nep-int New Economics Papers
on International Trade
Issue of 2020‒10‒26
39 papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. A review of economic analyses on the potential impact of Brexit By Committee, International Relations; Force, Brexit Task
  2. Effects of EU-Mercosur trade agreement on bilateral trade: the role of Brexit By Sanguinet, Eduardo; Alvim, Augusto
  3. Does trade participation limit domestic firms’ productivity gains from inward foreign direct investment? By Rene Belderbos; Vincent Van Roy; Leo Sleuwaegen
  4. Anxiety or Pain? The Impact of Tariffs and Uncertainty on Chinese Firms in the Trade War By Felipe Benguria; Jaerim Choi; Deborah L. Swenson; Mingzhi Xu
  5. Networked FDI and third-country intra-firm trade By Toshihiro Okubo; Yuta Watabe
  6. Decomposing Central and Eastern Europe’s trade: Extending the evidence By Robin Grözinger
  7. South Korean Economy and the Free Trade Agreement with China By Bayari, Celal
  8. Firm Input Choice Under Trade Policy Uncertainty By Kyle Handley; Nuno Limão; Rodney D. Ludema; Zhi Yu
  9. Trade and Trees: How Trade Agreements Can Motivate Conservation Instead of Depletion By Bård Harstad
  10. Covid-19 Shocking Global Value Chains By Peter Eppinger; Gabriel J. Felbermayr; Oliver Krebs; Bohdan Kukharskyy
  11. Trade and FDI Thresholds of CO2 emissions for a Green Economy in Sub-Saharan Africa By Simplice A. Asongu; Nicholas M. Odhiambo
  12. International Trade Finance from the Origins to the Present: Market Structures, Regulation and Governance By Olivier Accominotti; Stefano Ugolini
  13. Firm Dynamics and Trade By George A. Alessandria; Costas Arkolakis; Kim J. Ruhl
  14. De-globalization: Driven by Global Crises? By Assaf Razin
  15. An Empirical Analysis of Pakistan's Agriculture Trade with China: Complementarity or Competition? By Unbreen Qayyum; Neelum Nigar
  16. Highways and Globalization By Taylor Jaworski; Carl Kitchens; Sergey Nigai
  17. Between Lives and Economy: Optimal COVID-19 Containment Policy in Open Economies By Hsu, Wen-Tai; Lin, Hsuan-Chih (Luke); Yang, Han
  18. The Gravitational Constant? By David S. Jacks; Kevin Hjortshøj O'Rourke; Alan M. Taylor
  19. The Case for Healthy U.S.-China Agricultural Trade Relations despite Deglobalization Pressures By Wendong Zhang
  20. Non-Cooperative Climate Policies among Asymmetric Countries: Production- versus Consumption-based Carbon Taxes By Noha Elboghdadly; Michael Finus
  21. Opening the Door: Migration and Self-Selection in a Restrictive Legal Immigration Regime By Elizabeth U. Cascio; Ethan G. Lewis
  22. Economic Complexity and Growth: Can value-added exports better explain the link? By Philipp Koch
  23. Designing an International Economic Order: A Research Agenda By Renee Bowen; J. Lawrence Broz
  24. Offshoring and Segregation by Skill: Theory and Evidence By Gueyon Kim; Dohyeon Lee
  25. COVID-19 Has Temporarily Supercharged China’s Export Machine By Hunter L. Clark
  26. Inter-industry FDI spillovers from foreign banks: Evidence in transition economies By Shusen Qi; Kent Hui; Steven Ongena
  27. Microeconomic analysis of investment strategies of foreign companies in Russia in the context of their foreign trade activities By Knobel, Alexander (Кнобель, Александр); Zaitsev, Yuriy (Зайцев, Юрий)
  28. The Rise and Fall of Import Substitution By Douglas A. Irwin
  29. Immigration, diversity and institutions By Roupakias, Stelios; Dimou, Spiridoula
  30. Protectionism and economic growth: Causal evidence from the first era of globalization By Niklas Potrafke; Fabian Ruthardt; Kaspar W\"uthrich
  31. Latent Dirichlet Allocation Models for World Trade Analysis By Diego Kozlowski; Viktoriya Semeshenko; Andrea Molinari
  32. A test for Heckscher-Ohlin using value-added exports By Philipp Koch; Clemens Fessler
  33. Multinational enterprises, service outsourcing and regional structural change By Ascani, Andrea; Iammarino, Simona
  34. A Counterfactual Economic Analysis of Covid-19 Using a Threshold Augmented Multi-Country Model By Alexander Chudik; Kamiar Mohaddes; M. Hashem Pesaran; Mehdi Raissi; Alessandro Rebucci
  35. Offshoring and Non-Monotonic Employment Effects across Industries in General Equilibrium By Daniel Baumgarten; Michael Irlacher; Michael Koch
  36. Evolution of CGIAR funding By Beintema, Nienke M.; Echeverria, Ruben G.
  37. Borders: a lasting resurgence? By Gérard-François Dumont
  38. Railroads, specialization, and population growth in small open economies: Evidence from the First Globalization By Andrés Forero; Francisco A. Gallego; Felipe González; Matías Tapia
  39. World Economic and Strategic Security By Jacques Fontanel

  1. By: Committee, International Relations; Force, Brexit Task
    Abstract: This paper summarises the economic analyses of the potential impact of Brexit on the United Kingdom, European Union (EU) and euro area performed by members of and contributors to the Brexit Task Force, a group reporting to the International Relations Committee of the European System of Central Banks. The studies were carried out between 2017 and the initial months of 2019 and have been independently published by the authors. The aim of this Occasional Paper is to present the studies in an organic manner, highlighting common features and results. JEL Classification: F14, F15, F21, F22
    Keywords: Brexit, FDI, global value chains, migration, trade
    Date: 2020–10
  2. By: Sanguinet, Eduardo; Alvim, Augusto
    Abstract: This article aims to assess the impact of the EU-Mercosur Agreement on the Brazilian economy using the Computable General Model (CGE) Global Trade Analysis Project (GTAP). The study proposes two sets of simulations – one with the United Kingdom as a member of the EU and the other without being a member, according to Brexit context. There is evidence of positive effects on foreign trade and on the welfare level in Brazil, with emphasis on manufactured goods and the grains of crops. The EU consolidates its presence in global trade. The results show that Mercosur benefits Brazilian foreign trade, making it a strategic partner at the regional level. It is concluded that Brexit can reduce Brazilian gains in the EU-Mercosur agreement, being important the discussion about the creation of another agreement involving the United Kingdom.
    Keywords: Policy analysis, GTAP, Brexit, Brazil, Mercosur.
    JEL: D58 F13 R13
    Date: 2020–03–10
  3. By: Rene Belderbos; Vincent Van Roy; Leo Sleuwaegen
    Abstract: We examine to what extent domestic firms reap differential productivity gains from the presence of manufacturing affiliates of multinational firms in the home country (FDI spillovers), in the context of simultaneous participation in international trade through exporting and importing. FDI spillovers can occur within the industry (horizontal) and across industries due to client (forward) or supplier (backward) linkages of multinational firms, but the mechanisms underlying spillover effects may be attenuated if local firms are less reliant on inputs, clients, and competition in the domestic market. Fixed effects panel analyses on a sample of 4594 domestic Belgian firms during 2000-2007 reveal positive effects from horizontal, backward, and forward FDI spillovers on the productivity levels of domestic firms, as long as these firms do not engage in international trade. Horizontal spillovers from FDI are weaker for firms engaging in trade, while forward FDI spillovers do not benefit importing firms. Two-way traders benefit least from FDI spillovers. Forward and backward spillovers, are enhanced by human capital levels in local firms, while horizontal spillovers are reduced. The findings are broadly consistent with the notion that trade engagement and inward FDI can be substitutes in their effects on domestic firms’ productivity.
    Keywords: Foreign Direct Investment, Trade, Spillovers, Productivity
    Date: 2020–10–06
  4. By: Felipe Benguria; Jaerim Choi; Deborah L. Swenson; Mingzhi Xu
    Abstract: The unexpected outbreak of the U.S.-China trade war led to dramatic increases in the import and export tariffs confronting Chinese firms. Due to firm-level differences in trade engagement, customs trade data combined with tariff changes allow us to measure firm-level exposure to the trade war. Further, by adopting a new textual analysis approach to listed firms' annual reports, we develop trade policy uncertainty (TPU) measures that vary over firms and time. Our difference-in-differences examination of these firm-level data reveals that trade war increases in U.S. tariffs and Chinese retaliatory tariffs both raised Chinese firms’ TPU. The impact of tariffs on uncertainty is heterogeneous, and is most pronounced for smaller and less capital-intensive firms. This effect is also smaller for Chinese exporters that were more diversified in terms of partner countries. In the second stage of our analysis we explore and document the negative connection between Chinese firm-level increases in TPU and subsequent firm performance. Our estimates indicate that Chinese firms hit by a one standard deviation increase in TPU during the trade war reduced firm-level investment, R&D expenditures, and profits by 1.4, 2.7, and 8.9 percent, respectively.
    JEL: D81 F13 F14 F51
    Date: 2020–10
  5. By: Toshihiro Okubo (Faculty of Economics, Keio University); Yuta Watabe (Pennsylvania State University)
    Abstract: In the wave of globalization, foreign direct investment (FDI) is networked. Affiliates locate across countries and trade among them. This paper investigates the FDI networks, in particular, third-country intra-firm trade using the Japanese foreign affiliate data. We find active third-country sales and sourcing within the firm boundary, but only large firms tend to construct production networks. Driving forces for FDI networks are in the allocation of ownership and human resources by parent firms.
    Keywords: multinational firms, networked FDI, intra-firm trade, sales and sourcing, third-country
    JEL: F12 F15
    Date: 2020–09–08
  6. By: Robin Grözinger (IOS Regensburg)
    Abstract: In the early nineties Central and East European Countries (CEEC) took considerable liberalisation efforts which led to visible changes in CEEC trade. In the period under observation, from 1995 to 2016, these countries recorded high growth rates, which exceeded the performance of other regions, such as the OECD and Russia. These trade developments are described and interpreted in this note on a descriptive rather than an analytical basis. First, trade volumes by goods categories are examined to account for what kind of goods are the major trade growth drivers. The expansion of CEEC imports and exports can be accounted for by trade growth specifically of goods used in production, i.e., parts and components, capital goods and transport equipment. It can be associated with the development of vertical production networks among the old EU member states and the new EU-8 countries. Examining EU-8 exports to and imports from Germany confirms this finding: EU-8 states tend to import parts and components and intermediate goods from Germany to produce and export parts and components or final capital goods to Germany. Using the notion of comparative advantage further helps to attribute the extensive development of vertical linkages with the CEEC to the similarity of sectoral productivity vectors between the CEEC and the rest of the world. Second, the effects of liberalisation on the variety versus the intensity of trade are described. The liberalisation of the CEEC economies is expressed by the strong rise in newly traded goods, especially goods used in production, rather than volume growth in already traded goods. Considering imports, a higher input variety might thereby signal a change of the economy’s state of technology.
    Keywords: CEEC, intensive margin, extensive margin, vertical production networks, comparative advantage
    JEL: F1
    Date: 2020–10
  7. By: Bayari, Celal
    Abstract: South Korea has had a continuous engagement with significant trade, investment and security matters simultaneously in its relations with other nations. South Korea’s bilateralism with China is a part of a larger milieu which China has been constructing, that includes the Belt and Road Initiative (BRI) and the Asian Infrastructure Investment Bank (AIIB). South Korea has become a member of the AIIB in December 2015 and it has not joined the BRI. The discussion here also concerns South Korea-China FTA agreement’s aftermath. China is a nation with a very broad range of regional, intraregional and global ambitions and strategies. Undoubtedly, the East Asian security framework has an overbearing impact on the trade and investment environment. Moreover, the relations between Seoul and Pyongyang are relevant to the economic and political developments in East Asia. There are earlier discussions of the structure of the US-South Korea and China-North Korea alliances and there is also prior coverage of the effects of China on North Korean economy and the consequences for South Korea, neither of which will not be recapped here due to lack of space. South Korea, together with the US, Japan, North Korea, China and Russia, has been engaged in a long process of negotiations in several ‘six party talks’ since 2003, to bring a lasting peace to the Korean Peninsula, which have not, as yet, led to a final outcome, as has been the case with the series of the US and North Korean disarmament talks that originated in 1994. While these issues are relevant to the larger context of the topic, in this discussion, the focus is on the South Korean economic model and business systems and its interaction with the Chinese economy and the 2015 FTA and the Chinese business systems.
    Keywords: South Korean economy, Chaebols, China, FTA, Belt and Road Initiative, global value chains
    JEL: A2 B5 B52 E23 E30 E44 E6 F1 F10 F11 F12 F13 F14 F15 F16 F23 F43 F44 F5 G15 G18 G2 G21 G24 H1 H13 H5 H54 H77 J2 J21 J24 J31 J42 K2 K21 K23 L1 L11 L12 L13 L14 L16 M1 M13 O11 O14 O15 O19 P1 P12 P13 P16 P2 P23 P31 P32 P33 P36 P37
    Date: 2020–05–14
  8. By: Kyle Handley; Nuno Limão; Rodney D. Ludema; Zhi Yu
    Abstract: We examine the role of trade policy uncertainty in shaping the import decisions of firms. If the adoption of a new input requires a sunk cost investment, then the prospect of price increases in that input, e.g. due to trade barriers, reduces the adoption of that input (a substitution effect) and possibly other inputs (complementarity via lower profits). Thus trade policy uncertainty can affect a firm’s entire input mix. We provide a new model of input price uncertainty that captures both effects and derive its empirical implications. We test these using an important episode that lowered input price uncertainty: China’s accession to the WTO and the associated commitment to bind its import tariffs. We estimate large increases in imported inputs by firms from accession; the reduced uncertainty from commitment generates substitution effects larger than the reductions in applied tariffs in 2000-2006 and has significant profit effects.
    JEL: F02 F1 F12 F13 F14 F61 O19 O24
    Date: 2020–10
  9. By: Bård Harstad
    Abstract: Free trade can often lead to resource depletion, such as deforestation in the tropics. This paper first presents a dynamic model whereby the South (S) depletes to export the extracted units (timber) or the produce (beef) from land available after depletion. Because of the damages, the North benefits from trade liberalization only if the remaining stock is, in any case, diminished. For that reason, S speeds up exploitation. The negative results are reversed if the parties can negotiate a dynamic trade agreement, whereby the allocation of gains from trade, and thus the location on the Pareto frontier, is sensitive to the size of the remaining stock. In equilibrium, S conserves to maintain its favorable terms of trade, S conserves more than in autarky, and more when the gains from trade are large. The parties cannot commit to future policies, but they obtain the same outcome as if they could.
    Keywords: exhaustible resources, deforestation, international trade, trade agreements, environmental conservation, renegotiation
    JEL: F18 F13 F55 Q56 Q37
    Date: 2020
  10. By: Peter Eppinger; Gabriel J. Felbermayr; Oliver Krebs; Bohdan Kukharskyy
    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 transmitting the 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 are magnified 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
  11. By: Simplice A. Asongu (Yaounde, Cameroon); Nicholas M. Odhiambo (Pretoria, South Africa)
    Abstract: This research focuses on assessing how improving openness influences CO2 emissions in Sub-Saharan Africa. It is based on 49 countries in SSA for the period 2000-2018 divided into: (i) 44 countries in SSA for the period 2000-2012; and (ii) 49 countries for the period 2006-2018. Openness is measured in terms of trade and foreign direct investment (FDI) inflows. The empirical evidence is based on the Generalised Method of Moments. The following main findings are established. First, enhancing trade openness has a net positive impact on CO2 emissions, while increasing FDI has a net negative impact. Second, the relationship between CO2 emissions and trade is a Kuznets shape, while the nexus between CO2 emissions and FDI inflows is a U-shape. Third, a minimum trade openness (imports plus exports) threshold of 100 (% of GDP) and 200 (% of GDP) is beneficial in promoting a green economy for the first and second sample, respectively. Fourth, FDI is beneficial for the green economy below critical masses of 28.571 of Net FDI inflows (% of GDP) and 33.333 of net FDI inflows (% of GDP) for first and second samples, respectively. It follows from findings that while FDI can be effectively managed to reduce CO2 emissions, this may not be the case with trade openness because the corresponding thresholds for trade openness are closer to the maximum limit. This study complements the extant literature by providing critical masses of Trade and FDI that are relevant in promoting the green economy in Sub-Saharan Africa.
    Keywords: CO2 emissions; Economic development; Africa; Sustainable development
    JEL: C52 O38 O40 O55 P37
    Date: 2020–01
  12. By: Olivier Accominotti (LSE); Stefano Ugolini (LEREPS)
    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.
    Date: 2020–09
  13. By: George A. Alessandria; Costas Arkolakis; Kim J. Ruhl
    Abstract: We review the literature that studies the dynamics of firms in foreign markets, both at the intensive and extensive margins, and their aggregate implications. We first summarize a set of micro facts on exporter entry, expansion, contraction, and exit and macro facts about the response of aggregate trade flows to trade-policy and business-cycle shocks. We then present the canonical model developed in the literature to account for these facts and discuss its connection to the empirical evidence. We show how three model features — future uncertain profits, an investment in market access, and high depreciation of that access upon exit — generate transition dynamics and long-run aggregate outcomes from a cut in tariffs. The model and its extensions contribute to our understanding of the dynamics of trade integration and the evolution of future trade barriers. We discuss the key challenges faced by the canonical model, possible extensions, and applications of the framework to recent global events.
    JEL: F1 F11 F12 F14 F15 F41 F61 F62
    Date: 2020–10
  14. By: Assaf Razin
    Abstract: International trade increased rapidly after 1990, fueled by the growth of a complex network of global value chains. Financial globalization gathered force. Trade globalization, however, reversed course since the Global Financial Crisis. The new trend is expected to endure after the Global Pandemic Crisis. There is no indication so far of significant reversal of financial globalization.
    JEL: F0 F3
    Date: 2020–10
  15. By: Unbreen Qayyum (Pakistan Institute of Development Economics, Islamabad.); Neelum Nigar (Institute of Strategic Studies, Islamabad.)
    Abstract: This paper examines the bilateral trade flows between Pakistan and china with particular focus on the trade of agricultural goods. It observes the trends and characteristics of China-Pakistan trade relations after both countries signed the China-Pakistan Free Trade Agreement in 2006. We use trade complementarity index, revealed comparative advantage index, trade integration index and export similarity index to empirically analyse trade complementarity and competition of thirty five agricultural products. Furthermore, we investigate the future prospects of agriculture sector by calculating indicative trade potentials of top agriculture products. The findings of this study show that there exist competition and complementarity for few products; however, complementarity is strong.. The indicative trade potentials show that Pakistan has higher exports potentials in products rice, seafood and cotton, which however have not reached up to their potentials due to various barrier and nonbarrier tariffs. Thus it is important that these challenges are addressed in order to increase the bilateral trade in future.
    Keywords: Bilateral Trade; Agriculture sector; Trade Competition; Trade Complementarity; CPEC, CPFTA
    Date: 2020
  16. By: Taylor Jaworski; Carl Kitchens; Sergey Nigai
    Abstract: This paper quantifies the value of US highways and their contribution in shaping regional specialization patterns and facilitating internal and external market integration. We develop a multisector general equilibrium model of interregional and international trade with many locations in the United States (i.e., counties) and many countries. In the model, producers choose shipping routes subject to domestic and international trade costs, endogenous congestion, and port efficiency at international transshipment points. We find that removing the Interstate Highway System reduces real GDP by $619.1 billion (or 3.9 percent) with one quarter due to reduced international market access. We also quantify the value of the twenty longest highway segments and find a range between $2.7 and $55.1 billion with I-5 being the most valuable. Our results highlight the role of domestic transportation infrastructure in shaping regional comparative advantage and gains from international trade.
    JEL: F11 F14 H54 R13 R42
    Date: 2020–10
  17. By: Hsu, Wen-Tai (School of Economics, Singapore Management University); Lin, Hsuan-Chih (Luke) (Institute of Economics, Academia Sinica); Yang, Han (Institute of Economics, Academia Sinica)
    Abstract: This paper studies optimal containment policy for combating a pandemic in an open-economy context. It does so via quantitative analyses using a model that incorporates a standard epidemiological compartmental model in a multi-country, multi-sector Ricardian model of international trade with full-fledged input-output linkages. We devise a novel approach in computing optimal national policies in the long run, and contrast these policies with a baseline in which countries maintain their current policies until vaccine availability. The welfare gains under optimal policies are asymmetric as the gains for the set of countries which should tighten up the containment measures are much larger than those which should relax. We also find that the welfare implications of optimal policies in open economies differ significantly from those in closed ones.
    Keywords: COVID-19; pandemic; welfare analysis; containment policy; optimal policy; open economy; trade; input-output linkages
    JEL: E27 F11 F40 I18
    Date: 2020–10–05
  18. By: David S. Jacks; Kevin Hjortshøj O'Rourke; Alan M. Taylor
    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 magnitude. It was only after 1950 that distance would once again exert the same influence that it has today.
    JEL: F1 N7
    Date: 2020–10
  19. By: Wendong Zhang (Center for Agricultural and Rural Development (CARD))
    Abstract: The COVID-19 pandemic is crippling the global economy and heightening distrust and political disagreements among major countries. Furthermore, ongoing deglobalization efforts taken by firms and countries are fueling the rise of economic nationalism. A prime example is the possible decoupling of U.S.-China economic and trade relations, which the ongoing trade war has already significantly disrupted. This paper analyzes the impacts of COVID-19 on U.S. agricultural exports to China, especially the added delays and uncertainty on China's food imports meeting the U.S.-China phase one trade deal target. I present the views of U.S. farmers and the general public toward China and argue that healthy U.S.-China agricultural trade relations are not only critical for both countries but welcomed by U.S. farmers. I also discuss the possible rise in non-tariff barriers following the pandemic as well as trade policies that are increasingly intertwined with political tensions. Finally, I discuss how the U.S.-China phase one trade deal could possibly lead to a more balanced bilateral agricultural trade portfolio with greater share of protein and retail food products.
    Date: 2020–10
  20. By: Noha Elboghdadly (University of Bath, UK and Alexandria University, Egypt); Michael Finus (University of Graz, Austria)
    Abstract: Non-cooperative production-based carbon taxes might be set inefficiently low due to the concern of governments about carbon leakage and the loss of competitiveness of their industries. In a strategic trade model, we study the effect of a gradual shift from bilateral production- to unilateral or bilateral consumption-based carbon taxes, considering various forms of border carbon adjustments (BCAs). We analyse the optimal response of two countries in a non-cooperative policy game. We show that if the environmentally more concerned government shifts unilaterally to a consumption-based policy, BCAs on imports create a new incentive for the optimal tax structure. Although profit-shifting and carbon leakage distortions are gradually reduced or even eliminated by combining carbon tariffs with export rebates, the optimal tax may still be below individual marginal damages in strategic setting. In contrast, a bilateral consumption-based tax, could be set equal to or even above individual marginal damages. In equilibrium, all forms of BCAs could allow both governments to set higher carbon taxes than under a bilateral production-based tax regime. However, BCA-regimes which add export rebates to import tariffs should be chosen carefully, as they may actually increase global emissions.
    Keywords: Carbon Taxes; Border Carbon Adjustments; Carbon Leakage-shifting Effect; Profit-shifting Effect; Consumer Effect; Tariffs and Export Rebate Income Effect.
    JEL: C72 F12 F18 H23 Q58
    Date: 2020–10
  21. By: Elizabeth U. Cascio; Ethan G. Lewis
    Abstract: We examine how the large, one-time legalization authorized by the Immigration Reform and Control Act (IRCA) has affected the scale and character of immigration to the U.S. since the late 1980s. Exploiting cross-country variation in the magnitude of the legalization shock, we find that each IRCA admit accounts for the subsequent admission of 1 to 2 family members, mostly immediate family. There is little evidence that the legalization increased subsequent unauthorized migration; in fact, fewer temporary visa overstays have somewhat offset the additional family admissions. The marginal family-sponsored admit has not been negatively selected and has not increased fiscal burdens.
    JEL: F22 J08 J61 J68
    Date: 2020–10
  22. By: Philipp Koch
    Abstract: In economic literature, economic complexity is typically approximated on the basis of an economy's gross export structure. However, in times of ever increasingly integrated global value chains, gross exports may convey an inaccurate image of a country's economic performance since they also incorporate foreign value-added and double-counted exports. Thus, I introduce a new empirical approach approximating economic complexity based on a country's value-added export structure. This approach leads to substantially different complexity rankings compared to the established metrics. Moreover, the explanatory power of GDP per capita growth rates for a sample of 40 lower-middle- to high-income countries is considerably higher, even if controlling for typical growth regression covariates.
    Date: 2020–09
  23. By: Renee Bowen; J. Lawrence Broz
    Abstract: The institutions that have sustained global economic cooperation for the past 75 years are under threat. Despite admonitions that global peace and prosperity are at risk, policymakers in important countries have ignored the rules of the multilateral order and moved down the path of unilateralism and economic nationalism. What role can social scientists play in redesigning the international economic order? We offer a research agenda for contributing to the reform and improvement of global institutions. The research agenda is guided by three themes: threats, solutions, and leadership. Threats refer to the deep causes of the crisis in global institutions, not the symptoms or expressions of those problems. Solutions refers to institutional reforms required to address deep threats to the global order. Leadership addresses the challenge of coordinating efforts to supply international institutions, which can be thought of as global public goods. We demonstrate the value of this research agenda by applying it to the World Trade Organization.
    JEL: A11 F02 F13 F5 F51 F52 F53 F55 F6 H1 H4 K12 K33
    Date: 2020–10
  24. By: Gueyon Kim (University of California, Santa Cruz); Dohyeon Lee (University of Wisconsin--Madison)
    Abstract: This paper examines the labor market consequences of offshoring. We use the Danish employer-employee matched data together with the newly constructed skill measures to evaluate the effect of offshoring on wages and reallocation of workers within offshorable occupations. Offshoring reduces domestic worker wages; and increases the probability of reallocation away from the high-productivity firms to the low-productivity ones. The least-skilled workers further face a greater risk of switching out to a less competitive sector. On the firm-side, offshoring improves the average skill of in-house workers at a lower cost. By estimating a worker-firm matching model, we examine the mechanisms of how offshoring affects labor market inequality and further assess the quantitative importance of various competing hypotheses such as technological change and the expansion of higher education, in addition to offshoring. We find substantially different effects: technology mainly increases the inequality between firms in terms of worker skill quality and average wages, while offshoring mitigates this rising trend.
    Keywords: offshoring, skill, matching, segregation by skill, between-firm inequality
    JEL: F15 F16 F23 J21 J24 J31
    Date: 2020–10
  25. By: Hunter L. Clark
    Abstract: China’s export performance this year has been stronger than expected. After a sharp slump at the beginning of 2020, the country’s exports have posted positive growth—the only major economy’s to do so. However, a closer look at the data reveals that this growth has not been very broad-based, but rather concentrated in areas where China’s export structure was well-positioned to take advantage of the global crisis—namely, production of medical supplies and school-from-home and work-from-home (S/WFH) goods. Once the COVID-19 crisis passes, China’s exports will likely return to their pre-coronavirus growth path, including a gradual loss of market share to other countries.
    Keywords: China; COVID-19; exports
    JEL: F00 F1
    Date: 2020–10–15
  26. By: Shusen Qi (Xiamen University - School of Management); Kent Hui (Xiamen University); Steven Ongena (University of Zurich - Department of Banking and Finance; Swiss Finance Institute; KU Leuven; Centre for Economic Policy Research (CEPR))
    Abstract: Too little is known about the inter-industry spillovers from foreign direct investment (FDI) in services. We therefore study whether and how spillovers from FDI in the banking sector occurs. We access a sample of non-financial domestic firms in transition economies from Eastern Europe and Central Asia and find that the innovation pursued by domestic firms benefits from foreign bank penetration. This positive interindustry spillover surprisingly (and in contrast to conventional wisdom) does not seem to work through enhanced credit access, but rather through the improvement of the local market of fee-based banking services and through the transfer of knowledge to domestic firms in non-contractual interactions. These positive spillovers occur mainly for foreign banks that use relationship lending, domestic firms that do not export, and host countries that are less open to the global market.
    Keywords: FDI spillovers, knowledge transfer, foreign banks, services FDI, innovation
    Date: 2020–10
  27. By: Knobel, Alexander (Кнобель, Александр) (The Russian Presidential Academy of National Economy and Public Administration); Zaitsev, Yuriy (Зайцев, Юрий) (The Russian Presidential Academy of National Economy and Public Administration)
    Abstract: This working paper is devoted to identifying patterns of spatial and sectoral distribution of foreign direct investment enterprises in the Russian Federation and to developing recommendations for optimizing the strategy of attracting foreign direct investment to the Russian Federation. The following methods were applied: the method of macroeconomic modeling, evaluation of econometric models, as well as logical, systemic, comparative, economic and statistical analysis. Statistical data at the enterprise level were used from the «RUSLANA» and «SPARK-INTERFAX» databases. The results allow to point out some characteristic features of the spatial distribution of foreign enterprises, which must be taken into account when forming a picture of preferences of foreign investors and the policy of attracting foreign investors to Russian regions.
    Date: 2020–05
  28. By: Douglas A. Irwin
    Abstract: In the 1950s, many economists believed that import substitution – policies to restrict imports of manufactured goods – was the best trade strategy to promote industrialization and economic growth in developing countries. By the mid-1960s, there was widespread disenchantment with the results of such policies, even among its proponents. This paper traces the rise and fall of import substitution as a development idea. Perhaps surprisingly, early advocates of import substitution were quite cautious in their support for the policy and were also among the first to question it based on evidence derived from country experiences.
    JEL: B31 F13 F14 O14 O19 O24
    Date: 2020–10
  29. By: Roupakias, Stelios; Dimou, Spiridoula
    Abstract: This paper examines the relationship between immigration and host countries’ institutional quality, using international migration data, and two composite metrics, encompassing multiple dimensions of governance. Moreover, we construct indicators of cultural diversity, such as fractionalization and polarization, to capture potential effects from multiculturalism. To reduce endogeneity concerns, we employ pseudo gravity-based instruments in a 2SLS setting. Overall, our findings suggest that counties with higher immigrant concentrations and cultural polarization display lower levels of institutional quality. Notably, however, the impact on countries with healthy institutions appear to be negligible.
    Keywords: Immigration · Diversity · Institutions
    JEL: J15 O15 O43
    Date: 2020–10–02
  30. By: Niklas Potrafke; Fabian Ruthardt; Kaspar W\"uthrich
    Abstract: We investigate how protectionist policies influence economic growth. Our empirical strategy exploits an extraordinary tax scandal that gave rise to an unexpected change of government in Sweden. A free-trade majority in parliament was overturned by a comfortable protectionist majority in the fall of 1887. We employ the synthetic control method to select control countries against which economic growth in Sweden can be compared. We do not find evidence suggesting that protectionist policies influenced economic growth and examine channels why. Tariffs increased government revenue. However, the results do not suggest that the protectionist government stimulated the economy in the short-run by increasing government expenditure.
    Date: 2020–10
  31. By: Diego Kozlowski; Viktoriya Semeshenko; Andrea Molinari
    Abstract: The international trade is one of the classic areas of study in economics. Nowadays, given the availability of data, the tools used for the analysis can be complemented and enriched with new methodologies and techniques that go beyond the traditional approach. The present paper shows the application of the Latent Dirichlet Allocation Models, a well known technique from the area of Natural Language Processing, to search for latent dimensions in the product space of international trade, and their distribution across countries over time. We apply this technique to a dataset of countries' exports of goods from 1962 to 2016. The findings show the possibility to generate higher level classifications of goods based on the empirical evidence, and also allow to study the distribution of those classifications within countries. The latter show interesting insights about countries' trade specialisation.
    Date: 2020–09
  32. By: Philipp Koch; Clemens Fessler
    Abstract: Empirical evidence for the Heckscher-Ohlin model has been inconclusive. We test whether the predictions of the Heckscher-Ohlin Theorem with respect to labor and capital find support in value-added trade. Defining labor-capital intensities and endowments as the ratio of hours worked to the nominal capital stock, we find evidence against Heckscher-Ohlin. However, taking the ratio of total factor compensations, and thus accounting for differences in technologies, we find strong support for it. That is, labor-abundant countries tend to export value-added in goods of labor-intensive industries. Moreover, differentiating between broad industries, we find support for nine out of twelve industries.
    Date: 2020–09
  33. By: Ascani, Andrea; Iammarino, Simona
    Abstract: This article offers a joint analysis of two phenomena characterising most advanced economies in recent decades: the rise of foreign ownership in manufacturing activities and the pervasiveness of the service economy. The analysis focuses on a specific intersectoral demand-side channel for structural change: the forward linkage established by foreign manufacturing multinational enterprises (MNEs) with service providers through outsourcing in the UK local labour markets. Descriptive evidence shows that service outsourcing by foreign manufacturing plants is notably larger than that of their domestic counterparts. On this basic premise, we estimate the local multiplier effect that foreign manufacturing activity has on service employment. To test our hypotheses, the methodology adopts an instrumental variable approach. Our findings suggest that foreign MNEs in manufacturing can act as a catalyst for regional structural change by stimulating employment in intermediate services via demand linkages. While the composition of this effect seems to be homogeneous in terms of the knowledge content of services, differences are found once the degree of their spatial concentration is accounted for.
    Keywords: multinational enterprises; service outsourcing; regional structural change; local markets; multiplier; ES/M008436/1
    JEL: O3 R1
    Date: 2018–11–01
  34. By: Alexander Chudik; Kamiar Mohaddes; M. Hashem Pesaran; Mehdi Raissi; Alessandro Rebucci
    Abstract: This paper develops a threshold-augmented dynamic multi-country model (TG-VAR) to quantify the macroeconomic effects of Covid-19. We show that there exist threshold effects in the relationship between output growth and excess global volatility at individual country levels in a significant majority of advanced economies and in the case of several emerging markets. We then estimate a more general multi-country model augmented with these threshold effects as well as long term interest rates, oil prices, exchange rates and equity returns to perform counterfactual analyses. We distinguish common global factors from trade-related spillovers, and identify the Covid-19 shock using GDP growth forecast revisions of the IMF in 2020Q1. We account for sam-ple uncertainty by bootstrapping the multi-country model estimated over four decades of quarterly observations. Our results show that the Covid-19 pandemic will lead to a significant fall in world output that is most likely long-lasting, with outcomes that are quite heterogenous across countries and regions. While the impact on China and other emerging Asian economies are estimated to be less severe, the United States, the United Kingdom, and several other advanced economies may experience deeper and longer-lasting effects. Non-Asian emerging markets stand out for their vulnerability. We show that no country is immune to the economic fallout of the pandemic because of global interconnections as evidenced by the case of Sweden. We also find that long-term interest rates could fall significantly below their recent lows in core advanced economies, but this does not seem to be the case in emerging markets.
    Keywords: threshold-augmented global VAR (TGVAR), international business cycle, Covid-19, global volatility, threshold effects
    JEL: C32 E44 F44
    Date: 2020
  35. By: Daniel Baumgarten; Michael Irlacher; Michael Koch
    Abstract: We address the mismatch between existing theoretical models and standard empirical practice in the analysis of the labor market effects of offshoring. While theory focuses on one-sector or two-sector models, empirical studies exploit variation in offshoring across a large number of industries, typically including a linear offshoring term in the analysis. Thereby, these studies implicitly assume a monotonic relationship between offshoring and labor market outcomes and ignore general-equilibrium effects across industries. We analyze the effects of offshoring across a continuum of industries with different shares of offshorable tasks that are linked through labor and capital markets in general oligopolistic equilibrium (GOLE). Our main result is that offshoring generates a hump-shaped pattern of employment changes across industries. While the relocation effect reduces employment in offshoring-intensive industries, labor demand in industries with a high prevalence of domestic production falls because of rising domestic wages and firm exits in general equilibrium. In the empirical part, we test the non-monotonic employment effects across industries in response to an offshoring shock by focusing on Germany after the fall of the Iron Curtain. We find strong empirical support for the hump shape in the changes of employment across industries with different scopes for offshoring, which is almost entirely due to the extensive margin, underscoring the importance of establishment entry and exit. Finally, we discuss important implications for empirical and theoretical research arising from our study.
    Keywords: offshoring and employment, task offshoring industry heterogeneity, general oligopolistic equilibrium
    JEL: F12 F16 F23 J23 L13
    Date: 2020
  36. By: Beintema, Nienke M.; Echeverria, Ruben G.
    Abstract: The primary role of international public agricultural research is undoubtedly to address key social, environmental, and economic goals at the global level. Further, there is consensus that investment must be accelerated in research-based innovations focusing on sustainable food systems. And given the relatively weak situation of many national agricultural research systems in the global South, it is imperative to reach economies of scale in investments in international initiatives. It is not yet clear, however, how much additional investment is needed or how scarce resources should be allocated across priority research-for-development challenges. At the international level, growing consensus indicates that—in addition to increasing funding—far greater harmonization is needed in funding and executing research in order to more effectively tackle global agricultural research challenges. Growing opportunities for technology spillovers and research alliances to occur across national, regional, and international boundaries necessitates the ability to access new technological knowledge from a variety of sources. And since access to new technologies is closely related to the capacity to generate new technologies, the need to strengthen and harmonize national, regional, and global research systems becomes even more of a priority. Although the role, contributions, and impacts of the CGIAR have been analyzed by many authors, only a few have summarized the recent evolution of its financing. This note is intended to contribute to reflections on the CGIAR’s first 50 years, which it will celebrate in 2021, while also providing a useful reference for the current “One CGIAR” governance and management transformation.
    Date: 2020
  37. By: Gérard-François Dumont (ENeC - Espaces, Nature et Culture - UP4 - Université Paris-Sorbonne - CNRS - Centre National de la Recherche Scientifique)
    Abstract: On the issue of borders, the year 2020 has been an exceptional year. While the process of globalization since the 1990s has generally favored the opening of borders, never before has the world known so many borders closed for health reasons. Faced with this unprecedented situation, what are the prospects? More border walls, whether physical or regulatory, or the priority given to reopened borders as before the covid-19 pandemic?
    Abstract: Sobre la cuestión de las fronteras, el año 2020 se ha presentado como un año excepcional. Si bien el proceso de mundialización desarrollado desde la dé-cada de 1990 ha favorecido en general su apertura, nunca el mundo había cono-cido tantas fronteras cerradas por razones sanitarias. Ante esta situación sin precedentes, ¿cuales son las perspectivas ? ¿Todavía más muros fronterizos, físi-cos o reglamentarios o la prioridad dada a la reapertura de fronteras como antes de la pandemia covid-19 ?
    Abstract: Sur la question des frontières, l'année 2020 s'est présentée comme une an-née exceptionnelle. Alors que le processus de mondialisation déployé depuis les années 1990 favorisait généralement leur ouverture, jamais le monde n'avait connu autant de frontières fermées pour des raisons sanitaires. Face à cette si-tuation inédite, quelles perspectives ? Davantage de murs frontaliers, physiques ou réglementaires, ou la priorité donnée à des frontières réouvertes comme avant la pandémie covid-19 ?
    Keywords: Border,Geopolitics,Geography,Migration,Population,Demographics,Economy,Globalization,demographics,covid-19,Frontera,geopolítica,geografía,migración,población,economía,mondialización,demografía,Frontière,géopolitique,géographie,migration,économie,mon-dialisation,démographie
    Date: 2020–09
  38. By: Andrés Forero; Francisco A. Gallego; Felipe González; Matías Tapia
    Abstract: We explore how railroads affected population growth during the First Globalization (1865-1920) in Chile. We look at areas with strong comparative advantage in agriculture using novel data documenting sixty years of railroad construction. Using instrumental variables, we present four main findings. First, railroads increased both urban and rural population growth. Second, the impact was stronger in areas with more potential for agricultural expansion. Third, railroads increased specialization in agriculture when combined with a high level of the real exchange rate. And fourth, railroads had little effects on human capital and fertility. These results suggest that the effects of transportation technologies depend on existing macroeconomic conditions.
    Date: 2020–09
  39. By: Jacques Fontanel (CESICE [1977-2015] - Centre d'études sur la sécurité internationale et les coopérations européennes [1977-2015] - UPMF - Université Pierre Mendès France - Grenoble 2 - IEPG [?-2019] - Sciences Po Grenoble - Institut d'études politiques de Grenoble [?-2019])
    Abstract: The notion of international security has often been analyzed from a military perspective. Today, the concept of economic and human security broadens this conception, adding to strategic and military considerations, international pollution, global warming, environmental rights and the security of individuals and minority groups. The aim is then to reduce the potential for military, police, economic, psychological and social violence against human beings, to reduce misery, lack of care, precariousness and illiteracy. Security theories must take into account national and international economic, human and social relations, as well as the balance of power in the international system.
    Abstract: La notion de sécurité internationale a souvent été analysée sous un angle militaire. Aujourd'hui, le concept de sécurité économique et humaine élargit cette conception, en, ajoutant aux considérations stratégiques et militaires, la pollution internationale, le réchauffement climatique, les droits environnementaux et la sécurité des individus et des groupes minoritaires. Il s'agit alors de réduire le potentiel de violence militaire, policière, économique, psychologique et sociale contre les êtres humains, de réduire la misère, le manque de soins, la précarité et l'analphabétisme. Les théories de la sécurité doivent prendre en compte les relations économiques, humaines et sociales nationales et internationales, ainsi que l'équilibre des pouvoirs dans le système international.
    Keywords: International insecurity,economic security,international conflicts,military expenditures,military power,Internationale insécurité,sécurité économique,conflits internationaux,dépenses militaires,puissance militaire
    Date: 2019–09–11

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