States in response to deregulation, social and political polarization, open conflict between capitalism and democracy, the trading place between mature and emerging economies? These stylized facts challenge most economic theories but they can be explained by an institutionalist and historical approach that also helps in redesigning a relevant macroeconomic approach. Each capitalism brand displays specific complementarities among institutional forms and their growing interactions imply more their complementarity than their frontal competition. Consequently, all capitalisms have been transformed but they do not converge towards a canonical configuration. The rise of nationalist movements may challenge the present international relations but they should not underestimate the economic and social costs of their protectionist strategy.
    Keywords: Capitalism variety,Institutional complementarity,Global finance,Internationalization,Deregulation,National and international inequality,Capitalism and democracy,International relations
    Date: 2018–09
  43. By: Michael Amior
    Abstract: The US suffers from large regional disparities in employment rates which have persisted for many decades. It has been argued that foreign migration offers a remedy: it "greases the wheels" of the labor market by accelerating the adjustment of local population. Remarkably, I find that new migrants account for 30 to 60 percent of the average population response to local demand shocks since 1960. However, population growth is not significantly more responsive in locations better supplied by new migrants: the larger foreign contribution is almost entirely offset by a reduced contribution from internal mobility. This is fundamentally a story of "crowding out": I estimate that new foreign migrants to a commuting zone crowd out existing US residents one-for-one. The magnitude of this effect is puzzling, and it may be somewhat overstated by undercoverage of migrants in the census. Nevertheless, it appears to conflict with much of the existing literature, and I attempt to explain why. Methodologically, I offer tools to identify the local impact of immigration in the context of local dynamics.
    Keywords: migration, geographical mobility, local labor markets, employment
    JEL: J61 J64 R23
    Date: 2018–11

This nep-int issue is ©2018 by Luca Salvatici. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.