nep-int New Economics Papers
on International Trade
Issue of 2020‒11‒16
33 papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. Non-Tariff Measures and the Quality of Imported Products By Mahdi Ghodsi; Robert Stehrer
  2. Trade in value-added and the welfare gains of global value By Arnold Njike
  3. Global value chains and technology transfer: new evidence from developing countries By Rigo, Davide
  4. Financial Development and Trade Liberalization By David Kohn; Fernando Leibovici; Michal Szkup
  5. Trade Integration, Global Value Chains, and Capital Accumulation By Michael Sposi; Kei-Mu Yi; Jing Zhang
  6. A Primer on African Market Integration with a Hard look at Progress and Challenges Ahead By Jaime de Melo; Jean-Marc Solleder; Zakaria Sorgho
  7. The role of global governance institutions in mitigating the adverse economic impacts of epidemics By Archibong, Belinda; Annan, Francis; Ekhator-Mobayode, Uche
  8. Banking across borders: Are Chinese banks different? By Eugenio Cerutti; Catherine Koch; Swapan-Kumar Pradhan
  9. Does corruption matter for FDI flows in the OECD? A gravity analysis By Tobias Zander
  10. Relative Prices and Empirical Trade Patterns By Nazif Durmaz; Henry Thompson
  11. Colonizer Identity and Trade in Africa: Were the British More Favourable to Free Trade? By Federico Tadei
  12. One good turn deserves another? Evidence from China trade and aid policy By Camelia Turcu; Yunzhi Zhang
  13. UK Interregional Trade Estimation: Estimates of trade between Northern Ireland, Scotland, Wales and England By Alastair Greig; Mairi Spowage; Graeme Roy
  14. Foreign trade and sustainable business practices - New evidence from Ghana By Ackah, Charles Godfred; Görg, Holger; Hanley, Aoife; Hornok, Cecília
  15. Is the productivity premium of internationalized firms technology-driven? By Michele Battisti; Filippo Belloc; Massimo Del Gatto
  16. Pro-Globalization via FTAs in Times of COVID-19 By Fritz Breuss
  17. International Trade under Monopolistic Competition beyond the CES By Badis Tabarki
  18. Uncertain Times: The Macroeconomic Effects of Brexit By Myrto Oikonomou
  19. FDI and Investment Uncertainty in the Baltics By Jorge Durán
  20. Exchange Rates, International Outsourcing, and Firm Export Dynamics By INUI Tomohiko; Young Gak KIM
  21. Merchandise export diversification strategy for Tanzania - promoting inclusive growth, economic complexity and structural change By Christian Estmann; Bjoern Bo Soerensen; Benno Ndulu; John Rand
  22. Modeling European regional FDI flows using a Bayesian spatial Poisson interaction model By Tam\'as Krisztin; Philipp Piribauer
  23. Economic and Food Security Impacts of Agricultural Input Reduction Under the European Union Green Deal’s Farm to Fork and Biodiversity Strategies By Jayson Beckman, Maros Ivanic, Jeremy L. Jelliffe,; Felix G. Baquedano, and Sara G. Scott
  24. Hybrid Vertical FDI By JaeBin Ahn; Jee-Hyeong Park
  25. An Executive Order Worth $100 Billion: The Impact of an Immigration Ban’s Announcement on Fortune 500 Firms’ Valuation By Dany Bahar; Prithwiraj Choudhury; Britta Glennon
  26. Seasonality Fingerprint on Global Trading of Food-commodities A Data-mining Approach By Quaini, Stefania; Saccani, Sebastiano; Vergalli, Sergio; Assom, Luigi; Beria, Marco; Codello, Alessandro; Monaco, Maurizio; Sabatini, Riccardo
  27. Croatia's Tourism Industry – Part 2: Curse or Blessing? By Kristian Orsini; Mario Pletikosa
  28. Economic complexity and structural transformation: the case of Mozambique By Bjørn Bo Sørensen; Christian Estmann; Enilde Francisco Sarmento; John Rand
  29. World market for professional appliances By Mauro Spinelli; Donatella Cheri
  30. [WTO Case Review Series No.34] China – Tariff Rate Quotas for Certain Agricultural Products (WT/DS517): The Interpretation of the Report of the Working Party on the Accession of China, and the Relationship between this Dispute and the U.S.-China Phase One Deal (Japanese) By HIRAMI Kenta
  31. Protectionism or Free Trade? Or Both? Analysis of Protectionism Attitudes in the EU By Galina Kolev
  32. Anticipated impacts of Brexit scenarios on UK food prices and implications for policies on poverty and health: a structured expert judgement update By Martine J Barons; Willy Aspinall
  33. Foreign Direct Investment in the Czech Republic: A Visegrád Comparison By Septimiu Szabo

  1. By: Mahdi Ghodsi (The Vienna Institute for International Economic Studies, wiiw); Robert Stehrer (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: Eight multilateral rounds of negotiations under the General Agreement on Tariffs and Trade (GATT) and international agreements under the World Trade Organisation (WTO) have contributed significantly to the reduction of tariffs among WTO members. However, over the years legitimate reasons for the imposition of non-tariff measures (NTMs) within regulations have triggered their extensive use. Among these measures, technical barriers to trade (TBTs) and sanitary and phytosanitary (SPS) measures allow countries to impose restrictions on the import of low-quality products suspected of harming domestic consumers’ health, plant life or the environment. Such trade policy instruments may lead to higher standards in the import market, in addition to improving market efficiency through information requirements such as mandatory labelling. This paper analyses two types of regulative and standard-like NTMs – TBTs and SPS measures – and the quality improvement of traded products that is driven by their imposition, which might be a general underlying motive for the adoption of such regulations. Based on a model framework involving both the supply and the demand side of trade and using four types of measures of these NTMs, this paper assesses the impact of TBTs and SPS measures on the quality of traded products. A dummy variable measuring the existence of these NTMs and a count variable indicating their stringency are used in the analysis. Moreover, two other variables indicate flows of NTMs imposed in each year and stocks of these NTMs accumulated over years. The results indicate that TBTs and SPS measures do indeed imply a higher quality of traded products, which is also consistent with the model when NTMs enter as a specific trade cost. Stringent TBTs with more regulations imposed in each year (i.e. flows of count TBTs) have the largest impact on the quality of traded products. However, for SPS measures only the existence of a regulation (i.e. the dummy variable on flows of SPS measures) on a traded product has the strongest impact on its quality.
    Keywords: Non-tariff measures, technical barriers to trade, sanitary and phytosanitary measures, quality of products, global bilateral trade
    JEL: F13 F14 L15
    Date: 2020–10
  2. By: Arnold Njike (Université Paris Dauphine, PSL Research University)
    Abstract: In the current era of global value chains, the manufactured goods exported by a given country embed the value-added of many different other countries that intervened at specific stages of the production process. Unlike what is suggested by traditional trade statistics, the trade relationship between two countries is thus more multilateral than bilateral. Classical theoretical models that explain international trade, most often based upon the aforementioned trade statistics, do not explicitly take into account the complexity of the international production process. We propose a model that reflects more the functioning of international trade today by relying upon value-added exports, a data that reports the value-added of a given country in the goods consumed by its trading partners. Our model allows us to calculate the net share of international fragmentation in the welfare gains of trade and show that it is not that high, at least compared to the gross share. We also show that the total welfare gains of trade are different than what could predict a classical trade model, especially for upstream countries which would lose less real wage from a move to autarky and for downstream countries which would lose more.
    Keywords: Global value chains, Gravity model, trade costs, trade in value-added
    JEL: F
    Date: 2019
  3. By: Rigo, Davide
    Abstract: International trade has long been considered a channel of technology transfer. This paper draws from the World Bank’s Enterprise Surveys to provide a sample of 18 developing and emerging economies to investigate whether global value chains (GVCs) are a vehicle for the transfer of technology. It focuses on one specific channel for technology transfer, namely, the licensing of foreign technology. To control for the possible endogeneity of technology licensing, propensity score matching is combined with a difference-in-differences approach. The results show a positive effect of being involved in two-way trading on the licensing of foreign technology. Firms that become two-way traders are significantly more likely to use foreign-licensed technology than firms starting to export or import. This evidence suggests that the complexity associated with the mode of internationalisation determines the licensing of foreign technology. GVC participation also appears to foster firms’ performance, reflecting my findings that the acquisition of foreign technology leads to significant productivity improvements.
    Keywords: developing countries; global value chains; international technology transfer; productivity; technology licensing
    JEL: R14 J01 L81
    Date: 2020–10–29
  4. By: David Kohn; Fernando Leibovici; Michal Szkup
    Abstract: We study the role of financial development on the aggregate effects and welfare implications of reducing international trade barriers on production inputs such as physical capital and intermediates. We document that financially underdeveloped economies feature a slower response of real GDP, consumption, and investment following trade liberalization episodes that improve access to imported production inputs. We set up a quantitative general equilibrium model with heterogeneous firms subject to financial constraints and estimate it to match salient features from Colombian plant-level data. We find that the adjustment to a decline of import tariffs on physical capital and intermediate inputs is significantly slower in financially underdeveloped economies in line with the empirical evidence. Moreover, we find that financial development increases the welfare gains from trade liberalization; low-income agents benefit from higher wages while exporters benefit from a depreciated real exchange rate and lower capital costs.
    Keywords: financial development; trade liberalization; welfare
    JEL: F1 F4
    Date: 2020–10
  5. By: Michael Sposi (Southern Methodist University); Kei-Mu Yi (University of Houston, Federal Reserve Bank of Dallas, and NBER); Jing Zhang (Federal Reserve Bank of Chicago)
    Abstract: Motivated by increasing trade and fragmentation of production across countries since World War II, we build a dynamic two-country model featuring sequential, multi-stage production and capital accumulation. As trade costs decline over time, global-value-chain (GVC) trade expands across countries, particularly more in the faster growing country, consistent with the empirical pattern. The presence of GVC trade boosts capital accumulation and economic growth and magnifies dynamic gains from trade. At the same time, endogenous capital accumulation shapes comparative advantage across countries, impacting the dynamics of GVC trade: a country becoming more capital abundant concentrates more on the capital-intensive stage of the production.
    Keywords: Multistage production; International trade; Capital accumulation
    JEL: F10 F43 E22
    Date: 2020–11
  6. By: Jaime de Melo (FERDI - Fondation pour les Etudes et Recherches sur le Développement International, UNIGE - Université de Genève); Jean-Marc Solleder (UNIGE - Université de Genève); Zakaria Sorgho (African Centre for International Trade and Development (ACINTD), Centre for Inter-disciplinary Studies on International Trade and Investment (CISIT) - Laval University - Laval University, Quebec, Canada, FERDI - Fondation pour les Etudes et Recherches sur le Développement International)
    Abstract: Treaties implemented by Regional Organizations (ROs) among which the eight Regional Economic Communities (RECs) have piloted integration across the African continent. The recently created Africa Continental Free Trade Area (AfCFTA), effective since May 2019, is the latest effort along the roadmap started with the Abuja Treaty of 1994 and continued with the launch of ‘Agenda 2063' on the 50th anniversary of the OAU. This primer has three objectives: take stock of progress at market integration and understand the causes of the African ‘proximity gap'; summarize and provide new evidence on the extent of integration, and; discuss challenges ahead. The ambitious objectives of the AfCFTA among highly diverse economies is suggestive of a trilemma: (i) solidarity (calls for special and differential treatment); (ii) build large markets (calls for the removal of all policy-imposed barriers to trade to reap economies of scale); (iii) ‘deep' integration (calls for covering behind-the-border measures). The example of the negotiations for the Tripartite FTA illustrates the difficulties of accommodating differences in preferences in a group of 28 countries. This ambitious agenda in a setting of limited implementation capabilities raises the specter of capability traps. Lowering regional trade costs is key for a successful AfCFTA. Model-based calculations show that these costs have fallen over the last two decades, but not faster than elsewhere so that Africa has not improved its relative position. Estimates of the intensity of bilateral trade in parts and components are positively related to measures of ‘deep integration', an indication of the importance of tackling ‘behind-the-border' measures affecting trade, an objective of phase II of the AfCFTA. Estimates of the correlates of bilateral trade costs give support to measures promoting ‘deep' integration. An outcome indicator of the thickness of borders based on changes in light-intensity along all major cross-border African roads shows that over the period 2000-13, the thickness of African borders has fallen. All RECs are lagging MERCOSUR and ASEAN in supply chain trade. Over the 1990-2015 period, participation has been limited to the downstream side (i.e. value-added exports enter mostly as inputs into exports of importing countries) with partners outside the region which is in contrast with MERCOSUR and ASEAN where all value chains have developed with regional partners. In the case of ASEAN, the share of trade involving partners outside the region has stayed constant over the 25 period while the share of Regional Value Chain (RVC) trade only involving RTA partners has more than doubled from 7 percent to 17 percent. By 2015, ASEAN's RVC share was about 6 times higher than the RVC rate for SADC, the REC with the most RVC integration. This suggests that intra-regional trade costs have fallen in MERCOSUR and ASEAN but not across the RECs. In short, African countries still have to produce a complete product in order to enter a new product line. The review singles out two areas for reducing intra-regional trade costs: adopting simple rules of origin, i.e. rules that are business friendly rather than business owned (details in annex A3) and ‘taking seriously' the Trade Facilitation Agreement (TFA). New estimates suggest that if the average time in customs for imports at the African Union level were to be reduced to the average time for exports, that is reduced by 49 hours, this would be equivalent to a reduction of 2.7% on tariffs in importing countries. The greatest challenge ahead is increasing the provision of Regional Public Goods (RPGs). These are under-provided across the continent. Because this primer is mostly about economic integration, we only cover evidence of RPGs in two areas: peace and security and cross-border infrastructure. For both, the evidence suggests that provision of these RPGs has been low. Greater provision would be conducive, if not essential, to the success of African regional integration.
    Date: 2020–07–29
  7. By: Archibong, Belinda; Annan, Francis; Ekhator-Mobayode, Uche
    Abstract: Global foreign direct investment (FDI) has increased substantially over the past decades and so has FDI in Africa. However, still only 3 percent of global FDI stocks and 1 percent of German FDI is located in Africa. There are several policy instruments that can contribute to higher investment in developing countries. The Policy Brief outlines several important investment promotion instruments of both sender and recipient countries of FDI and assesses their impact.
    Date: 2020
  8. By: Eugenio Cerutti; Catherine Koch; Swapan-Kumar Pradhan
    Abstract: We explore the global footprint of Chinese banks and compare it with that of other bank nationalities. Chinese banks have become the largest cross-border creditors for almost half of all emerging market and developing economies (EMDEs). Their global reach resembles that of banks from advanced economies (AEs). We take a nationality approach as international banks, and Chinese banks in particular, grant a substantial share of their cross-border loans from affiliates located abroad. But differences remain. Using a gravity model with a novel measure of distance capturing the role of foreign affiliates across all bank nationalities, we find that larger distances deter crossborder bank lending to EMDEs more than to AEs. For Chinese banks, however, distance deters lending to EMDEs less than for peer EMDE banks. We show that for all banks combined, bilateral economic interactions like trade, FDI and portfolio investment, positively correlate with lending. Chinese banks' lending to EMDEs also strongly correlates with trade, but not with FDI and, unlike other banks, it correlates negatively with portfolio investment.
    Keywords: cross-border banking, Chinese banks, trade, FDI, gravity model
    JEL: F34 F36 F65 G2
    Date: 2020–10
  9. By: Tobias Zander (Europäisches Institut für Internationale Wirtschaftsbeziehungen (EIIW))
    Abstract: In this paper, the effect of corruption on foreign direct investment (FDI) flows is analyzed. The literature is thus far divided regarding the effects of corruption: One hypothesis argues that corruption greases the wheels of government and is therefore beneficial while the other hypothesis argues that it sands the wheels of government leading to suboptimal results in an economy. For the empirical analysis, a dataset consisting of bilateral FDI data from the OECD and the control of corruption measure from the World Governance Indicators of the World Bank is compiled. To further analyze the effects of corruption the Panama Papers revelation is used as a corruption increasing event and the implementation into law of the OECD Anti-Bribery Convention is used as a corruption decreasing event. Finally, the difference between corruption levels in the target and the origin country, will be examined. Then, a gravity model with dyadic and time-fixed effects is employed to analyze the data. Findings are ambiguous in that corruption is positively correlated with FDI inflows in the target country and negatively correlated with FDI inflows in the origin country. The Panama Papers variable shows strong evidence, that the release of the Panama Papers resulted in a drop in FDI flows. Therefore, it seems that corruption has complex country specific effects and that target and source countries have to adopt varying policies with regards to corruption. The general effect of corruption harms FDI flows, as shown by the Panama Papers revelation.
    Keywords: Foreign Direct Investment, Corruption, Gravity Model, PPML
    JEL: C33 D73 F21 F23
    Date: 2020–03
  10. By: Nazif Durmaz; Henry Thompson
    Abstract: This paper examines empirical links between relative prices and bilateral trade based on constant cost trade theory. The global models are built from the World Input-Output Database WIOD aggregated to three, four, and five regions and goods. The simple model assumes relative labor shares are relative prices and average relative price is the terms of trade. Trade patterns are complex among partially specialized regions. Model predictions are compared to observed net exports in seven different aggregations. Regression analysis also examines the effects of relative prices on the total bilateral net exports across models.
    Keywords: relative prices; comparative advantage; trade patterns; partial specialization
    JEL: F10
    Date: 2020–10
  11. By: Federico Tadei (Universitat de Barcelona)
    Abstract: It has often been claimed that the structure of export trade between Africa and Europe during the colonial period depended on the colonizer identity, with the British relying on free trade and the French employing instead monopsonistic policies. Yet, due to the lack of systematic data on colonial trade, this claim has so far remained untested. In this paper, I use recently available data on export prices from African colonies to estimate monopsonistic profit margins for British and French trading companies. The results challenge the view of the British colonizers as champions of free trade. The level of profit margins was determined much more by the local conditions in Africa than by the identity of the colonial power. The British did not necessarily rely on free trade more than the French and did so only when a stronger control of trade was not a viable option.
    Keywords: Africa, Trade Colonization, Development, Institutions, Market-Power.
    JEL: N17 F1 O43
    Date: 2020
  12. By: Camelia Turcu (Université d’Orléans, CNRS, LEO, FRE 2014); Yunzhi Zhang
    Abstract: In this paper we study the impact of China’s foreign aid on exports. To do this, we use a sample of 159 countries during the period 2000-2014 and employ a gravity model with GDP-weighted multilateral resistance terms. We fi nd that the return on Chinese exports of every dollar spent on foreign aid is around 0.194$-0.4115$, at aggregate level and at HS6 product level, of 0.00004$ on average, for the whole period. Our results also indicate that Chinese foreign aid initiates trade of new product varieties with foreign partners and strengthens the trade in goods that are already exchanged; foreign aid could also enhance trade in existing geographical markets. However, it does not help to create new market shares. Furthermore, it fosters a stronger South-South integration as it encourages mainly the trade relations with developing and emerging countries
    Keywords: Emerging donor, aid-trade nexus, trade margin
    JEL: F P
    Date: 2019
  13. By: Alastair Greig; Mairi Spowage; Graeme Roy
    Abstract: In the UK, there is major economic change such as Brexit on the horizon. The impact of such change is likely to vary across UK regions. There is also a growing demand for improved regional economic analysis to help inform devolution and City Deal-type policymaking. Despite these concerns, there are no comprehensive national statistics on interregional trade in the UK. This paper fills this gap, proposing a framework for estimating interregional trade between the devolved nations of the UK: England, Scotland, Wales, and Northern Ireland. We explain where gaps exist in the current UK data landscape and suggests various ways in which these could be addressed. We then apply our framework using currently available data, presenting initial results for trade between the 4 nations of the UK in 2015. Recommendations for future work are also presented, including the need to evaluate current methods for collecting trade information within the UK.
    Keywords: Interregional Trade Flows, Regional Supply Use Tables, Trade Surveys, Origin Destination Data
    JEL: F15 F17 R12
    Date: 2020–06
  14. By: Ackah, Charles Godfred; Görg, Holger; Hanley, Aoife; Hornok, Cecília
    Abstract: Foreign trade and sustainability is high on the political agenda. German and international policy-makers undertake increasing efforts to use trade policy more effectively for sustainable development purposes. A growing toolbox is meant to facilitate these policy aims, including sustainability chapters in trade agreements, sustainable value chains and sustainability standards. Meanwhile, scientific evidence on how trading activities impact on firms' sustainable behaviour is limited. This question is addressed by researchers from the Kiel Institute for the World Economy and the University of Ghana in a recent study 'Foreign Trade and Sustainable Development in Ghana'. The study provides new empirical evidence on the link between business sustainability and firms' engagement in international trade, using a survey database for more than 400 Ghanaian firms spanning 2013-2015, plus four case studies based on interviews. This unique information source provides a previously untapped wealth of information on various aspects of business sustainability in a Sub-Saharan African country. The key findings of the study are summarized in this policy paper.
    Keywords: Africa,Ghana,foreign trade,sustainability
    Date: 2020
  15. By: Michele Battisti; Filippo Belloc; Massimo Del Gatto
    Abstract: We ask whether the productivity advantage of internationalized firms documented by the international trade literature can be interpreted most accurately in terms of proximity to the “technological frontier". We answer in the affermative using a methodology (based on mixture models) of unbundling technology and total factor productivity (TFP) by estimating “technology-specic" production function parameters. Exploiting detailed data provided by the EFIGE database (a sample of firms distributed across Austria, France, Germany, Hungary, Italy, Spain, and the United Kingdom), we nd technology gaps (with respect to the frontier) more than three times larger than the TFP gaps on average. We also nd sizable technology advantages for firms undertaking foreign direct investment and/or exporting to other European Union countries or to China, for importers of materials, and for firms with competitors in China and the United States. Medium and large firms feature a higher technology premium, which is even higher for firms operating in country-sectors that are more exposed to import competition from China. Younger firms use better technologies but less effectively.
    Keywords: heterogenous firm, productivity premium, selection effect, technology, TFP, trade model
    JEL: F12 F14 D24
    Date: 2020–08
  16. By: Fritz Breuss
    Abstract: This analysis attempts to offer a counter strategy to the idea of anti-globalization and de-growth that had flared up again since the COVID-19 crisis. All international forecasts expect for the year 2020 the deepest recession since the Great Depression. Countries which can afford it, run a super-Keynesian fiscal policy to fight the crisis, accompanied by an extremely expansionary monetary policy in the USA (Fed) and in the euro area (ECB). As a third policy instrument besides fiscal and monetary policy, an aggressive pro-globalization trade policy could relieve and strengthen the crisis macro policy. To demonstrate which options are available we analyze nine mega free trade agreements, some of them are already in effect, others will be enacted soon. Overall, not the big players in world trade, the EU and the USA win by a simultaneous implementation of the nine FTAs. Japan would be the winner because it participates in four combinations (overlaps) of FTAs: EU–Japan, USA–Japan, CPTPP and RCEP. The USA hardly gain from further globalization. Similarly, the EU 27 cannot profit much from further globalization.
    Keywords: TP_COVID, Globalization, International Trade Policy, Model Simulations, COVID-19
    Date: 2020–11–03
  17. By: Badis Tabarki (UP1 - Université Panthéon-Sorbonne, CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics)
    Abstract: This paper considers a general yet tractable demand system encompassing directly- and indirectly-separable preferences, with homothetic CES as a commonn ground. An added flexibility of this demand system is that it allows for two alternative curvatures of demand. Beyond the CES, demand may be either "sub-convex": less convex than the CES, or "super-convex": more convex than the CES. Embedded in a general equilibrium trade model featuring standard assumptions on the supply side, this flexible demand system yields new comparative statics results and a wide range of predictions for the gains from trade, while illustrating existing ones in a simple and compact way. The main finding of this paper is that while demand curvature governs comparative statics results and plays a crucial role in determining the structure and the magnitude of welfare gains from trade, the type of preferences has only a second-order importance from a welfare standpoint.
    Keywords: gains from trade,heterogeneous firms,non-CES preferences,demand curvature
    Date: 2020–08
  18. By: Myrto Oikonomou
    Abstract: Uncertainty indexes spiked in the aftermath of the Brexit referendum, and remained elevated ever since. This paper studies the consequences of the Brexit-induced uncertainty on trade and labor market outcomes. We consider two scenarios that can resolve the uncertainty over the trade regime. The first is the World Trade Organization agreement, whereby the United Kingdom would receive the Most Favored Nation clauses from the European Union, face a substantial increase in trade barriers, and regain full control on immigration policies. The second scenario is a Norway-like arrangement, which corresponds to a minimal increase in trade barriers but no changes in labor market policies. The new status quo will determine the long-run level of output and employment after the Brexit transition is complete. The interplay between frictions in the goods and labor market generates a strong amplification mechanism for the propagation of Brexit-related uncertainty and brings the effects of Brexit on labor market variables to the front of the debate.
    Date: 2020–11–06
  19. By: Jorge Durán
    Abstract: Foreign direct investment (FDI) flows into the Baltic states collapsed during the crisis, experienced a short-lived recovery, and then plunged again. Today it remains subdued despite a modest but sustained recovery. This is worrying because FDI is a channel for technology transfers and its shortfall could imply that the Baltic states risk falling into a ‘middle income trap’ at around 70% of the EU-15 average income. This paper argues that the slow recovery of FDI is rather due to poor international market conditions, holding back investment in general and FDI in particular. Accordingly, FDI is expected to pick up once the economic environment improves. Still, further improving the framework conditions for investment could help to attract and reap the benefits of FDI in the future, particularly in Latvia and Lithuania.
    Keywords: Foreign direct investment, capital formation, unit labor costs, FDI and investment uncertainty in the Baltics, Jorge Durán, Héctor Navarrete-Plana.
    JEL: F2 F6 O1
    Date: 2019–03
  20. By: INUI Tomohiko; Young Gak KIM
    Abstract: Using the most comprehensive Japanese firm-level dataset, we investigate the effect of exchange rate fluctuations on Japanese firms' performance in the international market. We examine firm characteristics based on firm export dynamics. The estimation results overall indicate the depreciation of the yen may play an important role in the expansion of export, but a limited role in terms of entry to the export market. The results also show that export elasticity is significantly affected by import intensity, and decreases from 0.81 in 1997 to 0.64 in 2015 because of the increased import intensity, indicating that fully globalized firms utilize imports to alleviate negative shocks from exchange rates on exports and to improve price competitiveness.
    Date: 2020–10
  21. By: Christian Estmann (DERG, Department of Economics, University of Copenhagen); Bjoern Bo Soerensen (DERG, Department of Economics, University of Copenhagen); Benno Ndulu (Department of Economics, University of Dar es Salaam, Tanzania); John Rand (DERG, Department of Economics, University of Copenhagen)
    Abstract: In the pursuit of structural transformation and inclusive growth, this paper identifi?es industries in Tanzania which can accumulate new productive knowledge and diversify the economy. The analysis has two main components. First, a Product Space analysis identifi?es niches primarily within the manufacturing sector, which Tanzania should promote in order to move up the complexity scale and stimulate structural change. The identifi?cation process applies a supply-side network method following the literature on Economic Complexity and combines it with a demand-driven gravity model on merchandise export. Hence, we identify industries that are tangible given Tanzania’s current productive knowledge and are most feasible for Tanzania to target given product-specifi?c trade resistance and geographically dispersed demand. Second, as generating jobs for the rapidly growing labour force is a prime political priority in Tanzania, we construct a labour opportunity index in order to display which industries are correlated with a high labour intensity. We fi?nd that there is a larger scope for learning spillovers in the relatively more complex sectors, such as machinery and chemicals, whereas the less complex sectors, such as agro-processing and construction, are correlated with higher employment creation. The paper is, to the best of our knowledge, the ?first comprehensive study of economic complexity and structural change in Tanzania that systematically accounts for both supply and demand-side factors.
    Keywords: inclusive growth, economic complexity, tanzania, product space, structural transformation
    JEL: C53 F14 O14 O25
    Date: 2020–03–11
  22. By: Tam\'as Krisztin; Philipp Piribauer
    Abstract: This paper presents an empirical study of spatial origin and destination effects of European regional FDI dyads. Recent regional studies primarily focus on locational determinants, but ignore bilateral origin- and intervening factors, as well as associated spatial dependence. This paper fills this gap by using observations on interregional FDI flows within a spatially augmented Poisson interaction model. We explicitly distinguish FDI activities between three different stages of the value chain. Our results provide important insights on drivers of regional FDI activities, both from origin and destination perspectives. We moreover show that spatial dependence plays a key role in both dimensions.
    Date: 2020–10
  23. By: Jayson Beckman, Maros Ivanic, Jeremy L. Jelliffe,; Felix G. Baquedano, and Sara G. Scott
    Abstract: The European Commission (EC) unveiled its Farm to Fork and Biodiversity Strategies that would impose restrictions on European Union (EU) agriculture through targeted reductions in the use of land, fertilizers, antimicrobials, and pesticides. The proposal also pledges to use EC trade policies and other international efforts to support this vision of sustainable agri-food systems, suggesting intentions to expand the reach of the policy beyond the EU. To examine the economic implications of the proposal, we performed a range of policy simulations on several of the proposed targets using three progressively broader adoption scenarios of the EC’s initiative. Under all these scenarios, we found that the proposed input reductions affect EU farmers by reducing their agricultural production by 7 to 12 percent and diminishing their competitiveness in both domestic and export markets. Moreover, we found that adoption of these strategies would have impacts that stretch beyond the EU, driving up worldwide food prices by 9 (EU only adoption) to 89 percent (global adoption), negatively affecting consumer budgets, and ultimately reducing worldwide societal welfare by $96 billion to $1.1 trillion, depending on how widely other countries adopt the strategies. We estimate that the higher food prices under these scenarios would increase the number of food-insecure people in the world’s most vulnerable regions by 22 million (EU only adoption) to 185 million (global adoption).
    Keywords: Food Security and Poverty
    Date: 2020–11
  24. By: JaeBin Ahn; Jee-Hyeong Park
    Abstract: An exploration of Korean MNCs¡¯ foreign affiliate-level data reveals that a significant portion of manufacturing foreign affiliates sell both to related and unrelated firms at the same time. We refer to this as hybrid vertical FDI. We rationalize the presence of hybrid vertical FDI by modifying the otherwise standard property?rights model of global sourcing with the subsidiarylevel option of supplying inputs to unrelated customers in addition to related firms. Given the positive production externality from serving additional customers?that is proportional to the MNC¡¯s productivity?and the costs of getting such benefit?that are increasing in relationship-specificity of the outsourced inputs, the model predicts a couple of testable hypotheses that are robustly confirmed by our subsequent empirical analysis.
    Date: 2020–10
  25. By: Dany Bahar; Prithwiraj Choudhury; Britta Glennon
    Abstract: On June 22, 2020, President Trump issued an Executive Order (EO) that suspended new work visas, barring nearly 200,000 foreign workers and their dependents from entering the United States and preventing American companies from hiring skilled immigrants using H-1B or L1 visas. Exploiting this shock, and using event study methodology analyzing the cumulative average abnormal returns (CAARs) of Fortune 500 companies following this order, we find that the EO statistically and economically significantly caused negative CAARs of up to 0.45%, the equivalent of over 100 billion of US dollars of losses, based on the firms’ valuation before the event. Our results are particularly pronounced for firms that had maintained or increased their reliance on skilled immigrant workers over the prior years.
    JEL: G14 G38 J61
    Date: 2020–10
  26. By: Quaini, Stefania; Saccani, Sebastiano; Vergalli, Sergio; Assom, Luigi; Beria, Marco; Codello, Alessandro; Monaco, Maurizio; Sabatini, Riccardo
    Abstract: We analyze the United Nations commodities trade database (UN comtrade), comprised of international commodities exchanges in volume and price with monthly resolution. We introduce a trade impact index to quantify the impact, in terms of distance travelled, of importing a specific food raw commodity in a specific period of the year and in a specific country of the world. This index captures the seasonal exchange of raw commodities in an insightful and concise manner.
    Keywords: International Relations/Trade
    Date: 2020–11–05
  27. By: Kristian Orsini; Mario Pletikosa
    Abstract: Despite a generally benevolent view on the positive economic impact of tourism, some economists have long argued that a bloated tourism sector may crowd out other industries. The phenomenon is reminiscent of the Dutch Disease and is therefore sometimes dubbed the Beach Disease. The debate around it has often neglected the fact that while the impact of tourism on other tradable sectors may well be negative, its overall economic impact tends to be more ambiguous. In this paper, we distinctly analyse the two dimensions. Our results indicate that tourism development in Croatia is not likely to crowd out other tradable sectors. However, tourism is also unlikely to be as important for long-run growth as trade openness. These findings can be ascribed to the peculiarities of the Croatian tourism sector and already discussed in a previous Economic Brief on tourism in Croatia*, including a high leakage rate via imports and a limited impact on employment, which insulate tourism from the rest of the economy and limits potential positive (or negative) spillovers.
    Keywords: Croatia, tourism, crowing-out, "Beach Disease", growth, exports, "Cobb-Douglas", augmented, "export-led growth", "tourism-led growth", Orsini, Pletikosa.
    JEL: C32 C51 E13 F43
    Date: 2019–07
  28. By: Bjørn Bo Sørensen; Christian Estmann; Enilde Francisco Sarmento; John Rand
    Abstract: Mozambique is among the world's least complex economies. By systematically accounting for both supply- and demand-side factors, we identify new products and sectors that can help to diversify and upgrade its economy. In a supply-side analysis, we use network methods from the literature on economic complexity to identify a set of target products that are complex, require productive capabilities useful in the export of other products, and are close to Mozambique's existing productive structure.
    Keywords: economic complexity, Trade, Exports, Structural transformation, Mozambique
    Date: 2020
  29. By: Mauro Spinelli (CSIL Centre for Industrial Studies); Donatella Cheri (CSIL Centre for Industrial Studies)
    Abstract: This Report provides information on the world market for professional appliances including the following products: cooking appliances for the foodservice industry (ovens, hoods, professional coffee machines and ice-makers); refrigeration products (freezers and vending machines); washing and dishwashing machines commercial air conditioning. The analysis ranks 80 professional appliance manufacturers selected according to their volume of sales. From the point of view of the ownership, 68% of these companies are public listed while 32% are private owned. Considering the country of the headquarters, 20% of companies are located in Asia Pacific, 27% in America and 53% in EMEA Area. Company profiles are available for the top 50 appliance manufacturers, with information on products manufactured, recent facts, basic data (including total turnover of the last two years, professional appliances turnover, professional appliances share on total production, number of employees), sales breakdown by business, product and geographical area, production sites and brands. The report is divided as follows: PART I: SCENARIO. Basic data on the professional appliances sector, including ranking by sales and estimated market shares of the top manufacturers; World trade of professional appliances: basic data and overview of world trade of professional appliances: refrigeration, commercial cooking (including hoods), commercial dishwashing machines, washing (laundry), air conditioners, automatic vending machines; World trade of professional appliances by segment. PART II: TOP 50 MAJOR APPLIANCES MANUFACTURERS. Profiles of 50 major appliances manufacturers worldwide with information on company background, basic data, manufacturing presence and recent facts. PART III: EXCEL DIRECTORY. A detailed and customizable Excel Database with all the market figures and international trade by single product code is delivered together with this report. Data are reported both in values (US$) and in quantities (Units).
    JEL: L11 L22 L68 L81
    Date: 2020–07
  30. By: HIRAMI Kenta
    Abstract: This case is the second agriculture-related dispute brought by the United States against China at the WTO, in which the consistency with the WTO agreements of China's administration of tariff rate quotas (TRQ) for wheat, rice and corn was challenged. Since this dispute mainly concerned the interpretation of the Report of the Working Party on the Accession of China, the panel interpreted the relevant provision of the Report for the first time and newly clarified, to some extent, what special obligations China has in the administration of TRQ. The panel found that almost all the aspects of China's TRQ administration were inconsistent with the relevant obligations of China under the Working Party Report. China, while accepting the panel's findings, has expressed its willingness to continue to administer the TRQ for wheat, rice and corn in a manner consistent with the WTO agreements. Therefore, the focus will be on how China will implement the panel's recommendations and rulings. In this respect, since the issue of the implementation of this WTO ruling is also a subject of the U.S-China phase one deal, depending on future developments, it is possible that new legal problems will arise both inside and outside the WTO regime.
    Date: 2020–10
  31. By: Galina Kolev (RheinMain University and German Economic Institute)
    Abstract: The changing landscape in trade policy in recent years is undoubtedly related to a shift in voter preferences. Based on Eurobarometer survey data, the present paper investigates both the factors determining the level of support for protectionism and the striking positive correlation of responses to questions related to free trade and protectionism. EU citizens are more likely to support protectionism when the economy runs smoothly and reject protectionism if the national economy is not in the best shape. Unemployment, bad economic situations as well as negative feelings regarding immigration are identified as possible reasons to call for protectionism while respondents are favouring free trade at the same time. The positively correlated attitudes toward free trade and protectionism are furthermore a matter of lacking knowledge of political issues. Better educated EU citizens are less likely to support free trade and protectionism at the same time. This applies also to respondents who show a higher level of knowledge regarding basic EU-related facts as well as to those who discuss political matters with friends more often. A possible way to tackle this problem is a broad information strategy covering topics of international economics across several media channels. Especially radio, press and internet are identified as media which seem to contribute to a better understanding of these complex issues.
    Keywords: Trade Policy, Protectionism, International Political Economy
    JEL: F
    Date: 2019
  32. By: Martine J Barons; Willy Aspinall
    Abstract: Food insecurity is associated with increased risk for several health conditions and with increased national burden of chronic disease. Key determinants for household food insecurity are income and food costs. Forecasts show household disposable income for 2020 expected to fall and for 2021 to rise only slightly. Prices are forecast to rise. Thus, future increased food prices would be a significant driver of greater food insecurity. Structured expert judgement elicitation, a well-established method for quantifying uncertainty, using experts. In July 2020, each expert estimated the median, 5th percentile and 95th percentile quantiles of changes in price to April 2022 for ten food categories under three end-2020 settlement Brexit scenarios: A: full WTO terms; B: a moderately disruptive trade agreement (better than WTO); C: a minimally disruptive trade agreement. When combined in proportions for calculate Consumer Prices Index food basket costs, the median food price change under full WTO terms is expected to be +17.9% [90% credible interval:+5.2%, +35.1%]; with moderately disruptive trade agreement: +13.2% [+2.6%, +26.4%] and with a minimally disruptive trade agreement +9.3% [+0.8%, +21.9%]. The number of households experiencing food insecurity and its severity are likely to increase because of expected sizeable increases in median food prices in the months after Brexit, whereas low income group spending on food is unlikely to increase, and may be further eroded by other factors not considered here (e.g. COVID-19). Higher increases are more likely than lower rises and towards the upper limits, these would entail severe impacts. Research showing a low food budget leads to increasingly poor diet suggests that demand for health services in both the short and longer term is likely to increase due to the effects of food insecurity on the incidence and management of diet-sensitive conditions.
    Date: 2020–10
  33. By: Septimiu Szabo
    Abstract: This brief provides an analysis of foreign direct investment (FDI) in the Czech Republic since the 1990s, looking at its evolution over time and its distribution across regions and economic sectors. As the ratio of the FDI stock to GDP has grown six-fold since 1993, FDI has become a major contributor to the country's development. Encouraged by record-high rates of profitability, many foreign investors have directed their businesses towards the Czech Republic, especially to Prague. The largest sources of FDI are the Netherlands and Germany, and the main sectors are financial services, wholesale and retail, and motor vehicle manufacturing. As many investments reached maturity in the late 2000s, many foreign-controlled companies started to distribute a significant amount of dividends to their parent enterprises abroad. This outflow of dividends has particularly increased since the financial crisis, leading to an increasing GDP-GNI gap and a reduction in FDI inflows on the back of a low level of new capital acquisition. Nonetheless, even though a high proportion of profits have been repatriated, FDI has made a significant contribution to the domestic economy. The overall combination of new greenfield and brownfield investment, employment creation, taxes and social contributions, fiscal revenues, and domestic spillovers has had a much larger impact. Going forward, Czech authorities should encourage foreign investors to reinvest more of their earnings in the country by ensuring a viable business environment and a stable macroeconomic and political climate.
    Keywords: Foreign Direct Investment in the Czech Republic; A Visegrad comparison; Szabo; FDI; GDP; GNI.
    JEL: F21 F23 F43
    Date: 2019–02

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