nep-int New Economics Papers
on International Trade
Issue of 2019‒09‒30
thirty-one papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. Services Liberalization and Export Diversity: Theory and Evidence from Chinese Firms By Bai, Zhuoran; Meng, Shuang; Miao, Zhuang; Zhang, Yan
  2. U.S. Trade Policy in Historical Perspective By Douglas A. Irwin
  3. Persistent zeros: The extensive margin of trade By Hinz, Julian; Stammann, Amrei; Wanner, Joschka
  4. From Theory to Policy with Gravitas: A Solution to the Mystery of the Excess Trade Balances By Gabriel J. Felbermayr; Yoto V. Yotov
  5. Productivity and Trade Dynamics in Sudden Stops By Felipe Benguria; Felipe Saffie; Hidehiko Matsumoto
  6. The International Elasticity Puzzle Is Worse Than You Think By Lionel Fontagné; Philippe Martin; Gianluca Orefice
  7. A Quantitative Analysis of Tariffs across U.S. States By Ana Maria Santacreu; Jing Zhang; Michael Sposi
  10. The China Shock and Employment in Portuguese Firms By Lee G. Branstetter; Brian K. Kovak; Jacqueline Mauro; Ana Venancio
  11. Trade Shocks and Credit Reallocation By Stefano Federico; Fadi Hassan; Veronica Rappoport
  12. Bilateral Trade Imbalances By Alejandro Cuñat; Robert Zymek
  13. The limits of foreign-led growth: Demand for digital skills by foreign and domestic firms in Slovakia By Jan Drahokoupil; Brian Fabo
  14. The Design and Operation of Rules of Origin in Greater Arab Free Trade Area: Challenges of Implementation and Reform By Bashar H. Malkawi; Mohammad I. El-Shafie
  15. The Effect of Oil Price on United Arab Emirates Goods Trade Deficit with the United States By Osama D. Sweidan; Bashar H. Malkawi
  16. Trade and Firm Financing By Paul Bergin; Ling Feng; Ching-Yi Lin
  17. Collective Reputation in Trade: Evidence from the Chinese Dairy Industry By Jie Bai; Ludovica Gazze; Yukun Wang
  18. Trade and terroir. The political economy of the world's first geographical indications By Giulia Meloni; Jo Swinnen
  19. Trade, Jobs, and Worker Welfare By Erhan Artuc; Eunhee Lee; Paulo Bastos
  20. On the Heterogeneous Welfare Gains and Losses from Trade By Daniel Carroll; Sewon Hur
  21. Bilateral swap agreement and Renminbi settlement in cross-border trade By Song, Ke; Xia, Le
  22. Estimating the Effect of Exchange Rate Changes on Total Exports By Thierry Mayer; Walter Steingress
  23. Role of the Distribution Structure in Responsible Trade By Florence TOUYA
  24. A stochastic frontier analysis approach for estimating market power in the major U.S. meat export markets By Panagiotou, Dimitrios; Stavrakoudis, Athanassios
  25. The educational consequences of migration for women and men. Migrant and Europe-born Turkish origin people compared to non-migrants in Turkey By Bayrakdar, Sait; Güveli, Ayse
  26. International outsourcing and trade union (de-)centralisation By Kjell Erik Lommerud; Frode Meland; Odd Rune Straume
  27. The Africa Continental Free Trade Area: An opportunity to deepen cooperation on Regional public goods By Jaime de Melo
  28. Essays on banking and international trade By Schmitz, Emerson
  29. Self-Employment and Migration By Giambra, Samuele; McKenzie, David
  30. The Effect of Brexit on the UK Economy (so far) By Sindri Engilbertsson; Gylfi Zoega
  31. The China Shock and Portuguese Manufacturing By Lee Branstetter; Ana Venancio; Brian Kovak

  1. By: Bai, Zhuoran; Meng, Shuang; Miao, Zhuang; Zhang, Yan
    Abstract: During the last decades, we observe a liberalization trend in the services sector globally. Using the Chinese exporting firm data, this paper studies how multi-product firms adjust their export strategies in response to the services trade liberalization across export destination countries. Our study finds a highly significant positive relation between the services trade liberalization in the destination countries and each firm's export diversify, which is measured as the product scope, the Herfindahl-Hirschman style index, or the value skewness across varieties,export product switch. Our empirical analysis further finds that firms increase the relatedness of their exporting varieties towards the OECD countries, but reduce it towards the non-OECD countries. With a conventional multi-product firm model, we explore the mechanisms behind all our empirical findings.
    Keywords: Services trade Liberalization; Export Diversity; Chinese Data
    JEL: F13 F14
    Date: 2019–08–01
  2. By: Douglas A. Irwin
    Abstract: This survey reviews the broad changes in U.S. trade policy over the course of the nation’s history. Import tariffs have been the main instrument of trade policy and have had three main purposes: to raise revenue for the government, to restrict imports and protect domestic producers from foreign competition, and to reach reciprocity agreements that reduce trade barriers. These three objectives – revenue, restriction, and reciprocity – accord with three consecutive periods in history when one of them was predominant. The political economy of these tariffs has been driven by the interaction between political and economic geography, namely, the location of trade-related economic interests in different regions and the political power of those regions in Congress. The paper also addresses the impact of trade policies on the U.S. economy, such as the welfare costs of tariffs, the role of protectionism in fostering American industrialization, and the relationship between the Smoot-Hawley tariff and the Great Depression of the 1930s.
    JEL: F13 N71 N72
    Date: 2019–09
  3. By: Hinz, Julian; Stammann, Amrei; Wanner, Joschka
    Abstract: The extensive margin of bilateral trade exhibits a high level of persistence that cannot be explained by geography or trade policy. We combine a heterogeneous firms model of international trade with bounded productivity with features from the firm dynamics literature to derive expressions for an exporting country's participation in a specific destination market in a given period. The model framework asks for a dynamic binary choice estimator with two or three sets of high-dimensional fixed effects. To mitigate the incidental parameter problem associated with nonlinear fixed effects models, we characterize and implement suitable bias corrections. Extensive simulation experiments confirm the desirable statistical properties of the bias-corrected estimators. Empirically, taking two sources of persistence - true state dependence and unobserved heterogeneity - into account using a dynamic specification, along with appropriate fixed effects and bias corrections, changes the estimated effects considerably: out of the most commonly studied potential determinants (joint WTO membership, common regional trade agreement, and shared currency), only sharing a common currency retains a significant effect on whether two countries trade with each other at all in our preferred estimation.
    Keywords: high-dimensional fixed effects,dynamic panel model,binary choice,incidental parameter bias correction,trade policy
    JEL: C13 C23 F14 F15
    Date: 2019
  4. By: Gabriel J. Felbermayr; Yoto V. Yotov
    Abstract: Bilateral trade balances often play an important role in the international trade policy debate. Academic economists understand that they are misleading indicators of competitiveness and of the gains from trade. However, they also recognize their political relevance, calling for accurate statistical measurement and for more scholarly work. Disturbingly, Davis and Weinstein (2002) argue that the canonical gravity model of trade fails when confronted with bilateral trade balances data, dubbing this “The Mystery of the Excess Trade Balances”. Capitalizing on the latest developments in the theoretical and empirical gravity literature, we demonstrate that the workhorse international trade model actually performs well in explaining bilateral trade balances. Moreover, in our data, only 11 to 13% of the variance in bilateral balances is due to asymmetric bilateral trade costs, belying beliefs that bilateral imbalances are driven by ‘unfair’ manipulation of terms-of-trade. We also perform several general equilibrium experiments within the same structural gravity framework to show that free trade agreements tend to exacerbate bilateral imbalances and that macroeconomic rebalancing leads to adjustment with all trade partners.
    Keywords: trade imbalances, structural gravity estimation
    JEL: F10 F13 F14
    Date: 2019
  5. By: Felipe Benguria (University of Kentucky); Felipe Saffie (University of Maryland); Hidehiko Matsumoto (Bank of Japan)
    Abstract: This paper studies productivity and trade dynamics during sudden stop episodes. Sudden stops of capital inflows to emerging economies are characterized by deep recessions, slow recoveries, sharp devaluations, and reversals in the trade balance. We develop a framework to capture these salient features of sudden stops. The model features endogenous productivity and trade dynamics, and endogenous sudden stops. In this environment, firm and product entry and exit into domestic and export markets play a key role in shaping the dynamic response of the economy to a sudden stop. We discipline the model using unique firm-product level data in both domestic and export markets from a census of manufacturing firms in an emerging economy. The calibrated model matches the key stylized facts of sudden stops and their aftermath. In addition, we show that the models’ predictions are consistent with the dynamics of firms’ product portfolios during the Chilean sudden stop of 1998.
    Date: 2019
  6. By: Lionel Fontagné (Maison des Sciences Economiques); Philippe Martin (Département d'économie); Gianluca Orefice (Centre d'Etudes Prospectives et d'Informations Internationales (CEPII))
    Abstract: We instrument export prices with firm level electricity cost shocks and estimate three international price elasticities using firm-level export data: the elasticity of firm exports to export price, tariff and real exchange rate shocks. In standard models these three elasticities should be equal. We find that this is far from being the case. The export price elasticity is the highest, around 5, much larger than the exchange rate elasticity. The international elasticity puzzle is therefore worse than previously thought. We also show that exporters absorb one third of tariff changes in their export prices. Because we take into account this reaction of export prices to tariffs, our estimate of the tariff elasticity corrects from this omitted-variable bias.
    Keywords: Elasticity; International Trade and Macroeconomics; Export Price; Firm Exports
    JEL: F14 F18 Q56
    Date: 2018–11
  7. By: Ana Maria Santacreu (Federal Reserve Bank of Saint Louis); Jing Zhang (Federal Reserve Bank of Chicago); Michael Sposi (Southern Methodist University)
    Abstract: We build a multisector general equilibrium model of trade to quantify the effect of U.S. tariffs both at the national and global level. The model incorporates region-specific input-output linkages, endogenous capital accumulation and endogenous trade imbalances. We estimate sector-specific bilateral trade frictions and productivity levels for 50 U.S. states and 41 non-U.S. countries across 2 sectors of the economy using detailed bilateral trade and production data. We then simulate welfare Laffer curves for each state by varying the U.S. tariff rate. We consider two cases: (i) No retaliation from the foreign countries and (ii) Tit-for-Tat retaliation. We find that the tariff rate that maximizes consumption varies across states and it ranges from 14% to 45% when there is no retaliation and from 0% to 13% when there is retaliation. Furthermore, we find that these tariffs correlate negatively with the ratio of foreign exports to GDP.
    Date: 2019
  8. By: Juan de Lucio (Universidad Nebrija. Calle de Santa Cruz de Marcenado, 27, 28015, Madrid (Spain).); Raúl Mínguez (Universidad Nebrija. Calle de Santa Cruz de Marcenado, 27, 28015, Madrid (Spain).); Asier Minondo (Deusto Business School, University of Deusto, Camino de Mundaiz 50, 20012 Donostia - San Sebastián (Spain). Research aliate of Instituto Complutense de Estudios Internacionales.); Francisco Requena (Department of Economic Structure, University of Valencia, Avda. dels Tarongers s/n, 46022 Valencia (Spain).)
    Abstract: This paper helps to understand how firms learn from their peers when enter new markets. The results point the existence of information spillovers steaming from close companies: in the same region, sector or export markets'. In fact, exporters learn from very close firms; sectoral peers in their region. There seem to be also a competition effect that hinder spillovers; this comes from companies that without providing new information share the forieng demand. Knowledge externalities seem to be stronger in incoming companies what increase the relevance of these effects for export extensive margin growth.
    Keywords: Exports, firm-level data, local spillovers, region, sector.
    JEL: F1 F2 R12 F14
    Date: 2018–04
  9. By: Mariam Camarero (Jaume I University. Department of Economics, Av. de Vicent Sos Baynat s/n, E-12071 Castellón, Spain); Laura Montolio (University of Valencia, Department of Applied Economics II, Av. dels Tarongers, s/n Eastern Department Building E-46022 Valencia, Spain); Cecilio Tamarit (University of Valencia, INTECO Joint Research Unit. Department of Applied Economics II. PO Box 22.006 - E-46071 Valencia, Spain)
    Abstract: Despite the sound theoretical foundations of FDI gravity models and its popularity in empirical studies, there is a lack of consensus regarding the econometric specification and the estimation of the gravity equation. This paper provides a comprehensive empirical evidence of the determinants of German outward FDI comparing several estimation methods in their multiplicative form. We use four versions of the Generalized Linear Model (GLM), namely, Poisson Pseudo Maximum Likelihood(PPML), Gamma Pseudo Maximum Likelihood (GPML), Negative Binomal Pseudo Maximum Likelihood (NBPML) and Gaussian-GLM. The results of the empirical application indicate that NBPML is the best performing estimator followed by GPML.
    Keywords: FDI determinants; Outward Foreign Direct Investment; Germany; Gravity models; Generalized linear models
    JEL: F21 F23 C13 C33
    Date: 2019–09
  10. By: Lee G. Branstetter; Brian K. Kovak; Jacqueline Mauro; Ana Venancio
    Abstract: This paper considers the effects of Chinese import competition on firm-level labor market outcomes in Portugal. We examine direct competition in the Portuguese market and indirect competition Portugal's largest export markets in Western Europe. Using rich employer-employee data matched to firm-level trade transactions, we measure the degree to which different Portuguese firms faced Chinese import competition, based on firm product mix and distribution of sales across countries. We find economically and statistically significant employment declines in firms with more exposure to Chinese competition in European export markets, but minimal effects of direct competition in Portugal. Our findings also suggest a centrally important role for Portugal's stringent labor market regulations in limiting firms' ability to adjust to competitive shocks. In our earlier sample period (1995-2000), firms have limited ability to adjust employment, hours, or wages, and the primary adjustment margin is firm exit. In the later period (2000-2007), when more flexible temporary contracts comprise a larger share of employment, we find employment reductions among more exposed firms. Those employment reductions are entirely accounted for by changes in temporary employment, with no effect on permanent employment. We expect these findings to be informative for other peripheral European countries that had specialized in labor-intensive manufacturing industries operating under inflexible labor market regimes.
    JEL: F14 F16 J21 J31
    Date: 2019–09
  11. By: Stefano Federico; Fadi Hassan; Veronica Rappoport
    Abstract: The effect of trade liberalization on welfare and economic activity remains one of the most important questions in economics. The literature identifies a number of key determinants that reduce the potential gains from trade, by focusing on frictions to labor mobility across regions or sectors. This paper contributes to this debate by exploring a novel channel, namely the reallocation of credit in the aftermath of a trade shock. We find that there are endogenous financial frictions that arise from trade liberalization and spillovers between losers and winners from trade that go through banks, as banks can be negatively affected by a trade shock through the portfolio of firms they lend to. Using data from the Italian credit registry, matched with bank and firm level data, we follow the evolution of bank and firm activities prior to and after the entry of China into the WTO. We identify the sectors most affected by import competition from China and estimate the transmission of this trade shock from firms to their lending banks, and the consequence of the shock on banks' lending to other firms. We find that, controlling for credit demand, banks exposed to the China shock decrease their lending relative to non-exposed banks. Importantly, this lending is reduced both for firms exposed to competition from China and to those that are not and that we should expect to expand. The main mechanism is related to the reduction of the core capital of banks, and their resulting funding capacity, through the rise of non-performing loans. We quantify the impact of this effect on real outcomes such as employment, investment, and output and we find relevant aggregate implications. These findings provide evidence that following a trade shock, bank lending has a key impact on the reallocation channel and on the potential gains from trade.
    Keywords: trade liberalisation, China shock, bank credit, resource reallocation, gains from trade
    JEL: F10 F14 G21
    Date: 2019–09
  12. By: Alejandro Cuñat; Robert Zymek
    Abstract: Bilateral trade imbalances are determined by aggregate trade imbalances, production and expenditure patterns, and trade barriers. We calibrate a dynamic many-sector trade model to match the recent sectoral trade and production shares of 40 economies and the rest of the world. Through a variance decomposition and counterfactuals, the model allows us to assess the relative importance of these determinants for the observed variation in bilateral imbalances. Large pairwise asymmetries in residual trade “wedges” are needed for the model to match the data. These account for roughly 60% of the variation, with most of the rest due to differences in production and expenditure patterns. Aggregate trade imbalances play a minor role. A counterfactual trade policy which eliminates trade-wedge asymmetries would have sizeable effects on bilateral trade patterns and welfare. However, it would leave aggregate trade balances virtually unchanged.
    Keywords: trade imbalances, trade wedges, gravity
    JEL: F15 F20 F32 F40
    Date: 2019
  13. By: Jan Drahokoupil (European Trade Union Institute, Brussels, Belgium); Brian Fabo (Narodna banka Slovenska, Bratislava, Slovakia)
    Abstract: This paper addresses demand for skilled labour in Slovakia, a country that is characterized by a high degree of economic integration through inward foreign investment and through international backward linkages within global value chains. Developing existing approaches to political economy and global production networks (GPNs), our framework distinguishes between demand for digital skills on two levels: occupational structure; and skill content within occupational types. In this way, we can assess not only what kind of workers are hired by companies, but also what kind of specific skills are required from these workers. Using a large dataset on vacancies from a leading job portal, combined with administrative data on company size and ownership, we show that foreign and mixed-ownership companies generally advertise for higher skilled occupations than domestic firms, but their skill requirements for these jobs are lower than in similar jobs in domestic companies. Foreign companies have higher skill requirements only in some blue-collar jobs linked to assembly and component manufacturing. For white collar occupations, domestic companies are more likely to require digital skills. The findings confirm our expectations about the position of Slovakia as a country in an integrated periphery, where multinational companies are heavily present but rarely bring complex activities. Our key policy implication is that foreign direct investment in the integrated periphery brings only a limited potential for technology transfers.
    Keywords: skills, foreign direct investment, FDI, digitalization, global production networks, job vacancies
    JEL: J24 O33
  14. By: Bashar H. Malkawi; Mohammad I. El-Shafie
    Abstract: Rules of origin (ROO) are pivotal element of the Greater Arab Free Trade Area (GAFTA). ROO are basically established to ensure that only eligible products receive preferential tariff treatment. Taking into consideration the profound implications of ROO for enhancing trade flows and facilitating the success of regional integration, this article sheds light on the way that ROO in GAFTA are designed and implemented. Moreover, the article examines the extent to which ROO still represents an obstacle to the full implementation of GAFTA. In addition, the article provides ways to overcome the most important shortcomings of ROO text in the agreement and ultimately offering possible solutions to those issues.
    Date: 2019–09
  15. By: Osama D. Sweidan; Bashar H. Malkawi
    Abstract: We seek to investigate the effect of oil price on UAE goods trade deficit with the U.S. The current increase in the price of oil and the absence of significant studies in the UAE economy are the main motives behind the current study. Our paper focuses on a small portion of UAE trade, which is 11% of the UAE foreign trade, however, it is a significant part since the U.S. is a major trade partner with the UAE. The current paper concludes that oil price has a significant positive influence on real imports. At the same time, oil price does not have a significant effect on real exports. As a result, any increase in the price of oil increases goods trade deficit of the UAE economy. The policy implication of the current paper is that the revenue of oil sales is not used to encourage UAE real exports.
    Date: 2019–09
  16. By: Paul Bergin; Ling Feng; Ching-Yi Lin
    Abstract: This paper studies how financial frictions pose a barrier to export entry by altering the firm’s long-term capital structure, and thereby affecting the ability to finance sunk entry costs. Our focus on long-term firm financing stands in contrast with the emphasis in recent trade literature on the financing of short-term working capital as a barrier to export entry. We provide evidence that U.S. firms engaged in export tend to have leverage ratios higher than non-exporting firms in terms of long-term debt, but not in terms of short-term debt. To explain this fact and understand its implications, we marry a corporate finance model of capital structure, featuring an endogenous choice between equity and long-term debt financing, with a trade model featuring heterogeneous firms. The model of optimal capital structure indicates that in the long run, exporting firms will prioritize reducing the cost of long-term capital, used to pay sunk costs, over relaxing a short-term working capital constraint, which could be used to scale up production.
    JEL: F4
    Date: 2019–09
  17. By: Jie Bai; Ludovica Gazze; Yukun Wang
    Abstract: Collective reputation implies an important externality. Among firms trading internationally, quality shocks about one firm’s products could affect the demand of other firms from the same origin country. We study this issue in the context of a large-scale scandal that affected the Chinese dairy industry in 2008. Leveraging rich firm-product level administrative data and official quality inspection reports, we find that the export revenue of contaminated firms dropped by 84% after the scandal, relative to the national industrial trend, and the spillover effect on non-contaminated firms is measured at 64% of the direct effect. Notably, firms deemed innocent by government inspections did not fare any better than noninspected firms. These findings highlight the importance of collective reputation in international trade and the challenges governments might face in signaling quality and restoring trust. Finally, we investigate potential mechanisms that could mediate the strength of the reputation spillover. We find that the spillover effects are smaller in destinations where people have better information about parties involved in the scandal. New firms are more vulnerable to the collective reputation damage than established firms. Supply chain structure matters especially in settings where firms are less vertically integrated and exhibit fragmented upstream-downstream relationships.
    JEL: F10 F14 L15 L66 O10 O19
    Date: 2019–09
  18. By: Giulia Meloni; Jo Swinnen
    Abstract: The world’s first geographical indications (GIs) were in the wine sector and focused on the delineation of the location of production, the ‘terroir’: the Burgundy wines in the fifteenth century, the Port wines and Chianti wines in the eighteenth century, and the Champagne wines in the early twentieth century. We analyze the causes for the introduction of these GIs (‘terroirs’) and for changes in their delineation (expansion) later on. Our analysis shows that trade played a very important role in the creation of the ‘terroirs’ but not always through the same mechanisms. For the Port and Chianti GIs it was exports to Britain that were crucial; for Burgundy it was domestic trade to Paris; and for the Champagne GI it was not exports but pressure from wine imports and new wine regions that played a crucial role. For the expansions of the GIs later in history, other factors seem to have been equally important. Expansions of the GIs in the years and centuries after their introduction followed major changes in political power; the spread of a new philosophy in liberal and free markets across Europe; and infrastructure investments which opened up markets and made exports cheaper from “new” producers.
    Date: 2018–01
  19. By: Erhan Artuc (World Bank); Eunhee Lee (University of Maryland); Paulo Bastos (The World Bank)
    Abstract: This paper introduces a new framework to quantify the effect of international trade on worker's welfare through labor mobility. Our framework features various determinants of labor mobility and identifies how trade shocks impact those determinants endogenously. Focusing on wage and the number of jobs as two key determinants of labor mobility, we build a structural model of labor mobility where international trade affects not only wage but also the number of job opportunities. We then combine the local labor market approach to estimate the key structural parameters of our model. Our model delivers a sufficient statistic of change in worker's welfare, which can be easily estimated using a Bartik-type instrument. We find that the welfare of a median formal sector worker increases by 16%, wages increase by 5%, and employment increases by 5% due to increase in export from 2003 to 2012.
    Date: 2019
  20. By: Daniel Carroll (Federal Reserve Bank of Cleveland); Sewon Hur (Federal Reserve Bank of Cleveland)
    Abstract: How are the gains and losses from trade (disruptions) distributed across individuals within a country? First, we document that tradable goods constitute a larger fraction of expenditures for poor households. Second, we build a trade model with non-homothetic preferences---to generate the documented relationship between tradable expenditure shares, income, and wealth---and uninsurable earnings risk---to generate heterogeneity in income and wealth. Third, we use the calibrated model to quantify the differential welfare gains and losses from trade on households along the income and wealth distribution. In a numerical exercise, we increase trade costs by 20 percentage points and allow the economy to transition to a new steady state. We find that households in the lowest wealth decile experience welfare losses over the transition, measured by permanent consumption equivalents, that are 35 percent larger than those in the highest wealth decile. Finally, we find that the distributional impacts of trade significantly depend on how the tariff revenue is spent. In particular, using tariff revenue to reduce labor income taxes is close to welfare-neutral.
    Date: 2019
  21. By: Song, Ke; Xia, Le
    Abstract: This research empirically examines the impact of China’s Renminbi (RMB) bilateral swap agree-ments (BSAs) on the usage of the currency in cross-border trade transactions. By using a unique dataset from SWIFT including cross-border settlement messages of 91 countries/regions between October 2010 and November 2015, we confirm that the signing of a RMB BSA helps to increase the number, the value and the proportion of RMB settlement in cross-border trade. Our results are robust with respect to the choice of different models, including multi-level mixed model, two-stage regression model, and difference-in-difference model. In addition to justifying the effectiveness of China’s BSA-signing strategy to promote the RMB usage in trade settlement, our results clarify that the signing of those RMB BSAs is not purely for China’s political ends as some scholars claim.
    JEL: F33 F36 F42
    Date: 2019–09–20
  22. By: Thierry Mayer (Département d'économie); Walter Steingress (Bank of Canada)
    Abstract: This paper shows that real effective exchange rate (REER) regressions, the standard approach for estimating the response of aggregate exports to exchange rate changes, imply biased estimates of the underlying elasticities. We provide a new aggregate regression specification that is consistent with bilateral trade flows micro-founded by the gravity equation. This theory-consistent aggregation leads to unbiased estimates when prices are set in an international currency as postulated by the dominant currency paradigm. We use Monte-Carlo simulations to compare elasticity estimates based on this new “ideal-REER” regression against typical regression specifications found in the REER literature. The results show that the biases are small (around 1 percent) for the exchange rate and large (around 10 percent) for the demand elasticity. We find empirical support for this prediction from annual trade flow data. The difference between elasticities estimated on the bilateral and aggregate levels reduces significantly when applying an ideal-REER regression rather than a standard REER approach.
    Keywords: Econometric and Statistical Methods; Exchange Rates; International Topics
    JEL: F11 F12 F31 F32
    Date: 2019–05
  23. By: Florence TOUYA
    Abstract: Aware of the high importance of consumers' private information concerning their willingness-to-buy fair trade goods and taking into account the superior price they are willing to pay for this kind of goods with respect to conventional ones, we choose to feed the debate relative to the appropriateness of the different potential retailing channels. We use a common agency game framework to analyze the changes in the price level according various forms or distribution organization : direct competition between upstream producers or manufacturers (or cooperatives of producers / manufacturers), creation of a cooperative at the downstream stage, delivery of the final good to classical retailing networks. It appears that the private information parameter as well as the nature of the relationship between suppliers on the one hand and the retailer on the other hand are the key variables that determine the price paid by consumers. The conventional retailing channel brings excessively high prices with respect to a distribution made by an entity likely to be assimilated to a cooperative because of a double margin effect that is lessened in the cooperative case since the latter objective function involves additional elements such as providing services to upstream actors.
    Keywords: Informational asymmetry, Common Agency, Nonlinear prices, Cooperatives, Cooperation, Pro-social preferences
    JEL: D72 D82 H23 H30 H32 H71 H77
    Date: 2019–08
  24. By: Panagiotou, Dimitrios; Stavrakoudis, Athanassios
    Abstract: The present study estimates the degree of market power in the major U.S. beef and pork export destinations. The recently developed stochastic frontier (SF) estimator is used. Estimations of market and time specific Lerner indices are provided. Balanced panel data between 1980-2011 were employed. The average Lerner index is 39% for the U.S. beef exports and is the highest in the markets of ASEAN, Hong Kong/China, Japan, South Korea and Taiwan. For the U.S. pork exports, the average Lerner index is 16% and is the highest in the markets of Mexico and Taiwan.
    Keywords: Stochastic frontier; market power; U.S. meat exports
    JEL: D21 L22 L66
    Date: 2018–09–22
  25. By: Bayrakdar, Sait; Güveli, Ayse
    Abstract: Research commonly compares the educational outcomes of migrants and the second generation to their native peers in destination countries, often finding the former groups lagging behind in education. Their outcomes are rarely compared to their non-migrant peers in the origin countries. Using the dissimilation from origins perspective, we ask whether Turkish-origin men and women in Europe benefit from migration by comparing their educational outcomes to non-migrants in Turkey. At the same time, we comparatively examine the intergenerational transmission of education to determine whether individuals are better off than their parents and grandparents. Analysing the novel 2000 Families data, we show that migrants and their descendants in Europe obtain higher education than their nonmigrant peers in Turkey. While both men and women experience educational benefits from migration, women’s gains are higher. Another salient finding is that Turkish-origin parents in Europe are less able to pass on their socioeconomic resources to their children than their counterparts in Turkey. Overall, the findings corroborate the theory of the dissimilation of Turkish-origin Europeans from their Turkish peers in educational attainment.
    Date: 2019–09–23
  26. By: Kjell Erik Lommerud (Department of Economics, University of Bergen); Frode Meland (Department of Economics, University of Bergen); Odd Rune Straume (Department of Economics/NIPE, University of Minho)
    Abstract: We study the effects of centralised versus decentralised wage setting in a unionsed duopoly where firms can outsource parts of input production to foreign subcontractors. We show that decentralised (as opposed to centralised) wage setting allows trade unions to capture a larger share of the rents generated by international outsourcing. Consequently, the equilibrium degree of outsourcing is lower under decentralised wage setting, which benefits unions if they are sufficiently employment oriented. We identify situations in which both firms and unions prefer decentralised over centralised wage setting. Thus, international outsourcing opportunities is a potential driver of trade union decentralisation.
    Keywords: Outsourcing; trade unions; decentralisation
    JEL: F16 J51 L24
    Date: 2019
  27. By: Jaime de Melo (FERDI - Fondation pour les Etudes et Recherches sur le Développement International, UNIGE - Université de Genève)
    Abstract: The Africa Continental Free Trade Area (AFCFTA) signed in March 2018 aims to establish a single market across the continent. This challenge is also an opportunity to extend the provision of regional public goods beyond hard infrastructure. Peace and security, mining, and energy are such examples covered in the Africa Economic Outlook 2019.
    Keywords: AFCTA
    Date: 2019–09–13
  28. By: Schmitz, Emerson (Tilburg University, School of Economics and Management)
    Abstract: This thesis consists of three essays: the first two on banking and the third one on international trade. The first chapter examines the impact of two programs carried out by Brazilian federal banks in 2012 aimed at ameliorating credit conditions and expanding access to credit to individuals and small and medium enterprises (SME) in Brazil. The second chapter investigates a potential non-homogeneous relation between financial intermediation and economic growth by levels of human capital development, focusing on a period of exceptional growth of the credit market in Brazil, from 2004 to 2016. The third chapter analyzes the short-run effects of the uncertainties brought along with the Brexit referendum on the bilateral trade between Belgium and its main trading partners.
    Date: 2019
  29. By: Giambra, Samuele (Brown University); McKenzie, David (World Bank)
    Abstract: There is a widespread policy view that a lack of job opportunities at home is a key reason for migration, accompanied by suggestions of the need to spend more on creating these opportunities so as to reduce migration. Self-employment is widespread in poor countries, and faced with a lack of existing jobs, providing more opportunities for people to start businesses is a key policy option. But empirical evidence to support this idea is slight, and economic theory offers several reasons why the self-employed may in fact be more likely to migrate. We put together panel surveys from eight countries to descriptively examine the relationship between migration and self-employment, finding that the self-employed are indeed less likely to migrate than either wage workers or the unemployed. We then analyze seven randomized experiments that increased self-employment, and find their causal impacts on migration are negative on average, but often small in magnitude.
    Keywords: internal migration, international migration, self-employment, migrant selection, randomized experiment
    JEL: F22 J61 O15
    Date: 2019–09
  30. By: Sindri Engilbertsson (University of Iceland); Gylfi Zoega (Birkbeck, University of London)
    Abstract: The political turmoil in the UK following the referendum on future membership of the European Union in 2016 provides a natural experiment for studying the effects of political uncertainty (in the Knightian sense) on the economy. We find that the subsequent confusion and infighting in British politics has not affected the real economy much – employment is at a historical high and output growth is positive – but there are some signs of slowing investment and house price increases. The stock market has also not been much affected although it did fall after the referendum of 2016. The main effect of the Brexit vote and the subsequent political developments is found in the currency market where news that make a hard Brexit more likely cause the currency to depreciate. We conclude that leaving the European Union without an agreement is likely to make the currency depreciate and the stock market fall while output declines. In contrast, leaving with an agreement that gives continued access to the Single Market would likely make the currency appreciate, the stock market rise and employment and output increase further
    Keywords: Brexit, growth, share price, currency market
    JEL: E24 E44 F31
    Date: 2019–09
  31. By: Lee Branstetter (Carnegie Mellon University); Ana Venancio (ISEG (Lisbon School of Economics and Business), Universidade de Lisboa); Brian Kovak (Carnegie Mellon University)
    Abstract: In a widely cited series of papers, David Autor, Gordon Hanson, David Dorn, and their coauthors have documented the surprisingly strong effect of increased competition from Chinese exports on U.S. employment, political polarization, and even R&D spending and innovation (Autor et al., 2013; Autor et al., 2016a, b). China's exports to Western Europe have also grown sharply in recent decades. A number of papers have sought to follow Autor et al. (2013) in exploring the impact of these exports on European labor markets. The chief finding of this paper is that the nature of the impact of the China shock in Portugal and the mechanism through which it operates are quite different than that highlighted by Autor et al. (2013). We strongly suspect our findings for Portugal reflect economic realities common to other Southern European countries.
    Date: 2019

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