nep-int New Economics Papers
on International Trade
Issue of 2023‒03‒06
thirty-six papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. Bilateral Free Trade Agreements (FTAs) for Trade Promotion: Boon or Bane for Pakistan? By Farhat Mahmood
  2. International trade cooperation's impact on the world economy By Métivier, Jeanne; Bacchetta, Marc; Bekkers, Eddy; Koopman, Robert Bernard
  3. Labour Market Power and the Dynamic Gains to Openness Reforms By Priyaranjan Jha; Antonio Rodriguez-Lopez; Adam Hal Spencer
  4. The economics of carbon leakage mitigation policies By Ambec, Stefan; Esposito, Federico; Pacelli, Antonia
  5. How is global commerce affecting the gender composition of employment? A firm-level analysis of the effects of exposure to gender norms via trade and FDI By Lennon Zaninovic, Carolina Bernardita; Schneebaum, Alyssa
  6. Non-tariff barriers and consumer prices: evidence from Brexit By Bakker, Jan; Datta, Nikhil; Davies, Richard; De Lyon, Joshua
  7. E-commerce and entrepreneurship for African Continental Free Trade Area (AfCFTA): A readiness conceptual framework By Makoza, Frank
  8. Offshoring and its impact on employment By Adriana Peluffo
  9. Sequentially Exporting Products across Countries By Facundo Albornoz; Héctor F. Calvo Pardo; Gregory Corcos; Emanuel Ornelas
  10. Measuring distortions in international markets: The rolling-stock value chain By OECD
  11. FDI and the growing wage gap in Mexican municipalities By Ibarra-Olivo, J. Eduardo; Rodríguez-Pose, Andrés
  12. Gender-Segmented Labor Markets and Trade Shocks By Goes, Carlos; Lopez-Acevedo, Gladys; Robertson, Raymond
  13. Bilateral modern services trade between India and Latin America and the Caribbean in the context of the COVID-19 pandemic By Agarwal, Prachi
  14. Exporting and Investment Under Credit Constraints By Kim Huynh; Robert Petrunia; Joel Rodrigue; Walter Steingress
  15. Exchange Rates, Tariffs and Prices in 1930s’ Britain By Chadha, J. S.; Lennard, J.; Solomou, S.; Thomas, R.
  16. The Value Added-Exports Puzzle and Global Value Chains By Zhe Chen; Yoshinori Kurokawa
  17. The Choice of Technology and International Trade By Gong, Binglin; Zhou, Haiwen
  18. Benefits and risks for Russian industries and individual enterprises from the implementation of trade and economic agreements of the CIS countries By Alexander Knobel; Yuriy Zaytsev; Kniaz Bagdasaryan; Marina Baeva; Vladimir Sedalishchev; Maria Kazaryan; Dmitriy Kuznetsov; Diana Mirakyan; Nikita Toropov
  19. New dawn fades: trade, labour and the Brexit exchange rate depreciation By Vieira Marques Da Costa, Rui; Dhingra, Swati; Machin, Stephen
  20. Growth and Risk: A View from International Trade By Pravin Krishna; Andrei A. Levchenko; Lin Ma; William F. Maloney
  21. Child Labor Standards in Regional Trade Agreements: Theory and Evidence By Ryan M. Abman; Clark C. Lundberg; John McLaren; Michele Ruta
  22. The Ukraine war and its food security implications in Sri Lanka By Thibbotuwawa, Manoj; Dissanayake, Nimesha; Niwarthana, Sachini
  23. The effect of skills acquired abroad by return migrants on social relations and quality of life in Cameroon By Gislain S. GANDJON FANKEM; Dieudonné TAKA; Sévérin TAMWO
  24. Who Learns More from Afar? Spatial Empirical Evidence on Manufacturing and Services By Nina Vujanović
  25. Measuring distortions in international markets: Below-market energy inputs By OECD
  26. Productive or Extractive Periphery? Russian Poland and Timber Exports to Germany in the Late Nineteenth and Early Twentieth Centuries By Jawad Daheur
  27. Exposure to OFDI and regional labour markets: evidence for routine and non-routine jobs in Great Britain By Gagliardi, Luisa; Iammarino, Simona; Rodríguez-Pose, Andrés
  28. Home or Away? Profit Shifting with Territorial Taxation By Ms. Li Liu; Dominika Langenmayr
  29. Go where the wind does not blow: Climate damages heterogeneity and future migrations By Lesly Cassin; Aurélie Méjean; Stéphane Zuber
  30. A probabilistic forecast of the immigrant population of Norway By Nico Keilman
  31. What draws investment to Special Economic Zones? Lessons from developing countries By Susanne A. Frick; Andres Rodriguez-Pose; ;
  32. The Value of a Green Card in the U.S. Marriage Market: A Tale of Chain Migration? By Bansak, Cynthia; Dziadula, Eva; Zavodny, Madeline
  33. Reshoring, nearshoring and developing countries By Pietrobelli, Carlo; Seri, Cecilia
  34. Can international mobility shape students' attitudes toward inequality? By Granja, Cintia; Visentin, Fabiana; Carneiro, Ana Maria
  35. International Capital Flow Pressures and Global Factors By Linda S. Goldberg; Signe Krogstrup
  36. Cross-Border Shopping: Evidence from Swiss Household Consumption By Frédéric Kluser

  1. By: Farhat Mahmood (Pakistan Institute of Development Economics)
    Abstract: Opening international trade has become a norm in policy design worldwide to promote long-term economic growth. Until 2000, multilateral trade negotiation was governed by the General Agreement of Tariff and Trade (GATTs) and its successors, the World Trade Organisation (WTO), which was the core mechanism in reducing crossborder trade barriers, especially those in terms of tariffs. Since the new millennium, the mechanism to open up international trade has changed.
    Keywords: Exports, Imports, FTA, South Asia, Pakistan
    Date: 2022
  2. By: Métivier, Jeanne; Bacchetta, Marc; Bekkers, Eddy; Koopman, Robert Bernard
    Abstract: In this study, we investigate three trade policy scenarios: i) the revival of multilateralism, ii) plurilateral cooperation, and iii) geopolitical rivalry. In the first scenario, both tariffs and NTMs are reduced on a multilateral basis. In the second scenario, varying groups of countries cooperate on specific topics, such as E-commerce and services. In the last scenario, two main blocks emerge: a Western block and an Eastern block. International cooperation breaks down between blocks, leading to an increase in tariffs and NTMs, with blocks of countries setting up their own set of rules. Our findings are based on simulations with the WTO Global trade Model which has a specific novel feature: the diffusion of ideas between countries as a by-product of trade. The simulations indicate that: (i) there is a lot at stake for global trade cooperation, with global real GDP increasing by 3.2% compared to the baseline under multilateral cooperation and decreasing by 5.4% under geopolitical rivalry; (ii) LDCs would gain the most from multilateralism (real GDP increases by 4.8%) due to technology spillover effects; (iii) under both "open" and "exclusive" plurilateral agreements on services, most regions are projected to gain, with larger gains to participants if the initiative is "open" than if it is "exclusive"; (iv) intermediate linkages in services sectors will be reinforced in all scenarios, except under geopolitical rivalry; (v) geopolitical rivalry leads to a 21 percentage points decrease in exports between Western and Eastern blocks from 46% to 25%; and (vi) the WTO has an important role to play in preserving a free trade environment for developing countries and LDCs. The simulations show that in a decoupling world, it would be essential for LDCs to continue trading with both Eastern and Western blocks.
    Keywords: Trade policy simulations, CGE modeling
    JEL: F13 F17
    Date: 2023
  3. By: Priyaranjan Jha; Antonio Rodriguez-Lopez; Adam Hal Spencer
    Abstract: We develop a dynamic general equilibrium framework with firm heterogeneity and monopsonistic labour markets, for quantification of the impact of trade and FDI liberalisation episodes. Firms make standard extensive margin investment choices into exporting and multinational statuses. The labour market features upward-sloping supply curves and love of variety in employment. These features interact with the variable-fixed cost tradeoff of outward activity. We calibrate the model to U.S. data and study the effect of reductions in tariffs and outward FDI taxes in both bilateral and unilateral contexts, examining steady state and transitional effects. We compare the predictions of this model with a more standard version with perfectly competitive labour markets. Our headline finding is that the model with labour market power gives substantially different quantitative estimates to the perfectly competitive version. For instance, a bilateral trade liberalisation gives welfare gains that are over 10 times larger in the presence of monopsony power. Significant quantitative differences persist with a variety of robustness exercises.
    Keywords: monopsonistic labour market, trade liberalisation, love of firm variety, dynamics, foreign direct investment, corporate taxation
    JEL: F12 F13 F16 F23 F40 H25
    Date: 2023
  4. By: Ambec, Stefan; Esposito, Federico; Pacelli, Antonia
    Abstract: Carbon leakage occurs when carbon-priced low-emission domestic products are replaced with high-emissions foreign products. In a trade model with endogenous emissions abatement, we investigate the impact of three policies aimed at mitigating carbon leakage: free emission allowances, Carbon Border Adjustment Mechanism (CBAM) and export rebates. Providing allowances for free does not alter the incentives to abate carbon emissions, but fosters the entry of more carbon intensive producers. It levels the “playing field” both domestically and internationally, and may even reverse the carbon leakage. In contrast, the CBAM levels the playing field only domestically, which may lead to an autarky equilibrium. To reverse the carbon leakage, the CBAM should be complemented with other policies, such as export rebates. The optimality of these policies depends on the geographical scope of carbon emissions. With trade-adjusted emissions, the CBAM is always welfare enhancing, while free allowances alone are not. We then formally characterize the optimal combination of the three policies. Lastly, we calibrate the model to simulate the effects of the CBAM recently proposed by the European Union. The policy, when accompanied with either free allowances or export rebates, reverses the carbon leakage in the cement and steel sectors, and increases welfare in almost all sectors.
    Keywords: Carbon pricing; trade; carbon leakage; CBAM, free allowances; export rebates
    JEL: F13 F18 H23 Q52 Q54 Q58
    Date: 2023–02–03
  5. By: Lennon Zaninovic, Carolina Bernardita; Schneebaum, Alyssa
    Abstract: Global firms have a higher share of female employees than domestic non-exporters. To explain this fact, this paper tests whether international trade and FDI are channels through which norms regarding gender (in)equality are transmitted from customers and investors to firms. We employ pooled cross-sectional data from 2007 - 2016 for around 28, 000 firms in 104 different countries. We compare global versus non-global firms in the same market to study the infuence of firms' exposure to gender norms in commercial partner countries. The results show a race to the top for low- and mid-level jobs and the opposite for top managerial positions.
    Keywords: globalization, international trade, FDI, gender, transmission of social norms
    Date: 2023–02
  6. By: Bakker, Jan; Datta, Nikhil; Davies, Richard; De Lyon, Joshua
    Abstract: Non-Tariff Barriers (NTBs) are the main policy impediment to international trade, yet little is known about their pass-through to prices. This paper exploits the Brexit trade policy shock to quantify how NTBs affect consumer prices and welfare. The increase in NTBs raised prices by 6%, implying a pass-through of 50-80%. Based on a standard welfare framework, we show households lost £5.84bn, domestic producers gained £4.78bn, and £1.06bn was lost through deadweight loss. Due to differences in food expenditure shares, households in the lowest decile experience a 52% higher increase in the cost of living than households in the top decile.
    Keywords: Brexit; policy; shocks; wellbeing; welfare; cost of living; non-tariff barriers
    JEL: E31 F13 F15 Q11
    Date: 2022–12–01
  7. By: Makoza, Frank
    Abstract: African governments have ratified the African continental free trade area (AfCFTA) to support elimination of tariffs and taxes on intra-African trade on goods, services and investment; and promote integration that can lead to socio-economic growth. This paper proposes a readiness conceptual framework of electronic commerce and entrepreneurship. The study highlighted factors that African countries may consider to fully reap the benefits of the African continental free trade area. The factors include technology, legal frameworks, infrastructure, social norms, culture, economy, politics and entrepreneurship. The proposed readiness conceptual framework can be validated in further studies. The study contributes towards literature on e-commerce and entrepreneurship in the context of AfCFTA.
    Keywords: African continental free trade area, e-commerce, e-readiness, entrepreneurship
    Date: 2023
  8. By: Adriana Peluffo (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía)
    Abstract: Usually, in public discussion and academia there is concern about increased integration in the world economy and its impact on employment. While there is a number of studies for developed countries for developing economies these studies are scarce. The aim of this work is to analyze the evidence of offshoring on the labor market for an emerging economy at the firm level. We analyze if there are heterogeneous effects of offshoring. To this aim, we take into account the level of income of the countries of origin of foreign inputs, the technological level of the importing sector, and the export status of offshoring firms. The data source for this work is an unbalanced panel of manufacturing firms for the period 1998-2008 merged to detailed administrative data from the Customs Direction. We estimate a dynamic model using a system generalized method of moments which allows to tackle with rigidities in the labor market as well as the likely endogeneity of the model. The whole picture that emerges seems to be that intermediate imports have a small impact on employment, and when the source is high or middle income countries the impact is positive mainly for firms in low technology intensive sectors while exporting firms and firms in high technology sectors are not affected.
    Keywords: offshoring, employment, economic impact of globalization
    JEL: F1 F6 J2
    Date: 2022–08
  9. By: Facundo Albornoz (University of Nottingham); Héctor F. Calvo Pardo (University of Southampton); Gregory Corcos (Ecole polytechnique); Emanuel Ornelas (Sao Paulo School of Economics-FGV)
    Abstract: Exploiting disaggregated data on French exporters, we show that firms expand their product scope and geographical presence sequentially. This process of internationalization is uneven over time, exhibiting more volatility early than later in the life cycle of exporters. Specifically, young exporters are particularly likely to exit, and if they keep exporting, to expand at the intensive and sub-extensive margins, doing so by widening product scope within a destination before enteringnew destinations. We also find that firms’ core products are particularly resilient despite being used to “test the waters” when entering additional countries. Existing models of firm export dynamics are not designed to explain these empirical regularities. We argue that they can be rationalized by a mechanism where new exporters are uncertain about the profitability of their products in different markets, but learn from their initial export experiences and then adjust their sales, number of products and destination countries accordingly.
    Keywords: Export dynamics, experimentation, uncertainty, multiproduct firms, market inter- dependence.
    JEL: F10 F14 D22 L25
    Date: 2023–02
  10. By: OECD
    Abstract: Government support to producers of rolling stock is raising concerns about possible market distortions and unfair competition. This report aims to quantify both the scale of government support and to identify the various ways in which governments have been supporting local rolling-stock producers at the expense of foreign competitors. Over the period 2016-20, governments provided about USD 5 billion to the sector, much of it in the form of government grants and income tax concessions. While not quantified, discriminatory practices in government procurement and competition enforcement, forced technology transfers, as well as non-market export credits may have also distorted global competition in the rail-supply industry. Similar to earlier OECD studies of government support in the aluminium and semiconductor value chains, this report helps shed light on the magnitude and ways in which governments subsidise the producers of materials and equipment they view as strategic, with a view to informing efforts to revisit global trade rules.
    Keywords: Competition, Procurement, Rail, Signalling, Subsidies, Trade
    JEL: F13 F23 H25 H81 L52 L62 O25
    Date: 2023–02–15
  11. By: Ibarra-Olivo, J. Eduardo; Rodríguez-Pose, Andrés
    Abstract: Inward foreign direct investment (FDI) has generally been linked to higher wages, but evidence remains sparse on the overall effects of FDI on average wages, the wage gap between skilled and unskilled labour, and inter-industry heterogeneity. We address these issues for Mexican municipalities and industries for a period of increasing FDI and sectoral change that saw growing wage inequality. By combining two non-experimental techniques we find that FDI in Mexico was associated with higher wages, mostly for skilled workers—but also for unskilled ones—and a widening gap between them. Effects vary both between and within industries depending on location, and they either wax or wane when the initial or incremental effects are considered.
    Keywords: foreign direct investment; industries; Mexico; municipalities; wage inequality
    JEL: R14 J01 N0
    Date: 2022–12–01
  12. By: Goes, Carlos (University of San Diego); Lopez-Acevedo, Gladys (World Bank); Robertson, Raymond (Texas A&M University)
    Abstract: This paper focuses on how gender segmentation in labor markets shapes the local effects of international trade. We first develop a theoretical framework that embeds trade and gender-segmented labor markets to show that foreign demand shocks may either increase or decrease the female-to-male employment ratio. The key theoretical result shows formally that the effects of trade on gender-segmented labor markets depend crucially on (a) the sectors that face the foreign demand shock; and (b) the domestic relevance of the foreign countries in which the demand shocks originate from. If the foreign demand shock from a relevant market happens in a female-intensive (male-intensive) sector, the model predicts that the female-to-male employment ratio should increase (decrease). We then use plausibly exogenous variation in the exposure of Tunisian local labor markets to foreign demand shocks and show that the empirical results are consistent with the theoretical prediction. In Tunisia, a country with a high degree of gender segmentation in labor markets, foreign-demand shocks have been relatively larger in male-intensive sectors. This induced a decrease in the female-to-male employment ratio, with households likely substituting female for male labor supply.
    Keywords: international trade, labor markets, gender, inequality
    JEL: F16 J16 O19
    Date: 2023–01
  13. By: Agarwal, Prachi
    Abstract: The Information Technology enabled Services sector (also referred to as modern services) has been one of the fastest growing segments of India’s exports to and foreign direct investment in Latin America and the Caribbean (LAC) over the past decade. This sector also showed significant resilience during the COVID-19 pandemic, as many Indian firms were able to reinforce their digital transformation, which strengthened their growth and export potential. India’s main comparative and competitive advantages are its large educated workforce, a developed Information and communication technologies (ICT) related infrastructure, and strong innovation performance in this sector. However, imports in this sector remain more restricted both in India and LAC than those in other sectors due to various regulations. There is also scope to increase access and use of modern services businesses and individuals alike in India and LAC.
    Date: 2022–12–16
  14. By: Kim Huynh; Robert Petrunia; Joel Rodrigue; Walter Steingress
    Abstract: We examine the relationship between firms’ performance and credit constraints affecting export market entry. The existing research assumes that variation in firms’ financial conditions identifies credit constraints. A critical assumption is that financial conditions do not affect real outcomes (performance, exporting, or investment). To relax this assumption, we focus on the direct effect of firms’ fundamentals and financial conditions on firms’ performance. This approach distinguishes between firms that choose not to export because it is unprofitable from firms that do not export because of binding credit constraints. Our empirical specification allows firms’ characteristics to enter both the selection into exporting and return from exporting regressions. The leverage response heterogeneity identifies the presence of credit constraints. Using administrative Canadian firm-level data, our findings show that new exporters (a) increase their productivity, (b) raise their leverage ratio and (c) increase investment. We estimate that 48 percent of Canadian manufacturers face binding credit constraints when deciding whether to enter export markets. Alleviating these constraints would increase aggregate productivity by 0.97–1.04 percentage points.
    Keywords: Econometric and statistical methods; Firm dynamics; International topics; Productivity
    JEL: F10 F14 F36 G20 G28 G32
    Date: 2023–02
  15. By: Chadha, J. S.; Lennard, J.; Solomou, S.; Thomas, R.
    Abstract: This paper investigates the degree of pass-through from import prices and tariffs to wholesale prices in interwar Britain using a new high-frequency micro data set. The main results are: (i) Pass-through from import prices and tariffs to wholesale prices was economically and statistically significant. (ii) Despite devaluation, import prices exacerbated deflation in the early 1930s because of the global slump in export prices. (iii) Rising protection, however, was a mild stimulus to prices during the shift to inflation.
    Keywords: Exchange rates, interwar, pass-through, prices, tariffs, United Kingdom
    JEL: E31 F13 N14
    Date: 2023–02–21
  16. By: Zhe Chen; Yoshinori Kurokawa
    Abstract: While most OECD countries experienced declines in manufacturing value added relative to GDP over 1970-2001, they have experienced increases in manufacturing exports relative to GDP during the same period. Bergoeing et al. (2004) documented this "value added-exports puzzle" and predicted that vertical specialization can explain it. Using the 1995-2018 data for 22 OECD countries and 17 manufacturing industries, we empirically investigate whether vertical specialization, or global value chain (GVC) participation, is a factor significantly affecting the puzzle. Our regressions show that the puzzle is stronger for countries and industries with the greater GVC backward linkage, while it is weaker for countries and industries with the greater GVC forward linkage. We also find that the puzzle is weaker for countries and industries that focus more on the upstream stage. Thus Bergoeing et al. (2004) were right, but we must be careful that the two measures of vertical specialization, the backward and forward GVC linkages, have the opposite effects.
    Date: 2023–02
  17. By: Gong, Binglin; Zhou, Haiwen
    Abstract: We study the impact of international trade on a firm’s technology choice in an infinite-horizon model. Banks engage in oligopolistic competition in providing capital for the manufacturing sector. Manufacturing firms also engage in oligopolistic competition and choose technologies with different levels of fixed and marginal costs. In the steady state, firms in a country with a larger market size or a more efficient financial sector choose more advanced technologies, and this country has a higher capital stock. The opening of international trade leads manufacturing firms to choose more advanced technologies and the steady-state capital stock increases.
    Keywords: International trade, technology choice, financial development, infinite-horizon model, two-stage oligopoly
    JEL: D43 F12 O14
    Date: 2023–02–01
  18. By: Alexander Knobel (The Russian Presidential Academy Of National Economy And Public Administration); Yuriy Zaytsev (The Russian Presidential Academy Of National Economy And Public Administration); Kniaz Bagdasaryan (The Russian Presidential Academy Of National Economy And Public Administration); Marina Baeva (The Russian Presidential Academy Of National Economy And Public Administration); Vladimir Sedalishchev (The Russian Presidential Academy Of National Economy And Public Administration); Maria Kazaryan (The Russian Presidential Academy Of National Economy And Public Administration); Dmitriy Kuznetsov (The Russian Presidential Academy Of National Economy And Public Administration); Diana Mirakyan (The Russian Presidential Academy Of National Economy And Public Administration); Nikita Toropov (The Russian Presidential Academy Of National Economy And Public Administration)
    Abstract: The CIS countries, or more broadly the former republics of the USSR, are effectively making a choice between European (EU) and Eurasian (EAEU) integration, which leads to certain benefits and risks for all CIS+ countries (including Ukraine and Georgia), especially for Russia. The cases of Ukraine, Georgia and Moldova are of primary interest. Termination of trade and economic cooperation, disruption of value chains, etc. entail a serious threat to industrial development for Russian industries and individual enterprises. Crisis phenomena such as the COVID-19 pandemic, for example, only exacerbate these trends. Great Britain’s departure from the EU (Brexit) at the end of January 2020 is also of research interest. The topics of the post-Soviet countries and their trade and economic cooperation with different countries have been studied by various authors since the collapse of the USSR. In the past ten years, there has been an increase in the activity of studying these problems, in connection with the development of the European Neighborhood Policy on the one hand and Eurasian integration on the other. Research by foreign and domestic authors can be distinguished into the following groups: 1) Analysis, including quantitative analysis, of various integration scenarios for the CIS+ countries. 2) The confrontation between European and Eurasian integrations, as well as the problems of the EAEU. 3) Problems of cooperation between Russia and the post-Soviet countries, including at the level of individual enterprises. However, the issue of assessing the risks and possible consequences at the enterprise level for the EAEU countries from the implementation of the agreements of the CIS member states remains insufficiently studied, especially taking into account the participation in value chains and the importance of industrial recovery after the COVID-19 pandemic, etc.
    Keywords: trade and economic relations, regional trade agreements (RTA), CIS, EAEU, post-Soviet space
  19. By: Vieira Marques Da Costa, Rui; Dhingra, Swati; Machin, Stephen
    Abstract: This paper studies consequences of the very large exchange rate depreciation occurring in June 2016 due to the UK electorate unexpectedly voting to leave the European Union. As news of a leave vote came in, the value of sterling plummeted, recording the biggest one day depreciation of any of the world’s four major currencies since the collapse of Bretton Woods. The prospect of Brexit really happening generated sizable differences in how much sterling depreciated against different currencies. Coupled with pre-referendum cross-country trade patterns, this generated variations in exchange rate depreciations facing businesses in different industries. The paper first considers revenue and cost channels operating through trade price responses, offering evidence of a cost shock from the price of intermediate imports rising by more in higher depreciation industries, but with no revenue offset from exports. Workers were impacted by the increased cost pressures facing businesses, not in terms of job loss but through relative real wage declines and stagnation for workers employed in industries facing larger depreciations.
    Keywords: Brexit; exchange rate depreciation; trade prices; labour outcomes
    JEL: J68 L52 P25
    Date: 2022–12–07
  20. By: Pravin Krishna; Andrei A. Levchenko; Lin Ma; William F. Maloney
    Abstract: This paper studies the cross-country patterns of risky innovation and growth through the lens of international trade. We use a simple theoretical framework of risky quality upgrading by firms under varying levels of financial development to derive two predictions. First, the mean rate of quality growth and the corresponding cross-sectional variance of quality growth in a country are positively correlated. Second, both the mean and variance of quality changes are positively correlated with the country's level of financial development. We then test these two hypotheses using data on disaggregated (HS10) bilateral exports to the United States. The patterns in the data are consistent with the theory. The mean and the variance of quality growth are strongly positively correlated with each other. Countries with greater financial depth are systematically characterized by higher mean and higher variance in the growth of product quality. Our findings suggest a mean-variance trade-off in product quality improvements along the development path. Increases in financial depth do not imply lower variability of changes in the product space.
    JEL: F14 O3 O4
    Date: 2023–02
  21. By: Ryan M. Abman; Clark C. Lundberg; John McLaren; Michele Ruta
    Abstract: We study the impact of child labor standards in Regional Trade Agreements (RTAs) on a variety of child labor market outcomes, including employment, education, and household inequality. We develop a stylized general equilibrium model of child labor in an economy open to international trade and consider the impact of RTAs with and without child labor bans. We empirically investigate the effects of these clauses in trade agreements in a broad international panel of 101 developing countries using harmonized survey microdata. Exploiting quasi-experimental methods to obtain plausibly causal estimates, we find that RTAs without child-labor bans lead to reductions in child employment and increases in school enrollment, particularly for older children aged 14--17. Child labor bans in RTAs perversely increase child employment among 14--17 year olds and decrease school enrollment for both young and older children. These effects appear to decrease inter-household income inequality through increased child earnings. Our findings are consistent with theoretical predictions from our model and the literature on child labor bans.
    JEL: F66 J13 O15
    Date: 2023–02
  22. By: Thibbotuwawa, Manoj; Dissanayake, Nimesha; Niwarthana, Sachini
    Abstract: The Ukraine War has had major implications for food security and food systems across the world given the important role both Russia and Ukraine play in global food, fertilizer, and energy markets. Russia and Ukraine together supply about 12% of global agricultural exports on a caloric basis and over 30% of global wheat exports.1 Fertilizer and energy markets experienced rising prices and supply disruptions as well. The Russia-Ukraine conflict heavily impacted food security in Sri Lanka which is dependent on imports from the Caspian region. The impact of this shock has been compounded for Sri Lanka which has been suffering from a severe economic crisis due to a lack of foreign reserves, a debt default, high inflation, import restrictions, and shortages of critical goods and services. These compound crises have halted Sri Lanka’s progress on economic development and its achievement of the SDGs. Progress had been significant with the share of undernourished population declining from 16.7% in 2001 to 3.4% in 2020.2 During the same period the prevalence of stunting declined from 20.6% to 16%.3 The prevalence of wasting among children under age five declined from 15.9% in 2000 to 15.1% in 2016. Sri Lanka was ranked 65th out of 116 countries on the Global Hunger Index and 77th out of 113 countries on the Global Food Security Index in 2022 suggesting the need for some improvements in the food system. The latest food security assessment by the World Food Program (WFP) notes that about 30% of the population of 22 million (6.26 Mn people) are food insecure.4 Further, most households are regularly employing food-based coping strategies such as eating less preferred and less nutritious food and reducing the amount of food they eat. Further, an estimated 200, 000 households are using emergency livelihood coping strategies that are likely to severely impact their income-generating activities and it is anticipated that more people are turning to these coping strategies as the crisis deepens. Against this backdrop, this policy brief explores the impacts of the evolving crisis in Ukraine on the nexus of poverty, agriculture, and food security in Sri Lanka and the possible avenues for mitigating the negative implica-tions of export restrictions, rising import costs, and inflation.
    Keywords: SRI LANKA; agriculture; armed conflicts; economic development; foreign trade; fertilizer industry; exports; food security; imports; inflation; war
    Date: 2023
  23. By: Gislain S. GANDJON FANKEM (Yaoundé, Cameroon); Dieudonné TAKA (Douala, Cameroon); Sévérin TAMWO (Yaoundé, Cameroon)
    Abstract: This article fills the lack of work on the link between return migration and social cohesion in the country of origin of migration. For the first time, we assess the effect of skills acquired abroad by return migrants on social relations and quality of life in Cameroon using original survey data from the Institute of Demographic Training and Research. The main results, based on a probit model, show that formal and informal competences acquired abroad reduce the likelihood that return migrants will improve social relations and increase the probability that they will increase quality of life in their home country. These results remain robust to the inclusion of return migrants from African and non-democratic countries. Correcting for the endogeneity of skills acquired abroadby two-stage probit model with instrumental variablesdoes not alter these conclusions. Our results seem to corroborate the hypothesis that migration contributes to the transfer of norms and practices from destination countries to countries of origin.
    Keywords: Return migrants; skills; social relations; quality of life; Cameroon
    JEL: F22 O55 C3
    Date: 2023–01
  24. By: Nina Vujanović (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: This paper investigates spatial dependence of FDI knowledge spillovers in manufacturing and services using spatial panel techniques applied to the 2006-2014 Bureau Van Dijk’s Amadeus firm-level dataset for Croatia and Slovenia. The paper finds diverse results across the two sectors. The distance between regions does not hinder the absorption of foreign knowledge in manufacturing despite the strong market-stealing effects operating within regions as well as spatially. On the other hand, FDI knowledge spillovers decrease service productivity within regions, because of market-stealing effects operating strongly across a smaller geographical scale. However, its impact is lost as knowledge spillovers from more distant neighbours are accounted for, because the poaching of local labour is impeded by distance due to rising costs of labour mobility. The research indicates that for knowledge absorption, geographic distance plays differing roles in manufacturing and services, due to the different nature of the production process.
    Keywords: knowledge spillovers, FDI, spatial econometrics, manufacturing, services
    JEL: F23 L6 L8 L2 O3 O4
    Date: 2023–02
  25. By: OECD
    Abstract: Government support for industrial firms can come in many different forms and through a range of channels, varying in complexity. A particularly challenging form of support is energy inputs offered to industrial producers at below-market prices. To improve understanding about the scope and scale of such support, this report examines an illustrative sample of 33 companies and their subsidiaries operating in energy-intensive industries, namely aluminium smelting, steelmaking, chemicals (including fertilisers), and cement. Most of the energy subsidies identified appear to concern the provision of natural gas and electricity at below-market rates, resulting in an average subsidy of USD 0.4-1.3 per million British thermal units and USD 0.02-0.03 per kWh, respectively, over the period 2010-20. In some cases, estimates indicate that subsidies are a multiple of firms’ energy costs, suggesting a sizable impact on firms’ profits and operating margins. The results have important policy implications for efforts to better discipline industrial subsidies in the WTO and elsewhere, notably in relation to how to ensure policy transparency in a context where large energy providers tend to be majority owned by governments.
    Keywords: Electricity, Fossil Fuels, Natural gas, State enterprises, Subsidies, Trade
    JEL: F13 F23 H25 L52 L60 L94 O25 Q41
    Date: 2023–02–15
  26. By: Jawad Daheur (CERCEC - Centre d'études des mondes russe, caucasien et centre-européen - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique)
    Abstract: Researchers have long puzzled over the clearly paradoxical nature of Russian Poland's trading pattern from the point of view of the centre-periphery model. Located on the Western edge of the Russian Empire, this territory formed a periphery under the tight political domination of Saint Petersburg but, at the same time, it was a quickly developing zone, supplying the Russian heartland with manufactured goods. Challenging the idea of a full redirection of the regional economy towards the Russian market, the article reassesses the territory's foreign trade and shows that extractive activity for Western markets had not completely disappeared. There is certainly at least one notable exception to the standard view: the timber trade, which appears to have followed a separate path compared with other rural goods and was associated with huge social and environmental costs. Made possible both by the increasing pressure from German capital and a series of political decisions by Russian rule, these massive exports were part of a new dynamic, parallel and opposite to this territory's industrialisation: the advance of a resource frontier that made Russian Poland a timber reserve for a Germany that had become the leading industrial power on the continent.
    Date: 2022
  27. By: Gagliardi, Luisa; Iammarino, Simona; Rodríguez-Pose, Andrés
    Abstract: This article explores the role of subnational geography in the analysis of the consequences of Outward Foreign Direct Investment (OFDI) for workers performing different typologies of jobs. We qualify jobs according to their knowledge content, degree of tradability and response to agglomeration economies. While the former two dimensions are key to signal the intensity to OFDI exposure of different typologies of jobs, the latter contributes to explain the unequal spatial distribution of benefits and losses from OFDI in terms of job creation/destruction. We theorise areas that are more severely exposed to OFDI experience job losses in routine occupations, whereas they do not necessarily benefit from job creation in non-routine jobs. To test our hypothesis, we make use of a balanced panel dataset at the local labour market level, exploiting variations in OFDI exposure and in the job composition of local areas. Our findings—robust to numerous checks, including unobserved global and local trends—indicate that job losses concentrate in regions that were more exposed to OFDI based on their initial industry mix, and affect individuals performing mainly routine tasks. In these same areas, however, no significant effects are found when looking at job creation in non-routine occupations.
    Keywords: OFDI; local labour markets; Routine and non-routine occupations; Home impact of MNEs
    JEL: R14 J01
    Date: 2021–09–01
  28. By: Ms. Li Liu; Dominika Langenmayr
    Abstract: In 2009, the United Kingdom abolished the taxation of profits earned abroad and introduced a territorial tax system. Under the territorial system, firms have strong incentives to shift profits abroad. Using a difference-in-differences research design, we show that the profitability of UK subsidiaries in low-tax countries increased after the reform compared to subsidiaries of non-UK multinationals in the same countries by an average of 2 percentage points. This increase in profit shifting also leads to increases in measured productivity of the foreign affiliates of UK multinationals of between 5 and 9 percent.
    Keywords: profit shifting; territorial tax system; multinational firms; shifted profit; UK multinational; UK subsidiary; difference-in-differences research design; Total factor productivity; Transnational corporations; Corporate income tax; Income; Wages; Global
    Date: 2022–09–09
  29. By: Lesly Cassin (ENSAIA – Université de Lorraine – Bureau d'Economie Théorique Appliqué); Aurélie Méjean (Centre International de Recherche sur l'Environnement et le Développement); Stéphane Zuber (Université Paris 1 – CNRS – Centre d'Economie de la Sorbonne/Paris School of Economics)
    Abstract: In the context of climate change, migration can be considered as an adaptation strategy to reduce populations' exposure to climate damages. Those damages are very heterogeneous across regions. In this paper, we study migration induced by climate change damages. To do so, we estimate the socio-economic determinants of migration, focusing on economic damages. We then model endogenous migration in an integrated assessment model based on those estimates. We highlight the importance of the heterogeneity of the damages distribution to explain migration fows due to climate change. We find that high levels of climate damages globally do not necessarily induce large climate migration. Rather, large differences in exposure between regions may lead to substantial migration.
    Keywords: Climate Change, Damage, Migration, Integrated Assessment Model,
    JEL: Q51 Q54 J11 F22
    Date: 2023–02
  30. By: Nico Keilman (Statistics Norway)
    Abstract: We present a probabilistic forecast for the immigrant population of Norway and their Norwegian-born children (“second generation”) broken down by age, sex, and three types of country background: 1. West European countries plus the United States, Canada, Australia, and New Zealand; 2. East European countries that are members of the European Union; 3. other countries. First, we compute a probabilistic forecast of the population of Norway by age and sex, but irrespective of migration background. The future development of the population is simulated 3 000 times by stochastically varying parameters for mortality, fertility and international migration to 2060. We add migrant group detail using stochastically varying random shares to split up each result from the previous step into six sub-groups with immigration background, and one for the non-immigrants. The probabilistic forecast is calibrated against the Medium Variant of Statistics Norway’s official population projection.
    Keywords: stochastic forecast; immigrants; second generation; random share method
    JEL: C15 J11
    Date: 2023–01
  31. By: Susanne A. Frick; Andres Rodriguez-Pose; ;
    Abstract: Special Economic Zones (SEZs) are a popular policy tool for the promotion of economic development. However, questions remain about their economic contribution and about what aspects of SEZ policies are most relevant to investors. This article sheds light on these issues by comparing SEZs across Africa, Asia and Latin America. We find that, while investment decisions by foreign companies are driven by market access, political stability and low labour costs, adequate SEZ policies facilitate the attraction of investment. A good industrial infrastructure together with a strategic location and service provision within the zones draw investment. Fiscal incentives, by contrast, have a limited influence on investment decisions.
    Keywords: Special Economic Zones, inward investment, industrial policy, developing countries, FDI location decision
    JEL: F21 O14 O24 L52
    Date: 2023–02
  32. By: Bansak, Cynthia (St. Lawrence University); Dziadula, Eva (University of Notre Dame); Zavodny, Madeline (University of North Florida)
    Abstract: This study examines the impact of having a clear path to lawful permanent resident status, or a "green card, " and naturalized citizenship on marital status and spousal characteristics among Chinese immigrants in the United States. A series of U.S. policy changes in the early 1990s made all mainland Chinese immigrants already present in the country eligible for a green card. We examine the effect of those policy changes on Chinese immigrants' marriage market outcomes relative to other East Asian immigrants. Using 1990 and 2000 U.S. Census data, we find that the share of Chinese immigrants who are married increased after they became automatically eligible for a green card. In particular, highly educated Chinese immigrants became relatively more likely to be married with a spouse living with them and relatively less likely to be married with a spouse living elsewhere. This pattern suggests that some Chinese spouses immigrated after their husband or wife received legal status, or spousal chain migration occurred. We also find that highly educated Chinese immigrants benefited in the marriage market in terms of spousal education and earnings, but less-educated Chinese immigrants did not. Meanwhile, less-educated Chinese-born women became relatively more likely to marry a U.S. native.
    Keywords: immigration, marriage markets, assortative matching, legal status, China
    JEL: J12 J15 K37
    Date: 2023–01
  33. By: Pietrobelli, Carlo; Seri, Cecilia (RS: GSBE other - not theme-related research, Mt Economic Research Inst on Innov/Techn)
    Abstract: This paper discusses the concepts of reshoring and nearshoring that are gaining increasing popularity. We contribute to the literature in three main ways. First, building on previous theories we define a theoretical framework and consider how recent developments – COVID-19 and Industry 4.0 technologies – may impact on these patterns. Secondly, we process some preliminary evidence to test whether Latin American and Caribbean economies are indeed participating in this reshoring trend. Thirdly, we propose a measure of “Reshoring Readiness”, to assess whether Latin American countries appear to be ready to host relocations and benefit from them. Overall, we find limited evidence of nearshoring to the region so far, except for Mexico, and we highlight strengths and weaknesses of the region for attracting and benefitting from future relocations.
    JEL: F21 F23 L24 O16
    Date: 2023–01–16
  34. By: Granja, Cintia (RS: GSBE other - not theme-related research, Mt Economic Research Inst on Innov/Techn); Visentin, Fabiana (RS: GSBE other - not theme-related research, Mt Economic Research Inst on Innov/Techn); Carneiro, Ana Maria
    Abstract: In this study, we examine the impact of international mobility programs on students’ attitudes toward inequality, focusing on two dimensions: preference and perception of inequality. To provide causal evidence, we exploit unique survey data about more than a thousand students from a well-known and internationalized Brazilian university. Using Propensity Score Matching to construct an artificial comparison group, we find that going abroad does not affect students’ preference to reduce within-country inequality in Brazil. Still, international mobility affects students’ salary preferences, with mobile students expressing their preferences for favoring a raise in salaries for high-skilled jobs. Results also show that mobility affects how individuals perceive current inequality, as students who participate in mobility programs believe within-country inequality is smaller than their non-mobile counterparts. Our analysis presents empirical evidence to reflect on the role of international student mobility, providing insights to policymakers engaged in understanding their effects.
    JEL: D31 D63 I24 O15
    Date: 2023–01–02
  35. By: Linda S. Goldberg; Signe Krogstrup
    Abstract: The risk sensitivity of international capital flow pressures is explored using a new Exchange Market Pressure index that combines pressures observed in exchange rate adjustments with model-based estimates of incipient pressures that are masked by foreign exchange interventions and policy rate adjustments. The sensitivity of capital flow pressures to risk sentiment, including for so-called safe-haven currencies, evolves over time, varies significantly across countries, and differs between normal times and extreme stress events. Across countries, risk sensitivities and safe-haven status are associated with self-fulfilling exchange rate expectations and carry trade funding currencies. In contrast, association with more traditional macroeconomic country characteristics is weak.
    Keywords: exchange market pressure; risk aversion; safe haven; capital flows; exchange rates; foreign exchange interventions; global financial cycle
    JEL: F32 G11 G20
    Date: 2023–02–01
  36. By: Frédéric Kluser
    Abstract: Cross-border shopping allows purchasing comparable goods at lower prices abroad. Meanwhile, it can reduce domestic consumption, sales, and tax collection. During the Covid-19 pandemic, the Swiss government closed all national borders to mitigate the virus's spread, thereby prohibiting cross-border shopping. I exploit the random timing of this policy using data on 600 million household-level transactions from the largest Swiss retailer to identify patterns in cross-border shopping. I find that grocery expenditures increased by 10-15% in border regions. Households drive for up to 70 minutes to a cross-border location, but the distance decay function is non-linear and marginal costs of traveling become negligible after 40 minutes.
    Keywords: economic geography, consumption, consumption access, consumption inequality, spatial competition
    JEL: R1 R2 L14
    Date: 2023–02

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