nep-int New Economics Papers
on International Trade
Issue of 2020‒12‒14
forty-four papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. Exporters, Multinationals and Residual Wage Inequality: Evidence and Theory By Sarah Schroeder
  2. Accounting for Chinese Exports By Loren Brandt; Kevin Lim
  3. An Elementary Theorem on Gains from Virtual Trade By Sugata Marjit; Lei Yang
  4. International trade liberalization and domestic institutional reform: Effects of WTO accession on Chinese internal migration policy By Yuan Tian
  5. Trade Policy Uncertainty and its Effect on Foreign Direct Investment: Evidence from Mexico By Cebreros Alfonso; Salcedo Alejandrina; Chiquiar Daniel; Heffner-Rodríguez Aldo
  6. A Theory of Economic Disintegration By Eckhard Janeba; Karl Schulz
  7. Export performance under domestic anti-dumping protection By Andrea Ciani; Joel Stiebal
  8. Trade Policy Responses to the COVID-19 pandemic crisis: Evidence from a New Dataset By Simon Evenett; Matteo Fiorini; Johannes Fritz, Bernard Hoekman, Piotr Lukaszuk, Nadia Rocha, Michele Ruta, Filippo Santi and Anirudh Shingal
  9. Export-Led Growth after COVID-19: The Case of Portugal By Naudé, Wim; Cameron, Martin
  10. Export boosting policies and firm behaviour: Review of empirical evidence around the world By Srhoj, Stjepan; Vitezic, Vanja; Wagner, Joachim
  11. Decomposing the Gains from Trade through the Standard Gravity Variables By Hakan Yilmazkuday
  12. Under Pressure: Intractable Trade Conflicts and Korea -- Pneumatic Valves By Kristy Buzard; Kathleen Claussen
  13. Infrastructure Bottlenecks and Dual-Channel Exporters By Xiao Feng; Yongjin Wang; Laixun Zhao
  14. Mapping trade to household budget survey: A conversion framework for assessing the distributional impact of trade policies By Nhung Luu; Nicolas Woloszko; Orsetta Causa; Christine Arriola; Frank van Tongeren; Åsa Johansson
  15. Growing like China: Firm performance and global production line position By David Chor; Kalina Manova; Zhihong Yu
  16. Evaluating the impact of export finance support on firm-level export performance: Evidence from Pakistan By Fabrice Defever; Alejandro Riano; Gonzalo Varela
  17. International Trade, Upstream Market Power, and Endogenous Mode of Downstream Competition By John Gilbert; Onur A. Koska; Reza Oladi
  18. Welfare Costs of Bilateral Currency Crises: The Role of International Trade By Hakan Yilmazkuday
  19. Neo-Liberal, State-Capitalist and Ordo-Liberal Conceptions of Multilevel Trade Regulation By Ernst-Ulrich Petersmann; Armin Steinbach
  20. Consumer taste in trade By Bee Yan Aw; Yi Lee; Hylke Vandenbussche
  21. COVID-19, public procurement regimes and trade policy By Bernard Hoekman; Anirudh Shingal; Varun Eknath and Viktoriya Ereshchenko
  22. Productivity effects of processing and ordinary export market entry: A time-varying treatments approach By Sourafel Girma; Holger Goerg
  23. Substitution Bias in the Measurement of Import and Export Price Indices: Causes and Correction By Ludwig von Auer; Alena Shumskikh
  24. Export investment under uncertainty: a mean-variance decision analysis for Indian manufacturing exporters By Subhadip Mukherjee; Soumyatanu Mukherjee; Tapas Mishra; Udo Broll
  25. Australia — Anti-Dumping Measures on A4 Copy Paper: Opening a Door to More Anti-Dumping Investigations By Antonia Eliason; Matteo Fiorini
  26. Labor standards and social conditions in free trade zones: the case of the Manaus free trade zone By Louisiana Teixeira
  27. The Brexit referendum and the rise in hate crime; conforming to the new norm By Facundo Albornoz; Jake Bradley; Silvia Sonderegger
  28. Trade disruption, industrialisation, and the setting sun of British colonial rule in India By Roberto Bonfatti; Bjoern Brey
  29. Policy effects of international taxation on firm dynamics and capital structure By Adam Hal Spencer
  30. Gender-Specific Effects of Import Competition on Individual Fertility Decisions By Piriu, Andreea A.
  31. Fishy SPS Measures? The WTO’s Korea-Radionuclides Dispute By Rachel Brewster; Carolyn Fischer
  32. Why are Africa’s female entrepreneurs not playing the export game? Evidence from Ghana By Charles Ackah; Holger Goerg; Aoife Hanley; Cecília Hornok
  33. Export under background risk: A mean-variance decision analysis for Indian manufacturing firms By Subhadip Mukherjee; Soumyatanu Mukherjee; Tapas Mishra
  34. Corporate acquisitions and firm-level uncertainty: Domestic versus cross-border deals By Ye Bai; Sourafel Girma; Alejandro Riano
  35. Establishing a new role for antidumping policy: protection of an unestablished industry (Morocco—Hot-Rolled Steel (Turkey)) By Meredith A. Crowley; Federico Ortino
  36. A set of matrices to map the location of profit and economic activity of multinational enterprises By Sébastien Turban; Stéphane Sorbe; Valentine Millot; Åsa Johansson
  37. Services trade and labour market outcomes in the United Kingdom By Andrea Lassmann; Francesca Spinelli
  38. The new challenges raised by investment arbitration for the EU legal order By Mersch, Yves; Achtouk-Spivak, Laurie; Affaki, Georges; Contartese, Cristina; Puig, Ramón Vidal
  39. Does FDI Promote Entrepreneurial Activities? A Meta-Analysis By Sanghyun Hong; W. Robert Reed; Bifei Tian; Tingting Wu; Gen Chen
  40. Daewoo Motors (1992-1999)A dragon multinational in the car industry By Sardor Tadjiev; Pierre-Yves Donze
  41. The Causal Effect of the Dollar on Trade By Sai Ma; Tim Schmidt-Eisenlohr; Shaojun Zhang
  42. Food shortages, stockpiling and panic buying ahead of Brexit as reported by the British media: a mixed methods content analysis By Coleman, Paul; Dhaif, Fatema; Oyebode, Oyinlola
  43. De-globalisation, welfare state reforms and labour market outcomes By Hassan Molana; Catia Montagna; George E. Onwordi
  44. Trump, China, and the Republicans By Ben G. Li; Yi Lu; Pasquale Sgro; Xing Xu

  1. By: Sarah Schroeder
    Abstract: This paper studies the implications for wage inequality of two distinct forms of globalisation, namely trade and foreign direct investment. I use German linked employer-employee data to (1) jointly estimate the exporter and the multinational wage premium and (2) to further distinguish between wage premia of multinational firms that are foreign owned (inward FDI) and domestically owned (outward FDI). My findings exhibit a clear hierarchy of firms’ international activities with regard to wage premia and workforce ability. I interpret these patterns using a theoretical framework, which incorporates ex-ante homogeneous workers, heterogeneous firms and search and matching frictions into a multi-region model of trade and FDI with monopolistic competition. The model allows me to account for the observed empirical patterns, and delivers novel insights about the interplay between trade, FDI and labour market institutions.
    Keywords: wage inequality, trade, fdi, labour market frictions
    JEL: F14 F16 J31
    Date: 2020
  2. By: Loren Brandt; Kevin Lim
    Abstract: Rapid growth in Chinese exporting has spurred extensive research across multiple fields of economics investigating its effects. Yet, the causes of this growth remain less well-understood. We quantify the drivers of Chinese exporting using a general equilibrium model, estimated with detailed trade and production data that capture rich heterogeneity across destinations, firm ownerships, production locations, and sectors. Both external (foreign demand) and internal factors (productivity, firm entry, imported input access) were important drivers of high export growth from 2000-2007. A slowdown in export growth post-2007 is largely attributable to the disappearance of internal drivers, reinforced by weakening external factors.
    Keywords: China, Exports, Imports, Trade, Productivity, WTO, Market Access
    JEL: F14 F47 O47 O53
    Date: 2020–11–28
  3. By: Sugata Marjit; Lei Yang
    Abstract: Virtual markets allow consumers to save time costs to purchase goods and services. Countries lose relative to the conventional welfare gain when they increase consumption of non-virtual goods under free trade. We include the classical gains from trade theorem as a special case. For two identical countries that have same endowment and technology, the income difference between them can generate trade when we consider the time cost of purchasing goods. The rich country exports the non-virtual good and imports the virtual good while the poor country exports the virtual good and imports the non-virtual good.
    Keywords: virtual trade, time cost
    JEL: F10 O30
    Date: 2020
  4. By: Yuan Tian
    Abstract: Economic institutions that impede factor mobility become more costly when an economy experiences substantial transitions such as trade liberalization. I study how trade triggers changes in labor institutions that regulate internal migration in the context of China’s Hukou system. Using a newly-collected dataset on prefecture-level migration policies, I document an increase in pro-migrant regulations following WTO entry and estimate the impact of prefecture-level trade shocks on migration regulations from 2001 to 2007. I find that regions facing more export market liberalization enacted more migrant-friendly regulations.
    Keywords: Trade Liberalization, Institution, Migration Policy
    Date: 2020
  5. By: Cebreros Alfonso; Salcedo Alejandrina; Chiquiar Daniel; Heffner-Rodríguez Aldo
    Abstract: This paper investigates whether "trade policy uncertainty" (TPU), even absent changes in actual policy, may have an adverse effect on foreign direct investment. The paper focuses on the case of Mexico, where we observe a plausibly sharp and exogenous increase in TPU vis-à-vis a large trading partner beginning in the second half of 2016. To test this hypothesis, we use data from Google Trends to construct a TPU index and argue that this index adequately captures both time series and cross-sectional variation in TPU across states in Mexico. We exploit this variation to identify the effect of increased uncertainty on FDI flows. We find that the increase in TPU was associated with a negative effect on FDI inflows, with the effect being driven by the negative impact that TPU had on FDI in export oriented states.
    JEL: F40 F62 F21
    Date: 2020–12
  6. By: Eckhard Janeba; Karl Schulz
    Abstract: We develop a theory of economic disintegration with both endogenously formed tax and trade policies. We show very generally that, contrary to conventional wisdom, a country’s disintegration from an integrated area leads to a deeper integration inside the area. Similarly, the departure of a country from a customs union lowers tariffs world-wide. Moreover, we introduce international firm mobility and non-cooperative business tax policies into the multi-country, multi-sector general equilibrium trade model of Melitz and Ottaviano (2008). We address the model-inherent dimensions of economic disintegration, such as tariffs, non-tariff barriers, the harmonization of production standards and regulations, business frictions, as well as household migration and analyze their effects on the domestic tax policies of asymmetric countries.
    Keywords: trade policy, tax/subsidy competition, oligopolistic markets, economic integration
    JEL: F13 F15 F22 F53 H25 H73
    Date: 2020
  7. By: Andrea Ciani; Joel Stiebal
    Abstract: This paper investigates the effect of import protection on export performance at the firm-product level. We exploit product-specific information on anti-dumping (AD) measures imposed by Peru along with several indicators on the performance of Peruvian exporting firms across and within destination markets. Findings indicate that the impact of protection on export performance depends on which economies are targeted by domestic AD protection. Duties towards China are associated with significantly higher prices, especially among small exporting firms. These firms also reduce their shipments, as suggested by frameworks stressing the role of adjustment costs. In contrast, when AD measures are imposed on competitors from middle- and high-income countries, exporters decrease prices and increase quantities, consistent with the presence of learning curves and economies of scale.
    Keywords: Anti-dumping, Export Prices, Emerging Economies
    Date: 2020
  8. By: Simon Evenett; Matteo Fiorini; Johannes Fritz, Bernard Hoekman, Piotr Lukaszuk, Nadia Rocha, Michele Ruta, Filippo Santi and Anirudh Shingal
    Abstract: This paper presents new high frequency data on trade policy changes targeting medical and food products since the beginning of the COVID-19 pandemic, documenting how countries used trade policy instruments in response to the health crisis on a week-by-week basis. The dataset reveals a rapid increase in trade policy activism in February and March 2020 in tandem with the rise in COVID-19 cases, but also uncovers extensive heterogeneity across countries in both their use of trade policy and the types of measures used. Some countries acted to restrict exports and facilitate imports, others targeted only one of these margins, and many did not use trade policy at all. The observed heterogeneity suggests numerous research questions on the drivers of trade policy responses to COVID-19, on the effects of these measures on trade and prices of critical products, and on the role of trade agreements in influencing trade activism.
    Keywords: COVID-19, trade policy, export restrictions, import liberalization
    JEL: F13 F52 I18
    Date: 2020–12
  9. By: Naudé, Wim (RWTH Aachen University); Cameron, Martin (Trade Advisory Research (Pty) Ltd)
    Abstract: The COVID-19 pandemic has disrupted trade and global value chains. Small open economies such as Portugal are particularly vulnerable. In this paper we consider the impact of the pandemic on the country's exports, arguing that an export-led recovery is possible. The challenge is to identify viable export opportunities: one of the consequences of the COVID-19 pandemic is to have closed and shrunk export opportunities globally. Despite this we show that there are still significant under-utilized export opportunities for Portugal. We use the large UN-COMTRADE and CEPII BACI data sets to which we apply four sets of filters to identify 42,593 realistic export opportunities. These opportunities are worth €286,6 billion in untapped revenue potential. The major markets for these products are countries such as United States, Germany, China, United Kingdom, France and Japan. We discuss the trade facilitation and industrial policy implications for utilizing these opportunities in the context of the relevant literature on trade and development.
    Keywords: COVID-19, trade, exports, international entrepreneurship, Portugal
    JEL: F17 F14 I15 L52
    Date: 2020–11
  10. By: Srhoj, Stjepan; Vitezic, Vanja; Wagner, Joachim
    Abstract: How effective are direct government policies for boosting exports? We answer this question with a structured overview of 34 studies covering 26 countries around the world, and in doing so, we provide nine findings. We show export boosting policies are heterogenenous by design and include export promotion policies, public grants for exporters, public export guarantee schemes, subsidised export loans, and randomised foreign market access programmes. Our review provides insights into policy effectiveness with respect to extensive and intensive export margins as well as firms' production function inputs and its outputs. Heterogeneity of effects across firm characteristics is emphasised and the discussion is enriched with new evidence on spillover effects from export boosting policies. Finally, we provide back of the envelope calculations of aggregate macroeconomic effects and give recommendations for policymakers. Our findings show export boosting policies are relevant and proven-to-be-effective policy instruments.
    Keywords: export promotion policies; guarantees; grants; loans; impact evaluation; review
    JEL: F13 F14 L15 L25 O10 O24
    Date: 2020–11–24
  11. By: Hakan Yilmazkuday (Department of Economics, Florida International University)
    Abstract: Using the implications of a trade model, this paper measures the gains from trade through the standard gravity variables. Theoretically, it is shown that such gains can be calculated by using the estimated coefficients of these variables in a gravity regression, together with the bilateral expenditure shares of countries investigated. Empirically, the results show that the total actual gains through all gravity variables in the world have increased from about 1% in 1950s to about 5% as of 2015 that can be decomposed as 3.5% through proximity and 1.5% through other gravity variables. Gains through free trade agreements (FTAs) have started dominating among these other variables starting from 1990s, following the Uruguay Round. Across countries, the total gains of OECD countries are about 1.5 times those of others, whereas the total gains of European countries are more than 10 times those of Pacific countries. Calculations based on the future potential gains from trade through policy-oriented gravity variables further suggest that there is room for an additional 0.8% or 0.4% of a welfare gain in the world through having free trade agreements or using common currencies, respectively.
    Keywords: Welfare Gains from Trade, Potential Gains from Trade, Gravity Variables, Free Trade Agreements
    JEL: F13 F14 F63
    Date: 2020–11
  12. By: Kristy Buzard; Kathleen Claussen
    Abstract: The Appellate Body (AB) report in Korea -- Pneumatic Valves is among the most structurally complex of recent trade remedies reports. The AB weaves a complicated web to explicate the intricacies of the relationship among the relevant provisions on injury determination in anti-dumping disputes in the midst of a contentious and long-running series of disputes between two close regional trading powers. This Article first examines the Korean investigation and its significance in economic terms. Second, it analyzes the AB’s conclusions on Article 6.2 of the Dispute Settlement Understanding regarding the panel request and the significance of the AB’s treatment. Third, it studies the AB’s comments on the panel’s anti-dumping calculations where the AB amplifies its prior pronouncements on the elements of injury and causation. Finally, the Article situates this dispute in the broader political debates playing out both at the AB and between the two disputing parties.
    Keywords: WTO, dispute settlement, Appellate Body, antidumping, Korea
    JEL: F13 F53
    Date: 2020–11
  13. By: Xiao Feng (School of Economics, Nankai University, China); Yongjin Wang (School of Economics, Nankai University, China); Laixun Zhao (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan)
    Abstract: This paper investigates how infrastructure bottlenecks affect a firm's export mode. We find that under infrastructure bottlenecks, the most efficient firms become the so-called "dual-channel exporters", which export only a fraction of their products directly, with the remaining products exported through intermediaries. Using linked annual survey of industrial production and transaction-level customs datasets in China, we document that a significant share of firms are the dual-channel exporters. Further, these exporters are more productive than the direct and indirect exporters. Our quantitative model suggests that the elimination of exporting capacity constraint arising from infrastructure bottlenecks leads to substantial aggregate productivity growth via improved resource reallocation.
    Keywords: Infrastructure bottlenecks, Dual-channel Exporters, Productivity, Capacity constraint, Resource misallocation
    JEL: F10 O18
    Date: 2019–09
  14. By: Nhung Luu; Nicolas Woloszko; Orsetta Causa; Christine Arriola; Frank van Tongeren; Åsa Johansson
    Abstract: Whether gains from trade are equally distributed within countries is the subject of a lively debate. This paper presents a novel framework to analyse the distributional effects of trade policy by linking the OECD’s CGE trade model, METRO, with consumption expenditure data from household budget surveys. Specifically, this paper describes a methodology to produce a concordance and transition matrix linking GTAP sectors to household survey classifications based on the Classification of Individual Consumption According to Purpose (COICOP). A mapping methodology is an important pre-requisite for investigating research questions concerning the influence of household behaviour changes on trade, as well as trade developments and policy on household welfare. The paper provides an illustration of the mapping of trade policy induced price changes onto household expenditures by conducting stylized tariff simulations with METRO and translating those into household expenditures by income decile for selected EU countries.
    Keywords: Household expenditure microdata, Inequality, modelling, Trade policy
    JEL: C68 D12 E21 F13 F14
    Date: 2020–12–04
  15. By: David Chor; Kalina Manova; Zhihong Yu
    Abstract: Global value chains have fundamentally transformed international trade and development in recent decades. We use matched firm-level customs and manufacturing survey data, together with Input-Output tables for China, to examine how Chinese firms position themselves in global production lines and how this evolves with productivity and performance over the firm lifecycle. We document a sharp rise in the upstreamness of imports, stable positioning of exports, and rapid expansion in production stages conducted in China over the 1992-2014 period, both in the aggregate and within firms over time. Firms span more stages as they grow more productive, bigger and more experienced. This is accompanied by a rise in input purchases, value added in production, and fixed cost levels and shares. It is also associated with higher profits though not with changing profit margins. We rationalize these patterns with a stylized model of the firm lifecycle with complementarity between the scale of production and the scope of stages performed.
    Keywords: Global value chains, production line position, upstreamness, firm heterogeneity, firm lifecycle, China.
    Date: 2020
  16. By: Fabrice Defever; Alejandro Riano; Gonzalo Varela
    Abstract: This paper evaluates the impact of two export finance support schemes: The Export Finance Scheme (EFS) and the Long-Term Finance Facility for Plant and Machinery (LTFF) on firm level export performance. These policies offer loans to exporters at concessionary interest rates to finance short-term working capital and long-term investment in machinery and equipment respectively. To do so, we combine customs data with information about which firms participate in each scheme and the value of the loans they obtain between 2015 and 2017. We find that EFS and LTFF increased the growth rate of exports sales by 7 and 8-11 percentage points respectively. Neither policy exerts a significant impact on the number of products that a firm exports or the number of foreign countries it sells to. Our analysis indicates that facilitating long-term investment in physical capital is more cost effective to raise exports than subsidizing exporters' working capital needs.
    Keywords: Trade finance; Export credit; Export subsidies; Export margins; Pakistan
    Date: 2020
  17. By: John Gilbert; Onur A. Koska (University of Canterbury); Reza Oladi
    Abstract: In a trade model with both horizontal and vertical product differentiation, we analyze the implications of upstream market power for the endogenous mode of downstream competition. We show that when high-quality exports are manufactured under large frictions due to upstream monopoly power, the exporter can become a Bertrand competitor against a Cournot local rival in equilibrium, especially when the relative product quality of the foreign variety is sufficiently high and trade costs are sufficiently low (implying higher input price distortions due to double marginalization). We also show that the availability of FDI as an alternative to trade can make strategic asymmetry even more likely, especially when both input trade costs and fixed investment costs are sufficiently low and trade costs in final goods are sufficiently large. Our results show that strategic asymmetry is welfare improving and has important implications for both trade and FDI policy.
    Keywords: International trade; upstream market power; vertical product differentiation; horizontal product differentiation; Cournot-Bertrand-Nash equilibrium
    JEL: D43 F12
    Date: 2020–12–01
  18. By: Hakan Yilmazkuday (Department of Economics, Florida International University)
    Abstract: This paper shows that bilateral currency crises reduce bilateral trade up to 50% after controlling for the depreciation rate. Using a trade model, these reductions are connected to the welfare costs of currency crises. The results show that a single currency crisis can result in welfare reductions through changes in international trade corresponding to more than 10% (and up to 41%) of the costs of autarky for 23 different currency crisis episodes between 1960 and 2014. These welfare costs are also shown to be greater than the welfare gains from having free trade agreements and using common currencies for 25 different currency crisis episodes.
    Keywords: Welfare Costs, Currency Crises, International Trade
    JEL: F14 F31 F63
    Date: 2020–11
  19. By: Ernst-Ulrich Petersmann; Armin Steinbach
    Abstract: Reforms of international trade and investment law and institutions are hampered by conflicting economic paradigms. For instance, utilitarian Anglo-Saxon neo-liberalism (e.g. promoting self-regulatory market forces privileging the homo economicus), constitutional European ordo-liberalism (e.g. protecting multilevel, constitutional rights and judicial remedies of EU citizens), and authoritarian state-capitalism (e.g. protecting totalitarian power monopolies of the communist party in China) pursue different legal and institutional designs of trade and investment agreements. Globalization and its transformation of national into transnational public goods (PGs) require extending constitutional and institutional economics to multilevel governance of transnational PGs in order to enhance the wealth of nations. Maintaining the worldwide legal and dispute settlement system of the World Trade Organization (WTO) - and interpreting its regional and national exception clauses broadly in order to reconcile diverse, national and regional institutions of economic integration and of ‘embedded liberalism’ - remains in the interest of all WTO member states.
    Keywords: Adjudication, climate litigation, constitutionalism, neo-liberalism, ordo-liberalism, public goods, state-capitalism, WTO
    Date: 2020–11
  20. By: Bee Yan Aw; Yi Lee; Hylke Vandenbussche
    Abstract: This paper documents the importance of consumer taste for the food industry using firm product level customs data by destination country. We identify consumer taste through the use of a control function approach and estimate it jointly with other demand parameters using a flexible demand specification. We fid that, on average, consumer taste explains about as much of the variation in export revenue as marginal costs. The contribution of consumer tastes to export revenue variation ranges from 2% to 30% depending on product category in the food industry. Our results also show that consumer taste decreases in distance but this relationship is non-monotonic.
    Keywords: consumer taste, quality, productivity, exports, firm-product, food
    Date: 2020
  21. By: Bernard Hoekman; Anirudh Shingal; Varun Eknath and Viktoriya Ereshchenko
    Abstract: This paper analyzes a prominent dimension of the initial policy response to the COVID-19 pandemic observed in many countries: the imposition of export restrictions and actions to facilitate imports. Using weekly data on the use of trade policy instruments during the first seven months of the COVID-19 pandemic (January-July, 2020) we assess the relationship between the use of trade policy instruments and attributes of pre-crisis public procurement regulation. Controlling for country size, government effectiveness and economic factors, we find that use of export restrictions targeting medical products and their duration is strongly positively correlated with the total number of steps and average time required to complete procurement processes in the pre-crisis period. Membership of trade agreements encompassing public procurement disciplines is associated with actions to facilitate trade in medical products. These findings suggest future empirical assessments of the drivers of trade policy during the pandemic should consider public procurement systems.
    Keywords: COVID-19, export controls, trade facilitation, trade policy, public procurement, trade agreements
    JEL: F13 F15 H57 I18
    Date: 2020–11
  22. By: Sourafel Girma; Holger Goerg
    Abstract: China’s policy of encouraging export processing has been the topic of much discussion in the academic literature and policy debate. We use a recently developed econometric approach that allows for time varying “treatments” and estimate economically and statistically significant positive causal effects of entering into export processing on subsequent firm level productivity. These productivity effects are shown to be larger than those accruing to firms who enter into ordinary exporting. Interestingly, the estimation of quantile treatment effects shows that the positive effects do not accrue similarly to all types of firms, but are strongest for those at the low to medium end of the distribution of the productivity variable. We also find that export processors gain more when entering the industrialised North rather than the South, while this does not appear to matter much for ordinary exporting.
    Keywords: export processing; firm performance, China; time varying treatments
    Date: 2020
  23. By: Ludwig von Auer; Alena Shumskikh
    Abstract: The import and export price indices of an economy are usually compiled by some Laspeyres type index. It is well known that such an index formula is prone to substitution bias. Therefore, also the terms of trade (ratio of export and import price index) are likely to be distorted. The underlying substitution bias accumulates over time. The present paper introduces a simple and transparent retrospective correction approach that removes the substitution bias and produces meaningful long-run time series of import and export price levels and, therefore, of the terms of trade. Furthermore, an empirical case study is conducted that demonstrates the efficacy and versatility of the correction approach.
    Keywords: distortion, official statistics, terms of trade, time series
    Date: 2020
  24. By: Subhadip Mukherjee; Soumyatanu Mukherjee; Tapas Mishra; Udo Broll
    Abstract: This paper explores how much a domestic firm should optimally invest for facilitating export to the international market under uncertainty in nominal/spot exchange rate. We consider the presence of exogenous uncontrollable factors, influencing the fixed costs of exports and enhancing the uncertainty surrounding the exporting prospects. We categorise such additional randomness as a “background risk”, affecting the choice variable (i.e. investment) independent of the endogenous exchange rate risk. In this context, we apply a mean-variance decision-theoretic modelling approach to analyse a risk-averse firm’s optimal investment response to the changes in the distributions of the random spot exchange rate and of the background uncertainty, in terms of the relative trade-off between risk and return. Next, using an unbalanced panel data of 840 exporting Indian manufacturing firms over 17 years, we perform a structural estimation of the theoretical model, derived using a flexible utility function that incorporates all possible risk preferences, in order to demonstrate the key results in our model empirically. For this purpose, using fixed effects model and Heckman’s two-step estimation procedure, we empirically estimate firm-level mark-up(s), as proxy for firms’ risk-premium. This helps us to come up with the estimation of risk aversion elasticities in our context.
    Keywords: Exchange rate risk; Background risk; Mark-up estimation; Risk aversion elasticities.
    Date: 2019
  25. By: Antonia Eliason; Matteo Fiorini
    Abstract: This paper analyzes the Australia – Anti-Dumping Measures on A4 Copy Paper panel report, the second recent WTO dispute to involve a challenge to Indonesia’s paper industry. The Indonesian paper industry benefits from reduced-cost inputs because of the Indonesian government’s influence and subsidies over the timber and pulp market. The report offers the first interpretation of “particular market situation” under Article 2.2 of the WTO’s Anti-Dumping Agreement. At the same time, it raises questions regarding the appropriateness of using anti-dumping measures to address what are fundamentally subsidy issues. While the panel ultimately found that Australia’s measure was inconsistent with Article 2.2, the paper shows that the panel's interpretation of “particular market situation” increases the relative attractiveness of using anti-dumping duties instead of countervailing measures. Two key points on the welfare implications of the decision can be made. The first relates to the motivations of the Australian paper industry and the imperfectly competitive market in which Australian Paper operates. The second is the importance of challenging subsidies rather than imposing anti-dumping duties where the subsidies in question have negative environmental effects.
    Keywords: Anti-dumping, Subsidies, WTO, Particular market situation
    JEL: F13
    Date: 2020–12
  26. By: Louisiana Teixeira (Université Paris Dauphine-PSL - PSL - Université Paris sciences et lettres, LEDA-DIAL - Développement, Institutions et Modialisation - LEDa - Laboratoire d'Economie de Dauphine - CNRS - Centre National de la Recherche Scientifique - IRD - Institut de Recherche pour le Développement - Université Paris Dauphine-PSL - PSL - Université Paris sciences et lettres, IRD - Institut de Recherche pour le Développement)
    Abstract: The creation of the Manaus Free Trade Zone had a development purpose in the Brazilian political, economic and social scenario between 1960 and 1970. This industrial pole was an important device in achieving the desired development, populating a region considered deserted and exposed to external threats at that time. It has guaranteed the improvement on labor standards and social conditions in the Manaus' district and has become the main driving force behind regional employment, higher salaries and growth over the past decades. Using the residuals and the stochastic frontier techniques to estimate the labor and social performances of the Manaus Free Trade Zone, the analysis confirms that the implementation of the special economic zone collaborated to labor and social efficiency in the area-compared to other important industrial Brazilian municipalities-due to the rigid checks conducted by SUFRAMA and the strict respect of labor standards applied in the MFTZ. Nevertheless, economic linkages in the region are still weak and positive spillovers from Manaus to its surroundings were probably inexistent.
    Keywords: Free trade zone,Manaus,employment,labor standards,social progress
    Date: 2020–06–17
  27. By: Facundo Albornoz; Jake Bradley; Silvia Sonderegger
    Abstract: We show that the sharp increase in hate crime following the Brexit referendum was more pronounced in more pro-remain areas. This is consistent with a model where behavior is dictated by the desire to conform to imperfectly observed social norms in addition to following individual preferences, and where the referendum revealed that society’s real preferences over immigration were less positive than previously thought. For identification, we exploit the feature that the referendum revealed new information overnight in a context where other determinants of attitudes remained constant. The data can be replicated with a sensible parameterization of the model.
    Keywords: Hate crime, Brexit, attitudes towards immigrants, social norms, value of information
    Date: 2020
  28. By: Roberto Bonfatti; Bjoern Brey
    Abstract: Colonial trade encouraged colonies specialization in primary products. Did this prevent industrialisation in colonies? And did the absence of industrialisation help to keep colonies under control? To answer these questions, we examine the impact of the temporary trade collapse between Britain and India due to World War I, on industrialisation and anti-imperial feelings in India. Exploiting cross-district variation in exposure to the trade shock, we find that districts more exposed to the trade shock experienced substantially faster industrial growth in 1911-21, placing them on a higher level of industrialisation which persisted up to today. Using the WWI trade shock as an instrument for industrialisation levels, we also find that more industrialised districts were more likely to express anti-imperial feelings in 1922, and to vote for the Indian National Congress in the landmark election of 1937.
    Keywords: Colonial trade, India, Infant-industry argument, Decolonisation.
    Date: 2020
  29. By: Adam Hal Spencer
    Abstract: This paper develops a quantitative open economy framework with dynamics, firm heterogeneity and financial frictions to study the impact of corporate tax reforms targeted at multinationals. The model quantities their impact on productivity, GDP and welfare. Firms draw idiosyncratic shocks, invest in capital, choose optimal financing and select endogenously into servicing an overseas market, either through exporting or FDI. I apply this framework to the removal of the U.S. repatriation tax, an aspect of the Tax Cuts and Jobs Act. The reform's impact trades-off two selection effects more offshoring versus greater business dynamism from increased proftability. The reform leads to higher U.S. welfare and revenue neutrality. A series of exercises illustrate that the novel features of this framework have signifcant quantitative implications. The reform's beneficial effects are mitigated considerably when financial frictions are removed and it appears to be welfare reducing when using a static analogue of the model.
    Keywords: dynamics, financial frictions, productivity, corporate tax, firm heterogeneity, FDI, repatriation tax
    Date: 2020
  30. By: Piriu, Andreea A.
    Abstract: This paper studies the effects of import competition from China and Eastern Europe (EE) on the fertility decisions of individuals in German manufacturing. Through the lens of gender, the paper uniquely contributes to the literature by linking import competition to longitudinal individual data to examine individual fertility. Two separate measures of import exposure are computed for competition from China and EE (amassing five countries), whose trade volumes with Germany have increased remarkably during the panel years. Fixed-effects instrumental variable (FEIV) estimation results show that individual fertility decreases by 1.6 p.p. and by 2.0 p.p. with rising competition from China and EE, respectively. The effects are robust and consistent across different subgroups of individuals. Effects of import competition are then inspected by gender, alongside potential mechanisms underlying fertility decisions. Both male and female workers' fertility is affected via reduced earnings, though differently. The effect on male fertility is negative, with shortened employment duration. Conversely, the effect on female workers' fertility is positive, with worsened working conditions. Furthermore, in line with family economics theory, these results suggest that there is a substitution effect in the labour supply of women, here prevalently concentrated in low-technology sectors: as female earnings fall and their opportunity cost of work is lower, the prospect of having children possibly becomes a more rewarding alternative.
    Keywords: trade-induced shocks,labour market conditions,import competition,individual fertility,female labour supply,FEIV estimation,Germany
    JEL: F14 F16 J11 J13 J16
    Date: 2020
  31. By: Rachel Brewster; Carolyn Fischer
    Abstract: The Korea-Radionuclides case addresses Korean SPS measures imposed on Japanese fishery products after the Fukushima Dai-ichi nuclear plant meltdown in 2011. Japan challenged these measures as more restrictive than necessary under the SPS Agreement. The panel agreed with Japan, but this ruling was largely reversed by the Appellate Body. Korea’s victory at the Appellate Body was based on procedure. The panel accepted Korea’s appropriate level of protection (ALOP), which included both quantitative and qualitative elements. However, the Appellate Body found that the panel only addressed the quantitative aspect of Korea’s ALOP and reversed on that basis. The Appellate Body’s ruling did not affirmatively find that Korea’s SPS measures were legal under WTO rules. Instead, the Appellate Body found that panel had not sufficiently addressed Korea’s arguments and, thereby, the panel could not determine that the SPS measures were more restrictive than necessary. The case highlights the need for the Appellate Body to be able to conduct its own factual analysis, a power it could be given if the dispute settlement system is reformed. Without independent fact-finding power, the Appellate Body cannot correct panels’ mistakes, and respondents can prevail based on panel error.
    Keywords: WTO, dispute settlement, SPS, fish, Japan, Korea
    JEL: F13 F53
    Date: 2020–11
  32. By: Charles Ackah; Holger Goerg; Aoife Hanley; Cecília Hornok
    Abstract: We explore the export performance of Africa’s underperforming female entrepreneurs, using the Ghanaian ISSER-IGC panel, a comprehensive dataset of manufacturing firms for 2011–2015. Uniquely, the data provides information about the severity of key business constraints, across both male and female entrepreneurs. We find that females are less likely to export (and optimize their exporting) than their male peers. Although reduced access to finance seriously constrains the exports of female entrepreneurs, this limitation does not explain their relative inability to leverage value from exports. Consistent with related work, we find that certain social and cultural constraints, in particular constraints linked to bribes and security concerns, are more deeply felt by female entrepreneurs. This may hint at the exclusion of Africa’s females (voluntarily or involuntarily) from male-dominated networks or business practices.
    Keywords: female entrepreneurship; business constraints; productivity; exporting; Africa; Ghana
    Date: 2020
  33. By: Subhadip Mukherjee; Soumyatanu Mukherjee; Tapas Mishra
    Abstract: How would accessing foreign markets affect risk exposure of manufacturing firms? Producing for and selling specific goods to foreign markets (exports) require specialized attention. For example, manufacturing firms are exposed to idiosyncratic shocks in their global supply chains, such as exchange rate volatility, asset market frictions, transaction risks, credit tightening, and so on. Given this background, we probed production and exporting decision for a manufacturing firm (that serves both domestic and foreign markets) in the context of firm-specific and industry-specific shocks on trade, with a view of searching for optimality. These shocks are aggregated to form a type of risk that literature labels as ‘non-hedgeable’ background risk. We also propose that background risk is dependent on direct (endogenous) risk pertaining to fluctuations in the spot/nominal exchange rates. To test for potential optimal conditions, we employ a mean-variance decision-theoretic modelling approach. This approach was selected in order to trace out the comparative static responses of optimal export sales following the changes in the distribution of background risk or due to the dependence structure between the two sources of risks (i.e., background risk and exchange rate risk). Our contribution includes isolating all comparative static effects of these changes in the context of optimal production and exporting decisions. In particular, we consider the relative trade-offs between risks and returns, and offer intuitive economic theory-based interpretations of our results. In order to demonstrate robustness of the key results in our model empirically, we utilised an unbalanced panel data of 1,273 exporting Indian manufacturing firms over the time period of 1996-2017 to perform a structural estimation of our theoretical model. This model is derived using a flexible utility function that incorporates all possible options of risk preferences. Through this approach, we are able to estimate risk aversion elasticities specific to our context.
    Keywords: ICT; firm growth; cloud computing
    Date: 2020
  34. By: Ye Bai; Sourafel Girma; Alejandro Riano
    Abstract: This paper studies the impact of corporate acquisitions - both domestic and cross-border - on the uncertainty faced by acquiring firms. We use data for UK publicly-listed firms from 2004 to 2017 and employ a matching estimator combined with difference-in-differences to control for the endogenous election of firms into buying other companies. We find that acquisitions exert a large and persistent effect on the volatility of stock returns of acquirers and that this response is crucially determined by the geographic scope of the acquisitions firms undertake. We find that the impact of acquisitions on firm-level uncertainty is characterized by a pecking order: the announcement of a domestic takeover leads to a reduction in the uncertainty faced by the acquirer, while cross-border acquisitions particularly those involving target firms in emerging markets - engender a positive response in acquirers' volatility. Our results suggest that acquisitions affect uncertainty because they change firms' exposure to shocks - as they expand their operation in new markets - and also because they are large and risky investments whose returns take time to materialize.
    Keywords: Mergers and Acquisitions; Uncertainty; Volatility; Globalization; Stock Returns; UK
    Date: 2020
  35. By: Meredith A. Crowley; Federico Ortino
    Abstract: This article analyses economic and legal issues in the WTO dispute between Morocco and Turkey over hot-rolled steel. Over 2013-14, the Moroccan government conducted an antidumping investigation against two Turkish steel producers. Morocco’s investigation concluded that Turkish dumping was retarding the establishment of a new domestic industry; antidumping duties were imposed against both Turkish producers. Turkey filed a complaint at the WTO in 2016, asserting procedural and substantive violations. The Panel found that Morocco had acted inconsistently with a number of WTO obligations, including those regarding its injury investigation. Although Morocco initially appealed the Panel’s decision, it withdrew its appeal after the antidumping duties expired in September 2019. This case is unusual and important in that it was the first antidumping case in which a country sought to use antidumping duties to protect a newly developing industry. The Panel may have missed an opportunity to explore the definition of an ‘unestablished’ industry for purposes of determining injury in an antidumping investigation.
    Keywords: Industrial policy, trade policy, antidumping, WTO, dispute settlement, Morocco
    JEL: F13 F53 O24 O25
    Date: 2020–11
  36. By: Sébastien Turban; Stéphane Sorbe; Valentine Millot; Åsa Johansson
    Abstract: This paper describes the methodology and data sources used to build a set of matrices mapping the location of profit and economic activity of multinational enterprises (MNEs) across jurisdictions. These matrices were originally designed for the purpose of assessing the effect of proposals for the reform of international corporate tax arrangements under consideration by the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS). They could also serve other analytical purposes in the future. The set consists of a profit matrix and three matrices focusing on indicators of economic activity (turnover, tangible assets and payroll). Each matrix contains data spanning more than 200 jurisdictions (matrix rows) and broken down across more than 200 jurisdictions of MNE ultimate parent (matrix columns), focusing primarily on year 2016. The matrices combine data from a range of sources in a consistent framework, including newly available aggregated Country-by-Country Report (CbCR) data, the ORBIS database, and the OECD Analytical AMNE database. Gaps in data are filled using extrapolations based on macroeconomic data, including via a sophisticated procedure to extrapolate profit based on foreign direct investment (FDI) data. Extensive benchmarking has been undertaken to ensure consistency across the data sources and extrapolations used in the matrices.
    Date: 2020–12–08
  37. By: Andrea Lassmann (OECD); Francesca Spinelli (OECD)
    Abstract: Services trade has become increasingly important, yet its impact on employment has been understudied at present. This paper uses fine-grained data on firm- and worker-level information to shed light on the impact of services trade on employment and wages in the United Kingdom. It finds that firms can benefit from services trade, through increased employment, production and productivity. On average, workers’ wages are also positively impacted by increased services trade. The findings suggest that services imports enhance female wages more than those of males, thereby contributing to narrow the gender wage gap. They also suggest that reduction of services trade barriers in foreign markets with which the United Kingdom trades coincides with higher wages for employees of trading firms in the United Kingdom.
    Keywords: Employment, gender pay gap, skills, trade liberalisation, wages, worker and firm level data
    JEL: C26 F13 F16 J31 J40
    Date: 2020–12–03
  38. By: Mersch, Yves; Achtouk-Spivak, Laurie; Affaki, Georges; Contartese, Cristina; Puig, Ramón Vidal
    Abstract: The five contributions in this legal working paper discuss various aspects of investment arbitration. They were originally presented at the ECB legal colloquium on ‘The new challenges raised by investment arbitration for the EU legal order’ which took place in Frankfurt am Main in 2019.
    Keywords: Achmea, arbitration tribunals, bilateral investment treaties (BITs), Comprehensive Economic and Trade Agreement (CETA) tribunal, Court of Justice of the European Union (CJEU), dispute settlement mechanism, division of competence, European Central Bank, investment arbitration, investor-state arbitration clauses, Opinion 1/17, with investor-state dispute settlement mechanisms (ISDS)
    Date: 2019–10
  39. By: Sanghyun Hong (University of Canterbury); W. Robert Reed (University of Canterbury); Bifei Tian; Tingting Wu; Gen Chen
    Abstract: Researchers have long identified both FDI and entrepreneurship as potentially important determinants of economic development. Accordingly, a literature has grown to investigate whether FDI stimulates entrepreneurial activity in host countries. It is difficult to synthesize these empirical findings because many of the studies use different definitions of FDI and entrepreneurship, study different time periods and countries, and apply different estimation procedures to generate their results. In order to better understand this literature, we collect 728 estimates from 52 studies that estimate the relationship between FDI and entrepreneurial activity using country-level data. We use meta-analysis to address two questions: (1) What is the overall, mean effect of FDI on entrepreneurship?, and (2) What factors account for differences in estimated effects across studies? An innovation of our study is that it develops a nested testing framework to select among a number of competing meta-analytic models. It also extends the new Andrews-Kasy meta-analytic estimators to allow for explanatory variables. We find that the overall, mean effect of FDI on entrepreneurial activity is close to zero and statistically insignificant. While FDI and entrepreneurial activity may each play an important role in economic development, our results indicate that FDI does not generally stimulate entrepreneurship. This suggests that public policy efforts to encourage entrepreneurship through FDI are unlikely to be successful. All the files necessary to reproduce the results in this paper are available online at Harvard Dataverse.
    Keywords: Meta-analysis, FDI, Entrepreneurship
    JEL: L26 F21 C10
    Date: 2020–11–01
  40. By: Sardor Tadjiev (Osaka University, Graduate School of Economics); Pierre-Yves Donze (Osaka University, Graduate School of Economics)
    Abstract: Multinational enterprises (MNEs) from emerging countries have shown their ability to compete as latecomers against established enterprises in various industries. Such latecomers are known as gdragon multinationals h and much research has been conducted to analyze their behavior and competitive advantages. This paper focuses on the strategy implemented by the Korean automobile company Daewoo Motors to expand into the global market. Based on the international business literature on the emergence of multinational enterprises in emerging countries, this paper examines why Daewoo Motors invested first in developing economies such as Uzbekistan and Eastern Europe upon expanding into the global market. It discusses both the growth of foreign sales and the organization of overseas assembly plants. In addition, this paper explores the impact of investing in other emerging countries on the competitiveness of the firm and evaluates the potential risks of this approach.
    Keywords: Daewoo Motors, globalization, dragon multinationals, automobile industry
    JEL: D22 F23 L62 N85
    Date: 2020–11
  41. By: Sai Ma; Tim Schmidt-Eisenlohr; Shaojun Zhang
    Abstract: This paper establishes a causal link between the dollar exchange rate and international trade flows, employing a new instrument for the U.S. Dollar that is based on domestic U.S. housing activity (Ma and Zhang (2019)). In line with the dominant currency paradigm (Gopinath et al. (2020)), import prices and quantities respond strongly to a country’s exchange rate with the U.S. dollar. Once we instrument the dollar, we find evidence for perfect pass-through of the dollar exchange rate to import prices. A dollar appreciation of 1 percent lowers import quantities by 1.5 percent for countries that fully invoice in dollars.
    Keywords: dominant currency, dollar invoicing, international trade
    JEL: F14 F31 G15
    Date: 2020
  42. By: Coleman, Paul; Dhaif, Fatema; Oyebode, Oyinlola
    Abstract: Background: Government documents warn that if the UK and EU have not negotiated a trade deal by 31 December 2020 the UK could experience increased food prices and possible food shortages. The media have an important role in influencing recipients’ behaviour by promoting reassurance or anxiety on this issue. This study examines how food supply and demand, in the context of Brexit, has been portrayed by the British media. Methods: A mixed methods content analysis of articles reporting on food supply and demand in the context of Brexit, in three daily newspapers, between 01 January 2015 and 31 January 2020. Results: Five themes emerged: food shortages and panic buying (appearing in 96% of articles); food supply chain disruption (86%); economic impacts of Brexit (80%); preparation and stockpiling by the government and food sector (63%) and preparation and stockpiling by individuals (22%). Conclusion: Government messaging reported by the media sought to reassure the public that there will be no food shortages under a no-deal Brexit. These reassurances contradicted warnings from the food sector and leaked government reports of reduced availability of food items. These contradictory messages may have undermined trust in the government, potentially influencing stockpiling behaviour at the individual level.
    Date: 2020–11–24
  43. By: Hassan Molana; Catia Montagna; George E. Onwordi
    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: Flexicurity; Welfare State; Globalisation; Participation; Unemployment.
    Date: 2020
  44. By: Ben G. Li; Yi Lu; Pasquale Sgro; Xing Xu
    Abstract: The Republican Party has been the party most supportive of free trade in American politics for half a century. President Donald Trump, who is a Republican, holds a different stance from his party on free trade. We assess how Trump’s China tariffs in mid-2018 impacted the performance of his party in its midterm house elections later that year. We construct a measure of each county’s exposure to Trump’s China tariffs and merge that with the Republican share of votes in the county. We find that the counties heavily exposed to the tariffs were more supportive of their Republican house candidates. This association is stronger and causal in counties that previously voted for Democratic politicians. The Republican Party, despite losing its majority in the house, would have lost more seats without Trump’s China tariffs.
    Keywords: China, Donald Trump, Republican Party, trade, tariffs
    Date: 2020

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