nep-int New Economics Papers
on International Trade
Issue of 2018‒12‒17
forty-two papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. Export Processing Zones and the Composition of Greenfield FDI By Ronald B. Davies; Rodolphe Desbordes
  2. IFAD RESEARCH SERIES 11 - Food safety, trade, standards and the integration of smallholders into value chains: a review of the literature By Humphrey, J.
  3. Heterogeneous Workers, Trade, and Migration By Inga Heiland; Wilhelm Kohler
  4. Strategies for sustainable upgrading in global value chains: The Tunisian textile and apparel sector By Grumiller, Jan; Azmeh, Shamel; Staritz, Cornelia; Raza, Werner; Grohs, Hannes; Tröster, Bernhard
  5. The Results of Global Goods and Services Trade Development in 2017 By Pakhomov Alexander; Bagdasaryan Knyaz
  6. Exports and Productivity in Canadian Food Manufacturing By Piedrahita, N.; Hailu, G.
  7. Border Walls By Treb Allen; Cauê de Castro Dobbin; Melanie Morten
  8. Anti-Migration as a Threat to Internationalization? A Review of the Migration- Internationalization Literature By Hatzigeorgiou, Andreas; Lodefalk, Magnus
  9. Taking the Skill Bias out of Global Migration By Costanza Biavaschi; Micha? Burzynski; Benjamin Elsner; Joël Machado
  10. Distance and the Multinational Wage Premium By Hartmut Egger; Elke J. Jahn; Udo Kreickemeier
  11. The "China shock" revisited: Insights from value added trade flows By Jakubik, Adam; Stolzenburg, Victor
  12. Preferential Trade Agreements and Global Sourcing By Emanuel Ornelas; John L. Turner; Grant Bickwit
  13. Strategies for sustainable upgrading in global value chains: The Tunisian olive oil sector By Grumiller, Jan; Grohs, Hannes; Raza, Werner; Staritz, Cornelia; Tröster, Bernhard
  14. The role of Centrality in Preventing Free Trade of Processed Agricultural Goods under Imperfect Competition By May, D.; McCorriston, S.
  15. Environmental regulation and eco-industry trade: Theory and evidence from the European Union By Carl Gaigné; Lota D. Tamini
  16. Trade Exposure and Firms Markup Dynamics in the Food Industry By Curzi, D.; Garrone, M.; Olper, A.
  17. Market Power and Export Taxes By Jean-Marc Solleder
  18. Organizing Global Supply Chains: Input Cost Shares and Vertical Integration By Berlingieri, Giuseppe; Pisch, Frank; Steinwender, Claudia
  19. Competition policy, trade and the global economy: Existing WTO elements, commitments in regional trade agreements, current challenges and issues for reflection By Anderson, Robert D.; Kovacic, William E.; Müller, Anna Caroline; Sporysheva, Nadezhda
  20. Addressing tensions and avoiding disputes: Specific trade concerns in the TBT Committee By Holzer, Kateryna
  21. Globalization and political structure By Gino Gancia; Giacomo A. M. Ponzetto; Jaume Ventura
  22. Unilateral Tax Reform: Border Adjusted Taxes, Cash Flow Taxes, and Transfer Pricing By Eric Bond; Thomas A. Gresik
  23. Quantifying Disruptive Trade Policies By Christoph Boehringer; Edward Balistreri; Thomas Rutherford
  24. The Role of Institutions and Immigrant Networks in Firms’ Offshoring Decisions By Simone Moriconi; Giovanni Peri; Dario Pozzoli
  25. From China with Love: The Role of FDI from Third Countries on EU Competition and R&D Activities By Ronald B. Davies
  26. Impacts of a NoCAP Scenario on Sub-Saharan Africa By Boulanger, P.; Dudu, H.; Ferrari, E.; M'Barek, R.; Philippidis, G.
  27. The Benefits of Regional Trade Agreements in Africa By Fabien CANDAU; Julie SCHLICK; Geoffroy GUEPIE
  28. Gravity and Migration before Railways: Evidence from Parisian Prostitutes and Revolutionaries By Morgan Kelly; Cormac Ó Gráda
  29. Globalization, Gender, and the Family By Keller, Wolfgang; Utar, Hale
  30. Growth divergence and income inequality in OECD countries:the role of trade and financial openness By Enrico D'Elia; Roberta De Santis
  31. How admitting migrants with any skills can help overcome a shortage of workers with particular skills By Stark, Oded; Byra, Lukasz
  32. Foreign Ownership and Skillbiased Technological Change By Michael Koch; Marcel Smolka
  33. Foreign Demand and Greenhouse Gas Emissions: Empirical Evidence with Implications for Leakage By Geoffrey Barrows; Helene Ollivier
  34. Structural Transformation to Manufacturing and Services: What Role for Trade? By Anderson, Kym
  35. Does financial sector development affect the growth gains from trade openness? By N.R. Ramírez-Rondán; Marco E. Terrones; Andrea Vilchez
  36. Export Tax Rebate Policy in Chinese Fishery Sector: Who are the Beneficiaries? By Liu, X.
  37. Irexit: Making the Worst of a Bad Situation By Ronald B. Davies; Joseph Francois
  38. Keeping track of global trade in real time By Jaime Martinez-Martin; Elena Rusticelli
  39. Evaluating The Effect of Regional Trade Quota Policy on The Market Integration : A Case Study of The Indonesian Beef Industry By Utami, A.; Brummer, B.
  40. The Effect of the Brexit Referendum Result on Subjective Well-being By Georgios Kavetsos; Ichiro Kawachi; Ilias Kyriopoulos; Sotiris Vandoros
  41. Decomposing the impact of immigration on house prices By Rosa Sanchis-Guarner
  42. Foreign Land Acquisitions and Environmental Regulations: does the Pollution-Haven Hypothesis hold? By Scoppola, M.; Raimondi, V.

  1. By: Ronald B. Davies; Rodolphe Desbordes
    Abstract: Export processing zones (EPZs) are an increasingly common type of special economic zone. They are designed to facilitate international trade by lowering trade costs, such as import duties and/or export taxes. EPZs should thus be particularly attractive locations for multinational enterprises engaging in vertical, trade-intensive, foreign direct investment (FDI). Using data on worldwide greenfield FDI projects over the period 2003-2014, we find patterns consistent with this hypothesis. EPZs have a large positive effect on manufacturing FDI projects with a production focus, especially in trade- and labour-intensive sectors. Overall, our results suggest that EPZs are an effective tool to attract manufacturing FDI which exploit the opportunities offered by global value chains.
    Keywords: Export Processing Zone; Special Economic Zone; Greenfield FDI; Global Value Chain
    JEL: F23 F13
    Date: 2018–04
  2. By: Humphrey, J.
    Abstract: Current transformations in food consumption and food trade have allowed greatly increased food exports from developing countries and also shifted the composition of exports towards high-value foods that offer better opportunities for smallholder farmers to improve their livelihoods. Transformations in the domestic markets of developing countries are also changing the composition of food consumed and opening up opportunities there. Nevertheless, food safety crises and changing food safety requirements are widely considered as potentially limiting the opportunities for smallholder farmers to enter these expanding markets. In particular, a shift in food safety philosophy towards the introduction of risk-based preventive controls on farms appears to pose a threat to smallholder farmers by creating new requirements for knowledge about food safety, additional investment in equipment and food safety systems, and more intensive linkages between producers and the buyers of their products. Food safety challenges vary considerably across markets and across products. Markets – developed country export markets, regional markets and developing country domestic markets – are changing rapidly and present different opportunities and threats from food safety risks and also the controls introduced to contain them. The food products for which food safety challenges are most prominent are cereals and nuts susceptible to aflatoxin contamination, and high-value fresh products such as fresh fruit and vegetables, meat and dairy. The use of risk-based preventive controls to address challenges is being extended not only through the extension of border controls, but also through private standards and through domestic controls in developing countries and food importing countries. Increasingly, the pressure is for the food safety systems of exporting countries to demonstrate their capacities to offer levels of food safety protection equivalent to those achieved in destination markets. Responding to these food safety challenges involves developing country governments making strategic choices about establishing a range of domestic standards and facilitating the upgrading of capabilities by smallholder farmers and their inclusion into a range of different markets. With respect to enabling smallholder farmers to gain knowledge about new food safety requirements, invest in food safety systems and increase the confidence of buyers, the well-established mechanisms for supporting smallholder inclusion in markets can make a substantial contribution to limiting exclusion.
    Keywords: Agricultural and Food Policy
    Date: 2017
  3. By: Inga Heiland; Wilhelm Kohler
    Abstract: We develop a model that combines monopolistic competition on goods markets with skill-type heterogeneity on the labor market to analyze the effects of trade and migration on welfare and inequality. Skill-type heterogeneity and partial specificity to firms’ endogenously chosen skill requirements lead to endogenous worker-firm match quality, endogenous wage markups, and within-firm wage inequality. We identify novel effects of trade and migration. Trade enhances firms’ monopsony power on the labor market and worsens the average quality of worker-firm matches, but the gains from trade theorem survives. Integration of labor markets leads to two-way migration between symmetric countries. Migration enhances competitiveness on the labor market and tends to increase the average quality of worker-firm matches. Trade and migration are complements. Our model clearly advocates opening up labor markets simultaneously with trade liberalization.
    Keywords: two-way migration, gains from trade, heterogeneous workers
    JEL: F12 F16 F22 J24
    Date: 2018
  4. By: Grumiller, Jan; Azmeh, Shamel; Staritz, Cornelia; Raza, Werner; Grohs, Hannes; Tröster, Bernhard
    Abstract: This policy note presents policy recommendations for a sustainable development strategy for the Tunisian textile and apparel (T&A) sector in the context of the ongoing negotiations on the Deep and Comprehensive Free Trade Agreement (DCFTA) between Tunisia and the EU. Against the backdrop of economic crisis and decreasing apparel exports to the EU, support for the T&A industry could be an important way to help reinvigorate the economy. A sector development strategy should primarily focus on functional and product upgrading potentials, linkage development as well as on export market and product diversification.
    Date: 2018
  5. By: Pakhomov Alexander (Gaidar Institute for Economic Policy); Bagdasaryan Knyaz (RANEPA)
    Abstract: According to the latest projections released by the WTO, this year the global trade growth rate is going to decrease to 4.4% from its previous level of 4.7% in 2017. In its annual report, the WTO Secretariat warns that the threats voiced by the USA that it may impose duties on imports of goods from China and its other main partners in trade have probably already produced some negative impact on the global economy and international trade.
    Keywords: World Trade Organization, forecast, exports, imports, protectionism, Russian Federation
    JEL: F10 F13 F19
    Date: 2018
  6. By: Piedrahita, N.; Hailu, G.
    Abstract: This paper examines the relationship between productivity and export market participation of Canadian food processing plants using a plant-level panel dataset. We find that exporters are more productive than non-exporters, and have higher productivity growth prior to entering export markets. However, we find that plants do not experience higher productivity growth after entering export markets. The results have implications for policies targeted at enhancing R&D and innovation policy and lessening border restrictions, and the role of international trade openness. Acknowledgement :
    Keywords: International Relations/Trade
    Date: 2018–07
  7. By: Treb Allen; Cauê de Castro Dobbin; Melanie Morten
    Abstract: What are the economic impacts of a border wall between the United States and Mexico? We use confidential data on bilateral flows of primarily unauthorized Mexican workers to the United States to estimate how a substantial expansion of the border wall between the United States and Mexico from 2007 to 2010 affected migration. We then combine these estimates with a general equilibrium spatial model featuring multiple labor types and a flexible underlying geography to quantify the economic impact of the wall expansion. At a construction cost of approximately $7 per person in the United States, we estimate that the border wall expansion harmed Mexican workers and high-skill U.S. workers, but benefited U.S. low-skill workers, who achieved gains equivalent to an increase in per capita income of $0.36. In contrast, a counterfactual policy which instead reduced trade costs between the United States and Mexico by 25% would have resulted in both greater declines in Mexico to United States migration and substantial welfare gains for all workers.
    JEL: F11 F22 J2 R23
    Date: 2018–11
  8. By: Hatzigeorgiou, Andreas (Örebro University School of Business); Lodefalk, Magnus (Örebro University School of Business)
    Abstract: Does anti-migration sentiment threaten internationalization? One major pro-Brexit argument was that it would enable more control over immigration. The most recent US presidential election also focused on immigration. Anti-migration sentiment could be a threat to internationalization, given that migrants can help lower the costs of internationalization. Since trade contributes to economic growth, this could, in turn, impede economic development. Despite extensive literature on the migration-trade nexus, there are few examples of policymakers highlighting the role of migration for internationalization. One possible explanation is the absence of an accessible survey of the available theory and evidence on this relationship, and this article intends to bridge the gap. We review and discuss over 100 papers published on the subject, from pioneering country-level studies to nascent firm-level studies that utilize employer-employee data. To our knowledge, this is the first paper offering a wide-ranging review of the different strands of theory on the relationship between migration and internationalization, as well as new empirical findings. Although the evidence suggests that migration can facilitate internationalization we also note substantial gaps and inconsistencies in the extant literature. The aim of this article is to encourage future research and assist policymakers in their efforts to promote internationalization.
    Keywords: Migration; networks; information; trade; foreign direct investment
    JEL: D20 D80 F14 F16 F22 F23 J61
    Date: 2018–12–06
  9. By: Costanza Biavaschi; Micha? Burzynski; Benjamin Elsner; Joël Machado
    Abstract: Global migration is heavily skill-biased, with tertiary-educated workers being four times more likely to migrate than workers with a lower education. In this paper, we quantify the global impact of this skill bias in migration. Based on a quantitative multi-country model with trade, we compare the current world to a counterfactual with the same number of migrants, where all migrants are neutrally selected from their countries of origin. We find that most receiving countries benefit from the skill bias in migration, while a small number of sending countries is significantly worse off. The negative effect in many sending countries is completely eliminated — and often reversed — once we account for remittances and additional migration-related externalities. In a model with all our extensions, the average welfare effect of skill-biased migration in both OECD and non-OECD countries is positive.
    Keywords: Migration; Skill selection; Global welfare
    JEL: F22 O15 J61
    Date: 2018–05
  10. By: Hartmut Egger; Elke J. Jahn; Udo Kreickemeier
    Abstract: Combining administrative data on German workers with commercial data on German firms, we find evidence for a distance effect on the multinational wage premium: Foreign multinationals pay lower wages than German multinationals if the ultimate owner is located in close proximity to Germany, whereas the opposite is true if the ultimate owner is located further away. In addition to this so far unexplored effect, our results confirm previous evidence that on average foreign multinationals and domestic multinationals pay wages of similar size, with both types of firms paying a premium relative to other local firms. To provide a rationale for this pattern, we develop a theoretical model in which wages are firm-specific and firms can serve the foreign market via exporting or via FDI. In case of FDI, they face uncertainty about the wages to be paid abroad, and due to this uncertainty, firms that pay high wages at home are more likely to seek foreign investment. In the model, the observed distance effect on the multinational wage premium occurs since the alternative of exporting is less attractive for distant locations, and firms are therefore more willing to accept higher wages for foreign production in locations that are further away from their headquarters.
    Keywords: multinational wage premium, heterogeneous firms, distance effects
    JEL: F12 F14 F21 F23
    Date: 2018
  11. By: Jakubik, Adam; Stolzenburg, Victor
    Abstract: We exploit a decomposition of gross trade flows into their value added components to reassess the relationship between increased imports from China and manufacturing jobs in US local labour markets following the seminal paper of Autor, Dorn, and Hanson (2013, ADH). Decomposed trade flows enable us to address identification and measurement issues inherent to gross trade data. In particular, it allows us to remove US value added in Chinese exports from the exposure measure which is mechanically correlated with the dependent variable and overstates the volume of the trade shock. In addition, the decomposition permits to correct for double counting, to remove primary and services inputs in manufacturing exports, and to assign competition to the upstream industry that supplied the value added rather than the final exporting industry. This further reduces the volume of the shock and improves the accuracy of the import exposure measure. Consequently, we find considerable differences in the pattern of regions that are most affected by the trade shock and show that imports from China can explain less of the decline in US manufacturing than what gross trade data would suggest. We then separate the shock into a China-driven domestic reform and a thirdcountry-driven value chain component, and find in line with ADH that the smaller, but still negative labour market effects are indeed China driven. Finally, we observe that the negative effects identified in ADH are not present in the 2008-2014 period, as labour market adjustment has largely concluded. The long time needed for adjustment may have been prolonged by the evolution of China's comparative advantage.
    Keywords: value added trade,labor-market adjustment,local labor markets
    JEL: E24 F14 F16 J23 L60 R23
    Date: 2018
  12. By: Emanuel Ornelas; John L. Turner; Grant Bickwit
    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
  13. By: Grumiller, Jan; Grohs, Hannes; Raza, Werner; Staritz, Cornelia; Tröster, Bernhard
    Abstract: This policy note presents policy recommendations for a sustainable development strategy for the Tunisian olive oil sector in the context of the ongoing negotiations on the Deep and Comprehensive Free Trade Agreement (DCFTA) between Tunisia and the EU. Against the backdrop of increasing local value added and ecological constraints, a sector development strategy should primarily focus on exploiting functional and product upgrading potentials in the EU and other end markets instead of increasing low value bulk exports.
    Date: 2018
  14. By: May, D.; McCorriston, S.
    Abstract: Most trade in food and agricultural products involves processed food. We take this observation as our starting point to address why trade in food and agricultural products has been difficult to achieve. Drawing on recent developments in the theory of networks, we allow for the role of intermediaries with potential market power and where the bias of trade policy may reflect special interests. We draw on recent developments in the theory of networks to show that global free trade in food and agricultural markets is unlikely when there are countries occupying a central position in the network independently of any policy bias. Acknowledgement :
    Keywords: International Relations/Trade
    Date: 2018–07
  15. By: Carl Gaigné; Lota D. Tamini
    Abstract: In this paper, we theoretically and empirically study the impact of environmental taxation on trade in environmental goods (EGs). Using a trade model in which the demand for and supply of EGs are endogenous, we show that the relationship between environmental taxation and demand for EGs follows a bell-shaped curve. Above a cutoff tax rate, a higher pollution tax rate can reduce the bilateral trade of EGs because there are too many low-productivity suppliers of EGs. Our empirical results confirm our main findings using data regarding the EU-27 countries. We also theoretically and empirically show that environmental taxation has a monotonically positive impact on the extensive margin of trade. Furthermore, we show that if countries apply an environmental tax rate equals to the “optimal” tax rate, 4.03% (e.g., the tax rate maximizing international trade of EGs), then trade in EGs would experience an increase of 22 percentage points.
    Keywords: environmental goods, international trade, environmental taxation
    JEL: F12 F18 Q56
    Date: 2018
  16. By: Curzi, D.; Garrone, M.; Olper, A.
    Abstract: By examining the roles played by imports of intermediate inputs and final goods separately, this paper investigates the relationship between trade exposure, firm-level markups and industry markup dispersion. We exploit a rich micro-level dataset of French food companies from 2001 to 2013 and find a negative (positive) effect of an increased output (input) import competition on firm-level markups. This result is consistent with the recent predictions of the international trade literature. A similar pattern holds when considering the relationship between trade exposure and industry markup dispersion. We provide a theoretical intuition behind these findings, which represent an important insight introduced by our analysis. Acknowledgement :
    Keywords: International Relations/Trade
    Date: 2018–07
  17. By: Jean-Marc Solleder (UNIGE - Université de Genève)
    Abstract: This paper explores the extent to which market power considerations explain levels of export taxes. Market power is proxied by the inverse import demand elasticities faced by exporters. The paper first provides estimates of market power for exporting countries and products at the 6-digit level of the Harmonized System. It then finds a positive correlation between market power and export taxes. This result supports the theory that, when unconstrained in their trade policy choices, countries take their market power into account when setting their export taxes.
    Keywords: Market power,export taxes,export policy,import demand elasticities
    Date: 2018–10–29
  18. By: Berlingieri, Giuseppe; 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 self-constructed 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: direct requirements; input output relationship; intrafirm trade; Supply Chains; vertical integration
    JEL: F10 F14 L16 L23 O14
    Date: 2018–11
  19. By: Anderson, Robert D.; Kovacic, William E.; Müller, Anna Caroline; Sporysheva, Nadezhda
    Abstract: Competition policy, today, is an essential element of the legal and institutional framework for the global economy. Whereas decades ago, anti-competitive practices tended to be viewed mainly as a domestic phenomenon, most facets of competition law enforcement now have an important international dimension. Examples include: the investigation and prosecution of price fixing and market sharing arrangements that often spill across national borders and, in important instances, encircle the globe; multiple recent, prominent cases of abuses of a dominant position in high-tech network industries; important current cases involving transnational energy markets; and major corporate mergers that often need to be simultaneously reviewed by multiple jurisdictions. Beyond competition law enforcement per se, increasingly, major issues of competition policy (e.g., the impact on competition of the structure and scope of intellectual property rights or the role of state-owned enterprises) implicate the interests of multiple jurisdictions. [...]
    Keywords: competition policy,anti-competitive practices,international trade policy,WTO agreements,regional trade agreements,state-owned enterprises,competitive neutrality,the digital economy
    JEL: F02 F13 F23 F53 L40 L44 L49 N40
    Date: 2018
  20. By: Holzer, Kateryna
    Abstract: Most specific trade concerns (STCs), which are raised before the WTO Committee on Technical Barriers to Trade (TBT Committee), disappear from the TBT Committee's meeting agendas without escalating into formal disputes. At the same time, a relatively small number of TBT-related disputes have been subject to the WTO dispute settlement procedures. By examining the practice of raising STCs and the relationship between STCs and disputes, the paper emphasises the role of STCs as a trade tension resolution mechanism. It argues that the STC mechanism is a viable alternative to the currently overburdened WTO dispute settlement system. The paper also suggests ways to strengthen the STC mechanism of the TBT Committee through dividing TBT Committee meetings into thematic sessions, adopting mediation procedures and reporting on STC resolutions. Further, it underscores the importance of increasing transparency and promoting good regulatory practice in avoiding disputes.
    Keywords: specific trade concerns,technical barriers to trade,TBT Agreement,TBT Committee,trade disputes
    JEL: F13 F53 F55 K33 L15
    Date: 2018
  21. By: Gino Gancia (CREI, Universitat Pompeu Fabra & Barcelona GSE); Giacomo A. M. Ponzetto (CREI, Universitat Pompeu Fabra & Barcelona GSE); Jaume Ventura (CREI, Universitat Pompeu Fabra & Barcelona GSE)
    Abstract: The first wave of globalization (1830-1914) witnessed a decline in the number of countries from 125 to 54. Political consolidation was often achieved through war and conquest. The second wave of globalization (1950-present) has led instead to an increase in the number of countries to a record high of more than 190. Political fragmentation has been accompanied by the creation of peaceful structures of supranational governance. This paper develops a theoretical model of the interaction between globalization and political structure that accounts for these trends and their reversal. We show that political structure adapts to steadily expanding trade opportunities in a non-monotonic way. Borders hamper trade. In its early stages, the political response to globalization consists of removing borders by increasing country size. War is then an appealing way of conquering markets. In its later stages, however, the political response to globalization is to remove the cost of borders by creating international economic unions. As a result, country size declines and negotiation replaces war as a tool to ensure market access.
    Keywords: Globalization, political structure, size of countries, international unions
    JEL: D71 F15 F55 H77 O57
    Date: 2017
  22. By: Eric Bond; Thomas A. Gresik
    Abstract: We study the economic effects of unilateral adoption of corporate tax policies that include destination-based taxes and/or cash ow taxes in a heterogeneous agent model in which multinational firms can endogenously shift income between countries using transfer prices. Standard pass through arguments no longer apply because of the income shifting behavior of multinationals. Over or under- pass through will affect domestic consumer prices charged by multinational firms and will distort the decision of international businesses to outsource intermediate goods or to produce them in a foreign subsidiary. The welfare of the adopting country can decrease both with the adoption of destination-based taxes and the adoption of cash ow taxes. For a country with sufficiently large export markets that can optimally adjust its corporate tax rate on domestic earnings, unilaterally adopting cash ow taxation with full destination-based rate adjustments will reduce welfare.
    Keywords: border adjustments, destination-based taxes, source-based taxes, cash flow taxes, income taxes, transfer pricing, unilateral tax reform
    JEL: F23 H21 H25 H26
    Date: 2018
  23. By: Christoph Boehringer (University of Oldenburg, Department of Economics); Edward Balistreri (Iowa State University); Thomas Rutherford (University of Wisconsin)
    Abstract: Mainstream economic wisdom favoring cooperative free trade is challenged by a wave of disruptive trade policies. In this paper, we provide quantitative evidence concerning the economic impacts of tariffs implemented by the United States in 2018 and the subsequent retaliations by partner countries. Our analysis builds on a multi-region multi-sector general-equilibrium simulation model of the global economy that includes an innovative monopolistic-competition structure of bilateral representative firms.
    Keywords: Applied econimic analysis; Multi-region models; Trade policy; Monopolistic competition, Trade wars
    Date: 2018–11
  24. By: Simone Moriconi; Giovanni Peri; Dario Pozzoli
    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
  25. By: Ronald B. Davies
    Abstract: This report presents empirical analysis on the linkage between mergers and acquisition FDI and acquirer innovation efforts. The data indicates that acquisitions tend to result in a spike in research in the two following years. This impact, however, is contingent on industrial linkages between target and acquirer. In particular, nonmanufacturing targets appear to have the largest impact. Further investigation using input-output linkages finds that acquirer R&D increases more when the target is a primary source of inputs for the acquirer. These effects, however, are smaller for Chinese acquirers, suggesting that concerns over whether acquisition of foreign technology is spurring faster Chinese technological growth may be misguided. Finally, these effects are smaller in more concentrated industries, suggesting the need to consider industry concentration when projecting the R&D implications of cross-border mergers.
    Keywords: Innovation; M&A; FDI
    JEL: F23 O31
    Date: 2018–07
  26. By: Boulanger, P.; Dudu, H.; Ferrari, E.; M'Barek, R.; Philippidis, G.
    Abstract: This paper provides a model-based impact analysis of the Common Agricultural Policy (CAP) on the four main regional blocks in Sub-Saharan Africa (SSA). It uses the Modular Agricultural GeNeral Equilibrium Tool (MAGNET), a multi-region computable general equilibrium model. To provide a comprehensive analysis, other key EU policies, such as trade or GHG policies, are modelled as well. A thoroughly prepared reference scenario is contrasted with a counterfactual scenario, where the CAP is removed and ambitious trade agreements with non-African EU trade partners are implemented. Results provide interesting insights into the identification and quantification of - mainly indirect - effects of the CAP in SSA. Acknowledgement :
    Keywords: Agricultural and Food Policy
    Date: 2018–07
  27. By: Fabien CANDAU; Julie SCHLICK; Geoffroy GUEPIE
    Abstract: Despite the marginalization of Africa in the world trade system, this article shows that African Regional Trade Agreements (RTAs) ushered an era of economic integration with strong trade creation effects over the period 1965-2012. Some agreements failed to deliver the expected trade gains, but the Common Market for Eastern and Southern Africa (COMESA), the Economic Community of West African States (ECOWAS), and the Southern African Development Community (SADC) have signicantly increased trade between members. Based on this analysis, a simple quantitative trade model is used (Arkolakis et al. 2012) to compare trade and welfare with and without these agreements. These counterfactual exercises show that RTAs have strongly affected trade costs, multilateral resistances and finally trade flows but with small effects on welfare.
    Date: 2018–12
  28. By: Morgan Kelly; Cormac Ó Gráda
    Abstract: Although urban growth historically depended on large inflows of migrants, little is known of the process of migration in the era before railways. Here we use detailed data for Paris on women arrested for prostitution in the 1760s, or registered as prostitutes in the 1830s and 1850s; and of men holding identity cards in the 1790s, to examine patterns of female and male migration. We supplement these with data on all women and men buried in 1833. Migration was highest from areas of high living standards, measured by literacy rates. Distance was a strong deterrent to female migration (reflecting limited employment opportunities) that falls with railways, whereas its considerably lower impact on men barely changes through the nineteenth century.
    Keywords: Migration; Gravity; Prostitution
    JEL: N
    Date: 2018–06
  29. By: Keller, Wolfgang; Utar, Hale
    Abstract: This paper shows that globalization has far-reaching implications for the economy's fertility rate and family structure because they influence work-life balance. Employing population register data on new births, marriages, and divorces together with employer-employee linked data for Denmark, we show that lower labor market opportunities due to Chinese import competition lead to a shift towards family, with more parental leave taking and higher fertility as well as more marriages and fewer divorces. This pro-family, pro-child shift is driven largely by women, not men. Correspondingly, the negative earnings implications of the rising import competition are concentrated on women, and gender earnings inequality increases. We show that the choice of market versus family is a major determinant of worker adjustment costs to labor market shocks. While older workers respond to the shock rather similarly whether female or not, for young workers the fertility response takes away the adjustment advantage they typically have-if the worker is a woman. We find that the female biological clock-women have difficulties to conceive beyond their early forties-is central for the gender differential, rather than the composition of jobs and workplaces, as well as other potential causes.
    Keywords: Divorce; Earnings Inequality; Fertility; Gender Gap; import competition; Marriage
    JEL: F16 J12 J13 J16
    Date: 2018–11
  30. By: Enrico D'Elia; Roberta De Santis
    Abstract: This paper analyzes trade and financial openness effects on growth and income inequality in 35 OECD countries. Our model takes into account both short run and long run effects of factors explaining income divergence between and within the countries. We estimate, for the period 1995-2016, an error correction model in which per capita GDP and inequality are driven by changes over time of selected factors and by the deviation from a long run relationship. Stylised facts suggest that trade and financial openness reduce the growth gaps across the countries but not income inequality, and the effects of finance are stronger in high income countries. Nevertheless, low and middle income countries benefit more from international trade. Our contribution to the existing literature is threefold: i) we study the short and long run effects of trade and financial openness on income level and distribution, ii) we focus on developed countries (OECD) rather than on developing and iii) we provide a sensitivity analysis including in our baseline equation an institutional indicator, a trade agreement proxy and a dummy of global financial crisis. Estimates results indicate that trade openness significantly improved the conditions of OECD low income countries both in short and long run mostly, consistently with the catching up theory. It also decreased inequality, but only in low and middle income countries. Differently financial openness had a positive and significant impact only in the short run on middle income countries and increased income disparities within countries in the short term in low income countries and in the long term in high income countries.
    Keywords: Trade openness, income inequality, panel data analysis
    JEL: D63 D31 H23
    Date: 2018–11
  31. By: Stark, Oded; Byra, Lukasz
    Abstract: A country that experiences a shortage of workers with particular skills naturally considers two responses: import skills or produce them. Skill import may result in large-scale migration, which will not be to the liking of the natives. Skill production will require financial incentives, which will not be to the liking of the ministry of finance. In this paper we suggest a third response: impose a substantial migration admission fee, "import" fee-paying workers regardless of their skills, and use the revenue from the fee to subsidize the acquisition of the required skills by the natives. We calculate the minimal fee that will remedy the shortage of workers with particular skills with fewer migrants than under the skill "import" policy.
    Keywords: Skill heterogeneity,Production externalities,Market inefficiency,Shortage of particular skills,Social planner's choice,"Import" of skills,A migration admission fee,Skill acquisition subsidy
    JEL: D62 F22 J24
    Date: 2018
  32. By: Michael Koch; Marcel Smolka
    Abstract: We conduct an empirical investigation into the effects of foreign ownership on worker skills using firm-level data from Spain. To control for endogeneity bias due to selection into foreign ownership, we combine a difference-in-differences approach with a propensity score weighting estimator. Our results provide novel evidence that foreign-acquired firms actively raise the skills of their workforce in response to the acquisition by hiring high-skilled workers and providing worker training. To pin down the mechanism, we exploit unique information on whether firms use their foreign parent in exporting to foreign markets. Our results suggest a fundamental role for market access through the foreign parent in explaining skill upgrading in foreign-acquired firms. We reveal substantial productivity gains within foreign-acquired firms and we show that these gains derive from a concurrent effort to raise worker skills and adopt more advanced technology, suggesting a skill bias in technological innovations. We develop a simple theoretical model of foreign ownership featuring technology-skill complementarities in production that can rationalize our findings.
    Keywords: multinational enterprises, mergers and acquisitions, skill-biased technological change, worker training, productivity
    JEL: D22 D24 F23 G34
    Date: 2018
  33. By: Geoffrey Barrows (Ecole Polytechnique); Helene Ollivier (PSE)
    Abstract: With asymmetric climate policies, regulation in one country can be undercut by emissions growth in another. Previous research finds evidence that regulation erodes the competitiveness of domestic firms and leads to higher imports, but increased imports need not imply increased emissions if domestic sales are jointly determined with export sales or if emission intensity of manufacturing adjusts endogenously to foreign demand. In this paper, we estimate for the first time how production and emissions of manufacturing firms in one country respond to foreign demand shocks in trading partner markets. Using a panel of large Indian manufacturers and an instrumental variable strategy, we find that foreign demand growth leads to higher exports, domestic sales, production, and CO2 emissions, and slightly lower emission intensity. The results imply that a representative exporter facing the average observed foreign demand growth over the period 1995-2011 would have increased CO2 emissions by 1.39% annually as a result of foreign demand growth, which translates into 6.69% total increase in CO2 emissions from Indian manufacturing over the period. Breaking down emission intensity reduction into component channels, we find some evidence of product-mix effects, but fail to reject the null of no change in technology. Back of the envelope calculations indicate that environmental regulation that doubles energy prices world-wide (except in India) would only increase CO2 emissions from India by 1.5%. Thus, while leakage fears are legitimate, the magnitude appears fairly small in the context of India.
    Keywords: leakage, trade and environment, product mix, technological change
    JEL: F14 F18 Q56
    Date: 2018–11
  34. By: Anderson, Kym
    Abstract: Understanding how and why economies structurally transform as they grow is crucial for sound national policy making. Typically analysts of this issue focus on sectoral shares of GDP and employment. This paper extends that to include exports, including of services. It also considers mining in addition to agriculture and manufacturing, and recognizes some of the products of those four sectors are nontradable. The theory section's general equilibrium model provides hypotheses about structural change in different types of economies as they grow, and tests them econometrically with annual data for a sample of 117 countries for the period 1991-2014. The results point to the futility of adopting protective policies aimed at slowing de-agriculturalization and subsequent de-industrialization in terms of sectoral shares, since those trends inevitably will accompany economic growth. Fortuitously governments now have far more efficient and equitable ways of supporting the adjustments needed by people choosing or being pushed to leave declining industries.
    Keywords: comparative advantage; declining sectors; patterns of structural change; Productivity Growth
    JEL: D51 E23 F11 F43 N50 N60 O13 O14
    Date: 2018–12
  35. By: N.R. Ramírez-Rondán (Universidad del Pacífico); Marco E. Terrones (Universidad del Pacífico); Andrea Vilchez (Universidad del Pacífico)
    Abstract: A sizeable literature suggests that financial sector development could be an important enabler of the growth benefits of trade openness. We provide a comprehensive analysis of how financial development can affect the relationship between trade openness and growth using a dynamic panel threshold model and an extensive dataset for a large sample of countries for the 1970-2015 period. We find that there is a financial development threshold in which trade openness has a positive and significant effect on economic growth. We also find that when splitting the sample into industrialized and non-industrialized countries, the financial development threshold that enables the growth benefits of trade is higher in the former group of countries than in the latter. This finding is consistent with the fact that the export composition of industrialized countries is tilted towards more capital-intensive finance-constrained goods.
    Keywords: Trade openness, growth, threshold model, panel data
    JEL: F43 O41 C33
    Date: 2018–11
  36. By: Liu, X.
    Abstract: The export tax rebate policy in Chinese fishery sector is under dispute, as it is claimed that it works as a subsidy for foreign consumers rather than domestic producers. This paper investigates the distribution of benefits of this policy in the fishery sector. We find that the effects of the export tax rebate on domestic producers depend on the relative magnitude of the export supply and import demand elasticities. After applying the best-bet parameter values, simulation results indicate that, although the export tax rebate does improve Chinese producers welfare, foreign consumers capture most of the welfare benefits of this policy (60%-75%). Furthermore, the results imply that the welfare gain for Chinese producers is overestimated if the vertical linkage between the retail and the farm markets is ignored. Acknowledgement : We thank Dr. Henry Kinnucan at Auburn University for his helpful insight about the model. This work was supported by Shandong Social Science Research Project of China [grant number 16BCXJ04].
    Keywords: Resource/Energy Economics and Policy
    Date: 2018–07
  37. By: Ronald B. Davies; Joseph Francois
    Abstract: Relative to the rest of the EU, Ireland is especially vulnerable to the fallout from Brexit, both economically and politically. With increasing frustration over the reaction from Brussels, some are suggesting that an Irish exit from the EU would benefit the nation. A key argument for this is that it would allow for reintegration with the UK, thus preserving one of its largest trading partners. Using a structural general equilibrium model, we estimate that such a move would worsen the impacts of Brexit by as much as 250%, with low-skill workers disproportionately affected. This is due to the fact that while the UK is one of Ireland's single-nation trading partners, when compared to the EU27 as a group, it is much smaller.
    Keywords: Irexit; Brexit; Computable General Equilibrium
    JEL: F13 F17 F53
    Date: 2018–07
  38. By: Jaime Martinez-Martin (OECD); Elena Rusticelli (OECD)
    Abstract: This paper builds an innovative composite world trade cycle index (WTI) by means of a dynamic factor model to monitor and perform short-term forecasts in real time of world trade growth of both goods and (usually neglected) services. The selection of trade indicator series is made using a multidimensional approach, including Bayesian model averaging techniques, dynamic correlations and Granger non-causality tests in a linear VAR framework. To overcome real-time forecasting challenges, the dynamic factor model is extended to account for mixed frequencies, to deal with asynchronous data publication and to include hard and survey data along with leading indicators. Nonlinearities are addressed with a Markov switching model. Simulations analysis in pseudo real-time suggests that: i) the global trade index is a useful tool to track and forecast world trade in real time; ii) the model is able to infer global trade cycles precisely and better than the few competing alternatives; and iii) global trade finance conditions seem to lead the trade cycle, in line with the theoretical literature.
    Keywords: bayesian model averaging, cycles, dynamic factor models, goods trade, granger non-causality, leading indicators, markov switching models, Real-time forecasting, services trade, VAR models, world trade
    JEL: C2 E27 E32
    Date: 2018–12–13
  39. By: Utami, A.; Brummer, B.
    Abstract: This paper aims at analyzing the effect of regional trade quota policy to the market integration in the Indonesian beef industry which combines both vertical and spatial analysis. A panel co-integration approach was employed using monthly data covering nine producer areas and 18 consumer areas during 2008 until 2014. The degree of market integration was analyzed by applying a panel heterogeneous model developed by Pesaran-Shin and Smith (1999) from 117 trade pairs. The results found that the quota policy has a significant effect in the adjustment process between prices along the supply chain in the whole trade pairs. The study also confirmed the significant effects of several other variables representing the trade cost, and the degree of self-sufficiency rate in explaining the transmission of prices. Acknowledgement :
    Keywords: Agricultural and Food Policy
    Date: 2018–07
  40. By: Georgios Kavetsos; Ichiro Kawachi; Ilias Kyriopoulos; Sotiris Vandoros
    Abstract: We study the effect of the Brexit referendum result on subjective well-being in the United Kingdom. Using a quasi-experimental design, we find that this outcome led to an overall decrease in subjective well-being in the UK compared to a control group. The effect is driven by individuals who hold an overall positive attitude towards the EU and shows little signs of adaptation. Subjective well-being of those with a very negative attitude towards the EU increases in the short-run but turns negative, possibly due to unmet expectations. Using three different measures of socio-economic connection between the UK and other European countries, we generally do not find evidence supporting the presence of spillover effects of the Brexit result on subjective well-being of individuals in other EU countries.
    Keywords: subjective well-being, happiness, Brexit, election
    JEL: D72 I30 I31 I38
    Date: 2018–12
  41. By: Rosa Sanchis-Guarner (Centre for Economic Performance at the London School of Economics & the CESifo Research Network)
    Abstract: An inflow of immigrants into a region impacts house prices in three ways. For a fixed level of local population, housing demand rises due to the increase in foreign-born population. In addition, immigrants can influence native location decisions and induce additional shifts in demand. Finally, changes in housing supply conditions can in turn affect prices. Existing reduced form estimates of the effect of immigration on house prices capture the sum of all these effects. In this paper I propose a methodology to identify the different channels driving the total effect. I show that, conditional on supply, total changes in housing demand can be decomposed into the sum of direct immigrant demand and indirect demand changes from relocated population. The size and sign of the indirect demand effect depends on the impact of immigration on native mobility. I use Spanish data during the period 2001-2012 to estimate the different elements of the decomposition, applying an instrumental variables strategy to obtain consistent coefficients. The results show that overlooking the impact of immigration on native location induces a sizeable difference between the total and the immigrant demand effects, affecting the interpretation of the estimates.
    Keywords: Immigration, housing, Spain, instrumental variables
    JEL: J61 R12 R21
    Date: 2017
  42. By: Scoppola, M.; Raimondi, V.
    Abstract: The recent wave of Foreign Land Acquisitions (FLA) has raised several concerns in terms of their environmental and social sustainability. An unexplored issue is whether pollution-haven mechanisms are driving the world-wide location of agricultural production. This paper investigates whether and how differences in environmental stringency between investing and target country affect the pattern of FLA. We estimate a panel gravity- equation and use different indexes of ecosystem vitality to measure the environmental stringency. Our results show that differences in environmental stringency do affect both the number of contracts and the amount of the land acquired, overall confirming the existence of pollution-haven mechanisms also in agriculture, although the direction of these effects depends on the index of environmental stringency we use and on the characteristics of the target country. Acknowledgement :
    Keywords: Environmental Economics and Policy
    Date: 2018–07

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