nep-int New Economics Papers
on International Trade
Issue of 2021‒01‒25
forty-two papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. The shifting contours of trade in knowledge: The new "trade-related aspects" of intellectual property By Taubman, Antony
  2. How to measure bilateral economic relations? Case of Indonesia – Australia By Kiki, Verico
  3. Pound for Pound Export Diversification By James E. Anderson; Yoto V. Yotov
  4. Czech Republic; Selected Issues By International Monetary Fund
  5. WTO accession and growth: Tang and Wei Redux By Brotto, André; Jakubik, Adam; Piermartini, Roberta
  6. Latency and Economic Concert of India’s Trade with Russia: An Empirical Investigation By Wani, Nassir Ul Haq
  7. Impact of Covid-19 containment measures on trade By Juan de Lucio; Raúl Mínguez; Asier Minondo; Andrés Francisco Requena
  8. Aggregate Implications of Firm Heterogeneity: A Nonparametric Analysis of Monopolistic Competition Trade Models By Rodrigo Adao; Costas Arkolakis; Sharat Ganapati
  9. Global Value Chains and Productivity: Micro Evidence from Estonia By Hang T. Banh; Philippe Wingender; Cheikh A. Gueye
  10. Economic globalization and income inequality: Cross-country empirical evidence By Sovna Mohanty
  11. The impact of institutions and infrastructure on intra-regional trade: The Economic Community of West African States By Abban, Stanley
  12. Latent Exports: Almost Ideal Gravity and Zeros By James E. Anderson; Penglong Zhang
  13. Consequences of FTA Withdrawal: Evidence from 'Uxit' By Gnutzmann, Hinnerk, Gnutzmann-Mkrtchyan, Arevik; Korn, Tobias
  14. International Exploitation, Capital Export, and Unequal Exchange By Cogliano, Jonathan F.; Kaneko, Soh; Veneziani, Roberto; Yoshihara, Naoki
  15. Quality of government and regional trade: Evidence from European Union regions By Javier Barbero; Giovanni Mandras; Giovanni Mandras; Ernesto Rodriguez-Crespo; Andres Rodriguez-Pose
  16. Product Differentiation and Geographical Expansion of Exports Network at Industry level By Xuejian Wang
  17. An analysis of bilateral trade between Canada and India By Malini L Tantri; Preet S Aulakh
  18. The value of the Committee on Agriculture: Mapping Q&As to trade flows By Jackson, Lee Ann; Maggi, Federica; Piermartini, Roberta; Rubínová, Stela
  19. Regional and Global Patterns of Participation in Value Chains: Evidence from Brazil By Araújo, Inácio; Perobelli, Fernando; Faria, Weslem
  20. New Assessment of Economic Integration in East Asia: Application of Industry-Specific G-PPP Model By KAWASAKI Kentaro; SATO Kiyotaka
  21. Trade-induced local labor market shocks and asymmetrical labor income risk By Ursula Mello; Tomas Rodriguez Martinez
  22. Borders within Europe By Marta Santamaría; Jaume Ventura; Uğur Yeşilbayraktar
  23. International Trade and Corporate Market Power By Jesus R Gonzalez-Garcia; Yuanchen Yang
  24. Terms-of-trade shocks are not all alike By Di Pace, Federico; Juvenal, Luciana; Petrella, Ivan
  25. Europe's Migration Experience and its Effects on Economic Inequality By Guzi, Martin; Kahanec, Martin; Ulceluse, Magdalena M.
  26. Measurement of Global Value Chain (GVC) Participation in World Development Report 2020 By Sourish Dutta
  27. Roman Transport Network Connectivity and Economic Integration By Matthias Flückiger; Erik Hornung; Mario Larch; Markus Ludwig; Allard Mees
  28. Should Australia be Concerned by Beijing's Trade Threats: Modelling the Economic Costs of Restrictions on Imports of Australian Coal By J.A. Giesecke; N.H. Tran; R. Waschik
  29. The Revealed Comparative Advantages of Dutch Cities By Tijl Hendrich; Jennifer Olsen
  30. International Trade and Earnings Inequality: A New Factor Content Approach By Rodrigo Adão; Paul Carrillo; Arnaud Costinot; Dave Donaldson; Dina Pomeranz
  31. Quantifying the demand, supply, and welfare effects of natural disasters using monthly trade data By Felbermayr, Gabriel; Gröschl, Jasmin Katrin; Heid, Benedikt
  32. Chinese Import Competition, Offshoring and Servitization By Gu, Grace; Malik, Samreen; Pozzoli, Dario; Rocha, Vera
  33. Good regulatory practices and co-operation in trade agreements: A historical perspective and stocktaking By Céline Kauffmann; Camila Saffirio
  34. Global Firms, National Corporate Taxes: An Evolution of Incompatibility By Shafik Hebous
  35. Immigration and Employment: Substitute Versus Complementary Labor in Selected African Countries By Arina Viseth
  36. Globalisation and pandemics: surprising interactions By Pol Antràs; Stephen J. Redding; Esteban Rossi-Hansberg
  37. A critique of modern theories of trade By Uddin, Godwin
  38. Specialization, Market Access and Real Income By Dominick Bartelme; Ting Lan; Andrei A. Levchenko
  39. Immigration and Entrepreneurship in the United States By Pierre Azoulay; Benjamin F. Jones; J. Daniel Kim; Javier Miranda
  40. Impact of Regional Reactions to War on Contemporary Chinese Trade By Xuejian Wang
  41. Silk Roads to Riches: Persistence Along an Ancient Trade Network By Ahmad, Zofia; Chicoine, Luke
  42. Learning and Upgrading in Global Value Chains: An Analysis of India's Manufacturing Sector By Sourish Dutta

  1. By: Taubman, Antony
    Abstract: This paper charts the evolution and diversification of trade in knowledge that has taken place in the quarter-century since the WTO TRIPS Agreement came into force. Entirely new markets have come into being, potentially redefining the very character of 'trade'. The disruptive effect of digital technology has led to much of the content - formerly conceived of as 'added value' embedded in physical carrier media, traded and measured as 'goods' - can be traded in the form of specific licences that use IP rights covering the content that is increasingly accessed online in digital form. These new forms of exchange in valuable intangible content confront fundamental assumptions about the nature of trade and its interaction with the IP system, forcing a rethink of what constitutes the 'trade-related aspects' of intellectual property. The issues examined include the principle of territoriality of IP rights and the segmentation of markets according to national jurisdictions; the structuring of cross-border commercial exchanges into the two discrete categories of 'goods' and 'services'; the emerging disparity in regional trade agreements between provisions on digital IP standards and on digital products and e-commerce; and the significance of IP rights being treated as assets in investment treaties. Whatever formal or legal overlay is applied to these new trading arrangements - it is essential to understand that this is now trade in IP licences as such, rather than trade in goods that have an IP component as an adjunct or ancillary element. TRIPS came about at a time when economic growth theory incorporated intangible knowledge as an endogenous factor, rather than maintaining it as exogenous to models of growth. Trade policy must similarly work to incorporate an understanding of the trade in IP licences itself within cross-border commercial exchanges as an integral element of international trading relations: sale and licensing of IP rights can then be considered 'endogenous' to trade. This is essential for an accurate empirical picture of trade relations today, given the economic significance both of dispersed global value chains and of trade in 'pure' IP content as such particularly in the creative sectors.
    Keywords: intellectual property,trade in knowledge,digital trade,TRIPS Agreement
    JEL: F13 K10 K33 O30 O34 I18
    Date: 2020
  2. By: Kiki, Verico
    Abstract: Indonesia and Australia had agreed to seal the deal for a bilateral economic agreement entitled Indonesia-Australia Comprehensive Economic Partnership Agreement (IA CEPA). After about ten years since both countries committed to having a bilateral agreement, IA CEPA had entered into force on July 5th, 2020. This paper has two aims. Firstly, assessing potential trade and long-run investment relations with the combination of RCA (Revealed Comparative Advantage) and CMSA (Constant Market Share Analysis) with ToT (Terms of Trade) and Net Export (NX) as the filter. Secondly, measuring the potential impacts from tariff rate elimination utilizing the GTAP (Global Trade Analysis Project) model. This paper finds that both countries have complementarity relations that Indonesia can gain to improve manufacturing productivity, and Australia can benefit from sunrise to sunset relations. This paper proves that CEPA matches their need to increase their economic benefits, revealed that they could share mutual benefits and sustainable economic relations.
    Keywords: Bilateral Country Studies; Trade Policy; CGE GTAP; FDI analysis; Indonesia Australia
    JEL: D58 F13 F14 F21 O24
    Date: 2020–12–12
  3. By: James E. Anderson (Boston College); Yoto V. Yotov (Drexel University)
    Abstract: We propose a short-run model of the extensive margin of trade and deploy it to dis- tinguish and quantify domestic and cross-border margins. Our empirical focus is on the domestic extensive margin of trade (domestic distribution of a product) and its importance for quantifying policy and globalization effects on the international extensive margin of trade. We build a dataset that combines data on the domestic extensive margin and the standard international extensive margin. It reveals significant and intuitive variation in the domestic extensive margin across countries and over time. We quantify the extensive margin effects of European Union (EU) integration, 2008-2018, and demonstrate that these effects cannot be identified without the domestic extensive margin. We find strong and highly heterogeneous effects, both across countries and directionally.
    Keywords: Extensive Margin, Domestic Extensive Margin, Globalization, Gravity
    JEL: F13 F14 F16
    Date: 2020–12–20
  4. By: International Monetary Fund
    Abstract: This Selected Issues paper investigates the direct and indirect exposure of the Czech Republic to these external risks. The Czech Republic is a small open economy that has become increasingly reliant on export-driven growth over the last three decades. Domestic value-added in foreign exports as a share of gross exports in the Czech Republic is higher than the average share of the European Union 28. Services have a relatively low contribution to value-added in gross exports. Given the high integration of the Czech Republic into global value chains, it is crucial to take supply chain linkages into account when assessing the impact of trade shocks. The exposure to Germany is even more pronounced at the sectoral level. Manufacturing of machinery and transportation vehicles account for a large share of exports and imports in the Czech Republic. Although the impact of the US-China trade disputes on the Czech Republic would likely be limited, a hard Brexit scenario or lower demand in Germany could have sizable effects.
    Keywords: Exports;Imports;Tariffs;Global value chains;Trade disputes;ISCR,CR,GVC participation,demand
    Date: 2019–06–13
  5. By: Brotto, André; Jakubik, Adam; Piermartini, Roberta
    Abstract: On the occasion of the 25th anniversary of the WTO, this paper re-estimates the impact of WTO accession on growth. Joining the multilateral trading system not only expands access to international markets but also requires commitment to domestic reforms. Tang and Wei (2009) showed that there is in fact a positive effect of WTO on growth also during the period of accession when these commitments are undertaken. In this paper, we extend Tang and Wei's analysis to the sample of 32 newly acceded countries. We find that WTO accession is associated with a significant positive increase in GDP growth. This effect is larger than previously estimated. We find that five years after accession an economy is 30% larger, and that the impact of WTO entry on growth persists beyond the first five years.
    Keywords: Dynamic gains from trade,economic growth,trade liberalization,newly acceded countries,Article XII countries
    JEL: F1
    Date: 2021
  6. By: Wani, Nassir Ul Haq
    Abstract: This article focuses on Indo-Russia trade relations and evaluates the economic performance of trade in terms of symmetry, complementarity, intensity and similarity and future prospects for Indo-Russia trade relation and the change in the economic scenario over a 24-year period from 1995 to 2018. The article attempted to evaluate Indo-Russia trade using Thiel’s symmetry criteria, trade complementarity index (TCI), and export similarity index (ESI) analysis in exports and imports in different types of goods categorized on the basis of their production. In terms of symmetry, trade is increasingly asymmetric for Russia-India and is much more visible during 1995 as compared to 2018. Moreover, the declining complementarity trend (in 2010 and 2018) is a result of production specialization. Regarding the export similarity of India against Russia, India enjoys a competitive edge in the basic agricultural Commodities. During 2005-2010, the trend reversed as India’s exports were getting much more specialized and back in 2015 the trend of similarity remained in India’s favor.
    Keywords: India, Russia, Exports, Imports, Symmetry
    JEL: F1 F14 F15 F18
    Date: 2020–08–15
  7. By: Juan de Lucio (Universidad de Alcalá. Pza. San Diego, s/n, 28801, Alcalá de Henares (Spain)); Raúl Mínguez (Cámara de Comercio de España and Universidad Antonio de Nebrija. Calle de Santa Cruz de Marcenado, 27, 28015, Madrid (Spain)); Asier Minondo (Deusto Business School, University of Deusto, Camino de Mundaiz 50, 20012 Donostia - San Sebastián (Spain)); Andrés Francisco Requena (Department of Economic Structure, University of Valencia, Avda. dels Tarongers s/n, 46022 Valencia (Spain))
    Abstract: Combining Spanish firm-level monthly trade data with country-level Covid-19 containment measures over February-July 2020, we show that the value of exports decreased more in destinations that introduced strict containment measures, whereas the value of imports remained una_ected. Strict containment measures in a partner country increased the probability of a firm ceasing to trade with it. Negative effects were concentrated between March and May 2020. The detrimental effect of containment on exports was larger for goods consumed outside the household, for wholesalers and retailers, and for manufacturers not participating in global value chains.
    Keywords: Covid-19, containment measures, rm-level trade, Spain, consumption goods, global value chains
    JEL: F10 F14
    Date: 2020–12
  8. By: Rodrigo Adao (University of Chicago, Booth School of Business); Costas Arkolakis (Cowles Foundation, Yale University); Sharat Ganapati (Georgetown University)
    Abstract: We measure the role of ï¬ rm heterogeneity in counterfactual predictions of monopolistic competition trade models without parametric restrictions on the distribution of ï¬ rm fundamentals. We show that two bilateral elasticity functions are sufficient to nonparametrically compute the counterfactual aggregate impact of trade shocks, and recover changes in economic fundamentals from observed data. These functions are identiï¬ ed from two semiparametric gravity equations governing the impact of bilateral trade costs on the extensive and intensive margins of ï¬ rm-level exports. Applying our methodology, we estimate elasticity functions that imply an impact of trade costs on trade flows that falls when more ï¬ rms serve a market because of smaller extensive margin responses. Compared to a baseline where elasticities are constant, ï¬ rm heterogeneity ampliï¬ es both the gains from trade in countries with more exporter ï¬ rms, and the welfare gains of European market integration in 2003-2012.
    Keywords: International Trade, Nonparametric counterfactuals, Semiparametric estimation, Firm Heterogeneity
    Date: 2020–11
  9. By: Hang T. Banh; Philippe Wingender; Cheikh A. Gueye
    Abstract: The COVID-19 pandemic has led to an unprecedented collapse in global economic activity and trade. The crisis has also highlighted the role played by global value chains (GVC), with countries facing shortages of components vital to everything from health systems to everyday household goods. Despite the vulnerabilities associated with increased interconnectedness, GVCs have also contributed to increasing productivity and long-term growth. We explore empirically the impact of GVC participation on productivity in Estonia using firm-level data from 2000 to 2016. We find that higher GVC participation at the industry level significantly boosts productivity at both the industry and the firm level. Frontier firms, large firms, and exporting firms also benefit more from GVC participation than non-frontier firms, small firms, and non-exporting firms. We also find that GVC participation of downstream industries has a negative correlation with productivity. Frontier firms and large firms benefit more from GVC participation of upstream industries, while non-frontier firms and small firms benefit more from GVC participation of downstream industries. Our results suggest that policies designed to promote participation in GVCs are important to raise aggregate productivity and potential growth in Estonia.
    Keywords: Global value chains;Productivity;Exports;Industrial productivity;Labor productivity;WP,GVC participation,production function,export firm
    Date: 2020–07–03
  10. By: Sovna Mohanty (Institute for Social and Economic Change)
    Abstract: Widening income inequality has limited the growth potential of economies in the past few decades. This paper analyses the effect of economic globalization on income inequality in both cross-country and country-specific framework using panel data techniques and policy simulations. The sample comprises of developed, developing and least-developed countries in the post-liberalization period. The results show that on the whole, globalization has helped in reducing inequality in the advanced economies but has the opposite effect in low-income economies. Trade and FDI have offsetting experiences; trade worsens income distribution whereas FDI is beneficial in all the economies and helps to reduce income inequality. FDI is found to have a greater impact on reducing income inequality. The policy simulations prove that India can reduce its income inequality by adopting the strategies of high income and middle-income nations.
    Keywords: Economics; Globalization; Income inequality
  11. By: Abban, Stanley
    Abstract: Institutions and infrastructure are key to stimulate trade flows and economic growth. This study seeks to investigate the role of institutions on trade in the Economic Community of West African States. Additionally, the study investigates the impact of trade and transport infrastructure. The study used a Poisson Pseudo Maximum Likelihood (PPML) estimator for the augmented gravity model of international trade. The results show that Rule of Law and Political Stability facilitated intra-regional trade while Regulatory Quality, Corruption Control and Government Effectiveness hindered trade. Additionally, the study showed that trade and transport infrastructure has a negative but insignificant effect on trade. The study recommends a new institutional framework to aid curtail the ills and emphasize the need to intensify security as a paramount requirement to facilitate trade in the community.
    Keywords: Institution; Infrastructure; Poisson Pseudo Maximum Likelihood (PPML);intra-regional trade
    JEL: F1 F14
    Date: 2020–08–26
  12. By: James E. Anderson (Boston College); Penglong Zhang (Tsinghua University, School of Public Policy and Management)
    Abstract: Almost Ideal gravity associates zero trade flows with variable and fixed trade cost variation in a flexible demand system. Latent trade shares between non-partners are inferred from the Tobit estimator applied to trade among 75 countries and 25 sectors in 2006. Latent Trade Bias (LTB) is the difference between the latent trade share and the as-if-frictionless trade share. Explained LTB variance decomposition shows 52% due to variation of variable trade cost, 24% due to non-homothetic income effects, and 24% due to fixed trade cost effects. Counterfactual variable (fixed) cost reductions suggest cases of successful export promotion between non-partners.
    Keywords: Zero flows; variable cost; fixed cost; latent trade
    JEL: F10 F13 F14
    Date: 2020–12–15
  13. By: Gnutzmann, Hinnerk, Gnutzmann-Mkrtchyan, Arevik; Korn, Tobias
    Abstract: We use a unique case study to estimate the effect of withdrawing from a free trade agreement on international trade. Lately, the political opposition to international economic cooperation has been on the rise, but little is known about how the withdrawal from a trade agreement affects trade. We analyze a quasi-natural experiment to provide first empirical evidence. In 2004, Estonia joined the European Union, which mandated that it withdraws from its FTA with Ukraine (``Uxit''). Based on the gravity model of international trade, we provide evidence from triple difference-in-differences as well as PPML panel estimations that trade volumes between Estonia and Ukraine fell by more than 20%. We find that withdrawing an FTA revokes all benefits and that no institutional memory is left behind. General equilibrium estimates suggest that FTA withdrawal led to a noticeable loss in welfare of members.
    Keywords: free trade agreement, withdrawal, gravity, European Union, Estonia, Ukraine
    JEL: F14 F14 F15 F17
    Date: 2021–01
  14. By: Cogliano, Jonathan F.; Kaneko, Soh; Veneziani, Roberto; Yoshihara, Naoki
    Abstract: We discuss how international exploitation and unequal exchange emerge in the global economy by focusing on simple economic models with and without credit markets. Free trade of commodities among rich and poor countries results in a transfer of labor time between countries, allowing the citizens of some countries to consume more of the world's social labor than they have contributed. Capital movements across borders together with strong restrictions on the movement of people result in net exporters of capital exploiting (or bene ting from unequal exchange at the expense of) net capital importers. Under perfect competition, mutual bene ts from free trade in goods and capital can coexist alongside unequal flows of revenue and labor in the world economy. Market imperfections and the open use of coercion are not necessary for international exploitation to emerge. However, they may be central for it to persist over time.
    Keywords: Unequal exchange, class, capital flows, global economy
    JEL: B51 D63 C63 F21 F54
    Date: 2020–12
  15. By: Javier Barbero; Giovanni Mandras; Giovanni Mandras; Ernesto Rodriguez-Crespo; Andres Rodriguez-Pose
    Abstract: This paper examines – using a novel database of regional trade flows between 267 European regions for 2013 – how government quality affects trade between European Union (EU) regions. The results of a structural gravity cross-sectional analysis of trade show that trade across EU regions is highly influenced by differences in regional government quality. This influence varies by sector of economic activity and by the level of economic development of the region. The results indicate that, if the less developed regions of the EU want to engage in greater interregional trade, improving their institutional quality is a must.
    Keywords: Quality of government; institutions; regional policy; gravity model of trade; structural estimation
    JEL: F15 R10 E02
    Date: 2021–01
  16. By: Xuejian Wang
    Abstract: Industries can enter one country first, and then enter its neighbors' markets. Firms in the industry can expand trade network through the export behavior of other firms in the industry. If a firm is dependent on a few foreign markets, the political risks of the markets will hurt the firm. The frequent trade disputes reflect the importance of the choice of export destinations. Although the market diversification strategy was proposed before, most firms still focus on a few markets, and the paper shows reasons.In this paper, we assume the entry cost of firms is not all sunk cost, and show 2 ways that product heterogeneity impacts extensive margin of exports theoretically and empirically. Firstly, the increase in product heterogeneity promotes the increase in market power and profit, and more firms are able to pay the entry cost. If more firms enter the market, the information of the market will be known by other firms in the industry. Firms can adjust their behavior according to other firms, so the information changes entry cost and is not sunk cost completely. The information makes firms more likely to entry the market, and enter the surrounding markets of existing markets of other firms in the industry. When firms choose new markets, they tend to enter the markets with few competitors first.Meanwhile, product heterogeneity will directly affect the firms' network expansion, and the reduction of product heterogeneity will increase the value of peer information. This makes firms more likely to entry the market, and firms in the industry concentrate on the markets.
    Date: 2020–12
  17. By: Malini L Tantri; Preet S Aulakh (Institute for Social and Economic Change)
    Abstract: This paper explains the characteristics of the bilateral trade between Canada and India and analyses whether trade between both the countries is complementary or competitive. The analysis is based on the International Trade Centre (ITC) database for the years 2001-2015. The key findings of the paper help us to argue that over the years, India has emerged as an important trading partner for Canada, and there exists a strong comparative advantage in bilateral trade for both countries. Export and import intensities, which are less than unity, indicate the future prospects for the increasing trade participation between the countries. In this context, we argue for further research in this area, specifically non-tariff measures and trade facilitation issues affecting exporters of both countries.
    Keywords: Bilateral trade; International Trade Centre; Canada; India
    Date: 2019
  18. By: Jackson, Lee Ann; Maggi, Federica; Piermartini, Roberta; Rubínová, Stela
    Abstract: What is the value of the WTO Committee on Agriculture? How much trade do countries talk about at the WTO? Do low-income countries participate less than they should in the work of the Committee? How important are issues not covered by notifications? What are the most important issues on which to focus negotiations? In this paper, we attempt to answer these questions building and analysing a new database. WTO regular bodies and the Secretariat collect information on measures notified and concerns raised by members on these measures in text format. We transform the qualitative database maintained through the AG-IMS into a quantitative one. We first introduce a new methodology to associate each question to a product and to its HS 4-digit code. Then, we attempt to match each of the 5'526 questions asked between 1996 and 2016 to the bilateral flows of the corresponding questioner and respondent at the HS 4-digit level. Our working dataset relies on the 3'295 questions that we are able to match. Using this new database, we show that (i) questions covered at least $778 billion of agricultural trade over the period 1996-2016 (or 3% of total trade in agriculture); (ii) on average, when a Member receives a question the questioners account for 48 per cent of its trade in the main product concerned; (iii) for each Member/product the share of trade discussed in the Committee is correlated with its share of global trade in agriculture; (iv) questions related to subsidies and to non-notified measures cover an increasing amount of trade.
    Keywords: Agricultural trade policies,Trade policy monitoring,WTO Transparency,WTOReforms,value of WTO,WTO as discussion forum
    JEL: F13 F53 Q17 Q18
    Date: 2020
  19. By: Araújo, Inácio (Departamento de Economia, Universidade de São Paulo); Perobelli, Fernando (Universidade Federal de Juiz de Fora); Faria, Weslem (Universidade Federal de Juiz de Fora)
    Abstract: This paper focuses on the role played by the Brazilian economy in global value chains with reference to global and regional contexts. For which we calculate downstream and upstream indicators of global and regional integration and fragmentation of global value chains. We use the full Eora Multiregional Input-Output Table for the period from 1990 to 2015. The main results indicate that Brazilian participation in global value chains increased during this period and became more fragmented internationally, mainly in global terms, but its regional insertion has increased more than its global insertion. Although South America has a small share in value-added trade, Brazil operates as a regional hub, as it is a reference for international trade in this region. In the global context, Brazil plays the role of supplier of intermediate inputs, while in the regional context, Brazil serves as the main production center.
    Keywords: International fragmentation; Global value chains; Global and regional fragmentation; Input-output; Brazil
    JEL: C67 D57 F15
    Date: 2021–01–13
  20. By: KAWASAKI Kentaro; SATO Kiyotaka
    Abstract: It is well known that intra-industry trade and cross-border production network have promoted economic growth and regional integration in East Asia. However, regional supply and production chains may have been differently formed across industries, reflecting different degree and scope of regional economic linkages at an industry level. The contribution of this paper is three-fold. First, to assess industry-level differences, this study adopts the Generalized Purchasing Power Parity (G-PPP) model using industry-specific producer prices. Second, the momentum threshold autoregressive (M-TAR) model is employed to allow for possible nonlinearity arising from dynamic nature of regional economic growth and development. Third, Granger causality test is also conducted to assess whether regional economies have autonomously integrated. The empirical results reveal that economic integration has progressed more autonomously in the electrical industry as well as transport equipment industry, as China and ASEAN countries have grown as the final destination market for finished products in these two industries.
    Date: 2020–12
  21. 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
  22. By: Marta Santamaría; Jaume Ventura; Uğur Yeşilbayraktar
    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
  23. By: Jesus R Gonzalez-Garcia; Yuanchen Yang
    Abstract: This paper examines the effect of international trade on corporate market power in emerging market economies and developing countries, with a special focus on sub-Saharan Africa. The analysis is based on a large firm-level dataset, tariff data by sector and agreggate indicators of international trade for the period 2000-17. Greater trade liberalization and trade integration are associated with significant declines in market power, with the effect being more pronounced for firms in the manufacturing and ICT sectors, private sector firms, and firms with higher initial markups. Firms in sub-Saharan Africa tend to experience signficantly lower markups after allowing greater trade integration. The effects of trade liberalization on market power materializes over time, and there are significant complementarities between trade reforms and real sector reforms.
    Keywords: Trade liberalization;Tariffs;Trade barriers;Structural reforms;Imports;WP,market power,import penetration
    Date: 2020–07–17
  24. By: Di Pace, Federico (Bank of England); Juvenal, Luciana (International Monetary Fund); Petrella, Ivan (Warwick Business School and CEPR)
    Abstract: When analyzing terms-of-trade shocks, it is implicitly assumed that the economy responds symmetrically to changes in export and import prices. Using a sample of developing countries our paper shows that this is not the case. We construct export and import price indices using commodity and manufacturing price data matched with trade shares and separately identify export price, import price, and global economic activity shocks using sign and narrative restrictions. Taken together, export and import price shocks account for around 40% of output fluctuations but export price shocks are, on average, twice as important as import price shocks for domestic business cycles. Given that shifts in export and import prices have asymmetric effects on the economy, global economic activity shocks, which simultaneously affect export and import prices, are largely undetected in the terms of trade measure but have large effects on domestic business cycles.
    Keywords: Terms of trade; commodity prices; business cycles; world shocks
    JEL: F41 F44
    Date: 2021–01–08
  25. By: Guzi, Martin (Masaryk University); Kahanec, Martin (Central European University); Ulceluse, Magdalena M. (University of Groningen)
    Abstract: This chapter provides the historical context for the past half-century in Europe focusing specifically on the link between migration and economic development and inequality. The literature review suggests that there are several channels through which migration affects economic inequality between countries in one or the other direction. The net effects are an open empirical question and are likely to depend on the economic, demographic and institutional and policy contexts; sources, types and selectivity of migration, as well as responses of the receiving societies as well as migrants themselves. We undertake an empirical analysis and find that immigration has contributed to reducing inequality within the 25 EU countries over the 2003-2017 period. As the EU attracted relatively highly qualified immigrants throughout this period, our results are consistent with the ameliorating effect of skilled migration on within-country inequality, as predicted by theory.
    Keywords: immigration, inequality, labour mobility, income distribution, EU enlargement
    JEL: D31 D60 O15
    Date: 2021–01
  26. By: Sourish Dutta
    Abstract: As we can understand with the spread of GVCs, a lot of new questions emerge regarding the measurement of participation and positioning in the globalised production process. The World Development Report (WDR) 2020 explains the GVC phenomenon and then focus on participation and the prospects especially in a world of change in technology. From the overview section, we can figure out that nowadays, goods and services flow across borders as intermediate inputs rather than final goods. In traditional trade, we need two countries with the notions of export and import. However, in GVC trade, the goods and services cross borders multiple times requiring more than two countries. Remarkable improvements in information, communication, and transport technologies have made it possible to fragment production across national boundaries. So the question is: how to conceptualise this type of new trade to justify the measurement of participation.
    Date: 2021–01
  27. By: Matthias Flückiger (University of York, York, YO105DD, United Kingdom); Erik Hornung (CAGE, CEPR, CESifo, ECONtribute, and University of Cologne, Albertus-Magnus-Platz, 50923 Cologne, Germany); Mario Larch (CEPII, CESifo, ifo, GEP, and University of Bayreuth, Universitätsstr.30, 95447 Bayreuth, Germany); Markus Ludwig (CESifo and Technical University of Braunschweig, Spielmannstraße9, 38106 Braunschweig, Germany); Allard Mees (Romano-Germanic Central Museum-Leibniz Archaeological Research Institute, Ernst-Ludwig-Platz 2, 55116 Mainz, Germany)
    Abstract: We show that the creation of the first integrated multi-modal pan-European transport network during Roman times influences economic integration over two millennia. Drawing on spatially highly disaggregated data on excavated Roman ceramics, we document that contemporary interregional trade was influenced by connectivity within the network. Today, these connectivity differentials continue to influence integration as approximated by cross-regional firm investment behaviour. Continuity is partly explained by selective infrastructure routing and cultural integration due to bilateral convergence in preferences and values. We show that our results are Roman-connectivity specific and do not reflect pre-existing patterns of exchange using pre-Roman trade data.
    Keywords: Economic integration, Roman trade, transport network connectivity, business links, cultural similarity
    JEL: F14 F15 F21 N73 R12 R40 O18
    Date: 2021–01
  28. By: J.A. Giesecke; N.H. Tran; R. Waschik
    Abstract: The U.S.-China trade war can be viewed in part as a continuation of a wider recent pattern of use of trade instruments to advance political aims. Australia itself appears to have been subject to such instruments, with reports of a slowdown in processing of Australian coal imports through Chinese ports. Using a dynamic global model, we simulate the effects on Australia and China of a rise in Chinese barriers to Australian coal imports. We demonstrate that, when account is taken of trade diversion, foreign capital ownership, the terms of trade, resource mobility, and capital and production tax rates, the damage from Chinese coal trade sanction is far less than might be expected from a simple focus on the value of the affected trade alone. We explain the influence of these factors using a simple back-of-the-envelope model that reproduces the real consumption impact generated by the dynamic global model.
    Keywords: trade policy, coal embargo, multi-region CGE model
    JEL: F13 F17 C68
    Date: 2020–09
  29. By: Tijl Hendrich (CPB Netherlands Bureau for Economic Policy Analysis); Jennifer Olsen (CPB Netherlands Bureau for Economic Policy Analysis)
    Abstract: The trade literature often treats countries as dimensionless points, which is a strong assumption. Agglomeration or lumpiness of production factors within countries can affect the national pattern of trade. In this paper we analyze comparative advantage patterns for 22 cities and 4 regions for (a selection of) 83 sectors within The Netherlands.
    JEL: F11 F15 R12
    Date: 2021–01
  30. By: Rodrigo Adão; Paul Carrillo; Arnaud Costinot; Dave Donaldson; Dina Pomeranz
    Abstract: We develop a new factor content approach to study the impact of trade on inequality. Our analysis generalizes the theoretical results of Deardorff and Staiger (1988) and improves on past empirical implementations of these results. Combined with unique administrative data from Ecuador, our approach yields measures of individual-level exposure to exports and imports, for both capital and labor income, as well as estimates of the incidence of such exposure across the income distribution. We find that international trade raises earnings inequality in Ecuador, especially in the upper-half of the income distribution. However, the drop in inequality experienced by Ecuador over the last decade would have been less pronounced in the absence of trade.
    JEL: D3 F1 F6 J2
    Date: 2020–12
  31. By: Felbermayr, Gabriel; Gröschl, Jasmin Katrin; Heid, Benedikt
    Abstract: We estimate the short-run trade effects of natural disasters using monthly trade data and data on the physical intensity of earthquakes and storms. We find large negative effects for heavily indebted poor, least developed or landlocked developing countries but only small effects for other economies. We use our estimates to identify key parameters of a dynamic quantitative trade model to disentangle the effects of disasters on supply, demand, and welfare and their spillovers on third countries via trade linkages. We apply our model to quantify the effects of the 1992 earthquake in Nicaragua, a small, heavily indebted poor country, and the 2011 Tohoku earthquake in Japan, a large developed economy. We find that spillovers are negligible if the country affected by a disaster is small but sizable for large economies. Similar disasters have heterogeneous effects on countries' demand and supply, highlighting the importance of event-specific policies in the aftermath of disasters.
    Keywords: economic effects of natural disasters,monthly trade data,dynamic quantitative trade model,earthquakes,storms
    JEL: F14 F18 Q54 C68
    Date: 2020
  32. By: Gu, Grace (University of California Santa Cruz); Malik, Samreen (New York University AD); Pozzoli, Dario (Department of Economics, Copenhagen Business School); Rocha, Vera (Department of Strategy and Innovation, Copenhagen Business School)
    Abstract: This paper examines whether Chinese import competition increases the propensity for firms to offshore production or to cease any involvement in production by switching completely and permanently out of the manufacturing sector (servitization). Using a Danish employer-employee matched dataset covering a large sample of manufacturing firms over the 1995-2012 period, we find that import competition from China significantly increases offshoring but does not induce servitization. These findings are confirmed using various robustness tests as well as an analogous analysis of a Portuguese employer-employee matched dataset.
    Keywords: Foreign competition; Offshoring; Servitization
    JEL: F12 F14 O31
    Date: 2021–01–08
  33. By: Céline Kauffmann (OECD); Camila Saffirio (OECD)
    Abstract: This paper presents a stocktaking of standalone chapters in trade agreements dedicated to good regulatory practices and international regulatory co-operation. While standalone regulatory policy chapters in trade agreements remain a new development, they signal countries’ increasing interest in elevating the visibility and ambition of regulatory policy, in line with their commitments in the 2012 OECD Recommendation of the Council on Regulatory Policy and Governance and the 2005 APEC-OECD Integrated Checklist on Regulatory Reform. Still, the level of ambition of these chapters varies widely depending on the state of play of regulatory policy in trading partners. By comparing the main substantive and structural features of these chapters, this stocktaking aims to inform the development of similar chapters in future trade agreements.
    Keywords: CETA, CPTPP, good regulatory practices, international regulatory co-operation, Pacific Alliance, regulatory policy, trade agreements, USMCA
    JEL: F10 K2 K33 H11
    Date: 2021–01–20
  34. By: Shafik Hebous
    Abstract: How did the rise of multinational enterprises (MNEs) put pressure on the prevailing international corporate tax framework? MNEs, and firms with market power, are not new phenomena, nor is the corporate income tax, which dates to the early 20th century. This prompts the question, what is distinctly new (about multinational enterprises)—if anything—that has triggered unprecedented recent concerns about vulnerabilities in international tax arrangements and the taxation of MNEs? This paper presents a set of empirical observations and a synthesis of strands of the literature to answer this question. A key message is that MNEs of the 21st century operate differently from prior periods and have evolved to become global firms—with important tax ramifications. The fragility of international tax arrangements was present at the outset of designing international tax rules, but the challenges have drastically intensified with the global integration of business, the increased trade in hard-to-price services and intangibles, and the rapid growth of the digital economy.
    Keywords: Corporate income tax;Foreign direct investment;Double taxation;Tax incentives;Trade in services;WP,company,multinational enterprise,conduit company,holding company,business organization
    Date: 2020–09–04
  35. By: Arina Viseth
    Abstract: This paper uses census and household survey data on Cameroon, Ghana, and South Africa to examine immigration’s impact in the context of a segmented labor market in Sub-Saharan Africa. We find that immigration affects (i) employment (ii) employment allocation between informal and formal sectors, and (iii) the type of employment within each sector. The direction of the impact depends on the degree of complementarity between immigrants and native workers’ skills. Immigration is found to be productivity-enhancing in the short to near term in countries where, the degree of complementarity between immigrants and native workers’ skill sets is the highest.
    Keywords: Migration;Employment;Labor markets;Informal employment;Self-employment;WP,immigration share,wage employment,native worker,immigration's impact,impact immigration
    Date: 2020–07–31
  36. By: Pol Antràs; Stephen J. Redding; Esteban Rossi-Hansberg
    Abstract: Pandemics are only possible because of international travel. But perhaps surprisingly, in the absence of social distancing, a more globalised country will not necessarily suffer a worse outbreak. Pol Antràs, Stephen Redding and Esteban Rossi-Hansberg set out a new framework for analysing the interaction between globalisation and pandemics.
    Keywords: globalization, pandemics, gravity equation, SIR model
    Date: 2020–11
  37. By: Uddin, Godwin
    Abstract: This article recapitulates some of the trade theories reputed to be of the twentieth century. Here, the Heckscher-Ohlin theory (with some of its variants), endogenous growth theory, product cycle theory, and new trade theory were considered. This review thereof, amidst others, highlight some of the assumptions of these theories and thus present some critique of the same theories.
    Keywords: Trade; Critique; Heckscher-Ohlin theory; endogenous growth theory; product cycle theory; new trade theory
    JEL: F0 F00 F1 F10
    Date: 2021–01–07
  38. By: Dominick Bartelme; Ting Lan; Andrei A. Levchenko
    Abstract: This paper estimates the impact of external demand shocks on real income. Our empirical strategy is based on a first order approximation to a wide class of small open economy models that feature sector-level gravity in trade flows. The framework allows us to measure foreign shocks and characterize their impact on income in terms of reduced-form elasticities. We use machine learning techniques to group 4-digit manufacturing sectors into a smaller number of clusters, and show that the cluster-level elasticities of income with respect to foreign shocks can be estimated using high-dimensional statistical techniques. We find clear evidence of heterogeneity in the income responses to different foreign shocks. Foreign demand shocks in complex intermediate and capital goods have large positive impacts on real income, whereas impacts in other sectors are negligible. The estimates imply that the pattern of sectoral specialization plays a quantitatively large role in how foreign shocks affect real income, while geographic position plays a smaller role. Finally, a calibrated multi-sector production and trade model can rationalize both the average and the heterogeneity in real income elasticities to foreign shocks under reasonable values of structural parameters.
    JEL: F43 F62
    Date: 2020–12
  39. By: Pierre Azoulay; Benjamin F. Jones; J. Daniel Kim; Javier Miranda
    Abstract: Immigrants can expand labor supply and compete for jobs with native-born workers. But immigrants may also start new firms, expanding labor demand. This paper uses U.S. administrative data and other data sources to study the role of immigrants in entrepreneurship. We ask how often immigrants start companies, how many jobs these firms create, and how firms founded by native-born individuals compare. A simple model provides a measurement framework for addressing the dual roles of immigrants as founders and workers. The findings suggest that immigrants act more as “job creators” than “job takers” and play outsized roles in U.S. high-growth entrepreneurship.
    Date: 2020–12
  40. By: Xuejian Wang
    Abstract: Different regional reactions to war in 1894 and 1900 can significantly impact Chinese imports in 2001. As international relationship gets tense and China rises, international conflicts could decrease trade.We analyze impact of historic political conflict. We measure regional change of number of people passing imperial exam because of war. War leads to an unsuccessful reform and shocks elites. Elites in different regions have different ideas about modernization, and the change of number of people passing exam is quite different in different regions after war. Regional number of people passing exam increases 1% after war, imports from then empires decrease 2.050% in 2001, and this shows impact of cultural barrier. Manufactured goods can be impacted because brands can be identified easily. Risk aversion of expensive products in conservative regions can increase imports of equipment. Value chains need deep trust, and this decreases imports of foreign company and assembly trade.
    Date: 2020–12
  41. By: Ahmad, Zofia; Chicoine, Luke
    Abstract: The Silk Roads were a decentralized network of trade routes that connected ancient cities across Eurasia. Goods, ideas, people, and technology moved along the roads for over 1,500 years. Using a detailed georeferenced map of the entire trade network, this paper finds that areas within 50 KM of the historic location of the Silk Roads have higher levels of economic activity today. The persistent effect of proximity to the ancient trade network is associated with increased access to modern transportation infrastructure and the historical diffusion of technology along the routes but cannot be explained by differences in contemporary or historical levels of population density. This analysis is complemented by individual-level data from 22 countries; we find that districts with populations closest to the Silk Roads have higher rates of inter-group marriage, suggesting a weakening of social boundaries between groups that might possess differential technological knowledge.
    Keywords: ancient trade network; nighttime light intensity; modern transportation infrastructure; technological diffusion; cultural persistence
    JEL: N75 O18 O33 R11 R12
    Date: 2021–01
  42. By: Sourish Dutta
    Abstract: The topic of my research is "Learning and Upgrading in Global Value Chains: An Analysis of India's Manufacturing Sector". To analyse India's learning and upgrading through position, functions, specialisation & value addition of manufacturing GVCs, it is required to quantify the extent, drivers, and impacts of India's Manufacturing links in GVCs. I have transformed this overall broad objective into three fundamental questions: (1) What is the extent of India's Manufacturing Links in GVCs? (2) What are the determinants of India's Manufacturing Links in GVCs? (3) What are the impacts of India's Manufacturing Links in GVCs? These three objectives represent my three chapters in my PhD thesis.
    Date: 2021–01

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