nep-int New Economics Papers
on International Trade
Issue of 2022‒04‒04
thirty papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. Cutting through the value chain: The long-run effects of decoupling the East from the West By Felbermayr, Gabriel; Mahlkow, Hendrik; Sandkamp, Alexander-Nikolai
  2. EU trade policy reform: towards reciprocal concessions with developing countries By Gnutzmann-Mkrtchyan, Arevik; Volmer, Maximilian
  3. Brexit Spillovers: How Economic Policy Uncertainty Affects Foreign Direct Investment and International Trade By Xiaoqing An; William Barnett; Xue Wangd; Qingyuan Wu
  4. Your Pain, My Gain? Estimating the Trade Relocation Effects from Civil Conflict By Korn, Tobias; Stemmler, Henry
  5. Globalisation, productivity growth, and labour compensation By Dreger, Christian; Fourné, Marius; Holtemöller, Oliver
  6. Transportation Infrastructure and Trade By Zheng, Han; Hongtao, Li
  7. Two-sided Heterogeneity: New Implications for Input Trade By Tomohiro Ara
  8. Greenfield Foreign Direct Investment: Social Learning drives Persistence By Joe Cho Yiu NG; Thomas Chao Hung CHAN; Byron Kwok Ping TSANG; Charles Ka Yui LEUNG
  9. Website premia for extensive margins of international firm activities Evidence for SMEs from 34 countries By Joachim Wagner
  10. The Significance of Russia for Finnish Companies By Ali-Yrkkö, Jyrki; Hirvonen, Johannes; Kangasharju, Aki
  11. Covid-19, international agricultural economy and animal sectors: the case of China, the United States and the EU By Chatellier, Vincent; Chaumet, Jean-Marc; Pouch, Thierry
  12. Firm Heterogeneity and the Impact of Immigration: Evidence from German Establishments By Agostina Brinatti; Nicolas Morales
  13. Import Shock and Local Labour Market Outcomes: A Sino-Indian Case Study By Feiyang Shi
  14. Solving the longitude puzzle: A story of cocks, ships and cities By Martina Miotto; Luigi Pascali
  15. Digital and Sustainable Trade Facilitation in Latin America and the Caribbean: Regional Report 2021 By -
  16. Immigration Quotas and Anti-Immigration Attitudes: An Evaluation of Swiss Migration Policy By Qingyang Lin
  17. Out of sight, out of mind? Global chains, export, and credit allocation in bad times By Minetti, Raoul; Murro, Pierluigi; Peruzzi, Valentina
  18. Reluctant US vs ambitious German direct investment in China: The tale of two strategies By Langhammer, Rolf J.
  19. Interdependence between climate change and migration: Does Agriculture, geography and development level matter in sub-Saharan Africa? By Bannor, Frank; Magambo, Isaiah Hubert; Mahabir, Jugal; Tshitaka, Jean-Luc Mubenga
  20. China in Europe: FDI Trends and Policy Responses in the 17+1 Region and Austria By Zuzana Zavarská
  21. Exports Promotion Policies for African Manufacturing Firms : Does electricity infrastructure matter more than exchange rate undervaluation ? By Kabinet Kaba
  22. Occupational Regulation, Institutions, and Migrants' Labor Market Outcomes By Maria Koumenta; Mario Pagliero; Davud Rostam-Afschar
  23. Analysis of Chinese Response Patterns to Diplomatic Friction and Its Influencing Factors By Heo, Jaichul
  25. Designing a rational sanctioning strategy By Angeloni, Ignazio; Daase, Christopher; Deitelhoff, Nicole; Goldmann, Matthias; Krahnen, Jan Pieter; Kroll, Stefan; Luft, Carl-Georg Christoph; Nölke, Andreas; Peez, Anton; Pelizzon, Loriana
  26. Towards a simplified approach to international price comparisons: A case for the Multilateral Walsh Index By Abe, Naohito; Rao, D.S. Prasada
  27. Global Knowledge Embeddedness By Holger Graf; Martin Kalthaus
  28. Migration, Remittances and Clean Fuel Usage in Sri Lanka: The Mediating Role of Household Wealth By J.M.D. Sandamali Wijayarathne; Gazi M. Hassan; Mark J. Holmes
  29. Decentralised Cross-Border Interconnection By Crampes, Claude; Von Der Fehr, Nils-Henrik
  30. Dividend Imputation, Investment and Capital Accumulation in Open Economies By Chung Tran; Sebastian Wende

  1. By: Felbermayr, Gabriel; Mahlkow, Hendrik; Sandkamp, Alexander-Nikolai
    Abstract: With ever-increasing political tensions between China and Russia on one side and the EU and the US on the other, it only seems a matter of time until protectionist policies cause a decoupling of global value chains. This paper uses a computable general equilibrium trade model calibrated with the latest version of the GTAP database to simulate the effect of doubling non-tariff barriers - both unilateral and reciprocal - between the two blocks on trade and welfare. Imposing trade barriers almost completely eliminates bilateral imports. In addition, changes in price levels lead to higher imports and lower exports of the imposing country group from and to the rest of the world. The targeted country group increases exports to the rest of the world and reduces imports. Welfare falls in all countries involved, suggesting that governments should strive to cooperate rather than turning away from each other. By imposing a trade war on Russia, the political West could inflict severe damage on the Russian economy because of the latter's smaller relative size.
    Keywords: Trade,non-tariff barriers,global value chains,quantitative trade model,China,Russia,European Union
    JEL: F11 F13 F14 F17
    Date: 2022
  2. By: Gnutzmann-Mkrtchyan, Arevik; Volmer, Maximilian
    Abstract: The European Union (EU) supports developing countries with a unilateral trade preference scheme. The scheme underwent a major reform in 2014, in which many countries lost access to reduced tariff rates. We analyse how this radical step that removed preferences from 103 countries by 2018 fits into the EU’s strategy to promote bilateral agreements and how it affected imports from the removed beneficiaries. Using the gravity model of trade with high-dimensional fixed effects, we show that the removal results in a significant decline in exports of affected developing countries. Some countries formed a bilateral free trade agreement with the EU, in which case the negative effect of removal of unilateral trade preferences is compensated but we do not find significant and consistent additional benefits. Thus, the threat of removal can be seen as a lever for beneficiaries that are about to become ineligible to negotiate a bilateral agreement with the EU.
    Keywords: trade preferences; reciprocity; GSP; FTA; gravity model
    JEL: F13 F14 O19 O24 D78
    Date: 2022–03
  3. By: Xiaoqing An (School of Economics, Jinan University, Guangzhou city, Guangdong Province, China); William Barnett (Department of Economics, University of Kansas and Center for Financial Stability, New York City); Xue Wangd (dInstitute of Chinese Financial Studies, Southwestern University of Finance and Economics, Chengdu, China and Department of Economics, Emory University, Atlanta, GA, U.S.); Qingyuan Wu (School of Economics and Management, Hanshan Normal University, Chaozhou, China)
    Abstract: We examine the Brexit spillovers on five major EU member states and the UK through economic policy uncertainty. Cluster analysis and TVP VAR model are applied to data from five major EU member states and the UK to analyze the impacts of economic policy uncertainty (EPU) on foreign direct investment (FDI) and international trade (TRADE) during Brexit. The results show that the impacts of EPU in six economies are different at different stages of Brexit. The impulse responses of FDI are relatively large in the Netherlands and the UK, especially in the short term. Moreover, in terms of strengths, the impulse responses of FDI are generally greater than those of TRADE. At the time points related to Brexit, the EPU of the Netherlands has the greatest impacts on its FDI and TRADE, followed by the UK. Furthermore, the duration of the impact of EPU on FDI is generally greater than that of EPU on TRADE. Overall, the Brexit spillovers induced by economic policy uncertainty can be grouped into three categories considering intensity: high impact for two economies (the Netherlands and the UK); medium impact for two economies (France and Spain); and low impact for two economies (Germany and Italy).
    Keywords: Brexit, Economic Policy Uncertainty, Foreign Direct Investment, International Trade.
    JEL: E0 F1 H0
    Date: 2022–03
  4. By: Korn, Tobias; Stemmler, Henry
    Abstract: We derive a novel estimation approach to quantify three-party relocation effects in a dyadic framework. Applied to the effects of civil conflicts on trade, we find robust evidence that importers substitute away from exporters that are engaged in conflict. This trade relocation persists after the resolution of a conflict. As a potential explanation for the longevity of this effect, we provide evidence that trade relocation increases the likelihood of the two countries signing a Preferential Trade Agreement, which persistently decreases their bilateral trade costs. A heterogeneity analysis suggests that trade relocation does not occur in the fuels sector, and that highly integrated supply chains are less likely to relocate. We derive our estimation approach from the structural gravity model of international trade, translating the triadic relationship between a conflict country and an exporter-importer pair into an estimable dyadic relationship. Our estimation approach can be adapted to either cover alternative unilateral shocks, e.g. natural disasters, or to analyze other bilateral dependent variables, e.g. migration or FDI flows.
    Keywords: Conflict and trade; trade diversion; gravity estimation; general equilibrium
    JEL: F14 D74 N41
    Date: 2022–03
  5. By: Dreger, Christian; Fourné, Marius; Holtemöller, Oliver
    Abstract: Since the onset of globalisation, production activities have become increasingly fragmented and organised in global value chains (GVC). These networks facilitate trade in intermediaries across industrial sectors and countries and change the conditions for policies to respond to shocks. In this paper, we contribute to the understanding of the effects of GVC on productivity and labour shares in advanced and emerging economies. As indicators for globalisation we use the foreign share in intermediate inputs and the foreign share in value added, extracted from international input output tables. Estimates based on local projections reveal a positive relationship between globalisation and productivity. Moreover, we are able to reject the hypothesis that a higher degree of international integration in country-industry pairs is negatively associated with the change in the labour share for advanced countries.
    Keywords: global value chains,globalisation,international trade integration,labour share,productivity
    JEL: F4 F6 J3
    Date: 2022
  6. By: Zheng, Han; Hongtao, Li
    Abstract: This paper offers a variant of Ricardian model able to structurally interpret the estimate of country-specific variable—transportation infrastructure in a commonly used fixed effect gravity estimation. Guided by this new theoretical framework, this paper shows that transportation infrastructure enhances international trade more than internal trade and this result is robust to various estimation methods and different versions of transportation infrastructure measures. Moreover, it shows that the transportation infrastructure has a non-negative effect on internal trade. Further quantitative analysis suggests 10% increase in transportation infrastructure induce 3.9% increase in real income and more than 95% of the gains concentrate on the infrastructure improving country. All the above results suggest that better infrastructure leads to sizable gains providing additional empirical support to policies aiming to improve transportation infrastructure. This paper also suggests, contrary to what ACR formula claims, domestic goods expenditure share change is no longer sufficient to predict how real income changes.
    Keywords: Gravity model, Transportation infrastructure, Internal trade cost
    JEL: F10 F14
    Date: 2022–03
  7. By: Tomohiro Ara
    Abstract: How different are the impacts of trade cost on trade flows between intermediate goods and final goods? How large are the welfare gains from trade for intermediate goods relative to final goods? To address these questions, we develop a heterogeneous firm model in which selection into exporting and importing play a key role in industry productivity of vertically-related sectors. We show that the impact of trade cost on trade flows is is greater for intermediate goods than for final goods, due to an extra adjustment through the extensive margin. We also find that the impact of trade cost on welfare is greater for intermediate goods than for final goods if and only if the domestic input share is smaller than the domestic output share.
    Date: 2022–02–17
  8. By: Joe Cho Yiu NG; Thomas Chao Hung CHAN; Byron Kwok Ping TSANG; Charles Ka Yui LEUNG
    Abstract: This paper argues that the persistence of greenfield foreign direct investment (FDI) comes from information frictions. First, our simple social learning model shows that, through signaling effects, information frictions generate persistent greenfield FDI inflows. Second, we show empirically that the autoregressive coefficient of greenfield FDI increases in value with different proxies for information frictions, including six institutional and governance indicators and two common language measures. We also find that greenfield FDI persistence varies across industries. In particular, greenfield FDI by service firms is more persistent than that by manufacturing firms. Finally, our findings suggest that better governance, predictability, and transparency reduce information frictions and thereby avoiding drastic and persistent ups and downs in FDI.
    Date: 2022–03
  9. By: Joachim Wagner (Leuphana Universität Lüneburg, Institut für Volkswirtschaftslehre)
    Abstract: This paper uses firm level data from the Flash Eurobarometer 421 survey conducted in June 2015 in 34 European countries to investigate the link between having a website and international firm activities in small and medium sized enterprises (SMEs). We find that firms which are present in the web do more often export, import, engage in research and development cooperation with international partners, work as subcontractors for firms from other countries, use firms in other countries as subcontractors, and perform foreign direct investments – both inside and outside the European Union. The estimated website premia are statistically highly significant after controlling for firm size, country, and sector of economic activity. Furthermore, the size of these premia can be considered to be large. Internationally active firms tend to have a website.
    Keywords: Website premia, international firm activities, Flash Eurobarometer 421
    JEL: D22 F14 F23 L25
    Date: 2022–03
  10. By: Ali-Yrkkö, Jyrki; Hirvonen, Johannes; Kangasharju, Aki
    Abstract: Abstract This Policy Brief analyses the importance of Russia on the Finnish economy. We scrutinize both the trade relations and the presence of Finnish firms in Russia and that of Russian firms in Finland. We will show how Russia was seen as a large opportunity for the Finnish economy in the first two decades after the collapse of Soviet Union. During the 2010s, relations have, however, weakened, due to economic sanctions and the devaluation of ruble. The relations reached such low levels by the new war in Ukraine that new sanctions will most probably not cause economic crisis in Finland. A recession outcome would need an escalation in war and/or more severe deterioration in energy and raw material markets. Nonetheless, growth will decline and inflation will spike.
    Keywords: Russia, Significance, Economy, Companies, Exports, Imports, Investment
    JEL: F23 F14 F51 F1
    Date: 2022–03–10
  11. By: Chatellier, Vincent; Chaumet, Jean-Marc; Pouch, Thierry
    Abstract: The Covid-19 pandemic is a major global event. A reflection on the first implications of this sanitary crisis for the world agricultural economy and the animal sectors of three geographical areas is proposed in this article. The agri-food systems have been strongly affected by this crisis, whose global economic impacts (a 3.5 % drop in world gross domestic product and a 5.3 % drop in international trade in goods between 2019 and 2020) are affecting the purchasing power of final consumers. However, they have resisted the crisis well, both in terms of supply (stability or slight growth in the volumes of meat and milk produced on a global scale) and trade. In 2021, the sharp rise in international prices for agricultural products and the rapid resumption of economic growth, particularly in the three zones more specifically studied here (China, the United States and the European Union), suggest that agriculture should remain under pressure from sustained world demand. More than Covid-19, the impact of African swine fever in China has had a major impact on international meat trade flows for several years. In addition, the growing Chinese appetite for dairy products is playing a central role in the development of international dairy markets, to the benefit of exporting areas including the EU and the US.
    Keywords: Demand and Price Analysis, International Relations/Trade, Livestock Production/Industries
    Date: 2022–03–11
  12. By: Agostina Brinatti; Nicolas Morales
    Abstract: We use a detailed establishment-level dataset from Germany to document a new dimension of firm heterogeneity: large firms spend a higher share of their wage bill on immigrants than small firms. We show analytically that ignoring this heterogeneity in the immigrant share leads to biased estimates of the welfare gains from immigration. To do so, we set up and estimate a model where heterogeneous firms choose their immigrant share and then use it to quantify the welfare effects of an increase in the number of immigrants in Germany. Two new adjustment mechanisms arise under firm heterogeneity. First, native workers reallocate across firms, which mitigates the competition effect between immigrants and natives in the labor market. Second, the gains are largely concentrated among the largest and most productive employers, which induces an additional aggregate productivity gain. If we ignore the heterogeneity in the immigrant share across firms, we would underestimate the welfare gains of native workers by 11%.
    Keywords: Heterogeneous Firms; Migration; International Trade
    JEL: F16 F22 J24 J61
    Date: 2021–12
  13. By: Feiyang Shi (IHEID, Graduate Institute of International and Development Studies, Geneva)
    Abstract: Focusing on Sino-Indian trade, this paper uses detailed district-level data, exploits India's drastic increase in imports from China since 2001, and uses the instrumental variables approach to examine the impact of trade shock on the local labour market outcomes. Through a matching procedure, the geographical coverage of the paper is significantly improved comparing with prior studies. The range of labour market outcome variables examined is also much wider, including wage, residual wage fluctuation, and employment and underemployment as shares of working-age population. By exploiting spatial variations in industrial activities and labour participation in the industries, the paper finds that, unlike in some other cases, the import competition from China did not have a significant impact on the Indian district average wages. However, it did result in an increase in employment share. In further contribution, the paper also allows heterogeneous effects across consumption, age, gender, occupation and industrial groups. The results confirm that the effect of import shock is not uniformly distributed within the districts. Rather, it varies with respect to certain socio-economic characteristics.
    Keywords: International Trade; Wages; Income Inequality; Import shock; Underemployment
    JEL: F14 F16 J16
    Date: 2022–03–28
  14. By: Martina Miotto; Luigi Pascali
    Abstract: In the 19th century, the process of European expansion led to unprecedented changes in the urban landscape outside of Europe, with the urban population moving towards the coast and tripling in size. We argue that the majority of these changes can be explained by a single innovation, the chronometer, which allowed European explorers and merchants to measure longitude at sea. We use high-resolution global data on climate, ship routes, and demography from 1750 to 1900 to investigate empirically (i) the role of the adoption of the marine chronometer in re-routing trans-oceanic navigation, and (ii) the impact of these changes on the distribution of cities and population across the globe. Our identification relies on the differential impact of the chronometer across trans-oceanic sailing routes.
    Keywords: longitude, chronometer, gravity, globalization, trade, development
    JEL: F1 F15 F43 R12 R4
    Date: 2022–02
  15. By: -
    Abstract: This report presents the results for Latin America and the Caribbean of the fourth Global Survey on Digital and Sustainable Trade Facilitation, conducted in the first half of 2021 against the backdrop of the coronavirus disease (COVID-19) pandemic and with the participation of 135 countries (14 from the region). The survey results indicate that Latin America and the Caribbean has made considerable progress since the previous edition in 2019. For the first time, it is the best performing developing region ahead of East and Southeast Asia, with an average implementation rate of 80%. The region’s results are particularly strong in the categories of transparency and formalities, which coincide closely with the provisions of the Trade Facilitation Agreement of the World Trade Organization. Nevertheless, there is much room for improvement in the area of cross-border paperless trade, as well as in adapting trade facilitation measures to the specific needs of small and medium-sized enterprises and women in trade.
    Date: 2021–10–22
  16. By: Qingyang Lin (IHEID, Graduate Institute of International and Development Studies, Geneva)
    Abstract: Switzerland implemented an immigration quota system to manage the inflow of immigration between 1970 and 2002. This paper adopts a difference-in-difference strategy taking advantage of subnational variations in the implementation of the quota system to evaluate this migration policy. An instrument variable of antiimmigration attitudes is used to address the potential endogeneity issue. The author finds that the immigration quota system slowed down the growth of foreign population in Switzerland, but had no impact on unemployment. Moreover, such immigration restriction lowered the average skill level of the Swiss population which in turn hurt the productivity of the Swiss economy.
    Keywords: Migration; Anti-Immigration Attitudes; Unemployment; Labor Skills
    JEL: F22 J21 J24 J61 K37
    Date: 2022–03–28
  17. By: Minetti, Raoul (Michigan State University, Department of Economics); Murro, Pierluigi (LUISS University); Peruzzi, Valentina (Sapienza University of Rome)
    Abstract: We investigate whether globally active firms are more likely to be credit constrained by banks during a financial crisis. Using data on 15,000 businesses from seven European countries, we find that firms with a stable involvement in global value chains were 25% less likely to be rationed by banks during the 2009 financial crisis. This contrasts with the stronger likelihood of credit rationing of firms engaging in plain vanilla export activities. Matching the firm-level information with bank-level data, we obtain that banks insulated global chain participants from the credit crunch, not only accounting for the beneficial effects of global supply chain participation, but also to minimize negative spillovers on their own activities abroad.
    Keywords: Banks; global value chains; firm export; financial crises
    JEL: D22 F10 G20
    Date: 2022–02–28
  18. By: Langhammer, Rolf J.
    Abstract: The author shows that the US as the world's largest investor abroad so far shuns the most dynamic host region East Asia including China and instead continues to focus on investment in Europe. In contrast, Germany follows a different path. Similar to trade, German companies have been very active as investors, especially in China. The author explains the discrepancies in the regional structure of FDI by (1) differences in the sectoral focus: US in services and Germany in manufacturing, (2) differences in the regulatory framework protecting national security in the two home countries: much stronger in the US than in Germany especially against China, and (3) differences in Chinese policy interventions: stronger in services than in manufacturing. It can be expected that rising tensions between China and the US will lead to stronger trends of technological self-reliance on both sides, a higher local content of production and more importance of protecting national security. Against this backdrop, US companies with their low presence in China might face less challenges than German companies which are more subject to path dependency given their high presence in China.
    Keywords: Foreign direct investment,US,Germany,East Asia,national security,Ausländische Direktinvestitionen,USA,Deutschland,Ostasien,China,nationale Sicherheit
    Date: 2022
  19. By: Bannor, Frank; Magambo, Isaiah Hubert; Mahabir, Jugal; Tshitaka, Jean-Luc Mubenga
    Abstract: Concerns about the human effects of climate change have contributed to forecasts of how populations in drought-prone, and flood-prone areas would respond to these events. Empirical studies have predicted that human migration has been among the critical resilient strategy in responding to the impact of climate change. To obtain a more comprehensive understanding of the climate–migration relationship, the impacts of climate change on international migration flows from Sub-Saharan Africa (SSA) nations to South Africa are investigated empirically in this paper. The study employed a fixed effects model and panel data from 35 countries in SSA, spanning 1990 to 2017. The findings are as follows: (1) the analysis show that temperature has a positive and statistically significant effect on outmigration in agriculture-dependent nations. (2) the analysis shows that agricultural-value-added as a share in GDP has a negative and statistically significant effect on outmigration in agriculture-dependent nations. (3) the results also show that geographic location, and development level of a country, in addition to dependency on agriculture are key factors in the climate change–international migration nexus. Policy implications are discussed.
    Keywords: International migration,Sub-Saharan Africa,South Africa,Climate change,Agriculture
    JEL: F22 J61 Q50 Q54
    Date: 2022
  20. By: Zuzana Zavarská (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: Finding common ground across EU member states in responding to China’s increasingly prominent position in the global economy has thus far proven a challenge. As the EU tries to find a ‘third way’ for dealing with its most important trading partners amid heightened US-China tensions, selected countries within the CESEE region have been deepening their investment relations with China. Given these countries’ significant capital needs for economic development, and in view of the EU’s arguable neglect of parts of the region, it is hardly surprising that they would be incentivised to seek out alternative investors. In addition to managing the risks arising from debt dependencies, China’s growing position in the 17+1 countries’ energy sectors may present a possible risk area. The EU investment screening mechanism is unlikely to align strategic interests across member states in its present scope, given the deficiencies in enforcement. With Austria’s established investment presence and relative geographical proximity to the 17+1 countries, it needs to play a key role in moving the dialogue in the direction of harmonising EU investment screening mechanisms, aligning incentives through greater involvement of the Western Balkans in development financing from the EU and offering realistic EU accession prospects. The Comprehensive Agreement on Investment (CAI) would have constituted a positive step towards a mutually beneficial and competitively neutral investment relationship with China, despite its numerous shortcomings. Austria and the EU-CEE countries should therefore lean towards resumed engagement with China regarding the possible ratification of the CAI, keeping core European values in mind. The EU should prioritise proactive policies to drive growth at home, leveraging the continent’s innovation capacities, and not only rely on defensive mechanisms to keep out unwanted FDI. Ultimately, Austria should recognise and emphasise mutual respect and co-operation towards common goals among the world’s major trading blocs, despite sometimes profound differences in economic models.
    Keywords: EU, China, foreign direct investment, investment screening, investment agreements
    JEL: F13 F21 F42
    Date: 2022–03
  21. By: Kabinet Kaba (CERDI - Centre d'Études et de Recherches sur le Développement International - CNRS - Centre National de la Recherche Scientifique - UCA - Université Clermont Auvergne)
    Abstract: This paper studies the effects of power outages and exchange rate undervaluation on the allocation of manufacturing firms between the domestic and the exports market. I apply the instrumental variables approach to a sample of 12,062 manufacturing firms operating in 33 sub-Saharan African countries. The main results show that a 1% increase in the length of power outages reduces the share of exports in total sales by 0.939 percentage points. An undervaluation of 1% leads to an increase in the share of exports by 0.540 percentage points. The collateral damage effects show a negative impact of power outages and exchange rate undervaluation on the share of foreign inputs and a positive effect on the share of domestic inputs in the total purchase of inputs. Moreover, power outages and exchange rate undervaluation affect more the share of exports of firms in countries with low access to electricity, non-innovative firms, firms making less self-generation and firms operating in non-resource-rich countries. The robustness check indicates that the access to electricity and the exchange rate (undervaluation and depreciation) are substitutes. Indeed, a 1% improvement in electricity access per population reduces the positive impact of exchange rate undervaluation and depreciation on the share of exports by 0.172 and 0.583 percentage points, respectively.
    Keywords: Power outages,Exchange rate,Manufacturing firms,Exports,Domestic sales,Africa
    Date: 2021–10–26
  22. By: Maria Koumenta (Queen Mary, University of London); Mario Pagliero (University of Turin, Collegio Carlo Alberto, CEPR); Davud Rostam-Afschar (University of Mannheim, University of Hohenheim)
    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: 2022–03
    Abstract: As China grows into a global power, it is forming a closer relationship with the international community. In the process, the nation is experiencing increasing levels of diplomatic friction, such as confrontation and conflict with other countries, as well as cooperation. Accordingly, this study analyzes China's response to various forms of diplomatic friction, as Korea seeks an effective response to possible friction with China in the future. More specifically, China's response to diplomatic friction was examined through various cases, with the aim of categorizing China’s response measures based on these examples. In addition, this study aims to prepare for possible friction with China in the future by identifying factors that differ in China's response to diplomatic friction.
    Keywords: China; Korea; diplomatic friction; conflict; response
    Date: 2022–03–10
  24. By: Juif, Dacil Tania
    Abstract: The skill composition of European migrants to the New World and their contribution to the human capital and institutional formation in destination countries are popular topics in economic history. This study assesses the skill composition of 19th century transatlantic migrants to Cuba. It finds that nearly half of the European immigrants originate from the Spanish province of the Canary Islands, which displays the lowest literacy and numeracy rates of Spain. Even within this province, those who left belonged to the least skilled section of the population. By promoting the influx of a cheap and poorly educated white workforce that replaced African slaves on their sugar estates, large landowners in Cuba contributed to the perpetuation of high economic, political and social inequality
    Date: 2022–02–12
  25. By: Angeloni, Ignazio; Daase, Christopher; Deitelhoff, Nicole; Goldmann, Matthias; Krahnen, Jan Pieter; Kroll, Stefan; Luft, Carl-Georg Christoph; Nölke, Andreas; Peez, Anton; Pelizzon, Loriana
    Abstract: This policy note summarizes our assessment of financial sanctions against Russia. We see an increase in sanctions severity starting from (1) the widely discussed SWIFT exclusions, followed by (2) blocking of correspondent banking relationships with Russian banks, including the Central Bank, alongside secondary sanctions, and (3) a full blacklisting of the 'real' export-import flows underlying the financial transactions. We assess option (1) as being less impactful than often believed yet sending a strong signal of EU unity; option (2) as an effective way to isolate the Russian banking system, particularly if secondary sanctions are in place, to avoid workarounds. Option (3) represents possibly the most effective way to apply economic and financial pressure, interrupting trade relationships.
    Keywords: SWIFT,Russian Sanctions
    Date: 2022
  26. By: Abe, Naohito; Rao, D.S. Prasada
    Abstract: We offer a simple alternative to the Gini-Eltetö-Köves-Szulc and Geary-Khamis methods used for international price and real expenditure comparisons. We show that the only symmetric average fixed basket price index that satisfies transitivity, country symmetry, and invariance to proportional changes in quantities is the multilateral Walsh index, a generalization of the superlative bilateral Walsh index (Diewert, 2001). Simplicity and its superior axiomatic properties, including identity and monotonicity, compared to current International Comparison Program (ICP) and Penn World Table (PWT) methods and plausibility and comparability of results based on the 2017 ICP data make the multilateral Walsh method an ideal choice.
    Keywords: Price comparisons, Transitivity, Proportionality, Real expenditures
    JEL: E31 C43
    Date: 2022–02
  27. By: Holger Graf (Friedrich Schiller University Jena, Department of Economics); Martin Kalthaus (Friedrich Schiller University Jena, Department of Economics)
    Abstract: Various forms of interaction during the process of research and innovation constitute a global network of knowledge generation and diffusion. Countries and their research organizations and individual scientists need to be embedded in this network to participate in global knowledge flows and to increase success in idea generation, invention and innovation. In this chapter, we review the literature on two of the most important channels of international knowledge diffusion in the field of science: research collaboration and scientist mobility. We thereby focus on the motives and determinants to collaborate or move internationally, the formation of a global knowledge network and the effects of embeddedness in the network and its influence on aggregate outcomes. From this review, we derive seven stylized facts on global knowledge embeddedness.
    Keywords: scientist mobility, research collaboration, global knowledge network, literature review
    JEL: O33 F60 O15
    Date: 2022–03–08
  28. By: J.M.D. Sandamali Wijayarathne (University of Waikato); Gazi M. Hassan (University of Waikato); Mark J. Holmes (University of Waikato)
    Abstract: The Sustainable Development Goal (SDG) 7 ensures universal access to affordable, reliable, and modern energy services by 2030. However, one-third of the world's population still lacks access to clean cooking fuel, and it will account for 2.3 billion by 2030. The transition from solid to clean, modern fuel is challenging because it is influenced by various factors, with household income being one of the most influential. Nowadays, the overwhelming majority of people in low and middle-income countries heavily rely on migrant remittances as a source of income, and this will have a favourable impact on clean cooking fuel choice. To explore this, we use three waves of Sri Lankan Households' Income and Expenditure Survey data (2009, 2012, and 2016). The results of propensity score matching analysis reveal that migrants use about 5% more clean fuel for cooking than non-migrants. Furthermore, we use the instrumental variable approach and the log of the distance to the nearest bank as the instrument to address the endogeneity of remittances. Accordingly, the control function estimates show that a 10% increase in migrant remittances increases clean cooking fuel use by 3.2%. The instrumental variable mediation analysis results find that household wealth significantly mediates this relationship. The findings suggest that policies encouraging migrant remittances can assist in developing and implementing energy policies to achieve SDG 7 by 2030.
    Keywords: clean fuels; solid fuels; remittances; migration; household wealth; sustainable development goals
    JEL: F22 F24 Q40 R20
    Date: 2022–03–25
  29. By: Crampes, Claude; Von Der Fehr, Nils-Henrik
    Abstract: Reaping the full benefits from cross-border interconnection typically requires reinforcement of national networks. When the relevant parts of the networks are complements, a lack of coordination between national transmission system operators typically results in investment below optimal levels in both interconnectors and national infrastructure. A subsidy to financially sustain interconnector building is not sufficient to restore optimality; indeed, even when possible, such subsidisation may have to be restrained so as not to encourage cross-border capacities that will not be fully utilised due to lack of investment in national systems.
    Keywords: electrical grid; interconnector; externality; regulation; regional; cooperation
    JEL: H77 K23 L51 L94
    Date: 2022–03
  30. By: Chung Tran; Sebastian Wende
    Abstract: A dividend imputation system is designed to address double taxation of capital income by allowing companies to pass on profit taxes paid at the corporate level to shareholders in form of franking tax credits. In this paper, we study implications of dividend imputation in a small open economy model with firm heterogeneity and an internationally integrated capital market. Our analysis indicates that dividend imputation has opposing effects on investment and capital accumulation. On one hand, it mitigates the adverse effects of double taxation and induces more saving and investment; on other hand, it raises the cost of investment for firms that are not fully imputed, which subsequently results in less investment. Moreover, different tax treatments for resident and foreign investors amplify frictions in reallocation of capital across firms, which prevents inflows of foreign capital from fully offsetting the shortage of domestic savings. International investors are not marginal investors in our small open economy setting. Overall, the net effect on capital accumulation is analytically ambiguous, depending on which force is dominant. Our quantitative results indicate that the positive force is dominant and removing dividend imputation leads to decreases in domestic savings, aggregate capital and output. Interestingly, the overall welfare effect is positive as low income households benefit more from additional government transfers, while tax burdens are shifted towards high income households and foreign investors.
    Keywords: Double taxation; Franking tax credit; Fiscal policy; Firm heterogeneity; Overlapping generations; Open economy; Dynamic general equilibrium; Welfare.
    JEL: D21 E62 H21 H22 H25
    Date: 2022–03

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