nep-int New Economics Papers
on International Trade
Issue of 2021‒09‒13
forty-four papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. Industrial Policy and Foreign Direct Investment By Sjöholm, Fredrik
  2. Chinese vs. US trade in an emerging country: the impact of trade openness in Chile By Sotiriou, Alexandra; Rodríguez-Pose, Andrés
  3. How COVID-19 medical supply shortages led to extraordinary trade and industrial policy By Chad P. Bown
  4. Collateral benefits? South Korean exports to the United States and the US-China trade war By Mary E. Lovely; David Xu; Yinhan Zhang
  5. Input-output linkages and monopolistic competition: Input distortion and optimal policies By Jung, Benjamin; Kohler, Wilhelm
  6. Leveling the playing field: industrial policy and export-contingent subsidies in India-export related measures By Dhingra, Swati; Meyer, Timothy
  7. Learning by Exporting and Wage Profiles: New Evidence from Brazil By Ma, Xiao; Muendler, Marc-Andreas; Nakab, Alejandro
  8. Egypt-Mercosur FTA: A Complementarity Analysis By Hebatallah Ghoneim; Rana Abdulmonem; Noha Ghazy
  9. College Expansion, Trade and Innovation: Evidence from China By Ma, Xiao
  10. Multinational enterprises and intangible capital By Charles Cadestin; Alexander Jaax; Sébastien Miroudot; Carmen Zürcher
  11. Foreign Ownership, Exporting and Gender Wage Gaps: Evidence from Japanese Linked Employer-Employee Data By Theresa M. Greaney; Ayumu Tanaka
  12. From hermit kingdom to miracle on the Han By Douglas A. Irwin
  13. Educational Responses to Migration-Augmented Export Shocks: Evidence from China By Yao Pan; Jessica Leight
  14. Increased trade with China and Eastern Europe hardly affects Dutch workers By Rob Euwals; Harro van Heuvelen; Gerdien Meijerink; Jan Möhlmann; Simon Rabaté
  15. The Further Economic Consequences of Brexit: Energy By Pollitt, M .G.
  16. The relationship between the international trade and economic growth accounting for model uncertainty and reverse causality By Czyżewski, Daniel
  17. Did Trump's Trade War Impact the 2018 Election? By Emily J. Blanchard; Chad P. Bown; Davin Chor
  18. Globalization and Female Economic Participation in MINT and BRICS countries By Tolulope T. Osinubi; Simplice A. Asongu
  19. Free movement of inventors: open-border policy and innovation in Switzerland By Cristelli, Gabriele; Lissoni, Francesco
  20. How economic ideas led to Taiwan’s shift to export promotion in the 1950s By Douglas A. Irwin
  21. Migrant Inventors as Agents of Technological Change By Ernest Miguelez; Andrea Morrison;
  22. Barriers to entry and the role of African multinational corporations: Entrants in intermediate industrial products (inputs into construction) By Grace Nsomba; Thando Vilakazi
  23. Quantifying investment facilitation at country level: Introducing a new index By Berger, Axel; Dadkhah, Ali; Olekseyuk, Zoryana
  24. RCEP is not enough: South Korea also needs to join the CPTPP By Jeffrey J. Schott
  25. How the withdrawal of global correspondent banks hurts Emerging Europe By Borchert, Lea; de Haas, Ralph; Kirschenmann, Karolin; Schultz, Alison
  26. Expanding Global Bev to enhance analysis of trade policy, COVID impacts and other wine industry issues By Glyn Wittwer
  27. The Revealed Comparative Advantages of Dutch Cities By Tijl Hendrich; Jennifer Olsen; Steven Brakman; Charles van Marrewijk
  28. Reverse Dutch Disease with Trade Costs: Prospects for Agriculture in Africa's Oil-Rich Economies By Porteous, Obie C.
  29. Global value chains and innovation networks in the fourth industrial era By MÜLLER Julian M.; POTTERS Lesley; RENTOCCHINI Francesco; TUEBKE Alexander
  30. Capital Controls and International Trade: An Industry Financial Vulnerability Perspective By Kevin Lai; Tao Wang; David Xu
  31. Does welcoming refugees attract more migrants? The myth of the "Merkel effect" By Tjaden, Jasper Dag; Heidland, Tobias
  32. Global asymmetries strike back By Jean Pisani-Ferry
  33. Do US firms have an incentive to comply with the FLSA and the NLRA? By Anna Stansbury
  34. The rise of Eastern Europe and German labor market reform: Dissecting their effects on employment By Walter, Timo
  35. How COVID-19 vaccine supply chains emerged in the midst of a pandemic By Chad P. Bown; Thomas J. Bollyky
  36. The determinants of U.S. olive oil imports By Hammami, AbdelMalek; Beghin, John C.
  37. Immigration and Entrepreneurship in the United States By Pierre Azoulay; Benjamin Jones; J. Daniel Kim; Javier Miranda
  38. Matrix Completion of World Trade By Gnecco Giorgio; Nutarelli Federico; Riccaboni Massimo
  39. Globalisation and the Decoupling of Inflation from Domestic Labour Costs By Emanuel Kohlscheen; Richhild Moessner
  40. Migrant Networks and Destination Choice: Evidence from Moves across Turkish Provinces By Aydemir, Abdurrahman; Duman, Erkan
  41. Climate anomalies and international migration: A disaggregated analysis for West Africa By Martinez Flores, Fernanda; Milusheva, Sveta; Reichert, Arndt R.
  42. Matching across Markets: An Economic Analysis of Cross-Border Marriage By So Yoon Ahn
  43. Labor market choices of migrants and redistributive policies By Kerstin Mitterbacher; Stefan Palan; Jürgen Fleiß
  44. Which integration policies work? The heterogeneous impact of national institutions on immigrants’ labor market attainment in Europe By Platt, Lucinda; Polavieja, Javier; Radl, Jonas

  1. By: Sjöholm, Fredrik (Research Institute of Industrial Economics (IFN))
    Abstract: Foreign Direct Investment (FDI) can benefit host countries by facilitating access to sophisticated technologies, good management and global value chains. However, multinational firms have many alternative locations from which to choose. As a consequence, countries trying to attract inflows of FDI need to consider what types of industrial policies will increase the country´s attractiveness to foreign firms. Moreover, different types of FDI are of different value for the host country and might require different sets of policies. This paper starts by examining and discussing the global evolution of FDI. It continues by examining determinants to FDI and the types of industrial policies that are effective in attracting FDI. It ends with a discussion on quality FDI and how host country governments can maximize the benefits of FDI.
    Keywords: FDI; MNE; Industrial policy; Host country effects
    JEL: F21 F23 F60
    Date: 2021–09–01
  2. By: Sotiriou, Alexandra; Rodríguez-Pose, Andrés
    Abstract: This paper explores the effects of import competition on the manufacturing sector in Chile following the implementation of the country’s two largest Free Trade Agreements (FTA) (with the USA and China). Exploiting cross-industry variation in import exposure, we analyse the effects on manufacturing sales, employment and labour productivity at the finest level of industrial classification (4 digit ISIC level). We detect an overall negative effect of increased Chinese import penetration, owing to substitution effects from low and medium tech imports and a less pronounced effect from USA imports. By introducing interaction effects, we find that the levels of foreign ownership and the export intensity of the domestic industries reverse the negative effect due to the opportunities offered via participation in global value chains. An IV strategy is applied to address standard endogeneity concerns and confirm the robustness of our estimates.
    Keywords: import penetration; free trade; manufacturing; Chile; China; USA; Taylor & Francis deal
    JEL: L81
    Date: 2021–08–13
  3. By: Chad P. Bown (Peterson Institute for International Economics)
    Abstract: Early in the COVID-19 pandemic, a global shortage of hospital gowns, gloves, surgical masks, and respirators caused policymakers around the world to panic. This paper examines international trade in this personal protective equipment (PPE) during the crisis, with a focus on China, the European Union, and the United States. As the pandemic first hit, China increased imports and decreased exports of PPE, removing considerable quantities of supplies from global markets. For the European Union and United States, the decrease in their imports from China was not immediately replaced by increased trade from other foreign suppliers. Early shortages led to EU and US export controls on their own, domestically produced PPE and other extraordinary policy actions, including a US effort to reserve for itself supplies manufactured in China by a US-headquartered multinational. By April 2020 China’s exports had mostly resumed, and over the rest of the year its export volumes of some products surged, more than doubling compared to pre-pandemic levels. But China’s export prices also skyrocketed and remained elevated through 2020, reflecting severe and continued shortages. This paper documents these facts. It also explores these and other government actions, such as US trade war tariffs and the emergence of US industrial policy in the form of over $1 billion of subsidies to build out its domestic PPE supply chain, as well as potential lessons for future pandemic preparedness and international policy cooperation.
    Keywords: personal protective equipment, COVID-19, tariffs, export restrictions, supply chains, industrial policy
    JEL: F13
    Date: 2021–07
  4. By: Mary E. Lovely (Peterson Institute for International Economics); David Xu (Peterson Institute for International Economics); Yinhan Zhang (Syracuse University)
    Abstract: This Policy Brief assesses the extent to which the United States increased its imports from South Korea after the US imposition of tariffs on Chinese exports. Korea benefited from this shift in US imports, although the increase was relatively small in most sectors. The authors use highly disaggregated US import and tariff data to examine adjustments in US purchases of manufactured goods from its trade partners. Their analysis indicates that Korea made a small gain in the US market following the levying of US tariffs on Chinese exports, with Korea’s share of overall US manufacturing imports rising 0.9 percent and its share of US manufacturing imports subject to trade war tariffs rising 1.0 percent. Gains were spread across a variety of manufacturing sectors—such as wood products, textiles and apparel, and machinery—reflecting both the choices made by US officials regarding which Chinese exports to tax and the nature of preexisting trade relationships between South Korea and the United States.
    Date: 2021–07
  5. By: Jung, Benjamin; Kohler, Wilhelm
    Abstract: In this paper, we provide a detailed analysis of a mechanism that distorts production towards too much use of primary factors like labor and too little use of intermediate inputs. The distortion results from two ingredients that are cornerstones of modern quantitative trade theory: monopolistic competition and input-output linkages. The distortion as such is unrelated to trade, but has important consequences for trade policy, including a positive first-order welfare effect from an import subsidy. For a crystal-clear view on the distortion, we first look at it in a single-sector, closed economy where the monopolistic competition equilibrium would be efficient without the presence of input-output linkages. We compare the social-planner-solution with the decentralized market equilibrium, and we identify first-best policies to correct the distortion. To analyze the trade policy implications we then extend our analysis to a setting with trade between two symmetric countries. We identify first-best cooperative policies, featuring nondiscriminatory subsidies of intermediate input use, aswell as non-cooperative trade policies where countries use tariffs to weigh terms of trade effects against benefits from correcting the input distortion.
    Keywords: input-output linkages,monopolistic competition,international trade,allocational inefficiency,optimal policy
    JEL: F12 F13 D57 D61 H21
    Date: 2021
  6. By: Dhingra, Swati; Meyer, Timothy
    Abstract: In India–Export Related Measures, the United States challenged a range of Indian measures as prohibited export-contingent subsidies, and a WTO panel largely agreed. This article examines the factors at play in the United States’ decision to bring the challenge. At the level of policy, the United States case reflects India's graduation from the protections afforded developing nations’ export-contingent subsidies under the Agreement on Subsidies and Countervailing Measures. A closer examination, however, shows that India ramped up its export-contingent subsidies just as the SCM Agreement required it to wind those subsidies down. Moreover, the expanded Indian subsidies led to increased import competition with the politically influential metals and pharmaceutical sectors in the United States, which pushed the US challenge. We reflect on the larger implications of the challenge for the future of trade rules on industrial policy. In particular, we note that the United States pursued a trade enforcement policy that would have the effect of increasing pharmaceutical prices in the United States, by reducing subsidies for imported generic drugs, at a time when the Trump administration allegedly was trying to reduce the price of prescription drugs. This disconnect suggests the need for both greater transparency in trade policy and greater governmental coordination on the connection between trade policy and other policy priorities.
    Keywords: CUP deal
    JEL: R14 J01
    Date: 2021–08–02
  7. By: Ma, Xiao; Muendler, Marc-Andreas; Nakab, Alejandro
    Abstract: Export activity shapes workers’ experience-wage profiles. Using detailed Brazilian manufacturing employer-employee and customs data, we document that workers’ experience-wage profiles are steeper at exporters than at non-exporters. Aside from self-selection of more capable firms into exporting, we show that workers’ experience-wage profiles are steeper when firms export to high-income destinations. We then develop and quantify a model with export market entry, wage renegotiations, and human capital accumulation to interpret the data and perform counterfactual experiments. We find that human capital growth can explain roughly 40% of differences in wage profiles between exporters and non-exporters as well as the gains in experience returns after entry into high-income destinations. We also show that increased human capital per worker can account for one-half of the overall gains in real income from trade openness. In slowing human capital accumulation, trade liberalization can induce welfare losses if the trade partners are low-income destinations.
    Keywords: Export Activity; Wage Profiles; Human Capital Accumulation
    JEL: F10 F16 M53
    Date: 2020–08
  8. By: Hebatallah Ghoneim (Faculty of Management Technology, German University in Cairo); Rana Abdulmonem (Faculty of Management Technology, German University in Cairo); Noha Ghazy (Faculty of Managemennt Technology, German University in Cairo)
    Abstract: In 2010, Egypt signed a preferential Free Trade Agreement (FTA) with the Common Market of the South (Mercosur).Correspondingly, this paper evaluates the success of this FTA by measuring the degree of complementarity between the two economies
    Keywords: Complementarity Index; Egypt; Mercosur; Preferential Free Trade Agree-ment, Tariffs, Trade
    JEL: F14 F53 O54 O55
    Date: 2021–04
  9. By: Ma, Xiao
    Abstract: This paper examines how China’s expansion of college education since 1999 affects innovation and exports’ skill content. I develop a two-country spatial equilibrium model, featuring skill intensity differences across industries and heterogeneous firms’ innovation and exporting choices. I empirically validate my model mechanisms about how the college expansion affects innovation and exports, exploiting differential supply shocks of college-educated workers across regions due to historical college endowments. I apply the resulting reduced-form estimates in the calibration to discipline key elasticities that determine the magnitude of export expansion. Under different assumptions about firm entry, I find that China’s college expansion explained 40–70% of increases in China’s manufacturing R&D intensity between 2003–2018 and triggered export skill upgrading. I also find that trade openness amplified the impact of this education policy change on China’s innovation and production.
    Keywords: College Expansion, Trade, Innovation
    JEL: F16 I25 O32
    Date: 2020–11
  10. By: Charles Cadestin (OECD); Alexander Jaax (OECD); Sébastien Miroudot (OECD); Carmen Zürcher (OECD)
    Abstract: This paper provides new evidence on the role of intangible capital in global value chains (GVCs) by focusing on the role of multinational enterprises (MNEs) and their foreign affiliates in value capture through intangible assets. Industry-level data suggest that foreign affiliates of MNEs generate more income through intangible capital than domestic-owned firms. Intangible returns from foreign affiliates are found both in the host economy and in foreign-owned firms in other countries participating in the GVC. Some heterogeneity is observed across GVCs with returns to intangible capital of foreign-owned firms concentrated in key manufacturing (chemicals including pharmaceuticals, food products, ICT and electronics, and motor vehicles) and services GVCs (finance and insurance, other business services, wholesale and retail, and telecoms). Five case studies (Adidas, AstraZeneca, Rocket Internet, Starbucks and Tata Consultancy Services) complement the analysis by looking at the role of intangible capital in the GVC of specific MNEs.
    Keywords: factor income, foreign affiliates, global value chains, intangible capital, multinational enterprises
    Date: 2021–09–09
  11. By: Theresa M. Greaney (University of Hawai‘i); Ayumu Tanaka (Chuo University)
    Abstract: We explore potential relationships between international economic activities and gender wage gaps (GWGs) using linked employer-employee data for Japan. We find evidence that exporting and multinational activities are associated with reduced GWGs. Domestic-owned firms that neither export nor invest abroad (i.e., domestic-only firms) report the largest GWG, followed by Japanese-owned multinational enterprises(JMNE), then by locally-owned exporters that do not invest abroad and finally by foreign-owned multinational enterprises (FMNE). We separate FMNE by mode of entry and confirm that FMNE established by greenfield investment deviate more than FMNE established by merger and acquisition from domestic-only firms in terms of wages. Greenfield- born FMNE are associated with the smallest GWG and largest gender- neutral wage premium among the firm types. The estimated GWG among Greenfield-born FMNE is almost 12 percentage-points lower than the 26.8 percent prevailing at domestic-only firms.
    Keywords: gender wage gap; wage premium; exporters; multinational enterprises
    JEL: F14 F16 J31
    Date: 2020–12
  12. By: Douglas A. Irwin (Peterson Institute for International Economics)
    Abstract: In 1960, South Korea’s exports were about 1 percent of GDP, and the country’s ability to import depended almost entirely on US aid. After changing its foreign exchange and trade policies in the mid-1960s, Korea saw a surge in exports to more than 10 percent of GDP by the end of the decade. What factors account for the shift in policy that enabled this dramatic export growth to occur? The United States helped initiate the process by withholding financial assistance, pressuring Korea to devalue its currency and reform its foreign exchange regime. Initially, the Korean government resisted taking these steps, but in 1964 it became firmly committed to an export promotion strategy to boost foreign exchange earnings and end its dependence on American aid.
    Keywords: export promotion, export orientation, devaluation, foreign exchange reform
    JEL: F13 F31 N75
    Date: 2021–09
  13. By: Yao Pan (George Washington University); Jessica Leight (International Food Policy Research Institute)
    Abstract: This paper analyzes the effects of positive shocks to export-oriented industries following China's accession to the World Trade Organization on human capital investment in urban and rural areas. Exploiting cross-county variations in the reduction in export tariff uncertainty both locally and at plausible migration destinations, we find that youth reaching matriculation age post-accession in counties experiencing a larger export shock show a lower probability of enrolling in high school. In urban areas, this effect is driven by local shocks, while in rural areas, it is primarily driven by shocks at migration destinations. Urban youth show evidence of a deterioration in labor market outcomes linked to declining matriculation rates, while there is no evidence of significant labor market effects for rural youth.
    Keywords: Export Shock, Human Capital Attainment, Urban-rural Inequality, China
    JEL: F14 F16 J24 O15 O18 O19
    Date: 2021
  14. By: Rob Euwals (CPB Netherlands Bureau for Economic Policy Analysis); Harro van Heuvelen (CPB Netherlands Bureau for Economic Policy Analysis); Gerdien Meijerink (CPB Netherlands Bureau for Economic Policy Analysis); Jan Möhlmann (CPB Netherlands Bureau for Economic Policy Analysis); Simon Rabaté (CPB Netherlands Bureau for Economic Policy Analysis)
    Abstract: Contrary to other studies, we find no robust effect of an increase in trade with China and Central European (CEE) countries on local employment, wages and inequality in the Netherlands. If there is an effect, it is small, with positive effects of increased exports counteracting the negative effects of increased imports. One of the reasons why we find different results for the Netherlands is the fact that the Dutch manufacturing industry was already undergoing changes well before the emergence of China and the CEE countries and became less sensitive to import competition from China or the CEE countries. In addition, the Netherlands has collective wage negotiations, which may help to explain that we do not find any effects on wages. While the effect of increased trade with China and the CEE countries on manufacturing jobs is limited, it can create uncertainty for workers. The negative effect of import competition and the positive impact of export opportunities on manufacturing jobs also point to adjustments across industries and regions. Transitioning workers to new types of work can be difficult for these workers, as they are (temporarily) unemployed and may need to move to other regions.
    JEL: F16 J31 R11
    Date: 2021–07
  15. By: Pollitt, M .G.
    Abstract: The UK left the European single market in energy on 31 December 2020, having been a leading light in its promotion. It entered into a new energy relationship with the EU-27 as outlined in the EU-UK Trade and Cooperation Agreement (TCA) on 1 January 2021. This paper discusses what has happened to the UK energy sector since the Brexit referendum of June 2016. Since our previous paper on this topic in 2017, there has been a significant clarification in the impact of Brexit on the energy sector in the UK. We outline what the TCA says about energy. We then discuss the current and potential future effects of Brexit on the UK electricity and gas systems in turn. We observe that the likely economic welfare impacts on electricity are larger than the impacts on gas, but the overall microeconomic impact appears likely to be modest (but negative). We offer a number of concluding observations.
    Keywords: Brexit, Trade and Cooperation Agreement, market coupling
    JEL: L94
    Date: 2021–09–06
  16. By: Czyżewski, Daniel
    Abstract: This paper addresses issues connected with economic growth, how the theory on it has changed and also what its potential determinants are. In order to do so, the panel data was constructed for 129 countries with the time period of 1975-2015. In addition to this, the paper also accounts for the model uncertainty as well as reverse causality issues that may arise while dealing with such data. The methodology applied in the research consists of the Moral-Benito (2016) framework combined with the bayesian model averaging method (BMA). Out of the five variables, only one turned out to be fragile. The other four appeared to be robust with three of them at the most restrictive level. What is more, the paper also presents the potential reasoning behind obtained results and upholds the hypothesis that international trade has a positive impact on the economic growth.
    Keywords: economic growth, bayesian model averaging, trade openesss, dynamic panels, weakly exogenous regressors
    JEL: F1 F19 F43 O11 O49
    Date: 2021
  17. By: Emily J. Blanchard (Dartmouth College); Chad P. Bown (Peterson Institute for International Economics); Davin Chor (Dartmouth College)
    Abstract: We find that Republican candidates lost support in the 2018 congressional election in counties more exposed to trade retaliation, but saw no commensurate electoral gains from US tariff protection. The electoral losses were driven by retaliatory tariffs on agricultural products, and were only partially mitigated by the US agricultural subsidies announced in summer 2018. Republicans also fared worse in counties that had seen recent gains in health insurance coverage, affirming the importance of health care as an election issue. A counterfactual calculation suggests that the trade war (respectively, health care) can account for five (eight) of Republicans' lost House seats.
    Keywords: Trade War, Trade Policy, Retaliatory Tariffs, Agricultural Subsidies, Health Insurance Coverage, Voting
    JEL: F13 F14
    Date: 2019–12
  18. By: Tolulope T. Osinubi (Obafemi Awolowo University, Ile-Ife, Nigeria); Simplice A. Asongu (Yaoundé, Cameroon)
    Abstract: This study examines the effect of globalization on female economic participation (FEP) in MINT (Mexico, Indonesia, Nigeria & Turkey) and BRICS (Brazil, Russia, India, China & South Africa) countries between 2004 and 2018. Four measures of globalization are employed and sourced from KOF globalization index, 2018, while the female labour force participation rate is a proxy for FEP. The empirical evidence is based on Pooled Mean Group (PMG) estimators. The findings of the PMG estimator from the Panel ARDL method reveal that political and overall globalization in MINT and BRICS countries have a positive impact on FEP, whereas social globalization exerts a negative impact on FEP in the long-run. It is observed that economic globalization has no long-run effect on FEP. Contrarily, all the measures of globalization posit no short-run effect on FEP in the short-run. This supports the argument that globalization has no immediate effect on FEP. Thus, it is recommended that both MINT and BRICS countries should find a way of improving the process of globalization generally to empower women to be involved in economic activities. This study complements the extant literature by focusing on how globalization dynamics influence FEP in the MINT and BRICS countries.
    Keywords: Globalization; female; gender; labour force participation; MINT and BRICS countries
    JEL: E60 F40 F59 D60
    Date: 2020–01
  19. By: Cristelli, Gabriele; Lissoni, Francesco
    Abstract: We study the innovation effects of the Agreement on the Free Movement of Persons (AFMP), signed by Switzerland and the EU in 1999. Using geocoded patent data, complemented by matched inventor-immigrant-census records, we identify a large number of cross-border inventors (CBIs), commuters from neighbouring countries working in Swiss R&D labs. We show that, during the AFMP implementation phase, the influx of CBIs increased differentially across regions at different driving distances from the border, causing a 24% increase in patents, mostly due to large and medium patent holders (as opposed to very large ones) and to inventor teams mixing CBIs and natives. We do not detect any adverse effect on native inventors and show that Swiss incumbent inventors collaborating with CBIs increased their productivity. Our evidence suggests complementarity between CBIs’ and Swiss incumbents’ knowledge assets.
    Keywords: Immigration, Innovation, Patents, Inventors, Free Movement of Persons
    JEL: F22 J61 O31 O33
    Date: 2020–11
  20. By: Douglas A. Irwin (Peterson Institute for International Economics)
    Abstract: Taiwan was the first developing country to adopt an export-oriented trade strategy after World War II. The factors usually associated with big shifts in policy—a macroeconomic crisis, a change in political power or institutions, lobbying by export interests, pressure from international financial institutions—were not present; it was ideas that were key. In 1954, economist S. C. Tsiang proposed that Taiwan boost export earnings rather than squeeze import spending to deal with its chronic shortage of foreign exchange. He recommended a currency devaluation to establish a realistic exchange rate and a market-based system of foreign exchange allocation to end the inefficient rationing by the government. Four years later, a policymaker, K. Y. Yin, fought for the adoption of Tsiang’s proposal, helping clear the way for Taiwan’s phenomenal growth in trade.
    Keywords: trade reform, foreign exchange, flexible exchange rates
    JEL: F13 F31 N75
    Date: 2021–08
  21. By: Ernest Miguelez; Andrea Morrison;
    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: O30 F20 F60
    Date: 2021–08
  22. By: Grace Nsomba; Thando Vilakazi
    Abstract: Effective competition in the Southern and East African regions requires independent rivals competing across borders and within domestic markets through innovation and effort, investment, product quality, and prices. To understand the constraints to more dynamic rivalry between firms within the region, this paper considers the obstacles to integration from the perspective of fostering the development of domestic firms with strong capabilities.
    Keywords: African multinational corporations, Competition, Regional integration, Barriers to entry
    Date: 2021
  23. By: Berger, Axel; Dadkhah, Ali; Olekseyuk, Zoryana
    Abstract: This article introduces a new and unique dataset for measuring the adoption of investment facilitation measures at country level. The Investment Facilitation Index (IFI) covers 117 individual investment facilitation measures, clustered in six policy areas, and maps their adoption for 86 countries. This article presents the conceptual and methodological background of the IFI and provides a first analysis of the level of adoption of investment facilitation measures across countries participating in the investment facilitation for development negotiations in the World Trade Organization (WTO). Our dataset reveals novel insights. Countries which have lower levels of adoption belong to the low-income and lower-middle-income country group and are often located in Africa, the Middle East and to some extent Latin America and the Caribbean. The strong correlation between FDI and the IFI score shows that countries with the lowest levels of FDI, and thus in need of policy tools to attract FDI, have the lowest levels of adoption when it comes to investment facilitation measures. Our dataset has direct relevance for current policy discussions on investment facilitation for development in the WTO but also for domestic-level policy-making. Furthermore, the IFI provides the basis for a future research agenda to assess the design and impact of a future WTO agreement.
    Date: 2021
  24. By: Jeffrey J. Schott (Peterson Institute for International Economics)
    Abstract: The benefits of the Regional Comprehensive Economic Partnership (RCEP) for South Korea are limited and need to be supplemented by more comprehensive agreements that deepen Korea’s ties to strategic allies in the Asia-Pacific region. RCEP's most important achievement is its new regional content rule that will encourage deeper integration of supply chains across the 15 markets, a key benefit for Korean industries invested in the region. But Schott notes that the pact also has significant limitations. To complement RCEP, he recommends that South Korea move forward with two other trade negotiating priorities, membership in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and upgrading the Korea-US Free Trade Agreement (KORUS), the latter aimed at encouraging US reengagement in the Asia-Pacific integration pact.
    Date: 2021–07
  25. By: Borchert, Lea; de Haas, Ralph; Kirschenmann, Karolin; Schultz, Alison
    Abstract: Correspondent banks allow local banks in emerging markets to access the international payments system. This helps local banks to make cross-border payments, clear currencies, and provide trade finance. The recent retrenchment of global correspondent banks following the increased costs of financial crime compliance may therefore disrupt international trade. This policy brief shows that the withdrawal of correspondent banks from Emerging Europe has negatively and substantially affected the exports of this region. Exploiting an unexpected change in the U.S. regulator's enforcement of financial crime legislation we compare industry-level bilateral trade flows of countries experiencing a high withdrawal with those that maintain their correspondent bank relationships. We find that the decreased availability of international payment and trade finance services has considerable negative effects on exports. This negative effect is stronger for trading partners that are geographically more distant. A survey of 93 local banks confirms that banks face growing difficulties in performing cross-border payments and in clearing currencies. In particular, access to the U.S. financial system is severely inhibited and local banks can only imperfectly substitute lost correspondent bank relationships with new partners from Russia and Austria.
    Date: 2021
  26. By: Glyn Wittwer
    Abstract: The Global Bev Model is a partial equilibrium model of various wine types plus beer and spirits. This paper summarises four enhancements to the model. First, each still wine type is split into red and white. This is relevant in response to the prohibitive tariff imposed by China on Australian wine imports. Second, an on-premise sector is added to improve the depiction of wine consumption in the model. During COVID, lockdowns and social restrictions have resulted in marked reductions in hotel and restaurant activity, with a corresponding reduction in on-premise wine consumption. Now, the impacts on on-premise and off-premise can be analysed separately. Third, given the importance of interstate exports of wine from California to the rest of the nation, California is split from the rest of USA in the global model. Finally, a top-down module has been added to the model to capture sub-national impacts in Australia and sub-state impacts in California.
    Keywords: global wine modelling, tariff impacts, on-premise consumption
    JEL: C68 F17 Q17
    Date: 2021–09
  27. By: Tijl Hendrich (CPB Netherlands Bureau for Economic Policy Analysis); Jennifer Olsen (CPB Netherlands Bureau for Economic Policy Analysis); Steven Brakman (RUG); Charles van Marrewijk (UU)
    Abstract: The trade literature often treats countries as dimensionless points, which is a strong assumption. Agglomeration or lumpiness of production factors within countries can affect the national pattern of trade. In this paper we analyze comparative advantage patterns for 22 cities and 4 regions for (a selection of) 83 sectors within The Netherlands. Our findings are as follows. First, analysis of the lens condition indicates that the regional concentration of production factors (lumpiness) does not affect the Dutch national trade pattern. Second, despite the fact that the lens condition is verified, comparative advantage patterns across locations differ significantly from each other. Third, the differences across locations of comparative advantage patterns is explained by the interaction of local skill-abundance and sector skill-intensity, in line with the predictions of the factor abundance model.
    JEL: F11 F15 R12
    Date: 2021–01
  28. By: Porteous, Obie C.
    Keywords: International Development, International Relations/Trade, Agricultural and Food Policy
    Date: 2021–08
  29. By: MÜLLER Julian M.; POTTERS Lesley (European Commission - JRC); RENTOCCHINI Francesco (European Commission - JRC); TUEBKE Alexander (European Commission - JRC)
    Abstract: The successful implementation of Industry 4.0 (I4.0) within the European Union (EU) should build upon existing global innovation networks (GINs) and global value chains (GVCs) and the ecosystem of EU firms, especially in the manufacturing industry where I4.0 could play an important role.For the EU, which has a large share of small and medium-sized enterprises (SMEs) that are key to competitiveness in its main sectors, it is vital to integrate SMEs into I4.0 by ensuring they benefit from their efforts in implementing it, in order to capture, create and offer value. It is important to address training, requalification and workers’ concerns about I4.0 in order to support its implementation while maintaining the EU social model.Harnessing the EU’s strength in industrial application, while bearing in mind its lag in traditional ICT industries, could make I4.0 a viable policy option ensuring future leadership of the European economy, if certain factors discussed in this policy brief are included in future industrial policies.
    Keywords: Global value chains, innovation
    Date: 2021–08
  30. By: Kevin Lai (Federal Reserve Bank of New York); Tao Wang (Swarthmore College); David Xu (Peterson Institute for International Economics)
    Abstract: Capital control policies have consequences for economic growth and international trade. Using data on 99 countries from 1995 to 2014, we find evidence that the effect of capital controls on trade vary across industries that have differing levels of external financing and asset tangibility. For exporting countries that tighten capital controls, industries that rely more heavily on external financing experience a larger decline in exports, while industries that possess more tangible assets experience a smaller decline in exports. For importing countries, tighter capital controls imply a decrease in trade, and this effect is uniform across all industries. The pattern with respect to external financing persists after accounting for availability of domestic credit and differences in industry shares and is predominantly found in countries with low levels of financial development. On the other hand, the varying effect related to asset tangibility is mostly absorbed by the domestic credit market.
    Keywords: Capital controls, Financial vulnerability, International trade
    JEL: F14 F38 F68
    Date: 2019–12
  31. By: Tjaden, Jasper Dag; Heidland, Tobias
    Abstract: In 2015, German Chancellor Angela Merkel decided to allow over a million asylum seekers to cross the border into Germany. One key concern at the time was that her decision would signal an open-door policy to aspiring migrants worldwide - thus, increasing migration to Germany in the long-term. With the continued global rise in forced displacement, Merkel's decision in 2015 provides a unique case study for the fundamental question of whether welcoming migration policies have sustained effects on migration towards destination countries. We analyze an extensive range of data on migration inflows, intentions, and interest between 2000 and 2020. The results reject the 'pull effect' hypothesis while reaffirming states' capacity to adapt to changing contexts and regulate migration.
    Keywords: migration,migration policy,asylum and refugee policy,policy signaling,pull effects
    JEL: F22 F68
    Date: 2021
  32. By: Jean Pisani-Ferry
    Abstract: Join the launch event of this publication at 16- 00, 2 September. Asymmetries in the global economy arising from economic concentration, global value chains, financial centres, digital networks and the enduring supremacy of the dominant currency are becoming harder to ignore. This essay provides a cross-cutting economic perspective on the analysis of global asymmetries at a time of growing emphasis on polarisation and power relations.
    Date: 2021–09
  33. By: Anna Stansbury
    Abstract: To what extent do US firms have an incentive to comply with the Fair Labor Standards Act (FLSA) and the National Labor Relations Act (NLRA)? Stansbury examines this question through a simple comparison of the expected costs of noncompliance (in terms of legal sanctions) to the profits firms can earn through noncompliance. In the case of the FLSA minimum wage and overtime provisions, typical willful violators are required to pay back wages owed and in some cases additional penalties, if detected by the Department of Labor (DOL). Based on available data on the penalties levied, a typical firm would need to expect a chance of at least 78-88 percent that its violation would be detected in order to have an incentive to comply with the FLSA. In practice, the probability of detection many firms can expect to face is likely much lower than this. In the case of the NLRA, a firm that fires a worker illegally is required to reinstate the worker with back pay if the violation is detected. Based on empirical estimates of the effect of unionization on firm profits, a typical firm may have an incentive to fire a worker illegally for union activities if this illegal firing would reduce the likelihood of unionization at the firm by as little as 0.15-2 percent. These analyses illustrate that neither the FLSA nor the NLRA penalty and enforcement regimes create sufficient incentive to comply for many firms. In this context, the substantial evidence of minimum wage and overtime violations, and of illegal employer behavior toward unions, is not surprising.
    Keywords: US-China trade policy, tariffs, trade war timeline, phase one agreement, antidumping, countervailing duties, product exclusions, export controls
    JEL: F13
    Date: 2021–06
  34. By: Walter, Timo
    Abstract: From the early 1990s until 2005 the unemployment rate rose in Germany from 7.3% to 11.7%. While the unemployment rate reached its peak in 2005, it decreased steadily in the following years. On the one hand, the fourth stage of the German labor market reform (Hartz IV) was implemented in 2005 with the intent to cut the unemployment rate. On the other hand, the productivities in Germany and Eastern Europe grew strongly during the same period, enhancing the joint trade. The "rise of the East", in terms of rising trade, is likely to have had an ambiguous effect on the German labor market. This paper investigates the employment effects of the "Hartz IV-Reform". Further, it concentrates on the labor market effects of the German and Eastern European productivity shock. The focus lies on the national and county level (including 402 counties). As the effects on regional labor markets differ and take time, the paper builds on the dynamic and spatial trade model of Caliendo et al. (2019). I find that the "Hartz IV-Reform" and the German productivity contributes positively to the decline of unemployment, whereas the increase in Eastern European productivity is only responsible for a minor increase in unemployment.
    Keywords: Dynamic Trade Model,Labor Market Reform,Trade Liberalization,Productivity Shocks,Germany,Eastern Europe
    JEL: F14 F16 F17
    Date: 2021
  35. By: Chad P. Bown (Peterson Institute for International Economics); Thomas J. Bollyky (Council on Foreign Relations)
    Abstract: Many months after COVID-19 vaccines were first authorized for public use, still limited supplies could only partially reduce the devastating loss of life and economic costs caused by the pandemic. Could additional vaccine doses have been manufactured more quickly some other way? Would alternative policy choices have made a difference? This paper provides a simple analytical framework through which to view the contours of the vaccine value chain. It then creates a new database that maps the COVID-19 vaccines of Pfizer/BioNTech, Moderna, AstraZeneca/Oxford, Johnson & Johnson, Novavax, and CureVac to the product- and location-specific manufacturing supply chains that emerged in 2020 and 2021. It describes the choppy process through which dozens of other companies at nearly 100 geographically distributed facilities came together to scale up global manufacturing. The paper catalogues major pandemic policy initiatives—such as the United States' Operation Warp Speed—that are likely to have affected the timing and formation of those vaccine supply chains. Given the data, a final section identifies further questions for researchers and policymakers.
    Keywords: Vaccines, COVID-19, subsidies, export restrictions, supply chains
    JEL: F13
    Date: 2021–08
  36. By: Hammami, AbdelMalek; Beghin, John C.
    Keywords: International Relations/Trade, Marketing, International Development
    Date: 2021–08
  37. By: Pierre Azoulay (MIT Sloan School of Management, and NBER); Benjamin Jones (Northwestern University, and NBER); J. Daniel Kim (University of Pennsylvania); Javier Miranda (Friedrich-Schiller University Jena and Halle Institute for Economic Research (IWH))
    Abstract: Immigrants can expand labor supply and compete for jobs with native-born workers. But immigrants may also start new firms, expanding labor demand. This paper uses U.S. administrative data and other data sources to study the role of immigrants in entrepreneurship. We ask how often immigrants start companies, how many jobs these firms create, and how firms founded by native-born individuals compare. A simple model provides a measurement framework for addressing the dual roles of immigrants as founders and workers. The findings suggest that immigrants act more as "job creators" than "job takers" and play outsized roles in U.S. high-growth entrepreneurship.
    Keywords: Entrepreneurship, immigration, innovation, administrative data, Survey of Business Owners, Fortune 500, job creation, earnings, growth
    JEL: J15 L26 M13 O3
    Date: 2021–09–06
  38. By: Gnecco Giorgio; Nutarelli Federico; Riccaboni Massimo
    Abstract: This work applies Matrix Completion (MC) -- a class of machine-learning methods commonly used in the context of recommendation systems -- to analyse economic complexity. MC is applied to reconstruct the Revealed Comparative Advantage (RCA) matrix, whose elements express the relative advantage of countries in given classes of products, as evidenced by yearly trade flows. A high-accuracy binary classifier is derived from the application of MC, with the aim of discriminating between elements of the RCA matrix that are, respectively, higher or lower than one. We introduce a novel Matrix cOmpletion iNdex of Economic complexitY (MONEY) based on MC, which is related to the predictability of countries' RCA (the lower the predictability, the higher the complexity). Differently from previously-developed indices of economic complexity, the MONEY index takes into account the various singular vectors of the matrix reconstructed by MC, whereas other indices are based only on one/two eigenvectors of a suitable symmetric matrix, derived from the RCA matrix. Finally, MC is compared with a state-of-the-art economic complexity index (GENEPY). We show that the false positive rate per country of a binary classifier constructed starting from the average entry-wise output of MC can be used as a proxy of GENEPY.
    Date: 2021–09
  39. By: Emanuel Kohlscheen; Richhild Moessner
    Abstract: We provide novel systematic cross-country evidence that the link between domestic labour markets and CPI inflation has weakened considerably in advanced economies during recent decades. The central estimate is that the short-run pass-through from domestic labour cost changes to core CPI inflation decreased from 0.25 in the 1980s to just 0.02 in the 2010s, while the longrun pass-through fell from 0.36 to 0.03, with the estimates in the 2010s no longer significant. We show that the timing of the collapse in the pass-through coincides with a steep increase in import penetration from a group of major manufacturing EMEs around the turn of the millennium, which signals increased competition and market contestability.
    Keywords: competition, globalisation, import penetration, inflation, labour market, pass-through, wage
    JEL: E31 E50 F10 F60 J30
    Date: 2021
  40. By: Aydemir, Abdurrahman (Sabanci University); Duman, Erkan (Sabanci University)
    Abstract: This paper estimates effects of birth place migration networks and other location attributes on destination choices of internal migrants conditional on migration. We also study heterogeneity in the role of these factors for migrant types who differ by skill group, age at migration, and reason of migration. We use data on male migrants from three rounds of Turkish censuses 1985, 1990 and 2000 who choose among 67 provinces. We find that migrants are drawn to provinces with larger networks, relatively better economic conditions, and distance is a significant deterrent for migration. There are, however, significant heterogeneities across migrant types. More educated move longer distances and rely less on networks for destination choice. Importance of labor market conditions increases and the effect of distance decreases with age. Among migrants with different reason of migration, labor market conditions play a significant role only for migrants moving for employment reasons and networks matter less for this group.
    Keywords: migration, networks, destination choice, education, reason of migration, heterogeneous effects
    JEL: J61 O15 R23 Z13
    Date: 2021–08
  41. By: Martinez Flores, Fernanda; Milusheva, Sveta; Reichert, Arndt R.
    Abstract: Migration is one of the channels West African populations can use to adjust to the negative impacts of climate change. Using novel geo-referenced and high-frequency data, this study investigates the extent to which soil moisture anomalies drive international migration decisions within the region and toward Europe. The findings show that drier soil conditions decrease (rather than increase) the probability to migrate. A standard deviation decrease in soil moisture leads to a 2 percentage point drop in the probability to migrate, equivalent to a 25 percent decrease in the number of migrants. This effect is concentrated during the crop-growing season, and likely driven by financial constraints. The effect is only seen for areas that are in the middle of the income distribution, with no impact on the poorest or richest areas of a country, suggesting that the former were constrained to start and the latter can address those financial constraints.
    Keywords: West Africa,climate change,migration,agriculture
    JEL: F22 O13 O15 Q54
    Date: 2021
  42. By: So Yoon Ahn (University of Illinois at Chicago)
    Abstract: Severe gender imbalances coupled with the stark income differences across countries are driving an increase in cross-border marriages in many Asian countries. This paper theoretically and empirically studies who marries whom, including how cross-border couples are selected, and how marital surplus is allocated within couples in the marriage markets of Taiwan (a wealthier side with male-biased sex ratios) and Vietnam (a poorer side with balanced sex ratios). Among the cross-border marriages that are predominantly made up of Taiwanese men and Vietnamese women, I nd that Taiwanese men are selected from the middle level of the socioeconomic status distribution, and Vietnamese women are positively selected for cross-border marriages. Moreover, I show that changes in costs of cross-border marriage, incurred by immigration-policy changes and proliferation of matching services, also affect the welfare of Taiwanese and Vietnamese who do not participate in cross-border marriages by altering marriage rates, matching partners, and intra-household allocations.
    Keywords: Taiwan, Vietnam, Asia, marriage market, sex ratios, socioeconomic status, marital matching
    JEL: C78 D10 D13 J11 J12 J18 F22
    Date: 2021–09
  43. By: Kerstin Mitterbacher (Institute of Banking and Finance, University of Graz); Stefan Palan (Institute of Banking and Finance, University of Graz); Jürgen Fleiß (Business Analytics and Data Science-Center (BANDAS-Center), University of Graz)
    Abstract: We experimentally study economic migrants' willingness to take up work and integrate into society, and, in turn, destination country citizens' willingness to allow economic migrants to pursue formal work and integrate into society and its social security and welfare system. We find clear evidence for a reciprocal relationship between the individuals in these roles. The labor market participation of economic migrants co-moves with destination countries' openness to welcoming them. We conclude that supporting economic migrants in early labor market attachment is crucial to support a mutually beneficial co-existence in a society.
    Date: 2021–07–20
  44. By: Platt, Lucinda; Polavieja, Javier; Radl, Jonas
    Abstract: Can specific policies support the economic integration of immigrants? Despite the crucial importance of this question, existing evidence is inconclusive. Using data from the European Social Survey, we estimate the effects of integration and anti-discrimination policies, alongside social expenditure and labor market regulation, on the labor market performance of 6,176 non-European immigrants across 23 European countries. We make three contributions: 1) we investigate the distinct role of discrete policy areas for labor market integration outcomes, 2) we allow for heterogeneous effects of policies on immigrants with different characteristics, and 3) we examine immigrants’ occupational attainment while accounting for their selection into employment. We find that immigrants’ employment chances are negatively associated with national levels of expenditure on welfare benefits but positively associated with policies facilitating immigrant access to social security. We also find that labor market rigidity is negatively associated with immigrants’ occupational attainment, but we find little evidence that policies aimed at supporting the transferability of immigrants’ qualifications promote their occupational success. Our results strongly suggest that anti-discrimination policies are important for immigrant economic integration. Yet while these policies are associated with greater occupational success for all female immigrants, they seem to be only positively associated with the occupational attainment of higher-skilled and non-Muslim immigrant men. As this article suggests, anti-discrimination policies can foster immigrants’ labor market success, yet these policies currently fail to reach those who face the strongest anti-immigrant sentiments — that is, unskilled male immigrants and Muslim immigrant men.
    Keywords: immigrants; occupational attainment; employment; Europe; integration policies; social expenditure; labor market regulations; Sage deal
    JEL: R14 J01
    Date: 2021–08–02

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