nep-int New Economics Papers
on International Trade
Issue of 2022‒02‒14
27 papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. Import Liberalization as Export Destruction? Evidence from the United States By Holger Breinlich; Elsa Leromain; Dennis Novy; Thomas Sampson
  2. Trade policy coherence and coordination in Nepal By Paras Kharel; Kshitiz Dahal
  3. Trump ended WTO dispute settlement. Trade remedies are needed to fix it. By Chad P. Bown
  4. The Impact of Technical Barriers to Trade and Sanitary and Phytosanitary Measures on Trade in the Forest-Wood-Paper Sector By Bossoma Doriane N’DOUA
  5. Vulnerable to the Virus: Globally-Oriented Manufacturing Firms at Risk From the Spread of COVID-19 By Karl Jandoc; Adrian Mendoza; Stella Luz Quimbo
  6. Trade in the Time of Corona: Broken Chains and Mended Barriers By Adrian R. Mendoza
  7. How did China's GVCs participation influence its manufacturing productivity? By Ping Hua
  8. Building Bridges: The Effect of Major Infrastructure Development on Trade By Persson, Maria; Soegaard, Christian; Welander Tärneberg, Anna
  9. An assessment of the effects of COVID-19 pandemic on Kenya's trade By Maureen Were; Kethi Ngoka
  10. The Backlash of Globalization By Italo Colantone; Gianmarco Ottaviano; Piero Stanig
  11. Growth and Distribution regimes under Global Value Chains: Diversification, Integration and Uneven Development By Ganguly, Arpan; Spinola, Danilo
  12. Impact of Tourism on Regional Economic Growth: A Global Value Chain Perspective By Liu, Anyu
  13. Wage effects of global value chains participation and position: An industry-level analysis By Ndubuisi, Gideon; Owusu, Solomon
  14. Brexit and labour market inequalities: potential spatial and occupational impacts By Alex Davenport; Peter Levell
  15. On the Distributional Effects of International Tariffs By Daniel R. Carroll; Sewon Hur
  16. Longing for which home: Evidence from global aspirations to stay, return or migrate onwards By Bekaert, Els; Constant, Amelie F.; Foubert, Killian; Ruyssen, Ilse
  17. Enforcement of labor regulation and the labor market effects of trade: evidence from Brazil By Vladimir Ponczek; Gabriel Ulyssea
  19. Trade and informality in the presence of labor market frictions and regulations By Rafael Dix-Carneiro; Pinelopi Koujianou Goldberg; Costas Meghir; Gabriel Ulyssea
  20. Globalization By Kevin Hjortshøj O’Rourke
  21. Optimal Pricing for Carbon Dioxide Removal Under Inter-Regional Leakage By Max Franks; Matthias Kalkuhl; Kai Lessmann
  22. Two-sided Search in International Markets By Jonathan Eaton; David Jinkins; James Tybout; Daniel Yi Xu
  23. Strangers and Foreigners: Trust and Attitudes toward Citizenship By Graziella Bertocchi; Angelo Dimico; Gian Luca Tedeschi
  24. An empirical analysis of the export potential of pork produced under higher animal welfare standards By Derstappen, Rebecca; Christoph-Schulz, Inken; Banse, Martin
  25. Networks of international knowledge links: new layers in innovation systems By Leonardo Costa Ribeiro; Jorge Nogueira de Paiva Britto; Eduardo da Motta e Albuquerque
  26. The global minimum tax raises more revenues than you think, or much less By Janeba, Eckhard; Schjelderup, Guttorm
  27. The Political Economy of Open Borders: Theory and Evidence on the role of Electoral Rules By Matteo Gamalerio; Massimo Morelli; Margherita Negri

  1. By: Holger Breinlich (University of Surrey); Elsa Leromain (IRES/LIDAM, UC Louvain); Dennis Novy (University of Warwick); Thomas Sampson (London School of Economics)
    Abstract: How does import protection affect export performance? In trade models with scale economies, import liberalization can reduce industry-level exports by cutting domestic production. We show that this export destruction mechanism reduced US export growth following the permanent normalization of trade relations with China (PNTR). But there was also an offsetting boost to exports from lower input costs. We use our empirical results to calibrate the strength of scale economies in a quantitative trade model. Counterfactual analysis implies that while PNTR increased aggregate US exports relative to GDP, exports declined in the most exposed industries because of the export destruction effect. On aggregate, the US and China both gain from PNTR, but the gains are larger for China.
    JEL: F12 F13 F15
    Date: 2022–02
  2. By: Paras Kharel (South Asia Watch on Trade, Economics and Environment); Kshitiz Dahal
    Abstract: This paper is an exploratory assessment of the coherence of policies, strategies and laws that have a bearing on Nepal's international trade, and the mechanism and extent of coordination between government agencies and between the government and the private sector in trade-related decision making, including policy formulation and implementation. It outlines possible measures for achieving policy coherence and improved inter-agency coordination.
    Keywords: Trade policy, tariffs, revenue, non-tariff measures, export promotion, import substitution, institutions, coordination failure
    JEL: F10 F13 H20
    Date: 2021–04
  3. By: Chad P. Bown (Peterson Institute for International Economics)
    Abstract: Unhappy with the rulings of the WTO dispute settlement system, which disproportionately targeted US use of trade remedies, the United States ended the entire system in 2019. There are multiple hurdles to agreeing to new terms of trade remedy use and thus potentially restoring some form of binding dispute settlement. First, a change would affect access to policy flexibility by the now large number of users of trade remedies. Second, although China's exports are the overwhelming target of trade remedies, exporters in other countries increasingly find themselves caught up in trade remedy actions linked to China. Third, critical differences posed by China's economic model may call for new rules for trade remedies, but no consensus on those rules has emerged. Even some of the most promising reforms have practical limitations, create additional challenges, or may be politically unviable.
    Keywords: WTO, dispute settlement, Appellate Body, trade remedies, antidumping, countervailing duties, safeguards, US, China
    JEL: F13
    Date: 2022–01
  4. By: Bossoma Doriane N’DOUA
    Abstract: Sanitary and phytosanitary (SPS) measures and technical barriers to trade (TBTs) govern trade in several sectors, including the forest-wood-paper sector. Using a gravity model, we analyze the impact of SPS and TBT measures on trade flows in the forest-wood-paper sector by distinguishing between technical regulations and conformity assessment procedures. Our results show that SPS and TBT conformity assessment procedures and TBT technical regulations increase trade flows. We also find that the impact of these measures differs depending on the level of development of imposing countries when imports come from developing countries. In particular, SPS and TBT conformity assessment procedures and SPS technical regulations imposed by developed countries tend to restrict trade with developing country exporters, while TBT technical regulations tend to increase it. In contrast, SPS and TBT conformity assessment procedures imposed by developing countries contribute to increasing such trade. In analyzing the differences or similarities in regulatory patterns between these countries, we find that, on average, developing countries exhibit less regulatory intensity than developed countries. This result suggests that it will require more technical and financial resources for developing countries to comply with measures imposed by developed countries that adopt more stringent technical measures than they do.
    Keywords: STEM migrants; High-skilled migrants; Inventors; Gender
    JEL: F13 F14
    Date: 2022
  5. By: Karl Jandoc (School of Economics, University of the Philippines Diliman); Adrian Mendoza (School of Economics, University of the Philippines Diliman); Stella Luz Quimbo (House of Repsesentatives, Batasan Complex, Constitution Hills, Quezon City)
    Abstract: We use a unique Philippine firm-level database consisting of trade transactions data merged with firm surveys of manufacturing establishments covering the period from 2013 to 2019 to examine which exporting and importing firms are potentially vulnerable to the economic slowdown brought about by the spread of COVID-19. We find that the exposure of Philippine trade to the COVID-19 affected countries is substantial, accounting for more than half of the value of both exports and imports. Those that stand to lose the most are firms connected to the global value chains that simultaneously export and import. Around 370,000 workers from these firms are at risk. While large firms are able to withstand, to some extent,the COVID-19 shock, SMEs do not have such capability. We find that the profile of these SMEs is substantially different than that of the larger firms in terms of product composition. These SMEs export food and food products which are highly perishable and more sensitive even to short-term vicissitudes in global demand. Given these, we estimate the subsidy needed to support both SMEs and large firms. For SMEs, we compute the subsidy to be Php9.4 billion pesos for 2020. The amount of subsidy increases to Php33.2 billion if large firms were also subsidized for their losses. Identifying the specific mechanism by which such subsidies will be provided to firms of various sizes (e.g. SMEs vs large) requires further study.
    Keywords: COVID-19; Philippine Firms; Stimulus Package
    JEL: O14 L11 H25
    Date: 2020–03
  6. By: Adrian R. Mendoza (School of Economics, University of the Philippines Diliman)
    Abstract: In light of the unprecedented mutation of the COVID-19 pandemic into a global economic recession, the WTO projects world trade volume to plummet by a staggering 13 percent to 32 percent in 2020. This translates to large-scale losses in global output and employment, especially in trade-oriented emerging economies such as the Philippines. Recovering from this dystopic scenario greatly depends on the duration of the outbreak, the downside risks from protectionist tendencies, the severity of the global recession, and the ability of world leaders to come up with a coordinated policy response. This paper provides a quick assessment of the major risks that must be dealt with to overcome these "four horsemen of trade apocalypse". Anchored on the WTO projections, this paper also assesses the short term prospects for Philippine trade. The results of the forecasting exercise suggest that Philippine merchandise exports could plummet in 2020 by 17.2 percent in the optimistic scenario and 39.5 percent in the pessimistic scenario. Compared to the pre-pandemic government target, the pessimistic case suggests that the country could lose up to US$31 billion export revenues this year due to the COVID-19 crisis. Merchandise imports will also experience a similar decline, albeit less severe. While the negative impact will likely be felt by all sectors, the biggest plunge is expected to be in electronics and other industries that are strongly connected to global production networks. On a positive note, Philippine exports and imports are expected to recover in 2021, albeit not fully, if the global public health crisis is resolved sooner than later.
    Keywords: COVID-19 pandemic; global recession; trade collapse; Philippine exports and imports; 2020 projections
    JEL: F01 F13 F17 F42 F50 F60
    Date: 2020–04
  7. By: Ping Hua (EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)
    Abstract: By using panel data of 15 Chinese manufacturing industries over the 2005-2014 period from OECD TiVA and WIOD databases, the impact of China's GVCs participation on labor productivity is estimated. We find that while the productivity elasticity of the share of sector's foreign value added relative to sector's exports known as sector backward linkages is negative, that relative to China's gross exports named structure backward linkage is positive. As the annual average growth rates of both backward linkages are negative, China's backward linkages have contributed to productivity growth of 6.41% per year on average. We find that the positive productivity elasticity of the share of domestic intermediate goods embodied in exports of third countries relative to sector's exports, named sector forward linages together with a positive annual average growth rate, and that relative to China's exports named structure forward linkages together with a negative annual average growth rate, have increased productivity of 1.97% per year on average. We find finally that GVCs position is improved from 0.3 in 2005 to 0.7 in 2014. China's GVCs participation exerted positive productivity effects via optimizing resource allocation inside sectors towards more efficiency ones, via moving up from low productivity backward linkages to higher productivity forward linkages and via improving its position. This diminished the risk to be entrenched in low-profitability low productivity growth GVCs activities in China. However, the productivity contribution of backward linkages 3 times higher than that of forward linkage suggests that the future positive productivity impact of GVCs moving up may be much more difficult in a less favorable context (trade war between China and USA, reindustrialization and trade protection related to Covid-19 for example).
    Keywords: JEL Classification Numbers: F62,F63,O5,O47 global value chains,manufacturing productivity,China
    Date: 2021–12–31
  8. By: Persson, Maria (Department of Economics, Lund University); Soegaard, Christian (Department of Economics, University of Warwick); Welander Tärneberg, Anna (Centre for Economic Demography, Lund University)
    Abstract: We provide evidence of a positive effect of major infrastructure development on international trade, using the opening of the fixed link between Denmark and Sweden in 2000 (The Oresund Bridge) as a quasi-natural experiment. Our Synthetic Control Method (SCM) constructs a counterfactual Danish-Swedish trade relationship, which represents bilateral trade in the absence of the bridge. Evaluating actual trade against its synthetic counterpart for the period 2001-2008 shows that Danish-Swedish trade was 24.6% larger than it would have been in the absence of the bridge using our preferred specification. The result is robust to standard sensitivity checks. We supplement our analysis with a standard Difference-in-differences (DiD) estimator, which uses fixed effects. The DiD estimator yields a slightly larger trade effect of 26.7%, and is robust to a number of sensitivity analyses, including estimation at the product level. Both our SCM and DiD point to the trade-boosting effects being gradual.
    Keywords: Fixed link; bridge; tunnel; transport infrastructure; trade; Synthetic Control Method; Difference-in-differences
    JEL: F14 F15
    Date: 2022–02–08
  9. By: Maureen Were; Kethi Ngoka
    Abstract: We examine the impact of the COVID-19 pandemic on Kenya's foreign trade using quarterly trade data for the period 2019 to the second quarter of 2021. The exploratory analysis shows that growth of Kenya's merchandise exports remained resilient, largely supported by traditional exports of tea and horticultural products. However, the service exports, particularly travel and transport services, were adversely affected. Heterogeneous effects of the COVID-19 pandemic on exports are observed across sectors.
    Keywords: Trade, Kenya, Exports, COVID-19, Pandemic
    Date: 2022
  10. By: Italo Colantone; Gianmarco Ottaviano; Piero Stanig
    Abstract: We review the literature on the globalization backlash, seen as the political shift of voters and parties in a protectionist and isolationist direction, with substantive implications on governments’ leaning and enacted policies. Using newly assembled data for 23 advanced democracies, we document a protectionist and isolationist shift in electorates, legislatures, and executives from the mid-1990s onwards. This is associated with a noticeable protectionist shift in trade policy –although with some notable nuances– especially since the financial crisis of 2008. We discuss the economics of the backlash. From a theoretical perspective, we highlight how the backlash may arise within standard trade models when taking into account the ‘social footprint’ of globalization. Then, we review the empirical literature on the drivers of the backlash. Two main messages emerge from our analysis: (1) globalization is a significant driver of the backlash, by means of the distributional consequences entailed by rising trade exposure; yet (2) the backlash is only partly determined by trade. Technological change, crisis-driven fiscal austerity, immigration, and cultural concerns are found to play an important role in creating politically consequential cleavages. Looking ahead, we discuss possible future developments, with specific focus on the issue of social mobility
    Keywords: Globalization, Social Footprint, Backlash
    Date: 2021
  11. By: Ganguly, Arpan; Spinola, Danilo
    Abstract: This article aims to theoretically and empirically study the macroeconomic interactions between productive structure and income distribution in the context of the Global Value Chains (GVC). Firstly, we develop a theoretical framework, inspired by the Structuralist macroeconomic literature, establishing distinct regimes in the scenario of globalized production chains. The regimes are defined in terms of (1) a structure/diversification regime, (2) an integration/GVC regime, both drawn from the Balance of Payments Constrained Model (BPCM) literature, and (3) a functional income distribution regime. The theoretical framework guides the selection of proxies used to characterize each regime, measured using Principal Component Analysis (PCA) scores. That allows us to identify country patterns in a structured typology. Finally, we focus on growth trajectories, estimating the causal relationship between each of the beforementioned regimes and per-capita growth, using IV estimations. The dataset consists of 37 countries, with sources from the World Development Indicators (WDI), World Input-Output Database (WIOD), Trade in Value Added (TiVA), and the Penn World Tables (PWT). On one hand, this article contributes to structuralist growth models that typically estimate demand and distribution regimes independently, thereby offering a unified narrative on regimes of economic growth in the context of GVCs. On the other hand, our typology depicts how growth dynamics vary distinctly by geographical regions and how globalization has retained and accelerated processes of uneven development globally. The results show that (1) developed countries are more inclusive in terms of distribution under GVCs, (2) structural change has been exclusive, and growth patterns have been following a specialized pattern, and (3) the growth pattern has been associated with higher integration, but less diversification.
    Keywords: Global Value Chains; Uneven Development; Income Distribution
    Date: 2022–02–07
  12. By: Liu, Anyu (University of Surrey)
    Abstract: In the globalization era, many products in the tourism industry are imported from other economies; whereas other products may be exported as intermediates to other economies. Researchers have assessed the economic impact of tourism for more than 40 years, but have shed little light on the economic impact on economies in the global value chain. To fill this gap, this analysis used the multiregional input–output table with 35 industries and 63 economies to comprehensively examine the economic contribution of tourism to Thailand as well as to the global economy. Findings suggest that tourism in Thailand generates significant economic impact on output and value added. The industry has stronger intra-spillover and linkage with domestic industries, particularly downstream industries, and weaker connections with industries in other economies in the global supply chain. The multiregional input–output model also reveals that it can measure the export performance of the industry more accurately than the traditional input–output model. Findings generate comprehensive empirical results for destinations and regional organizations to more accurately strategize tourism or regional tourism development plans.
    Keywords: multiregional input–output model; global value chain; economic impact; tourism development
    JEL: R15 Z32
    Date: 2022–01–28
  13. By: Ndubuisi, Gideon (UNU-MERIT, Maastricht University, and German Development Institute (DIE)); Owusu, Solomon (UNU-MERIT, Maastricht University, and German Development Institute (DIE))
    Abstract: We examine how participation and positioning in global value chains (GVC) affect wages. We also examine whether this relationship is conditioned by a country's development level and labour market regulation. The results show that participation and upstream specialisation in GVCs are associated with higher wages but only in developed countries. In developing countries, while GVC participation is associated with higher wages, upstream specialisation exerts downward pressure on wages. For analysis focusing on the role of labour market regulation, we find that GVC participation only exerts a positive effect on wages under stringent labour market regulation. Under flexible labour market conditions, it exerts downward pressure on wages but allows for the effective reallocation of GVC workers into knowledge-intensive and high value added upstream activities in the value chain that are more productive and wage rewarding. Additional analysis on the effects of GVCs along the wage distribution show that participation and upstream specialisation in GVCs are associated with higher wages across all wage segments in the developed countries. In developing countries, GVC participation only benefits higher wage earners and make low-wage earners worse-off. Even when upstream specialisation is associated with lower wages across all wage segments, low wage earners are disproportionately affected.
    Keywords: Wages, Global Value Chain, GVC Participation, Upstream Specialisation
    JEL: F14 F16 J16 O14 O15 P51
    Date: 2021–11–11
  14. By: Alex Davenport (Institute for Fiscal Studies); Peter Levell (Institute for Fiscal Studies and Institute for Fiscal Studies)
    Abstract: In this paper we examine the possible distributional impacts of new trade barriers associated with the new Trade and Cooperation Agreement governing relations between the UK and EU after Brexit. We use a model of labour demand that incorporates input-output links across industries, and that allows for demand substitution by firms and consumers and worker reallocation across industries. We find that workers’ exposure is moderately increasing across the earnings distribution. Exposure is greater for men than for women as they are more likely to work in manufacturing industries that are relatively harder hit by new trade barriers. Looking across areas, we find that exposure to new Brexit trade barriers is uncorrelated with measures of local deprivation and the impacts of the recent COVID-19 pandemic.
    Date: 2021–11–15
  15. By: Daniel R. Carroll; Sewon Hur
    Abstract: We provide a quantitative analysis of the distributional effects of the 2018 increase in tariffs by the U.S. and its major trading partners. We build a trade model with incomplete asset markets and households that are heterogeneous in their age, income, wealth and labor skill. When tariff revenues are used to reduce labor and capital income taxes and increase transfers, the average welfare loss from the trade war is equivalent to a permanent 0.1 percent reduction in consumption. Much larger welfare losses are concentrated among retirees and low-wealth and low-income workers, while only wealthy households experience a welfare gain.
    Keywords: tariffs; inequality; consumption; welfare; taxation
    JEL: E21 F10 F62 H21
    Date: 2022–01–29
  16. By: Bekaert, Els (UNU-CRIS, Ghent University, Department of Economics); Constant, Amelie F. (UNU-MERIT, GLO, CESifo and Princeton University); Foubert, Killian (UNU-CRIS, Ghent University, Department of Economics); Ruyssen, Ilse (UNU-CRIS, Ghent University, Department of Economics)
    Abstract: Aspirations provide the underlying dynamics of the behavior of individuals whether they are realized or not. Knowledge about the characteristics and motives of those who aspire to leave the host country is key for both host and home countries to formulate appropriate and effective policies in order to keep their valued immigrants or citizens and foster their (re-)integration. Based on unique individual-level Gallup World Polls data, a random utility model, and a multinomial logit we model the aspirations or stated preferences of immigrants across 138 countries worldwide. Our analysis reveals selection in characteristics, a strong role for soft factors like social ties and sociocultural integration, and a faint role for economic factors. Changes in circumstances in the home and host countries are also important determinants of aspirations. Results differ by the host countries’ level of economic development.
    Keywords: Economics of Immigrants, Geographic Labor Mobility, Public Policy, Micro-economic Behavior, International Migration, Large Data Sets, Modeling and Analysis
    JEL: J15 J61 J68 D01 F22 C55 O15
    Date: 2021–09–14
  17. By: Vladimir Ponczek (Institute for Fiscal Studies); Gabriel Ulyssea (Institute for Fiscal Studies)
    Abstract: How does enforcement of labor regulations shape the labor market effects of trade? Does the informal sector introduce greater de facto flexibility, reducing employment losses during bad times? To tackle these questions, we exploit local economic shocks generated by trade liberalization and variation in enforcement capacity across local labor markets in Brazil. In the aftermath of the trade opening, regions with stricter enforcement observed: (i) lower informality effects; (ii) larger losses in overall em-ployment; and (iii) greater reductions in the number of formal plants. Regions with weaker enforcement observed opposite effects. All these effects are concentrated on low-skill workers. Our results indicate that greater de facto labor market flexibility introduced by informality allows both formal firms and low-skill workers to cope better with adverse labor market shocks.
    Date: 2021–03–23
  18. By: Luca Fontanelli (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis (... - 2019) - COMUE UCA - COMUE Université Côte d'Azur (2015-2019) - CNRS - Centre National de la Recherche Scientifique - UCA - Université Côte d'Azur, SSSUP - Scuola Universitaria Superiore Sant'Anna [Pisa]); Mattia Guerini (University of Brescia, GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis (... - 2019) - COMUE UCA - COMUE Université Côte d'Azur (2015-2019) - CNRS - Centre National de la Recherche Scientifique - UCA - Université Côte d'Azur, SSSUP - Scuola Universitaria Superiore Sant'Anna [Pisa]); Mauro Napoletano (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis (... - 2019) - COMUE UCA - COMUE Université Côte d'Azur (2015-2019) - CNRS - Centre National de la Recherche Scientifique - UCA - Université Côte d'Azur, OFCE - Observatoire français des conjonctures économiques - Sciences Po - Sciences Po, SKEMA Business School, SSSUP - Scuola Universitaria Superiore Sant'Anna [Pisa])
    Abstract: We build a simple dynamic model to study the effects of technological learning, market selection and international competition in the determination of export flows and market shares. The model features two countries populated by firms with heterogeneous productivity levels and sales. Market selection in each country is driven by a finite pairwise Pólya urn process. We show that market selection leads either to a national or to an international monopoly in presence of a static distribution of firm productivity levels. We then incorporate firm learning and entry-exit in the model and we show that the market structure does not converge to a monopoly. In addition, we show that the extended model is able to jointly reproduce a wide ensemble of stylized facts concerning intra-industry trade, industry and firm dynamics.
    Keywords: International trade,industrial dynamics,rm dynamics,market selection,Pólya urn
    Date: 2022–01–04
  19. By: Rafael Dix-Carneiro (Institute for Fiscal Studies and Duke University); Pinelopi Koujianou Goldberg (Institute for Fiscal Studies and Yale University); Costas Meghir (Institute for Fiscal Studies and Yale University); Gabriel Ulyssea (Institute for Fiscal Studies)
    Abstract: We build an equilibrium model of a small open economy with labor market frictions and imperfectly enforced regulations. Heterogeneous firms sort into the formal or informal sector. We estimate the model using data from Brazil, and use counterfactual simulations to understand how trade affects economic outcomes in the presence of informality. We show that: (1) Trade openness unambiguously decreases informality in the tradable sector, but has ambiguous effects on aggregate informality. (2) The productivity gains from trade are understated when the informal sector is omitted. (3) Trade openness results in large welfare gains even when informality is repressed. (4) Repressing informality increases productivity, but at the expense of employment and welfare. (5) The effects of trade on wage inequality are reversed when the informal sector is incorporated in the analysis. (6) The informal sector works as an “unemployment," but not a “welfare buffer" in the event of negative economic shocks.
    Date: 2021–01–21
  20. By: Kevin Hjortshøj O’Rourke (Division of Social Science)
    Abstract: This chapter written for the Oxford Handbook of Historical Political Economy argues that you cannot understand the history of globalization without taking political factors into account; and that you cannot understand the history of comparative economic development without taking globalization into account. Globalization compels us to take geography seriously and to think more like historians.
    Date: 2022–01
  21. By: Max Franks (Potsdam Institute for Climate Impact Research, Technische Universität Berlin); Matthias Kalkuhl (Mercator Research Institute on Global Commons and Climate Change, University of Potsdam); Kai Lessmann (Potsdam Institute for Climate Impact Research)
    Abstract: Carbon dioxide removal (CDR) moves atmospheric carbon to geological or land-based sinks. In a first-best setting, the optimal use of CDR is achieved by a removal subsidy that equals the optimal carbon tax and marginal damages. We derive second-best subsidies for CDR when no global carbon price exists but a national government implements a unilateral climate policy. We find that the optimal carbon tax differs from an optimal CDR subsidy because of carbon leakage, terms-of-trade and fossil resource rent dynamics. First, the optimal removal subsidy tends to be larger than the carbon tax because of lower supply-side leakage on fossil resource markets. Second, terms-of-trade effects exacerbate this wedge for net resource exporters, implying even larger removal subsidies. Third, the optimal removal subsidy may fall below the carbon tax for resource-poor countries when marginal environmental damages are small.
    Keywords: carbon pricing, trade, unilateral climate policy, terms-of-trade effects, removal subsidies
    JEL: F18 H23 Q37 Q5
    Date: 2022–02
  22. By: Jonathan Eaton; David Jinkins; James Tybout; Daniel Yi Xu
    Abstract: We develop a dynamic model of international business-to-business transactions in which sellers and buyers search for each other, with the probability of a match depending on both individual and aggregate search effort. Fit to customs records on U.S. apparel imports, the model captures key cross-sectional and dynamic features of international buyer-seller relationships. We use the model to make several quantitative inferences. First, we calculate the search costs borne by heterogeneous importers and exporters. Second, we provide a structural interpretation for the life cycles of importers and exporters as they endogenously acquire and lose foreign business partners. Third, we pursue counterfactuals that approximate the phaseout of the Agreement on Textiles and Clothing (the “China shock") and the IT revolution. Lower search costs can significantly improve consumer welfare, but at the expense of importer pro ts. On the other hand, an increase in the population of foreign exporters can congest matching to the extent of dampening or even reversing the gains consumers enjoy from access to extra varieties and more retailers.
    Date: 2022–01
  23. By: Graziella Bertocchi; Angelo Dimico; Gian Luca Tedeschi
    Abstract: We analyze the relationship between natives' attitudes towards citizenship acqui- sition for foreigners and trust. Our hypothesis is that, in sub-Saharan Africa, the slave trade represents the deep factor behind contemporary attitudes toward citi- zenship, with more intense exposure to historical slave exports for an individual's ethnic group being associated with contemporary distrust for strangers, and in turn opposition to citizenship laws that favor the inclusion of foreigners. Wefind that individuals who are more trusting do show more positive attitudes towards the ac- quisition of citizenship at birth for children of foreigners, that these attitudes are also negatively related to the intensity of the slave trade, and that the underlying link between trust and the slave trade is cofirmed. Alternative factors- conflict, kinship, and witchcraft beliefs|that, through trust, may ffect attitudes toward citizenship, are not generating the same distinctive pattern of linkages emerging from the slave trade.
    Keywords: Citizenship, Trust, Slave Trade, Migration, Ethnicity, Conflict, Kinship, Witchcraft.
    JEL: J15 K37 N57 O15 Z13
    Date: 2022–01
  24. By: Derstappen, Rebecca; Christoph-Schulz, Inken; Banse, Martin
    Abstract: Livestock farming and especially pig husbandry are controversially discussed in European society. As a result, the demand for higher animal welfare standards is rising. However, higher animal welfare standards imply higher production costs for farmers and other partners along the processing chain. Therefore, farmers are concerned about their future perspective. Since Germany is a net exporter for pork, the question arises, whether German pork produced under higher animal welfare standards might have a chance on foreign markets? Thus, within this study, four case studies for Poland, Italy, Japan and South Korea were selected to assess the possible export potential for German pork produced under higher animal welfare standards. Two survey methods were used: First, a market analysis to generate market information and second, interviews with market experts in all four countries to receive additional insider information regarding the respective pork market. The expert interviews were evaluated based on a qualitative content analysis. According to the interviewees the issue of animal welfare plays a distinct role in each country covered. Particularly large disparities have been observed regarding the attitude towards animal welfare in European and in Asian countries. Besides the aspect of animal welfare further criteria seem to be relevant for consumers. Therefore, purchasing criteria such as quality (in particular meat quality including colour, water capacity, freshness), taste, price and the country of origin have to be considered. These criteria already indicate a possible outcome of our analysis that the export potential of German pork produced under higher animal welfare standards varies depending on the individual target market. Therefore, multiple aspects and market data need to be analysed in order to understand the mechanism and speciality of foreign markets. Nevertheless, further research steps need to be carried out in order to be able to make a clearer statement regarding the export potential of German pork produced under higher animal welfare standards.
    Keywords: Agribusiness, Agricultural and Food Policy
    Date: 2022–02–10
  25. By: Leonardo Costa Ribeiro (Cedeplar/UFMG); Jorge Nogueira de Paiva Britto (Universidade Federal Fluminense); Eduardo da Motta e Albuquerque (Cedeplar/UFMG)
    Abstract: The unit of analysis of this paper is an international knowledge link (IKL), a knowledge flow that leaves a trace and connects two nodes – different institutions, firms and universities, in different countries. We present and analyze 17,240,834 international knowledge links (data from 2017). These international knowledge links form three basic networks. These three international layers overlap and interweave, forming a network of networks. The contribution of this paper is the identification and preliminary analysis of this overlapping and intertwinement. These networks are robust and their properties suggest a hierarchical structure of a multilayer network that is asymmetric. These networks are interpreted as new layers of innovation systems, with implications for the dynamic of innovation – a reorganization of different levels of innovation systems, now a more complicated structure with interaction between local, sectoral and national levels, as well as these overlapping international networks.
    Keywords: International Knowledge flows; Innovation Systems; Networks of networks
    JEL: O32 O34 O39
    Date: 2022–01
  26. By: Janeba, Eckhard (Dept. of Economics, University of Mannheim); Schjelderup, Guttorm (Dept. of Business and Management Science, Norwegian School of Economics)
    Abstract: The OECD's proposal for a global minimum tax (GMT) of 15% aims for a reversal of a decades-long race to the bottom of corporate tax rates driven by competition over real investments and profit shifting to low-tax jurisdictions. We study the revenue effects of the GMT by focusing on the induced strategic tax setting effects. The direct effect of the GMT is a reduction in profit shifting, which has a positive effect on revenues in high-tax countries as their tax base grows, and makes higher taxes attractive. A secondary effect, however, is that the value of attracting real foreign investments increases, which intensifies tax competition. We argue that the revenue effects of the GMT depend on the instruments governments use to attract firms. With endogenous corporate tax rates, revenues in non-havens increase if initially tax competition among non-havens is fierce. By contrast, when governments compete via lump sum subsidies, the revenue gains from less profit shifting are exactly offset by higher subsidies.
    Keywords: Global Minimum Tax; Tax Competition; OECD BEPS; Pillar II
    JEL: F23 F55 H25 H73
    Date: 2022–02–07
  27. By: Matteo Gamalerio; Massimo Morelli; Margherita Negri
    Abstract: Institutions matter for the political choice of policies, and hence the consideration of the median voter's preferences should not be considered sufficient. We study theoretically and empirically how different electoral systems affect the level of openness of a country or city, zooming on the labor market as the main source of heterogeneous economic preferences towards immigration. The general result is that a polity is more open to immigration the less likely it is that policy making can be supported by a plurality of voters who do not constitute the absolute majority. There is evidence for this result at all levels in terms of correlations, and we establish causality via regression discontinuity design for the Italian case.
    Keywords: Electoral Rules, Immigration, Occupational Choice
    JEL: D72 J24 J61 R23
    Date: 2021

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