nep-int New Economics Papers
on International Trade
Issue of 2019‒12‒02
34 papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. What are the determinants of international trade in services? Evidence from firm-level data for Poland By Krzysztof Matuszczak
  2. Implications of Foreign Direct Investment, Capital Formation and its Structure for Global Value Chains By Amat Adarov; Robert Stehrer
  3. South-North Trade in Ireland: Gravity and Firms from the Good Friday Agreement to Brexit By Peter Neary; Martina Lawless; Zuzanna Studnicka
  4. International Trade and Employment: Theory and Evidence from Korean Firms By Priyaranjan Jha; Jae Yoon Lee; Yang Liang; Devashish Mitra
  5. GVC journeys: Industrialisation and Deindustrialisation in the Age of the Second Unbundling By Richard Baldwin; Toshihiro Okubo
  6. Contractual Frictions and the Patterns of Trade: The Role of Generalized Trust By Ndubuisi, Gideon
  7. Firm Adjustment to Trade Policy Changes in East Asia By Narjoko, Dionisius; Urata, Shujiro
  8. New Zealand as a Niche Player in World Markets By Ralph G. Lattimore
  9. Italy’s international trade in services: a story of missed growth? By Alessandro Moro; Enrico Tosti
  10. Firm heterogeneity and trade in EU countries: A cross-country analysis By Claire Giordano; Paloma Lopez-Garcia
  11. Firms' export decisions: Selection versus trial-and-error By Movahedi, Mohammad; Shahbazi, Kiumars; Abdessalam, Ahmed Haidara Ould
  12. Credit constraints and trade performance: Does trust-based social capital matter? By Ndubuisi, Gideon; Konte, Maty
  13. Inequality in Latin America: The role of the nature of trade and partners By García Muñoz, Teresa María; Milgram Baleix, Juliette; Odeh, Omar Odeh
  14. Productivity trends and drivers in global agriculture: could the UK match up in a post Brexit world? By Revell, Brian
  15. Trade shocks, product mix adjustment and productivity growth in Italian manufacturing By Maria Gabriela Ladu; Andrea Linarello; Filippo Oropallo
  16. Innovation, Growth, and Dynamic Gains from Trade By Wen-Tai Hsu; Raymond G. Riezman; Ping Wang
  17. Mathematics of the Armington, Krugman and Melitz Models with Multiple Sectors and Heterogeneous Regions, with Detailed Derivations By Edward J. Balistreri; David G Tarr
  18. Beyond "dependent development" in a high-tech industry? The interplay between domestic institutions and transnational sectoral governance in the trajectories of emerging Polish IT firms By Lechowski, Grzegorz
  19. Technology-induced Trade Shocks? Evidence from Broadband Expansion in France By Clément Malgouyres; Thierry Mayer; Clément Mazet-Sonilhac
  20. A new and benign hegemon on the horizon? The Chinese century and growth in the global South By NguyenHuua, Tam; Karaman Örsal, Deniz Dilan
  21. Trade Wars, Technology and Productivity By Ching-mu Chen; Wan-Jung Cheng; Shin-Kun Peng; Raymond Riezman; Ping Wang
  22. Impact of institutional and cultural distance on ASEAN's trade efficiency By Doanh Khanh Nguyen; Van Ngoc Thi Pham; Heo, Yoon
  23. A simple model of time zone differences, virtual trade and informality By Mandal, Biswajit; Prasad, Alaka Shree
  24. China’s international projection in the Xi Jinping’s era By Lorenzo Bencivelli; Flavia Tonelli; Daniela Marconi; Stefano Iezzi; Andrea Zanotti; Raffaele Tartaglia Polcini; Alberto Coco; Maurizio Ghirga; Andrea Zucchini; Alessandro Giraudo; Raffaele De Marchi; Andrea Furgeri; Pietro Ginefra; Sergio Longoni; Giovanni Majnoni d'Intignano; Anna Marra; Elisa Sales; Giorgio Trebeschi; Ignazio Musu
  25. Settlement Location Shapes Refugee Integration: Evidence from Post-War Germany By Braun, Sebastian Till; Dwenger, Nadja
  26. Does foreign direct investment in financial services induce financial development? Lessons from emerging economies By Podikkalathil, Jithin; Manalaya, Suresh Babu
  27. An Economic Analysis of China’s Domestic Crude Oil Supply Policies By Bertrand Rioux; Philipp Galkin; Kang Wu
  28. Financial development and FDI inflows in China By Khan, Hameed; Khan, Umair
  29. Globalization and Populism in Europe By Bergh, Andreas; Gustafsson, Anders
  30. Forecasting Bitcoin Returns: Is there a Role for the U.S. – China Trade War? By Vasilios Plakandaras; Elie Bouri; Rangan Gupta
  31. Deepening Cooperation Between Saudi Arabia and China By Dongmei Chen; Wenke Han
  32. Exchange rate volatility in the eurozone By Bajo Rubio, Oscar; Berke, Burcu; McMillan, David G.
  33. Potential Effects of Trade Liberalization on China’s Imports of Plastics From the GCC By Philipp Galkin; Carlo Andrea Bollino; Rami Shabaneh
  34. A Theory of Economic Unions By Gino Gancia; Giacomo A. M. Ponzetto; Jaume Ventura

  1. By: Krzysztof Matuszczak (Faculty of Economic Sciences, University of Warsaw)
    Abstract: In this paper, we investigate the determinants of firm-level services export performance. Our focus is on three main aspects affecting services export: international capital linkages (FDI relationships), the existence of trade barriers, the demand and supply factors. The estimated models of the export performance include product and firm-level controls, such as foreign demand, firm-level imports, merchandise exporter status and foreign ownership, as well as destination fixed effects, product fixed effects, firm-level fixed effects. We used the Services Trade Restrictiveness Index (STRI) as a proxy to control for institutional trading barriers. The results suggest export-augmenting effects in services caused by both foreign ownership and involvement in activity in merchandise trade. Restrictions on international services market turned out to be significant as well. As far as the heterogeneity of firms is concerned, size of firms, industry and gravity variables such as GDP of trade-partner, distance and the common border have a significant impact on export. The study uses a unique firm-level dataset providing detailed information on services exports for the period of 2010-2015. In contrast to modern studies based on a random sample of firms, we used the entire population of services exporters in Poland.
    Keywords: firm heterogeneity, services trade, FDI in services, trade barriers, determinants of export
    JEL: F10 F14 F23
    Date: 2019
  2. By: Amat Adarov (The Vienna Institute for International Economic Studies, wiiw); Robert Stehrer (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: In the age of globalisation, international trade and foreign direct investment (FDI) have become integral elements of cross-country production sharing. In this paper we empirically assess the impact of FDI, as well as capital dynamics and structure, on the formation of global value chains (GVC) and trade in value added at country and sectoral levels based on a database constructed for a sample of European countries over the period 2000-2014. The analysis reveals that inward FDI is especially conducive to the formation of backward linkages while outward FDI facilitates forward GVC participation, especially in high-tech manufacturing sectors. A particularly robust influence of FDI and capital accumulation on GVC integration is identified in the textile and clothing industry. While capital accumulation in general intensifies GVC linkages for most sectors, ICT capital appears to be especially instrumental for backward integration of electrical and transportation equipment sectors. Disclaimer Financial support from the Joint Research Centre (JRC) of the European Commission is gratefully acknowledged (grant contract number 936041 - 2018 A8 AT).
    Keywords: global value chains, value added trade, foreign direct investment, capital, capital composition, gravity model, fractional response model
    JEL: F14 F15 F21 E22
    Date: 2019–11
  3. By: Peter Neary; Martina Lawless; Zuzanna Studnicka
    Abstract: This paper revisits the work of Fitzsimons, Hogan, and Neary (1999) on the level of trade between Ireland and Northern Ireland. In doing so, we reflect on the recent move to prominence of this issue since the referendum decision of the UK to leave the EU and also on the shift within the economics literature to looking at trade issues from a micro rather than a macro perspective as data availability has grown. Our country-level results show the same pattern of limited statistical significance for a border effect as was found in the earlier work still holds but when using firm-level data we find a positive and significant border effect. This effect holds for total trade at firm and product level with the primary determinant coming from the intensive margin, both in terms of average exports per firm and average exports per product within firms.
    Keywords: Brexit; Gravity; Multi-Product Firms
    JEL: F10
    Date: 2019–11–20
  4. By: Priyaranjan Jha (Department of Economics, University of California-Irvine); Jae Yoon Lee (KIET); Yang Liang (San Diego State University); Devashish Mitra (Maxwell School, Syracuse University)
    Abstract: We extend the small country trade model with firm heterogeneity (Demidova and Rodriguez-Clare, 2013) to incorporate offshoring (along with final goods trade). We derive the firm-level employment implications of output and input trade and trade costs to provide a guide for our empirical work using Korean firm-level data for the period 2006-2016. A key theoretical result is that the impact of a change in offshoring cost on employment depends crucially on the net substitutability between inputs where net substitutability is the difference between the elasticities of input substitution and output substitution. Empirically we find that a decrease in the input trade cost reduces employment and the impact is stronger the greater the net substitutability between inputs. Exporting almost always leads to higher employment. Our 2SLS results with firm-level imports (in place of trade costs) do not contradict our results with trade costs. However, using propensity score matching, we find that being an importer, on average, is associated with greater employment, with the magnitude of this positive employment effect being greater for exporting firms and in industries with lower net substitutability among inputs.
    Keywords: Offshoring; Employment; South Korea; Trade Costs; Net Input Substitutability
    JEL: F12 F14 F16
    Date: 2019–10
  5. By: Richard Baldwin; Toshihiro Okubo
    Abstract: Offshoring and participation in Global Value Chains (GVCs) are critical to understanding the rapid deindustrialisation of G7 nations and the rapid industrialisation of a handful of developing nations. This paper distinguishes between trade in final goods and trade in parts to track the shifting pattern of the location of manufacturing. We introduce a simple empirical measure of comparative advantage in parts on one hand and in final goods on the other. We illustrate how this distinction can help organise thinking on the patterns of industrialisation and deindustrialisation-namely the "GVC journeys" of advanced and emerging economies. We also provide one simple model. The model highlights the interactions of trade costs and the knowledge transfers to accompany offshoring of parts production and assembly, which we call trade-led versus knowledge-led globalisation.
    Date: 2019–08
  6. By: Ndubuisi, Gideon
    Abstract: Extant studies on the relationship between “domestic institutions, comparative advantage and international specialization” have largely focused on formal institutions. This paper contributes to this literature by focusing on domestic informal contracting institution vis-á-vis generalized trust as a source of comparative advantage. Employing a bilateral industry trade data, the paper finds a robust evidence that countries with high generalized trust level export relatively more in industries that that are prone to contractual frictions. Results on export margins further suggest that countries with high generalized trust level enter more markets, ship more products to each destination, and have higher export per product and export intensities in those industries. On the one hand, the results reemphasizes the importance of trust for improved economic performance. On the other hand, it offers explanation as to why a country though poorly endowed with weak formal domestic institutions may still have a comparative cost advantage in industries that are more prone to contractual frictions due to having strong domestic informal institutions such as generalized trust.
    Keywords: Generalized Trust, Contractual Frictions; Trade; Trade Margins
    JEL: D70 F10 F14
    Date: 2019–10
  7. By: Narjoko, Dionisius (Asian Development Bank Institute); Urata, Shujiro (Asian Development Bank Institute)
    Abstract: Trade and investment liberalization has been one of the key features of economic policy in many developing countries since the 1990s. Research on this subject has consistently produced more evidence on the benefits of globalization; theoretical studies give more attention to what happens within an industry when trade and liberalization occur, while empirical studies confirm the positive impact of trade liberalization. We review some recent studies on the subject of firms in a globalized economy to enable us to understand more about how firms respond to globalization or changes in trade and investment liberalization. We focus on presenting or explaining the underlying mechanisms through which the effects are realized. The studies we summarized generally confirm the positive impact of trade liberalization on productivity or the spectrum of measures reflecting productivity, such as product quality, firm size, or skill intensity. The positive impact goes through various channels, including competition and industry dynamics, exporting and innovation decisions, and production or investment decisions.
    Keywords: trade liberalization; investment liberalization; globalization; productivity
    JEL: F01 F60 O14 O53
    Date: 2019–05–06
  8. By: Ralph G. Lattimore (University of Waikato)
    Abstract: This short paper was originally designed as a backgrounder for small and medium sized firms who are searching for new ventures in export markets. The paper surveys the export performance of New Zealand over the period 1989 to 2018 using United Nations 2 and 4-digit Harmonised System data in an attempt to provide some clues on where one might look further and deeper for production and trade opportunities.
    Keywords: New Zealand; exports; trade trends; comparative advantage; export competitiveness
    JEL: D22 E61 E65 F13 F14
    Date: 2019–11–26
  9. By: Alessandro Moro (Bank of Italy); Enrico Tosti (Bank of Italy)
    Abstract: The paper analyses the trend in Italy’s trade in services over the last twenty years, showing a low growth in relation to its potential demand and in comparison with the main euro-area countries. The delay accumulated by Italy’s exports of services from 1999 to 2015 was highly significant and only in the subsequent period was there a recovery. The analysis by typology shows that services other than travel and transport are the aggregate with the worst performance compared with a stronger trend at global level; from a geographical point of view, sales outside the EMU have displayed the most negative contribution. Using firm-level microdata, it is possible to examine the main determinants of Italian service exports, highlighting the negative role of the scarcity of medium-sized and large companies, the low productivity and the limited internationalization of the services sector; the recovery recorded in the three years 2016-18 was driven by large foreign-controlled companies.
    Keywords: International trade in services, mirror statistics, foreign demand, firm-level data
    JEL: F14 L80
    Date: 2019–10
  10. By: Claire Giordano (Banca d’Italia); Paloma Lopez-Garcia (European Central Bank)
    Abstract: Firms are heterogeneous, even within narrowly defined sectors. This article surveys the relevant theoretical and empirical literature on firm heterogeneity and external trade. By innovatively exploiting rich cross-country micro-aggregated data sourced from the ECB Competitiveness Research Network (CompNet), this study investigates the main implications of firm heterogeneity for trade by EU countries, presenting a set of stylized facts. On the one hand, exporting firms are larger, more productive and pay higher wages than non-exporting firms. Indeed, only these firms are able to bear export costs arising from various factors, such as tariff and non-tariff trade barriers, the quality of the legal system or access to finance. Hence, only few enterprises actually export and the intensity of aggregate export concentration within a few large firms varies across countries and sectors. On the other hand, engaging in trade boosts individual firms’ productivity growth via a number of channels and enhances allocative efficiency across firms, in turn increasing aggregate productivity growth. One of the main standard determinants of export growth, namely changes in the real effective exchange rate, impacts aggregate performance differently across countries depending on sectoral composition and on firm characteristics within a given sector.
    Keywords: trade, firm heterogeneity, productivity, real effective exchange rates.
    JEL: F14 L25
    Date: 2019–07
  11. By: Movahedi, Mohammad; Shahbazi, Kiumars; Abdessalam, Ahmed Haidara Ould
    Abstract: In this paper, an original and simple theoretical model is developed to better integrate various dimensions of the firms' decision to export. The model sheds light on the affirmations of the founding models of the "new theory of international trade", in particular the role of productivity and sunk costs of exporting in the firms' export decisions. It can also explain stylized facts that seem difficult to reconcile with the implications of the founding models: 1) flows of export market entry and exit are substantial; 2) entry into export markets would be rather gradual in the sense that firms start exporting small quantities and, if they survive, quickly expand their exports.
    Keywords: firm heterogeneity,self-selection,sequential exporting
    JEL: F10
    Date: 2019
  12. By: Ndubuisi, Gideon (UNU-MERIT); Konte, Maty (UNU-MERIT)
    Abstract: It has been extensively argued that trust-based social capital expands access to credit. We embed this argument in the "credit-constrained literature," which documents inter-sector differences in financial vulnerability. We argue that financially constrained sectors are relatively better off in countries with a higher social trust level. Employing bilateral trade data comprising 50 countries' exports in 27 sectors during 1996-2008, we find that countries with a higher social trust level export more in financially vulnerable sectors because they export more products to each destination (extensive margin) and sell more of each product (intensive margin), which is in line with our hypothesis. With the exception of the intensive margin, these results are robust to a battery of sensitivity checks, including controlling for formal financing.
    Keywords: F10, F14, D70
    Date: 2019–11–08
  13. By: García Muñoz, Teresa María; Milgram Baleix, Juliette; Odeh, Omar Odeh
    Abstract: This paper investigates the relationship between trade openness and income inequality in 11 Latin American countries over the period 1989-2015. We use a panel dynamic approach to take into account the high persistence of income inequality. The analysis classifies trade flows, exports and imports according to trading partner's economic development and income level. Then, we split trade flows according to different stages of production. The results show that overall trade flows lessen income inequality in Latin America. However, trade has divergent effects depending on the trade partners: trade with similar-income countries exacerbates inequality, while trade with developing countries and higher-income countries reduces income dispersion. The results also emphasise the role of the export channel (in particular in primary commodities) in explaining income inequality in Latin American countries and imports of consumption goods seem to matter more than imports of intermediate and capital goods.
    Keywords: trade openness,trade direction,income inequality,Latin America
    JEL: F14 O54 E25
    Date: 2019
  14. By: Revell, Brian
    Abstract: The analysis in the paper focuses on global trends in total factor productivity (TFP) growth and some of its key components and drivers. The relative performance of the UK in relation to many key countries with globally important agri-food sectors, either or both as exporters and or importers of agricultural products, and as potential targets of its future UK post-Brexit strategy are examined. Two approaches are explored in order to gain some insights into productivity growth and its measurement: the decomposition output growth through the contributions of growth in land, labour, capital, material inputs and TFP, and modelling output growth to identify the significant contributing variables. Finally, the challenges that the agricultural sector of the might face as a consequence of its proposed UK post Brexit agricultural policy (if and when it might happen) for its productivity are considered and some conclusions regarding the relevance to future agri-technology developments are outlined.
    Keywords: Agricultural and Food Policy, International Relations/Trade
    Date: 2019–10–21
  15. By: Maria Gabriela Ladu (University of Sassari and ISTAT); Andrea Linarello (Bank of Italy); Filippo Oropallo (ISTAT)
    Abstract: In this paper we use firm-level data on the universe of Italian manufacturing multi-product exporters to test whether demand shocks in export markets lead multi-product exporters to increase their productivity. The main mechanism behind the documented productivity gains is the reallocation of resources across products within firms (Mayer et al., 2014 and 2016). Intuitively, the increased demand stemming from foreign markets will induce firms to adjust their product-mix by moving inputs from low to high productive/profitable uses. We find that these productivity gains are significant and account for about 30 per cent of aggregate productivity growth in the manufacturing sector.
    Keywords: Italian manufacturing sector, export, trade shocks, productivity
    JEL: D22 F14
    Date: 2019–10
  16. By: Wen-Tai Hsu; Raymond G. Riezman; Ping Wang
    Abstract: How large are the welfare gains from trade? Would such gains be significantly amplified in the long run when productivity is endogenously enhanced? To address these questions, we focus on the dynamic effect of trade, in particular, how trade affects the incentives for technological advancement. We construct an innovation-based endogenous growth model of North-South trade. There are two types of innovation: one by the North to upgrade the general purpose technology (GPT) and another by all countries to advance entrepreneurial knowledge for developing differentiated products. We find sizable welfare gains from trade, about 5.3% when compared to autarky. The gains in our dynamic model are much higher than the static estimates where the effects of GPT-driven innovation are eliminated. The share of dynamic gains from trade is about 78% of the total gains in our benchmark economy – much higher than comparable figures identified in previous studies. Comparative statics indicate that GPT innovation efficacy, entrepreneurial talent distribution and trade elasticity are crucial for dynamic gains from trade.
    JEL: D92 F10 O30 O41
    Date: 2019–11
  17. By: Edward J. Balistreri (Center for Agricultural and Rural Development (CARD)); David G Tarr
    Abstract: In Balistreri and Tarr (2018), we numerically assess the relative welfare impacts of trade cost reductions in models based on Armington (1969), Krugman (1980) and Melitz (2003). In order to be able to apply these models to data, Balistreri and Tarr (2018) consider extended or general versions of these models to include: intermediates with data-based shares of inputs, labor-leisure choice, heterogeneous regions based on data, initial heterogeneous tariffs as well as iceberg costs, multiple factors of production and the possibility of sector-specific inputs. In this paper we provide detailed derivations of the equilibrium conditions of these models. We hope these derivations will be a clear roadmap for understanding and constructing modern multi-sector, multi-region international trade models that must be fitted to data.
    Date: 2019–11
  18. By: Lechowski, Grzegorz
    Abstract: The present study adds to the ongoing discussions on the economic and industrial change in postcommunist Central Europe by investigating in-depth the case of a relatively successful development of two large domestic IT firms from Poland. The case is theoretically interesting because it calls into question the dominant perspective on industrial transformation in the region which focuses on the role of foreign direct investment (FDI). The presented empirical analysis uses rich historical data to reconstruct the strategies of the two Polish firms regarding: sales market operations, corporate finance, and productive organization. The study's general assumption is that the relatively successful development of the two analyzed companies has been shaped by the interplay between home-country conditions and the governance structure of the transnational enterprise IT (EIT) industry. The conducted analysis indicates, first, that the firms have benefited from a well-functioning local capital market, the domestic supply of high-skilled labor, and some characteristics of the home country sales market. Second, the study reveals that the firms' development has been conditioned by the ongoing "modularization" processes in the EIT sector. In their initially home market oriented operations, the analyzed firms focused on the downstream segments of the EIT value chain while sourcing the more high-tech components (e.g. databases) from collaborations with foreign suppliers. In general, the results of the study suggest that a more nuanced perspective on the ongoing processes of industrial change in Central Europe than the one proposed in the existing literature is needed.
    Keywords: IT industry,emerging-country firms,Poland,postcommunist Europe,IT-Industrie,Schwellenländerunternehmen,Polen,postkommunistisches Europa
    JEL: P12 P16 L86
    Date: 2019
  19. By: Clément Malgouyres (IPP - Institut des politiques publiques - PSE - Paris School of Economics, PSE - Paris School of Economics, 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); Thierry Mayer (CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique, IEP Paris - Sciences Po Paris - Institut d'études politiques de Paris, Centre de recherche de la Banque de France - Banque de France, CEPR - Center for Economic Policy Research - CEPR); Clément Mazet-Sonilhac (IEP Paris - Sciences Po Paris - Institut d'études politiques de Paris, Centre de recherche de la Banque de France - Banque de France)
    Abstract: In this paper, we document the presence of "technology-induced" trade in France between 1997 and 2007 and assess its impact on consumer welfare. We use the staggered roll-out of broadband internet to estimate its causal effect on the importing behavior of affected firms. Using an event-study design, we find that broadband expansion increases firm-level imports by around 25%. We further find that the "sub-extensive" margin (number of products and sourcing countries per firm) is the main channel of adjustment and that the effect is larger for capital goods. Finally, we develop a model where firms optimize over their import strategy and which yields a sufficient statistics formula for the quantification of the effects of broadband on consumer welfare. Interpreted within this model, our reduced-form estimates imply that broadband internet reduced the consumer price index by 1.7% and that the import-channel, i.e. the enhanced access to foreign goods that is allowed by broadband, accounts for a quarter of that effect.
    Date: 2019–06
  20. By: NguyenHuua, Tam; Karaman Örsal, Deniz Dilan
    Abstract: This study investigates the impacts of trade with China on the gross domestic product (GDP) of the global South. While the current literature on the growth impacts of trade (by leading partner countries) often neglects the properties of macro panel data, such as cross-sectional dependence, heterogeneity and structural breaks, our models take these features into account. The empirical results of 22 major developing countries over 2000Q1 to 2016Q4 find positive contributions of imports from China to GDP in our studied sample, although the magnitude of these effects is smaller than that of otheremerging and developing economies (not including China) (EDE) and advanced economies (AdE). The authors also show that, in contrast with considerable impacts of exports to EDE and AdE, exports to China have limited effects on the growth of its partners. However, the recent financial crisis marks a turning point of China's role as a major driver of growth in the South. Namely, while contributions of trade with China in its partners after the global crisis are on the rise, the opposite is true for EDE and AdE.Examining the effects by individual countries, they present that the distance between China and its partners and economic development level of its partners are almost irrelevant to the contributions of imports from China to its partners' growth. They provide some important policy recommendations for the global South from these findings.
    Keywords: China,growth,developing and emerging economies,international trade,panel data,econometrics,cross-sectional dependence
    JEL: C23 F43 O4
    Date: 2019
  21. By: Ching-mu Chen; Wan-Jung Cheng; Shin-Kun Peng; Raymond Riezman; Ping Wang
    Abstract: If international trade is strictly trade in intermediate goods, would the common presumption, that small, less developed economies (the South) lose from trade wars still be true? We address this question by constructing a dynamic general equilibrium model in which the North and the South trade technology-embodied intermediate goods. We show that the detrimental effects of the trade war are mitigated by the fact that producers in the South can adjust their choice of imported intermediate goods and their investment in domestic technologies. We establish sufficient conditions under which the steady-state trade equilibrium length of the production line and the range of domestic production in the South both expand in response to a tariff war. It thereby creates a novel channel of scale-scope trade-off: The South counters the losses from trade protection in the volume and value of trade (scale) with an upward movement along the value chain (scope). As a result, average productivity in the South and aggregate technology used by the South both turn out to be higher.
    JEL: D92 F12 O33
    Date: 2019–11
  22. By: Doanh Khanh Nguyen; Van Ngoc Thi Pham; Heo, Yoon
    Abstract: This paper aims to analyze the impact of institutional and cultural distance on ASEAN's trade efficiency using bilateral trade data from 2006 to 2016. The authors first employ an improved version of the stochastic frontier model to control endogeneity in estimating efficiency scores and then apply a sys-GMM model to estimate the impact of various distances on trade efficiency. The major findings are summarized as follows: first, trade efficiency of ASEAN's with the rest of the world is moderate, ranging from 0.48 to 0.60, and shows a downward trend. This indicates that considerable trade potential exists between ASEAN countries and the rest of the world. Second, institutional and cultural distance negatively affects ASEAN's trade efficiency. Third, trade freedom is an important factor that positively influences ASEAN's trade efficiency. Based on these findings, this study concludes that efforts to reduce differences in institutions and culture and to promote trade liberalization are strongly suggested as remedies for ASEAN countries to turn potential trade performance into actual trade performance.
    Keywords: trade efficiency,endogenous stochastic frontier model,endogeneity,system GMM,ASEAN
    JEL: F14 C55 F15
    Date: 2019
  23. By: Mandal, Biswajit; Prasad, Alaka Shree
    Abstract: In this paper we attempt to model virtual trade resulting from time zone differences in an otherwise Heckscher-Ohlin set up which is absent in the literature. So, this paper tries to add some value to the existing stuff on the trade theory and the role of time zones. In doing so, it has been proved that exploitation of time zone difference benefits skilled labor only under reasonable assumption. Contrarily, in output font, time zone difference exploiting sector expands and the other sector contracts irrespective of any factor intensity assumption. The model has been extended to examine how distance may also lead to similar outcomes. In addition, the model is further extended to explore the effect of virtual trade on an economy also endowed with a huge supply of unskilled labor causing the occurrence of informality and associated corruption. Interestingly trade turns out to be beneficial to unskilled workers and lead to a fall in the number of workers engaged in corrupt activities in the economy though the informal sector expands.
    Keywords: Trade; Time Zone; Factor Prices; Informality; Corruption
    JEL: D73 E26 F1 F11 J31
    Date: 2018
  24. By: Lorenzo Bencivelli (Bank of Italy); Flavia Tonelli (Bank of Italy); Daniela Marconi (Bank of Italy); Stefano Iezzi (Bank of Italy); Andrea Zanotti (Bank of Italy); Raffaele Tartaglia Polcini (Bank of Italy); Alberto Coco (Bank of Italy); Maurizio Ghirga (Bank of Italy); Andrea Zucchini (Bank of Italy); Alessandro Giraudo (Institut Supérieur de Gestion - Paris); Raffaele De Marchi (Bank of Italy); Andrea Furgeri (Bank of Italy); Pietro Ginefra (Bank of Italy); Sergio Longoni (Bank of Italy); Giovanni Majnoni d'Intignano (Bank of Italy); Anna Marra (Bank of Italy); Elisa Sales (Bank of Italy); Giorgio Trebeschi (Bank of Italy); Ignazio Musu (University of Venice Ca' Foscari)
    Abstract: Since the beginning of his presidency, Xi Jinping has progressively redirected foreign policy in order to better protect Chinese interests around the world. To this end, Beijing has significantly increased its international exposure on various fronts, often combining assertive approaches with more cooperative ones, among them the proposal of an "alternative model" of world economic cooperation. The external projection of the Chinese economy has continued to grow and diversify, as can be seen from the trend in exports, their composition (today characterized by greater added value than in the past), the amount of foreign investments and the credit granted by Chinese financial institutions to foreign borrowers. This evolution faces up to the incompleteness of China’s transformation into a market economy, evident in the ongoing role of the State in directing economic decisions (also through the lever of companies and public-owned banks), a source of growing tensions with its major trading partners.
    Keywords: China, BRI, MIC2025, FDI, trade disputes
    JEL: F02 F40 F53 P33
    Date: 2019–07
  25. By: Braun, Sebastian Till (University of Bayreuth); Dwenger, Nadja (DIW Berlin)
    Abstract: Following one of the largest displacements in human history, almost eight million forced migrants arrived in West Germany after WWII. We study empirically how the settlement location of migrants affected their economic, social and political integration in West Germany. We first document large differences in integration outcomes across West German counties. We then show that high inflows of migrants and a large agrarian base hampered integration. Religious differences between migrants and natives had no effect on economic integration. Yet, they decreased intermarriage rates and strengthened anti-migrant parties. Based on our estimates, we simulate the regional distribution of migrants that maximizes their labor force participation. Inner-German migration in the 1950s brought the actual distribution closer to its optimum.
    Keywords: forced migration, regional integration, post-war Germany
    JEL: N34 J15 J61
    Date: 2019–11
  26. By: Podikkalathil, Jithin; Manalaya, Suresh Babu
    Abstract: The authors employ panel Vector Error Correction Models (VECM) and cointegration framework to identify the existence and direction of the causal association between foreign direct investment (FDI) in financial services and financial development for 26 emerging economies for the period 2003-2015. Their results show that there exists a long-run cointegrating relationship between financial development and FDI in financial services after incorporating the extent of heterogeneity among emerging economies. The authors find long run unidirectional causality from financial development to financial services FDI. Using fully modified OLS (FMOLS) estimation, they estimate the long run elasticities between financial services FDI and financial development. Their results show that financial development has a positive and significant impact on FDI in financial services, which implies that a country with well-developed financial markets tend to attract larger amounts of FDI in financial services.
    Keywords: financial development,FDI,services,emerging economies
    JEL: G20 F23 C33
    Date: 2019
  27. By: Bertrand Rioux; Philipp Galkin; Kang Wu (King Abdullah Petroleum Studies and Research Center)
    Abstract: China’s domestic oil production has lagged the rapid growth in the country’s oil consumption since 2000, leading to a large, and growing, reliance on crude imports to meet demand. Factors including China’s current market structure and regulatory environment impede further development of the country’s oil industry, despite a number of policies aimed at protecting domestic producers. Using a short-run equilibrium model of China’s oil and gas supply industry, calibrated to 2016 data, the authors assessed the impact of market access barriers on China’s domestic production.
    Keywords: Crude Oil Trade, Fossil Fuel Policy, Market Deregulation, Oil Production
    Date: 2019–05–28
  28. By: Khan, Hameed; Khan, Umair
    Abstract: In this paper, the authors revisit the nexus of financial development and FDI inflows in Chinese perspective, incorporating the vital role of institutional quality and other important variables in this paradigm. Using ARDL bound testing and VECM procedures, they establish causality by exploiting variations in financial development and FDI. To unmask the shortcomings in the previous literature, the authors use a composite index of financial development, recently developed by the IMF, since it provides a more fine-grained analysis. The results show that there is a long-run relationship between FDI and financial development. Bidirectional causality is confirmed by using VECM. The inclusion of control variables, e.g., institutional quality, transport infrastructure, per capita GDP, trade openness, domestic investment, natural resources rent, is robust in the analysis. The positive role of financial development in FDI inflows is of utmost importance for policymakers and the Chinese government. Several policy implications are given in this study.
    Keywords: financial development,FDI,ARDL,liberalization,capital market,money market
    JEL: C22 F23 F38 G21 G32 O17
    Date: 2019
  29. By: Bergh, Andreas (Lund University); Gustafsson, Anders (Örebro University)
    Abstract: Recent micro-level studies have suggested that globalization – in particular, economic globalization – breeds political polarization and populism. This study examines if those results generalize by examining the country-level association between vote shares for European populist parties and economic globalization. Using data on vote share for 267 right-wing and left-wing populist parties in 33 European countries 1980–2016, and globalization data from the KOF-institute, we find no evidence of a positive association between economic globalization and populism. In many cases, the partial correlation is significantly negative. EU-membership is associated with 5 to 10 percentage units larger vote shares for right-wing populism in both random and fixed effects models.
    Keywords: Globalization; Populism; Trade
    JEL: P16
    Date: 2019–11–19
  30. By: Vasilios Plakandaras (Department of Economics, Democritus University of Thrace, University Campus, Komotini, Greece); Elie Bouri (USEK Business School, Holy Spirit University of Kaslik, Jounieh, Lebanon); Rangan Gupta (Department of Economics, University of Pretoria, Pretoria, 0002, South Africa)
    Abstract: Previous studies provide evidence that trade related uncertainty tends to predict an increase in Bitcoin returns. In this paper, we extend the related literature by examining whether the information on the U.S. – China trade war can be used to forecast the future path of Bitcoin returns controlling for various explanatory variables. We apply ordinary least square (OLS) regression, support vector regression (SVR), and the least absolute shrinkage and selection operator (LASSO) techniques that stem from the field of machine learning, and find weak evidence of the role of the trade war in forecasting Bitcoin returns. Given that out-of-sample tests are more reliable than in-sample tests, our results tend to suggest that future Bitcoin returns are unaffected by trade related uncertainties, and investors can use Bitcoin as a safe haven in this context.
    Keywords: Bitcoin, forecasting, machine learning, U.S. – China trade war
    JEL: C53 G11 G17
    Date: 2019–11
  31. By: Dongmei Chen; Wenke Han (King Abdullah Petroleum Studies and Research Center)
    Abstract: In recent decades China and Saudi Arabia have gradually deepened their collaboration in many areas. Five indicators are used to assess the overall progress of the two countries’ collaboration and to help form recommendations for ways to improve the integration between China’s Belt and Road Initiative (BRI) and Saudi Vision 2030. The strategic partnership between China and Saudi Arabia has presented opportunities for a new level of collaboration at a time when both countries are seeking economic transformation and sustainable growth.
    Keywords: China Belt and Road Initiative (BRI), Low Carbon Technology, Foreign Direct Investment, Infrastucture Investment, Sustainable Development
    Date: 2019–03
  32. By: Bajo Rubio, Oscar; Berke, Burcu; McMillan, David G.
    Abstract: The current economic crisis has witnessed a strong deceleration in the growth of international trade. This has been even greater in the cases of the European Union and the eurozone, where the rates of export growth have even reached negative figures. In this paper, the authors examine to which extent exchange rate volatility might account for the drop in the rate of growth of exports in the eurozone since the start of the crisis. To that end, the authors estimate export functions, augmented to include several measures of exchange rate volatility, for the four largest economies of the eurozone, i.e., France, Germany, Italy and Spain, for the period 1994:1-2014:4. In the empirical application, they make use of two alternative measures for exchange rate volatility, i.e., (i) the standard deviation and (ii) the conditional variance from the GARCH methodology, of the change in the logarithm of the exchange rate, for both nominal and real exchange rates, and in the latter case computed using as deflators both export prices and unit labour costs. The empirical results show no clear-cut evidence on the impact of exchange rate volatility on the exports of the countries analysed, suggesting that financial markets were developed enough so that exchange rate volatility does not hinder the evolution of exports.
    Keywords: exchange rate volatility,exports,eurozone
    JEL: F31 F41 F45
    Date: 2019
  33. By: Philipp Galkin; Carlo Andrea Bollino; Rami Shabaneh (King Abdullah Petroleum Studies and Research Center)
    Abstract: Energy economists are interested in how a change in electricity prices prompts a response by way of end-user power demand. It is difficult to estimate price elasticities statistically if historical prices are low and change infrequently, especially in the short run. This paper extends a previous analysis by Matar (2018) that explored the merger of a residential building energy model and a utility maximization component by incorporating more demand-reducing measures within a utility-maximization framework for households. The framework is informed by the physical equations that govern how electricity is consumed.
    Keywords: Consumer Behavior, Consumer Energy Use, Domestic energy consumption, Electricity
    Date: 2018–06
  34. 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 and 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 some salient features of the process of European integration and statistical evidence from survey data.
    JEL: D71 F15 F55 F62 H77
    Date: 2019–11

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