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on International Trade |
| By: | Francesco Paolo Conteduca; Ekaterina Kazakova |
| Abstract: | This paper studies foreign-market entry patterns in the professional services industry. We build a structural model of horizontal foreign direct investment (FDI) with firms that are heterogeneous in terms of service quality. Firms can choose to serve foreign markets via exporting, cross-border mergers (M&A), or greenfield investment. Greenfield investment and exporting are subject to the standard proximity-concentration tradeoff and, in addition, associated with uncertainty about foreign quality perception, while M&A resolves this uncertainty by letting multinationals access the demand of the acquired firm. Reproduction of high quality abroad potentially requires larger fixed entry costs, inducing high-quality service firms to export. The model is sufficiently flexible to accommodate different orderings of entry types in terms of firm’s service quality. We then structurally estimate the fundamental market-specific parameters of the model using firm-level FDI and trade data for a sample of German firms. We find that entry patterns are reversed compared to the standard sorting in manufacturing: only the firms providing the highest service quality export, while lower-quality firms conduct FDI. The relative sorting of M&A vs. greenfield FDI in terms of firm quality is market-specific and depends on the relative importance of uncertainty about quality perception, the structure of entry costs, and size of synergies associated with M&A. Finally, we calibrate the model equilibrium to the data on multinational and trade flows between the EU, the US, and the rest of the world. Simulation of the service-trade liberalization between the EU and the US, as planned for TTIP (Transatlantic Trade and Investment Partnership), shows that the reduction of non-tariff trade barriers and introduction of quality standards reallocate quality across entry alternatives, as well as make FDI a more prominent entry type |
| Keywords: | Multinational Firms, Foreign Direct Investment, Mergers, Greenfield Investment, Services |
| JEL: | F14 F23 |
| Date: | 2018–01 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2018_008&r=all |
| By: | Ana Margarida Fernandes; Hibret Maemir; Aaditya Mattoo; Alejandro Forero |
| Abstract: | Does "infant industry" preferential access durably boost export performance? This paper exploits significant trade policy changes in the United States (US) to address this question. The expansion of Generalized System of Preferences (GSP) products for less developed countries in 1997 and the African Growth and Opportunity Act (AGOA) in 2001 are used to assess whether preferential access boosts exports of eligible products in general and apparel specifically. The end of the Multi-Fiber Arrangement (MFA) in 2005 is used to assess whether apparel export expansions survived the erosion of preferences. To find a causal impact of these changes, we use a triple-differences regression and 26 years of newly constructed trade and tariff data at the country-product-year level (1992-2017). The analysis finds that AGOA boosted African apparel exports and the GSP expansion increased African exports of other eligible products. While the marginal impacts on African apparel exports grew sharply in the first AGOA years, they leveled off after 2005, when the MFA end unleashed competition from Asian countries. The illusion of sustained African apparel exports is created by late-bloomers in East Africa offsetting boom-bust patterns in Southern Africa and insignificant responses in Central and West Africa. Firm-level customs data reveal that even in East Africa the recent export growth was driven by new entrants rather than incumbent firms whose competitiveness might have been nurtured by the big preference margins in the early AGOA period. Preferential access per se was not sufficient but needed to be complemented by specific domestic reforms: tariff liberalization, reduced regulatory burden, and enhanced connectivity. |
| Keywords: | tariff preferences, Africa, AGOA, GSP, exports, MFA |
| JEL: | F13 F14 O20 O55 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7672&r=all |
| By: | Mustafizur Rahman; Towfiqul Islam Khan |
| Abstract: | UK’s EU-referendum held on 23 June 2016, and the verdict of the British electorate to leave the EU (popularly known as Brexit), have important implications not only for the UK, but also for its major trading and economic partners, both within and outside of the EU region. This paper aims to capture the possible short- and mediumterm implications of Brexit for the economy of Bangladesh. The paper makes an attempt to anticipate the terms of Brexit, and what these could mean for Bangladesh’s bilateral economic relationship with the UK in a diverse range of areas. With the help of a gravity model exercise, the paper tries to capture the likely fallouts of Brexit on exports of Bangladesh to the UK. The paper argues that Bangladesh’s exports, remittances, FDI and aid could be significantly affected by Brexit. The paper comes up with a number of recommendations to address the likely challenges facing the Bangladesh economy arising out of Brexit. |
| Keywords: | Mustafizur Rahman, Towfiqul Islam Khan, Sherajum Monira Farin, CPD, Bangladesh, UK, Brexit, EU-referendum, Export, Remittance, FDI, Economic relationship |
| Date: | 2018–11 |
| URL: | http://d.repec.org/n?u=RePEc:pdb:opaper:121&r=all |
| By: | Robert C. Johnson; Andreas Moxnes |
| Abstract: | We build a quantitative model of trade with multistage manufacturing value chains, which features iceberg trade costs and technology differences across both goods and production stages. We estimate technology and trade costs via the simulated method of moments, matching bilateral shipments of final goods and inputs. Applying the model, we investigate how comparative advantage and trade costs shape the structure of global value chains and trade flows. As the level of trade costs falls, we show that the elasticity of bilateral trade to trade costs increases, due to the endogenous reorganization of value chains (increased export platform production). Surprisingly, however, the elasticity of world trade to trade costs is not magnified by multistage production. |
| JEL: | F1 |
| Date: | 2019–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:26018&r=all |
| By: | Rui Costa; Swati Dhingra; Stephen Machin |
| Abstract: | This paper presents new evidence on international trade and worker outcomes. It examines a big world event that produced an unprecedentedly large shock to the UK exchange rate. In the 24 hours in June 2016 during which the UK electorate unexpectedly voted to leave the European Union, the value of sterling plummeted. It recorded the biggest depreciation that has occurred in any of the world’s four major currencies since the collapse of Bretton Woods. Exploiting this variation, the paper studies the impact of trade on wages and worker training. Wages and training fell for workers employed in sectors where the intermediate import price rose by more as a consequence of the sterling depreciation. Calibrating the estimated wage elasticity with respect to intermediate import prices to theory uncovers evidence of a production complementarity between workers and intermediate imports. This provides new direct evidence that, in the modern world of global value chains, it is changes in the cost of intermediate imports that act as a driver of the impact of globalization on worker welfare. The episode studied and the findings add to widely expressed, growing concerns about poor productivity performance relating to skills and to patterns of real wage stagnation that are plaguing contemporary labour markets. |
| JEL: | F14 F31 J24 J31 |
| Date: | 2019–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:25919&r=all |
| By: | Adam, Marc Christopher |
| Abstract: | Was the collapse of world trade between 1928 and 1937 caused by higher transport costs, increased protectionism or the collapse of the gold standard? Using recent advances in the estimation of gravity equations, I examine the partial and general equilibrium effects of bilateral distance, international borders, and the payment system on trade. My results suggest that had average tari and non-tari trade barriers remained at their 1928 level, total international trade would have been 64.6 % higher in 1937. Had the gold standard not collapsed in 1931 and had the British Empire not departed to establish its own currency and trade blocs, international trade would have been 3 % larger. Finally, had transport costs remained at their 1928 level, global trade would not have been significantly different nine years on. These results are supported by over 6,000 new hand-collected observations of ad-valorem ocean freight rates for cotton, which show an average increase of only 1.2 percentage points between 1928 and 1936. When expressed as an index, the movement of freight rates mirrors the evolution of the elasticity of trade to distance over the period. |
| Keywords: | International trade,Gravity equation,Great Depression |
| JEL: | F10 F12 F13 F33 N70 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:fubsbe:20198&r=all |
| By: | Mary Amiti; Stephen Redding; David Weinstein |
| Abstract: | What has been happening to the US economy as a result of the Trump administration's 2018 round of import tariffs? Research by Mary Amiti, Stephen Redding and David Weinstein estimates the effects of this change in US trade policy on domestic consumers and the firms that import foreign goods. |
| Keywords: | international trade, tariffs, trade war |
| JEL: | F13 F14 |
| Date: | 2019–07 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepcnp:553&r=all |
| By: | Mustafizur Rahman; Estiaque Bari |
| Abstract: | Bangladesh’s agricultural trade with SAARC countries, through formal channels, accounts for only about 2.4 per cent of its global trade. However, formal trade movements do not reveal the actual picture concerning bilateral trade since a significant part of the agricultural trade takes place through informal channels. This paper has attempted to (a) analyse Bangladesh’s agricultural trade pattern, trends and scale with SAARC countries, (b) highlight the related trade and non-trade barriers, (c) identify the concerns of transboundary plant and animal diseases originating from the high informal agricultural trade and, (d) come up with suggestions towards deepening Bangladesh agricultural trade with the SAARC countries. The paper recommends that strengthening port capacity and customs facilities, harmonising customs rules and regulations, cross-border data sharing, pursuing strategic trade liberalisation policies for agricultural trade items and undertaking innovative border initiatives such as border haats could help reduce informal trade in agricultural goods. |
| Keywords: | SAARC, agricultural trade, bilateral trade, Trade, Global trade, South Asia, Bangladesh |
| Date: | 2018–06 |
| URL: | http://d.repec.org/n?u=RePEc:pdb:opaper:114&r=all |
| By: | Eugene Beaulieu (University of Calgary); Kamala Dawar; Lindsey Garner-Knapp |
| Abstract: | The United Kingdom (UK) and Canada face uncertainty as they respectively manage relations with their largest trading partners: both the UK's withdrawal from the European Union (EU) post-Brexit and an aggressive American pivot toward a protectionist trade agenda threaten stability and economic prosperity. |
| Date: | 2019–07–03 |
| URL: | http://d.repec.org/n?u=RePEc:clg:wpaper:2019-07&r=all |
| By: | Douglas A. Irwin |
| Abstract: | Do trade reforms that significantly reduce import barriers lead to faster economic growth? In the two decades since Rodríguez and Rodrik’s (2000) critical survey of empirical work on this question, 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 have a positive impact on economic growth, on average, although the effect is heterogeneous across countries. Overall, these research findings should temper some of the previous agnosticism about the empirical link between trade reform and economic performance. |
| JEL: | F13 F14 F43 |
| Date: | 2019–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:25927&r=all |
| By: | Eugenia Andreasen (Economics Department, Universidad de Santiago de Chile); Sofía Bauducco (Central Bank of Chile); Evangelina Dardati (Economics Department, Universidad Alberto Hurtado) |
| Abstract: | This paper studies the effects of capital controls on firms’ production, investment and exporting decisions. We empirically characterize the firm’s responses to the introduction of a capital control, using the Chilean encaje implemented between 1991 and 1998 as a laboratory. Motivated by our findings, we build a general equilibrium model with heterogeneous firms, financial constraints and international trade and calibrate it to the Chilean economy. We find that capital controls reduce aggregate production and investment while increasing exports, the share of exporters and TFP. The e↵ects of capital controls are exacerbated for firms in more capital-intensive sectors and for exporters. |
| Keywords: | Capital controls, firm dynamics, financial frictions, international trade. |
| Date: | 2019–06 |
| URL: | http://d.repec.org/n?u=RePEc:ila:ilades:inv331&r=all |
| By: | Joel Waldfogel |
| Abstract: | Perceptions of Anglo-American dominance in movie and music trade motivate restrictions on cultural trade. Yet, the market for another cultural good, food at restaurants, is roughly ten times larger than the markets for music and film. Using TripAdvisor data on restaurant cuisines, along with Euromonitor data on overall and fast food expenditure, this paper calculates implicit trade patterns in global cuisines for 52 destination countries. We obtain three major results. First, the pattern of cuisine trade resembles the “gravity” patterns in physically traded products. Second, after accounting gravity factors, the most popular cuisines are Italian, Japanese, Chinese, Indian, and American. Third, excluding fast food, the largest net exporters of their cuisines are the Italians and the Japanese, while the largest net importers are the US – with a 2017 deficit of over $130 billion – followed by Brazil, China, and the UK. With fast food included, the US deficit shrinks to $55 billion but remains the largest net importer along with China and, to a lesser extent, the UK and Brazil. Cuisine trade patterns appear to run starkly counter to the audiovisual patterns that have motivated concern about Anglo-American cultural dominance. |
| JEL: | F14 L66 |
| Date: | 2019–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:26020&r=all |
| By: | Eric Osei Opoku (City University of Hong Kong); Isabel K. M. Yan (City University of Hong Kong); Kate Hydes (UCD School of Economics, Ireland) |
| Abstract: | This paper investigates the effect of competition in both the domestic and foreign markets on firm productivity and export decisions using firm level data from 139 countries. Using a Sample Selection Endogenous Treatment (SSET) Poisson model that tackles both the issue of endogenous sample selection and endogenous treatment at the same time, we document robust evidence that strong competition in the domestic market propels firms to be more productive, and rising domestic competition increases firms’ propensity to export. However, firms’ export intensity, i.e. how much they export, is not directly influenced by competition in the domestic market. Moreover, lower competition in the foreign market increases the propensity of domestic firms to export, enlarging the set of exporting firms to firms with relatively smaller export amount. |
| Keywords: | Productivity; Export Propensity; Export Intensity; Competition; SSET-Poisson Model |
| JEL: | F14 O12 |
| URL: | http://d.repec.org/n?u=RePEc:cth:wpaper:gru_2018_012&r=all |
| By: | Evangelina Dardati (Economics Department, Universidad Alberto Hurtado); Meryem Saygili (Department of Social Sciences, The University of Texas at Tyler) |
| Abstract: | We use microdata from Chile to examine the relationship between foreign ownership and the environmental performance of firms. We make a distinction between exporting vs. non-exporting foreign firms. We proxy environmental performance by a measure of emission intensity. We find that foreign firms that serve only the domestic markets have higher emission intensity than foreign exporters. |
| Keywords: | Emission intensity, export status, foreign ownership. |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:ila:ilades:inv333&r=all |
| By: | Chatellier, Vincent |
| Abstract: | Animal production accounts for 16% of international agri-food trade. The growing imbalance between supply and demand for animal products in Asian countries, where consumption is growing, particularly in China, stimulates trade for the benefit of the major exporting countries: the European Union (EU), the United States, New Zealand, Brazil and Australia. While this development offers trade opportunities for countries with a structural surplus, purchases fluctuate from year to year and price competition is very strong, despite the qualitative requirements of some countries. The EU, which has a positive trade balance in dairy products and pork, but a negative one (in monetary terms) in beef and poultry meat, is the world's largest exporter of animal products (with 22% of the extra-EU trade in 2016). This article analyses the evolution of trade in animal products using customs statistics data (BACI and COMEXT) from 2000 to 2016. It presents the evolution of international trade for different types of goods (dairy products, beef, pork, poultry meat) and highlights the trade trajectories (patterns) of the main net importing countries (China, Japan and Russia) and net exporting countries (India, Australia, New Zealand, Brazil, the United States and the EU). |
| Keywords: | International Relations/Trade, Livestock Production/Industries |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ags:inrasl:291481&r=all |
| By: | Mariarosaria Comunale (Bank of Lithuania); Giulia Felice (Politecnico di Milano) |
| Abstract: | This paper investigates the role of international trade in the increase in the employment share of non-tradable sectors (services and construction). Borrowing insights from the vast theoretical literature on the determinants of structural change, we build an empirical model allowing to distinguish between long-run and short-run effects. We use this model to investigate the relative importance of the main traditional demand-side and supply-side channels of structural change, assessing, in this context, the role of trade variables. To this end, we use an unbalanced panel of countries for the period 1960-2011 from the EU-KLEMS and the GGDC 10-sector databases. Our preliminary results suggest that both Engelian income effects, i.e. the so-called demand-side drivers, and relative productivity, i.e. the supply-side channel, are relevant drivers of structural change. We show that the import and export shares are positively and negatively related, respectively, with the employment shifts to non-tradable sectors in the long run, in particular, for mature and transition economies. In the short run, a positive and significant relationship between the import share and structural shifts towards tradable sectors emerges. |
| Keywords: | Structural change, International trade, ECM |
| JEL: | F1 F4 O1 O4 |
| Date: | 2019–06–20 |
| URL: | http://d.repec.org/n?u=RePEc:lie:wpaper:62&r=all |
| By: | Wenting Wang; Longbao Wei |
| Abstract: | As the world’s largest importer of agricultural commodities, China’s agricultural policies have significant implications for the world agricultural market. For the first time, we develop an aggregate structural econometric model of China’s soybean market with linkage to the rest of the world to analyze the worldwide impacts of China’s soybean price support policies from 2008 to 2016. We investigate the impacts of China’s policies on the variability of their domestic and world prices, and adopt a Monte Carlo simulation to evaluate the distributional and aggregate welfare effects. Results indicate that (a) China’s soybean price support policies play an effective role in stabilizing their domestic price, while its increasing imports absorb world production surplus and reduce world price swings; (b) China’s producers gain at the expense of consumers and budgetary costs, and the net welfare change in their domestic market is negative; (c) Soybean exporting countries experience considerable welfare gains, and the world net welfare change is positive. Our findings provide new insights for future trade negotiations and agricultural market reforms in developing countries. |
| Date: | 2019–07 |
| URL: | http://d.repec.org/n?u=RePEc:ias:cpaper:19-wp592&r=all |
| By: | Matthias Aistleitner (Institute for Comprehensive Analysis of the Economy, Johannes Kepler University Linz, Austria); Stephan Puehringer (Institute for Comprehensive Analysis of the Economy, Johannes Kepler University Linz, Austria) |
| Abstract: | In the aftermath of recent populist upheavals in Europe, the U.S., the UK and other areas around the world, nationalist economic policies challenge the overly positive view on economic integration and the reduction of trade barriers established by standard economic theory. For quite a long time the great majority of economists supported trade liberalization policies, at least those, who were actively engaged in policy advice or public debates. Yet it was hardly investigated whether this general support emerges from a consensus view among economists on this issue or whether only a partisan interpretation of economic expertise is used to serve a distinct political purpose. Against this background, in this paper we examine the elite economics discourse on trade and trade policies by applying a multilevel mixedmethod approach. In doing so we combine quantitative methods with a discourse analytical approach in order to examine dominant narratives and imaginaries present in high impact papers dealing with trade, globalization and related policy issues. Our analysis yields the following results: First, the hierarchical structure of economics is also present in the economic debate on trade. Second, the top economic discourse on trade is predominantly characterized by a normative bias in favor of trade liberalization policies leading to a systematically underestimation of negative effects of free trade policies. Third, we found that other-thaneconomic impacts and implications (political, social and cultural as well as environmental issues) of trade policies either remain unmentioned or are rationalized by means of pure economic criteria. To sum up, we conclude that the narrow perspective present in top economics discourse on trade prevents a more comprehensive understanding of the multifaceted gains and challenges related to the issue of international integration. |
| Keywords: | trade narratives, discourse analysis, sociology of economics, bibliometric analysis, top economic journals |
| Date: | 2019–07 |
| URL: | http://d.repec.org/n?u=RePEc:ico:wpaper:97&r=all |
| By: | Reuven Glick (Federal Reserve Bank of San Francisco); Andrew K. Rose (University of California, Berkeley) |
| Abstract: | In our European Economic Review (2002) paper, we used pre‐1998 data on countries participating in and leaving currency unions to estimate the effect of currency unions on trade using (then‐) conventional gravity models. In this paper, we use a variety of empirical gravity models to estimate the currency union effect on trade and exports, using recent data which includes the European Economic and Monetary Union (EMU). We have three findings. First, our assumption of symmetry between the effects of entering and leaving a currency union seems reasonable in the data. Second, our preferred methodology indicates that EMU has boosted exports by around 50%. While other estimation techniques yield different results, a panel approach with both time‐varying country and dyadic fixed effects on a large span of data (across both countries and time) seems to deliver insensitive and reliable results. Third, different currency unions have different trade effects. |
| Keywords: | gravity, exports, bilateral, common, fixed, time‐varying, country, specific |
| JEL: | F15 F33 |
| URL: | http://d.repec.org/n?u=RePEc:cth:wpaper:gru_2016_016&r=all |
| By: | Simone Salotti (European Commission - JRC); Paola Rocchi (European Commission - JRC); Jose Manuel Rueda-Cantuche (European Commission - JRC); Inaki Arto (Basque Centre for Climate Change – BC3) |
| Abstract: | In March 2018, the United States (US) President Donald Trump announced the imposition of a tariff on US imports of steel and aluminium products. This technical report sheds light on the possible macroeconomic impacts of this policy, focusing in particular on exports, value added (VA), output and employment. The modelling analysis considers two possible scenarios to be compared with a baseline in which no tariffs are imposed by the US government. In the first scenario we assume that the European Union (EU) is exempted from the new tariffs. In the second scenario we instead assume that the EU is not exempted, as it has been declared that the exemption is only temporary. Under an EU exemption, the most significant economic effect of the US tariff involves the trade of basic metals' products to the US whose volume would decrease due to the protectionist measure. The most exposed countries would be India, Russia, and Turkey, although the impact of the new tariffs on GDP and employment is negligible. The US metal industry would increase its production, to the detriment of other sectors which would face higher input costs (such as manufacture of electrical equipment, machinery, or motor vehicles and other transport equipment).In a second scenario that assumes no exemption for the EU, EU metal products exports would be lower by slightly more than 1% with respect to the non-tariff baseline scenario. Still, there would be countries hit more severely, like Russia and India. In all cases, though, the overall effects on total exports would be much smaller due to the relative importance of the metal sector in the economy. |
| Keywords: | US steel and aluminium tariffs, FIDELIO model, multi-regional input-output model, value added, exports, employment |
| Date: | 2019–06 |
| URL: | http://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc112036&r=all |
| By: | Simplice A. Asongu (Yaoundé/Cameroon); Nicholas M. Odhiambo (Pretoria, South Africa) |
| Abstract: | The research assesses how information and communication technology (ICT) modulates the effect of foreign direct investment (FDI) on economic growth dynamics in 25 countries in Sub-Saharan Africa for the period 1980-2014. The employed economic growth dynamics areGross Domestic Product (GDP) growth, real GDP and GDP per capita while ICT is measured by mobile phone penetration and internet penetration. The empirical evidence is based on the Generalised Method of Moments. The study finds that both internet penetration and mobile phone penetration overwhelmingly modulate FDI to induce overall positive net effects on all three economic growth dynamics. Moreover, the positive net effects are consistently more apparent in internet-centric regressions compared to “mobile phone†-oriented specifications. In the light of negative interactive effects, net effects are decomposed to provide thresholds at which ICT policy variables should be complemented with other policy initiatives in order to engender favorable outcomes on economic growth dynamics. Practical and theoretical implications are discussed. |
| Keywords: | Economic Output; Foreign Investment; Information Technology; Sub-Saharan Africa |
| JEL: | E23 F21 F30 L96 O55 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:exs:wpaper:19/038&r=all |
| By: | Kate Hynes (University College Dublin); Yum K. Kwan (City University of Hong Kong); Anthony Foley (Dublin City University) |
| Abstract: | This paper investigates the interdependence of foreign and domestic firms’ local linkage decisions and the extent to which they respond differently to variations in export intensity and productivity originating from each of the two groups of firms. Our empirical analysis, based on Irish data, uncovers an interesting asymmetric pattern in the local linkage dynamics of foreign and domestic firms. We find that local linkages of domestic firms tend to evolve independently of their foreign counterpart, and that they react almost instantaneously to exogenous events such as increases in export intensity or productivity. Local linkages of foreign firms, by contrast, react gradually to exogenous events and the impact works through the reverberating dynamics of the lagged linkages of both foreign and domestic firms. The Irish experience is instructive to policymakers in emerging markets who are naturally interested in the best way to maximize the value of FDI, in terms of benefits the latter brings about for sustainable economic development. |
| Keywords: | Local linkages; Multinationals; Foreign direct investment; Emerging markets |
| JEL: | F23 L22 |
| URL: | http://d.repec.org/n?u=RePEc:cth:wpaper:gru_2017_006&r=all |
| By: | Xingwang Qian (SUNY Buffalo State); Jianhong Qi (Shandong University) |
| Abstract: | This paper studies firms’ choice of sequential outward foreign direct investment (OFDI) under uncertainty. Using an illustrative theoretical model where an investor chooses an irreversible OFDI project that maximizes the returns over finite investment periods, we demonstrate that, due to uncertainty, sequential OFDI that accumulates experiential information is advantageous over other types of OFDI in optimizing investment decision. Using Chinese firm-level data and various regression specifications, we find that Chinese firms are more likely to carry out sequential OFDI when the level of uncertainty is high. Macroeconomic uncertainty and investment risk in host countries are found to associate with higher probability of sequential OFDI. Chinese government support policies make firms rely less on sequential OFDI to deal with investment risk. Analyses on different firm types, namely state-owned enterprises (SOEs), foreign invested enterprises (FIEs), and private enterprises (PVEs), each of which has different sensitivity toward investment uncertainty, suggest that more risk-sensitive firm type weighs more on uncertainty, and therefore is prone to choose sequential OFDI. Our results are robust to various definitions of sequential OFDI. |
| Keywords: | Uncertainty, sequential outward FDI |
| JEL: | F21 F23 |
| URL: | http://d.repec.org/n?u=RePEc:cth:wpaper:gru_2017_016&r=all |
| By: | Kreickemeier, Udo; Richter, Philipp M. |
| Abstract: | In this paper, we analyse the effects of a unilateral change in an emissions tax in a model of international trade with heterogeneous firms. We find a positive effect of tighter environmental policy on average productivity in the reforming country through reallocation of labour towards exporting firms. Domestic aggregate emissions fall, due to both a scale and a technique effect, but we show that the reduction in emissions following the tax increase is smaller than in autarky. Moreover, general equilibrium effects through changes in the foreign wage rate lead to a reduction in foreign emissions and, hence, to negative emissions leakage in case of transboundary pollution. |
| Keywords: | Trade and environment,Heterogeneous firms,Unilateral environmental policy,Emissions leakage |
| JEL: | F18 F12 F15 Q58 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cegedp:373&r=all |
| By: | Rui Costa; Swati Dhingra; Stephen Machin |
| Abstract: | The unexpected result of the Brexit referendum, working through the rapid depreciation of sterling, had a sizable negative impact on UK workers. New CEP work by Rui Costa, Swati Dhingra and Stephen Machin shows that the big drop in the value of the pound caused a rise in import prices, which has led to a fall in both wages and training for employees in the most heavily hit sectors. |
| Keywords: | international trade, worker outcomes, wages, productivity, skills, real wage stagnation |
| JEL: | F14 F31 J24 J31 |
| Date: | 2019–07 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepcnp:551&r=all |
| By: | Simplice A. Asongu (Yaoundé/Cameroon) |
| Abstract: | Linkages between foreign aid, terrorism and natural resource (fuel and iron ore) exports are investigated in this study. The focus is on 78 developing countries with data for the period 1984 to 2008. The generalised method of moment is employed as empirical strategy. Three main foreign aid variables are used for the analysis, namely: bilateral aid, multilateral aid and total aid. The corresponding terrorism variables employed are: domestic terrorism, transnational terrorism, unclear terrorism and total terrorism. The following findings are established. First, the criteria informing the validity of specifications corresponding to iron ore exports do not hold. Second, there is evidence of convergence in fuel exports. Third, whereas the unconditional impacts of aid dynamics are not significant, the unconditional impacts of terrorism dynamics are consistently positive on fuel exports. Fourth, the interaction between terrorism and aid dynamics consistently display negative signs, with corresponding modifying aid thresholds within respective ranges. Unexpected signs are elicited and policy implications discussed. Given the unexpected results, an extended analysis is performed in which net effects are computed. These net effects are constitutive of the unconditional effect from terrorism and the conditional impacts from the interaction between foreign aid and terrorism dynamics. Based on the extended analysis, bilateral aid and total aid modulate terrorism dynamics to induce net positive effects on fuel exports while multilateral aid moderates terrorism dynamics to engender negative net effects on fuel exports. The research improves extant knowledge on nexuses between resources, terrorism and foreign aid. |
| Keywords: | Foreign Aid; Exports; Natural Resources; Terrorism; Economic Development |
| JEL: | F40 F23 F35 Q34 O40 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:exs:wpaper:19/023&r=all |
| By: | Dueñas, Marco; Mastrandrea, Rossana; Barigozzi, Matteo; Fagiolo, Giorgio |
| Abstract: | This paper analyses the world web of mergers and acquisitions (M&As) using a complex network approach. We use data of M&As to build a temporal sequence of binary and weighted-directed networks for the period 1995-2010 and 224 countries (nodes) connected according to their M&As flows (links). We study different geographical and temporal aspects of the international M&A network (IMAN), building sequences of filtered sub-networks whose links belong to specific intervals of distance or time. Given that M&As and trade are complementary ways of reaching foreign markets, we perform our analysis using statistics employed for the study of the international trade network (ITN), highlighting the similarities and differences between the ITN and the IMAN. In contrast to the ITN, the IMAN is a low density network characterized by a persistent giant component with many external nodes and low reciprocity. Clustering patterns are very heterogeneous and dynamic. High-income economies are the main acquirers and are characterized by high connectivity, implying that most countries are targets of a few acquirers. Like in the ITN, geographical distance strongly impacts the structure of the IMAN: link-weights and node degrees have a non-linear relation with distance, and an assortative pattern is present at short distances |
| JEL: | C1 N0 |
| Date: | 2017–09–07 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:84092&r=all |
| By: | Mi Lin (University of Lincoln); Yum K. Kwan (City University of Hong Kong) |
| Abstract: | This paper investigates the geographic extent of FDI technology spillovers and associated spatial diffusion. By adopting a spatiotemporal autoregressive panel model as the platform of our study, the complex impact resulting from FDI penetration is separated into spatial direct and indirect effects while accounting for feedback loops among regions. A set of spatially partitioned summary measures is produced to identify and to quantify FDI spillovers from different channels with distinct geographic scopes. Empirical results based on data from China document that the direct impacts of FDI presence to a specific location itself are likely to be negative. Domestic firms mainly benefit from FDI presence in their neighboring regions through knowledge spillovers that have wider geographic scope. Negative market stealing effect nevertheless has no spatial boundary. Policy implications of these findings are discussed. |
| Keywords: | FDI spillovers, spatial diffusion, geography, spatial dynamic panel, Chinese economy |
| JEL: | R12 F21 O33 |
| URL: | http://d.repec.org/n?u=RePEc:cth:wpaper:gru_2016_002&r=all |
| By: | Opeyemi Akinyemi (Covenant University, Ota, Nigeria); Uchenna Efobi (Covenant University, Ota, Nigeria); Simplice A. Asongu (Yaoundé, Cameroon); Evans S. Osabuohien (Covenant University, Ota, Nigeria) |
| Abstract: | The paper investigates the dynamic relationship between renewable energy usage and trade performance in sub-Saharan Africa (SSA), while considering the conditioning role of corruption control, regulatory quality, and the private sector access to finance. Focusing on 42 SSA countries for the period 2004-2016, and engaging the System generalized method of moments (GMM) technique for its estimation, this study found a negative relationship between renewable energy usage and the indicators of trade performance. However, with corruption control, improved regulatory framework, and better finance for the private sector, there are potentials for a positive net impact of renewable energy usage on manufacturing export. For renewable energy and total trade nexus, we find that improved regulatory framework and better finance for the private sector are important conditioning structures. These findings are significant because they highlight the different important structures of SSA countries that improve the effect of renewable energy use on trade outcomes. For instance, the consideration of the financial, institutional and regulatory frameworks in SSA countries in conditioning the renewable energy-trade nexus stipulates a clear policy pathway for countries in this region as the debate for transition to the use of renewable energy progresses. |
| Keywords: | Environment; Green growth; Trade performance; Pollution; Renewable energy; sub-Saharan Africa |
| JEL: | C5 F1 Q4 Q5 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:exs:wpaper:19/032&r=all |
| By: | Baumgarten, Daniel (LMU); Lehwald, Sybille (Federal Ministry for Economic Affairs and Energy) |
| Abstract: | We analyze the effect of the increase in trade exposure induced by the rise of China and the transformation of Eastern Europe on collective bargaining coverage of German plants in the period 1996-2008. We exploit cross-industry variation in trade exposure and use trade flows of other high-income countries as instruments for German trade exposure. We find that increased import exposure has led to an increase in the probability of German plants leaving industry-wide bargaining agreements, accounting for about one fifth of the overall decline in the German manufacturing sector. The effect is most pronounced for small and medium-sized plants. |
| Keywords: | international trade; import competition; collective bargaining; |
| JEL: | F16 J51 |
| Date: | 2019–07–11 |
| URL: | http://d.repec.org/n?u=RePEc:rco:dpaper:165&r=all |
| By: | Filipe R. Campante; Davin Chor; Bingjing Li |
| Abstract: | We study how adverse economic shocks influence political outcomes in authoritarian regimes in strong states, by examining the 2013-2015 export slowdown in China. We exploit detailed customs data and the variation they reveal about Chinese prefectures’ underlying exposure to the global trade slowdown, in order to implement a shift-share instrumental variables strategy. Prefectures that experienced a more severe export slowdown witnessed a significant increase in incidents of labor strikes. This was accompanied by a heightened emphasis in such prefectures on upholding domestic stability, as evidenced from: (i) textual analysis measures we constructed from official annual work reports using machine-learning algorithms; and (ii) data we gathered on local fiscal expenditures channelled towards public security uses and social spending. The central government was subsequently more likely to replace the party secretary in prefectures that saw a high level of “excess strikes”, above what could be predicted from the observed export slowdown, suggesting that local leaders were held to account on yardsticks related to political stability. |
| JEL: | D73 D74 F10 F14 F16 H10 J52 P26 |
| Date: | 2019–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:25925&r=all |
| By: | Barry Eichengreen; Rebecca Mari; Gregory Thwaites |
| Abstract: | In the UK’s 2016 referendum on EU membership, young voters were more likely than their elders to vote Remain. Applying new methods to a half century of data, we show that this pattern reflects both ageing and cohort effects. Although voters become more Eurosceptical as they age, recent cohorts are also more pro-European than their predecessors. Much of the pro-Europeanism of these recent cohorts is accounted for by their greater years of education. Going forward, the ageing of the electorate will thus be offset at least in part by the replacement of older cohorts with younger, better-educated and more pro-European ones. But we also document large nationwide swings in sentiment that have little to do with either seasoning or cohort effects. Hence these demographic trends are unlikely to be the decisive determinants of future changes in European sentiment. Rather, nationwide changes in sentiment, reflecting macroeconomic or other conditions, and the age-turnout gradient will be key. |
| Keywords: | Brexit, voting, demographics, APC effects, age period cohort effects |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:baf:cbafwp:cbafwp1894&r=all |
| By: | Levi, Eugenio; Mariani, Rama Dasi; Patriarca, Fabrizio |
| Abstract: | In this paper, we test the hypothesis that the causal effect of immigrant presence on anti-immigrant votes is a short-run effect. For this purpose, we consider a distributed lag model and adapt the standard instrumental variable approach proposed by Altonji and Card (1991) to a dynamic framework. The evidence from our case study, votes for the UK Independent Party (Ukip) in recent European elections, supports our hypothesis. Furthermore, we find that this effect is robust to differences across areas in terms of population density and socioeconomic characteristics, and it is only partly explained by integration issues. |
| Keywords: | Immigration,Voting,Political Economy |
| JEL: | P16 J61 D72 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:364&r=all |
| By: | Rajesh Srinivas Upadhyayula (Indian Institute of Management, Kozhikode) |
| Abstract: | While extant literature highlight business groups as a response to institutional voids, recent studies emphasized that business groups continue to persist because of the information advantages they possess. Studies in the developed economy context have shown that firms in clusters could benefit significantly from the information advantages and perform better than firms outside clusters. In this study, we examine if clusters serve as an alternative response to business groups for internationalization and performance. We find that both clusters and business groups have a positive association with internationalization and performance of firms. In addition, we also find that clusters and business groups serve as substitutes in explaining the performance of firms. |
| Keywords: | Internationalization, Emerging markets, Clusters and Business Groups |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:iik:wpaper:320&r=all |
| By: | Mountford, Andrew (Royal Holloway, University of London); Wadsworth, Jonathan (Royal Holloway, University of London) |
| Abstract: | While skilled immigration ceteris paribus provides an immediate boost to GDP per capita by adding to the human capital stock of the receiving economy, might it also reduce the number of 'good jobs', i.e. those with training, available to indigenous workers? We analyse this issue theoretically and empirically. The theoretical model shows how skilled immigration can affect the sectoral allocation of labor and how it may have a positive or negative effect on the training and social mobility of native born workers. The empirical analysis uses UK data from 2001 to 2018 to show that training rates of UK born workers have declined in a period where immigration has been rising strongly, and have declined significantly more in high wage non-traded sectors. At a more disaggregated level however this link is much less strong, though there is evidence of different training effects of skilled immigration across traded and non-traded sectors. Hiring of UK born workers in high wage non-traded sectors has also been negatively affected by skilled immigration, although this effect is not large. Taken together the theoretical and empirical analyses suggest that skilled immigration may have some role in allocating native born workers away from 'good jobs' sectors but it is unlikely to be a major driver of social mobility. |
| Keywords: | immigration, training, income distribution |
| JEL: | J6 |
| Date: | 2019–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp12409&r=all |
| By: | ZHANG Geng; SU Shuitian |
| Abstract: | This paper explored the impact of political animosity on consumers’ willingness to purchase in the context of the global value chain and found that openness value and familiarity can weaken the negative impact of political animosity on consumers’ willingness to purchase. Thus, this paper expanded the application of the consumer animosity model. The research background of this paper is whether Taiwanese consumers’ willingness to purchase is affected by political animosity when they face international clothing brand made by China Mainland. The empirical results showed that political animosity can significantly lower the willingness of Taiwanese consumers to purchase international brand with China Mainland participation in its value chain. However, if Taiwanese consumers hold higher openness value or increase their familiarity with China Mainland, the negative effect of political animosity can be effectively weakened. The empirical results also brought inspirations to everyone. If Taiwanese consumers can have an open mind to China Mainland and be more proactive in their contacts with China Mainland, their political animosity towards China Mainland will gradually disappear. |
| Keywords: | Political Animosity; Openness Value; Familiarity; Willing to Purchase; Global Value Chain |
| Date: | 2019–07–06 |
| URL: | http://d.repec.org/n?u=RePEc:wyi:wpaper:002444&r=all |
| By: | Simplice A. Asongu (Yaoundé/Cameroon); Uchenna R. Efobi (Covenant University, Ota, Ogun State, Nigeria); Belmondo V. Tanankem (MINEPAT, Cameroon); Evans S. Osabuohien (Covenant University, Ota, Nigeria) |
| Abstract: | This study assesses the relationship between globalisation and the economic participation of women (EPW) in 47 Sub-Saharan African countries for the period 1990-2013. EPW is measured with the female labour force participation and employment rates. The empirical evidence is based on Panel-corrected Standard Errors and Fixed Effects regressions. The findings show that the positive effect of the overall globalisation index on EPW is dampened by its political component and driven by its economic and social components, with a higher positive magnitude from the former or economic globalisation. For the most part, the findings are robust to the control for several structural and institutional characteristics. An extended analysis by unbundling globalisation shows that the positive incidence of social globalisation is driven by information flow (compared to personal contact and cultural proximity) while the positive effect of economic globalisation is driven by actual flows (relative to restrictions). Policy implications are discussed with some emphasis on how to elevate women’s social status and potentially reduce their victimisation to male dominance. |
| Keywords: | Globalisation; female; gender; inequality; inclusive development; labour force participation; Africa |
| JEL: | E60 F40 F59 D60 O55 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:exs:wpaper:19/019&r=all |
| By: | ZHANG Geng; ZHANG Yingqin |
| Abstract: | It is a great interest of scholars and corporate managers that how to establish overseas subsidiaries and adopt an optimal organizational structure when a multinational company is in the process of internationalization. As a representative emerging market country, Chinese multinational corporations have their own specific characteristics in the management of overseas subsidiaries. This paper analyzes the impact of the international organization structure of Chinese multinational corporations on business performance. It defines the international organization structure of multinational corporations, analyzes the characteristics of different international organization structures. And it selects the data of the top 200 listed companies in China ranked by overseas income for empirical analysis. It is found that if the organizational structure of Chinese multinational corporations is more centralized, the performance of parent company's business performance will be better. And the accumulation of parent company's international experience will promote the impact of “centralized” organizational structure on performance. In the further research, it is found that technology-oriented internationalization and government holding are main reasons for the differences in the performance between Chinese multinationals and developed countries’ multinationals. So, Chinese enterprises could consider adopting a “centralized” organizational structure to managing overseas subsidiaries and continuously enrich their international experience for management. |
| Keywords: | Organizational structure; Overseas subsidiaries; Operating performance; International experience. |
| Date: | 2019–07–06 |
| URL: | http://d.repec.org/n?u=RePEc:wyi:wpaper:002443&r=all |