nep-int New Economics Papers
on International Trade
Issue of 2021‒12‒20
28 papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. Unlocking New Methods to Estimate Country-specific Trade Costs and Trade Elasticitie By Freeman, Rebecca; Larch, Mario; Theodorakopoulos, Angelos; Yotov, Yoto
  2. Economic Sanctions and Agricultural Trade By Larch, Mario; Luckstead, Jeff; Yotov, Yoto
  3. Cross-Product and Cross-Market Adjustments Within Multiproduct Firms: Evidence from Antidumping Actions By Xiaohua Bao; Bruce A. Blonigen; Zhi Yu
  4. The effect of globalization on wage inequality: an application to the European Union before the Great Recession By Ribeiro, Ana Paula; Carvalho, Vitor; Ferreira, Mariana
  5. On the Determinants of Trade in Natural Gas: A Political Economy Approach By Farag, Markos; Zaki, Chahir
  6. The Foreign Direct Investment Job Multiplier During a Resource Boom: Evidence from Mongolia By Sayour, Nagham; Schröder, Marcel
  7. Globalization and the Ladder of Development: Pushed to the Top or Held at the Bottom? By David Atkin; Arnaud Costinot; Masao Fukui
  8. Dollar Not So Dominant: Dollar Invoicing Has Only a Small Effect on Trade Prices By Joseph E. Gagnon; Madi Sarsenbayev
  9. Income Inequality, International Trade and Firm Location By Richard Chisik; Nazanin Behzadan;
  10. Terms-of-Trade Shocks are Not all Alike By Luciana Juvenal
  11. International trade and labor reallocation: misclassification errors, mobility, and switching costs By Maximiliano Dvorkin
  12. Public Policymaking for International Agricultural Trade using Association Rules and Ensemble Machine Learning By Feras A. Batarseh; Munisamy Gopinath; Anderson Monken; Zhengrong Gu
  13. Trade Shocks, Job Insecurity and Individual Health By Piriu, Andreea Alexandra
  14. Supply Spillovers During the Pandemic: Evidence from High-Frequency Shipping Data By Diego A. Cerdeiro; Andras Komaromi
  15. Labor Market Effects of Technology Shocks Biased toward the Traded Sector By Luisito Bertinelli; Olivier Cardi; Romain Restout
  16. We Are All in the Same Boat: Cross-Border Spillovers of Climate Risk through International Trade and Supply Chain By International Monetary Fund
  17. Agricultural Export, Growth and the Poor in Africa: A Meta Analysis By David Adeabah; Simplice A. Asongu
  18. Implementing the Trade Facilitation Agreement (TFA): estimates of reduction in time at customs for the United Nations’ vulnerable economies By Jaime de Melo; Zakaria Sorgho; Laurent Wagner
  19. Why U.S. Immigration Matters for the Global Advancement of Science By Ruchir Agarwal; Geoff Smith; Patrick Gaulé
  20. The Choice of Technology and Economic Geography By Zhou, Haiwen
  21. The Impact of Political Uncertainty on Asset Prices: The Case of the United Kingdom's EU Membership Referendum By Mr. Niels-Jakob H Hansen; Ms. Margaux MacDonald
  22. Local Economic and Political Effects of Trade Deals: Evidence from NAFTA By Jiwon Choi; Ilyana Kuziemko; Ebonya L. Washington; Gavin Wright
  23. The Role of E-Government in Promoting Foreign Direct Investment Inflows By Mr. Ali J Al-Sadiq
  24. Rising Political Populism and Outmigration of Youth as International Students By Murat Demirci
  25. Tariffs, productivity, and resource misallocation By Michael Kilumelume; Bruno Morando; Carol Newman; John Rand
  26. Immigrant Labor and the Institutionalization of the U.S.-born Elderly By Kristin F. Butcher; Kelsey Moran; Tara Watson
  27. Productivity and Real Exchange Rates for India: Does Balassa-Samuelson Effect Explain? By Ghosh, Saurabh; Nath, Siddhartha; Srivastava, Sauhard
  28. Migration and Spatial Misallocation in China By Li, Xiaolu; Ma, Lin; Tang, Yang

  1. By: Freeman, Rebecca (Bank of England); Larch, Mario (University of Bayreuth); Theodorakopoulos, Angelos (University of Oxford); Yotov, Yoto (Drexel University)
    Abstract: We propose new methods to identify the full impact of country-specific characteristics on bilateral trade flows within the framework of “the new quantitative trade model.” We complement theory with a simple two-stage estimating procedure, and offer a proof of concept by quantifying the impact of country-specific R&D expenditure on trade. Results suggest a positive relationship overall, but a larger impact on international (versus domestic) trade. Further, our methodology allows us to recover trade elasticity estimates without the need for price/tariff data. Bringing this to the sectoral level, we obtain estimates of the trade elasticity for manufacturing, services, and tradable versus non-tradable sectors
    Keywords: Structural gravity; Country-specific trade costs; Trade elasticity; Elasticity of substitution; R&D and trade
    JEL: F10 F14 F16
    Date: 2021–11–21
  2. By: Larch, Mario (University of Bayreuth); Luckstead, Jeff (Washington State University); Yotov, Yoto (Drexel University)
    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: 2021–11–07
  3. By: Xiaohua Bao; Bruce A. Blonigen; Zhi Yu
    Abstract: Multiproduct firms are responsible for the vast majority of global trade. A prior literature examines how multiproduct firms respond to trade liberalizations that simultaneously affect all of the firms' products and inputs. In contrast, our study uses Chinese firm-product-level export data to examine how an AD action, a very targeted trade policy against a specific product in a specific export destination, affects a multiproduct firms' price and quantity decisions across its other products and export destinations. We find robust evidence for a new phenomenon we call within-firm cross-product trade deflection whereby an AD duty against one of the firm's products in one of its export destinations is associated with reduced prices and increased sales of its other products across all markets. This type of effect depends on increasing costs from joint production within multiproduct firms, something that is often assumed away in many models of the multiproduct firm. We also document for the first time a within-firm chilling effect whereby an AD action in one export destination on a product leads the firm to raise price and lower quantity of the product in other export destinations to lower the risk of AD actions in these other markets.
    JEL: F13 F14 L11 L23
    Date: 2021–11
  4. By: Ribeiro, Ana Paula; Carvalho, Vitor; Ferreira, Mariana
    Abstract: This paper aims at relating globalization with wage inequality, explaining if and how this relation is expected to hold differently for different-income countries. We intend to contribute to the literature with an empirical analysis for the countries of the European Union, before the Great Recession, by building and testing a panel data model on two distinct groups: the countries from the “North” (higher GDP per capita) and those from the “South” (lower GDP per capita). We found that trade has the effect of enhancing inequality in the “North” countries (confirming the Hecksher-Ohlin-Stopler-Samuelson mechanism), though we could not significantly conclude on its effect in the “South” group. Foreign Direct Investment inflows have the effect of diminishing inequality in the “North”, while FDI outflows have the same effect in the “South”. These results are not predicted by Feenstra-Hanson theory. We also tested for the effect of technology on inequality and, while we found mixed evidence on how the share of High Tech Exports affects inequality, Gross Expenditure on Research and Development, when significant, increases inequality in the “North” group of countries. By using a composite globalization index, we conclude that trade is dominant over FDI in affecting inequality. Moreover, when we tested for the non-economic aspects of globalization, we found that both political and social dimensions cause wage inequality to increase.
    Keywords: wage inequality; globalization; European Union
    JEL: F15 F63 O15
    Date: 2020–10
  5. By: Farag, Markos (Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI)); Zaki, Chahir (Cairo University, Faculty of Economics and Political Science)
    Abstract: This paper aims to analyze the determinants of trade in natural gas through a political economy lens. Indeed, in addition to the economic determinants of trading in natural gas, the latter could be affected by political determinants such as the economic sanctions and the institutional gap between the trading partners. Moreover, while the literature considers the effect of tariffs, less attention has been attributed to non-tariff measures (NTMs) that might also be imposed for political reasons. To quantify the impact of these different determinants on natural gas trade, we use a gravity model that explains bilateral trade for pipeline natural gas (PNG) and liquefied natural gas (LNG) over the period 2000-2017. We also consider the zero trade flows of natural gas by using the Poisson Pseudo Maximum Likelihood estimator. Our results show that economic sanctions have reduced bilateral LNG trade by 24%, on average. We also find that the institutional gap between trading partners exerts a significant negative effect on bilateral PNG and LNG trade, pointing out that institutions could be considered as fixed export costs in the natural gas market. Moreover, our results indicate that, in addition to tariffs, non-tariff measures have a significant negative effect on trade in natural gas.
    Keywords: Natural gas; gravity model; institutions; economic sanctions
    JEL: C55 F14 Q34 Q35 Q43
    Date: 2021–11–29
  6. By: Sayour, Nagham (Zayed University); Schröder, Marcel (Asian Development Bank)
    Abstract: This paper explores the job creation impacts of the large foreign direct investment (FDI) inflows to Mongolia’s non-resource sector following the signing of the investment agreement for the Oyu Tolgoi mine in 2009. Using FDI project and national employment data over 2009–2013, we employ a triple difference methodology on the sector–province (aimag)-year level. The results suggest that each FDI job and every $1 million FDI inflow displace 5.5 and 20 local jobs, respectively. Several factors may explain this result: the majority of FDI was targeted at sectors such as transportation and retail where efficiency gains led to job losses; the low skill-intensity of FDI jobs in those sectors; the low labor supply elasticity in Ulaanbaatar where most of the FDI projects are concentrated; and the limited extent of localized supply chains.
    Keywords: resource boom; foreign direct investment; local job multiplier; Mongolia
    JEL: F21 J21 O11 Q32 Q33
    Date: 2021–12–15
  7. By: David Atkin; Arnaud Costinot; Masao Fukui
    Abstract: We study the relationship between international trade and development in a model where countries differ in their capability, goods differ in their complexity, and capability growth is a function of a country’s pattern of specialization. Theoretically, we show that it is possible for international trade to increase capability growth in all countries and, in turn, to push all countries up the development ladder. This occurs because: (i) the average complexity of a country’s industry mix raises its capability growth, and (ii) foreign competition is tougher in less complex sectors for all countries. Empirically, we provide causal evidence consistent with (i) using the entry of countries into the World Trade Organization as an instrumental variable for other countries’ patterns of specialization. The opposite of (ii), however, appears to hold in the data. Through the lens of our model, these two empirical observations imply dynamic welfare losses from trade that are small for the median country, but pervasive and large among a number of African countries.
    JEL: F1 O1 O4
    Date: 2021–11
  8. By: Joseph E. Gagnon (Peterson Institute for International Economics); Madi Sarsenbayev (Peterson Institute for International Economics)
    Abstract: This paper estimates and tests four models of the effects of exchange rate changes on export prices. It supports the Goldberg and Knetter (1997) canonical result that exporters adjust their prices by about half of any movement in exchange rates. A new twist is that exchange rate movements against importing countries account for only three-fifths of this price adjustment, while exchange rate movements against a dominant currency account for the other two-fifths. The dominant currency is the euro in Europe and Africa and the US dollar in Asia and the Western Hemisphere. The recent claim that the dollar is the most important driver of export prices (Gopinath et al. 2020) is shown to be valid only for the smallest exporting economies. For the bulk of international trade, the extra effects of the dollar (or the euro) beyond their effects as exporter or importer currencies are relatively modest.
    Keywords: Exchange rate pass-through, pricing to market, dominant currency paradigm, local currency pricing, producer currency pricing
    JEL: F14 F32 F41
    Date: 2021–12
  9. By: Richard Chisik (Department of Economics, Ryerson University, Toronto, Canada); Nazanin Behzadan (Department of Economics, University of Prince Edward Island, Charlottetown, Canada);
    Abstract: In this paper we analyze the effect of within-country income inequality on economic outcomes. We develop a new model of international trade with non-homothetic preferences whereby within-country income distribution affects firm location decisions. In a two-country, three-sector framework with increasing returns to scale and positive trade costs we show that an increase in income inequality can generate firm movement to the country with a more equal income distribution.
    Date: 2021–12
  10. By: Luciana Juvenal
    Abstract: When analyzing terms-of-trade shocks, it is implicitly assumed that the economy responds symmetrically to changes in export and import prices. Using a sample of developing countries our paper shows that this is not the case. We construct export and import price indices using commodity and manufacturing price data matched with trade shares and separately identify export price, import price, and global economic activity shocks using sign and narrative restrictions. Taken together, export and import price shocks account for around 40 percent of output fluctuations but export price shocks are, on average, twice as important as import price shocks for domestic business cycles.
    Keywords: Commodity Prices;Business Cycles;World Shocks;WP;price shock;terms-of-trade shock;import share;export share;export price shock;import price shock;share exhibit
    Date: 2020–12–11
  11. By: Maximiliano Dvorkin
    Abstract: Over the last few decades, international trade has increased at a rapid pace, altering domestic production and labor demand in different sectors of the economy. A growing literature has studied the heterogeneous effects of trade shocks on workers’ industry and occupation employment and on welfare when reallocation decisions are costly. The estimated effects critically depend on data on workers’ reallocation patterns, which is typically plagued with coding errors. In this paper, I study the consequences of misclassification errors for estimates of the labor market effects of international trade and show that structural parameter values and the estimated effects are biased when the analysis uses uncorrected data. I develop an econometric framework to jointly estimate misclassification probabilities, corrected mobility matrices, and structural parameters in a unified way. Under different model specifications, I compare how the estimated effects of a trade shock differ on whether the analysis uses correct mobility measures and parameters. The results show that estimated employment and welfare effects of a trade shock are substantially different, raising an important warning for quantitative exercises using mobility data with coding errors.
    Keywords: International trade; labor markets; classification errors; mobility; worker reallocation; structural estimation
    JEL: F16 F66 J24 J62 C25
    Date: 2021–12–03
  12. By: Feras A. Batarseh; Munisamy Gopinath; Anderson Monken; Zhengrong Gu
    Abstract: International economics has a long history of improving our understanding of factors causing trade, and the consequences of free flow of goods and services across countries. The recent shocks to the free trade regime, especially trade disputes among major economies, as well as black swan events, such as trade wars and pandemics, raise the need for improved predictions to inform policy decisions. AI methods are allowing economists to solve such prediction problems in new ways. In this manuscript, we present novel methods that predict and associate food and agricultural commodities traded internationally. Association Rules (AR) analysis has been deployed successfully for economic scenarios at the consumer or store level, such as for market basket analysis. In our work however, we present analysis of imports and exports associations and their effects on commodity trade flows. Moreover, Ensemble Machine Learning methods are developed to provide improved agricultural trade predictions, outlier events' implications, and quantitative pointers to policy makers.
    Date: 2021–11
  13. By: Piriu, Andreea Alexandra
    Abstract: As the COVID-19 pandemic unfolds, future health care expenditure is likely the discriminant between nations who will build resilience and those who will not. Despite costly labor-market adjustments due to increased international trade over the last two decades, the health effects of trade liberalization are underexplored, with potentially wide implications for public policy and national budgets. Given the remarkable increase in trade volumes between Germany and China following reunification, this paper studies the causal effects of Chinese import competition on the health outcomes of individuals working in the German manufacturing sector. Results in this reduced-form approach exploiting region-industry variation in imports over 22 years show that higher import competition from China increases the individual demand for healthcare and probability of developing chronic illness via job insecurity, job loss and occupational change, an increased reliance on social welfare, and wage reduction. I find that individuals increase their visits to the doctor by 14 per cent and are 18.4 to 20.6 per cent more likely to develop chronic illness, on average. Results are robust for alternative health outcomes and across different population subgroups. The paper calls for reshaping health policy such that it governs well-being, starting with prevention and adequate care for working individuals: amidst globalization and recent chronic disease management, it is fundamental that future sustainable health policy champions the idea that creating better jobs means avoiding preventable costs of care from increased healthcare utilization and hence more effective chronic care through the introduction of preventive primary care plans for vulnerable working population segments.
    Keywords: trade,labor,job insecurity,individual health,chronic illness,healthcare utilization
    JEL: F14 F16 I12 I15
    Date: 2021
  14. By: Diego A. Cerdeiro; Andras Komaromi
    Abstract: World trade contracted dramatically during the global economic crisis induced by the COVID-19 pandemic. Disruptions in international supply chains were widely reported as governments imposed containment measures (lockdowns) to halt the spread of the disease. At the same time, demand declined as households and firms scaled back spending. This paper attempts to disentangle the supply and demand channels in trade by quantifying the causal effect of supply spillovers from lockdowns. We utilize a novel dataset of daily bilateral seaborne trade, and design a shift-share identification strategy that leverages geography-induced cargo delivery lags to track the transmission of supply disruptions across space. We find strong but short-lived supply spillovers of lockdowns through international trade. Moreover, the evidence is suggestive of the downstream propagation of countries’ lockdowns through global supply chains.
    Keywords: lockdowns;trade;supply chains.;WP;lockdown exposure;import growth;lockdown measure;government lockdown;lockdown spillover; COVID-19; spillovers; supply disruption; Imports; Plurilateral trade; Foreign currency exposure; Global; Europe; Asia and Pacific
    Date: 2020–12–18
  15. By: Luisito Bertinelli; Olivier Cardi; Romain Restout
    Abstract: Motivated by recent evidence pointing at an increasing contribution of asymmetric shocks across sectors to economic fluctuations, we explore the labor market effects of technology shocks biased toward the traded sector. Our VAR evidence for seventeen OECD countries reveals that the non-traded sector alone drives the increase in total hours worked following a technology shock that increases permanently traded relative to non-traded TFP. The shock generates a reallocation of labor toward the non-traded sector which contributes to 35% on average of the rise in non-traded hours worked. Both labor reallocation and variations in labor income shares are found empirically connected with factor-biased technological change. Our quantitative analysis shows that a two-sector open economy model with flexible prices can reproduce the labor market effects we document empirically once we allow for imperfect mobility of labor, gross substitutability between home- and foreign-produced traded goods, and factor-biased technological change. When calibrating the model to country-specific data, its ability to account for the cross-country reallocation and redistributive effects we estimate increases once we let factor-biased technological change vary between sectors and across countries.
    Keywords: Sector-biased technology shocks, Factor-augmenting efficiency, Open economy, Labor reallocation, CES production function, Labor income share
    JEL: E21 E32 F11 F41 O33
    Date: 2021
  16. By: International Monetary Fund
    Abstract: Are assets in a landlocked country subject to sea-level rise risk? In this paper, we study the cross-border spillovers of physical climate risks through international trade and supply chain linkages. As we base our findings on historical data between 1970 and 2018, we observe that globalization increased the similarity of countries’ global climate risk exposures. Exposures to foreign climatic disasters in major trade partner countries (both upstream and downstream) lower the home-country stock market valuation for the aggregate market and for the tradable sectors. We also find that exposures to foreign long-term climate change risks reduce the asset price valuations of the tradable sectors at home. Findings in this paper suggest that climate adaptation efforts in a country can have positive externalities on other countries’ macrofinancial performance and stability through international trade.
    Keywords: climate risk;financial spillover;supply chain;financial stability;WP;risk exposure;disaster damage;spillover index;exposure measure;assets ratio;expected return; Climate change; Stock markets; Foreign currency exposure; Financial sector; Natural disasters; Global
    Date: 2021–01–22
  17. By: David Adeabah (Legon, Ghana); Simplice A. Asongu (Yaoundé, Cameroon)
    Abstract: Over the past decade, a growing number of studies have examined the role of agricultural export in economic growth in Africa. The literature, however, provides conflicting results about the agricultural export-led growth hypothesis. In this study, we aim to examine the impact of agricultural export on economic growth by performing a meta-analysis. Our meta-analysis finds significant presence of negative publication bias in the literature. Using mixed-effect multilevel meta-regression, we find that after correction for publication bias, the average agricultural export elasticity to economic growth is 0.763 for the poor in Africa. Interestingly, agricultural export is growth for the rich in Africa, although the elasticity of GDP is 0.043. These results are consistent with the agricultural export-led growth hypothesis. The implication is that export promotion should be targeted at agricultural output in low-income and lower middle-income countries whereas upper middle-income countries in Africa may focus on non-agricultural export.
    Keywords: Africa; export-led growth; agricultural export; meta-analysis
    JEL: C10 C40 I30 N50 O55
    Date: 2021–11
  18. By: Jaime de Melo (University of Geneva [Switzerland], FERDI - Fondation pour les Etudes et Recherches sur le Développement International); Zakaria Sorgho (Laval University, FERDI - Fondation pour les Etudes et Recherches sur le Développement International); Laurent Wagner (FERDI - Fondation pour les Etudes et Recherches sur le Développement International)
    Abstract: All members of the WTO participate in the Trade Facilitation Agreement (TFA) that is to reduce border and documentary compliance in customs. Successful implementation should benefit all countries, the developing countries and more particularly the three categories of vulnerable countries receiving special status at the UN: Least Developed Countries (LDCs), the Landlocked Developing Countries (LLDCs) and the Small Island Developing States (SIDS). This paper gives plausible estimates (in the sense of realizable at the country and group levels) of reduction in trade costs from a successful implementing of the TFA. The paper starts with a presentation of the TFA noting its two principal characteristics. First, the TFA is a rules-based bottom-up approach built into the agreement that takes into account countries' implementation capabilities, an important feature for the three groups of UN vulnerable countries. Second, the TFA provisions are monitorable (e.g. provisions like the publication of information, advance rulings, appeal or review of decisions, transparency, and border agency cooperation). In preparation for the agreement, the OECD has assembled large amount of indicators of the state of implementation of provisions in the TFA summarized in a TFI (Trade Facilitation Index). TFI values for 2019 are then used to evaluate econometrically the impact of implementing TFA on the waiting-time reduction at customs for a sample of 160 countries. Average ad-valorem equivalents (AVEs) of reduction of time in customs estimates for each UN-grouping (LDCs, LLDCs, and SIDS) show averages in the range 2.1%-2.9% for imports and 1.9%-2-7% for exports. Larger gains are obtained for a more ambitious implementation of the TFA. Importantly, gains are larger for each of the three groupings than for other developing countries, a corroboration that the UN vulnerable categories capture an aspect of vulnerability.
    Keywords: International trade,Trade policy,Trade Facilitation,LDCs,LLDCs,SIDS
    Date: 2021–11–30
  19. By: Ruchir Agarwal; Geoff Smith; Patrick Gaulé
    Abstract: This paper studies the impact of U.S. immigration barriers on global knowledge production. We present four key findings. First, among Nobel Prize winners and Fields Medalists, migrants to the U.S. play a central role in the global knowledge network—representing 20-33% of the frontier knowledge producers. Second, using novel survey data and hand-curated life-histories of International Math Olympiad (IMO) medalists, we show that migrants to the U.S. are up to six times more productive than migrants to other countries—even after accounting for talent during one’s teenage years. Third, financing costs are a key factor preventing foreign talent from migrating abroad to pursue their dream careers, particularly for talent from developing countries. Fourth, certain ‘push’ incentives that reduce immigration barriers—by addressing financing constraints for top foreign talent—could increase the global scientific output of future cohorts by 42 percent. We concludeby discussing policy options for the U.S. and the global scientific community.
    Keywords: Immigration;Science;Talent;Universities;WP;IMO medalist;migrants to the U.S.;IMO participant;productivity regression;IMO point; Migration; Productivity; Income; Global
    Date: 2021–02–19
  20. By: Zhou, Haiwen
    Abstract: Empirical evidence shows that firms located in regions with larger population size are on average larger and more productive. To explain this empirical observation, firms producing intermediate goods are assumed to choose their technologies with different levels of fixed and marginal costs. In this general equilibrium model of economic geography, intermediate good producers engage in oligopolistic competition. The model is tractable and leads to interesting and analytical results. An intermediate good producer in the region with a higher population produces a higher level of output and has a lower marginal cost of production regardless of the existence of regional trade. With regional trade, if a worker moves from the region with a lower number of workers to the region with a higher number of workers, intermediate good producers in both regions choose less advanced technologies.
    Keywords: Technology choice, economic geography, international trade, increasing returns, oligopoly
    JEL: D43 F12 L13 O14 R12
    Date: 2021–12–04
  21. By: Mr. Niels-Jakob H Hansen; Ms. Margaux MacDonald
    Abstract: How did expectations of the outcome of the United Kingdom's (UK) referendum on European Union (EU) membership in 2016 affect prices in financial markets? We study this using high frequency data from betting and financial markets. We find that a one percentage point increase in the probability of "Leave" result caused British stocks (FTSE All-Share) to decline by 0.004 percent, and the Pound to depreciate by 0.006 percent against the euro. We find negative and significant effects for most sub-sectors, and negative spill-overs to other EU member countries. We show that the differential impact across sectors and countries can be explained by differences in the trade exposures.
    Keywords: Brexit; EU referendum; political uncertainty; high frequency data.
    Date: 2021–02–05
  22. By: Jiwon Choi; Ilyana Kuziemko; Ebonya L. Washington; Gavin Wright
    Abstract: Why have white, less educated voters left the Democratic Party over the past few decades? Scholars have proposed ethnocentrism, social issues and deindustrialization as potential answers. We highlight the role played by the 1994 North American Free Trade Agreement (NAFTA). In event-study analysis, we demonstrate that counties whose 1990 employment depended on industries vulnerable to NAFTA suffered large and persistent employment losses relative to other counties. These losses begin in the mid-1990s and are only modestly offset by transfer programs. While exposed counties historically voted Democratic, in the mid-1990s they turn away from the party of the president (Bill Clinton) who ushered in the agreement and by 2000 vote majority Republican in House elections. Employing a variety of micro-data sources, including 1992-1994 respondent-level panel data, we show that protectionist views predict movement toward the GOP in the years that NAFTA is debated and implemented. This shift among protectionist respondents is larger for whites (especially men and those without a college degree) and those with conservative social views, suggesting an interactive effect whereby racial identity and social-issue positions mediate reactions to economic policies.
    JEL: D72 F16 H5 J2
    Date: 2021–11
  23. By: Mr. Ali J Al-Sadiq
    Abstract: The outbreak of the COVID-19 pandemic has helped accelerate the digitization of public services. The lockdown initiated by most governments to curb the spread of the coronavirus forced most public agencies to switch to online platforms to continue providing information and services to the public. It is widely recognized that information diffusion and communication technology play a large role in improving the quality of public services in terms of time, cost, and interface with the public, business, and other agencies. Potentially, e-government could enhance a country’s locational advantages and attract more Foreign Direct Investment (FDI) inflows. This hypothesis is tested empirically using an unbalanced panel data analysis for 178 host countries over the period 2003-2018. The results suggest that e-government stimulates the inflow of FDI.
    Keywords: E-government;Developing Countries;WP;FDI inflow;E-government service;e-government variable;FDI equation;development index
    Date: 2021–01–15
  24. By: Murat Demirci (Department of Economics, Koç University)
    Abstract: Populism is on the rise, and democratic rights are deteriorating in many countries as a result of authoritarian policies adopted by populist leaders. This study analyzes how rising political populism in developing countries affects whether their citizens pursue higher education abroad. Applying the Synthetic Control Method, student migration patterns from Hungary, Ukraine, Venezuela, and Indonesia are explored as cases constituting early examples of populism. The estimates show that the rise of populism in these countries increases the number of citizens who attend universities in foreign countries. Limited evidence for worsening higher education options in the origin countries suggests that more students start pursuing foreign education to increase their chances of living abroad after graduation.
    Keywords: International Students, Outmigration of Skilled People, Political Populism, Synthetic Control Method.
    JEL: F22 I23 J24 O15
    Date: 2021–12
  25. By: Michael Kilumelume; Bruno Morando; Carol Newman; John Rand
    Abstract: An often-neglected potential negative consequence of tariffs is the impact they may have on the misallocation of factor inputs. Trade protection can provide space for domestic firms to increase prices and mark-ups, allowing low-productivity firms to survive, thereby leading to a sub-optimal allocation of resources. This paper explores the impact of tariffs on the allocation of capital using administrative data from South Africa. We find that tariffs are highly correlated with capital misallocation, leading to aggregate productivity losses of 5-10 per cent.
    Keywords: Tariffs, Productivity, Misallocation, South Africa
    Date: 2021
  26. By: Kristin F. Butcher; Kelsey Moran; Tara Watson
    Abstract: The U.S. population is aging. We examine whether immigration causally affects the likelihood that the U.S.-born elderly live in institutional settings. Using a shift-share instrument to identify exogenous variation in immigration, we find that a 10 percentage point increase in the less-educated foreign-born labor force share in a local area reduces institutionalization among the elderly by 1.5 and 3.8 percentage points for those aged 65+ and 80+, a 26-29 percent effect relative to the mean. The estimates imply that a typical U.S-born individual over age 65 in the year 2000 was 0.5 percentage points (10 percent) less likely to be living in an institution than would have been the case if immigration had remained at 1980 levels. We show that immigration affects the availability and cost of home services, including those provided by home health aides, gardeners and housekeepers, and other less-educated workers, reducing the cost of aging in the community.
    JEL: I11 J14 J15 J61
    Date: 2021–11
  27. By: Ghosh, Saurabh; Nath, Siddhartha; Srivastava, Sauhard
    Abstract: We attempt to explore the long-term equilibrium relationship between India’s real exchange rates and sectoral productivity trends using internationally comparable productivity databases such as KLEMS databases for India, China, Euro area, USA, UK and Japan. Our panel-ARDL results find support for an ‘extended’ Balassa-Samuelson hypothesis that allows for labour market frictions that does not allow for wage equalisation between traded and non-traded sectors within a country. These empirical findings are also robust to both labour productivity and total factor productivity as alternative measures of sectoral productivity. This mechanism continues to find some support when we separate out distribution sector, that comprises wholesale and retail trade in the domestic services sector. Our empirical evidence suggests that India’s real exchange rate is anchored to domestic fundamentals and is closely aligned to its fair value over a medium to long-time horizon.
    Keywords: Balassa-Samuelson Model, Real exchange rate, Productivity, Trade, Panel Data
    JEL: F11 F41
    Date: 2021–12–12
  28. By: Li, Xiaolu (Nanjing University of Posts and Telecommunications); Ma, Lin (Singapore Management University); Tang, Yang (Nanyang Technological University)
    Abstract: We structurally estimate the firm-level frictions across prefectures in China and quantify their aggregate and distributional implications. Based on a general equi-librium model with input and output distortions and migration, we show that the firm-level frictions are less dispersed and less correlated with productivity in richer prefectures. Counterfactual exercises show that reducing the within-prefecture mis-allocation increases the aggregate welfare, discourages migration towards large cities, and narrows the spatial inequality. Moreover, internal migration alleviates the impacts of micro-frictions on aggregate welfare and worsens their impacts on spatial inequality.
    Keywords: misallocation; regional trade; economic geography; welfare gain
    JEL: F12 O11 R12
    Date: 2021–09–01

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