nep-int New Economics Papers
on International Trade
Issue of 2020‒07‒13
37 papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. Determinants of Global Value Chain Participation: Cross-Country Evidence By Ana Margarida Fernandes; Hiau Looi Kee; Deborah Winkler
  2. Globalization for Sale By Blanga-Gubbay, Michael; Conconi, Paola; Parenti, Mathieu
  3. East Asia Decouples from the United States: Trade War, COVID-19, and East Asia's New Trade Blocs By Peter A. Petri; Michael G. Plummer
  4. Trade Liberalization and the Great Labor Reallocation By Zi, Yuan
  5. Robots, Tasks, and Trade By Artuc, Erhan; Bastos, Paulo; Rijkers, Bob
  6. Made and Created in China: Super Processors and Two-way Heterogeneity By Chen, Zhiyuan; Erbahar, Aksel; Zi, Yuan
  7. Mis-allocation Within Firms: Internal Finance and International Trade By Doerr, Sebastian; Marin, Dalia; Suverato, Davide; Verdier, Thierry
  8. Heterogeneous Globalization: Offshoring and Reorganization By Bernard, Andrew B.; Fort, Teresa; Smeets, Valerie; Warzynski, Frederic
  9. Why Trump Shot the Sheriffs: The End of WTO Dispute Settlement 1.0 By Bown, Chad P.; Keynes, Soumaya
  10. Gravity without Apologies: The Science of Elasticities, Distance, and Trade By Carrère, Céline; Mrázová, Monika; Neary, J Peter
  11. The Pursuit of Non-Trade Policy Objectives in EU Trade Policy By Borchert, Ingo; Conconi, Paola; Di Ubaldo, Mattia; Herghelegiu, Cristina
  12. The Impact of COVID-19 international travel restrictions on services-trade costs By Sebastian Benz; Frédéric Gonzales; Annabelle Mourougane
  13. The Looming Threat of Tariff Hikes: Entry into Exporting Under Trade Agreement Renegotiation By Crowley, M. A.; Exton, O.; Han, L.
  14. Immigrants, occupations and firm export performance By Léa Marchal; Clément Nedoncelle
  15. Market Segmentation by Certification: Quantity effects on tropical timber production By Matthew T. Cole; Jacqueline Doremus; Stephen Hamilton
  16. Investor-State vs. State-State Dispute Settlement By Horn, Henrik; Tangerås, Thomas
  17. Retaliatory Use of Public Standards in Trade By Kjersti Nes; K Aleks Schaefer
  18. Breaking Badly: The Currency Union Effect on Trade By Douglas L. Campbell; Aleksandr Chentsov
  19. Ideologies implicated in IT innovation in government: a critical discourse analysis of Mexico’s international trade administration By Avgerou, Chrisanthi; Bonina, Carla
  20. On "Trade Induced Technical Change: The Impact of Chinese Imports on Innovation, IT and Productivity" By Douglas L. Campbell; Karsten Mau
  21. Immigrant Inventors and Diversity in the Age of Mass Migration By Campo, Francesco; Mendola, Mariapia; Morrison, Andrea; Ottaviano, Gianmarco
  22. Immigration, Legal Status and Fiscal Impact By Andri Chassamboulli; Xiangbo Liu
  23. Technological Trade Composition and Performance in African Countries By Blessing Chipanda; Matthew Clance; Steven F. Koch
  24. Border Carbon Adjustments and Industrial Competitiveness in a European Green Deal By Stuart Evans; Michael A Mehling; Robert A Ritz; Paul Sammon
  25. The Evolution of Offshore Renminbi Trading: 2016 to 2019 By Yin-Wong Cheung; Louisa Grimm; Frank Westermann
  26. Transfer Pricing Regulation and Tax Competition By Jay Pil CHOI; FURUSAWA Taiji; ISHIKAWA Jota
  27. Evaluating the impact of market integration -Banning online trade restrictions in the EU portable PC market By Néstor Duch-Brown; Lukasz Grzybowski; André Romahn; Frank Verboven
  28. Foreign Direct Investment and Growth Convergence in a North-South Framework By Vinicius Curti Cicero; Gilberto Tadeu Lima
  29. The (Structural) Gravity of Epidemics By Alejandro Cuñat; Robert Zymek
  30. The Effect of Exporting on Product Compositional Changes and a Manufacturing Plant's Average Product Characteristics in Japan By ITO Keiko; Chin Hee HAHN
  31. Are Trade Agreements Good For You? By Giovanni Maggi; Ralph Ossa
  32. Export Booms and Labor Coercion: Evidence from the Lancashire Cotton Famine By Saleh, Mohamed
  33. Trade Relationships, Bargaining and Export Dynamics By Mirko Abbritti, Ivan Kim, Tommaso Trani
  34. The impact of trade policy uncertainty shocks on the Euro Area By Arigoni, Filippo; Lenarčič, Črt
  35. Effects of International Migration on Child Schooling and Child Labour: Evidence from Nepal By Hari Sharma; John Gibson
  36. The Cost of Trade Distortion: Britain’s Carbon Price Support and Cross-border Electricity Trade By Guo, B., Newbery, D.; Newbery, D.
  37. The global distribution of routine and non-routine work By Piotr Lewandowski; Albert Park; Simone Schotte

  1. By: Ana Margarida Fernandes; Hiau Looi Kee; Deborah Winkler
    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.
    Keywords: global value chain, factor endowments, trade policy, foreign direct investment, institutions
    JEL: F13 F14 F23 O20
    Date: 2020
  2. By: Blanga-Gubbay, Michael; Conconi, Paola; Parenti, Mathieu
    Abstract: We study the role of firms in the political economy of trade agreements. Using detailed information from lobbying reports filed under the Lobbying Disclosure Act, we find that virtually all firms that lobby on free trade agreements (FTAs) support their ratification. Moreover, relative to non-lobbying firms, lobbying firms are larger, and more likely to be engaged in international trade and to operate in comparative advantage sectors. To rationalize these findings, we develop a model in which heterogeneous firms decide whether to lobby and how much to spend in favor or against a proposed FTA. We show that the distributional effects are asymmetric: the winners from the FTA have higher stakes in the agreement than the losers, which explains why only pro-FTA firms select into lobbying. The model also delivers predictions on the intensive margin of lobbying. In line with these predictions, we find that firms spend more supporting agreements that generate larger potential gains -- in terms of the extent of the reduction of tariffs on their final goods and intermediate inputs, the depth of the agreement, and the export and sourcing potential of the FTA partners -- and when politicians are less likely to be in favor of ratification.
    Date: 2020–04
  3. By: Peter A. Petri (Peterson Institute for International Economics); Michael G. Plummer (Johns Hopkins University)
    Abstract: The deepening US-China trade war and nationalist reactions to the COVID-19 pandemic are reshaping global economic relationships. Alongside these developments, two new megaregional trade agreements, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Regional Comprehensive Economic Partnership (RCEP), will refocus East Asia's economic ties in the region itself. The new accords are moving forward without the United States and India, once seen as critical partners in the CPTPP and RCEP, respectively. Using a computable general equilibrium model, we show that the agreements will raise global national incomes in 2030 by an annual $147 billion and $186 billion, respectively. They will yield especially large benefits for China, Japan, and South Korea and losses for the United States and India. These effects are simulated both in a business-as-before-Trump environment and in the context of a sustained US-China trade war. The effects were simulated before the COVID-19 shock but seem increasingly likely in the wake of the pandemic. Compared with business as before, the trade war generates large global losses rising to $301 billion annually by 2030. The new agreements offset the effects of the trade war globally, but not for the United States and China. The trade war makes RCEP especially valuable because it strengthens East Asian interdependence, raising trade among members by $428 billion and reducing trade among nonmembers by $48 billion. These shifts bring regional ties closer to institutional arrangements proposed in the 1990s and incentivize greater cooperation among China, Japan, and South Korea.
    Keywords: RCEP, CPTPP, East Asia, Regional Economic Integration, CGE Modeling
    JEL: F13 F14 F15 F5 F6
    Date: 2020–06
  4. By: Zi, Yuan
    Abstract: The extent to which a country can benefit from trade openness crucially depends on how easily it can reallocate resources. However, we know little about the role of domestic frictions in shaping the effects of trade policy. I address this question by analyzing the impact of tariff reductions on the spatial allocation of labor in China and how this impact depends on migration frictions that stem from China's household registration system (hukou). I first provide reduced-form evidence that input trade liberalization has induced significant spatial labor reallocation in China, with a stronger effect in regions with less hukou frictions. The quantitative exercise shows that trade liberalization increases China's welfare by 0.71%. Abolishing the hukou system leads to a direct welfare improvement of 1.33%. Additionally, it increases gains from tariff reductions by 2% and alleviates the latter's negative distributional consequences. I also develop a novel measure of migration frictions associated with the hukou system.
    Keywords: hukou frictions; input trade liberalization; spatial labor reallocation
    JEL: F14 F15 F16
    Date: 2020–03
  5. By: Artuc, Erhan; Bastos, Paulo; Rijkers, Bob
    Abstract: This paper examines the effects of robotization on trade patterns, wages and welfare. It develops a Ricardian model with two-stage production and trade in intermediate and final goods in which robots can take over some tasks previously performed by humans in a subset of industries. An increase in robot adoption in the North reduces the cost of production and thereby impacts trade in final and intermediate goods with the South. The empirical analysis uses ordinary least squares and instrumental-variable regressions exploiting variation in exposure to robots across countries and sectors. Both reveal that greater robot intensity in own production leads to: (i) a rise in imports sourced from less developed countries in the same industry; and (ii) an even stronger increase in exports to those countries. Counterfactual simulations indicate that Northern robotization raises domestic welfare, but initially depresses wages. However, this adverse effect is likely to be reversed by further reductions in robot prices. Northern robotization may lead to higher wages and welfare in the South.
    Keywords: automation; Gains from trade; global value chains; intermediate inputs; jobs; robots; Tasks; Trade; wages
    JEL: F1 J23 J24 O3 O4
    Date: 2020–03
  6. By: Chen, Zhiyuan; Erbahar, Aksel; Zi, Yuan
    Abstract: This paper uses China's processing trade regime to examine firm performance and specialization within a production network. We show that there exists a special breed of firms that are active in both ordinary and processing exports, and are superior to other firms in multiple dimensions. Motivated by these "super processors," we document novel stylized facts on the interplay among exporters' performance, export mode, and brand ownership. We find that productivity and branding ability jointly shape firms' exporting activities. Based on these facts, we provide a general equilibrium model with endogenous production networks where firms are heterogeneous in both manufacturing and branding abilities. Testing our model's central prediction, we find that facilitating processing exports induces productive domestic downstream firms to establish their own trademarks. Our results highlight that processing trade not only leads goods to be "Made in China," but also "Created in China."
    Keywords: Heterogeneous Firms; processing trade; production networks
    JEL: F1 F12 F13 F14 L11 L21
    Date: 2020–03
  7. By: Doerr, Sebastian; Marin, Dalia; Suverato, Davide; Verdier, Thierry
    Abstract: We develop a novel theory of mis-allocation within firms (rather than between firms) due to managers' empire building. We introduce an internal capital market into a two-factor model of multi-segment firms. We show that more open markets impose discipline on competition for capital within firms, which explains why exporters exhibit a lower conglomerate discount than non-exporters (a fact that we establish). Testing our model with data on US companies, we establish that import competition reduces mis-allocation within firms. A one standard deviation increase in Chinese imports lowers the conglomerate discount by 32% and over-reporting of costs by up to 15%.
    Keywords: China shock; Conglomerate discount; Internal Capital Markets; multi-product firms; trade and organization
    JEL: D23 F12 G30 L22
    Date: 2020–03
  8. By: Bernard, Andrew B.; Fort, Teresa; Smeets, Valerie; Warzynski, Frederic
    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 resources for the development, production, and marketing of higher-quality varieties. Firms' reactions also motivate a new offshoring measure â?? produced-good imports â?? that is readily observed in most firm-level datasets.
    Keywords: import competition; Innovation; offshoring; R&D; Skilled Workers; technology
    JEL: F14 F61 L25
    Date: 2020–03
  9. By: Bown, Chad P.; Keynes, Soumaya
    Abstract: On December 10, 2019, the WTO's 25-year-old system of resolving disputes broke down. This paper explains why. It describes the dysfunctional system that preceded the WTO, when the United States dealt with politically troublesome imports by using voluntary export restraints and increasingly resorted to the "aggressively unilateral" Section 301 policy to resolve trade concerns. The WTO was a compromise between the rest of the world and the United States, whereby the latter accepted some constraints with the expectation that the new system of binding dispute settlement would serve its interests. But although the creation of the WTO resolved some concerns about American unilateralism in the short term, its system of handling disputes turned out to be politically unsustainable.
    Keywords: antidumping; Appellate Body; Dispute Settlement; trade remedies; WTO
    JEL: F13
    Date: 2020–03
  10. By: Carrère, Céline; Mrázová, Monika; Neary, J Peter
    Abstract: Gravity as both fact and theory is one of the great success stories of the modern study of international trade, and has featured prominently in policy debates such as that 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, including 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: F10 F14 F17
    Date: 2020–03
  11. By: Borchert, Ingo; Conconi, Paola; Di Ubaldo, Mattia; Herghelegiu, Cristina
    Abstract: The European Union (EU) often conditions preferential access to its market upon compliance by its trading partners with Non-Trade Policy Objectives (NTPOs), including human rights and labor and environmental standards. We systematically document the coverage of NTPOs in EU trade agreements and in its Generalized System of Preferences (GSP). We then examine the extent to which trade agreements and GSP programs can be used to promote NTPOs. Preferential trade agreements are negotiated under multilateral rules, which require members to eliminate all tariffs reciprocally. As a result, once a trade agreement enters into force, the EU cannot easily restrict or extend access to its market so as to "punish bad behavior" or "reward good behavior" on NTPOs by its trading partners. By contrast, GSP preferences are granted on a unilateral basis, so they can be limited or extended, depending on compliance with NTPOs. EU GSP programs can thus provide a carrot-and-stick mechanism to promote NTPOs in partner countries.
    Keywords: Conditionality; GSP; Non-Trade Policy Objectives; Trade agreements
    Date: 2020–04
  12. By: Sebastian Benz (OECD); Frédéric Gonzales (OECD); Annabelle Mourougane (OECD)
    Abstract: This report casts light on the impact of regulatory restrictions on the movement of people across international borders on services trade costs. Such restrictions were implemented on health and safety grounds following the COVID-19 outbreak in March 2020. The analysis relies on several illustrative scenarios in which all the countries are assumed to close their borders to passengers, but leave freight trade open. Services trade costs are estimated to increase by an average of 12% of export values across sectors and countries in the medium term in such a hypothetical scenario. The analysis identifies a large variability in the increase in services-trade costs across sectors and across countries, reflecting the stringency of initial regulations and the relative importance of business travel and labour mobility to international services trade.
    Keywords: COVID-19 (coronavirus), trade in services, travel bans
    JEL: F2 F68 F14
    Date: 2020–07–06
  13. By: Crowley, M. A.; Exton, O.; Han, L.
    Abstract: Since the end of World War II, trade policy around the world has been characterized by a tendency toward greater liberalization. Among developed countries, almost all reductions in import tariffs and relaxation of quantitative restrictions have been negotiated under multilateral, preferential, or bilataral trade agreements. Countries engaged in these negotiations have sought to reduce trade barriers relative to the existing level of protectin - the threat point in the event of a breakdown in negotiations has generally been a continuation of the status quo.
    Date: 2020–03–11
  14. By: Léa Marchal (Universität Bielefeld = Bielefeld University); Clément Nedoncelle (ECO-PUB - Economie Publique - INRA - Institut National de la Recherche Agronomique - AgroParisTech)
    Abstract: This paper investigates the export‐enhancing effect of immigrant workers and how this effect varies across occupations. We use a dataset made of French manufacturing firms from 1997 to 2009 and address the problem of endogenous employment choice using an instrumental variable‐two‐stage least squares (IV‐2SLS) strategy and a doubly robust estimator. Our results show that immigrants in both low‐ and high‐skilled occupations foster exports at both the intensive and the extensive margins. In addition, we show that this effect is spread across all export destinations.
    Abstract: Cet article estime l'effet des travailleurs immigrés sur l'amélioration des exportations et la manière dont cet effet varie selon les occupations. Les auteurs utilisent des données d'entreprises manufacturières françaises de 1997 à 2009. Ils écartent le problème de l'emploi endogène à l'exportation à l'aide d'une stratégie de variable instrumentale (IV-2SLS) et d'un estimateur doublement robuste. Les résultats montrent que les immigrés dans les professions peu ou fortement qualifiées favorisent les exportations à la marge intensive et extensive. De plus, cet effet est réparti sur toutes les destinations d'exportation.
    Date: 2019
  15. By: Matthew T. Cole (Department of Economics, California Polytechnic State University); Jacqueline Doremus (Department of Economics, California Polytechnic State University); Stephen Hamilton (Department of Economics, California Polytechnic State University)
    Abstract: Eco-certification standards are increasingly used by industrial countries to impose import restrictions on goods produced by foreign suppliers. Import restrictions on eco-certified goods that prevent the trade of goods derived from unsustainable practices serve to segment global markets served by foreign producers into a conventional market and a certified market, altering market structure and equilibrium prices in a manner that potentially works against sustainability goals. In this paper, we examine the effect of forest certification on tropical timber production in Central Africa. Using panel data of timber production in Cameroon from 2003 to 2009, we show that conventional timber producers substantially increase harvest rates in response to eco-certification standards, and that this effect is strongest in less competitive timber markets. Moreover, we find eco-certification shifts production to forests with higher extraction costs and potentially higher marginal damages from timber extraction, exacerbating economic inefficiency.
    Keywords: forestry, trade, product differentiation, eco-label
    JEL: Q23 O13 L31
    Date: 2019
  16. By: Horn, Henrik; Tangerås, Thomas
    Abstract: International investment agreements have been intensely criticized, and in particular the "ISDS" mechanisms that enable foreign investors to litigate against host countries. This paper examines the common claim that host countries benefiÂ?t from state-state dispute settlement (SSDS), since this yields less litigation. It assumes the standard rationale for ISDS, that SSDS causes political litigation costs. It shows how a host country might indeed beneÂ?fit from SSDS, but that there is no presumption that these conditions will prevail. Furthermore, negotiations regarding dispute settlement will plausibly yield ISDS, regardless of the distributional consequences for host countries, since SSDS is Pareto inefficient.
    Keywords: expropriation; IDSD; international investment agreement; regulatory chill
    JEL: F21 F23 F55 K33
    Date: 2020–03
  17. By: Kjersti Nes; K Aleks Schaefer
    Abstract: This research investigates the extent to which countries use public standards as a means of political retaliation in the international policy arena. We construct a dataset that matches the adoption of sanitary and phytosanitary (SPS) standards between 1996-2015 with SPS committee data on specific trade concerns and annual, bilateral trade flows. We evaluate the presence and frequency of retaliation by assessing the extent to which measures imposed by one country against another increase the probability that the country targeted by the original measure will respond with a measure of their own. We observe that this type of tit-for-tat behavior commonly occurred outside the product group of the original measure and for politically strategic goods. At the two-digit level, we find that about 3,000 bilateral trade flows globally--or just over $110 billion in trade--were subject to retaliatory standards in 2015.
    JEL: F13 F5 Q18
    Date: 2020–05
  18. By: Douglas L. Campbell (New Economic School); Aleksandr Chentsov (New Economic School)
    Abstract: As several European countries debate entering, or exiting, the euro, a key policy question is how much currency unions (CUs) affect trade. Recently, Glick and Rose (2016) estimated that CUs increase trade on average by 100%, and that the euro has increased trade by 50%. In this paper, we find that other major geopolitical events correlated with CU switches drive the large estimated impact of CUs on trade. We find that these estimates are sensitive to intuitive controls and to dynamic specifications. Overall, we estimate that the impact of CUs on trade is often indistinct from zero, depending on the specification and controls.
    Keywords: Euro, Currency Union Effect, Gravity Estimation
    JEL: F15 F33 F54
    Date: 2020–06
  19. By: Avgerou, Chrisanthi; Bonina, Carla
    Abstract: We develop a perspective of IT innovation in the public sector as a process that involves three complementary areas of ideology and concomitant dispute. First, the widespread view of e-government as a transformative force that leads to major improvements of public sector functions for the benefit of society at large. Second, ideologies concerning the substantive policies enacted by public sector organizations. Third, ideology regarding public sector modernization. Our research examines how the objectives of IT projects and their actual effects in government are influenced by such ideologies and contestations that surround them. We develop our theoretical contribution with a critical discourse analysis that traces the ideological underpinnings of two consecutive IT projects for the administration of international trade in Mexico. This analysis associates the objectives of the IT projects with the emergence and ensuing contestation in Mexican politics of two ideologies: the first ideology concerns free international trade as imperative for economic development; the second ideology concerns public sector modernization which sought to overcome historically formed dysfunctionalities of public administration bureaucracies by adopting management practices from the private sector. The analysis then identifies the effects of the ideologically shaped IT projects on two key values of public administration, efficiency and legality. The insights of this research on the role of ideology in IT innovation complement organizational perspectives of e-government; socio-cognitive perspectives that focus on ideas and meaning, such as technology frames and organizing visions; and perspectives that focus on politics in IT innovation.
    Keywords: information technology; e-government; public administration; ideology; CDA; Mexico; international trade
    JEL: L81
    Date: 2020–01–01
  20. By: Douglas L. Campbell (New Economic School); Karsten Mau (Maastricht University)
    Abstract: Bloom, Draca, and Van Reenen (2016) find that Chinese import competition induced a rise in patenting, IT adoption, and TFP by up to 30% of the total increase in Europe in the late 1990s and early 2000s. We uncover several coding errors in an important robustness check of their patent results. When corrected, we find no statistically significant relationship between Chinese competition and patents. Other specifications in the original paper use a problematic log(1 + patents) transformation. This normalization induces bias given low average patent counts for firms in China-competing sectors, and rapidly declining patents across the sample.
    Keywords: Patents, China, Europe, Textiles, Trade Shocks, Manufacturing
    JEL: F14 F13 L25 L60
    Date: 2020–06
  21. By: Campo, Francesco (University of Milan Bicocca); Mendola, Mariapia (University of Milan Bicocca); Morrison, Andrea (Bocconi University); Ottaviano, Gianmarco (Bocconi University)
    Abstract: A possible unintended but damaging consequence of anti-immigrant rhetoric, and the policies it inspires, is that they may put high-skilled immigrants off more than low-skilled ones at times when countries and businesses intensify their competition for global talent. We investigate this argument following the location choices of thousands of immigrant inventors across US counties during the Age of Mass Migration. To do so we combine a unique USPTO historical patent dataset with Census data and exploit exogenous variation in both immigration flows and diversity induced by former settlements, WWI and the 1920s Immigration Acts. We find that co-ethnic networks play an important role in attracting immigrant inventors. However, we also find that immigrant diversity acts as an additional significant pull factor. This is mainly due to externalities that foster immigrant inventors' innovativeness. These findings are relevant for today's advanced economies that have become major receivers of migrant flows and, in a long-term perspective, have started thinking about immigration in terms of not only level but also composition.
    Keywords: international migration, cultural diversity, innovation
    JEL: F22 J61 O31
    Date: 2020–06
  22. By: Andri Chassamboulli; Xiangbo Liu
    Abstract: How do legal and illegal immigrants affect the fiscal balance and welfare of natives in the host country? To answer this question we develop a general equilibrium model with search frictions in the labor market that accounts for both the direct net contribution of immigrants to the fiscal balance and their indirect fiscal effects through their labor market impact. We calibrate the model to the US economy and find that legal immigrants increase native welfare, mainly due to their positive direct net contribution to the fiscal balance. On the other hand, illegal immigrants' positive welfare impact stems mainly from their positive effect on job creation, which helps improve the fiscal balance, but also increases income to natives and in turn consumption. A legalization program leads to a fiscal gain and increases native welfare and it is more beneficial to the host country's citizens than a purely restrictive immigration policy that reduces the illegal immigrant population.
    Keywords: Immigration, Search Frictions, Fiscal Impact, Welfare, Job creation, Immigration Policies
    JEL: J61 J64 E20 F22
    Date: 2020–06
  23. By: Blessing Chipanda (Department of Economics, University of Pretoria, Pretoria, 0002, South Africa); Matthew Clance (Department of Economics, University of Pretoria, Pretoria, 0002, South Africa); Steven F. Koch (Department of Economics, University of Pretoria, Pretoria, 0002, South Africa)
    Abstract: A number of studies have found that spillovers or other externalities associated with trade are sector specific. Yet trade linkages are typically analysed at the macroeconomic aggregates. We analyse Africa's trade composition spanning 1980-2015, using a disaggregated and detailed classification by technological levels. We find that Africa is a net importer of capital goods and its technological export composition has remained highly concentrated in primary goods, which has contributed to a decline in Africa's share of global exports. We also find that regions within Africa have similar technological export composition structures. A few notable countries that have managed to transform their export composition into more semi-processed and relatively high technology exports are the leading importers of capital goods, are better financially developed and better endowed with human capital, infrastructure, and institutions than other African countries.
    Keywords: Exports, imports, trade composition
    JEL: F10 F19 F60
    Date: 2020–06
  24. By: Stuart Evans (London School of Economics); Michael A Mehling (CEEPR, Massachusetts Institute of Technology); Robert A Ritz (EPRG, University of Cambridge); Paul Sammon (London School of Economics)
    Keywords: Border carbon adjustment, carbon pricing, competitiveness, international trade
    JEL: H23 K33 Q54
    Date: 2020–05
  25. By: Yin-Wong Cheung (City University of Hong Kong, Department of Economics and Finance, Hong Kong); Louisa Grimm (Institute of Empirical Economic Research, Osnabrueck University, 49069 Osnabrueck, Germany); Frank Westermann (Institute of Empirical Economic Research, Osnabrueck University, 49069 Osnabrueck, Germany)
    Abstract: We study the evolution of offshore renminbi trading between 2016 and 2019. The diffusion behaviour of offshore renminbi trading during this period is different from the one between 2013 and 2016. The geographical diffusion process displayed in the 2016-2019 period, in addition to the previously reported convergence to the geographical trading pattern of all currencies, is affected by trade intensity, bilateral swap line arrangements, and has a regional bias. Further, it is possibly affected by disputes with China, and is different from the diffusion behaviours of the offshore US dollar, euro, British pound, and Japanese yen trading.
    Keywords: Global Currency; FX Turnover; Geographical Diffusion; Renminbi Internationalization; Trade Intensity
    JEL: C24 F31 F33 G15 G18
    Date: 2020–06–22
  26. By: Jay Pil CHOI; FURUSAWA Taiji; ISHIKAWA Jota
    Abstract: The paper analyzes multinational enterprises' incentives to manipulate internal transfer prices to take advantage of tax differences across countries, and implications of transfer-pricing regulations as a countermeasure against such profit shifting. We find that tax-motivated foreign direct investment (FDI) may entail inefficient internal production but may benefit consumers. Thus, encouraging transfer-pricing behavior to some extent can enhance social welfare. Furthermore, we consider tax competition between two countries in order to explore the interplay with transfer-pricing regulations. We show that the FDI source country will be willing to set a higher tax rate and tolerate some profit shifting to a tax haven country if the regulation is tight enough. We also indicate a novel mechanism through which it is the larger country that undertakes tax-motivated FDI, the pattern we often observe in reality.
    Date: 2020–04
  27. By: Néstor Duch-Brown; Lukasz Grzybowski; André Romahn; Frank Verboven
    Abstract: We develop a framework to evaluate the impact of market integration, accounting for spillovers between multiple distribution channels. Our adaptation of the standard random coefficients logit demand model allows for substitution between distribution channels and incorporates consumer arbitrage across countries. We apply our framework to the European portable PC market, where geo-blocking practices that restrict online trade have recently been banned. The total consumer and welfare gains from reducing cross-border arbitrage costs are relatively modest, and entirely due to increased product choice rather than reduced price discrimination. At the same time, the distributional effects from the cross-country price convergence are substantial. Consumers in high income countries gain most, while consumers in medium and low income countries are only marginally better or even worse off.
    Date: 2020–06–16
  28. By: Vinicius Curti Cicero; Gilberto Tadeu Lima
    Abstract: This paper develops a general extended version of the balance-of-payments constrained growth model that takes into consideration some often ignored aspects of growth in open economies - namely, the importance of capital flows in the long run, terms of trade changes and trade and payments interdependence among regions. Furthermore, this paper incorporates Thirlwall's analysis into a North-South model that takes into account four intrinsically connected channels through which FDI inflows can affect the productive structure of Southern region - capital accumulation, balance-of-payments components, technological change and income distribution - finding that it still explains uneven development, although reducing the distance between regions by easing the external restriction, that is indicate a more even development path. In addition, this article presents an empirical exercise that, although not conclusive when considering the income elasticities of import ratio, points to a quite relevant result: the non-consideration of income distribution effects in the import functions represents not only the omission of a relevant variable on econometric estimations but, mainly, the omission of an important theoretical channel to understand growth in open economies.
    Keywords: Foreign direct investment; Economic growth; Uneven development; North-South relations; Balance-of-Payments constraint; Functional distribution of income
    JEL: F21 E12 O11 F14
    Date: 2020–06–18
  29. By: Alejandro Cuñat; Robert Zymek
    Abstract: Epidemiological models assume gravity-like interactions of individuals across space without microfoundations. We combine a simple epidemiological frame-work with a dynamic model of individual location choice. The model predicts that flows of people across space obey a structural gravity equation. By means of an application to data from Great Britain we show that our structural-gravity framework: provides a rationale for quarantines; offers a clear mapping from observed geography to the spread of a disease; and makes it possible to evaluate the welfare impact of (expected and unexpected) mobility restrictions in the face of a deadly epidemic.
    Keywords: epidemics, Covid-19, gravity, regional mobility
    JEL: E65 F14 F17 J61 R23
    Date: 2020
  30. By: ITO Keiko; Chin Hee HAHN
    Abstract: This paper examines whether exporting activity contributes to promoting product compositional changes and/or upgrading a plant's product portfolio. We first present evidence that exporters tend to produce, on average, products with higher product attributes than non-exporters do. Next, we find evidence that exporting improves a plant's average product attributes, utilizing propensity score difference-in-difference matching technique. Further examination of the mechanism reveals that the positive effect of exporting on a plant's average product attributes is realized through its effect of adding higher-attribute products and dropping lower-attribute products. Although exporting also promotes share changes among continuously produced products, the effects on product adding/dropping seem to be stronger. The results suggest that exporting might have contributed to the sustained economic growth of Japan by promoting creative destruction.
    Date: 2020–04
  31. By: Giovanni Maggi; Ralph Ossa
    Abstract: We examine how deep agreements on domestic regulations affect welfare in a world where such agreements are influenced by producer lobbies. The answer to this question depends in a critical way on whether the agreement focuses on product standards or on production regulations. International cooperation on product standards can decrease welfare, and this is more likely to happen when producer lobbies are stronger. On the other hand, international cooperation on production regulations tends to enhance welfare when lobbying pressures are strong. A key determinant of the welfare impact of deep agreements is whether the interests of producer lobbies in different countries are aligned or in conflict: the former situation tends to occur in the case of product standards, while the latter situation tends to occur in the case of production regulations.
    JEL: F13 F15 F50
    Date: 2020–05
  32. By: Saleh, Mohamed
    Abstract: Price booms in labor-intensive exports are expected to benefit labor. The surging demand for labor can increase labor coercion, though, if labor is relatively scarce. Using a unique natural experiment, the Lancashire cotton famine in 1861-1865 that prompted Egypt to quadruple its cotton output, and a novel data source, Egypt's population censuses of 1848 and 1868, I document that the cotton famine had a positive impact on labor coercion in rural Egypt. Agricultural slavery emerged, with an influx of imported slaves from Sudan. Owners of large estates confiscated areas with larger (non-slave) local populations. It also had a positive impact on the non-coercive employment in agriculture of local labor. I explain these findings by the scarcity of local labor relative to cotton expansion, and by large landholders' exclusive right to coerce local labor. The findings accentuate the far-reaching unintended consequences of globalization on labor in poorer economies.
    Keywords: Cotton; Globalization; Labor coercion; Labor scarcity; Slavery
    JEL: F16 J47 N35
    Date: 2020–03
  33. By: Mirko Abbritti, Ivan Kim, Tommaso Trani
    Abstract: In the data, emerging market economies’ exports tend to grow after real devaluations, but even when these are large, the rise in export revenues is low and delayed. We examine this fact by in- troducing long-term trade relationships and bargaining into a standard small open economy model. Both domestic exporters and foreign importers need to spend time and resources to establish trade relationships. Once a relationship is formed, export prices and quantities are decided through bilat- eral bargaining. The presence of search frictions and bargaining alters the transmission mechanism of shocks. The long-term nature of trade relationships reduces the expenditure-switching effect re- sulting from exchange rate fluctuations and the allocative role of intermediate export prices. These elements improve the ability of the model to explain export growth following a large devaluation as well as other second moments. Moreover, our sensitivity analysis suggests that higher exporters’ bargaining power or lower trade adjustment costs would make an economy more resilient to interest rate shocks.
    Keywords: Search and Matching, Price Bargaining, Real Exchange Rate, Devaluation, Export Dynamics.
    JEL: E32 F41 F31
    Date: 2020–06
  34. By: Arigoni, Filippo; Lenarčič, Črt
    Abstract: This paper sets up a Bayesian SVAR model on Euro Area data and identifies trade policy uncertainty shocks using a minimum set of sign restrictions. We find that rising trade policy uncertainty adversely affects the real business cycle in the Euro Area mostly in short term, while it has more persistent effects on the Euro effective exchange rate and, to a lesser extent, on prices. In line with the recent geo-political events, the evidence suggests an increasing contribution to Euro Area fluctuations towards the end of the sample period. The results are robust to alternative measures of trade policy uncertainty. Furthermore, we show that sectors exhibit heterogeneous responses to trade policy uncertainty shocks.
    Keywords: Trade policy uncertainty; Euro Area; uncertainty shocks; Bayesian SVAR; sign restrictions.
    JEL: C32 D80 E30 F13
    Date: 2020–06–01
  35. By: Hari Sharma (University of Waikato); John Gibson (University of Waikato)
    Abstract: In the last two decades, Nepal experienced a significant rise in work-related migration and subsequent remittance inflows. We examine the impacts on child education and child labour in a two-wave panel constructed from the 2008 Nepal Labour Force Survey and the 2010 Nepal Living Standards Survey. We use grade-specific net enrolment rates rather than the more commonly studied attendance rate, and exploit variation in destination-driven predicted migration as an instrumental variable. Migration and remittances appear to raise net enrolment of children in secondary education. The positive effect on school outcomes is complemented by a fall in child labour force participation. The effects appear larger for children aged ten and above, and seem to predominantly operate through remittances.
    Keywords: human capital; child labour; migration; school enrolment; Nepal
    JEL: E20 J22 F22 I21 O15
    Date: 2020–06–19
  36. By: Guo, B., Newbery, D.; Newbery, D.
    Abstract: This paper replaces CWPE1951. An additional carbon tax in one market can distort electricity trade with external markets. We show how to estimate the deadweight cost of the distortion and possible external global benefits from reduced emissions, and investigate econometrically the impact of the British Carbon Price Support (CPS, an extra carbon tax) on GB’s cross-border electricity trade with France and The Netherlands. Over 2015-2018 the CPS raised GB day-ahead electricity price by about €11/MWh, after allowing for replacement by cheaper imports. It raised French wholesale price by 3.5% and Dutch wholesale price by 2.8%. The CPS increased GB imports by 12 TWh/yr, thereby reducing carbon tax revenue by €100 m/yr. Congestion income increased by €150 m/yr, half transferred to foreign interconnector owners. The unilateral CPS created €80 m/yr deadweight loss, about 32% of the initial social value created by the interconnector, or 4% of the global emissions benefit of the CPS at €2 bn/yr. About 0.9% of the CO2 emission reduction is undone by France and The Netherlands, the monetary loss of which is about €18 m/yr.
    Keywords: Carbon tax, Bilateral Trading, Electricity Market, Cost-benefit analysis
    JEL: Q48 F14 D61 C13
    Date: 2020–03–10
  37. By: Piotr Lewandowski; Albert Park; Simone Schotte
    Abstract: Studies of the effects of technology and globalization on employment and inequality commonly assume that occupations are identical around the world in the job tasks they require. To relax this assumption, we develop a regression-based methodology to predict the country-specific routine task intensity (RTI) of occupations based on survey data collected in 46 low-, middle- and high-income countries. We find that within the same occupation jobs in low- and middle-income countries are more routine intensive than in high-income countries. We attribute these differences mainly to lower technology use in less-developed countries. Using predicted country-specific RTI measures for 87 countries that together employ more than 2.5 billion workers, we find that from 2000 to 2017 the shift away from routine work and towards non-routine work in low- and middle-income countries was much slower than in the high-income countries. The gap in average RTI increased and high-income countries remain the dominant provider of non-routine work. In contrast, assuming that occupations are identical around the world significantly overestimates the role of non-routine tasks in low- and middle-income countries and leads to an implausible conclusion that they have become the dominant supplier of non-routine work.
    Keywords: de-routinization, economic development, global division of labour, task content of jobs, skills
    JEL: J21 J23 J24
    Date: 2020–06

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