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on International Trade |
| By: | Crowley, Meredith A; Exton, Oliver; Han, Lu |
| Abstract: | The renegotiation of a trade agreement introduces uncertainty into the economic environment. In June 2016 the British electorate unexpectedly voted to leave the European Union, introducing a new era in which the UK and EU began to renegotiate the terms of the UK-EU trading relationship. We exploit this natural experiment to estimate the impact of uncertainty associated with trade agreement renegotiation on the export participation decision of firms in the UK. Starting from the Handley and Limao (2017) model of exporting under trade policy uncertainty, we derive testable predictions of firm entry into (exit from) a foreign market under an uncertain `renegotiation regime'. Empirically, we develop measures of the trade policy uncertainty facing firms exporting from the UK to the EU after June 2016. Using the universe of UK export transactions at the firm and product level, and cross-sectional variation in `threat point' tariffs, we estimate that in 2016 over 5300 exporters did not enter into exporting new products to the EU, whilst over 5400 exporters exited from exporting products to the EU. Entry (exit) in 2016 would have been 5.0% higher (6.1% lower) if firms exporting from the UK to the EU had not faced increased trade policy uncertainty after June 2016. |
| Keywords: | export participation; extensive margin of trade; Trade agreement; Trade policy uncertainty |
| JEL: | F13 F14 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:13446&r=all |
| By: | Lenoir, Clemence; Martin, Julien; Mejean, Isabelle |
| Abstract: | This paper studies how search frictions in international good markets can distort competition between firms of heterogeneous productivity. We add bilateral search frictions between buyers and sellers in a Ricardian model of trade. Search frictions prevent buyers from identifying the most productive sellers which induces competitive distortions and benefits low-productivity firms at the expense of high-productivity ones. We use French firm-to-firm trade data and a GMM estimator to recover search frictions faced by French exporters at the product and destination level. They are found more severe in large and distant countries and for products that are more differentiated. In a counterfactual exercise, we show that reducing the level of search frictions leads to an improvement in the efficiency of the selection process because the least productive exporters are pushed out of the market while the export probability and the conditional value of exports increase at the top of the productivity distribution. As a consequence, the mean productivity of exporters increases significantly. |
| Keywords: | firm-to-firm trade; Ricardian trade model; search frictions; structural estimation |
| JEL: | F10 F11 F14 L15 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:13442&r=all |
| By: | Jared Greenville; Kentaro Kawasaki; Marie-Agnes Jouanjean |
| Abstract: | Global value chains (GVCs) in agriculture and food sectors have the potential to influence trading relationships and the gains from trade for different sectors along the value chain. This report explores the way in which value from trade and GVC participation is created for the agriculture sector. It examines differences in returns to the sector from participation in GVCs and trade either directly in contrast to participation that relies on downstream domestic processing. The study makes use of a database on trade in value added for 22 agro-food sectors derived from the Global Trade Analysis Project (GTAP) database. The evidence presented in this paper suggests that aggregate value to the agriculture and to the economy overall from direct participation in trade and GVCs generates at least as much value as participation that relies on domestic downstream processing. Similar overall gains from primary exports are associated with greater volumes and the value created from ‘value addition’ to these exports – the embodied service and other inputs. Indeed, countries that specialise in primary exports have higher shares of service value added in these exports, with this also being a determinant of value growth for middle-income countries. |
| Keywords: | agricultural trade, GTAP, Multi-regional output |
| JEL: | Q17 F14 |
| Date: | 2019–02–19 |
| URL: | http://d.repec.org/n?u=RePEc:oec:agraaa:123-en&r=all |
| By: | Konrad Burchardi (Institute for International Economic Studies (IIES)); Thomas Chaney (Département d'économie); Tarek A. Hassan (Boston University) |
| Abstract: | We use 130 years of data on historical migrations to the U.S. to show a causal effect of the ancestry composition of U.S. counties on foreign direct investment (FDI) sent and received by local firms. To isolate the causal effect of ancestry on FDI, we build a simple reduced-form model of migrations: Migrations from a foreign country to a U.S. county at a given time depend on (1) a push factor, causing emigration from that foreign country to the entire U.S., and (2) a pull factor, causing immigration from all origins into that U.S. county. The interaction between time-series variation in origin-specific push factors and destination-specific pull factors generates quasi-random variation in the allocation of migrants across U.S. counties. We find that doubling the number of residents with ancestry from a given foreign country relative to the mean increases the probability that at least one local firm engages in FDI with that country by 4 percentage points. We present evidence that this effect is primarily driven by a reduction in information frictions, and not by better contract enforcement, taste similarities, or a convergence in factor endowments. |
| Keywords: | Migrations; Foreign direct investment; International trade; Networks; Social ties |
| JEL: | O11 J61 L14 |
| Date: | 2018–08 |
| URL: | http://d.repec.org/n?u=RePEc:spo:wpmain:info:hdl:2441/24ib66dtho86rp6keb6eqd20hr&r=all |
| By: | Mario Larch; Aiko F. Schmeißer; Joschka Wanner |
| Abstract: | In view of the deferred start of negotiations for the modernization of the Customs Union between the EU and Turkey (CU-EUT), we look back and analyse the ex post trade consequences of the CU-EUT. Employing up-to-date econometric best practices for regional integration agreements, we quantify both total and heterogeneous trade effects of the CU-EUT. In contrast to most previous studies, our results indicate a significantly positive, large, and robust impact of the CU-EUT, implying an additional increase in EU-Turkey manufacturing trade by 55-65% compared to the previously active Ankara Agreement. We also provide evidence that the CU-EUT significantly increased Turkey’s trade with third countries. Additionally, a substantial heterogeneity in the CUEUT effect is found across different industries as well as for each of its member countries and the direction of trade. We link the heterogeneity of our up to 911 coefficient estimates to differences in initial trade costs and show that it cannot be ascribed to reductions in bilateral tariff rates. |
| Keywords: | gravity model, European integration, country-specific effects |
| JEL: | F14 F15 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7498&r=all |
| By: | Maria Bas; Pamela Bombarda; Sébastien Jean; Gianluca Orefice |
| Abstract: | Inequalities between workers of different skills have been growing in the era of globalization. Firms’ internationalization mode has an impact on job stability. Exporting firms are not only exposed to different foreign shocks, they also pay skill-intensive fixed costs to serve foreign markets. This implies that, for larger exporters, the labor demand for skilled workers is expected to be less volatile than for unskilled workers. In this paper we study the relationship between firms’ export activity and job stability across employment skills. Relying on detailed firm-level data from France for the period 1996-2007, we show that firms with higher export intensity exhibit a lower volatility of skilled labor demand relative to the volatility of unskilled labor demand. Our identification strategy is based on an instrumental variable approach to provide evidence on the causal effect of the export performance of the firm on the volatility of employment of different skills. Our findings suggest that exporting increases the stability of skilled jobs, but feeds the precariousness of unskilled ones. |
| Keywords: | exports, employment volatility, skilled labor, firm-level data |
| JEL: | F10 F16 L25 L60 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7516&r=all |
| By: | Ndubuisi, Gideon (UNU-MERIT); Avenyo, Elvis (UNU-MERIT) |
| Abstract: | Digitalization and robotization are two essential aspects of modern technological advancement. Albeit, the former has gained scholastic attention of empirical trade economists, the latter has not. This paper, therefore, examines the impact of robotization on trade. Specifically, we estimate empirically the effect of robotization on total exports, and further examine its effect on the different export margins. We find robust evidence that robotization increases total exports, and this effect works both along the extensive (number of exported product varieties) and intensive margins (average value of exported product variety). Results obtained using the volume and price of exports suggest that the positive effect of robotization on the intensive margin is driven by increases in both the quantity and unit prices of exports. Redefining the margins as the number of market destinations and the number of product by market destination, our results also show a positive effect of robotization. |
| Keywords: | Robotization, Exports, Extensive and Intensive Margins |
| JEL: | F14 O31 O33 O14 |
| Date: | 2018–12–11 |
| URL: | http://d.repec.org/n?u=RePEc:unm:unumer:2018046&r=all |
| By: | Redding, Stephen J.; Weinstein, David |
| Abstract: | One of the most successful empirical relationships in international trade is the gravity equation, which relates bilateral trade flows between an origin and destination to bilateral trade frictions, origin characteristics, and destination characteristics. A key decision for researchers in estimating this relationship is the level of aggregation, since the gravity equation is log linear, whereas aggregation involves summing the level rather than the log level of trade flows. In this paper, we derive an exact Jensen's inequality correction term for the gravity equation in a nested constant elasticity of substitution (CES) import demand system, such that a log-linear gravity equation holds exactly for each nest of this demand system. We use this result to decompose the effect of distance on bilateral trade in the aggregate gravity equation into the contribution of a number of different terms from sectoral gravity equations. We show that changes in sectoral composition make a quantitatively relevant contribution towards the aggregate effect of distance, particularly for more disaggregated definitions of sectors. |
| Keywords: | aggregation; Gravity Equation; Trade |
| JEL: | C43 F10 F14 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:13459&r=all |
| By: | Tröster, Bernhard; Grumiller, Jan; Grohs, Hannes; Raza, Werner; Staritz, Cornelia; von Arnim, Rudi |
| Abstract: | The European Union (EU) promotes the Free Trade Agreement with Vietnam (EVFTA) as an important milestone of its trade agenda. The agreement, whose part with EU-only issues is supposed to be ratified in 2019, is the most comprehensive one that the EU has concluded with a developing country so far, including an ambitious sustainability chapter. The reciprocal liberalization of tariffs and quotas will benefit important Vietnamese export sectors such as textiles, apparel, and footwear. On the other side, agricultural and industrial sectors in Vietnam might face increased import competition. Other provisions in the agreement such as the adoption of international or EU standards might be associated with adjustment costs. Thus, it will be crucial for Vietnam to promote its export sectors with pro-active upgrading policies. Further, the provisions in the sustainability chapter will have to demonstrate that increased trade and investment are compatible with labour and environmental protection. Both issues require substantive support by the EU. |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:oefsep:292019&r=all |
| By: | Brautzsch, Hans-Ulrich; Holtemöller, Oliver |
| Abstract: | We use the World Input Output Database (WIOD) to estimate the potential employment effects of a hard Brexit in 43 countries. In line with other studies we assume that imports from the European Union (EU) to the UK will decline by 25% after a hard Brexit. The absolute effects are largest in big EU countries which have close trade relationships with the UK like Germany and France. However, there are also large countries outside the EU which are heavily affected via global value chains like China, for example. The relative effects (in percent of total employment) are largest in Malta and Ireland. UK employment will also be affected via intermediate input production. Within Germany, the motor vehicle industry and in particular the 'Autostadt' Wolfsburg are most affected. |
| Keywords: | Brexit,employment,European Union,international trade,tariffs |
| JEL: | C67 D57 F16 R15 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:iwhdps:42019&r=all |
| By: | Jared Greenville (OECD); Kentaro Kawasaki (OECD); Marie-Agnes Jouanjean (OECD) |
| Abstract: | Agricultural sectors are increasingly integrated into international markets as global value chains (GVCs) expand. This integration is helping to drive value added growth in the sector, including the returns that flow to labour. This report explores the impact that trade and agro-food GVC participation has on labour returns and thereby employment not only within the agricultural sectors, but across other sectors of the economy. At the global level, trade and agro-food GVCs generated an average of between 20-26% of total agricultural workforce returns between 2004 and 2014, and labour returns were generated from both direct participation in trade and from indirect participation through other downstream sectors. This report finds that the impact on economy-wide labour returns is on average greater for countries specialising in direct exports of primary products as compared to those specialising in indirect agricultural exports. Evidence also shows that agricultural subsidies have a negative impact both on labour returns from primary sector exports and the returns generated indirectly from processing-sector exports. |
| Keywords: | agricultural trade, Agriculture, Global value chains, GTAP, multi-regional output |
| JEL: | Q17 F14 |
| Date: | 2019–02–20 |
| URL: | http://d.repec.org/n?u=RePEc:oec:agraaa:124-en&r=all |
| By: | Badarinza, Cristian; Ramadorai, Tarun; Shimizu, Chihiro |
| Abstract: | Gravity models excel at explaining international trade and investment flows; their success poses a continuing puzzle. In a comprehensive dataset of global commercial real-estate investments, we find that the role of distance in the gravity model is well-explained by preferential matching between counterparties of the same nationality. This tendency for same-country matching is widespread, robust, and increases in poorly-governed locations. We structurally estimate an equilibrium matching model with a friction affecting different-nationality transactions. The model explains the persistent success of gravity using a combination of this friction and the spatial distribution of same-nationality counterparties, which is well-predicted by current and historical linguistic, cultural, and trade links between countries. |
| Keywords: | Commercial real estate; Cross-border flows; Foreign investment; Gravity; Matching; Trust |
| JEL: | D83 F14 F30 G11 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:13491&r=all |
| By: | Jan in ‘t Veld |
| Abstract: | This paper examines the macro-economic benefits of the Single Market in goods and services by simulating a counterfactual scenario in which tariffs and non-tariff barriers are reintroduced. Model simulations show how the reintroduction of trade barriers in such a counterfactual would lead to significantly lower trade flows between the Member States. Lower trade openness also means reduced market size and less competition. Using empirical evidence on the effect of the Single Market on firms’ mark-ups over marginal costs, we add these effects to the direct trade effects to come to a total estimate of the economic benefits of the Single Market of between 8% and 9% higher GDP on average for the EU. |
| JEL: | F13 F14 F15 F17 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:euf:dispap:094&r=all |
| By: | Guillaume Gaulier (Université Paris 1 Panthéon-Sorbonne); Aude Sztulman (PSL, Université Paris-Dauphine, LEDa); Deniz Ünal (CEPII) |
| Abstract: | In this article, we examine the dynamics of Global Value Chains (GVCs) since the 2000s. Did it show a marked expansion up to the Great Recession and did GVCs begin a downturn in the 2010s? To better understand the evolution of GVCs at the world level, we use very detailed trade data for 2000 to 2016, which distinguishes different production stages along the GVC. In particular, among intermediate goods, we focus on Parts and Components (P&C) rather than semi-finished products since the manufacture of P&C corresponds to activities more embedded in GVCs. We control, also, for the global business cycle and price effects using an original production stages deflator based on detailed bilateral trade unit-values. This new GVC indicator shows moderate growth over the study period with no trend reversal. In the electronics sector, where GVCs are particularly well-developed, we observe contrasting effects: the share in P&C trade for office machinery and computers has decreased, while it has increased in the case of telecommunications equipment, the flagship IT revolution industry. Also, counts of clients or suppliers by stages of production indicate higher and growing geographical diversity for P&C. |
| Keywords: | Global value chains; Parts and Components – P&C; Trade in volume; Electronics |
| JEL: | F14 F15 L60 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:dia:wpaper:dt201903&r=all |
| By: | Brülhart, Marius; Cadot, Olivier; Himbert, Alexander |
| Abstract: | Does international trade help or hinder the economic development of border regions relative to interior regions? Theory tends to suggest that trade helps, but it can also predict the reverse. The question is policy relevant as regions near land borders are generally poorer, and sometimes more prone to civil conflict, than interior regions. We therefore estimate how changes in bilateral trade volumes affect economic activity along roads running inland from international borders, using satellite night-light measurements for 2,186 border-crossing roads in 138 countries. We observe a significant 'border shadow': on average, lights are 37 percent dimmer at the border than 200 kilometers inland. We find this difference to be reduced by trade expansion as measured by exports and instrumented with tariffs on the opposite side of the border. At the mean, a doubling of exports to a particular neighbor country reduces the gradient of light from the border by some 23 percent. This qualitative finding applies to developed and developing countries, and to rural and urban border regions. Proximity to cities on either side of the border amplifies the effects of trade. We provide evidence that local export-oriented production is a significant mechanism behind the observed effects. |
| Keywords: | border regions; Economic Geography; night lights data; trade liberalization |
| JEL: | F14 F15 R11 R12 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:13515&r=all |
| By: | Thierry Mayer (Département d'économie); Keith Head (Sauder School of Business (Columbia University)) |
| Abstract: | Following the 2016 Leave vote in the referendum on UK membership in the EU and the election of Donald Trump, trade agreements have entered a period of great instability. To predict the impact of possible disruptions to existing arrangements requires counterfactual analysis that takes into account the complex set of factors influencing the production and marketing strategies of multinational corporations. We estimate a model of multinational decisionmaking in the car industry. This model predicts the production reallocation and consumer surplus consequences of changes in tariffs and non-tariff barriers induced by US-led protectionism, Brexit, Trans-Pacific and Trans-Atlantic integration agreements. |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:spo:wpmain:info:hdl:2441/mlkvtnbqe9pg8nsvf612mcnbs&r=all |
| By: | Eichengreen, Barry; Mehl, Arnaud; Chiţu, Livia |
| Abstract: | We analyze the role of economic and security considerations in bilateral trade agreements. We use the pre-World War I period to test whether trade agreements are governed by pecuniary factors, such as distance and other frictions measured by gravity covariates, or by geopolitical factors. While there is support for both hypotheses, we find that defense pacts boost the probability of trade agreements by as much as 20 percentage points. Our estimates imply that were the U.S. to alienate its geopolitical allies, the likelihood and benefits of successful bilateral agreements would fall significantly. Trade creation from an agreement between the U.S. and E.U. countries would decline by about 0.6 percent of total U.S. exports. JEL Classification: F13, N20 |
| Keywords: | alliances, geopolitics, international trade agreements |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20192246&r=all |
| By: | Bolt, Wilko; Mavromatis, Kostas; van Wijnbergen, Sweder |
| 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 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: | Exchange Rates; Local Currency Pricing; trade diversion; trade policy |
| JEL: | E32 F30 H22 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:13495&r=all |
| By: | Forslid, Rikard; Okubo, Toshihiro |
| Abstract: | In this paper we study how trade liberalization affects the location and the product scope of firms. We find that the largest and most productive multiproduct firms concentrate to the larger market as a result of trade liberalization. In the presence of relocation costs, we also find that these firms will expand their product range in the larger market while firms in the smaller market will contract their product scope. These effects are magnified with firm-level productivity. The findings are consistent with Japanese manufacturing firm data. |
| Keywords: | firm location; Heterogeneous Firms; multi-product firms; trade liberalization |
| JEL: | F12 F15 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:13528&r=all |
| By: | Clément Malgouyres (Banque de France); Thierry Mayer (Département d'économie) |
| Abstract: | We investigate the role that labor costs hold in exporters’ performance. To do so, we exploit a large-scale French reform that granted most firms a tax credit proportional to the wagebill of their employees paid below a given threshold. This policy effectively translated into a cut in labor cost whose magnitude varies depending on firm-specific wage structures. We use the predicted treatment intensity based on pre-reform composition of the labor force as an instrument for the actual policy-induced firm-level change in labor costs. Although our point estimates are consistent with commonly estimated firm-level trade elasticities combined with reasonable labor shares in total costs, coefficients are found to be very noisy, suggesting lack of robust evidence of a causal effect of the policy. We discuss several potential explanations for our results as well as their implications. |
| Keywords: | Labor costs; Firm-level exports; Competitiveness |
| JEL: | H32 F14 F16 D04 |
| Date: | 2018–08 |
| URL: | http://d.repec.org/n?u=RePEc:spo:wpmain:info:hdl:2441/juegcqdoe81pq2u57eide0qm5&r=all |
| By: | Michelle R. Garfinkel; Constantinos Syropoulos; Yoto V. Yotov |
| Abstract: | We analyze how trade openness matters for interstate conflict over productive resources. Our analysis features a terms-of-trade channel that makes security policies trade-regime dependent. Specifically, trade between two adversaries reduces each one’s incentive to arm given the opponent’s arming. If these countries have a sufficiently similar mix of initial resource endowments, greater trade openness brings with it a reduction in resources diverted to conflict and thus wasted, as well as the familiar gains from trade. Although a move to trade can otherwise induce greater arming by one of them and thus need not be welfare improving for both, aggregate arming falls. By contrast, when the two adversaries do not trade with each other but instead trade with a third (friendly) country, a move from autarky to trade intensifies conflict between the two adversaries, inducing greater arming. With data from the years surrounding the end of the Cold War, we exploit the contrasting implications of trade between enemies versus trade between friends to provide some evidence that is consistent with the theory. |
| Keywords: | resource insecurity, interstate disputes, conflict, arming, trade openness, comparative advantage |
| JEL: | D30 D74 F10 F51 F52 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7500&r=all |
| By: | Thierry Mayer (Département d'économie); Keith Head (Sauder School of Business (Columbia University)) |
| Abstract: | This paper estimates the role of country/variety comparative advantage in the decision to offshore assembly of more than 2000 models of 197 car brands headquartered in 23 countries. While offshoring in the car industry has risen from 2000 to 2016, the top five offshoring brands account for half the car assembly relocated to low wage countries. We show that the decision to offshore a particular car model depends on two types of cost (dis)advantage of the home country relative to foreign locations. The first type, the assembly costs common to all models, is estimated via a structural triadic gravity equation. The second effect, model-level comparative advantage, is an interaction between proxies for the model's skill and capital intensity and headquarter country's abundance in these factors. |
| Keywords: | Offshoring; Gravity; Cars |
| JEL: | F1 |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:spo:wpmain:info:hdl:2441/283ebth88t9q891sj72go9n0bv&r=all |
| By: | Johannes Boehm (Département d'économie) |
| Abstract: | Contracting frictions affect the organization of firms, but how much does this matter on the aggregate level? This paper studies how costly supplier contract enforcement shapes the patterns of intermediate input use and quantifies the impact of these distortions on aggregate productivity and welfare. Using the frequency of litigation between US firms to measure the potential for hold-up problems, I find a robust relationship between countries’ input-output structure and their quality of legal institutions: in countries with high enforcement costs, firms have lower expenditure shares on intermediate inputs in sector pairs where US firms litigate frequently for breach of contract. I adapt a Ricardian trade model to the study of intersectoral trade, and show that the variation in intermediate input shares that is explained by contracting frictions is large enough to generate sizeable welfare increases when enforcement institutions are improved. |
| Date: | 2018–12 |
| URL: | http://d.repec.org/n?u=RePEc:spo:wpmain:info:hdl:2441/1uut5itepl9q5osfl3tj7qatje&r=all |
| By: | Ojo, Marianne |
| Abstract: | It appears the United States Senate may have been trying to make the points that renegotiating or enacting new legislations require more energy, efforts and time than many would appreciate – particularly in the processes and attempts involved in dismantling the Affordable Care Act – an attempt which ultimately proved unsuccessful – even though certain key elements were eventually replaced through the Tax Reform Bill which was approved in December 2017 – the first major legislative success of the Trump Administration. However the Affordable Care Act remains a testimony of efforts which had been invested in designing a legislation – which although not the ultimate legislation for some, still partially addresses certain concerns of the medical system. Certain other agreements have not had it so easy during the first twelve months of the new administration. Notably, the Trans Pacific Partnership, the Paris Global Climate Agreement – and even the North American Free Trade Area (still being re negotiated) – which have either been withdrawn from, or face the threat of being withdrawn from. So which alliances appear to have been understated, dismantled or being re considered, during and following the first year marking the inauguration of the 45th President of the United States? |
| Keywords: | Brexit; Trans Pacific Partnership; North American Free Trade Area; African Union; European Union; trade agreements; environmental agreements; Affordable Care Act; Deferred Action for Childhood Arrivals Program |
| JEL: | E3 E31 E32 E4 E44 G2 G28 K23 M4 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:84050&r=all |
| By: | LeSage, James P.; Fischer, Manfred M. |
| Abstract: | Past focus in the panel gravity literature has been on multidimensional fixed effects specifications in an effort to accommodate heterogeneity. After introducing conventional multidimensional fixed effects, we find evidence of cross-sectional dependence in flows. We propose a simultaneous dependence gravity model that allows for network dependence in flows, along with computationally efficient Markov Chain Monte Carlo estimation methods that produce a Monte Carlo integration estimate of log-marginal likelihood useful for model comparison. Application of the model to a panel of trade flows points to network spillover effects, suggesting the presence of network dependence and biased estimates from conventional trade flow specifications. The most important sources of network dependence were found to be membership in trade organizations, historical colonial ties, common currency and spatial proximity of countries. |
| Keywords: | origin-destination panel data ows, cross-sectional dependence, log-marginal like- lihood, gravity models of trade, sociocultural distance, convex combinations of interaction matrices |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wus046:6828&r=all |
| By: | Foellmi, Reto; Oechslin, Manuel |
| Abstract: | We explore the consequences of international trade in an economy that encompasses technology choice and an endogenous distribution of mark-ups due to credit market frictions. We show that in such an environment a gradual opening of trade may -- but not necessarily must -- have a negative impact on productivity and overall output. The reason is that the pro-competitive effects of trade reduce mark-ups and hence make access to credit more difficult for smaller firms. As a result, smaller firms -- while not driven out of the market -- may be forced to switch to less productive technologies. |
| Keywords: | credit market frictions; International trade; Polarization; productivity |
| JEL: | F13 O11 O16 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:13538&r=all |
| By: | Hideo Konishi (Boston College); Minoru Nakada (Nogaya University); Akihisa Shibata (Kyoto University) |
| Abstract: | In this paper, we investigate the effects of a free trade agreement (FTA) with environmental standards between Northern and Southern countries, with explicit considerations for transferring clean technology and enforcing reduced emissions. Southern producers benefit greatly by having access to a Northern market without barriers, while they are reluctant to use new high-cost, clean technology provided by the North. Thus, environmentally conscious Northern countries should design an FTA where Southern countries provide sufficient benefits for the membership while imposing tighter enforcement requirements. Since including too many Southern countries dilutes the benefits of being a member of the FTA, it is in the best interest of the North to limit the number of Southern memberships while requiring strict enforcement of emissions reduction. This may result in unequal treatment among the Southern countries. We provide a quantitative evaluation of FTA policies by using a numerical example. |
| Keywords: | free trade agreement, technology standard, North-South model, environmental standard |
| JEL: | F18 Q54 Q55 Q56 |
| Date: | 2018–09–22 |
| URL: | http://d.repec.org/n?u=RePEc:boc:bocoec:972&r=all |
| By: | Cajal-Grossi, Julia; Macchiavello, Rocco; Noguera, Guillermo |
| Abstract: | Large international buyers play a key role in global value chains. We exploit detailed transaction-level data on the usage of material inputs to study how Bangladeshi garment suppliers' markups vary across international buyers. We find substantial dispersion in markups across export orders of a given seller for the same product. Buyer effects explain a significant share of this variation, while destination effects do not. Buyers adopting relational sourcing strategies pay higher markups than non-relational buyers. This pattern holds within seller-product-year combinations, is robust to controlling for the buyer's size, traded volumes, and quality, and, together with larger volumes, implies higher profits for suppliers dealing with relational buyers. |
| Keywords: | Buyer-Driven Value Chains; Global Buyers; Markups; Sourcing Strategies |
| JEL: | D23 L11 L14 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:13482&r=all |
| By: | Joakim Ruist (University of Gothenburg) |
| Abstract: | This study estimates the fiscal consequences of receiving refugees, over the refugees’ lifetime. It uses data from Sweden in 2015, and the calculations account for refugees’ age, years since immigration, and country of origin. The estimated average annual fiscal net contribution over the lifetime of the average refugee (58 years) ranges from –12 per cent of GDP per capita for refugees from the countries of origin for which labor market performance has historically been the strongest, to –22 per cent for those for which it has been the weakest. The estimates imply that if the European Union received all refugees currently in Asia and Africa, the implied average annual fiscal cost over the same time span would be at most 0.6 per cent of GDP. |
| Keywords: | refugees; immigration; public finances |
| JEL: | F22 H20 H50 J61 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:crm:wpaper:1902&r=all |
| By: | Napasintuwong, Orachos |
| Abstract: | Thailand is the 2nd largest seed exporter in Asia after China, and maize contributes to the largest export revenue of all seed exports from Thailand. Leading multinational seed companies have invested in research facilities and breeding programs in Thailand since the late 1970s, and this makes Thailand one of important bases of maize seed production. Currently there are five multinational companies integrated in maize seed production in Thailand while many small local companies operate at national or provincial scale. This paper addresses different contract models operated by seed companies, and analyze the factors contributing to the participation of growers in maize seed production contracts. |
| Keywords: | Crop Production/Industries, International Relations/Trade |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aare19:283984&r=all |
| By: | Roman Mendelevitch; Christian Hauenstein; Franziska Holz |
| Abstract: | The Trump administration has promised to stop the spiraling down of the U.S. coal industry that has been going on for several years. We discuss the origins of the decline of the U.S. coal industry and new policy interventions by the Trump administration. We find that a further decrease of coal consumption in the U.S. electricity sector must be expected because of the old and inefficient U.S. coal-fired generation fleet. By contrast, we adapt the EIA’s overly optimistic view and analyze three potential support schemes to assess whether under such assumptions they can turn the tide for the U.S. coal industry: i) revoking the Clean Power Plan (CPP); ii) facilitating access to the booming Asian market by developing West Coast coal export terminals; and iii) enhanced support for the Carbon Capture, Transport and Storage (CCTS) technology to provide a long-term perspective for domestic coal use while mitigating climate change. We investigate the short-term and long-term effects for U.S. coal production using a comprehensive partial equilibrium model of the world steam coal market, COALMOD-World (Holz et al. 2016). Revoking the CPP will stop the downward trend of steam coal consumption in the U.S., but will not lead to a return of U.S. coal production to the levels of the 2000s with more than 900 Mtpa. Even when assuming a continuously strong global coal demand and expanding U.S. coal export capacities, U.S. coal production will not return to its previous production highs. When global steam coal use, including U.S. consumption, is aligned with the 2°C climate target, U.S. steam coal production drops to around 100 Mtpa by 2030 and below 50 Mtpa by 2050, respectively, even if CCTS is available and exports via the U.S. West Coast are possible. |
| Keywords: | U.S. coal sector, Trump administration, Clean Power Plan, steam coal, coal ports, CCS |
| JEL: | L72 Q34 Q38 F14 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1790&r=all |
| By: | Kilian, Lutz; Zhou, Xiaoqing |
| Abstract: | There has been much interest in the relationship between the price of crude oil, the value of the U.S. dollar, and the U.S. interest rate since the 1980s. For example, the sustained surge in the real price of oil in the 2000s is often attributed to the declining real value of the U.S. dollar as well as low U.S. real interest rates, along with a surge in global real economic activity. Quantifying these effects one at a time is difficult not only because of the close relationship between the interest rate and the exchange rate, but also because demand and supply shocks in the oil market in turn may affect the real value of the dollar and real interest rates. We propose a novel identification strategy for disentangling the causal effects of oil demand and oil supply shocks from the effects of exogenous shocks to the U.S. real interest rate and exogenous shocks to the real value of the U.S. dollar. We empirically evaluate popular views about the role of exogenous real exchange rate shocks in driving the real price of oil, and we examine the extent to which shocks in the global oil market drive the U.S. real exchange rate and U.S. real interest rates. Our evidence for the first time provides direct empirical support for theoretical models of the link between oil prices, exchange rates, and interest rates. |
| Keywords: | carry trade; commodity; Exchange rate; global real activity; interest rate; oil price |
| JEL: | E43 F31 F41 Q43 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:13478&r=all |
| By: | Alberto Alesina; Elie Murard; Hillel Rapoport |
| Abstract: | We examine the relationship between immigration and attitudes toward redistribution using a newly assembled data set of immigrant stocks for 140 regions of 16 Western European countries. Exploiting within-country variations in the share of immigrants at the regional level, we find that native respondents display lower support for redistribution when the share of immigrants in their residence region is higher. This negative association is driven by regions of countries with relatively large Welfare States and by respondents at the center or at the right of the political spectrum. The effects are also stronger when immigrants originate from Middle-Eastern countries, are less skilled than natives, and experience more residential segregation. These results are unlikely to be driven by immigrants' endogenous location choices. |
| JEL: | D6 O15 P16 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:25562&r=all |
| By: | Bloom , Nicholas (Stanford University); Bunn, Philip (Bank of England); Chen, Scarlet (Stanford University); Mizen, Paul (University of Nottingham); Smietanka, Pawel (Bank of England); Thwaites, Greg (LSE Centre for Macroeconomics); Young, Garry (National Institute of Economic and Social Research) |
| Abstract: | The UK’s decision to leave the EU in the 2016 referendum created substantial uncertainty for UK businesses. The nature of this uncertainty is different from that of a typical uncertainty shock because of its length, breadth and political complexity. Consequently, a new firm-level survey, the Decision Maker Panel (DMP), was created to investigate this, finding three key results. First, Brexit was reported to be one of the top three sources of uncertainty for around 40% of UK businesses in the two years after the vote in June 2016 referendum. This proportion increased further in Autumn 2018. Hence, Brexit provided both a major and persistent uncertainty shock. Second, uncertainty has been higher in industries that are more dependent on trade with the EU and on EU migrant labour. Third, the uncertainties around Brexit have been primarily about the impact on businesses over the longer term rather than shorter term, including uncertainty about the timing of any transition arrangements and around the nature of Brexit. |
| Keywords: | Business surveys; Brexit; companies; uncertainty |
| JEL: | D80 E66 G18 H32 |
| Date: | 2019–02–15 |
| URL: | http://d.repec.org/n?u=RePEc:boe:boeewp:0780&r=all |
| By: | Jérôme Creel (Observatoire français des conjonctures économiques) |
| Abstract: | Comme toujours depuis le démarrage du processus d’intégration européenne, l’Union européenne progresse pas à pas, crise après crise. La dernière en date a cependant révélé les incohérences de sa gouvernance économique. La crise bancaire survenue aux États-Unis en septembre 2008 a profondément affecté la zone euro. La première phase de récession, globale en 2009, en a amené une deuxième, européenne, en 2012-2013. Celle-ci faisait suite à la mise en oeuvre coordonnée de politiques d’austérité budgétaire. L’échec de la gouvernance budgétaire européenne à endiguer la crise a alors obligé la Banque centrale européenne à adopter des mesures exceptionnelles. Ont aussi été créées les bases d’une gestion coordonnée des crises économiques au travers du Mécanisme européen de stabilité. Au-delà de cette avancée, des réformes restent nécessaires pour assurer une meilleure coordination entre les politiques monétaires et budgétaires et avec les réformes structurelles engagées en Europe. |
| Keywords: | Union européenne; Crise; Austérité budgétaire; Mecanisme européen de stabilité |
| Date: | 2018–08 |
| URL: | http://d.repec.org/n?u=RePEc:spo:wpmain:info:hdl:2441/1k1ntsbjvs8osq4pa5v6qceau3&r=all |
| By: | Alesina, Alberto (Harvard University); Murard, Elie (IZA); Rapoport, Hillel (Paris School of Economics) |
| Abstract: | We examine the relationship between immigration and attitudes toward redistribution using a newly assembled data set of immigrant stocks for 140 regions of 16 Western European countries. Exploiting within-country variations in the share of immigrants at the regional level, we find that native respondents display lower support for redistribution when the share of immigrants in their residence region is higher. This negative association is driven by regions of countries with relatively large Welfare States and by respondents at the center or at the right of the political spectrum. The effects are also stronger when immigrants originate from Middle-Eastern countries, are less skilled than natives, and experience more residential segregation. These results are unlikely to be driven by immigrants' endogenous location choices. |
| Keywords: | income redistribution, population heterogeneity, welfare systems, immigration |
| JEL: | D31 D64 I3 Z13 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp12130&r=all |