nep-int New Economics Papers
on International Trade
Issue of 2022‒03‒21
seventeen papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. The US-China Trade War and Global Reallocations By Pablo Fajgelbaum; Pinelopi K. Goldberg; Patrick Kennedy; Amit Khandelwal; Daria Taglioni
  2. When Tariffs Disrupt Global Supply Chains By Gene M. Grossman; Elhanan Helpman
  3. Globalization and Pandemics By Pol Antrà s; Stephen J. Redding; Esteban Rossi-Hansberg
  4. The role of value added across economic sectors in modulating the effects of FDI on TFP and economic growth dynamics By Simplice A. Asongu; Christelle Meniago; Raufhon Salahodjaev
  5. International Friends and Enemies By Benny Kleinman; Ernest Liu; Stephen J. Redding
  6. The Long-Term Effects of War on Foreign Direct Investment and Economic Development: Evidence from Vietnam By Nguyen, Cuong Viet; Tran, Tuyen Quang; Vuc, Huong Van
  7. Venting Out: Exports During a Domestic Slump By Miguel Almunia; Pol Antrà s; David Lopez-Rodriguez; Eduardo Morales
  8. Agricultural Export, Growth and the Poor in Africa: A Meta Analysis By David Adeabah; Simplice A. Asongu
  9. Unequal Expenditure Switching: Evidence from Switzerland By Raphael Auer; Ariel Burstein; Sarah M. Lein; Jonathan Vogel
  10. The Role of Agribusiness in Polish Economy: An Analysis Based on the Input-Output Tables By Ambroziak, Łukasz
  11. Occupational Regulation, Institutions, and Migrants' Labor Market Outcomes By Koumenta, Maria; Pagliero, Mario; Rostam-Afschar, Davud
  12. Refugee Migration and the Labor Market: Lessons from 40 Years of Post-arrival Policies in Denmark By Jacob Nielsen Arendt; Christian Dustmann; Hyejin Ku
  13. FDI Spillover Effects on Innovation Activities of Knowledge-using and Knowledge-creating Firms: Evidence from an Emerging Economy By Iraj Hashi; Mehtap Hisarciklilar; Slavo Radošević; Nebojša Stojčić; Nina Vujanović
  14. Social Networks and (Political) Assimilation in the Age of Mass Migration By Biavaschi, Costanza; Giulietti, Corrado; Zenou, Yves
  15. Module for the Analysis of Growth in International Commerce (MAGIC): User Guide By -
  16. An equilibrium model of the international price system By Mukhin, Dmitry
  17. What if? The Economic Effects for Germany of a Stop of Energy Imports from Russia By Ruediger Bachmann; David Baqaee; Christian Bayer; Moritz Kuhn; Andreas Löschel; Benjamin Moll; Andreas Peichl; Karen Pittel; Moritz Schularick

  1. By: Pablo Fajgelbaum (Princeton University); Pinelopi K. Goldberg (Yale University); Patrick Kennedy (University of California, Berkeley); Amit Khandelwal (Columbia GSB); Daria Taglioni (World Bank)
    Abstract: We study global trade responses to the US-China trade war. We estimate the tariff impacts on product-level exports to the US, China, and rest of world. On average, countries decreased exports to China and increased exports to the US and rest of world. Most countries export products that complement the US and substitute China, and a subset operate along downward-sloping supplies. Heterogeneity in responses, rather than specialization, drives export variation across countries. Surprisingly, global trade increased in the products targeted by tariffs. Thus, despite ending the trend towards tariff reductions, the trade war did not halt global trade growth.
    Keywords: Conflicts, Globalization, United States, China, Trade disputes, Exports, International relations, Tariffs
    JEL: F10
    Date: 2021–12
  2. By: Gene M. Grossman (Princeton University); Elhanan Helpman (Harvard University)
    Abstract: We study unanticipated tariffs on imports of intermediate goods in a setting with firm-to-firm supply relationships. Firms that produce differentiated products conduct costly searches for potential input suppliers and negotiate bilateral prices with those that pass a reservation level of match productivity. Global supply chains are formed in anticipation of free trade. Once they are in place, the home government surprises with an input tariff. This can lead to renegotiation with initial suppliers or new search for replacements. We identify circumstances in which renegotiation generates improvement or deterioration in the terms of trade. The welfare implications of a tariff are ambiguous in this second-best setting, but plausible parameter values suggest a welfare loss that rises rapidly at high tariff rates.
    Keywords: global supply chains, global value chains, input tari§s, imported intermediate goods
    JEL: F13 F12
    Date: 2021–01
  3. By: Pol Antràs (Harvard University); Stephen J. Redding (Princeton University); Esteban Rossi-Hansberg (Princeton University)
    Abstract: We develop a model of human interaction to analyze the relationship between globalization and pandemics. Our framework provides joint microfoundations for the gravity equation for international trade and the Susceptible-Infected-Recovered (SIR) model of disease dynamics. We show that there are cross-country epidemiological externalities, such that whether a global pandemic breaks out depends critically on the disease environment in the country with the highest rates of domestic infection. A deepening of global integration can either increase or decrease the range of parameters for which a pandemic occurs, and can generate multiple waves of infection when a single wave would otherwise occur in the closed economy. If agents do not internalize the threat of infection, larger deaths in a more unhealthy country raise its relative wage, thus generating a form of general equilibrium social distancing. Once agents internalize the threat of infection, the more unhealthy country typically experiences a reduction in its relative wage through individual-level social distancing. Incorporating these individual-level responses is central to generating large reductions in the ratio of trade to output and implies that the pandemic has substantial effects on aggregate welfare, through both deaths and reduced gains from trade.
    Keywords: COVID-19, Globalization, Gravity Equation, Pandemics, SIR model
    JEL: F1 F2 F4 F6 I1
    Date: 2020–09
  4. By: Simplice A. Asongu (Yaounde, Cameroon); Christelle Meniago (Sol Plaatje University, South Africa); Raufhon Salahodjaev (Tashkent, Uzbekistan)
    Abstract: This study investigates: (i) the effect of foreign direct investment (FDI) on total factor productivity (TFP) and economic growth dynamics, and (ii) the relevance of value added from three economic sectors in modulating the established effect of FDI on TFP and economic growth dynamics. The geographical and temporal scopes are respectively 25 Sub-Saharan African countries and the period 1980–2014. The empirical evidence is based on non-interactive and interactive Generalised Method of Moments. The following main findings are established. First, FDI has a positive effect on GDP growth, GDP per capita and welfare real TFP. Second, the effect of FDI is negative on real GDP and TFP, while the impact is insignificant on real TFP growth and welfare TFP. Third, values added to the three economic sectors largely modulate FDI to produce negative net effects on TFP and growth dynamics. Policy implications are discussed with particular emphasis on the need to complement added value across various economic sectors in order to leverage on the benefits of FDI in TFP and economic growth. To the best of knowledge, this is the first study to assess how value added from various economic sectors affect the relevance of FDI on macroeconomic outcomes.
    Keywords: Economic output, total factor productivity, foreign investment, agricultural sector, manufacturing sector, service sector, sub-Saharan Africa
    JEL: E23 F21 F30 F43 O55
    Date: 2021–01
  5. By: Benny Kleinman (Princeton University); Ernest Liu (Princeton University); Stephen J. Redding (Princeton University)
    Abstract: We develop sufficient statistics of countries’ bilateral income and welfare exposure to foreign productivity shocks that are exact for small shocks in the class of models with a constant trade elasticity. For large shocks, we characterize the quality of the approximation, and show it to be almost exact. We compute these sufficient statistics for over 140 countries from 1970-2012. We show that our exposure measures depend on market-size, cross-substitution and cost of living effects. As countries become greater economic friends in terms of welfare exposure, they become greater political friends in terms of United Nations voting and strategic rivalries.
    Keywords: Productivity Growth, Trade, welfare
    JEL: F14 F15 F50
    Date: 2020–07
  6. By: Nguyen, Cuong Viet; Tran, Tuyen Quang; Vuc, Huong Van
    Abstract: In this study, we find that the negative effect of unexploded ordnance (UXO) on the geographical density of foreign direct investment and large firms is a new channel through which the war legacy impedes local development in Vietnam. A 1% increase in the proportion of UXO-contaminated area leads to a 0.78% relative decrease in the density of FDI firms within districts. Point estimates for the elasticity of the density of joint-venture FDI firms and state-owned enterprise (SOEs) due to UXO are smaller, equal to -0.56 and -0.54. Consequently, a 1% increase in the proportion of UXO-contaminated areas leads to a 0.46% relative decrease in the intensity of nighttime light.
    Keywords: War,FDI, unexploded ordnance,local development,Vietnam
    JEL: R12 O12 O15
    Date: 2022
  7. By: Miguel Almunia (CUNEF); Pol Antrà s (Harvard University); David Lopez-Rodriguez (Banco de España); Eduardo Morales (Princeton University)
    Abstract: We exploit plausibly exogenous geographical variation in the reduction in domestic demand caused by the Great Recession in Spain to document the existence of a robust, within-firm negative causal relationship between demand-driven changes in domestic sales and export flows. Spanish manufacturing firms whose domestic sales were reduced by more during the crisis observed a larger increase in their export flows, even after controlling for firms’ supply determinants (such as labor costs). This negative relationship between demand-driven changes in domestic sales and changes in export flows illustrates the capacity of export markets to counteract the negative impact of local demand shocks. We rationalize our findings through a standard heterogeneous-firm model of exporting expanded to allow for non-constant marginal costs of production. Using a structurally estimated version of this model, we conclude that the firm-level responses to the slump in domestic demand in Spain could well have accounted for around one-half of the spectacular increase in Spanish goods exports (the so-called ‘Spanish export miracle’) over the period 2009-13.
    Keywords: Spain, Europe, Exports, Manufacturing, Recession
    JEL: D22 E32 F14 L60
    Date: 2021–01
  8. By: David Adeabah (Department of Finance, 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: 2021–01
  9. By: Raphael Auer; Ariel Burstein; Sarah M. Lein; Jonathan Vogel
    Abstract: What are the unequal effects of changes in consumer prices on the cost of living? In the context of changes in import prices, most analyses focus on variation across households in initial expenditure shares on imported goods. However, the unequal welfare effects of non-marginal foreign price changes also depend on differences in how consumers substitute between imported and domestic goods, on which there is scant evidence. Using data from Switzerland surrounding the 2015 appreciation of the Swiss franc, we provide evidence that lower income households have higher price elasticities. These differences in elasticities contribute significantly to the unequal welfare effects of large import price changes.
    JEL: E3 F1 F41
    Date: 2022–02
  10. By: Ambroziak, Łukasz
    Abstract: The aim of this paper is to evaluate changes in the role of agribusiness in the Polish economy, the relationships between various spheres of agribusiness and its links with othersectors of the national economy. The research was conducted on the basis of the input-output tables for 2005, 2010, and 2015 published by Statistics Poland. The analysis also confirmed most of the relationships formulated so far between the agribusiness development path and the level of economic development of a given country. From 2005-2015, the share of agri-business in creating the gross value added of the Polish economy decreased, similarly as the role of internal turnover in the material supply of agriculture, while the food sector became the leading link in the agri-food sector. The agri-business sector also showed strong links with the other sectors of the economy. The changes in the food economy were caused by the intensified relations of this sector with the other countries, which translated into benefits from the international division of labor.
    Keywords: Agribusiness, Agricultural and Food Policy
    Date: 2021–09–23
  11. By: Koumenta, Maria; Pagliero, Mario; Rostam-Afschar, Davud
    Abstract: We study how licensing, certification and unionisation affect the wages of natives and migrants and their representation among licensed, certified, and unionized workers. We provide evidence of a dual role of labor market institutions, which both screen workers based on unobservable characteristics and also provide them with wage setting power. Labor market institutions confer significant wage premia to native workers (3.9, 1.6, and 2.7 log points for licensing, certification, and unionization respectively), due to screening and wage setting power. Wage premia are significantly larger for licensed and certified migrants (10.2 and 6.6 log points), reflecting a more intense screening of migrant than native workers. The representation of migrants among licensed (but not certified or unionized) workers is 14% lower than that of natives. This implies a more intense screening of migrants by licensing institutions than by certification and unionization.
    Keywords: Occupational regulation,Licensing,Certification,Unionization,Migration,Wages
    JEL: J61 J31 J44 J71 J16
    Date: 2022
  12. By: Jacob Nielsen Arendt (Jacob Nielsen Arendt); Christian Dustmann (Christian Dustmann); Hyejin Ku (Hyejin Ku)
    Abstract: Denmark has accepted refugees from a large variety of countries and for more than four decades. Denmark has also frequently changed policies and regulations concerning integration programs, transfer payments, and conditions for permanent residency. Such policy variation in conjunction with excellent administrative data provides an ideal laboratory to evaluate the effects of different immigration and integration policies on the outcomes of refugee immigrants. In this article, we first describe the Danish experience with refugee immigration over the past four decades. We then review different post-arrival refugee policies and summarize studies that evaluate their effects on the labor market performance of refugees. Lastly, we discuss and contrast these findings in the context of international studies of similar policies and draw conclusions for policy.
    Keywords: refugee integration, immigration policies, labor supply, employment, language
    JEL: J22 J24 J61
    Date: 2022–03
  13. By: Iraj Hashi; Mehtap Hisarciklilar; Slavo Radošević; Nebojša Stojčić; Nina Vujanović (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: The beneficial effects of innovation for firms’ performance and competitiveness are well documented, but it has been suggested in recent years that innovation regimes differ between advanced and emerging economies. While advanced economies rely on knowledge generation, their emerging counterparts follow mainly a knowledge-use regime through the application of existing knowledge and technology. Climbing up the technological ladder can be helped through spillovers from foreign investors to local firms. We investigate whether FDI spillovers influence different phases of the innovation process (from decision to innovate to productivity) among knowledge-using and knowledge-creating firms in an emerging European economy. The results show that the innovation process in emerging economies is closer to the imitation than the creation of novel products. Local firms benefit from foreign counterparts in the early phase of the innovation process. Stronger FDI effects are found among firms that undertake innovation through knowledge use rather than through knowledge generation.
    Keywords: knowledge use; knowledge generation; FDI; innovation; emerging economy
    JEL: F21 F23 L25 C31 L21
    Date: 2022–03
  14. By: Biavaschi, Costanza; Giulietti, Corrado; Zenou, Yves
    Abstract: This paper investigates the causal pathways through which ethnic social networks influence individual naturalization. Using the complete-count Census of 1930, we digitize information on the exact residence of newly arrived immigrants in New York City. This allows us to define networks with a granularity detail that was not used before for historical data - the Census block - and therefore to overcome issues of spatial sorting. By matching individual observations with the complete-count Census of 1940, we estimate the impact that the exogenous fraction of naturalized co-ethnics in the network observed in 1930 has on the probability of immigrants to acquire citizenship a decade later. Our results indicate that the concentration of naturalized co-ethnics in the network positively affects individual naturalization and that this relationship operates through one main channel: information dissemination. Indeed, immigrants who live among naturalized co-ethnics are more likely to naturalize because they have greater access to critical information about the benefits and procedures of naturalization.
    Keywords: Social networks,assimilation,naturalization,migration
    JEL: J61 J62 N32 Z1
    Date: 2022
  15. By: -
    Abstract: This guide describes the main characteristics ofthe new Module far the Analysis of Growth in lnternational Commerce (MAGIC), developed by the subregional headquarters of the Economic Commission far Latin America and the Caribbean (ECLAC) in Mexico City. The fi rst part describes MAGIC's development and its main characteristics, as well as the technical requirements far using the software. A second part describes each of the new modules the MAGIC comprises, its functions and the parameters required befare consulting it. lt also includes an exercise far interpreting the data and indicators in each module. Lastly, the annexes section provides the user with tools that should assist in understanding and analysing the data contained in MAGIC. The annexes include a glossary, a volume unit reference, another far identifying and solving technical errors and a section providing breakdowns of the mathematical formulas underpinning MAGIC's indicators.
    Date: 2021–11–18
  16. By: Mukhin, Dmitry
    Abstract: What explains the central role of the dollar in world trade? Will the U.S. currency retain its dominant status in the future? This paper develops a quantitative general equilibrium framework with endogenous currency choice that can address these questions. Complementarities in price setting and input-output linkages across rms generate complementarities in currency choice making exporters coordinate on the same currency of invoicing. The dollar is more likely to play this role because of the large size of the U.S. economy, a widespread peg to the dollar, and the history dependence in currency choice. Calibrated using the world input-output tables and exchange rate moments, the model can successfully replicate the key empirical facts about the use of currencies at the global level, across countries, and over time. According to the counterfactual analysis, the peg to the dollar in other economies ensures that the U.S. currency is unlikely to lose its global status because of the falling U.S. share in the world economy, but can be replaced by the renminbi in case of a negative shock in the U.S. economy. If the peg is abandoned, the world is likely to move to a new equilibrium with multiple regional currencies.
    Keywords: International Economics Section; Cowles Foundation
    JEL: D21 E31 E42 F14 F31 F33
    Date: 2022–02–01
  17. By: Ruediger Bachmann; David Baqaee; Christian Bayer; Moritz Kuhn; Andreas Löschel; Benjamin Moll; Andreas Peichl; Karen Pittel; Moritz Schularick
    Abstract: This article discusses the economic effects of a potential cut-off of the German economy from Russian energy imports. We show that the effects are likely to be substantial but manageable. In the short run, a stop of Russian energy imports would lead to a GDP decline in range between 0.5% and 3% (cf. the GDP decline in 2020 during the pandemic was 4.5%).
    Date: 2022

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