nep-int New Economics Papers
on International Trade
Issue of 2019‒09‒23
38 papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. The impact of the EU-MERCOSUR deal on Africa in times of growing protectionism By Kohnert, Dirk
  2. The TBTs, Firm Organization and Labour Structure By Giorgio Barba Navaretti; Lionel Fontagné; Gianluca Orefice; Giovanni Pica; Anna Cecilia Rosso
  3. No Double Standards: Quantifying the Impact of Standard Harmonization on Trade By Julia Schmidt; Walter Steingress
  4. The Brexit Vote and Labour Demand: Evidence from Online Job Postings By Beata Javorcik; Ben Kett; Katherine Stapleton; Layla O'Kane
  5. The Effect of Border Barriers to Services Trade on Goods Trade By Dincer, Nergiz; Tekin-Koru, Ayca
  6. Dynamic Trade, Education and Intergenerational Inequality By Yang, Han
  7. The Economic and Environmental Impact of Foreign Direct Investment on the Mongolian Coal-Export Sector By Ragchaasuren Galindev; Tsolmon Baatarzorig; Nyambaatar Batbayar; Delgermaa Begz; Unurjargal Davaa; Oyunzul Tserendorj
  9. Is Environmental Tax Harmonization Desirable in Global Value Chains? By Haitao Cheng; Hayato Kato; Ayako Obashi
  10. Governance and foreign direct investment: comparative study between Arab Maghreb countries and ASEAN By Aloui, Zouhaier
  11. European Immigrants and the United States’ Rise to the Technological Frontier By Costas Arkolakis; Michael Peters; Sun Kyoung Lee
  12. Emerging economy MNEs: how does home country munificence matter? By Estrin, Saul; Meyer, Klaus E.; Pelletier, Adeline
  13. The Quantitative Effects of Trade Policy on Industry and Labor Locations By Lorenzo Caliendo; Fernando Parro
  14. How Large is the Impact of Trade on Inequality? A New Factor Content of Trade Approach By Rodrigo Adao; Arnaud Costinot; Dave Donaldson; Dina Pomeranz; Paul Carrillo
  15. Does automation lead to de-industrialization in emerging economies? Evidence from Brazil By Stemmler, Henry
  16. Governance and Foreign Direct Investment : A comparative Analysis between Low and Middle Income African Countries By Bouchoucha, Najeh; Yahyaoui, Ismahen
  17. IO FOR EXPORT(S) By Peter Neary; Monika Mrázová
  18. Estimates of Exchange Rate Pass-through with Product-level Data By Yusuf Emre Akgunduz; Emine Meltem Bastan; Ufuk Demiroglu; Semih Tumen
  19. Production Networks and the Propagation of Commodity Price Shocks By Shutao Cao; Wei Dong
  20. FDI in Selected Developing Countries: Evidence from Bundling and Unbundling Governance By Simplice A. Asongu
  21. Rules of Origin Liberalization with Multi-Product Firms: Theory and Evidence from Bangladeshi Apparel Exporters By Sytsma, Tobias
  22. Economic Geography Aspects of the Panama Canal By Ferdinand Rauch; Stephan Maurer
  23. The Spatial Dimension of Import Competition By Gullstrand, Joakim; Knutsson, Polina
  24. Trade openness and economic growth:Empirical evidence from Lesotho By Malefane, Malefa R; Odhiambo, Nicholas M
  25. How Distortions Alter the Impacts of International Trade in Developing Countries By David Atkin; Amit Khandelwal
  26. Offshoring and Skill-Biased Technical Change in the Context of US Protectionism By Agnese, Pablo; Hromcová, Jana
  27. Does Migration Policy affect the Residential Pattern of Immigrants? evidence from UK quasi-experimental research By Anupam Nanda; Sarah Jewel; Olayiwola Oladiran
  28. Geography, Competition, and Optimal Multilateral Trade Policy By Antonella Nocco; Gianmarco Ottaviano; Matteo Salto
  29. Trade Policy is Real News: A quantitative analysis of past, current, and future changes in U.S. trade barriers. By George Alessandria; Carter Mix
  30. Rising Policy Uncertainty By Steven J. Davis
  31. International yield spreads as a determinant of foreign real estate investment activity By Jonas Willwersch
  32. What are the Price Effects of Trade? Evidence from the U.S. and Implications for Quantitative Trade Models By Xavier Jaravel; Erick Sager
  33. A Theory of Economic Unions By Gino Gancia; Giacomo A.M. Ponzetto; Jaume Ventura
  34. Are asylum seekers more likely to work with more inclusive labor market access regulations? By Slotwinski, Michaela; Stutzer, Alois; Uhlig, Roman
  35. Education and the Geography of Brexit By Robert Calvert Jump; Jo Michell
  36. Climate Change, Inequality, and Human Migration By Michal Burzynski; Christoph Deuster; Frederic Docquier; Jaime de Melo
  37. The global distribution of economic activity: nature, history, and the role of trade By Henderson, Vernon; Squires, Tim; Storeygard, Adam; Weil, David
  38. Measuring inefficiency in international electricity trading By Montoya, L.; Guo, B.; Newbery, D. M.; Dodds, P.; Lipman, G.; Castagneto Gissey, G.

  1. By: Kohnert, Dirk
    Abstract: ABSTRACT & RÉSUMÉ & ZUSAMMENFASSUNG : The EU-Mercosur deal of 2019 was heralded as a milestone of free trade agreements worldwide in times of growing protectionism and nationalism. Critics condemned deficient ecological and sanitary standards as well as persistent non-tariff barriers to trade. The EU farm lobby complained about a sell-out of European interests in advantage of dominating multinationals. However, the fatal repercussions of the deal on Africa have rarely been mentioned. They include increasing cut-throat competition and asymmetrical partnership to the detriment of the African poor. Given the additional destructive impact of the Brexit crisis, African governments should use their increased bargaining power vis à vis the EU27 and the UK, in times of stiffening competition concerning the EU’s Africa trade with new global players such as China and India, to enforce EPAs re-negotiations on a level playing field. RÉSUMÉ : L'accord de 2019 entre l'UE et le Mercosur a été qualifié de jalon dans les accords de libre-échange dans le monde entier à une époque de protectionnisme et de nationalisme grandissants. Les critiques ont condamné les normes écologiques et sanitaires déficientes, ainsi que les obstacles non-tarifaires persistants au commerce. Le lobby agricole de l'UE s'est plaint de la vente d'intérêts européens au profit de multinationales dominantes. Cependant, les répercussions fatales de l'accord sur l'Afrique ont rarement été mentionnées. Ils incluent une concurrence acharnée et un partenariat asymétrique au détriment des pauvres en Afrique. Compte tenu de l'impact destructeur supplémentaire de la crise du Brexit, les gouvernements africains devraient utiliser leur pouvoir de négociation accru vis-à-vis de l'UE27 et du Royaume-Uni, en période de durcissement de la concurrence concernant le commerce africaine de l'UE avec des nouveaux acteurs mondiaux tels que la Chine et l'Inde, pour imposer des renégociations des APEs sur un pied d’égalité. ------------------------------------------------------------------------------------------------------------------------------------------ ZUSAMMENFASSUNG : Das Abkommen zwischen der EU und dem Mercosur von 2019 wurde als Meilenstein für weltweite Freihandelsabkommen in Zeiten wachsenden Protektionismus und Nationalismus eingeläutet. Kritiker bemängelten unzureichende Umwelt- und Hygienestandards sowie anhaltende nichttarifäre Handelshemmnisse. Die EU-Agrarlobby beschwerte sich außerdem über einen Ausverkauf europäischer Interessen zugunsten dominierender multinationaler Unternehmen. Die fatalen Auswirkungen des Abkommens auf Afrika wurden jedoch selten erwähnt. Dazu gehören ein zunehmender Verdrängungswettbewerb und eine asymmetrische Partnerschaft zum Nachteil der afrikanischen Armen. Angesichts der zusätzlichen destruktiven Auswirkungen der Brexit-Krise sollten die afrikanischen Regierungen, in Zeiten zunehmenden Wettbewerbs im Afrikahandel der EU mit neuen globalen Akteuren wie China und Indien, ihre verstärkte Verhandlungsmacht gegenüber der EU27 und Großbritannien einsetzen, um Neuverhandlungen der Wirtschaftlichen Partnerschaftsabkommen auf Augenhöhe durchzusetzen.
    Keywords: EU, MERCOSUR, Africa, post-colonialism, development, international trade, ODA, Brexit, security, partnership, multinationals
    JEL: E26 F13 F15 F23 F35 F42 F54 N46 N47 O17 Z13
    Date: 2019–09–05
  2. By: Giorgio Barba Navaretti (University of Milan and LdA); Lionel Fontagné (Paris School of Economics – Universit´e Paris I and CEPII); Gianluca Orefice (CEPII); Giovanni Pica (Università della Svizzera Italiana, LdA and CSEF); Anna Cecilia Rosso (Università degli Studi di Milano and LdA)
    Abstract: Trade shocks in export markets may affect the employment composition and the organization of exporting ï¬ rms. In particular, the imposition of new technological standards in destination markets may force exporters to adjust the ï¬ rm’s organization to comply and cope with the additional complexity of the new production process. This paper investigates the effects on ï¬ rms’ organization of shocks induced by the introduction of Technical Barriers to Trade (TBTs) in exporting countries. It relies on the Speciï¬ c Trade Concern (STC) data released by the WTO to identify trade-restrictive TBT measures, combined with matched employer-employee data for the population of French exporters over the period 1995-2010. It also exploits information on the list of product-destinations served by each French exporter. Controlling for tariffs and for a given state of technology in the sector of the ï¬ rm, it ï¬ nds that exporters respond to increased complexity associated with restrictive Technical Barriers to Trade at destination by raising the share of managers at the expense of blue collars, white collars and professionals. This paper is related to the growing literature exploring how ï¬ rms organize production in hierarchies to economize on their use of knowledge. It is also related to the well beaten literature on the labour market effects of trade, but from the perspective of exports rather than imports.
    Keywords: skill composition, labor demand, job polarization, trade barriers
    Date: 2019–09–13
  3. By: Julia Schmidt; Walter Steingress
    Abstract: Product standards are omnipresent in industrialized societies. Though standardization can be beneficial for domestic producers, divergent product standards have been categorized as a major obstacle to international trade. This paper quantifies the effect of standard harmonization on trade flows and characterizes the extent to which it changes the cost and demand structure of exporting. Creating a novel and comprehensive database on cross-country standard equivalences, we identify standard harmonization events at the document level. Our results show that the introduction of harmonized standards increases trade through a larger sales volume of existing exporters (intensive margin) and more entry (extensive margin). These findings are consistent with a multi-country heterogeneous firm model featuring endogenous standard adoption. Because of additional demand, standard harmonization raises firms’ incentives to produce varieties in accordance with the standard despite high sunk investment costs. Firms’ export sales expand and entry into foreign markets is encouraged.
    Keywords: Econometric and statistical methods; International topics
    JEL: F13 F14 F15 L15
    Date: 2019–09
  4. By: Beata Javorcik; Ben Kett; Katherine Stapleton; Layla O'Kane
    Abstract: This paper uses high frequency data on the universe of job adverts posted online in the UK to study the impact of the trade uncertainty caused by the Brexit referendum on labour demand. We develop measures of industry and regional exposure to the threat of poten¬tial most-favoured-nation (MFN) tariffs if the UK were to leave the EU without a trade deal. We show that industries and regions more exposed to the tariff threat differentially reduced online hiring in the period after the referendum. We also show that the magni¬tude of this negative effect varied with the time-varying perceived probability of a no-deal Brexit, proxied by the relative frequency of Google-searches for terms associated with a no-deal Brexit. The policy implications of this paper are that uncertainty around trade policy, not only enacted policy, have real economic impacts and governments should therefore strive for clarity and predictability in their actions to create a strong enabling environment for the private sector.
    Date: 2019–08–29
  5. By: Dincer, Nergiz; Tekin-Koru, Ayca
    Abstract: This paper has two objectives: (i) to introduce border policy-induced barriers (PIBs) to services trade and (ii) analyze the impact of border PIBs in services sectors on goods trade. The World Input-Output Database covering 43 countries is used over the period 2000-2014. A three-stage analysis is employed. The measures of bilateral services trade barriers calculated in each services sector in the first stage are decomposed into its cultural/geographical and policy-induced parts in the second stage. Border PIBs to services trade are used in the structural gravity estimations of bilateral goods trade in the final stage. The results demonstrate significant and robust adverse effects of barriers to services trade on goods trade. When the level of development is taken into consideration, there are marked differences in the impact of these barriers on goods trade.
    Keywords: border services trade barriers, goods exporting, gravity
    JEL: F10 F14
    Date: 2019–08
  6. By: Yang, Han
    Abstract: To what extent does education alleviate income inequality induced by globalization? What are the corresponding intergenerational welfare implications? I incorporate human capital and capital accumulation into a dynamic, multi-country general equilibrium model, and study the exact transitional path. Interactions between comparative advantage, capital accumulation, and endogenous education are the main driving forces of the inequality dynamics. These channels reflect ability to adjust factor supply at different stages of the transition. I parameterize the model for 40 countries, six sectors using the World Input-Output Database. Trade liberalization raise the skill premium, the skill share and the real wage for both skilled and unskilled workers in all countries in my model. Through decomposition, I find that education eliminates trade-induced inequality by 65\% on average. My model also suggests that globalization can cause more intergenerational inequality. Because older and more educated people generally benefit relatively more from globalization.
    Keywords: international trade, dynamic,education, inequality, skill premium
    JEL: F1 F4
    Date: 2019–09
  7. By: Ragchaasuren Galindev; Tsolmon Baatarzorig; Nyambaatar Batbayar; Delgermaa Begz; Unurjargal Davaa; Oyunzul Tserendorj
    Abstract: This paper examines the impact of Foreign Direct Investment (FDI) intended to increase the exporting capacity of the coal sector on the Mongolian economy and environment by using a recursive dynamic Computable General Equilibrium model. FDI was used to expand the coal-export sector as well as to construct a railway line connecting the Mongolian main coal reserve and the Chinese border. FDI had a positive impact on macroeconomic variables such as GDP, employment, investment, and household consumption but produced a Dutch disease effect in some sectors. The new railway reduced the environmental impact of transporting coal.
    Keywords: CGE model, Mongolian economy, Mining, Fiscal consolidation
    JEL: D58 E62 I32 Q33
    Date: 2019
  8. By: Dagmara Nikulin (Gdansk University of Technology, Gdansk, Poland); Joanna Wolszczak-Derlacz (Gdansk University of Technology, Gdansk, Poland)
    Abstract: In this paper we examine the linkages between involvement into global value chains (GVCs) and the gender wage inequalities. We use merged wide-ranging Structure of Earning (SES) and World Input Output Database (WIOD) for the years 2002, 2006, 2010 and 2014, covering manufacturing industries of 18 European countries. We employ a wealth of information on employees’ personal and company characteristics as well as sectoral variable reflecting the involvement in GVC measured by foreign value added embodied in exports (FVA/Exp.) We augment the Mincerian regression with GVC variable and report gender wage discrimination among European employees. The results indicate that wages of workers employed in sectors more involved in GVC are lower. However, the relationship between GVC and wages differs in respect to gender; women are more affected by the negative impact of greater trade involvement in comparison to men. There is some education/skill/occupation heterogeneity with workers with middle education level and middle skills being most affected. Finally, our results show the different patters across concentrated and competitive industries: the wage drop due GVC intensification is observed for the former ones.
    Keywords: gender wage gap, gender inequalities, micro data, European countries
    JEL: J16 J31 F16
    Date: 2019–08
  9. By: Haitao Cheng (Graduate School of Economics, Hitotsubashi University,); Hayato Kato (Graduate School of Economics, Osaka University); Ayako Obashi (School of International Politics, Economics and Communication, Aoyama Gakuin University)
    Abstract: The current globalization is characterized by the spatial unbundling of parts production and assembly, leading to the dispersion of pollution. We study environmental taxes in a two-country model of global value chains in which the location of parts and assembly can di er. When unbundling costs are so high that parts and assembly must co-locate in the pre-globalized world, pollution is spatially concentrated and harmonizing environmental taxes maximizes the global welfare. By contrast, under low unbundling costs triggering the dispersion of parts and thus of pollution in the world today, the harmonization does not maximize the global welfare.
    Keywords: Environmental policy; Fragmentation; International coordination
    JEL: F18 F23 Q56 Q58
    Date: 2019–09
  10. By: Aloui, Zouhaier
    Abstract: The interest of this paper is to show the impact of governance on foreign direct investment and its different effects among Maghreb Arab countries and Asian countries. The results of the effect of political stability, the rule of law, the quality of regulation and the way responsibility and Showed That governance Positively and Significantly contributed to Improving the attractiveness of foreign direct investment (FDI) in Asia purpose in the Arab Maghreb countries, and the way responsibility: has a significant negative impact on FDI. The objective of this work is to study the impact of governance on direct foreign investment (FDI) for a panel of Maghreb Arab countries in Asia countries during 1996 to 2014. Empirical verification generally shows significant results in Asia and is not significant in countries of Arab Maghreb. Indeed, thesis results in Asian countries claim that governance plays a key role in attracting foreign direct investment (FDI).
    Keywords: governance, foreign direct investment, Arab Maghreb, Asia, panel data.
    JEL: F2 F21 F23 K12
    Date: 2019–09–02
  11. By: Costas Arkolakis (Yale University); Michael Peters (Yale University); Sun Kyoung Lee (Columbia University)
    Abstract: What is the role of immigrants on (American) Growth? To answer this perplex question, we undertake a massive effort of collecting, digitizing, and harmonizing micro and macro economic data from the 19th and early 20th century. The data originate from the historical manufacturing and demographic census of the United States, immigration records datasets and the universe of US patents. To analyze the counterfactual implications of alternative allocations of immigrants, we develop a dynamical trade model where heterogenous firms make innovation and exporting decisions across space and time. The model predicts that the timing and the spatial allocation of immigrant arrivals affect the path of growth outcomes for each location and the aggregate US economy. We use the structural equations arising from the model to interpret empirical findings from the difference-in-difference analysis for the importance of the influx of skilled immigrants on the differential growth of US counties. Counterfactual scenarios of alternative allocation of skilled immigrants from different countries across space and time reveal the economic impact of barriers to migration to the United States economy.
    Date: 2019
  12. By: Estrin, Saul; Meyer, Klaus E.; Pelletier, Adeline
    Abstract: Multinational Enterprises (MNEs) from emerging economies (EEs) are establishing operations in advanced economies (AEs), apparently departing from traditional models of internationalization. We explore an under-explored difference between EE MNE and their AE counterparts concerning their country of origin: EEs have less munificent business environments. This leads EE MNEs to make different location choices than AE MNEs when entering AEs, specifically because they are more deterred by barriers to entry. We therefore predict EE MNEs to be relatively more deterred by distance and weak intellectual property protection and relatively more attracted by diaspora of migrants and by markets. Our empirical results are consistent with these predictions
    Keywords: Foreign direct investment; Location choice; Emerging economy multinationals; Home country munificence; Liability of foreignness
    JEL: R14 J01 J50
    Date: 2018–06–30
  13. By: Lorenzo Caliendo (Yale University); Fernando Parro (Johns Hopkins University)
    Abstract: What does protectionism protect? One of the arguments to support unilateral trade policy, that is that is an increase in protectionisms, is to improve the welfare of workers displaced from industries impacted by import competition by bringing jobs back home. In fact, this argument is supported by the insights of the new economic geography models. However, these models predict that trade protectionism can be welfare enhancing by delocating foreign firms which result in a reduction in the Price Index in the country imposing protectionism. Moreover, this effect is even stronger when introducing agglomeration forces. The problem of this theoretical insight is that it can become easily ambiguous when enriching the structure of the models by adding some additional “realistic” structure. For instance, strong comparative advantage can prevent the relocation of firms (or make it weak). Also, relocation of firms can take time, because for instance, firms that want to entry in the U.S. market will locate in a region and need to absorb workforce that can be costly or take very long. In addition, trade intermediate goods can also prevent this “industrialization” process as shown. Beyond this, the adjustment of protectionism are also shaped by the internal geography and production structure of a country, as can be inferred by the neoclassical theory. As an example, the impact of a trade policy to protect unskilled workers can be very heterogeneous (and hurt a group of unskilled workers) depending on the location of production and the ability of workers to move across industries. We develop a dynamic general equilibrium model that embed the mechanisms present on the new economic geography (and the ones in the neoclassical theories) into a dynamic general equilibrium model with a realistic internal geography and labor market dynamics. We use the framework to study these mechanisms, and to study the overall distributional consequences (focusing on its heterogeneity) of unilateral protectionism.
    Date: 2019
  14. By: Rodrigo Adao (University of Chicago Booth School of Business); Arnaud Costinot (MIT); Dave Donaldson (MIT); Dina Pomeranz (University of Zurich); Paul Carrillo (George Washington University)
    Abstract: How are relative earnings across individuals (such as an economy’s collection of workers and firm owners) affected by openness to international trade? Extending the insights of Deardorff and Staiger (1988) to an arbitrary neoclassical economy, we develop a new theoretical framework for answering this question as a function of each individual’s factor content of trade and the economy’s factor demand system. We use a unique merged dataset (drawing on firm-to-firm transaction data, employer-employee matched data, owner-firm matched data, and firm-level customs transaction records) in order to measure the factor content of trade for each formal sector individual in Ecuador and to estimate the factor demand system for that country.
    Date: 2019
  15. By: Stemmler, Henry
    Abstract: This paper investigates several channels through which automation affects an emerging economy. Building on a Ricardian model of trade with sectoral linkages and a two-stage production technology, in which robots replace labor in certain tasks, it is shown that domestic and foreign automation have differential effects on labor markets. Based on this model, the impact of automation on local labor markets in Brazil are estimated using a shift-share approach. Local labor market exposures to industry-level stocks of robots are derived from their initial industry-employment composition. Foreign automation is found to decrease manufacturing employment through the channel of final goods exports, while it increases employment in the mining sector through the channel of input exports. This may stimulate what has been called "premature deindustrialization" in emerging economies. To account for possible endogeneity in adopting robots domestically, robot uptake in other emerging economies is used as an instrumental variable. Domestic automation is found to directly decrease the ratio of unskilled industry workers and increase the ratio of skilled workers. Also, the wage gap between the two groups widens as a consequence of domestic automation, reinforcing income inequality.
    Keywords: automation,trade,deindustrialization,employment,wages
    JEL: J23 J24 F16 O33
    Date: 2019
  16. By: Bouchoucha, Najeh; Yahyaoui, Ismahen
    Abstract: This paper investigates the effect of governance on FDI on a sample of 41 African countries: 20 low income countries and 21 middle income countries, over the period of 1996-2013.Our study moves from an aggregated analysis to a disaggregated analysis by applying the system generalized method of moments (System-GMM). The aggregated approach consists to use a composite institutional quality index, which includes the six dimensions of governance to identify the overall impact of governance on FDI inflows. While, the iterative approach examines the effect of the six dimensions of governance on FDI. Our results indicate that good governance is a deterministic condition in attractiveness of FDI in African economies.
    Keywords: governance,FDI,GMM,African countries
    JEL: H0
    Date: 2019–09–08
  17. By: Peter Neary; Monika Mrázová
    Abstract: We provide an overview and synthesis of recent work on models of monopolistic competition with heterogeneous firms in international trade, paying particular atten¬tion to pass-through, selection effects, competition effects, and matching endogenous with exogenous distributions. A recurring theme is that CES preferences are extremely convenient for deriving analytic results, but also extremely restrictive in their theoret-ical and empirical implications. We introduce the class of “constant-response demand functions†to describe some related families of demand functions that provide a unifying principle for much recent work that explores alternatives to CES demands.
    Keywords: Heterogeneous Firms; Pass-Through; Quantifying Effects of Globalization; Super- and Sub-Convexity; Supermodularity
    JEL: F12 L11 F23
    Date: 2019–02–08
  18. By: Yusuf Emre Akgunduz; Emine Meltem Bastan; Ufuk Demiroglu; Semih Tumen
    Abstract: We estimate the export and import pass-through rates using product-level data from Turkey. We find that the Turkish lira (TRY) exchange rate changes are mostly passed on to TRY prices of exports and imports–and therefore modestly to their prices in trading partners’ currencies. The rate of average pass-through to TRY-prices is 89% for imported goods and 82% for exported goods, with no apparent lags in the impact. Pass-through estimates by sector show variation and are relatively low for food and agricultural products. We argue that the highly-detailed productlevel data enable us to estimate the pass-through rates with better reliability and precision than we could by using only aggregated time-series data. We also introduce a pooled equation to estimate the difference between the export and import pass-through rates–a potentially useful statistic–in a way that allows statistical inference.
    Keywords: Exchange rate pass-through, Product-level estimates, Turkish export prices, Turkish import prices
    JEL: F14 F31 F41
    Date: 2019
  19. By: Shutao Cao (Bank of Canada); Wei Dong (Bank of Canada)
    Abstract: Commodity price fluctuations have macroeconomic implications not only through resource reallocation, currency value changes and monetary policy reaction, but also through production network linkages. In this paper, we study the propagation of commodity price shocks in a multiple-sector general equilibrium model for a small open economy that exports commodity. In the small open economy, a shock to commodity prices is both aggregate and sectoral. As an aggregate shock, commodity price movements lead to changes in the value of domestic currency, impacting the macro economy due to its size and triggering monetary policy responses. As a sectoral shock, changes in commodity price impact non-commodity sectors in two aspects: impacting demand for the upstream goods and impacting the cost of production in the downstream sectors. Calibrated to the Canadian data, our model suggests that, following a positive shock to commodity prices, production and exports in the commodity sector rises, while the net impact on the rest of the economy's production is negative. The aggregate gross domestic output increases primarily owing to growth in investment and improved trade balance. The export connection with the rest of the world in the open economy production network plays an important role in the process of adjusting to a commodity price shock, while the import connections do not matter nearly as much. We show that these propagation channels of shocks to commodity price explain a large fraction of drop in Canadian real GDP in 2015 following the sharp decline in commodity prices that started in late 2014.
    Date: 2019
  20. By: Simplice A. Asongu (Yaoundé/Cameroon)
    Abstract: The objective of this study is to assess governance drivers of FDI in a panel of BRICS and MINT countries for the period 2001-2011. We bundle and unbundle governance determinants using a battery of contemporary and non-contemporary estimation techniques. Our findings reveal the following: Firstly, for both contemporary and non-contemporary specifications, while the majority of our governance determinants of Gross FDI are significant, they are overwhelmingly insignificant for Net FDI. Secondly, the significance of the governance dynamics in increasing order of magnitude are general governance, political governance, economic governance, political stability, regulation quality and government effectiveness. Thirdly, for non-contemporary specifications, the significance of governance variables is as follows in ascending order of magnitude: economic governance, institutional governance, general governance, corruption-control, political governance and political stability. The importance of combining governance indicators is captured by the effects of political governance, economic governance and institutional governance. The results indicate that the simultaneous implementation of the various components of governance clarifies a country’s attractiveness for FDI location. Policy implications are discussed with particular emphasis on the timing of FDI and its targeting.
    Keywords: Foreign direct investment, emerging countries, governance
    JEL: C52 F21 F23 P37 P39
    Date: 2019–01
  21. By: Sytsma, Tobias
    Abstract: I study how rules of origin in potential export destinations influence firm- and industry-level export behavior in least-developed countries (LDCs). Rules of origin restrict LDCs from taking advantage of preferential tariff rates in export markets, and this undermines market access for LDCs and reduces the efficacy of export-oriented industrialization. I develop a model of multi-product firms in which rules of origin influence the product scope and export revenue of final goods producers through their effect on input sourcing decisions. I test the model's predictions using the 2011 revisions to the EU's rules of origin for apparel products from LDCs. To control for the potential endogeneity of the policy change I use a triple-difference approach, exploiting variation in the input-cost differentials across apparel products and export destination, before and after the EU policy change. Liberalizing rules of origin results in revenue gains, expansion of product scope, and firm entry into the export market. Within firms, incumbents upgrade product quality. Across firms, market share is reallocated toward more productive incumbents.
    Keywords: Rules of origin, Non-tariff barriers, Economic development, Exports-oriented industries, Ready-made garments
    JEL: F13 L25 O19 O24
    Date: 2019–09–10
  22. By: Ferdinand Rauch; Stephan Maurer
    Abstract: This paper studies how the opening of the Panama Canal in 1914 changed market access and influenced the economic geography of the United States. We compute shipment distances with and without the canal from each US county to each other US county and to key international ports and compute the resulting change in market access. We relate this change to population changes in 20-year intervals from 1880 to 2000. We find that a 1 percent increase in market access led to a total increase of population by around 6 percent. We compute similar elasticities for wages, land values and immigration from out of state. When we decompose the effect by industry, we find that tradable (manufacturing) industries react faster than non-tradable (services), with a fairly similar aggregate effect.
    Keywords: Market access; Panama Canal; trade shock; gravity
    JEL: F1 R1 O1 N72
    Date: 2019–08–06
  23. By: Gullstrand, Joakim (Department of Economics, Lund University); Knutsson, Polina (Department of Economics, Lund University)
    Abstract: Exposure to international competition on a country level has been shown to improve the efficiency of domestic producers. We contribute to this literature by assessing whether the distance between producers and importers, within a country, matters for import competition effects at product level. Using detailed geographical information about the location of all manufacturing firms in Sweden during the period 2005–2014, we find strong evidence of an increased efficiency in the domestic production when imports surge, but that the effect diminishes with the distance between the producer and the importer. In addition to the importance of the geographical pattern within a country, we find that the average effect of import competition conceals large variations across firms and products. Highly productive firms respond to import competition by further improving efficiency, which, in turn, is transmitted to both a lower price and a higher markup. Firms are also more likely to drop fringe products while keeping core ones. Products undercut by low import prices in their proximity respond by lowering prices only, although highly efficient products resist this by a more pronounced improvement in the marginal cost, which, in turn, is transmitted to both a lower price and a higher markup.
    Keywords: Import competition; distance; firm-product performance
    JEL: F14
    Date: 2019–09–10
  24. By: Malefane, Malefa R; Odhiambo, Nicholas M
    Abstract: This paper examines the dynamic impact of trade openness on economic growth in Lesotho using the autoregressive distributed lag (ARDL) bounds testing approach. The study employs four indicators of trade openness, which include three trade-based proxies and an index of trade openness. The empirical results of this study show that trade openness has no significant impact on economic growth in both the short run and long run irrespective of which proxy of trade openness is used. These empirical results have important policy implications for Lesotho. Among others, this study suggests that the policymakers adopt policies aimed at boosting human capital and infrastructural development so that the economy grows to a threshold level required to reap the benefits of trade openness in its various forms. The policymakers should also pursue policies that enable the expansion in both international trade and economic growth, such that beneficial growth effects can be realized from trade with no exclusions.
    Keywords: Trade Openness, Economic Growth; ARDL; Exports; Imports; Lesotho
    Date: 2019–09
  25. By: David Atkin; Amit Khandelwal
    Abstract: Substantial research in development economics has highlighted the presence of weak institutions, market failures and distortions in developing countries. Yet, much of the knowledge generated in international trade comes from workhorse models that abstract from these frictions. This review summarizes the recent literature that assesses how these characteristics interact (or may interact) with trade reforms, resulting in different impacts in developing countries relative to what we would expect in developed countries. We discuss understudied areas that warrant further research.
    JEL: F1 O1
    Date: 2019–09
  26. By: Agnese, Pablo (UIC Barcelona); Hromcová, Jana (ESSCA School of Management)
    Abstract: We discuss the effects of offshoring on the labor market in a matching model with endogenous adjustment of educational skills. We carry out a comparative statics analysis and show that offshoring leads to a restructuring of the economy through skill-biased technical change (SBTC) where overall welfare is improved. In a policy exercise we show that, if offshoring were to be opposed by a protectionist agenda, labor market flexibility can bring about the same welfare gain. In addition, we offer an empirical analysis aimed at verifying the correlation be- tween offshoring and SBTC in US manufacturing industries in recent years. Our results show that different offshoring strategies affect SBTC differently. In particular, the evidence suggests that while high-skill offshoring strategies open the skill gap, low-skill offshoring strategies tend to work in the opposite direction.
    Keywords: offshoring, skills, skill-biased technical change
    JEL: J64 F16 F17
    Date: 2019–09
  27. By: Anupam Nanda; Sarah Jewel; Olayiwola Oladiran
    Abstract: The United Kingdom is one of the major destination of immigrants and approximately 50% of the UK immigrant population reside in London. This immigrant concentration has been linked to the city’s political, economic and administrative relevance globally and to the UK in particular. This paper presents empirical evidence that migration policy may also play a significant role in the locational choices and residential pattern of UK immigrants. A conceptual link is developed on the premise that migration policy plays a key role in creating and sustaining migration waves and by extension, the socio-economic, socio-cultural and demographic composition of immigrants which are also key factors in individuals’ locational choices and residential patterns. Using rigorous quasi-experimental techniques namely Regression Discontinuity Design (RDD) and Difference-in-Difference (D-in-D) style approaches, this research examines the impact of the 2004 accession of 10 new countries to the EU (EU A10) and the Immigration Act of 1971 on the concentration of immigrants in London as well as the general residential pattern of UK immigrants. The results reveal that EU A10 immigrants that immigrated to the UK after the 2004 migration liberalisation (post-EU A10 immigrants) have a 20% lower likelihood of residing in London and are more spread out to other regions, compared to the pre-EU A10 immigrants who have a higher concentration in London. The results also reveal that Commonwealth immigrants that immigrated after the introduction of new immigration restrictions in 1972 have a 10% higher likelihood of residing in London compared to Commonwealth immigrants that immigrated before 1972. These results provide new insight on the potential link between migration policy, locational choices and residential patterns of immigrants.
    Keywords: Demography; housing; Migration policy; Tenure; Windrush
    JEL: R3
    Date: 2019–01–01
  28. By: Antonella Nocco; Gianmarco Ottaviano; Matteo Salto
    Abstract: How should multilateral trade policy be designed in a world in which countries differ in terms of market access and technology, and ?firms with market power differ in terms of productivity? We answer this question in a model of monopolistic competition in which variable markups increasing in firm size are a key source of misallocation across ?firms and countries. We use ?disadvantaged?to refer to countries with smaller market size, worse state of technology (in terms of higher innovation and production costs), and worse geography (in terms of more remoteness from other countries). We show that, in a global welfare perspective, optimal multilateral trade policy should: promote the sales of low cost ?firms to all countries, but especially to disadvantaged ones; trim the sales of high cost ?firms to all countries, but especially to disadvantaged ones; reduce firm entry in all countries, but especially in disadvantaged ones. This would not only restore efficiency but also reduce welfare inequality between advantaged and disadvantaged countries if their differences in market size, state of technology and geography are large enough.
    Keywords: International trade policy, monopolistic competition, ?rm heterogeneity, pricing to market, multilateralism.
    JEL: D4 D6 F1 L0 L1
    Date: 2019
  29. By: George Alessandria (University of Rochester); Carter Mix (University of Rochester)
    Abstract: We evaluate the aggregate effects of changes in trade barriers in a model in which trade re- sponds gradually to changes in trade policy and trade policy changes are gradual. Our model offers insights into how changing trade barriers affects the economy and how business cycle shocks can affect trade. We find that a fall in current trade barriers has an expansionary effect while a decline in future trade costs can be recessionary on impact. We find that cancelling agreed upon declines in barriers to be expansionary in the short-run but substantially lowers growth over the medium run. We also find that even controlling for composition, trade tends to lag the recovery in demand for tradables. We capture the growth and trade factors driving the economy with movements in productivity, investment efficiency, the labor wedge, and trade costs. We estimate the model to match the key time series on trade integration and business cycles since 1970. Our estimation yields a path for current and expected future trade barriers and allows us to decompose the source of aggregate fluctuations and integration. We find that trade barriers have been expected to decline but that these declines have been repeatedly delayed. We find that aside from these delays that the outlook on future trade barriers did not change much between 2012 and 2016, but deteriorated substantially since. We also decompose the sources of the trade and growth slowdowns since the Great Recession. We show that data on export participation is helpful to identify future trade costs when exporting is a dynamic decision. We use our model to consider the impact of alternative unilateral and bilateral changes in trade barriers being contemplated.
    Date: 2019
  30. By: Steven J. Davis
    Abstract: I review evidence of rising policy uncertainty in the U.S. and global economies, drawing heavily on newspaper-based measures. Examples from countries around the world illustrate the role of political and policy developments as drivers of fluctuations in economic uncertainty. I also highlight the prominent role of trade policy as a source of uncertainty and stock market volatility since March 2018, when U.S.-China tensions began to escalate. Lastly, I offer remarks on the interplay between policy uncertainty and economic performance.
    JEL: D80 E20 F13
    Date: 2019–09
  31. By: Jonas Willwersch
    Abstract: Volumes of Foreign Real Estate Investment (FREI) have rapidly grown in many countries over the past decade (Mauck, Price (2017)). Thus, activities of foreign investors become increasingly important for domestic but also globalized real estate markets. So far, literature has quantified the effect of foreign capital on fundamental real estate parameters such as cap rates (see e.g. McAllister, Nanda (2016) and Kim et al. (2018)). Furthermore, researchers identified several determinants of foreign capital flows (see e.g. Lieser, Groh (2014)). However, the literature entails a gap if and to which extent differences in international cap rates (so-called yield spreads) affect foreign investors. Consequently, the functional relationship between the foreign investors’ calculus and international yield spreads is the fundamental research aim of the present study.This paper will utilize insights from real estate literature for national markets, which identified domestic yield spreads as a decisive factor to determine capital inflows into an asset class (Laposa, Mueller (2017)). The analysis will assess whether this national mechanism can also be observed on an international level by focusing on the United States (US) as the target country for foreign real estate investments. Thus, the empirical study will isolate the effect of international yield spreads on foreign inflows into commercial real estate in the US. These spreads are calculated as the difference between US yields and yields in several foreign markets (e.g. Germany, the United Kingdom, France, and others, which showed high investment activity in the US in the past). Hence, the central hypothesis states that positive spreads trigger inflows and consequently increase the transaction volumes of foreign investment. The latter will be tested by using regression models. These include time series analysis such as OLS as well as logistic models and Markov-Switching, following the existing literature methodically (see Tsolacos et al. (2014) as well as Laposa, Mueller (2017)), but also expanding it by including spreads as explanatory variables.To the best of the author's knowledge, there is no study, which investigates international yield spreads as a determinant for foreign real estate investment. Therefore, the paper will improve the understanding of investors’ calculus and contribute to the body of literature by shedding light on the impact of international yield spreads on foreign investment activity.
    Keywords: capitalization rate; commercial real estate; cross-border real estate investment; foreign real estate investment; Panel Data
    JEL: R3
    Date: 2019–01–01
  32. By: Xavier Jaravel (London School of Economics); Erick Sager (Federal Reserve Board)
    Abstract: We estimate the impact of trade with China on U.S. consumer prices and use this evidence to discipline quantitative trade models. Using comprehensive price data from the U.S. Bureau of Labor Statistics and two complementary identication strategies from Pierce and Schott (2016) and Autor et al. (2014), we find that trade with China had a large impact on U.S. prices. Between 2000 and 2007, a one percentage point increase in Chinese import penetration in a given industry led to a three percentage point fall in the Consumer Price Index in that industry. This effect is large but plausible; abstracting from GE effects and benchmarking our estimates against those of Autor et al. (2013), our results imply that increased Chinese import penetration generated benefits to U.S. consumers through lower prices equal to $101,250 per lost manufacturing job, or a cumulative 1.97% fall in the aggregate U.S. CPI between 2000 and 2007. These price effects are one order of magnitude larger than in the class of trade models nested by Arkolakis et al. (2012). In contrast with these models, we find that (i) the price response of pre-existing domestic products drives the overall price effects; (ii) market concentration is a key predictor of the magnitude of the price response. Using a simple model, we show that these patterns can be explained by a fall in markups in response to increased import competition. These results indicate that the pro-competitive effects of trade have important implications for inflation and consumer welfare.
    Date: 2019
  33. By: Gino Gancia; Giacomo A.M. Ponzetto; Jaume Ventura
    Abstract: After decades of successful growth, economic unions have recently become the focus of heightened political controversy. We argue that this is partly due to the growth of trade between countries that are increasingly dissimilar. We develop a theoretical framework to study the effects on trade, income distribution and welfare of economic unions that differ in size ad scope. Our model shows that political support for international unions can grow with their breadth and depth as long as member countries are sufficiently similar. However, differences in economic size and factor endowments can trigger disagreement over the value of unions between and within countries. The model is consistent with same salient features of the process of European integration and statistical evidence from survey data.
    Keywords: economic unions, non-tariff barriers, European integration
    JEL: F15 F55 H77 D71 D78
    Date: 2019–09
  34. By: Slotwinski, Michaela; Stutzer, Alois; Uhlig, Roman
    Abstract: In the face of recent refugee migration, early integration of asylum seekers into the labor market has been proposed as an important mechanism for easing their economic and social lot in the short as well as in the long term. However, little is known about the policies that foster or hamper their participation in the labor market, in particular during the important initial period of their stay in the host country. In order to evaluate whether inclusive labor market policies increase the labor market participation of asylum seekers, we exploit the variation in asylum policies in Swiss cantons to which asylum seekers are as good as randomly allocated. During our study period from 2011 to 2014, the employment rate among asylum seekers varied between 0% and 30.2% across cantons. Our results indicate that labor market access regulations are responsible for a substantial proportion of these differences, in which an inclusive regime increases participation by 11 percentage points. The marginal effects are larger for asylum seekers who speak a language that is linguistically close to the one in their host canton.
    Keywords: Asylum policy,asylum seekers,economic integration,employment ban,labor market access regulation
    JEL: F22 J61 J15
    Date: 2019
  35. By: Robert Calvert Jump (University of the West of England, Bristol); Jo Michell (University of the West of England, Bristol)
    Abstract: The role of education in the geography of Brexit is usually examined using descriptive statistics and regression, which are ill-suited to the assessment of predictive capacity. By presenting in-sample and out-of-sample probit classification results, this paper demonstrates that educational attainment alone can correctly classify up to 92.24% of local authorities by voting outcome, including up to 80% of Remain-voting authorities. These results emphasise the importance of education as a key factor in the political geography of the Brexit vote.
    Date: 2019–01–01
  36. By: Michal Burzynski (LISER, Luxembourg Institute of Socio-Economic Research (Luxembourg)); Christoph Deuster (IRES, UCLouvain (Belgium), and Universidade Nova de Lisboa (Portugal)); Frederic Docquier (LISER (Luxembourg), FNRS and IRES, UCLouvain (Belgium), and FERDI (France)); Jaime de Melo (Universite de Geneve (Switzerland), CEPR (United Kingdom) and FERDI (France))
    Abstract: This paper investigates the long-term implications of climate change on local, interregional, and international migration of workers. For nearly all of the world's countries, our micro-founded model jointly endogenizes the effects of changing temperature and sea level on income distribution and individual decisions about fertility, education, and mobility. Climate change intensifies poverty and income inequality creating favorable conditions for urbanization and migration from low- to highlatitude countries. Encompassing slow- and fast-onset mechanisms, our projections suggest that climate change will induce the voluntary and forced displacement of 100 to 160 million workers (200 to 300 million climate migrants of all ages) over the course of the 21st century. However, under current migration laws and policies, forcibly displaced people predominantly relocate within their country and merely 20 % of climate migrants opt for long-haul migration to OECD countries. If climate change induces generalized and persistent conflicts over resources in regions at risk, we project significantly larger cross-border flows in the future.
    Keywords: Climate change, Migration, Inequality, Urbanization, Conflicts
    JEL: E24 F22 J24 J61 Q54
    Date: 2019–09–14
  37. By: Henderson, Vernon; Squires, Tim; Storeygard, Adam; Weil, David
    Abstract: We explore the role of natural characteristics in determining the worldwide spatial distribution of economic activity, as proxied by lights at night, observed across 240,000 grid cells. A parsimonious set of 24 physical geography attributes explains 47% of worldwide variation and 35% of within-country variation in lights. We divide geographic characteristics into two groups, those primarily important for agriculture and those primarily important for trade, and confront a puzzle. In examining within-country variation in lights, among countries that developed early, agricultural variables incrementally explain over 6 times as much variation in lights as do trade variables, while among late developing countries the ratio is only about 1.5, even though the latter group is far more dependent on agriculture. Correspondingly, the marginal effects of agricultural variables as a group on lights are larger in absolute value, and those for trade smaller, for early developers than for late developers. We show that this apparent puzzle is explained by persistence and the differential timing of technological shocks in the two sets of countries. For early developers, structural transformation due to rising agricultural productivity began when transport costs were still high, so cities were localized in agricultural regions. When transport costs fell, these agglomerations persisted. In late-developing countries, transport costs fell before structural transformation. To exploit urban scale economies, manufacturing agglomerated in relatively few, often coastal, locations. Consistent with this explanation, countries that developed earlier are more spatially equal in their distribution of education and economic activity than late developers.
    Keywords: agriculture; physical geography; development
    JEL: O13 O18 R12
    Date: 2018–02–01
  38. By: Montoya, L.; Guo, B.; Newbery, D. M.; Dodds, P.; Lipman, G.; Castagneto Gissey, G.
    Abstract: We show that established metrics used to monitor electricity trading inefficiency become increasingly inaccurate in several trading conditions. We devise the Unweighted and Price-Weighted Inefficient Interconnector Utilisation indices to address these deficiencies. These metrics are substantially more accurate than existing ones and perform equally well whether or not markets are coupled. Our results show a substantial decrease in inefficient trading between Great Britain and both France and the Netherlands after the European Union’s market coupling regulations were introduced in 2014. In view of Great Britain’s likely withdrawal from the European Union, the paper also evaluates how market uncoupling would affect cross-border trade. We find that uncoupling would lead to inefficiencies in trade, the electricity price differential between GB and France (Netherlands) rising by 3% (2%), net imports into GB decreasing by 26% (13%), congestion income decreasing by 10% (5%), and infra-marginal surplus decreasing by 1.6% (1.6%) of coupled congestion income. We also show that, should the EU decide to implement an equivalent carbon tax to GB’s Carbon Price Floor, uncoupling impacts would be slightly magnified due to electricity prices converging (by about 1% of coupled congestion income).
    Keywords: Electricity trading efficiency, cross-border allocation, interconnector, market coupling, metrics
    JEL: C81 F14 F15 Q41
    Date: 2019–09–18

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