nep-int New Economics Papers
on International Trade
Issue of 2020‒04‒06
35 papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. Determinants of Global Value Chain Participation : Cross-Country Evidence By Fernandes,Ana Margarida; Kee,Hiau Looi; Winkler,Deborah Elisabeth
  2. Short and Long-Run Labor Market Effects of Developing Country Exports: Evidence from Bangladesh By Robertson, Raymond; Kokas, Deeksha; Cardozo, Diego; Lopez-Acevedo, Gladys
  3. Trade Elasticity: Estimates From Product-Level Data By Juyoung Cheong; Do Won Kwak; Kam Ki Tang
  4. The Role of Non-Discrimination in a World of Discriminatory Preferential Trade Agreements By Kamal Saggi; Woan Foong Wong; Halis Murat Yildiz
  5. Heterogeneous Globalization: Offshoring and Reorganization By Andrew B. Bernard; Teresa C. Fort; Valerie Smeets; Frederic Warzynski
  6. Mounting Uncertainties in the Global Trade Order and Korea's Policy Response By Song, Yeongkwan
  7. Do Protectionist Trade Policies Integrate Domestic Markets? Evidence from the Canada-U.S. Softwood Lumber Dispute By Jinggang Guo; Craig M.T. Johnston
  8. A Note on the Time-Varying Impact of Global, Region- and Country-Specific Uncertainties on the Volatility of International Trade By Selçuk Gul; Rangan Gupta
  9. Gravity without Apology: The Science of Elasticities, Distance, and Trade By Céline Carrère; Monika Mrázová; J. Peter Neary
  10. Cross-border Investments and Uncertainty Firm-level Evidence By Rafael Cezar; Timothée Gigout; Fabien Tripier
  11. The CFA Franc effect on trade By Mignamissi, Dieudonné
  12. Internationalization and family ownership. Does the life-cycle of destination markets matter? By Marco Cucculelli; Yu Sun; Yi Zhu
  13. The economic effects of Brexit - evidence from the stock market By Breinlich, Holger; Leromain, Elsa; Novy, Dennis; Sampson, Thomas; Usman, Ahmed
  14. Exports of Spanish manufacturing firms and financial constraints By Juan A. Máñez Castillejo; Oscar Vicente-Chirivella
  15. Borrowing constraints and export decision : the case of Vietnamese exporters By T.T.A. Duong; C.J.M. Kool; L. Zhang
  16. Network dependence in multi-indexed data on international trade flows By LeSage, James P.; Fischer, Manfred M.
  17. Poverty-reducing or Poverty-inducing? A CGE-based Analysis of Foreign Capital Inflows in Pakistan By Siddiqui, Rizwana; Kemal, A.R.
  18. International Patent Protection and Trade: Transaction-Level Evidence By Gaetan de Rassenfosse; Marco Grazzi; Daniele Moschella; Gabriele Pellegrino
  19. Taxation and Global Spillovers in the Digital Advertising Market. Theory and Evidence from Facebook By Andrea Lassmann; Federica Liberini; Antonio Russo; Ángel Cuevas; Rubén Cuevas
  20. The Global Financial Resource Curse By Gianluca Benigno; Luca Fornaro; Martin Wolf
  21. Dynamic pricing and exchange rate pass-through: Evidence from transaction-level data By Nagengast, Arne J.; Bursian, Dirk; Menz, Jan-Oliver
  22. The Structure of Multinational Firms' International Activities By Ronald B. Davies; James R. Markusen
  23. Mapping industrial patterns and structural change in exports By Guillard, Charlotte
  24. Economic Effects of the USA - China Trade War: CGE Analysis with the GTAP 9.0a Data Base By Enkhbayar Shagdar; Tomoyoshi Nakajima
  25. Linkages between Globalisation, Carbon dioxide emissions and Governance in Sub-Saharan Africa By Simplice A. Asongu; Rexon T. Nting; Joseph Nnanna
  26. Merchandise exports and economic growth: multivariate time series analysis for the United Arab Emirates By Kalaitzi, Athanasia S.; Chamberlain, Trevor W.
  27. Unemployment Effects of Trade with a Low-Wage Country: A Minimum-Wage Model with Sector-Specific Factors By Richard A. Brecher; Zhihao Yu
  28. Immigration and Worker-Firm Matching By Gianluca Orefice; Giovanni Peri
  29. Corona-shock Hits the Economy – To What Extent Finland Is Dependent on Global Value Chains? By Ali-Yrkkö, Jyrki; Kuusi, Tero
  30. Goods exports and soft export indicators: is a disconnect under way? By Claire Giordano
  31. Redrawing the Map of Global Capital Flows: The Role of Cross-Border Financing and Tax Havens By Antonio Coppola; Matteo Maggiori; Brent Neiman; Jesse Schreger
  32. How to Attract Highly Skilled Migrants into The Russian Regions By Vera Barinova; Sylvie Rochhia; Stepan Zemtsov
  33. Uneven development and the balance of payments constrained model: Terms of trade, economic cycles, and productivity catching-up By Sartorello Spinola, Danilo
  34. Capital Flow Waves—or Ripples? Extreme Capital Flow Movements Since the Crisis By Kristin J. Forbes; Francis E. Warnock
  35. The North-South Divide, the Euro and the World By Konstantinos Chisiridis; Kostas Mouratidis; Theodore Panagiotidis

  1. By: Fernandes,Ana Margarida; Kee,Hiau Looi; Winkler,Deborah Elisabeth
    Abstract: The past decades witnessed big changes in international trade with the rise of global value chains. Some countries, such as China, Poland, and Vietnam, rode the tide, while other countries, many in the Africa region, faltered. This paper studies the determinants of participation in global value chains, based on empirical evidence from a panel data set covering more than 100 countries over the past three decades. The evidence shows that factor endowments, geography, political stability, liberal trade policies, foreign direct investment inflows, and domestic industrial capacity are very important in determining participation in global value chains. These factors affect participation in global value chains more than traditional exports.
    Date: 2020–03–26
  2. By: Robertson, Raymond (Texas A&M University); Kokas, Deeksha (World Bank); Cardozo, Diego (University of Chicago); Lopez-Acevedo, Gladys (World Bank)
    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, we instrument export demand with OECD imports to ensure identification. We compare 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, we find 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. We show 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.
    Keywords: local labor markets, Bangladesh, apparel, exports, wage inequality, Stolper-Samuelson
    JEL: F13 F14 F15 F16 J23 J31 O15 O19
    Date: 2020–03
  3. By: Juyoung Cheong (Department of Economics, Kyung Hee University, Korea); Do Won Kwak (Graduate School of International Studies, Korea University, Korea); Kam Ki Tang (School of Economics, University of Queensland)
    Abstract: In a seminal paper, Helpman et al. (2008) demonstrate that accounting for self-selection and firm heterogeneity is crucial for obtaining unbiased estimates in the gravity equation. In this paper, we show how this insight helps solve the trade elasticity puzzle that, hitherto, trade elasticity estimates in the gravity equations have implied very small welfare gains from trade. To apply their approach to product-level data, we propose new exclusion restrictions based on the export learning literature. Our new estimates imply much larger welfare gains from trade than the previous literature suggested.
    Keywords: Gravity Model; Firm Heterogeneity; Disaggregate Data; Trade Elasticity; Learning
    JEL: C13 C23 F10 F15
    Date: 2020–03–23
  4. By: Kamal Saggi; Woan Foong Wong; Halis Murat Yildiz
    Abstract: In a three-country model of endogenous trade agreements, we study the implications of the Most Favored Nation Clause (MFN) when countries are free to form discriminatory preferential trade agreements (PTAs). While PTA members discriminate against non-member countries, MFN requires non-members to treat PTA members in a non-discriminatory fashion. We show that MFN reduces the potency of a country’s optimal tariffs and therefore its incentive for unilaterally opting out of trade liberalization. Thus, MFN can be a catalyst for trade liberalization. However, when PTAs take the form of customs unions, the efficiency case for MFN as well as its pro-liberalization effect is weaker since one country finds itself deliberately excluded by member countries as opposed to staying out voluntarily.
    Keywords: trade agreements, tariffs, customs unions, World Trade Organization, coalition proof Nash equilibrium, welfare
    JEL: F11 F12
    Date: 2020
  5. By: Andrew B. Bernard; Teresa C. Fort; Valerie Smeets; Frederic Warzynski
    Abstract: This paper exploits a unique offshoring survey to show that firms continue domestic production of the same goods they offshore to low-wage countries. This shift towards “produced-good imports” coincides with a reallocation of labor from physical production to innovation and technology occupations, and an increase in domestically-produced varieties' unit values. These responses suggest an additional, firm-level benefit of trade liberalization: the opportunity to offshore production of low-quality varieties, thereby freeing up domestic resources for the development, production, and marketing of higher-quality varieties. Firms’ reactions also motivate a new offshoring measure – produced- good imports – that is readily observed in most firm-level datasets.
    JEL: F14 F16 F23 F61 L23 L25
    Date: 2020–03
  6. By: Song, Yeongkwan
    Abstract: The US-China trade war is propagating uncertainties within the global trade order, weakening global value chains and the WTO system. These uncertainties pose a considerable threat to the Korean economy which is heavily dependent on foreign trade. To tackle this, the Korean government needs to positively consider joining the CPTPP and make efforts to improve the effectiveness and efficiency of policies for the materials and components industries as well as export support.
    Keywords: Business Regulation: Sale,Qualification Restriction
    Date: 2020
  7. By: Jinggang Guo; Craig M.T. Johnston
    Abstract: We consider the effects of protectionist trade policies on international and domestic market integration, using evidence from the long-standing softwood lumber trade dispute between Canada and the United States. The benefits of trade liberalization are widely acknowledged, including better home-to-foreign price transmission due to reduced tariffs and lower trade costs between countries. Yet in recent years we see efforts to protect specific domestic groups, including producers, through a revival of protectionist trade policies. Such policies could improve the home-to-home price transmission across domestic markets as consumers may seek lower-cost alternatives domestically. We investigate these ideas using a bi-variate threeregime threshold vector error-correction model (TVECM) to examine the spatial price transmission between Canadian and U.S. markets and within U.S. domestic markets. We do that by introducing a structural break at the start of an effective free trade period within our sample. The results suggest that duty-free treatment for imported Canadian softwood lumber substantially lowers the transaction costs between the two nations. Prices are more easily transmitted from the Canadian market to the U.S. at a higher speed, but the speed of price transmission in the reverse direction is not statistically significant. The U.S. domestic market experienced a higher speed of price adjustment across domestic regions prior to the free trade period, which provides evidence that protectionist policies lead to better domestic market integration.
    Keywords: International topics; Market structure and pricing; Trade integration
    JEL: F13 Q17
    Date: 2020–03
  8. By: Selçuk Gul (Central Bank of the Republic of Turkey, Anafartalar Mah. Istiklal Cad. No:10 06050, Ankara, Turkey); Rangan Gupta (Department of Economics, University of Pretoria, Pretoria, South Africa)
    Abstract: We use a dynamic factor model with time-varying parameters and stochastic volatility to decompose the variance of exports and imports over time for 22 Organization for Economic Co-operation and Development (OECD) countries spanning the quarterly period of 1960:01 to 2016:04 into contributions from country- and region-specific uncertainties and uncertainty common to all countries. We find that, while idiyosyncratic uncertainty has a dominant role in explaining the volatility of international trade, global, country-, and region-specific uncertainties drives around 40% of the volatility of real exports and imports, with the impact of the latter three uncertainties rising in explanatory power during episodes of crises. Our results have important policy implications.
    Keywords: Dynamic factor model, time-varying parameters, stochastic volatility, uncertainty shocks, trade volatility
    JEL: C32 F10
    Date: 2020–03
  9. By: Céline Carrère; Monika Mrázová; J. Peter Neary
    Abstract: Gravity as both fact and theory is one of the great success stories of recent research on international trade, and has featured prominently in the policy debate over Brexit. We first review the facts, noting the overwhelming evidence that trade tends to fall with distance. We then introduce some expository tools for understanding CES theories of gravity as a simple general-equilibrium system. Next, we point out some anomalies with the theory: mounting evidence against constant trade elasticities, and implausible predictions for bilateral trade balances. Finally, we sketch an approach based on subconvex gravity as a promising direction to resolving them.
    Keywords: bilateral trade balances, Brexit, elasticity of trade to distance, quantile regression, structural gravity and trade, subconvex demands
    JEL: F17 F14 F10
    Date: 2020
  10. By: Rafael Cezar; Timothée Gigout; Fabien Tripier
    Abstract: This paper studies the impact of uncertainty on cross-border investments. We build a data-set of firm-level outward Foreign Direct Investments between 2000 and 2015. We create a time and country varying measure of uncertainty based on the dispersion of idiosyncratic investment returns. An increase in uncertainty delays cross-border flows to the affected country. Yet, this average effect hides strong heterogeneity. Firms with low ex-ante performance durably reduce their foreign investments. Meanwhile high-performing firms increase their investments after the initial shock. We interpret these results as the evidence of a cleansing effect of uncertainty shocks among multinational firms in the presence of financial frictions.
    Keywords: Uncertainty;Asymmetric Uncertainty;FDI flows;FDI Returns;Volatility;Multinational Firms
    JEL: D81 F23 G10 G15
    Date: 2020–03
  11. By: Mignamissi, Dieudonné
    Abstract: This paper aims to assess the effect of sharing the CFA franc on bilateral trade in the Afri-can Franc Zone (AFZ) since 1995. In the light of the endogenous theory of optimum cur-rency, we estimate an augmented gravity model with the Poisson Pseudo Maximum Like-lihood estimator, and obtain two major results: (i) the effect of CFA on the bilateral trade of the African Franc Zone member countries is positive, but different in the two zones, because of the specific characteristics of the countries; (ii) based on three modeled scenar-ios ("Aggregation", "Cooperation" and "Consolidation"), the results finally show that the two zones would all win if they merged to form a consolidated monetary union, which would tend to justify the ongoing reforms
    Keywords: African franc zone, CFA Franc, Bilateral trade, Gravity model
    JEL: F1 F15
    Date: 2020–01
  12. By: Marco Cucculelli (Dipartimento di Scienze Economiche e Sociali - Universita' Politecnica delle Marche); Yu Sun (London School of Economics and Political Science); Yi Zhu (mail: Universite' Catholique de Louvain (Belgium) and Universita' Politecnica delle Marche)
    Abstract: Despite the conventional view on family firms that are slow to venturing into foreign markets, Hennart et al. (J Int Bus Stud, 2019) show that family firms in high-quality niche businesses are able to overcome the internationalization barriers. Eddleston et al. (J Int Bus Stud, 2019) counterpoint it by arguing that the effect only conditionally holds when external and internal contexts are considered, specified as pro-market development and professionalization practices respectively. We extend Hennart et al.'s (2019) and Eddleston et al'i.s (2019) research by explicitly considering the heterogeneity in the life-cycle of destination markets. Specifically, we show that family firms, no matter selling niche or mass products, are encouraged to internationalize given satisfactory market growth potential - an external context, as in Eddlelston et al. 2019. We develop a two-period competition model with logistic market growth to assess the role of the life cycle of export markets on the decision to entry. The empirical evidence shows that family firms are more likely to enter markets with high growth potential in their early stages of development. We also test a pricing-to-market model to show that a replication strategy, which consists of exporting products already sold in domestic markets, is a viable entry strategy for (price-taking) family firms.
    Keywords: internationalization, family firms, life-cycle, potential market growth, replication strategy, mass and niche products
    JEL: F23 F14 G32 L60
    Date: 2020–03
  13. By: Breinlich, Holger; Leromain, Elsa; Novy, Dennis; Sampson, Thomas; Usman, Ahmed
    Abstract: We study stock market reactions to the Brexit referendum on 23 June 2016 in order to assess investors' expectations about the effects of leaving the European Union on the UK economy. Our results suggest that initial stock price movements were driven by fears of a cyclical downturn and by the sterling depreciation following the referendum. We also find tentative evidence that market reactions to two subsequent speeches by Theresa May (her Conservative Party conference and Lancaster House speeches) were more closely correlated with potential changes to tariffs and non-tariff barriers on UK-EU trade, indicating that investors may have updated their expectations in light of the possibility of a `hard Brexit'. We do not find a correlation between the share of EU migrants in different industries and stock market returns.
    Keywords: Brexit; depreciation; event study; recession; stock market; tariffs; ES/R001804/1
    JEL: F15 F22 G14
    Date: 2018–12–18
  14. By: Juan A. Máñez Castillejo (Universitat de València and ERICES); Oscar Vicente-Chirivella (Universitat de València)
    Abstract: We investigate the role of financial constraints on firms’ exporting behaviour, including firms’ export decision, export intensity, firms starting to export decision and exports persistence. Our financial constraints variable is a synthetic variable that summarises information on different dimensions such as total assets, profitability, liquidity, solvency, repaying ability and (new in this type of analyses) the cost of external financing. Using data on Spanish manufacturing for the period 1992-2014, we find evidence supporting that financial health is relevant to explain SMEs exporting decisions and starting to export decisions but not those of large firms. Financial health does not seem to affect large firms’ export intensity and the results of the impact of financial health on SMEs export intensity are not conclusive. Nevertheless, financial health is a determinant of export persistence of large firms and SMEs.
    Date: 2019–12
  15. By: T.T.A. Duong; C.J.M. Kool; L. Zhang
    Abstract: This paper examines the impact of borrowing constraints and productivity on the export decision of Vietnamese firms, where we approximate borrowing constraints by leverage and the tangible asset ratio. Using a large firm-level dataset for the years 2009-2014, we show that borrowing constraints play an important role in the export decision. There is an inverse U-shaped relationship between leverage and the export probability for private manufacturers. The marginal effect of leverage is declining with leverage, but positive up till a leverage ratio of about 47 percent and negative beyond. Borrowing constraints matter both for the decision to start exporting and for the decision to continue exporting, but more so for the latter. Medium and high productive firms are more sensitive to borrowing constraints than low productive firms.
    Keywords: international trade, heterogeneous firms, non-linear effects, probit analysis, leverage, productivity, credit constraints
    Date: 2019–12
  16. By: LeSage, James P.; Fischer, Manfred M.
    Abstract: In this paper, we introduce a model of trade flows between countries over time that allows for network dependence in flows, based on sociocultural connectivity structures. We show that conventional multidimensional fixed effects model specifications exhibit cross-sectional dependence between countries that should be modeled to avoid simultaneity bias. Given that the source of network interaction is unknown, we propose a panel gravity model that examines multiple network interaction structures, using Bayesian model probabilities to determine those most consistent with the sample data. This is accomplished with the use of computationally efficient Markov Chain Monte Carlo estimation methods that produce a Monte Carlo integration estimate of the log-marginal likelihood that can be used for model comparison. Application of the model to a panel of trade flows points to network spillover effects, suggesting the presence of network dependence and biased estimates from conventional trade flow specifications. The most important sources of network dependence were found to be membership in trade organizations, historical colonial ties, common currency, and spatial proximity of countries.
    Keywords: origin-destination panel data ows, cross-sectional dependence, MCMC estimation, log-marginal likelihood, gravity models of trade, sociocultural distance
    Date: 2020–03–30
  17. By: Siddiqui, Rizwana; Kemal, A.R.
    Abstract: Foreign capital inflows (FKI) help an economy by financing the imbalance between income and expenditure. However, their impact on poverty in the recipient economy is a controversial issue. In this study, a static computable general equilibrium (CGE) model for Pakistan has been used to assess the impact of foreign capital on poverty. Several interesting results emerged from the study. FKI increase demand for goods for investment purposes that lead to the expansion of import-competing- sector machinery to fulfil domestic demand. However, the contraction of the majority of trading sectors combined with expansion of non-trading sectors of the economy have generated ‘Dutch disease effect’. The results show that FKIs have a positive impact on poverty in Pakistan. Trade liberalization of import of machinery reduces the negative effect of the decline in FKI. Rise in poverty in Pakistan may be attributed to the decline in foreign capital.
    Keywords: FKI, Poverty, CGE model
    JEL: F13 F2 I32
    Date: 2019–01–01
  18. By: Gaetan de Rassenfosse; Marco Grazzi; Daniele Moschella; Gabriele Pellegrino
    Abstract: This paper investigates the extent to which international trade hinges on patents. We analyze the export and patenting activities of the universe of French exporting firms over the period 2002-2011. The noticeable feature of our study is that we observe export and patenting activities worldwide and at the product level. We exploit how heterogeneity of patent coverageacross (and within) product-country relates to exports. We find a patent premium of at least 10 percent, which is mainly associated with a quantity effect. A modest price effect emerges in specific sectors, notably pharmaceuticals.
    Keywords: Export; Patents; Products; Intellectual property rights; Innovation.
    Date: 2020–03–30
  19. By: Andrea Lassmann; Federica Liberini; Antonio Russo; Ángel Cuevas; Rubén Cuevas
    Abstract: We study the effects of taxation on the international online advertising market, using data on Facebook ad prices, Facebook users product preferences and international trade. Our data encompass a de facto increase in the platform’s corporate tax rate in several countries. We show that, due to international trade linkages, tax changes produce global spillovers. Yet, advertisers experience higher prices in countries that directly face the tax increases compared to advertisers in countries that do not. This result is consistent with a theoretical model, which shows that the platform reduces the supply of ads to advertisers from countries where taxation increases.
    Keywords: tax incidence, online advertising, Facebook
    JEL: H22 H25 F23
    Date: 2020
  20. By: Gianluca Benigno; Luca Fornaro; Martin Wolf
    Abstract: Since the late 1990s, the United States have received large capital flows from developing countries and experienced a productivity growth slowdown. Motivated by these facts, we provide a model connecting international financial integration and global productivity growth. The key feature is that the tradable sector is the engine of growth of the economy. Capital flows from developing countries to the United States boost demand for U.S. non-tradable goods. This induces a reallocation of U.S. economic activity from the tradable sector to the non-tradable one. In turn, lower profits in the tradable sector lead firms to cut back investment in innovation. Since innovation in the United States determines the evolution of the world technological frontier, the result is a drop in global productivity growth. We dub this effect the global financial resource curse. The model thus offers a new perspective on the consequences of financial globalization, and on the appropriate policy interventions to manage it.
    Keywords: global productivity growth, international financial integration, Capital flows, U.S. productivity growth slowdown, low global interest rates, Bretton Woods II, export-led growth
    JEL: E44 F21 F41 F43 F62 O24 O31
    Date: 2020–02
  21. By: Nagengast, Arne J.; Bursian, Dirk; Menz, Jan-Oliver
    Abstract: Dynamic pricing is a widely employed pricing strategy for goods and services in which firms flexibly set prices, taking into account current market conditions. This paper studies theoretically and empirically the role of this pricing strategy in explaining the heterogeneous response of consumer prices to exchange rate fluctuations. We provide a theoretical model that illustrates how foreign producers and domestic retailers adjust prices to exchange rate fluctuations for three forms of dynamic pricing. Our model predicts that pass-through increases for clearance sales and with the capacity costs of producers in periods of high demand, while it decreases for advance purchases. We find robust empirical evidence for the model predictions using a unique German transaction-level data set of package tours at the daily frequency between 2012 and 2018 featuring rich variation of prices over time.
    Keywords: exchange rate pass-through,dynamic pricing,heterogeneity,services trade,tourism
    JEL: F14 F31
    Date: 2020
  22. 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.
    Keywords: horizontal multinationals, vertical multinationals, replication, fragmentation
    JEL: F23
    Date: 2020
  23. By: Guillard, Charlotte (UNU-MERIT, BETA, Universite de Strasbourg, and Institute for Innovation and Public Purpose, UCL.)
    Abstract: This paper proposes a new methodology for identifying patterns in the organisation of industries and their evolution over time, based on the temporal network structure of the product space. To do this, I apply a community detection algorithm on 5-year snapshots of the product space from 1975 to 2000. This exercise enables us to identify different clusters of related products and to follow their evolution over time. I find that the product space is highly modular, that is it contains well delimited clusters of products. The community structure and its evolution show that the factors explaining industrial patterns and structural change are more complex than the traditional divide between low, medium and high-tech industries. Several common drivers can be identified to explain the emergence and evolution of different communities including the experience in a technological domain, factor abundance, scale economies as well as global value chains and vertical integration. Moreover, I find that technological domains and boundaries between industries are not always clear-cut and can evolve over time.
    Keywords: Structural change, Capabilities, Economic Complexity, Networks, Community Structure, Exports
    JEL: O11 O14 O33 O25 P40 E14
    Date: 2020–01–23
  24. By: Enkhbayar Shagdar (Economic Research Institute for Northeast Asia (ERINA)); Tomoyoshi Nakajima (Economic Research Institute for Northeast Asia (ERINA))
    Abstract: An analysis of the economic effects of the ongoing USA-China trade war using the standard CGE Model and GTAP Data Base 9.0a revealed that both parties will be worse-off from this trade friction, having welfare losses and real GDP contractions regardless of international capital mobility status—i.e. whether the capital is internationally mobile or not. Moreover, the results indicated that the negative economic and trade impacts on China would be larger compared to those of the USA. Although, other countries and regions would be better-off having positive changes in their welfare and real GDP, their magnitudes were much lower than losses of the USA and China. Therefore, as a whole, the global economy will be worse-off as a result of this trade war between the world’s two largest economies, the USA and China.
    Keywords: Trade policy, CGE models
    JEL: F13 C68
    Date: 2018–12
  25. By: Simplice A. Asongu (Yaoundé/Cameroon); Rexon T. Nting (London, UK); Joseph Nnanna (The Development Bank of Nigeria, Abuja, Nigeria)
    Abstract: This study investigates linkages between environmental degradation, globalisation and governance in 44 countries in Sub-Saharan Africa using data for the period 2000-2012. The Generalised Method of Moments is employed as empirical strategy. Environmental degradation is proxied by carbon dioxide emissions whereas globalisation is appreciated in terms of trade openness and net foreign direct investment inflows. Bundled and unbundled governance indicators are used, namely: political governance (consisting of political stability/no violence and “voice & accountability†), economic governance (encompassing government effectiveness and regulation quality), institutional governance (entailing corruption-control and the rule of law) and general governance (a composite measurement of political governance, economic governance and institutional governance). The following main finding is established. Trade openness modulates carbon dioxide emissions to have positive net effects on political stability, economic governance, the rule of law and general governance.
    Keywords: Carbon dioxide emissions; Economic development; Africa
    JEL: C52 O38 O40 O55 P37
    Date: 2019–01
  26. By: Kalaitzi, Athanasia S.; Chamberlain, Trevor W.
    Abstract: This paper examines the validity of the export-led growth (ELG) hypothesis in the United Arab Emirates (UAE) over the period 1975–2012, using a neoclassical production function augmented with merchandise exports and imports of goods and services. The study applies the Johansen cointegration technique and dynamic ordinary least squares (DOLS) regression to confirm the existence of a long-run relationship between exports and economic growth, while the multivariate Granger causality test is applied to examine the direction of the short-run causality. In addition, the existence of long-run causality is investigated by applying a modified version of the Wald test in an augmented vector autoregressive model. The Johansen test and DOLS results confirm the existence of a long-run relationship between exports and economic growth. In addition, the study provides evidence to support the validity of the ELG hypothesis in the short-run, while no long-run causality is found to exist.
    Keywords: economic growth; Exports; Granger causality; UAE
    JEL: J1 L81
    Date: 2020–02–23
  27. By: Richard A. Brecher (Department of Economics, Carleton University); Zhihao Yu (Department of Economics, Carleton University)
    Abstract: Contrary to conventional wisdom, this paper shows that a high-wage economy can paradoxically reduce its level of aggregate unemployment by engaging in international trade with a low-wage country. We demonstrate this possibility after introducing a minimum wage into the basic specific-factor model (with immobile capital and mobile labor), even though the opposite result is known to arise in the longer-run framework of the standard Heckscher-Ohlin-Samuelson model (with both inputs mobile). Our result provides a cautionary note for public-policy discussions that promote trade barriers as a way to reduce unemployment.
    Keywords: Trade, Unemployment, Minimumwage, Sector-specific factors
    JEL: F16
    Date: 2020–03–04
  28. By: Gianluca Orefice; Giovanni Peri
    Abstract: The process of matching between firms and workers is an important mechanism in determining the distribution of wages. In a labor market characterised by large dispersion of workers' productivity and worker-firm complementarity, high quality firms have strong incentives to screen for the quality of workers. This process will increase the positive quality association of firm-worker matches known as positive assortative matching (PAM). Immigration in a local labor market, by increasing the variance of workers abilities, may drive stronger PAM between firms and workers. Using French matched employer-employee (DADS) data over the period 1995-2005 we document that positive supply-driven changes of immigrant workers in a district increased the strength of PAM. We then show that this association is consistent with causality, is quantitatively significant, and is associated with higher average productivity and firm profits, but also with higher wage dispersion. We also show that the increased degree of positive assortative matching is mainly reached by high-productive firms "losing" lower quality workers and "attracting" higher quality workers.
    Keywords: Matching;Workers;Firms;Immigration;Productivity
    JEL: F16 J20 J61
    Date: 2020–04
  29. By: Ali-Yrkkö, Jyrki; Kuusi, Tero
    Abstract: Abstract The spread of Coronavirus (SARS-CoV-2) has caused distortions to global value chains. This report studies how dependent Finnish companies and industries are on raw materials, components and other intermediate goods/services that they use in their own production. Our results suggest that the great majority of the supply of key intermediates such as electronic components, parts of motor vehicles and medical products and their ingredients are sourced abroad. Over 80% of these intermediate goods/products are sourced abroad. In several industries critical to society, the shares are substantially lower. In the Food industry, 20% of intermediate goods are sourced abroad. In Agriculture and in the Energy supply the shares are 14% and 25%, correspondingly. The spread of Coronavirus and the corresponding preventive measures cause distortions to global value chains. Therefore, economic policy should provide means and tools that help to sustain and re-organize them.
    Keywords: Global value chain, GVC, Imports, Dependence, Resilience, Value added
    JEL: F14 F23 L14
    Date: 2020–03–26
  30. By: Claire Giordano (Banca d’Italia)
    Abstract: We find evidence of a gradual weakening of the correlation between the new export orders component of the manufacturing purchasing managers’ index (PMI) and real goods export dynamics in the four major euro-area countries since 2012. In Italy this disconnect has been particularly strong over the last few quarters and concerns other soft export indicators as well. The decline in the information content of firms’ survey responses has gone hand in hand with several economic factors common to all four countries, such as a significant rise in economic uncertainty and the growing role of infra-group transactions within multinational enterprises.
    Keywords: national accounts, goods exports, soft indicators
    JEL: F00 F19
    Date: 2020–03
  31. By: Antonio Coppola; Matteo Maggiori; Brent Neiman; Jesse Schreger
    Abstract: Global firms finance themselves through foreign subsidiaries, often shell companies in tax havens, which obscures their nationality in aggregate statistics. We associate the universe of traded securities with their issuer's ultimate parent and restate bilateral investment positions to better reflect the true financial linkages connecting countries around the world. We find that portfolio investment from developed countries to firms in large emerging markets is dramatically larger than previously thought. The national accounts of the United States, for example, understate the U.S. position in Chinese firms by nearly $600 billion, while China's official net creditor position to the rest of the world is overstated by about 50 percent. We additionally show how taking account of offshore issuance is important for our understanding of the currency composition of external liabilities, the nature of foreign direct investment, and the growth of financial globalization.
    JEL: E0 F0 G0
    Date: 2020–03
  32. By: Vera Barinova (RANEPA University); Sylvie Rochhia (Université Côte d'Azur, France; GREDEG CNRS); Stepan Zemtsov (RANEPA University)
    Abstract: In this work, we examine the factors and patterns of attracting highly skilled migrants by the Russian regions. Attracting such specialists is particularly relevant for large developing countries with territories actively losing qualified personnel, and, accordingly, opportunities for long-term development. The results of an econometric study show that there are a number of objective factors that are poorly modifiable but have a significant positive effect on staff recruitment: the demographic potential of neighbouring regions, the size of accessible markets, and the natural comfort of living. Adverse socio-economic conditions in the region, such as high unemployment, negatively affect the possibility of emigration. However, there are factors that the regional authorities and the federal government are able to influence in the medium term. One of the most important determinants remains the income of highly qualified specialists and the availability of housing. Highly qualified specialists also strive to move to regions with a high level of education and a good healthcare system. The creation of favourable conditions for entrepreneurship has a positive effect on attracting active migrants, providing opportunities for new firms' establishments. As recommendations for regional policy, in particular, attracting highly qualified specialists to the Russian rare-populated Far East, efforts are needed to develop rental housing and zero-interest mortgages, create high-performance jobs, especially in education, science and medicine, as well as general improvement of institutional conditions for conducting business.
    Keywords: Russian regions, migration, gravity model, market access, institutions, human development index, regional policy, high-tech sector
    JEL: P23 J61 P36 R23
    Date: 2020–03
  33. By: Sartorello Spinola, Danilo (UNU-MERIT)
    Abstract: This paper expands the Dutt (2002) version of the Balance of Payments Constrained Model (BPCM). We question the assumption of price-neutrality and the incompatibility between the BPCM and the Prebisch-Singer hypothesis (PSH) in terms of the long-run terms-of-trade dynamics. The research focuses on three main elements: (1) the long-run behaviour of the terms of trade in a Structuralist framework. (2) The cyclical endogenous dynamics in the relationship between economic activity and income distribution à la Goodwin. (3) Productivity gap and catching-up. This article adds to the Dutt(2002) model (a) a productivity gap dynamics in which the south has a catching-up element; (b) labour market by including a Phillips Curve for the relationship between employment rate and economic activity; (c) labour supply dynamics that considers the labour transfer issue between traditional and modern sectors. We find that the Structuralist/evolutionary arguments hold in the BPCM framework with these changes.
    Keywords: Balance of Payments constrains, Terms of Trade, Economic Cycles, Latin American Structuralism
    JEL: E22 E32 O41
    Date: 2020–01–14
  34. By: Kristin J. Forbes; Francis E. Warnock
    Abstract: Has the occurrence of “extreme capital flow movements”—episodes of sudden surges, stops, flight and retrenchment—changed since the Global Financial Crisis (GFC)? This paper addresses this question by updating and building on the dataset and methodology introduced in Forbes and Warnock (2012) to calculate the occurrence of sharp capital flow movements by foreigners and domestics into and out of individual countries. The results suggest that the occurrence of these extreme capital flow movements has not increased since the GFC. The drivers of these episodes, however, appear to have changed since the GFC. Extreme capital flow movements are less correlated with changes in global risk, and are more difficult to explain with basic global, regional and domestic variables. What used to be large global “waves” in international capital flows have more recently become idiosyncratic “ripples”.
    JEL: F3
    Date: 2020–03
  35. By: Konstantinos Chisiridis (Department of Economics, University of Macedonia, Greece); Kostas Mouratidis (Department of Economics, University of Sheffield, UK); Theodore Panagiotidis (Department of Economics, University of Macedonia, Greece; Rimini Centre for Economic Analysis)
    Abstract: The European north-south divide has been an issue of a long-standing debate. We employ a Global VAR model for 28 developed and developing countries to examine the interaction between the global trade imbalances and their impact within the euro area framework. The aim is to assess the propagation mechanisms of real shocks, focusing on the interconnections among the north euro area and the south euro area. We incorporate theory-based long-run over-identifying restrictions and examine the effects of (i) non-export real output shocks, (ii) expansionary shocks and (iii) real exchange rate shocks. An expansionary policy of the north euro area and increased competitiveness in the south euro area could alleviate trade imbalances of the debtor euro area economies. From the south euro area perspective, internal devaluation decreases output but at the same time, it also reduces current account deficits. North euro area origin shocks to domestic output exert a dominant influence in the rest of the Europe and Asia.
    Keywords: Trade Imbalances, European North-South Divide, Global VAR, International Linkages, Spillover Effects, Generalised Impulse Response Analysis
    JEL: C33 E27 F14
    Date: 2020–03

This nep-int issue is ©2020 by Luca Salvatici. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.