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on International Trade |
| By: | Mario Holzner (The Vienna Institute for International Economic Studies, wiiw); Branimir Jovanović (The Vienna Institute for International Economic Studies, wiiw); Goran Vukšić |
| Abstract: | This paper investigates how corporate income taxes affect international trade, and identifies the underlying channel. Using data on 33 NACE sectors, for 34 EU and OECD economies, over the period 2005-2014, we find that corporate income taxes reduce exports and imports only when the stock of foreign direct investment (FDI) is high. The effect is present primarily in the service sector and in countries with low corporate taxes. We interpret these findings as evidence that multinational enterprises reduce their operations in countries that raise their corporate taxes. The effect has been found to be small on aggregate, implying that the expected increase in corporate taxes in the future, arising from the global minimum tax, is unlikely to hurt international trade. |
| Keywords: | taxation, profits, international trade, exports, imports, FDI |
| JEL: | F14 F23 H25 |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:wii:wpaper:212&r= |
| By: | Kutlina-Dimitrova, Zornitsa (DG Trade); Rueda-Cantuche, José Manuel (DG Trade) |
| Abstract: | • In 2019, extra-EU exports of goods and services are more important than ever, supporting 38 million jobs in the EU. This corresponds to an increase of 11 million jobs in one decade. On average, each billion euro of EU exports to third countries supported about 12,000 jobs in the EU. • European workers from all Member States benefit from EU exports. These job opportunities are due to exporting firms expanding sales outside the EU but also because firms supply indirectly goods and services to exporting industries. Almost one fifth or 6.5 million jobs supported by extra-EU exports are in firms providing intermediate inputs along the Single Market supply chains. • Export-related jobs in the EU are, on average, 12% better paid than other jobs. The export wage premium ranges from 5% to 14%, depending on workers’ skill level and occupational profile. • With the expansion of global value chains, EU exports support jobs in our trading partners in addition to jobs sustained domestically. Almost 24 million jobs beyond the EU are supported by EU exports, thanks to EU firms participating in global supply chains. |
| Keywords: | EU; international trade; input-output modelling; employment; |
| JEL: | B27 C67 F16 |
| Date: | 2021–11–11 |
| URL: | http://d.repec.org/n?u=RePEc:ris:dgtcen:2021_002&r= |
| By: | Branimir Jovanović (The Vienna Institute for International Economic Studies, wiiw) |
| Abstract: | This policy note summarises the main findings of our recent research on the effects of labour and corporate taxation on international trade, and discusses their policy implications. The first major finding is that labour taxes do not seem to affect imports, while their effect on exports is likely to depend on how much domestic labour contributes to total value added. If the contribution of domestic labour is low, as has often been the case recently, changes in labour taxes are unlikely to have a major impact on exports. This is an important finding, because it challenges the established view in the literature and policy making, that by lowering labour taxes, authorities can improve the trade balance. The second major finding is that the effect of corporate tax on exports and imports depends on the stock of FDI. Corporate taxes are unlikely to affect international trade in general, but only when the stock of FDI is large. This means that corporate taxes affect international trade through multinational enterprises, which reduce their activity in countries with higher taxes and increase it in countries with lower taxes. Both labour and corporate taxes have seen a downward trend in recent decades, but we find that the contribution of this to the expansion of international trade has been small. |
| Keywords: | abour taxes, corporate taxes, international trade, exports, imports |
| JEL: | F14 F16 F23 H24 H25 J32 |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:wii:pnotes:pn:54&r= |
| By: | Thierry Mayer; Hillel Rapoport; Camilo Umana Dajud |
| Abstract: | Many of the measures to contain Covid-19 severely reduced business travel. Using provisions to ease the movement of business visitors in trade agreements, we show that removing barriers to the movement of business people promotes trade. To do this, we first document the increasing complexity of Free Trade Agreements. We then develop an algorithm that combines machine learning and text analysis techniques to examine the content of FTAs. We use the algorithm to determine which FTAs include provisions to facilitate the movement of business people and whether those provisions are included in dispute settlement mechanisms. Using these data and accounting for the overall depth of FTAs, we show that provisions facilitating business travel indeed facilitate business travel (but not permanent migration) and, eventually, increase bilateral trade flows. |
| Keywords: | Covid-19;Business travel;Free Trade Agreements;Machine Learning;Text Analysis |
| JEL: | F10 F13 F14 F15 F20 |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:cii:cepidt:2021-10&r= |
| By: | Ms. Valerie Cerra |
| Abstract: | This paper surveys the literature on the relationship between international trade and inclusive growth. It examines claims that the rise in inequality in many countries can be attributed to the concurrent rise in trade competition, especially from EMEs like China, spurring trade tensions and protectionist measures. The paper investigates the conflicting literature showing the aggregate benefits of trade versus the adverse and persistent impact of trade, especially import competition, on specific industries and local communities. The paper then reviews the evidence for using trade policies and other complementary policies for adjustment and compensation to those groups adversely affected by trade. |
| Keywords: | trade; inclusive growth; inequality; globalization; growth; poverty; gender; labor; productivity difference; export-led growth; wage inequality; trade facilitation; trade cost; firm productivity difference; liberalization episode; superstar firm; adjustment policy; trade theory; size firm; trade openness; Exports; Imports; Wages; Tariffs; Trade policy; Global |
| Date: | 2021–03–12 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2021/074&r= |
| By: | Mario Larch; Jeff Luckstead; Yoto V. Yotov |
| Abstract: | Combining two new datasets on sanctions and agricultural trade and implementing step-by-step the latest developments in the empirical structural gravity literature, we investigate the effects of sanctions on international trade of agricultural products. We find that trade sanctions have been effective in impeding agricultural trade, while other sanctions do not show any significant effects. The complete trade sanctions in our sample have led to about a 73% decrease in the agricultural trade between the sanctioned and sanctioning countries, or a corresponding tariff equivalent of 38.8%, but we also obtain significant estimates for partial sanctions. At the industry level, we find substantial heterogeneity depending on the sanctioning and sanctioned countries, the type of sanctions used, and the direction of trade flows. Focusing on the sanctions on Russia, we find that these sanctions substantially decreased bilateral trade of Russia, mainly due to reduced trade with the EU. |
| Keywords: | structural gravity, sanctions, agriculture, Russia, heterogeneity |
| JEL: | F14 F51 Q17 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9410&r= |
| By: | Martin Richardson |
| Abstract: | In this note I identify a simple Pareto-improving tariff reform for two countries in a free trade area, motivated by the approach in Kemp and Wan (1976). |
| Keywords: | Tariff reform; Free trade area; Pareto improvement |
| JEL: | F02 F13 F15 |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:acb:cbeeco:2021-680&r= |
| By: | Mr. Gonzalo Salinas |
| Abstract: | The lack of a clear link between general economic fundamentals and export diversification indicators in the literature has fueled the believe that industrial policies are an absolute requisite to diversify exports. This paper, however, does find a strong statistical connection between horizontal policies and diversification by making two novel changes to traditional methodologies: using export categories that lead to diversification (for example, manufactures) as dependent variables, and using a gravity-equation regression setting. Proximity to other economies explains about a third of cross-country heterogeneity in targeted exports, and four fifths together with horizontal policies. Australia, Chile, and New Zealand emerge as new role models for diversification policies. |
| Keywords: | International trade; economic growth; economic development; export diversification; export complexity.; NHM export; export basket; target export category; concentration index; goods export; export concentration index; export country level; targeted export; policy variable; export group; Exports; Trade policy; Export performance; Trade liberalization; East Asia; Global |
| Date: | 2021–03–05 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2021/064&r= |
| By: | Haruka Takayama (Economics Faculty, University at Albany, SUNY, U.S.A., Junior Research Fellow, Research Institute for Economics and Business Administration, Kobe University, JAPAN) |
| Abstract: | When a multinational firm invests abroad, it can either establish a new facility (greenfield investment, GF) or purchase a local firm (cross-border merger and acquisition, M&A). Using a novel US firm-level dataset, I provide the first evidence that multinationals with higher levels of intangible capital systematically invest through GF rather than through M&A. Motivated by this empirical result, I develop and quantify a general equilibrium search model of a multinational firm's choice between M&A and GF. The model implies that equilibrium FDI patterns can be suboptimal from the host country's perspective. In particular, since the gap between the productivities of multinationals and local firms is larger in less developed countries, policymakers there can increase welfare by incentivizing FDI through M&A. By allowing highly productive multinationals to use local intangible capital, this policy increases aggregate productivity more than the laissez-faire outcome. |
| Keywords: | FDI; Cross-border M&A; Greenfield FDI; Intangible capital |
| JEL: | F14 F21 F23 |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:kob:dpaper:dp2021-24&r= |
| By: | Odhiambo, Nicholas M; Saungweme, Talknice |
| Abstract: | In this study, the relationship between tourism development and trade in 12 sub-Saharan African (SSA) countries is examined during the period 1995-2019. Three proxies of trade are used, namely the total trade, total exports, and total imports of goods and services to examine this linkage, thereby leading to three separate model specifications. A wide range of modern econometric techniques were also employed to examine the relationship between the various proxies of trade and tourist arrivals. These include i) cross-sectional dependence tests based on Breusch-Pagan (1980) LM, Pesaran (2004) scaled LM, Baltagi et al. (2012) bias-corrected scaled LM, and Pesaran (2004) CD; ii) a slope homogeneity test based on Pesaran and Yamagata (2008); iii) an ECM panel cointegration test based on Westerlund (2007); and iv) a heterogeneous panel causality model based on Dumitrescu and Hurlin (2012), among others. Using the dynamic ordinary least squares (DOLS) and the fully modified ordinary least squares (FMOLS), the study found that, overall, international tourism has a positive and significant impact on trade in SSA countries. This finding is also corroborated by the heterogeneous Granger causality test, which found a distinct unidirectional causal flow from international tourism arrivals to trade. The study, therefore, recommends that SSA countries should implement policies aimed at promoting international tourism in order to increase their international trade and boost their overall trade balance. |
| Keywords: | Tourism, trade openness, Granger-causality, panel analysis, SSA |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:uza:wpaper:28345&r= |
| By: | Ogeda, Pedro Molina (Sao Paulo School of Economics); Ornelas, Emanuel (Sao Paulo School of Economics); Soares, Rodrigo R. (Insper, São Paulo) |
| Abstract: | We show that the Brazilian trade liberalization in the early 1990s led to a permanent relative decline in the vote share of left-wing presidential candidates in the regions more affected by the tariff cuts. This happened even though the shock, implemented by a right-wing party, induced a contraction in manufacturing and formal employment in the more affected regions, and despite the left's identification with protectionist policies. To rationalize this response, we consider a new institutional channel for the political effects of trade shocks: the weakening of labor unions. We provide support for this mechanism in two steps. First, we show that union presence—proxied by the number of workers directly employed by unions, by union density, and by the number of union establishments—declined in regions that became more exposed to foreign competition. Second, we show that the negative effect of tariff reductions on the votes for the left was driven exclusively by political parties with historical links to unions. Furthermore, the impact of the trade liberalization on the vote share of these parties was significant only in regions that had unions operating before the reform. These findings are consistent with the hypothesis that tariff cuts reduced the vote share of the left partly through the weakening of labor unions. This institutional channel is fundamentally different from the individual-level responses, motivated by economic or identity concerns, that have been considered in the literature. |
| Keywords: | trade shocks, elections, unions, Brazil |
| JEL: | F13 D72 J51 F16 F14 |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14849&r= |
| By: | Gnangnon, Sèna Kimm |
| Abstract: | This article explores the effect of WTO membership and the duration of this membership on the utilization of non-reciprocal trade preferences (NRTPs) offered by the QUAD countries (Canada, European Union, Japan and the United States). It uses an unbalanced dataset of 136 beneficiaries of NRTPs over the period of 2002-2019. Results based on the two-step system generalized method of moments approach have revealed that over the full sample, both the WTO membership and its duration exerts a strong positive effect on the utilization rate of GSP programs and other trade preferences. WTO members have made a better utilization of GSP programs than of other trade preferences. Meanwhile, as the duration of their WTO membership increases, beneficiaries make more use of other trade preferences than of GSP programs. Additionally, WTO membership and its duration exert different effects on the usage of NRTPs across sub-samples, including in least developed countries versus non-least developed countries on the one hand, and in WTO Article XII members versus non-Article XII members, on the other hand. Finally, there exists a non-linear positive effect of the duration of WTO membership on the utilization of both GSP programs and other trade preferences, whereby the positive effect takes place immediately after entry of a country into the WTO, and its magnitude amplifies for every additional year of WTO membership. |
| Keywords: | WTO membership,Duration of WTO membership,Utilization of unilateral trade preferences utilization,QUAD countries,Developing Countries |
| JEL: | F1 O19 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:esprep:247265&r= |
| By: | Christophe Gouel; Sébastien Jean |
| Abstract: | This paper shows how gains from trade are conditioned by love of variety, defined as the extent to which an additional product variety generates benefits in either final or intermediate consumption. We develop a multi-country, multisector gravity trade model where love of variety is parameterized separately from product substitutability using a generalized CES demand function, and show analytically how gains from trade depend on love of variety through different channels that we identify and interpret. In this context, except for very specific parameterizations, gains from trade differ between a heterogeneous- and a homogeneous-firm model. Counterfactual simulations based on a calibrated version of this model show that, all other things being equal, the assessed gains from trade commonly vary by a proportion of one to three depending on the value of the love-of-variety elasticity, in a way that differs significantly across countries. Trade war simulations also point to the strong sensitivity of the assessed impacts. We conclude that love of variety is a key determinant of the gains from trade, an aspect that has so far been overlooked for the sake of convenience in the modeling framework and due to lack of empirical estimates. |
| Keywords: | International Trade;Firm Heterogeneity;Gains from Trade;Gravity;Love of Variety |
| JEL: | F11 F12 F13 |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:cii:cepidt:2021-09&r= |
| By: | Kilian, Lutz; Nomikos, Nikos K.; Zhou, Xiaoqing |
| Abstract: | Since the 1970s, exports and imports of manufactured goods have been the engine of international trade and much of that trade relies on container shipping. This paper introduces a new monthly index of the volume of container trade to and from North America. Incorporating this index into a structural macroeconomic VAR model facilitates the identification of shocks to domestic U.S. demand as well as foreign demand for U.S. manufactured goods. We show that, unlike in the Great Recession, the primary determinant of the U.S. economic contraction in early 2020 was a sharp drop in domestic demand. Although detrended data for personal consumption expenditures and manufacturing output suggest that the U.S. economy has recovered to near 90% of pre-pandemic levels as of March 2021, our structural VAR model shows that the component of manufacturing output driven by domestic demand had only recovered to 59% of pre-pandemic levels and that of real personal consumption only to 76%. The difference is mainly accounted for by unexpected reductions in frictions in the container shipping market. |
| Keywords: | Merchandise trade,container,shipping,manufacturing,consumption,COVID-19,supply chain,recession,recovery,globalization |
| JEL: | E32 E37 F47 F62 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cfswop:659&r= |
| By: | Mr. Dmitriy L Rozhkov; Zsoka Koczan; Magali Pinat |
| Abstract: | International migration is an important channel of material improvement for individuals and their offspring. The movement of people across country borders, especially from less developed to richer countries, has a substantial impact in several dimensions. First, it affects the migrants themselves by allowing them to achieve higher income as a result of their higher productivity in the destination country. It also increases the expected income for their offspring. Second, it affects the destination country through the impact on labor markets, productivity, innovation, demographic structure, fiscal balance, and criminality. Third, it can have a significant impact on the countries of origin. It may lead to loss of human capital, but it also creates a flow of remittances and increases international connections in the form of trade, FDI, and technological transfers. This paper surveys our understanding of how migration affects growth and inequality through the impact on migrants themselves as well as on the destination and origin countries. |
| Keywords: | International Migration; Inequality; Economic growth; complementarity effect; consequences of migration; E. country case; origin country; wage effect; Migration; Remittances; Labor markets; Wages; Income; Global; Eastern Europe; costs of emigration; impact of migration; wage effect of migration |
| Date: | 2021–03–19 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2021/088&r= |
| By: | Samuel Kortum; David A. Weisbach |
| Abstract: | We derive the optimal unilateral policy in a general equilibrium model of trade and climate change where one region of the world imposes a climate policy and the rest of the world does not. A climate policy in one region shifts activities—extraction, production, and consumption—in the other region. The optimal policy trades off the costs of these distortions. The optimal policy can be implemented through: (i) a nominal tax on extraction at a rate equal to the global marginal harm from emissions, (ii) a tax on imports of energy and goods, and a rebate of taxes on exports of energy but not goods, both at a lower rate than the extraction tax rate, and (iii) a goods-specific export subsidy. The policy controls leakage by combining supply-side and demand-side taxes to control the price of energy in the non-taxing region. It exploits international trade to expand the reach of the climate policy. We calibrate and simulate the model to illustrate how the optimal policy compares to more traditional policies such as extraction, production, and consumption taxes and combinations of those taxes. The simulations show that combinations of supply-side and demand-side taxes are much better than simpler policies and can perform nearly as well as the optimal policy. |
| Keywords: | carbon taxes, border adjustments, leakage, climate change |
| JEL: | F18 H23 Q54 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9409&r= |
| By: | Mr. Shanaka J Peiris; Mr. Dirk V Muir; Rui Mano; Diego A. Cerdeiro; Johannes Eugster |
| Abstract: | This paper proposes channels through which technological decoupling can affect global growth, and embeds these different layers in a global dynamic macroeconomic model. Multiple scenarios are considered that differ along two dimensions: (i) the coalition of countries (hubs) that initiate the decoupling, and (ii) whether non-hub countries are also forced to decouple via ‘preferential attachment’ – i.e. by aligning themselves with the hub they trade most with. All global technology hubs lose across scenarios, and losses are largest under preferential attachment. Smaller countries with relations that straddle multiple hubs generally lose, whereas those whose trade is heavily concentrated with one hub may gain due to reduced competition under some scenarios. Technological fragmentation can lead to losses in the order of 5 percent of GDP for many economies. |
| Keywords: | Technological decoupling; trade; non-tariff barriers.; non-tariff barriers; China-United States; R&D number; innovation drive; United States stop; world trade f low; sectoral trade elasticity; high-tech goods trade; Labor productivity; Productivity; Spillovers; Exports; Trade balance; Global; Asia and Pacific |
| Date: | 2021–03–12 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2021/069&r= |
| By: | Xu, Chenzi (Stanford University) |
| Abstract: | I show that a disruption to the financial sector can reshape the patterns of global |
| Abstract: | trade for decades. I study the first modern global banking crisis originating in London in 1866 and collect archival loan records that link multinational banks headquartered there to their exports financing abroad. Countries exposed to bank failures in London immediately exported significantly less and did not recover to pre-crisis trend levels. Their market shares within each destination were significantly lower for four decades. Decomposing the persistent losses shows that they primarily stem from lack of extensive margin growth relative to unexposed countries, as importers sourced more from new and unexposed trade partners. Exporters producing more substitutable goods, those with little access to alternative forms of credit, and those trading with more distant partners experienced more persistent losses, consistent with the existence of sunk costs and the importance of finance for intermediating trade. |
| JEL: | F14 G01 G21 N20 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:stabus:3995&r= |
| By: | Jeong, Hyung-gon (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)); Lee, Cheol-won (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)); Park, Min-suk (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)) |
| Abstract: | North Korean authorities have been seeking changes in North Korea’s economic policy since the Kim Jong Un regime took power. Along with decentralization, the government is trying to increase efficiency and productivity within the socialist economic system, and as part of this policy it has designated 27 economic development zones to attract foreign investment. Foreign direct investment plays a crucial role in economic growth for low-income countries such as North Korea, which lacks capital and technology. This study discusses North Korea's foreign investment policy and tasks ahead of its government to revitalize the economy, based on the premise that nuclear negotiations between North Korea and the US proceed smoothly. First of all, in order to derive policy tasks, we compared and analyzed the achievements and policies of transition countries in Asia and Eastern Europe in terms of attracting FDI, also analyzing the determinants of FDI inflows, after which we present policy tasks for North Korean authorities. As South Korea may very well become the largest investor in North Korea, our study also discusses tasks for the Korean government to pursue in order for Korean companies to successfully invest in North Korea. |
| Keywords: | North Korea; US; FDI; socialist economic system; economic development zone; nuclear negotiation |
| Date: | 2020–11–05 |
| URL: | http://d.repec.org/n?u=RePEc:ris:kiepwe:2020_032&r= |
| By: | Sugata Marjit; Reza Oladi |
| Abstract: | In this paper, we construct an elaborate general equilibrium model with a continuum of production fragments for an intermediate good, then embed it in a growth model to address the effects of global production fragmentation, vertical specialization and trade on growth and inequality for a small developing country. Among other results, we show that a small developing economy grows faster than the rest of the world as a result of global fragmentation and trade in intermediates if it is skilled-labor scarce. We also address the effects of such trade opening on wage inequality. |
| Keywords: | vertical specialization, trade, growth, inequality |
| JEL: | F10 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9406&r= |
| By: | Suh, Jin Kyo (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)); Park, Ji Hyun (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)); Kim, Min-Sung (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)) |
| Abstract: | The multilateral trading system has been in crisis. The world economy has changed significantly since the WTO replaced the previous GATT system and new challenges are quickly piling on top of the old ones. The rising emerging countries and the relative decline of traditional economic members, together with the need to deal with complex new issues such as climate change and e-commerce and digital trade, are shaking the foundations on which the WTO was built some 25 years ago. There is also growing momentum among many WTO members to 'modernize' the WTO, including the Appellate Body although the details and feasibility of reform are unclear at this stage. In this perspective, we suggest some ideas on both trade-distorting farm subsidies and S&DT which are the two important issues in the WTO negotiations. |
| Keywords: | WTO; reform; agricultural subsidy; treatment |
| Date: | 2020–10–08 |
| URL: | http://d.repec.org/n?u=RePEc:ris:kiepwe:2020_029&r= |
| By: | Goerlach, Joseph-Simon (Bocconi University) |
| Abstract: | As wages in migrant sending countries catch up with those in destinations, migrants adjust on several margins, including their duration of stay, the number of migrations they undertake, as well as the amount saved while abroad. This paper combines Mexican and U.S. data to estimate a dynamic model of consumption, emigration and re-migration, accounting for financial constraints. An increase in Mexican household earnings shortens migration duration, but raises the number of trips per migrant. For lower-income migrants, a rise in Mexican wages leads to a more than proportional effect on consumption expenditure in Mexico, arising from repatriated savings. |
| Keywords: | migration duration, repeat migration, borrowing constraints |
| JEL: | J61 D15 F22 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14817&r= |
| By: | Kelishomi, Moghaddasi Ali (Loughborough University); Nistico, Roberto (University of Naples Federico II) |
| Abstract: | This paper investigates the effect of economic sanctions on employment. We exploit the imposition of a series of unexpected and unprecedented international economic sanctions on Iran in 2012 and estimate the short-run effects of the change in import exposure on manufacturing employment at the industry level. Our estimates indicate that the sanctions led to an overall decline in the manufacturing employment growth rate by 16.4 percentage points. However, we uncover significant asymmetric effects across industries with different ex-ante import shares. Interestingly, the effects are mostly driven by labor-intensive industries and industries that heavily depend on imported inputs. This suggests that the overall negative impact of the sanctions on employment might be largely due to the decline in productivity experienced by industries with a high propensity to import inputs from abroad. |
| Keywords: | economic sanctions, employment, import exposure, labor reallocation |
| JEL: | F16 F51 J21 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14814&r= |
| By: | Robert J R Elliott (University of Birmingham); Puyang Sun (Renmin University); Tong Zhu (University of Dundee) |
| Abstract: | The next decade will see a pressing demand for countries to deliver a low-carbon future while at the same time ensuring they can meet an ever growing demand for energy. In this paper we investigate how he spatial distribution of endowments of energy resources across Chinese provinces influence the location of firms and their subsequent exports. Employing a pseudo-endowment approach, we measure energy abundance using three-dimensional input data at the province-sector-year level from 2006 to 2010. Our results suggest that energy abundance has a positive and significant impact on the location of industrial production and subsequent exports, especially for energy intensive sectors. On average, a 70 yuan/MWh industrial electricity price rise in a province leads to a 2.67% reduction in production share. On average, a ten percentage point change in energy abundance leads to 3.5% change in the share of production, and a 2.6% change in the share of net exports. Further analysis explores how an uneven distribution of resource reserves impacts the location of production using data on coal mine location. Our results shed light on the role that energy abundance plays in shaping a country’s industrial structure and trade patterns. |
| Keywords: | Energy abundance, geography, industry distribution, international trade |
| JEL: | F1 L6 O13 |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:bir:birmec:21-16&r= |
| By: | John Spray |
| Abstract: | I develop a model of firm-to-firm search and matching to show that the impact of falling trade costs on firm sourcing decisions and consumer welfare depends on the relative size of search externalities in domestic and international markets. These externalities can be positive if firms share information about potential matches, or negative if the market is congested. Using unique firm-to-firm transaction-level data from Uganda, I document empirical evidence consistent with positive externalities in international markets and negative externalities in domestic markets. I then build a dynamic quantitative version of the model and show that, in Uganda, a 25% reduction in trade costs led to a 3.7% increase in consumer welfare, 12% of which was due to search externalities. |
| Keywords: | Firm-to-Firm Trade; VAT Data; Search-and-Matching; Importing; transport cost reduction; buyer-supplier search; search externality; welfare gains from trade; consumer welfare; Imports; Labor market frictions; Search models; Value-added tax; East Africa; Global |
| Date: | 2021–03–19 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2021/091&r= |
| By: | Lee, Sanghun (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)); Kim, Hongwon (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)); Kim, Joohye (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)); Choi, Jiwon (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)); Choi, Jaehee (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)) |
| Abstract: | As the Chinese economy becomes more advanced and the internal and external economic environment surrounding China changes, so too does China's strategy for external openness and economic cooperation. Accordingly, specific policies are diversifying from the past focus on manufacturing and foreign direct investment to services, overseas investment, bilateral and multilateral FTAs, and bilateral investment treaties (BITs). As the central government's policy stance changes, China's local governments are also promoting external openness and cooperation based on regional development stages, industrial structure, and regional development policies, reflecting the central government's strategy. In particular, after the 19th Party Congress, the central government showed a strategic stance expanding external openness. In response, local governments have moved away from the traditional method of cooperation in the manufacturing sector centered on industrial complexes, and in recent years various cooperative methods have been promoted, including regional economic integration, service and investment, the use of FTAs, and innovations in institutions to expand external openness. Along with the shift in China's foreign economic strategy, the economic cooperation environment surrounding Korea and China is changing as well, including the strengthening of protectionism, structural changes in the Chinese economy, the Korea-China FTA coming into effect, and the launch of follow-up negotiations. Therefore Korea needs to find new strategies and measures for economic cooperation with China, making it time to find new ways to expand cooperation with China's central and local governments. Against this backdrop, this study aims to analyze the strategies, detailed policies and major cases of China's central and local governments' external openness and economic cooperation, and to draw policy implications for strengthening economic cooperation between Korea and China in the future. |
| Keywords: | Chinese; local governments; cooperation; Korea; China; FTA |
| Date: | 2020–10–27 |
| URL: | http://d.repec.org/n?u=RePEc:ris:kiepwe:2020_031&r= |
| By: | Agustín Bénétrix (IMTCD, Department of Economics, Trinity College Dublin); Lorenz Emter (IMTCD, Department of Economics, Trinity College Dublin and Central Bank of Ireland); Martin Schmitz (European Central Bank) |
| Abstract: | This paper examines the impact of international automatic exchange of information (AEOI) treaties on cross-border investments in tax havens. Using a restricted version of the BIS Locational Banking Statistics we find that AEOIs significantly reduced cross-border deposits. A sectoral breakdown assessment reveals that households were the key driving force behind this contraction. Analysing other forms of cross-border investment, we observe that tax havens' portfolio and direct investment assets in non-haven countries fell significantly after AEOI introduction, indicating a reduction of round-tripping investments. However, we also document evidence of households' deposits shifting to non-AEOI haven countries. Moreover, we observe larger FDI positions and deposits by non-bank financial institutions between tax haven countries, suggesting an increased use of shell corporation networks since AEOI introduction. |
| Keywords: | cross-border banking, tax havens, international tax treaties, tax evasion |
| JEL: | G21 G28 H26 H87 K34 |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:tcd:tcduee:tep1321&r= |
| By: | Gnangnon, Sèna Kimm |
| Abstract: | This paper has investigated the utilization of non-reciprocal (or unilateral) trade preferences (NRTPs) provided by QUAD countries on poverty in recipient-countries. It uses a panel dataset of 77 beneficiaries of NRTPs over the period of 2002-2019, and considers two main blocks of NRTPs, namely 'Generalized System of Preferences' (GSP) programs and 'other trade preferences programs'. The analysis relies on two main indicators of poverty, i.e., the poverty headcount ratio at $1.90 and the poverty gap at $1.90, but also provides a robustness check using indicators of poverty at $3.20 and $5.50. Empirical findings obtained from the use of the two-step generalized methods of moments indicate that over the full sample, an increase in the utilization rates of both GSP programs and other trade preferences programs is associated with poverty reduction in beneficiary countries, with the magnitude of this effect being higher for least developed countries (LDCs) than for other countries in the full sample. Additionally, GSP programs and other trade preferences programs are strongly complementary in helping reduce poverty in beneficiary countries. Finally, the effect of the utilization of each type of NRTPs on poverty works through the economic complexity channel, as the greater the level of economic complexity, the higher is the negative effect of the utilization of these NRTPs on poverty. |
| Keywords: | Utilization of non-reciprocal trade preferences,Poverty,QUAD countries,Beneficiary countries |
| JEL: | F13 F14 O14 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:esprep:247346&r= |
| By: | Kim, Hyo Sang (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)); Yang, Da Young (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)); Kang, Eunjung (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)) |
| Abstract: | The current account surplus of Korea mainly comes from its export-driven trade surplus. The current account surplus can be interpreted as foreign savings for future consumption, which is ultimately accumulated in a net foreign asset position. Net foreign assets can contribute to the current account surplus with income balances such as profits, dividends and interest. Korea has maintained its current account surplus since 1998 due to the demographic structure, but only entered into a net foreign assets surplus country in 2014. Under Korea’s rapid demographic change, it is necessary to construct a positive feedback-loop structure between the current account surplus and net foreign assets. |
| Keywords: | demographic; current account; foreign asset; surplus |
| Date: | 2020–12–09 |
| URL: | http://d.repec.org/n?u=RePEc:ris:kiepwe:2020_036&r= |
| By: | Andre Sanchez Pacheco (Department of Economics, Trinity College Dublin) |
| Abstract: | How exposed is Ireland to foreign shocks? Relying on residence-based measures of foreign holdings to answer this question can be challenging. These statistics are obscured by the vast presence of Special Purpose Entities in the country. Alternatively, I construct an estimate of the Irish consolidated-by-nationality foreign balance sheet for the period between 2011 and 2019 based on a novel methodology that builds on firm-level data. I find that Ireland's consolidated foreign balance sheet is on average 46.7% smaller relative to its residence-based analogue. I interpret this result as an indication that Ireland is significantly less exposed to foreign shocks than what is suggested by residence-based statistics. |
| Keywords: | International financial integration, financial globalisation, consolidated-by-nationality statistics |
| JEL: | F36 F21 F23 |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:tcd:tcduee:tep1421&r= |
| By: | Mariani, Rama Dasi (University of Rome Tor Vergata); Rosati, Furio C. (University of Rome Tor Vergata) |
| Abstract: | The availability of child-care services has often been advocated as one of the instruments to counter the fertility decline observed in many high-income countries. In the recent past large inflows of low-skilled migrants have substantially increased the supply of child-care services. In this paper we examine if immigration has actually affected fertility exploiting the natural experiment occurred in Italy in 2007, when a large inflow of migrants – many of them specialized in the supply of child care – arrived unexpectedly. With a difference-in-differences method, we show that immigrant female workers have increased native births by a number that ranges roughly from 2 to 4 per cent. We validate our result by the implementation of an instrumental variable approach and several robustness tests, all concluding that the increase in the supply of child-care services by immigrant women has positively affected native fertility. |
| Keywords: | household economics, fertility, immigrant labour, international migration |
| JEL: | D12 F22 J13 J61 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14750&r= |
| By: | Scott A. Carson |
| Abstract: | In migration studies, immigrant health is a concern before, during, and after migration. This study uses a large late 19th and early 20th century data set of over 20 US prisons to assess migrant net nutrition. Native-born individuals were taller and had the lowest BMIs. International immigrants had lower BMIs and shorter statures. After controlling for other characteristics, native-born females had lower BMIs than men; however, foreign-born women’s’ BMIs were higher than domestic-born women. Females and males with darker complexions had greater BMIs than their counterparts with fairer complexions. |
| Keywords: | nineteenth century US health, immigrant health, BMI, malnourishment |
| JEL: | I12 I31 J31 J70 N31 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9411&r= |
| By: | Elsby, Michael (University of Edinburgh); Smith, Jennifer C. (University of Warwick); Wadsworth, Jonathan (Royal Holloway, University of London) |
| Abstract: | This paper examines the role of population flows on labour market dynamics across immigrant and native-born populations in the United Kingdom. Population flows are large, and cyclical, driven first by the maturation of baby boom cohorts in the 1980s, and latterly by immigration in the 2000s. New measures of labour market flows by migrant status uncover both the flow origins of disparities in the levels and cyclicalities of immigrant and native labour market outcomes, as well as their more recent convergence. A novel dynamic accounting framework reveals that population flows have played a nontrivial role in the volatility of labour markets among both the UK-born and, especially, immigrants. |
| Keywords: | immigration, worker flows, labour market dynamics |
| JEL: | E24 J6 |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14847&r= |
| By: | Hangartner, Dominik (Stanford University); Sarvimäki, Matti (Aalto University); Spirig, Judith (Stanford University) |
| Abstract: | We review and interpret research on the economic and political effects of receiving asylum seekers and refugees in developed countries, with a particular focus on the 2015 European refugee protection crisis and its aftermath. In the first part of the paper, we examine the consequences of receiving asylum seekers and refugees and identify two main findings. First, the reception of refugees is unlikely to generate large direct economic effects. Both labor market and fiscal consequences for host countries are likely to be relatively modest. Second, however, the broader political processes accompanying the reception and integration of refugees may give rise to indirect yet larger economic effects. Specifically, a growing body of work suggests that the arrival of asylum seekers and refugees can fuel the rise of anti-immigrant populist parties, which may lead to the adoption of economically and politically isolationist policies. Yet, these political effects are not inevitable and occur only under certain conditions. In the second part of the paper, we discuss the conditions under which these effects are less likely to occur. We argue that refugees' effective integration along relevant linguistic, economic, and legal dimensions, an allocation of asylum seekers that is perceived as 'fair' by the host society, and meaningful contact between locals and newly arrived refugees have the potential to mitigate the political and indirect economic risks. |
| Keywords: | refugees, asylum seekers, populism, integration policies |
| JEL: | D72 J61 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14821&r= |
| By: | Körner, Konstantin (Institute for Employment Research (IAB), Nuremberg, Germany) |
| Abstract: | "This paper analyzes the labor market effects of offshoring in a high-wage home country and how these effects crucially depend on (1) job complexity and (2) the characteristics of the destination country. It thereby links several sources: rich administrative data on individuals and plants in the German manufacturing sector, information on a job’s task bundle, and the evolution of imported inputs from low- or high-wage destinations, which are represented by Eastern and Western Europe, respectively. Offshoring to these origins has opposing effects on German wages with respect to the relative task complexity of jobs: While offshoring to the West puts pressure on the wages of complex jobs and increases the wages of simple jobs, offshoring to the East entails the opposite effect. The overall effect adds up to a 4.2 percent increase in wages for jobs with high complexity, while low-complexity jobs see a 3.9 percent decrease in wages." (Author's abstract, IAB-Doku) ((en)) |
| Keywords: | Bundesrepublik Deutschland ; Osteuropa ; Westeuropa ; Ausland ; Auswirkungen ; Einkommenseffekte ; Lohnhöhe ; Niedriglohnland ; outsourcing ; Zielgebiet |
| JEL: | F15 F16 J31 |
| Date: | 2021–10–29 |
| URL: | http://d.repec.org/n?u=RePEc:iab:iabdpa:202115&r= |
| By: | Michael A. Clemens (Michael A. Clemens) |
| Abstract: | Immigration policy can have important net fiscal effects that vary by immigrants’ skill level. But mainstream methods to estimate these effects are problematic. Methods based on cash-flow accounting offer precision at the cost of bias; methods based on general equilibrium modelling address bias with limited precision and transparency. A simple adjustment greatly reduces bias in the most influential and precise estimates: conservatively accounting for capital taxes paid by the employers of immigrant labor. The adjustment is required by firms’ profit-maximizing behavior, unconnected to general equilibrium effects. Adjusted estimates of the positive net fiscal impact of average recent U.S. immigrants rise by a factor of 3.2, with a much shallower education gradient. They are positive even for an average recent immigrant with less than high school education, whose presence causes a present-value subsidy of at least $128,000 to all other taxpayers collectively. |
| JEL: | F22 H68 J61 |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:crm:wpaper:2134&r= |
| By: | Minseog Oh; Donggyu Kim |
| Abstract: | In this paper, we investigate the effect of the U.S.--China trade war on stock markets from a financial contagion perspective, based on high-frequency financial data. Specifically, to account for risk contagion between the U.S. and China stock markets, we develop a novel jump-diffusion process. For example, we consider three channels for volatility contagion--such as integrated volatility, positive jump variation, and negative jump variation--and each stock market is able to affect the other stock market as an overnight risk factor. We develop a quasi-maximum likelihood estimator for model parameters and establish its asymptotic properties. Furthermore, to identify contagion channels and test the existence of a structural break, we propose hypothesis test procedures. From the empirical study, we find evidence of financial contagion from the U.S. to China and evidence that the risk contagion channel has changed from integrated volatility to negative jump variation. |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2111.09655&r= |