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on International Trade |
| By: | Chang, Pao-Li (Singapore Management University); Nguyen, Tran Bao Phuong (Singapore Management University) |
| Abstract: | The CPTPP, or the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, is an example of a “mega-regional” free trade agreement, whose provisions on the rules of origin and trade facilitation can have potentially large impacts on the CPTPP-wide supply chains. In this paper, we investigate whether the CPTPP members are key upstream and downstream trade partners to each other in the global value chains. We develop formulas of bilateral upstreamness and downstreamness, based on the gross-export decomposition framework of Koopman, Wang and Wei (2014) and Borin and Mancini (2017). We demonstrate how the decomposition of gross exports can be used to construct informative measures of the position of countries in global value chains. |
| Keywords: | Global value chain (GVC); Gross export decomposition; Upstream/downstream trade partners; GVC position; CPTPP |
| JEL: | F14 F15 |
| Date: | 2019–06–10 |
| URL: | http://d.repec.org/n?u=RePEc:ris:smuesw:2019_012&r=all |
| By: | Lin, Tracy Kuo; Teymourian, Yasmin; Tursini, Maitri Shila |
| Abstract: | Background: Studies find that economic, political, and social globalization - as well as trade liberalization specifically - influence the prevalence of overweight and obesity in countries through increasing the availability and affordability of unhealthful food. However, what are the mechanisms that connect globalization, trade liberalization, and rising average body mass index (BMI)? We suggest that the various sub-components of globalization interact, leading individuals in countries that experience higher levels of globalization to prefer, import, and consume more imported sugar and processed food products than individuals in countries that experience lower levels of globalization. Method: This study codes the amount of sugar and processed food imports in 172 countries from 1995 to 2010 using the United Nations Comtrade dataset. We employ country-specific fixed effects (FE) models, with robust standard errors, to examine the relationship between sugar and processed foods imports, globalization, and average BMI. To highlight further the relationship between the sugar and processed food import and average BMI, we employ a synthetic control method to calculate a counterfactual average BMI in Fiji. Conclusion: We find that sugar and processed food imports are part of the explanation to increasing average BMI in countries; after controlling for globalization and general imports and exports, sugar and processed food imports have a statistically and substantively significant effect in increasing average BMI. In the case of Fiji, the increased prevalence of obesity is associated with trade agreements and increased imports of sugar and processed food. The counterfactual estimates suggest that sugar and processed food imports are associated with a 0.5 increase in average BMI in Fiji. |
| Keywords: | Globalization; Imports; Obesity; Synthetic control method |
| JEL: | N0 |
| Date: | 2018–04–14 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:101053&r=all |
| By: | Bakari, Sayef; Sofien, Tiba |
| Abstract: | The objective of this paper is to examine the impact of openness, foreign investment inflows, and domestic investment on economic growth for the case of 24 Asian economies over the time span 2002-2017 through the use of the fixed and random effect models. Our empirical results pointed out that domestic investment positively influences economic growth. However, we found that foreign direct investment and exports are negatively affecting the growth path. Also, the population, imports, and final consumption expenditure have no real impact on economic growth. Due to the importance of the positive externalities linked to the trade openness and foreign direct investments inflow, in terms of technology transfer bias, financial capacities, human expertise, large markets size, and spillover effect added to the domestic capacities and the national investment, the pace of the phenomenal economic performance of the Asian economies is very well justified. |
| Keywords: | Trade openness, FDI, Domestic Investment, Economic Growth. |
| JEL: | E22 F13 F14 F15 O11 O16 O47 O53 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:94489&r=all |
| By: | Felbermayr, Gabriel; Syropoulos, Constantinos; Yalcin, Erdal; Yotov, Yoto V. |
| 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 effects within the same framework. |
| Keywords: | Sanctions,Effectiveness of Sanctions,Structural Gravity |
| JEL: | F1 F13 F14 F5 F51 H5 N4 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ifwkwp:2131&r=all |
| By: | Bakari, Sayef; Mabrouki, Mohamed |
| Abstract: | This paper analyzes the relationship between economic growth, export and import in Morocco. VAR modeling techniques and Granger causality are used in empirical work. The study showed a causal effect ranging from economic growth in exports. Evidence shows that economic growth favors exports. However, there is no effect that goes for export to growth. In addition, there is no relationship between imports and economic growth. |
| Keywords: | Economic growth, Exports, Imports, VAR, Causality, Morocco |
| JEL: | F10 F11 F13 F14 O47 O55 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:94488&r=all |
| By: | Nith, Kosal |
| Abstract: | This paper analyzes the threat and opportunity of textiles and clothing industry in Cambodia by employing SWOT analysis, quantitative method of revealed comparative and competitive advantage. The findings reveal that Cambodia has both comparative and competitive advantage of garment industry comparing to another Asian garment exporting countries-namely India, Pakistan, Thailand, and Vietnam, except Bangladesh. Whereas the Cambodian textile industry experiences both comparative and competitive disadvantage as it obtains the lowest score among counties in this study. Our analysis shows that the Cambodian T&S sector faces the risk of EBA, negative impact on the US-China trade war. Vietnam’s readiness, along with good trade policy between India and Bangladesh, is also has a negative impact on Cambodia. Cambodia must consider long-term and medium-term strategies to expand competitiveness for T&S exports. Nevertheless, the term of trade could obtain positive growth since the price of garment and textile products experiences an increasing trend. |
| Keywords: | Textiles and Clothing, Everything but Arms, Revealed Comparative Advantage, Revealed Competitive Advantages, Trade Policy. |
| JEL: | F18 F21 F53 L16 L52 |
| Date: | 2019–05–18 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:94378&r=all |
| By: | Douglas A. Irwin (Peterson Institute for International Economics) |
| Abstract: | Do trade reforms that significantly reduce import barriers lead to faster economic growth? In the two decades since the critical survey of empirical work on this question by Francesco Rodriguez and Dani Rodrik in 2000, new research has tried to overcome the various methodological problems that have plagued previous attempts to provide a convincing answer. This paper examines three strands of recent work on this issue: cross-country regressions focusing on within-country growth, synthetic control methods on specific reform episodes, and empirical country studies looking at the channels through which lower trade barriers may increase productivity. A consistent finding is that trade reforms that significantly reduce import barriers have a positive impact on economic growth, on average, although the effect differs across countries. Overall, these research findings should temper some of the previous agnosticism about the empirical link between trade reform and economic performance. |
| Keywords: | trade liberalization, trade reform, tariffs, economic growth |
| JEL: | F13 F43 |
| Date: | 2019–05 |
| URL: | http://d.repec.org/n?u=RePEc:iie:wpaper:wp19-9&r=all |
| By: | George A. Alessandria; Shafaat Y. Khan; Armen Khederlarian |
| Abstract: | We study the effects on trade from the annual tariff uncertainty about China’s MFN status renewal prior to joining the WTO. We have three main findings. First, counter to the evidence elsewhere, trade increases strongly in anticipation of uncertain future increases in tariffs. Second, even though the trade response can be quite large, the probability of a tariff increase was perceived to be relatively small, with an average annual probability of non-renewal of about 5.5 percent. And third, what matters more is the expected future tariff rather than the uncertainty around it. We identify these effects using within-year variation in the risk of trade policy changes around the renewal vote and trade flows. We show that an (s,s) inventory model generates this behavior and that variation in the strength of the stockpiling in advance of the vote is increasing in the storability of goods. The model is also consistent with a sizeable fraction of the cross-industry variation in annual trade flows documented elsewhere. Our results explain why trade may hold up well in advance of a prospective policy change such as Brexit or the US escalating tariff war of 2018-19, but may fall off sharply even if expected tariff increases do not materialize. |
| JEL: | E32 E60 F12 F13 F14 |
| Date: | 2019–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:25965&r=all |
| By: | Bolhuis, Marijn |
| Abstract: | Developing economies tend to export more skill-intensive products as they become more productive. This paper provides a new tractable, quantitative framework to examine the role of inter-industry productivity spillovers in this development process. I start by documenting that a country’s comparative advantage tends to increase in industries that employ occupations that are used most intensively in current exports. In the model, productivity growth is driven by occupation-specific dynamic scale economies, which generate productivity spillovers between occupationally similar sectors. By exploiting cross-sector heterogeneity in foreign demand shocks, I find that dynamic scale economies are substantial in high-skilled production but negligible in low-skilled production. As a result, inter-industry productivity spillovers are larger in richer countries, and access to foreign markets allows developing countries to shift labor into sectors that contribute more to aggregate productivity growth. The model can account for a substantial share of the variation in aggregate and industry-level labor productivity growth across developing economies. Counterfactual exercises suggest that inter-industry spillovers play a quantitatively substantial role in accounting for slow cross-country convergence. Moreover, spillovers increase the gains from trade, especially in developing economies with a comparative advantage in manufacturing. |
| Keywords: | Productivity; Convergence; Spillovers; Dynamic scale economies; Comparative advantage; Exports |
| JEL: | F1 F4 O1 O3 O4 |
| Date: | 2019–06–16 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:94730&r=all |
| By: | Anelí Bongersy (Universidad de Málaga); Carmen Díaz-Roldán (Universidad de Castilla-La Mancha); José L. Torres (Universidad de Málaga) |
| Abstract: | This paper studies the impact of international labor migration on human capital invest- ment in both destination and origin countries using an integrated theoretical framework. We develop a two-country Dynamic Stochastic General Equilibrium human capital investment model with international labor mobility, in which both decision to migrate and to invest in skill acquisition are endogenous. We show that human capital formation process in the coun- tries of origin is very sensible to migration policies implemented by destination countries. Our results show that human capital accumulation in the country of origin is encouraged by the possibility of emigration to higher labor productivity countries, supporting the recent view of the "brain gain" hypothesis. Productivity shocks hitting the destination country reduces human capital investment by natives but increase human capital investment in the country of origin when migration is allowed. Finally, we find that migration increases world human capital, increasing the stock of human capital in both destination and origin countries. |
| Keywords: | Migration; Brain Drain; Brain Gain; Human capital formation; Migration policy |
| JEL: | F22 J24 J61 |
| Date: | 2018–04 |
| URL: | http://d.repec.org/n?u=RePEc:aee:wpaper:1804&r=all |
| By: | Chen, Hung-Ju |
| Abstract: | This paper develops a North-South product-cycle model with innovation and foreign direct investment (FDI) to analyze the influences from strengthening intellectual property rights (IPR) protection. Innovation occurs in the North while imitation happens in the South. Southern firms can imitate either goods produced in the North or goods produced by multinationals in the South. We find that if the target of strengthening IPR protection is Northern-produced goods, then such a policy change reduces the innovation rate and raises the North-South relative wage in the long run. However, the effects on the long-run innovation rate and the North-South relative wage reverse if its target is Southern-produced goods by multinationals. As for the pattern of production, strengthening IPR protection raises the long-run extents of FDI and Southern production imitating goods produced by multinationals while reducing the long-run extents of Northern production and Southern production imitating goods produced in the North, regardless of the target of stronger IPR protection. In addition to examining the long-run effects of strengthening IPR protection, we also analyze its effects during the transitional dynamics. The quantitative analysis indicates that the two strengthening-IPR-protection policies cause welfare losses for both Northern and Southern consumers if we consider the accumulated effects during the transitional dynamics. |
| Keywords: | FDI; Imitation; Innovation; IPR; R&D. |
| JEL: | E52 F23 O31 |
| Date: | 2019–06–25 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:94692&r=all |
| By: | Rasmas Fatum (University of Alberta); Runjuan Liu (University of Alberta); Jiadong Tong (Nankai University); Jiayun Xu (Tsinghua University) |
| Abstract: | The premise of beggar-thy-neighbor policies and currency wars is that currency depreciations lead to export growth. This premise, however, is far from validated as the existing economic literature largely either fails to find significant trade flow effects of currency fluctuations or finds that these effects are only minor. We revisit the question of whether currency fluctuations are systematically associated with trade flows using rich and unique firm level Chinese customs data on China-US trade over the 2000 to 2011 period that allows us to consider firm involvement in processing trade and firm dynamics in both export and import markets. Our firm-level based estimation of trade elasticities suggest that the China-US trade balance strongly responds to changes in the CNY/USD rate. This finding is particularly pronounced when we distinguish between ordinary and processing firms. Our results thus suggest that the influence of exchange rates on trade flows is stronger than previously thought and add insights to the policy debate on beggar-thy-neighbor policies and currency wars by, at least in principle, validating the underlying premise of such policies. |
| Keywords: | Exchange Rate Changes, Trade Balance, Processing Trade, Firm Dynamics |
| JEL: | F14 F31 F41 |
| URL: | http://d.repec.org/n?u=RePEc:cth:wpaper:gru_2016_004&r=all |
| By: | Mendoza, Adrian |
| Abstract: | This study explores the 2012 Survey on Adjustments of Establishments to Globalization (SAEG) to analyze the economic and social upgrading experience of Philippine manufacturers inside global value chains (GVCs). Three broad patterns emerge from the data. First, firms with stronger GVC linkages tend to have better labor indicators than purely domestic producers. Second, the majority of manufacturers either experienced or missed economic and social upgrading simultaneously. Lastly, almost all social upgrading is accompanied by economic upgrading but economic upgrading may take place without a social component. Against this background, this study uses bivariate probit regression to model the joint determination of the two separate but interconnected upgrading outcomes. The estimation results show that the covariates in the model can be grouped into three based on their statistical significance—purely economic (i.e., employment size, unit labor cost, high skill intensity, and the Kaitz dummy), purely social (i.e., training, female intensity and foreign equity), and both (i.e., contractualization and process and product innovations). These results have several important implications. First, GVC firms’ notion of social upgrading are closer to the softer components of working conditions than to traditional measurable indicators such as employment, wages and efficiency. Second, the results suggest direct and indirect channels through which technological upgrading may generate desirable social outcomes. The direct channel highlights that innovation should be accompanied by skills development to sustain higher value creation while the indirect channel underlines the potential of innovation to create upward spirals in output, productivity, and ultimately labor conditions. Lastly, there are some indications that the social benefits of economic upgrading may not be evenly distributed among different types of employment. Overall, the above results emphasize the need for a holistic upgrading experience that shifts the country’s comparative advantage from cheap labor to innovative local industries and highly-skilled workers. |
| Keywords: | global value chains, globalization, economic upgrading, social upgrading, labor conditions, Philippine manufacturing |
| JEL: | F16 F23 J81 O30 |
| Date: | 2018–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:94702&r=all |
| By: | Bahar, Dany (Brookings Institution); Özgüzel, Cem (Université Paris 1 Panthéon-Sorbonne); Hauptmann, Andreas (Institute for Employment Research (IAB), Nuremberg); Rapoport, Hillel (Paris School of Economics) |
| Abstract: | During the early 1990s Germany offered temporary protection to over 600,000 Yugoslavian refugees fleeing war. By 2000, many had been repatriated. We exploit this natural experiment to investigate the role of migrants in post-conflict reconstruction in the former Yugoslavia, using exports as outcome. Using confidential social security data to capture intensity of refugee workers to German industries–and exogenous allocation rules for asylum seekers within Germany as instrument—we find an elasticity of exports to return migration between 0.08 to 0.24. Our results are stronger in knowledge-intensive industries and for workers in occupations intensive in analytical and managerial skills. |
| Keywords: | migration, refugees, knowledge diffusion, management, exports, productivity |
| JEL: | O33 F14 F22 |
| Date: | 2019–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp12412&r=all |
| By: | Pal, Barun Deb; Pohit, Sanjib |
| Abstract: | This paper attempts to answer one crucial research question, why the utilization of India Sri Lanka Free Trade Agreement (ISFTA) route for trade is very poor by the India exporters (13%) as compared to their Sri Lankan Counterpart (65%) even after one decade of its implementation? The available studies have blamed the non-tariff barriers (NTBs) which are hamstringing growth of trade between these partners development of international trade. However, these have considered NTBs as sub set of non-tariff measures (NTMs) which are quite narrow sense of finding the hidden barriers within the International trade process. Therefore, this paper has analyzed in detail the logistic process involved in international trade between India and Sri Lanka to understand various NTBs sheltered within this logistic process. Further, the paper has identified issues which are not directly beyond the logistic process which are affecting the international trade between these two countries. |
| Keywords: | Non-Tariff barriers, Free Trade Agreements, India Sri Lanka |
| JEL: | F13 F14 F15 |
| Date: | 2019–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:94751&r=all |
| By: | Isabelle CHORT; Maëlys DE LA RUPELLE |
| Abstract: | This paper uses state-level data on migration flows between Mexico and the U.S. from 1999 to 2011 to investigate the migration response to climate shocks and the mitigating impact of an agricultural cash-transfer program (PROCAMPO) and a disaster fund (Fonden). While lower than average precipitations increase undocumented migration, especially from the most agricultural states, Fonden amounts decrease the undocumented migration response to abnormally low precipitations during the dry season. Changes equalizing the distribution of PROCAMPO and favoring vulnerable producers in the non irrigated ejido sector mitigate the impact of droughts on migration, especially for a high initial level of inequality. |
| Keywords: | International migration ; Climate ; Public policies ; Weather variability ; Natural disasters ; Mexico-U.S. migration ; Inequality |
| JEL: | F22 J61 O15 Q18 Q54 |
| Date: | 2019–06 |
| URL: | http://d.repec.org/n?u=RePEc:tac:wpaper:2018-2019_8&r=all |
| By: | Florian Unger |
| Abstract: | This paper analyzes the effects of credit frictions in a trade model where heterogeneous firms select both into exporting and into two types of external finance. In our framework, small producers face stronger credit frictions, pay a higher borrowing rate and rely on bank finance, whereas large firms have access to cheaper bond finance. We show that an increase in credit frictions induces firms to select into bank finance, which attenuates the negative implications on product variety and welfare. In the open economy, the presence of effective financial intermediation increases the welfare gains from trade. In a counterfactual analysis, we exploit that our framework nests a model with credit frictions and one type of finance as a special case, and we show that endogenous selection into external finance is an important channel of adjustment. |
| Keywords: | international trade, external finance, credit constraints, heterogeneous firms, moral hazard, bank and bond finance |
| JEL: | F12 G32 L11 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7641&r=all |
| By: | Tilman Graff |
| Abstract: | I assess the efficiency of transport networks for every country in Africa. Using rich spatial data, I simulate trade flows over more than 70,000 links covering the entire continent. I maximise over the space of networks and find the optimal road system for every African state. My simulations predict that Africa would gain 1.1% of total welfare from better organising its national road systems. I then construct a novel dataset of local network inefficiency and I find that colonial infrastructure projects significantly skew trade networks towards a sub-optimal equilibrium. I also find evidence for regional favouritism and inefficient aid provision. |
| JEL: | F1 O18 R4 |
| Date: | 2019–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:25951&r=all |
| By: | David S. Jacks; Dennis Novy |
| 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 blocs. |
| Keywords: | Commonwealth, distance, gravity, interwar period, trade blocs, trade wars |
| JEL: | F10 F30 N70 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7665&r=all |
| By: | Gregory Huffman (Vanderbilt University) |
| Abstract: | A dynamic model of offshoring is studied which permits the analysis of how offshoring can affect economic and welfare outcomes. Firm owners make location decisions based on the future returns from locating in either foreign or domestic markets, or ceasing operations altogether. It is shown that increased offshoring can raise growth and welfare in both the domestic and foreign economies. Imposing a tax on firms that relocate abroad can make firms delay this move, but at the cost of lowering both domestic and foreign welfare, as well as growth. A tax on domestic profits has an ambiguous impact on growth, while lowering domestic welfare. The effect that these policy or parameter changes have on domestic income inequality, and international wage inequality is also studied. In contrast to the view that the economic impact of outsourcing is equivalent to that of admitting more immigrants, the present model implies that these policies are nearly the opposite of each other. Immigration reduces growth, and lowers the welfare of both foreign and domestic agents. |
| Keywords: | Economic Growth, Offshoring, Innovation, Firm Exit, Tax Policy, Creative Destruction |
| JEL: | E0 O1 |
| Date: | 2019–06–24 |
| URL: | http://d.repec.org/n?u=RePEc:van:wpaper:vuecon-19-00011&r=all |
| By: | Gregory Huffman (Vanderbilt University) |
| Abstract: | A dynamic model of offshoring is studied which permits the analysis of how offshoring can affect economic and welfare outcomes. Firm owners make location decisions based on the future returns from locating in either foreign or domestic markets, or ceasing operations altogether. It is shown that increased offshoring can raise growth and welfare in both the domestic and foreign economies. Imposing a tax on firms that relocate abroad can make firms delay this move, but at the cost of lowering both domestic and foreign welfare, as well as growth. A tax on domestic profits has an ambiguous impact on growth, while lowering domestic welfare. The effect that these policy or parameter changes have on domestic income inequality, and international wage inequality is also studied. In contrast to the view that the economic impact of outsourcing is equivalent to that of admitting more immigrants, the present model implies that these policies are nearly the opposite of each other. Immigration reduces growth, and lowers the welfare of both foreign and domestic agents. |
| Keywords: | Economic Growth, Offshoring, Innovation, Firm Exit, Tax Policy, Creative Destruction |
| JEL: | E00 E62 H23 O10 O30 O40 |
| Date: | 2019–06–24 |
| URL: | http://d.repec.org/n?u=RePEc:van:wpaper:vuecon-sub-19-00009&r=all |
| By: | Susana Vieira; Renato G. Flôres Jr.; Maria Paula Fontoura |
| Abstract: | We employ network analysis to characterise the evolution of the world’s trade in value-added between 2000 and 2014. Relatively to previous studies, more recent time points are included, consolidating some of their conclusions. A small number of countries occupy central positions in the international production chains and concentration rules, along a few main production regions. Without Germany, Europe loses its pumping engine; the same for Asia without China and, in 2014, for the whole world, without the US. Will China eventually either absorb or dominate the other hubs, becoming the new central node of the World Trade Network? |
| Keywords: | Trade in Value Added; Input -Output Matrix; Network Analysis; Node and Eigenvector Centrality. |
| JEL: | F01 F23 |
| Date: | 2019–06 |
| URL: | http://d.repec.org/n?u=RePEc:ise:remwps:wp0862019&r=all |
| By: | Gunther Schnabl |
| Abstract: | For a long time, China’s impressive growth performance has been driven by investment and high productivity gains. Based on the recent discussion on possible overcapacities and overinvestment in China, the paper investigates the sustainability of China’s investment- and export-driven growth model. It is shown that since the turn of the millennium buoyant capital inflows and low interest rates have been at the roots of overinvestment and misallocation of capital, which necessitated export subsidies to clear markets. The overinvestment boom is argued to have ended around 2014. Since then, the overcapacities have weakened China’s bargaining position in the US-Chinese trade conflict and have tempted the Chinese authorities to postpone a restructuring of the Chinese economy by low-interest credit provision. The resulting gradual reemergence of quasi soft budget constraints is seen to undermine China’s long-term growth potential. |
| Keywords: | China, investment, overinvestment, trade policy, credit growth, rebalancing, soft budget constraints, zombification |
| JEL: | E22 E43 E58 F13 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7642&r=all |
| By: | Bouchoucha, Najeh; Bakari, Sayef |
| Abstract: | This paper aims to analyze the impact of domestic investment and Foreign Direct Investment on economic growth in Tunisia during the period 1976–2017. This study is based on the Auto-Regressive Distributive Lags (ARDL) approach that is proposed by Pesaran et al (2001). Bound testing approaches to the analysis of level relationships. According to the results of the analysis, domestic investment and foreign direct investment have a negative effect on economic growth in the long run. However, in the short run, only domestic investment causes economic growth. The findings are important for Tunisian economic policy makers to undertake the effective policies that can promote and lead domestic and foreign investments to boost economic growth. |
| Keywords: | Domestic investment; Foreign Direct Investment; Economic Growth; Tunisia; ARDL. |
| JEL: | F11 F13 F14 F43 O47 O55 |
| Date: | 2019–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:94777&r=all |
| By: | Lee G. Branstetter (Peterson Institute for International Economics); Britta Glennon (Wharton School, University of Pennsylvania); J. Bradford Jensen (Peterson Institute for International Economics) |
| Abstract: | For decades, US multinational corporations (MNCs) conducted nearly all their research and development (R&D) within the United States. Their focus on R&D at home helped establish the United States as the unrivaled leader of innovation and technology advances in the world economy. Since the late 1990s, however, the amount of R&D conducted overseas by US MNCs has grown nearly fourfold and its geographic distribution has expanded from a few advanced industrial countries to many parts of the developing world, creating an innovation system that spans the globe. Like many aspects of globalization, including the offshoring of manufacturing over recent decades, the globalization of R&D raises concerns about US competitiveness and loss of technological leadership. At the same time, the spreading geographic location of innovation presents opportunities for US-based companies if the right policies are adopted to seize them. The research presented in this Policy Brief demonstrates that US innovators continue to remain involved in important ways in US MNCs' global R&D activities, and fears of a hollowing out of US capacity to innovate—based probably on previous fears about the hollowing out of US-based manufacturing—may be overstated. Indeed, the large and growing pool of highly educated scientists and engineers in the developing world could increase the rate of global productivity growth, to the advantage of US-based companies and the world in general. The authors conclude that a productive way to capitalize on the globalization of MNC R&D is not to oppose it but to combine emerging-market talent with MNC experience so that innovation can flourish to improve global living standards and fuel economic progress. |
| Date: | 2019–06 |
| URL: | http://d.repec.org/n?u=RePEc:iie:pbrief:pb19-9&r=all |
| By: | Hirasawa, Katsuhiko |
| Abstract: | The purpose of this paper is to examine what kind of impact neo - liberalisti c globali za- tion has on small businesses in Japan. First, we review the background of neo - liberal- istic globalization. It can truly be said that globalization not only results in the overseas development of goods and capital, it is also closely linked to new li beralism and dereg- ulation . Then we examine how small businesses in Japan have changed. It may be true that the existence of small businesses, which had been built in a self - sufficient manner within Japan, was reorganized in a wider East Asian region, we should not overlook that the advancement of globalization has changed the struc ture of small businesses established in Japan. Thus, we clarify the impact of neo - liberalistic global- ization on small busi ne sses. As can be shown more than 1 - million small businesses closed or went bankrupt in 15 years, during which globalization gained ground. Whereas the overseas expansion of the econ omy had an impac t on the national econ- omy, globalization today progresses via fierce competition based on neo - liberalism in the background of the declines in the rates of profit and the amounts of profit of Amer- ican big businesses. This neo - liberalistic globalization caus es the industry structure of each country to be reor ganized, and it causes the sustainment of small businesses to fail. |
| Keywords: | Globalization,SME,Japan |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:opodis:201906&r=all |
| By: | Zhou, Yiming; Xu, Hangtian |
| Abstract: | This study investigates how industries with different patterns of firm heterogeneity are distributed across countries by developing a three-sector general-equilibrium model. There are two manufacturing industries in our setting: one in which firm productivity is homogeneous and the other in which it is heterogeneous. The higher degree of firm heterogeneity in the latter reflects the larger difference in firm heterogeneity between industries. We show that the larger country is more specialized in the industry with heterogeneous (homogeneous) firms when trade costs are low (high) and that an increase in the inter-industry difference in firm heterogeneity fosters the larger country's degree of specialization in the industry with heterogeneous firms. We also disclose the trade patterns across countries and show how they respond to trade liberalization. Moreover, wages are found to be higher in the larger country, with an increase in the inter-industry difference in firm heterogeneity enlarging the wage inequality across countries. |
| Keywords: | Firm heterogeneity; Industrial specialization; Trade patterns |
| JEL: | F12 F22 R12 |
| Date: | 2019–06–28 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:94746&r=all |
| By: | Marcus Noland (Peterson Institute for International Economics) |
| Abstract: | In 2016, the United States elected an avowedly protectionist president. This paper uses US county-level electoral data to examine this outcome. The hypothesis that support for protectionism was purely a response to globalization is rejected. Exposure to trade competition encouraged a shift to the Republican candidate, but this effect is mediated by race, diversity, education, and age. If the turn toward protectionism is due to economic dislocation, then public policy interventions could mitigate the impact and support the reestablishment of a political consensus for open trade. If, however, the drivers are identity or cultural values, then the scope for constructive policy intervention is unclear. |
| Keywords: | China shock, Donald Trump, globalization, protectionism, sociotropic voting |
| JEL: | D72 F13 Z13 |
| Date: | 2019–06 |
| URL: | http://d.repec.org/n?u=RePEc:iie:wpaper:wp19-10&r=all |
| By: | Michelle R. Garfinkel (Department of Economics, University of California-Irvine); Constantinos Syropoulos (Department of Economics and International Business, Drexel University) |
| Abstract: | We consider an environment in which two sovereign states with overlapping ownership claims on a resource/asset first arm and then choose whether to resolve their dispute violently through war or peacefully through settlement. Both approaches depend on the states' military capacities, but have very different outcomes. War precludes trade between the two states and can be destructive; however, once a winner is declared, arming is unnecessary in future periods. By contrast, a peaceful resolution under the threat of war today avoids destruction and supports mutually advantageous trade; yet, settlements must be renegotiated and the states must arm in future periods to resolve their ongoing dispute. Paying special attention to the importance of trade on arming incentives and payoffs in this context, we explore the conditions under which "armed peace" arises as the perfectly coalition-proof equilibrium over time. Our analysis reveals that, depending on the destructiveness of war, time preferences, and the distribution of initial resource endowments, greater gains from trade (jointly determined by trade costs and the substitutability of traded commodities) can reduce arming and pacify international tensions. Even when the gains from trade are relatively small, peace might be sustainable, but only for more uneven distributions of initial resources. |
| Keywords: | Interstate disputes; Conflict and settlement; Security policies; Gains from trade |
| JEL: | C72 C78 D30 D70 D74 F10 F51 |
| Date: | 2019–06 |
| URL: | http://d.repec.org/n?u=RePEc:irv:wpaper:181910&r=all |
| By: | Alejandro Micco |
| Abstract: | Digital technologies, robotics, and artificial intelligence substitute tasks performed by labor are bringing back old fears about the impact of technology on labor markets and international trade. The aim of this paper is to provide evidence about the causal effect of automation on the labor market and sectoral US imports. We use robots per workers, instrumented by robot penetration in Europe, to study employment in almost 800 occupations in 285 industries in the US during 2002-2016. We use Autor et al (2003) and Frey and Osborne (2017) methodologies to define occupations at risk of automation and to study their behavior after robots´ penetration. We find that employment in occupations at risk has been declining at an annual rate of 2.0-2.5%, relative to other occupations. This result is mainly driven by a substitution effect within industries defined at the 4-digit NAICS level. One standard deviation increase in robots per worker reduces employment growth by 1.25-1.45% in occupations at risk compared to the other professions in the same sector. Industries with a higher share of occupation at risk have a lower rate of employment growth during the period 2002-2016. Also, imports of commodities produced by these sectors have been falling, in particular from countries with lower penetration of automation technologies. This result suggests that automation is changing countries´ comparative advantage. |
| Date: | 2019–07 |
| URL: | http://d.repec.org/n?u=RePEc:udc:wpaper:wp486&r=all |
| By: | Jackson, Osborne (Federal Reserve Bank of Boston) |
| Abstract: | This paper examines the impact of migration on earnings inequality using 1940–2015 data from the U.S. census and American Community Survey. Despite measurement challenges, I successfully replicate existing findings regarding national trends in earnings inequality and migration, and subsequently analyze regional and state patterns. Using 1940 birthplace information to instrument for migration, I find that recent immigration mildly increases the top decile earnings share, while recent in-migration and out-migration have no significant effects on such inequality. I estimate that immigration contributed 5.8 percent to the observed rise in U.S. earnings inequality from 1950 to 2015, primarily through a non-migrant channel. |
| Keywords: | migration; earnings inequality |
| JEL: | D31 F22 R23 |
| Date: | 2018–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedbwp:19-5&r=all |
| By: | Brucal, Arlan; Javorcik, Beata; Love, Inessa |
| Abstract: | The link between foreign ownership and environmental performance remains a controversial issue. This paper contributes to our understanding of this subject by analyzing the impact of foreign acquisitions on plant-level energy intensity. The analysis applies a difference-in-differences approach combined with propensity score matching to the data from the Indonesian Manufacturing Census for the period 1983-2001 (or 1983-2008 in robustness checks). It covers 210 acquisition cases where an acquired plant is observed two years before and at least three years after an ownership change and for which a carefully selected control plant exists. The results suggest that while foreign ownership increases the overall energy usage due to expansion of output, it decreases the plant's energy intensity. Specifically, acquired plants reduce energy intensity by about 30% two years after acquisition, relative to the control plants. In contrast, foreign divestments tend to increase energy intensity. At the aggregate level, entry of foreign-owned plants is associated with industry-wide reduction in energy intensity. |
| Keywords: | FDI; Foreign acquisition; foreign divestment; energy intensity; Indonesia |
| JEL: | F21 Q56 |
| Date: | 2019–06 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:101090&r=all |
| By: | Abe, Naohito; Rao, D.S.Prasada |
| Abstract: | The Sato-Vartia (SV) index for bilateral price comparisons has impressive analytical properties and is used intensively in recent international trade and macroeconomic analyses. In this paper we propose several ways of constructing transitive multilateral version of the SV index. We show that the SV index is only one of many logarithmic indices that satisfy the factor reversal test discussed in index number theory. We derive closed form expressions for the generalized SV indices and empirically implement the new indices for making cross-country price comparison using World Bank data from the 2011 International Comparison Program. |
| Keywords: | Sato-Vartia Index, Multilateral comparisons, Transitivity, Factor Reversal Test |
| JEL: | C13 C83 E01 E31 |
| Date: | 2019–06 |
| URL: | http://d.repec.org/n?u=RePEc:hit:rcesrs:dp19-1&r=all |
| By: | Adnan Mazarei (Peterson Institute for International Economics) |
| Abstract: | Faced with fluctuating oil prices and other uncertainties, the oil-rich countries of the Middle East and North Africa have made efforts—some for decades—to diversify their exports, in order to reduce their dependence on oil revenue and generate much-needed jobs. The results of these diversification efforts have been disappointing overall, raising concerns about the region's stability and potential risk to the global economy. Transparent public debates and dialogue are needed, especially with the private sector, about policies that have worked and those that have not, the costs and benefits of various diversification strategies, and improving governance of public resources being used for diversification. |
| Date: | 2019–04 |
| URL: | http://d.repec.org/n?u=RePEc:iie:pbrief:pb19-6&r=all |
| By: | Jackson, Osborne (Federal Reserve Bank of Boston) |
| Abstract: | Migration plays an important role in the New England economy; absent immigration, the region’s population and workforce would have shrunk in recent years. Yet increasingly, immigrant inflows have been met with legislative opposition at both the national and regional levels, motivated in part by concerns that immigration may be an important factor driving the marked rise in earnings inequality. The research findings presented in this report, however, indicate that immigration accounts for a very small portion—only 6.0 percent—of the rising earnings inequality that the region has experienced. These results suggest that policymakers interested in responding to increased inequality should pursue avenues other than immigration reform. |
| Keywords: | inequality; immigration; New England; NEPPC |
| Date: | 2019–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedbcr:19-2&r=all |
| By: | Isaure Delaporte |
| Abstract: | The objective of this paper is twofold: first, to determine the immigrants’ ethnic identity, i.e. the degree of identification to the culture and society of the country of origin and the host country and second, to investigate the impact of ethnic identity on the immigrants’ employment outcomes. Using rich survey data from France and relying on a polychoric principal component analysis, this paper proposes two richer measures of ethnic identity than the ones used in the literature, namely: i) the degree of commitment to the origin country culture and ii) the extent to which the individual holds multiple identities. The paper investigates the impact of the ethnic identity measures on the employment outcomes of immigrants in France. The results show that having multiple identities improves the employment outcomes of the migrants and contribute to help design effective post-immigration policies. |
| Keywords: | ethnic identity, immigration, employment, polychoric principal component analysis |
| JEL: | J15 J21 J71 Z13 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7651&r=all |
| By: | Jaerim Choi (University of Hawaii at Manoa); Theresa Greaney (University of Hawaii at Manoa) |
| Abstract: | Do multinational enterprises (MNEs) from more gender-equal countries bring gender-equal employment practices with them or do they adopt the gender norms of a less gender-equal host country as part of their assimilation strategy? Using firm-level panel data for Korea, a country with low gender equality, we find suggestive evidence that MNEs from more gender-equal countries have higher female shares of employment and a higher likelihood of a female CEO of their Korean affiliate. Then, using difference-in-differences and nearest-neighbor matching techniques, we uncover causal evidence that MNEs bring their country of origin’s gender norms in employment with them. Firms that switch from Korean to foreign ownership report 2 to 12 percentage points higher female shares of permanent main-task workers at firm headquarters compared with firms that remain under domestic ownership. Lastly, we quantify that 1 to 7 percent of the increase in firm-level total factor productivity caused by foreign acquisition can be attributed to workforce reorganization that may reduce gender-based misallocations of talent. |
| Keywords: | Gender inequality, Foreign ownership |
| JEL: | J16 F23 |
| Date: | 2019–06 |
| URL: | http://d.repec.org/n?u=RePEc:hai:wpaper:201908&r=all |