nep-int New Economics Papers
on International Trade
Issue of 2021‒05‒10
forty-one papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. The US-China Trade War and Phase One Agreement By Bown, Chad P.
  2. Trade Liberalization and the Extensive Margin of Differentiated Goods: Evidence from China By Van Biesebroeck, Johannes; Yi, Yingting; Zaurino, Elena
  3. Good connections : bank specialization and the tariff elasticity of exports By Berthou, Antoine; Mayer, Thierry; Mésonnier, Jean-Stéphane
  4. Local Global Watchdogs: Trade, Sourcing and the Internationalization of Social Activism By Koenig, Pamina; Krautheim, Sebastian; Löhnert, Claudius; Verdier, Thierry
  5. The Variation of Gravity within Countries By Yotov, Yoto
  6. Rules of Origin and Market Power By Chung, Wanyu; Perroni, Carlo
  7. A Second-best Argument for Low Optimal Tariffs By Caliendo, Lorenzo; Feenstra, Robert; Romalis, John; Taylor, Alan M.
  8. Government Policies in a Granular Global Economy By Gaubert, Cécile; Itskhoki, Oleg; Vogler, Maximilian
  9. The Smoot-Hawley Trade War By Mitchener, Kris James; O'Rourke, Kevin Hjortshøj; Wandschneider, Kirsten
  10. Innovation and Trade Policy in a Globalized World By Akcigit, Ufuk; Ates, Sina T.; Impullitti, Giammario
  11. Global Value Chains By Antràs, Pol; CHOR, HAN PING DAVIN
  12. Trade Imbalances and the Rise of Protectionism By Delpeuch, Samuel; Fize, Etienne; Martin, Philippe
  13. The interdependencies between the private and public sectors in open economies By Andersen, Torben M; Sørensen, Allan
  14. Post-Brexit power of European Union from the world trade network analysis By Justin Loye; Katia Jaffr\`es-Runser; Dima Shepelyansky
  15. The global trade environment in the Biden era and response strategies for Korea By Song, Yeongkwan
  16. Preferential Trade Agreements as Insurance By Appelbaum, Elie; Melatos, Mark
  17. Business responsibilities and investment treaties By David Gaukrodger
  18. Factoryless Manufacturers and International Trade in the Age of Global Value Chains By Yuqing Xing
  19. Borders within Europe By Santamaría, Marta; Ventura, Jaume; Yesilbayraktar, Ugur
  20. Can Trade Agreements Solve the Wicked Problem of Disinformation By Susan Aaronson
  21. The Internationalization of State-Owned Enterprises: An Analysis of cross-border M\&As By Stefano Clò; Enrico Marvasi; Giorgio Ricchiuti
  22. Trade Protection Along Supply Chains By Bown, Chad P.; Conconi, Paola; Erbahar, Aksel; Trimarchi, Lorenzo
  23. Automation, Offshoring and Employment Distribution in Western Europe By Jocelyn Maillard
  24. Knowledge Spillovers, Trade, and Foreign Direct Investment By Wolfgang Keller
  25. Export, Female Comparative Advantage and the Gender Wage Gap By Bonfiglioli, Alessandra; De Pace, Federica
  26. Globalisation in Europe: Consequences for the business environment and future patterns in light of Covid-19 By Inferrera, Sergio
  27. Trade and FDI Thresholds of CO2 emissions for a Green Economy in Sub-Saharan Africa By Asongu, Simplice; Odhiambo, Nicholas
  28. One Nation, One Language? Domestic Language Diversity, Trade and Welfare By Gurevitch, Tamara; Herman, Peter; Toubal, Farid; Yotov, Yoto
  29. Brexit and trade policy: an analysis of the governance of UK trade policy and what it means for health and social justice By van Schalkwyk, May C.I.; Barlow, Pepita; Siles-Brügge, Gabriel; Jarman, Holly; Hervey, Tamara; McKee, Martin
  30. The Economic Case for Global Vaccinations: An Epidemiological Model with International Production Networks By Cem Cakmakli; Selva Demiralp; Sebnem Kalemli-Ozcan; Sevcan Yesiltas; Muhammed A. Yildirim
  31. Trade Reforms and Current Account Imbalances By Ju, Jiandong; Shi, Kang; Wei, Shang-Jin
  32. Average income, income inequality and export unit values By Latzer, Helene; Mayneris, Florian
  33. Techies, Trade, and Skill-Biased Productivity By Harrigan, James; Resheff, Ariell; Toubal, Farid
  34. On Immigration and Native Entrepreneurship By Duleep, Harriet Orcutt; Jaeger, David A.; McHenry, Peter
  35. Trade and the spatial distribution of transport infrastructure By Felbermayr, Gabriel; Tarasov, Alexander
  36. Trade and Informality in the Presence of Labor Market Frictions and Regulations By Dix-Carneiro, Rafael; Goldberg, Pinelopi Koujianou; Meghir, Costas; Ulyssea, Gabriel
  37. Enforcement of Labor Regulation and the Labor Market Effects of Trade: Evidence from Brazil By Ponczek, Vladimir; Ulyssea, Gabriel
  38. Trade networks and shock transmission within the Italian production system By Stefano Costa; Federico Sallusti; Claudio Vicarelli
  39. The components and determinants of FDI within firms: A case study of Zambia By Grivas Chiyaba
  40. Artificial Intelligence, Globalization, and Strategies for Economic Development By Korinek, Anton; Stiglitz, Joseph E
  41. The Welfare Cost of a Current Account Imbalance: A 'Clean' Channel By Lee, Jungho; Wei, Shang-Jin; Xu, Jianhuan

  1. By: Bown, Chad P.
    Abstract: The Trump administration changed US trade policy toward China in ways that will take years for researchers to sort out. This paper makes four specific contributions to that research agenda. First, it carefully marks the timing, definitions, and scale of the products subject to the tariff changes affecting US-China trade from January 20, 2017 through January 20, 2021. One result was that each country increased its average duty on imports from the other to rates of roughly 20 percent, with the new tariffs and counter-tariffs covering more than 50 percent of bilateral trade. Second, the paper highlights two additional channels through which bilateral tariffs changed during this period: product exclusions from tariffs and trade remedy policies of antidumping and countervailing duties. These two channels have received less research attention. Third, it explores why China fell more than 40 percent short of meeting the goods purchase commitments set out for 2020, the first year of the phase one agreement. Finally, the paper considers additional trade policy actions - involving forced labor, export controls for reasons of national security or human rights, and reclassification of trade with Hong Kong - likely to affect US-China trade beyond the Trump administration.
    Keywords: antidumping; Countervailing Duties; export controls; Phase One agreement; product exclusions; tariffs; trade war timeline; US-China trade policy
    JEL: F13
    Date: 2021–02
  2. By: Van Biesebroeck, Johannes; Yi, Yingting; Zaurino, Elena
    Abstract: We exploit tariff reductions associated with China's entry into the WTO to evaluate whether the response of trade flows at the extensive margin depends on the degree of product differentiation. We adopt a 4-way difference-in-differences approach to identify the effects as cleanly as possible by comparing market entry of products from each WTO member into China with entry into India and Indonesia. The absolute tariff elasticities are estimated to be relatively large, compared to existing estimates. This is especially true for differentiated goods, for goods with low Chinese demand elasticity, and for exports from OECD countries. We provide both new evidence and a theoretical justification for the heterogeneity of these effects across products and countries.
    Keywords: exports; import tariff; trade policy; WTO
    JEL: F10 F13 F14
    Date: 2021–03
  3. By: Berthou, Antoine; Mayer, Thierry; Mésonnier, Jean-Stéphane
    Abstract: In this paper, we show that exporters react more strongly to a tariff cut when their banks have been specializing in funding exports to this country. To make our case, we build upon a theoretical model where an informational advantage provided by the exporter's bank results in a lower distribution cost in the destination country. We test the implications of this model for French exporters using the 2011 free trade agreement between the European Union and the Republic of South-Korea as a quasi-natural experiment. We measure a bank's specialization in Korea using granular information on bank-firm credit lines and firm-level exports in the years preceding the agreement. We compare how customers of different banks react to the trade liberalization episode using detailed information on the bilateral tariff cuts and disaggregated data on French export flows at the firm-product level. We find robust evidence that the specialized lenders help exporters to respond more strongly to changes in tariffs. The effect is strong for all firms along the extensive margin, but only for smaller, less productive exporters along the intensive margin.
    Keywords: bank specialization; Trade Elasticities; trade liberalization
    JEL: F14 G21
    Date: 2021–03
  4. By: Koenig, Pamina; Krautheim, Sebastian; Löhnert, Claudius; Verdier, Thierry
    Abstract: International NGO campaigns against the value chains of leading firms in a diverse set of industries are a salient feature of economic globalization. What determines the patterns of the internationalization of NGO campaigns? Stylized facts obtained from recently available data containing 102532 campaigns by 4343 NGOs targeting 11429 firms from 145 countries guide our theoretical analysis. We propose a model of global sourcing and international trade in which heterogeneous NGOs campaign against heterogeneous firms in response to infringements along their international value chains. We find that campaigns are determined by a triadic gravity equation, i.e. bilateral trade costs between the country of the NGO, the country of the firm and the sourcing country affect campaigns. Most notably, the latter implies that by advancing the internationalization of production, falling trade costs boost the internationalization of NGO campaigns. We use our data to estimate the NGO level triadic gravity equation implied by our model and find strong support for our predictions.
    Keywords: campaigns; Gravity; international sourcing; international trade; NGOs; Social activism
    JEL: F12 F14 F60 L31 O35
    Date: 2021–03
  5. By: Yotov, Yoto (Drexel University)
    Abstract: The gravity equation is the workhorse model for analysis of bilateral trade flows. Despite solid theoretical foundations and clear gains from theory-consistent policy analysis, there are still gaps between gravity theory and empirics. This paper focuses on domestic trade flows, and I argue that there are significant benefits from adhering to theory by estimating gravity equations with domestic (in addition to international) trade flows. To this end, I review the contributions from the related literature and I synthesize them into fifteen arguments for using domestic trade flows in gravity estimations. The survey of the literature reveals the need for further theory contributions and new data developments, and points to opportunities for more empirical analysis and policy applications.
    Keywords: Domestic Trade Flows; Structural Gravity; Trade Policy; Estimation
    JEL: F13 F14 F16
    Date: 2021–04–25
  6. By: Chung, Wanyu; Perroni, Carlo
    Abstract: We study how regional content requirements in Free Trade Areas (FTAs) affect market power and market structure in concentrated intermediate goods markets. We show that content requirements increase oligopolistic markups beyond the level that would obtain under an equivalent import tariff, and we document patterns in Canadian export data and US producer price data that align with the model's predictions: producers of intermediate goods charge comparatively higher prices when the associated final goods producers are more constrained by FTA origin requirements and by Most Favoured Nation (MFN) tariffs for both intermediate and final non-FTA goods.
    Keywords: Content Requirements; Free Trade Areas; market power
    JEL: D43 F12 F13 F14
    Date: 2021–03
  7. By: Caliendo, Lorenzo; Feenstra, Robert; Romalis, John; Taylor, Alan M.
    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.
    Keywords: Gains from trade; input-output linkages; monopolistic competition; trade policy
    JEL: F12 F13 F17 F61
    Date: 2021–01
  8. By: Gaubert, Cécile; Itskhoki, Oleg; Vogler, Maximilian
    Abstract: We use the granular model of international trade developed in Gaubert and Itskhoki (2021) to study the rationale and implications of three types of government interventions typically targeted at large individual firms - antitrust, trade and industrial policies. We find that in antitrust regulation, governments face an incentive to be overly lenient in accepting mergers of large domestic firms, which acts akin to beggar-thy-neighbor trade policy in sectors with strong comparative advantage. In trade policy, targeting large individual foreign exporters rather than entire sectors is desirable from the point of view of a national government. Doing so minimizes the pass-through of import tariffs into domestic consumer prices, placing a greater portion of the burden on foreign producers. Finally, we show that subsidizing `national champions' is generally suboptimal in closed economies as it leads to an excessive build-up of market power, but it may become unilaterally welfare improving in open economies. We contrast unilaterally optimal policies with the coordinated global optimal policy and emphasize the need for international policy cooperation in these domains.
    Keywords: Antitrust; granular comparative advantage; import tariff; industrial policy
    JEL: F12 F13 L13 L40 L52
    Date: 2021–03
  9. By: Mitchener, Kris James; O'Rourke, Kevin Hjortshøj; Wandschneider, Kirsten
    Abstract: We document the outbreak of a trade war after the U.S. adopted the Smoot-Hawley tariff in June 1930. U.S. trade partners initially protested the possible implementation of the sweeping tariff legislation, with many eventually choosing to retaliate by increasing their tariffs on imports from the United States. Using a new quarterly dataset on bilateral trade for 99 countries during the interwar period, we show that U.S. exports to countries that protested fell by between 15 and 22 percent, while U.S. exports to retaliators fell by 28-33 percent. Furthermore, using a second new dataset on U.S. exports at the product-level, we find that the most important U.S. exports to retaliating markets were particularly affected, suggesting a possible mechanism whereby the U.S. was targeted despite countries' MFN obligations. The retaliators' welfare gains from trade fell by roughly 8-17%.
    Keywords: Smoot-Hawley; Trade; Trade War
    JEL: F14 N72
    Date: 2021–03
  10. By: Akcigit, Ufuk; Ates, Sina T.; Impullitti, Giammario
    Abstract: What is the role of innovation policy in open economy? We address this question employ- ing a new innovation-driven growth model with two large open economies at different stages of development. We examine the implications of the U.S. Research and Experimentation Tax Credit, introduced in 1981, and alternative protectionist policies. Key findings are: First, the tax credit generates substantial gains over medium and long horizons. Second, protectionist measures generate large dynamic losses by distorting the firms' innovation incentives. Third, the optimal R&D subsidy decreases in trade openness. Fourth, the optimal unilateral import tariff is zero for all policy horizons.
    Keywords: economic growth; innovation policy; Open economy; trade policy
    JEL: F13 F43 F60 O40
    Date: 2021–02
  11. By: Antràs, Pol; CHOR, HAN PING DAVIN
    Abstract: This paper surveys the recent body of work in economics on the importance of global value chains (GVCs) in shaping international trade flows and multinational activity. On the empirical front, we begin reviewing several variants of the "macro approach" to measuring the relevance of global production sharing in the world economy, and we also offer a critical evaluation of the country- and industry-level datasets (or World Input Output Tables) that have been used to date. We next discuss the advantages and disadvantages of a burgeoning alternative "micro approach" that has instead employed firm-level datasets to document the ways in which firms have sliced up their value chains across countries. On the theoretical front, we propose an analogous dissection of the literature. First, we review a vast body of work developing country- and industry-level quantitative frameworks that are easily calibrated with World Input Output Tables, and that open the door for counterfactual exercises with minimal demands on estimation. Second, we overview micro-level frameworks that have treated firms rather than countries or industries as the relevant unit of analysis, and that have unveiled a number of distinctive mechanisms by which GVCs shape the determinants and consequences of international trade flows in ways distinct from traditional models of international trade. We close this survey with a discussion of a still infant literature on the desirability and effects of trade policy in a world of GVCs.
    JEL: F1 F2 F4 F6
    Date: 2021–03
  12. By: Delpeuch, Samuel; Fize, Etienne; Martin, Philippe
    Abstract: We investigate the role of trade imbalances in the rise of protectionism in the past 10 years. Bilateral as well as multilateral trade imbalances are robust predictors of protectionist attacks. This result is partly but not entirely driven by the US and the Trump years. We also find that countries that experience a bilateral real exchange rate appreciation launch more protectionist attacks. The role of trade imbalances in the rise of protectionism is confirmed when we use fiscal policies as instrumental variables for trade imbalances. Countries with more expansionary fiscal policies react to the ensuing trade imbalance by a more protectionist trade policy. The role of trade imbalances in the rise of protectionism is quantitatively important: in the G20, a one standard deviation increase in the bilateral and multilateral trade deficits of a country leads respectively to a 7% and 17% rise of protectionist attacks by this country.
    Keywords: protectionism; trade imbalances
    JEL: F13 F14 F41
    Date: 2021–01
  13. By: Andersen, Torben M; Sørensen, Allan
    Abstract: Empirical evidence shows that countries with larger public sectors also have larger trade shares, also for the manufacturing sector, and a larger share of firms that export. We reconcile these links between the public and private sector in an analytically tractable general equilibrium model. We derive two-way causal relations between size (and composition) of the public sector and openness and industry structure of the private sector. First, an increase in public sector size or a shift in public expenditures toward public employment (away from transfers) increases openness of the private sector (trade share and fraction of firms exporting), and is also associated with higher average productivity, lower average unit labour costs, and improved wage competitiveness and terms of trade. These outcomes are driven by endogenous entry and selection of firms. A quantitative exercise reveals substantial quantitative differences in the effects from public sector reforms between the open and closed economy. Second, international spillovers imply that non-cooperative policies have an upward bias in the overall size of the public sector, but a downward bias in transfers as a share of public expenditures. Trade liberalization and the degree of firm heterogeneity magnify these biases and thereby shape the size and composition of the public sector.
    Keywords: biases in fiscal policies; composition of public expenditures; Globalization; Heterogeneous Firms; Labour taxation; selection; size of public sector
    JEL: F15 F4 H20 H40
    Date: 2021–02
  14. By: Justin Loye; Katia Jaffr\`es-Runser; Dima Shepelyansky
    Abstract: We develop the Google matrix analysis of the multiproduct world trade network obtained from the UN COMTRADE database in recent years. The comparison is done between this new approach and the usual Import-Export description of this world trade network. The Google matrix analysis takes into account the multiplicity of trade transactions thus highlighting in a better way the world influence of specific countries and products. It shows that after Brexit, the European Union of 27 countries has the leading position in the world trade network ranking, being ahead of USA and China. Our approach determines also a sensitivity of trade country balance to specific products showing the dominant role of machinery and mineral fuels in multiproduct exchanges. It also underlines the growing influence of Asian countries.
    Date: 2021–05
  15. By: Song, Yeongkwan
    Abstract: Many expect that the trade war between the US and China will persist, and East Asia's global value chains will undergo a significant transformation in the mid- to long-term, as China's contracts while that of ASEAN expands. Accordingly, to effectively respond to the coming changes, Korea should adopt proactive strategies to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), and attract quality FDI in an effort to realize sustainable growth.
    Date: 2021
  16. By: Appelbaum, Elie; Melatos, Mark
    Abstract: We investigate preferential trade agreement (PTA) formation when risk averse countries face demand uncertainty and, hence, have an insurance motive for pursuing trade integration. In this environment, when deciding which type of PTA - if any - they wish to form, countries seek to maximise their net welfare; that is, their expected utility less a risk premium. The desire for insurance influences, not just whether a particular PTA forms, but also the preferred depth of integration. We analyze the insurance implications of free trade agreements (FTAs), customs unions (CUs), and countries choosing to stand alone. We further distinguish between shallow CUs and deep CUs; in the former, members maximise the sum of their individual net welfares, while in the latter they maximise the net value of the sum of their individual expected welfares. We show that differences in country risk attitudes and the levels of risk they face, as well as the degree to which these risks are correlated with each other, each, and together, influence the formation and design of TAs. When countries’ demands are uncorrelated, they form a deep CU if their levels of risk aversion are sufficiently different. If, however, their risk attitudes are similar, countries opt for shallower trade integration - either a shallow CU or a FTA - if they face low levels of uncertainty, and choose to stand alone if one country faces a sufficiently high level of uncertainty. When countries’ demands are correlated, they tend to form a deep CU if their demands are strongly negatively correlated, a FTA if their demands are strongly positively correlated and a shallow CU when their demands are weakly correlated. Intuitively, differences in country risk attitudes (i.e., their degree of risk aversion) act as an additional source of comparative advantage. Deeper integration - particularly via a CU - permits less risk averse members to essentially export their relative partiality for risk to more risk averse partners, thereby effectively providing the latter with insurance.
    Keywords: Trade Agreement, Free Trade Area, Customs Union, Insurance, Uncertainty, Risk Premium.
    Date: 2021–04
  17. By: David Gaukrodger (OECD)
    Abstract: Investment treaty policy increasingly interacts with business responsibilities. This scoping paper first surveys the converging approaches to responsible business conduct (RBC) and business and human rights (BHR) as reflected in the OECD Guidelines for Multinational Enterprises, the United Nations Guiding Principles on Business and Human Rights and core ILO standards. Legislative developments and court cases are examined. The paper focuses primarily on government action as part of a flexible “smart mix” to address RBC and maximise the positive contribution of business to sustainable development, but also examines some business and civil society action.Three aspects of trade and investment treaty interaction with business responsibilities are considered: treaty impact on policy space for governments including for the non-discriminatory regulation of business; treaty provisions that buttress domestic environmental, labour or other law; and provisions that speak directly to business by, for example, encouraging RBC or establishing conditions for access to investment treaty benefits.
    Keywords: bilateral investment treaties, business and human rights, environmental law, human rights, investment treaties, investment treaty policy, investor-state dispute settlement, policy space, regulatory autonomy, responsible business conduct, right to regulate, sustainable development
    JEL: F13 F21 F23 F60 K23 K29 K32 K33 K38 M14
    Date: 2021–05–04
  18. By: Yuqing Xing (National Graduate Institute for Policy Studies, Tokyo, Japan)
    Abstract: The emergence of factoryless manufacturers in the world economy has given rise to a new mode of exporting services of intangible assets by multinational corporations, which has challenged the reliability of conventional trade statistics for the measurement of value chain trade. This study finds that even though Apple, the largest factoryless manufacturer in the world, sells billions of dollars products in the Chinese and Japanese markets, the official trade statistics do not count any of the sales as US exports to those two countries. The same is true for Nike, the largest seller of athletic footwear and apparel in the world. Using a hypothetical case of iPhone trade, the study provides an intuitive illustration of the failure of official trade statistics to record trade in intangible assets by factoryless manufacturers. For an appropriate evaluation of the contribution of factoryless manufacturers to international trade, this study estimates the exports in services of intangible assets by the American factoryless manufacturers, Apple, Nike, AMD, Cisco and Qualcomm. The estimation shows that in 2018 the five companies exported $70.3 billion in intangible asset services, equivalent to 8.2% of US exports in services as reported by official trade statistics. From the perspective of US-China economic relations, in 2018 Apple, Nike, AMD and Qualcomm sold to Chinese customers $27.9 billion services of intangible assets, equal to 48.9% of US service exports to China as reported by official trade statistics. Counting those exports as part of US exports to China would reduce the US trade deficit with the country by 7.3%.
    Keywords: China, US, GVCs, Exports, Apple
    Date: 2021–04
  19. By: Santamaría, Marta; Ventura, Jaume; Yesilbayraktar, Ugur
    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 dentification 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: 2021–01
  20. By: Susan Aaronson (George Washington University)
    Abstract: Disinformation is a wicked problem. Increasingly, disinformation comes from overseas. Many nations have adopted a wide range of strategies to mitigate disinformation. This patchwork may not be effective in mitigating cross-border disinformation. Moreover, the lack of coherent approaches could also lead to trade distortions and spillover effects upon internet openness and generativity. This paper shows how policymakers might use trade agreements to govern the cross-border data flows that at times fuel disinformation.
    Keywords: trade, disinformation, spam, trust
    JEL: F68 F53
    Date: 2021–12
  21. By: Stefano Clò; Enrico Marvasi; Giorgio Ricchiuti
    Abstract: Using a database of more than 100,000 M\&As, we study the internationalization of State-Owned Enterprises (SOEs) in the 21st century, and the underlying firm-level and country-level drivers. Meaningful differences are found - compared to private enterprises and across various types of SOEs as well - along many dimensions, including the time trend, the geographical-sectoral coverage, and firms' proprietary structure. Majority-owned SOEs are more focused on domestic markets, while State-Invested Enterprises and government-backed financial institutions are more internationalized. SOEs' internationalization has been less affected by the Great Financial Crisis, it is less sensitive to geographical and cultural proximity, it involves countries with a lower institutional quality and which are more peripheral in the world trade network.
    Keywords: Internationalization, State-Owned Enterprises, cross-border M\&As, Trade Network
    JEL: F2 L22 L33
    Date: 2021
  22. By: Bown, Chad P.; Conconi, Paola; Erbahar, Aksel; Trimarchi, Lorenzo
    Abstract: During the last decades, the United States has applied increasingly high trade protection against China. We combine detailed information on US antidumping (AD) duties --- the most widely used trade barrier --- with US input-output data to study the effects of trade protection along supply chains. To deal with endogeneity concerns, we propose a new instrument for AD protection, which combines exogenous variation in the political importance of industries with their historical experience in AD proceedings. We find that tariffs have large negative effects on downstream industries, decreasing employment, wages, sales, and investment. Our baseline estimates for 1988-2016 indicate that, due to AD protection against China, around 1.8 million US jobs were lost in downstream industries, with no significant job gains in protected sectors. When we extend the analysis to measures introduced under President Trump, we find that around 500,000 jobs were lost during the first two years of his term. We also provide evidence of the mechanisms behind the negative effects of protection along supply chains: AD duties decrease imports and raise production costs for downstream industries.
    Date: 2021–01
  23. By: Jocelyn Maillard (Univ Lyon, Université Lumière Lyon 2, GATE UMR 5824. 93, Chemin des Mouilles, F-69130 Ecully, France)
    Abstract: This paper investigates the effects of automation and offshoring on the dynamics of the occupational distribution of employment with a focus on Western Europe between 2000 and 2016. I use a general equilibrium model with three regions, three types of workers, ICT capital, trade in final goods and endogenous offshoring. Fed with exogenous measures of ICT-capital prices and trade costs, the model replicates key features of the data. It matches the observed dynamics of offshoring to Eastern Europe and Asian countries. It also reproduces accurately the observed polarization of the labor market: abstract and manual labor increase while routine labor falls. A counterfactual experiment reveals that automation is the main driver of polarization. Since it is also the only factor that drives individuals to become abstract (high-skill) workers, it is welfare enhancing. The effects of falling trade costs on labor polarization are smaller, but imply welfare gains.
    Keywords: Automation, offshoring, labor-market polarization, European employment distribution
    JEL: F16 F41 J24 J62 O33
    Date: 2021
  24. By: Wolfgang Keller
    Abstract: I study knowledge spillovers, positive externalities that augment the information set of an economic agent, and reviews the evidence on such spillovers in the context of international economic transactions. Even though spillovers are by their very nature difficult to identify, over recent decades a number of advances-conceptual, empirical, as well as in form of new data–have produced robust evidence that both trade and foreign direct investment lead to sizable knowledge spillovers.
    JEL: F1 F23 O3
    Date: 2021–04
  25. By: Bonfiglioli, Alessandra; De Pace, Federica
    Abstract: This paper studies the effect of firms' export activity on the gender wage gap among its workers. Using matched employer-employee data from Germany for the period between 1993 and 2007, we show that an increase in a firm's export widens the wage gap between male and female blue-collar workers, while it reduces it between male and female white collars. In particular, the former effect is stronger for workers in routine manual tasks, while the latter is driven by employees performing interactive tasks. This evidence is consistent with the hypothesis that serving foreign markets relies more on interpersonal skills, which reinforces female comparative advantage and reduces (widens) the gender wage gap in white-collar (blue-collar) occupations. Our results, identified out of the variation in wages within firm-worker pairs, are robust to controlling for a series of worker and firm characteristics, and a host of firm, sector, time and state fixed effects, and heterogeneous trends.
    Keywords: comparative advantage; Employer-employee data; gender wage gap; Trade
    JEL: F16 J16 J31
    Date: 2021–02
  26. By: Inferrera, Sergio
    Abstract: In this paper, I study the consequences of globalisation, as measured by the involvement of firms in GVC, on the business environment. In particular, I focus on concentration and productivity, firstly by estimating robust elasticities and then isolating the exogenous component of the variation in the participation in GVC. To this aim, I exploit the distance between industries in terms of upstreamness and downstreamness along the supply chain. The evidences suggest that involvement in international supply chains is positively related to concentration at the sector level and positively associated with aggregate productivity, an effect that is driven by the firms at the top of the productivity distribution. Finally, I relate these findings to the current pandemic, going beyond the lack of official statistics and estimating GVC participation for 2020 at the country-level through real time world-seaborne trade data, providing evidences on the reabsorption of the Covid shock in several European economies.
    Date: 2021
  27. By: Asongu, Simplice; Odhiambo, Nicholas
    Abstract: This research focuses on assessing how improving openness influences CO2 emissions in Sub-Saharan Africa. It is based on 49 countries in SSA for the period 2000-2018 divided into: (i) 44 countries in SSA for the period 2000-2012; and (ii) 49 countries for the period 2006-2018. Openness is measured in terms of trade and foreign direct investment (FDI) inflows. The empirical evidence is based on the Generalised Method of Moments. The following main findings are established. First, enhancing trade openness has a net positive impact on CO2 emissions, while increasing FDI has a net negative impact. Second, the relationship between CO2 emissions and trade is a Kuznets shape, while the nexus between CO2 emissions and FDI inflows is a U-shape. Third, a minimum trade openness (imports plus exports) threshold of 100 (% of GDP) and 200 (% of GDP) is beneficial in promoting a green economy for the first and second sample, respectively. Fourth, FDI is beneficial for the green economy below critical masses of 28.571 of Net FDI inflows (% of GDP) and 33.333 of net FDI inflows (% of GDP) for first and second samples, respectively. It follows from findings that while FDI can be effectively managed to reduce CO2 emissions, this may not be the case with trade openness because the corresponding thresholds for trade openness are closer to the maximum limit. This study complements the extant literature by providing critical masses of Trade and FDI that are relevant in promoting the green economy in Sub-Saharan Africa.
    Keywords: CO2 emissions; Economic development; Africa; Sustainable development
    JEL: C52 O38 O40 O55 P37
    Date: 2020–01
  28. By: Gurevitch, Tamara; Herman, Peter; Toubal, Farid; Yotov, Yoto
    Abstract: Using new data on linguistic diversity across and within countries, we examine novel channels though which language affects trade patterns and economic welfare. We find that linguistic similarity within a country accounts for about 10 percent of estimated 'home bias', demonstrating the importance of shared languages for domestic integration. To highlight the general equilibrium implications of domestic language proximity, we simulate the repeal of Quebec's Bill 101, which made French an official language in Canada and established fundamental language rights for French-speakers. The analysis demonstrates that domestic language diversity has significant implications for Canada's welfare but also sizable economic consequences that stretch far beyond its borders.
    Keywords: Common language; Domestic trade; domestic trade costs; ethno-linguistic diversity; identity; international trade; welfare
    JEL: C54 D60 F14 F19 Z13
    Date: 2021–01
  29. By: van Schalkwyk, May C.I.; Barlow, Pepita; Siles-Brügge, Gabriel; Jarman, Holly; Hervey, Tamara; McKee, Martin
    Abstract: There is an extensive body of research demonstrating that trade and globalisation can have wide-ranging implications for health. Robust governance is key to ensuring that health, social justice and sustainability are key considerations within trade policy, and that health risks from trade are effectively mitigated and benefits are maximised. The UK’s departure from the EU provides a rare opportunity to examine a context where trade governance arrangements are being created anew, and to explore the consequences of governance choices and structures for health and social justice. Despite its importance to public health, there has been no systematic analysis of the implications of UK trade policy governance. We therefore conducted an analysis of the governance of the UK’s trade policy from a public health and social justice perspective.
    Keywords: population health; political determinants of health; health policy; social justice; democracy; trade policy; goverance; Brexit; transparency; participation
    JEL: L81
    Date: 2021–03–06
  30. By: Cem Cakmakli (Koç University); Selva Demiralp (Koç University); Sebnem Kalemli-Ozcan (University of Maryland, Department of Economics); Sevcan Yesiltas (Koç University); Muhammed A. Yildirim (Koç University & Center for International Development at Harvard University)
    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, can be 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.
    Keywords: COVID-19; Sectoral Infection Dynamics; Globalization; International I-O Linkages.
    JEL: E61 F00 C51
    Date: 2021–04
  31. By: Ju, Jiandong; Shi, Kang; Wei, Shang-Jin
    Abstract: This paper studies the effects of trade liberalization on capital flows in a dynamic Heckscher-Ohlin model, and makes four contributions. First, we identify an interest rate over-determination problem in such a model, and solve it with an endogenous discount factor. Second, we show that a trade liberalization in a developing country generally leads to a greater current account surplus, which is the exact opposite of a common but partial equilibrium intuition. Third, factor market reforms reinforce the effect of the trade liberalization on capital outflows. Finally, our calibrations suggest that China's accession to the WTO is likely an important factor driving the rise of its current account surplus.
    Keywords: China; trade reforms; trade surplus; Wto accession
    JEL: F13 F32
    Date: 2021–02
  32. By: Latzer, Helene; Mayneris, Florian
    Abstract: This paper analyses the relationship between a country's income distribution and its exports' unit values. Using bilateral export flows, we not only confirm the positive association between a country's average income and its export unit values, but further identify a heterogeneous relationship with income inequality: we find a greater income spread to be associated with higher exports unit values in the case of poor countries only. These results are robust to the inclusion of controls for other determinants of export unit values, as well as to the use of alternative measures of income inequality and of the quality index. We finally discuss various theoretical rationalisations for this heterogeneous relationship between income inequality and the quality content of exports along the average income dimension, and show suggestive evidence that demand-side mechanisms can account for it at least partly.
    Keywords: export unit values; Home Market Effect; income distribution; product quality; Trade
    JEL: F12 L15 O15
    Date: 2021–03
  33. By: Harrigan, James; Resheff, Ariell; Toubal, Farid
    Abstract: We study the impact of firm-level choices on ICT, R&D, exporting and importing on the evolution of productivity, its bias towards skilled workers, and implications for labor demand. We use a novel measure of firm-level R&D and ICT adoption: employment of "techies" who perform these tasks. We develop methodology for estimating nested-CES production functions and for measuring both Hicks-neutral and skill-augmenting technology differences at the firm level. Using administrative data on French firms we find that techies, exporting and importing raise skill-biased productivity. In contrast, only ICT techies raise Hicks-neutral productivity. On average, higher firm-level skill biased productivity hardly affects low-skill employment, even as it raises relative demand for skill, due to the cost-reducing effect. ICT accounts for large increases in aggregate demand for skill, mostly due to the effect on firm size, less so through within-firm changes. Exporting, importing, and R&D have smaller aggregate effects.
    Keywords: Globalization; ICT; labor demand; Outsourcing; productivity; R&D; skill augmenting; Skill bias; STEM skills; techies
    JEL: D2 D24 F1 F16 F6 F66 J2 J23 J24 O52
    Date: 2021–02
  34. By: Duleep, Harriet Orcutt; Jaeger, David A.; McHenry, Peter
    Abstract: We present a novel theory that immigrants facilitate innovation and entrepreneurship by being willing and able to invest in new skills. Immigrants whose human capital is not immediately transferable to the host country face lower opportunity costs of investing in new skills or methods and will be more flexible in their human capital investments than observationally equivalent natives. Areas with large numbers of immigrants may therefore lead to more entrepreneurship and innovation, even among natives. We provide empirical evidence from the United States that is consistent with the theory's predictions.
    Keywords: entrepreneurship; Human Capital; Immigration; Innovation
    JEL: J15 J24 J39 J61 L26
    Date: 2021–03
  35. By: Felbermayr, Gabriel; Tarasov, Alexander
    Abstract: The distribution of transport infrastructure across space is the outcome of deliberate government planning that reflects a desire to unlock the welfare gains from regional economic integration. Yet, despite being one of the oldest government activities, the economic forces shaping the endogenous emergence of infrastructure have not been rigorously studied. This paper provides a stylized analytical framework of open economies in which planners decide non-cooperatively on transport infrastructure investments across continuous space. Allowing for intra- and international trade, the resulting equilibrium investment schedule features underinvestment that turns out particularly severe in border regions and that is amplified by the presence of discrete border costs. In European data, the mechanism explains about 16% of the border effect identified in a conventionally specified gravity regression.
    Keywords: international trade,infrastructure investment,economic geography,border effect
    JEL: F11 R42 R13
    Date: 2021
  36. By: Dix-Carneiro, Rafael; Goldberg, Pinelopi Koujianou; Meghir, Costas; Ulyssea, Gabriel
    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
  37. By: Ponczek, Vladimir; Ulyssea, Gabriel
    Abstract: How does enforcement of labor regulations shape the labor market effects of trade? Does the informal sector introduce greater de facto flexibility, reducing employment losses during bad times? To tackle these questions, we exploit local economic shocks generated by trade liberalization and variation in enforcement capacity across local labor markets in Brazil. In the aftermath of the trade opening, regions with stricter enforcement observed: (i) lower informality effects; (ii) larger losses in overall employment; and (iii) greater reductions in the number of formal plants. Regions with weaker enforcement observed opposite effects. All these effects are concentrated on low-skill workers. Our results indicate that greater de facto labor market flexibility introduced by informality allows both formal firms and low-skill workers to cope better with adverse labor market shocks.
    Keywords: Informality; Labor market flexibility; Trade
    JEL: F16 J32 J46
    Date: 2021–03
  38. By: Stefano Costa; Federico Sallusti; Claudio Vicarelli
    Abstract: Making use of domestic and international input-output tables and network analysis indicators, we analyze international and domestic trade relationships of Italian industries looking at their ability of transmission of shocks. To do this, we also propose a new taxonomy being able to distinguish sectors in terms of the extent to, and the speed at, which they spread domestic and foreign economic shocks into the Italian production system. Our results show a mismatch between sectors having a central position in terms of trade relationships with foreign countries and those having a central role for the propagation of shocks within the Italian economic system. Only a small group of sectors has both a high openness to international markets and a central position within the network of Italian production system. It follows that the domestic transmission capacity of stimuli from abroad is limited: this aspect strongly compromises the possibility of benefiting from positive shocks deriving from increases in foreign demand, even if it could represent, at least in part, a safeguard element in the event of negative impulses deriving from the trend of the international economic cycle.
    Keywords: Input/output tables; network analysis; shocks transmission.
    Date: 2021–04–30
  39. By: Grivas Chiyaba (Department of Economics, University of Reading)
    Abstract: This study investigates the response of the components of FDI flows to macroeconomic variables within firms. The analysis uses a new firm-level database constructed from anonymised confidential data held by the Zambian Central Bank, covering the period 2008 – 2017. Applying the fixed effects estimation method, the study confirms a positive association between FDI inflows and commodity prices. The study also confirms a positive correlation between reinvested earnings and exchange rate depreciation. Furthermore, the study accepts, but with a qualification, the preference for intra-company debt financing when there is policy uncertainty in a host country. However, the proposition of a positive relationship between equity financing and currency appreciation in the host country is rejected. The study proposes instead a new hypothesis, a negative relationship between equity financing and the exchange rate appreciation.
    Keywords: Foreign direct investment, retained earnings, equity, intra-company debt, firm
    JEL: E3 F23 F24 F31 H32
    Date: 2021–05–07
  40. By: Korinek, Anton; Stiglitz, Joseph E
    Abstract: Progress in artificial intelligence and related forms of automation technologies threatens to reverse the gains that developing countries and emerging markets have experienced from integrating into the world economy over the past half century, aggravating poverty and inequality. The new technologies have the tendency to be labor-saving, resource-saving, and to give rise to winner-takes-all dynamics that advantage developed countries. We analyze the economic forces behind these developments and describe economic policies that would mitigate the adverse effects on developing and emerging economies while leveraging the potential gains from technological advances. We also describe reforms to our global system of economic governance that would share the benefits of AI more widely with developing countries.
    Keywords: artificial intelligence; inequality; labor-saving progress; terms-of-trade losses
    JEL: D63 F63 O25 O32
    Date: 2021–02
  41. By: Lee, Jungho; Wei, Shang-Jin; Xu, Jianhuan
    Abstract: A current account surplus is associated with a welfare loss, according to the existing open-economy macroeconomics literature, only when there are distortions in either savings or investment. We propose a new source of welfare loss even in the absence of such distortions. In particular, a trade surplus, the largest component of a current account surplus for most countries, can alter the shipping costs and the composition of a country's imports and exports in ways that tend to raise the pollution level of the country. Thus, when its pollution tax is low, a trade surplus can produce a welfare loss outside the standard channels.
    Keywords: and transportation cost; pollution; trade surplus
    JEL: F18 F32
    Date: 2021–02

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