nep-int New Economics Papers
on International Trade
Issue of 2020‒03‒30
27 papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. Rising Import Tariffs, Falling Export Growth: When Modern Supply Chains Meet Old-Style Protectionism By Kyle Handley; Fariha Kamal; Ryan Monarch
  2. Are Customs Records Consistent Across Countries? Evidence from the U.S. and Colombia By C.J. Krizan; James Tybout; Zi Wang; Yingyan Zhao
  3. Trade Effects of the New Silk Road: A Gravity Analysis By Baniya,Suprabha; Rocha Gaffurri,Nadia Patrizia; Ruta,Michele
  4. Immigration, trade and productivity in services: evidence from U.K. firms By Ottaviano, Gianmarco I. P.; Peri, Giovanni; Wright, Greg C.
  5. Using synthetic indicators to assess the quality of macroeconomic statistics via mirror data By Jellema, Tjeerd; Picón Aguilar, Carmen; Pastoris, Fausto
  6. Trade Liberalization and Wage inequality: Evidence from Chile By Yoshimichi Murakami
  7. Lessons learned and challenges ahead for the WTO Trade Monitoring exercise By Bogetoft Pedersen, Peter; Diakantoni, Antonia
  8. Technology-Induced Trade Shocks? Evidence from Broadband Expansion in France By Clément Malgouyres; Thierry Mayer; Clément Mazet-Sonilhac
  9. Short and Long-Run Labor Market Effects of Developing Country Exports : Evidence from Bangladesh By Robertson,Raymond; Kokas,Deeksha; Cardozo,Diego; Lopez-Acevedo,Gladys C.
  10. From FDI to economic complexity: a panel Granger causality analysis By Roberto Antonietti; Chiara Franco
  11. Let a Thousand Flowers Bloom: A Short Note on the Multidimensional Benefits of Chinese Immigrants to Canada By DeVoretz, Don J.
  12. On the Political Economy of Free Trade By Rabah Amir; Hend Ghazzai; Rim Lahmandi-Ayed
  13. Do FDI Firms Employ More Workers than Domestic Firms for Each Dollar of Assets? By Sakai Ando; Mengxue Wang
  14. Of mice and merchants: connectedness and the location of economic activity in the Iron Age By Bakker, Jan; Maurer, Stephan; Pischke, Jorn-Steffen; Rauch, Ferdinand
  15. Voting with their money: Brexit and outward investment by UK firms European economic review By Breinlich, Holger; Leromain, Elsa; Novy, Dennis; Sampson, Thomas
  16. Financial constraints, institutions, and foreign ownership By Ron Alquist; Nicolas Berman; Rahul Mukherjee; Linda Tesar
  17. Does Birthplace Diversity Affect Economic Complexity? Cross-country Evidence By Dany Bahar; Hillel Rapoport; Riccardo Turati
  18. Electoral systems and international trade policy By Serkan Kucuksenel; Osman Gulseven
  19. The role of Globalization in Modulating the Effect of Environmental Degradation on Inclusive Human Development By Simplice A. Asongu; Nicholas M. Odhiambo
  20. The Structure of Multinational Firms' International Activities By Ronald B. Davies; James R. Markusen
  21. A Unified Model of International Business Cycles and Trade By Saroj Bhattarai; Konstantin Kucheryavyy
  22. Mass Migration and Technological Change By Andersson, David; Karadja, Mounir; Prawitz, Erik
  23. Brexit - Populist Reaction to the 2008 Speculative Bubble Bursting? By Ejan Mackaay
  24. Trade, Transportation and the Environment By Forslid, Rikard
  25. Border Carbon Adjustments and Alternative Measures for the EU ETS: An Evaluation By Roland Ismer; Karsten Neuhoff; Alice Pirlot
  26. Decarbonizing Trade Policy. Options towards a European Decarbonized Trade Policy By Mehdi Abbas
  27. EU-China Bilateral Investment Relations: How Can the European Union Deal with the Chinese Investment Offensive? By Bahri Yilmaz

  1. By: Kyle Handley; Fariha Kamal; Ryan Monarch
    Abstract: We examine the impacts of the 2018-2019 U.S. import tariff increases on U.S. export growth through the lens of supply chain linkages. Using 2016 confidential firm-trade linked data, we document the implied incidence and scope of new import tariffs. Firms that eventually faced tariff increases on their imports accounted for 84% of all exports and represented 65% of manufacturing employment. For all affected firms, the implied cost is $900 per worker in new duties. To estimate the effect on U.S. export growth, we construct product-level measures of import tariff exposure of U.S. exports from the underlying firm micro data. More exposed products experienced 2 percentage point lower growth relative to products with no exposure. The decline in exports is equivalent to an ad valorem tariff on U.S. exports of almost 2% for the typical product and almost 4% for products with higher than average exposure.
    Keywords: Global supply chains; tariffs; trade war; U.S. exports
    JEL: F1 F13 F14 F23 H2
    Date: 2020–01
  2. By: C.J. Krizan; James Tybout; Zi Wang; Yingyan Zhao
    Abstract: In many countries, official customs records include identifying information on the exporting and importing firms involved in each shipment. This information allows researchers to study international business networks, offshoring patterns, and the micro-foundations of aggregate trade flows. It also provides the government with a basis for tariff assessments at the border. However, there are no mechanisms in place to ensure that the shipment-level information recorded by the exporting country is consistent with the shipment-level information recorded by the importing country. And to the extent that there are discrepancies, it is not clear how prevalent they are or what form they take. In this paper we explore these issues, both to enhance our understanding of the limitations of customs records, and to inform future discussions of possible revisions in the way they are collected. Specifically, we match U.S.-bound export shipments that appear in Colombian Customs records (DIAN) with their counterparts in the US Customs records (LFTTD): U.S. import shipments from Colombia. Several patterns emerge. First, differences in the coverage of the two countries customs records lead to significant discrepancies in the official bilateral trade flow statistics of these two countries: the DIAN database records 8 percent fewer transactions than the LFTTD database over the sample period, and the average export shipment size in the DIAN is roughly 4 percent smaller than the corresponding import shipment size in the LFTTD. These discrepancies are not due to difference in minimum shipment sizes and they are not particular to a few sectors, though they are more common among small shipments and they evolve over time. Second, if we rely exclusively on firms’ names and addresses, ignoring other shipment characteristics (value, product code, etc.), we are able to match 85 percent of the value of U.S. imports from Colombia in our LFTTD sample with particular Colombian suppliers in the DIAN. Further, fully 97 percent of the value of Colombian exports to the U.S. can be mapped onto particular importers in the U.S. LFTTD. Third, however, match rates at the shipment level within buyer-seller pairs are low. That is, while buyers and sellers can be paired up fairly accurately, only 25-30 percent of the individual transactions in the customs records of the two countries can be matched using fuzzy algorithms at reasonable tolerance levels. Fourth, the manufacturer ID (MANUF_ID) that appears in the LFTTD implies there are roughly twice as many Colombian exporters as actually appear in the DIAN. And similar comments apply to an analogous MANUF_ID variable constructed from importer name and address information in the DIAN. Hence studies that treat each MANUF_ID value as a distinct firm are almost surely overstating the number of foreign firms that engage in trade with the U.S. by a substantial amount. Finally, we conclude that if countries were to require that exporters report standardized shipment identifiers—either invoice numbers or bill of lading/air waybill numbers—it would be far easier to track individual transactions and to identify international discrepancies in reporting.
    Date: 2020–03
  3. By: Baniya,Suprabha; Rocha Gaffurri,Nadia Patrizia; Ruta,Michele
    Abstract: This paper takes a first look at the trade effects of China's Belt and Road Initiative, also referred to as the New Silk Road, on the 71 countries potentially involved. The initiative consists of several infrastructure investment projects to improve the land and maritime transportation in the Belt and Road Initiative region. The analysis first uses geo-referenced data and geographical information system analysis to compute the bilateral time to trade before and after the Belt and Road Initiative. Then, it estimates the effect of improvement in bilateral time to trade on bilateral export values and trade patterns, using a gravity model and a comparative advantage model. Finally, the analysis combines the estimates from the regression analysis with the results of the geographical information system analysis to quantify the potential trade effects of the Belt and Road Initiative. The paper finds that (i) the Belt and Road Initiative increases trade flows among participating countries by up to 4.1 percent; (ii) these effects would be three times as large on average if trade reforms complemented the upgrading in transport infrastructure; and (iii) products that use time sensitive inputs and countries that are highly exposed to the new infrastructure and integrated in global value chains have larger trade gains.
    Keywords: International Trade and Trade Rules,Transport Services,Ports&Waterways,Energy and Environment,Energy Demand,Energy and Mining
    Date: 2019–01–10
  4. By: Ottaviano, Gianmarco I. P.; Peri, Giovanni; Wright, Greg C.
    Abstract: This paper explores the impact of immigrants on the imports, exports and productivity of service-producing firms in the U.K. Immigrants may substitute for imported intermediate inputs (offshore production) and they may impact the productivity of the firm as well as its export costs. The first effect can be understood as the re-assignment of offshore tasks to immigrant workers. The second can be seen as a cost cutting effect due to immigration, and the third as a trade-cost reducing effect. To test the empirical significance and size of these effects, we exploit differences in immigrant inflows across U.K. labor markets and a new firm-level dataset on U.K. service firms. We find that immigrants increase overall productivity in service-producing firms, revealing a cost cutting impact on these firms. They also reduce the extent of country-specific offshoring, consistent with a reallocation of tasks, and they increase country-specific exports, consistent with a reduction in bilateral communication and trade costs.
    Keywords: immigration; service trade
    JEL: F10 F16 F22 F23
    Date: 2018–05–01
  5. By: Jellema, Tjeerd; Picón Aguilar, Carmen; Pastoris, Fausto
    Abstract: The quality of the geographical breakdown in the balance of payments and related statistics (such as international trade in goods, trade in services and foreign direct investment (FDI) statistics) can be assessed by means of comparisons with mirror data in order to assess bilateral asymmetries. Although such comparisons are performed on a regular basis, they tend to focus on pairs of countries and are not sufficient to determine which of the countries involved has better data. This paper describes three synthetic indicators that have been developed with a view to assessing whole groups of countries. In the specific context of an economic union’s external account, they allow us to assess the quality of geographical breakdowns by country and the contribution that an individual country makes to the aggregate asymmetry for that group of countries. Those indicators are applied in the context of euro area FDI statistics. JEL Classification: C82, E01, F21, F23
    Keywords: asymmetries, balance of payments, foreign direct investment, mirror data
    Date: 2020–03
  6. By: Yoshimichi Murakami (Research Institute for Economics and Business Administration, Kobe University, Japan)
    Abstract: This study analyzes the impacts of further tariff reductions resulting from the proliferation of regional trade agreements on wage inequality between skilled and unskilled workers in Chile in the 2000s. Thus, we use data on effective tariff rates instead of uniform most-favored-nation rates to measure trade liberalization. We match panel data on industry characteristics, including effective tariff rates, to pooled individual cross-section data from national household surveys at the industry level. We find that the reductions in effective tariffs on final goods increase industry wage premiums, thus suggesting that liberalization-induced productivity improvements lead to higher wages. However, considering the differential impacts on different skill groups, we find that the reductions significantly increase industry wage premiums only for skilled workers, thereby increasing wage inequality. Moreover, the impact is larger in skilled workers employed in large-sized firms. The results are robust to the inclusion of other industry characteristics, including input tariffs, the share of foreign-owned capital, and payments to foreign technology. The results are also robust to the inclusion of industry productivity, which is likely to affect the effective tariffs and industry wage premiums simultaneously, as well as control for the potential endogeneity of trade policy.
    Keywords: Regional trade agreements; Effective tariffs; Industry wage premiums; Industry skill premiums; Productivity
    JEL: F16 F61 J31 O15 O54
    Date: 2020–03
  7. By: Bogetoft Pedersen, Peter; Diakantoni, Antonia
    Abstract: A little over a decade has passed since the onset of the global financial crisis in 2008. Shortly after the collapse of the Lehman Brothers investment bank, an internal Secretariat Task Force was established by the WTO Director-General to monitor the trade-related developments associated with the crisis. Meeting in London in early 2009, the G20 Leaders mandated the WTO, together with other international bodies, to monitor and report publicly on G20 adherence to resisting protectionism and promoting global trade and investment. Since then, 22 G20 reports and 24 WTO-wide reports have been published. The paper will introduce the WTO Trade Monitoring exercise. It will show how the idea and the principles behind the current Trade Monitoring effort have much earlier origins than the financial crisis. It will also provide an overview of selected trends and developments identified by the monitoring exercise since 2009 and will focus on recent developments in the global trading environment, including the effects of the increasingly protectionist rhetoric which has characterized much of the debate on trade over the past couple of years. Finally, the paper will address the challenges facing the WTO monitoring exercise, and the way forward after ten years of existence.
    Keywords: trade monitoring,protectionism,trade restrictions,trade facilitation
    JEL: F13 F14 F61
    Date: 2020
  8. By: Clément Malgouyres; Thierry Mayer; Clément Mazet-Sonilhac
    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.
    Keywords: : Broadband Internet; Trade; Import; Consumer Welfare.
    JEL: F14 F15 F61 F66 L23 O33
    Date: 2019
  9. By: Robertson,Raymond; Kokas,Deeksha; Cardozo,Diego; Lopez-Acevedo,Gladys C.
    Abstract: This paper studies how a positive export shock -- the sharp increase in garment-sector exports that began at the end of the Multifibre Arrangement (MFA) -- spread through Bangladesh's labor markets. Although the end of the MFA was arguably exogenous to Bangladesh, the authors instrument export demand with OECD imports to ensure identification. The paper compares estimates of the local labor market effects (wages and informality) and estimates from wage equations that reflect the predictions from long-run, general-equilibrium neoclassical trade theory. As in other studies, this paper finds that the export shock was localized both in terms of sector and geography. Wages increased and informality decreased in sub-districts more exposed to the export shock. Unlike in other studies, these local labor market effects dissipate quickly. Furthermore, Bangladesh's export shock was sector specific, limited predominantly to the female-intensive garment and textile sector. The paper shows that, following the increase in exports of the female-intensive good, the male-female wage gap closes considerably throughout the country -- not just in the apparel sector. In relatively small Bangladesh, the national labor market seems to be more integrated compared to larger countries studied, possibly suggesting that labor adjustment costs are lower in smaller countries.
    Date: 2020–03–09
  10. By: Roberto Antonietti; Chiara Franco
    Abstract: In this paper, we assess whether attracting higher amounts of FDI induces a greater level of economic complexity in a country. Using a panel of 117 countries and 22 years, from 1995 to 2016, we test for the causal relationship between inward FDI and economic complexity using a panel Granger causality approach. We also estimate the short-run relationship between these two factors using a panel vector autoregressive model and an impulse response function approach. We find that accumulating a higher stock of inward FDI per capita Granger-causes a greater economic complexity in a country, and not vice versa. This causal effect is very small, however, and occurs only in countries with above average levels of GDP per capita, tertiary education, tertiarization or financial development. Looking at the FDI entry mode, we find that only greenfield FDIs Granger-cause economic complexity in developed countries, whereas mergers and acquisitions have no such effect. Finally, we find that knowledge-intensive greenfield projects are the only form of inward FDI that Granger-cause complexity in a less developed country, but the estimated effect is near zero and disappears after two years.
    Keywords: economic complexity, foreign direct investment, panel Granger causality, panel VAR
    JEL: C23 F21 F23 O19 O33
    Date: 2020–03
  11. By: DeVoretz, Don J. (Simon Fraser University)
    Abstract: A rise in Chinese immigrant arrivals would have respectively decisive and unambiguous positive socio-economic effects on Canadians. The multidimensional positive impacts accruing to Canada from the increased arrival of Hong-Kong, Taiwanese and PRC immigrants would be manifested in terms of the long term presence of highly educated immigrants increasing Canada’s productivity which will in turn diversify Canada’s trade patterns beyond Canada’s current NAFTA/USMCA boundaries. Cultural enrichment in terms of increased financial and artistic support for Canada’s fine arts and musical world would also be encouraged by an increased presence of Chinese immigrants in Canada’s cultural milieu.
    Keywords: cultural enrichment, Canada, immigration policy
    JEL: J60 J61 J68
    Date: 2020–03
  12. By: Rabah Amir (University of Iowa [Iowa City]); Hend Ghazzai (UR MASE - Modélisation et Analyse Statistique et Economique - ESSAIT - Ecole Supérieure de la Statistique et de l'Analyse de l'Information - Université de Carthage - University of Carthage); Rim Lahmandi-Ayed (LEGI - Laboratoire d'Économie et de Gestion Industrielle [Tunis] - Ecole Polytechnique de Tunisie)
    Abstract: We consider a general equilibrium model with vertical preferences for one good and two identical countries each having initially one firm. Citizens in each country are asked to vote either for openness or for autarky. Openness means that a foreign firm can sell and produce its product in the domestic country and that the domestic firm can sell and produce its product in the foreign country. The decision to open frontiers is effective only when it is bilateral. Citizens in each country are potentially consumers, workers and shareholders in the domestic firm. They differ with respect to their intensity of preference for quality and their sensitivity to effort. The regime which will prevail between countries corresponds to the majority vote in the low quality country, as we prove that citizens in the high quality country always vote for openness. The outcome thus depends in a complex way on the degree of concentration of the ownership structure in the low quality country and the relative dispersion of the citizens with respect to their intensity of preference for quality and their sensitivity to effort.
    Keywords: Globalization,Democracy,Owner- ship Structure,General Equilibrium,Vertical Preferences
    Date: 2020–03–12
  13. By: Sakai Ando; Mengxue Wang
    Abstract: This paper studies whether FDI firms employ more workers than domestic firms for each dollar of assets. Using the Orbis database and its ownership structure information, we show that, in most economies, domestic firms tend to employ more workers per asset than FDI firms. The result remains robust across individual industries in the case study of the United Kingdom. The analysis of the switchers (ownership changes from domestic to foreign or vice versa) suggests that ownership changes do not have an immediate impact on the employment per asset. This result suggests that different patterns of employment per asset seem to come from technological differences rather than from different ownership structures.
    Date: 2020–03–13
  14. By: Bakker, Jan; Maurer, Stephan; Pischke, Jorn-Steffen; Rauch, Ferdinand
    Abstract: We study the causal relationship between geographic connectedness and development using one of the earliest massive trade expansions: the first systematic crossing of open seas in the Mediterranean during the time of the Phoenicians. We construct a geography based measure of connectedness along the shores of the sea. We relate connectedness to economic activity, which we measure using the presence of archaeological sites. We find an association between better connected locations and archaeological sites during the Iron Age, at a time when sailors began to cross open water routinely on a big scale. We corroborate these findings at world level.
    Keywords: urbanization; locational fundamentals; trade; ES/M010341/1
    JEL: F14 O47
    Date: 2020–01–23
  15. By: Breinlich, Holger; Leromain, Elsa; Novy, Dennis; Sampson, Thomas
    Abstract: We study the impact of the 2016 Brexit referendum on UK foreign direct investment. Using the synthetic control method to construct appropriate counterfactuals, we show that by March 2019 the Leave vote had led to a 17% increase in the number of UK outward investment transactions in the remaining EU27 member states, whereas transactions in non-EU OECD countries were unaffected. These results support the hypothesis that UK companies have been setting up European subsidiaries to retain access to the EU market after Brexit. At the same time, we find that the number of EU27 investment projects in the UK has declined by around 9%, illustrating that being a smaller economy than the EU leaves the UK more exposed to the costs of economic disintegration.
    Keywords: brexit; foreign direct investment; Synthetic control method
    JEL: F15 F21 F23
    Date: 2020–05
  16. By: Ron Alquist (AQR Capital Management); Nicolas Berman (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique, CEPR - Center for Economic Policy Research - CEPR); Rahul Mukherjee (Department of Economics, Graduate Institute of International and Development Studies); Linda Tesar (NBER - National Bureau of Economic Research - National Bureau of Economic Research)
    Abstract: We develop a model of cross-border acquisitions in which the foreign acquirer's ownership choice reflects a trade-off between easing the target's credit constraints and the costs of operating in an environment with weak institutions. Data on domestic and foreign acquisitions in emerging markets over the period 1990–2007 support the model predictions. The share of full foreign acquisitions is higher in sectors more reliant on external finance, in countries with lower financial development, and in countries with higher institutional quality. Sectoral external finance dependence accentuates the effect of country-level financial development and institutional quality. By contrast, the level of foreign ownership in partial acquisitions is insensitive to institutional factors and depends weakly on financial factors.
    Keywords: Institutional quality,Mergers and acquisitions,Financial development,Foreign direct investment,Foreign ownership
    Date: 2019–05
  17. By: Dany Bahar (Center for International Development at Harvard University); Hillel Rapoport; Riccardo Turati
    Abstract: We empirically investigate the relationship between a country’s economic complexity and the diversity in the birthplaces of its immigrants. Our cross-country analysis suggests that countries with higher birthplace diversity by one standard deviation are more economically complex by 0.1 to 0.18 standard deviations above the mean. This holds particularly for diversity among highly educated migrants and for countries at intermediate levels of economic complexity. We address endogeneity concerns by instrumenting diversity through predicted stocks from a pseudo-gravity model as well as from a standard shift-share approach. Finally, we provide evidence suggesting that birthplace diversity boosts economic complexity by increasing the diversification of the host country’s export basket.
    Keywords: economic complexity, birthplace diversity, immigration, growth
    JEL: F22 O31 O33
    Date: 2020–03
  18. By: Serkan Kucuksenel; Osman Gulseven
    Abstract: We develop a simple theoretic game a model to analyze the relationship between electoral sys tems and governments' choice in trade policies. We show that existence of international pressure or foreign lobby changes a government's final decision on trade policy, and trade policy in countries with proportional electoral system is more protectionist than in countries with majoritarian electoral system. Moreover, lobbies pay more to affect the trade policy outcomes in countries with proportional representation systems.
    Date: 2020–03
  19. By: Simplice A. Asongu (Yaoundé/Cameroon); Nicholas M. Odhiambo (Pretoria, South Africa)
    Abstract: This study assesses how globalisation modulates the effect of environmental degradation on inclusive human development in 44 countries in Sub-Saharan Africa (SSA), using data for the period 2000 to 2012. The empirical results are based on the Generalized Method of Moments (GMM). The following main findings are established. First, a trade openness (imports + exports) threshold of between 80-120% of GDP is the maximum level required for trade openness to effectively modulate CO2 emissions (metric tonnes per capita) and induce a positive effect on inclusive human development. Second, a minimum threshold required for trade openness to modulate CO2 intensity (kg per kg of oil-equivalent energy use) and induce a positive effect on inclusive human development is 200% of GDP. Third, there is a net positive effect on inclusive human development from the relevance of trade openness in modulating the effect of CO2 emissions per capita on inclusive human development and a negative net effect on inclusive human development from the importance of trade openness in moderating the effect of CO2 intensity on inclusive human development.
    Keywords: CO2 emissions; Economic development; Africa
    JEL: C52 O38 O40 O55 P37
    Date: 2020–01
  20. By: Ronald B. Davies; James R. Markusen
    Abstract: The structure of a multinational firm, that is how its affiliates relate to one another, is critical for understanding where multinationals locate, how policy affects them, and their resilience to localized shocks. Here, we review the two main structures: horizontal investments which replicate activities across borders, and vertical investments which fragment activities across countries. In addition, we use data (primarily from the US) to examine which of these structures seems to dominate the data. This includes a novel use of measures of global value-chain positioning of a country's industries. In each case, the data suggests a dominant role for horizontal investment. We conclude with a discussion of the challenge that intangibles play in multinational data and point towards potentially fertile areas for future research.
    JEL: F23
    Date: 2020–03
  21. By: Saroj Bhattarai; Konstantin Kucheryavyy
    Abstract: We present a unified dynamic framework to study the interconnections between international trade and business cycle models. We prove an aggregate equivalence between a competitive, representative firm model that has aggregate production externalities and dynamic trade models that feature monopolistic competition, endogenous entry, and heterogeneous firms. The production externalities in the representative firm model have to be introduced in the intermediate and final good sectors so that the model is isomorphic to dynamic trade models that embody love-of-variety and selection effects. In a quantitative exercise with multiple shocks, we show that to improve the fit of the dynamic trade models with the data, the most important ingredient is negative capital externality in the intermediate good sector. This presents a puzzle for the literature as standard dynamic trade models provide micro-foundations for positive capital externality.
    Keywords: international business cycles, dynamic trade models, heterogeneous firms, production externalities, monopolistic competition, export costs, entry costs
    JEL: F12 F41 F44 F32
    Date: 2020
  22. By: Andersson, David; Karadja, Mounir; Prawitz, Erik (Research Institute of Industrial Economics)
    Abstract: This paper studies the effect of emigration on technological change in sending locations after one of the largest migration events in human history, the mass migration from Europe to the United States in the 19th century. To establish causality, we adopt an instrumental variable strategy that combines local growing-season frost shocks with proximity to emigration ports. We document two sets of results. First, using novel data on technological patents, we find that emigration led to an increase in innovative activity in sending municipalities. Moreover, the increase in innovation is coupled with an increased adoption of new technologies in both the agricultural and industrial sectors. Second, in terms of local economic development, we find that emigration led to higher unskilled wages in agriculture, a shift towards employment in the nascent industrial sector, a larger presence of incorporated firms, as well as higher tax revenues.
    Date: 2020–03–20
  23. By: Ejan Mackaay
    Abstract: As evidence accumulates about the harmful effects Brexit is likely to cause to the British economy, one may wonder what made a majority of Brits vote to leave the EU. Rather than treat it as a fit of ill temper or an unfortunate accident, this paper explores the idea that it should be seen as a populist reaction triggered by the burst of the speculative bubble in 2008-2009 and the subsequent economic mayhem. To make the case, the paper looks at (1) what populism is, (2) how it can arise as part of long-term economic waves and (3) what precisely happened in Britain before and after 2009.
    Keywords: Law and Economics,Public Choice,Populism,Technological Revolutions and Bubble Collapses,Brexit,
    JEL: K00 B52
    Date: 2020–03–24
  24. By: Forslid, Rikard (Dept. of Economics, Stockholm University)
    Abstract: This paper analyzes the environmental impact of emissions related to trade and transportation. It is shown that transportation may in principle lower global emissions if the production sector is dirtier than the transport sector. The measure of a sector´s dirtiness is related to the emissions taxes and the abatement efficiency within that sector. It is shown that a firm´s abatement efficiency can be calculated from the emissions-to-cost ratio times the emissions tax. Using Swedish data to rank 5-digit industries in terms of their dirtiness reveals that several production sectors have a higher dirtiness index than transportation does.
    Keywords: Emissions; Trade; Transportation;
    JEL: F10 F18
    Date: 2020–01–31
  25. By: Roland Ismer; Karsten Neuhoff; Alice Pirlot
    Abstract: As part of its Green Deal, the European Commission is considering the introduction of border carbon adjustments and alternative measures. The measures, which would primarily apply to basic materials like steel and cement, pursue a double objective: they are aimed at enhancing the effectiveness of carbon pricing for the transition to climate neutrality but also at avoiding carbon leakage risks. When implementing carbon adjustment mechanisms and alternative measures, various design options might be considered to reform the EU Emissions Trading Scheme (EU ETS). In this paper, we have decided to focus on three main models, which help to highlight the main differences between the available options. Under the first model, importers of basic materials would be required to surrender carbon allowances at the level of a product benchmark or, where lower, at the verified level of foreign carbon intensity. In parallel, allocation of free allowances would be phased out. Under the second model, a symmetric adjustment mechanism for exports and imports would be adopted, including refund to exporters for the carbon costs incurred on basic materials embodied in products. Finally, under the third model, the EU ETS would be complemented with a climate contribution charged for materials sold in the European Union (EU) at the product benchmark level related to the carbon intensity of each material. The free allowance allocation regime would then be modified to be directly linked to the volume of material production at the product benchmark level. In order to contribute to the current policy debate, we evaluate for each of these three models, their legality, coherence with EU climate objectives, effectiveness in carbon leakage prevention, potential international implications, as well as their administrative complexity and compliance costs
    Keywords: Carbon pricing, Climate policy, International trade, WTO
    JEL: F18 K33 L61 Q58
    Date: 2020
  26. By: Mehdi Abbas (Pacte, Laboratoire de sciences sociales - UPMF - Université Pierre Mendès France - Grenoble 2 - UJF - Université Joseph Fourier - Grenoble 1 - IEPG - Sciences Po Grenoble - Institut d'études politiques de Grenoble - CNRS - Centre National de la Recherche Scientifique - UGA - Université Grenoble Alpes)
    Abstract: The new European Commission, chaired by Ursula Von der Leyen, has made the environment and climate the central parameters of European policy, both internal and international, for the period 2020-2025. As such, the European Green Deal has set itself the goal of making Europe the "first climate neutral" continent by 2050. It has been five years since the Paris Agreements was agreed. This working Paper analyzes the trade policy options available to the EU for a low-carbon international trading system.
    Date: 2020–03–09
  27. By: Bahri Yilmaz (Sabanci University, Koç University)
    Abstract: China and Europe are two global economic powers and essential parts of the international value chain. Companies on both sides are interested in taking advantage of the opportunities offered by the European and Chinese markets in the form of creating jobs, inducing innovation, and extending their markets. China's rapid development has benefited greatly from the capital, technology, and know-how of European companies. For EU companies, China is no longer only an important location for the production of intermediate goods and raw materials, a supplier, or sales market, but it is also considered of great importance as a research and development location. The main aim of this paper is to examine EU-China investment relations. In the first part of our work, we will focus on the overall view of the development of Chinese FDIs in the EU and vice-versa. Then, we will deal with the distribution of Chinese FDIs in the EU according to member states and economic sectors. In the last part, we will discuss the main concerns between Brussels and Beijing regarding the Chinese investment offensive on Europe and its consequences for both sides. In this respect, we focus on a new EU-level screening framework implemented mainly against Chinese investments in Europe.
    Keywords: China, European Union, Foreign Direct Investments, Portfolio Investments.
    Date: 2020–03

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