nep-int New Economics Papers
on International Trade
Issue of 2019‒11‒25
33 papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. Heterogeneous Impacts of Finance on Firm Exports: Evidence from Export Deregulation in A Large Developing Country By Cheng, Dong; Hu, Zhongzhong; Tan, Yong
  2. Export Decision under Risk By José de Sousa; Anne-Célia Disdier; Carl Gaigné
  3. The Impact of EU’s Trade Sanctions Against Russia on Western Countries Exports By Berg-Andersson, Birgitta
  4. Tariff Passthrough at the Border By Gita Gopinath; Alberto Calvallo; Brent Neiman; Jenny Tang
  5. Business travels, multinational firms and international trade By Francesco Bripi
  6. US trade policy in numbers: how exposed is the EU? By Rita Cappariello; Michele Mancini
  7. The Textbook Case for Industrial Policy: Theory Meets Data By Dominick Bartelme; Arnaud Costinot; Dave Donaldson; Andres Rodriguez-Clare
  8. Financial Development and Tax Revenue in Developing Countries: Investigating the International Trade and Economic Growth Channels By Gnangnon, Sèna Kimm
  9. Protectionist Tendencies in the North and Vulnerable Economies in the South By Slaughter, Matthew J.
  10. Physical Capital, Skill Intensity and Ownership Structure in Foreign Direct Investment Projects in Sub-Saharan Africa By J. Paul Dunne; Santigie Mohamed Kargbo
  11. Made and Created in China: Super Processors and Two-way Heterogeneity By Zhiyuan Chen; Aksel Erbahar; Yuan Zi
  12. Special and Differential Treatment for Developing Countries: Does It Help Those Who Help Themselves By Fukasaku, Kiichiro
  13. Reconciling International Trade Data By Shaar, Karam
  14. US-China Trade War: Both Countries Lose, World Markets Adjust, Others Gain By Sherman Robinson; Karen Thierfelder
  15. Exporters of Services: A Look at U.S. Exporters Outside of the Manufacturing Sector By Maria D. Tito
  16. EMU Effects on International Trade and Investment By Flam, Harry; Jansson, Per
  17. Did Trump's Trade War Impact the 2018 Election? By Emily J. Blanchard; Chad P. Bown; Davin Chor
  18. Environmental Regulation and Export Product Quality: Evidence from Chinese Firms By Yuping Deng; Yanrui Wu; Helian Xu
  19. Cross-Border Movements of People By Nayyar, Deepak
  20. Subsidies, spillovers and exports By Girma, Sourafel; Görg, Holger; Stepanok, Ignat
  21. The Korea discount and chaebols By Ducret, Romain; Isakov, Dusan
  22. What are the Price Effects of Trade? Evidence from the U.S. and Implications for Quantitative Trade Models By Xavier Jaravel; Erick Sager
  23. Nationalism and Economic Policy in the Era of Globalization By Bhaduri, Amit
  24. Trends in International Cooperation and Net Resource Transfers to Developing Countries By Sood, Krishalekha
  25. Agricultural development, trade, and income distribution: A 2015 social accounting matrix multiplier decomposition approach for Mozambique By van Seventer Dirk; Mondlane Silvana
  26. Long-run relationship between exports and imports: current account sustainability tests for the EU By António Afonso; Florence Huart; João Tovar Jalles; Piotr Stanek
  27. Virtual trade between different time zones, educational capital and corrupt informal sector By Prasad, Alaka Shree; Mandal, Biswajit
  28. Slavery, Corruption, and Institutions By Michael Rauscher; Bianca Willert
  29. Offshoring within South African manufacturing firms: An analysis of the labour market effects By Matthee Marianne; Bezuidenhout Carli; Pretorius Anmar; Blaauw Derick
  30. The New Regionalism Implications for Global development and International Security By Hettne, Bjorn; Inotai, Andras
  31. Liberalization of Capital Movements and Trade By Haaparanta, Pertti; Kahkonen, Juha
  32. The governance of global value chains, the state, and small businesses.: The case of timber in Myanmar By Rand John; Tarp Finn; Trifkovi? Neda; Rodriguez Paula
  33. The belt and road initiative as a hybrid international public good By Öztürk, İbrahim

  1. By: Cheng, Dong; Hu, Zhongzhong; Tan, Yong
    Abstract: This paper investigates the heterogeneous effects of finance on firm exports through the lens of differential exporting modes. China's WTO accession leads to an export deregulation, which empowers private domestic firms with low registered capital to export directly. This quasi-natural experiment encourages firms switching from indirect to direct exporting, and thus providing an ideal setting to explore the heterogeneous effects of finance on exports for switchers and non-switchers. Applying the difference-in-differences(DID) approach to a comprehensive survey data on Chinese manufacturing firms, we find that finace improves exports more for firms switching from indirect to direct exporting, relative to continuous indirect exporters. Moreover, we show that the heterogeneous effects of finance on exports of switchers and non-switchers are more pronounced in the post-WTO accession period. The time-varying heterogeneous impacts suggest an economic loss causes by the export distortion before China's WTO accession because it prevents productive but financially constrained private domestic firms from direct exporting.
    Keywords: Financial Credits, WTO Accession, Indirect export, Direct Export, Difference-in-Differences
    JEL: F13 F14 F61 G28
    Date: 2019–08–07
  2. By: José de Sousa (Université Paris-Saclay); Anne-Célia Disdier (PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics); Carl Gaigné (INRA Rennes - INRA Rennes - INRA - Institut National de la Recherche Agronomique, University of Laval)
    Abstract: We show that economic uncertainty in foreign markets affects firms' economic decisions, particularly those of the most productive firms. Using export data at both the industry and firm levels, we uncover two empirical regularities. First, demand uncertainty in foreign markets affects export entry/exit decisions (extensive margin) and export sales (intensive margin). If all destination countries exhibited the lowest volatility observed across destinations, then total French exports would rise by approximately 18% (an increase primarily driven by the extensive margin). Second, the most productive exporters are more affected by a higher industry-wide expenditure volatility than are the least productive exporters. The 25% most productive firms export, on average, 27% more in value than the 25% least productive firms in less volatile markets, while this difference decreases to 12% in the most volatile markets.
    Keywords: firm exports,demand uncertainty,expenditure volatility,skewness
    Date: 2019–10
  3. By: Berg-Andersson, Birgitta
    Abstract: Abstract EU’s trade sanctions against Russia came into force 1.8.2014. Sanctioned products were exported to Russia at a value of 22 billion euros during the time period 2001–2017. The most important exporting countries were Ukraine, China, South Korea, Germany and the United States. Exports of banned products from a country to Russia may be very high in some years and very small in other years. Some products have been exported even during the years 2015–2017 at a value of 2,2 billion euros because export contracts which were made before 1.8.2014 are still in force and the ban on exports of sensitive technology concerns only products, the destination of which is forbidden projects in the oil sector. The exports of the sanctioned products from the whole world to Russia fell substantially in the year 2015 from 1,6 billion euros in the previous year to 0,7 billion euros, which corresponded to the level in 2005. Finland exported banned products to Russia during the years 2001–2017 at a value of 0,57 billion euros. In the years 2010–2011, there were exceptionally big deliveries at a value of 0,2 billion euros. In relation to our total export of goods to Russia, this accounted for a share of 6,6 percent in the year 2010, the corresponding share for the whole world was one percent. In the other years before the sanctions, Finland’s percentage share has been substantially smaller than the average share of the whole world and after they have been imposed Finland’s share has fallen less than in other countries. We draw the conclusion that Finland has suffered less from the trade sanctions than the rest of the world on average.
    Keywords: Trade sanctions, EU, Russia, Exports, Arms
    JEL: F13 F14
    Date: 2019–11–11
  4. By: Gita Gopinath; Alberto Calvallo; Brent Neiman; Jenny Tang
    Abstract: We use micro data collected at the border and at retailers to characterize the effects brought by recent changes in US trade policy - particularly the tariffs placed on imports from China - on importers, consumers, and exporters. We start by documenting that the tariffs were almost fully passed through to total prices paid by importers, suggesting the tariffs' incidence has fallen largely on the United States. Since we estimate the response of prices to exchange rates to be far more muted, the recent depreciation of the Chinese renminbi is unlikely to alter this conclusion. Next, using product-level data from several large multi-national retailers, we demonstrate that the impact of the tariffs on retail prices is more mixed. Some affected product categories have seen sharp price increases, but the difference between affected and unaffected products is generally quite modest, suggesting that retail margins have fallen. These retailers' imports increased after the initial announcement of possible tariffs, but before their full implementation, so the intermediate passthrough of tariffs to their prices may not persist. Finally, in contrast to the case of foreign exporters facing US tariffs, we show that US exporters lowered their prices on goods subjected to foreign retaliatory tariffs compared to exports of non-targeted goods.
    Date: 2019–11–01
  5. By: Francesco Bripi (Bank of Italy)
    Abstract: Business travels are a key driver of growth as they contribute to knowledge diffusion and innovation. They are also a relevant component of services trade. This paper analyzes the determinants of business travels expenditure in Italy, where this phenomenon is relevant and it is concentrated in few Italian regions. Using a “unilateral” gravity approach, I find significant correlations between trade flows, FDI stocks and business travel expenditures. Identification is addressed using inverse measures of offshorable and of routinary tasks, instrumental variables and selection methods. The analysis highlights that the pattern of business travels expenditure is shaped to some extent by the business cycle of partner countries relative to that of Italian regions. Moreover, the pattern is determined to a greater extent by activities that are least intensive in offshorable or routinary tasks. This second result suggests that remote controls systems substituted only more standardized activities. Indeed, broadband diffusion in the partner countries reduced business travels expenditure only in more routinary sectors. Overall this evidence is consistent with the view that business travels have been affected by the recent developments in ICT.
    Keywords: services trade, travel, FDI, knowledge diffusion
    JEL: F14 F20 J61 O33
    Date: 2019–11
  6. By: Rita Cappariello (Bank of Italy); Michele Mancini (Bank of Italy)
    Abstract: Amid lingering uncertainty on future US trade policies towards the EU, this study provides an assessment of the implications of a change in US trade tariffs for the EU, with a focus on Italy. By examining trade flows and matching over 5.000 products to effective tariffs, the work quantifies, at the aggregate and sectoral level, actual bilateral average tariffs on trade in final goods and intermediates. Although US goods’ tariffs are generally lower than those imposed by partners, this asymmetry is not as marked for the EU. This study also evaluates the direct and indirect exposure of the EU’s and its major countries’ GDP to alternative scenarios of US tariff hikes. A change in US tariffs would affect around 2.8 per cent of total EU GDP. The EU GDP potentially affected by US tariffs only on automotive imports would be 0.4 per cent while the overall Italian exposure would be just below, 0.3 per cent, around 10 per cent in terms of the value-added produced in the motor vehicles sector.
    Keywords: tariffs, protectionism, US trade policy
    JEL: F13 F15
    Date: 2019–11
  7. By: Dominick Bartelme (University of Michigan); Arnaud Costinot (MIT); Dave Donaldson (MIT); Andres Rodriguez-Clare (UC Berkeley)
    Abstract: The textbook case for industrial policy is well understood. If some sectors are subject to external economies of scale, whereas others are not, a government should subsidize the first group of sectors at the expense of the second. The empirical relevance of this argument, however, remains unclear. In this paper we develop a strategy to estimate sector-level economies of scale and evaluate the gains from such policy interventions in an open economy. Our benchmark results point towards significant and heterogeneous economies of scale across manufacturing sectors, but only modest gains from industrial policy, below 1% of GDP on average. Though these gains can be larger in some of the alternative environments that we consider, they are always smaller than the gains from optimal trade policy.
    Keywords: Industrial Policy
    JEL: F1 F10 F11 F12 F13 F14 F17
  8. By: Gnangnon, Sèna Kimm
    Abstract: This study examines the effect of financial development on non-resource tax revenue performance in developing countries, including through the international trade and economic growth channels. Using a sample of 104 developing countries over the period 1980-2014, the empirical analysis shows that financial development exerts a positive effect on non-resource tax revenue performance. Interestingly, this positive effect takes place through higher trade openness, greater export product diversification, higher share of manufactured exports in total export products, and higher economic growth rate.
    Keywords: Non-resource tax revenue,financial development,trade openness,export product diversification,manufacturing exports,economic growth
    JEL: F14 G20 H20
    Date: 2019
  9. By: Slaughter, Matthew J.
    Abstract: This paper examines whether protectionist tendencies, in terms of both policy preferences and policy actions, in 'Northern' countries-looking in particular at the United States - seem to be an obstacle to the integration into the world economy of small, vulnerable 'Southern' countries. The paper makes three related points. First, current trade barriers in the North appear to cost Southern countries billions of dollars annually. Second, although some WTO-governed trade barriers in the North are declining, it appears that there is an increasing US resistance to further globalization via trade, investment, and immigration liberalization. Third, the paper speculates about what forces might be driving this rising Northern resistance to further liberalization, and what this resistance may imply for the integration prospects of small, vulnerable economies
    Keywords: International Development
  10. By: J. Paul Dunne (School of Economics, University of Cape Town); Santigie Mohamed Kargbo (West African Monetary Institute (WAMI), Ghana)
    Abstract: While the intra-firm trade literature finds that capital-intensive foreign direct investment (FDI) is more likely to occur through joint ventures with local companies when targeted at capital-intensive industries, there is scant evidence on what happens in developing countries. This paper investigates FDI in sub-Saharan Africa, using a large firm-level dataset of manufacturing and services sectors for 19 countries in the region in 2010. It finds strong evidence that domestic firms are indeed more likely to be integrated in FDI projects in capital-intensive rather than labour-intensive sectors. This means that the composition of FDI matters for developing countries, as more capital-intensive FDI is more likely to result in joint ventures and this should facilitate knowledge and technology spillovers to the local agents. In addition, it implies that support is needed to develop skills in local firms in capital-intensive sectors to encourage foreign firms to engage in joint ventures with them, rather than set up wholly owned subsidiaries and outsource.
    Date: 2019
  11. By: Zhiyuan Chen (Pennsylvania State University); Aksel Erbahar (Erasmus University Rotterdam); Yuan Zi (University of Oslo)
    Abstract: In this paper, we show that there exists a special breed of firms that are active in both ordinary and processing exports. Contrary to the existing literature that describes processing firms as inferior, these mixed firms are superior to other firms in multiple dimensions, and hence we call them “super processors.†We build on Antr’et al. (2017) and Bernard et al. (2019) to develop a model in which firms are heterogeneous in multiple stages of production. Firms endogenously choose to become suppliers or final good producers, and those that excel in both manufacturing ability and blueprint quality choose to engage in both activities. We test our model’s central prediction by exploiting China’s pilot “paperless†processing trade supervision program that lowered the cost of processing trade but left ordinary trade costs unchanged. We find that facilitating processing exports induces productive domestic downstream firms to establish their own trademarks. Our results highlight that processing trade not only leads goods to be “Made in China,†but also “Created in China.â€
    Keywords: heterogeneous firms, production networks, trade policy, processing trade, China
    JEL: F14 F12 F13
    Date: 2019–11–19
  12. By: Fukasaku, Kiichiro
    Abstract: This paper reviews main S&D provisions for developing countries under the GATT-WTO trading system and discusses issues relating to the future of S&D treatment from the perspective of the least-developed countries (LDCs). It argues that negotiations on S&D provisions in the next trade round must take the question of trade capacity building seriously. This would require WTO Members to make binding commitments to meeting the special need of LDCs in terms of market access and technical assistance. Despite design flaws and deficiencies involved in various S&D provisions under the WTO Agreements, there is little reason to believe that the move back to the past approach to S&D treatment would be desirable for LDCs.
    Keywords: International Development
  13. By: Shaar, Karam
    Abstract: International trade data are filled with discrepancies–where two countries report different values of trade with each other. I develop a novel trade data quality index for reconciling the discrepancies in bilateral trade data. I calculate the quality for each country’s imports and exports separately for every year from 1962 to 2016 and reconcile international trade data by picking the value reported by the country with higher data quality in every bilateral flow. The reconciled data reshape our views on international trade: (a) countries with low data quality under-report their imports and exports: low-quality reporters are 14% more open to trade using reconciled data; (b) corruption, the level of development, and erroneous reporting can explain data quality; (c) importers’ data are more accurate; (d) China tends to under-report its exports and over-report its imports, while there is only a small difference between US self-reported and reconciled data.
    Keywords: Trade data quality,Data discrepancy,Trade data reconciliation,International trade
    JEL: F01 C20 C18
    Date: 2019
  14. By: Sherman Robinson (Peterson Institute for International Economics); Karen Thierfelder (US Naval Academy)
    Abstract: The terms of the US-China trade war change often, but the tariff escalations have inflicted documented economic damage on both countries. Expanding the conflict will only increase the damage and reverberate across the world economy. This Policy Brief uses a computable general equilibrium model of the global economy to analyze three scenarios that could unfold in coming months. The first scenario is the current situation (as of June 2019). Two additional scenarios assume implementation of proposed US tariffs and Chinese responses. The models project the situation after the two countries and the rest of the world adjust across a time horizon of three to five years. For the United States, higher tariffs raise prices and reduce demand for consumers and producers. For China, the tariffs raise the prices of consumer goods but have less direct impact on producers, because the Chinese have exempted some intermediate inputs. US exports and imports decline under all three scenarios. But China can successfully divert its exports away from the United States and escape maximum economic damage.
    Date: 2019–11
  15. By: Maria D. Tito
    Abstract: Using transaction data for the U.S., this paper presents a series of stylized facts on exporters in services industries. We find that most of the basic facts on manufacturing exporters extend to the services sectors with three important differences. First, the participation rate of services firms in foreign markets is much lower than that of manufacturing firms. Second, the size premia at services exporters are significantly higher than those among manufacturers. Third, the survival rates of services exporters tend to be lower than that of manufacturing exporters. All three facts are compatible with the hypothesis that firms in services sectors face larger trade costs. A simple calibration suggests that services firms face two-to-three-time higher fixed costs than manufacturing exporters.
    Keywords: Exporters of services ; Extensive and intensive margins ; Firm heterogeneity ; Trade costs
    JEL: F14
    Date: 2019–08
  16. By: Flam, Harry; Jansson, Per
    Abstract: The partial effect of nominal exchange rate volatility on exports from each EMU member to the rest of the EMU is estimated on annual data for 1967-97, using modern time-series methods. The long-run relations between exchange rate volatility and exports are mostly negative and in several cases insignificantly different from zero. Thus, these estimates do not provide much support for the hypothesis that the elimination of nominal exchange rate volatility will significantly increase trade within the EMU. However, the EMU will presumably lead to geographical concentration of production and therefore indirectly to increased trade within the EMU and, during a transitional stage, to increased foreign direct investment, both within the EMU and between the EMU and the rest of the world.
    Keywords: International Development
  17. By: Emily J. Blanchard; Chad P. Bown; Davin Chor
    Abstract: We find that Republican candidates lost support in the 2018 congressional election in counties more exposed to trade retaliation, but saw no commensurate electoral gains from US tariff protection. The electoral losses were driven by retaliatory tariffs on agricultural products, and were only partially mitigated by the US agricultural subsidies announced in summer 2018. Republicans also fared worse in counties that had seen recent gains in health insurance coverage, affirming the importance of health care as an election issue. A counterfactual calculation suggests that the trade war (respectively, health care) can account for five (eight) of Republicans' lost House seats.
    JEL: F13 F14
    Date: 2019–11
  18. By: Yuping Deng (School of Economics and Trade, Hunan University, Changsha, P.R. China); Yanrui Wu (Business School, The University of Western Australia); Helian Xu (School of Economics and Trade, Hunan University, Changsha, P.R. China)
    Abstract: The Chinese government adopted a series of pollution reduction targets in its eleventh five-year (2006-2010) economic development program. Whether this program can achieve its goal of pollution reduction and quality improvement for exports is of vital importance for China’s sustainable development. This paper aims to investigate the effects of these environmental regulation policies on export product quality by using the quasi-difference-in-difference method. Empirical results show that the implementation of these pollution reduction targets significantly reduces export product quality. This negative impact is more profound in western regions, capital-intensive sectors and privately-owned firms. Moreover, the negative effect is only observed among firms exporting to non-OECD countries, whereas the export quality of firms exporting to OECD countries is positively affected by the new policy. Lastly, our extended analysis shows that the negative effects can be mitigated through product switching within the firms.
    Keywords: Environmental regulation; Export product quality; Product switching; China
    JEL: F10 F18 Q56
    Date: 2019
  19. By: Nayyar, Deepak
    Abstract: This paper sketches a profile of international labour migration over the past fifty years and draws a distinction between different categories of labour flows in the contemporary world economy. It examines the underlying factors with an emphasis on structural determinants at a macrolevel. It explains why the gathering momentum of globalization has coincided with a discernible slowdown in migration during the last quarter of twentieth century, to analyse how globalization might influence emigration pressures on the supply side and immigration needs on the demand side. It argues that globalization has set in motion forces which are creating a demand for labour mobility across borders, as also developing institutions on the supply side to meet this demand. The future prospects are also bound to be shaped by demographic change and population imbalances, arising in particular from the ageing of industrial societies. In conclusion, the paper suggests that the time has come to reflect upon the necessity of formulating international rules or creating international institutions for the governance of cross-border movements of people.
    Keywords: International Development
  20. By: Girma, Sourafel; Görg, Holger; Stepanok, Ignat
    Abstract: We ask whether production related subsidies have a role to play in explaining Chinese firms' export performance. We, firstly, implement an estimation approach that allows for both direct and indirect ("spillover") effects of the subsidy on the probability to export. Secondly, our approach enables us to allow these two effects to differ depending on the share of firms that already receive subsidies in a well-specified cluster. These two issues have, to the best of our knowledge, not been considered in evaluations of subsidies on export performance. Our estimation results provide a sobering assessment of the role of production related subsidies in stimulating export performance.
    Keywords: exporting,subsidies,spillovers
    JEL: F14 F12 H25
    Date: 2019
  21. By: Ducret, Romain (Faculty of Economics and Social Sciences); Isakov, Dusan
    Abstract: Finance practitioners frequently claim that stocks of Korean firms are undervalued and trade at a discount relative to foreign firms. This phenomenon is commonly called «the Korea discount». It is based on anecdotal evidence comparing either the price-earnings ratios of different market indexes or those of different individual stocks. This paper provides empirical evidence on the existence of such a discount using a large sample of stocks from 28 countries over the period 2002-2016. We find that Korean stocks have significantly lower price-earnings ratios than their global peers. We also investigate the role of large business groups called chaebols, which are often considered to be the main cause of the discount because of their poor corporate governance. Our findings show that it is not the case.
    Keywords: valuation; price-earnings ratio; business groups; emerging markets; Korea.
    JEL: G15 G32
    Date: 2019–11–21
  22. By: Xavier Jaravel; Erick Sager
    Abstract: This paper finds that U.S. consumer prices fell substantially due to increased trade with China. With comprehensive price micro-data and two complementary identification strategies, we estimate that a 1pp increase in import penetration from China causes a 1.91% decline in consumer prices. This price response is driven by declining markups for domestically-produced goods, and is one order of magnitude larger than in standard trade models that abstract from strategic price-setting. The estimates imply that trade with China increased U.S. consumer surplus by about $400,000 per displaced job, and that product categories catering to low-income consumers experienced larger price declines.
    Keywords: China ; Inequality ; Markups ; Prices ; Trade
    JEL: F10 F13 F14
    Date: 2019–09–20
  23. By: Bhaduri, Amit
    Abstract: The raison d'etre of the nation-state is the ideology of nationalism. Yet, nationalism is a complex notion which encompasses the society, the state and the economy. It comprises of a complex nexus of multiple loyalties of an individual as a member of the society, duties and rights of the citizen in a reciprocal political arrangement with the state, and the role of the individual as a producer and consumer in the economy. While the balance among these different aspects of nationalism evolved historically, in the present area of globalization this balance seems to be shifting in favour of global market forces. Its consequences for the nation-state, and the new role that it needs to define for itself, especially in terms of economic policy, is the theme of this paper.
    Keywords: International Development
  24. By: Sood, Krishalekha
    Abstract: Meaningful achievements in the development process on a global level depended on sound domestic policies and on the international conditions. International conditions which were considered desirable and favourable included supportive monetary, trade and debt policies; and resource transfers in the forms of capital, expertise, and technology. In the increasingly competitive world of the 1990s, the further reduction of protectionism and the expansion of international trade are crucial factors in promoting economic growth and development.
    Keywords: International Development
  25. By: van Seventer Dirk; Mondlane Silvana
    Abstract: This paper considers the impact of agriculture and international trade development on income distribution and economic activity in Mozambique. A social accounting matrix multiplier decomposition model is used—in particular, an extension of the standard model that details the process of income distribution through the economy’s institutions. When we focus on the impact on rural low-income households, the emphasis is on the food crop and food-processing sectors. The results suggest surprisingly that such households do not benefit much from exogenous increases in agricultural crops; high-income rural and urban households benefit more. A full decomposition of the multipliers suggests that rural low-income households link strongly to foodprocessing, but that the latter is not very prominent in the Mozambican economy due to high import penetration. The second focus is therefore on international trade, which reveals that the high rates of imports regarding food-processing are mainly sourced from South Africa.
    Keywords: Agriculture,multiplier effects,Decomposition methods,Social Accounting Matrix,Trade,Income distribution
    Date: 2019
  26. By: António Afonso; Florence Huart; João Tovar Jalles; Piotr Stanek
    Abstract: We assessthe sustainability of external imbalances for EUcountriesusing panel stationarity tests of Current Account(CA) balance-to-GDP ratiosand panel cointegration of exports and imports of goods and services, for the period 1970Q1-2015Q4. We find that: i) the country panel isnon-stationary; ii) cross-sectional dependence plays an important role; iii) there is non-stationarity of the CA, imports, and exportswith cross-sectional panel dependenceand multiple structural breaks; iv) however, there is a stable long-run relationship between exports and imports in the panel.Hence, trade imbalances can be less unsustainable but this is not sufficient to make current account imbalances sustainable.
    Keywords: current account, exports, imports, unit roots, cointegration
    JEL: C23 F32 F41
    Date: 2019–11
  27. By: Prasad, Alaka Shree; Mandal, Biswajit
    Abstract: With the help of a stylized economy resembling the features of a developing country endowed with huge supply of unskilled labor, informality, informality related corruption and limited supply of educational capital we examine how virtual trade with a country located in a geographically different time zone affects the factor prices and subsequently output of different sectors. We show that skilled labors and educational capital owners are the beneficiaries of virtual trade. The service sector expands and the formal and informal good producing sectors contract along with the number of people engaged in corruption related intermediation. Following this, we also check the effect of a fall in the extent of cost of corruption. Results show an increase in unskilled wage and outflow of educational capital thus hurting the skill intensive sector. We proceed further to club the effects of both virtual trade and fall in cost of corruption and explore the consequences. Interestingly, both skilled and unskilled labors benefit. The effect on output and intermediators, however, is ambiguous.
    Keywords: Time Zones; Virtual Trade; Service; Educational Capital; Informality; Corruption; Extortion.
    JEL: D73 E26 F16 F2 L86 O17
    Date: 2019
  28. By: Michael Rauscher; Bianca Willert
    Abstract: We develop a model where firms profit from coercing workers into employment under conditions violating national law and international conventions and where bureaucrats benefit from accepting bribes from detected perpetrators. Firms and bureaucrats are heterogeneous. Employers differ in their unscrupulousness regarding the use of slave labour whereas bureaucrats have differing intrinsic motivations to behave honestly. Moreover, there is a socially determined warm-glow effect: honest bureaucrats feel better if their colleagues are honest too. The determination of bribes is modelled via Nash bargaining between the firm and the corrupt civil servant. It is shown that multiple equilibria and hysteresis are possible. Depending on history, an economy may be trapped in a locally stable high-corruption, high-slavery equilibrium and major changes in government policies may be necessary to move the economy out of this equilibrium. Moreover, we show that trade bans that are effective in reducing slavery in the export industry tend to raise slavery in the remainder of the economy. It is possible that this leakage effect dominates the reduction of slavery in the export sector.
    Keywords: coerced labour, modern slavery, corruption, social norms, trade-related process standards
    JEL: D73 F16 J47
    Date: 2019
  29. By: Matthee Marianne; Bezuidenhout Carli; Pretorius Anmar; Blaauw Derick
    Abstract: In South Africa, the manufacturing sector—important for growth and employment creation—has shown declining growth, poor productivity performance, decreased labour demand, and increased imports of intermediate goods (offshoring activities). Offshoring influences jobs and wages differently depending on the type of industry and worker. We provide a nuanced view of offshoring in South Africa, using firm- and employer–employee-level data to disentangle its impact on the labour market in terms of capital- and labour-intensive industries and skilled and unskilled workers. Contrary to previous findings in developed countries, we find that offshoring generally lowers employment in manufacturing firms, and seems to increase the percentage of unskilled workers and lower the percentage of skilled workers. There are indications that increased narrow offshoring increases the cohort of unskilled workers, particularly in ultra-labour-intensive industries. As offshoring gains momentum, worker-level earnings increase in capital- and labourintensive industries but decrease in ultra-labour-intensive industries.
    Keywords: Linked employer-employee data,Wages,Employment,Firm-level data,offshoring,Skills
    Date: 2019
  30. By: Hettne, Bjorn; Inotai, Andras
    Abstract: The papers in this booklet are the two introductory studies of a new UNU/WIDER project on regional cooperation and neo-regionalism. Both are pilot papers; one deals with the main theoretical issues, the other is a case study on Latin America.
    Keywords: International Development
  31. By: Haaparanta, Pertti; Kahkonen, Juha
    Abstract: A two-period, two-sector optimizing model is used to study the effects of liberalization of trade and capital movements on the real exchange rate, unemployment, and welfare. The mechanism creating unemployment is assumed to be real wage rigidity caused by wage indexation. Due to this distortion, neither free trade nor free capital mobility is in general optimal. It is shown that in the short run liberalization leads to real appreciation while in the long run the picture is not as clear especially regarding trade liberalization. If real appreciation is associated with an increase in unemployment it is optimal to protect the open sector and restrict foreign borrowing. The optimality of these policies is guided by their effects on employment, even though in general there is no necessary connection between welfare and employment. If the initial situation is very distorted liberalization may increase welfare despite the fact that unemployment increases.
    Keywords: International Development
  32. By: Rand John; Tarp Finn; Trifkovi? Neda; Rodriguez Paula
    Abstract: We use the case of the timber industry in Myanmar to analyse how national regulatory frameworks and international ecological discourses affect forest management and small businesses.The state plays two roles in the timber industry in Myanmar: it is the main producer and legal source of raw timber for the private sector; and it regulates timber extraction and the legality of operation of private sector firms. The state seeks a balance between forest conservation as a public policy objective and providing enough raw timber for the private sector. The implications of this for the private sector are twofold. The strict regulatory framework increases operational costs, as multiple licences and permits are required. And the state-controlled supply of raw materials results in inefficiencies, such as shortage and high raw timber prices.Under these conditions, the smallholder wood industry in Myanmar is at risk of stagnating at best, if not disappearing.
    Date: 2019
  33. By: Öztürk, İbrahim
    Abstract: The Belt and Road Initiative (BRI) is a Chinese endeavor to create an international public good (IPG) for bringing a cooperative solution to existing infrastructure deficits, mainly in the Eurasian landmass. This article aims to question the institutional quality of the BRI as a global governance platform with IPG characteristics in emerging political and economic oligopolistic markets. The central hypothesis of the article is that in order to successfully address both the conflicting and the overlapping demand and supply conditions in the rising multiplex world, the BRI should blend the Western experience of IPG creation in the post-World War II era with that of China's recent development. Such an amalgamation would also support China's integration in the global system as well as complement its weaker aspects. This type of synthesis of diverse experiences would help the BRI to evolve as a new brand of "hybrid IPG." In terms of methodology, an institutional economic theory with an interdisciplinary approach is employed in addressing collective action problems and agency issues and, therefore, in offering a win-win game in infrastructure-oriented cooperation. We found that although the BRI has striking achievements in terms of quantitative criteria, because of qualitative issues concerning its institutional governance structure, not only is the emergence of several managerial-coordination problems unavoidable, but destructive geopolitical rivalries and conflicts would also be triggered. The article concludes that, first, by applying the principles of international "good governance," the BRI would become a fully rule-based multilateral initiative; and second, China needs to show through working modalities and measurable outcomes along the BRI how its systemic values would contribute to the provision of such a hybrid IPG.
    Keywords: global governance,international public goods,infrastructure connectivity,sustainable development,Belt and Road Initiative,multiplex world,cooperation,agency issues
    JEL: F02 H4 P48
    Date: 2019

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