nep-int New Economics Papers
on International Trade
Issue of 2021‒10‒11
23 papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. Dynamics of Large Multinationals By Elhanan Helpman; Benjamin C. Niswonger
  2. Drivers of Global Trade: A Product-Level Investigation By Hakan Yilmazkuday
  3. Trade Agreements in the Last 20 Years: Retrospect and Prospect By Beghin, John C; O'Donnell, Jill
  4. Effectiveness of export promotion programs By Demena, B.A.
  5. Tracing Value Added in the Presence of Foreign Direct Investment By Zhi Wang; Shang-Jin Wei; Xinding Yu; Kunfu Zhu
  6. Trade Openness and Growth: A Network-Based Approach By Georg Duernecker; Moritz Meyer; Fernando Vega-Redondo
  7. Learning to Use Trade Agreements By Kala Krishna; Carlos Salamanca; Yuta Suzuki; Christian Volpe Martincus
  8. Import Competition and Firms’ Internal Networks By Jay Hyun; Ziho Park; Vladimir Smirnyagin
  9. Liberal trade policy and food insecurity across the income distribution: an observational analysis in 132 countries, 2014–17 By Barlow, Pepita; Loopstra, Rachel; Tarasuk, Valerie; Reeves, Aaron
  10. The effect of Brexit on British workers living in the EU By Ana Venâncio; João Pereira dos Santos
  11. Universal Database for Economic Complexity By Aurelio Patelli; Andrea Zaccaria; Luciano Pietronero
  12. An Update on the U.S.–China Phase One Trade Deal By Hunter L. Clark
  13. Does institutional quality mitigate the effect of Foreign Direct Investment on environmental quality: Evidence of MENA countries By bouchoucha, najeh
  14. Effects of Infrastructures on Environmental Quality Contingent on Trade Openness and Governance Dynamics in Africa By Tii N. Nchofoung; Simplice A. Asongu
  15. The Heterogeneous Impact of Market Size on Innovation:Evidence from French Firm-Level Exports By P. AGHION; A. BERGEAUD; M. LEQUIEN; M.J.
  16. Delivery Times in International Competition: An Empirical Investigation By Ciani, Andrea; Mau, Karsten
  17. Pudding, Plague and Education: trade and human capital formation in an agrarian economy By Pantelis Kammas; Argyris Sakalis; Vassilis Sarantides
  18. Supply Chain Resilience: Should Policy Promote Diversification or Reshoring? By Gene M. Grossman; Elhanan Helpman; Hugo Lhuillier
  19. ICT for Sustainable Development: Global Comparative Evidence of Globalisation Thresholds By Tii N. Nchofoung; Simplice A. Asongu
  20. Climate Change, The Food Problem, and the Challenge of Adaptation through Sectoral Reallocation By Ishan Nath
  21. Russia in Africa: Is great power competition returning to the continent? By Paczyńska, Agnieszka
  22. Profit Shifting of Multinational Corporations Worldwide By Garcia-Bernardo, Javier; Janský, Petr
  23. Decrypting New Age International Capital Flows By Clemens Graf von Luckner; Carmen M. Reinhart; Kenneth S. Rogoff

  1. By: Elhanan Helpman; Benjamin C. Niswonger
    Abstract: We develop a model of large multinational enterprises, each one producing a continuum of products. These outsized firms compete as oligopolists in a domestic and foreign market, facing competitive pressure from single-product firms that engage in monopolistic competition. The multinational enterprises invest in R&D in order to expand the span of their products and in foreign direct investment (FDI) in order to expand the range of products manufactured by their foreign affiliates. We study the dynamic evolution of these markets and characterize transition dynamics and steady states. In addition to the evolution of product spans, we characterize the evolution of prices, markups, market shares, and exports relative to subsidiary sales. Furthermore, we study comparative dynamics that result from changes in trade costs, R&D costs, the cost of FDI and productivity changes of the multinational firms.
    JEL: D43 F12 F23 L11 L13 L25
    Date: 2021–10
  2. By: Hakan Yilmazkuday (Department of Economics, Florida International University)
    Abstract: This paper investigates the drivers of global trade at the six-digit product level. The identification is achieved first by estimating the log-linear product-level bilateral trade implications of a model and second by aggregating the fitted estimation results across bilateral countries using Taylor series to obtain global measures in levels for each product. The empirical results suggest that supply-side effects (capturing production or exporting costs in source countries) contribute to changes in global trade more than six times the demand-side effects (capturing economic activity or preferences in destination countries) and more than ten times the effects of bilateral trade costs (capturing bilateral protectionism measures). Several product-level implications follow.
    Keywords: Global Trade, Product-Level Analysis, Decomposition
    JEL: F14 F60
    Date: 2021–09
  3. By: Beghin, John C; O'Donnell, Jill
    Abstract: We provide an overview of major developments in multi- and plurilateral trade agreements over the last 20 years with a focus on the implications for agricultural and food markets. We take stock of what has been accomplished in market integration, remaining obstacles to trade, events that have changed the trade landscape, and emerging issues. Agricultural tariffs have fallen through commitments made in the Uruguay Round Agreement on Agriculture and through the proliferation of regional trade agreements. Nevertheless agricultural trade remains distorted with some prohibitive tariffs. RTAs have achieved progress on nontariff measures and other beyond-the-border frictions. The WTO’s negotiations on agricultural distortions have stalled because of their complexity and divergent interests among WTO members. In addition, the dispute settlement mechanism of the WTO has been seriously impaired as its Appellate Body can no longer function. The WTO will have to adjust to a world of RTAs and use its tools and procedures to support the multilateral trading system through increasing transparency of RTAs and reporting on conformity with existing WTO agreements. The WTO can also use substitute tools to head off disputes using specific trade concern mechanisms, like those of the SPS and TBT committees.
    Keywords: International Relations/Trade
    Date: 2021–10–06
  4. By: Demena, B.A.
    Abstract: Export promotion policies and programmes (EPP) are increasingly popular to enhance export performance, but the evidence from their reported estimates appear puzzling and yet vary widely. We examine 1869 estimated parameters dealing with EPP and firm-level export performance from 37 studies published up to including 2020. Our main findings are threefold. First, constructing 26 moderator variables reflecting the context in which researchers obtain their estimated parameters, we uncovered that differences across the primary studies are mainly driven by the characteristics of the data, the types of firms targeted, the set of variables controlled in the underlying estimation techniques, the adopted a four-dimensional view of export performance, and the publication characteristics. Second, controlling for publication selection bias and reducing potential endogeneity issues, the implied gains from trade-promotion polices is about 0.069, suggesting a small practical impact by the existing guidelines. Third, unlike the econometric evaluation technique, we find robust evidence that the firm-extensive and destination-extensive margins appeared to be associated with mediating factors of publication bias.
    Keywords: International trade, trade policy, export promotion, firm export performance, impact evaluation, meta-analysis
    JEL: F13 F14 L25 O55
    Date: 2021–09–28
  5. By: Zhi Wang; Shang-Jin Wei; Xinding Yu; Kunfu Zhu
    Abstract: We develop a unified framework to trace value added along global supply chains in the presence of foreign direct investment by decomposing either GDP based on forward linkages or final production based on backward linkages. The new framework accounts for the presence of foreign invested enterprises (FIEs), their interactions with local firms in the host countries as well as their activities in international trade. The size of the GVC activities identified with this framework roughly doubles that in the previous literature that treats FIEs the same as local firms. The “missing GVC activities” are more serious for high-tech sectors than for those with a lower R&D intensity, and more serious for high-income economies than for middle-income economies.
    JEL: F1
    Date: 2021–10
  6. By: Georg Duernecker; Moritz Meyer; Fernando Vega-Redondo
    Abstract: In this paper, we propose a novel approach to the study of international trade that leads to a measure of country openness that is quite different from the various alternatives proposed by the received literature. In contrast to these, our measure does not use indicators of aggregate trade intensity, trade policy, or trade restrictiveness but relies on a broad systemic viewpoint on the effects of trade. More specifically, it goes beyond direct trade connections and measures a country’s level of integration in the world economy through the full architecture of its second, third, and all other higher-order connections in the world trade network. We apply our methodology to a sample of 204 countries spanning the period from 1962 to 2016 and perform a Bayesian analysis of model selection to identify the most important correlates of growth. The analysis finds that there is a sizable and significant positive relationship between our integration measure and a country’s rate of growth, while that of the aforementioned traditional measures of outward orientation is only minor and statistically insignificant. We perform several sensitivity checks and conclude that our baseline findings are very robust to either different data sets or alternative variations of the integration measure. Overall, this suggests that a network-based approach to measuring country openness may provide a valuable perspective on economic growth.
    Keywords: globalization, trade integration, economic growth, network analysis, dynamic panel model, Bayesian model averaging
    Date: 2021
  7. By: Kala Krishna; Carlos Salamanca; Yuta Suzuki; Christian Volpe Martincus
    Abstract: Free trade or preferential trade areas (PTAs) allow importers who belong to the area to export to each other while paying zero or preferential tariffs as long as Rules of Origin (ROOs) are met. Meeting them is costly not only in terms of production costs but also in terms of documentation costs. We ask if these fixed costs of documentation change over time with the experience of the firm in obtaining preferential tariffs. We explore this using a unique importer-exporter matched transaction-level customs data set on a group of Latin American countries. Our estimating equation is model-based and shows that these fixed costs depend on the history of preference utilization. Most of the effect comes from experience in the same product and same partner, with some spillover to other partners buying the same product. There is little learning from experience in other products and other partners. When considering products that have been under preferences for a while, some learning might have occurred prior to the start of our data. Using a natural experiment in Argentina, where some products were newly brought under preferences, we show that learning is indeed larger for such products. As facilitating preference use today also makes it easier to use preferences in the future, interventions early on in the life of the FTA to reduce such costs would be more effective.
    JEL: F02 F13 F14 F68 N76
    Date: 2021–10
  8. By: Jay Hyun; Ziho Park; Vladimir Smirnyagin
    Abstract: Using administrative data on U.S. multisector firms, we document a cross-sectoral propagation of the import competition from China (“China shock”) through firms’ internal networks: Employment of an establishment in a given industry is negatively affected by China shock that hits establishments in other industries within the same firm. This indirect propagation channel impacts both manufacturing and non-manufacturing establishments, and it operates primarily through the establishment exit. We explore a range of explanations for our findings, highlighting the role of within-firm trade across sectors, scope of production, and establishment size. At the sectoral aggregate level, China shock that propagates through firms’ internal networks has a sizable impact on industry-level employment dynamics.
    Keywords: China shock, import competition, multisector firms, multiproduct firms, network propagation, trade
    JEL: D22 F14 F40
    Date: 2021–09
  9. By: Barlow, Pepita; Loopstra, Rachel; Tarasuk, Valerie; Reeves, Aaron
    Abstract: Background. Eradicating food insecurity is necessary for achieving global health goals. Liberal trade policies may increase food supplies but how these policies influence individual-level food insecurity remains uncertain. Methods. We combined Food and Agricultural Organization data from 460,102 persons in 132 countries, 2014-2017, with a country-level trade policy index from the Konjunkturforschungsstelle (KOF) Swiss Economic Institute. We examined the association between a country’s trade policy score and the probability of reporting ‘moderate/severe’ food insecurity using regression models and algorithmic weighting procedures. We control for multiple covariates, including GDP, democratization, and population size. We further examined heterogeneity by country- and household-income. Results. Liberal trade policy was not significantly associated with moderate/severe food insecurity after covariate adjustment. However, among households in high-income countries with incomes larger than $25,430 per person per year, a unit increase in the trade policy index (more liberal) corresponded to a 0·07 % (95% CI: -0·10% to -0·04%) reduction in the predicted probability of reporting moderate/severe food insecurity. Among households in the lowest income decile (
    Keywords: ES/N017358/1
    JEL: N0 J1
    Date: 2020–08
  10. By: Ana Venâncio; João Pereira dos Santos
    Abstract: The effect of Brexit is an important topic in the European and British political agendas. This study examines the perspective of the EU countries, with regards how British citizens working in an EU country reacted to the end of free movement of workers. Employing synthetic control methods and using data from Portugal, we estimate how the behaviour of UK citizens working in Portugal would have evolved if the Remain vote had won the referendum. Our results suggest that the Brexit referendum reduced the number of UK citizens working in Portugal, particularly in the case of non-university educated, male individuals with temporary employment contracts. This reduction is explained by the decrease in the number of incomers. We also find that those UK citizens who were already working in Portugal before Brexit are less likely to leave the country.
    Keywords: Brexit, employment, migration
    JEL: J10 J61 J68
    Date: 2021–09
  11. By: Aurelio Patelli; Andrea Zaccaria; Luciano Pietronero
    Abstract: We present an integrated database suitable for the investigations of the Economic development of countries by using the Economic Fitness and Complexity framework. Firstly, we implement machine learning techniques to reconstruct the database of Trade of Services and we integrate it with the database of the Trade of the physical Goods, generating a complete view of the International Trade and denoted the Universal database. Using this data, we derive a statistically significant network of interaction of the Economic activities, where preferred paths of development and clusters of High-Tech industries naturally emerge. Finally, we compute the Economic Fitness, an algorithmic assessment of the competitiveness of countries, removing the unexpected misbehaviour of Economies under-represented by the sole consideration of the Trade of the physical Goods.
    Date: 2021–10
  12. By: Hunter L. Clark
    Abstract: A Liberty Street Economics post from last summer by Matthew Higgins and Thomas Klitgaard contained an assessment of the Phase One trade agreement between the United States and China. The authors of that note found that, depending on how successfully the deal was implemented, the impact on U.S. economic growth could have been substantially larger than originally foreseen by many of its critics, as a result of the fact that the pandemic had depressed the U.S. economy far below its potential growth path. Here we take another look at these considerations with the benefit of an additional year’s worth of trade data and a much different economic environment in the United States.
    Keywords: China; trade; tariff
    JEL: E2 F00
    Date: 2021–10–06
  13. By: bouchoucha, najeh
    Abstract: The purpose of this study is to examine the interaction effects of Foreign Direct investment and institutional quality on environmental degradation in 17 Middle East and North African (MENA). We use ordinary least squares (OLS), Fixed effects (FE) random effects (RE) and system generalized method of moments (GMM) for the period 1996–2018. Six dimensions of governance are used : control of corruption, a sound voice and accountability, rule of Law, regulatory Quality, Govenance effectiviness and Political Stability. First, our findings show that FDI increases CO2 emissions in the MENA countries. Second, the effect of FDI on environmental degradation can be ameliorated through the presence of good institutional quality. In fact, FDI accompagnied by good governance could reduce the adverse effects of co2 emissions in MENA countries. Therefore, MENA countries should implement efficiently good institutions that will help to reduce carbon dioxide emissions.
    Keywords: FDI, CO2 emissions, institutional quality, GMM Panel, MENA countries.
    JEL: K0
    Date: 2021–10–04
  14. By: Tii N. Nchofoung (University of Dschang, Cameroon); Simplice A. Asongu (Yaoundé, Cameroon)
    Abstract: The objective of this study is to evaluate: (i) the effects of infrastructures on CO2 emission and (ii) how trade openness and governance contribute to mitigating these effects. The results from the system GMM methodology for 36 African countries between the 2003-2019 period show that infrastructural development exacerbates CO2 emission in Africa. This result is robust across different types of infrastructural development indexes. When the indirect effect regressions are carried out by interacting governance and trade openness with the different infrastructural development variables, the following results are obtained. Firstly, infrastructural development interacts with governance producing a positive net effect, up to a governance threshold estimate of 0.532 when the positive net effect is nullified. Secondly, infrastructures interact with trade openness producing a negative net effect up to a trade openness threshold of 78.066914 (% of GDP) when the negative net effect is nullified. Positive and negative synergy effects are also apparent. Practical policy implications are discussed based on the results obtained.
    Keywords: Infrastructures, CO2, trade openness, governance, Africa, System GMM
    JEL: N67 N77 C23 Q56
    Date: 2021–01
  15. By: P. AGHION (Collège de France, LSE et PSE); A. BERGEAUD (Banque de France et CEP); M. LEQUIEN (Insee, Banque de France et PSE); M.J. (Harvard et NBER)
    Abstract: We analyze how demand conditions faced by a firm in its export markets impact its innovation decisions. To disentangle the direction of causality between export demand and innovation, we construct a firm-level export demand shock which responds to aggregate conditions in a firm's export destinations but is exogenous to firm-level decisions. Using exhaustive data covering the French manufacturing sector, we show that French firms respond to exogenous growth shocks in their export destinations by patenting more; and that this response is entirely driven by the subset of initially more productive firms. The patent response arises 2 to 5 years after a demand shock, highlighting the time required to innovate. In contrast, the demand shock raises contemporaneous sales and employment for all firms, without any notable differences between high and low productivity firms. We show that this finding of a skewed innovation response to common demand shocks arises naturally from a model of endogenous innovation and competition with firm heterogeneity. The market size increase drives all firms to innovate more by increasing the innovation rents; yet by inducing more entry and thus more competition, it also discourages innovation by low productivity firms.
    Keywords: Innovation, export, demand shocks, patents
    JEL: D21 F13 F14 F41 O30 O47
    Date: 2020
  16. By: Ciani, Andrea (European Commission); Mau, Karsten (Maastricht University)
    Abstract: This paper investigates the role of timely delivery in international competition. Using a demand-side, industry-specific measure of time-sensitivity, we assess the effect of Chinese competition on the export performance of Eastern European transition economies into Western European (EU15) destination-product markets. Our empirical analysis relies on exploiting the increase of Chinese competition in global markets during the first decade of the 2000s. We find evidence of heterogeneous adjustments to Chinese competition among Eastern European exporters due to the differential importance of timely delivery across sectors (i.e. timesensitivity). While we observe sizable real displacement effects, they appear to be at least 50 percent smaller for time-sensitive exports. Relying on firm-level customs data, we establish that this mechanism also plays a role for responses to Chinese competition within firms.
    Keywords: Time sensitivity, International Competition, China
    JEL: F14 F15 F61 L25
    Date: 2021–08
  17. By: Pantelis Kammas; Argyris Sakalis; Vassilis Sarantides
    Abstract: During the late 19th century, the increasing popularity of pudding in England, along with the outbreak of phylloxera plague in French vineyards had an unintended effect in the agrarian economy of Greece. In particular, these events escalated the international demand and production of currants in Greece during the 1870s, causing an unprecedented positive shock that was transmitted through trade in the agricultural population. Using novel data from historical archives, we explore how this exogenous event affected investment towards human capital. Consistent with expectations, in an agrarian economy that specializes in unskilled labour-intensive agricultural goods, this shock had a negative effect on human capital formation.
    Keywords: Education; Fertility; Agriculture; International Trade
    Date: 2021–10
  18. By: Gene M. Grossman; Elhanan Helpman; Hugo Lhuillier
    Abstract: Supply chain disruptions, which have become commonplace, are often associated with globalization and trade. Little is known about optimal policy in the face of insecure supply chains. Should governments promote resilience by subsidizing backup sources of input supply? Should they encourage firms to source from closer and presumably safer domestic suppliers? We address these questions in a very simple model of production with a single critical input and with exogenous risks of relationship-specific and country-wide supply disturbances. We follow Matsuyama and Ushchev (2020) in positing a class of preferences that are homothetic with a single aggregator and that obey Marshall's Second Law of Demand. The familiar case of CES preferences is a member of the class, but it imposes restrictions that are important for policy conclusions.We find that, in the CES case, a subsidy for diversification achieves the constrained social optimum and dominates a policy that promotes reshoring or offshoring. When the demand elasticity rises with price, two policy instruments generally are needed to achieve efficient supply chains, private investments in resilience may be socially excessive, and policy that alter incentives to invest at home versus abroad may achieve greater welfare than ones that encourage or discourage diversification.
    JEL: F12 F13
    Date: 2021–10
  19. By: Tii N. Nchofoung (University of Dschang, Cameroon); Simplice A. Asongu (Yaoundé, Cameroon)
    Abstract: The objectives of this paper are to investigate the effect of ICT on sustainable development and the mechanisms through which the effect is modulated. The methodology involves the: (i) Fixed Effects estimator to control for individual heterogeneity, (ii) Driscoll and Kraay estimator to control for cross-section dependence between panels, (iii) the Mean Group estimator to take into account the averages between panel groups, (iv) the system GMM to correct for unobserved heterogeneity and simultaneity bias and (v) the instrumental variable Fixed Effects Tobit to take in to account the limited range in our dependent variable. The results show that ICT has a positive and significant effect on sustainable development. Whereas overall net effects are positive, the findings are contingent on the choice of the ICT measurement, the geographical location of the economy and the income group category. The study recommends policy makers to take into account ICT and the advantages it offers in the elaboration of measures for the sustainable development agenda.
    Keywords: ICT; Sustainable development; panel data; trade openness; foreign direct investments
    JEL: C52 O38 O40 O55 P37
    Date: 2021–01
  20. By: Ishan Nath
    Abstract: This paper combines local temperature treatment effects with a quantitative macroeconomic model to assess the potential for global reallocation between agricultural and non-agricultural production to reduce the costs of climate change. First, I use firm-level panel data from a wide range of countries to show that extreme heat reduces productivity less in manufacturing and services than in agriculture, implying that hot countries could achieve large potential gains through adapting to global warming by shifting labor toward manufacturing and increasing imports of food. To investigate the likelihood that such gains will be realized, I embed the estimated productivity effects in a model of sectoral specialization and trade covering 158 countries. Simulations suggest that climate change does little to alter the geography of agricultural production, however, as high trade barriers in developing countries temper the influence of shifting comparative advantage. Instead, climate change accentuates the existing pattern, known as “the food problem,” in which poor countries specialize heavily in relatively low productivity agricultural sectors to meet subsistence consumer needs. The productivity effects of climate change reduce welfare by 6-10% for the poorest quartile of the world with trade barriers held at current levels, but by nearly 70% less in an alternative policy counterfactual that moves low-income countries to OECD levels of trade openness.
    Date: 2021–09
  21. By: Paczyńska, Agnieszka
    Abstract: Since 2014, Russian involvement in Africa has grown significantly. African leaders have been receptive to these overtures as a result of increasing concerns about growing Chinese dominance, retrenchment of the United States (US) and their interest in diversifying trading and security partners. Russia cultivates these relationships by relying on the legacy of the Soviet Union's support for anti-colonial and liberation movements, and focuses on strengthening diplomatic, military and economic collaborations. This analysis shows that: * Overall, Russia's strategy in Africa appears to involve a mix of arms sales, political support to authoritarian leaders and security collaborations - in exchange for mining rights, business opportunities and diplomatic support for Russia's foreign policy preferences. The offers of military assistance and political support, especially for authoritarian leaders, have opened doors to Russian firms and strengthened diplomatic relationships. The support of African allies has been especially important to Russia at the United Nations (UN), where African countries account for a quarter of all votes in the General Assembly. * Russian trade and investment in Africa has grown significantly, particularly in north Africa. Yet, Russia remains a minor economic player on the continent in comparison to China, India or the US. Russia's support for smaller states, especially those that have been internationally shunned, gives Moscow significant influence in those countries. * As of autumn 2019, Russia had concluded military cooperation agreements with 21 African countries and is negotiating the establishment of military bases in a number of states. It is also providing counter-terrorism training. Russia is currently the largest supplier of arms to the continent. * Russia is increasing efforts to influence elections. Its strategy focuses on shoring up authoritarian strongmen in unstable yet resource-rich states thus bolstering these regimes' ability to persist. These priorities are in stark contrast to popular opinion on the continent, which favours democracy. * Russia remains a relatively minor economic and political player on the continent, and European Union (EU) and US concerns that Russian expansion in Africa draws the continent into a broader geopolitical struggle between great powers are overstated. * Germany and the EU should counter Russian assistance to authoritarian leaders by bolstering support for good governance and civil society strengthening initiatives.
    Date: 2020
  22. By: Garcia-Bernardo, Javier; Janský, Petr
    Abstract: Multinational corporations (MNCs) avoid taxes by shifting their profits from countries where real activity takes place towards tax havens, depriving governments worldwide of billions of tax revenue. Earlier research investigating the scale and distribution of profit shifting has faced methodological and data challenges, both of which we address. First, we propose a logarithmic function to model the extremely non-linear relationship between the location of profits and tax rates faced by MNCs at those locations – that is, the extreme concentration of profits without corresponding economic activity in a small number of low-tax jurisdictions. We show that the logarithmic model allows for a more accurate identification of profit shifting than linear and quadratic models. Second, we apply the logarithmic model to newly available country-by-country reporting data for large MNCs – this provides information on the activities of large MNCs, including for the first time many low- and lower-middle-income countries. We estimate that MNCs shifted US$1 trillion of profits to tax havens in 2016, which implies approximately US$200-300 billion in tax revenue losses worldwide. MNCs headquartered in the United States and Bermuda are the most aggressive at shifting profits towards tax havens, while MNCs headquartered in India, China, Mexico and South Africa the least. We establish which countries gain and lose most from profit shifting: the Cayman Islands, Luxembourg, Bermuda, Hong Kong and the Netherlands are among the most important tax havens, whereas low- and lower-middle-income countries tend to lose more tax revenue relative to their total tax revenue. Our findings thus support the arguments of low- and lower-middle-income countries that they should be represented on an equal footing during international corporate tax reform debates.
    Keywords: Development Policy, Economic Development, Globalisation, Governance,
    Date: 2021
  23. By: Clemens Graf von Luckner; Carmen M. Reinhart; Kenneth S. Rogoff
    Abstract: This paper employs high frequency transactions data on the world’s oldest and most extensive centralized peer-to-peer Bitcoin market, which enables trade in the currencies of more than 135 countries. We develop an algorithm that allows, with high probability, the detection of “crypto vehicle transactions” in which crypto currency is used to move capital across borders or facilitate domestic transactions. In contrast to previous work which has used “on-chain” data, our approach enables one to investigate parts of the vastly larger pool of “off-chain” transactions. We find that, as a conservative lower bound, over 7 percent of the 45 million trades on the exchange we explore represent crypto vehicle transactions in which Bitcoin is used to make payment in fiat currency. Roughly 20 percent of these represent international capital flight/flows/remittances. Although our work cannot be used to put a price on cryptocurrencies, it provides the first systematic quantitative evidence that the transactional use of cryptocurrencies constitutes a fundamental component of their value, at least under the current regulatory regime.
    JEL: E42 E51 E58 F21 F24 F32 F38
    Date: 2021–10

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