nep-int New Economics Papers
on International Trade
Issue of 2019‒02‒18
39 papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. Alignment of Multinational Firms along Global Value Chains: A Network-based Perspective By Charlie Joyez
  2. China’s Processing Trade and Value Chains By Lili Yan Ing; Wei Tian; Maiojie Yu
  3. How U.S. Agriculture Will Fare Under the USMCA and Retaliatory Tariffs By Chepeliev, Maksym; Tyner, Wallace E.; va der Mensbrugghe, Dominique
  4. Taking a Bigger Slice of the Global Value Chain Pie: An Industry-Level Analysis By Chong-Sup Kim; Seungho Lee; Jihyun Eum
  5. Exporting Spanish firms. Stylized facts and trends By Eduardo Gutiérrez Chacón; César Martín Machuca
  6. How Would a Slowdown in the People's Republic of China Affect its Trading Partners? By Willem THORBECKE
  7. The relationship between trade openness and economic growth: Some new insights on the openness measurement issue By Marilyne Huchet; Chantal Le Mouel; Mariana Vijil
  8. Political Economy, Uncertainty, and Contracting Costs: Agriculture and the Negotiation of Trade Agreements By Li, Na; Ker, Alan P.
  9. Pro-competitive effects of globalisation on prices, productivity and markups: Evidence in the Euro Area By R. S.-H. LEE; M. PAK
  10. The growth effect of trade openness on African countries: evidence from using an Instrumental Variable Panel Smooth Transition Model By Bonga-Bonga, Lumengo; Kinfack, Emilie
  11. Export performance, price competitiveness and technology: Revisiting the Kaldor paradox By Claudius Graebner; Philipp Heimberger; Jakob Kapeller
  12. Transportation Mode Choice and International Fragmentation of Production: Evidence from a Developing Country By Hulya Saygili; Kemal Turkcan
  13. China Should Join the New Trans-Pacific Partnership By Peter A. Petri; Michael Plummer
  14. The Global Macroeconomics of a Trade War. The EAGLE model on the US-China trade conflict By Wilko Bolt; Kostas Mavromatis; Sweder van Wijnbergen
  15. Impacts of Trade Liberalization in Canada's Supply Managed Dairy Industry By Biden, Scott; Ker, Alan P.
  16. Countries’ perceptions of China’s Belt and Road Initiative: A big data analysis By Alicia García-Herrero; Jianwei Xu
  17. The Macroeconomic Effects of Trade Tariffs: Revisiting the Lerner Symmetry Result By Lindé, Jesper; Pescatori, Andrea
  18. Economic effects of inward foreign direct investment in Vietnamese provinces By Taguchi, Hiroyuki
  19. Priority Roads: The Political Economy of Africa's Interior-to-Coast Roads By Roberto Bonfatti; Yuan Gu; Steven Poelhekke
  20. Turkiye'de Reel Kur Hareketlerinin Ýhracat Uzerindeki Asimetrik Etkileri (Asymmetric Effects of Real Exchange Rate Movements on Turkish Exports) By Selcuk Gul
  21. Forecasting Imports with Information from Abroad By Christian Grimme; Robert Lehmann; Marvin Noeller
  22. Impacts of Possible Chinese Protection on US Soybeans By Taheripour, Farzad; Tyner, Wallace E.
  23. How Migration Policies Moderate the Diffusion of Terrorism By Tobias Böhmelt; Tobias Böhmelt; Vincenzo Bove
  24. Trade-Driven Sectoral Upgrading and the Global Balances By Haiping Zhang
  25. From Immigrants to Americans: Race and Assimilation during the Great Migration By Vasiliki Fouka; Soumyajit Mazumder; Marco Tabellini
  26. The Eurasian Land Bridge: The Role of Service Providers in Linking the Regional Value Chains in East Asia and the European Union By Richard Pomfret
  27. Understanding the International Elasticity Puzzle By Hakan Yilmazkuday
  28. Remittances, Finance and Industrialisation in Africa By Uchenna R. Efobi; Simplice A. Asongu; Chinelo Okafor; Vanessa Tchamyou; Belmondo Tanankem
  29. The US-China trade dispute: A macro perspective By Rod Tyers; Yixiao Zhou
  30. Digital Opportunities for Trade in the Agriculture and Food Sectors By Marie-Agnes Jouanjean
  31. Emerging Market Economies and Turkey in the Globalization Age By Orhun Sevinc
  32. Multilateral Index Number Systems for International Price Comparisons: Properties, Existence and Uniqueness By Gholamreza Hajargasht; D.S. Prasada Rao
  33. Shared Ownership in the International Make or Buy Dilemma By Charlie Joyez
  34. Spatial Linkages, Global Shocks, and Local Labor Markets: Theory and Evidence By Rodrigo Adão; Costas Arkolakis; Federico Espósito
  35. FDI asymmetries in emerging economies:the case of Colombia. By José U Mora Mora; Celso J Costa Junior
  36. Tom Hertel’s influence and its lessons about academic inquiry By Hillberry, Russell; Hummels, David
  37. The Economic Benefits of Latino Immigration: How the Migrant Hispanic Population’s Demographic Characteristics Contribute to US Growth By Jacob Funk Kirkegaard; Gonzalo Huertas
  38. The trade costs of financial crises By Jean-Marc Bédhat Atsebi; Jean-Louis Combes; Alexandru Minea
  39. Import Competition, Heterogeneous Preferences of Managers, and Productivity By Cheng Chen; Claudia Steinwender

  1. By: Charlie Joyez (Université Côte d'Azur, France; GREDEG CNRS)
    Abstract: The multiple location choices of firms respond to a complex design of simultaneous and related goals. This paper reveals how the geographic coverage of French multinational firms is increasingly determined by Global Value Chains (GVCs) since the mid-1990s. I study the network structure of French multinationals using firm-level data, and of the Global Value Chains using the bilateral value added (VA) content of exports (from international Input-Output tables). The comparison of the two networks reveals an alignment of firms' plants along global value chains, supported by several econometric estimations including a multiple regression Quadratic Assignment Procedure and a panel OLS defined at the country-pair level. Multinationals have modified their foreign affiliates' locations to settle in countries engaged in sequential production, and this result holds when controlling for gravity-like location's determinants and raw international trade flows. Specifically, I report how MNEs are moving up the value chain, as their new locations turned to be more driven by an upstream alignment on GVCs (toward the VA source) rather than a downstream one (toward VA destination). Eventually, the GVCs' attraction increased after the 2008 crisis, even though GVCs were experiencing a slowdown. Therefore, firm's vulnerability to the dismantling of GVCs similarly increased.
    Keywords: Global Value Chains, Multinational Firms, Location Choices, Weighted Directed Networks
    JEL: F02 F23 C45
    Date: 2019–02
  2. By: Lili Yan Ing; Wei Tian; Maiojie Yu
    Abstract: We investigate how trade liberalisation affects the performance of Chinese manufacturing firms. To better understand China’s role in global value chains, we examine Chinese firms with a significant import share from Indonesia, one of its largest processing source countries. We find that Chinese firms with a greater import share from Indonesia perform better in productivity, export, and sales, and they are more likely to engage in processing exports. Moreover, the impact of foreign trade liberalisation on China’s export scope is more pronounced for firms with a larger import share from Indonesia because of their greater extent of engagement in global value chains.
    Keywords: trade liberalisation, firm performance, processing trade
    JEL: F1 F13 F14
  3. By: Chepeliev, Maksym; Tyner, Wallace E.; va der Mensbrugghe, Dominique
    Abstract: A hallmark of the Trump Administration has been to reverse the post-World War II consensus on lowering of trade barriers and a commitment towards multilateral free trade, towards a more protectionist and perhaps mercantilist position vis-à -vis trade policy. One of the Administration's first actions in this regard was the decision to leave the Trans-Pacific Partnership (TPP) agreement, followed thereafter by raising tariffs on steel and aluminum imports. President Trump left no doubt where he stood on the North American Free Trade Agreement (NAFTA), which he often stated was the worst trade deal maybe ever signed anywhere.†The administration's actions on trade are likely to have significant implications for U.S. farmers as these actions target three of the largest markets for U.S. agricultural exports ”Canada, China and Mexico accounting" for some 44% of U.S. agricultural exports representing an average of $63 billion from 2013 to 2015.
    Keywords: Agricultural and Food Policy
    Date: 2018–10
  4. By: Chong-Sup Kim (Graduate School of International Studies, Seoul National University); Seungho Lee (Graduate School of International Studies, Seoul National University); Jihyun Eum (Economic Research Institute, The Bank of Korea)
    Abstract: This paper analyzes how countries are linked into global value chains and their export performance in value added terms. We estimate the relationship between a country¡¯s mode of integration into global value chains, represented by global value chain participation and position indices, and its share in world¡¯s total value added at the aggregate and sectoral levels. We use OECD-WTO Trade in Value Added data of 61 countries over the period between 2000 and 2011. Based on the estimation results, we find that the extent of their upstream and downstream activities within global value chains is one of the key determinants of countries¡¯ export performance in value added terms. At the aggregate level, countries located upstream are associated with a higher share in total valued added. At the sectoral level, the positive effect of participating in global value chains thorough upstream activities on the share in total value added is apparent in the automotive industry, whereas the benefits of downstream activities are pronounced in the electrical and optical industry. Countries are expected to reap benefits from linking into global value chains either through forward or backward linkages in the textiles and foods industry. Thus, the effects of the mode of integration into global value chains on the share in total value added are found to be heterogeneous across industries.
    Keywords: Global value chain, Trade in value added, Forward linkage, Backward linkage
    JEL: F10 F14
    Date: 2019–01–16
  5. By: Eduardo Gutiérrez Chacón (Banco de España); César Martín Machuca (Banco de España)
    Abstract: During the last years, Spanish goods exports have increased significantly against a background of widening of the Spanish firms exporting base. This change has been led by SMEs, although there is still a high concentration of international sales in a small fraction of large and stable exporters. In any case, potential export growth has improved thanks to the widening of stable exporters base and to their geographical diversification towards emerging markets. Exporting firms are greater and have higher labour productivity than those focused only in domestic markets. Also within exporting firms, those with stable and diversified external flows are positively selected in terms of productivity and size. The potential widening of the stable exporting base would require an improvement of the efficiency of the segment of SMEs. Removing potential regulatory barriers that might restrict their growth and innovation ability is key to consolidate their presence in international markets in the long run.
    Keywords: international trade, exports, firms, geographical diversification.
    JEL: F1 F14 F19 F23
    Date: 2019–02
  6. By: Willem THORBECKE
    Abstract: The People's Republic of China (PRC) has become an important importer for many countries. This paper investigates how turbulence in the PRC can spill over to trading partners through the trade channel. Exports from several East and Southeast Asian countries to the PRC exceed 10 percent of their GDPs. To shed light on countries' exposures to the PRC, this paper estimates a gravity model. The results indicate that Taiwan and the Association of Southeast Asian Nations are exposed to the PRC because they produce goods for the Chinese market and exposed to advanced economies because they ship parts and components to the PRC for processing and re-export to the West. South Korea is more exposed to a slowdown in advanced economies that purchase processed exports from the PRC than to a slowdown in the PRC. Major commodity exporters such as Australia, Brazil, Indonesia, and Saudi Arabia and exporters of sophisticated consumer and capital goods such as Germany and Switzerland are exposed to a slowdown in the Chinese domestic market. This paper also estimates import elasticities for the PRC. The results indicate that imports for processing into the PRC are closely linked to processed exports from China to the rest of the world and that ordinary imports are closely linked to Chinese GDP. The renminbi exerts only a weak impact on imports, however. The paper concludes by recommending that firms and countries diversify their export base and their trading partners to reduce their exposures to the PRC and to advanced economies.
    Date: 2019–01
  7. By: Marilyne Huchet (SMART - Structures et Marché Agricoles, Ressources et Territoires - INRA - Institut National de la Recherche Agronomique - AGROCAMPUS OUEST); Chantal Le Mouel (SMART - Structures et Marché Agricoles, Ressources et Territoires - INRA - Institut National de la Recherche Agronomique - AGROCAMPUS OUEST); Mariana Vijil (SMART - Structures et Marché Agricoles, Ressources et Territoires - INRA - Institut National de la Recherche Agronomique - AGROCAMPUS OUEST)
    Abstract: Empirical results on the links between trade openness and economic growth often suggest that, in the long run, more outward-oriented countries register better economic growth. However, a similar level of trade openness can hide different types of trade structures. The aim of this paper is to enrich the way of measuring trade openness taking into account two different dimensions of countries' integration in world trade: export quality and export variety. Based on the estimation of an endogenous growth model on a panel of 169 countries between 1988 and 2014 using a Generalized Method of Moments estimator, our results confirm that countries exporting higher quality products and new varieties grow more rapidly. More importantly, we find a non-linear pattern between the export ratio and the quality of the export basket, suggesting that openness to trade may impact growth negatively for countries which are specialized in low quality products. A non-linear relationship between exports variety, the export ratio and growth is also found, suggesting that countries increasing their exports will grow more rapidly after reaching a certain degree of the extensive margin of exports.
    Keywords: GMM,dynamic panel model,growth,trade openness,quality,variety,extensive margin
    Date: 2018
  8. By: Li, Na; Ker, Alan P.
    Abstract: Recent negotiations of the United States Mexico Canada Agreement (USMCA) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) highlight the impact of contracting costs, uncertainty, and the importance of political welfare. Agriculture exhibits these traits perhaps more than any other sector and subsequently tends to be pivotal in many trade negotiations. Moreover, these traits are -- to some extent -- responsible for the large increase in Regional Trade Agreements (RTAs). In this manuscript we extend the political economy model of trade agreements to include both contracting costs and uncertainty. Uncertainty is incorporated through trade and policy shocks while contracting costs are incorporated as a function of the number of policy instruments. The optimal conditions on domestic support differ considerably if governments maximize social surplus only versus some linear combination of both social surplus and private political welfare. We also show that the politically optimal structure of trade agreements allows for countervailing duties. Our model helps explain: (a) why tariffs rather than production subsidies are more common in agriculture; (b) differential treatment of agricultural producers in developed versus developing countries; (c) continued presence of agricultural subsidies in many RTAs even under significant trade volume growth; and (d) the trend toward harmonization of Sanitary and Phytosanitary Standards (SPS) measures.
    Keywords: Agricultural and Food Policy
    Date: 2019–01–31
  9. By: R. S.-H. LEE (Insee, Polytechnique et Crest-LMA); M. PAK (OCDE)
    Abstract: Global trade has recently slowed down after a peak in the 1990s and early 2000s. Existing literature shows evidence of pro-competitive effects of trade liberalisation during this booming period on prices, productivity and markups. The goal of this paper is to assess whether such pro-competitive effects are still carried on in the manufacturing industry of five Euro Area countries (Austria, Germany, Spain, France and Italy). Our analysis is based on Melitz and Ottaviano’s (2008) theoretical framework and its empirical setup by Chen et al. (2004, 2009). Our contribution is twofold. First, we use traditional trade indicators (gross and value added exports and imports) but also novel indicators that account for the development of global value chains. Second, from the findings of Chen et al. (2004, 2009), we go further by investigating the effect of trade at sector level with respect to quality upgrading and firm concentration. We find that pro-competitive effects are more significant when using import penetration in value-added terms and such effects are particularly strong in sectors with low concentration. Indeed, higher concentration seems to mitigate the trade-induced competition. However, our model focuses on price competition and further research on the quality upgrading would be complementary to our results.
    Keywords: inflation, markups, productivity, competition, globalisation
    JEL: E31 F12 F14 L11 L16
    Date: 2018
  10. By: Bonga-Bonga, Lumengo; Kinfack, Emilie
    Abstract: This paper assesses the relationship between trade openness and economic growth in Africa by accounting for the heterogeneity of African countries. In addition, the paper contributes to the literature of trade openness and economic growth nexus by applying the instrumental variable panel smooth transition regression (IVPSTR), a methodology that accounts for nonlinearity and endogeneity in the relationship between the two variables. The results of the empirical analysis reveal that the level of investment is a channel through which trade openness affects economic growth in the African continent. In addition, the relationship between trade openness and economic growth varies according to the degree of a country’s development in Africa. For low-income countries, the study finds no significant relationship between openness and growth. Conversely, for middle and upper-income countries, the coefficients of trade indicators are positive and statistically significant. The results indicate that African countries are not homogenous, especially with regard to trade openness and economic growth nexus.
    Keywords: economic growth, trade openness, non-linearity, instrumental variable panel smooth transition
    JEL: C23 C26 F13 F14 F15
    Date: 2019
  11. By: Claudius Graebner (Institute for Comprehensive Analysis of the Economy, Johannes Kepler University Linz, Austria); Philipp Heimberger (Vienna Institute for International Economic Studies); Jakob Kapeller (Institute for Comprehensive Analysis of the Economy, Johannes Kepler University Linz, Austria)
    Abstract: We reassess the contemporary relevance of the "Kaldor paradox" (1978), according to which changes in relative unit labor costs as well as relative export prices are positively correlated with advanced countries' export shares in world markets - although conventional trade theory predicts the opposite. Using a sample of 34 OECD countries over the period 1980-2015, we find clear evidence for the continued relevance of Kaldor's paradox. Our findings indicate that the paradox can neither be resolved by pointing to a lack of econometric sophistication in Kaldor's original work nor by exploiting additional data on other major determinants of export success (e.g. technology). A reverse-causality interpretation - according to which export success allows countries to increase relative unit labor costs without substantially reducing international competitiveness - seems most promising for rationalizing the paradox.
    Keywords: Trade, export success, competitiveness, technology, Kaldor effect
    Date: 2019–02
  12. By: Hulya Saygili; Kemal Turkcan
    Abstract: Developments in transportation technologies have facilitated and encouraged the international fragmentation of production by reducing transportation costs and ensuring that parts and components are delivered safely and timely within global production networks. The fact that the stages of the fragmented production processes have been placed in different distance and geographical locations created a demand for alternative modes of transportation. The objective of this study is to analyze the effects of fragmentation of production measured by parts and components trade on the choice of transportation mode including air, sea and road. By doing that, the paper attempts to account for the advantages/disadvantages of alternative transportation modes in short-medium-long distance trade. Using a detailed data set (HS-12 digit product level statistics for the 2000-2014 period and 188 countries) of Turkey’s machinery exports, we show that fragmentation of production plays a significant role in the selection of transportation mode. In particular, road transportation with good infrastructure is a significant trade facilitating mode of transportation to nearby trade partners, when trade involves P&C and light products.
    Keywords: Mode of transportation, Fragmentation of production, Global production networks, International trade, Turkey
    JEL: J21 J24 H56
    Date: 2018
  13. By: Peter A. Petri (Peterson Institute for International Economics); Michael Plummer (Johns Hopkins University and East-West Center)
    Abstract: A year after President Donald Trump’s ill-advised pullout from the Trans-Pacific Partnership (TPP) trade agreement in early 2017, the remaining 11 Asian and Pacific countries agreed on a deal in spite of the absence of the United States. Renamed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the accord took effect on December 30, 2018, and provides rigorous, up-to-date rules for Asia-Pacific trade—but it excludes the region’s two biggest economies, the United States and China. Petri and Plummer calculate that Chinese membership in the CPTPP would yield large economic and political benefits to China and other members. The CPTPP, in its current form, would generate global income gains estimated at $147 billion annually. If China were to join, these gains would quadruple to $632 billion, or a quarter more than in the original TPP with the United States. But to join the CPTPP, China would have to undertake unprecedented reforms and manage complex political challenges.
    Date: 2019–01
  14. By: Wilko Bolt; Kostas Mavromatis; Sweder van Wijnbergen
    Abstract: We study the global macroeconomic effects of tariffs using a multiregional, general equilibrium model, EAGLE, that we extend by introducing US tariffs against Chinese imports into the US, and subsequently Chinese tariffs against US imports into China, consistent with recent trade policies by the US and the Chinese governments. We abstract from tariffs on goods exported from the euro area, focusing on a US-China trade war. A unilateral tariff from the US against China dampens US exports in line with the Lerner Symmetry theorem but global output contracts. Global output contracts even further after China retaliates. The euro area benefits from this trade war. These European trade diversion benefits are caused by cheaper imports from China and Europe's improved competitiveness in the US. As price stickiness in the export sector in each region increases, the negative effects of tariffs in the US and China are mitigated, but the positive effects in the euro area are then also dampened.
    Keywords: Trade Policy; Exchange Rates; Trade Diversion; Local Currency Pricing
    JEL: E32 F30 H22
    Date: 2019–02
  15. By: Biden, Scott; Ker, Alan P.
    Abstract: Trade is an integral part of the Canadian economy. The main institutional drivers governing trade are bilateral and multilateral agreements outlining permissible trade distorting measures. Since its inception in 1972, Canada's supply management system has remained protected throughout trade negotiations. The system appears, by any economic measure, to be having an increasingly disproportional influence in recent trade negotiations. However, trade agreements serve not only to maximize social surplus, but also to maximize some measure of political welfare. Canada has recently negotiated three prominent trade agreements: the Canada-European Union Comprehensive Economic and Trade Agreement (CETA) came into effect in the latter part of 2017; the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) came into effect at the end of 2018; and the Canada-United States-Mexico Agreement (CUSMA) could come into effect as early as late 2019. Collectively, these agreements have guaranteed increased market access for fresh and processed dairy products. We build a spatial partial equilibrium model of the Canadian dairy industry consisting of three regions and ten commodities to assess the individual and cumulative effect of these trade agreements. We pay particular attention to the institutional drivers within today's dairy sector: milk protein concentrates; component pricing including Class 7; and differential demand growth. We find that the aggregate impacts are: (i) a 7.0% decrease in the marginal retail price; (ii) a 4.7% decrease in the blended producer price; and (iii) an overall increase in social welfare of 5.5%. Worth noting, the decrease in producer surplus varies from 3.1% in the western region to 6.3% in the eastern region. Our results may be relevant to future negotiations as well as the publicly promised compensation package for dairy producers.
    Keywords: International Relations/Trade
    Date: 2019–02–14
  16. By: Alicia García-Herrero; Jianwei Xu
    Abstract: Drawing on a global database of media articles, we quantitatively assess perceptions of China’s Belt and Road Initiative (BRI) in different countries and regions. We find that the BRI is generally positively received. All regions as a whole, except South Asia, have a positive perception of the BRI, but there are marked differences at the country level, with some countries in all regions having very negative views. Interestingly, there is no significant difference in perceptions of the BRI between countries that officially participate in the BRI and those that do not. We also use our dataset of media articles to identify the topics that are most frequently associated with the BRI. The most common topics are trade and investment. Finally, we use regression analysis to identify how the frequency with which these topics are discussed in the news affects the perceptions of the BRI in different countries. We find that the more frequently trade is mentioned in the media, the more negative a country’s perception of the BRI tends to be. On the other hand, while investment under the BRI seems also to attract attention in the media, it is not statistically relevant for countries’ perceptions of the BRI.
    Date: 2019–02
  17. By: Lindé, Jesper (Research Department, Central Bank of Sweden); Pescatori, Andrea (IMF)
    Abstract: We study the robustness of the Lerner symmetry result in an open economy New Keynesian model with price rigidities. While the Lerner symmetry result, i.e. the absence of allocative and trade-.ow effects of an equally-sized change in import tariff and export subsidy, holds up approximately for a number of alternative assumptions, we obtain quantitatively important long-term deviations under complete international asset markets. Direct pass-through of tariffs and subsidies to prices and slow exchange rate adjustment can also generate significant short-term deviations from Lerner. De- viations from symmetry, however, do not necessarily imply an impact on global output and are often limited to a redistribution of production and consumption across coun- tries. Finally, we quantify the macroeconomic costs of a trade war and find that they can be substantial, with permanently lower income and trade volumes. However, a fully symmetric retaliation to an unilaterally imposed border adjustment tax can prevent any sizable adverse real or nominal effects.
    Keywords: Import Tariffs; Export Subsidies; Lerner Condition; Incomplete Markets; Complete Markets; Border Adjustment Tax; Trade War; New Keynesian open-economy model
    JEL: E52 E58
    Date: 2018–12–01
  18. By: Taguchi, Hiroyuki
    Abstract: This article examines the effect of FDI on economic growth and domestic investment with a focus on Vietnamese provinces by conducting the Granger causality and impulse response tests under a vector auto-regression (VAR) estimation using panel data. The major research questions in this study are twofold: whether the inward FDI causes economic growth or economic growth induces the FDI, and whether the inward FDI crowds in or crowds out domestic investment. Since this study targets Vietnamese provinces, it explores reginal differences in the FDI effect by dividing Vietnamese provinces according to FDI-value intensity. The VAR estimation results showed two clear contrasts on FDI effects between the FDI-intensive region and the FDI-less-intensive one. One contrast was that FDI causes economic growth in the FDI-intensive region, whereas economic growth induces FDI in the FDI-less-intensive region. Another contrast was that FDI crowds in domestic investment in the FDI-intensive region, whereas FDI crowds out domestic investment in the FDI-less-intensive region. These contrasts suggest the existence of FDI’s agglomeration effects.
    Keywords: Inward foreign direct investment (FDI), Economic growth, Domestic investment, Crowd-in or -out effects, Vietnamese provinces, Vector auto-regression estimation, Granger causality and Impulse responses
    JEL: F21 O47 O53
    Date: 2019–02
  19. By: Roberto Bonfatti; Yuan Gu; Steven Poelhekke
    Abstract: Africa’s interior-to-coast roads are well suited to export natural resources, but not to support regional trade. Are they the optimal response to geography and comparative advantage, or the result of suboptimal political distortions? We investigate the political determinants of road paving in West Africa across the 1965-2012 period. Controlling for geography and the endogeneity of democratization, we show that autocracies tend to connect natural resource deposits to ports, while the networks expanded in a less interior-to-coast way in periods of democracy. This result suggests that Africa’s interior-to-coast roads are at least in part the result of suboptimal political distortions.
    Keywords: political economy, democracy, infrastructure, natural resources, development
    JEL: P16 P26 D72 H54 O18 Q32
    Date: 2019
  20. By: Selcuk Gul
    Abstract: This study investigates the sensitivity of export demand to variations in foreign income and real exchange rate by examining the determinants of Turkish exports (excluding gold) with a demand side model. To minimize the aggregation bias caused by using aggregate export statistics, country level bilateral export data is employed. Real exchange rate developments are modeled asymmetrically by the nonlinear ARDL method (NARDL). This method allows examining whether the response of exports differs with respect to real exchange rate depreciation and appreciation. Findings indicate that exports are significantly affected by real exchange rate developments for the countries to which almost half of Turkey’s total exports are made. Panel data estimations also confirm the long-run relationship between exports and real exchange rate. Standardized coefficient estimates indicate that income elasticity of exports is greater than real exchange rate elasticity of exports in absolute terms. In addition, there is evidence that real exchange rate developments induce asymmetrical effects on exports. Findings show that exchange rate elasticity of exports is greater during the periods when Turkish lira appreciates.
    Keywords: Export demand, Exchange rate elasticity, Nonlinear cointegration, Panel ARDL
    JEL: C22 C23 F14
    Date: 2018
  21. By: Christian Grimme; Robert Lehmann; Marvin Noeller
    Abstract: Globalization has led to huge increases in import volumes, increasing the importance of imports for total output. Since imports are a volatile component, they are difficult to forecast and strongly influence the forecast accuracy of gross domestic product. We introduce the first leading indicator constructed to forecast import growth, the Import Climate. It builds on the idea that the import demand of the domestic country should be reflected in the expected export developments of its main trading partners. A foreign country’s expected exports are, in turn, determined by its trading partners’ business and consumer confidence and its own price competitiveness. In a real-time forecasting experiment, the Import Climate outperforms standard business cycle indicators at short horizons for France, Germany, Italy, and the United States for the first release of data. For Spain and the United Kingdom, our indicator works particularly well with the latest vintage of data.
    Keywords: Import climate, import forecasting, survey data, price competitiveness
    JEL: F01 F10 F17
    Date: 2019
  22. By: Taheripour, Farzad; Tyner, Wallace E.
    Abstract: China is the world largest soybean importer and imported 93.5 Million Metric Tons (MMT) of soybeans in 2016, about 65% of global soybean imports. China imports soybeans mainly from Brazil, US, and Argentina. The shares of these three countries in China's imports were about 44%, 42%, and 9% in 2016. Canada, Uruguay, and Russia also export soybeans to China. The shares of these countries in total Chinese soybean imports were about 2.1%, 1.9% and 0.5% in 2016, respectively.
    Keywords: International Relations/Trade
    Date: 2018–02
  23. By: Tobias Böhmelt; Tobias Böhmelt (University of Eessex); Vincenzo Bove (University of Warwick)
    Abstract: There is an ongoing debate among practitioners and scholars about the security consequences of transnational migration. Yet, existing work has not yet fully taken into account the policy instruments states have at their disposal to mitigate these, and we lack reliable evidence for the effectiveness of such measures. The following research addresses both shortcomings as we analyze whether and to what extent national migration policies affect the diffusion of terrorism via population movements. Spatial analyses report robust support for a moderating influence of states’ policies: while larger migration populations can be a vehicle for the diffusion of terrorism from one state to another, this only applies to target countries with extremely open controls and lax regulations. This research sheds new light on the security implications of population movements, and it crucially adds to our understanding of governments’ instruments for addressing migration challenges as well as their effectiveness.
    Keywords: Terrorism, Diffusion, Immigration; National Migration Policies
    Date: 2018–02
  24. By: Haiping Zhang (Department of Economics, University of Auckland Business School)
    Abstract: This paper analyzes how trade integration may affect international financial flows in a world with heterogeneous financial development. In the presence of financial frictions and sector-specific minimum investment requirements, the static gains from trade trigger the cross-sector investment reallocation on the extensive margin, which may allow the more financially developed country (North) to offshore low-return production activities and upgrade to high-return activities. This way, trade-driven sectoral upgrading in North becomes a mechanism through which the substantial decline in trade and communication costs and the resulting boom in supply-chain trade may contribute to the global imbalances in the recent decades.
    Keywords: financial frictions, global imbalances, minimum investment requirements, sectoral shifts, supply-chain trade
    JEL: F11 F41
    Date: 2018
  25. By: Vasiliki Fouka (Stanford University); Soumyajit Mazumder (Harvard University); Marco Tabellini (Harvard Business School)
    Abstract: How does the appearance of a new out-group affect the economic, social and cultural integration of previous outsiders? We study this question in the context of the first Great Migration (1915-1930), when 1.5 million African Americans moved from the US South to urban centers in the North, where 30 million Europeans had arrived since 1850. We test the hypothesis that black inflows led to the establishment of a binary black-white racial classification, and facilitated the incorporation of - previously racially ambiguous - European immigrants into the white majority. We exploit variation induced by the interaction between 1900 settlements of southern-born blacks in northern cities and state-level outmigration from the US South after 1910. Black arrivals increased both the effort exerted by immigrants to assimilate and their eventual Americanization. These average effects mask substantial heterogeneity: while initially less integrated groups (i.e. Southern and Eastern Europeans) exerted more assimilation effort, assimilation success was larger for those that were culturally closer to native whites (i.e. Western and Northern Europeans). These patterns are consistent with a framework in which changing perceptions of out-group distance among native whites lower the barriers to the assimilation of white immigrants.
    Keywords: Immigration, assimilation, Great Migration, race, group identity.
    JEL: J11 J15 N32
    Date: 2019–02–04
  26. By: Richard Pomfret
    Abstract: Rail links between China and Europe are typically analysed in the context of China’s Belt and Road Initiative, focusing on China’s economic rise and the implications for international relations. This paper argues that establishment of the China–Europe Land Bridge predated the Belt and Road Initiative and has been market-driven, as service-providers identified and responded to demand for efficient freight services along pre-existing railway lines. Governments’ role was trade facilitating, i.e. reducing delays and costs at border crossing points, rather than investing in hard infrastructure. Service-providers responded by linking European and Asian value chains (e.g. in automobiles and electronic goods) and reducing costs for traders shipping between China and Europe. The Eurasian Land Bridge provides a case study of ‘servicification’ as a component of increased trade in the 21st century.
    Keywords: Servicification, Belt and Road Initiative, Trade costs
    JEL: L92 O18 F14
  27. By: Hakan Yilmazkuday (Department of Economics, Florida International University)
    Abstract: International trade studies have higher macro elasticity measures compared to international finance studies, which has evoked mixed policy implications regarding the effects of a change in trade costs versus exchange rates on welfare measures. This so-called international elasticity puzzle is investigated in this paper by drawing attention to the alternative strategies that the two literatures use for the aggregation of foreign products in consumer utility functions. Using the implications of having a finite number of foreign countries in nested CES frameworks that are consistent with the two literatures, the discrepancy between the elasticity measures is explained by showing theoretically and confirming empirically that the macro elasticity in international trade is a weighted average of the macro elasticity in international finance and the corresponding elasticity of substitution across products of foreign source countries.
    Keywords: International Elasticity Puzzle, International Trade and Finance
    JEL: F12 F14 F41
    Date: 2018–11
  28. By: Uchenna R. Efobi (Covenant University, Ota, Ogun State, Nigeria); Simplice A. Asongu (Yaoundé, Cameroon); Chinelo Okafor (Covenant University, Ota, Ogun State, Nigeria); Vanessa Tchamyou (University of Antwerp, Antwerp, Belgium); Belmondo Tanankem (MINEPAT, Cameroon)
    Abstract: The paper assesses how remittances directly and indirectly affect industrialisation using a panel of 49 African countries for the period 1980-2014. The indirect impact is assessed through financial development channels. The empirical evidence is based on three interactive and non-interactive simultaneity-robust estimation techniques, namely: (i) Instrumental Fixed Effects (FE) to control for the unobserved heterogeneity; (ii) Generalised Method of Moments (GMM) to control for persistence in industrialisation and (iii) Instrumental Quantile Regressions (QR) to account for initial levels of industrialisation. The non-interactive specification elucidates direct effects of remittances on industrialisation whereas interactive specifications explain indirect impacts. The findings broadly show that for certain initial levels of industrialisation, remittances can drive industrialisation through the financial development mechanism. Policy implications are discussed.
    Keywords: Africa; Diaspora; Financial development; Industrialisation; Remittances
    JEL: F24 F43 G20 O55
    Date: 2019–01
  29. By: Rod Tyers; Yixiao Zhou
    Abstract: The recent rise of populism and authoritarian politics has seen a turn from multilateralism and toward international disputes like that between the US and China. This paper uses a calibrated global macro model to assess the potential economic consequences of this conflict under explicit assumptions about monetary and fiscal policy. US unilateral protection emerges as “beggar thy neighbor” policy, the more so if new tariff revenue affords capital tax relief. China’s proportional losses are comparatively large and little mitigated by retaliation, which nonetheless constrains US net gains. Avoiding leakage by protecting against all sources causes substantial losses in third regions trading with China and the US.
    Keywords: Trade disputes, China, macroeconomic policy, general equilibrium analysis, numerical theory
    JEL: F13 F41 F47
    Date: 2019–02
  30. By: Marie-Agnes Jouanjean
    Abstract: How are new opportunities to create and share information shaping the digital transformation of the agriculture and food system, and thus potentially fostering its reorganisation? This report focuses on cross-border trade aspects along the global agriculture and food value chain, and looks at how changes brought about by digital technologies can influence who participates in the value chain, where value added is created, and how value is distributed between actors in the chain. However, it is not only changes in the agriculture and food sector from digital technologies that matters, but also the digital transformation of other actors in the global value chain (GVC) such as support services, logistics and governments. Digital technologies present a potential to reduce trade and transaction costs, including those related to identifying and negotiating a deal, proving compliance with standards and to delivering products across borders quickly and efficiently.
    Keywords: agricultural trade, agriculture and food standards, Digital technology, market access, SPS, traceability, trade facilitation
    JEL: Q16 Q17 Q13 F13
    Date: 2019–02–15
  31. By: Orhun Sevinc
    Abstract: [EN] Globalization, which continued uninterruptedly from the 1980s to the recent period, was accompanied by rapid transformations in trade, finance and technology. In addition to its common impacts such as economic integration and increased mobility of labor, capital and information, the opportunities and risks caused by globalization significantly differ across countries. This study reviews the changes in growth, unemployment, inflation, trade and industry dynamics in emerging markets and Turkey vis-à-vis globalization and discusses aggregate and country-specific conditions to benefit more from globalization. [TR] 1980’lerden gunumuze kadar araliksiz devam eden kuresellesme sureci ticaret, finans ve teknoloji alanindaki hizli donusumleri beraberinde getirmistir. Ulkelerin ekonomik butunlesmesine ek olarak isgucu hareketliligi ile sermaye ve bilginin dolasimini hizlandirmasi gibi genel sonuclar iceren kuresellesme, sagladigi gelisim imkanlari ve yol actigi riskler acisindan ise ulkeden ulkeye belirgin farkliliklar gostermektedir. Bu calismada, gelismekte olan ulkeler ve Turkiye’de kuresellesme sureciyle birlikte buyume, issizlik, enflasyon, ticaret ve sanayi dinamiklerinin ne yonde degistigi incelenmekte ve kuresellesmeden daha cok yararlanabilmeye iliskin olarak genel ve ulkeye ozgu kosullar tartisilmaktadir.
    Date: 2018
  32. By: Gholamreza Hajargasht (Swinburne Business School, Swinburne University of Technology); D.S. Prasada Rao (School of Economics and Centre for Efficiency and Productivity Analysis (CEPA) at The University of Queensland, Australia)
    Abstract: Over the past five decades a number of multilateral index number systems have been proposed for spatial and cross-country price comparisons. These multilateral indexes are usually expressed as solutions to systems of linear or nonlinear equations. In this paper, we provide general theorems that can be used to establish necessary and sufficient conditions for the existence and uniqueness of the Geary-Khamis, IDB, Neary and Rao indexes as well as potential new systems including two generalized systems of index numbers. One of our main results is that the necessary and sufficient conditions for existence and uniqueness of solutions can often be stated in terms of graph-theoretic concepts and a verifiable condition based on observed quantities of commodities.
    Keywords: purchasing power parities, international prices, nonlinear Perron-Frobenius problem, connected graphs, DAD problem, generalized mean
    JEL: E31 C19
    Date: 2019–02
  33. By: Charlie Joyez (Université Côte d'Azur, France; GREDEG CNRS)
    Abstract: The traditional Grossman-Hart-Moore Property Right Theory of the firm and subsequent works do not consider shared ownership as an optimal solution because of the incentives losses it would carry. This paper provides an extension of Antràs & Helpman (2008) international integration dilemma under partially incomplete contracts to joint-ventures (JVs), and identifies several cases where JVs are optimal for foreign investors.The model insists on the interaction between firm-level and country-level parameters, with higher productivity giving increasing access to higher control in countries with stronger contractual enforceability, consistent with empirical observations. Potential heterogeneous spillovers effects can be deduced from this framework.
    Keywords: Property Right Theory, International Joint Ventures, Contracting Institutions, Firms Heterogeneity, Multinational Enterprises
    JEL: D23 F23 L23
    Date: 2019–02
  34. By: Rodrigo Adão (The University of Chicago Booth School of Business); Costas Arkolakis (Cowles Foundation, Yale University); Federico Espósito (Dept. of Economics, Tufts University)
    Abstract: How do shocks to economic fundamentals in the world economy affect local labor markets? In a framework with a flexible structure of spatial linkages, we characterize the model-consistent shock exposure of a local market as the exogenous shift in its production revenues and consumption costs. In general equilibrium, labor outcomes in any market respond directly to the market’s own shock exposure, and indirectly to other markets shocks exposures. We show how spatial linkages control the size and the heterogeneity of these indirect effects. We then develop a new estimation methodology - the Model-implied Optimal IV (MOIV) - that exploits quasi-experimental variation in economic shocks to estimate spatial linkages and evaluate their counterfactual implications. Applying our methodology to US Commuting Zones, we find that difference-in-difference designs based on model-consistent measures of local shock exposure approximate well the differential effect of international trade shocks across CZs, but miss around half of the aggregate effect, partly due to the offsetting action of indirect effects.
    Keywords: Economic Impacts of Globalization, Regional Economics Measurement, International Trade, Economic Geography, General Equilibrium, Structural Estimation
    Date: 2019–02
  35. By: José U Mora Mora; Celso J Costa Junior (Faculty of Economics and Management, Pontificia Universidad Javeriana Cali)
    Abstract: We build a DSGE model to study the asymmetries of FDI shocks in an economy like Colombia. Besides nominal wage and price rigidities, we use the fact that Colombia has two productive and differentiated regions, Bogota that produces more than 25% of Colombia GDP (DANE, 2016) and the rest of the country, Ricardian and non-Ricardian agents, habit formation, capital adjustment costs, and modeled an entire foreign sector. Empirical results show that even when in the long run results are not very different in terms of real output, the short run effects are asymmetric implying that a shock to FDI in the rest of the country might cause important microeconomic adjustments that could improve the distribution of income throughout the country. The version here presented corresponds to the updated study.
    Keywords: Asymmetries, DSGE models, foreign direct investment
    JEL: F21 E17 E30
    Date: 2018–12
  36. By: Hillberry, Russell; Hummels, David
    Abstract: Fields of academic inquiry differ in their preferred forms of output, in the ways in which knowledge is accumulated and stored, and so in the ways that academic influence is measured. We compare Tom Hertel’s research record to other international economists of his generation in order to illustrate the unique breadth and influence of his work, and of the GTAP project broadly. We then provide an analytical framework that helps explain the evolution of the field of international economics from a tool-use standpoint. This framework helps us to assess the academic productivity gains from creating the GTAP model and consortium. It also provides a possible answer to a significant puzzle: why is GTAP increasingly influential in the physical and biological sciences, but less so within the international economics community?
    Keywords: Teaching/Communication/Extension/Profession
    Date: 2018–11
  37. By: Jacob Funk Kirkegaard (Peterson Institute for International Economics); Gonzalo Huertas (Peterson Institute for International Economics)
    Abstract: The Hispanic community in the United States has contributed significantly to US economic growth in recent decades and will continue to do so over the next 10 to 20 years, adding more to US growth than some past immigrant communities at similar stages of integration and time following their arrival on American shores. This contribution derives partially from demographic vitality: the fact that Hispanics are the youngest and largest minority group in America and are on a path toward becoming an increasingly large share of the US labor force. Higher fertility rates, net immigration, and growing labor force participation rates will reinforce this trend. This paper presents evidence showing that Hispanic educational attainments are now rapidly converging to the US average. The Hispanic community now exhibits significantly higher levels of opportunity-driven entrepreneurship than does the rest of the US population. These factors position the Hispanic community to increase its contribution to the US economy in coming decades, with significant positive effects on the overall economic growth rate. The data underlying this analysis are available at
    Keywords: geographic labor mobility, immigrant workers, demographic trends, macroeconomic effects, forecasts, international migration
    JEL: J61 J11 F22
    Date: 2019–02
  38. By: Jean-Marc Bédhat Atsebi (CERDI - Centre d'Études et de Recherches sur le Développement International - Clermont Auvergne - UCA - Université Clermont Auvergne - CNRS - Centre National de la Recherche Scientifique); Jean-Louis Combes (CERDI - Centre d'Études et de Recherches sur le Développement International - Clermont Auvergne - UCA - Université Clermont Auvergne - CNRS - Centre National de la Recherche Scientifique); Alexandru Minea (CERDI - Centre d'Études et de Recherches sur le Développement International - Clermont Auvergne - UCA - Université Clermont Auvergne - CNRS - Centre National de la Recherche Scientifique)
    Abstract: The "Great Trade Collapse" triggered by the 2008-09 crisis calls for a careful assessment of the trade costs of financial crises. Compared with the existing literature that mainly focuses on the total trade of goods and, in the context of the recent great recession, on manufacturing trade, we adopt a more detailed perspective by looking at the response of different types of trade (i.e. agricultural, mining, and manufactured goods, and services) following various types of financial crises (i.e. debt, banking, currency, and inflation crises). Estimations performed on the 1980-2014 period using a combination of impact assessment and local projections to capture a causal dynamic effect running from financial crises to the trade activity unveil the complex panorama of the trade costs of financial crises. Through illustrating the contribution of three sources that drive these complex effects, namely the type of financial crisis, the considered type of goods or services, and countries' key structural characteristics, our analysis contributes to the general understanding of the trade effects of financial crises, and may provide insightful support for the design and implementation of policies aimed at coping with these effects.
    Keywords: Trade costs,Financial crises,Impact assessment,Local projections.
    Date: 2019–01–23
  39. By: Cheng Chen; Claudia Steinwender
    Abstract: Empirical evidence on the relationship between import competition and firm productivity is mixed. We explore a new dimension of firm heterogeneity by focusing on different types of managers. Using Spanish firm-level data, we show that import competition leads to productivity increases for family-managed firms that are initially unproductive. Productivity changes are driven by family management as opposed to family ownership or non-managing family members. This evidence is consistent with a model in which family managers care more about the survival of their firm than professional managers, which triggers additional effort when the firm is faced with an increased bankruptcy risk. We show evidence consistent with this mechanism.
    JEL: F13 F14 O31
    Date: 2019–02

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