nep-int New Economics Papers
on International Trade
Issue of 2022‒04‒25
37 papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. Fixed Costs in Exporting and Investing By Youngmin BAEK; HAYAKAWA Kazunobu
  2. Service offshoring and export experience By Berlingieri, Giuseppe; Marcolin, Luca; Ornelas, Emanuel
  3. WTO 2025: Enhancing global trade intelligence By Alan Wm. Wolff
  4. Machine learning in international trade research - evaluating the impact of trade agreements By Breinlich, Holger; Corradi, Valentina; Rocha, Nadia; Ruta, Michele; Silva, J.M.C. Santos; Zylkin, Tom
  5. The Long-Run Labor Market Effects of the Canada-U.S. Free Trade Agreement By Brian K. Kovak; Peter M. Morrow
  6. Measuring value circulation in regional chains: assessing two alternative methods in South America By Álvaro Lalanne
  7. Can export promotion reduce unemployment? By Cristian Ugarte; Marcelo Olarreaga
  8. Governance, foreign aid, and Chinese foreign direct investment By Fon, Roger; Alon, Ilan
  9. Intermediated Trade and Credit Constraints: The Case of Firm's Imports By Nucci, Francesco; Pietrovito, Filomena; Pozzolo, Alberto Franco
  10. Firms under pressure: International trade and social activism By Löhnert, Claudius
  11. Globalization, trade imbalances and labor market adjustment By Dix-Carneiro, Rafael; Pessoa, João Paulo; Reyes-Heroles, Ricardo; Traiberman, Sharon
  12. Export Expansion and Investment in Children’s Human Capital: Evidence from the U.S.-Vietnam Bilateral Trade Agreement By Brian McCaig; Minh Nguyen; Robert Kaestner
  13. Global Shipping Container Disruptions and U.S. Agricultural Exports By Carter, Colin A.; Steinbach, Sandro; Zhuang, Xiting
  14. Gravity with granularity By Breinlich, Holger; Fadinger, Harald; Nocke, Volker; Schutz, Nicolas
  15. The Impact of Geopolitical Conflicts on Trade, Growth, and Innovation By Carlos G\'oes; Eddy Bekkers
  16. The art of trade war: spurring investments in Indonesia amidst the US–China trade war By Jong, Hilda Yanuar
  17. Sequential exporting across countries and products By Albornoz, Facundo; Calvo-Pardo, Héctor; Corcos, Gregory; Ornelas, Emanuel
  18. Industry influence over global alcohol policies via the World Trade Organization: a qualitative analysis of discussions on alcohol health warning labelling, 2010–19 By Barlow, Pepita; Gleeson, Deborah; O'Brien, Paula; Labonte, Ronald
  19. The labour share along global value chains Perspectives and evidence from sectoral interdependence By Federico Riccio; Lorenzo Cresti; Maria Enrica Virgillito
  20. Globalization and Factor Income Taxation By Pierre Bachas; Matthew H. Fisher-Post; Anders Jensen; Gabriel Zucman
  21. The trade impact of the Covid-19 pandemic By Liu, Xuepeng; Ornelas, Emanuel; Shi, Huimin
  22. Enhancement of the European Parliament’s monitoring for better coherence between trade policy and NTPOs By Wolfgang Weiß
  23. The impact of Russian presence in Africa By Kohnert, Dirk
  24. Foreign Direct Investment, Growth, and Publication Bias in Latin America and the Caribbean By Iorngurum, Tersoo
  25. The impact of Russian presence in Africa By Kohnert, Dirk
  26. Solving the longitude puzzle: A story of clocks, ships and cities By Miotto, M; Pascali, L
  27. Monitoring trade in plastic waste and scrap By Andrew Brown; Frithjof Laubinger; Peter Börkey
  28. Conflict as a Cause of Migration By Crippa, Andrea; d'Agostino, Giorgio; Dunne, Paul; Pieroni, Luca
  29. ‘When a Stranger Shall Sojourn with Thee': The Impact of the Venezuelan Exodus on Colombian Labor Markets By Santamaria, J.
  30. Labour share in Indian economy: An Exploratory analysis of the role of trade, technology and structural transformation By Anwesha Basu; C. Veeramani
  31. Imperialist appropriation in the world economy: drain from the global South through unequal exchange, 1990–2015 By Hickel, Jason; Dorninger, Christian; Wieland, Hanspeter; Suwandi, Intan
  32. The experience of the Oriental Republic of Uruguay: Market integration within MERCOSUR and with other global partners Insights for AfCFTA countries? By Isabelle Tsakok
  33. Profit shifting by multinational corporations: Evidence from transaction-level data in Nigeria By Bathusi Gabanatlhong; Javier Garcia-Bernardo; Paulinus Iyika; Miroslav Palanský
  34. Plausible deniability: Integration vs. outsourcing with heterogeneous firms and unethical suppliers By Löhnert, Claudius
  35. How Does the Reform of Rules of Origin Affect Firm Performance in Importing Countries? By HAYAKAWA Kazunobu; YAMANOUCHI Kenta
  36. Cumulative Climate Shocks and Migratory Flows: Evidence from Sub-Saharan Africa By Salvatore Di Falco; Anna B. Kis; Martina Viarengo
  37. The Long-Run Effects of Immigration: Evidence Across a Barrier to Refugee Settlement By Antonio Ciccone; Jan Nimczik

  1. By: Youngmin BAEK; HAYAKAWA Kazunobu
    Abstract: This study quantifies the fixed costs of export and outward foreign direct investment (FDI). Specifically, we compute the ratio of fixed costs for FDI to those for exports, which is called the "fixed cost ratio" (FCR). To do so, we solve an equation derived from the theoretical model of the choice between exporting and FDI. We apply this method to exports and FDI from Japan to 68 countries during the period 2002-2018. Our findings can be summarized as follows: In terms of median values, the FCR is estimated to be approximately 10, indicating that the fixed costs for FDI are approximately 10 times higher than those for exports. Furthermore, our regression analyses on the determinants of the FCR show a significantly negative effect of regional trade agreements (RTAs) on the FCR, which indicates that RTAs contribute to reducing fixed costs of FDI more greatly than those of exporting. This result has important implications for the RTAs' trade creation effect. Finally, we conduct simulation analyses of the effect of RTAs on the ratio of exports to FDI sales.
    Date: 2022–03
  2. By: Berlingieri, Giuseppe; Marcolin, Luca; Ornelas, Emanuel
    Abstract: Service inputs are a key component of the costs of exporting, and contribute to explain the process of internationalization of firms. A new dataset on the participation of French firms in global value chains reveals that firms with longer export experience in a market are more likely to source service inputs from there. We rationalize this fact in a model where firms are initially uncertain about how successful they are as exporters, but learn their export profitability as they keep selling abroad. Because offshoring requires larger sunk costs than domestic sourcing, some firms decide to offshore only when they become sufficiently confident about their export prospects, i.e., once they acquire enough export experience. More export experience in a foreign destination also induces firms to offshore within the boundaries of the firm rather than at arm's length. The model further implies that firms are more likely to offshore when frictions in the provision of services between the domestic and the foreign market are greater. In turn, offshoring firms sell greater volumes, display less volatility, and are less likely to exit foreign markets. Exploiting our novel dataset, we provide strong empirical support for each of these predictions.
    Keywords: export dynamics; commercial presence; global sourcing; services; firm boundaries
    JEL: F12 F14 F23 L22 L23 L84
    Date: 2021–06–03
  3. By: Alan Wm. Wolff (Peterson Institute for International Economics)
    Abstract: International trade flows based on information. Is the foreign market open? What are the conditions for entry? Are there customs duties to be paid and other regulations that need to be satisfied? Businesses thrive on getting as much certainty as they can find, and this requires reliable information. Is the competition subsidized? Are the competitors favored state-owned companies? During the pandemic, governments needed to know if food and medical supplies were going to be available from foreign sources and, most importantly, how available vaccines would be as most of the world’s countries could not produce any. Effective public policy cannot be made in the dark. The World Trade Organization, and the General Agreement on Tariffs and Trade before it, were founded with the idea of providing transparency. But more is needed to understand why trade is taking place, and even more important, when it is not, why not?
    Keywords: WTO, transparency, monitoring, international trade, forensic analysis, policy planning, foresight
    JEL: F13 F51 F53 F55 K33 K41 N40
    Date: 2022–04
  4. By: Breinlich, Holger; Corradi, Valentina; Rocha, Nadia; Ruta, Michele; Silva, J.M.C. Santos; Zylkin, Tom
    Abstract: Modern trade agreements contain a large number of provisions in addition to tariff reductions, in areas as diverse as services trade, competition policy, trade-related investment measures, or public procurement. Existing research has struggled with overfitting and severe multicollinearity problems when trying to estimate the effects of these provisions on trade flows. Building on recent developments in the machine learning and variable selection literature, this paper proposes data-driven methods for selecting the most important provisions and quantifying their impact on trade flows, without the need of making ad hoc assumptions on how to aggregate individual provisions. The analysis finds that provisions related to antidumping, competition policy, technical barriers to trade, and trade facilitation are associated with enhancing the trade-increasing effect of trade agreements.
    Keywords: lasso; machine learning; preferential trade agreements; deep trade agreements; EST013567/1
    JEL: F14 F15 F17
    Date: 2021–06–16
  5. By: Brian K. Kovak; Peter M. Morrow
    Abstract: This paper assesses the long-run effects of the 1988 Canada-U.S. Free Trade Agreement (CUSFTA) on the Canadian labor market using matched longitudinal administrative data for the years 1984-2004. We simultaneously examine the labor market effects of increased export expansion and import competition, generally finding adverse effects of Canadian tariff cuts and favorable effects of U.S. cuts, though both effects are small. Workers initially employed in industries that experienced larger Canadian tariff concessions exhibit a heightened probability of layoffs at large firms, but little impact on long-run cumulative earnings. Lower earnings and years worked at the initial employer are offset by gains in other manufacturing industries, construction, and services. Canadian workers quickly transitioned out of industries facing import competition, with the majority of industry adjustment occurring among new entrants to the labor market.
    JEL: F13 F16 F66 J23 J31
    Date: 2022–02
  6. By: Álvaro Lalanne (Consultant at ECLAC Office in Uruguay)
    Abstract: Since Hummels, Ishii and Ye (2001) seminal work there have been lots of proposals for measuring participation in global value chains with input-output tables. Conjointly to the development of measures, several projects created Inter-Country Input-output tables. To the extent that integrating data of different origins requires strong assumptions and confidence in sources, some projects keep more detailed inter country input-output tables at a regional level. In this paper I adapt two of the most complete methods conceived for global Input-output tables to the case of regional tables, and I use them to analyze the intraregional value chain trade of South America. Besides characterizing the trade in this region, this paper identifies and asses the differences between adaptations of Borin and Mancini (2019) source-based decomposition of gross exports and the Wang, Wei and Zhu (2018) method.
    Keywords: trade in value-added; global value chains; regional integration, inter-country input-output tables
    JEL: E16 F14 F15
    Date: 2021–06
  7. By: Cristian Ugarte; Marcelo Olarreaga
    Abstract: The paper examines the impact of export promotion on aggregate unemployment. We find that increases in the share of Export Promotion Agencies' (EPAs) budgets on total exports lead to small decreases in aggregate unemployment. This effect is amplified when export promotion efforts are concentrated in sectors in which the country has a comparative advantage. On the other hand, when EPAs aim at reducing aggregate unemployment by focusing their efforts in sectors with high levels of unemployment, then aggregate unemployment increases. These results suggest that even if EPAs' priorities were to shift towards reducing unemployment, this would be better addressed by focusing on sectors in which the country has a comparative advantage rather than sectors with high labor market frictions.
    Keywords: Export promotion, Unemployment, Comparative Advantage
    JEL: F13 F14 O19
    Date: 2021–08
  8. By: Fon, Roger; Alon, Ilan
    Abstract: This article examines how Chinese foreign aid interacts with the quality of the host country's governance in shaping Chinese state-owned enterprises' (CSOEs') foreign direct investment (FDI) in Africa. By analyzing the firm-level greenfield FDI data of CSOEs between 2003 and 2014 and distinguishing between China's official development assistance and less concessional forms of Chinese foreign aid, we reveal two main findings. First, the quality of the host country's governance negatively affects CSOEs' FDI. Second, other official aid and loans from China negatively moderate the relationship between the quality of the host country's governance and FDI by CSOEs. Specifically, the tendency for CSOEs to invest in locations with weak governance increases when their investments are integrated with less concessional forms of Chinese foreign aid in the form of other official flows and loans. Our results are robust to alternative measures of the governance and different methodological approaches. The article challenges the traditional notion of institutional theory which assumes a positive relationship between governance quality and FDI attraction.
    Keywords: foreign aid; foreign direct investment; governance; international political economy; state-owned enterprises; Wiley deal
    JEL: F3 G3
    Date: 2022–03–01
  9. By: Nucci, Francesco; Pietrovito, Filomena; Pozzolo, Alberto Franco
    Abstract: Growing evidence suggests that a large share of international trade transactions are made through intermediaries and that whether firms use them or not depends on different factors. The aim of this paper is to empirically investigate if credit constraints introduce a degree of difference among firms in their mode of importing. Building on the intuition provided by a simple theoretical framework, we use firm-level data from 66 developing and developed countries to test the possible links between credit constraints and reliance on import intermediaries. Our results show that indeed credit-constrained firms exhibit a higher probability of importing their inputs using an intermediary, while unconstrained firms are more likely to import directly. Our results also establish that the impact of credit constraints on the probability of indirect importing is amplified for firms with a higher distance from their international sourcing network. Moreover, if firms face other types of frictions to import, then the probability that credit-constrained firms rely on intermediaries is estimated to be higher. Remarkably, credit rationing affects the probability of indirect importing no matter what the mode of exporting is.
    Keywords: Firms' Import Mode, Trade Intermediaries, Financial Constraints
    JEL: F10 F14 F36 G20
    Date: 2022–04–11
  10. By: Löhnert, Claudius
    Abstract: Activists denouncing firms for what they consider unethical conduct (e.g., poor treatment of labor or practices that are harmful to the environment) often pressure firms through consumer boycotts. This paper presents a model of international trade with heterogeneous firms and endogenous campaigns conducted by social activists. Being the target of campaigns damages the reputation of a firm, reducing the perceived quality and therefore sales of its variety. Campaigns require funding by consumers who support the activists' mission. The paper analyzes the effect of such demand-reducing campaigns on firms. It identifies a feedback effect of campaigns that increases mark-ups in the presence of social activism, which stems from large firms attracting more campaigns while campaigns also decrease sales. The paper further shows that social activism reduces the elasticity of bilateral trade flows with respect to trade costs.
    Keywords: international trade,heterogeneous firms,gravity,consumer boycotts,NGOs,campaigns,social activism
    JEL: F12 F61 L11 L31 O35
    Date: 2022
  11. By: Dix-Carneiro, Rafael; Pessoa, João Paulo; Reyes-Heroles, Ricardo; Traiberman, Sharon
    Abstract: We study the role of global trade imbalances in shaping the adjustment dynamics in response to trade shocks. We build and estimate a general equilibrium, multi-country, multi-sector model of trade with two key ingredients: (a) Consumption-saving decisions in each country commanded by representative households, leading to endogenous trade imbalances; (b) labor market frictions across and within sectors, leading to unemployment dynamics and sluggish transitions to shocks. We use the estimated model to study the behavior of labor markets in response to globalization shocks, including shocks to technology, trade costs, and inter-temporal preferences (savings gluts). We find that modeling trade imbalances changes both qualitatively and quantitatively the short- and long-run implications of globalization shocks for labor reallocation and unemployment dynamics. In a series of empirical applications, we study the labor market effects of shocks accrued to the global economy, their implications for the gains from trade, and we revisit the “China Shock” through the lens of our model. We show that the US enjoys a 2.2% gain in response to globalization shocks. These gains would have been 73% larger in the absence of the global savings glut, but they would have been 40% smaller in a balanced-trade world.
    Keywords: global trade imbalances; labor market disruption
    JEL: F16
    Date: 2021–03–22
  12. By: Brian McCaig; Minh Nguyen; Robert Kaestner
    Abstract: We examine how export expansion induced by the U.S-Vietnam Bilateral Trade Agreement (BTA) affected migration, school enrollment, work and healthcare use of young children and adolescents in Vietnam. To do so, we exploit variation in tariff reductions across industries associated with the BTA and differences in industry employment shares across Vietnamese provinces prior to the policy change. We find that the BTA led to migration to the most affected provinces, particularly by adolescents (15 to 18) and young adults (19 to 29). The BTA also increased household expenditures, slightly decreased employment among nonmigrant adults and increased employment among migrant adults. Among adolescents, enrolment increased among non-migrants, but fell among migrants, with the opposite pattern for working. For children (7 to 14), enrolment did not change among non-migrants, but fell for migrants, who typically moved with their family. Conditional on being enrolled, education expenditures increased for both children and adolescents. We find evidence that healthcare utilization decreased for both children and adolescents.
    JEL: F16 I25 O15
    Date: 2022–03
  13. By: Carter, Colin A.; Steinbach, Sandro; Zhuang, Xiting
    Abstract: Containerized exports are significant for U.S. agriculture, especially for certain products, such as meat, tree nuts, and oilseeds. We assess the trade losses to U.S. agriculture arising from shipping container disruptions in 2021. We rely on a non-linear panel event study design to measure the dynamic treatment effects using both bills of lading and Census Bureau export data at the U.S. port level. Our findings are that the volume of U.S. containerized agricultural exports was 22 percent below the counterfactual level from May 2021 to January 2022, amounting to USD 10 billion in export losses. There were differences in the trade effects across geographic regions and product groups. We find that Western and Southern ports faced the brunt of export losses, with meat, edible fruits and nuts, oilseeds, and animal feed being the most affected.
    Keywords: International Relations/Trade
    Date: 2022–04
  14. By: Breinlich, Holger; Fadinger, Harald; Nocke, Volker; Schutz, Nicolas
    Abstract: We evaluate the consequences of oligopolistic behavior for the estimation of gravity equations for trade flows. With oligopolistic competition, firm-level gravity equations based on a standard CES demand framework need to be augmented by markup terms that are functions of firms' market shares. At the aggregate level, the additional term takes the form of the exporting country's market share in the destination country multiplied by an exporter-destination-specific Herfindahl-Hirschman index. For both cases, we show how to construct appropriate correction terms that can be used to avoid problems of omitted variable bias. We illustrate the quantitative importance of our results for combined French and Chinese firm-level export data as well as for a sample of product-level imports by European countries. Our results show that correcting for oligopoly bias can lead to substantial changes in the coefficients on standard gravity regressors such as distance or the impact of currency unions.
    Keywords: gravity equation; oligopoly; CES demand; aggregative game
    JEL: F12 F14 L13
    Date: 2021–03–15
  15. By: Carlos G\'oes; Eddy Bekkers
    Abstract: Geopolitical conflicts have increasingly been a driver of trade policy. We study the potential effects of global and persistent geopolitical conflicts on trade, technological innovation, and economic growth. In conventional trade models the welfare costs of such conflicts are modest. We build a multi-sector multi-region general equilibrium model with dynamic sector-specific knowledge diffusion, which magnifies welfare losses of trade conflicts. Idea diffusion is mediated by the input-output structure of production, such that both sector cost shares and import trade shares characterize the source distribution of ideas. Using this framework, we explore the potential impact of a "decoupling of the global economy," a hypothetical scenario under which technology systems would diverge in the global economy. We divide the global economy into two geopolitical blocs -- East and West -- based on foreign policy similarity and model decoupling through an increase in iceberg trade costs (full decoupling) or tariffs (tariff decoupling). Results yield three main insights. First, the projected welfare losses for the global economy of a decoupling scenario can be drastic, as large as 15% in some regions and are largest in the lower income regions as they would benefit less from technology spillovers from richer areas. Second, the described size and pattern of welfare effects are specific to the model with diffusion of ideas. Without diffusion of ideas the size and variation across regions of the welfare losses would be substantially smaller. Third, a multi-sector framework exacerbates diffusion inefficiencies induced by trade costs relative to a single-sector one.
    Date: 2022–03
  16. By: Jong, Hilda Yanuar
    Abstract: The US–China trade war creates significant opportunities for developing countries, as global manufacturers need to relocate their production facilities out of China to avoid future tariff hikes. However, Indonesia as the biggest economy in the ASEAN is not experiencing any substantial advantage relative to its neighbors, especially compared to Vietnam. While there is no clarity on how long the trade war will last, it is important for Indonesia to strategize quickly to capitalize the opportunities. This article addresses the question of how Indonesia should strategize through country comparison and analysis of two types of policy competition, namely, incentives-based (IBC) and rules-based competition (RBC). In the short-term, Indonesia should be more accommodating for investors of all sizes and maximize the trade-related investment assistance. In the longer term, Indonesia should prudently open up to trade, improve cooperation between investment and trade functions, and build a positive public mindset for free trade.
    Keywords: FDI; free trade; Southeast Asia; strategy; trade war
    JEL: L81
    Date: 2021–08–26
  17. By: Albornoz, Facundo; Calvo-Pardo, Héctor; Corcos, Gregory; Ornelas, Emanuel
    Abstract: How do exporters expand their product scope and geographical presence? We argue that new exporters are uncertain about their profitability in different countries and products, but learn it as they start to export. As a consequence, exporters add products and countries sequentially, in an interdependent process. Exploiting disaggregated data on French exporters, we find empirical support consistent with such a mechanism, where firms learn from their initial export experiences and then adjust their sales, number of products and destination countries accordingly. Our results indicate that part of the learning is firm-specific, and not merely product- or market-specific. Furthermore, we find that firms tend to expand in the sub-extensive margin first by widening product scope within a destination and later by entering new destinations; and that firms' core products are particularly resilient despite being used to "test the waters" when entering additional countries.
    Keywords: export dynamics; experimentation; uncertainty; multiproduct firms; market inter-dependence
    JEL: F10 F14 L25
    Date: 2021–06–02
  18. By: Barlow, Pepita; Gleeson, Deborah; O'Brien, Paula; Labonte, Ronald
    Abstract: Background: Accelerating progress to implement effective alcohol policies is necessary to achieve multiple targets within the WHO global strategy to reduce the harmful use of alcohol and the Sustainable Development Goals. However, the alcohol industry's role in shaping alcohol policy through international avenues, such as trade fora, is poorly understood. We investigate whether the World Trade Organization (WTO) is a forum for alcohol industry influence over alcohol policy. Methods: In this qualitative analysis, we studied discussions on alcohol health warning labelling policies that occurred at the WTO's Technical Barriers to Trade (TBT) Committee meetings. Using the WTO Documents Online archive, we searched the written minutes of all TBT Committee meetings available from Jan 1, 1995, to Dec 31, 2019, to identify minutes and referenced documents pertaining to discussions on health warning labelling policies. We specifically sought WTO member statements on health warning labelling policies. We identified instances in which WTO member representatives indicated that their statements represented industry. We further developed and applied a taxonomy of industry rhetoric to identify whether WTO member statements advanced arguments made by industry in domestic forums. Findings: Among 83 documents, comprising TBT Committee minutes, notifications to the WTO of the policy proposal, and written comments by WTO members, WTO members made 212 statements (between March 24, 2010, and Nov 15, 2019) on ten alcohol labelling policies proposed by Thailand, Kenya, the Dominican Republic, Israel, Turkey, Mexico, India, South Africa, Ireland, and South Korea. WTO members stated that their claims represented industry in seven (3·3%) of 212 statements, and 117 (55·2%) statements featured industry arguments. Member statements featured many arguments used by industry in domestic policy forums to stall alcohol policy. Arguments focused on descaling and reframing the nature and causes of alcohol-related problems, promoting alternative policies such as information campaigns, promoting industry partnerships, questioning the evidence, and emphasising manufacturing and wider economic costs and harms. Interpretation: WTO discussions at TBT Committee meetings on alcohol health warnings advanced arguments used by the alcohol industry in domestic settings to prevent potentially effective alcohol policies. WTO members appeared to be influenced by alcohol industry interests, although only a minority of challenges explicitly referenced industry demands. Increased transparency about vested interests might be needed to overcome industry influence. Funding: None.
    JEL: L81
    Date: 2022–03–01
  19. By: Federico Riccio; Lorenzo Cresti; Maria Enrica Virgillito
    Abstract: This article proposes a novel framework to investigate how globalisation affects workers' share of value added. We explore functional income distribution by looking at industrial interdependence and thus identifying GVCs as the unit of analysis; we then track inputs composition and their labour share evolution along the value chains. First, we find widespread heterogeneous patterns across value chains components, accounting for the direct, domestic and foreign requirements of the chains, inside an overall declining trend. Second, we study the evolution of the vertical labour share along development stages. Finally, by means of a shift-share analysis, we investigate what drives such decline in the vertical labour share: albeit country-sector idiosyncratic factors accounted by the within-input component contribute the most, between-input reallocation - GVCs restructuring - matters particularly to detect the role played by foreign contributions. In essence, we provide evidence of a recombination of inputs toward emerging economies and service-based activities. Such recombination negatively impacts upon the overall labour share dynamics. Overall, our methodology contributes to better understanding the process of fragmentation of production and international division of labour by developing a series of novel and fine-grained indicators; in addition, it allows to study the ensuing implication for functional income distribution.
    Keywords: Structural Change; Global Value Chains; Labour Share.
    Date: 2022–04–19
  20. By: Pierre Bachas; Matthew H. Fisher-Post; Anders Jensen; Gabriel Zucman
    Abstract: How has globalization affected the relative taxation of labor and capital, and why? To address this question we build and analyze a new database of effective macroeconomic tax rates covering 150 countries since 1965, constructed by combining national accounts data with government revenue statistics. We obtain four main findings: (1) The effective tax rates on labor and capital converged globally since the 1960s, due to a 10 percentage-point increase in labor taxation and a 5 percentage-point decline in capital taxation. (2) The decline in capital taxation is concentrated in high-income countries. By contrast, capital taxation increased in developing countries since the 1990s, albeit from a low base. (3) Consistently across a variety of research designs, we find that the rise in capital taxation in developing countries can be explained by a tax-capacity effect of international trade: Trade openness leads to a concentration of economic activity in formal corporate structures, where capital taxes are easier to impose. (4) At the same time, international economic integration reduces statutory tax rates, due to increased tax competition. In high-income countries, this negative tax competition effect of trade has dominated, while in developing countries the positive tax-capacity effect of international trade appears to have prevailed.
    JEL: F14 F62 H20 O24
    Date: 2022–03
  21. By: Liu, Xuepeng; Ornelas, Emanuel; Shi, Huimin
    Abstract: Using a gravity-like approach, we study how Covid-19 deaths and lockdown policies affected countries' imports from China during 2020. We find that a country's own Covid-19 deaths and lockdowns significantly reduced its imports from China, suggesting that the negative demand effects prevailed over the negative supply effects of the pandemic. On the other hand, Covid-19 deaths in the main trading partners of a country (excluding China) induces more imports from China, partially offsetting countries' own effects. The net effect of moving from the pre-pandemic situation to another where the main variables are evaluated at their 2020 mean is, on average, a reduction of nearly 10% in imports from China. There is also significant heterogeneity. For example, the negative own effects of the pandemic vanish when we restrict the sample to medical goods and are significantly mitigated for products with a high "work-from-home" share or a high contract intensity for products exported under processing trade, and for capital goods. We also find that deaths and lockdowns in previous months tend to increase current imports from China, partially offsetting the contemporaneous trade loss, suggesting that trade is not simply "destroyed", but partially "postponed".
    Keywords: trade flows; Covid-19; lockdown; stringency; China; coronavirus
    JEL: F14
    Date: 2021–05–26
  22. By: Wolfgang Weiß
    Abstract: Since the Treaty of Lisbon, trade policy has become an explicit part of the EU's external policy and integrated into the general framework of the EU´s external policy, but must also be in conformity with internal policies. Thus, trade policy is subject to a requirement of multiple coherence. Beyond constitutional obligations, other drivers work for the inclusion of non-genuine commercial policy objectives in trade policy, such as the orientation of contemporary trade politics towards the behind the border issues of national regulation, so that trade policy became closely intertwined with domestic regulatory policy. Therefore the actors primarily responsible for legislation, i.e. parliaments, advocate for their extended participation in determining trade policy, and rightly so for reasons of transparency, control and political inclusiveness. Parliaments thus become actors of respect for and positive consideration of non-commercial policy objectives in trade policy, which applies as well to the European Parliament (EP). Hence, an institutional design of policy formulation cycles and decision-making in EU trade policy that strives for better coherence of trade concerns with NTPOs must focus on strengthening the influence of the EP and improve its participatory rights in decision-making and its control and monitoring mechanisms. Consequently, the present paper derives proposals for improving EP´s monitoring mechanisms for the benefit of non-trade policy objectives (NTPOs) in trade policy from an analysis of weaknesses in the negotiation and implementation stage of trade policy.
    Keywords: Policy coherence, trade, European Parliament, non-commercial policy objectives.
    Date: 2021–08
  23. By: Kohnert, Dirk
    Abstract: Putin attaches great importance to rebuilding Russia as a world power, including relations with Africa. But while the Soviet Union used to advocate socialist modernization in Africa, Moscow no longer offers socialist ideologies. Instead, it focuses on access to African elites, particularly authoritarian leaders. It also seeks to sway elections in its favour, particularly in fragile but resource-rich states. The Kremlin says it wants to avoid competing directly with other powers active in Africa. Instead, it wants to focus on countries where neither the West nor China dominates. There it expects to be able to work more effectively. But Russia, like China, is challenging Western norms, undermining US and EU sanctions. In addition, both strategic partners support non-interference in the internal affairs of states. In addition, Russia's relations with Africa have been motivated significantly by its interest in African resources and security markets. Russia's resurgence in Africa benefits not least from Islamist terrorism, for example, in the Sahel and Mozambique. It uses fragile states and ongoing conflicts to secure lucrative arms deals and mining concessions. Moscow signed military cooperation agreements with 21 African governments, including negotiations on establishing military bases. It uses paramilitary contractors to manipulate the course of local conflicts in its favour. Since 2015, Russian-African trade has doubled to around USD 20 billion per year. Russia exported $14 billion worth of goods and services and imported about $5 billion worth of African products. In return, Moscow can count on the support of African leaders in foreign policy. Thus, Eritrea voted against a UN General Assembly resolution strongly condemning Russia's war in Ukraine. 18 other African countries abstained, including Mali, Mozambique, Angola and South Africa.
    Keywords: Russia, Africa, Sub-Sahara Africa, African affairs, international trade, global power, African resources, fragile state, Islamist terrorism, arms deals, BRICS, China, Eritrea, South Africa, Mali, Mozambique, EU, NATO,
    JEL: F13 F21 F35 F51 F52 F54 G28 H56 H77 N17 N47 P16 P27 Z13
    Date: 2022–03–27
  24. By: Iorngurum, Tersoo
    Abstract: Economic literature contains conflicting empirical results and explanations concerning the growth effect of foreign direct investment (FDI). In this study, several numerical estimates of FDI’s growth effect in Latin America and the Caribbean were drawn from 33 empirical studies and analysed with meta-analytic techniques. The results show that the true growth effect of FDI is near zero and statistically insignificant at all conventional levels. Tests of publication bias performed on the estimates reveal evidence of publication bias in peer-reviewed journal publications authored by PhD holders, but reveal no evidence of publication bias in the empirical literature as a whole. Furthermore, multivariate meta-regression analysis and Bayesian model averaging both show that publication bias is dependent on type of publication outlet and sample size. More precisely, publishing in peer-reviewed journals leads to publication bias, while sample size enlargement reduces publication bias.
    Keywords: Foreign Direct Investment, Economic Growth, Publication Bias, Meta-Analysis, Latin America and the Caribbean.
    JEL: C83 F21 O47
    Date: 2022–02–23
  25. By: Kohnert, Dirk
    Abstract: Putin attaches great importance to rebuilding Russia as a world power, including relations with Africa. But while the Soviet Union used to advocate socialist modernization in Africa, Moscow no longer offers socialist ideologies. Instead, it focuses on access to African elites, particularly authoritarian leaders. It also seeks to sway elections in its favour, particularly in fragile but resource-rich states. The Kremlin says it wants to avoid competing directly with other powers active in Africa. Instead, it wants to focus on countries where neither the West nor China dominates. There it expects to be able to work more effectively. But Russia, like China, is challenging Western norms, undermining US and EU sanctions. In addition, both strategic partners support non-interference in the internal affairs of states. In addition, Russia's relations with Africa have been significantly motivated significantly by its interest in African resources and security markets. Russia's resurgence in Africa benefits not least from Islamist terrorism, for example, in the Sahel and Mozambique. It uses fragile states and ongoing conflicts to secure lucrative arms deals and mining concessions. Moscow signed military cooperation agreements with 21 African governments, including negotiations on establishing military bases. It uses paramilitary contractors to manipulate the course of local conflicts in its favour. Since 2015, Russian-African trade has doubled to around USD 20 billion per year. Russia exported $14 billion worth of goods and services and imported about $5 billion worth of African products. In return, Moscow can count on the support of African leaders in foreign policy. Thus, Eritrea voted against a UN General Assembly resolution strongly condemning Russia's war in Ukraine. 18 other African countries abstained, including Mali, Mozambique, Angola and South Africa.
    Keywords: Russia, Africa, Sub-Sahara Africa, African affairs, international trade, global power, African resources, fragile state, Islamist terrorism, arms deals, BRICS, China, Eritrea, South Africa, Mali, Mozambique
    JEL: F13 F21 F35 F51 F52 F54 G28 H56 H77 N17 N47 P16 P27 Z13
    Date: 2022–03–26
  26. By: Miotto, M (CERGE-EI and CAGE); Pascali, L (Pompeu Fabra Univerity, Barcelona GSE, CAGE and CEPR)
    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 Classification: F1, F15, F43, R12, R4
    Date: 2022
  27. By: Andrew Brown (OECD); Frithjof Laubinger (OECD); Peter Börkey (OECD)
    Abstract: Trade in plastic waste and scrap plays a potentially important role in helping to strengthen markets for recycled plastics as it can help to achieve economic efficiency through for instance economies of scale. But such trade has also been criticised for leading to plastic pollution when recipient countries lack capacity to treat such waste in an environmentally sound manner. This report aims to identify and assess trends in trade patterns of plastic waste and scrap in the context of recent policy developments, particularly the strengthening of controls applied in the context of the Basel Convention, which came into force at the beginning of 2021. One of the findings is that OECD Member Countries continue to make up a significant share of global trade in plastic scrap and waste (89% of global reported exports and 67% of global reported imports by weight), but that the trade surplus has continued to shrink, as well as the overall volume of trade.
    Keywords: circular economy, plastics, trade, waste management
    JEL: F18 L65 Q53 Q56
    Date: 2022–04–20
  28. By: Crippa, Andrea; d'Agostino, Giorgio; Dunne, Paul; Pieroni, Luca
    Abstract: Much of the literature on the determinants of migration considers push and pull and while conflict is considered a push factor it has received surprisingly little empirical scrutiny. When it has the focus is on the most visible result, refugee flows. While political oppression, economic adversities and environmental degradation are important determinants of migration, conflict and wars account for the bulk of low income country refugees and migrants. This paper considers the role that conflict plays in migration, beyond refugee flows, across a range of countries for which data is available. It estimates the impact of conflict on migration allowing for other important factors and different measures of conflict. A large effect of conflict on net migration is found for low income countries.
    Keywords: Migration, internal conflict, income, panel data
    JEL: C33 D74 F22 O5
    Date: 2022
  29. By: Santamaria, J.
    Abstract: This paper analyzes the effect of open-door immigration policies on local labor markets. Using the sharp and unprecedented surge of Venezuelan refugees into Colombia, I study the impact on wages and employment in a context where work permits were granted at scale. To identify which labor markets immigrants are entering, I overcome limitations in offcial records and generate novel evidence of refugee settlement patterns by tracking the geographical distribution of Internet search terms that Venezuelans but not Colombians use. While offcial records suggest migrants are concentrated in a few cities, the Internet search index shows migrants are located across the country. Using this index, high-frequency labor market data, and a difference-in-differences design, I find precise null effects on employment and wages in the formal and informal sectors. A machine learning approach that compares counterfactual cities with locations most impacted by immigration yields similar results. All in all, the results suggest that open-door policies do not harm labor markets in the host community.
    Keywords: Migration; Employment; Wages; Google searches
    JEL: J61 J68 C81
    Date: 2022–02–07
  30. By: Anwesha Basu (Indira Gandhi Institute of Development Research); C. Veeramani (Indira Gandhi Institute of Development Research)
    Abstract: This study analyses the trends, patterns and determinants of the labour share in India. While most of the literature on this topic covers only the organized manufacturing sector, this paper provides a detailed analysis of the labour share at the sectoral level, covering both formal and informal sectors of the entire economy. Using KLEMS data, we find that the aggregate economy-wide labour share declined from 54 in 1980 to 49 in 2016. Shift-share decomposition exercise reveals that both within and between sectoral factors played a role in determining the trends in the aggregate labour share. However, analysis at the disaggregated level reveals that the within sector decline in labour share is neither driven by technological progress, nor by exposure to international trade. Instead, it is mainly driven by two sectors: real estate and construction, neither of which is susceptible to the effects of technological change or trade. The between sector component, on the other hand, is driven by the idiosyncratic nature of the economy's structural transformation, which has favored the high skilled service sector and bypassed manufacturing completely. Within the organized manufacturing sector as well we find that the value-added share of capital-intensive sectors, with the lowest level of labour share, has increased steadily, while that of unskilled manufacturing has declined; leading to a decline in the labour share within the formal manufacturing sector. Sectoral level regression analysis reveals that, controlling for other factors like trade openness and capital intensity, a growth in the share of capital intensive and high skilled sectors leads to a decline in the sectoral wage share. We conclude that the apprehension regarding automation and globalization eating up labour's share of the income might be pre-mature in the context of India. The nature of reallocation of economic activity between sectors has an important role to play.
    Keywords: labour share, structural transformation, trade, technological progress
    JEL: D33 E25 F66
    Date: 2021–12
  31. By: Hickel, Jason; Dorninger, Christian; Wieland, Hanspeter; Suwandi, Intan
    Abstract: Unequal exchange theory posits that economic growth in the “advanced economies” of the global North relies on a large net appropriation of resources and labour from the global South, extracted through price differentials in international trade. Past attempts to estimate the scale and value of this drain have faced a number of conceptual and empirical limitations, and have been unable to capture the upstream resources and labour embodied in traded goods. Here we use environmental input-output data and footprint analysis to quantify the physical scale of net appropriation from the South in terms of embodied resources and labour over the period 1990 to 2015. We then represent the value of appropriated resources in terms of prevailing market prices. Our results show that in 2015 the North net appropriated from the South 12 billion tons of embodied raw material equivalents, 822 million hectares of embodied land, 21 exajoules of embodied energy, and 188 million person-years of embodied labour, worth $10.8 trillion in Northern prices – enough to end extreme poverty 70 times over. Over the whole period, drain from the South totalled $242 trillion (constant 2010 USD). This drain represents a significant windfall for the global North, equivalent to a quarter of Northern GDP. For comparison, we also report drain in global average prices. Using this method, we find that the South's losses due to unequal exchange outstrip their total aid receipts over the period by a factor of 30. Our analysis confirms that unequal exchange is a significant driver of global inequality, uneven development, and ecological breakdown.
    Keywords: embodied resource flows; inequality; input-output analysis; international development; trade in value added; unequal exchange; European Union’s Horizon 2020 research and innovation programme (FINEPRINT project; grant agreement No. 725525).
    JEL: N0
    Date: 2022–03–01
  32. By: Isabelle Tsakok
    Abstract: The pros and the cons of regional market integration are well exemplified by the experience of Uruguay, a small, open economy in MERCOSUR, which is a highly protectionist trade bloc, dominated by Argentina and Brazil. With access to such large markets, Uruguay did raise its growth rate during the first decade of MERCOSUR, the 1990s. However, market integration as implemented in MERCOSUR was also problematic in that Uruguay suffered from the high protectionism of Argentina in the form of ad hoc trade barriers and Brazil’s retaliation against Argentina; the instability of Argentina’s boom and bust economic management; the co- movements in the appreciating exchange rates vis-à -vis the US $; the sudden devaluation of Brazil’s Real in Jan 1999 and Argentina’s financial collapse and fast devaluing peso in 2002. Uruguay’s ability to emerge from the 2002 crisis stronger than before is testimony to the strength of its social compact. Uruguay’s experience also shows that what is determining is the framework of domestic political economy and institutions, including the caliber of governance. Both Argentina and Uruguay have access to the same enlarged regional market, but each performed very differently. The key insight: how a country uses the opportunities offered is what matters; not just having access to an enlarged market.
    Date: 2022–03
  33. By: Bathusi Gabanatlhong; Javier Garcia-Bernardo; Paulinus Iyika; Miroslav Palanský
    Abstract: Research on profit shifting by multinational corporations in developing countries is limited due to a lack of data. In this paper we use, for the first time, novel administrative data on the transactions of multinational corporations operating in Nigeria vis-à-vis related parties in other jurisdictions. The data provides a breakdown of these intra-group transactions into seven categories: (1) tangible goods, (2) services and fees, (3) royalties, (4) interest, (5) dividends, (6) reimbursements, and (7) other.
    Keywords: Tax havens, Multinational firms, Profit shifting
    Date: 2022
  34. By: Löhnert, Claudius
    Abstract: This paper presents a property rights model of the international organization of production, where heterogeneous headquarter firms source from suppliers in the Global South. Due to weak regulatory stringency in the Global South, suppliers can employ a cost-saving technology. Consumers, however, consider this technology as unethical and may therefore participate in a consumer boycott, if they consider a firm to be responsible for its supplier's conduct. The paper analyzes how the international organization of production and the choice of technology interact with each other as well as sectoral characteristics. It identifies three mechanisms that govern whether integration is preferred by high-productivity firms in a given sector: the Antràs mechanism (severity of underinvestment by headquarter vs. supplier), the unethical mechanism (cost savings vs. boycott risk) and the deniability mechanism (higher boycott risk under integration than under outsourcing). The equilibrium share of active firms who integrate in a sector increases with productivity dispersion and decreases in the sector's cost advantage of unethical production.
    Keywords: international outsourcing,property rights theory,heterogeneousfirms,ethical production,consumer boycotts,NGOs,social activism
    JEL: D23 F12 F23 F61 L11 L23 L31 O35
    Date: 2022
  35. By: HAYAKAWA Kazunobu; YAMANOUCHI Kenta
    Abstract: This study empirically examined the economic impacts of reform in Japan's generalized system of preferences regarding firm performance. Specifically, we considered the relaxation of the rules of origin (RoOs) for knitted apparel in 2011 and 2015. We conducted difference-in-differences analysis by defining the knitted apparel industry as a treatment group and the woven apparel industry as a control group. First, we demonstrate that Japan's total imports of knitted apparel products did not experience a greater increase than that of woven apparel products. However, imports of knitted apparel products from least developed countries increased significantly. Second, on average, the two RoO reforms did not significantly change the shipment values of knitted apparel producers. However, we identified significant results for knitted apparel producers in the lower price range. While the first relaxation in 2011 reduced their production quantity and raised their unit prices, the second relaxation in 2015 reduced their shipment value through a reduction in production quantity.
    Date: 2022–03
  36. By: Salvatore Di Falco; Anna B. Kis; Martina Viarengo
    Abstract: We re-examine the effects of negative weather anomalies during the growing season on the decision to migrate in rural households in five sub-Saharan African countries. To this end we combine a multi-country household panel dataset with high-resolution gridded precipitation data. We find that while the effect of recent adverse weather shocks is on average modest, the cumulative effect of a persistent exposure to droughts over several years leads to a significant increase in the probability to migrate. The results show that more frequent adverse shocks can have more significant and long-lasting consequences in challenging economic environments.
    Date: 2021–04–08
  37. By: Antonio Ciccone; Jan Nimczik
    Abstract: After the end of World War II in 1945, millions of refugees arrived in what in 1949 became the Federal Republic of Germany. We examine their e ect on today's productivity, wages, income, rents, education, and population density at the municipality level. Our identification strategy is based on a spatial discontinuity in refugee settlement at the border between the French and US occupation zones in the South-West of post-war Germany. These occupation zones were established in 1945 and dissolved in 1949. The spatial discontinuity arose because the US zone admitted refugees during the 1945-1949 occupation period whereas the French zone restricted access. By 1950, refugee settlement had raised population density on the former US side of the 1945-1949 border significantly above density on the former French side. Before the war, there never had been significant di erences in population density. The higher density on the former US side persists entirely in 2020 and coincides with higher rents as well as higher productivity, wages, and education levels. We examine whether today's economic di erences across the former border are the result of the di erence in refugee admission; the legacy of other policy di erences between the 1945-1949 occupation zones; or the consequence of socio-economic di erences predating WWII. Taken together, our results indicate that today's economic di erences are the result of agglomeration e ects triggered by the arrival of refugees in the former US zone. We estimate that exposure to the arrival of refugees raised income per capita by around 13% and hourly wages by around 10%.
    Keywords: immigration, productivity wages, refugess, long-run effects
    JEL: O4 O11 R11
    Date: 2022–04

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