nep-int New Economics Papers
on International Trade
Issue of 2020‒03‒02
thirty-six papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. Determinants of Participation in Manufacturing GVCs in Africa: The Role of Skills, Human Capital Endowment and Migration By Yameogo,Nadege Desiree; Jammeh,Kebba
  2. Fettered Cross-Border Capital Flows, External Finance Dependence, and International Trade By Ndubuisi, Gideon
  3. Rising Protectionism and Global Value Chains: Quantifying the General Equilibrium Effects By Rita Cappariello; Sebastián Franco-Bedoya; Vanessa Gunnella; Gianmarco Ottaviano
  4. Trade, value chains, and rent distribution with foreign exchange controls: Coffee exports in Ethiopia By Tamru, Seneshaw; Minten, Bart; Swinnen, Johan F.M.
  5. FIRM PRODUCTIVITY GAINS IN A PERIOD OF SLOW TRADE LIBERALIZATION: EVIDENCE FROM BRAZIL By Xavier Cirera; Daniel Lederman; Juan A. Máñez Castillejo; María E. Rochina Barrachina; Juan A. Sanchis-Llopis
  6. Export-platform FDI and Brexit Uncertainty By Nicolo' Tamberi
  7. The Causal Impact of Trade on Migration: A Gravity Model Estimation By Rosmaiza Abdul Ghani; Michael P. Cameron; William Cochrane; Matthew Roskruge
  8. The importance of value chains for euro area trade: a time series perspective By Duncan van Limbergen; Robert Vermeulen
  9. The Extent of Engagement in Global Value Chains by Firms in Rwanda By Frazer,Garth; Van Biesebroeck,Johannes
  10. Effects of Trade Liberalization on Textile and Apparel Exports from Sub-Sahara Africa By Van Biesebroeck,Johannes; Zaurino,Elena
  11. Determinants of Global Value Chain Participation: Cross-country Analysis By Biswajit Banerjee; Juraj Zeman
  12. Structural Change and Global Trade By Logan Lewis; Ryan Monarch; Michael Sposi; Jing Zhang
  13. Aid for Trade flows and Wage Inequality in the manufacturing sector of recipient-countries By Gnangnon, Sèna Kimm
  14. Jobs in Global Value Chains : New Evidence for Four African Countries in International Perspective By Pahl,Stefan; Timmer,Marcel Peter; Gouma,Reitze; Woltjer,Pieter J.
  15. The origin, supply chain, and deforestation footprint of Brazil’s beef exports By Ermgassen, Erasmus Klaus Helge Justus zu; Godar, Javier; Lathuillière, Michael J; Löfgren, Pernilla; Vasconcelos, André; Gardner, Toby; Meyfroidt, Patrick
  16. Imports and Credit Rationing: A Firm-Level Investigation By Francesco Nucci; Filomena Pietrovito; Alberto Franco Pozzolo
  17. Taking Another Look at Policy Research on China's Accession to the World Trade Organization By Ianchovichina,Elena; Martin,William J.
  18. Sugar taxes: An economy-wide assessment: The case of Guatemala By Piñeiro, Valeria; Diaz-Bonilla, Eugenio; Paz, Flor; Allen, Summer L.
  19. Trade Liberalization and Macroeconomic Performance in Cameroon: An Imperfect Competition Approach By Tchoffo, Rodrigue; Ngouhouo, Ibrahim; Nkemgha, Guivis
  20. Impact of FDI on economic growth: The role of country income levels and institutional strength By Baiashvili, Tamar; Gattini, Luca
  21. Global Tariffs and CO2 By Klotz, Richard; Sharma, Rishi
  22. Migrant Inventors and the Technological Advantage of Nations By Dany Bahar; Hillel Rapoport
  23. Passport, Please! Travels, Travails and Trade By Nitsch, Volker
  24. Revisiting the Trade Impact of the African Growth and Opportunity Act : A Synthetic Control Approach By Kassa,Woubet; Coulibaly,Souleymane
  25. Domestic versus export-led agricultural transformation: evidence from Uganda's dairy value chain By Bjorn Van Campenhout; Bart Minten; Jo Swinnen
  26. Would a Stronger Renminbi Narrow the U.S.-China Trade Imbalance? By Thomas Klitgaard; Matthew Higgins
  27. Impact of International Migration on Labor Supply in Nepal By Phadera,Lokendra
  28. The Extent of GVC Engagement in Sub-Saharan Africa By Van Biesebroeck,Johannes; Mensah,Emmanuel Buadi
  29. Import Competition, Heterogeneous Preferences of Managers, and Productivity By Cheng Chen; Claudia Steinwender
  30. Business cycles,bilateral trade and international financial intergration : Evidence from Economic Community of West African States (ECOWAS) By Zouri, Stéphane
  31. Where Does Multinational Profit Go with Territorial Taxation? Evidence from the UK By Dominika Langenmayr; Li Liu
  32. Measures to Enhance the Effectiveness of International Climate Agreements: The Case of Border Carbon Adjustments By Alaa Al Khourdajie; Michael Finus
  33. Determinants and Dynamics of Forced Migration to Europe: Evidence from a 3-D Model of Flows and Stocks By Tilman Brück; Kai M. Dunker; Neil T. N. Ferguson; Aline Meysonnat; Eleonora Nillesen
  34. Trips and Trade By Nitsch, Volker
  35. Global implications of a US-led currency war By Adam Triggs; Warwick J McKibbin
  36. Can Taxes Help Ensure a Fair Globalization ? By Langot,Francois; Merola,Rossana; Oh,Samil

  1. By: Yameogo,Nadege Desiree; Jammeh,Kebba
    Abstract: This analysis assesses the role of skills, human capital endowment, and migration as determinants of Sub-Saharan Africa's participation in manufacturing global value chains. Due to lack of reliable data on skilled labor, skilled and unskilled labor contents in exports were generated from the Global Trade Analysis Project database. A panel of 23 countries for which data on skills and manufacturing global value chains are available for 19 subsectors was constructed. A fixed-effect gravity model was used to estimate the determinants of backward and forward global value chain participation. The estimates obtained from the sample are compared with global data covering 115 countries for benchmarking purposes. The results indicate that for economies in Sub-Saharan Africa, skilled labor seems to be the strongest determinant of participation in backward and forward global value chains. Similarly, initial human capital endowment has a strong positive impact on global value chain participation at the global level. However, countries with relatively high initial capital endowment benefit more by incorporating foreign value-added products in their manufacturing exports. Finally, countries that receive net inflows of migrants tend to engage better in backward and forward global value chains than those with net outflows of migrants. The findings suggest that policies to improve Sub-Saharan Africa?s integration in manufacturing global value chains should target: shifting from unskilled to skilled labor-intensive backward and forward global value chain activities; upgrading the quality of the labor force, since unskilled workers are so far the most available and the most used in manufacturing global value chains; investing in the quality of human capital; and promoting intraregional skills mobility.
    Keywords: Food&Beverage Industry,Business Cycles and Stabilization Policies,Common Carriers Industry,Construction Industry,General Manufacturing,Textiles, Apparel&Leather Industry,Pulp&Paper Industry,Plastics&Rubber Industry,International Trade and Trade Rules,Health Care Services Industry,Industrial and Consumer Services and Products
    Date: 2019–07–11
  2. By: Ndubuisi, Gideon
    Abstract: The effects of capital controls on international trade have not been thoroughly examined empirically. Using highly disaggregated bilateral industry-level export data across a large number of countries, this paper evaluates how restrictions on cross-border capital flows affect export. We identify the effect of capital control on export by exploiting the variation in capital control across countries and variation in external finance dependence across industries. While we find that capital control adversely effects total exports, analyses of the export margins indicate that the export distorting effect of capital controls works by deterring single and multiple export market entries by exporters, reducing export intensities of exporters, and the range of goods exporters can ship to each market destination. Our result has important policy implications for countries that seek to pursue export-led growth but suffer from capital accounts restrictions.
    Keywords: Capital controls, International Trade, External Finance Dependence
    JEL: F1 F14 F2 F21 F3 F32 F38
    Date: 2019–11
  3. By: Rita Cappariello (Bank of Italy); Sebastián Franco-Bedoya (The World Bank); Vanessa Gunnella (European Central Bank); Gianmarco Ottaviano (Bocconi University)
    Abstract: Quantifying the effects of trade policy in the age of ’global value chains’ (GVCs) requires an enhanced analytical framework that takes due account of the observed international input-output relations. However, the existing quantitative general equilibrium models generally assume that industry-level bilateral final and intermediate trade shares are identical, and that the allocation of imported inputs across sectors is the same as the allocation of domestic inputs. This means applying two proportionality assumptions, one at the border to split final goods and inputs, and another behind the border to allocate inputs across industries. In practice, neither assumption holds in the available input-output data sets. To overcome this limitation in the existing models, we consider a richer input-output structure across countries and sectors that we can match with the actual structure reported in the input-output tables. This allows us to investigate the relationship between the effects of changes in trade policies and GVCs. When we apply the enhanced quantitative general equilibrium model to the assessment of the effects of Brexit, we find trade and welfare losses that are substantially larger than those obtained by previous models. This is due to the close integration of UK-EU production networks and implies that denser GVCs amplify the adverse effects of protectionist trade policies.
    Keywords: Trade model, supply chains, Trade policy shocks, Brexit
    JEL: F13 F15 F40 F60
    Date: 2020–02
  4. By: Tamru, Seneshaw; Minten, Bart; Swinnen, Johan F.M.
    Abstract: Exchange rate policies can have important implications on incentives for export agriculture. However, their effects are often not well understood. We study the issue of foreign exchange controls and pricing in the value chain for Ethiopia’s coffee - its most important export crop. Relying on unique pricing and cost data, we find that coffee exporters are willing to incur losses during exporting by offering high prices for coffee locally in order to access scarce foreign exchange. The losses in export markets are then more than recovered in importing, indicating rents - import parity prices are significantly lower than the prices charged for imported goods, so that profits on imports are much higher than the losses incurred in exporting. We further show that the high coffee wholesale prices are transmitted to farmers, so that they benefit from the rents downstream. These results suggest that a better exchange rate alignment to reduce the overvaluation of the local currency in this case would have a lower impact on export crop producer prices than typically is anticipated.
    Keywords: ETHIOPIA; EAST AFRICA; AFRICA SOUTH OF SAHARA; AFRICA; trade; supply chain; coffee; food prices; exports; imports; exchange rate; coffee exports; coffee prices; rent distribution
    Date: 2019
  5. By: Xavier Cirera (The World Bank Group.); Daniel Lederman (The World Bank Group.); Juan A. Máñez Castillejo (University of Valencia and ERICES.); María E. Rochina Barrachina (University of Valencia and ERICES.); Juan A. Sanchis-Llopis (University of Valencia and ERICES.)
    Abstract: Existing literature recognizes the potential roles played by trade policy and firms’ exposure to international trade as potential determinants of productivity. A strand of the literature sheds light on the effects of trade policy changes on firm-level productivity. Another, studies the relationship between trading status (exporting goods or importing intermediates, but usually not both simultaneously) and firm-level TFP dynamics. However, analyses that integrate both strands are scarce. This paper studies the effects of import tariffs (on outputs and inputs) and firms’ trade status on productivity by assessing how the impact of trade policy on firm productivity depends on firms’ trade status. The empirics use data on the Brazilian industrial sectors (manufacturing and mining firms) during 2000-2008. After estimating firm level total factor productivity (TFP) using updated methodologies, the paper estimates the impacts of both trade policy and trade status on TFP dynamics. The results suggest that trade liberalization (through reductions in input or output import tariffs) increases TFP. However, the impact of trade policy on TFP spreads among all firms, what is consistent with the existence of spillovers from trading firms to other firms or with the notion that liberalization exerts competitive pressures on all firms, regardless of their initial exposure to international trade. In addition, even after controlling for import tariffs and fluctuations of the real effective exchange rate, there is still evidence of both learning-by-exporting and learning-by-importing effects.
    Keywords: Brazil; TFP; output/input tariffs; exporters; input importers
    JEL: F13 F14 F15 D24 C33 C14
    Date: 2020–02
  6. By: Nicolo' Tamberi (Department of Economics, University of Sussex, Falmer, United Kingdom)
    Abstract: This paper analyses the effect of Brexit uncertainty on export-platform FDI in the United Kingdom. First, I develop a partial equilibrium framework with heterogeneous firms that involves the trade policy uncertainty about access to the EU. Second, I derive a difference in differences equation that I test empirically using data on manufacturing FDI up to 2018. Results show that trade policy uncertainty negatively impacted on firms' decision to invest in export-platform activities in the UK, and there is some evidence that firms preferred to locate in the continent. I estimate the effect of trade policy uncertainty as a reduction of around 13.5% export-platform FDI projects.
    Date: 2020–01
  7. By: Rosmaiza Abdul Ghani (University of Waikato); Michael P. Cameron (University of Waikato); William Cochrane (University of Waikato); Matthew Roskruge (Massey University)
    Abstract: Studies on the causal impact of trade on migration are rare. Most previous studies have instead looked at the impact of migration on trade. The few empirical studies that have a causal interpretation have focused either on a single country, a single region, or within the members of a single trade agreement. This paper addresses the research question, does an increase in bilateral trade flows cause an increase in bilateral migration? We employ a novel instrumental variables strategy, using World Trade Organisation (WTO) affiliation and average tariff rates as instrumental variables within a gravity model framework. This approach mitigates against the endogeneity problem and allows us to extract the causal association between bilateral trade flows and bilateral migration flows. In the model, we employ data for 248 countries over the period 1990-2010. Our preferred estimator is the Poisson Pseudo-Maximum Likelihood Estimator, since it better handles the sparse nature of the data. Our findings suggest that trade is a statistically significant causal driver of migration. Based on our results, migration flows from country i to country j would increase by 11.3 percent if the corresponding trade flows increased by 10 percent.
    Keywords: international trade; international migration; gravity model; causality
    JEL: F14 F22 O24
    Date: 2020–02–19
  8. By: Duncan van Limbergen; Robert Vermeulen
    Abstract: This paper analyses intra- and extra-euro area (EA) trade flows for the five largest EA countries in order to gauge the importance of value chains. We bridge findings from input-output table analysis with a time series approach. Evidence of value chains is found for all trade patterns and is most pronounced within the EA. Imports from EA and RoW are not only domestically absorbed, but also re-exported. Exports to EA depend on demand in both the importing country and the rest of the world (RoW), indicating the importance of re-exports to RoW. Demand factors play a large role in all trade patterns.
    Keywords: global value chains; euro area; trade patterns
    JEL: F14 F45
    Date: 2020–02
  9. By: Frazer,Garth; Van Biesebroeck,Johannes
    Abstract: Using administrative data for an exhaustive sample of formally registered firms, reveals that the engagement of Rwandan firms in global value chains (GVCs) is remarkably limited. The paper documents several patterns of firm-level exports and compares firm characteristics between exporters and non-exporters. It also illustrates which firm-level characteristics are good predictors for a variety of extensive margins of export and import activities. The analysis includes firms from three goods-producing sectors, agriculture, mining, and manufacturing, but focuses mostly on manufacturing firms. The results indicate large differences between small and large exporters in terms of export market participation, type of products exported, and destinations served. GVC engagement has increased over the 2008-2016 sample period, especially for manufacturing firms, but this is a slow process with frequent set-backs.
    Keywords: Construction Industry,Common Carriers Industry,Food&Beverage Industry,Plastics&Rubber Industry,Business Cycles and Stabilization Policies,General Manufacturing,Pulp&Paper Industry,Textiles, Apparel&Leather Industry,Mining&Extractive Industry (Non-Energy),Food Security,International Trade and Trade Rules
    Date: 2019–08–13
  10. By: Van Biesebroeck,Johannes; Zaurino,Elena
    Abstract: This paper estimates the impact of market access liberalization in high-income countries on sub-Saharan African exports. The methodology exploits the large reduction in trade barriers that was induced by three unilateral trade liberalization initiatives: (1) the dismantling of the Multi-Fiber Arrangement, (2) the African Growth and Opportunity Act in the United States, and (3) the extension of EU trade preferences for developed countries through its Everything-but-Arms program and the General System of Preferences. Using detailed product-level information at the 6-digit level of the Harmonized System and a triple-difference empirical specification, the usual endogeneity-of-policy critique is flexibly controlled for. The results indicate strongly positive export effects, which are especially large for textile, apparel, and leather products, and tend to be realized fully within 5 years. Each percentage point reduction in import tariffs raises exports to the EU by 0.73 percent and to the United States by 0.30 percent; effects are two to three times as large for textiles. The presence of strong Chinese imports has ambiguous effects on countries'ability to take advantage of trade liberalization as the impact on the export effects to the EU and the United States show an opposite sign.
    Keywords: International Trade and Trade Rules,Macroeconomic Management,Common Carriers Industry,Food&Beverage Industry,Plastics&Rubber Industry,Textiles, Apparel&Leather Industry,Pulp&Paper Industry,Construction Industry,Business Cycles and Stabilization Policies,Energy and Mining,General Manufacturing
    Date: 2019–07–10
  11. By: Biswajit Banerjee (Ashoka University and National Bank of Slovakia); Juraj Zeman (National Bank of Slovakia)
    Abstract: This paper examines the factors that influence the five most common measures of GVC participation for the sample of countries included in the World Input Output Database (WIOD). For this sample, backward linkage is stronger than forward linkage and is the main channel for integration into GVCs. Also, a stronger backward linkage is associated with a relatively more downstream position in GVCs. Country size and openness to inward FDI are important determinants of GVC indicators. Of all the industry groupings, the influence on all the GVC indicators is strongest for high-tech manufacturing. In both manufacturing and services, the higher is the share of the high-tech categories the greater is the backward linkage and GVC participation rate, and the GVC position is relatively more downstream. The real exchange rate is positively associated with the share of domestic value added in gross exports (VAX ratio), which is a manifestation of the exchange rate elasticity of value-added exports being smaller than the exchange rate elasticity of gross exports.
    Keywords: Global value chains, VAX ratio, Backward linkage, Forward linkage, GVC participation rate, GVC position index
    Date: 2020–02
  12. By: Logan Lewis (Federal Reserve Board); Ryan Monarch (Federal Reserve Board); Michael Sposi (Southern Methodist University); Jing Zhang (Federal Reserve Bank of Chicago)
    Abstract: Services, which are less traded than goods, rose from 58 percent of world expenditure in 1970 to 79 percent in 2015. Using a Ricardian trade model incorporating endogenous structural change, we quantify how this substantial shift in consumption has affected trade. Without structural change, we find that the world trade to GDP ratio would be 15 percentage points higher by 2015, about half the boost delivered from declining trade costs. In addition, this structural change has lowered the global welfare gains from trade integration by almost 40 percent over the past four decades. Absent further reductions in trade costs, ongoing structural change implies that world trade as a share of GDP would eventually decline. Going forward, higher income countries gain relatively more from reducing services trade costs than from reducing goods trade costs.
    Keywords: Globalization, Structural Change, International Trade.
    JEL: F41 L16 O41
    Date: 2020–02
  13. By: Gnangnon, Sèna Kimm
    Abstract: The present article aims to contribute to the literature on the effectiveness of Aid for Trade (AfT) flows in recipient-countries by investigating the effect of these resource flows on wage inequality in the manufacturing sector of recipient-countries. The analysis has shown that AfT interventions help reduce wage inequality in the manufacturing sector of countries that liberalize their trade policies, enjoy greater trade openness, experience higher exports of labour-intensive, low-skill and high skill manufacturing products. Additionally, AfT interventions contribute to dampening the negative effect of export product concentration (for example on primary products) on wage inequality in the manufacturing sector. Finally, AfT flows reduce wage inequality in the manufacturing sector of countries that import manufacturing products (including machinery and transport equipment goods) or enjoy a greater extent of multilateral trade liberalization.
    Keywords: Aid for Trade,Wage inequality in the manufacturing sector
    JEL: F35 F13 F14 J3
    Date: 2020
  14. By: Pahl,Stefan; Timmer,Marcel Peter; Gouma,Reitze; Woltjer,Pieter J.
    Abstract: What is the potential for job growth in Africa under participation in global value chains (GVCs)? In this study the concept of GVC jobs is introduced which tracks the number of jobs associated with GVC production of goods. A novel decomposition approach is used to account for GVC jobs by three proximate sources: global demand for final goods, a country's GVC competitiveness (measured as the country's share in serving global demand) and technology (workers needed per unit of output). Based on newly assembled data, it is shown how GVC jobs and incomes have changed over the period 2000-14 in Ethiopia, Kenya, Senegal and South Africa, compared to developments in some other low- and middle-income countries in the world. The four African countries stand out in terms of a low share of GVC jobs in the (formal) manufacturing sector, and a relatively high share in agriculture due to strong backward linkages, especially in the case of food production. All countries benefitted highly from growing global demand for final goods. At the same time it appears that technical change in GVCs is biased against the use of labour, greatly diminishing the potential for job growth through GVC participation.
    Keywords: Labor Markets,Food&Beverage Industry,Plastics&Rubber Industry,Business Cycles and Stabilization Policies,Textiles, Apparel&Leather Industry,Pulp&Paper Industry,Common Carriers Industry,Construction Industry,General Manufacturing,International Trade and Trade Rules,Industrial and Consumer Services and Products,Transport and Trade Logistics
    Date: 2019–07–31
  15. By: Ermgassen, Erasmus Klaus Helge Justus zu; Godar, Javier; Lathuillière, Michael J; Löfgren, Pernilla; Vasconcelos, André; Gardner, Toby; Meyfroidt, Patrick
    Abstract: Though the international trade in agricultural commodities is worth more than 1.6 trillion USD per year, we still have a poor understanding of the supply chains connecting places of production and consumption and the socio-economic and environmental impacts of this trade. In this study, we provide the first wall-to-wall subnational map of the origin and supply chain of Brazilian meat, offal, and live cattle exports from 2015 to 2017, a trade worth more than 5.4 billion USD/year. Brazil is the world’s largest beef exporter, exporting approximately one-fifth of its production, and the sector has a notable environmental footprint, linked to one-fifth of all commodity-driven deforestation across the tropics. By combining official per-shipment trade records, slaughterhouse export licenses, subnational agricultural statistics, and data on the origin of cattle per slaughterhouse, we mapped the flow of cattle from more than 2,900 municipalities where cattle were raised to 152 exporting slaughterhouses where they were slaughtered, via the 202 exporting and 2,630 importing companies handling that trade, and finally to 151 importing countries. We find stark differences in the subnational origin of the sourcing of different actors and link this supply chain mapping to spatially explicit data on cattle-associated deforestation, to estimate the ‘deforestation risk’ (in hectares/year) of each supply chain actor over time. Our results provide an unprecedented insight into the global trade of a deforestation-risk commodity.
    Date: 2020–02–20
  16. By: Francesco Nucci (Sapienza University); Filomena Pietrovito (University of Molise); Alberto Franco Pozzolo (Roma Tre University and Centro Studi Luca d’Agliano)
    Abstract: Firm performance is known to benefit from participation in import markets. For this reason, understanding whether credit constraints hamper firms’ ability to purchase foreign inputs is a relevant issue. In this paper, we investigate the relationship between financial constraints and imports of intermediate inputs using a large sample of small- and medium-sized enterprises from 66 developing countries. To measure credit constraints we use information from a firm’s in-depth self-assessment of its difficulties in having access to external finance. Furthermore, to tackle the endogeneity problems in the estimation, we rely on an instrumental variable approach that allows us to establish more directly the impact of financial constraints on importing activities. We provide robust evidence of a statistically and economically significant restraining effect of credit constraints on both the probability of importing intermediates (the extensive margin) and the incidence of imported intermediates in total input expenditure (the intensive margin). Moreover, we show that the impact on these margins of import is stronger for firms operating in countries where the financial system is less developed, the quality of institutions poorer and the overall level of economic freedom lower.
    Keywords: import market participation; import margins; credit constraints.
    JEL: D22 F10 F14 F23 M21
    Date: 2020–02–25
  17. By: Ianchovichina,Elena; Martin,William J.
    Abstract: Recent work on China's accession to the World Trade Organizations pays little attention to the wave of reforms in China in the 1980s and 1990s. These reforms created the preconditions for accession and strongly influenced its outcomes. The preeminence of processing trade at the time of accession sharply reduced the impact of accession-related tariff reductions on exports and set the stage for China's increases in domestic value added and reduction in China's involvement in global production sharing since that time. The assessment in this paper, based on export data and simulation results on the ex ante accession-related effects on export volumes in the literature, finds that the accession must have increased China's real export growth by at most 6 percentage points between 1997 and 2005. This effect is substantial, but not as large as suggested by the difference between the pre- and post-accession export growth rates in the four years before and after accession. This is because the influence of cyclical fluctuations related to the Asian financial crisis and the U.S. dot-com crash dampened export growth in the period before accession in 2001 and accelerated it afterward.
    Date: 2019–07–01
  18. By: Piñeiro, Valeria; Diaz-Bonilla, Eugenio; Paz, Flor; Allen, Summer L.
    Abstract: This study presents an economy-wide analysis for Guatemala, considering several tax options on sugar and SSB and then tracing their differentiated general economic effects. We focus on Guatemala, considering the increasing health burden imposed by obesity and the fact that it is also an important sugar producer and exporter. In the next section we describe the general conditions for sugar production and consumption in Guatemala. We then describe the economy-wide model utilized, the modeled scenarios, and finally, the results of the simulations before concluding.
    Keywords: GUATEMALA, LATIN AMERICA, CENTRAL AMERICA, sugar, taxes, assessment, exports, food consumption, agricultural production, trade, health, nutrition, food systems, sugar production, consumption indicators, sugar exports,
    Date: 2019
  19. By: Tchoffo, Rodrigue; Ngouhouo, Ibrahim; Nkemgha, Guivis
    Abstract: This article analyzes the impact of trade liberalization in a situation of imperfect competition (IC) on the economy of Cameroon as part of the bilateral economic partnership agreement (EPA) with the European Union. As a result, the article shows that taking into account the trade liberalization in a situation of imperfect competition perspective will have amplified impacts on the economy. This result is supported by the implementation of a recursive dynamic computable general equilibrium model based on the 2016 social accounting matrix we built for Cameroon which reveals specifically that: growth losses estimated at 1381.10 billion of CFAF between 2016 and 2040 in perfect competition increase with the consideration of the IC up to 1474.13 billion of CFAF. The losses in customs revenue amount to more than 1008 billion of CFAF against 237.42 billion recorded in perfect competition. Hence, we recommend to the Cameroonian government to resign the agreement.
    Keywords: Imperfect Competition, Economic Partnership Agreement, Computable General Equilibrium, Social Accounting Matrix
    JEL: C68 D44 D58 F47
    Date: 2020–02–09
  20. By: Baiashvili, Tamar; Gattini, Luca
    Abstract: Foreign direct investment (FDI) is generally considered a driving factor to economic growth. Nevertheless, empirical evidence is rather mixed, reporting a positive, neutral, or even negative relationship of FDI with growth. Our investigation concentrates on the impact of FDI inflows on growth and their effect mediated by income levels and the quality of the institutional environment. Specifically, we focus the interaction between country income levels - including low-, middle- and high-income countries - and FDI. This was not analysed thoroughly in earlier studies. Moreover, we deploy a new perspective to look into the FDI effects on growth mediated by institutional quality whereby we make use of country income levels as the key elements to peer-reference countries. Our study is based on 111 countries, stretching from developed economies to developing and emerging markets starting in 1980. Our estimations make use of panel GMM techniques robust to sample size, instrument proliferation and endogeneity concerns. We find that FDI benefits do not accrue mechanically and evenly across countries. We detect an inverted-U shaped relationship between countries' income levels and the size of FDI impact on growth. Moving from low to middle-income countries the effect gets larger. On the other hand, it diminishes again transitioning to high income countries. Finally yet importantly, we find that absorptive capacity matters in channelling FDI effects. Institutional factors have a mediating positive effect on FDI within country income groups, whereby countries with better-developed institutions relative to their income group peers show a positive impact of FDI on growth.
    Keywords: Foreign Direct Investment (FDI),growth,income levels,institutions,absorptive capacity,global panel,Economics
    JEL: C33 F21 E02 O43 O47
    Date: 2020
  21. By: Klotz, Richard (Department of Economics, Colgate University); Sharma, Rishi (Department of Economics, Colgate University)
    Abstract: We study the impact of existing worldwide tariffs and several tariff reform schemes on global CO2 emissions using a multi-country, multi-sector general equilibrium model with detailed input-output linkages. Our analysis reveals the importance of a simple mechanism relating trade policy to global emissions that has not been previously highlighted in the literature: reducing existing tariffs tends to increase emissions primarily by increasing the global output of intermediate inputs relative to final goods. Greater use of intermediates implies, all things equal, more fossil fuel usage and therefore more emissions per unit of global final output. This effect ultimately results from the fact that tariffs are to some extent a tax on material but not on labor. This channel accounts for the majority of the emissions increase from moving to complete liberalization, exceeding even the mechanical effect of increased GDP and overwhelming effects from reallocation of activity across countries and sectors. We find that global partial liberalization schemes that temper this channel -- especially by reducing tariff escalation -- could achieve substantial global GDP increases with small increases in CO2 or even emissions reductions.
    Keywords: tariffs; trade liberalization; CO2 emissions
    JEL: F13 F18 Q54 Q56 Q58 H23 H87
    Date: 2020–01–01
  22. By: Dany Bahar (Center for International Development at Harvard University); Hillel Rapoport
    Abstract: We investigate the relationship between the presence of migrant inventors and the dynamics of innovation in the migrants’ receiving countries. We find that countries are 25 to 60 percent more likely to gain advantage in patenting in certain technologies given a twofold increase in the number of foreign inventors from other nations that specialize in those same technologies. For the average country in our sample, this number corresponds to only 25 inventors and a standard deviation of 135. We deal with endogeneity concerns by using historical migration networks to instrument for stocks of migrant inventors. Our results generalize the evidence of previous studies that show how migrant inventors "import" knowledge from their home countries, which translates into higher patenting in the receiving countries. We interpret these results as tangible evidence of migrants facilitating the technology-specific diffusion of knowledge across nations.
    Keywords: innovation, migration, patent, technology, knowledge
    JEL: O31 O33 F22
    Date: 2020–02
  23. By: Nitsch, Volker
    Abstract: A country’s visa policies are widely assumed to have economic consequences. In this short paper, I examine the effect of the ease with which a country’s citizens can enter foreign countries on international trade. Using a specification of the gravity model that avoids the endogeneity problems that typically arise when analyzing the association between ease of travel and the extent of bilateral interactions, I find that countries which issue powerful passports experience more international trade.
    Date: 2018–10–10
  24. By: Kassa,Woubet; Coulibaly,Souleymane
    Abstract: This study examines the impact of the African Growth and Opportunity Act using the synthetic control method, a quasi-experimental approach. The novelty in the approach is that it addresses problems of estimation that are prevalent in nonexperimental methods used to analyze the impact of preferential trade agreements. The findings show that most of the eligible countries registered gains in exports due to the African Growth and Opportunity Act. However, the results are varied, and the gains were largely unsteady. Much of the gains are due to exports of petroleum and other minerals, while there are few countries that were able to expand into manufacturing and other industrial goods. The positive trade impacts were largely associated with improvements in information and communications technology infrastructure, integrity in the institutions of legal and property rights, ease of labor market regulations, and sound macroeconomic environment, including stable exchange rates and low inflation. Undue exposure to a single market, like the United States, or few commodities may have also restricted the gains from trade.
    Keywords: International Trade and Trade Rules,Trade Policy,Construction Industry,Common Carriers Industry,Food&Beverage Industry,Plastics&Rubber Industry,Business Cycles and Stabilization Policies,General Manufacturing,Pulp&Paper Industry,Textiles, Apparel&Leather Industry,Oil Refining&Gas Industry,Inflation
    Date: 2019–08–20
  25. By: Bjorn Van Campenhout; Bart Minten; Jo Swinnen
    Abstract: Driven by increased demand from both local and export markets and fa- cilitated by far-reaching liberalization and privatization policies, the dairy sub-sector in Uganda has undergone significant changes in the last decade. With a comparative advantage in milk production, the southwest of Uganda has started to attract considerable Foreign Direct Investment(FDI) in processing capacity, mainly targeting the export market. As a result, processing capacity increased five-fold and dairy became Uganda’s third most important export product, coming from negligible amounts a decade earlier. In this study, we use observational data collected at different nodes within the value chain to compare the structure of the chain and the roles and economic activities of different actors between export-led value chains and value chains that cater for the local market. Doing so allows us to identify the technological and institutional innovations that both result from the emergence of export-led dairy value chains and at the same time drive further upgrading. Our analysis underscores the importance of milk collection centers, which often take the form of farmer cooperatives, in providing many of the support services that enable other actors in the value chain to produce sufficient milk, and maintain milk sanitation levels necessary for an export sector to emerge.
    Date: 2019
  26. By: Thomas Klitgaard; Matthew Higgins (National Bureau of Economic Research; Georgia Institute of Technology; Federal Reserve Bank of New York; College of Management)
    Abstract: The United States buys much more from China than it sells to China?an imbalance that accounts for almost half of our overall merchandise trade deficit. China's policy of keeping its exchange rate low is often cited as a key driver of that country's large overall trade surplus and of its bilateral surplus with the United States. The argument is that a stronger renminbi (the official currency of China) would help reduce that country?s trade imbalance with the United States by lowering the prices of U.S. goods relative to those made in China. In this post, we examine the thinking behind this view. We find that a stronger renminbi would have a relatively small near-term impact on the U.S. bilateral trade deficit with China and an even more modest impact on the overall U.S. deficit.
    Keywords: China; exports; dollar; merchandise; trade; imports; renminbi; United States
    JEL: F00
  27. By: Phadera,Lokendra
    Abstract: This paper analyzes the differential impact of migration on labor supply of the left-behind household members in Nepal, where international migration for employment, predominantly a male phenomenon, increased substantially between 2001 and 2011. Using the Nepal Living Standard Survey data, the paper extends the analysis by incorporating the impacts on the extensive and intensive margins. The study also answer the question: if they are not wage-employed, in what activities are the remaining household members engaging instead? The paper finds that, in response to out-migration of some family members, women realign their priorities and reallocate their time from market employment to self-employment and home production, possibly filling in the roles vacated by the migrants. In contrast, the income effect dominates the impact of migration on the left-behind men; that is, men value their leisure more because of the remittances from abroad and decrease their overall supply of labor. Additionally, the research finds significant heterogeneity in the supply of labor by age, skill, and household head status among the left-behind women, pointing toward intrahousehold bargaining.
    Keywords: Employment and Unemployment,Wages, Compensation&Benefits,Labor Markets,Rural Labor Markets,Inequality
    Date: 2019–09–16
  28. By: Van Biesebroeck,Johannes; Mensah,Emmanuel Buadi
    Abstract: This paper exploits information from two different datasets to provide a novel and multi-dimensional picture of the engagement of all sub-Saharan African countries in global value chains (GVCs). It documents in detail the nature of the underlying data and the way it is used to construct several indicators of GVC engagement. As a companion to the paper, the data files are made available to interested researchers. While it is impossible to summarize the broad range of experiences that we document, two patterns stand out. First, the level of GVC engagement of most countries in sub-Saharan Africa is rather low, especially for their manufacturing sectors. Second, while there is increased GVC engagement over time in some countries, this pattern is by no means universal. The average engagement for the region over the time period studied (1995-2018) is not even positive on average across countries for several indicators.
    Keywords: Food&Beverage Industry,Plastics&Rubber Industry,Business Cycles and Stabilization Policies,Textiles, Apparel&Leather Industry,Pulp&Paper Industry,Common Carriers Industry,Construction Industry,General Manufacturing,International Trade and Trade Rules,Employment and Unemployment,Food Security,Industrial and Consumer Services and Products
    Date: 2019–07–10
  29. By: Cheng Chen; Claudia Steinwender
    Abstract: When managers have objectives beyond maximizing monetary profits, inefficiencies may arise. An increase in competition may then force managers to improve the productivity of the firm in order to ensure survival. While this hypothesis has received ample theoretical attention, empirical evidence is scarce, mainly because preferences of managers are typically unobserved. In this paper, we exploit the fact that a large literature has documented specific non-monetary preferences of family managers. Using Spanish firm-level data, we compare how family-managed and professionally-managed firms react to import competition shocks. We find that import competition leads to productivity increases in family-managed firms that are initially unproductive. Productivity improvements are driven by family management as opposed to family ownership or non-managing family members. Furthermore, we show that these managers increase efficiency by reducing material usage, which is consistent with them trying to increase their short-term cash flow in order to survive. Finally, productivity improvements seem to be particularly pronounced in multi-generational family firms that also introduce organizational changes.
    Keywords: import competition, productivity, family firms, managers
    JEL: D22 D23 F14 L21 L22
    Date: 2019
  30. By: Zouri, Stéphane
    Abstract: This paper identifies the determinants of synchronization of business cycles in ECOWAS because it allows decision-makers to better target their economic policies. It is relevant given the willingness of ECOWAS heads of state to create a single currency by 2020. Indeed, conducting actions in the direction of the synchronization of business cycles is important because the asymmetries of the cycles observed within a monetary union determine its sustainability. Unlike previous studies in this area, it is innovative as it takes into account international financial integration. In addition, it proposes new measures to increase the quality of results. Finally, it takes into account the structure of trade by analyzing inter-regional links. The results show that bilateral trade and financial openness are determinants of the synchronization of business cycles in the region. However, they show that, trade channel dominates financial openness channel. In addition, the results show that the weakness of intra-community trade doesn’t constitute a barrier to monetary union.
    Keywords: business cycles, trade intensity, financial integration, ECOWAS.
    JEL: E32 F15 F36 O55
    Date: 2019–07–22
  31. By: Dominika Langenmayr; Li Liu
    Abstract: In 2009, the United Kingdom abolished the taxation of profits earned abroad and introduced a territorial tax system. Under the territorial system, firms have strong incentives to shift profits abroad. Using a difference-in-differences research design, we show that profits of UK subsidiaries in low-tax countries increased after the reform compared to subsidiaries of non-UK multinationals in the same countries, by an average of 2.1 percentage points. The increase in profit shifting also leads to increases in measured productivity of the foreign affiliates of UK multinationals of between 5 and 9 percent.
    Keywords: profit shifting, territorial tax system, multinational firms
    JEL: H25 H87 F23
    Date: 2020
  32. By: Alaa Al Khourdajie (Centre for Environmental Policy, Imperial College London, UK); Michael Finus (University of Graz, Austria)
    Abstract: Actions on climate change which are not supported by all countries are not very effective. However, full participation in a global climate treaty with meaningful emission reductions is difficult to achieve. The non-excludability of the public good mitigation provides an incentive to abstain from global action. Moreover, carbon leakage renders it unattractive to join a treaty without full participation. We study whether and under which conditions border carbon adjustments (BCAs) can mitigate free-riding and reduce carbon leakage in a simple strategic trade model. We show that BCAs can lead to large stable climate agreements, including full participation, associated with large global welfare gains if treaties do not restrict membership (open membership), as this is typical for environmental agreements. We caution against restricting accession to treaties (exclusive membership), as this is typical for trade agreements, which may serve individual but not global interests.
    Keywords: self-enforcing international climate agreements; international trade; border carbon adjustments
    JEL: C71 D62 F18 H23 H41 Q54
    Date: 2020–02
  33. By: Tilman Brück (ISDC – International Security and Development Center); Kai M. Dunker (ISDC – International Security and Development Center); Neil T. N. Ferguson (ISDC – International Security and Development Center); Aline Meysonnat (UNU-MERIT); Eleonora Nillesen (UNU-MERIT)
    Abstract: Violent conflict is a well-recognised driver of forced migration but literature does not usually consider the pull factors that might also cause irregular movements. In turn, the decision to leave and of where to go are rarely considered separately. This is in contrast to literature on regular international migration, which considers both push and pull factors. We contribute to these literatures by studying bilateral forced migration from multiple countries of origin to 28 European countries in the years either side of two “migration crises†– the wars in the Balkans and the Arab Spring. We pay attention to dynamics by analysing lagged flows and stocks of forced migrants and modelling their spatial distribution. We find that these partial adjustment and network effects are key pull factors, with employment rate in the destination country the only significant economic variable. In addition, we demonstrate that it is episodes of escalating conflict, rather than accumulated violence, that drives decisions to leave. Out-of-sample predictions indicate that if conflict in origin countries were to cease, forced migration would continue, albeit at a significantly reduced rate. Our findings suggest that past patterns of forced migration help shape future flows, that forced migration flows cannot easily be stopped by destination country policies, and that preventing conflict escalation is important for preventing forced migration.
    Keywords: Forced migration; refugees; displacement; conflict; Arab Spring; MENA; Balkans; dynamic panel data; gravity model JEL Classification: J61; J68; F22; O15; F51
    Date: 2018–09
  34. By: Nitsch, Volker
    Abstract: Politicians travel a lot, for various reasons. The types of trips to foreign countries range, for instance, from a formal, highly‐orchestrated, multi‐day visit to brief logistical stop‐overs, from the regular exchange of information during official talks in a working environment to ceremonial visits. This chapter reviews selected issues in the analysis of the economic effects of foreign travels by politicians. It starts by highlighting possible differences in the effects dependent on the visitor’s official position. Next, it is emphasized that only few travels, dependent on their purpose, may be economically relevant. Finally, issues related to the choice of the travel destination are discussed.
    Date: 2018–03–03
  35. By: Adam Triggs; Warwick J McKibbin
    Abstract: In 2019, President Trump called on the U.S. Federal Reserve to cut interest rates to depreciate the U.S. dollar, which, according to the IMF, is overvalued by between 6 and 12 percent. This paper uses an intertemporal general equilibrium model to explore what would likely happen if the President’s wish was granted. Using the G-Cubed (G20) model, it shows that the general equilibrium effects of a depreciated real effective exchange rate brought about by lower U.S. interest rates can result in a wide variety of unintended consequences, many of which contradict the stated aims of President Trump and his administration. Such a policy would likely result in a larger U.S. trade deficit, would only temporarily devalue the real effective exchange rate and would only temporarily support the U.S. economy. The policy would boost the trade balances of most U.S. trading partners, depreciate China’s exchange rate and boost China’s GDP. Given the policy would make the overvalued exchange rates of many economies even more overvalued, the paper explores what would happen if U.S. trading partners were to retaliate by devaluing their currencies. It shows that this makes it harder for the U.S. to achieve its objectives and forces a more severe adjustment for economies that presently have undervalued exchange rates.
    Keywords: Econometric modelling, Computable general equilibrium models, productivity, monetary policy, fiscal policy, international trade and finance, globalization
    JEL: C5 C68 D24 E2 E5 E6 E62 F1 F2 F3 F4 F6
    Date: 2020–02
  36. By: Langot,Francois; Merola,Rossana; Oh,Samil
    Abstract: This paper analyzes whether taxation can be successfully used to reduce the incidence of labor informality and achieve higher equality in a globalized economy. To this purpose, it develops a two-area model: a developed country and an emerging country. The two areas differ according to the size of the informal sector, which is characterized by a more flexible labor market and lower productivity. To illustrate the potential role of taxation in achieving a more fair income distribution, the paper introduces a trade shock to simulate the effects of trade liberalization. Trade expansion has often been blamed for leading to an expansion of the informal sector and a widening of wage income disparities. In this context, the paper analyzes whether a budget-neutral tax reform -- switching the tax burden from payroll taxes paid by firms operating in the formal sector to a consumption tax -- can mitigate possible adverse effects of trade liberalization and support labor formalization. The effects of taxation are seen in the context of the trade-offs between growth, labor formality and equity. The analysis suggests that small improvements in formalization, resulting from the tax reform, come at the cost of widening income inequality. To reduce the incidence of low-quality jobs, tax policy interventions should go hand in hand with more effective social protection systems and labor laws.
    Keywords: International Trade and Trade Rules,Labor Markets,Public Finance Decentralization and Poverty Reduction,Macro-Fiscal Policy,Taxation&Subsidies,Economic Adjustment and Lending,Public Sector Economics,Employment and Unemployment,Rural Labor Markets
    Date: 2019–08–12

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