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on International Trade |
| By: | Kosuke Suzuki; Manasit Choomsai Na Ayudhaya; Patrick Lenain |
| Abstract: | Services are an important part of global economic activity and of international trade. Nevertheless, compared to its very large tourism sector, the sector of high-end business services in Thailand remains small. As IT and information, and professional services are traded indirectly through value chains and are now crucial elements of manufacturing, strengthening these services would benefit Thailand in its post-COVID-19 participation of global value chains, enhancing the competitiveness of its manufacturers. This paper analyses how Thailand can seize the opportunity of growing international trade in services. It points out that liberalising services sector markets would strengthen the competitiveness of the services sectors and boost productivity not only in the sectors, but also in manufacturing sectors that rely on these services as input. In this regard, Thailand can benefit more from service-oriented Preferential Trade Agreements (PTAs). Moreover, eliminating FDI restrictions would not only be crucial to spur employment and exports, but also benefit consumers. The paper identifies that, to maximise the benefits of services trade integration, Thailand needs to step up policies to re- and up-skill workers and make the labour market more flexible. |
| Keywords: | Global Value Chains (GVCs), Thailand, Trade in Services |
| JEL: | F13 F14 F16 F17 F21 F63 F66 F68 L80 |
| Date: | 2020–12–18 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:1642-en&r=all |
| By: | Simplice A. Asongu (Yaounde, Cameroon); Joseph Nnanna (The Development Bank of Nigeria, Abuja, Nigeria); Paul N. Acha-Anyi (Walter Sisulu University, South Africa) |
| Abstract: | This study investigates the simultaneous openness hypothesis by assessing the importance of trade openness in modulating the effect of foreign direct investment (FDI) on economic dynamics of gross domestic product (GDP) growth, real GDP and GDP per capita. The focus of the study is on 25 countries in Sub-Saharan Africa over the period spanning from 1980 to 2014. First, trade imports modulate FDI to induce net positive effects on GDP growth and GDP per capita. Second, trade exports moderate FDI to generate overall positive impacts on GDP growth, real GDP and GDP per capita. Implications of the study are discussed, inter alia: (i) both FDI and trade infrastructures are necessary for FDI-focused measures to engender positive economic development outcomes in host communities and countries. (ii) Macroeconomic conditions that are relevant for promoting economic development are necessary for the interactions between trade openness and FDI to generate favorable outcomes in terms of GDP growth, real GDP and GDP per capita. |
| Keywords: | Economic Output; Foreign Investment; Sub-Saharan Africa |
| JEL: | E23 F21 F30 L96 O55 |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:abh:wpaper:20/056&r=all |
| By: | Alguacil Marí, María Teresa; Lo Turco, Alessia; Martínez-Zarzoso, Inmaculada |
| Abstract: | We estimate the effect of the introduction of robots on the intensive and extensive margins of exports using a sample of Spanish manufacturing firms over the period 1994-2014. The empirical strategy used to identify the causal impact of robot adoption on the firm level export performance consists on combining propensity score matching (PSM) and difference in differences (DID) techniques. The results show that firms that start to use robots experience a sharp increase in their export probability, export sales and share of exports in total output and this result is robust to a wide array of checks. Robot adoption not only helps firms to start exporting and moves their specialisation towards intermediate products, but also favours export survival and export sales of exporting firms. The main results are driven by firms active in non-comparative advantage industries facing higher export sunk costs and market penetration costs and by those specialised in the production of intermediates, which can explain the increasing participation of Spain in global value chains. Inspection of the transmission channels suggests that the positive impact of robot adoption on exports could be driven by its positive effect on firm TFP and import probability. |
| Keywords: | robots,firm,exports,imports,intensive margin,extensive margin,PSM,DID |
| JEL: | F14 O14 O33 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cegedp:410&r=all |
| By: | Josh De Lyon; Joao Paulo Pessoa |
| Abstract: | We exploit the recent surge in Chinese export growth to study the effects of a trade shock on workers and firms in a foreign market, the UK, in the period 2000-2007. We find that individuals initially employed in sectors highly exposed to growth in imports from China experienced lower income growth and remained out of employment longer than workers in sectors that were less exposed to import competition. The effects are heterogeneous, with initially lower-paid workers suffering more in terms of employment and earnings than those initially better-paid, and female workers experiencing a greater relative fall in total earnings than males, mostly through reduced years of employment. Plants in industries more exposed to Chinese products displayed lower employment growth and higher probability of going out of business than plants in sectors more insulated from competition with China, with stronger effects for larger plants. |
| Keywords: | globalisation, employment, wages, UK economy. |
| JEL: | F14 F16 J3 J6 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1741&r=all |
| By: | Akgündüz, Yusuf Emre (Sabanci University); Bağır, Yusuf Kenan (Central Bank of the Republic of Turkey); Cilasun, Seyit Mümin (Central Bank of the Republic of Turkey); Kirdar, Murat G. (Bogazici University) |
| Abstract: | This study combines an administrative dataset of the full population of Turkish firms and the setting of the sudden mass migration of Syrian refugees to Turkey to identify the effect of migrants on firm performance and market structure. As a result of the migrant shock, existing firms expand and new firms are established. Quantitatively, a 10 percentage-point rise in migrant-to-native ratio increases average firm sales by 4% and the number of registered firms by 5%. While the number of firms rises, new firms are more likely to be small. The resulting market structure shows less concentration and firms reduce the share of workers formally employed. We further document an increased propensity to export and an increase in the variety of exported products. The impact on exports is driven by a rise in competitiveness of firms in regions hosting Syrians as a decline in export prices is observed. We also uncover evidence for an effect of migrants' skills and networks on exports, as the export value and variety of products to the Middle East and North Africa (MENA) region increase more than those to the EU region among exporters while the prices of products exported to the two regions show similar changes. |
| Keywords: | refugees, firm performance, market structure, sales, informality, exports, migrant business networks |
| JEL: | J15 J61 F16 L11 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp13953&r=all |
| By: | Nitya Aasaavari; Fabio Di Vittorio; Ana Lariau; Yuebo Li; Rui Mano; Pedro Rodriguez |
| Abstract: | Asia and Latin America and the Caribbean (LAC), two regions with large growth potential, have become increasingly connected over the last 20 years. China has emerged not only as a top trading partner, but also as an important competitor of LAC exports. China’s retreat from certain markets, due to the ongoing rebalancing process, could open new opportunities for LAC exporters but also entail some challenges. Our results show that China’s rebalancing will have an overall positive effect on LAC’s GDP and exports in the long run, but this effect is small and uneven across countries, leading to winners and losers. We also provide evidence that other countries, such as India, are currently trying to fill the gap left by China and could undermine LAC’s competitive advantage in some export markets. In this context, reduction of trade barriers and further integration within the region and/or with the rest of the world would lead to unequivocally positive outcomes for all LAC countries. The COVID-19 shock might exacerbate the effects identified in our analysis. |
| Keywords: | Exports;Competition;Comparative advantage;Imports;Real exports;China’s rebalancing,Latin America and the Caribbean,trade integration,WP,Asia-Lac trade linkage,export category,trade competition index,exports of goods,export dependency,exports of service |
| Date: | 2020–11–13 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2020/239&r=all |
| By: | Yuhua Li (Department of Information Management, Zhejiang University of Finance & Economics, China); Ze Jian (School of business administration, Guangdong University of Finance & Economics, China); Wei Tian (School of Ecnomics, Peking University, China); Laixun Zhao (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan) |
| Abstract: | We examine how political conflicts affect trade, using both the Goldstein score that scales all political conflicts daily worldwide and the firm-country-product level data of Chinese imports. We find that political conflicts reduce Chinese imports in general. Speci cally, (i) the imports of State-owned enterprises (SOEs) are most reduced, and the effects mostly fall on imports for intermediate goods while not so much on capital goods; (ii) foreign-invested enterprises (FIEs) are less negatively affected, because most of their trade is processing, which is less negatively affected by political conflict than ordinary trade. These results are obtained via mechanisms in the mode of trade (processing vs. ordinary), variations in broad economic categories (BEC) and import boycotts and export controls. |
| Keywords: | Political conflicts; Trade; State-owned enterprises; Goldstein score |
| JEL: | F1 F51 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:kob:dpaper:dp2021-01&r=all |
| By: | Cigna, Simone; Meinen, Philipp; Schulte, Patrick; Steinhoff, Nils |
| Abstract: | In this paper we provide evidence on the existence of short-run trade diversion effects towards third countries as a consequence of tariff shocks. We exploit sudden policy changes in the context of the trade dispute between the US and China. Based on a data set covering monthly product-level information on US imports from 30 countries for the period January 2016 until May 2019, we employ a difference-in-differences estimation framework. Doing so, we (1) can confirm previous findings showing a strong negative direct effect of US tariffs on US imports from China, but (2) do not find evidence for significant short-run trade diversion effects towards third countries. This latter finding holds for product and country subgroups as well as for a variety of robustness checks. JEL Classification: F13, F14, F61 |
| Keywords: | difference-in-differences, product-level data, tariffs, trade diversion, US imports |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20202503&r=all |
| By: | Alvaro Garcia Marin; Andrei V. Potlogea; Nico Voigtländer; Yang Yang |
| Abstract: | We document a novel stylized fact: Using data for several countries, we show that export activity is disproportionately concentrated in larger cities – even more so than overall economic activity. We account for this fact by marrying elements of international trade and economic geography. We build a model with agglomeration economies where firms with heterogeneous productivity sort across city sizes and select into exporting. The model allows us to study the geographic implications of trade policy, as well as the international trade effects of urban policies. We show that (i) lifting restrictions on housing supply raises not only the aggregate productivity of the economy but also its aggregate export intensity, by allowing more firms to locate in larger cities and profit from agglomeration effects; (ii) conversely, while opening up to trade has complex overall economic geography implications, within sectors it tends to shift employment towards larger cities. We structurally estimate the model using data for the universe of Chinese manufacturing firms and study the general equilibrium effects of trade liberalization and of urban policies. We find that the effects of these policies are quantitatively different from those predicted by trade models that ignore economic geography, and by economic geography models that omit international trade (both of which are nested in our framework). |
| JEL: | F23 F6 R13 R31 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28309&r=all |
| By: | Di Nino, Virginia; Ekstam, Anna |
| Abstract: | Beside large capital flows, euro area financial centres feature important and growing trade surpluses. We investigate the composition of their gross trade flows and disentangle (i) domestic and foreign production content that is (ii) directly traded with final absorbing economies or embedded in intermediates that are carried to final destination by partner countries. This accounting exercise uncovers that foreign production transiting through their borders accounts for most of the surpluses of financial centres but also that the net surplus in domestic value added traded directly with final consumers is twice as large as in other euro area economies. MNEs allocate the value created globally to financial centres. They do so through transfer pricing practices which undermine the correct representation of the external position of these countries with a bearing also on the external position of the euro area. Their participation in production chains also appears oddly large. When we replace the official trade statistics with predictions based on the gravity law of trade, the surpluses of main euro area financial centres disappear. JEL Classification: F14, F23, F40 |
| Keywords: | domestic and foreign value added, financial centres, profit shifting, trade balance |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20202506&r=all |
| By: | Eugenio M Cerutti; Catherine Koch; Swapan-Kumar Pradhan |
| Abstract: | We explore the global footprint of Chinese banks and compare it with that of other bank nationalities. Chinese banks have become the largest cross-border creditors for almost half of all emerging market and developing economies (EMDEs). Their global reach resembles that of banks from advanced economies (AEs). We take a nationality approach as international banks, and Chinese banks in particular, grant a substantial share of their cross-border loans from affiliates located abroad. But differences remain. Using a gravity model with a novel measure of distance capturing the role of foreign affiliates across all bank nationalities, we find that larger distances deter cross-border bank lending to EMDEs more than to AEs. For Chinese banks, however, distance deters lending to EMDEs less than for peer EMDE banks. We show that for all banks combined, bilateral economic interactions like trade, FDI and portfolio investment, positively correlate with lending. Chinese banks’ lending to EMDEs also strongly correlates with trade, but not with FDI and, unlike other banks, it correlates negatively with portfolio investment. |
| Keywords: | Bank credit;Portfolio investment;Cross-border banking;Foreign direct investment;Foreign banks;Chinese banks,Trade,FDI,Gravity model,WP,borrower country,cross-border lending,EMDE borrower,bank lending,lending bank,parent country |
| Date: | 2020–11–13 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2020/249&r=all |
| By: | Beckman, Jayson; Gale, Fred; Lee, Tani |
| Abstract: | Forty World Trade Organization (WTO) members have established 1,125 agricultural tariff-rate quotas (TRQs). TRQs are a two-tiered tariff scheme (a lower rate under a quota amount, and a higher rate once that is reached), developed during multilateral trade negotiations in the 1990s to facilitate market access for agricultural trade. This report provides data and analysis on the prevalence of these trade measures. TRQs are classified according to indicators of whether market access is constrained by administrative procedures or nontariff measures that prevent the quota from filling or by the quota itself. This analysis found that 13 percent of TRQs were “underutilized” when imports were less than 65 percent of the quota (a low “fill rate”), even though the cost of imports was less than the domestic price. Another 22 percent of TRQs were classified as “binding” when the fill rate was high and the import cost was less than the domestic commodity rice. Issues have been raised in the WTO regarding some of these TRQs, with the largest number of questions about transparency and administration of quotas. |
| Keywords: | Agricultural Finance |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:ags:uerser:308595&r=all |
| By: | Swati Dhingra; Thomas Sampson |
| Abstract: | Since the UK voted to leave the European Union in June 2016, Brexit has dominated UK politics and economic policy. Three and a half years after the referendum, the UK is yet to leave the EU, there is no certainty over if or when Brexit will take place, and the shape of future UK-EU relations is yet to be determined. |
| Keywords: | Brexit, trade, customs union, UK-EU border, 2019 General Election |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepeap:048&r=all |
| By: | Margaux MacDonald; Roberto Piazza; Johannes Eugster; Florence Jaumotte |
| Abstract: | Based on an empirical gravity model of sectoral bilateral trade, we uncover three features of bilateral trade balances. First, the difficulty of gravity models in fitting the observed level of bilateral balances is likely due to the presence of unobservable bilateral trade costs. Second, the model fit improves drastically when we focus on changes over time of the balances. Third, using a log linear approximation we show that changes in bilateral trade balances over the past two decades were driven almost entirely by changes in the same macro factors that determine countries’ aggregate balances – changes in bilateral trade costs, including tariffs, played therefore only a negligible role. This conclusion provides new support for the view that bilateral balances are, for practical purposes, not relevant to the conduct of macroeconomic policy. |
| Keywords: | Trade balance;Plurilateral trade;Exports;Gravity models;Trade relations;WP,bilateral trade balances,trade cost,predicted trade balance,aggregate trade balances,log-linearization approximation error |
| Date: | 2020–09–25 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2020/210&r=all |
| By: | Povilas Lastauskas (Bank of Lithuania, Vilnius University); Mariarosaria Comunale (Bank of Lithuania, Vilnius University, and Australia National University); Justas Dainauskas (London School of Economics and Political Science) |
| Abstract: | International trade flows are volatile, imbalanced, and fragmented across off-shored supply chains. Yet, not much is known about the mechanism through which trade flows adjust in response to shocks over time. This paper derives a dynamic gravity equation from a theory of habits in the supply chains that generates autocorrelated bilateral trade flows that are heterogeneous across different country pairs. We estimate our version of the dynamic gravity equation for 39 countries over the period of 1950-2014 and find that the transmission of local and global trade shocks is fundamentally different. We show that the trade persistence coefficient falls from 0.91 to 0.35 when we depart from the existing empirical gravity models that draw inference from the pooled coefficient estimates without controlling for the variation in the unobservable global factors. Thus, our approach escapes the excess trade persistence puzzle and adds to the explanation of the sharp decline and the rapid recovery of the global trade flows during the "Great Trade Collapse" of 2008-09. In addition to the traditional variables in the gravity equation, we also show that a cross-country habit asymmetry creates bilateral and multilateral trade imbalances, which are an important determinant of bilateral trade flows both theoretically and empirically. |
| Keywords: | Dynamic Gravity Equation; Habits; Trade Persistence; Trade Imbalance; Global Shocks; Parameter Heterogeneity |
| JEL: | C23 F14 F41 F62 |
| Date: | 2021–01–11 |
| URL: | http://d.repec.org/n?u=RePEc:lie:wpaper:85&r=all |
| By: | Chad Bown; Paola Conconi; Aksel Erbahar; Lorenzo Trimarchi |
| Abstract: | During the last decades, the United States has applied increasingly high trade protection against China. We combine detailed information on US antidumping (AD) duties— the most widely used trade barrier — with US input-output data to study the effects of trade protection along supply chains. To deal with endogeneity concerns, we propose a new instrument for AD protection, which combines exogenous variation in the political importance of industries with their historical experience in AD proceedings. We find that tariffs have large negative effects on downstream industries, decreasing employment, wages, sales, and investment. Our baseline estimates for 1988-2016 indicate that, due to AD protection against China, around 1.8 million US jobs were lost in downstream industries, with no significant job gains in protected sectors. When we extend the analysis to measures introduced under President Trump, we find that around 500,000 jobs were lost during the first two years of his term. We also provide evidence of the mechanisms behind the negative effects of protection along supply chains: AD duties decrease imports and raise production costs for downstream industries. |
| Keywords: | trade protection, supply chains, input-output linkages, employment |
| JEL: | F13 D57 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1739&r=all |
| By: | Paras Kharel (South Asia Watch on Trade, Economics and Environment) |
| Abstract: | This paper seeks to contribute to the discourse on industrialization in Nepal. It shows that it would be premature to write off manufacturing-powered industrialization. It emphasizes that the debate over whether protecting domestic industry from import competition as part of an industrialization strategy works or not is far from settled. It discusses Nepal's muddled input-tariff policy for exports, and examines whether there are valid revenue loss concerns behind the anti-export bias of the tariff policy. While existing research on Nepal suggests revenue loss is not significant if tariff elimination is targeted at inputs used by a few key export products, the paper suggests further extensions and lines of inquiry, taking into account alternative scenarios. Finally, it highlights some questions, trade-offs and issues in tariff setting for the Government of Nepal to ponder. |
| Keywords: | Manufacturing, structural transformation, infant industry, liberalization, deindustrialization, industrial policy, trade policy, tariff, revenue loss |
| JEL: | F13 L52 L60 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:saw:wpaper:wp/20/01&r=all |
| By: | Agarwal, Ruchir (International Monetary Fund); Ganguli, Ina (Stockholm School of Economics); Gaule, Patrick (University of Bath); Smith, Geoff (University of Bath) |
| Abstract: | This paper studies the impact of U.S. immigration barriers on global knowledge production. We present four key findings. First, among Nobel Prize winners and Fields Medalists, migrants to the U.S. play a central role in the global knowledge network— representing 20-33% of the frontier knowledge producers. Second, using novel survey data and hand-curated life-histories of International Math Olympiad (IMO) medalists, we show that migrants to the U.S. are up to six times more productive than migrants to other countries—even after accounting for talent during one's teenage years. Third, financing costs are a key factor preventing foreign talent from migrating abroad to pursue their dream careers, particularly talent from developing countries. Fourth, certain 'push' incentives that reduce immigration barriers – by addressing financing constraints for top foreign talent – could increase the global scientific output of future cohorts by 42% percent. We conclude by discussing policy options for the U.S. and the global scientific community. |
| Keywords: | immigration, science, talent, universities |
| JEL: | O33 O38 F22 J61 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14016&r=all |
| By: | Chad Brown; Paola Conconi; Aksel Erbahar; Lorenzo Trimarchi |
| Abstract: | During the last decades, the United States has applied increasingly high trade protection against China. We combine detailed information on US antidumping (AD) duties - the most widely used trade barrier - with US input-output data to study the effects of trade protection along supply chains. To deal with endogeneity concerns, we propose a new instrument for AD protection, which combines exogenous variation in the political importance of industries with their historical experience in AD proceedings. We find that tariffs have large negative effects on downstream industries, decreasing employment, wages, sales, and investment. Our baseline estimates for 1988-2016 indicate that, due to AD protection against China, around 1.8 million US jobs were lost in downstream industries, with no significant job gains in protected sectors. When we extend the analysis to measures introduced under President Trump, we find that around 500,000 jobs were lost during the first two years of his term. We also provide evidence of the mechanisms behind the negative effects of protection along supply chains: AD duties decrease imports and raise production costs for downstream industries. |
| Keywords: | Trade Protection, Supply Chains, Input-Output Linkages. |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:eca:wpaper:2013/316768&r=all |
| By: | Ursula Mello; Tomas Rodriguez Martinez |
| Abstract: | This paper investigates the relationship between international trade and asymmetrical labor income risk. Using the case study of Brazil, we inspect how an increase in import penetration following the China shock impacted the distribution of idiosyncratic earnings changes across the country’s local labor markets, depending on the initial sectoral composition of each region. We find that an increase in import penetration leads to a more disperse and negatively skewed distribution and that these effects can partially be explained by an increase in the volatility of hours worked following job and industry transitions. Moreover, the effect on dispersion grows larger as the lags between periods increase, suggesting a rise in the permanent risk. Through the lens of an incomplete market model, an unborn individual would be willing to forgo up to 4.4% of consumption to avoid the riskier labor market. The welfare cost is half if the higher-order risk is ignored. |
| Keywords: | labor income risk, international trade, China shock, income process |
| JEL: | D31 E24 F14 F16 J31 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:1230&r=all |
| By: | Simplice A. Asongu (CEREDEC, Bangui, CAR); Thales P. Yapatake Kossele (CEREDEC, Bangui, CAR); Joseph Nnanna (The Development Bank of Nigeria, Abuja, Nigeria) |
| Abstract: | This study examines linkages between political stability and trade openness dynamics in a panel of 44 countries in SSA from 1996 to 2016. The empirical evidence is based on the generalized method of moments. From the findings, the negative relationship between political stability and merchandise trade is not significant while the negative relationship between political stability and trade openness (exports plus imports) is significant. Hence, the findings do not validate the tested hypothesis that political stability/no violence increases trade in the sub-region. The perspective that some forms of political stability can slow down and prevent international trade is consistent with Oslon in Rise and Decline of Nations (RADON) and recent contributions to the economic development literature which have shown that not all forms of political stability are development friendly because much depends on the extent to which stability translates into, inter alia, good governance. The principal policy implication is that standards of political governance need to be boosted in order to improve the anticipated effects of political stability on trade, especially in the light of the ambitious African Continental Free Trade Area (AfCFTA). Other policy implications are discussed. |
| Keywords: | Political Stability; Trade; Sub-Saharan Africa |
| JEL: | F52 K42 O17 O55 P16 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:exs:wpaper:21/005&r=all |
| By: | Marta Santamaría; Jaume Ventura; Ugur Yesilbayraktar |
| Abstract: | Are country borders still an impediment to trade flows within Europe? Using a rich microlevel survey with 3 million annual shipments of goods by road across 269 European regions, we construct a matrix of bilateral trade flows for 12 industries from 2011 to 2017. We then use the causal inference framework to design an identification strategy to estimate the causal effect of country borders on trade flows. Take two similar region pairs, the first one containing regions in different countries and the second one containing regions in the same country. The market share of the origin region in the destination region for the international pair is only 17.5 percent that of the intranational pair. We refer to this estimate as the average border effect. When we look at each industry separately, we find border effects that range from 12.3 to 38.9 percent. When we look at recent borders, i.e. created after 1910, we find a border effect of 28.8 percent, which is smaller than the average border effect but still quite large. The implication is clear: Europe is far from having a single market. |
| Keywords: | border effect, European integration, regional trade |
| JEL: | D71 F15 F55 H77 O57 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:1229&r=all |
| By: | Christine Arriola; Sophie Guilloux-Nefussi; Seung-Hee Koh; Przemyslaw Kowalski; Elena Rusticelli; Frank van Tongeren |
| Abstract: | The COVID-19 outbreak and the resulting disruptions in supply chains of some manufacturing and medical products have renewed the debate on costs and benefits of globalisation and, particularly, on risks associated with international fragmentation of production in global value chains (GVCs). While GVCs helped addressing supply shortages in several cases already during the early stages of the COVID-19 pandemic, much of the policy debate has concentrated on whether the gains from expanding international specialisation in GVCs are worth the associated risks of transmission of shocks and even whether governments should use policy tools to ‘re-localise’ GVCs. But re-localising may also mean less diversification and thereby limit the scope for cushioning shocks. This paper builds on on-going OECD analysis and aims at providing empirical evidence to inform and guide discussion on these questions. First, it reviews briefly the key issues and lessons learnt from the past, and identifies the main features of world trade and GVC participation that influence exposures to risks in supply chains. Subsequently, it presents key results of a set of economic model simulations conducted using the OECD’s computable general equilibrium (CGE) trade model METRO to shed light on the consequences of a stylised re-localisation policy scenario. In this scenario, countries are less exposed to foreign shocks, but they are also less efficient and less able to cushion shocks through trade. Quantitatively, the latter effect tends to dominate: re-localising GVCs would make the economy in most countries both less efficient and less stable. The economic case for policy-induced reshoring of GVCs is therefore weak. There is nevertheless scope for governments to join efforts with businesses to improve risk preparedness. |
| Keywords: | diversification, global value chains, relocalisation, shocks, trade |
| JEL: | F13 F23 F60 |
| Date: | 2020–12–16 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:1637-en&r=all |
| By: | Benjamin Carton; Nan Hu; Joannes Mongardini; Kei Moriya; Aneta Radzikowski |
| Abstract: | An essential element of the work of the Fund is to monitor and forecast international trade. This paper uses SWIFT messages on letters of credit, together with crude oil prices and new export orders of manufacturing Purchasing Managers’ Index (PMI), to improve the short-term forecast of international trade. A horse race between linear regressions and machine-learning algorithms for the world and 40 large economies shows that forecasts based on linear regressions often outperform those based on machine-learning algorithms, confirming the linear relationship between trade and its financing through letters of credit. |
| Keywords: | Oil prices;Imports;Exports;Trade finance;Trade balance;SWIFT,trade forecast,machine learning,WP,world trade,trade message,Brent crude oil price,trade advance,letter of credit,linear regression forecast,Merchandise trade,World trade sample |
| Date: | 2020–11–13 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2020/247&r=all |
| By: | Masahiro Endoh (Faculty of Business and Commerce, Keio University) |
| Abstract: | This study estimates the trade effect on wage inequality of Japanese manufacturing workers, with consideration of worker and firm heterogeneity. Parameters are obtained from regression results of hourly wage by using constructed worker-establishment panel data. Estimated wage effects differ largely by trade indexes, and the logarithmic real trade value is assessed to be a more appropriate measure for trade in this study. The estimated wage change is positively larger for higher-paid workers, who are employed by larger firms in industries of which Japan has a comparative advantage, while it is negatively larger for lower-paid workers. It implies that wage inequality between industry-size-skill groups is increased by international trade in Japan. However, the actual evolution of wage inequality during 1998-2013 is not successfully explained by the predicted change of wage inequality from international trade. International trade has a potential to widen wage inequality, but its effect is marginal for actual wage inequality compared with other economic and social shocks. |
| Keywords: | Firm heterogeneity, Skill premiums, Wage inequality, Worker heterogeneity |
| JEL: | F16 F66 J31 |
| Date: | 2020–09–29 |
| URL: | http://d.repec.org/n?u=RePEc:keo:dpaper:2020-017&r=all |
| By: | Tiago Domingues; João Ferreira do Amaral; João Carlos Lopes |
| Abstract: | Backward and forward integration are growing in most sectors across the European Union (EU). To benefit from this increasing participation in Global Value Chains (GVC), the increase in imports, namely of intermediate inputs, should be followed by adequate growth in exports. The external dependency of many industries and the corresponding low domestic value-added generated in production,combinedwith relatively weak export potential can cause high trade deficits and growing external debt to GDP ratios. This paper evaluates the inter-industry participation in GVCs considering eightdifferent EU economies and 25 tradable sectors. Based on Input-Output production multipliers and intermediate import coefficients, we propose an empirical method to assess the evolution of vertical specialization, domestic value-added generation and external dependency. After a convenient arrangement of the Leontief inverse matrix, the evolution of backward linkage indicators can be used to detect structural changes, particularly quantifying a "net growth effect" and an "external dependency effect". This method allows the classification of each sector into different areasconsidering their recent structural evolution and it can be useful as a simple, but suggestive, device to compare different economies in a given period or assess their structural development processes in time. Adetailed comparison of one EU periphery country (Portugal) and one EU core country (Germany) is made, based on WIOD data for the period 2000-2014, followed by a brief presentation of sixother cases (Austria, Check Republic, Belgium, Finland, Greece, and Netherlands). Particular attention is given to differences within and between countries before and after the global financial crisis. |
| Keywords: | Global Value Chains; Input-Output analysis, External dependency, Structural change |
| JEL: | C67 E01 F14 F62 L60 L70 L96 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:ise:remwps:wp01572021&r=all |
| By: | Onome Christopher Edo (Department of Accounting, University of Benin, Nigeria. Author-2-Name: Anthony Okafor, PhD Author-2-Workplace-Name: Department of Finance, University of Louisville, Kentucky Author-3-Name: Akhigbodemhe Emmanuel Justice Author-3-Workplace-Name: Department of Economics, University of Benin, Nigeria Author-4-Name: Author-4-Workplace-Name: Author-5-Name: Author-5-Workplace-Name: Author-6-Name: Author-6-Workplace-Name: Author-7-Name: Author-7-Workplace-Name: Author-8-Name: Author-8-Workplace-Name:) |
| Abstract: | Objective - Tax policies play significant role in the direction of foreign direct investments. We investigate the proposition that tax policies enacted by military and democratic regimes differ on the influence the foreign direct investments. Methodology – Our hypotheses are tested using the error correction model as we compare the impact of tax policies on flow foreign direct investments in Nigeria between two dispensations: military rule from 1983 to 1999 and democratic rule from 1999 to 2017. Panel data between 1983 and 2017 were obtained from the databases of the World Bank, Central Bank of Nigeria and the Federal Inland Revenue Services. The explanatory variables include company income tax, value added tax, tertiary education tax and customs and exercise duties. Findings – The study reveals that tax variables during the military regime exerted more explanatory power of 79% compared to the civilian administration of 66% with respect to the impact of corporate taxes on FDI. The effect of company income tax on FDI was more pronounced during the military regime than in the civilian regime. FDI had a higher degree of convergence during the military regime compared to civilian rule, and this is vital for policy assessments and comparison. Novelty – We bring to light new evidences on the effects of taxes polices on FDI. Type of Paper - Empirical |
| Keywords: | Corporate taxes; Tax Policies; Foreign Direct Investments; Error Correction Model; Military regime; Civilian regime. |
| JEL: | E22 F21 H2 P33 |
| Date: | 2020–12–31 |
| URL: | http://d.repec.org/n?u=RePEc:gtr:gatrjs:jfbr176&r=all |
| By: | Kozo Kiyota (Keio Economic Observatory, Keio University) |
| Abstract: | Shortly after Leamer (1980) found that the Leontief Paradox was based on a simple conceptual misunderstanding, Brecher and Choudhri (1982) argued that the fact that the United States exported labor services was, in itself, paradoxical because it is true if and only if its per-capita consumption is less than the world average. Surprisingly, however, no formal answer to this paradox has been provided for nearly four decades. This paper revisits this paradox and formally shows that the paradox can be resolved if the Heckscher-Ohlin-Vanek model takes into account technology differences across countries and trade imbalance. In contrast, the paradox cannot be resolved even if the analysis takes into account quasi-homothetic preferences, the Armington home bias, or offshoring. |
| Keywords: | Leontief Paradox, Technology differences, Trade imbalance, Nonhomothetic preferences, Armington home bias, offshoring |
| JEL: | F14 |
| Date: | 2020–10–07 |
| URL: | http://d.repec.org/n?u=RePEc:keo:dpaper:2020-018&r=all |
| By: | Toptancı, Ali İskan |
| Abstract: | The global crisis and the reactions of countries to the crisis did not spread the 1930's weather conditions. This situation caused relief. However, it does not provide for policies that will slow down globalization and growth. The worldwide creeping has led to increased protectionism and more crises. New protectionism models are not similar to the developments in the 1970s and 1980s rather than the 1930s. Domestic crisis interventions in the capital and product markets and the return of America eventually led to the emergence of more defensive trade policies. |
| Keywords: | Economic Crisis,Trade Policies,Protectionism,Keynesian Economy |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:esrepo:228521&r=all |
| By: | Gordon H. Hanson |
| Abstract: | In this paper, I review evidence on changing global specialization in labor-intensive exporting. Production of apparel, footwear, furniture, and related products are how many low-income countries first enter export manufacturing. Just as China's rise as a powerhouse in these goods supplanted a role previously occupied by the East Asian Tigers, the world may again be on the cusp of significant change in where labor-intensive goods are produced. China's prowess in these sectors peaked in the early 2010s; its share in their global exports, while still substantial, is now in decline. Mechanisms through which the global economy may adjust to China's graduation into more technologically sophisticated activities include expanded labor-intensive export production in other emerging economies and labor-saving technological change in products currently heavily reliant on less-educated labor. Available evidence suggests that the first mechanism is operating slowly and the second hardly at all. As a third mechanism, China may in part replace itself by moving labor-heavy factories out of densely populated and expensive coastal cities and into the country's interior. Such a transition, though still in its infancy, would mirror the decentralization of manufacturing production in the U.S. and Europe, which occurred after World War II. |
| JEL: | F14 F61 O24 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28313&r=all |
| By: | Carillo, Maria Rosaria; Lombardo, Vincenzo; Venittelli, Tiziana |
| Abstract: | This paper explores the relationship between social identity and labor market outcomes of immigrants. Using survey data from Italy, we provide robust evidence that immigrants with stronger feelings of belonging to the societies of both the host and home country have higher employment rates, while those who exclusively identify with the host country culture do not have a net occupational advantage. Analysis of the potential mechanisms suggests that, although simultaneous identification with host and home country groups can be costly, the positive effect of multiple social identities is especially triggered by the enlarged information transmission and in-group favoritism that identification with, and membership of, extended communities ensure. |
| Keywords: | Migration,Integration,Ethnic identity,Acculturation,Culture,Labor market |
| JEL: | F22 J15 J61 Z1 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:749&r=all |
| By: | Simone Strambach; Stephen Momanyi; ; ; |
| Abstract: | Alternative economic forms are credited with great potential to contribute to social innovation and sustainability transitions. Hybrid organizations, combining multiple institutional logics, emerge in different forms in many regional contexts. There are, however, limited insights on the emergence and unfolding of hybrid organizational fields in different spatial contexts, especially in the spaces of the Global South. This paper contributes to this shortcoming by investigating the institutional dynamics of the emerging field of impact sourcing service providers (ISSPs) in Kenya. Impact sourcing can be considered as a social innovation. These hybrids follow a social mission to promote the integration of disadvantaged youth in the labor market by building IT capabilities, simultaneously striving for financial sustainability for the organization. The findings of this study reveal the multi-scalarity of the field configuring processes; furthermore, they reveal the necessity for Global South hybrids to flexibly combine the weight of both economic and social logics in their business models. This enables them to cope with the double burden of building legitimacy for new practices in the local environment, and the global value chains (GVCs), simultaneously. By combining neo- institutional organization theory, with insights from economic geography and social innovation theory, this paper provides a deeper understanding of the complex institutional dynamics in the emergence and formation of fields of hybrid organizations located in the Global South and their social impacts, enabled due to embeddedness in GVCs. |
| Keywords: | Hybrid organizations, Global South, Social innovation, Organizational and institutional change, Global Value Chains |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:egu:wpaper:2057&r=all |
| By: | Murat, Marina |
| Abstract: | The ‘mobility transition’ hypothesis – with emigration first increasing and then decreasing as a country develops – (Zelinsky, 1971) is often interpreted as a stylised fact, which bears the implication that immigration into rich countries will grow as low-income countries develop. This paper tests the relationships between development and emigration from 130 developing countries during 25 years. Results, robust to different semiparametric and parametric specifications, show that emigration from low to middle-income countries declines as income increases, education improves or population growth slows down. The stage of development at home also affects the main destinations of emigration. Immigration into rich economies increases from countries at intermediate levels of development. Hence, policies supporting development in low-income countries are associated with less emigration to all destinations, including that to rich economies. |
| Keywords: | emigration,income,development,demographic transitions |
| JEL: | F22 J11 O11 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:747&r=all |
| By: | Jonathan Wadsworth |
| Abstract: | Immigration remains a highly contentious issue and its purported effects on the labour market and the wider economy are still highly contested. The discussion in this briefing is intended as a short overview of what we know and what we don't know about immigration to the UK, its economic effects and the possible direction of future migration policy. A longer version of the briefing discusses many of the points raised in more detail. There are links to the relevant discussion throughout this briefing. |
| Keywords: | immigration policy, taxes, state benefits, economy |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepeap:052&r=all |
| By: | Alfaro-Urena, Alonso; Manelici, Isabela; Vasquez, Jose P |
| Abstract: | This paper estimates the effects of foreign multinational corporations (MNCs) on workers. To that end, we combine microdata on all worker-firm and firm-firm relationships in Costa Rica with an instrumental variable strategy that exploits shocks to the size of MNCs in the country. First, using a within-worker event-study design, we find a direct MNC wage premium of nine percent. This premium reflects above market wages rather than compensation for disamenities. Next, we study the indirect effects of MNCs on workers in domestic firms. As MNCs bring jobs that pay a premium, they can improve the outside options of workers by altering both the level and composition of labor demand. MNCs can also enhance the performance of domestic employers through firm-level input-output linkages. Shocks to firm performance may then pass through to wages. We show that the growth rate of annual earnings of a worker experiencing a one standard deviation increase in either her labor market or firm-level exposure to MNCs is one percentage point higher than that of an identical worker with no change in either MNC exposure. Finally, we develop a model to rationalize the reduced-form evidence and estimate structural parameters that govern wage setting in domestic firms. We model MNCs as paying a wage premium and buying inputs from domestic firms. To hire new workers, domestic firms need to incur recruitment and training costs. Model-based estimates reveal that workers in domestic firms are sensitive to improvements in outside options. Moreover, the marginal recruitment and training cost of the average domestic firm is estimated at 90% of the annual earnings of a worker earning the competitive market wage. This high cost allows incumbent workers to extract part of the increase in firm rents coming from intensified linkages with MNCs. |
| Keywords: | Social and Behavioral Sciences, multinational corporations, worker-firm relationships, firm-firm relationships, wages, wage setting, labor markets |
| Date: | 2019–11–21 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:indrel:qt51r419w9&r=all |
| By: | Tolulope T. Osinubi (Obafemi Awolowo University, Ile-Ife, Nigeria); Simplice A. Asongu (Yaoundé, Cameroon) |
| Abstract: | This study examines the effect of globalization on female economic participation (FEP) in MINT (Mexico, Indonesia, Nigeria & Turkey) and BRICS (Brazil, Russia, India, China & South Africa) countries between 2004 and 2018. Four measures of globalization are employed and sourced from KOF globalization index, 2018, while the female labour force participation rate is a proxy for FEP. The empirical evidence is based on Pooled Mean Group (PMG) estimators. The findings of the PMG estimator from the Panel ARDL method reveal that political and overall globalization in MINT and BRICS countries have a positive impact on FEP, whereas social globalization exerts a negative impact on FEP in the long-run. It is observed that economic globalization has no long-run effect on FEP. Contrarily, all the measures of globalization posit no short-run effect on FEP in the short-run. This supports the argument that globalization has no immediate effect on FEP. Thus, it is recommended that both MINT and BRICS countries should find a way of improving the process of globalization generally to empower women to be involved in economic activities. This study complements the extant literature by focusing on how globalization dynamics influence FEP in the MINT and BRICS countries. |
| Keywords: | Globalization; female; gender; labour force participation; MINT and BRICS countries |
| JEL: | E60 F40 F59 D60 |
| Date: | 2020–08 |
| URL: | http://d.repec.org/n?u=RePEc:abh:wpaper:20/058&r=all |
| By: | Mariani, R. D.; Rosati, F. C. |
| Abstract: | The availability of child-care services has often been advocated as one of the instruments to counter the fertility decline observed in many high-income countries. In the recent past large inflows of lowskilled migrants have substantially increased the supply of child-care services. In this paper we examine if the flow of immigrants as actually affected fertility exploiting the natural experiment occurred in Italy in 2007, when a large inflow of migrants - many of them specialized in the supply of child care - arrived unexpectedly. With a difference-in-differences method, we show that newly arrived immigrant female workers have increased the number of native births by roughly 2 per cent. We validate our result by the implementation of an instrumental variable approach and several robustness tests, all concluding that the increase in the supply of child-care services by immigrants has positively affected native fertility choice. |
| Keywords: | Household Economics,Fertility,Immigrant Labour,International Migration |
| JEL: | D12 F22 J13 J61 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:745&r=all |
| By: | Jorge Nogueira de Paiva Britto (Universidade Federal Fluminense); Leonardo Costa Ribeiro (Cedeplar/UFMG); Eduardo da Motta e Albuquerque (Cedeplar/UFMG) |
| Abstract: | This paper revisits the pioneers of innovation systems in the 1980s to evaluate their perception of international forces tensioning national boundaries of those systems. The development of multinational enterprises and consequent changes in their operation beyond national borders is discussed, looking at the formation of a network of international knowledge flows. Those changes are connected to the internationalization of science and consequent formation of another network of international knowledge flows. Both networks, one firm-led and the other university-led, are pushed by the revolutions in information and communication technologies. The combination, overlapping and intertwinement of those two networks of international knowledge flows constitute a new layer in innovation systems - an emergent global innovation system. This new layer rearranges the roles of regional, sectoral and national innovation systems. |
| Keywords: | innovation systems, international knowledge flows, layers of innovation systems |
| JEL: | O30 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:cdp:texdis:td628&r=all |
| By: | Julien Martin; Isabelle Mejean; Mathieu Parenti |
| Abstract: | This paper examines how the degree of stickiness in business relationships influences the real impact of aggregate uncertainty. We first develop a novel index of relationship stickiness (RS) for more than 5,000 HS6 products based on the duration of firm-to-firm trade. The RS measure is derived from a stylized search model in which a higher degree of stickiness implies a lower probability of switching and longer firm-to-firm trade relationships, conditional on match quality. Relationship stickiness shapes the dynamics of firm-to-firm relationships in response to uncertainty shocks. Uncertainty shocks induce a significant and larger decrease in the rate at which new firm-to-firm relationships are formed in high-RS product categories. The relationship between uncertainty and separation rates also varies along the distribution of RS indices, the probability of a trade relationship ending being significantly reduced in sticky-product markets in uncertain times. These results provide evidence that trade of sticky products is characterized by wait-and-see behaviors during uncertainty episodes. |
| Keywords: | Relationship Stickiness, International Trade, Economic Uncertainty |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:eca:wpaper:2013/317363&r=all |
| By: | Carine Meyimdjui |
| Abstract: | Using a panel of 101 low- and middle-income countries with data covering the period 1980-2012, this paper applies various econometric approaches that deal with endogeneity issues to assess the impact of food price shocks on socio-political instability once fiscal policy and remittances have been accounted for. It focuses on import prices to reflect the vulnerability of importer countries / net-buyer households to food price shocks. The paper finds that import food price shocks strongly increase the likelihood of socio-political instability. This effect is greater in countries with lower levels of private credit and income per capita. On the other hand, while remittances seem to dampen the adverse effect of import food price shocks on socio-political instability in almost all countries, the mitigating role of fiscal policy is significant only in countries with low-levels of private credit. |
| Keywords: | Commodity price shocks;Remittances;Fiscal policy;Expenditure;Government consumption;import food price shocks,political instability,fiscal policy.,WP,food price shock,government crisis,consumption expenditure,expenditure growth,government reaction |
| Date: | 2020–11–13 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2020/248&r=all |