nep-int New Economics Papers
on International Trade
Issue of 2021‒07‒19
forty-nine papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. Interactions Between Global Value Chains and Foreign Direct Investment: A Network Approach By Amat Adarov
  2. The unappreciated trend toward unilateral trade liberalization By Robert Z. Lawrence
  3. Economic Sentiment Indicators and Foreign Direct Investment: Empirical Evidence from European Union Countries By Andrzej Cieślik; Mahdi Ghodsi
  4. Tariff Changes by Turkey During the Covid-19 Pandemic: Impact on Import Value and Import Prices By Yusuf Kenan Bagir
  5. The Information and Communication Technology Cluster in the Global Value Chain Network By Amat Adarov
  6. Why Trade When You Can Transfer the Technology: Revisiting Smith and Ricardo By Rajat Acharyya; Sugata Marjit
  7. The Distributional Effects of Trade: Theory and Evidence from the United States By Kirill Borusyak; Xavier Jaravel
  8. The Role of Domestic Factors in the EU’s Governance of Labour Standards through Trade By Franklin Maduko; Timea Pál; László Bruszt
  9. Foreign direct investment, prices and efficiency: Evidence from India By Ali, Nesma; Stiebale, Joel
  10. Did the U.S. Bilateral Goods Deficit With China Increase or Decrease During the US-China Trade Conflict? By Hunter L. Clark; Anna Wong
  11. Import Competition and Public Attitudes Towards Trade By Davenport, Alex; Dorn, David; Levell, Peter
  12. Expanding the international trade and investment policy agenda: the role of cities and services By Cote, Christine; Estrin, Saul; Shapiro, Daniel
  13. The Resilience of FDI to Natural Disasters through Industrial Linkages By KATO Hayato; OKUBO Toshihiro
  14. The effect of recent technological change on US immigration policy By Björn Brey
  15. International Investment Agreements, Double-Taxation Treaties and Multinational Activity: The (Heterogeneous) Effects of Binding By Monika Sztajerowska
  16. Return Migrants and the Wage Premium: Does the Legal Status of Migrants Matter? By Elmallakh, Nelly; Wahba, Jackline
  17. Learn German, Buy German? Language-learning opportunities abroad and exports By Omar Martin Fieles-Ahmad; Matthias Huber
  18. Trade Promotion from Thailand to China As A Result Of a New Train Route By Siyuan wei
  19. Can China blunt the impact of new US economic sanctions? By Mary E. Lovely; Jeffrey J. Schott
  20. The Link between Financial Globalisation and Integration into Global Value Chains and Macroeconomic Impacts By Werner Hölzl
  21. Estimation and Machine Learning Prediction of Imports of Goods in European Countries in the Period 2010-2019 By Costantiello, Alberto; Laureti, Lucio; Leogrande, Angelo
  22. Central, East and Southeast European Countries in the Global Value Chain Network By Amat Adarov
  23. Heterogeneous Effect of Exchange Rates on Firms’ Exports: Role of Labor Intensity By Kurmas Akdoðan; Yusuf Kenan Bagir; Huzeyfe Torun
  24. State Dependence and Unobserved Heterogeneity in the Extensive Margin of Trade By Julian Hinz; Amrei Stammann; Joschka Wanner
  25. Capital Goods and the Comparative Advantages Chain By Ariel Dvoskin; Guido Ianni
  26. Container Trade and the U.S. Recovery By Lutz Kilian; Nikos Nomikos; Xiaoqing Zhou
  27. Strategic corporate social responsibility and tariff policies: The timing of commitments and policy implications By Xu, Lili; Lee, Sang-Ho
  28. Size, Trade, Technology and the Division of Labor By Nuno Limão; Yang Xu
  29. Predicting Exporters with Machine Learning By Francesca Micocci; Armando Rungi
  30. Fundamentals vs. policies: can the US dollar's dominance in global trade be dented? By Georgios Georgiadis; Helena Le Mezo; Arnaud Mehl; Cédric Tille
  31. A World Trading System for the Twenty-First Century By Robert W. Staiger
  32. Gravity models of networks: integrating maximum-entropy and econometric approaches By Marzio Di Vece; Diego Garlaschelli; Tiziano Squartini
  33. Towards Building Shared Prosperity in Sub-Saharan Africa: How Does the Effect of Economic Integration Compare to Social Equity Policies? By Ofori, Isaac K.
  34. Towards the Reversal of Poverty and Income Inequality Setbacks Due to COVID-19: The Role of Globalisation and Resource Allocation By Ofori, Isaac K.; Armah, Mark K.; Asmah, Emmanuel E.
  35. Profit Shifting and Equilibrium Principles of International Taxation By Manon François
  36. China's State-owned Enterprises and Competitive Neutrality By Alicia Garcia-Herrero; Gary Ng
  37. Bias and consistency in three-way gravity models By Martin Weidner; Thomas Zylkin
  38. Optimal tariffs with emissions taxes under non-restrictive two-part licensing strategies by a foreign eco-competitor By Kim, Seung-Leul; Lee, Sang-Ho
  39. Borders of Network Effects and Early Internationalization as a Latecomer Strategy By Chang, Sungyong; Park, Sanghyun
  40. The evolution of Cambodian current account: A dynamic general equilibrium analysis By Kheng, Veasna; Pan, Lei
  41. The global migration network of sex-workers By Luis E C Rocha; Petter Holme; Claudio D G Linhares
  42. "Migrant Inventors as Agents of Technological". By Ernest Miguelez; Andrea Morrison
  43. Why Do Citizens Prefer Highly Skilled Immigrants to Low-Skilled Immigrants? Identifying Causal Mechanisms of Immigration Preferences with a Survey Experiment By IGARASHI Akira; MIWA Hirofumi; ONO Yoshikuni
  44. The Impact of Economic Growth, Trade Openness and Technological Progress on Renewable Energy Use in Organization for Economic Co-Operation and Development Countries By Alam, Md. Mahmudul; Murad, Wahid
  45. Bilateral investment treaties and sovereign default risk By Eichler, Stefanie; Nauerth, Jannik A.
  46. Do Japanese Expatriates Matter for Foreign Subsidiary Performance? A Role-Based Analysis of Three-Wave Panel Data By Jesper EDMAN; Riki TAKEUCHI
  47. Winners and losers of immigration By Davide Fiaschi; Cristina Tealdi
  48. The politics of labour relations in global production networks: collective action, industrial parks, and local conflict in the Ethiopian apparel sector By Oya, Carlos; Schaefer, Florian
  49. A new Ricardian model of trade, growth and inequality- The role of financial capital By Sugata Marjit

  1. By: Amat Adarov (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: The world economy is increasingly shaped by cross-border production and investment activity. The paper uses complex network analysis along with panel data econometric techniques to study the structure and interactions between the networks of global value chains (GVC) and foreign direct investment (FDI). The analysis reveals that both FDI and GVC networks have a distinct core-periphery structure dominated by a relatively small number of countries with the USA constituting the global hub interlinked with regional European and Asian clusters, which, in turn, are centered around regional hub countries like China and Germany. Simultaneous equation model regressions using three-stage least squares suggest that FDI centrality facilitates GVC centrality of countries. However, FDI centrality is driven to a large extent by the FDI statutory restrictions and tax offshore regulations, rather than GVC connectivity.
    Keywords: global value chains; foreign direct investment; network analysis; cross-border connectivity; simultaneous equation model
    JEL: F10 F14 F15 F21
    Date: 2021–07
  2. By: Robert Z. Lawrence (Peterson Institute for International Economics)
    Abstract: A frequently voiced complaint from the Trump administration was that US firms have faced a competitive disadvantage in exports because the US market is open and US tariffs are low but US trading partners protect their markets with high tariffs. The administration used this concern to justify raising US tariffs whenever it could. Lawrence argues that these claims should be more nuanced and account for the extensive unilateral liberalization by many countries over the past 30 years and that the grievances that motivated the Trump trade policies are increasingly misplaced. Many developing countries have reduced their tariffs unilaterally to rates that are far lower than they applied three decades ago and far less than the bound rates reflected in their World Trade Organization (WTO) obligations. Globally, on average, tariffs were not raised during the global financial crisis of 2008 and continued to decline through at least 2018. Even when shocks from imports resulted in serious injury to domestic industries, several developing countries temporarily provided safeguard protection but at levels that were lower than their WTO bound rates. This evidence of import liberalization also suggests that rising protectionism was not responsible for the slow growth in world trade that has been evident since 2011. It remains uncertain whether countries will now respond to disruptions to global supply chains since 2018 caused by Trump’s trade policies and the COVID-19 pandemic by reversing their tariff liberalization stance, but the sustained enthusiasm for new megaregional trade agreements suggests many countries will not.
    Date: 2021–03
  3. By: Andrzej Cieślik; Mahdi Ghodsi (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: This paper studies the role of business sentiment in the decisions of multinational enterprises (MNEs) to undertake foreign direct investment (FDI) across European Union (EU) member states. Based on the knowledge-capital model, the study employs the Pseudo Poisson Maximum Likelihood (PPML) estimator and panel data to examine empirically the determinants of FDI across EU member states during the period 2003-2017. The empirical evidence suggests that better economic sentiment in an EU Member State induces MNEs to undertake FDI in that country, while worse economic sentiment in an EU member state motivates an MNE in that country to invest abroad.
    Keywords: economic sentiment, factor endowments, foreign direct investment, multinational enterprise, market size, EU Member States
    JEL: F21 F23
    Date: 2021–07
  4. By: Yusuf Kenan Bagir
    Abstract: Turkey introduced additional customs duties on 5,088 products for a temporary period in 2020. This study investigates the impact of the changes in effective tariff rates on quarterly import value and prices using monthly trade data at 12-digit product – country breakdown. Although the product range affected from the tariff rate hikes is quite wide, the regulations affected only 6.5% of total imports since the majority of top trade partners are excluded from the additional custom duties via existing bilateral trade agreements. Country-product level regression analysis suggests that a one percentage point increase in effective tariff rates reduces the import value by 1.24 percent. There is no evidence of heterogeneity at product level despite Turkey’s market power in certain product groups. There is also no statistically significant impact on import prices therefore the price cost of increased tariff rates is entirely borne by the Turkish firms and consumers. Overall, the regression results imply that the temporary increases in additional customs duty rates with 6 different regulations reduced the total import value by about 0.9% in the third quarter of 2020.
    Keywords: Tariff rates, Imports, Import prices
    JEL: F13 F14
    Date: 2021
  5. By: Amat Adarov (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: Global value chains (GVCs) are among the critical factors shaping the world economy nowadays. Within cross-border production networks an increasingly important role has been played by the information and communication technology (ICT) sectors. Based on the multi-country input-output database recently developed by the Vienna Institute for International Economic Studies, covering the period 2005-2018, this policy brief examines the structure and the dynamics of global value chains associated with the ICT sectors. To this end we use complex network analysis techniques to characterise the overall topology of the international ICT cluster in the GVC network, identify the key countries and sectors therein from the perspective of their connectivity. The analysis shows that the ICT GVC network is dominated by the mutual value-added trade linkages between China, South Korea and Taiwan in the Computers and electronics manufacturing sector. These sectors are heavily interlinked via backward and forward GVC linkages with a large number of ICT and non-ICT sectors, many of which are located in the USA, China and Germany. In the recent decade, there has been a major shift in terms of importance to the GVC network from ICT manufacturing towards ICT services, especially prominent for the ICT services sector in Ireland, which has become among the most interconnected sectors in the global ICT cluster.
    Keywords: global value chains; ICT sector; network analysis; digitalisation
    JEL: F10 F14 F15
    Date: 2021–07
  6. By: Rajat Acharyya; Sugata Marjit
    Abstract: This paper explores the possibility of international technology transfer in lieu of trade in a model with absolute and comparative advantage. Countries having absolute advantage in producing a good may offer that technology to a possible trading partner against a fee and both the countries might gain. Thus, gains from trade might be dominated by gains from technology transfer depending on the extent of comparative and absolute advantages. We provide detailed conditions under which free trade equilibrium will be pre-empted by technology transfer. Such an avenue of fruitful exchange remains unexplored in the Ricardian model of trade.
    Keywords: technology transfer, absolute advantage, comparative advantage, Smith, Ricardo
    JEL: F10
    Date: 2021
  7. By: Kirill Borusyak; Xavier Jaravel
    Abstract: How much do consumption patterns matter for the impact of international trade on inequality? In neoclassical trade models, the effects of trade shocks on consumers' purchasing power are governed by the shares of imports in consumer expenditures, under no parametric assumptions on preferences and technology. This paper provides in-depth measurement of import shares across the income distribution in the United States, using new datasets linking expenditure and customs microdata. Contrary to common wisdom, we find that import shares are flat throughout the income distribution: the purchasing-power gains from lower trade costs are distributionally neutral. Accounting for changes in wages in addition to prices in a unified nonparametric framework, we find substantial distributional effects that arise within, but not across, income and education groups. There is little impact of a fall in trade costs on inequality, even though trade shocks generate winners and losers at all income levels, via wage changes.
    JEL: D63 F14 F16 F60
    Date: 2021–06
  8. By: Franklin Maduko; Timea Pál; László Bruszt
    Abstract: This paper analyses the role of domestic factors in the ability of the EU to promote NTPOs through formal trade policies and market integration, as two distinct governance approaches. Focusing on labour standards, we examine how economic and political factors in developing economies influence the ability of key stakeholders – governments, businesses and labour organizations – to undermine or reinforce EU governance efforts. We use a combination of regression and comparative case analysis to assess associations and understand processes on ground. The quantitative analysis shows that improvements in labour standards are closely associated with 1) labour standards in key export markets, 2) technological sophistication of exports, 3) state capacity and 4) freedom of CSOs. Comparative analysis of how differences in state strategies and capacity, key export destinations and strength of labour organizations across Moldova and Morocco set in place divergent pathways of labour standard improvements allows us to shed more light on the potentials and limitations of EU governance efforts.
    Keywords: Trade policy, EU governance, labour standards, European Neighbourhood Policy, domestic factors.
    Date: 2021–05
  9. By: Ali, Nesma; Stiebale, Joel
    Abstract: This paper uses a rich panel data set of Indian manufacturing firms to analyze the effects of foreign direct investment (FDI) on various outcomes of domestic firms. We apply recent methodological advances in the estimation of production functions together with detailed product-level information on prices and quantities to estimate physical productivity, markups and marginal costs. Our results indicate the importance of price adjustments which stem from competitive pressure and a pass-through of cost savings to consumers. In line with the previous literature, we find little evidence for spillovers based on commonly used measures of revenue productivity. In contrast, we measure sizable efficiency gains using measures that are not affected by pricing heterogeneity, such as marginal costs and physical productivity. Exploiting exogenous variation from India's FDI liberalization, we provide evidence that the relationship between exposure to FDI and efficiency is causal. Our results suggest that knowledge spills over across product categories within industries and mainly benefits producers of high-quality products. We also provide evidence that FDI spillovers are stronger for joint ventures and when foreign investors enter via acquisitions.
    Keywords: Foreign Direct Investment,Spillovers,Productivity,Marginal Costs,Prices,Markups,Multi-Product Firms
    JEL: F61 F23 G34 L25 D22 D24
    Date: 2021
  10. By: Hunter L. Clark; Anna Wong
    Abstract: The United States' bilateral goods trade deficit with China appeared to have narrowed substantially since the escalation of the U.S.-China trade conflict in 2018, or so U.S. trade data suggest. By contrast, the Chinese data tell a much different story: the deficit, as implied by China's bilateral surplus, nearly reached historical highs by the end of 2020.
    Date: 2021–06–21
  11. By: Davenport, Alex (Institute for Fiscal Studies, London); Dorn, David (University of Zurich); Levell, Peter (Institute for Fiscal Studies, London)
    Abstract: We use data from the Pew Global Attitudes Survey to analyse how public attitudes towards trade have changed over time in developed economies, and how these attitudes differ across groups in the population. Attitudes towards trade deteriorated in the 2000s before the onset of the financial crisis, with declines tending to be greater in countries that also saw larger increases in Chinese import competition. Perhaps surprisingly, given that barriers to trade appear to be on the increase again after several decades of steady decline, attitudes towards trade improved again during the last decade both in the US and in leading European economies. Comparing across survey respondents with different individual characteristics, those without a university education are less likely to have a favourable impression of international trade, and to believe that it has specific benefits in terms of reducing prices, creating jobs, or increasing wages. While economists often emphasize the consumer benefits of trade due to lower prices, only 20-40% of survey respondents in most countries perceive such a price effect, suggesting that the benefits of trade may not be salient for many people.
    Keywords: trade, attitudes, prices
    JEL: F10 F16 F60
    Date: 2021–07
  12. By: Cote, Christine; Estrin, Saul; Shapiro, Daniel
    Abstract: We explore the public policy implications of two new, significant, and inter-related global phenomena. First, the rising share of services, particularly innovation-driven digital and knowledge-based services, in foreign trade and multinational enterprise activity; and second, the increasingly important role of global cities as home and hosts to these activities. Our framework distinguishes between national economic policies to promote trade and FDI, referred to as economic diplomacy, and comparable policies originating in cities, referred to as city diplomacy. National economic diplomacy has traditionally promoted trade and investment in goods, often through trade agreements and promotion agencies, and we explore the limitations of these tools as trade in services becomes more important. However, we also note that trade in services, particularly innovation-driven services, is concentrated in global cities, and traded between them, often within MNEs. We conclude that national policies on trade and investment cannot be divorced from innovation and knowledge strategies, and that these strategies cannot be divorced from cities. We emphasize that national economic diplomacy should be better aligned with city diplomacy. We also discuss how the transition to stronger city diplomacy may have consequences for firms and their strategies for corporate diplomacy.
    Keywords: services; trade and investment policy; economic diplomacy; city diplomacy; global cities; MNEs; corporate diplomacy; ES/S008373/1
    JEL: L81
    Date: 2020–07–06
  13. By: KATO Hayato; OKUBO Toshihiro
    Abstract: When do multinationals show resilience during natural disasters? To answer this, we develop a simple model in which multinationals and local firms in the host country are interacted through input-output linkages. When natural disasters seriously hit local firms and thus increase the cost of sourcing local intermediates, most multinationals may leave the host country. However, they are likely to stay if they are tightly linked with local suppliers and face lower trade costs of importing foreign intermediates. We further provide two extensions of the basic model to allow for multinationals with heterogeneous productivity and disaster reconstruction.
    Date: 2021–06
  14. By: Björn Brey
    Abstract: Did recent technological change, in the form of automation, affect immigration policy in the United States? I argue that as automation shifted employment from routine to manual occupations at the bottom end of the skill distribution, it increased competition between natives and immigrants, consequently leading to increased support for restricting low-skill immigration. I formalise this hypothesis theoretically in a partial equilibrium model with constant elasticity of substitution in which technology leads to employment polarization, and policy makers can vote on immigration legislation. I empirically evaluate these predictions by analysing voting on low-skill immigration bills in the House of Representatives during the period 1973-2014. First, I find evidence that policy makers who represent congressional districts with a higher share of manual employment are more likely to support restricting low-skill immigration. Second, I provide empirical evidence that representatives of districts which experienced more manual-biased technological change are more likely to support restricting low-skill immigration. Finally, I provide evidence that this did not affect trade policy, which is in line with automation having increased employment in occupations exposed to low-skill immigration, but not those exposed to international trade.
    Keywords: Political Economy, Voting, Immigration Policy, Technological Change.
    Date: 2021
  15. By: Monika Sztajerowska (PSE - Paris School of Economics - ENPC - École des Ponts ParisTech - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)
    Abstract: There are close to 3,000 international investment agreements (IIAs) that aim to protect and promote cross-border investment. Do they achieve their main purpose? This paper provides novel firm-level evidence on the effects of IIAs on location decisions of multinational enterprises (MNEs) in a multi-country context. It uses unique micro-level data on the location of MNEs' affiliates globally and country-pair data on the coverage and content of treaties over a twenty-year period (1990-2010). It finds that IIAs, in particular those with the investor state dispute settlement (ISDS), increase the probability of MNEs' first foreign entry when they are accompanied by a double-taxation treaty. This interaction between investment and tax treaties can have important policy implications.
    Keywords: Double Taxation Treaties,Bilateral Investment Agreements,Multinational Enterprises,Double Taxation Treaties Multinational Enterprises,Double Taxation Treaties F23,F14,F15,F53
    Date: 2021–06
  16. By: Elmallakh, Nelly (World Bank); Wahba, Jackline (University of Southampton)
    Abstract: This paper examines the impact of the legal status of overseas migrants on their wages upon return to the home country. Using unique data from Egypt, which allows us to distinguish between return migrants according to their type of international migration, documented versus undocumented, we examine the impact of the illegal status on wages upon return. Relying on a conditional mixed process model, which takes into account the selection into emigration, into return, and into the legal status of temporary migration, we find that, upon return, undocumented migrants witness a wage penalty compared to documented migrants, as well as relative to non-migrants. Our results are the first to show the impact of undocumented migration on the migrant upon return to the country of origin.
    Keywords: return migration, undocumented migration, illegality, wages, Egypt
    JEL: F22 J30
    Date: 2021–06
  17. By: Omar Martin Fieles-Ahmad (Otto von Guericke University Magdeburg); Matthias Huber (Friedrich Schiller University Jena)
    Abstract: Using data on the presence of the Goethe Institutes (GI) in 134 importer countries between 1978 and 2014, we study the effect that language learning opportunities abroad have on German exports. We employ a gravity model of trade with a single exporter and use the Poisson-Pseudo Maximum Likelihood (PPML) estimator to measure the relationship of interest. To gauge the importance of potential reverse causality, we also estimate the effect that institutes have on Swiss exports. Our findings for both Germany and German-speaking Swiss cantons show that institutes do stimulate exports to GI-hosting countries, but that this effect is confined to institutes offering language training services, which suggests that language requirements and acquisition underlie the positive link found between institutes and exports. This reading of our findings receives further support in additional explorations, where we study exports differentiated by Rauch (1999) product categories to account for differing communication requirements in trading.
    Keywords: gravity model, foreign trade, language, cultural institute
    JEL: C23 F14 Z10
    Date: 2021–07–05
  18. By: Siyuan wei (Naresuan University, Thailand Author-2-Name: Vatcharapol Sukhotu Author-2-Workplace-Name: Naresuan University 99, Moo.9, Thapo sub-district, Mueang district, Phitsanulok province 65000, Thailand Author-3-Name: Author-3-Workplace-Name: Author-4-Name: Author-4-Workplace-Name: Author-5-Name: Author-5-Workplace-Name: Author-6-Name: Author-6-Workplace-Name: Author-7-Name: Author-7-Workplace-Name: Author-8-Name: Author-8-Workplace-Name:)
    Abstract: Objective - This paper aims to analyse the impact of the China-Laos railway on export trade from China to Thailand. The paper analyses the advantages and disadvantages of the new route and other routes base on driven factors, identifies what trade industry is suitable for this new route and provides some reference for Thai trade exporters. This will enable Thai export traders to understand the new transportation route formed by the railway and improve the trade volume and competitiveness of Thai products through this route. Methodology/Technique - Literature review method, secondary data method, in-depth interview method. Findings - It is found that the new route formed after the completion of the China-Laos railway has many advantages base on driven factors and many industries are suitable for the use of this new route. Novelty - Few people know much about the China-Laos railway, and even less about the analysis of its impact on Thailand's trade. The author's in-depth interview method allows him to get in touch with experts who are very relevant to the China-Laos railway, providing valuable insights. Type of Paper - Empirical.
    Keywords: Thai Products; Driving Factors; Route Selection; China-Laos Railway; In-depth Interviews; Secondary Data Method
    JEL: F16 F18 F19
    Date: 2021–06–30
  19. By: Mary E. Lovely (Peterson Institute for International Economics); Jeffrey J. Schott (Peterson Institute for International Economics)
    Abstract: Successive US administrations have embraced economic sanctions, especially financial sanctions, to punish bad actors in Iran, North Korea, Russia, and other hostile countries. Often, US officials leverage the economic pressure on their targets by forcing individuals and companies outside the United States to stop transacting with those on the US sanctions list or face severe penalties. European governments have instituted blocking regulations to prohibit compliance with such extraterritorial US sanctions against their nationals, but with limited success. Most companies forsake business in countries targeted by US sanctions rather than risk losing access to the US market. China is now adopting new blocking rules to nullify the effect of foreign sanctions or other measures “unjustifiably applied” against Chinese nationals. The new rules allow Chinese government officials to issue orders prohibiting Chinese companies from complying with foreign sanctions, essentially forcing them to choose between access to the Chinese market and access to the US market, with penalties possible in either direction. For decades weak foreign pushback allowed unilateral sanctions to remain a relatively powerful tool of US economic statecraft, but the Chinese blocking rules signal a major change to the status quo. The authors argue that multinational firms operating abroad are increasingly at risk of being caught firmly between US sanctions, including export controls, and Chinese countermeasures. These pressures add to growing US-China trade frictions already pushing the restructuring of global supply chains.
    Date: 2021–06
  20. By: Werner Hölzl
    Abstract: This paper examines the association between participation in global value chains and financial globalisation measured by international net and capital flows. The results show that financial globalisation and the rise of global value chains are related but not two sides of the same coin. In fact, we find that GVC participation is positively associated with equity capital flows but negatively associated with debt capital flows. We also study the association of GVC participation and capital flows with aggregate economic outcomes. The findings show that both GVC participation and equity flows affect the share of mortgage and business credit. But we uncover also important differences in the impact of capital flows between advanced and emerging countries. Regarding changes in the economic structure our results suggest a positive association of both GVC participation and equity inflows on the manufacturing share, while debt inflows are primarily associated with a growth of the service sector in advanced economies, but not in emerging and developing countries. The finding that there is no strong association between the globalisation indicators and innovation suggests that the fragmentation of value chains leads to functional specialisation in tasks and tends to weaken the link between innovation and production at country level. We find in addition that a higher GVC participation is weakly associated with a higher growth of government revenue, as are debt flows but only in advances countries. This finding suggests also that debt flows were redirected primarily into safe countries in advanced countries.
    Keywords: Globalisation, Financial Flows, Global Value Chains, Structural Change, Innovation
    Date: 2021–07–05
  21. By: Costantiello, Alberto; Laureti, Lucio; Leogrande, Angelo
    Abstract: In this article we estimate the imports of goods in European countries in the period 2010-2019 for 28 countries. We use Panel Data with Fixed Effects, Panel Data with Random Effects, Pooled OLS, WLS. Our results show that “Imports of Goods” is negatively associated with “Private Consumption Expenditure at Current Prices”, “Consumption of Fixed Capital”, and “Gross Domestic Product” and positively associated with “Harmonised consumer price index” and “Gross Operating Surplus: Total Economy”. Finally, we compare a set of predictive models based on different machine learning techniques using RapidMiner, and we find that “Gradient Boosted Trees”, “Random Forest”, and “Decision Tree” are more efficient then “Deep Learning”, “Generalized Linear Model” and “Support Vector Machine”, in the sense of error minimization, to forecast the degree of “Imports of Goods”.
    Keywords: General Trade, Global Outlook, International Economic Order and Integration, Empirical Studies of Trade, Trade Forecasting and Simulation.
    JEL: F00 F01 F02 F14 F17
    Date: 2021–07–05
  22. By: Amat Adarov (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: The policy brief examines the position of Central, East and Southeast European (CESEE) countries in the global value chain (GVC) network. Effective integration in global value chains has been recognised as one of the important ingredients of economic development. The analysis uses the multi-country input-output database recently developed by the Vienna Institute for International Economic Studies, covering the period of 2005-2018, to construct and examine the topology of the GVC network focusing on the CESEE region. We show that the CESEE segment of the GVC network has a core-periphery structure with several sectoral clusters forming the closely intertwined core centred around Russia's mining, petroleum and metals industries, as well as the value-added linkages formed by Central European countries with Germany's automotive sector. While these specialisation patterns have intensified over time, the advanced CESEE countries have also managed to diversify their participation in regional value chains. At the same time, a large part of the CESEE region, particularly, the Western Balkans, remains only marginally integrated in the GVC network, calling for additional policy efforts to boost their competitiveness and unlock the potential for a more intensive participation in cross-border production sharing in the region.
    Keywords: global value chains; CESEE countries; network analysis
    JEL: F10 F14 F15
    Date: 2021–07
  23. By: Kurmas Akdoðan; Yusuf Kenan Bagir; Huzeyfe Torun
    Abstract: Using an extensive firm-level database that combines balance sheet information, social security registry and customs data, we examine whether the relationship between the exchange rate and exports change with the degree of labor-intensity of production. The results based on manufacturing firms in Turkey suggest that the sensitivity of labor-intensive firms to the exchange rate is higher than that of the less labor-intensive ones, both at the intensive and extensive margins of exports. However, we do not find a significant impact on the export prices varying across the labor-intensity of the firms. Our results are robust to alternative definitions of labor-intensity and exchange rates, and the use of different time spans.
    Keywords: Exports, Exchange rates, Labor-intensity
    JEL: F14 F16 D22
    Date: 2021
  24. By: Julian Hinz (Bielefeld University, Kiel Institute for the World Economy, Kiel Centre for Globalization); Amrei Stammann (Ruhr-University Bochum); Joschka Wanner (University of Potsdam, Kiel Institute for the World Economy)
    Abstract: We study the role and drivers of persistence in the extensive margin of bilateral trade. Motivated by a stylized heterogeneous firms model of international trade with market entry costs, we consider dynamic three-way fixed effects binary choice models and study the corresponding incidental parameter problem. The standard maximum likelihood estimator is consistent under asymptotics where all panel dimensions grow at a constant rate, but it has an asymptotic bias in its limiting distribution, invalidating inference even in situations where the bias appears to be small. Thus, we propose two different bias-corrected estimators. Monte Carlo simulations confirm their desirable statistical properties. We apply these estimators in a reassessment of the most commonly studied determinants of the extensive margin of trade. Both true state dependence and unobserved heterogeneity contribute considerably to trade persistence and taking this persistence into account matters significantly in identifying the effects of trade policies on the extensive margin.
    Keywords: dynamic binary choice, extensive margin, high-dimensional fixed effects, incidental parameter bias correction, trade policy
    JEL: C13 C23 C55 F14 F15
    Date: 2021–07
  25. By: Ariel Dvoskin (Central Bank of Argentina, CONICET, Universidad Nacional de San Martin); Guido Ianni (Universita degli Studi Roma Tre)
    Abstract: In this article we study the effects of changes in income distribution on comparative costs and we show that the presence of capital goods dramatically affects the possibility of constructing a "chain of comparative advantages" that allows us to explain the direction of international trade. In particular, we show that i) autarky comparative costs are poor predictors of the pattern of specialization because, under the presence of imported capital goods, costs do not vary proportionally with the relative wage rate; ii) to ensure that "a single cut in the chain" allows the exported and imported goods to be separated, at most a single good can be used as an intermediate input and that, when capital is made up of heterogeneous goods, the chain of comparative advantages it may not even be well defined. iii) We also show that changes in the profit rate can alter the ordering of the links in the chain, even under conditions in which the chain is well defined for a constant profit rate (e.g. null); and, additionally, iv that) the plausibility that the comparative advantages chain requires multiple links for the same industry increases with the value of the profit rate.
    Keywords: comparative advantages chain, comparative costs, imported capital goods,trade pattern
    JEL: B51 F10 F16
    Date: 2021–06
  26. By: Lutz Kilian; Nikos Nomikos; Xiaoqing Zhou
    Abstract: Since the 1970s, exports and imports of manufactured goods have been the engine of international trade and much of that trade relies on container shipping. This paper introduces a new monthly index of the volume of container trade to and from North America. Incorporating this index into a structural macroeconomic VAR model facilitates the identification of shocks to domestic U.S. demand as well as foreign demand for U.S. manufactured goods. We show that, unlike in the Great Recession, the primary determinant of the U.S. economic contraction in early 2020 was a sharp drop in domestic demand. Although detrended data for personal consumption expenditures and manufacturing output suggest that the U.S. economy has recovered to near 90% of pre-pandemic levels as of March 2021, our structural VAR model shows that the component of manufacturing output driven by domestic demand had only recovered to 57% of pre-pandemic levels and that of real personal consumption only to 78%. The difference is mainly accounted for by unexpected reductions in frictions in the container shipping market.
    Keywords: merchandise trade, container, shipping, manufacturing, consumption, Covid-19, supply chain, recession, recovery, globalization
    JEL: E32 E37 F47 F62
    Date: 2021
  27. By: Xu, Lili; Lee, Sang-Ho
    Abstract: This study considers commitments between tariff policy and corporate social responsibility (CSR) activities, and compares both domestic CSR and foreign CSR. We show that the committed tariff yields lower tariff and higher CSR under domestic CSR, resulting in higher welfare and lower profits, while it might be reversed under foreign CSR if the substitutability is low, which results in lower welfare and profits. Finally, the committed tariff is a desirable equilibrium of an endogenous timing game under domestic CSR, whereas the committed CSR can be under foreign CSR if the substitutability is low.
    Keywords: Strategic CSR, trade policy; committed tariff, committed CSR; international duopoly
    JEL: H21 L13 M14 O24
    Date: 2021–06
  28. By: Nuno Limão; Yang Xu
    Abstract: We model the implications of the classical ideas that larger markets allow for a finer division of labor and this division feeds back into larger market size. Market size affects specialization due to firm-level increasing returns to scale arising from fixed costs of adopting intermediate-intensive technologies. The impacts are magnified in general equilibrium by an endogenous multiplier—due to input-output linkages in a roundabout structure—and a selection effect due to heterogeneous fundamental productivity and entry costs. Market size expansions imply (i) larger real income gains than under fixed specialization; (ii) an increase in the aggregate variable cost share for intermediates and a decrease for labor; (iii) increased concentration; (iv) increased average productivity for survivors; and (v) an increase in the intermediate trade share. We derive similar results for intermediate productivity improvements. The effects in (ii)-(v) are absent in a similar model with exogenous specialization. In a calibration to U.S. manufacturing in 1987-2007 we isolate trade and intermediate productivity shocks, quantify their effects. Trade cost reductions increased effective market size by 7 log points (lp) and generated (i) a real income gain 1.4 times higher than under exogenous specialization; (ii) increases in the intermediate share in production and trade of 2 lp and a reduction in the labor share of value added of similar magnitude. Two counterfactuals highlight the importance of industrial and trade policy. First, a tax that induces firms to specialize increases real income; so the initial equilibrium is inefficient. Second, an increase in trade costs of 16 lp—similar to the recent trade war—reduces market size and real income substantially: almost half way to trade autarky.
    JEL: F1 F4 L11 O24 O25 O51
    Date: 2021–06
  29. By: Francesca Micocci; Armando Rungi
    Abstract: In this contribution, we exploit machine learning techniques to predict out-of-sample firms' ability to export based on the financial accounts of both exporters and non-exporters. Therefore, we show how forecasts can be used as exporting scores, i.e., to measure the distance of non-exporters from export status. For our purpose, we train and test various algorithms on the financial reports of 57,021 manufacturing firms in France in 2010-2018. We find that a Bayesian Additive Regression Tree with Missingness In Attributes (BART-MIA) performs better than other techniques with a prediction accuracy of up to $0.90$. Predictions are robust to changes in definitions of exporters and in the presence of discontinuous exporters. Eventually, we argue that exporting scores can be helpful for trade promotion, trade credit, and to assess firms' competitiveness. For example, back-of-the-envelope estimates show that a representative firm with just below-average exporting scores needs up to $44\%$ more cash resources and up to $2.5$ times more capital expenses to reach full export status.
    Date: 2021–07
  30. By: Georgios Georgiadis (European Central Bank); Helena Le Mezo (European Central Bank); Arnaud Mehl (European Central Bank); Cédric Tille (IHEID, Graduate Institute of International and Development Studies, Geneva)
    Abstract: The US dollar plays a dominant role in the invoicing of international trade, albeit not an exclusive one as more than half of global trade is invoiced in other currencies. Of particular interest are the euro, with a large role, and the renminbi, with a rising role. These two currencies are well suited to contrast the roles of economic fundamentals and policies, as European policy makers have taken a neutral stance in contrast to the promotion of the international role of the renminbi by the Chinese authorities. We assess the drivers of invoicing using the most recent and comprehensive data set for 115 countries over 1999-2019. We find that standard mechanisms that foster use of a large economy's currency predicted by theory ‒ i.e. strategic complementarities in price setting and integration in cross-border value chains ‒ underpin use of the dollar and the euro for trade with the United States and the euro area. These mechanisms also support the role of the dollar, but not the euro, in trade between non-US and non-euro area countries, making the dollar the globally dominant invoicing currency. Fundamentals and policies have played a contrasted role for the use of the renminbi. We find that China's integration into global trade has further strengthened the dominant status of the dollar at the expense of the euro. At the same time, the establishment of currency swap lines by the People's Bank of China has been associated with increases in renminbi invoicing, with an adverse effect on dollar use that is larger than for the euro.
    Keywords: International trade invoicing; dominant currency paradigm; markets vs. policies
    JEL: F14 F31 F44
    Date: 2021–07–01
  31. By: Robert W. Staiger
    Abstract: I explore whether the world trading system of the twentieth century can be adapted to address the challenges of the twenty-first. I first develop an understanding of how GATT functioned during the twentieth century, and which features of the economic environment were most important in determining its success. I then examine a list of changes in the global economy that are sometimes identified as warranting changes in the design of the GATT/WTO. I argue that the "terms-of-trade" theory of trade agreements provides a compelling framework for understanding the impact of GATT in the twentieth century, and I show that when viewed through this lens, the rationale for GATT’s design features transcend many, though not all, of the current challenges facing the WTO.
    JEL: F02 F1 F13
    Date: 2021–06
  32. By: Marzio Di Vece; Diego Garlaschelli; Tiziano Squartini
    Abstract: The World Trade Web (WTW) is the network of international trade relationships among world countries. Characterizing both the local link weights (observed trade volumes) and the global network structure (large-scale topology) of the WTW via a single model is still an open issue. While the traditional Gravity Model (GM) successfully replicates the observed trade volumes by employing macroeconomic properties such as GDP and geographic distance, it, unfortunately, predicts a fully connected network, thus returning a completely unrealistic topology of the WTW. To overcome this problem, two different classes of models have been introduced in econometrics and statistical physics. Econometric approaches interpret the traditional GM as the expected value of a probability distribution that can be chosen arbitrarily and tested against alternative distributions. Statistical physics approaches construct maximum-entropy probability distributions of (weighted) graphs from a chosen set of measurable structural constraints and test distributions resulting from different constraints. Here we compare and integrate the two approaches by considering a class of maximum-entropy models that can incorporate macroeconomic properties used in standard econometric models. We find that the integrated approach achieves a better performance than the purely econometric one. These results suggest that the maximum-entropy construction can serve as a viable econometric framework wherein extensive and intensive margins can be separately controlled for, by combining topological constraints and dyadic macroeconomic variables.
    Date: 2021–07
  33. By: Ofori, Isaac K.
    Abstract: The debate on the need for Sub-Saharan African (SSA) countries to foster inclusive growth has intensified following the coming into force of the African Continental Free Trade Area (AfCFTA), and the emergence of the coronavirus pandemic. A conspicuous lacuna in the literature is a lack of rigorous empirical work(s) exploring: (1) the joint effect of economic integration and resource allocation, and (2) social equity policies on inclusive growth in SSA. Using data from the World Bank’s World Development Indicators and the Global Consumption and Income Project (1980–2019) for 43 SSA countries, I provide evidence robust to several econometric techniques the fixed-effect, random-effect, and the system generalized method of moments estimators to show that: (1) though economic integration induces inclusive growth, the effect is higher in the presence of greater financial deepening and productive government expenditure; (2) relative to economic integration, social equity policies are rather remarkable in enhancing inclusive growth. Policy recommendations are provided in line with the AfCFTA and the reversals of welfare gains due to the coronavirus pandemic.
    Keywords: AfCFTA, Economic Integration, Financial Deepening, Globalisation; Inclusive Growth; Sub-Saharan Africa; Social Protection; Social Inclusion
    JEL: F1 F14 F15 F4 F6 I3 O1 O55
    Date: 2021
  34. By: Ofori, Isaac K.; Armah, Mark K.; Asmah, Emmanuel E.
    Abstract: Policy recommendations for building resilient and all-inclusive societies post COVID-19 pandemic continue to dominate the media and research landscapes. However, rigorous empirical content backing such claims, particularly, on both poverty and income inequality, is hard to find. Motivated by the bleak outlook of the Middle East and North Africa (MENA) region, as driven primarily by the floundering hydrocarbon sector, vulnerable employment, and low foreign direct investment, we analyse the poverty and income inequality effects of globalisation and resource allocation in the region. Using data from the World Bank’s Poverty and Equity Database for the period 1990–2019, we provide estimates robust to several econometric techniques the pooled least square, fixed effect, random effect, and the system generalized method of moments estimators to show that: (1) while economic globalisation reduces both poverty and income inequality, social globalisation matters only for income inequality in MENA; (2) economic globalisation is remarkable in reducing income inequality through resource allocation. Policy recommendations are provided in the light of the geopolitical fragility and rise in social globalisation of the region.
    Keywords: Economic Integration, Financial Deepening, GMM, MENA, Globalisation, Inequality, Poverty
    JEL: F13 F14 F15 F43 F6 I3 O1 O23 O43 O55
    Date: 2021
  35. By: Manon François (PSE - Paris School of Economics - ENPC - École des Ponts ParisTech - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)
    Abstract: We study the choice between source-based and destination-based corporate taxes in a twocountry model, allowing multinational firms to use transfer pricing to allocate profits across tax jurisdictions. We show that source-based taxation is a Nash equilibrium for tax revenue maximizing jurisdictions if domestic and/or foreign firms generate large revenues. We also show that destination-based taxes are a Nash equilibrium when firms generate low revenues, which implies the presence of multiple equilibria. Both the source and the destination principle coexist in equilibrium when domestic and foreign corporate revenues are average. However, the source principle always Pareto-dominates the destination principle.
    Keywords: Corporate taxes,Multinational firms,Tax competition,Transfer pricing
    Date: 2021–06
  36. By: Alicia Garcia-Herrero (Adjunct Professor, Department of Economics , Hong Kong University of Science and Technology Technology.Author-Email:; Gary Ng (Economist at Natixisy Technology.Author-Email:
    Abstract: Whether or not China adopts the principles of competitive neutrality in its huge market is important for China and for the rest of the world. The advantageous position of SOEs in China results in a poor competitive business environment, with the automotive sector being furthest away from competitive neutrality General and sectoral trends point to private firms being unable to leverage as much as SOEs A working measure of competitive neutrality could help improve the level playing field for foreign companies in China. The concept could even be introduced in a potential reform of the World Trade Organisation.
    Date: 2021–06
  37. By: Martin Weidner (Institute for Fiscal Studies and cemmap and UCL); Thomas Zylkin (Institute for Fiscal Studies)
    Abstract: We study the incidental parameter problem for the “three-way” Poisson Pseudo-Maximum Likelihood (PPML) estimator recently recommended for identifying the effects of trade policies and in other panel data gravity settings. Despite the number and variety of fixed effects involved, we confirm PPML is consistent for fixed T and we show it is in fact the only estimator among a wide range of PML gravity estimators that is generally consistent in this context when T is fixed. At the same time, asymptotic confidence intervals in fixed-T panels are not correctly centered at the true point estimates, and cluster-robust variance estimates used to construct standard errors are generally biased as well. We characterize each of these biases analytically and show both numerically and empirically that they are salient even for real-data settings with a large number of countries. We also offer practical remedies that can be used to obtain more reliable inferences of the effects of trade policies and other time-varying gravity variables.
    Date: 2021–03–08
  38. By: Kim, Seung-Leul; Lee, Sang-Ho
    Abstract: This study considers eco-technology licensing strategy by a foreign innovator that competes with a polluting domestic firm in the home country. We examine and compare the two-part licensing contracts with and without non-negative constraints on the royalty or a fixed fee. We find that the licensor may choose either negative royalty or negative fixed fee, depending on the levels of emissions tax and tariff. We then examine the government’s optimal tariff policies under the emissions tax and demonstrate that allowing a non-restrictive two-part licensing contract is better for domestic welfare than a restrictive licensing contract. We also reveal that the tariffs under the two-part licensing have a negative relationship with emissions taxes, but the tariff with non-restrictive licensing is higher than that with restrictive licensing.
    Keywords: Eco-technology; tariff policies; emissions tax; non-restrictive two-part licensing; foreign innovated firm
    JEL: D45 H23 L13
    Date: 2021–06
  39. By: Chang, Sungyong (London Business School); Park, Sanghyun
    Abstract: Scholars have examined the persistent heterogeneity of firm performance from the entry-order effect perspective. In the international business literature, this perspective has been highlighted in research on early internationalization (i.e., the born global strategy). While prior work has focused on the heterogeneity of firm characteristics and capabilities, we present a demand-side view of early internationalization by focusing on network effects. Prior theoretical work on network effects has predicted that when network effects are prominent, survival is challenging for latecomers because of the installed bases of first movers in the global market. However, we see many cases, such as the mobile instant messenger (MIM) market, where no single winner dominates the global market and where many latecomers have survived by implementing early internationalization. We build upon Brian Arthur’s model of demand-side dynamics. The findings suggest that latecomers may overcome their disadvantages by pursuing early internationalization, especially when the direct network effects (i.e., social network effects) are stronger than the indirect network effects (i.e., installed base effects). The underlying rationale is that country borders often demarcate the reach of the direct network effect, limiting the power of installed bases.
    Date: 2021–07–08
  40. By: Kheng, Veasna; Pan, Lei
    Abstract: This paper develops and estimates a small open economy real-business cycle model to study the dynamics of Cambodian current account. Differing from previous studies, we include net unilateral transfers and net foreign direct investment (FDI) as additional sources of macroeconomic fluctuations. We show that these two sources explain the variations in current account better than the shocks that are widely identified in the literature (i.e. productivity and interest rate). Our model captures Cambodia’s saving-and investment behaviour and matches well the evolution of its current account. Specifically, the measurement error is nearly 4% and the correlation between data and model is around 0.93. As a step further, using our well-fitted model, we predict the future trend of Cambodian current account in the context of negative shocks in productivity, remittance, FDI and COVID-19 pandemic.
    Keywords: real business cycle; current account; FDI; unilateral transfer; COVID-19
    JEL: F3 F41
    Date: 2021
  41. By: Luis E C Rocha; Petter Holme; Claudio D G Linhares
    Abstract: Differences in the social and economic environment across countries encourage humans to migrate in search of better living conditions, including job opportunities, higher salaries, security and welfare. Quantifying global migration is, however, challenging because of poor recording, privacy issues and residence status. This is particularly critical for some classes of migrants involved in stigmatised, unregulated or illegal activities. Escorting services or high-end prostitution are well-paid activities that attract workers all around the world. In this paper, we study international migration patterns of sex-workers by using network methods. Using an extensive international online advertisement directory of escorting services and information about individual escorts, we reconstruct a migrant flow network where nodes represent either origin or destination countries. The links represent the direct routes between two countries. The migration network of sex-workers shows different structural patterns than the migration of the general population. The network contains a strong core where mutual migration is often observed between a group of high-income European countries, yet Europe is split into different network communities with specific ties to non-European countries. We find non-reciprocal relations between countries, with some of them mostly offering while others attract workers. The GDP per capita is a good indicator of country attractiveness for incoming workers and service rates but is unrelated to the probability of emigration. The median financial gain of migrating, in comparison to working at the home country, is 15.9%. Only sex-workers coming from 77% of the countries have financial gains with migration and average gains decrease with the GDPc of the country of origin. Our results shows that high-end sex-worker migration is regulated by economic, geographic and cultural aspects.
    Date: 2021–07
  42. By: Ernest Miguelez (GREThA UMR CNRS 5113 – Université de Bordeaux, France. AQR-IREA – University of Barcelona, Spain.); Andrea Morrison (ICRIOS & Department of Management and Technology - Bocconi University, Italy. Department of Human Geography and Planning – Utrecht University, The Netherlands.)
    Abstract: How do regions enter new and distant technological fields? Who is triggering this process? This work addresses these compelling research questions by investigating the role of migrant inventors in the process of technological diversification. Immigrant inventors can indeed act as carriers of knowledge across borders and influence the direction of technological change. We test these latter propositions by using an original dataset of immigrant inventors in the context of European regions during the period 2003-2011. Our findings show that: immigrant inventors generate positive local knowledge spillovers; they help their host regions to develop new technological specialisations; they trigger a process of unrelated diversification. Their contribution comes via two main mechanisms: immigrant inventors use their own personal knowledge (knowledge creation); they import knowledge from their home country to the host region (knowledge transfer). Their impact is maximised when their knowledge is not recombined with the local one (in mixed teams of inventors), but it is reused (in teams made by only migrant inventors). Our work contributes to the existing literature of regional diversification by providing fresh evidence of unrelated diversification for European regions and by identifying important agents of structural change. It also contributes to the literature of migration and innovation by adding fresh evidence on European regions and by unveiling some of the mechanisms of immigrants’ knowledge transmission.
    Keywords: Patents, Migration, Technological diversification, Relatedness, Europe. JEL classification: O30, F20, F60.
    Date: 2021–07
  43. By: IGARASHI Akira; MIWA Hirofumi; ONO Yoshikuni
    Abstract: Why do citizens prefer highly skilled immigrants to low-skilled immigrants? To understand the causal mechanism behind this tendency among citizens, we conducted a vignette survey experiment that enables us to clarify the role of multiple mediators. We specifically focused on three key factors that have been proposed in existing research as those that could lead citizens to be more welcoming to highly skilled immigrants: expectations of economic contributions, welfare contributions, and smaller potential for increases in crime rates. Our findings revealed that the effect of immigrants' skill levels on citizens' attitudes was fully mediated by the economic factor. In other words, people welcome high-skilled immigrants simply because they welcome the economic benefits of those immigrants, not because of the expected contributions to welfare or assumptions of low crime levels related to highly skilled immigrants.
    Date: 2021–06
  44. By: Alam, Md. Mahmudul (Universiti Utara Malaysia); Murad, Wahid
    Abstract: This study investigates the short-term and long-term impacts of economic growth, trade openness and technological progress on renewable energy use in Organization for Economic Co-operation and Development (OECD) countries. Based on a panel data set of 25 OECD countries for 43 years, we used the autoregressive distributed lag (ARDL) approach and the related intermediate estimators, including pooled mean group (PMG), mean group (MG) and dynamic fixed effect (DFE) to achieve the objective. The estimated ARDL model has also been checked for robustness using the two substitute single equation estimators, these being the dynamic ordinary least squares (DOLS) and fully modified ordinary least squares (FMOLS). Empirical results reveal that economic growth, trade openness and technological progress significantly influence renewable energy use over the long-term in OECD countries. While the long-term nature of dynamics of the variables is found to be similar across 25 OECD countries, their short-term dynamics are found to be mixed in nature. This is attributed to varying levels of trade openness and technological progress in OECD countries. Since this is a pioneer study that investigates the issue, the findings are completely new and they make a significant contribution to renewable energy literature as well as relevant policy development.
    Date: 2019–12–31
  45. By: Eichler, Stefanie; Nauerth, Jannik A.
    Abstract: This paper analyzes the impact of bilateral investment treaties (BITs) on sovereign bond returns of 25 emerging markets from 1993 to 2016. Under a BIT, foreign investors can use an international arbitration scheme to enforce compensation claims against the domestic government in case of direct or indirect expropriation. We focus on the so far unexplored effects of legal risk associated with BITs on sovereign creditworthiness. We find small unconditional effects of BITs on sovereign bond returns. Taking the heterogeneity of BITs and political regimes into account, we find robust and strong negative effects. In countries with high political risk of expropriation (measured by low executive constraints), we find that the implementation of investor-friendly BITs is associated with a significantly negative impact on sovereign bond returns, accounting for roughly 15% of bond returns' standard deviation.
    Keywords: Sovereign default risk,Bilateral investment treaty,Political risk,Legal risk,Emerging markets
    JEL: G15 G12 F30 K33
    Date: 2021
  46. By: Jesper EDMAN; Riki TAKEUCHI
    Abstract: One of the key challenges for Japanese multinational enterprises is where or whether to employ headquarter expatriates in the management of foreign subsidiaries. We contribute to addressing this issue by theorizing and examining how expatriates in different positions (e.g., CEO, Sales manager, HR manager or line manager) impact different aspects of subsidiary performance. We examine how expatriate positions influence two facets of subsidiary performance -- sales and productivity and how these effects are moderated by country-specific factors. Controlling for self-selection effects, we find that knowledge and economic distance between the destination staff and expatriate CEOs and sales managers have negative moderation interaction effects on subsidiary sales. Conversely, we find a statistically significant impact on productivity whereby locations with strong nationalist sentiment exhibit negative moderation interaction effects in the case of Japanese line managers. Taken together, our findings point to the contingent effects of both position-based and country-level factors when examining expatriates' impacts on subsidiary performance.
    Date: 2021–06
  47. By: Davide Fiaschi; Cristina Tealdi
    Abstract: We aim to identify winners and losers of a sudden inflow of low-skilled immigrants using a general equilibrium search and matching model in which employees, either native or non-native, are heterogeneous with respect to their skill level and produce different types of goods and Government expenditure in public goods is financed by a progressive taxation on wages and profits. We estimate the short-term impact of this shock for Italy in each year in the period 2008-2017 to be sizeable and highly asymmetric. In 2017, the real wages of low-skilled and high-skilled employees were 4% lower and 8% higher, respectively, compared to a counter-factual scenario with no non-natives. Similarly, employers working in the low-skilled market experienced a drop in profits of comparable magnitude, while the opposite happened to employers operating in the high-skilled market. Finally, the presence of non-natives led to a 14% increase in GDP and to an increment of approximately 70 billion euros in government revenues and 18 billion euros in social security contributions.
    Date: 2021–07
  48. By: Oya, Carlos; Schaefer, Florian
    Abstract: In this paper we examine the emerging politics of labour agency as new manufacturing locations are incorporated into existing global production networks, using the example of the Ethiopian apparel industry. The Ethiopian state has employed an active space-based industrial policy to attract leading apparel manufacturers into a series of new industrial parks in the country. Both investors and the Ethiopian government expected to find a large and pliant labour force willing to work for low wages. However, the new sector has already seen a wave of collective and individual resistance from workers. We ask which factors contribute to drive and constrain labour agency and shape the specific forms it takes in firms tied into leading global production networks. Drawing on a large-N quantitative survey of factory workers and in-depth qualitative interviews with managers, workers, trade union representatives and government officials, we show how the quality of industrial relations depends not just on state action and the business strategies of lead firms in production networks, but also on variegated forms of labour agency used both by organised and unorganised Ethiopian workers. We find that many industrial conflicts result from the collision of the productivity imperatives of manufacturing firms tied into demanding, but low value-added, segments of global production networks with the expectations of workers with limited prior experience in industrial jobs, but are compounded by the contradictory actions of different state agencies, a lack of formal unionisation, and the contingent interactions of factory based grievances with local political conflicts. Industrial parks emerge as spaces of particular contestation. Our findings highlight the need to adopt an understanding of labour regimes grounded in local political realities. These findings have implications for the design of industrial policies and labour market institutions aiming to support firms and workers in emerging manufacturing clusters.
    Keywords: apparel industry; employment; Ethiopia; global production networks; labour conflict; labour regimes; ES/M004228/1
    JEL: R14 J01
    Date: 2021–10–01
  49. By: Sugata Marjit
    Abstract: The classical Wage Fund (Financial Capital) framework is integrated with the Ricardian model of comparative advantage. It can easily and effectively reflect on critical contemporary issues without the ammunitions of a more complex neoclassical system. Some of the results are as follows. Trade pampers inequality across the globe independent of trade patterns. It is likely to increase growth rate but that rate declines over time. Technological progress without capital accumulation magnifies inequality in or out of steady state. Financiers may wish to invest in innovations and outsource production to the rest of the world. Financial crisis in terms of credit shortage hurts workers but benefits capitalists etc. Interestingly this Ricardian model with capital and labour replicates many iconic neoclassical results without neoclassical assumptions.
    Keywords: New Ricardo, Neoclassical, Trade, Growth, Inequality
    Date: 2020

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