nep-int New Economics Papers
on International Trade
Issue of 2020‒10‒12
forty-four papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. On the heterogeneous trade and welfare effects of GATT/WTO membership By Felbermayr, Gabriel; Larch, Mario; Yalçin, Erdal; Yotov, Yoto
  2. Gravity Models and the Law of Large Numbers By Colin Jareb; Sergey K. Nigai
  3. On the Heterogeneous Trade and Welfare Effects of GATT/WTO Membership By Felbermayr , Gabriel; Larch, Mario; Yalcin, Erdal; Yotov, Yoto
  4. Preferential Trade Liberalization with Endogenous Cartel Discipline: Implications for Welfare and Optimal Trade Policies By Agnosteva, Delina; Syropoulos, Constantinos; Yotov, Yoto
  5. Investor-State Dispute Settlement and Multinational Firm Behavior By Guttorm Schjelderup; Frank Stähler
  6. Covid-19 shocking global value chains By Eppinger, Peter S.; Felbermayr, Gabriel; Krebs, Oliver; Kukharskyy, Bohdan
  7. International trade, trade policy and foreign investment: preliminary considerations on the impact of the COVID-19 crisis By Ivan Oliveira; Fernando Ribeiro; Renato Baumann; Glauco Avellino Oliveira; Luís Felipe Giesteira; Luís Fernando Tironi; André Pinelli Alves
  8. Global Firms and Emissions By Kwon, Ohyun; Zhao, Hao; Zhao, Min Qiang
  9. The Effect of Outward Foreign Direct Investments on Home Employment: Evidence using Swiss Firm-Level Data By Preetha Kalambaden, Daniel Steffen
  10. Exploring alternative approaches to estimate the impact of non-tariff measures and further implementation in simulation models By Ana Sanjuan Lopez; Marie-Luise Rau; Geert Woltjer
  12. An Introduction to the Economics of Immigration in OECD Countries By Edo, Anthony; Ragot, Lionel; Rapoport, Hillel; Sardoschau, Sulin; Steinmayr, Andreas; Sweetman, Arthur
  13. International Trade Finance from the Origins to the Present: Market Structures, Regulation and Governance By Olivier Accominotti; Stefano Ugolini
  14. Swiss Trade During the COVID-19 Pandemic: An Early Appraisal By Konstantin Bu¨chel, Stefan Legge, Vincent Pochon, Philipp Wegmu¨ller
  15. Regional Variations in the Brexit Vote: Causes and Potential Consequences By David Blackaby; Stephen Drinkwater; Catherine Robinson
  16. The Relationship between Product Complexity and Exchange Rate Elasticities: Evidence from the People's Republic of China's Manufacturing Industries By Willem THORBECKE; CHEN Chen; Nimesh SALIKE
  17. The Gravitational Constant? By David S. Jacks; Kevin Hjortshøj O'Rourke; Alan M. Taylor
  18. How Do Exchange Rate Depreciations Affect Trade and Prices? A Survey and Lessons about UK Experience after June 2016 By Yohannes Ayele; L. Alan Winters
  19. Returns to intangible capital in global value chains: New evidence on trends and policy determinants By Ali Alsamawi; Charles Cadestin; Alexander Jaax; Joaquim Guilhoto; Sébastien Miroudot; Carmen Zurcher
  20. Compliance with WTO rules in controversies involving public Health, environmental protection and other 'exceptions' By Rodrigo Fagundes Cezar
  21. Economic and Environmental Consequences of the ECJ Genome Editing Judgement in Agriculture By Gocht, Alexander; Consmüller, Nicola; Thom, Ferike; Grethe, Harald
  22. Trade, Financial Flows and Stock Market Interdependence: Evidence from Asian Markets By Sudha Narayanan; Sowmya Dhanaraj; Arun Kumar Gopalaswamy; M. Suresh Babu
  23. Gravity-model Estimation with Time-interval Data: Revisiting the Impact of Free Trade Agreements By Egger, Peter; Larch, Mario; Yotov, Yoto
  24. An Adverse Social Welfare Effect of Quadruply Gainful Trade By Stark, Oded; Kosiorowski, Grzegorz
  25. Managing the Impact of Climate on Migration: Evidence from Mexico By Isabelle Chort; Maëlys de la Rupelle
  26. Global Firms, National Corporate Taxes: An Evolution of Incompatibility By Shafik Hebous
  27. Export Performance, Innovation, and Productivity in Indian Manufacturing Firms By Santosh Kumar Sahu; Sunder Ramaswamy; Abishek Choutagunta
  28. The long-run impact of historical shocks on the decision to migrate: Evidence from the Irish Migration By Gaia Narciso; Battista Severgnini; Gayane Vardanyan
  29. Corruption and assortative matching of partners in international trade By Arusha Cooray; Chandan Kumar Jha; Bibhudutta Panda
  31. Gravity-Model Estimation with Time-Interval Data: Revisiting the Impact of Free Trade Agreements By Peter H. Egger; Mario Larch; Yoto V. Yotov
  32. Domestic versus foreign drivers of trade (im)balances: How robust is evidence from estimated DSGE models By Cardani, Roberta; Hohberger, Stefan; Pfeiffer, Philipp; Vogel, Lukas
  33. Panel cross-country analysis of the degree of interconnection domestic savings and investment By Zubarev, Andrey (Зубарев, Андрей); Rybak, Konstantin (Рыбак, Константин)
  34. Do Skilled Migrants Compete with Native Workers? Analysis of a Selective Immigration Policy By Sara Signorelli
  35. Migration and Inequalities Around the Mediterranean Sea By Björn Nilsson; Racha Ramadan
  36. Going beyond default intensities in an EU carbon border adjustment mechanism By Mehling, M.; Ritz, R.
  37. Agro-industry, exports, and income distribution: A multiplier decomposition analysis for Myanmar By Dirk van Seventer; Finn Tarp
  38. Immigration History, Entry Jobs, and the Labor Market Integration of Immigrants By Laura Ansala; Olof Åslund; Matti Sarvimäki
  39. Workplace Contact and Support for Anti-Immigration Parties By Henrik Andersson; Sirus H. Dehdari
  40. Importing Inequality: Immigration and the Top 1 Percent By Advani, Arun; Koenig, Felix; Pessina, Lorenzo; Summers, Andy
  41. Immigration and Redistribution By Benjamin Elsner; Jeff Concannon
  42. U.S. Immigration Policy and Immigrant Fertility By Amuedo-Dorantes, Catalina; Arenas-Arroyo, Esther
  43. Borderline Disorder: (De Facto) Historical Ethnic Borders and Contemporary Conflict in Africa By Depetris-Chauvin, Emilio; Özak, Ömer

  1. By: Felbermayr, Gabriel; Larch, Mario; Yalçin, Erdal; Yotov, Yoto
    Abstract: We build on the latest developments in the structural gravity literature to quantify the partial and general equilibrium effects of GATT/WTO membership on trade and welfare. Using an extensive database covering manufacturing trade for 186 countries over the period 1980-2016, we find that the average impact of GATT/WTO membership on trade among member counties is large, positive, and significant. We contribute to the literature by estimating country-specific estimates and find them to vary widely across the countries in our sample with poorer members benefitting more. Using these estimates, we simulate the general equilibrium effects of GATT/WTO on welfare, which are sizable and heterogeneous across members, and relatively small for non-member countries. We show that countries not experiencing positive trade effects from joining GATT/WTO can still gain in terms of welfare, due to beneficial terms-of-trade effects.
    Keywords: GATT,WTO,Heterogeneous Policy Effects,Structural Gravity,Welfare
    JEL: F1 F13 F14
    Date: 2020
  2. By: Colin Jareb; Sergey K. Nigai
    Abstract: Modern quantitative theories of international trade rely on the probabilistic representation of technology and the assumption of the Law of Large Numbers (LLN), which ensures that when the number of traded goods goes to infinity, trade flows can be expressed via a deterministic gravity equation that is log-linear in exporter-specific, importer-specific and bilateral trade cost components. This paper shows that when the number of traded goods is finite, the gravity equation has a structural stochastic component not related to the fundamental gravity forces. It provides a novel explanation of the differences in the goodness of fit of gravity models across different sectors observed in the data. It also suggests that when the LLN does not hold, the welfare gains from trade have a considerable stochastic component and should be characterized via distributions rather than point estimates. We use sectoral trade data and Monte Carlo simulations to develop a procedure with minimal data requirements that allows estimation of intervals for the welfare gains from trade.
    Keywords: trade gravity, Law of Large Numbers, gains from trade
    JEL: F10 F60 F14 F17
    Date: 2020
  3. By: Felbermayr , Gabriel (Kiel Institute & Kiel University); Larch, Mario (University of Bayreuth); Yalcin, Erdal (Konstanz University of Applied Sciences); Yotov, Yoto (School of Economics LeBow College of Business Drexel University)
    Abstract: We build on the latest developments in the structural gravity literature to quantify the partial and general equilibrium effects of GATT/WTO membership on trade and welfare. Using an extensive database covering manufacturing trade for 186 countries over the period 1980-2016, we find that the average impact of GATT/WTO membership on trade among member counties is large, positive, and significant. We contribute to the literature by estimating country-specific estimates and find them to vary widely across the countries in our sample with poorer members benefiting more. Using these estimates, we simulate the general equilibrium effects of GATT/WTO on welfare, which are sizable and heterogeneous across members, and relatively small for non-member countries. We show that countries not experiencing positive trade effects from joining GATT/WTO can still gain in terms of welfare, due to beneficial terms-of-trade effects.
    Keywords: GATT; WTO; Heterogeneous Policy Effects; Structural Gravity; Welfare
    JEL: F10 F13 F14
    Date: 2020–09–06
  4. By: Agnosteva, Delina (Department of Economics); Syropoulos, Constantinos (School of Economics Drexel University LeBow College of Business); Yotov, Yoto (School of Economics Drexel University LeBow College of Business)
    Abstract: We consider an international cartel whose members interact repeatedly in their own as well as in third-country segmented markets. Cartel discipline--an inverse measure of the degree of competition between firms--is endogenously determined by the cartel's incentive compatibility constraint (ICC), which links strategically markets that are seemingly unrelated. Owing to this linkage, trade cost reductions induce cartel members to adjust their sales, not only due to direct effects, but also due to spillover effects related to cartel discipline. We apply these ideas to preferential trade agreements (PTAs) and show that the indirect effects can give rise to trade diversion. We also characterize the welfare effects of preferential tariff cuts for all countries under various circumstances regarding the determination of external PTA trade policy. A persistent finding is that, in the absence of appropriate regulation, preferential trade liberalization can be welfare-reducing even when external policy is jointly optimal.
    Keywords: multimarket contact; repeated interactions; constrained collusion; intra-industry trade; welfare; optimal trade policies
    JEL: D43 F10 F12 F13 F15 L12 L13
    Date: 2020–08–24
  5. By: Guttorm Schjelderup; Frank Stähler
    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
  6. By: Eppinger, Peter S.; Felbermayr, Gabriel; Krebs, Oliver; Kukharskyy, Bohdan
    Abstract: In early 2020, the disease Covid-19 caused a drastic lockdown of the Chinese economy. We use a quantitative trade model with input-output linkages to gauge the effects of this adverse supply shock in China on the global economy through international trade and global value chains (GVCs). We find moderate welfare losses in most countries outside of China, while a few countries even gain from the shock due to trade diversion. As a key methodological contribution, we quantify the role of GVCs (in contrast to final goods trade) in transmittingthe shock. In a hypothetical world without GVCs, the welfare loss due to the Covid-19 shock in China is reduced by 40% in the median country. In several other countries, the effects aremagnified or reversed for several countries. Had the U.S. unilaterally repatriated GVCs, the country would have incurred a substantial welfare loss while its exposure to the shock would have barely changed.
    Keywords: Covid-19,quantitative trade model,input-output linkages,global value chains,supply chain contagion,shock transmission
    JEL: F11 F12 F14 F17 F62
    Date: 2020
  7. By: Ivan Oliveira (IPC-IG); Fernando Ribeiro (IPC-IG); Renato Baumann (IPC-IG); Glauco Avellino Oliveira (IPC-IG); Luís Felipe Giesteira (IPC-IG); Luís Fernando Tironi (IPC-IG); André Pinelli Alves (IPC-IG)
    Abstract: This One Pager seeks to provide a preliminary assessment of the impacts of the COVID-19 health crisis on international trade in goods, and to comment on its effects on both commercial policy and direct foreign investment.
    Keywords: global trade; trade policy; foreign investment; COVID-19; coronavirus
    Date: 2020–05
  8. By: Kwon, Ohyun (School of Economics LeBow College of Business Drexel University); Zhao, Hao (Chapman University); Zhao, Min Qiang (MOE Key Laboratory of Econometrics)
    Abstract: This paper finds that both importing and exporting can effectively reduce firm-level emission intensities. In our theoretical contribution, we develop a model in which firms endogenously determine whether or not to import foreign intermediate inputs and the extent of investment in emissions abatement. The model shows that the complementarity between import and abatement decisions reduces firm-level emission intensities when firms import foreign intermediate inputs. In our empirical contribution, we estimate a theory-guided regression model using Chinese firm-level data on emissions and trade. Our IV regression results show that when a firm starts importing, its emission intensities drop by approximately 30% across the types of emissions that we study. The estimate of the export margin, despite being statistically significant in the OLS results, appears to be more sensitive to regression specification in the IV results and is lower in magnitude than that of the import margin
    Keywords: International trade; Emissions; China
    JEL: D22 F18 Q56
    Date: 2020–08–01
  9. By: Preetha Kalambaden, Daniel Steffen
    Abstract: This paper investigates the effect of outward foreign direct investments (FDI) on home employment in an understudied context - a small economy with a large relative outward FDI stock. Using Swiss firm-level data we construct a novel instrumental variable to identify a direct negative displacement effect and an indirect positive output effect. We find that FDI to high-income countries have a positive effect on domestic jobs, while FDI to lower middle-income countries are associated with a loss of domestic jobs. Further, FDI to low-income countries tend to have a positive effect on home employment. Overall, the effect of outward FDI on home employment is small and tends to create more domestic jobs than it relocates.
    Keywords: Foreign direct investments, home employment, multinational firms, globalization
    JEL: F14 F16 F23 F66
    Date: 2020–08
  10. By: Ana Sanjuan Lopez (Unidade de Economía Agroalimentaria y de los Recursos Naturales, Centro de Investigación y Tecnología Agroalimentaria de Aragón (CITA) Government of Aragon); Marie-Luise Rau; Geert Woltjer (Wageningen UR)
    Abstract: This report generates estimates for the effect of non-tariff measures (NTMs) on trade unit values. Adding to the latest development of the NTM analysis, we account for different types of NTMs for pairs of countries/regions. Our estimates thus provide new insights about the bilaterally distinct effect of specific NTMs. This is particularly interesting for policy makers that like to know which types of measures are relevant for trade from or to specific countries/regions and whether they are trade-hampering or trade-facilitating. We elaborate on the estimation of the price effect (measured in trade unit values) vis-Ã -vis the standard gravity on trade quantities (measured in trade value). A panel dataset (2012-2015) using the last releases of trade unit values (Berthou & Emlinger, 2011) and UNCTAD NTMs global database is built, and alternative approaches to account for the distinct bilateral impact are tested on beef, white meat (poultry) and milk. The focus is on trade between the EU member states and relevant regions with which the EU is negotiating or has just completed trade agreements: MERCOSUR, ASEAN, Japan and New Zealand. In this report, we do not implement the specific Ad-valorem equivalents (AVE) estimates for NTMs in a simulation model but rather provide a literature review that elaborates on the different approaches to depict NTMs in simulation models. The next step would be the application of the AVEs estimated in a simulation model in order to gauge the economy-wide effects of the respective NTMs under review.
    Keywords: non-tariff measures (NTMs), gravity, simulation models.
    Date: 2019–05
  11. By: Kenneth W. Clements (Economics Discipline, Business School, University of Western Australia); Marc Jim Mariano (KPMG Economics); George Verikios (KPMG Economics and Griffith University)
    Abstract: Foreign-domestic substitution elasticities (the so-called “Armington elasticities”) determine the degree of competitiveness in demand between similar products produced in different countries and are key parameters in a variety of numerical models of international trade. Armington elasticities are part of the explanation of the large increases in market shares of foreign products relative to locally produced ones in Australia, for example. The existing literature provides only limited evidence on these elasticities for Australia with the most disaggregated produced some time ago by Alaouze et al. (1977). This paper provides up-to-date parametric estimates of Armington elasticities for Australia with a reasonable degree of sectoral disaggregation. We use 22-years of data for 20 types of merchandise commodities, using OLS, panel and restricted-panel approaches. Our estimates range from 0.30 to 2.26, with higher elasticities for Transport and Equipment products and lower ones for Energy and. We illustrate the use of our elasticities with a trade-policy simulation using a computable generable equilibrium model of the Australian economy. We analyse the sensitivity of the results to the Armington elasticities by also using those estimated by Alaouze et al. (1977). We find an overestimation of economic effects when using the old Armington values.
    Keywords: Foreign-domestic substitution, Armington elasticities, CGE analysis, International trade, Tariff policy
    Date: 2020
  12. By: Edo, Anthony (CEPII, Paris); Ragot, Lionel (University Paris Ouest-Nanterre); Rapoport, Hillel (Paris School of Economics); Sardoschau, Sulin (Humboldt University Berlin); Steinmayr, Andreas (University of Munich); Sweetman, Arthur (McMaster University)
    Abstract: The share of the foreign-born in OECD countries is increasing, and this article summarizes economics research on the effects of immigration in those nations. Four broad topics are addressed: labor market issues, fiscal questions, the political economy of immigration, and productivity/international trade. Extreme concerns about deleterious labour market and fiscal impacts following from new immigrants are not found to be warranted. However, it is also clear that government policies and practices regarding the selection and integration of new migrants affect labour market, fiscal and social/cultural outcomes. Policies that are well informed, well crafted, and well executed beneficially improve population welfare.
    Keywords: immigration, labor market and fiscal effects of immigration, integration, diversity and productivity, trade and migration, political economy of immigration, refugees
    JEL: F22 J15 J61
    Date: 2020–09
  13. By: Olivier Accominotti (LSE - Economic History Department - London school of economics and political science - LSE - London School of Economics and Political Science); Stefano Ugolini (LEREPS - Laboratoire d'Etude et de Recherche sur l'Economie, les Politiques et les Systèmes Sociaux - UT1 - Université Toulouse 1 Capitole - UT2J - Université Toulouse - Jean Jaurès - Institut d'Études Politiques [IEP] - Toulouse - ENSFEA - École Nationale Supérieure de Formation de l'Enseignement Agricole de Toulouse-Auzeville)
    Abstract: This chapter presents a history of international trade finance - the oldest domain of international finance - from its emergence in the Middle Ages up to today. We describe how the structure and governance of the global trade finance market changed over time and how trade credit instruments evolved. Trade finance products initially consisted of idiosyncratic assets issued by local merchants and bankers. The financing of international trade then became increasingly centralized and credit instruments were standardized through the diffusion of the local standards of consecutive leading trading centres (Antwerp, Amsterdam, London). This process of market centralization/product standardization culminated in the nineteenth century when London became the global centre for international trade finance and the sterling bill of exchange emerged as the most widely used trade finance instrument. The structure of the trade finance market then evolved considerably following the First World War and disintegrated during the interwar de-globalization and Bretton Woods period. The reconstruction of global trade finance in the post-1970 period gave way to the decentralized market structure that prevails nowadays.
    Keywords: Bills of exchange,Letter of credit,Market structure,Trade finance
    Date: 2020–09–02
  14. By: Konstantin Bu¨chel, Stefan Legge, Vincent Pochon, Philipp Wegmu¨ller
    Abstract: This study uses trade data from Switzerland's Federal Customs Administration to examine the impact of COVID-19 on international goods trade between January and July 2020. We show that Swiss trade during that period fell by 11% compared to 2019, and that the contraction following the “Federal Lockdown” in mid-March was considerably steeper than the Swiss trade collapse in the aftermath of the Lehman Brothers bankruptcy in September 2008. Exploiting country variation in the spread of COVID-19, the stringency of containment measures, and Swiss trade flows, we document that the pandemic adversely affected both the demand and supply side of foreign trade. We discuss several channels at work and show that our COVID-19 measures are correlated with country-specific consumer and producer confidence series, which explain considerable heterogeneity in the observed trade dynamics.
    Keywords: COVID-19, Trade, Switzerland
    JEL: E32 F14 H12 I18
    Date: 2020–09
  15. By: David Blackaby (Swansea University and WISERD); Stephen Drinkwater (University of Roehampton, London CReAM (UCL), IZA Bonn and WISERD); Catherine Robinson (University of Kent and WISERD)
    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
  16. By: Willem THORBECKE; CHEN Chen; Nimesh SALIKE
    Abstract: More complex products are less substitutable in international trade and may therefore have lower price elasticities. We investigate this issue using 960 types of Chinese manufactured exports to 190 partner countries disaggregated at the Harmonized System 4-digit level. We measure complexity using Hausmann and Hidalgo's (2009) product complexity index. We find that price elasticities are lower for more complex goods. These results imply that the People's Republic of China can reduce its exporters' exposure to tariffs, trade wars, and exchange rate volatility by upgrading its export basket.
    Date: 2020–09
  17. By: David S. Jacks; Kevin Hjortshøj O'Rourke; Alan M. Taylor (Division of Social Science)
    Abstract: We introduce a new dataset on British exports at the bilateral, commodity-level from 1700 to 1899. We then pit two primary determinants of bilateral trade against one another: the trade-diminishing effects of distance versus the trade-enhancing effects of the British Empire. We find that gravity exerted its pull as early as 1700, but the distance effect then attenuated and had almost vanished by 1800. Meanwhile the empire effect peaked sometime in the late 18th century before significantly declining in value. It was only after 1950 that distance would once again exert the same influence that it has today. JEL codes: F1, N7
    Date: 2020–09
  18. By: Yohannes Ayele (Department of Economics, University of Sussex); L. Alan Winters (Department of Economics, University of Sussex)
    Abstract: The sterling depreciation following the Brexit referendum was expected to boost the export sector of the UK economy. But the boom never arrived. This paper first reviews a selection of empirical research on the effects of exchange rate changes on import prices, consumer prices, export prices and trade quantities over the recent decades and then specifically discusses the effects of the recent sterling depreciation. It asks specifically whether the absence of an export boom should be considered a surprise or not. We find that the weakness of the export boom after the sterling depreciation was not wildly out of line with what the literature suggests. But we also argue, however, that the poor performance was also at least partly due to the huge increase in uncertainty about UK trade policy that accompanied the depreciation.
    Date: 2020–08
  19. By: Ali Alsamawi; Charles Cadestin; Alexander Jaax; Joaquim Guilhoto; Sébastien Miroudot; Carmen Zurcher
    Abstract: Intangible capital, a broad category of knowledge-based assets that lack physical embodiment, increasingly shapes the distribution of income in global value chains (GVCs). While some intangible assets are reported in national accounts (e.g. R&D or computer software and databases), others are hard to detect in conventional statistics (e.g. brand value or organisational capital). In this paper, we combine information on factor income from national accounts with the OECD Inter-Country Input-Output tables in order to estimate returns to measured (i.e. included in national accounts) and ‘unmeasured’ intangible capital (captured as a residual) in GVCs. We find that total intangible capital accounts for about 27% of income in manufacturing GVCs and that this share has increased between 2005 and 2015 in OECD countries. The paper highlights differences across GVC stages and specific types of GVCs. A significant share of income is captured at the distribution stage, particularly in buyer-driven value chains. An econometric analysis suggests that trade and investment openness are important determinants of patterns in returns to intangible capital in GVCs. Direct public funding of R&D and the quality of intellectual property protection are associated with higher returns to intangible assets.
    JEL: E1 E22 F23 F68
    Date: 2020–09–30
  20. By: Rodrigo Fagundes Cezar (IPC-IG)
    Abstract: When a WTO member country is accused by another of implementing discriminatory trade measures, the affected country can trigger the WTO's Dispute Settlement Mechanism to evaluate whether there was a breach of multilateral trade rules. This One Pager explores the motives why certain disputes take longer than others to be resolved.
    Keywords: World Trade Organization; trade disputes; environmental protection; civil society organisations
    Date: 2020–07
  21. By: Gocht, Alexander; Consmüller, Nicola; Thom, Ferike; Grethe, Harald
    Abstract: Genome edited crops are on the verge of being placed on the market and their agricultural and food products will thus be internationally traded soon. National regulation, however, diverges regarding the classification of genome edited crops. Major countries such as the US and Brazil do not specifically regulate genome edited crops, while in the European Union they fall under GMO legislation, according to the European Court of Justice (ECJ). As it is in some cases impossible to analytically distinguish products from genome edited plants compared to non-genome edited plants, EU importers may fear the risk of violating EU legislation. They may choose to not import anymore agricultural and food products based on crops, for which genome edited varieties are available. As a consequence, crop products, for which the EU is currently a net importer, would become more expensive in the EU and production would intensify. Furthermore, strong substitu-tion among products covered and not covered by genome editing would occur in consumption, production and trade. We analyse the effects of such a cease of EU imports for cereals and soy on the EU agricultural sector with the comparative static agricultural sector equilibrium model CA-PRI. Our results indicate that effects on agricultural and food prices as well as farm income are strong, and the intensification of EU agriculture may result in negative net environmental effects in the EU as well as increases in global greenhouse gas emissions. This suggests that the trade effects should be taken into account when developing domestic regulation for genome edited crops.
    Keywords: Agribusiness, International Relations/Trade, Research Methods/ Statistical Methods
    Date: 2020–09–25
  22. By: Sudha Narayanan (Associate Professor, Indira Gandhi Institute of Development Research (IGIDR)); Sowmya Dhanaraj (Lecturer, Madras School of Economics); Arun Kumar Gopalaswamy (IIT Madras, India); M. Suresh Babu (IIT Madras, India)
    Abstract: Liberalization and globalization of Newly Industrialized Economies have contributed to increased integration of capital markets. This study tests whether convergence of macroeconomic variables and enhanced bilateral trade and financial flows causes greater interdependence of markets. Daily closing indices and quarterly differentials in interest, inflation, growth rates, exchange rates, trade of goods and services, direct and portfolio investment were used. Results revealed that markets of Asia are not immune to shocks originating in US although co-movements of macroeconomic variables do not help in explaining level of interdependence. Portfolio flows were found to be important than trade flows in explaining market interdependence
    Keywords: Dynamic market interdependence, US and Asian Newly Industrialized Economies (NIEs), Emerging Market Economies (EMEs), FEVD, Trade and Financial Flows
    JEL: F4 G1
  23. By: Egger, Peter (EggerDepartment of Management, Technology and Economics, KOF Swiss Economic Institute); Larch, Mario (University of Bayreuth); Yotov, Yoto (School of Economics Drexel University LeBow College of Business)
    Abstract: We challenge the common practice of estimating gravity equations with time-interval data in order to capture dynamic-adjustment effects to trade-policy changes. Instead, we point to a series of advantages of using consecutive-year data recognizing dynamic-adjustment effects. Our analysis reveals that, relative to time-interval data, the proposed approach avoids downward-biased effect estimates due to the distribution of trade-policy events during an event window as well as due to anticipation (pre-interval) and delayed (post-interval) effects, and it improves the efficiency of effect estimates due to the use of more data.
    Keywords: Structural Gravity; Trade Policy; Free Trade Agreements; Interval Data
    JEL: F10 F14
    Date: 2020–09–04
  24. By: Stark, Oded (University of Bonn); Kosiorowski, Grzegorz (Cracow University of Economics)
    Abstract: Acknowledging that individuals dislike having low relative income renders trade less attractive when seen as a technology that integrates two economies by merging separate social spheres into one. We define a "trembling trade" as a situation in which gains from trade are less than losses in relative income, with the result that global social welfare is reduced. We show that a "trembling trade" can arise even when trade is more gainful in four ways: through trade the absolute income of everyone increases, the income gap in both economies is reduced, as is the income gap between the trading economies. However, trade brings populations, economies, or markets that were not previously connected closer together in social space. As a consequence, separate social spheres merge, and people's social space and their comparators are altered. Assuming that people like high (absolute) income and dislike low relative income, the aggregate increase in unhappiness caused by the trade-induced escalation in relative deprivation can result in a negative overall impact of trade on (utilitarian-measured) social welfare, if the absolute income gains are not large enough to mitigate the relative income losses.
    Keywords: gains from trade, increase of incomes, decrease of income gaps, integration, change of social space, low relative income, quadruply gainful trade, "trembling trade", social welfare
    JEL: D31 D63 F10 F15 R12
    Date: 2020–10
  25. By: Isabelle Chort (CATT - Centre d'Analyse Théorique et de Traitement des données économiques - UPPA - Université de Pau et des Pays de l'Adour); Maëlys de la Rupelle (THEMA - Théorie économique, modélisation et applications - CNRS - Centre National de la Recherche Scientifique - CY - CY Cergy Paris Université, CRED - Centre de recherche en économie du développement - UNamur - Université de Namur [Namur])
    Abstract: This paper uses state-level data on migration flows between Mexico and the U.S. from 1999 to 2011 to investigate the migration response to climate shocks and the mitigating impact of an agricultural cash-transfer program (PROCAMPO) and a disaster fund (Fonden). While lower than average precipitations increase undocumented migration, especially from the most agricultural states, Fonden amounts decrease the undocumented migration response to abnormally low precipitations during the dry season. Changes equalizing the distribution of PROCAMPO and favoring vulnerable producers in the non irrigated ejido sector mitigate the impact of droughts on migration, especially for a high initial level of inequality.
    Keywords: International migration,Climate,Public policies,Weather variability,Natural disasters,Mexico-U.S. migration,Inequality
    Date: 2019–06
  26. By: Shafik Hebous
    Abstract: How did the rise of multinational enterprises (MNEs) put pressure on the prevailing international corporate tax framework? MNEs, and firms with market power, are not new phenomena, nor is the corporate income tax, which dates to the early 20th century. This prompts the question, what is distinctly new (about multinational enterprises)—if anything—that has triggered unprecedented recent concerns about vulnerabilities in international tax arrangements and the taxation of MNEs? This paper presents a set of empirical observations and a synthesis of strands of the literature to answer this question. A key message is that MNEs of the 21st century operate differently from prior periods and have evolved to become global firms—with important tax ramifications. The fragility of international tax arrangements was present at the outset of designing international tax rules, but the challenges have drastically intensified with the global integration of business, the increased trade in hard-to-price services and intangibles, and the rapid growth of the digital economy.
    Keywords: multinational enterprises, global firm, tax avoidance, international tax profit shifting
    JEL: F14 F23 H25 H26
    Date: 2020
  27. By: Santosh Kumar Sahu (Assistant Professor, Madras School of Economics); Sunder Ramaswamy (Visiting Distinguished Professor of Economics, Madras School of Economics); Abishek Choutagunta (Institute of Law and Economics, Universität Hamburg)
    Abstract: This study re-examines the relationship between export performance and productivity in manufacturing firms in India for the period 2003-2015, using firm level information. Departing from the earlier studies on India economy, we argue that product innovations boost export performance of the economy. The hypothesis being that, in the post-economic-reforms era competitive export market scenario, productivity alone, without product innovation and participation in R and D cannot drive export performance. We observe that the argument of highly productive firms entering the export market without eallocating resources towards innovation and R and D seems to be invalid in our sample. Nevertheless, we find in our sample, that productivity as a selection criterion coupled with advertising and marketing strategies explains participation in R and D in boosting exports.
    Keywords: Export Performance, Innovation, Productivity, Manufacturing firms, India
    JEL: D20 D24 L16 L6 L60
  28. By: Gaia Narciso (Trinity College Dublin); Battista Severgnini (Copenhagen Business School); Gayane Vardanyan (Trinity College Dublin)
    Abstract: What is the long-run impact of large negative historical events on the individual decision to migrate? We investigate this research question by looking at the effect of the Great Irish Famine (1845-1850) on the long-run individual decision to migrate to the US during the Age of the Mass Migration. We construct a unique dataset based on two early 20th century Irish Censuses and the Ellis Island Administrative Records. This allows us to test whether the Great Irish Famine, one of the most lethal episodes of mass starvation in history, had a long-run impact on individuals’ migration decisions. Controlling for individual and geographical characteristics, we find that the Irish Famine was a significant long-run driver of individuals’ migration choices.
    Keywords: mass migration, negative shock, long-run impact, Great Famine
    JEL: F22 N33 N93
    Date: 2020–01
  29. By: Arusha Cooray; Chandan Kumar Jha; Bibhudutta Panda
    Abstract: While the effects of corruption on bilateral trade have been relatively well explored, its effect on the composition of trading partners has not been studied. In this paper, we argue that corruption in a country is likely to impose asymmetric costs on its trading partners depending on their characteristics. As a result, as the level of corruption in a country changes, its trade flows from some of its trading partners change more than others depending on the latter's characteristics, causing a change in the composition of its trading partners.
    Keywords: Corruption, international bribery, International trade, OECD Convention
    Date: 2020
  30. By: Kenneth W. Clements (Economics Discipline, Business School, University of Western Australia); Long Vo (Economics Discipline, Business School, University of Western Australia); Marc Jim Mariano (KPMG Economics)
    Abstract: This paper analyses import penetration with a consumer demand approach that distinguishes domestically and foreign-produced varieties. Consistent aggregation leads to a macro-level import demand equation that faithfully reflects the underlying micro demands for foreign varieties. The approach avoids restrictive assumptions such as homotheticity and permits an array of hypothesis tests of functional form. We show how to estimate the model with a relative short time series -- important for countries with limited data -- and as an illustrative example, apply it to Australia. We find that income growth is largely responsible for the recent surge in imports into that country.
    Keywords: Disaggregated import demand; Consumer demand; Estimating demand equations; Bootstrap simulation
    JEL: D12 F41
    Date: 2020
  31. By: Peter H. Egger; Mario Larch; Yoto V. Yotov
    Abstract: We challenge the common practice of estimating gravity equations with time-interval data in order to capture dynamic-adjustment effects to trade-policy changes. Instead, we point to a series of advantages of using consecutive-year data recognizing dynamic-adjustment effects. Our analysis reveals that, relative to time-interval data, the proposed approach avoids downward-biased effect estimates due to the distribution of trade-policy events during an event window as well as due to anticipation (pre-interval) and delayed (post-interval) effects, and it improves the efficiency of effect estimates due to the use of more data.
    Keywords: structural gravity, trade policy, free trade agreements, interval data
    JEL: F10 F14
    Date: 2020
  32. By: Cardani, Roberta (European Commission – JRC); Hohberger, Stefan (European Commission – JRC); Pfeiffer, Philipp (European Commission); Vogel, Lukas (European Commission)
    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: 2020–07
  33. By: Zubarev, Andrey (Зубарев, Андрей) (The Russian Presidential Academy of National Economy and Public Administration); Rybak, Konstantin (Рыбак, Константин) (The Russian Presidential Academy of National Economy and Public Administration)
    Abstract: Theoretical and empirical works on capital mobility, characterizing the relationship between savings and investments, are systematized. Own econometric calculations of the relationship between savings and investments were carried out on a sample of OECD countries, developing countries, countries with a high dependence on hydrocarbon exports. In general, the results of the empirical analysis indicate an increase in capital mobility over time, but after the global financial crisis, capital mobility declined again. Greater capital mobility is characteristic of developing countries and countries with high dependence on hydrocarbons. The paper also systematizes theoretical and empirical work to identify the role of uncertainty in the dynamics of macroeconomic indicators. Based on estimates based on cross-country data, it was found that the volatility of the terms of trade negatively affects the rate of economic growth.
    Keywords: savings, investments, the Feldstein-Horioki paradox, exporting countries of hydrocarbons
    Date: 2020–05
  34. By: Sara Signorelli
    Abstract: In recent years high-skill immigration has been often encouraged by governments aiming to support their economy, but its impact on native workers facing a direct increase in competition is still debated. This paper addresses the question by taking advantage of a reform facilitating the hiring of foreign workers within a list of technical occupations. The analysis relies on administrative employer-employee data and applies a difference-in-differences approach. Results show that the reform was successful in boosting migrants' hires without affecting native employment. Wages decrease following the supply shift but, in contrast with the standard model predictions, do so twice as much for migrants than for natives. I find that two channels explain this differential effect: imperfect degree of substitution in production and differences in bargaining power. Overall, this paper provides evidence that policies encouraging high-skill migration do not excessively harm the native labor force.
    JEL: J61 J62 J63
    Date: 2020–09–22
  35. By: Björn Nilsson (Université Paris-Saclay); Racha Ramadan (Cairo University)
    Abstract: This paper aims to quantify the effects from migration on net income distributions, disentangling the roles played by factor reallocation and remittances, and focusing on two (primarily) destination countries (Spain and Italy) and two (primarily) origin countries (Jordan and Iraq). Using LIS-ERF data sets for the four countries; the paper relies separately on a variant of a shift-share instrument to identify the effect of migration on inequalities at the regional level in Spain and Italy, and on quantile regression to estimate the impact of receiving remittances on per capita expenditure in Iraq and Jordan. The results suggest that migration increases inequality in both origin and receiving countries.
    Date: 2020–04–20
  36. By: Mehling, M.; Ritz, R.
    Abstract: As part of its Green Deal, the European Union is currently preparing a “Carbon Border Adjustment Mechanism” (CBAM). A CBAM applies carbon pricing to imports with the objective of mitigating concerns about carbon leakage. To reduce complexity, it is likely the EU will rely on “default” values in determining the carbon intensity of imports to which its CBAM will apply. In this paper, we suggest that a CBAM based solely on default intensities runs counter to the economic logic of carbon pricing by distorting the incentives for emissions abatement. Instead we propose a CBAM design with a voluntary “individual adjustment mechanism” (IAM) that allows producers to demonstrate that their actual carbon intensity lies below the default value. We argue that the use of an IAM captures additional economic benefits of carbon pricing—notably providing more efficient abatement incentives—and improves the overall legal prospects of a CBAM being found to comply with international law and WTO rules. We discuss practical considerations around the implementation of an IAM, and illustrate with a short case study on the steel sector.
    Keywords: Border carbon adjustment, carbon pricing, Green Deal, international law, international trade
    JEL: H23 K33 Q54
    Date: 2020–09–16
  37. By: Dirk van Seventer; Finn Tarp
    Abstract: This paper considers the impacts of agro-industry development and international trade on income distribution in Myanmar, focusing on low-income rural households. We use a social accounting matrix multiplier (SAM) decomposition model featuring detailed economic linkages. After describing the Myanmar economy through the lens of a SAM for 2017, we focus on agriculture development. Our results suggest that low-income rural households benefit considerably from exogenous increases in crop and agro-processing activities.
    Keywords: Social Accounting Matrix, Decomposition, Myanmar
    Date: 2020
  38. By: Laura Ansala (City of Helsinki, City Executive Office, Urban Research and Statistics Unit); Olof Åslund (Uppsala University, IFAU, IZA, and CReAM); Matti Sarvimäki (Aalto University School of Business, VATT Institute for Economic Research, Helsinki Graduate School of Economics, IZA, and CReAM)
    Abstract: This paper studies the relationship between past immigration experiences of the host country and the way new immigrants enter the labor market. We focus on two countries—Finland and Sweden—that have similar formal institutions but starkly different immigration histories. In both countries, immigrants tend to find their first jobs in low-paying establishments, where the manager and colleagues share their ethnic background. The associations between background characteristics, time to first job, other entry job characteristics, earnings dynamics and job stability are also remarkably similar. These results are consistent with the hypothesis that the host country’s immigration history plays a limited role in shaping the integration process.
    Date: 2020–04
  39. By: Henrik Andersson (Uppsala University); Sirus H. Dehdari (Uppsala University)
    Abstract: This paper studies the consequences of an increased presence of immigrants in the workplace on anti-immigration voting behavior by combining detailed Swedish workplace data with election outcomes for a large anti-immigration party (the Sweden Democrats). At each election precinct, we match the election outcomes with the share of non-European co-workers among the average native-born worker for three consecutive elections between 2006 and 2014. Using a fixed effects approach, we estimate a negative effect of an increased share of non-Europeans in the workplace on support for the Sweden Democrats: a one standard deviation increase in the average share of non-European co-workers decreases the precinct vote share for the Sweden Democrats by roughly 0.4 percentage points. We show that these results are solely driven by within-skill contact, and by contact within occupations that are less exposed to job loss. We interpret the results as supporting the contact hypothesis: that increased interactions with minorities r duce prejudice among native-born voters, which leads to lower support for anti-immigration parties.
    Date: 2020–02
  40. By: Advani, Arun (Institute for Fiscal Studies, London); Koenig, Felix (Carnegie Mellon University); Pessina, Lorenzo (Columbia University); Summers, Andy (London School of Economics)
    Abstract: In this paper we study the contribution of migrants to the rise in UK top incomes. Using administrative data on the universe of UK taxpayers we show migrants are over-represented at the top of the income distribution, with migrants twice as prevalent in the top 0.1% as anywhere in the bottom 97%. These high incomes are predominantly from labour, rather than capital, and migrants are concentrated in only a handful of industries, predominantly finance. Almost all (85%) of the growth in the UK top 1% income share over the past 20 years can be attributed to migration.
    Keywords: income inequality, migration, top income shares
    JEL: H2 J3 J6
    Date: 2020–09
  41. By: Benjamin Elsner; Jeff Concannon
    Abstract: One of the fundamental questions in the social sciences is whether modern welfare states can be sustained as countries welcome more immigrants. On theoretical grounds, the relationship between immigration and support for redistribution is ambiguous. Immigration may increase ethnic diversity, which may reduce the support for redistribution. On the other hand, natives may demand more redistribution as an insurance against labour market risks brought by immigration. In this chapter, we review the theoretical and empirical literature on immigration and redistribution from across the social sciences. We focus on two themes, namely the effect of immigration on natives’ support for redistribution, and the effect on the actual setting of tax and spending policies. Recent empirical evidence suggests that immigration lowers the support for redistribution and leads to lower taxation and spending. However, the magnitude of these effects appears to be highly context-dependent.
    Keywords: Migration; Redistribution; Public policy
    JEL: F22 H2 H4
    Date: 2020–09
  42. By: Amuedo-Dorantes, Catalina (University of California, Merced); Arenas-Arroyo, Esther (Vienna University of Economics and Business)
    Abstract: Using the 2005-2014 waves of the American Community Survey –a period characterized by the rapid expansion of interior immigration enforcement initiatives across the United States, we evaluate the impact of a tougher policy environment on undocumented immigrants' fertility. We find that a one standard deviation increases in enforcement lowers childbearing among likely undocumented women by 5 percent. The effect emanates from police-based measures linked to increased deportations, which may raise uncertainty about the future of the family unit and its resources. Understanding these impacts is important given the critical contributions of immigrants and their offspring to diversity, the economy and the sustainability of the welfare state.
    Keywords: fertility, immigration policy, interior immigration enforcement, undocumented immigrants, unauthorized immigrants, United States
    JEL: J13 J15 K37
    Date: 2020–09
  43. By: Depetris-Chauvin, Emilio (Pontificia Universidad Catolica de Chile); Özak, Ömer (Southern Methodist University)
    Abstract: We explore the effect of historical ethnic borders on contemporary conflict in Africa. We document that both the intensive and extensive margins of contemporary conflict are higher close to historical ethnic borders. Exploiting variations across artificial regions within an ethnicity's historical homeland and a theory-based instrumental variable approach, we find that regions crossed by historical ethnic borders have 27 percentage points higher probability of conflict and 7.9 percentage points higher probability of being the initial location of a conflict. We uncover several key underlying mechanisms: competition for agricultural land, population pressure, cultural similarity and weak property rights.
    Keywords: borders, conflict, territory, property rights, landownership, population pressure, migration, historical homelands, development, Africa, Voronoi tessellation, Thiessen tessellation
    JEL: D74 N57 O13 O17 O43 P48 Q15 Q34
    Date: 2020–09
  44. By: Giovanni Scarano
    Abstract: The share of surplus devoted to direct investment in capital goods by big corporations also depends on their corporate savings decisions, which are closely connected not only to the features of corporate governance and the forms of competition, but also to the possibilities of holding liquid financial assets bearing high returns. Financial globalization, multiplying the potential range of financial instruments available to big corporations’ portfolios and creating new ways to access the high profits produced in the emergent markets, can contribute to change the portfolio composition. The paper deals with some contributions that analyse the effects of financial globalization on portfolio management and investment decisions in big corporations, seeking to determine how they may be playing a major role in timing the rhythms of real investment. The main objective is to understand whether these models can account for the tendency to put growing shares of social surplus into speculative channels.
    Keywords: Investment theory, Corporate Savings, Capital Movements, Financialisation, Financial Crises
    JEL: B51 E11 E12 E32 F23 G35
    Date: 2020–09

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