nep-int New Economics Papers
on International Trade
Issue of 2019‒04‒22
34 papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. The potential economic impact of Brexit on Denmark By Donal Smith; Mikkel Hermansen; Sune Malthe-Thagaard
  2. CPTPP: Implications for Malaysia’s Merchandise Trade Balance By BANGA, RASHMI
  3. Global Value Chains in Mexico: A Historical Perspective By Chiquiar Daniel; Tobal Martín
  4. The Micro-economics of Export Supply: Firm-Level Evidence from Mexico By Cebreros Alfonso
  5. Moving ideas across borders: Migrant inventors, patents and FDI By Ana Cuadros; Jordi Paniagua; Antonio Navas
  6. Tariffs and Politics: Evidence from Trump’s Trade Wars By Fetzer, Thiemo; Schwarz, Carlo
  7. Post-Brexit Realism and international law: renegotiating a bad Withdrawal Agreement By Minford, Patrick
  8. A New Dawn for MENA Firms: Service Trade Liberalization for More Competitive Exports By Fida Karam; Chahir Zaki
  9. Europe in the midst of China-US strategic competition: What are the European Union's options? By Alicia García-Herrero
  10. International Trade Finance From the Origins to the Present: Market Structures, Regulation, and Governance By Accominotti, Olivier; Ugolini, Stefano
  11. Trade Protectionism and US Manufacturing Employment By Li, Chunding; Wang, Jing; Whalley, John
  12. Brain Drain and Brain Gain in Italy and Ireland in the Age of Mass Migration By Matteo Gomellini; Cormac Ó Gráda
  13. Quantifying Disruptive Trade Policies By Balistreri, Edward J.; Bohringer, Christoph; Rutherford, Thomas F.
  14. Firm Export Dynamics and the Exchange Rate: A Quantitative Exploration By López-Martín Bernabé
  15. The importance of consumer taste in trade By Bee Yan Aw; Yi Lee; Hylke Vandenbussche
  16. The Effects of Foreign Direct Investment on Regional Innovation Capacity in China By Paul J.J. Welfens; Tian Xiong
  17. Chinese acquisitions abroad: are they different? By Clemens Fuest; Felix Hugger; Samina Sultan; Jing Xing
  18. Distance(s) and the volatility of international trade(s) By Mehl, Arnaud; Schmitz, Martin; Tille, Cédric
  19. BREXIT Perspectives: Financial Market Dynamics, Welfare Aspects and Problems from Slower Growth By Paul J.J. Welfens; Tian Xiong
  20. Foreign Competition and the Durability of US Firm Investments By Philippe Fromenteau; Jan Schymik; Jan Tscheke
  21. Easy Come, Easy Go? Economic Shocks, Labor Migration and the Family Left Behind By André Gröger
  22. Exporting Pollution By Ben-David, Itzhak; Kleimeier, Stefanie; Viehs, Michael
  23. Impacts of Exchange Rate on Vietnam-Japan Trade Balance: A Nonlinear Asymmetric Cointegration Approach By Tran, Thi Ha
  24. EU28 Capital Market Perspectives of a Hard BREXIT: Theory, Empirical Findings and Policy Options By Paul J.J. Welfens; Fabian Baier; Samir Kadiric; Arthur Korus; Tian Xiong
  25. Dirty versus Clean Firms’ Relocation under International Trade and Imperfect Competition By Julie Ing; Jean-Philippe Nicolai
  26. The impact of Brexit on International Students’ Return Intentions By Falkingham, Jane; Giulietti, Corrado; Wahba, Jackline; Wang, Chuhong
  27. International trade, non-trading firms and their impact on labour productivity By Millard, Stephen; Nicolae, Anamaria; Nower, Michael
  28. FDI, banking crisis and growth: direct and spill over effects By Brahim Gaies; Khaled Guesmi; Stéphane Goutte
  29. The politics of upgrading in global value chains: The case of Rwanda’s coffee sector By Pritish Behuria
  30. The roles of the state in global value chains: an update and emerging agenda By Rory Horney; Matthew Alford
  31. Trade, Technology, and the Great Divergence By O'Rourke, Kevin Hjortshøj; Rahman, Ahmed; Taylor, Alan M.
  32. Global Value Chain Integration and Productivity: The Case of Turkish Manufacturing Firms By Yilmaz Kiliçaslan; Ugur Aytun; Oytun Meçik
  33. Trade, Technology, and the Great Divergence By Kevin Hjortshøj O'Rourke; Ahmed Rahman; Alan M. Taylor
  34. Regional Integration in Border Cities By OECD

  1. By: Donal Smith; Mikkel Hermansen; Sune Malthe-Thagaard
    Abstract: This paper provides estimates of the potential trade effects on exports and production at the sectoral level as well as GDP in Denmark of the exit of the United Kingdom (UK) from the European Union (EU). Owing to the high uncertainty regarding the final Brexit deal between the EU and the UK, this paper assumes a worst case outcome where trade relations are governed by World Trade Organization (WTO) most favoured nation (MFN) rules. In doing so, it provides something close to an upper bound estimate of the potential negative economic impact. Any trade agreement that would result in a closer relationship between the United Kingdom and the EU than WTO rules reduces the negative impact.Under the worst case illustrative scenario assumed in this paper, Danish exports to the UK fall by 17%, total exports and GDP decline by 1.3% in the medium term. This effect is from the trade channel absent any change in foreign direct investment (FDI) or productivity. The fall in exports is concentrated in the Danish agri-food and machinery and equipment sectors, which account for half of the export reduction. Exports to the UK of agri-food and machinery and equipment fall by 24% and 17% respectively. Smaller manufacturing sectors such as wood and leather products, metals and textiles see falls of over 20% in their exports to the UK. The chemicals sector, which includes pharmaceuticals, comprises 9.5% of Danish exports to the UK and would experience an 18% reduction in its exports to the UK.Seven Danish sectors experience production declines of over 2.5% in the scenario. The largest decline is in the meat products sectors (7%), metals (3%), material manufacturing (2.3%) and other agri-food sectors (2.2%). These sectors would also see the largest declines in labour demand.
    Keywords: Brexit, computable general equilibrium model, Denmark, European Union, international trade, METRO model, sectoral economic effects
    JEL: C68 C10 F13 F14
    Date: 2019–04–23
    Abstract: A mega regional Free Trade Agreement like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) has the potential to impact countries which are inside as well as those which are outside the agreement. This paper provides empirical estimates of potential changes in Malaysia’s merchandise balance of trade if it joins the CPTPP and compares it to its trade balance if it does not join this free trade agreement (FTA). A positive balance of merchandise trade is important for Malaysia as it is a net importer of services. However, since 2010, Malaysia’s merchandise imports have been growing much faster than its exports. Using SMART simulations, the estimates show that if Malaysia joins the CPTPP its imports will rise much more than its exports leading to a worsening of its trade balance by around US$2.4 billion per annum. Imports of vehicles from the CPTPP countries will increase including that of plastics and its articles. Exports to the CPTPP partner countries will rise only marginally as Malaysia already has free trade agreements with its top three export markets, i.e., Japan, Singapore and Australia, which together account for 84% of its exports to the CPTPP countries. Remaining out of the CPTPP will also adversely impact Malaysia’s exports to the CPTPP countries but this decline in exports is much smaller compared to the rise in its imports if it joins the CPTPP. The estimated tariff revenue loss to Malaysia of joining the CPTPP is estimated at US$1.6 billion per annum. The paper argues that along with the traditional indicators of trade competitiveness like trade balance developing countries now need to give importance to preserving their policy space in free trade agreements since the fourth digital industrial revolution is changing the ways products are manufactured and exported.
    Keywords: CPTPP; Malaysia and CPTPP; Balance of Trade; SMART Simulations
    JEL: F1 F13 F14 F17
    Date: 2019–03–25
  3. By: Chiquiar Daniel; Tobal Martín
    Abstract: This paper performs a historical analysis of Mexico's insertion into Global Value Chains (GVCs) and links it to the notion of competition underlying traditional theoretical models of international trade. In contrast with existing studies, it uses both new analytical tools pertaining to the GVC literature and tools based on the traditional notion of comparative advantage. This combination allows identifying three periods: (i) since NAFTA's signature until 2001, Mexico deepened its insertion into GVCs and reallocated resources to the production of more skilled-intensive goods; (ii) this higher GVC participation vanished when China entered the WTO; and (iii) since the second half of the 2000s, Mexico recovered the ground lost due to higher integration in the automotive sector and a reallocation of resources to the production of more unskilled-intensive goods, likely generated by an efficient response to competition with China. Hence, Mexico used two different models of GVC insertion entailing production processes with different characteristics in terms of skill-usage.
    Keywords: Global Value Chains;NAFTA;Skill intensity
    JEL: F11 F15 F16
    Date: 2019–04
  4. By: Cebreros Alfonso
    Abstract: This paper uses firm-level data for Mexican exporters to understand how firm-level export decisions shape a country's aggregate exports. The data allows for a characterization of both the crosssectional distribution of Mexican exports, across destinations and across exporting firms, and of the time-series variation in aggregate exports and its relation to time-series variation in the export supply decisions of firms. It is found that the cross-sectional variation of exports is mostly accounted for the extensive margins of trade, particularly the extensive margin of number of products exported, while the time-series variation in aggregate exports is mostly accounted for by the intensive margin of trade, and in particular by the growth of exporting firms that retain their export status from year to year.
    Keywords: International trade;firm heterogeneity;productivity;multi-product firms;exporter dynamics
    JEL: D21 F10 F12 F14 L1 L11 L21 L25 L60
    Date: 2019–02
  5. By: Ana Cuadros (Jaume I University (Spain).); Jordi Paniagua (Department of Economic Structure, University of Valencia, Avda. dels Tarongers s/n, 46022 Valencia (Spain).); Antonio Navas (University of Sheffield (United Kingdom).)
    Abstract: The purpose of this paper is to gain insights into the exact mechanisms through which migration enhances the innovative performance of multinational firms and fosters Foreign Direct Investment (FDI). We develop a formal model showing that migrants may help firms to increase the perceived quality of their products at the host country of investment. This can be done by patent an invention that permits the customization of products in order to meet foreign quality standards. We focus on a very specific type of migrants: Those who cross borders and patent an invention (migrant inventors). The structural estimation of our model using high-dimensional PPML 2SLS confirms our theoretical priors at both the intensive and the extensive margins. A placebo test reveals that non-inventor migrants are not a good instrument to capture the effect of patents on FDI. Additionally, a structural PPML gravity estimation shows that both patents and migrants inventors fosters Greenfield FDI, with a larger impact on the intensive margin. Our estimations also reveal certain sectoral heterogeneity.
    Keywords: migrant inventors; patents; FDI; foreign Direct Investment; migration
    JEL: F20 F21 F23
    Date: 2019–04
  6. By: Fetzer, Thiemo (University of Warwick); Schwarz, Carlo (University of Warwick)
    Abstract: Are retaliatory tariffs politically targeted and, if so, are they effective? Do countries designing a retaliation response face a trade-off between maximizing political targeting and mitigating domestic economic harm? We use the recent trade escalation between the US, China, the European Union (EU) and the North American Free Trade Agreement (NAFTA) countries to answer these questions. We find substantial evidence that retaliation was directly targeted to areas that swung to Donald Trump in 2016 (but not to other Republican candidates running for office in the same year). We further assess whether retaliation was optimally chosen using a novel simulation approach constructing counterfactual retaliation responses. For China and particularly, for Mexico and Canada, the chosen retaliation appears suboptimal: there exist alternative retaliation bundles that would have produced a higher degree of political targeting, while posing a lower risk to damage the own economy. We further present evidence that retaliation produces economic shocks: US exports on goods subject to retaliation declined by up to USD 15.28 billion in 2018 and export prices have dropped significantly. Lastly, we find some evidence suggesting that retaliation is effective: in areas exposed to retaliation Republican candidates fared worse in the 2018 Midterm elections, and similarly Presidential approval ratings, especially among Democrats, have declined.
    Keywords: trade war, tariff, targeting, political economy, elections, populism JEL Classification: F13, F14, F16, F55, D72
    Date: 2019
  7. By: Minford, Patrick (Cardiff Business School)
    Abstract: Some pro-Brexit MPs will not vote for the government's proposed Withdrawal Agreement because of its fine print: they think it will be written in indelible tablets of law that we can never change. But they forget that sovereign states will not indefinitely stay in treaties that do not suit them, if no one can force them to, as in general no one can, unlike in national law where the state can force us. That is just the plain economics of national self-interest, as deployed in game theory studies of international treaties. Our Agreement with the EU if we sign it will not last for long if it stops us from pursuing our interests in trade and regulation: no one, certainly not the EU, can force us to stay with it. It has been negotiated like a hostile divorce because the EU wanted to prove it does not pay to leave. But once the divorce has happened, it will be a new situation where, as with ex-partners in a divorce, they will want to live harmoniously with us in the long term. There will be sensible diplomacy so that we can accommodate each other's interests, in a process of adaptation. After leaving, we can push ahead with good policies on trade, regulation and migration that the government we vote for will pursue; the EU will cooperate as it will not wish us to move to default WTO rules.
    Date: 2019–04
  8. By: Fida Karam (Gulf University for Science and Technology); Chahir Zaki
    Abstract: With the ongoing debates on the Doha Agenda, micro-level empirical evidence has emerged to highlight the positive effect of services deregulation on the productivity and exports of manufacturing firms in developing countries. While the MENA region has been neglected in this literature so far, the current paper fills the gap by exploring the effect of service liberalization on the extensive and intensive trade margins of manufacturing and services firms in selected MENA countries for 2013. The results show that service trade restrictiveness weighted by the input-output technical coefficient of service sectors, has a significantly negative effect on both the intensive andthe extensive margins of trade. The results are robust to different measures of service trade restrictiveness, namely the tariff equivalent of services and the service trade restrictiveness index.
    Date: 2019
  9. By: Alicia García-Herrero
    Abstract: With the trade conflict between the United States and China bringing China-US strategic competition into the open, the European Union faces an urgent question - how to position itself in the competition. This paper reviews the impact of the US-led trade war against China and its immediate consequences for China, the US and the EU. Although protectionism can never be growth enhancing, European companies could see gains if the trade confrontation between China and the US ends up reducing their bilateral trade to the benefit of European companies that export to China. This is because US exports to China are concentrated in sectors that are also key for the EU’s exports to China, with the exception of energy and agricultural products. However, a solution to the US-China trade conflict that artificially increases Chinese imports from the US can only hurt European exporters. A much broader and structural deal which pushes China to reform and open up would not only be beneficial for the US but also for the EU and the rest of the world. Against this background, this paper reviews the EU’s options in the new world of strategic confrontation between China and the US. The most obvious option would be to continue to safeguard multilateralism, but the EU should not be naïve in remaining alone, among major economic blocs, pushing for such an option. The second option would be for the EU to become more reliant on the Transatlantic Alliance. The last option would be for the EU to move its centre of gravity towards China, or at least to remain neutral between the US and China. While it might seem unrealistic today, this last option might need to be explored if the US continues to move away from multilateralism and, to some degree, from the Transatlantic Alliance. For the time being, the European Commission seems to have stepped up its thinking about the necessary conditions for stronger economic cooperation with China, which is already an important step in this direction.
    Date: 2019–04
  10. By: Accominotti, Olivier; Ugolini, Stefano
    Abstract: We describe how the structure and governance of international trade finance - the oldest domain of international finance- evolved from the Middle Ages until today. Trade finance products initially consisted of idiosyncratic assets issued by local merchants and bankers. The financing of international trade then became increasingly centralized and credit instruments were standardized through the diffusion of the local standards of consecutive leading trading centers (Antwerp, Amsterdam, London). This process of market centralization/product standardization culminated in the nineteenth century when London became the global center for international trade finance and the sterling bill of exchange emerged as the most widely used trade finance instrument. The structure of the trade finance market then evolved considerably following the First World War and disintegrated during the interwar de-globalization and Bretton Woods period. The reconstruction of global trade finance in the post-1970 period gave way to the decentralized market structure that prevails nowadays.
    Keywords: bill of exchange; letter of credit; market structure; Trade Finance
    JEL: F1 F3 K12 N2 N7
    Date: 2019–04
  11. By: Li, Chunding (China Agricultural University, Beijing); Wang, Jing (Western University (UWO)); Whalley, John (Western University (UWO))
    Abstract: This paper uses a numerical global general equilibrium model to simulate the possible effects of US initiated trade protection measures on US manufacturing employment. The simulation results show that US trade protection measures do not increase but will instead reduce manufacturing employment, and US losses will further increase if trade partners take retaliatory measures. The mechanism is that although the substitution effects between domestic and foreign goods have positive impacts, the substitution effects between manufacturing and service sectors and the retaliatory effects both have negative influences, therefore the whole effect is that the US will lose manufacturing employment.
    Keywords: Trade Protectionism, Manufacturing Employment, United States, Numerical Simulation JEL Classification: F16; C68; F62
    Date: 2019
  12. By: Matteo Gomellini; Cormac Ó Gráda
    Abstract: Emigrants from Italy and Ireland contributed disproportionately to the Age of Mass Migration. That their departure improved the living standards of those they left behind is hardly in doubt. Nevertheless, a voluminous literature on the selectivity of migrant flows— both from sending and receiving country perspectives—has given rise to claims that migration generates both ‘brain drains’ and ‘brain gains’. On the one hand, positive or negative selection among emigrants may affect the level of human capital in sending countries. On the other hand, the prospect of emigration and return migration may both spur investment in schooling in source countries. This essay describes the history of emigration from Italy and Ireland during the Age of Mass Migration from these perspectives.
    Keywords: Migration; Brain Drain; Brain Gain; Human Capital; Italy; Ireland
    JEL: F22 J61 N33 O15
    Date: 2019–03
  13. By: Balistreri, Edward J. (Iowa State U); Bohringer, Christoph (U of Oldenburg); Rutherford, Thomas F. (U of Wisconsin)
    Abstract: Mainstream economic wisdom favoring cooperative free trade is challenged by a wave of disruptive trade policies. In this paper, we provide quantitative evidence concerning the economic impacts of tariffs implemented by the United States in 2018 and the subsequent retaliations by partner countries. Our analysis builds on a multi-region multi-sector general-equilibrium simulation model of the global economy that includes an innovative monopolistic-competition structure of bilateral representative firms.
    JEL: C68 F12 F17
    Date: 2018–11
  14. By: López-Martín Bernabé
    Abstract: We develop a quantitative theoretical model of firm dynamics to analyze key determinants of the elasticity of exports with respect to the exchange rate. The model incorporates mechanisms that determine the firms? capacity to react when the profitability of exports change due to fluctuations in the exchange rate. The framework allows for a quantitative assessment of different mechanisms: distribution costs represent the most important factor, as well as the exogenous and gradual growth dynamics of new exporters, and the currency denomination of sunk-entry costs into the foreign market. The different versions of the model are evaluated by contrasting the behavior of simulated variables with empirical estimates and evidence found in the literature. In addition, we present an assessment of the effects on the intensive and extensive margins of exports.
    Keywords: export dynamics;hysteresis;exchange rates;heterogeneous firms;exchange rate passthrough
    JEL: J21 E32
    Date: 2019–03
  15. By: Bee Yan Aw; Yi Lee; Hylke Vandenbussche
    Abstract: This paper documents the importance of consumer taste in trade flows using Belgian firm-product customs data by destination. We identify consumer taste through the use of a control function approach and estimate it jointly with other demand parameters using a very flexible demand specification. Consumer taste is identified for every trade ow. The results show that taste decreases in distance but this relationship is not monotonic. The contribution of consumer taste to actual export revenue ranges between 1-31% depending on the product category in the food industry. Overall, the demand shifters, taste and product quality explain twice as much of the variation in export revenues than cost.
    Keywords: tastes, quality, productivity, exports, firm-product
    JEL: F12 F14
    Date: 2019
  16. By: Paul J.J. Welfens (Europäisches Institut für Internationale Wirtschaftsbeziehungen (EIIW)); Tian Xiong (Europäisches Institut für Internationale Wirtschaftsbeziehungen (EIIW))
    Abstract: Foreign direct investment (FDI) has been widely considered as an essential channel contributing to a host countries’ innovation development through knowledge and skill spillover effects. In recent years, China has become the second biggest FDI recipient in the world and continues to promote its domestic innovation ability. Here, the question of how FDI affect the growth of regional innovation in China is posed. By applying an alternative knowledge production function (KPF), we investigate the effects of FDI on the development of self-innovation capacities in 31 Chinese provinces using a fixed-effects specification panel data analysis covering the period from 2000 to 2015. Our findings on the contribution of FDI to the growth of different kinds of patent applications in different regions are mixed. Significant results were mainly found for invention patents in the eastern region. Concluding, we suggest potential policy implementations.
    Keywords: Regional Innovation Capacity, Patent, Foreign Direct Investment, China
    JEL: O33 O34 F21 R11
    Date: 2018–06
  17. By: Clemens Fuest; Felix Hugger; Samina Sultan; Jing Xing
    Abstract: In recent years Chinese acquisitions abroad have increased significantly. This paper uses a large dataset on cross-border M&A deals to investigate whether Chinese foreign acquisitions differ from acquisitions coming from other countries. We find that Chinese acquirers buy targets with lower profitability, larger size, higher debt levels, and more patents. However, private and state-owned Chinese investors differ in preferences for location in offshore financial centers, industry diversification, natural resources and technology. Chinese state-owned acquirers are similar to government-led acquirers from other countries in pursuing target firms in the resource extraction industry. Policy initiatives like the Belt and Road Initiative and Made in China 2025 influence investment patterns of Chinese state-owned acquirers but not those of private investors. Surprisingly, for acquisition prices, we find that Chinese investors pay less for firms with similar observable characteristics than investors from other countries.
    Keywords: cross-border M&A, China, government acquirers
    JEL: G34 G38 F02
    Date: 2019
  18. By: Mehl, Arnaud; Schmitz, Martin; Tille, Cédric
    Abstract: Does distance matter for the volatility of international real and financial transactions? We show that it does, in addition to its well-established relevance for the level of trade. A simple model of trade with endogenous markups shows that demand shocks have a larger impact on trade between more distant countries. We test this implication in two steps, relying on a broad range of real and financial transactions measures, as well as several different metrics of distance (physical, linguistic, and internet). We first show that during the Great Trade Collapse of 2007-09 international transactions fell more between countries that are more distant along the various metrics, and find that the different distance measures magnify each other's respective impacts. We then focus on a longer panel analysis of trade in goods and show that trade is more volatile between more distant countries, with again a magnification pattern across metrics of distance.
    Keywords: distance,gravity,volatility,international trade,international finance,Great Trade Collapse
    JEL: F10 F30
    Date: 2019
  19. By: Paul J.J. Welfens (Europäisches Institut für Internationale Wirtschaftsbeziehungen (EIIW)); Tian Xiong (Europäisches Institut für Internationale Wirtschaftsbeziehungen (EIIW))
    Abstract: In this analysis, BREXIT is considered with regard to the main consequences for financial markets; and real economic implications are taken into account while policy options are also highlighted. The role of the interest elasticity of the demand for money is emphasized for both welfare analysis of BREXIT and overshooting – assuming that that elasticity will fall post-BREXIT. Key insights emerge from aspects related to Dornbusch-type exchange rate overshooting problems and insights from the Branson model: This medium-term perspective is used to derive some short-term and long-term BREXIT implications. As regards overall welfare effects, the BREXIT welfare effect related to a lower holding of real money balances – due to a lower gross domestic product post-BREXIT in the long run – is rather high, so that adding this to the HM Treasury finding of a 10% income loss from BREXIT suggests that the long run welfare loss of the UK could be high. Moreover, the quality of financial market integration in the EU countries is highlighted: For the first time, financial services trade restrictiveness indices are empirically analyzed. This leads – on the basis of a restrictiveness index regarding international financial services and additional information about prudential supervision quality – to an assessment of the quality of financial markets. Policy conclusions take into account the new protectionist challenges and use insights from the Welfens enhanced growth model with trade and foreign direct investment.
    Keywords: BREXIT, financial markets, macroeconomic policy, political economy, welfare analysis, capital flows
    JEL: D6 D53 E6 E66 F5 F21
    Date: 2018–09
  20. By: Philippe Fromenteau; Jan Schymik; Jan Tscheke
    Abstract: How does the exposure to product market competition affect the investment horizon of firms? We study if firms have an incentive to shift investments towards more short-term assets when exposed to tougher competition. Based on a stylized firm investment model, we derive a within-firm estimator using variation across investments with different durabilities. Exploiting the Chinese WTO accession, we estimate the effects of product market competition on the composition of US firm investments. Firms that experienced tougher competition shifted their expenditures towards investments with a shorter durability. This effect is larger for firms with lower total factor productivity.
    Keywords: import competition, firm investment behavior, investment life-span, short-termism
    JEL: F14 F36 G32 L20 D22
    Date: 2019–04
  21. By: André Gröger
    Abstract: This article investigates the impact of negative income shocks in migrant destination countries around the world on the domestic and international labor migration decisions of their family members left behind at origin. Exploiting differences in labor market shocks across and within destinations during the Great Recession, I find large and heterogeneous effects on both types of migration decisions. High remittance-dependent households reduced domestic and increased international labor migration in response to the shock. Low dependence ones remained largely unaffected. I provide a theoretical framework, which rationalizes this heterogeneity by the relative magnitudes of income and substitution effects caused by the shock. The results imply a deterioration in the skill selection of aggregate international migrant flows as high dependence households had below average skill levels. New international migrants targeted the same destinations as established ones from the same household, providing evidence of strong kinship migration networks. The results show that domestic and foreign migration decisions are interrelated and jointly determine aggregate migration flows.
    Keywords: international migration, domestic migration, migration selection, unemployment, Vietnam
    JEL: F22 J61 O15 R23
    Date: 2019–04
  22. By: Ben-David, Itzhak (Ohio State University (OSU) - Department of Finance; National Bureau of Economic Research (NBER)); Kleimeier, Stefanie (Maastricht University - Department of Finance); Viehs, Michael (Oxford University Smith School of Enterprise and the Environment; European Centre for Corporate Engagement (ECCE))
    Abstract: Despite awareness of the detrimental impact of CO2 pollution on the world climate, countries vary widely in how they design and enforce environmental laws. Using novel micro data about firms’ CO2 emissions levels in their home and foreign countries, we document that firms headquartered in countries with strict environmental policies perform their polluting activities abroad in countries with relatively weaker policies. These effects are stronger for firms in high-polluting industries and with poor corporate governance characteristics. Although firms export pollution, they nevertheless emit less overall CO2 globally in response to strict environmental policies at home.
    JEL: N50 O13 Q56 R11
    Date: 2018–09
  23. By: Tran, Thi Ha
    Abstract: The paper examines the impacts of exchange rate on Vietnam’s trade balance with Japan based on the employment of industry-level data in a set of linear and nonlinear auto-regressive distributed lag models. Results from the models indicate a degree of bias in regression when using aggregate data and a linear ARDL approach. Among 19 industries under consideration, the NARDL model presents different responses from 16 industries, which account for 40% of imports and 60% of exports between Vietnam and Japan, to exchange rate movements. The trade balance of each industry responds differently towards exchange rate and asymmetric reactions are found in 9 out of 16 industries affected by changes in exchange rate. The model using aggregate data shows that exchange rate positively affects Vietnam-Japan trade balance in case of currency depreciation, whereas currency appreciation has no impact on the trade balance between the two countries. Besides, results of the model using aggregate data reveal that the level of economic activity of Japan exerts positive impacts on Vietnam’s trade balance with Japan.
    Keywords: Trade balance, exchange rate, ARDL, NARDL
    JEL: E4 E5 F10 F3 F31
    Date: 2019–04–13
  24. By: Paul J.J. Welfens (Europäisches Institut für Internationale Wirtschaftsbeziehungen (EIIW)); Fabian Baier (Europäisches Institut für Internationale Wirtschaftsbeziehungen (EIIW)); Samir Kadiric (Europäisches Institut für Internationale Wirtschaftsbeziehungen (EIIW)); Arthur Korus (Europäisches Institut für Internationale Wirtschaftsbeziehungen (EIIW)); Tian Xiong (Europäisches Institut für Internationale Wirtschaftsbeziehungen (EIIW))
    Abstract: Key aspects covered refer to the cost of leaving the EU and in particular the implications for corporate bond risk premiums in the UK and the Eurozone: The gap between the interest rates of corporate bonds and government bonds could increase in the UK and Eurozone, respectively, as a result of BREXIT where the 2016 BREXIT referendum itself is considered to be a first BREXIT event (see the empirical findings), followed by the main BREXIT event, namely the day of officially leaving the EU - possibly as a No-deal BREXIT. It is as yet not clear what type of BREXIT will be implemented – hard versus soft – and it is also unclear what type of free trade agreement the EU and the UK could accomplish post-BREXIT. However, it is obviously necessary to carefully consider the background of the BREXIT dynamics and to then refer to various versions of BREXIT if one is to understand the inherent politico-economic dynamics of BREXIT – with a No-deal case representing an analytical benchmark which most politicians in the British Parliament obviously would want to avoid; a simple way to indeed avoid this case, with obvious high costs for the British economy, is not easy to discern as the UK’s political system is fractured. If the safe-haven status of the UK should be impaired by BREXIT, the rise of government bond interest rates by 0.3% would stand for the same burden as the net UK contribution to the EU.
    Keywords: BREXIT, capital markets, credit spreads, FDI, growth
    JEL: F02 F4 F21 G1 G2
    Date: 2019–03
  25. By: Julie Ing (University of Rennes, France); Jean-Philippe Nicolai (ETH Zurich, Switzerland)
    Abstract: This paper develops a simple partial equilibrium model with two countries (North and South) to fathom the effects of firms’ relocation in a context of international and imperfect competition. Two different production technologies are considered, a clean technology and a dirty one, and the effects of relocation according to the kind of technology used by the relocated firms are determined. Two heterogeneous firms in the North and only one dirty firm in the South are assumed and the four different possible scenarios are compared: neither firm relocates, the two northern firms relocate, the clean one relocates and the dirty one relocates. This paper demonstrates that the relocation of a dirty firm as compared to the relocation of a clean firm is worse for the environment, better for northern consumers, and better for the domestic profits. Moreover, the relocation of a dirty firm always increases global emissions, while the relocation of a clean firm may decrease global emissions.
    Keywords: Relocation, Emissions tax, Trade of polluting goods, Dirty and clean production technologies, Imperfect competition
    JEL: L13 Q53 Q58
    Date: 2019–04
  26. By: Falkingham, Jane; Giulietti, Corrado; Wahba, Jackline; Wang, Chuhong
    Abstract: This paper is the first attempt to study the causal impact of “Brexit”, namely the UK’s departure from the European Union (EU), on the post-graduation mobility decisions of EU students in the UK. We exploit the British government’s formal withdrawal notification under Article 50 as a natural experiment and employ a difference-in-differences design. Using data from a new survey of graduating international students, we find that EU graduating students are significantly more likely than non-EU graduating students to plan on leaving the UK upon graduation immediately after the announcement. Interestingly, results are especially driven by students from the new EU countries and students from the EU14 countries who are undecided of their migration plans. We further show that the deterrent effects are heterogeneous and depend on age and subject among others. These findings carry important implications for post-Brexit UK and for other European countries with emerging calls for their own referendums.
    Keywords: Brexit,Article 50,Higher education,International students,Intention to leave
    Date: 2019
  27. By: Millard, Stephen (Bank of England); Nicolae, Anamaria (Durham University Business School); Nower, Michael (Durham University Business School)
    Abstract: In this paper we examine the impact of non-trading firms on labour productivity and its persistence in response to macroeconomic shocks, through their entry and exit into the domestic market, in a model with monopolistic competition and heterogeneous firms. We quantify the effects of various macroeconomic shocks on labour productivity and we demonstrate that non-trading domestic firms’ entry and exit into the domestic market explains the persistence of labour productivity in response to transitory shocks. We also show that the model successfully replicates the sluggish recovery of labour productivity in the United Kingdom since the Great Recession.
    Keywords: International trade; heterogeneous firms; productivity; endogenous persistence
    JEL: E24 F17 J24 O40
    Date: 2019–04–12
  28. By: Brahim Gaies (IPAG Business School); Khaled Guesmi (IPAG Business School); Stéphane Goutte (LED - Université Paris 8)
    Abstract: This study suggests a new decomposition of the effect of Foreign Direct Investment (FDI) on long-term growth in developing countries. It reveals that FDI not only have a positive direct effect on growth, but also increase the latter by reducing the recessionary effect resulting from a banking crisis. Even more, they reduce its occurrence. JEL: F65, F36, G01, G15
    Keywords: growth,FDI,system GMM,panel logit model
    Date: 2019–04–07
  29. By: Pritish Behuria
    Abstract: Two parallel tracks of research on economic transformation in developing countries have operated at a distance from each other over the last two decades. A global track – global value chains/global production networks (GVC/GPNs) – has focused on the increasing interconnectedness of global trading networks and has overlooked the role of the state and the explanatory power of domestic political economy. Meanwhile, a domestic track – including literature on developmental states, industrial policy and political settlements – has tended to take a methodologically nationalist perspective to examine economic transformation in developing countries, with limited reflections on external economic and political pressures. This paper contributes to an emerging stream of literature that examines how the domestic and global scales influence how developing country governments and firms tackle the challenge of economic upgrading. By combining insights from the political settlements and GVC/GPNs literature, this paper examines the Rwandan government’s attempt at upgrading its coffee production to enter specialty coffee markets. It shows how the existing GVC/GPNs literature makes an important contribution to describing how multipolar governance influences the pathways for economic upgrading in Rwanda’s coffee sector, but that even where access is granted, benefits are captive to the demands of international buyers, and gains for some have not translated across the sector. Insights from the political settlements literature showcase how domestic politics influences who benefits from insertion to GVC/GPNs and how the unequal provision of opportunities affects political stability.
    Date: 2018
  30. By: Rory Horney; Matthew Alford
    Abstract: While understanding the influence of private governance through global lead firms has been a defining feature of global value chain (GVC) analysis, the state has often been implicitly observed as part of the broader institutional context shaping GVCs. More recently, however, the state–GVC nexus has attracted more explicit attention. Drawing on insights from GVC research, this paper highlights four roles of the state within GVCs – as facilitator, regulator, producer and buyer – and outlines key issues on the research agenda in relation to each role. While the facilitator role has received considerable attention and the regulator role is a growing focus, those of producer and buyer are relatively underexplored. The paper concludes that the contemporary reformulation of economic globalisation means the state–GVC nexus is, and will continue to be, especially significant in shaping development outcomes.
    Date: 2019
  31. By: O'Rourke, Kevin Hjortshøj; Rahman, Ahmed; Taylor, Alan M.
    Abstract: Why did per capita income divergence occur so dramatically during the 19th Century, rather than at the outset of the Industrial Revolution? How were some countries able to reverse this trend during the globalization of the late 20th Century? To answer these questions, this paper develops a trade-and-growth model that captures the key features of the Industrial Revolution and Great Divergence between a core industrializing region and a peripheral and potentially lagging region. The model includes both endogenous biased technological change and intercontinental trade. An Industrial Revolution begins as a sequence of more unskilled-labor-intensive innovations in both regions. We show that the subsequent co-evolution of trade and directed technologies can create a delayed but inevitable divergence in demographics and living standards-the peripheral region increasingly specializes in production that worsens its terms of trade and spurs even greater fertility increases and educational declines. Allowing for technological diffusion between regions can mitigate and even reverse divergence, spurring a reversal of fortune for peripheral regions.
    Keywords: "North-South" model; "West-East" model; demog- raphy; education; Endogenous Growth; Fertility; industrial revolution; skill premium; Unified growth theory
    JEL: F11 F16 F43 J10 J24 N10 N30 O11 O19 O33 O4 O41
    Date: 2019–04
  32. By: Yilmaz Kiliçaslan (Anadolu University); Ugur Aytun; Oytun Meçik
    Abstract: In this study, we examine how firms’ positions (supplier, consumer, or both) in both global and domestic value chains (GVC andDVC) affect their productivity. This is said to be the first attempt in exploring the impact of integration of firms to the GVCs on productivity generation in Turkish manufacturing industry at the firm level. The analysis is based on firm level data obtained from Turkish Statistical Institute (TurkStat) and covers the period from 2003 to 2015. The data used in the analysis includes all firms employing 20 or more employees in Turkish manufacturing industry. Our findings based on both fixed-effects and GMM estimations show that while supplier position on domestic chain has negative effect on productivity, the same position in GVC vanishes this effect. Consumer position in the GVC, on the other hand, provide more benefits to SMEs than to large-scale firms.
    Date: 2019
  33. By: Kevin Hjortshøj O'Rourke; Ahmed Rahman; Alan M. Taylor
    Abstract: Why did per capita income divergence occur so dramatically during the 19th Century, rather than at the outset of the Industrial Revolution? How were some countries able to reverse this trend during the globalization of the late 20th Century? To answer these questions, this paper develops a trade-and-growth model that captures the key features of the Industrial Revolution and Great Divergence between a core industrializing region and a peripheral and potentially lagging region. The model includes both endogenous biased technological change and intercontinental trade. An Industrial Revolution begins as a sequence of more unskilled-labor-intensive innovations in both regions. We show that the subsequent co-evolution of trade and directed technologies can create a delayed but inevitable divergence in demographics and living standards—the peripheral region increasingly specializes in production that worsens its terms of trade and spurs even greater fertility increases and educational declines. Allowing for technological diffusion between regions can mitigate and even reverse divergence, spurring a reversal of fortune for peripheral regions.
    JEL: F11 F16 F43 J10 J24 N10 N30 O11 O19 O33 O4 O41
    Date: 2019–04
  34. By: OECD
    Abstract: This report, part of the “Cities” collection, highlights the contribution of border towns to the process of regional integration in West Africa. For 18 countries, six indicators are used to identify the specificities of border towns at the local, national and international levels: demography, urban morphology, formal enterprises, health infrastructure, road accessibility, border control posts. These indicators are analysed from the perspective of three geographical scales of regional integration (density, distance and division). The report details the economic and institutional obstacles facing border towns. It concludes with place-based political options to facilitate the economic and political development of West African border towns.Also in this Collection:“Population and Morphology of Border Cities”, No. 21“Businesses and Health in Border Cities”, No. 22“Accessibility and Infrastructure in Border Cities”, No. 23
    Keywords: border cities, multidimensional analyses, placed-based policies, regional integration, West Africa
    JEL: O18 O21 F15 F10
    Date: 2019–04–18

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