nep-int New Economics Papers
on International Trade
Issue of 2023‒03‒27
37 papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. Trade in Times of Uncertainty By Anna Matzner; Birgit Meyer; Harald Oberhofer
  2. Inventory, Sourcing, and the Effects of Trade Costs: Theory and Empirical Evidence By Chris Muris; Horst Raff; Nicolas Schmitt; Frank Stähler
  3. The Globalization-Inequality Nexus: A Comparative Study of Developed and Developing Countries By Md Shah Naoaj
  4. Economic Impact of Tennessee Forest Product Exports in 2021 By Muhammad, Andrew; Hellwinckel, Chad M.; Nzayiramya, Savant; Taylor, Adam
  5. Foreign Banks and Firms' Export Dynamics: Evidence from China's Banking Reform By Ana P. Fernandes; Jing-Lin Duanmu
  6. Is Taiwan’s New Southbound Policy Effective in the Global Supply Chain? By Chen, Chien-Hsun
  7. Measuring Domestic Factor Content in Bilateral and Sectoral-Level Trade Flows By Zhi Wang; Shang-Jin Wei; Kunfu Zhu
  8. Economic Sanctions and Trade Flows in The Neighbourhood By Vincenzo Bove; Jessica Di Salvtore; Roberto Nisticò
  9. Does Similarity in Philippine FTAs Matter in Trade? By Quimba, Francis Mark A.; Barral, Mark Anthony A.
  10. Analyzing Filipinos’ Openness to Trade Partnerships and Globalization Using Sentiment Analysis By Quimba, Francis Mark A.; Barral, Mark Anthony A.
  12. Climbing the Export Ladder: Government Support for Korean Defense Exports and the Path to Becoming a Big Four Exporter By Jang, Won-Joon; Song, Jae Pil; Kim, Mi Jung
  13. Estimating Consumer Surplus Resulting from Lower Cross-Border E-Commerce Prices By Kim, Sukkyung
  14. Exploring European Regional Trade By Marta Santamaría; Jaume Ventura; Ugur Yesilbayraktar
  15. The role of national development institutions in Russian export diversification By Knobel Alexander; Kuznetsov Dmitry; Loshchenkova Anna
  16. The Effective Rate of Protection in an Input-Output Framework By Muhammad Zeshan
  17. Automation, Global Value Chains and Functional Specialization By Lionel Fontagné; Ariell Reshef; Gianluca Santoni; Giulio Vannelli; Lionel Gérard Fontagné
  18. Foreign Demand, Developing Country Exports, and CO2 Emissions: Firm-Level Evidence from India By Hélène Ollivier; Geoffrey Barrows
  19. Spatial Production Networks By Costas Arkolakis; Federico Huneeus; Yuhei Miyauchi
  20. Beware the Side Effects: Capital Controls, Trade, Misallocation and Welfare By Eugenia Andreasen; Sofía Bauducco; Evangelina Dardati; Enrique G. Mendoza
  21. How Does Immigration Affect Housing Costs in Switzerland? By Helfer, Fabienne; Grossmann, Volker; Osikominu, Aderonke
  22. A Study of Supply Chains of Korean Firms in Vietnam Based on Business Survey Data (2022) By Kim, Dongsoo; Sakong, Mok; Park, Byungyul; Lee, Eun-Song
  23. Effects of Sustainable Monetary and Fiscal Policy on FDI Inflows to EMDE Countries By Bruno Pires Tiberto; Helder Ferreira de Mendonça
  24. Does trade integration imply growth in Latin America? Evidence from a dynamic spatial spillover model By F. Blasques; P. Gorgi; S. J. Koopman; J. Sampi
  25. Online social integration of migrants: evidence from Twitter By Ji Su Kim; Soazic Elise Wang Sonne; Kiran Garimella; André Grow; Ingmar G. Weber; Emilio Zagheni
  26. Assessing Digital Leadership: Is the EU Losing out to the US? By Dario Guarascio; Roman Stöllinger
  27. Does offshoring shape labor market imperfections? A comparative analysis of Belgian and Dutch firms By Sabien Dobbelaere; Catherine Fuss; Mark Vancauteren
  28. Crossing Borders: Labor Market Effects of European Integration By Hannah Illing
  29. [WTO Case Review Series No.41] Canada – Tariff Quota Allocation for Dairy Products (CDA-USA-2021-31-01) ― Interpretative Standard and Use of Judicial Economy in FTA State-to-State DS ― (Japanese) By SHIMIZU Mari
  30. Prospects for Taiwan’s Outward Investment in China By Chen, Chien-Hsun
  31. Towards a Pan-African Approach to Food Security By Hafez Ghanem
  32. The EU's open strategic autonomy in the field of pharmaceuticals: Overcoming import dependencies for antibiotics through the EU authority HERA By Bayerlein, Michael
  33. Beasts of Burden, Trade, and Hierarchy: The Long Shadow of Domestication By Andreas Link
  34. Immigration, The Long-Term Care Workforce, and Elder Outcomes in the U.S. By David C. Grabowski; Jonathan Gruber; Brian McGarry
  35. 미중 전략경쟁 시대 지정학적 리스크와 경제안보(Geopolitical Risk in the Era of U.S.-China Strategic Competition and Economic Security) By Heo, Jai Chul; Yeon, Wonho; Kim, Sangbae; Kim, Younkyoo; Kim, Heungkyu; PAK, Seong Bin; Lee, Seungjoo; LEE, Jungoo; Lee, Wang Hwi
  36. FOREIGN AID AND ECONOMIC GROWTH IN SUB-SAHARAN AFRICAN COUNTRIES By Santos Bila; Mduduzi Biyase; Matias Farahane; Thomas Udimal
  37. Regional market integration within the AfCFTA to further agri-food transformation and food security - The case of the Republic of Madagascar By Isabelle Tsakok

  1. By: Anna Matzner; Birgit Meyer; Harald Oberhofer
    Abstract: This paper analyses the direct and indirect trade volume and trade cost effects of uncertainty on international trade and economic welfare using a structural gravity framework for a panel of 97 developed and developing countries from 2000 to 2018. Our results suggest that an increase in unilateral uncertainty affects average trade costs in a heterogeneous manner, depending on whether the uncertainty originates from the importing or exporting country. Moreover, using a cross-sectional gravity approach, we show that an uncertainty shock directly reduces cross-border trade flows. The paper illustrates the suitability of the proposed modeling approach by means of two counterfactual scenario analyses in which we calculate the general equilibrium trade and welfare effects of uncertainty induced by the unexpected outcome of the Brexit referendum in 2016 and the outbreak of the COVID-19 pandemic in 2020.
    Keywords: international trade, trade costs, gravity, uncertainty, counterfactual scenario, analysis, Brexit, Covid-19
    JEL: F13 F14 F42 E60
    Date: 2023
  2. By: Chris Muris; Horst Raff; Nicolas Schmitt; Frank Stähler
    Abstract: We develop a dynamic model of inventory investment and trade to examine how firms adjust to changes in international trade costs when facing a risk of stockouts due to demand uncertainty and order lead times for imports. We study two strategies firms may use to avoid stockouts, namely holding inventories of imports, and engaging in dual sourcing. Both strategies are shown to magnify the protective effects of trade costs. Using transaction-level data for a U.S. steel wholesaler experiencing an episode of Section-201 tariffs, we find strong evidence consistent with this magnification effect. Higher tariffs are shown to significantly reduce both the inventory-sales and the import-sales ratios, as the firm adjusts its stockout avoidance strategies.
    Keywords: international trade, import tariff, inventory, dual sourcing, stockout avoidance
    JEL: F12 L81
    Date: 2023
  3. By: Md Shah Naoaj
    Abstract: This study examines the relationship between globalization and income inequality, utilizing panel data spanning from 1992 to 2020. Globalization is measured by the World Bank global-link indicators such as FDI, Remittance, Trade Openness, and Migration while income inequality is measured by Gini Coefficient and the median income of 50% of the population. The fixed effect panel data analysis provides empirical evidence indicating that globalization tends to reduce income inequality, though its impact varies between developed and developing countries. The analysis reveals a strong negative correlation between net foreign direct investment (FDI) inflows and inequality in developing countries, while no such relationship was found for developed countries.The relationship holds even if we consider an alternative measure of inequality. However, when dividing countries by developed and developing groups, no statistically significant relationship was observed. Policymakers can use these findings to support efforts to increase FDI, trade, tourism, and migration to promote growth and reduce income inequality.
    Date: 2023–02
  4. By: Muhammad, Andrew; Hellwinckel, Chad M.; Nzayiramya, Savant; Taylor, Adam
    Abstract: U.S. forest product exports were negatively impacted by the U.S. trade war with China in 2018 and 2019, and the COVID-19 pandemic in 2020. Muhammad and Taylor (2020) note that the pandemic had a significant impact on U.S. and Tennessee forest product exports due to supply and demand disruptions in the global market for finished wood products (e.g., furniture) and the interrelated market for raw materials and inputs (e.g., logs and lumber). These effects were in addition to the negative impact of China’s retaliatory tariffs on U.S. timber (Muhammad et al., 2022). In 2021, U.S. companies expected a recovery due to the U.S. Phase One Trade Agreement with China signed on January 2020, which included exemptions from related retaliatory tariff for forest products shipped to China (Inouye, 2020). In addition, the lifting of pandemic-imposed measures such as port closures and shutdowns in construction and manufacturing suggested a recovery for U.S. exports overall (Susskind and Vines, 2020). In this report, we focus on the post-pandemic period and its impacts on Tennessee forest product exports. We examine the export changes in 2021 (relative to 2020) across destination countries and product categories, and further assess the full economic impact of export sales on income and jobs at the state level. The impacts of the trade war and the COVID-19 pandemic on U.S. and Tennessee forestry exports have been discussed in previous reports (Muhammad and Taylor, 2020; Muhammad and Smith, 2020; and Muhammad et al., 2022). Forest product exports from 2018 to 2021 at the national, regional and state level are reported in Table 1. From 2018 to 2020, U.S. forest product exports decreased by $2.2 billion. In 2021, however, exports increased by $2.1 billion when compared to the previous year. The increase was mostly in southern states ($829 million), followed by Western states ($677 million). The gains in 2021 were a welcomed recovery from the decrease in exports the previous years.
    Keywords: Demand and Price Analysis, International Relations/Trade, Resource /Energy Economics and Policy
    Date: 2023–02–24
  5. By: Ana P. Fernandes (Department of Economics, University of Exeter); Jing-Lin Duanmu (Department of Economics, University of Exeter)
    Abstract: This paper investigates how banking integration affects export dynamics. To estimate the causal link, we exploit the phased liberalization of the Chinese banking industry to foreign competition across cities, based on WTO accession commitments, and use transaction-level data for all Chinese exporters. Following deregulation of foreign banks' local-currency lending, the increased local presence of foreign banks from the importing country raises export entry and initial sales to the same country for firms in the city, but has no effect on survival or growth. The effects are significantly more pronounced for firms in industries with less collateralizable assets and those exporting riskier goods. The results uncover particular channels for banking integration to facilitate exports, and are consistent with foreign banks having an informational advantage in screening export projects, relying less on collateral for their lending decisions, and in reducing export risk for firms exporting to the banks' country.
    Keywords: banking deregulation, exports, export dynamics, export risk, financial constraints, financial globalization, foreign banks, knowledge spillover, local-currency lending, uncertainty
    JEL: F10 F14 F36 G20 G28 G32
    Date: 2023–03–14
  6. By: Chen, Chien-Hsun
    Abstract: The emergence of the international fragmentation of production has led to structural changes in world trade. Trade in intermediate goods has turned out to be an important part of world trade, with an emphasis on the information and communications technology (ICT) sector in particular. Economic interdependence within the East Asia region indicates that this region as a whole is gradually being transformed into a single trading bloc, with a pronounced increase in the intensity of intra-regional trade. In terms of the global supply chain, China is now the nexus of a production network involving most countries in Asia and a final export market for the East Asia region. Indeed, China has become a regional hub for supply chain trade. However, China’s position within the global supply chains is changing. China has become more competitive in intermediate goods due to industrial upgrading. The New Southbound Policy proposed by the Tsai administration is based on four principles, namely, economic cooperation, special talent exchange programs, resource sharing and regional integration, and is aimed at deepening economic and cultural links with 16 ASEAN and South Asian countries, as well as with Australia and New Zealand. In terms of the political and economic viewpoint, the goal of the New Southbound Policy is to keep Taiwan from becoming overly dependent on a single market (e.g., China), and to seek to establish bilateral economic partnerships with targeted countries to support a New Model for Economic Development.
    Keywords: Taiwan’s New Southbound Policy; global supply chain; international fragmentation of production
    JEL: F13 F15 F2 F21 F23
    Date: 2023–03–07
  7. By: Zhi Wang; Shang-Jin Wei; Kunfu Zhu
    Abstract: Measuring country origins of factor content in bilateral or sector-level exports is important to understand evolution of regional and global value chains and the roles of individual country-sectors in these chains. This paper proposes a method to distinguish between measures based on backward and forward linkages and between net and gross factor content. It is consistent with the System of National Account Standard and has the adding-up property. In comparison, these properties do not hold for the “hypothetical extraction method” proposed by Los et al. (2016). We show a number of examples involving disaggregated trade in which the two methods diverge.
    JEL: F10
    Date: 2023–02
  8. By: Vincenzo Bove (University of Warwick); Jessica Di Salvtore (University of Warwick); Roberto Nisticò (Università di Napoli Federico II, CSEF and IZA)
    Abstract: We investigate the effect of economic sanctions on trade flows in countries sharing a border with sanctioned states. According to trade models, sanctions are expected to reduce trade flows as they disrupt established trading routes and economic relationships with suppliers and customers. However, there may also be instances where countries circumvent trade restrictions by clandestinely exchanging goods with sanctioned countries across the border and trading on their behalf, leading to an increase in imports and/or exports. To shed light on this issue, we employ a combination of large-N panel data analysis and comparative case studies using the synthetic control method. We find that, in the aggregate, neighbouring countries experience economic costs as sanctions disrupt trade. Yet, case studies uncover heterogeneity in countries’ responses, with some cases exhibiting an increase in trade flows. We discuss possible explanations for these outcomes in the case-study analysis.
    Keywords: Economic sanctions; trade; sanctions-busting; land neighbours; smuggling; synthetic control method.
    Date: 2023–02–22
  9. By: Quimba, Francis Mark A.; Barral, Mark Anthony A.
    Abstract: This study seeks to understand the design of the Japan-Philippines Economic Partnership Agreement and European Free trade Association (EFTA), notably the similarities with other free trade agreements (FTAs) of Japan and EFTA-member countries, respectively, and how these similarities affect Philippine trade. To do this, the study proposes using text-of-trade-analysis, that is, text analysis employing text-as-data. The paper demonstrates the application of text analysis to complement the conventional methods of assessing the impacts of trade agreements. The results reveal that similarity across trade agreements, both at document and chapter or topic-specific provisions (e.g., trade in goods, rules of origin, strong references to sustainable development) may influence and encourage trade. Comments to this paper are welcome within 60 days from the date of posting. Email
    Keywords: EFTA-PH FTA;Cosine LSA;Export;Jaccard;Free Trade Agreements;PJEPA;Non-Tariff Measures;Rules of Origin;Sustainable Development;Text Analysis;Similarity;Trade in Goods
    Date: 2022
  10. By: Quimba, Francis Mark A.; Barral, Mark Anthony A.
    Abstract: Empirical evidence points to globalization being favorable for a nation’s growth and development. For the Philippines, trade openness and foreign portfolio helped increase per capita GDP as investment and productivity improved. With trade openness and globalization, nations share and gain access to knowledge and technology, inputs of lower costs, new markets, and talents, which improve domestic economic processes. Over the years, however, skepticism about globalization emerged, which affects governments’ foreign strategies and policies and, in turn, the realization of intended benefits. With respect to RCEP, which the country signed in 2020, the Philippines is yet to ratify the deal after clamors to delay or reject the deal. Considering the opposing views, this paper aims to analyze Filipino’s openness to globalization and trade partnerships using text mining and sentiment analysis to detect evidence suggesting prevailing perspectives towards these issues. In general, the paper finds favorable sentiments toward globalization and trade openness. This study demonstrates the potential of understanding moods and sentiments toward policy to provide distinctive explanatory power that can be used in harmonizing differences in opinions across several domestic and international issues. Comments to this paper are welcome within 60 days from the date of posting. Email
    Keywords: globalization;international trade;RCEP;sentiment analysis;trade openness
    Date: 2022
  11. By: BIANCARDI Daniele (European Commission - JRC); MARTINEZ CILLERO Maria (European Commission - JRC); NARDO Michela (European Commission - JRC)
    Abstract: This note presents the latest trends in the investment behaviour of multinational enterprises focusing on non-EU (foreign) investors . It looks at merger and acquisition (M&A) deals and other equity investments of at least 10% of capital of the target company in the EU, as well as at greenfield projects.
    Keywords: FDI investments, Cross-border investments, Greenfields, Merger and Acquisitions
    Date: 2023–01
  12. By: Jang, Won-Joon (Korea Institute for Industrial Economics and Trade); Song, Jae Pil (Korea Institute for Industrial Economics and Trade); Kim, Mi Jung (Korea Institute for Industrial Economics and Trade)
    Abstract: Korean defense exports have grown at a higher rate than anywhere else in the world in the five year period from 2017 to 2021, exploding by 177 percent and positioning Korea as the world’s eighth-largest defense exporter. Moreover, if after final accounting Korean defense exports came to more than USD 17 billion in 2022, Korea would in fact be the world’s fourth-largest arms exporter, surpassing the UK, Italy, China, and Germany. This paper analyzes recent defense market trends and prospects, compares and analyzes the Korean defense export support system with those in place in major defense exporters such as the United States, France, and Israel, and identifies a path by which Korea can become one of the so-called Big Four major global arms exporters. Keywords: Korea, defense, defense exports, arms exports, weapons systems, weapons systems exports, global defense market, Big Four, NATO, COVID-19, US-China conflict, National Defense Authorization Act, global defense industry, defense spending, Redback, FA-50, K-2 MBT, K-9 howitzer, Cheonmu MRL, M-SAM
    Keywords: Korea; defense; defense exports; arms exports; weapons systems; weapons systems exports; global defense market; Big Four; NATO; COVID-19; US-China conflict; National Defense Authorization Act; global defense industry; defense spending; Redback; FA-50; K-2 MBT; K-9 howitzer; Cheonmu MRL; M-SAM
    JEL: F10 F13 F14 F17 F18 F23 F32 F50 F51 F52 F55 F59 H56 H57 H61
    Date: 2023–02–28
  13. By: Kim, Sukkyung (Korea Institute for Industrial Economics and Trade)
    Abstract: Cross-border B2C e-commerce is growing rapidly in Korea. According to data released by Statistics Korea, Korea’s total retail import value from the cross-border e-commerce trade in 2017 stood at about KRW 2.2 trillion, while in 2021 it reached KRW 5.1 trillion.2 The total retail value of consumer goods in 2017 and in 2021 was KRW 440.3 trillion and KRW 518.5 trillion, respectively.3 Thus the share of the total retail value of consumer goods accounted for by cross-border e-commerce retail imports rose from 0.5 percent in 2017 to one percent in 2021. In the literature on cross-border e-commerce in Korea, studies have found that cross-border e-commerce increases consumer welfare. But no research has determined quantitatively how the degree to which this occurs. Therefore, this study aims to estimate the level of consumer welfare that domestic consumers can obtain from cross-border e-commerce. Increases in consumer welfare due to cross-border e-commerce can be divided into increases due to lower prices and increases due to wider product variety. This study aims to identify the increases in consumer welfare due to lower prices by estimating consumer surplus.
    Keywords: cross-border e-commerce; BDC e-commerce; consumer surplus; consumer welfare; consumer economics; exports; e-commerce exports; consumer choice; consumer decision-making; retails sales; retail distribution; innovation; competition policy
    JEL: F10 F12 F14 F16 F23 F31 I30 L81 O31 O38
    Date: 2023–02–28
  14. By: Marta Santamaría; Jaume Ventura; Ugur Yesilbayraktar
    Abstract: We use the new dataset of trade flows across 269 European regions in 24 countries constructed in Santamaría et al. (2020) to systematically explore for the first time trade patterns within and across country borders. We focus on the differences between home trade, country trade and foreign trade. We document the following facts: (i) European regional trade has a strong home and country bias, (ii) geographic distance and national borders are important determinants of regional trade, but cannot explain the strong regional home bias and (iii) the home bias is heterogeneous across regions and seems to be driven by political regional borders.
    Date: 2023–01
  15. By: Knobel Alexander (Gaidar Institute for Economic Policy); Kuznetsov Dmitry (Gaidar Institute for Economic Policy); Loshchenkova Anna (RANEPA)
    Abstract: The development of non-commodity non-energy exports is one of the national goals reflected in the President’s Decrees in 2018 and 2020. It is assumed that national development institutions should play a key role in pursuing a consistent export promotion policy, including Russian Export Center JSC currently managed by VEB.RF. In Russia the increasing role of development institutions in facilitating the export activities of firms is due to unprecedented sanctions against Russian companies and sectors and the need to find new export directions in friendly countries and promote Russian goods in these markets. To a large extent, export support measures are aimed at increasing the involvement of small and medium-sized enterprises in export activities: out of 11, 3 thousand exporters supported in 2019, 80% are SMEs. In 2019 the total volume of supported exports by the REC amounted to about 19, 5 billion US dollars. The econometric analysis shows that export support measures are generally an effective tool for the development of Russian non-resource exports: companies which have received support from REC JSC export more and have a more diversified commodity and country export structure. The most effective measures are those related to credit and guarantee support and insurance, and virtually all types of support encourage companies to explore new markets.
    Keywords: Russian exports, sanctions
    JEL: F13 F14 F15
    Date: 2022
  16. By: Muhammad Zeshan (Pakistan Institute of Development Economics)
    Abstract: This research work quantifies the changes in effective protection rates in Pakistan during the last decade, 2011-20, using various inputs and outputs. Based on its results, it supports a more flexible trade policy in Pakistan. Furthermore, it identifies the sectors with strong and weak long-run productive capacities and highlights the role of trade barriers in these industries. A key concern is the decreasing productive capacity of the textile and leather sectors, where the textile industry has the largest share in total exports from Pakistan. Hence, there is a dire need to invest more in research and development activities in such industries. Finally, the country needs to increase its range of export items and export destinations with more favourable terms of trade.
    Keywords: Effective Rate of Protection, Industry, Input Output Table, Pakistan, Trade
    JEL: C67 D57 F6 L5 R15
    Date: 2022
  17. By: Lionel Fontagné; Ariell Reshef; Gianluca Santoni; Giulio Vannelli; Lionel Gérard Fontagné
    Abstract: We study how technology adoption and changes in global value chain (GVC) integration jointly affect labor shares and business function specialization in a sample of 14 manufacturing industries in 14 European countries in 1999–2011. Our main contribution is to highlight the indirect effect of robotization on relative demand for labor via GVC integration. To do this, we develop a methodology to separately account for robots in the total capital stock. Increases in upstream, forward GVC participation directly reduce labor shares, mostly through reductions in fabrication, but also via management, marketing and R&D business functions. We do not find any direct effects of robot adoption; robotization affects labor only indirectly, by increasing upstream, forward GVC integration. In this sense robotization is “upstream-biased”. We also study novel channels through which rapid robotization in China shaped robotization in Europe and, therefore, GVC participation. This highlights an understudied way by which the global integration of China has affected relative demand for labor in its trading partners.
    Keywords: labor share, functional specialization, global value chains, upstreamness, technological change, automation, robots
    JEL: E25 F14 F16 O33
    Date: 2023
  18. By: Hélène Ollivier (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Geoffrey Barrows (CREST - Centre de Recherche en Economie et Statistique [Bruz] - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz], X - École polytechnique)
    Abstract: With asymmetric climate policies, regulation in one country can be undercut by missions growth in another. Previous research finds evidence that regulation erodes the competitiveness of domestic firms and leads to higher imports, but increased imports need not imply increased emissions if domestic sales are jointly determined with export sales or if emission intensity of manufacturing adjusts endogenously to foreign demand. In this paper, we estimate for the first time how production and emissions of manufacturing firms in one country respond to foreign demand shocks in trading partner markets. Using a panel of large Indian manufacturers and an instrumental variable strategy, we find that foreign demand growth leads to higher exports, domestic sales, production, and CO2 emissions, and slightly lower emission intensity. The results imply that a representative exporter facing the average observed foreign demand growth over the period 1995-2011 would have increased CO2 emissions by 1.39% annually as a result of foreign demand growth, which translates into 6.69% total increase in CO2 emissions from Indian manufacturing over the period. Breaking down emission intensity reduction into component channels, we find some evidence of product-mix effects, but fail to reject the null of no change in technology. Back of the envelope calculations indicate that environmental regulation that doubles energy prices world-wide (except in India) would only increase CO2 emissions from India by 1.5%. Thus, while leakage fears are legitimate, the magnitude appears fairly small in the context of India.
    Keywords: Globalization, Trade and environment, Product mix, Technological change
    Date: 2021–03
  19. By: Costas Arkolakis; Federico Huneeus; Yuhei Miyauchi
    Abstract: We use new theory and data to study how firms endogenously form production networks across regions and countries. Supplier and buyer relationships form depending on firms' productivity and geographic location. We characterize the normative and positive properties of the spatial distribution of economic activity and welfare in general equilibrium. We calibrate the model using domestic and international firm-to-firm trade data from Chile. Both iceberg trade costs and search and matching frictions are important for aggregate trade flows and production networks. Endogenous formation of production networks leads to larger and more dispersed effects of international and intra-national trade cost shocks.
    JEL: F10 R13
    Date: 2023–02
  20. By: Eugenia Andreasen; Sofía Bauducco; Evangelina Dardati; Enrique G. Mendoza
    Abstract: We show that capital controls have large adverse effects on misallocation, exports and welfare using a dynamic Melitz-OLG model with heterogeneous firms, monopolistic competition, endogenous trade participation and collateral constraints. Static effects increase misallocation by reducing capital-labor ratios and rising firm prices, dynamic effects reduce it by incentivizing saving and delaying entry into export markets, and general equilibrium effects are ambiguous. Firms at the collateral constraint or at their optimal scale are barely affected but those in between are severely affected. Calibrated to the 1990s Chilean encaje, the model yields higher aggregate misallocation with larger effects on exporters and high-productivity firms. Social welfare falls and welfare of exporters falls significantly more. LTV regulation cuts credit by the same amount at sharply lower costs, because it spreads the burden of the cut more evenly. A panel data analysis of Chilean manufacturing firms yields strong evidence supporting the model's predictions.
    JEL: F12 F38 F41 O47
    Date: 2023–02
  21. By: Helfer, Fabienne (University of Fribourg); Grossmann, Volker (University of Fribourg); Osikominu, Aderonke (University of Hohenheim)
    Abstract: This paper examines the short-run immigration effects on prices for owner-occupied housing and rents in Switzerland, exploiting regional variation at the level of 106 local labour markets ("Mobilité Spatiale" regions) and 26 cantons, respectively. We propose two empirical strategies that exploit the Agreement on the Free Movement of Persons (AFMP) with the European Union (EU), enacted in 2002, as an exogenous shock to immigration. The first approach uses the AFMP reform within an instrumental variable approach, instrumenting current regional inflows of immigrants based on the historical distribution of immigrants across regions. The second conducts an event study of housing price changes before and after the reform, distinguishing between regions with historically high, medium, and low immigration from EU-15 countries. The analysis based on data at the level of local labour markets for the years 1985-2016 suggests that immigration triggered off by the AFMP reform substantially raises prices of single-family homes and of owner-occupied apartments. Estimates based on cantonal data for the years 1998-2016, suggest that immigration raises rental prices even more than prices of owner-occupied housing.
    Keywords: agreement on the free movement of persons, immigration, shift-share instrument, event study, house prices, rental rates
    JEL: F22 O18 R31
    Date: 2023–02
  22. By: Kim, Dongsoo (Korea Institute for Industrial Economics and Trade); Sakong, Mok (Korea Institute for Industrial Economics and Trade); Park, Byungyul (Korea Institute for Industrial Economics and Trade); Lee, Eun-Song (Korea Institute for Industrial Economics and Trade)
    Abstract: As of 2021, Korean trade volume with Vietnam ranks fourth after China, the United States, and Japan, while direct investment in Vietnam ranks third, after the United States and China, and excepting the Cayman Islands and Hong Kong. Surveys on the business environment of Korean companies in Vietnam are conducted intermittently, so it is necessary to secure basic statistics on time series. For this, a business survey was conducted from August to October 2022, the second such survey of Korean businesses in Vietnam (the first having been conducted in 2021) by the Korean Institute for Industrial Economics and Trade (KIET) and the Korean Chamber of Commerce (KORCHAM) in Vietnam. In addition, KIET interviewed several Korean companies in Hanoi. This work analyzes the results of a survey on the business environment and the actual conditions faced by Korean enterprises in Vietnam. The Hanoi and Ho Chi Minh offices of the Korean Chamber of Commerce oversaw the implementation of the survey as co-organizer. KIET planned and conducted the survey together with KORCHAM in Vietnam. Written responses were collected from 326 companies.
    Keywords: Vietnam; Korea; FDI; trade; manufacturing; supply chains; raw materials; rare earths; foreign investment in China; COVID-19; regulation; business outlook in Vietanam; business environment in Vietnam; Korea-Vietnam relations
    JEL: F01 F20 F21 F23 F51 G32 G38 H32 O24 Q27 Q37
    Date: 2023–02–28
  23. By: Bruno Pires Tiberto; Helder Ferreira de Mendonça
    Abstract: Emerging Market and Developing Economies (EMDE) countries are the leading destinations of Foreign Direct Investment (FDI). We investigate whether sustainable monetary and fiscal policy through indicators that reflect the expectations concerning the central bank’s commitment to a target and the sustainability of government finance affects FDI inflows. Based on a large sample of 75 EMDE countries from 1990 to 2019, we provide empirical evidence through panel data analysis that sustainable macroeconomic policies are an essential driver of FDI inflows. The findings show EMDE countries should increase the central bank credibility, decrease the fiscal imbalance, and adopt inflation targeting to enhance FDI inflows.
    Date: 2023–02
  24. By: F. Blasques (Vrije Universiteit Amsterdam); P. Gorgi (Vrije Universiteit Amsterdam); S. J. Koopman (Vrije Universiteit Amsterdam); J. Sampi (World Bank)
    Abstract: To investigate the role of intra-regional trade integration on economic growth in Latin America, we develop a multilevel spatial production network model with time-varying parameters. The theoretical model is established for a multi-country and multi-sectoral economy. The reduced-form econometric framework relies partly on observation-driven dynamic processes. The finite-sample properties of the maximum likelihood estimates are investigated through a Monte Carlo study. The empirical study is for six countries in Latin America. The findings suggest that intra-country spillovers configure an important factor for explaining growth, while the importance of domestic spillovers is limited. The growth volatility is substantively reduced since 2005.
    Keywords: Spatial network model, multilevel model, time-varying parameters, economic modeling, trade liberization, growth.
    JEL: C31 C32 F14 F43
    Date: 2023–02–24
  25. By: Ji Su Kim (Max Planck Institute for Demographic Research, Rostock, Germany); Soazic Elise Wang Sonne (Max Planck Institute for Demographic Research, Rostock, Germany); Kiran Garimella; André Grow (Max Planck Institute for Demographic Research, Rostock, Germany); Ingmar G. Weber; Emilio Zagheni (Max Planck Institute for Demographic Research, Rostock, Germany)
    Abstract: As online social activities have become increasingly important for people’s lives and well-being, understanding how migrants integrate into online spaces is crucial for providing a more complete picture of integration processes. We curate a high-quality data set to quantify patterns of new online social connections among immigrants in the United States. Specifically, we focus on Twitter, and leverage the unique features of these data, in combination with a propensity score matching technique, to isolate the effects of migration events on social network formation. The results indicate that migration events led to an expansion of migrants' networks of friends on Twitter in the destination country, relative to those of users who had similar characteristics, but who did not move. We found that male migrants between 19 and 29 years old who actively posted more tweets in English after migration also tended to have more local friends after migration compared to other demographic group, which indicates that migrants' demographic characteristics and language skills can affect their level of integration. We also observed that the percentage of migrants' friends who were from their country of origin decreased in the first few years after migration, and increased again in later years. Finally, unlike for migrants' friends networks, which were under their control, we did not find any evidence that migration events expanded migrants' networks of followers in the destination country. While following users on Twitter in theory is not a geographically constrained process, our work shows that offline (re)location plays a significant role in the formation of online networks.
    Keywords: America, World, immigrants, immigration, integration, social network
    JEL: J1 Z0
    Date: 2023
  26. By: Dario Guarascio; Roman Stöllinger (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: Since Leontief’s (1953) seminal work on the factor content of trade, the validity of the Heckscher-Ohlin-model has been judged not only on the basis of formal tests of the theory but also tested against prior expectation. In this vein, this paper uses the Heckscher-Ohlin-Vanek (HOV) approach to investigate whether supposed US leadership in the digital domain can be traced back to digital task endowments embodied in labour services. In a comparison between EU member states and the US, we find that the latter is more intensive in digital tasks than the EU and that this difference is explained by both an intensity-effect (US occupations being more digital-task intensive) and a structural component (relatively more digital-task intensive occupations). Viewed through the lens of the HOV theorem we find that the US is abundant in digital tasks relative to non-digital tasks, while the opposite is true for the EU. The standard tests for the predictive power of the HOV theorem are high and in line with the results for labour in previous literature.
    Keywords: Comparative advantages, digitalisation, Heckscher-Ohlin-Vanek theorem, digital tasks
    JEL: F11 F14 D57
    Date: 2023–03
  27. By: Sabien Dobbelaere (Vrije Universiteit Amsterdam); Catherine Fuss (National Bank of Belgium); Mark Vancauteren (Universiteit Hasselt)
    Abstract: We study the relationship between offshoring and the prevalence and intensity of labor market imperfections at the firm level in Belgium and the Netherlands. Wage markup pricing stemming from workers’ monopoly power is more prevalent than wage markdown pricing originating from firms’ monopsony power in both countries. Offshoring benefits firms in that imports of final as well as intermediate goods are associated with a higher prevalence and intensity of wage markdowns. The widening effect of offshoring on wage markdowns arises from an increase in productivity that is only imperfectly passed through into an increase in wages. Offshoring is negatively related to the prevalence of wage markups. This also holds for the intensity of wage markups measured by workers’ bargaining power in Belgium.
    Keywords: Wage markdowns, wage markups, firm-level offshoring
    JEL: F14 F16 J42 J50
    Date: 2023–02–17
  28. By: Hannah Illing (Institute for Applied Microeconomics, Department of Economics)
    Abstract: This paper studies the labor market effects of out- and in-migration in the context of cross-border commuting. It investigates an EU policy reform that granted Czech citizens full access to the German labor market, resulting in a Czech commuter outflow across the border to Germany. Exploiting the fact that the reform specifically impacted the Czech and German border regions, I use a matched difference-in-differences design to estimate its effects on local labor markets in both countries. Using a novel dataset on Czech regions, I show that municipalities in the Czech border region experienced a decrease in unemployment rates due to the worker outflow, and a corresponding increase in vacancies. For German border municipalities, I find evidence for slower employment growth (long-term) and slower wage growth (short-term), but no displacement effects for incumbent native workers.
    Keywords: Out-Migration, In-Migration, Local Labor Markets
    JEL: J61 J15 R23
    Date: 2023–03
  29. By: SHIMIZU Mari
    Abstract: This is the second decision involving the State-to-State DS under USMCA (effective from 2020), whose use has been more frequent compared to during the NAFTA era. As the suspension of the functioning of the WTO Appellate Body draws on, WTO Members may need to consider using FTA DS more actively to ensure the enforcement of international trade rules, and this case may contribute to examining the possibility of using FTA DS. It should be noted that this case can be handled in FTA DS only as it is a dispute about FTA-unique rules on tariff quotas under the FTA. The panel conducted the interpretation of the text of the relevant provision in an elaborate manner and had broadly recourse to the supplemental means, including policy background, similar provisions in the past in other agreements, and communications during the negotiation, in accordance with the Vienna Convention on the Law of Treaties. As the text of disputed provision itself was explicit, those detailed examinations of text and supplemental means may be meaningful in allowing the state that lost the case to accept the findings. Also, the panel used judicial economy in a broad manner. Consequently, the decision itself was unable to achieve a satisfactory settlement of the dispute considering that the second panel request was made only about a year after the decision. One possible reasonable approach for FTA DS may be to set a baseline for rapidly proceeding with piecemeal decisions, by thinking that it suffices to re-raise the matter in the FTA DS when necessary, making use of procedural provisions weighing on the promptness. However, it is necessary to provide leeway for undertaking necessary procedures so that fundamental issues can be examined sufficiently even in complex matters. Also, as a suggestion for restoring the WTO DS, WTO Members may be able to try various ideas from the available FTA DS regimes and provide feedback in the form of meaningful procedures and perspectives that could improve the WTO DS.
    Date: 2023–02
  30. By: Chen, Chien-Hsun
    Abstract: The similarities in language and culture have given Taiwanese companies an edge in employing ethnic ties through personal connections or “guanxi” to overcome competitive and resource disadvantages. Such relational linkages facilitate Taiwanese investment in China. Since Taiwan has orchestrated a very efficient production network to serve its customers, cross-strait investment and trading activities have driven the formation of close collaborative relationships between Taiwanese and Chinese industries. China is now developing its domestic market to promote economic growth. This is bound to affect cross-strait industrial division of labor, which is not only accelerating the localization of Taiwan businessmen in the Mainland, but also further weakening the connections between Taiwanese businessmen and their parent companies in Taiwan. In the financial sector, Taiwanese banks would do well to find their own niche markets and formulate appropriate strategies, instead of following the practices of large international banks.
    Keywords: Taiwan’s outward investment in China; global supply chain; business strategies; globalization
    JEL: F15 F21 F23
    Date: 2023–03–04
  31. By: Hafez Ghanem
    Abstract: This brief argues for a pan-African food security initiative that would: 1). encourage free trade in food products between African countries; 2). promote multi-country regional investments in infrastructure to enhance agricultural productivity and resilience to climate change; 3). support public-private partnerships to establish fertilizer factories across the continent; 4). create an African council responsible for coordinating and encouraging agricultural research and development; and 5). support a facility that would ensure vulnerable African countries can finance food imports in times of crisis.
    Date: 2022–11
  32. By: Bayerlein, Michael
    Abstract: The COVID-19 pandemic and war in Ukraine have highlighted the dependence of the European Union (EU) on individual trading partners. One of the tasks of the European Commission's new Directorate-General, the Health Emergency Preparedness and Response Authority (HERA), established in 2021, will therefore be to contribute to the EU's 'open strategic autonomy' by identifying and eliminating import dependencies in the field of pharmaceuticals. HERA's work thus aligns with current EU efforts to reduce concentrated import risks. Here, three aspects of this work are particularly important: the identification of dependencies, the development of strategies to overcome them and the incorporation of these strategies within global health governance.
    Keywords: Health Emergency Preparedness and Response Authority, HERA, Biomedical Advanced Research and Development Authority, BARDA, Critical Raw Materials Act, CRMA, European Raw Materials Alliance, ERMA, European Chips Act, Global Antibiotic Research & Development Partnership, GARDP, Innovative Health Initiative, IHI, Incubator for Antibacterial Therapies in Europe, INCATE, Minerals Security Partnership, MSP, Raw Materials Investment Platform, RMIP, Covid-19, NextGenerationEU, rescEU, UN Comtrade, European Centre for Disease Prevention and Control, ECDC, Important Project of Common European Interest, IPCEI, pharmaceuticals, antibiotics, Active Pharmaceutical Ingredients, API, Finished Pharmaceutical Product, FPP, supply chains, global health governance, Reshoring, friend-shoring
    Date: 2023
  33. By: Andreas Link
    Abstract: This paper studies how the prehistoric geographic distribution of domesticable transport animal species has contributed to shaping di erences in development. I identify the historic ranges of the ten animal species that are (1) suitable for domestication and (2) suitable for carrying loads. Based on these ranges, I create a measure of the prehistoric presence of domesticable transport animals around the world. The empirical analysis reveals a strong relationship between the historic presence of domesticable transport animals and the emergence of ancient long-distance trade routes and early forms of hierarchy. Historical access to domesticable transport animals also continued to matter in the long run: Pre-industrial ethnic groups living in regions historically home to domesticable transport animals were more involved in trade and had built more complex hierarchical structures. Moreover, these groups developed greater numerical skills, larger levels of labor specialization, and higher levels of class stratification, thus underscoring the broad cultural and developmental impacts exerted by historical access to domesticable transport animals.
    Keywords: Domestication, hierarchy, long-distance trade, persistence
    JEL: F10 N30 N70 O10 Z10
    Date: 2023–03
  34. By: David C. Grabowski; Jonathan Gruber; Brian McGarry
    Abstract: Although debates over immigration remain contentious, one important sector served heavily by immigrants faces a critical labor shortage: nursing homes. We merge a variety of data sets on immigration and nursing homes and use a shift-share instrumental variables analysis to assess the impact of increased immigration on nursing home staffing and care quality. We show that increased immigration significantly raises the staffing levels of nursing homes in the U.S., particularly in full time positions. We then show that this has an associated very positive effect on patient outcomes, particularly for those who are short stayers at nursing homes, and particularly for immigration of Hispanic staff.
    JEL: I11 I18 J61
    Date: 2023–02
  35. By: Heo, Jai Chul (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)); Yeon, Wonho (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)); Kim, Sangbae (Seoul National University); Kim, Younkyoo (Hanyang University); Kim, Heungkyu (Ajou University); PAK, Seong Bin (Ajou University); Lee, Seungjoo (Chung-Ang University.); LEE, Jungoo (Hanyang University); Lee, Wang Hwi (Ajou University)
    Abstract: 본 연구는 최근의 경제안보 이슈를 ‘복합지정학(Complex Geopolitics)’의 시각에서 이해해야 할 필요성을 제기하며, 경제안보 개념이 경제적 통치술(economic statecraft)과 경제회복력(economy resilience), 그리고 상호신뢰(mutual trust) 구축이라는 요소를 내포하고 있다고 보았다. 그리고 이러한 개념 정리를 바탕으로 반도체, 배터리 등 주요 산업별 공급망과 주요국의 경제안보 전략에 대해 분석한 후, 우리의 경제안보 전략에 대한 시사점을 도출하였다. The concept of economic security largely includes the elements of economic statecraft, economic resilience, and building mutual trust. Economic statecraft refers to the act of using economic means in fields such as trade, investment, and finance as a source of power in order to achieve one’s national interest or to change the behavior of another country. Economic resilience, then, refers to measures used to preserve the national interest in the economic field from external threats, and signifies the ability to recover immediately even when physically threatened. This can be explained as the ability to respond to areas of sensitivity and vulnerability, which can be secured by reducing sensitivity by lowering dependence on the other party and reducing vulnerability by preparing alternatives for emergencies. Lastly, building mutual trust explains the psychological aspect of economic security, and in the end, it means that a stable economic security environment cannot be created without trust- building between countries. Recently, the intensification of U.S.-China strategic competition, spread of COVID-19 infections, and the Russia-Ukraine war are disrupting the global supply chain and increasing instability in the global economy. The resulting instability in the supply of semiconductors, medicines, food, and energy is leading to an economic downturn, and the U.S., China, Japan, and EU are actively pursuing strategies to strengthen economic security.(the rest omitted)
    Keywords: International Security; Economic Cooperation; Geopolitical Risk; U.S.-China Strategic Competition; U.S.-China Strategic Competition; Economic Security
    Date: 2022–10–30
  36. By: Santos Bila (College of Business and Economics, School of Economics, University of Johannesburg); Mduduzi Biyase (College of Business and Economics, School of Economics, University of Johannesburg); Matias Farahane (School of Economics, Eduadro Mondlhane University); Thomas Udimal (Southwest forestry University)
    Abstract: This study investigates the effect of Official Development Assistance (ODA) on economic growth in Sub-Saharan African (SSA) countries using a panel of 24 countries over 38 years, extracted from the World Development Indicators, African Development Bank and the Penn World Tables 9.0. (2006). We employ the moment moment quantile regression approach to establish whether the effect of ODA varies along the conditional economic growth distribution. Quantile estimates show that ODA is positively related to economic growth in the Sub-Saharan Africa (SSA) region. Moreover, our study finds that the positive impact of aid is bigger in the countries with high levels of economic growth-- the results show a positive statistically significant effect at 75th and 95% quantiles for 5% and 10%, respectively. Controlling for social infrastructures and institutions quality, the results also show a positive and statistically significant relationship between this control variable and economic growth in 50th quantile, 75th quantile and 95th quantile, suggesting that improvement in institutions quality brings much benefit to the countries within those quantiles compared to those in the lower quantiles. Incorporating institutions quality institutions variable and interaction terms into the model influences the effect of aid on economic growth. With those variables ODA is only effective in countries located within the 25th and 50th quantiles, implying that aid has significant effect on economic growth net of institutions quality and other control variables. The implication of our findings is that aid can be strategically employed as a central instrument for stimulating economic growth in SSA countries, particularly low-income countries.
    Keywords: Official Development Assistance, MM-QR, GDP
    Date: 2023
  37. By: Isabelle Tsakok
    Abstract: If the recent peaceful transfer of power in Madagascar heralds a new trend, then the Malagasy people can dream big. For decades, the exercise of economic-cum-political power in the hands of a tiny elite has held the entire nation hostage. Today, the high poverty rate—around 80% (2021) stands in stark contrast to the natural resource abundance of this huge enormous island. There is hope, however, that with political stability, the Plan d’EÌ mergence Madagascar (PEM) President Andry Rajoelina will undertake critical investments and reforms the Plan d’EÌ mergence Madagascar (PEM) under President Andry Rajoelina will undertake key critical investments and reforms.
    Date: 2022–11

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