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on International Trade |
| By: | Ana de Almeida (Banco de Portugal); Teresa Sastre (Banco de España); Duncan van Limbergen (De Nederlandsche Bank); Marco Hoeberichts (De Nederlandsche Bank) |
| Abstract: | European Union (EU) integration has boosted inward EU foreign direct investment (FDI) into the United Kingdom (UK). Within the EU, the UK has a relatively significant stock of inward FDI, having reached 61% of its Gross Domestic Product (GDP) in 2017 and risen strongly since 2005. The exit of the UK from the EU and the Single Market will probably result in reduced FDI amongst both investment destinations. The aim of this study is to look at the “real-time” effects of the Brexit June 2016 referendum outcome and its aftermath on UK-related FDI activity. Although FDI flows are notably volatile and biased by periodic non-systematic outliers, and despite some caveats on data sources and availability of time series data, we find tentative evidence of a post-referendum slowdown in gross FDI flows between the UK and the EU, notably involving the big EU economies and Ireland. Regarding a very favoured form of FDI, greenfield FDI, we document a post-referendum fall in announced projects and capital expenditures into the UK by both other EU countries as well as one of the most important non-EU partners, the United States. A different approach is also used to analyse the Brexit effect on FDI activity, based on estimating the effect of two successive stages in the European integration process – EU membership and the Euro area launch – and considering Brexit effects as the reversal of the UK integration into the EU. By using a fixed-effect gravity model to estimate the effects of these integration processes on bilateral FDI activity with the UK, the empirical results suggest that, on the one hand, this country played a role as a gateway for a set of international investor countries outside the Euro area to enter European markets and, on the other, it acted as a hub that reallocated these inflows and those coming from Euro countries across the Euro area itself. Thus the disconnection of the UK from the EU may have further implications for FAI than just reverting the effect of EU membership. Larger trade barriers and lower integration between the UK and the Euro area countries’ markets will likely have a negative impact on FDI activity in the UK and might have, in the short run, a negative effect in the Euro area. |
| Keywords: | foreign direct investment, FDI, Brexit, EU membership, single currency |
| JEL: | F15 F21 |
| Date: | 2019–05 |
| URL: | http://d.repec.org/n?u=RePEc:bde:opaper:1913&r=all |
| By: | Rodolfo Campos (Banco de España); Jacopo Timini (Banco de España) |
| Abstract: | This paper uses a gravity model approach to estimate the effects of Brexit in two dimensions: trade in goods and migration. We simulate two scenarios: 1) no agreement with reversión to WTO rules and no special treatment for migrants; 2) signature of a bilateral free trade agreement (FTA). According to our results, Brexit may have large negative effects on trade and migration flows between the EU and the UK. In the WTO scenario, trade flows are predicted to drop by 30% and migration by close to 25%. If the UK and the EU sign an FTA-like agreement (which does not include free mobility of labour), the negative effects on trade are lessened although there is no significant difference in terms of migration with respect to the WTO scenario. |
| Keywords: | international trade, migration, Brexit, gravity models, United Kingdom, European Union |
| JEL: | F13 F14 F17 F22 |
| Date: | 2019–05 |
| URL: | http://d.repec.org/n?u=RePEc:bde:opaper:1912&r=all |
| By: | KIM YoungGak; INUI Tomohiko |
| Abstract: | Under the recent rapid development of production fragmentation across countries, there is a growing number of studies that examines the effect of international outsourcing and offshoring decisions on the domestic operations of firms. According to the Global Value Chain Index (GVCI) developed by OECD, the participation rate of Japanese firms in global value chains increased from 29.3 % in 1995 to 47.7% in 2007. RIETI-TID database shows that Japanese parts and product imports from China increased from 5.8 billion US dollars in 2000 to 25.0 billion US dollars in 2016. This paper examines the effect of increases in imported intermediate input use goods on firm outcomes, especially exports. First, we examine the effect on firm productivity, and we find a positive relationship between increases in imported intermediate input use goods and productivity level. When we separate the analysis by import source regions, a positive relationship is observed from imports from North America and Europe, but no relationship is found in the case of imports from China. These results indicate that firms benefit from the technology spillover effects from the advanced countries by importing from them. Our analysis also indicates that the increase in imports supports the improvement of resource allocation within firms. Next, we analyze the effect of the increase of imported inputs on both extensive margin and intensive margin of firm exports, controlling for the productivity of firms and establishments, finding a positive relationship in both cases. These results imply that imported inputs have a positive impact on firm exports both through productivity improvement and reduced intermediate input price. We also examine the effect of imported inputs on the number of employees, but we find no significant effect. |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:eti:rdpsjp:19016&r=all |
| By: | Olga Pindyuk (The Vienna Institute for International Economic Studies, wiiw) |
| Abstract: | Trade in services was overshadowed by trade in goods in the Brexit debate, undeservingly so as services account for almost half of the UK cross-border exports and the EU is a major market for UK services exporters. Leaving the EU Single Market in services will cause increased regulatory costs of trading services and could have significant effects on the volume and composition of UK services exports under any exit deal. The highest rise in trade costs is to be expected in professional services, such as legal services, architecture, engineering, and accounting. With a rise in cross-border trade barriers there would be a relative increase in the proportion of services provided via a more costly physical presence within the EU. Regulatory heterogeneity among the EU members towards third countries will be an additional factor behind significant shifts in the sectoral and geographic composition of the UK services exports. |
| Keywords: | services trade, Brexit, Single Market |
| JEL: | L80 F13 F15 |
| Date: | 2019–06 |
| URL: | http://d.repec.org/n?u=RePEc:wii:pnotes:pn:31&r=all |
| By: | James Lake (Southern Methodist University); Moise Nken (Ryerson University); Halis M. Yildiz (Ryerson University) |
| Abstract: | We show that multilateral tariff binding liberalization substantially impacts the nature and extent of Preferential Trade Agreement (PTA) formation. First, it shapes the nature of forces constraining expansion of Free Trade Agreements (FTAs). The constraining force is a free riding incentive of FTA non-members under relatively high bindings but an exclusion incentive of FTA members under relatively low bindings. Second, multilateral tariff binding liberalization shapes the role played by PTAs in the attainment of global free trade. Initially, tariff binding liberalization leads to Custom Union (CU) formation in equilibrium but in a way that undermines the pursuit of global free trade. However, further tariff binding liberalization leads to FTA formation in equilibrium and in a way that facilitates the attainment of global free trade. Our theoretical analysis also has implications regarding recent empirical discussions over the relative merits of FTAs versus CUs. |
| Keywords: | Tariff bindings, Preferential Trade Agreement, Free Trade Agreement, Customs Union, global free trade, dynamic |
| JEL: | C72 F12 F13 |
| Date: | 2019–06 |
| URL: | http://d.repec.org/n?u=RePEc:smu:ecowpa:1904&r=all |
| By: | Larch, Mario (Department of Law and Economics, University of Bayreuth & CEPII & ifo; CESifo & GEP.); Monteiro, José-Antonio (World Trade Organization); Piermartini, Roberta (World Trade Organization); Yotov, Yoto (School of Economics, Drexel University & CESifo & ifo Institute & ERB-BAS) |
| Abstract: | We capitalize on the latest developments in the empirical structural gravity literature to revisit the question of whether and how much does GATT/WTO membership affect international trade. We are the first to capture the non discriminatory nature of GATT/WTO commitments by measuring the effects of GATT/WTO membership on international trade relative to domestic sales. These unilateral effects of GATT/WTO membership are found to be large, positive, and statistically significant. We also obtain bilateral GATT/WTO estimates, which are larger than those reported in the literature. In particular, our results imply that, on average, joining GATT and/or WTO has increased trade between members by 171% and trade between member and non-member countries by about 88%. We also find that although both GATT/WTO has been effective in promoting trade between members, the WTO has been more effective in promoting trade with non-members than GATT. A battery of sensitivity experiments confirms the effectiveness of our methods and robustness of our main findings. |
| Keywords: | GATT/WTO; International Trade; Domestic Sales; Structural Gravity |
| JEL: | F13 F14 F16 |
| Date: | 2019–05–28 |
| URL: | http://d.repec.org/n?u=RePEc:ris:drxlwp:2019_004&r=all |
| By: | Alan V. Deardorff (University of Michigan); Rishi R. Sharma (Colgate University) |
| Abstract: | This paper conducts analysis of a free trade agreement within a simple model of partial equilibrium, linear supply and demand, and circumstances such that trade flows are positive in all equilibria considered. The results illustrate the close connection, on the one hand, between trade creation and the benefit to the FTA-forming countries and to the world, and, on the other hand, the equally close connection between trade diversion and the harm to outside countries and potentially both the participating countries and the world. In addition, by considering a second case in which a country that already has one FTA adds another, we show that the new FTA causes trade to be diverted from its prior partner, an effect that we call trade reversion. It turns out that trade reversion causes neither harm nor benefit to the importing country, and when we look at world welfare, if trade reversion is equal to trade diversion their two effects cancel out, leading the effect on world welfare to be a simple function of the amount of trade creation and the size of the tariff. |
| Keywords: | FTAs, Trade creation, trade diversion |
| JEL: | F13 |
| URL: | http://d.repec.org/n?u=RePEc:mie:wpaper:670&r=all |
| By: | Antoine Berthou (Banque de France); Sophie Haincourt (Banque de France); Marie-Elisabeth de la Serve (Banque de France); Ángel Estrada (Banco de España); Moritz A. Roth (Banco de España); Alexander Kadow (Deutsche Bundesbank) |
| Abstract: | This joint work by the Bundesbank, the Banque de France and the Banco de España highlights some of the numerous channels through which Brexit will affect the UK economy and its economic partners. In particular, it focuses on trade and migration channels, adding a more general assessment of exiting the EU through the use of a gravity model. The trade cannel alone may cut UK GDP by 2% over the medium term if the UK reverts to WTO rules, while a more general gravity model would point to UK GDP falling by almost 6% compared to baseline. According to our analysis, the ‘cost of non-Europe’ (such as originally stated by Cecchini’s seminal work in 1988) lies therefore between 2% and 6% in terms of real GDP losses for the UK. With the shock being largely asymmetric, the EA remains relatively unscathed by the UK’s exit, with GDP less than 1% lower than baseline by 2023. The study also shows that results are sensitive to the envisaged policy response. In general, monetary and fiscal policies may act to cushion a Brexit-related shock; however, the potency of the policy response depends on the underlying source of the shock. |
| Keywords: | Brexit, NiGEM, trade, tariffs, non-tariff trade barriers, migration, scenario analysis |
| JEL: | F15 F42 F53 |
| Date: | 2019–05 |
| URL: | http://d.repec.org/n?u=RePEc:bde:opaper:1911&r=all |
| By: | Lisandro Abrego; Maria Alejandra Amado; Tunc Gursoy; Garth P. Nicholls; Hector Perez-Saiz |
| Abstract: | In March 2018, representatives of member countries of the African Union signed the African Continental Free Trade Area (AfCFTA) agreement. This agreement provides a framework for trade liberalization in goods and services and is expected to eventually cover all African countries. Using a multi-country, multi-sector general equilibrium model based on Costinot and Rodriguez-Clare (2014), we estimate the welfare effects of the AfCFTA for 45 countries in Africa. Three different model specifications—comprising both perfect competition and monopolistic competition—are used. Simulations include full elimination of import tariffs and partial but substantial reduction in non-tariff barriers (NTBs). Results reveal significant potential welfare gains from trade liberalization in Africa. As intra-regional import tariffs in the continent are already low, the bulk of these gains come from lowering NTBs. Overall gains for the continent are broadly similar under the three model specifications used, with considerable variation of potential welfare gains across countries in all model structures. |
| Date: | 2019–06–07 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:19/124&r=all |
| By: | Felbermayr, Gabriel (Kiel Institute, Kiel University); Syropoulos, Constantinos (School of Economics, Drexel University & CESifo.); Yalcin, Erdal (Konstanz University of Applied Sciences & CESifo); Yotov, Yoto (School of Economics, Drexel University & CESifo & ifo Institute & ERI-BAS) |
| Abstract: | Using a new, global data base covering the years 1950 to 2015, we study the impact of sanctions on international trade and welfare. We make use of the rich dimensionality of our data and of the latest developments in the structural gravity literature. Starting with a broad evaluation by sanction type, we carefully investigate the case of Iran. Effects are significant but also widely heterogeneous across sanctioning countries. Moreover, they depend on the direction of trade. We also perform a counterfactual analysis which translates our partial equilibrium sanction estimates into heterogeneous but intuitive general equilibrium. |
| Keywords: | Sanctions; Effectiveness of Sanctions; Structural Gravity |
| JEL: | F13 F14 F51 |
| Date: | 2019–06–17 |
| URL: | http://d.repec.org/n?u=RePEc:ris:drxlwp:2019_003&r=all |
| By: | Sam Haltenhof (University of Michigan) |
| Abstract: | Internet connectivity and exports of services are positively correlated. This paper presents a gravity model with bilateral measures of Internet connectivity to formalize this correlation. To establish bilateral connectivity, I construct a novel dataset based on the undersea fiber-optic cable network responsible for 99% of international data traffic. I measure the degree of bilateral connectivity using information on the capacities of these cables in order to estimate the effect of that connection on export growth between pairs of digitally connected countries. I estimate a positive relationship between Internet connectivity and bilateral exports in data-intensive industries with an elasticity of 0.25 to 2.25 over a variety of possible settings. |
| Keywords: | Internet, trade in services, gravity |
| JEL: | F14 |
| URL: | http://d.repec.org/n?u=RePEc:mie:wpaper:668&r=all |
| By: | Simplice A. Asongu (Yaoundé/Cameroon); Uduak S. Akpan (SPIDER Solutions, Nigeria); Salisu R. Isihak (Rural Electrification Agency, Nigeria) |
| Abstract: | This study employs panel analysis to examine the determinants of foreign direct investment (FDI) to Brazil, Russia, India, China, and South Africa (BRICS) and Mexico, Indonesia, Nigeria, and Turkey (MINT) using data for eleven years i.e. 2001 – 2011. First, it uses pooled time-series cross sectional analysis to estimate the model on determinants of FDI for three samples: BRICS only, MINT only, and BRICS and MINT combined; then, fixed effects model is also employed to estimate the model for BRICS and MINT combined. The results show that market size, infrastructure availability, and trade openness play the most significant roles in attracting FDI to BRICS and MINT while the roles of availability of natural resources and institutional quality are insignificant. Given that FDI inflow to a country has the potential of being mutually beneficial to the investing entity and host government, the challenge is on how BRICS and MINT can sustain the level of FDI inflow and ensure it results in economic growth and socio-economic transformation. To sustain the level of FDI inflow, governments of BRICS and MINT need to ensure that their countries remain attractive for investment. BRICS and MINT also need to ensure that their economies absorb substantial skills and technology spillovers from FDI inflow to promote sustainable long-term economic growth by investing more in their human capital. The study is significant because it contributes to literature on determinants of FDI by extending the scope of previous studies which often focus only on BRICS. |
| Keywords: | FDI, determinants, fast-growing economies, BRICS, MINT |
| JEL: | C52 F21 F23 O40 P37 |
| Date: | 2018–01 |
| URL: | http://d.repec.org/n?u=RePEc:abh:wpaper:18/038&r=all |
| By: | Beata Bierut (Narodowy Bank Polski); Piotr Dybka (SGH Warsaw School of Economics) |
| Abstract: | Although the impact of institutions has been broadly studied in the literature on economic growth, their impact on international trade is less well-established. We aim to fill this gap by creating an extended database that, apart from price and non-price factors traditionally analyzed as determinants of exports, also includes measures of institutional development. Next, we introduce the Bayesian Model Averaging to establish which factors play the most important role for the export performance. Our results show that institutions have two types of effects on exports: a direct positive effect on the overall export performance (e.g. regulation) as well as a transformational impact on the export structure (from less to more technologically advanced exports, e.g. freedom to trade internationally). Our results also confirm that technological factors (e.g. patents) have a much greater impact on export performance than price factors. Moreover, some technological factors only have a significant transformational impact on the export structure (e.g. R&D expenditure). Human capital also seems to have only a transformational, rather than direct, impact on exports. |
| Keywords: | Trade, price competitiveness, technological competitiveness, institutional environment, Bayesian Model Averaging |
| JEL: | C11 C33 F14 F15 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:nbp:nbpmis:306&r=all |
| By: | Guanie Lim (Nanyang Centre for Public Administration, Nanyang Technological University, Singapore) |
| Abstract: | This paper focuses on China fs outward foreign direct investment (FDI), arguably one of the most prominent forms of enew f capital entering the Association of South East Asian Nations (ASEAN) in recent times, not least since the Belt and Road Initiative (BRI) was announced by Chinese President Xi Jinping in 2013. Despite initial warmth and hopes for Chinese capital to uplift the economies of the region, recent years have witnessed some high profile pushback against China by some ASEAN members. Key concerns include but are not limited to new, often project-related concerns as well as old, if unspoken, fears that eChina is buying the world f through a spate of edebt trap diplomacy f. This paper aims to shed light on this issue, focusing on China fs outward FDI into ASEAN. Through an analysis of statistical information, it shows that Chinese FDI in ASEAN economies is considerably esmaller f than what popular rhetoric suggests. Firstly, Chinese outward FDI, while increasing in value, is not more significant than the region fs traditional investors, mainly Japan and ASEAN itself. Secondly, the quality of Chinese outward FDI is considerably less sophisticated and sustainable than what is commonly expected. Much of it is directed towards tertiary industries such as real estate activities, which contain a rather speculative element. |
| Date: | 2019–06 |
| URL: | http://d.repec.org/n?u=RePEc:ngi:dpaper:19-04&r=all |
| By: | Amat Adarov (The Vienna Institute for International Economic Studies, wiiw); Mahdi Ghodsi (The Vienna Institute for International Economic Studies, wiiw); Gabor Hunya (The Vienna Institute for International Economic Studies, wiiw); Olga Pindyuk (The Vienna Institute for International Economic Studies, wiiw) |
| Abstract: | Foreign direct investment (FDI) inflows to Central, East and Southeast Europe (CESEE) declined by 13% in 2018. The decline was almost exclusively on account of lower inflows into Russia, which halved compared with 2017. Inflows to the new EU Member States (EU-CEE11) were largely unchanged from the previous year, despite strong economic growth. By contrast, inflows into the Western Balkans rose by 28%, thanks in particular to rising investor interest in Serbia and North Macedonia. Turkey received a bit more FDI than in 2017, but the overall amount is still very low relative to the size of the economy. The decline in FDI to Russia in 2018 was particularly striking. Russia is becoming more and more inward looking, due to the exchange of sanctions with the West and (related) import-substitution economic policies. Efforts to stimulate the return of capital from abroad do not seem to be working FDI outflows were three times greater than inflows in 2018. Services accounted for the bulk of FDI in most countries in CESEE last year. In particular, producer-related business activities such as ICT, business process outsourcing and shared service centres expanded across the region. Services are not capital intensive, and thus are barely reflected in FDI data. However, the increasing share of services in announced greenfield FDI projects, and of commercial services in total exports, both point to a growing importance for foreign investors in these sectors. Germany and the US are the most important ultimate sources of FDI in CESEE. The share of Austrian outward FDI in CESEE is shrinking, at the expense of Asia and the US. Tax havens, the Netherlands, Cyprus and Luxembourg in particular are among the largest immediate investors but not among the important ultimate investing countries. Several trends shaping the future of FDI that are given special attention in this study. First, we find that the link between FDI inflows and GDP growth has become less strong since the crisis. Second, FDI inflows and participation in global value chains are strongly and positively correlated. Third, using a gravity model we highlight several CESEE countries attracting FDI at a level above their potential, particularly Montenegro and Bulgaria. By contrast, Belarus and Moldova could attract more FDI if business conditions improve. Finally, we note that business sentiment has a significant impact on greenfield investment decisions. Given that economic confidence across EU-CEE11 countries appears to be declining, we expect lower FDI inflows in 2019, which could lead to lower GDP growth. This is owing to faltering global and European economic activity, and restrictive policies in the US, Russia and China. Tax reform in the US will likely continue to have a particularly important negative impact on global FDI activity. The wiiw FDI Database is available online This online access with a modern query tool supports easy search and download of data. The wiiw FDI Database contains the full set of FDI data with time series starting form 1990 as far as available. Access to wiiw FDI Database |
| Keywords: | foreign direct investment, balance of payments, business sentiment, FDI by form, income repatriation, ultimate investing country, statistics, new EU Member States, Central Europe, Southeast Europe, Western Balkans, Austria, China, Turkey, CIS, Russia, Ukraine |
| JEL: | C82 F21 O57 P23 |
| Date: | 2019–06 |
| URL: | http://d.repec.org/n?u=RePEc:wii:fdirep:fdi:2019-06&r=all |
| By: | Nordin, Ida; Wilhelmsson, Fredrik; Jansson, Torbjörn; Fellmann, Thomas; Barreiro-Hurle, Jesús; Himics, Mihaly |
| Abstract: | There is concern that unilateral climate action in the EU agricultural sector may cause higher emissions abroad (i.e. emission leakage) and harm the competitiveness of the EU´s agricultural sector. Applying the CAPRI model, this paper assesses the potential for border carbon adjustments (BCA) in the form of import tariffs to limit the leakage of emissions and preserve the competitiveness of the EU agricultural sector. Our results show that even though BCA reduces emission leakage, 92 % of the emission reduction in the EU is still offset by emission increases outside the EU. What limits the effectiveness of the investigated BCA measures is that these measures are unilateral, and thus they only adjust for the reduced competitiveness at the EU internal market, whereas EU exports are still largely replaced by commodities produced in less GHG-efficient countries. Therefore, BCA alone cannot solve the high risk of emission leakage in the agri-food sector as a consequence of unilateral EU climate action. |
| Keywords: | Agricultural and Food Policy, Environmental Economics and Policy, International Relations/Trade |
| Date: | 2019–05–29 |
| URL: | http://d.repec.org/n?u=RePEc:ags:eaa172:290209&r=all |
| By: | Edita A. Tan (School of Economics, University of the Philippines Diliman) |
| Abstract: | The paper briefly surveys recent migration policies in major destinations of Filipino migrants and tries to see their effect on migration flows in the past two decades. Most Western OECD economies have heightened their restrictive immigration programs that covered not only those relating to workers but also those for family unification. Their admission for employment is restricted to the highly skilled/highly educated labor. Despite the tightening of policy, emigration to Western OECD increased in the past three decades. Emigration to the US has been declining but emigration to other countries, though relatively small, rose. Saudi Arabia, the largest employer of foreign workers in the Gulf adopted the Nitaqat policy of imposing higher national to foreign labor ratio in the private sector. This may explain the drop in the flow of labor to the GCC in 2015 and 2016. The drop could be a temporary fluctuation as the state could not easily develop sufficient number of skilled and disciplined citizens to replace foreign labor. The GCC states’ heavy dependence on foreign labor is expected to continue. The skill composition of foreign workers may change depending on their future economic and social development. |
| Keywords: | migration; Philippines |
| JEL: | J08 J15 J61 |
| Date: | 2019–06 |
| URL: | http://d.repec.org/n?u=RePEc:phs:dpaper:201902&r=all |
| By: | Jacks, David S. (Simon Fraser University and NBER); Novy, Dennis (University of Warwick and CEPR) |
| Abstract: | What precisely were the causes and consequences of the trade wars in the 1930s? Were there perhaps deeper forces at work in reorienting global trade prior to the outbreak of World War II? And what lessons may this particular historical episode provide for the present day? To answer these questions, we distinguish between long-run secular trends in the period from 1920 to 1939 related to the formation of trade blocs (in particular, the British Commonwealth) and short-run disruptions associated with the trade wars of the 1930s (in particular, large and widespread declines in bilateral trade, the narrowing of trade imbalances, and sharp drops in average traded distances). We argue that the trade wars mainly served to intensify pre-existing efforts towards the formation of trade blocs which dated from at least 1920. More speculatively, we argue that the trade wars of the present day may serve a similar purpose as those in the 1930s, that is, the intensification of China- and US-centric trade bloc. |
| Keywords: | Commonwealth ; distance ; gravity ; interwar period ; trade blocs ; trade wars |
| JEL: | F1 F3 N7 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:wrk:warwec:1197&r=all |
| By: | Sarah Guillou (Observatoire français des conjonctures économiques); Tania Treibich (Observatoire français des conjonctures économiques) |
| Abstract: | The objective of this paper is to show that part of the fixed cost of a firm’s trade expansion is due to the acquisition of new internal capabilities (e.g., technology, production processes or skills), which implies a costly change in the firm’s internal labor organization. We investigate the relationship between a firm’s labor structure, in terms of the relative number of managers, and the scope of its export portfolio, in terms of its product-destination varieties. The empirical analysis is based on a matched employer-employee dataset covering the population of French firms from tradable sectors over the period 2009-2015. Our analysis suggests that market ex- pansion, both through export entry and export diversification, is associated with a change in the firm’s workforce composition, namely an increase in the number of managerial layers. These results are generally confirmed with the use of an instrumental variable approach to control for reverse causality. We show how these results are consistent with a simple model, where the complexity of a firm’s operations increases with the number of product-destination couples ex- ported and the manager’s role is to address the unsolved problems arising from such increased operational complexity. |
| Keywords: | Exports diversification; Managers; Occupations; Employer-employee data |
| JEL: | F16 E24 C14 D20 |
| Date: | 2019–06 |
| URL: | http://d.repec.org/n?u=RePEc:spo:wpmain:info:hdl:2441/6th2hsnrrq9ro9u65eksphmaf9&r=all |
| By: | Daryna Grechyna (Department of Economic Theory and Economic History, University of Granada.) |
| Abstract: | This paper explores the impact of international financial and trade networks on current account balances in a large sample of developing and developed countries. The financial and trade inter-country networks centrality measures are computed based on the quantity and strength of the financial assets flows (for financial network) or export flows (for trade network) among the countries. I rely on a panel data and employ the fundamental characteristics of a country’s trading partners as instruments for the position of a given country in the international networks. I find that a more central position in the international trade or financial network improves the current account balance in developed and developing countries. Besides, the impact of international financial network on current account has become stronger over the past two decades and a better position in this network helped improve the current account balances during the Great Recession. |
| Keywords: | current account; international financial network; international trade network; panel data. |
| JEL: | F32 F41 F42 |
| Date: | 2019–06–11 |
| URL: | http://d.repec.org/n?u=RePEc:gra:wpaper:19/08&r=all |
| By: | : Andrew Minster; Danielle Kavanagh-Smith; Lara-Zuzan Golesorkhi (Schwartz Center for Economic Policy Analysis (SCEPA)) |
| Abstract: | This paper recognizes additional complicating factors, like social policy and employers' power to shape job prospects, to more accurately characterize the relationship between the labor market and migration. The authors discuss the need to improve the status of unions, create state-funded jobs guarantees, and reform retirement policy to support all workers in the face of growing employer influence. |
| Keywords: | immigration, job markets, undocumented, compensation, immigration economics, labor |
| JEL: | J6 J3 J5 J7 |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:epa:cepawp:2018-01&r=all |
| By: | Fernando Giuliano; Emiliano Luttini |
| Abstract: | We use transaction-level customs data to document that a large majority of Chilean imports are invoiced in dollars regardless of country of origin and sector. We study the implications of this fact for the determination of exchange rate pass-through (ERPT) to border prices. We find that the special role of the dollar in international trade has real effects, but bilateral exchange rates with respect to exporter currencies also matter in the medium-term. In particular, exchange rate fluctuations against the dollar account for most of the ERPT in the short run and are still relevant after two years. However, the cumulative ERPT with respect to the exporter country's currency increases with time and after two years accounts for most of the ERPT to border prices. |
| Keywords: | invoice currency, exchange rate pass-through |
| JEL: | F3 F4 |
| Date: | 2019–05 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:784&r=all |
| By: | Simplice A. Asongu (Yaoundé/Cameroon); Ivo J. Leke (Saskatoon, Canada) |
| Abstract: | The study investigates whether development assistance can be used to crowd-out the negative effect of terrorism on international trade. The empirical evidence is based on a panel of 78 developing countries for the period 1984-2008 and Quantile Regressions. The following main findings are established. First, bilateral aid significantly reduces the negative effect of transnational terrorism on trade in the top quantiles of the trade distribution. Second, multilateral aid also significantly mitigates the negative effect of terrorism dynamics on trade in the top quantiles of the trade distributions. It follows that it is primarily in countries with above median levels of international trade that development assistance can be used as an effective policy tool for dampening the adverse effects of terrorism on trade. Practical implications are discussed. |
| Keywords: | Exports; Foreign Aid; Terrorism; Development |
| JEL: | F40 F23 F35 Q34 O40 |
| Date: | 2018–01 |
| URL: | http://d.repec.org/n?u=RePEc:abh:wpaper:18/032&r=all |
| By: | Annalisa Marini (University of Exeter); Steve McCorriston (University of Exeter) |
| Abstract: | Changes in weather patterns associated with climate change can be an important determinant of commodity price volatility. In this paper, we provide new insights into this issue from two perspectives. First, by using detailed country-level precipitation data for a specific commodity (bananas), and employing a panel VAR model, we show that untypical rainfall patterns are an important influence on export prices and that the impact on export prices varies across exporters given the largely uncorrelated experience of anomalous levels of precipitation. Second, we show that source-specific rainfall patterns generate spillovers across competing exporters and these spillover effects can dominate the own-country precipitation anomaly effect. Accounting for these spillover effects is important for several reasons: (i) the aggregate impact of weather fluctuations on importers depends on the magnitude of these effects which we show to be quantitatively strong; (ii) for some exporters, the spillover effect on export prices can be a more important source of price volatility than their own experience of untypical weather; (iii) given the frequency of precipitation anomalies across all export countries, untypical variations in weather is an important source of commodity price volatility for all exporters and importers. In sum, the impact of climate-related weather events on prices is more nuanced than recent research has suggested. |
| Keywords: | Weather, Spillovers, Export Prices, Panel Vector Autoregression (PVAR) |
| JEL: | F00 C3 C5 Q1 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:exe:wpaper:1905&r=all |
| By: | Petros C. Mavroidis; André Sapir |
| Abstract: | China’s accession to the World Trade Organisation in 2001 was hailed as the natural conclusion of a long march that started with the reforms of Deng Xiaoping in the 1970s. However, China’s participation in the WTO has been anything but smooth. Its self-proclaimed socialist market economy system has alienated its trading partners. Two diametrically opposite approaches have been proposed to deal with the emerging problems. One is to demand that China changes its economic regime. The other is to stay idle and accept that the WTO must accommodate different economic regimes, no matter how idiosyncratic. In this paper, we argue that there is a more promising third way. In our view, the problems posed by China arise from the fact that, while in the past the GATT/WTO had to address the accession of socialist countries or of big trading nations, it never had to deal with a big, socialist country like China. In order to retain its principles while accommodating China, the WTO needs to translate some of its implicit legal understanding into explicit treaty language. We advance specific proposals to this effect. |
| Date: | 2019–06 |
| URL: | http://d.repec.org/n?u=RePEc:bre:wpaper:31119&r=all |
| By: | Camila Casas |
| Abstract: | In the presence of price rigidities, nominal exchange rate fluctuations can have real effects on the economy. External shocks may have differentiated effects across economic sectors depending on firms' marginal cost structure and features of the demand they face, such as strategic complementarities. I analyse the relationship between the exchange rate pass-through to export and import prices and volumes and the use of imported inputs in production, an important determinant of marginal cost. Using microdata from Colombia, I show that manufacturing industries differ significantly in their use of imported inputs and in the estimated exchange rate pass-through. I find a clear correlation between the use of imported inputs and the response of prices to changes in exchange rates. That is, the exchange rate pass-through to prices tends to be larger for industries in which firms use a larger share of imported inputs. The link is stronger in the case of exports, but the effect on the pass-through to import prices is also positive. In contrast, I do not find a clear correlation between the use of imported inputs and the response of traded quantities to changes in exchange rates. |
| Keywords: | exchange rate pass-through, export and import prices, export and import volumes, intermediate inputs |
| JEL: | F1 F2 L2 L6 |
| Date: | 2019–05 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:787&r=all |
| By: | Edward J. Balistreri (Center for Agricultural and Rural Development (CARD)); Daniel T. Kaffine; Hidemichi Yonezawa |
| Abstract: | A country choosing to adopt border carbon adjustments based on embodied emissions is motivated by both environmental and strategic incentives. We argue that the strategic component is inconsistent with commitments under the General Agreement on Tariffs and Trade (GATT). We extend the theory of border adjustments to neutralize the strategic incentive, and consider the remaining environmental incentive in a simplified structure. The theory supports border adjustments on carbon content that are below the domestic carbon price, because price signals sent through border adjustments inadvertently encourage consumption of emissions intensive goods in unregulated regions. The theoretic intuition is supported in our applied numeric simulations. Countries imposing border adjustments at the domestic carbon price will be extracting rents from unregulated regions at the expense of efficient environmental policy and consistency with international trade law. JEL classifications: F13, F18, Q54, Q56 Keywords: climate policy, border tax adjustments, carbon leakage, trade and carbon taxes. |
| Date: | 2019–06 |
| URL: | http://d.repec.org/n?u=RePEc:ias:cpaper:19-wp591&r=all |
| By: | Bernard Poirine (GDI - Gouvernance et développement insulaire - UPF - Université de la Polynésie Française); Vincent Dropsy (GDI - Gouvernance et développement insulaire - UPF - Université de la Polynésie Française) |
| Abstract: | This paper presents a model in which remittances stem from a decision made jointly by a family coalition of multiple migrants and non-migrants, allowing two alternative interpretations: migrants' altruism or bargaining power. The model predicts that aggregate remittances first increase, reach a maximum, and then decrease as the emigration ratio (migrants/non-migrants) increases. An alternative model of loan repayment arrangement between each migrant and her parents, predicts that aggregate remittances grow monotonously with the emigration ratio. Testing both predictions on a macroeconomic bilateral dataset we find evidence in favour of the first model and an inverted-U relationship between aggregate remittances and the emigration ratio, with a maximum reached at a value of 0.5. Since many small "MIRAB" island nations are close to or even above this threshold value, this finding is of highly relevant for them since they may experience declining aggregate remittances as the diaspora grows further. |
| Keywords: | International migration,Remittances,Diaspora,Gravity model |
| Date: | 2018–09–29 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-02133273&r=all |
| By: | Dongyeol Lee |
| Abstract: | Through the 2000s, Korea’s export and import linkages to advanced and emerging markets increased significantly. At the same time, the correlation of output growth between Korea and these economies rose. This paper investigates the nature of the link between trade linkages and the comovement of international business cycles (BC) using Korean industry-level domestic and international input-output data. The results suggest that, at the industry-level, higher export linkages lead to a larger positive GDP growth comovement, while higher import linkages lead to higher negative employment growth comovement. Furthermore, the decomposition of aggregate BC comovement shows that the increase in trade with China has contributed the most to aggregate BC comovement, while the impact of trade linkages on BC comovement is propagated domestically via vertical linkages. These findings suggest that the Korean economy can be significantly affected by a few countries that are highly linked through trade to Korea and/or a few industries that are highly interconnected to other industries. |
| Date: | 2019–05–24 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:19/116&r=all |
| By: | Lucian Liviu ALBU (Institute for Economic Forecasting, Romanian Academy) |
| Abstract: | The empirical study is based on 138 countries (and territories) for which there are available comparable data regarding FDI at UNCTAD, FDI/MNE database (www.unctad.org/fdistatistics) for 2000-2017. In order to analyse the relations between FDI and GDP per capita and the socalled Real Convergence, usually evaluated only based on expressing GDP per capita in international dollars PPP (Purchasing Power Parity), data for the global economy (represented by the group of 138 countries and territories, as W138), are for the period 2000-2018 from World Bank, and for the period up to 2024 from IMFforecast (IMF Report,April 2019). |
| Keywords: | FDI, convergence, growth |
| JEL: | C50 F43 O11 O50 |
| Date: | 2019–06 |
| URL: | http://d.repec.org/n?u=RePEc:rjr:wpiecf:190612&r=all |
| By: | Haeng-Sun Kim (Jeju National University (KOREA), FFJ - Fondation France-Japon de l'EHESS - EHESS - École des hautes études en sciences sociales) |
| Abstract: | Most existing literature examining the links between firm heterogeneity and entry into exporting assumes that firms are risk neutral. In this study, we relax this strict assumption that firms are risk neutral and introduce different attitudes of firms toward risk as an additional source of firm heterogeneity. In particular, we examine how risk attitude changes the effect of uncertainty on the decision of a firm to export considering the different types of uncertainty faced by the firm, namely, firm-specific and macroeconomic. Our analysis yields two interesting findings. First, firm-specific uncertainty discourages risk-averse firms from participating in foreign markets more than risk-taking firms. One possible explanation for this finding is that risk-averse firms are more cautious in export market participation when firm-specific uncertainty increases. Second, we find that riskaverse firms are less likely to decrease their export market participation when responding to macroeconomic uncertainty. Thus, risk-averse firms are more likely to diversify their domestic risk by participating in foreign markets in responding to macroeconomic uncertainty. |
| Keywords: | Exports,Risk aversion,Uncertainty,Firm heterogeneity |
| Date: | 2019–05 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-02128335&r=all |
| By: | Ben Westmore; Paula Adamczyk |
| Abstract: | Portugal’s export performance over the past decade has been impressive, helping to reduce external imbalances. This partly owed to a sequence of structural reforms that benefited the productivity of the export sector and led to an increase in its size. Nonetheless, exports as a share of GDP and the stock of foreign direct investment remain below that of other comparable small European economies. Further shifting the orientation of the economy to the external sector is vital for Portugal given the strong link between trade openness and GDP per capita. To do this, policymakers must ensure that policy settings incentivise exporting firms to expand and improve their competitiveness, both through lower price and improved quality. For example, regulatory barriers that reduce competition in professional services should be lowered to improve the cost and quality of intermediate inputs. Increasing the efficiency of domestic infrastructure is also key, especially through competition-enhancing reforms to the port sector. To further differentiate and improve Portuguese export products, skills in the business sector need to be enhanced through better-targeted lifelong learning opportunities. At the same time, there is a need to focus innovation policies on raising the participation of small and medium enterprises in innovative activities. |
| Keywords: | competitiveness, export performance, foreign direct investment, infrastructure, innovation, lifelong learning, regulatory reforms |
| JEL: | F43 G38 H25 O31 O43 |
| Date: | 2019–06–25 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:1556-en&r=all |
| By: | Laixun Zhao (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan) |
| Abstract: | In this paper, I examine the Sino-U.S. trade disputes from less-talked about angles: institutional differences, SOEs, hukou control and contemporary Chinese history. Based on these, I provide suggestions for future cooperation and improvement. |
| Keywords: | China, US, Trade Disputes, Institutions, East-Asian Cooperation |
| Date: | 2019–04 |
| URL: | http://d.repec.org/n?u=RePEc:kob:dpaper:dp2019-10&r=all |
| By: | Sandra Rozo (University of Southern California); Juan Vargas (Universidad del Rosario) |
| Abstract: | Can voter’s negative attitudes toward immigration be explained by self-interest or sociotropic motives? Self-interested voters care about their personal economic circumstances. Sociotropic voters display in-group bias and perceive migrants as threats to their culture. We study the voting effects of forced internal and international migration in Colombia and exploit the disproportionate flows of migrants to municipalities with early settlements of individuals from their origin locations. In line with the sociotropic hypothesis, we find that only international migration inflows increase political participation and shift votes from left- to right-wing ideologies. These results are not accounted for by the observed changes caused by migrants in socioeconomic variables. |
| Keywords: | Colombia; Economic Development, Political Development, Demographic; Socioeconomic |
| JEL: | D72 F2 O15 R23 |
| Date: | 2019–06 |
| URL: | http://d.repec.org/n?u=RePEc:pri:esocpu:12&r=all |
| By: | Martin Lábaj; Paula Puskarova |
| Abstract: | Income and wealth inequalities, both between and within the advanced and developing countries,haveattracted much attention in current economic debates. Wage inequalities appear to play akeyrole in the generation of final inequalities in terms of households’ income, consumptionand wealth. In this paper, we propose a decomposition approach based on the input-output analysis that allows us to disentangle the effects on the final inequalities’levels into the contributions of various determinants. So far, the analysis of income and wealth inequalities measured by standard inequality indices, e.g. Gini coefficient, Theil index, has received limited space in the input-output analysis. This does not imply thatissuesof income and wealth inequalities havebeen ignored in this stream of research. The focus of the input-output research has however been directed into distinct aspectsof inequalities. In one way, researchers have put a lot of effort in the understanding how the income and wealthinequalities influence the structure of final demand of households,and eventuallygenerate ambivalent effects on production, value added and employment. Other stream of research in input-output analysis has paid a lot of attention to inequalities that arise from the distribution of income that goes to labour andcapital. We propose to calculate cross-industry and cross-country wage inequalities directly from the input-output tablesandanalyse the final inequality variations through the lens of changes in the inputs. Detailed industry-level data on employees’ wages linked to their hours worked and education attainments, which are covered bythe World input-output database, allow us to illustrate the application of proposed methodology on major advanced and developing countries in the world. The analysis contributes to solving the puzzle around the impactsof human capital and technological progress on income inequality but may shed also more light on the rising global inequalities unfolded by international trade and fragmentation of global value chains. |
| Keywords: | wage inequality, input-output analysis, world input-output database, global value chains |
| JEL: | C67 D57 D63 I24 |
| Date: | 2018–11–28 |
| URL: | http://d.repec.org/n?u=RePEc:brt:depwps:014&r=all |
| By: | Rod Tyers (Business School, University of Western Australia and Research School of Economics, Centre for Applied Macroeconomic Analysis (CAMA), Australian National University); Yixiao Zhou (School of Economics and Finance, Curtin Business School, Curtin University) |
| Abstract: | Stylized representations of recent US and Chinese tax reforms, tariffs against imports and alternative Chinese monetary targeting are examined using a calibrated global macro model that embodies both trade and financial interdependencies. For both countries, unilateral capital tax relief and bilateral tariffs are shown to be “beggar thy neighbor” in consequence with tariffs most advantageous for the US if revenue finances consumption tax relief. China is nonetheless a net loser when these policies are implemented unilaterally by the US, irrespective of its policy response, though a currency float is shown to cushion the effects on its GDP in the short run. Equilibria in normal form non-cooperative tariff games exhibit spill-overs that are substantial but insufficient to deter dominant strategies. The US imposes tariffs while China liberalizes, sustaining fiscal balance via consumption tax relief in the US and expenditure restraint in China. |
| Keywords: | Trade policy, macroeconomic policy, general equilibrium analysis, numerical theory, China |
| JEL: | F13 F41 F47 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:uwa:wpaper:19-08&r=all |
| By: | Thierry Mayer; Walter Steingress |
| Abstract: | This paper shows that real effective exchange rate (REER) regressions, the standard approach for estimating the response of aggregate exports to exchange rate changes, imply biased estimates of the underlying elasticities. We provide a new aggregate regression specification that is consistent with bilateral trade flows micro-founded by the gravity equation. This theory-consistent aggregation leads to unbiased estimates when prices are set in an international currency as postulated by the dominant currency paradigm. We use Monte-Carlo simulations to compare elasticity estimates based on this new "ideal-REER" regression against typical regression specifications found in the REER literature. The results show that the biases are small (around 1 percent) for the exchange rate and large (around 10 percent) for the demand elasticity. We find empirical support for this prediction from annual trade flow data. The difference between elasticities estimated on the bilateral and the aggregate levels reduce significantly when applying an ideal-REER regression rather than a standard REER approach. |
| Keywords: | trade elasticity, real effective exchange rate, gravity equation, dominant currency paradigm, aggregation bias |
| JEL: | F11 F12 F31 F32 |
| Date: | 2019–05 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:786&r=all |
| By: | Dongyeol Lee; Huan Zhang |
| Abstract: | Export structure is less diversified in low-income countries (LICs) and especially small states that face resource constraints and small economic size. This paper explores the potential linkages between export structure and economic growth and its volatility in LICs and small states, using a range of indices of export concentration differing in the coverage of industries. The empirical analysis finds that export diversification may promote economic growth and reduce economic volatility in these countries. Furthermore, the analysis demonstrates that the economic benefits of export diversification differ by country size and income level—there are bigger benefits for relatively larger and poorer countries within the group of LICs and small states. |
| Date: | 2019–05–24 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:19/118&r=all |
| By: | Hill, Berkeley; Bradley, Dylan |
| Abstract: | There is concern among part of the UK policy community that Brexit may damage the contribution that the farming industry makes to social networks, social capacity, community resilience and other aspects of social and cultural capital in rural areas. There is a perception that the current contributions may be particularly significant in the more remote and least densely populated parts of the UK. A lack of hard evidence could result in possible under- or over-estimates of the importance of agriculture’s social contributions to rural communities and thus inappropriate policy responses (over- or under-reacting) to mitigating any likely damage from Brexit. The Welsh Government commissioned a study2, the genesis of this paper, to examine the available evidence and to propose ways of filling gaps. The paper discusses the issued involved in identifying and evaluating evidence of agriculture’s social contributions and the proposals for further research to fill evidence gaps, with specific reference to Wales. |
| Keywords: | Agricultural and Food Policy, International Development |
| Date: | 2019–04–15 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aesc19:289583&r=all |