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on International Trade |
| By: | Prema-chandra Athukorala |
| Abstract: | This paper examines the implications of the Trump administration’s U.S. trade policy on U.S.-India relations and the Indian economy against the backdrop of strengthening political and strategic ties between the two countries, which have been strong since the beginning of this century. Trump’s strategy of using tariffs as the bargaining chip in bilateral economic relations with India, while ignoring mutual geopolitical interests, has coincided with new protectionist tendencies in India under the Make in India strategy of the Modi government, setting the stage for a protracted bilateral trade dispute. U.S. safeguard duties on steel and aluminum has taken a toll on India’s exports of these products to the United States, but these products account for a tiny share of India’s total exports to the United States. The hard hit was Trump’s termination of India’s designation as a beneficiary developing nation under the Generalized System of Preferences (GSP). The GSP abolition is likely to have a much more significant effect on the Indian economy as exports under the program are heavily concentrated in the traditional labor-intensive industries. However, given the handsome mandate received by the Modi government at the May 2019 election and that the next election is almost four years away, GSP abolition is unlikely to receive much weight in determining India’s position in trade negotiations compared to the new protectionist policy stance stemming from the Make in India strategy. The WTO verdict on the U.S. complaint on India’s manufacturing export subsidies, if upheld by the WTO Appellate body, would strengthen the U.S. position in negotiating a trade deal with India. |
| Keywords: | India, U.S. trade policy, U.S.-China trade conflict |
| JEL: | F13 F14 O19 O53 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:pas:papers:2020-02&r=all |
| By: | Foong, Gerald (Ministry of Trade and Industry); Chang, Pao-Li (School of Economics, Singapore Management University) |
| Abstract: | Apart from the public health crisis entailed by the Coronavirus Disease 2019 (COVID-19) pandemic, it has also propagated a pandemic-induced economic shock globally. One transmission channel is via the inter-country linkages arising from the trade in intermediate inputs, which is a pertinent characteristic of global value chains (GVCs), and resulting in a "supply-chain contagion" as termed by Baldwin and Tomiura (2020). In this paper, we propose measures of bilteral downstreamness and upstreamness, the extent of a country's GVC participation, and the position of a country in GVCs by leveraging upon the gross export decomposition framework as laid out by Borin and Mancini (2019), which builds upon the work done by Koopman et al. (2014). By applying a regional lens to our analysis, we also identify key intermediary nodes that intermediate GVC-related ows within their region and across regions. Through this, we investigate the trade linkages of countries and discuss the potential impact of COVID-19 on GVCs. |
| Keywords: | COVID-19; global value chain (GVC); gross export decomposition; GVC position; upstream/downstream trade partners |
| JEL: | F14 F15 |
| Date: | 2020–11–05 |
| URL: | http://d.repec.org/n?u=RePEc:ris:smuesw:2020_024&r=all |
| By: | Fida Karam (Gulf University for Science and Technology); Chahir Zaki (Cairo University) |
| Abstract: | This paper investigates the contribution of female labor participation as well female ownership/management to trade margins using firm-level data for 18 manufacturing and services sectors in 8 MENA countries for 2013. This topic is innovative, and critical for the MENA region where female participation in the export sector is shy, at a time the region is looking for new sources of competitiveness to boost its exports. Our results show that first, female labor participation has a positive a significant impact on both the probability of export and export volume, with the effect on the probability of the firm to export being lower for small firms relatively to large firms. Female labor participation matters in traditional sectors where the MENA region has a comparative advantage. Second, while female ownership or management is not significant in its impact on trade margins, it seems to be positively correlated with the probability of large firms to export. Furthermore, this positive effect is mainly driven by female ownership and not management, highlighting the importance of female empowerment in international trade. Third, there is no statistical evidence that femaleowned/managed firms face more financial constraints to export than their male counterparts. The effect of other regulatory barriers on exports, such as having a website for the company, is more pronounced for female-owned/managed firm, with respect to a men-owned/managed firm. |
| Date: | 2020–11–20 |
| URL: | http://d.repec.org/n?u=RePEc:erg:wpaper:1425&r=all |
| By: | Eman Moustafa (General Authority for Investment and Free Zones) |
| Abstract: | This paper uses a time series analysis to estimate the impact of corruption on FDI in Egypt during the period 1970-2019 and to address some of the drawbacks of the empirical literature. Unit root and cointegration tests are used to ensure stationarity and long run relationship among variables of interest. The results show a significant positive relationship between FDI and corruption in Egypt. Since corruption is not found to hinder FDI inflows, treating corruption should be based on sound legal procedures that infringe neither on the freedom of FDI nor on the degree of openness of the economy, which are the real stimulants of FDI in Egypt. |
| Date: | 2020–10–20 |
| URL: | http://d.repec.org/n?u=RePEc:erg:wpaper:1408&r=all |
| By: | Adeolu O. Adewuyi; Ebenezer Olubiyi (University of Ibadan) |
| Abstract: | This study analyses the role of governance institutions in trade involving Sub-Saharan Africa (SSA) and its trading partners. Specifically, the objectives of this study are to: investigate the effect of institutions on trade between SSA and its trading partners; and examine whether governance institutions matter more for trade in SSA resourcepoor countries (or non-mineral products) than for trade in resource-rich countries (or mineral products). Based on a combination of strands of literature on the subject matter, we used a modified gravity model to analyse the objectives highlighted above. Using data spanning 1996 to 2014, empirical analysis involves estimating variants of gravity equations using the modified Poisson pseudo maximum likelihood estimation approaches. Empirical results show that not all governance variables matter for trade between SSA and its partners. Whether it matters or not depends on countries’ resource endowment, the pattern of trade and the direction of trade. Trade between SSA and developed countries (especially imports) is driven significantly by governance institutions, particularly the bureaucratic quality and compliance with law and order. Such importance of governance institutions could not be established in trade between SSA and Asia, which are both developing economies. Furthermore, governance institutions matter more for trade in non-mineral products than for trade in mineral products. The interaction of tariff with governance variables produced some results which suggest that inadequate governance institutions reflected in poor implementation of tariff policy may increase trade costs, thus reinforcing the negative effect of tariff on trade. Some policy recommendations were articulated to improve governance institutions in SSA to promote trade with its trading partners. |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:aer:wpaper:376&r=all |
| By: | Hylke Vandenbussche; William Connell; Wouter Simons |
| Abstract: | Within an open economy framework characterised by vertical linkages in production and search frictions and two-sided heterogeneity in the labour market, raising trade barriers is shown to increase unemployment across skill levels, and to reduce labour market participation and aggregate income. These effects are not necessarily moderated by maintaining frictionless mobility of capital across borders. We find that a flexicurity reform of a liberal welfare state can dampen the adverse effects of de-globalisation. |
| Keywords: | global value chains, trade shocks, jobs, employment, labour markets |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:not:notgep:2020-21&r=all |
| By: | Holger Breinich; Harald Fadinger; Volker Nocke; Nicolas Schutz |
| Abstract: | We evaluate the consequences of oligopolistic behavior for the estimation of gravity equations for trade ows. With oligopolistic competition, firm-level gravity equations based on a standard CES demand framework need to be augmented by markup terms that are functions of firms' market shares. At the aggregate level, the additional term takes the form of the exporting country's market share in the destination country multiplied by an exporter-destination-specific Herfindahl-Hirschman index. For both cases, we show how to construct appropriate correction terms that can be used to avoid problems of omitted variable bias. We illustrate the quantitative importance of our results for combined French and Chinese firm-level export data as well as for a sample of product-level imports by European countries. Our results show that correcting for oligopoly bias can lead to substantial changes in the coefficients on standard gravity regressors such as distance or the impact of currency unions. |
| Keywords: | Gravity Equation, Oligopoly, CES Demand, Aggregative Game |
| JEL: | F12 F14 L13 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2020_236&r=all |
| By: | Insaf Guedidi (Ecole Supérieure des Sciences Economiques et Commerciales de Tunis (ESSECT)); Leila Baghdadi (Ecole Supérieure des Sciences Economiques et Commerciales de Tunis (ESSECT)) |
| Abstract: | The paper investigates the relationship between carbon emissions, environmental provisions in Regional Trade Agreements (RTAs) and Global Value Chains (GVCs) using a panel data gravity model for the Middle East and North Africa (MENA) region over the period 1990- 2015. We find that RTAs have a positive effect on carbon emissions. However, good institutional quality in MENA region decreases carbon footprint. Participation of MENA countries in GVCs rises environmental degradation in upstream Low-Tech Manufacturing (LTM) sectors and downstream High-Tech Manufacturing (HTM) and Primary sectors. Moreover, we examine the interaction effects between RTAs with environmental laws and participation of MENA countries in GVCs. Results confirm that participating in upstream activities in GVCs and signing more RTAs with environmental laws reduce pollution in LTM sectors. Furthermore, our study proves that RTAs (with or without environmental laws) could reduce carbon emissions in MENA region participating in backward GVCs. Backward participation is related to trade in LTM and primary sectors. Therefore, there is a need to understand the GVC landscape in MENA region to be able to set suitable RTAs with environmental provisions in order to reduce pollution and contribute to sustainable upgrading in GVCs. |
| Date: | 2020–11–20 |
| URL: | http://d.repec.org/n?u=RePEc:erg:wpaper:1428&r=all |
| By: | Autor, David (MIT); Dorn, David (University of Zurich); Hanson, Gordon H. (University of California, San Diego); Majlesi, Kaveh (Lund University) |
| Abstract: | Has rising import competition contributed to the polarization of U.S. politics? Analyzing multiple measures of political expression and results of congressional and presidential elections spanning the period 2000 through 2016, we find strong though not definitive evidence of an ideological realignment in trade-exposed local labor markets that commences prior to the divisive 2016 U.S. presidential election. Exploiting the exogenous component of rising import competition by China, we find that trade exposed electoral districts simultaneously exhibit growing ideological polarization in some domains—meaning expanding support for both strong-left and strong-right views—and pure rightward shifts in others. Specifically, trade-impacted commuting zones or districts saw an increasing market share for the FOX News channel (a rightward shift), stronger ideological polarization in campaign contributions (a polarized shift), and a relative rise in the likelihood of electing a Republican to Congress (a rightward shift). Trade-exposed counties with an initial majority white population became more likely to elect a GOP conservative, while trade-exposed counties with an initial majority-minority population become more likely to elect a liberal Democrat, where in both sets of counties, these gains came at the expense of moderate Democrats (a polarized shift). In presidential elections, counties with greater trade exposure shifted towards the Republican candidate (a rightward shift). These results broadly support an emerging political economy literature that connects adverse economic shocks to sharp ideological realignments that cleave along racial and ethnic lines and induce discrete shifts in political preferences and economic policy. |
| Keywords: | political polarization, elections, trade, labor market shocks |
| JEL: | D72 F14 F16 F68 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp13861&r=all |
| By: | Zhang, Wendong |
| 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 US–China economic and trade relations, which the ongoing trade war has already significantly disrupted. This paper analyzes the impacts of COVID†19 on US agricultural exports to China, especially the added delays and uncertainty regarding China's food imports meeting the US–China phase one trade deal target. I present the views of US farmers and the general public toward China and argue that healthy US–China agricultural trade relations are not only critical for both countries but welcomed by US farmers. I also discuss the possible rise in nontariff barriers following the pandemic as well as trade policies that are increasingly intertwined with political tensions. Finally, I discuss how the US–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: | 2020–10–13 |
| URL: | http://d.repec.org/n?u=RePEc:isu:genstf:202010130700001624&r=all |
| By: | Kym Anderson (Wine Economics Research Centre, School of Economics, University of Adelaide, Australia, and Arndt-Corden Dept of Economics, Australian National University, Canberra ACT 2601, Australia); Signe Nelgen (Wine Economics Research Centre, School of Economics, University of Adelaide, Australia, and Hochschule Geisenheim University, Geisenheim, Germany) |
| Abstract: | Aim: To quantify the extent to which national mixes of winegrape varieties (in terms of vineyard bearing area) have become more or less diversified, and ‘internationalized’, since wine globalization accelerated from the 1990s. Method and results: In addition to bearing area (in hectares), shares and indexes are estimated for each of 53 countries in an updated global database involving 700+ wine regions that account for 99% of the world’s winegrape vineyard area and 1,700+ DNA-distinct prime winegrape varieties and 1350+ synonyms, for 2000, 2010 and 2016. This global database (Anderson and Nelgen 2020) is a major revision, extension and update of Anderson (2013). Its prime varieties are linked to their country of origin and synonyms are as nominated by Robinson, Harding, and Vouillamoz (2012) or otherwise JKI (2019). Conclusion: These results reveal that vignerons’ winegrape varietal choices are narrowing across the world. That is, they are becoming less diversified as many countries converge on the major ‘international’ varieties, especially French ones. This is not inconsistent with the fact that wine consumers are enjoying an ever-wider choice range, thanks to far greater international trade in wine associated with the current wave of globalization. Nor is it inconsistent with strengthening vigneron interest in ‘alternative’ and native varieties in numerous countries, including Italy (D’Agata, 2014) and Australia (Higgs, 2019). That interest stems in part from a desire to diversify their varietal mix to differentiate their offering – including through the terroir-driven use of minor varieties in blends – and to hedge against increasing weather volatility. It just happens that in recent decades the latter centrifugal forces are dominated by the centripetal force of embracing the most popular varieties for ease of marketing and presumably higher profits. Moreover, the quality of the current global mix of varieties is arguably substantially above the average quality of the top half-dozen varieties as of 1990. Significance and impact of the study: The apparent paradox of reduced diversity and greater internationalization in the world’s vineyards is partly explained by major changes in a few national bearing areas. This new database provides many other insights in addition to those highlighted in this paper. For example, it includes for the first time numerous climate variables for each of its 700+ regions, prepared with the assistance of Gregory Jones of Linfield University, Oregon. That allows one to examine the varietal mix in regions whose climate in recent years is similar to what other regions will endure in the decades ahead thanks to on-going climate changes. |
| Keywords: | Index of similarity between national and global varietal mixes, index of internationalization of prime varieties |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:adl:winewp:2020-02&r=all |
| By: | Christine Arriola; Sebastian Benz; Annabelle Mourougane; Frank van Tongeren |
| Abstract: | This paper quantifies the sectoral trade impact in the United Kingdom and in EU countries of the UK’s exit from the Single Market, using the OECD general-equilibrium METRO model. A comprehensive free-trade agreement could lead to a fall by about 6.1% of UK exports and 7.8% of UK imports in the medium term compared to a situation where the United Kingdom would stay in the Single Market. Cost would come essentially from rising technical barriers and sanitary and phytosanitory measures on goods and rising trade costs on services. Rules of origin and border transition costs would have a small effect. Output losses in the European Union (0.4-0.5%) are expected to be less pronounced, but would vary markedly across individual countries. Ireland would experience the largest losses. Losses would also vary across sectors. Accounting for the regulatory impact of ending free movement of people for EU nationals on services trade is expected to bring some additional costs to the services economy. Those losses could be partly compensated by growth-enhancing changes to UK regulations, but only to a limited extent. |
| Keywords: | Brexit, free-trade agreement, general-equilibrium model |
| JEL: | C68 F15 F47 |
| Date: | 2020–11–23 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:1631-en&r=all |
| By: | Crowley, M. A.; Han, L.; Son, M. |
| Abstract: | How do the choices of individual firms contribute to the dominance of a currency in global trade? Using export transactions data from the UK over 2010-2016, we document strong evidence of two mechanisms that promote the use of a dominant currency: (1) prior experience: the probability that a firm invoices its exports to a new market in a dominant currency is increasing in the number of years the firm has used the dominant currency in its existing markets; (2) strategic complementarity: a firm is more likely to invoice its exports in the currency chosen by the majority of its competitors in a foreign destination market in order to stabilize its residual demand in that market. |
| Date: | 2020–11–26 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:20113&r=all |
| By: | Cortinovis, Nicola; Crescenzi, Riccardo; Van Oort, Frank |
| Abstract: | This paper investigates the link between multinational enterprises (MNEs) and employment in their host regions by cross-fertilizing the literature on MNE externalities with the emerging body of research on industrial relatedness. The link between employment and MNE presence in the same and related industries is tested for European regions. The results suggest that cross-sectoral MNE spillovers are mediated through industrial relatedness and that they are positively and significantly associated with higher employment levels, independently of input-output relations. Our results indicate that regions characterized by lower factor prices are likely to benefit the most from the presence of multinationals in terms of employment, but these benefits are concentrated in high knowledge-intensive sectors, potentially fostering inequalities within less developed economies. |
| Keywords: | employment; foreign direct investment; relatedness; Europe; regions; 639633-MASSIVE-ERC-2014-STG) |
| JEL: | O33 F22 |
| Date: | 2020–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:104063&r=all |
| By: | Gnutzmann-Mkrtchyan, Arevik; Hoffstadt, Martin |
| Abstract: | Antidumping creates opportunities for abuse to stifle market competition. Whether cartels actually abuse trade policy for anticompetitive purposes remains an open question in the literature. To address this gap, we construct a novel dataset that matches cartel investigations with trade data at the product level. We then estimate the world import price and quantity effects of antidumping in cartel products. We find that the use of antidumping in cartel industries helps to maintain higher world import prices and lower quantities during cartel periods, and to induce the establishment of a cartel. The effect is present both for antidumping cases that result in duties and cases that are withdrawn by the petitioning industry. |
| Keywords: | tcartels; collusion; antitrust; antidumping; trade policy |
| JEL: | F14 F15 L41 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:han:dpaper:dp-677&r=all |
| By: | Afzali, Haaron (Hanken School of Economics, Helsinki, Finland); Martikainen, Minna (University of Vaasa, Faculty of Business Studies, Vaasa, Finland); Oxelheim, Lars (School of Business and Law, University of Agder, Kristiansand, Norway); Randoy, Trond (School of Business and Law, University of Agder, Kristiansand, Norway) |
| Abstract: | Motivated by agency theory and arguments from linguistic studies, we argue in this paper the internationalization of a firm’s audit committee to be associated with weaker firm-level corporate governance. Based on 2,015 publicly traded European firms from 16 countries over 2000-2018, we find the presence of foreign directors on audit committees to have a significant negative impact on financial reporting quality (FRQ). The effect is found to be weaker in countries with strong investor protection. We find linguistic differences within audit committees an important explanation for the negative influence of foreign directors on FRQ. The results are robust to alternative FRQ measures and model specifications, including difference-in-differences and propensity score matching. While foreign directors on a corporate board may create value for the firm by boosting the advisory capacity of that board, recruiting a foreign director to that firm’s audit committee may compromise the board’s monitoring function and the firm’s FRQ. |
| Keywords: | Reporting Quality; Foreign Directors; Audit Committee; Investor Protection |
| JEL: | F23 G34 K22 M16 M42 |
| Date: | 2020–11–24 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iuiwop:1370&r=all |
| By: | Ari Van Assche (HEC Montreal) |
| Abstract: | Located at the heart of global value chains (GVCs), intangibles are documented to have a high and rising value capture, and to depend on both agglomeration economies and global connectedness for their performance. In this paper, we study how the distinct nature of intangibles require countries to develop novel policy prescriptions to attract intangible-intensive activities and to increase the value capture of these activities. We suggest that such GVC-oriented policies fall into three categories: Attractiveness policies that aim to strengthen the appeal of a location for intangible activities; Buzz policies that intend to strengthen the local production and innovation ecosystem; and Connectedness policies that aspire to strengthen the local ecosystem’s connections to other locations. Together, they constitute the ABCs of GVC-oriented policies. |
| Keywords: | Innovation, Intangible capital, Investment policy, Trade policy |
| JEL: | E22 F23 F68 |
| Date: | 2020–11–25 |
| URL: | http://d.repec.org/n?u=RePEc:oec:traaab:242-en&r=all |
| By: | Giorgio Chiovelli; Francesco Amodio; Leonardo Baccini; Michele Di Maio |
| Abstract: | Does comparative advantage explain legislators' support for trade liberalization? We use data onpotential crop yields as determined by weather and soil characteristics to derive a new, plausiblyexogenous measure of comparative advantage in agriculture for each district in the US. Evidenceshows that comparative advantage in agriculture predicts how legislators vote on the ratificationof preferential trade agreements in Congress. We show that legislators in districts with highagricultural comparative advantage are more likely to mention that trade agreements are goodfor agriculture in House floor debates preceding roll-call votes on their ratifications. Individualsliving in the same districts are also more likely to support free trade. Our analysis and resultscontribute to the literature on the political economy of trade and its distributional consequences,and to our understanding of the economic determinants of legislators voting decisions. |
| Keywords: | Trade, Agricultural, Political Economy, Trade Agreements |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:mnt:wpaper:2002&r=all |
| By: | Gomtsyan, David; Tarasov, Alexander |
| Abstract: | In this paper, employing transaction level data for Russian imports, we explore the role of multi-product shipments in explaining shipping patterns across countries. First, we document that firms from more developed countries include on average more different products into a single shipment. We then show that such multi-product shipments can potentially explain why more developed countries tend to have a higher number of shipments per period with a lower average quantity and value. The mechanism considered in the paper is based on that multiproduct shipments allow splitting fixed costs per shipment across many products and, therefore, reducing total shipment costs. As a result, more developed countries tend to have lower fixed costs per shipment. Finally, we construct a simple partial equilibrium model that enables us to quantify the role of multi-product shipments in determining shipping costs. |
| Keywords: | asymmetric trade costs,fixed costs per shipment,advanced countries |
| JEL: | F10 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:20061&r=all |
| By: | Eun Jung Kim; Annabelle Mourougane; Mark Baker |
| Abstract: | This paper examines the link between barriers to trade and investment and productivity performance, in the United Kingdom and selected European countries using both firm-level and sectoral data. Barriers to trade and investment appear to be a robust determinant of productivity in the long term. Control variables such as spending on R&D and human capital also play a role, though their effects depend on the way they are measured or on the sample. The results are robust across a range of productivity measures as well as to changes in the sectoral coverage and the set of controls. |
| Keywords: | barriers to trade and investment, firm-level, productivity, sectoral |
| JEL: | C23 D24 F13 |
| Date: | 2020–11–23 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:1630-en&r=all |
| By: | Marcel Boyer |
| Abstract: | Table of contents (Summary) Introduction Free-trade within a portfolio of government policies The goals of food security or sovereignty The dynamics of free trade Comparative advantage (Nash) equilibrium of choices Trade deficit, foreign investment, and the exchange rate Conclusion |
| Keywords: | Free Trade,Trade Deficit,Public Policies,Grants,Croony Capitalism, |
| Date: | 2020–11–17 |
| URL: | http://d.repec.org/n?u=RePEc:cir:cirwor:2020s-56&r=all |
| By: | Yao Axel Ehouman |
| Abstract: | This paper re-examines the dependence structure between uncertainty in oil prices and sovereign credit risk of oil exporters. To address this issue, we employ a copula approach that allows us to capture a myriad of complex and nonlinear dependence structures. Empirical analyses involve daily data of the 5-year sovereign credit default swaps spreads and the crude oil implied volatility from January 2010 to May 2019, covering a sample of ten oil-exporting countries. Except for Brazil and Venezuela, our results provide evidence of significant positive and upper tail dependence in the relationship between oil market uncertainty and oil exporters’ sovereign risk. Overall, our findings highlight that high uncertainty in oil prices coincides with large-scale increases in the sovereign credit risk of oil-exporting countries, supporting the hypothesis that investors, exposed to economic losses from risk events in oil exporters, are all the more pessimistic that prevails high uncertainty about future oil prices. Our findings have implications for oil exporter’ policymakers as well as investors. |
| Keywords: | Copula; Dependence; Oil market; Sovereign credit risk; Uncertainty |
| JEL: | C1 F3 G1 Q4 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:drm:wpaper:2020-31&r=all |
| By: | Norihiko Yamano; Joaquim Guilhoto |
| Abstract: | This paper describes the sources and methods used to estimate carbon emissions embodied in final demand and international gross trade for 65 economies over the period 2005-2015. Earlier OECD analyses of carbon footprints, accounting for global production networks, helped raise awareness of divergences between territorial and resident principles, and between production-based and consumption-based carbon emissions. Understanding the differences in these measures is important for governments to better understand and address greenhouse gas mitigation options. Thus, a new refined methodology was applied to allocate territorial emissions to production-based emissions (industries and households) using OECD Inter-Country Input-Output tables and International Energy Agency (IEA) CO2 emissions from fuel combustion statistics. In particular, this methodology introduces: 1) explicit distinctions between territorial and resident principles, economic output and final demand-based emissions and emissions embodied in gross imports and exports; 2) estimates by major fuel combustion sources; and 3) fuel purchases by non-resident industries and households. |
| Keywords: | CO2 emissions, Consumption-based accounting, Inter-Country Input-Output, International trade |
| Date: | 2020–11–23 |
| URL: | http://d.repec.org/n?u=RePEc:oec:stiaaa:2020/11-en&r=all |
| By: | Koch, Philipp |
| 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 valueadded 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 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. |
| Keywords: | complexity,economic growth,value-added exports |
| JEL: | O19 O47 F43 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ecoarp:14&r=all |
| By: | Joseph E. Gagnon (Peterson Institute for International Economics) |
| Abstract: | President Donald Trump launched a trade war to eliminate the longstanding US trade deficit. But the trade deficit has only grown on his watch because tariffs were the wrong policy choice. Trade deficits are not always a bad thing, but a wealthy country like the United States should not run a perpetual deficit. Decades of US trade deficits have piled up debt that makes future generations of Americans less well off, as they must pay interest and dividends to foreigners. Cheap imports and the decline in exports have also contributed to the loss of a significant number of US manufacturing jobs. The main cause of the deficit is a secular overvaluation of the dollar, driven by excessive financial flows into dollar assets from foreign official and private investors. Although Trump’s policies have failed, achieving balanced trade is not a hopeless quest. President-elect Joseph Biden should direct his Treasury secretary to pursue a more sensible dollar policy that can tame the deficit without violating any international norms or rules. |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:iie:pbrief:pb20-15&r=all |
| By: | Julian di Giovanni (Federal Reserve Bank of New York, ICREA-Universitat Pompeu Fabra, Barcelona GSE, CREI and CEPR); Andrei A. Levchenko (University of Michigan, NBER, & CEPR); Isabelle Mejean (CREST-Ecole Polytechnique and CEPR) |
| Abstract: | This paper uses a dataset covering the universe of French firm-level sales, imports, and exports over the period 1993-2007 and a quantitative multi-country model to study the international transmission of business cycle shocks at both the micro and the macro levels. The largest firms are both important enough to generate aggregate fluctuations (Gabaix, 2011), and most likely to be internationally connected. This implies that foreign shocks are transmitted to the domestic economy primarily through the largest firms. We first document a novel stylized fact: larger French firms are significantly more sensitive to foreign GDP growth. We then implement a quantitative framework calibrated to the full extent of observed heterogeneity in firm size, exporting, and importing. We simulate the propagation of foreign shocks to the French economy and report one micro and one macro finding. At the micro level heterogeneity across firms predominates: 40 to 85% of the impact of foreign fluctuations on French GDP is accounted for by the Òforeign granular residualÓ Ð the term capturing the fact that larger firms are more affected by the foreign shocks. At the macro level, firm heterogeneity dampens the impact of foreign shocks, with the GDP responses 10 to 20% larger in a representative firm model compared to the baseline model. |
| Keywords: | Granularity; Shock transmission; Aggregate fluctuations; Input linkages; International trade |
| JEL: | E32 F15 F23 F44 F62 L14 |
| Date: | 2020–11–16 |
| URL: | http://d.repec.org/n?u=RePEc:mie:wpaper:678&r=all |
| By: | Li, Haoran; Wan, Xibo; Zhang, Wendong |
| Abstract: | Political and economic tensions, which often jeopardize trade, are rising among the world’s major powers. Previous literature largely focuses on how brief, short-lived political tensions affect bilateral trade; however, little is known about firm-level trade responses to long-term political tensions. This paper investigates how firms respond to long-term political tensions by examining the Norway-China political tensions that lasted for six years. In particular, we use an event study approach to examine China's seafood importers' response to China's 2010 sanction on Norwegian fresh salmon after Norway awarded Liu Xiaobo, a Chinese political dissident, a Nobel Peace Prize. Our results reveal firm-level responses at both the extensive and intensive margins. At the intensive margin, firms that imported Norwegian fresh salmon before the sanction saw a dramatic and persistent decline in their imports of fresh salmon products from Norway ranging from 89% to 96%. At the extensive margin, we not only find a trade diversion effects of firms importing from other countries and less firms importing fresh salmon from Norway, but also a permanent "political hedging" effect with a decline in the maximum import share from any particular country, even if not Norway. |
| Date: | 2020–11–25 |
| URL: | http://d.repec.org/n?u=RePEc:isu:genstf:202011250800001118&r=all |
| By: | Jong, Meng-Chang |
| Abstract: | Tourism is one of the most remarkable multi-faceted phenomena that contributes enormously to economic development for most countries around the globe. The steady growth of the world economy, rapid development in transportation systems, and visa facilitation have bolstered the industry by facilitating higher accessibility for tourists. However, tourism is a vulnerable and competitive industry that need to accommodate the rapid changes of tourist demand and economies as well as consider environment effects. Apart from these dynamic needs, an unexpected health crisis may also lead to devastating impacts on the tourism industry. The recent pandemic caused by the novel coronavirus of 2019 (COVID-19) has brought severe disruptions to the global economy, and specifically caused a tremendous decline in the tourism industry. It is one of the industries tremendously impacted by the outbreak, grounding airplanes and severely limiting the ability of people to travel abroad. Once the vaccines are available and movement restrictions are lifted, the tourism sector can be one of the key industries for economic recovery. More than ever, studies on tourism demand modelling and forecasting are crucial. A review of literature on tourism demand takes into account recent studies on the unprecedented COVID-19 pandemic. |
| Keywords: | Tourism demand; COVID-19; Panel analysis; ARDL; Forecasting; Gravity model |
| JEL: | C33 C87 E17 Z0 |
| Date: | 2020–11–08 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:103919&r=all |
| By: | Matthew T. Cole; James Lake; Ben Zissimos |
| Abstract: | We develop a new theoretical political economy framework called a `parallel contest' that emphasizes the political fight over trade agreement (TA) ratification within countries. TA ratiification is inherently uncertain in each country because anti- and pro-trade interests contest each other to in fluence their own government's ratification decision. As in the terms-of-trade theory of TAs, the TA removes terms-of-trade externalities created by unilateral tarifs. But, a TA also creates new terms-of-trade and local-price externalities in our framework due to endogenous ratification uncertainty combined with the requirement that each country ratifies the TA for it to go ahead. Thus, reciprocal TA liberalization fails to eliminate all terms-of-trade externalities. |
| Keywords: | Contest, international agreement, lobbying, tarifs, trade agreement |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:not:notgep:2020-22&r=all |
| By: | Niftiyev, Ibrahim |
| Abstract: | Oil booming and accumulated mineral revenue contributed to the economic growth in Azerbaijan since independence but also pressurized the national currency leading to the appreciation of the nominal effective exchange rate (NEER) and real effective exchange rate (REER). An increase in export prices makes them expensive, decreasing the competitiveness of the country. Azerbaijan’s recent decreased economic performance during 2014–2015 reflected a common reality among the resource exporting countries: relying on the primary sectors might jeopardize the national economy due to the extreme price volatility. The paper investigates the extension of the relationship between NEER, REER, and other export-related macroeconomic variables and agricultural exports to identify Azerbaijan’s non-oil sub-sectoral dynamics between 2001–2018 via the OLS estimations. The main findings indicate that NEER negatively impacted potato, fresh fruit, and fresh vegetable exports. Moreover, potato and fresh fruit exports demonstrated more stable export dynamics during the economic crisis periods. |
| Keywords: | Azerbaijan economy,nominal effective exchange rate,real effective exchange rate,agriculture,crop exports |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:esprep:226347&r=all |
| By: | Ferrari, Massimo Minesso; Pagliari, Maria Sole; Kurcz, Frederik |
| Abstract: | In this paper, we apply textual analysis and machine learning algorithms to construct an index capturing trade tensions between US and China. Our indicator matches well-known events in the US-China trade dispute and is exogenous to the developments on global financial markets. By means of local projection methods, we show that US markets are largely unaffected by rising trade tensions, with the exception of those firms that are more exposed to China, while the same shock negatively affects stock market indices in EMEs and China. Higher trade tensions also entail: i) an appreciation of the US dollar; ii) a depreciation of EMEs currencies; iii) muted changes in safe haven currencies; iv) portfolio re-balancing between stocks and bonds in the EMEs. We also show that trade tensions account for around 15% of the variance of Chinese stocks while their contribution is muted for US markets. These findings suggest that the US-China trade tensions are interpreted as a negative demand shock for the Chinese economy rather than as a global risk shock. JEL Classification: D53, E44, F13, F14, C55 |
| Keywords: | Exchange rates, Machine Learning, Stock indexes, Trade Shocks |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20202490&r=all |
| By: | Inaki Arto (Basque Centre for Climate Change – BC3); Jose M. Rueda-Cantuche (European Commission – JRC); M. Victoria Roman (European Commission – JRC); Ignacio Cazcarro (Basque Centre for Climate Change – BC3); Antonio F. Amores (European Commission – JRC); Erik Dietzenbacher (University of Groningen) |
| Abstract: | The European Commission identified trade policy as a core component of the European Union's 2020 Strategy. The fast changing global economy, characterised by the dynamic creation of business opportunities and increasingly complex production chains, means that it is now even more important to fully understand how global value chains affect employment. Gathering comprehensive, reliable and comparable information on this is crucial to support evidence-based policymaking. Guided by that objective, the European Commission's Joint Research Centre (JRC) has produced this publication. It aims to be a valuable tool for trade policymakers. The report features a series of indicators to illustrate in detail the dependence of the EU employment on the final demand of each EU Member State, and of the employment in each Member State on the EU final demand. This is done using the World Input-Output Database (WIOD), 2016 release, as the main data source. This information has been complemented with data on employment by skill and gender from other sources such as EUKLEMS. Besides, indicators have been also included to account for the inter-dependence between the EU and other world economies. Most indicators cover the period 2000-2014 but, due to data constraints, the indicators on employment split by skill and gender are only available from 2008 onwards. The geographical breakdown of the data includes the 28 EU Member States, Australia, Brazil, Canada, China, India, Indonesia, Japan, Mexico, Norway, Russia, South Korea, Switzerland, Turkey, Taiwan, the United States of America, and an aggregate “Rest of the World†region. The information presented in this pocketbook is complemented with a software tool for analyses of global value chains, trade, income and employment. This tool enables a more detailed analysis of the different indicators related to global value chains and includes additional data management and visualization options. |
| Keywords: | Employment, Trade, European Union |
| JEL: | F62 C67 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc120520&r=all |
| By: | Akihiko Yanase; Ngo Van Long |
| Abstract: | This paper develops a two-country model of intra-industry trade with trade costs, which can be reduced by public investment in an international infrastructure capital, the stock of which accumulates over time. Taking the relationship between trade costs and national welfare into consideration, the governments carry out a dynamic game of public investment. We show that the dynamic equilibrium of the policy game may exhibit history dependency; if the initial stock of international infrastructure is smaller (larger) than a certain level, the infrastructure stock decreases (increases) over time, and the world economy will end up in autarky (two-way free trade) in the long run. We also show that international cooperation is beneficial in the sense that it may enable the world economy to escape from a "low-development trap". Cet article développe un modèle de commerce intra-industriel à deux pays avec des coûts commerciaux, qui peuvent être réduits par un investissement public dans un capital d'infrastructure internationale, dont le stock s'accumule avec le temps. Prenant en compte la relation entre les coûts commerciaux et le bien-être national, les gouvernements mènent un jeu dynamique d'investissement public. Nous montrons que l'équilibre dynamique du jeu entre les deux gouvernements peut présenter une dépendance de l'histoire; si le stock initial d'infrastructures internationales est inférieur (supérieur) à un certain niveau, le stock d'infrastructures diminue (augmente) au fil du temps et l'économie mondiale se retrouvera en autarcie (libre-échange bidirectionnel) à long terme. Nous montrons également que la coopération internationale est bénéfique : elle peut permettre à l'économie mondiale de sortir d’un «piège à faible développement». |
| Keywords: | Public Infrastructure Capital,Intra-Industry Trade,Differential Games,Multiple Equilibria, Capital d'infrastructure,Commerce intra-industriel,Jeux différentiels,Multiplicité d'équilibres |
| JEL: | C61 C73 F12 H54 H87 O18 |
| Date: | 2020–11–18 |
| URL: | http://d.repec.org/n?u=RePEc:cir:cirwor:2020s-59&r=all |
| By: | Michał Gradzewicz; Jakub Mućk |
| Abstract: | We propose a framework allowing to identify sources changes in aggregate markups. Our approach derives from the conjectural variation theory and allows to evaluate the role of price elasticity of demand as well as concentration in shaping the markups. In the empirical part, we show that a decline in the aggregate markups in Poland, showed by Gradzewicz and Mućk (2019), can be explained to a large extent by rising demand elasticity, while rising concentration has mitigated this effect. We also document that at the industry level the globalization trends, e.g. international fragmentation, increasing standardization and tighter integration with global economy, a ect both demand elasticity and markups but in a theory-consistent, inverse way. Besides, we identify factors which are specific to demand elasticity (product varieties and a home bias) and the markups (import content of exports). |
| Keywords: | markups, price elasticity of demand, globalization |
| JEL: | C23 D22 D4 F61 L11 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:sgh:kaewps:2020056&r=all |
| By: | Inaki Arto (Basque Centre for Climate Change – BC3); Jose M. Rueda-Cantuche (European Commission – JRC); M. Victoria Roman (European Commission – JRC); Ignacio Cazcarro (Basque Centre for Climate Change – BC3); Antonio F. Amores (European Commission – JRC); Erik Dietzenbacher (University of Groningen) |
| Abstract: | The European Commission identified trade policy as a core component of the European Union's 2020 Strategy. The fast changing global economy, characterised by the dynamic creation of business opportunities and increasingly complex production chains, means that it is now even more important to fully understand how global value chains affect value added. Gathering comprehensive, reliable and comparable information on this is crucial to support evidence-based policymaking. Guided by that objective, the European Commission's Joint Research Centre (JRC) has produced this publication. It aims to be a valuable tool for trade policymakers. The report features a series of indicators to illustrate in detail the EU value added dependence on the final demand of each EU Member State, and the value added in each Member State depending on the EU final demand as a whole. This is done using the World Input-Output Database (WIOD), 2016 release, as the main data source. This information has been complemented with data on labour compensation by skill and gender from other sources such as EUKLEMS. Besides, indicators have been also included to account for the inter-dependence between the EU and other world economies. Most indicators cover the period 2000-2014 but, due to data constraints, the indicators on labour compensation by skill and gender are only available from 2008 onwards. The geographical breakdown of the data includes the 28 EU Member States, Australia, Brazil, Canada, China, India, Indonesia, Japan, Mexico, Norway, Russia, South Korea, Switzerland, Turkey, Taiwan, the United States of America, and an aggregate “Rest of the World†region. The information presented in this pocketbook is complemented with a software tool for analyses of global value chains, trade, income and employment. This tool enables a more detailed analysis of the different indicators related to global value chains and includes additional data management and visualization options. |
| Keywords: | Employment, Trade, European Union |
| JEL: | F62 C67 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc120522&r=all |
| By: | Spengel, Christoph; Fischer, Leonie; Stutzenberger, Kathrin |
| Abstract: | Upon more than 400 judgements on direct taxation, the case law of the European Court of Justice has considerably shaped Member States' tax systems. Based on Member States' tax law adjustments in the context of four landmark rulings on corporate income taxation, we analyse whether case law is a suitable instrument to eliminate tax distortions towards the realisation of a European internal market. Our analysis is based on effective tax burdens using the Devereux/Griffith methodology. Overall, we find that due to Member States' mostly heterogeneous adjustments and varying levels of compliance, cross- border investment continues to be discriminated in some Member States following the Marks & Spencer and National Grid Indus judgements. In addition, differences in the general availability of the rules under scrutiny and design of related provisions, cross-country differences in effective tax burdens and hence distortions to the internal market might persist. We conclude that a comprehensive harmonisation of Member States' tax systems by way of positive integration would be necessary to sustainably eliminate tax obstacles to cross-border business activities. |
| Keywords: | European Court of Justice,Internal Market,Effective Tax Rates,Thin Capitalisation Rules,Cross-Border Loss Relief,Controlled Foreign Company Rules,Exit Taxation |
| JEL: | H25 K34 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:20059&r=all |