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on International Trade |
| By: | Cappariello, Rita; Franco-Bedoya, Sebastian; Gunnella, Vanessa; Ottaviano, Gianmarco I. P. |
| Abstract: | Quantifying the effects of trade policy in the age of ’global value chains’ (GVCs) requires an enhanced analytical framework that takes the observed international input-output relations in due account. However, existing quantitative general equilibrium models generally assume that industrylevel bilateral final and intermediate trade shares are identical, and that the allocation of imported inputs across sectors is the same as the allocation of domestic inputs. This amounts to applying two proportionality assumptions, one at the border to split final goods and inputs, and another behind the border to allocate inputs across industries. In practice, neither assumption holds in available inputoutput data sets. To overcome this limitation of existing models, we consider a richer input-output structure across countries and sectors that we can match with the actual structure reported in inputoutput tables. This allows us to investigate the relation between the effects of changes in trade policies and GVCs. When we apply the enhanced quantitative general equilibrium model to the assessment of the effects of Brexit, we find trade and welfare losses that are substantially larger than those obtained by previous models. This is due to the close integration of UK-EU production networks and implies that denser GVCs amplify the adverse effects of protectionist trade policies. |
| Keywords: | trade model; supply chains; trade policy shocks; Brexit |
| JEL: | F13 F15 F40 |
| Date: | 2020–03 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:108423&r=all |
| By: | Crescenzi, Riccardo; Limodio, Nicola |
| Abstract: | We exploit exogenous variation in China’s export taxes to investigate the impact of Chinese foreign direct investment (FDI) in Ethiopia. Higher sector-specific export taxes in China lead to more Chinese FDI in Ethiopian districts specialized in those sectors and generate highly heterogeneous effects. Domestic firms competing with Chinese FDI reduce their sales, investment, inputs and prices, while firms in upstream and downstream sectors expand. We build a 20-year district panel of night lights and observe that Chinese FDI leads to no instantaneous impact on local growth, but significant and persistently positive effects after 6-12 years. |
| Keywords: | foreign direct investment; domestic investment; growth; 639633-MASSIVE-ERC2014-STG |
| JEL: | F23 O16 O47 |
| Date: | 2021–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:108455&r=all |
| By: | Stefano Bolatto; Alireza Naghavi; Gianmarco Ottaviano; Katja Zajc Kejzar |
| Abstract: | This paper introduces the concept of intangible assets in a property rights model of sequential supply chains. Firms transmit knowledge to their suppliers to facilitate input customization. Yet, to avoid knowledge dissipation, they must protect the transmitted intangibles, the cost of which depends on the knowledge intensity of inputs and the quality of institutions protecting intellectual property rights (IPR) in supplier locations. When input knowledge intensity increases (decreases) downstream and suppliers' investments are complements, the probability of integrating a randomly selected input is decreasing (increasing) in IPR quality and increasing (decreasing) in the relative knowledge intensity of downstream inputs. Opposite but weaker predictions hold when suppliers' investments are substitutes. Comprehensive trade and FDI data on Slovenian firms' value chains provide evidence in support of our model's predictions. They also suggest that, in line with our model, better institutions may have very different effects on firm organization depending on whether they improve the protection of tangible or intangible assets. |
| Keywords: | sequential production, intellectual property, intangible assets, appropriability, stage complementarity, upstreamness, firm organization, outsourcing, vertical integration |
| JEL: | F12 F14 F21 F23 D23 L22 L23 L24 O34 |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1673&r=all |
| By: | Mary Amiti; Stephen J. Redding; David E. Weinstein |
| Abstract: | Using data from 2018, a number of studies have found that recent U.S tariffs have been passed on entirely to U.S. importers and consumers. These results are surprising given that trade theory has long stressed that tariffs applied by a large country should drive down foreign prices. Using another year of data including significant escalations in the trade war, we find that U.S. tariffs continue to be almost entirely borne by U.S. firms and consumers. We show that the response of import values to the tariffs increases in absolute magnitude over time, consistent with the idea that it takes time for firms to reorganize supply chains. We find heterogeneity in the responses of some sectors, such as steel, where tariffs have caused foreign exporters to drop their prices substantially, enabling them to export relatively more than in sectors where tariff passthrough was complete. |
| Keywords: | tariffs, trade war, passthrough |
| JEL: | F13 F14 F68 |
| Date: | 2020–02 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1675&r=all |
| By: | Antoine Berthou; John Jong-Hyun Chung; Kalina Manova; Charlotte Sandoz Dit Bragard |
| Abstract: | We examine the gains from globalization in the presence of firm heterogeneity and potential resource misallocation. We show theoretically that without distortions, bilateral and export liberalizations increase aggregate welfare and productivity, while import liberalization has ambiguous effects. Resource misallocation can either amplify, dampen or reverse the gains from trade. Using model-consistent measures and unique new data on 14 European countries and 20 industries in 1998-2011, we empirically establish that exogenous shocks to export demand and import competition both generate large aggregate productivity gains. Guided by theory, we provide evidence consistent with these effects operating through reallocations across firms in the presence of distortions: (i) Both export and import expansion increase average firm productivity, but the former also shifts activity towards more productive firms, while the latter acts in reverse. (ii) Both export and import exposure raise the productivity threshold for survival, but this cut-off is not a sufficient statistic for aggregate productivity. (iii) Efficient institutions, factor and product markets amplify the gains from import competition but dampen those from export access. |
| Keywords: | international trade, export demand, import competition, productivity, allocative efficiency, misallocation |
| JEL: | F10 F14 F43 F62 O24 O40 O47 |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1668&r=all |
| By: | Defever, Fabrice; Reyes, Jose-Daniel; Riaño, Alejandro; Varela, Gonzalo |
| Abstract: | This paper studies the impact of a `textbook' ad-valorem export subsidy on firm-level export performance. The Cash Incentive Scheme for Exports (CISE) program offered by the government of Nepal offers a cash subsidy to firms exporting a select group of products to countries other than India. Using customs transactions data combined with subsidy disbursements at the firm level from 2011 to 2014, we estimate the impact of the subsidy on exports of targeted and non-target product-destination combinations and their extensive and intensive margins. We employ a range of doubly-robust matching estimators to control for the non-random selection of exporters into the scheme. We find that subsidized firms increased their exports of targeted product-destinations relative to firms in the control group and that this rise is fully accounted for by the extensive margin: a higher number of targeted products exported and foreign markets served. We do not find any significant changes along the intensive margin nor among non-targeted product-destination combinations. While our results show that the CISE scheme fomented export diversification, its limited impact on total exports and high fiscal cost call into question its effectiveness. |
| Keywords: | export subsidies; export diversification; export margins; least developed countries; special and differential treatment for developing countries; Nepal |
| JEL: | F13 F14 O24 |
| Date: | 2020–05–18 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:108444&r=all |
| By: | Benjamin L Hunt; Susanna Mursula; Rafael A Portillo; Marika Santoro |
| Abstract: | In this paper, we investigate the mechanisms through which import tariffs impact the macroeconomy in two large scale workhorse models used for quantitative policy analysis: a computational general equilibrium (CGE) model (Purdue University GTAP model) and a multi-country dynamic stochastic general equilibrium (DSGE) model (IMF GIMF model). The quantitative effects of an increase in tariffs reflect different mechanisms at work. Like other models in the trade literature, in GTAP higher tariffs generate a loss in terms of output arising from an inefficient reallocation of resources between sectors. In GIMF instead, as in other DSGE models, tariffs act as a disincentive to factor utilization. We show that the two models/channels can be broadly interpreted as capturing the impact of tariffs on different components of a country’s aggregate production function: aggregate productivity (GTAP) and factor supply/utilization (GIMF). We discuss ways to combine the estimates from these two models to provide a more complete assessment of the macro effects of tariffs. |
| Keywords: | Tariffs;Imports;Exports;Trade balance;Exchange rates;Trade policy,trade elasticity,Nominal and real rigidities,general equilibrium,WP,import tariff,trade diversion,terms of trade,GTAP estimate,price distortion |
| Date: | 2020–12–11 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2020/279&r=all |
| By: | Magdi Farahat (Centre for Socio-Eco-Nomic Development - CSEND); Raymond Saner (Unibas - University of Basel, Centre for Socio-Eco-Nomic Development - CSEND); Luca Chiarato (Centre for Socio-Eco-Nomic Development - CSEND); Lichia Yiu (Centre for Socio-Eco-Nomic Development - CSEND) |
| Abstract: | The authors assess to what extent the Enhanced Integrated Framework (EIF) provides assistance to LDCs through its "Diagnostic Trade Integration Study (DTIS)" towards more effective trade and development policies. The DTISs raison d'étre is to improve LDC's trade capabilities and - thence - reduce their levels of poverty. A key feature of LDCs economies are their agricultural commodities. DTIS are intended to guide LDCs in increasing the quantity, quality and value-addition of exports of agricultural commodities; creating jobs and increase welfare. Thus, better understanding how products best fit into the global supply and global value chains (GSC/GVC) becomes critical. Our analysis shows that the new guidelines for the DTISs of 2018 do not sufficiently address the Global/Regional Supply and Value Chains. |
| Keywords: | DTIS,EIF,agricultural commodities,global supply chain,African LDCs,sustainable development |
| Date: | 2020–12–16 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03109417&r=all |
| By: | Fabrice Defever; Michele Imbruno; Richard Kneller |
| Abstract: | We investigate theoretically and empirically the role of wholesalers in mediating the productivity effects of trade liberalization. Intermediaries provide indirect access to foreign produced inputs. The productivity effects of input tariff cuts on firms that do not directly import therefore depends on the extent that wholesalers are a feature of input supply within an industry. Using firm level data from China, we document that wholesalers play no such role for direct importers. However, other firms experience productivity gains from reducing input tariffs if trade intermediation of foreign inputs within their sector is high. They suffer efficiency losses otherwise. |
| Keywords: | firm heterogeneity, trade liberalization, intermediate inputs, productivity, intermediaries, China |
| JEL: | F12 F13 |
| Date: | 2019–12 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1666&r=all |
| By: | Pisch, Frank |
| Abstract: | Revised August 2020. Global value chains are highly fragmented across countries and dominated by a few large multinational firms. But the challenges of an increasingly difficult international business environment are raising the question of how these patterns will change. I study the role of international Just-in-Time (JIT) supply chains in how global production is organized and what the future may hold. Using survey and administrative data for a large panel of French manufacturers, I first document that JIT is widespread across all industries and accounts for roughly two thirds of aggregate employment and trade. Next, I establish two novel stylized facts about the structure of international JIT supply chains: (1) They are more concentrated in space and (2) more vertically integrated than their ‘traditional’ counterparts. I rationalize these patterns in a framework of sequential production where failure to coordinate adaptation decisions in an uncertain environment leads to inventory holding. In JIT supply chains, information about downstream demand conditions is relayed upstream, which facilitates coordination. The associated inventory saving effect is stronger when firms are close to each other, so that the supply chain reacts quickly to changes in demand. This also applies when they are part of the same company and incentives for adaptation are aligned. I validate this model by supporting empirical evidence for further predictions and discuss potential long term implications of Brexit and COVID-19 for the structure of international supply chains. |
| Keywords: | just-in-time; global value chains; multinational firms; vertical integration |
| JEL: | F10 F14 F23 D23 L23 |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:108488&r=all |
| By: | Benny Kleinman; Ernest Liu; Stephen J. Redding |
| Abstract: | We develop sufficient statistics of countries' bilateral income and welfare exposure to foreign productivity shocks that are exact for small shocks in the class of models with a constant trade elasticity. For large shocks, we characterize the quality of the approximation, and show it to be almost exact. We compute these sufficient statistics for over 140 countries from 1970-2012. We show that our exposure measures depend on market-size, cross-substitution and cost of living effects. As countries become greater economic friends in terms of welfare exposure, they become greater political friends in terms of United Nations voting and strategic rivalries. |
| Keywords: | productivity growth, trade, welfare |
| JEL: | F14 F15 F50 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1708&r=all |
| By: | Tatiana Didier; Sebastian Herrador; Magali Pinat |
| Abstract: | This paper assesses whether cross-border M&A decisions exhibit network effects. We estimate exponential random graph models (ERGM) and temporal exponential random graph models (TERGM) to evaluate the determinants of cross-country M&A investments at the sectoral level. The results show that transitivity matters: a country is more likely to invest in a new destination if one of its existing partners has already made some investments there. In line with the literature on export platforms and informational barriers, we find a sizable impact of third country effects on the creation of new investments. This effect is sizable and larger than some of the more traditional M&A determinants, such as trade openness. |
| Keywords: | Comparative advantage;Trade balance;Manufacturing;Exports;Civil society;WP,primary sector |
| Date: | 2019–12–04 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2019/264&r=all |
| By: | Barth, Erling (Institute for Social Research, Oslo); Finseraas, Henning (Norwegian University of Science and Technology (NTNU)); Kjelsrud, Anders (University of Oslo); Moene, Karl Ove (University of Oslo) |
| Abstract: | Have recent trends in globalization changed the positive link between trade openness and social insurance? The consensus view - that voters want better social insurance against income loss the more open the economy - is seemingly contested by the rise of populism and the China shock. We present a theoretical framework of risk and income effects of globalization that captures the conventional view, but also shows when it will be modified: When the income effect is negative, the political support for social insurance can decline in spite of the risk effect. We construct an empirical measure of welfare state support across European regions and leverage the rapid integration of China into the world economy to show that higher import competition reduces the support for social insurance. Consistent with our framework, we decompose the overall effect of the shock into a (weak) positive risk effect and a (strong) negative income effect. |
| Keywords: | regional labor demand, welfare state support, social insurance, China shock, trade exposure |
| JEL: | J21 J23 H55 F16 F6 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14063&r=all |
| By: | Vigninou Gammadigbe |
| Abstract: | The main objective of Regional Trade Agreements (RTAs) is to stimulate economic growth in participating countries through increased trade, economies of scale, knowledge and technology transfer. Using a panel data over the period 1979 to 2018, this paper examines the contribution of regional trade integration (RTI) to economic growth and income convergence in Africa and its major Regional Economic Communities (RECs). The results of the instrumental variable and panel fixed-effects estimation show that RTI promotes economic growth in Africa. However, it fosters income divergence, reflecting the distribution of the gains from regional integration in favor of the more developed economies of the continent. The results of this study show the importance to support the African Continental Free Trade Area (AfCFTA) project with policies aimed at reducing non-tariff barriers to trade and improving infrastructure in order to maximize the effects on growth in all participating countries. |
| Date: | 2021–01–29 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2021/019&r=all |
| By: | Michael Amior; Alan Manning |
| Abstract: | In a competitive labor market, immigration affects native wages only through its impact on marginal products. Under the sole assumption of constant returns, we show that a larger supply of migrants (keeping their skill mix constant) must increase the marginal products of native-owned factors on average (an extension of the familiar "immigration surplus" result); and in the long run (if capital is supplied elastically), this surplus passes entirely to native labor. However, in a monopsonistic labor market, wages will also depend on any mark-downs applied by firms; and immigration may affect native wages through these mark-downs. We present a model of monopsony which generates testable restrictions on the null hypothesis of perfect competition, which we reject using US census data commonly studied in the literature. Our estimates suggest that the (negative) mark-down effect dominates the (by construction, positive) effect on marginal products for the average native. These findings shed new light on the interpretation of previous empirical estimates and the so-called "structural approach" to predicting wage effects. |
| Keywords: | migration, wages, monopsony |
| JEL: | J31 J42 J61 |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1690&r=all |
| By: | Campo, Francesco; Mendola, Mariapia; Morrison, Andrea; Ottaviano, Gianmarco I. P. |
| Abstract: | A possible unintended but damaging consequence of anti-immigrant rhetoric, and the policies it inspires, is that they may put high-skilled immigrants off more than low-skilled ones at times when countries and businesses intensify their competition for global talent. We investigate this argument following the location choices of thousands of immigrant inventors across US counties during the Age of Mass Migration. To do so we combine a unique USPTO historical patent dataset with Census data and exploit exogenous variation in both immigration flows and diversity induced by former settlements, WWI and the 1920s Immigration Acts. We find that co-ethnic networks play an important role in attracting immigrant inventors. However, we also find that immigrant diversity acts as an additional significant pull factor. This is mainly due to externalities that foster immigrant inventors’ innovativeness. These findings are relevant for todays advanced economies that have become major receivers of migrant flows and, in a long-term perspective, have started thinking about immigration in terms of not only level but also composition. |
| Keywords: | international migration; cultural diversity; innovation |
| JEL: | F22 J61 O31 |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:108464&r=all |
| By: | Cem Çakmaklı; Selva Demiralp; Ṣebnem Kalemli-Özcan; Sevcan Yeşiltaş; Muhammed A. Yıldırım |
| Abstract: | COVID-19 pandemic had a devastating effect on both lives and livelihoods in 2020. The arrival of effective vaccines can be a major game changer. However, vaccines are in short supply as of early 2021 and most of them are reserved for the advanced economies. We show that the global GDP loss of not inoculating all the countries, relative to a counterfactual of global vaccinations, is higher than the cost of manufacturing and distributing vaccines globally. We use an economic-epidemiological framework that combines a SIR model with international production and trade networks. Based on this framework, we estimate the costs for 65 countries and 35 sectors. Our estimates suggest that up to 49 percent of the global economic costs of the pandemic in 2021 are borne by the advanced economies even if they achieve universal vaccination in their own countries. |
| JEL: | F0 F15 F16 F2 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28395&r=all |
| By: | Luke Milsom; Vladimír Pažitka; Isabelle Roland; Dariusz Wójcik |
| Abstract: | We shed light on the impact of institutional quality and information barriers on trade in financial services using a novel panel data set on revenue earned on domestic and cross-border equity securities underwriting transactions. Our data set covers 91,511 transactions across 122 countries of origin and 145 countries of destination for the period 2000-2015. The granularity of our data set enables us to estimate theory-consistent gravity equations, avoiding the methodological caveats that apply to most of the existing literature on gravity in international finance. First, we find that institutional quality in the exporting country, proxied by the rule of law, is an important determinant of financial services trade. In addition, we provide support for the "bonding hypothesis" (Coffee, 1999) in the literature on the determinants of foreign listings. Foreign firms can increase their valuation by bonding themselves to high-quality institutions through cross-listing. In line with this hypothesis, we find that institutional quality matters primarily for transactions where the underwriter is located in the country of the stock exchange where the shares are listed. Second, we focus on the role of multinational business networks in breaking down information frictions. Specifically, we control for several measures of "connectivity" based on banks' parent-subsidiary networks and syndication ties across banks. We find evidence supporting our hypothesis. In all our estimations, we control for the classical determinants of trade in the gravity framework, including distance. Interestingly, we find that the inclusion of our institutional and informational variables leaves a very limited role for physical distance - supporting the consensus in the literature on gravity in international finance that the role of distance reflects institutional and information frictions. |
| Keywords: | Gravity, international trade, international finance, equity securities underwriting, multinational business networks, financial geography |
| JEL: | F14 F23 F65 G15 G24 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1703&r=all |
| By: | Jorge Alvarez; Ivo Krznar; Trevor Tombe |
| Abstract: | This paper assesses the costs of internal trade barriers and proposes policies to improve internal trade. Estimates suggest that complete liberalization of internal trade in goods can increase GDP per capita by about 4 percent and reallocate employment towards provinces that experience large productivity gains from trade. The positive impact highlights the need for federal, provincial and territorial governments to work together to reduce internal trade barriers. There is significant scope to build on the new Canadian Free Trade Agreement to more explicitly identify key trade restrictions, resolve differences, and agree on cooperative solutions. |
| Keywords: | Trade barriers;Trade agreements;Trade liberalization;Trade balance;Employment;WP,free trade,trade cost,real wage |
| Date: | 2019–07–22 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2019/158&r=all |
| By: | Fang, Hamming; Ge, Chunmian; Hwang, Hanwei; Li, Hongbin |
| Abstract: | This paper studies how the COVID-19 pandemic has affected labor demand, using over 100 million posted jobs on one of the largest online platforms in China. Our data reveal that the number of newly posted jobs within the first 14 weeks after the Wuhan lockdown on January 23, 2020, was about 31% lower than that of comparable periods in 2018 and 2019. We show that, via the global supply chain, COVID-19 cases abroad and pandemic-control policies by foreign governments reduced new-job creation in China by 11.7%. We also find that firms most exposed to international trade outperformed other firms at the beginning of the pandemic but underperformed during the recovery as the virus spread throughout the world. |
| Keywords: | Covid-19; coronavirus; labor demand; global supply chains; trade; China; employment |
| JEL: | R14 J01 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:108489&r=all |
| By: | Rafael Dix-Carneiro; Pinelopi K. Goldberg; Costas Meghir; Gabriel Ulyssea |
| Abstract: | We build an equilibrium model of a small open economy with labor market frictions and imperfectly enforced regulations. Heterogeneous firms sort into the formal or informal sector. We estimate the model using data from Brazil, and use counterfactual simulations to understand how trade affects economic outcomes in the presence of informality. We show that: (1) Trade openness unambiguously decreases informality in the tradable sector, but has ambiguous effects on aggregate informality. (2) The productivity gains from trade are understated when the informal sector is omitted. (3) Trade openness results in large welfare gains even when informality is repressed. (4) Repressing informality increases productivity, but at the expense of employment and welfare. (5) The effects of trade on wage inequality are reversed when the informal sector is incorporated in the analysis. (6) The informal sector works as an "unemployment," but not a "welfare buffer" in the event of negative economic shocks. |
| JEL: | F14 F16 J46 O17 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28391&r=all |
| By: | Pedersen, Maja Uhre (University of Southern Denmark); Geloso, Vincent (King’s University College); Sharp, Paul (University of Southern Denmark) |
| Abstract: | Previous work has demonstrated the potential for wheat market integration between the US and the UK before the ‘first era of globalization’ in the second half of the nineteenth century. It was however frequently interrupted by policy and ‘exogenous’ events such as war. This paper adds Canada to this story by looking at trade and price data, as well as contemporary debates. We find that she faced similar barriers to the US, and that membership of the British Empire was therefore not a great benefit. We also describe the limitations she faced accessing the US market, in particular after American independence. Transportation costs do not appear to be the main barrier to the emergence of a globalized economy before around 1850. |
| Keywords: | British Empire, Canada, globalization, market integration, United Kingdom, United States, wheat JEL Classification: N51, N53, N71, N73 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:cge:wacage:531&r=all |
| By: | Ritabrata Bose (Indira Gandhi Institute of Development Research); K.V. Ramaswamy (Indira Gandhi Institute of Development Research) |
| Abstract: | A variety of mechanisms linking globalization and margins of adjustments in the labour markets have been empirically tested in recent years. How globalization could affect workforce composition of industries and thereby the quality of jobs, a key labour market indicator is much less studied and the econometric evidence is sparse. This study contributes to filling the gap by studying India's formal manufacturing sector that experienced deep trade and industrial reforms since the 1990s. Industrylevel panel data are analysed to establish the indirect link between product market structure (concentration) and workforce composition of firms (usage of contract workers). We explicitly measure changes in market concentration using a newly constructed trade-adjusted concentration ratio, profitability (price-cost mark-up) and workforce composition (usage of contract workers) to show how the effect of globalization is mediated indirectly through the product market structure. Our sample includes 46 three-digit formal manufacturing industries spanning from 1998 to 2014. The findings provide significant evidence that Indian manufacturing firms responded to globalization by hiring relatively more contract workers a key margin of labour market flexibility. This finding underlines the importance of understanding the indirect ways in which globalization could affect labour market conditions and workers welfare in developing countries. |
| Keywords: | market concentration, price cost mark-up, contract labour, globalisation |
| JEL: | D22 F60 F66 F16 D22 L16 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:ind:igiwpp:2020-036&r=all |
| By: | Lorenzo Caliendo; Robert C. Feenstra; John Romalis; Alan M. Taylor |
| Abstract: | We derive a new formula for the optimal uniform tariff in a small-country, heterogeneous-firm model with roundabout production and a nontraded good. Tariffs are applied on imported intermediate inputs. First-best policy requires that markups on domestic intermediate inputs are offset by subsidies. In a second-best setting where such subsidies are not used, the double- marginalization of domestic markups creates a strong incentive to lower the optimal tariff on imported inputs. In a 186-country quantitative model, the median optimal tariff is 10%, and negative for five countries, as compared to 27% in manufacturing from the one-sector, optimal tariff formula without roundabout production. |
| JEL: | F12 F13 F17 F61 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28380&r=all |
| By: | Swati Dhingra; Silvana Tenreyro |
| Abstract: | Policies to encourage agribusinesses-led development of crop markets are high on the agenda of many policy-makers. Since the 1980s, several countries have moved to a model in which agribusinesses provide market access to farmers. The motivation behind these policies is to raise income and wellbeing, particularly for low-income rural households. Yet, systematic analyses of the overall impact of such policies on household welfare are scant. This paper provides a novel modelling framework to study the role of agribusinesses in shaping the gains from trade and the share accruing to small farmers. Exploiting a national policy change in Kenya in 2004, we find that the shift to the agribusiness model reduced farmer incomes from policy-affected crops, relative to other crops. The relative fall in incomes was higher for farmers selling primarily to large agribusinesses. Correspondingly, agribusiness firms specialized in policy-affected crops saw larger increases in profit margins. Farmers in villages with a comparative advantage in policy-affected crops saw larger reductions in consumption, especially of durable assets. The findings contribute to the academic and policy debate on the impact of market power on the size and distribution of the gains from trade. |
| Keywords: | agribusiness, market power, intermediated trade, middlemen, oligopsony |
| JEL: | F1 F6 Q1 O1 |
| Date: | 2020–02 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1677&r=all |
| By: | Tommaso Sonno |
| Abstract: | Using georeferenced data on the affiliates and headquarters of multinational enterprises together with georeferenced conflict data, this work is the first to establish a causal link between the activities of multinational enterprises and violence. The results indicate that activities which increase local human capital, such as education and health, decrease the probability of civil conflict, while the activity of sectors intense in scarce resources, in particular forestry, increases conflict. The increase in the likelihood of conflict is amplified especially in areas where the leading ethnic groups can place the burden of land deals on unrepresented groups. |
| Keywords: | multinationals, civil conflict, FDI, ethnic minority |
| JEL: | C23 D74 F23 L70 O13 |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1670&r=all |
| By: | Kerim Peren Arin; Juan A. Lacomba; Francisco Lagos; Ana I. Moro-Egido; Marcel Thum |
| Abstract: | We examine the impact of the rapid spread of the COVID-19 pandemic and the nationwide movement restrictions on socio-economic attitudes in four European countries (France, Germany, Spain, and the United Kingdom). We conducted large-scale surveys while the pandemic rapidly spread before and after nationwide lockdowns were implemented. We investigate the impact in three different categories of attitudes: i) economic perceptions (economic insecurity and views on globalization); ii) political attitudes (trust in domestic and international institutions, populism and immigration); and iii) social aspects (authoritarianism and loneliness). We find that overall, the pandemic/social-distancing, but not the lockdowns, has increased economic insecurity, loneliness, and acceptance of authoritarianism while decreasing support for globalization. On the bright side, there is a sensible increase in trust in domestic institutions. We also document that the pandemic had heterogeneous and disproportional effects both at the country level and at the demographic group level. In terms of societal groups, our results suggest that the aggregate results are mostly driven by a number of groups, most notably women, families with children, and the labor force. |
| Keywords: | lockdown, Covid-19, Europe, economic insecurity, globalization, trust, populism, authoritarianism, social loneliness |
| JEL: | D70 H11 H12 H41 I18 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8845&r=all |
| By: | Anthony J. Venables |
| Abstract: | External trade affects the internal spatial structure of an economy, promoting growth in some cities or regions and decline in others. Internal adjustment to these changes has often proved to be extremely slow and painful. This paper combines elements of urban and international economics to draw out the implications of trade shocks for city performance. Localisation economies in production of internationally tradable goods mean that cities divide into two types, those producing tradables and those specialising in sectors producing just for the national market (non-tradables). Negative trade shocks (and possibly also some positive ones) reduce the number of cities engaged in tradable production, increasing the number producing just non-tradables. This has a negative effect across all non-tradable cities, which lose population and land value. Remaining tradable cities boom, gaining population and land value. Depending on the initial position, city size dispersion may increase, this raising the share of urban land-rents in national income and reducing the share of labour. |
| Keywords: | Globalisation, urban, de-industrialisation, rustbelt, polarisation |
| JEL: | F12 R11 R12 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1707&r=all |
| By: | Dongyeol Lee; Huan Zhang |
| Abstract: | Export structure is less diversified in low-income countries (LICs) and especially small states that face resource constraints and small economic size. This paper explores the potential linkages between export structure and economic growth and its volatility in LICs and small states, using a range of indices of export concentration differing in the coverage of industries. The empirical analysis finds that export diversification may promote economic growth and reduce economic volatility in these countries. Furthermore, the analysis demonstrates that the economic benefits of export diversification differ by country size and income level—there are bigger benefits for relatively larger and poorer countries within the group of LICs and small states. |
| Keywords: | Export diversification;Exports;Personal income;Government consumption;Export performance;WP,export,diversification,export concentration |
| Date: | 2019–05–24 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2019/118&r=all |
| By: | Klöble, Katrin |
| Abstract: | This paper addresses the self-selection of potential migrants. In particular, the study examines whether risk and time preferences explain a significant proportion in the movement heterogeneity of individuals. It is further intended to shed light on the role of social preferences (trust, altruism, reciprocity) as potential migratory determinants. By making use of a unique cross-sectional data set on migration intentions (Gallup World Poll) and experimentally-validated preferences (the Global Preference Survey) covering 70 countries worldwide, a probit model is estimated. The empirical results provide evidence that potential migrants exhibit higher levels of risk-taking and patience than their counterparts who stay at home (the stayers). This holds true across differing countries with various cultural backgrounds and income levels. Trust and negative reciprocity are found to be significantly related to migration aspirations as well. Yet conclusive clarifications still remain necessary, providing impetuses for future research. |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:diedps:42021&r=all |
| By: | Cheng Chen; Claudia Steinwender |
| Abstract: | When managers have objectives beyond maximizing monetary profits, inefficiencies may arise. An increase in competition may then force managers to improve the productivity of the firm in order to ensure survival. While this hypothesis has received ample theoretical attention, empirical evidence is scarce, mainly because preferences of managers are typically unobserved. In this paper, we exploit the fact that a large literature has documented specific non-monetary preferences of family managers. Using Spanish firm-level data, we compare how family-managed and professionally-managed firms react to import competition shocks. We find that import competition leads to productivity increases in family-managed firms that are initially unproductive. Productivity improvements are driven by family management as opposed to family ownership or non-managing family members. Furthermore, we show that these managers increase efficiency by reducing material usage, which is consistent with them trying to increase their short-term cash flow in order to survive. Finally, productivity improvements seem to be particularly pronounced in multi-generational family firms that also introduce organizational changes. |
| Keywords: | import competition, productivity, family firms, managers |
| JEL: | D22 D23 F14 L21 L22 |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1674&r=all |
| By: | Tiaradina, Vrisycha Wike |
| Abstract: | Dalam model Wholly Owned Subsidiary, perusahaan global lebih memilih untuk memimpin integrasi global dalam operasi yang seragam. Pada aspek organisasi, perusahaan mendirikan anak perusahaannya di berbagai negara dan mempercayakn operasi kepada mereka sebagai strategi mengejar bisnis dalam skala global. Pendekatan Join Ventur lebih praktis bagi perusahaan asing untuk memilih akuisisi yang menciptakan operasi global, yang perlu memenuhi berbagai persyaratan, mulai dari tunjangan bagi karyawan lokal, saluran distribusi baru hingga persetujuan peraturan untuk operasi. Perjanjian lisensi tidak membawa entitas bisnis baru tetapi lebih disukai sebagai cara untuk meluncurkan bisnis baru dalam kemitraan dengan perusahaan lokal berdasarkan kontrak. Outsourcing dilakukan perusahaan dalam mengembangkan beberapa aspek produk ke perusahaan lain. Dalam khasus alat-alat medis di Indonesia biasanya menggunakan strategi Wholly Subsidiary with the Licence Agreement |
| Date: | 2020–12–20 |
| URL: | http://d.repec.org/n?u=RePEc:osf:osfxxx:euvwc&r=all |
| By: | Clemens Fuest; Felix Hugger; Florian Neumeier |
| Abstract: | This paper is the first to use information from individual country-by-country (CbC) re-ports to assess the extent of profit shifting by multinational enterprises. Unlike other data often used to evaluate the extent of profit shifting and tax avoidance, CbC reports pro-vide a complete coverage of the global distribution of profits and indicators of economic activity for multinationals exceeding a certain revenue threshold. We show that 82% of the German multinationals subject to CbC reporting have tax haven subsidiaries and that these subsidiaries are notably more profitable than those in non-havens. However, only 9% of the global profits of German multinationals are reported in tax havens. Results from regression analysis suggest that approximately 40% of the profits reported in tax havens are a result of tax-induced profit shifting. The associated annual tax base loss for Germany amounts to EUR 5.4 billion. Adding estimates of profit shifting by multinationals not covered by the CbC data yields an overall estimate for profits shifted out of Germany to tax havens of EUR 19.1 billion per year, corresponding to 4.3% of the profits reported by these firms in Germany. This implies a tax revenue loss due to corporate profit shifting to tax havens of EUR 5.7 billion per year. |
| Keywords: | corporate taxation, tax avoidance, profit shifting, multinational enterprises, country-by-country reporting |
| JEL: | F23 H25 H26 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8838&r=all |
| By: | Fabio Antoniou; Panos Hatzipanayotou; Nikos Tsakiris |
| Abstract: | We explore the possibility of achieving a cooperative outcome when governments act non-cooperatively in a strategic environmental policy model where emission permit markets are linked. We introduce a specific distribution scheme of the permit revenues between the exporting countries so as to sustain the cooperative outcome as a subgame perfect Nash equilibrium. Participation in the scheme is endogenized and we show that it constitutes a subgame perfect Nash equilibrium as long as the countries are not too asymmetric. Our results are robust once we allow for multiple pollutants, different modes of competition and market power in the permits market. |
| Keywords: | strategic environmental policy, internationally tradable permits, cross-border pollution, imperfect competition, welfare |
| JEL: | Q58 F12 F18 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8847&r=all |
| By: | Claire Brunel; Arik Levinson |
| Abstract: | The US has been a global leader in regulating local air pollution and a global laggard in regulating greenhouse gases (GHGs). For decades, critics of US policy have expressed fears that stringent US regulations on local air pollution would lead to pollution havens overseas. Prior research, suggests that has not happened. But what about the converse fear? Are the less stringent US climate regulations causing the US to become a pollution haven for other countries’ GHG-intensive industries? We provide a decomposition of US manufacturing GHG emissions and find no evidence of offshoring either to or from the United States since 1990. |
| JEL: | F18 Q56 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28372&r=all |
| By: | Holger Breinlich; Elsa Leromain; Dennis Novy; Thomas Sampson |
| Abstract: | This paper studies how the depreciation of sterling following the Brexit referendum affected consumer prices in the United Kingdom. Our identification strategy uses input-output linkages to account for heterogeneity in exposure to import costs across product groups. We show that, after the referendum, inflation increased by more for product groups with higher import shares in consumer expenditure. This effect is driven by both direct consumption of imported goods and the use of imported inputs in domestic production. Our results are consistent with complete pass-through of import costs to consumer prices and imply an aggregate exchange rate pass-through of 0:29. We estimate the Brexit vote increased consumer prices by 2:9 percent, costing the average household £870 per year. The increase in the cost of living is evenly shared across the income distribution, but differs substantially across regions. |
| Keywords: | Brexit, exchange rate pass-through, import costs, inflation |
| JEL: | E31 F15 F31 |
| Date: | 2019–12 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1667&r=all |
| By: | Catarina, Nyoman Ayu Shandy |
| Abstract: | Perusahaan multinasional memiliki berbagai macam strategi penetrasi yang digunakan agar untuk dapat menjalankan perusahaannya. Strategi yang ada antara lain, wholly owned subsidiary, join venture, licence agreement, subcontracting, dan outsourcing. Dan masing masing strategi memiliki kekurangan dan kelebihan masing masing. |
| Date: | 2020–12–24 |
| URL: | http://d.repec.org/n?u=RePEc:osf:osfxxx:bhckm&r=all |
| By: | Tidiane Kinda |
| Abstract: | The use of e-commerce around the world has accelerated in recent years, with Asia, led by China, spearheading the rise. Using cross-country enterprise survey data, this paper shows that firms engaged in e-commerce have higher productivity and generate a larger share of their revenues from exports than other firms. This is particularly true in Asia, where firms have 30 percent higher productivity and generate about 50 percent more of their revenues from exports. The results presented in this paper are robust to the use of instrumental variables, which highlight possible larger effects of e-commerce on Asian productivity and exports when essential elements are in place for its effective use, such as reliable electricity, telecommunication, and transport infrastructure. Despite the rapid growth of e-commerce in recent years, gaps persist in digital infrastructure and legislation, preventing many Asian countries from fully reaping the potential benefits of e-commerce. |
| Keywords: | Total factor productivity;Exports;Productivity;Population and demographics;Human capital;WP,e-commerce firm,World Bank enterprises survey,firm performance,way firm,affiliate company |
| Date: | 2019–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2019/135&r=all |
| By: | gumilang, adhe roy |
| Abstract: | Wholly owned subsidiary adalah perusahaan yang saham biasa 100% dimiliki oleh perusahaan lain, yaitu perusahaan induk. Sedangkan suatu perusahaan dapat menjadi wholly owned subsidiary melalui akuisisi oleh perusahaan induk atau telah dipisahkan dari perusahaan induk, maka anak perusahaan biasa adalah 51% sampai 99% dimiliki oleh perusahaan induk. Ketika biaya dan risiko yang lebih rendah diinginkan - atau ketika tidak mungkin untuk memperoleh kendali penuh atau mayoritas - perusahaan induk mungkin memperkenalkan perusahaan afiliasi , rekanan, atau rekanan di mana ia akan memiliki saham minoritas. |
| Date: | 2020–12–22 |
| URL: | http://d.repec.org/n?u=RePEc:osf:osfxxx:ucbq7&r=all |
| By: | N. Wei; W. -J. Xie; W. -X. Zhou |
| Abstract: | In the international oil trade network (iOTN), trade shocks triggered by extreme events may spread over the entire network along the trade links of the central economies and even lead to the collapse of the whole system. In this study, we focus on the concept of "too central to fail" and use traditional centrality indicators as strategic indicators for simulating attacks on economic nodes, and simulates various situations in which the structure and function of the global oil trade network are lost when the economies suffer extreme trade shocks. The simulation results show that the global oil trade system has become more vulnerable in recent years. The regional aggregation of oil trade is an essential source of iOTN's vulnerability. Maintaining global oil trade stability and security requires a focus on economies with greater influence within the network module of the iOTN. International organizations such as OPEC and OECD established more trade links around the world, but their influence on the iOTN is declining. We improve the framework of oil security and trade risk assessment based on the topological index of iOTN, and provide a reference for finding methods to maintain network robustness and trade stability. |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2101.10679&r=all |
| By: | Tyler Daun; Sebastian Galiani; Gustavo Torrens |
| Abstract: | Most populist regimes in Latin American countries used trade policy to redistribute income, despite being less efficient than other redistribution schemes such as transfers financed with an income tax. Often, this outcome is attributed to the lack of fiscal capacity in Latin American countries. Instead, we develop a simple political economy game where the populist government may use trade policy to encourage capitalists to invest in the more labor-intensive industry. Since moving capital is costly, those capitalists will support the continuation of the protectionist trade policy even after the populist government falls from power. The populist government may therefore choose to implement the less efficient but politically-sustainable policy instead of the more efficient policy that will be easily overturned after a regime change. Building fiscal capacity does not change the equilibrium. Only a long run commitment to a minimum level of redistribution restores efficiency. |
| JEL: | F13 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28359&r=all |