nep-int New Economics Papers
on International Trade
Issue of 2020‒09‒14
thirty-two papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. Investor-State Dispute Settlement and Multinational Firm Behavior By Schjelderup, Guttorm; Stähler, Frank
  2. The impact of FTAs on MENA exports of intermediate and final goods By Cardozo, Adriana R.; Martínez-Zarzoso, Inmaculada; Vogler, Paula L.
  3. Greater than the Sum of its Parts? How does Austria Profit from a Widening Network of EU Free Trade Agreements? By Julia Grübler; Oliver Reiter
  4. Gains from trade or from catching-up? Value creation and distribution in the era of China's WTO accession By Giovanni Dosi; Maria Enrica Virgillito; Xiaodan Yu
  5. How Do Restrictions on High-Skilled Immigration Affect Offshoring? Evidence from the H-1B Program By Britta Glennon
  6. Productivity Convergence : Is Anyone Catching Up? By Kindberg-Hanlon,Gene; Okou,Cedric Iltis Finafa
  7. Collateral Damage? Labour Market Effects of Competing with China – at Home and Abroad By Cabral, Sónia; Martins, Pedro S.; Pereira dos Santos, João; Tavares, Mariana
  8. Intra-African Trade By William W. Olney
  9. Trade agreements and international technology transfer By Martínez-Zarzoso, Inmaculada; Chelala, Santiago
  10. Tariff Volatility and Tariff Policy in Developed and Developing Countries By Gnangnon, Sena Kimm
  11. Exporting and Pollution Abatement Expenditure: Evidence from Firm-Level Data By Soumendra N. Banerjee; Jayjit Roy; Mahmut Yasar
  12. Services trade and labour market outcomes By Andrea Lassmann
  13. Services trade costs in the United States: A simulation based on the OECD Services Trade Restrictiveness Index By Sebastian Benz; Alexander Jaax
  14. Unpicking Portugal’s export performance: A microdata analysis By Paula Adamczyk; Ben Westmore
  15. Migration and Cultural Change By Hillel Rapoport; Sulin Sardoschau; Arthur Silve
  16. Impact on the Mongolian Economy of Foreign Direct Investment in the Coal-Export Sector By Ragchaasuren Galindev; Nyambaatar Batbayar; Lulit Mitik Beyene; Oyunzul Tserendorj; Unurjargal Davaa
  17. Trade Disruption, Industrialisation, and the Setting Sun of British Colonial Rule in India By Roberto Bonfatti; Björn Brey
  18. Does the COVID-19 Pandemic Improve Global Air Quality? New Cross-National Evidence on Its Unintended Consequences By Dang, Hai-Anh; Trinh, Trong-Anh
  19. Regional Variations in the Brexit Vote: Causes and Potential Consequences By Blackaby, David H.; Drinkwater, Stephen; Robinson, Catherine
  20. Exchange Rate Pass-through: An exploration on India’s automobile sector By Sengupta, Darpajit; Sinha Roy, Saikat
  21. Trade Wars, Currency Wars By Stéphane Auray; Michael B. Devereux; Aurélien Eyquem
  22. Trade, Unemployment, and Monetary Policy By Matteo Cacciatore; Fabio Ghironi
  23. Globalization, Time-Preferences, and Populist Voting By Thomas Aronsson; Clemens Hetschko; Ronnie Schöb
  24. China-Middle East Economic Relations and the Belt and Road Initiative By Nader Habibi
  25. Domestic Versus Foreign Drivers Of Trade (Im)Balances: How Robust Is Evidence From Estimated DSGE Models By Roberta Cardani; Stefan Hohberger; Philipp Pfeiffer; Lukas Vogel
  26. Impact of a Single Customs Territory in the East African Community on Tanzania's exports By Anne Kamau; Maureen Odongo
  27. The Brexit referendum and the rise in hate crime; conforming to the new norm By Facundo Albornoz; Jake Bradley; Silvia Sonderegger
  28. Multinational Corporation Affiliates, Backward Linkages, and Productivity Spillovers in Developing and Emerging Economies : Evidence and Policy Making By Jordaan,Jacob Arie; Douw,Willem; Qiang,Zhenwei
  29. Automation, globalisation and relative wages: An empirical analysis of winners and losers By Gravina, Antonio Francesco; Foster-McGregor, Neil
  30. Optimal Border Control during the Re-opening Phase of the COVID-19 Pandemic By Zhen Zhu; Enzo Weber; Till Strohsal; Duaa Serhan
  31. Globalisation and responsibility in the ecological problems By Jordi Roca Jusmet; Emilio Padilla Rosa
  32. World Economy Summer 2020 - Historic contraction of the world economy By Gern, Klaus-Jürgen; Hauber, Philipp; Kooths, Stefan; Stolzenburg, Ulrich

  1. By: Schjelderup, Guttorm (Dept. of Business and Management Science, Norwegian School of Economics); Stähler, Frank (School of Business and Economics, University of Tübingen)
    Abstract: This paper shows that Investor-State Dispute Settlements (ISDS) makes multinational firms more aggressive by increasing cost-reducing investments with the aim to enlarge the potential compensation an ISDS provision may offer. While a larger investment reduces the market distortion, it will also make potential compensations larger. Consequently, potential compensations to a foreign investor do not imply a zero-sum game. ISDS may decrease domestic welfare, in particular if the investment leads to the establishment of an export platform, and we find that even global welfare may decline.
    Keywords: Investor-State Dispute Settlement; Multinational Enterprises; Foreign Direct Investment; TTIP; TPP
    JEL: F21 F23 F53 F55
    Date: 2020–08–28
  2. By: Cardozo, Adriana R.; Martínez-Zarzoso, Inmaculada; Vogler, Paula L.
    Abstract: This paper is the first to analyze the impact of free trade agreements (FTAs) and the harmonization of rules of origin (RoO) on Middle East and North African (MENA) countries' exports differentiating between final and intermediate goods for a global sample of trade partners. Data on exports from four MENA countries (Egypt, Jordan, Morocco and Tunisia) to 61 destinations over the period 1995-2016 are used to estimate a structural gravity model applying a Poisson Pseudo Maximum Likelihood (PPML) estimator. Moreover, the paper estimates the effect of the progressive adoption of the Pan-European-Mediterranean RoO. Results show that FTAs have been overall successful in increasing MENA exports. This is particularly truefor FTAs that eliminate protection on agricultural products. In contrast to the existing literature, we find that the agreements concluded with European countries raise MENA exports, whereas no significant impact is found for the application of the Pan-European RoO.
    Keywords: gravity model,FTA,MENA,PPML,panel data
    JEL: F10
    Date: 2020
  3. By: Julia Grübler (The Vienna Institute for International Economic Studies, wiiw); Oliver Reiter (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: Political debates and economic analyses often focus on single free trade agreements and their potential economic effects on participating trading partners. This study contributes to the literature by shedding light on the significance of trade agreements in the context of countries’ positions in worldwide trade agreement networks, by combining network theory with gravity trade modelling. We illustrate, both numerically and graphically, the evolution of the global web of trade agreements in general, and the network of the European Union specifically, accounting for the geographical and temporal change in the depth of agreements implemented. Gravity estimations for the period 1995-2017 distinguish the direct bilateral effects of trade agreements from indirect effects attributable to the scope of trade networks and countries’ positions therein.
    Keywords: Free trade agreements, network effects, trade policy, structural gravity model
    JEL: D58 F13 F14 F43
    Date: 2020–09
  4. By: Giovanni Dosi; Maria Enrica Virgillito; Xiaodan Yu
    Abstract: In this article we focus on the role of exports in Chinese economic development in the era of WTO accession. We address a series of different, although connected, questions. First, do Chinese exporting and non-exporting firms differ in terms of their productivity performance and paid wages? Second, to what extent exporting and non-exporting firms have contributed to the process of convergence and catching-up? Third, does the productivity-wage pass-through differ between exporting and non-exporting firms? Overall our findings downplay the role of exporting firms as both carriers of labour productivity and wage growth for the Chinese economy. In this respect, ''gains from catching-up'' outweigh any ''gain from trade''.
    Keywords: Export; Wage; Productivity; Trade; Event studies
    Date: 2020–09–01
  5. By: Britta Glennon
    Abstract: Skilled immigration restrictions may have secondary consequences that have been largely overlooked in the immigration debate: multinational firms faced with visa constraints have an offshoring option, namely, hiring the labor they need at their foreign affiliates. If multinationals use this option, then restrictive migration policies are unlikely to have the desired effects of increasing employment of natives, but rather have the effect of offshoring jobs. Combining visa data and comprehensive data on US multinational firm activity, I find that restrictions on H-1B immigration caused foreign affiliate employment increases at the intensive and extensive margins, particularly in Canada, India, and China.
    JEL: F16 F22 F23 J61 O3
    Date: 2020–07
  6. By: Kindberg-Hanlon,Gene; Okou,Cedric Iltis Finafa
    Abstract: Labor productivity in EMDEs is just under one-fifth of the advanced economy average, while in LICs, it is just 2 percent. Average productivity growth in EMDEs has picked up rapidly since 2000, renewing interest in the convergence hypothesis, which predicts that economies with low productivity should close productivity gaps over time. However, the average rate of convergence remains low, with current growth differentials halving the productivity gap only after over 100 years. Behind the low average pace of convergence lies considerable diversity among groups of countries converging toward different productivity levels (convergence clubs). Many EMDEs have moved into higher-level productivity convergence clubs since 2000, with 16 joining the highest club, primarily consisting of advanced economies. These transitioning EMDEs have been characterized by systematically better initial education levels, greater institutional quality, and high or deepening economic complexity relative to their income level, frequently aided by policies to encourage participation in global value chains. Countries seeking to replicate successes, or continue along rapid convergence paths, face a range of headwinds, including a more challenging environment to gain market share in manufacturing production or to increase global value chain integration.
    Keywords: Labor Markets,International Trade and Trade Rules,Educational Sciences,Economic Growth,Industrial Economics,Economic Theory&Research
    Date: 2020–09–02
  7. By: Cabral, Sónia; Martins, Pedro S.; Pereira dos Santos, João; Tavares, Mariana
    Abstract: The increasing range and quality of China’s exports is a major development internationally with potentially far-reaching effects. In this paper, on top of the direct labour market effects of imports from China studied in previous research, we also measure the indirect effects stemming from increased export competition in third markets. Our findings, based on matched employeremployee data of Portugal covering the 1991-2008 period, indicate that workers’ earnings and employment are significantly negatively affected by China’s competition, but only through the indirect ’market-stealing’ channel. In contrast to earlier evidence, the direct effects of Chinese imports are mostly non-significant. The results are robust to a number of checks and also highlight particular groups more affected by indirect competition, including women, older and less educated workers, and workers in larger, older and domestic firms.
    Keywords: International trade,Labour market,Matched employer-employee data,China,Import competition
    JEL: F14 F16 F66 J31
    Date: 2020
  8. By: William W. Olney (Williams College)
    Abstract: This paper examines why the intra-continental trade share in Africa is only 12%, compared to 47% in North America, 53% in Asia, and 69% in Europe. Results show that exports to other African countries decrease more quickly with distance and increase less quickly with economic size, than exports to non-African countries. The analysis investigates possible explanations and identifies factors that promote trade between African countries. Intra-African exports are found to disproportionately increase with infrastructure (especially roads), trade agreements, and a more efficient customs clearing process. Diversifying the domestic economy away from agriculture and towards services is also associated with more intra-African trade. These results can guide efforts to promote African economic integration.
    Keywords: intra-continental trade, exports, infrastructure, corruption, trade agreements, Africa
    JEL: F14 F15 O55
    Date: 2020–07
  9. By: Martínez-Zarzoso, Inmaculada; Chelala, Santiago
    Abstract: This is the first paper that analyzes for a global sample how trade agreements that include technology-related provisions impact exports of goods, and how this impact differs depending on the technology content of the goods. It includes estimations of a structural gravity model for a panel of 176 countries over the period 1995-2015. The model differentiates between provisions relating technology transfer, technical cooperation, research and development (R&D), and patents and intellectual property rights. It also estimates the differences in these effects depending on whether the trade flow in question is between countries with similar or different levels of development. The main results indicate that regional trade agreements (RTAs) that contain technology provisions generate a significantly higher volume of trade than RTAs that do not, after controlling for the depth of the RTAs. For countries that ratify RTAs that include such provisions, it is exports of technology-intensive goods that increase the most. Trade agreements including such provisions have a heterogeneous effect that varies by income level of the trading partners and depends on the extent to which the RTA incorporates other provisions.
    Keywords: sectoral exports,trade agreements,gravity model,PPML,technology transfer,innovation,Intellectual Property Rights
    JEL: F13 O33
    Date: 2020
  10. By: Gnangnon, Sena Kimm
    Abstract: In this paper, we investigate 'at the aggregate level', the effect of tariff volatility on tariff rates, using three groups of products, including 'all products', 'manufactured products' and 'primary products', and a large panel dataset covering 163 countries over the period 1995-2017. Results, based on the feasible generalized least squares estimator, have shown for the full sample that tariff volatility leads to a greater extent of tariff liberalization. This finding holds for each of the three groups of products highlighted above, as well as for three sub-samples, including lower-middle income countries, upper-middle income countries and high-income countries. However, for Low-income countries, tariff volatility influences significantly (although negatively) tariff rates only for primary products. Additionally, for recipient-countries of Aid for Trade related to trade policy and regulation (AfTPOL), the effect of tariff volatility on tariff rates is conditional upon the amounts of AfTPOL flows only for primary products. Specially, there exists a substitutability between tariff volatility and AfTPOL flows in influencing tariffs applied on primary products. For lower amounts of AfTPOL flows, tariff volatility induces a greater extent of tariff liberalization, while for higher amounts of these aid flows, tariff volatility results in higher tariff rates. Alternatively, the higher the amounts of AfTPOL flows, the greater is the positive effect of tariff volatility on the extent of liberalization of tariff on primary products.
    Keywords: Tariffs,Tariff volatility,Primary products,Manufactured products
    JEL: F14 F35
    Date: 2020
  11. By: Soumendra N. Banerjee; Jayjit Roy; Mahmut Yasar
    Abstract: The relevance of analyzing whether exporting firms engage in greater pollution abatement cannot be overemphasized. For instance, the question relates to the possibility of export promotion policies being environmentally beneficial. In fact, the issue is especially relevant for developing countries typically characterized by ineffective environmental regulation. However, despite the significance of the topic, the extant literature examining the environmental consequences of firm-level trade is skewed toward developed countries. Moreover, the existing contributions rarely attend to concerns over non-random selection into exporting. Accordingly, we employ cross-sectional data across Indonesian firms as well as a number of novel identification strategies to assess the causal effect of exporting on abatement behavior. Two of the approaches are proposed by Millimet and Tchernis (2013), and entail either minimizing or correcting for endogeneity bias. The remaining methods, attributable to Lewbel (2012) and Klein and Vella (2009), rely on higher moments of the data to obtain exclusion restrictions. While we largely find exporting to encourage pollution abatement, the estimated impacts are more pronounced after accounting for selection into exporting.
    Keywords: Treatment Effect; Pollution Abatement; Instrumental Variables; Environment; Exporting
    JEL: C26 F18 F23 Q41
    Date: 2020–07–17
  12. By: Andrea Lassmann (OECD)
    Abstract: This report draws on individual-level and firm-level data to better understand the relationships between services trade and labour market outcomes. It seeks to shed light on how firms benefit from the rise in services trade, which groups of workers are affected the most, how employment and wages adjust to increased services trade, and the impact of policy settings on outcomes in these areas. It relies on new empirical analyses undertaken on the European Union, Brazil, India, Italy, Slovenia, Sweden, the United Kingdom, and Viet Nam together with insights from economic literature and a meta-analysis of the results underlying this report. Findings suggest that firms’ importing, offshoring and exporting activities are generally associated positively with firm employment in advanced and emerging market economies, although the relationship is more uncertain for the latter group of countries. Firm’s overall wage responses to services trade are on average positive as well, but quantitatively small. Looking at the distributional impact, there is mixed evidence for a skill bias in wages related to increased services exports and imports. Women are found to benefit from services export growth, while increased imports are estimated to exert downward pressure on the wages of women compared to the ones of men.
    Keywords: employment, individual and firm-level data, wages
    JEL: C26 F16 F61 J40
    Date: 2020–09–09
  13. By: Sebastian Benz; Alexander Jaax
    Abstract: While services account for almost 80% of GDP in the United States and a growing share of global trade, regulatory barriers to services trade around the world are still high. Using a hypothetical liberalisation scenario, this paper assesses the potential reduction of trade costs that could be achieved in 17 US services sectors. The analysis relies on the OECD Services Trade Restrictiveness Index (STRI) which records barriers to services trade in 46 economies. The illustrative scenario assumes a 50% reduction in the gap between the current STRI score of the United States and the score of the least restrictive country in each sector. The results highlight the economic benefits of aligning US services regulation with global best practice. The average reduction in trade costs across the 17 sectors analysed would amount to 9.7 percentage points, with a quarter of the sectors experiencing reductions larger than 14.1 percentage points and another quarter experiencing reductions smaller than 5.3 percentage points.
    Keywords: regulation, services trade, services trade restrictions, trade cost, trade liberalisation
    JEL: F13 F14 F15 F68 L88
    Date: 2020–09–14
  14. By: Paula Adamczyk; Ben Westmore
    Abstract: Portugal has notably increased its international openness over recent decades, with exports’ share of GDP rising by 20 percentage points since 1993. This analysis couples microdata with panel regression techniques to investigate the drivers of Portuguese export growth over the 1995-2016 period. The results highlight that there was no one single factor behind the export expansion. While an improvement in price competitiveness played a significant role, the majority of the increase in exports was explained by other factors. These include increases in the quality of export products and weak domestic demand that prompted firms to increase their focus on foreign markets. The empirical results also suggest that the restoration of the health of the Portuguese financial sector and its further development is beneficial for export growth.
    Keywords: competitiveness, export performance, financial development, international trade, microdata, Portugal
    JEL: F10 F14 F43 F65 C32 C55
    Date: 2020–09–14
  15. By: Hillel Rapoport; Sulin Sardoschau; Arthur Silve
    Abstract: We examine both theoretically and empirically how migration affects cultural change in home and host countries. Our theoretical model integrates various compositional and cultural transmission mechanisms of migration-based cultural change for which it delivers distinctive testable predictions on the sign and direction of convergence. We then use the World Value Survey for the period 1981-2014 to build time-varying measures of cultural similarity for a large number of country pairs and exploit within country-pair variation over time. Our evidence is inconsistent with the view that immigrants are a threat to the host country’s culture. While migrants do act as vectors of cultural diffusion and bring about cultural convergence, this is mostly to disseminate cultural values and norms from host to home countries (i.e., cultural remittances).
    Keywords: Migration;Cultural Change;Globalization
    JEL: F22 O15 Z10
    Date: 2020–09
  16. By: Ragchaasuren Galindev; Nyambaatar Batbayar; Lulit Mitik Beyene; Oyunzul Tserendorj; Unurjargal Davaa
    Abstract: This paper developed a recursive dynamic Computable General Equilibrium model to examine the impact on the Mongolian economy of Foreign Direct Investment (FDI) in the coal-export sector. Based on a 2014 Social Accounting Matrix, the model simulated two scenarios during the 2016-2025 period: 1) a business-as-usual scenario as a reference case that replicated the latest IMF projections for main macroeconomic variables; and 2) an FDI scenario in which the coal-export sector received 1 trillion MNT over four years between 2019-2022, which increased production capacity in 2023. Although FDI increased GDP, employment, private consumption, and investment while decreasing budget deficits and public debt, it altered the structure of the economy and created a Dutch disease effect.
    Keywords: Mining sector, Dutch disease, CGE model, Mongolian economy
    JEL: D58 Q33
    Date: 2020
  17. By: Roberto Bonfatti; Björn Brey
    Abstract: Colonial trade encouraged the colonies to specialise in primary products. Did this prevent in-dustrialisation in the colonies? And did lack of industrialisation, in turn, help to keep the colonies under control? To answer these questions, we examine the impact of the temporary collapse in trade between Britain and India due to World War I, on industrialisation and anti-imperial feelings in India. Exploiting cross-district variation in exposure to the trade shock stemming from initial differences in industrial specialisation, we find that districts more exposed to the trade shock experienced substantially faster industrial growth in 1911-21, placing them on a higher level of industrialisation which has persisted up to today. Using the World War I trade shock as an instrument for industrialisation levels, we also find that more industrialised districts were more likely to express anti-imperial feelings in 1922, and to vote for the Indian National Congress in the landmark election of 1937. These results suggest that colonial trade may have played an important role in preventing colonial industrialisation, and in embedding foreign rule.
    Keywords: colonial trade, India, infant-industry argument, decolonisation
    JEL: F14 F54 O14 N65
    Date: 2020
  18. By: Dang, Hai-Anh (World Bank); Trinh, Trong-Anh (World Bank)
    Abstract: Despite a growing literature on the impacts of the COVID-19 pandemic, scant evidence currently exists on its impacts on air quality. We offer the first study that provides cross-national evidence on the causal impacts of COVID-19 on air pollution. We assemble a rich database consisting of daily, sub-national level data of air quality for 178 countries before and after the COVID-19 lockdowns, and investigate their impacts on air quality using a Regression Discontinuity Design approach. We find the lockdowns to result in significant decreases in global air pollution. These results are consistent across measures of air quality and data sources and robust to various model specifications. Some limited evidence emerges that countries with a higher share of trade and manufacturing in the economy or with an initially lower level of air pollution witness more reduced air pollution after the lockdowns; but the opposite result holds for countries near the equator. We also find that mobility restrictions following the lockdowns are a possible explanation for improved air quality.
    Keywords: regression discontinuity design, COVID-19, air pollution, mobility restriction
    JEL: D00 H00 O13 Q50
    Date: 2020–07
  19. By: Blackaby, David H. (Swansea University); Drinkwater, Stephen (University of Roehampton); Robinson, Catherine (University of Kent)
    Abstract: There were large regional differentials in the Brexit vote. Most notably, the percentage voting to leave the EU ranged from 38% in Scotland and 40% in London to 59% in the East and West Midlands. Turnout also varied across Britain, from a low of 67% in Scotland to 77% in the South East and South West. Existing empirical studies have tended to focus on the demographic composition of geographical areas to identify the key socio-economic characteristics in explaining spatial and other variations in the leave vote - with age and education found to be important drivers. We use the British Social Attitudes Survey to provide a more nuanced picture of regional differences in the Brexit vote by examining in particular the role that national identity and attitudes towards immigration played. In addition to education, we find that national identity exerted a strong influence on the probability voting leave in several English regions, including the East, North East, London and South East. Whereas, over and above this, concerns about immigration had a quantitatively large and highly significant impact in all regions bar London, and the East to a lesser extent. Differences by country of birth are also explored, with national identity and concerns about immigration having a larger impact for the English-born. Our findings are then discussed in the light of changes that have affected regional economies during the process of increased globalisation, austerity, the current Covid-19 crisis and recent UK government announcements to rebalance the economy.
    Keywords: Brexit, regional economies, globalisation, immigration
    JEL: D72 R11 F60 J61
    Date: 2020–08
  20. By: Sengupta, Darpajit; Sinha Roy, Saikat
    Abstract: This study is aimed at estimating the Exchange Rate Pass Through (ERPT) to export prices of Indian Automobiles at HS 8 digit level classification. Using profit maximising approach of firms, in lines of Bailliu and Fujii (2004) theoretical specification this paper estimates the ERPT elasticities in the ambit of dynamic panel data technique. While the pass through is quite low for tractors and bicycles, the elasticities are high for vehicular spare parts and fighting equipment like tankers etc. Unlike in the short run, the pass through is relatively high in the long run. The dynamic panel results at the aggregate level show that trade openness and world demand are statistically significant variables in explaining the volatility of export prices in a small open economy like India. The findings on exchange rate pass through have implications for exchange rate being used as an important policy instrument for export promotion and growth on one hand, and in reducing current account deficit, on the other hand.
    Keywords: exchange rate pass-through, export prices, dynamic panel data
    JEL: C23 F14 F31 F41
    Date: 2020–02
  21. By: Stéphane Auray; Michael B. Devereux; Aurélien Eyquem
    Abstract: For most of the post WWII period, until recently, trade protectionism followed a downward trend, and was formulated in multilateral or bilateral agreements between countries. Recently however, there hasbeen a sharp shift towards unilateral, discretionary trade policy focused on short term macroeconomic objectives, and as a consequence, the use of trade policy has become entangled with that of monetary policy. This paper explores the consequences of this shift within a standard DSGE open economy macroeconomic model. We find that a discretionary non-cooperative approach to trade policy can significantly worsen macroeconomic conditions. Moreover, the stance of monetary policy has major implications for the degree of protection in a non-cooperative equilibrium. In particular, cooperative determination of monetary policy implies an increase in both equilibrium tariffs and inflation, and a significant fall in welfare. By contrast, when the exchange rate is pegged by one country, equilibrium rates of protection are generally lower, but in this case, there are multiple asymmetric equilibria in tariff rates which benefit one country relative to another. We also explore the determination of non-cooperative tariffs in a situation where monetary policy is constrained by the zero lower bound on nominal interest rates.
    JEL: F30 F40 F41
    Date: 2020–07
  22. By: Matteo Cacciatore; Fabio Ghironi
    Abstract: We study how trade linkages affect the conduct of monetary policy in a two-country model with heterogeneous firms, endogenous producer entry, and labor market frictions. We show that the ability of the model to replicate key empirical regularities following trade integration---synchronization of business cycles across trading partners and reallocation of market shares toward more productive firms---is central to understanding how trade costs affect monetary policy trade-offs. First, productivity gains through firm selection reduce the need of positive inflation to correct long-run distortions. As a result, lower trade costs reduce the optimal average inflation rate. Second, as stronger trade linkages increase business cycle synchronization, country-specific shocks have more global consequences. Thus, the optimal stabilization policy remains inward looking. By contrast, sub-optimal, inward-looking stabilization---for instance too narrow a focus on price stability---results in larger welfare costs when trade linkages are strong due to inefficient fluctuations in cross-country aggregate demand.
    JEL: E24 E32 E52 F16 F41 J64
    Date: 2020–07
  23. By: Thomas Aronsson; Clemens Hetschko; Ronnie Schöb
    Abstract: Societies see growing support for populist politicians who advocate an end to globalization. Our behavioral economics model links impatience to voters’ appraisals of an income shock due to globalization that is associated with short-run costs and delayed gains. The model shows that impatient individuals may reject further globalization if they are subject to borrowing constraints. Using German data, we confirm that impatient voters choose right-wing anti-globalist parties. Similarly, we show for the United Kingdom that a preference for immediate gratification increases the support for right-wing anti-globalist parties as well as for Brexit. A policy implication of our study is that governments may use up-front redistribution to gain voters’ support for further globalization.
    Keywords: globalization, time-preference, impatience, time-inconsistency, populism, Brexit, up-front redistribution
    JEL: D72 D91 F15 F61 F68 H53
    Date: 2020
  24. By: Nader Habibi (Brandeis University)
    Abstract: While many Middle Eastern countries maintain strong military and strategic relations with the United States and Europe, they have significantly increased their trade and investment ties with China since 2000. China has emerged the largest trade partner and crude oil customer for most MENA countries. Now China is offering investment and financial incentive to Middle Eastern countries to join its Belt and Road global connectivity project. In Israel, Egypt and GCC countries China’s investments are oriented toward development of seaports and economic free zones near them. In Iran and Iraq, China is developing railways and highways to enhance their transit and transport connectivity in the Belt and Road land transport network. The Covid-19 pandemic has led to a setback in China’s infrastructure investments in MENA countries but it is using the health crisis to enhance its digital, telecommunication and healthcare related investments in the region. So far China has managed to maintain a policy and non-interference and neutrality in multiple conflicts among Middle Eastern countries and develop good relations with both sides of each conflict such as Iran and Saudi Arabia. China has also been very cautious about respecting the U.S. strategic interests in the region. The escalation of tensions between the United States and China might force China to change this strategy. China might react to recent attempts by the United States to prevent some MENA countries from awarding investment contracts to Chinese firms. China might also show more willingness to develop closer ties with the regional adversaries of the United States such as Iran and the Syrian regime.
    JEL: Q43 F55 O10
    Date: 2019–09
  25. By: Roberta Cardani (European Commission, Joint Research Centre (JRC), Ispra, Italy); Stefan Hohberger (European Commission, Joint Research Centre (JRC), Ispra, Italy); Philipp Pfeiffer (European Commission, Directorate General for Economic and Financial Affairs, Brussels, Belgium); Lukas Vogel (IRES, UCLouvain and European Commission, Directorate General for Economic and Financial Affairs, Brussels, Belgium)
    Abstract: Estimated DSGE models tend to ascribe a significant and often predominant part of a country's trade balance (TB) dynamics to domestic drivers ("shocks"), suggesting foreign factors to be only of secondary importance. This paper revisits the result based on more agnostic approaches to shock transmission and using "agnostic structural disturbances". We estimate multi-region models for Germany and Spain as countries with very distinct TB patterns since 1999. Results suggest that domestic drivers remain dominant when theory-based restrictions on shock transmission are relaxed, although the transmission of foreign shocks is strengthened.
    Keywords: Agnostic structural disturbances, open economy DSGE model, trade balance, Germany, Spain
    JEL: F30 F32 F41 F45
    Date: 2020–03–02
  26. By: Anne Kamau; Maureen Odongo
    Abstract: The implementation of a Single Customs Territory by East African Community countries is intended to ease the movement of goods across borders by cutting costs and time through harmonization and simplification of customs documents, removal of burdensome customs procedures, and automation of customs systems. Using descriptive statistics and an econometrics estimation method, this study examines the impact of a Single Customs Territory on Tanzania's exports from 2004 to 2018.
    Keywords: Single Customs Territory, Trade costs, East African Community, Trade
    Date: 2020
  27. By: Facundo Albornoz (University of Nottingham); Jake Bradley (University of Nottingham); Silvia Sonderegger (University of Nottingham)
    Abstract: We document a sharp increase in hate crime in the aftermath of the Brexit referendum. We show that this rise was more pronounced in more pro-remain areas. These facts are consistent with a model in which individual behavior is dictated by a desire to conform to imperfectly observable social norms in addition to following individual preferences. Arguably, the referendum was a source of new information about society’s overall preferences over immigration in a context where other determinants of attitudes remained constant. We exploit this feature of the referendum for identiï¬ cation. We build a quantitative model to examine whether the observed trends can be replicated with a sensible parameterization of the model. Our estimation of the conformity parameter allows us to quantify the role of shared narratives, national identity and stereotypes in shaping aggregate behavior.
    Keywords: Hate crime, Brexit, attitudes towards immigrants, social norms, value of information
    Date: 2020–12
  28. By: Jordaan,Jacob Arie; Douw,Willem; Qiang,Zhenwei
    Abstract: Recent research on productivity spillovers from affiliates of multinational corporations in developing and emerging economies finds that backward linkages from affiliates of foreign-owned firms to local suppliers constitute the main channel transmitting productivity spillovers. This finding has important policy implications, given that host economy governments often spend considerable resources on attracting multinational corporation investments and promoting their impact on technological development and economic growth. This paper conducts a new and comprehensive survey of recent empirical studies that focus on the drivers and impacts of backward linkages between multinational corporation affiliates and their local suppliers. The literature survey reveals that several characteristics of multinational corporation affiliates and domestic firms, host economy conditions, and various mediating factors influence the level of use of local suppliers, the nature and degree of technology dissemination, and the materialization of productivity spillovers among domestic firms. These findings are used to identify the main areas where policy making can be effective. The paper discusses various types of soft or light-handed industrial policies that host economy governments can design and implement to foster the extent of linkages between multinational corporations and local suppliers, facilitate technology dissemination, and enhance productivity spillovers among domestic firms.
    Keywords: International Trade and Trade Rules,Macroeconomic Management,Economic Forecasting,Governance Diagnostic Capacity Building,Macroeconomics and Economic Growth,Economic Policy, Institutions and Governance,Access to Finance
    Date: 2020–08–24
  29. By: Gravina, Antonio Francesco (Department of Law, University of Palermo, Italy and Department of Economics, University of Messina, Italy); Foster-McGregor, Neil (UNU-MERIT, Maastricht University)
    Abstract: In this paper, we study the effects of advances in robotics, tangible and intangible technologies, and trade openness and global value chain participation on relative wages, relying upon the skill-biased technical change and polarisation of the labour force frameworks. The empirical analysis is carried out using a panel dataset comprising 18 mostly advanced European economies and 6 industries, with annual observations spanning the period 2008-2017. Our findings suggest that intangible technologies - especially software & databases - significantly increase the wage premium for high relative to lower-skilled labour. Additionally, the tangible component of ICT primarily benefits lower-skilled workers, whereas R&D and trade openness produce polarising effects. The results are robust to the inclusion of sector-specific labour market regulations variables in the models.
    Keywords: Robots, Intangibles, Automation, ICT, Globalisation, Wage Differentials
    JEL: C01 F16 F63 J31 O11 O33 O43
    Date: 2020–09–03
  30. By: Zhen Zhu; Enzo Weber; Till Strohsal; Duaa Serhan
    Abstract: Most of the existing literature on the current pandemic focuses on approaches to model the outbreak and spreading of COVID-19. This paper proposes a generalized Markov-Switching approach, the SUIHR model, designed to study border control policies and contact tracing against COVID-19 in a period where countries start to re-open. We offer the following contributions. First, the SUIHR model can include multiple entities, reflecting different government bodies with different containment measures. Second, constraints as, for example, new case targets and medical resource limits can be imposed in a linear programming framework. Third, in contrast to most SIR models, we focus on the spreading of infectious people without symptoms instead of the spreading of people who are already showing symptoms. We find that even if a country has closed its borders completely, domestic contact tracing is not enough to go back to normal life. Countries having successfully controlled the virus can keep it under check as long as imported risk is not growing, meaning they can lift travel restrictions with similar countries. However, opening borders towards countries with less controlled infection dynamics would require a mandatory quarantine or a strict test on arrival.
    Date: 2020–08
  31. By: Jordi Roca Jusmet (Department of Economic theory, Universidad de Barcelona, 08034, Barcelona, Spain); Emilio Padilla Rosa (Department of Applied Economics, Universidad Autónoma de Barcelona, 08193, Bellaterra, Spain)
    Abstract: Most statistics, analyses and policies on environmental pressures take a territorial perspective. According to this, environmental pressures are assigned to the country (region or city) in which they are generated. However, the global economy is characterised by massive flows of goods between different territories. Therefore, it is important to analyse the environmental pressures caused by domestic demands of a country, regardless of where they take place. This perspective is known as the “consumption-based” perspective and relates to the concept of environmental footprint. This article looks at some examples of this dual perspective, both in a case of a global problem, such as greenhouse gas emissions, and in other environmental indicators o more local or regional problems. The important differences between the indicators obtained with both perspectives reinforce the need to take into account the “consumption-based” perspective in order to have better information on the different responsibilities in the different environmental problems.
    Keywords: Consumption-based accounting; ecological problems; carbon footprint; material footprint; environmental load displacement.
    Date: 2020–09
  32. By: Gern, Klaus-Jürgen; Hauber, Philipp; Kooths, Stefan; Stolzenburg, Ulrich
    Abstract: As a result of the Covid-19 pandemic, global economic activity is expected to have fallen by almost 10 percent in the first half of 2020. However, the low point seems to have been passed in the meantime, and in China the economy has even already made up a considerable part of the production slump of January and February. How quickly and decisively the global economy will recover depends not least on the epidemiological developments and on how policymakers change their epidemic policy measures in response. Assuming that the development of the pandemic allows a sustained broad-based easing of containment policies, and thanks to massive support from monetary and fiscal policy, output is expected to rebound in the second half of this year. Although the low point in global production is likely to have been reached already in April, the current year will probably see a decline of GDP (measured on the basis of purchasing power parities) of 3.8 percent, by far the sharpest contraction in the past 70 years. For 2021 we expect production to rise by 6.2 percent. The level of global production will, however, remain well below the path we expected at the beginning of the year for some time to come, due to the loss of income incurred in the course of the corona crisis and subdued investment as a result of reduced sales expectations and a diminished corporate equity base. We have drastically lowered our 2020 forecast by 5.6 percentage points compared with our regular spring forecast published in early March, but we have revised upwards by 0.3 percentage points with respect to the interim forecast presented in mid-May as incoming data suggest a slightly less negative outlook for the advanced economies.
    Keywords: Americas,Asia,Business Cycle World,China,Emerging Markets & Developing Countries,Europe,USA
    Date: 2020

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