nep-int New Economics Papers
on International Trade
Issue of 2021‒08‒30
24 papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. The Brexit hammer : repercussions for the US and transatlantic relations in times of Corona By Kohnert, Dirk
  2. Logistics and trade flows in selected ECOWAS Countries: An empirical verification By Eriamiatoe Efosa Festus
  3. Intra-Bloc Tariffs and Preferential Margins in Trade Agreements By Emanuel Ornelas; Patricia Tovar
  4. Exchange Rate Volatility and Global Food Supply Chains By Sandro Steinbach
  5. Non-tariff Measures, Overall Protection, and Export Competitiveness: Evidence from Pakistan and Regional Countries By Irfan Aleem; Bushra Faizi
  6. More crucial than ever: employment content of Extra-EU exports By RUEDA CANTUCHE Jose; KUTLINA-DIMITROVA Zornitsa
  7. A Possible Continental Free Trade Agreement in Africa for Trade Integration: The Perspectives Between Reality and Myth By Boujema El Gazzan; Kamal Hassani
  8. The impact of Brexit on Israel and neighbouring Arab states in times of the COVID-19 crisis By Kohnert, Dirk
  9. Revisiting the Relationship between Trade Liberalization and Taxation By Rabah Arezki; Alou Adesse Dama; Gregoire Rota-Graziosi
  10. Import competition and informal employment: Empirical evidence from China By Wang, Feicheng; Liang, Zhe; Lehmann, Hartmut
  11. Decomposition of Bilateral Trade Flows Using a Three-Dimensional Panel Data Model By Yufeng Mao; Bin Peng; Mervyn J Silvapulle; Param Silvapulle; Yanrong Yang
  12. Economic Determinants of Regional Trade Agreements Revisited Using Machine Learning By Simon Blöthner; Mario Larch
  14. Train drain? Access to skilled foreign workers and firms' provision of training By Maria Esther Oswald-Egg; Michael Siegenthaler
  15. Immigrants as Future Voters By Arye L. Hillman; Ngo Van Long
  16. De Facto Immigration Enforcement, ICE Raid Awareness, and Worker Engagement By Amuedo-Dorantes, Catalina; Antman, Francisca M.
  17. Lobbying Behind the Frontier By Matilde Bombardini; Olimpia Cutinelli Rendina; Francesco Trebbi
  18. Labor Market Competition and the Assimilation of Immigrants By Albert, Christoph; Glitz, Albrecht; Llull, Joan
  19. Sharing Asymmetric Tail Risk: Smoothing, Asset Prices and Terms of Trade By Giancarlo Corsetti; Anna Lipinska; Giovanni Lombardo
  20. COVID-19, Irregular Migration and Asymmetrical Dependency By Nasir Iqbal; Fahd Zulfiqar
  21. Understanding the Origins of Populist Political Parties and the Role of External Shocks By Eugenio Levi; Isabelle Sin; Steven Stillman
  22. Redistribution of wealth through cross border financial transactions: A closer look By Nizam, Ahmed Mehedi
  23. Immigration and Local Business Dynamics: Evidence from U.S. Firms By Parag Mahajan
  24. Chinese Investment in Ethiopia: Contribution, Challenges, Opportunities and Policy Recommendations By Gebrehiwot, Berihu Assefa; Gebreeyesus, Mulu; Weldesilassie, Alebel Bayrau

  1. By: Kohnert, Dirk
    Abstract: The global revival of economic nationalism and protectionism poses a serious threat to the international foreign trade policy orientation towards principles of a market economy. Popular economic nationalism such as Trumpism, Brexit or the isolation of the Eastern European Visegrád states from immigrants violates fundamental principles of the WTO. Economists agree that Brexit will hurt the UK economy significantly in the medium and long term. In addition, its political and economic effects will damage the US and transatlantic relations. British Prime Minister Boris Johnson, on the other hand, continues to claim that leaving the EU will enable Britain to "take back control". In addition, the socioeconomic effects of the Corona crisis on the US, UK, EU and transatlantic relations are devastating. It has far-reaching political, social and economic consequences that go well beyond public health. All partners need each other more than ever to cope with the Covid crisis. Increased transatlantic cooperation to strengthen resilience would also be necessary in closely related areas of international relations and security issues.
    Keywords: Brexit, COVID-19-pandemic, Corona crisis, economic growth, USA, United Kingdom, transatlantic relations, international trade, free trade area, customs union, Anglosphere
    JEL: F13 F15 F22 F52 F62 I14 N1 N40 O24 O5 Z13
    Date: 2021–08–24
  2. By: Eriamiatoe Efosa Festus
    Abstract: This study investigates the role of logistics and its six components on trade flows in selected Economic Community of West Africa States (ECOWAS) countries. The impact of other macro-economic variables on trade flows was also investigated. Ten countries were selected in eight years period. We decomposed trade flows into import and export trade. The World Bank Logistics performance index was used as a measure of logistics performance. The LPI has six components, and the impact of these components on trade flows were also examined. The fixed-effect model was used to explain the cross-country result that was obtained. The results showed that logistics has no significant impact on both Import and export, thus logistics play no role on trade flows among the selected ECOWAS countries. The components of logistics except Timeliness of shipments in reaching the final destination ( CRC ),have no impact on trade flows. Income was found to be positively related to imports. Exchange rate, consumption and money supply, reserve and tariff have no significant impact on imports. Relative import price has an inverse and significant relationship with imports. GDP has a positive and significant impact on export trade. The study also found FDI, savings, exchange rate and labour to have insignificant impact on exports. Finally, we found that logistics is not a driver of trade among the selected ECOWAS countries. The study recommended the introduction of the single window system and improvement in border management in order to reduce the cost associated with Logistics and thereby enhance trade.
    Date: 2021–08
  3. By: Emanuel Ornelas; Patricia Tovar
    Abstract: We study, theoretically and empirically, how countries choose intra-bloc tariffs and preferential margins when they form Preferential Trade Agreements (PTAs). Our model indicates that countries should set systematically lower preferential margins when the bloc takes the form of a free trade area (where members set external trade policies independently), relative to a customs union (where members coordinate external tariffs). Moreover, in customs unions (but not necessarily in free trade areas) preferential margins should increase with the supply of partner countries and decrease with the level of preferential imports. These relationships reflect, respec-tively, the internalization of political-economy goals within the bloc and the desire to curb trade diversion. Using a sample that covers most PTAs formed by Latin American countries in the 1990s, when their popularity in the region shot up, we find empirical support for each of those predictions. These findings make clear that the type of PTA matters significantly for the bloc’s tariff structure. Our results carry out important implications for the welfare consequences and the social desirability of different types of PTAs.
    Keywords: regionalism, free trade agreements, customs unions, tariff complementarity, Latin America
    JEL: F15 F13
    Date: 2021
  4. By: Sandro Steinbach
    Abstract: This paper analyzes the impact of exchange rate risk on global food supply chains. Although the theoretical literature suggests ambivalence regarding the sign and magnitude of this effect, most empirical studies indicate a negative association between exchange rate volatility and international trade flows. I contribute to the ongoing debate by investigating the relationship at the product-level using a sectoral gravity model and relying on detailed retrospective trade and exchange rate data for a balanced panel of 159 countries for 2001 to 2017. I study the relationship for 781 agricultural and food products and estimate the trade effects of short-run and long-run exchange rate volatility. My findings indicate significant heterogeneity in the trade effects of exchange rate risk. While the mean trade effects are positive for short-run and long-run volatility, these effects vary substantially according to product and industry characteristics. I find a positive association between exchange rate volatility and the trade effects for upstreamness and a negative association for downstreamness of the traded products. I show that the significant and adverse trade effects in earlier studies result from model misspecification and measurement errors. This research enhances the understanding of the implications of exchange rate volatility which is a primary source of international risk exposure for global food supply chains.
    JEL: F14 Q17
    Date: 2021–08
  5. By: Irfan Aleem (Visiting Fellow, Brookings Doha Centre); Bushra Faizi (Researcher, Hamad Bin Khalifa University)
    Abstract: Pakistan’s exports have stagnated since 2013 after growing significantly during the previous decade. While many other factors have undoubtedly contributed, the evidence outlined in this paper indicates that the substantial increase in overall protection, driven by incidence of non-tariff measures, has had a major and decisive impact.
    Date: 2021
  6. By: RUEDA CANTUCHE Jose (European Commission - JRC); KUTLINA-DIMITROVA Zornitsa
    Abstract: The purpose of the current brief is to provide first results on the link between employment and international trade ahead of a more comprehensive package that DG TRADE and JRC are preparing for an event in Autumn 2021 with the participation of DGs and Commissioners. EU exports supported almost 38 million jobs in the EU in 2019, up from 29 million in 2010. In 2019, 18% of the total EU employment were directly or indirectly linked to EU exports to non-EU countries, up by 3 p.p. from almost 15% in 2010. The labour productivity related to extra-EU exports increased by 17% from 2010 to 2019, similar to the whole EU economy for the same period.
    Keywords: Trade, Jobs, European Union, COVID-19
    Date: 2021–07
  7. By: Boujema El Gazzan (Université Mohammed Premier [Oujda]); Kamal Hassani (Université Mohammed Premier [Oujda])
    Abstract: With a view to intra-regional trade integration, African countries have decided to create an African Continental Free Trade Area (ACFTA) which should establish the rules and political guidelines necessary to promote intra-regional trade but the success of such political choice is conditioned by the degree of complementarity between the economies of these countries as well as their establishment in a win-win approach. In order to assess the prospects for the creation of the ACFTA and specifically on the Moroccan economy by integrating the specificities and potentials of African countries, the estimation of the potential has, however, shown the existence of a significant global potential for Morocco which can be exploited. To do this, the implementation of the ACFTA should allow the dismantling of tariff and non-tariff barriers under the condition of a great diversification of Moroccan products exported regionally which is necessary. The empirical study by integrating the gravitational model and economic variables for the period 2001-2019 on a sample of 50 African countries has made it possible to detect a potential to be exploited but the experience of failure of the already existing interregional communities presupposes a structural transformation of a commercial order, piloting by better diversity and integration of the production chain reinforced by good infrastructure and logistics, and of a political order by boycotting with historical factors and individualism for the benefit of a goal and a lucrative common identity for all countries.
    Abstract: En vue d'une intégration commerciale intra régionale, les pays africains ont décidé de créer une zone de libre échange continentale africaine (ZLECA) qui devrait instaurer les règles et les orientations politiques nécessaires pour promouvoir le commerce intra régional, mais le succès d'un tel choix politique est conditionné par le degré de complémentarité entre les économies de ces pays, de même que leur instauration dans une approche gagnantgagnant. Dans un objectif d'évaluer les perspectives de la création de la ZLECA et spécifiquement sur l'économie marocaine en intégrant les spécificités et les potentialités des pays africains, l'estimation du potentiel a montré toutefois l'existence d'un potentiel global important pour le Maroc qui peut être exploité. Pour ce faire, la mise en œuvre de la ZLECA devrait permettre le démantèlement des barrières tarifaires et non tarifaires sous condition d'une grande diversification des produits marocains exportés régionalement ce qu'est nécessaire. L'étude empirique par l'intégration du modèle gravitationnel et des variables économiques pour la période 2001-2019 sur un échantillon de 50 pays africains a permet de détecter un potentiel à exploiter, mais l'expérience d'échec des communautés interrégionales déjà existantes supposent une transformation structurelle d'ordre commerciale, piloter par une meilleure diversité et intégration de chaine de production renforcée par des bonnes infrastructures et logistique, et d'ordre politique en boycottant avec les facteurs historiques et l'individualisme au profit d'un but et d'une identité commune lucrative à tous les pays
    Keywords: Trade Integration,African Continental Free Trade Area (ACFTA),Free Trade Agreement,Regional Community,Intégration commerciale,Accords de libre-échange,Communauté régionale,Zone de libre-échange continentale africaine (ZLECA)
    Date: 2021
  8. By: Kohnert, Dirk
    Abstract: ABSTRACT & RÉSUMÉ & ZUSAMMENFASSUNG : The combined impact of Brexit and the COVID-19 pandemic on British foreign- and trade relations to Israel and its Arab neighbours constitute a particularly sensitive case. A destabilization of these countries could impact seriously stability and security, not just of the Middle-East region, but on the whole world. So far, the preliminary effects are ambivalent. Whereas Britons entertained reasoned hope for a ‘Corona miracle’ and a marvellous economic recovery in 2021, the prospects for Israel, the occupied Palestinian territories, Lebanon, Jordan and Egypt were less rosy. Presumably, Brexit is likely to harm the United Kingdom in the medium and long run. The post-Brexit impact on Israel and its Arab neighbours will be negative as well, but probably only be felt in the medium and long term also. However, the direct and indirect negative effects of the global COVID-19 crisis will by far outdo the Brexit impact. RÉSUMÉ : L'impact combiné du Brexit et de la pandémie de COVID-19 sur les relations étrangères et commerciales britanniques avec Israël et ses voisins arabes constitue un cas particulièrement sensible. Une déstabilisation de ces pays pourrait avoir de graves répercussions sur la stabilité et la sécurité, non seulement de la région du Moyen-Orient, mais du monde entier. Jusqu'à présent, les effets préliminaires sont ambivalents. Alors que les Britanniques nourrissaient un espoir raisonné d'un « miracle de Corona » et d'une merveilleuse reprise économique en 2021, les perspectives pour Israël, les territoires palestiniens occupés, le Liban, la Jordanie et l'Égypte étaient moins roses. Vraisemblablement, le Brexit est susceptible de nuire au Royaume-Uni à moyen et long terme. L'impact post-Brexit sur Israël et ses voisins arabes sera également négatif, mais ne se fera probablement sentir qu'à moyen et long terme également. Cependant, l'effet négatif direct et indirect de la crise mondiale du COVID-19 dépassera de loin l'impact du Brexit. --------------------------------------------------------------------------------------------------------------------------------------- ZUSAMMENFASSUNG : Die gemeinsamen Auswirkungen des Brexits und der COVID-19-Pandemie auf die britischen Außen- und Handelsbeziehungen zu Israel und seinen arabischen Nachbarn sind ein besonders heikler Fall. Eine Destabilisierung dieser Länder könnte die Stabilität und Sicherheit nicht nur im Nahen Osten, sondern auf der ganzen Welt ernsthaft gefährden. Bisher erscheinen die vorläufigen Effekte ambivalent. Während die Briten begründete Hoffnungen auf ein „Corona-Wunder“ und eine erstaunliche wirtschaftliche Erholung im Jahr 2021 hegen, sind die Aussichten für Israel, die besetzten palästinensischen Gebiete, den Libanon, Jordanien und Ägypten weniger rosig. Vermutlich wird der Brexit dem Vereinigten Königreich mittel- und langfristig schaden. Die post-Brexit Auswirkungen auf Israel und seine arabischen Nachbarn werden ebenfalls negativ s, aber vermutlich ebenfalls nur mittel- und langfristig zu spüren sein. Die direkten und indirekten negativen Effekte der weltweiten COVID-19-Krise werden jedoch die Folgen des Brexits bei weitem übertreffen.
    Keywords: Brexit, COVID-19-pandemic, Corona, economic growth, Israel, Palestine, Lebanon, Jordan, Egypt, United Kingdom, international trade, free trade area, customs union, Anglosphere,
    JEL: F13 F15 F22 F52 F68 I14 N1 N40 O24 O5 Z13
    Date: 2021–08–08
  9. By: Rabah Arezki; Alou Adesse Dama; Gregoire Rota-Graziosi
    Abstract: This paper explores the dynamic effects of trade liberalization on tax revenue using a worldwide panel dataset. Results point to statistically significant negative effect of liberalization on (non- resource) tax revenues in the short term and no significant effect in the medium term. Liberalization also alter the tax structure tilting revenues toward indirect taxes away from direct ones. Economies which have implemented value added taxes prior to liberalization have mitigated its negative effects on tax revenues. The evidence is supportive of the complementarity role of state capacity to reap the benefits of liberalization.
    Keywords: tax, tax structure, openness, liberalization, natural resources
    JEL: H20 H87 F13
    Date: 2021
  10. By: Wang, Feicheng; Liang, Zhe; Lehmann, Hartmut
    Abstract: This paper investigates the effects of trade liberalisation induced labour demand shocks on informal employment in China. We employ a local labour market approach to construct a regional measure of exposure to import tariffs by exploiting initial differences in industrial composition across prefectural cities and then link it with the employment status of individuals. Using three waves of household survey data between 1995 and 2007, our results show that workers from regions that experienced a larger tariff cut were more likely to be employed informally. Further results based on firm-level data reveal a consistent pattern; tariff reductions increased the share of informal workers within firms. Such effects are more salient among smaller and less productive firms. Our findings suggest an important margin of labour market adjustment in response to trade shocks in developing countries, i.e. employment adjustment along the formal-informal dimension.
    Keywords: Trade liberalisation,Import competition,Informal employment,Firms,China
    JEL: F14 F16 F66 J46
    Date: 2021
  11. By: Yufeng Mao; Bin Peng; Mervyn J Silvapulle; Param Silvapulle; Yanrong Yang
    Abstract: This study decomposes the bilateral trade flows using a three-dimensional panel data model. Under the scenario that all three dimensions diverge to infinity, we propose an estimation approach to identify the number of global shocks and countryspecific shocks sequentially, and establish the asymptotic theories accordingly. From the practical point of view, being able to separate the pervasive and nonpervasive shocks in a multi-dimensional panel data is crucial for a range of applications, such as, international financial linkages, migration flows, etc. In the numerical studies, we first conduct intensive simulations to examine the theoretical findings, and then use the proposed approach to investigate the international trade flows from two major trading groups (APEC and EU) over 1982-2019, and quantify the network of bilateral trade.
    Keywords: three-dimensional panel data, bilateral trade, asymptotic theory
    JEL: C23 P45
    Date: 2021
  12. By: Simon Blöthner; Mario Larch
    Abstract: While traditional empirical models using determinants like size and trade costs are able to predict RTA formation reasonably well, we demonstrate that allowing for machine detected non-linear patterns helps to improve the predictive power of RTA formation substantially. We employ machine learning methods and find that the fitted tree-based methods and neural networks deliver sharper and more accurate predictions than the probit model. For the majority of models the allowance of fixed effects increases the predictive performance considerably. We apply our models to predict the likelihood of RTA formation of the EU and the United States with their trading partners, respectively.
    Keywords: Regional Trade Agreements, neural networks, tree-based methods, high-dimensional fixed effects
    JEL: F14 F15 C45 C53
    Date: 2021
  13. By: Nicholas M Odhiambo (University of South Africa)
    Abstract: Purpose – This study examines the causal relationship between exports and economic growth in sub-Saharan African (SSA) countries during the period 1980 to 2017. The study also examines whether the causality between these two macroeconomic variables depends on the countries’ stage of development as proxied by their per capita income. Design/methodology/approach – The study uses a panel cointegration test and panel Granger-causality model to examine the link between exports and growth. The study also incorporates external debt as an intermittent variable in a bivariate setting between exports and economic growth, thereby creating a dynamic multivariate panel Granger-causality model. Findings – Although the study found the existence of a long-run relationship between exports and economic growth, the study failed to find any export-led growth response in both low-income and middle-income countries. Instead, the study found evidence of a bidirectional causality and a neutrality response in middle-income and low-income countries, respectively. The study, therefore, concludes that the benefits of an export-led growth hypothesis may have been oversold, and that the strategy may not be desirable to some low-income developing countries. Practical implications – These findings have important policy implications as they indicate that the causality between exports and economic growth in SSA countries varies with the countries’ stage of development. Consistent with the contemporary literature, the study cautions low-income SSA countries against over-relying on an export-led growth strategy to achieve a sustained growth path as no causality between exports and economic growth has been found to exist in those countries. Instead, such countries should consider pursuing new growth strategies by building the domestic demand side of their economies alongside their export promotion strategies in order to expand the real sector of their economies. For middle-income countries, the study recommends that both export promotion strategies and pro-growth policies should be intensified as economic growth and exports have been found to reinforce each other in those countries. Originality/value – Unlike the previous studies, the current study disaggregated the full sample of SSA countries into two subsets – one comprising of low-income countries and the other consisting of middle-income countries. In addition, the study uses a multivariate Granger-causality model in order to address the emission-of-variable bias. To our knowledge, this may be the first study of its kind in recent years to examine in detail the causal relationship between exports and economic growth in SSA countries using an ECM-based multivariate panel Granger-causality model.
    Keywords: Granger Causality, Economic Growth, Exports, Sub-Saharan Africa
    JEL: C33 F14 O41
    Date: 2021–01–01
  14. By: Maria Esther Oswald-Egg; Michael Siegenthaler
    Abstract: Does better access to skilled workers reduce firms' willingness to provide general skills training to unskilled workers? We analyze how the gradual opening of the Swiss labor market to workers from the European Union affected the number of apprenticeship positions that firms provide. We exploit that the availability of skilled workers increased more in firms close to the border because they gained unrestricted access to cross-border workers from neighboring countries. Our Difference-in-Differences estimates suggest that firm-provided training and access to skilled workers are not necessarily substitutes: opening the borders did not have a statistically significant effect on apprenticeship provision. We show theoretically and empirically that the small impact was the consequence of two opposing effects: the greater availability of skilled workers reduced firms' incentive to train because the cost of hiring external labor fell. Positive impacts on firm growth worked in the opposite direction.
    Keywords: labor demand, skilled immigration, firm-provided training, apprenticeships, vocational education and training, free movement of workers, cross-border workers, recruitment, immigration policy, labor mobility, hiring costs
    JEL: J24 J63 M53
    Date: 2021–08
  15. By: Arye L. Hillman; Ngo Van Long
    Abstract: Immigration policies in western democracies have often been contrary to the policies predicted by the mainstream theory of international economics. In particular, political parties that, according to economic theory, should adopt policies beneficial for lower-income voter-constituencies, have not protected workers from labor-market competition or from a fiscal burden of financing welfare-dependent immigrants. We explain the contradiction by accounting for immigrants as future voters. We identify a political principal-agent problem based on ego-rents from political office. Our theory predicts voter defection from worker-supported political-establishment parties to new-entrant anti-immigration political candidates and parties. We give a hearing to alternative interpretations of the evidence.
    Keywords: international migration, political ego rents, immigrant welfare dependency, immigration amnesties, political entry barriers, policy exceptionalism
    JEL: F22 F66 H53 P16
    Date: 2021
  16. By: Amuedo-Dorantes, Catalina (University of California, Merced); Antman, Francisca M. (University of Colorado, Boulder)
    Abstract: We explore whether fear of apprehension affects immigrants' labor market engagement by examining how ICE removals due to immigration violations and increased awareness of immigration raids impact their labor market outcomes. We find that ICE deportations are associated with reductions in the labor force participation and employment of likely undocumented immigrants when compared to similarly skilled foreign-born U.S.citizens. Effects are particularly strong among women, especially those with children, as well as in industries likely targeted by ICE raids. Controlling for perceived threats and de jure immigration policies has little impact on these results.
    Keywords: undocumented immigrants, immigration raids, labor supply
    JEL: J15 J61 J2 J3
    Date: 2021–08
  17. By: Matilde Bombardini; Olimpia Cutinelli Rendina; Francesco Trebbi
    Abstract: This chapter investigates the non-market response of firms to international trade shocks increasing the level of competition in U.S. industries. Lobbying expenditures increase as a consequence of import changes related to the China shock. The effect on lobbying is not homogeneous across firms and it concentrates particularly in those producers which are behind the technological frontier. We discuss theoretical mechanisms driving lobbying of firms away from the technological frontier: not only the cost-benefit trade-off between innovation and lobbying is relatively less appealing for low productivity firms, but the collective action ability of low productivity firms improves after a competitive shock.
    JEL: D72 P48
    Date: 2021–08
  18. By: Albert, Christoph (CEMFI, Madrid); Glitz, Albrecht (Universitat Pompeu Fabra); Llull, Joan (MOVE, Barcelona)
    Abstract: In this paper, we show that the wage assimilation of immigrants is the result of the intricate interplay between individual skill accumulation and dynamic equilibrium effects in the labor market. When immigrants and natives are imperfect substitutes, increasing immigrant inflows widen the wage gap between them. Using a simple production function framework, we show that this labor market competition channel can explain about one quarter of the large increase in the average immigrant-native wage gap in the United States between the 1960s and 1990s arrival cohorts. Once competition effects and compositional changes in education and region of origin are accounted for, we find that the unobservable skills of newly arriving immigrants increased over time rather than decreased as traditionally argued in the literature. We corroborate this finding by documenting closely matching patterns for immigrants' English language proficiency.
    Keywords: immigrant assimilation, labor market competition, cohort sizes, imperfect substitution, general and specific skills
    JEL: J21 J22 J31 J61
    Date: 2021–08
  19. By: Giancarlo Corsetti; Anna Lipinska; Giovanni Lombardo
    Abstract: Crises and tail events have asymmetric effects across borders, raising the value of arrangements improving insurance of macroeconomic risk. Using a two-country DSGE model, we provide an analytical and quantitative analysis of the channels through which countries gain from sharing (tail) risk. Riskier countries gain in smoother consumption but lose in relative wealth and average consumption. Safer countries benefit from higher wealth and better average terms of trade. Calibrated using the empirical distribution of moments of GDP-growth across countries, the model suggests non-negligible quantitative effects. We offer an algorithm for the correct solution of the equilibrium using DSGE models under complete markets, at higher order of approximation.
    Keywords: International risk sharing; Asymmetry; Fat tails; Welfare
    JEL: F15 F41 G15
    Date: 2021–08–06
  20. By: Nasir Iqbal (Pakistan Institute of Development Economics, Islamabad.); Fahd Zulfiqar (Pakistan Institute of Development Economics, Islamabad.)
    Abstract: This study explores the process of irregular migration that drives people to opt for illegal channels to migrate. The study further examines the impact of the COVID-19 pandemic on the socio-economic vulnerabilities of irregular migrant workers. We find that due to COVID-19, irregular migrants suffered job losses, with only a few cases of job restoration. Their predicament is compounded given their questionable legal status, economic vulnerabilities, the stance of governments of the host and origin countries, vulnerability to poverty, and resort only to social capital as social security. We suggest that the governments should intervene to facilitate irregular migrants during pandemics.
    Keywords: COVID-19; Irregular Migration; Pakistan; Europe
    Date: 2021
  21. By: Eugenio Levi (Masaryk University); Isabelle Sin (Motu Economic and Public Policy Research); Steven Stillman (Free University of Bozen-Bolzano)
    Abstract: We use electoral survey data to examine the impact that two large external shocks had on the development of New Zealand First (NZF), one of the oldest populist parties in the OECD. We find that structural reforms, which led to large negative impacts on particular locations, and immigration reforms, which led to large spatially concentrated increases in skilled migration, both increased voting for NZF in its first years of existence. These shocks led to changes in political attitudes and policy preferences and had persistent effects on voting for NZF even twenty years later. Overall, they play an important role in explaining the rise of populism in NZ. Understanding how these shocks led to the development of NZF is particularly relevant for thinking about how populism has been extending its reach in the 2010s.
    Keywords: Populism; political parties; trade; immigration; shocks
    JEL: D72 P16 H40
    Date: 2021–08
  22. By: Nizam, Ahmed Mehedi
    Abstract: Contrary to existing literature, here we consider the foreign exchange reserve balance of a particular country as an indicator of how much goods, services and/or physical asset the country has transferred to the rest of the world in exchange of some fiat foreign currencies. On the other hand, the reserve balances of the rest of the world denominated in the currency of that particular country can be considered as the amount of goods, services and/or physical assets that the particular country has received from the rest of the world in exchange of its own fiat currencies. Hence, if we subtract the second quantity from the first one, we get an estimate of the extent of net non-monetary wealth that the particular country has transferred so far to the rest of the world in exchange of some fiat foreign money. We calculate the amount of net non-monetary wealth (thus defined) transferred to and from some major economies stemming from cross border financial transactions and analyze their long term and short term dynamics using VECM. The main objective of this study is to give a new perspective to what we conventionally mean by foreign exchange reserve of a country: Instead of assuming the reserve balance of a country as an asset we consider it as a measure of gross wealth (i.e., goods, services and physical asset) the country has transferred so far to other countries around the globe in exchange of some paper currencies with no intrinsic value.
    Keywords: Cross border trade, wealth redistribution, hard currencies
    JEL: E01 E21 F14 F41
    Date: 2021–08–25
  23. By: Parag Mahajan
    Abstract: This paper finds that establishment entry and exit—particularly the prevention of establishment exit—drive immigrant absorption and immigrant-induced productivity increases in U.S. local industries. Using a comprehensive collection of confidential survey and administrative data from the Census Bureau, it shows that inflows of immigrantworkers lead to more establishment entry and less establishment exit in local industries. These relationships are responsible for nearly all of long-run immigrant-induced job creation, with 78 percent accounted for by exit prevention alone, leaving a minimal role for continuing establishment expansion. Furthermore, exit prevention is not uniform: immigrant inflows increase the probability of exit by establishments from low productivity firms and decrease the probability of exit by establishments from high productivity firms. As a result, the increase in establishment count is concentrated at the top of the productivity distribution. A general equilibrium model proposes a mechanism that ties immigrantworkers to high productivity firms and shows how accounting for changes to the firm productivity distribution can yield substantially larger estimates of immigrant-generated economic surplus than canonical models of labor demand.
    Keywords: Immigration, Business Dynamics, Job Creation, Productivity, Firm Heterogeneity
    JEL: J23 J61 L11 F22
    Date: 2021–08
  24. By: Gebrehiwot, Berihu Assefa; Gebreeyesus, Mulu; Weldesilassie, Alebel Bayrau
    Abstract: Recognizing the immense potential for greater Chinese investment promotion and its contribution to Ethiopia’s industrialization and acknowledging the gaps, this paper aims to conduct a rigorous research through analysis of secondary sources and qualitative survey of Chinese enterprise doing business in Ethiopia in various sectors. In this regard, the key policy questions that this study tries to answer are ‘the involvement in and the contribution to Ethiopia’s industrialization and the challenges and opportunities they face. Hence, the overall objective of this research will be to (i) assess the trends in Chinese enterprises involvement in Ethiopia’s industrialization for the last decade, (ii) inform both the Chinese government and Ethiopian government on key business barriers and market failures that are constraining Chinese business entry and growth in Ethiopia; (iii) investigate the immense untapped investment potential from China that can be attracted and opportunities that Ethiopia could offer to Chinese investors; and (iv) propose policy options on how to address the challenges and thereby maximize the opportunities to enhance Chinese investment towards Ethiopia’s industrialization.
    Keywords: Enterprise, Investment, China, Ethiopia, FDI
    JEL: E22
    Date: 2020–03–05

This nep-int issue is ©2021 by Luca Salvatici. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.