nep-int New Economics Papers
on International Trade
Issue of 2023‒05‒15
35 papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. Of bytes and trade: Quantifying the impact of digitalisation on trade By Javier López González; Silvia Sorescu; Pinar Kaynak
  2. Brexit and Canadadvent: An Application of Graphs and Hypergraphs to Recent International Trade Agreements By Michela Chessa; Arnaud Persenda; Dominique Torre
  3. Estimation of economic welfare gains from trade facilitation in the Andean Community By Glenn Jenkins; Mehmet Nazif
  4. Is the Global Economy Deglobalizing? And if so, why? And what is next? By Pinelopi K. Goldberg; Tristan Reed
  5. Looking beyond the curtain: pass-through capital and round-tripping in Italy's foreign direct investment By Nadia Accoto; Giacomo Oddo
  6. Economic Integration and the Transmission of Democracy By Marco Tabellini; Giacomo Magistretti; Giacomo Magistretti
  7. Bound by Ancestors: Immigration, Credit Frictions, and Global Supply Chain Formation By Jaerim Choi; Jay Hyun; Ziho Park
  8. Multinational Production and Global Shock Propagation during the Great Recession By Haishi Li
  9. A probabilistic method for reconstructing the foreign direct investments network in search of ultimate host economies By Nadia Accoto; Valerio Astuti; Costanza Catalano
  10. Foreign Direct Investment in Ukraine By Puzikova, Valentyna
  11. The empirical measurement and determinants of intra-industry trade for a developing country By Aggarwal, Sakshi
  12. Trade Policy Mainstreaming in Federal Nepal (Policy Brief 44) By Kshitiz Dahal; Neelu Thapa
  13. Migration, Specialization, and Trade: Evidence from the Brazilian March to the West By Heitor S. Pellegrina; Sebastian Sotelo
  14. Towards sustainability: The relationship between foreign direct investment, economic freedom and inclusive green growth By Isaac K. Ofori; Francesco Figari; Nathanael Ojong
  15. Economic sectors and globalization channels to gender economic inclusion in Sub-Saharan Africa By Simplice A. Asongu; Nicholas M. Odhiambo
  16. Fragmentation in Global Trade: Accounting for Commodities By Mr. Jiaqian Chen; Marijn A. Bolhuis; Benjamin R Kett
  17. Immigration Disruptions and the Wages of Unskilled Labor in the 1920s By Jeff Biddle; Elior Cohen
  18. Responsible sourcing? Theory and evidence from Costa Rica By Alonso Alfaro-Urena; Benjamin Faber; Cecile Gaubert; Isabela Manelici; Jose P Vasquez
  19. Are trade wars class wars? The importance of trade-induced horizontal inequality By Kirill Borusyak; Xavier Jaravel
  20. International Target Market Selection Using Entropy and Multi-Moora Methods through a Case Study By METİN, İsmail
  21. Global trends in countries‘ perceptions of the Belt and Road Initiative By Alicia García-Herrero; Robin Schindowski
  22. Distributional effects of immigration and imperfect labour markets By Julian Costas-Fernandez; Simon Lodato
  23. Challenges in the external statistics framework: how to register MNE financial restructuring operations By Nadia Accoto; Giuseppina Marocchi; Silvia Sabatini
  24. Export Experience and the Choice of Invoice Currency: Evidence from a questionnaire survey of Japanese SMEs By GOTO Mizuki; HAYAKAWA Kazunobu; KOIBUCHI Satoshi; YOSHIMI Taiyo
  25. The Impact of the Real Exchange Rate on Non-Traditional Chilean and Peruvian Exports: Evidence using Microdata By Renzo Castellares Añazco
  26. Decomposing Migrant Self-Selection: Education, Occupation, and Unobserved Abilities By Ilpo Kauppinen; Panu Poutvaara
  27. Can BRI be the Road to Peace and Prosperity? By Khan, Haider
  29. A North-South agent based model of segmented labour markets. The role of education and trade asymmetries By Lucrezia Fanti; Marcelo C. Pereira; Maria Enrica Virgillito
  30. Master Plan for Transport Connectivity: An Undertaking in Enhancing Regional Integration By Kshitiz Dahal
  31. Enhancing intraregional investment in South Asia By Kshitiz Dahal
  32. Does economic openness matter in the impact of financial development on income inequality? By Roya Taherifar; Mark J. Holmes; Gazi M. Hassan
  33. COVID-19 and the Role of Remittances on Sustainable Development: Insights from Sub-Saharan Africa By Waliu O. Shittu; Gazi M. Hassan; Frank G. Scrimgeour
  34. Global food policy report 2023: Rethinking food crisis responses: Synopsis [in Chinese] By International Food Policy Research Institute (IFPRI)
  35. International Diversification, Reallocation, and the Labor Share By Joel M. David; Romain Rancière; David Zeke

  1. By: Javier López González; Silvia Sorescu; Pinar Kaynak
    Abstract: This paper provides an overview of the evolving nature of digital trade and digital trade policies. It shows that digital trade has been growing faster than “non-digital” trade. By 2018, 24% of global trade (USD 5.1 trillion) could be considered digital trade. In parallel, countries have embraced digital trade provisions in trade agreements and new digital economy agreements have emerged. The empirical analysis shows that growing digital connectivity delivers a double dividend, increasing both domestic and international trade. It also shows that digital trade chapters have the potential to double the effect of trade agreements, while reductions in domestic barriers affecting digital trade have a strong export-enhancing effect, particularly in digitally-deliverable services. Overall, the results suggest that digital connectivity and digital trade policies play a significant and growing role in reducing trade costs and increasing trade across countries at all levels of development. The paper calls for wider participation and ambition in discussions at the WTO.
    Keywords: Data Flows, Digital connectivity, Digital trade, E-commerce, Trade agreements, Trade costs
    JEL: F13 F14 F15 F68 O33 C54
    Date: 2023–05–03
  2. By: Michela Chessa (Université Côte d'Azur, France; GREDEG CNRS); Arnaud Persenda (Université Côte d'Azur, France; GREDEG CNRS); Dominique Torre (Université Côte d'Azur, France; GREDEG CNRS; University of Bergamo)
    Abstract: This paper uses a network approach to study the relationship between trade agreements and trade flows. For the first time in the literature, hypergraphs are used to capture the topology of trade agreements, while theusual graphs are used to represent trade fows. For our analysis, we focused on a snapshot of 2017 data. This data did not consider CETA as an agreement already in force (the provisional application began only on September 21). It was also several years before Brexit. An analysis of modularity conducted on both the trade agreements and the trade flows shows an imperfect correspondence between the communities of countries found within the two networks. The results justify Brexit as a way to reconcile the networks of flows and agreements, and the CETA agreement as a confirmation that Canada already belonged to the module of countries including the EU community concerning trade agreements.
    Keywords: hypergraphs, trade agreements, networks, Brexit, CETA
    JEL: F10 F14 F15 C69
    Date: 2022–09
  3. By: Glenn Jenkins (Queen's University); Mehmet Nazif (Department of Economics, Eastern Mediterranean University, Famagusta, Northern Cyprus via Mersin 10, Turkey)
    Abstract: Border procedures around the globe can act as barriers hindering international trade. Another impact of these procedures relates to their economic resource costs. In this study, using a microeconomic framework of international trade, the potential economic gains are estimated for reductions in trade administration costs related to sea border trade in the Andean Community (CAN) as well as for the increase in import and export trades that are stimulated as a consequence of the reduction in trade administration costs. The potential cost reductions are estimated separately for import and export trade. The estimates are made with respect to the existing levels of trade flows. We measure the excess economic cost of the current trade administration procedures in CAN with respect to two benchmark levels of trade administration costs, namely those for Chile and Singapore. Our results suggest that improving the trade administration cost levels to match those of the reference countries will enable CAN countries to enjoy economic resource savings of between US$1.25 billion and US$1.5 billion annually, corresponding to 0.19% to 0.23% of their gross domestic product. Given the current trade environment of CAN nations, relevant policy and reform options are suggested. The key policy recommendation is to improve the electronic single window system for trade administration and in particular, the interconnectivity of information flows between the member countries of CAN. Maintaining the port infrastructure is also critical for the delivery of efficient services for the movement of goods.
    Keywords: international trade, trade facilitation, trade administration cost, trade transaction costs, economic gain, welfare gain, Andean Community, Latin America
    JEL: F14 F13 D60
    Date: 2023–04
  4. By: Pinelopi K. Goldberg; Tristan Reed
    Abstract: Data on global trade as well as capital and labor flows indicate a slowdown, but not reversal, of globalization post the 2008-09 financial crisis. Yet profound changes in the policy environment and public sentiment in the largest economies over the past five years suggest the beginning of a new era. Increasing anxiety about the labor market effects of import competition from low-wage countries, especially China, laid the groundwork, but was not the catalyst for the reversal in attitudes towards globalization. Similarly, the COVID pandemic provided novel arguments against free trade based on global supply chain resilience, but neither the pandemic nor short run policy response had enduring effects on trade flows. We demonstrate that global trade was remarkably resilient during the pandemic and that supply shortages would likely have been more severe in the absence of international trade. After a temporary decline in 2020, global trade in goods and services increased sharply in 2021. Russia’s invasion of Ukraine raised new concerns about national security and the exposure of supply chains to geopolitical risk. This was followed by demands to diversify away from “non-friendly” countries and to the employment of trade policy, export restrictions in particular, to halt China’s technological development. The future of globalization is highly uncertain at this point, but these new policies will likely slow global growth, innovation, and poverty reduction even if they benefit certain industries in certain countries. Regarding resilience, the main goal of recent trade policy changes, measures of trade volatility or concentration can be helpful, but resilience will be elusive as long as we lack benchmarks against which policy performance can be measured.
    JEL: F0 F1 N0 O10 O49
    Date: 2023–04
  5. By: Nadia Accoto (Bank of Italy); Giacomo Oddo (Bank of Italy)
    Abstract: The growing complexity of the financing and ownership structures of multinational enterprises (MNEs) leads to control chains that extend across a number of countries and obscure the ultimate sources and destinations of foreign direct investment (FDI). This results in what is known in the literature as ‘pass-through capital' (i.e. capital entering and exiting from a given country) and 'round-tripping' (i.e. capital leaving the investor's jurisdiction at the top of the investment chain and then returning to the same country). This study quantifies and analyses pass-through capital and round-tripping for Italy along their geographical and sectoral dimensions, applying a simple methodology based on information on the residency of the ultimate investor as reported in the surveys of firms conducted for the purpose of compiling the balance of payments in the years 2013-2020.
    Keywords: foreign direct investment, pass-through capital, multinational enterprises, external statistics
    JEL: F21 F23
    Date: 2023–04
  6. By: Marco Tabellini (Harvard Business School, NBER, CEPR, and IZA); Giacomo Magistretti (International Monetary Fund); Giacomo Magistretti (IMF)
    Abstract: In this paper, we study the effects of economic integration with democracies on individuals’ democratic values and on countries’ institutions. We combine survey data with country level measures of democracy from 1960 to 2015, and exploit improvements in air, relative to sea, transportation to derive a time-varying instrument for trade. We find that economic integration with democracies increases both citizens’ support for democracy and countries’ democracy scores. Instead, trade with non-democracies has no impact on either attitudes or institutions. The effects of trade with democracies are stronger when partners have a longer history of democracy, grow faster, spend more on public goods, and are culturally closer. They are also driven by imports, rather than exports, and by integration with partners that export higher quality goods and that account for a larger share of a country’s trade in institutionally intensive, cultural, and consumer goods as well as in goods that involve more face-to-face interactions and entail higher levels of bilateral trust. These patterns are consistent with trade in goods favoring the transmission of democracy by signaling the (actual or perceived) desirability of the latter. We examine alternative mechanisms, and conclude that none of them can, alone, explain our findings.
    Keywords: Democracy, political preferences, institutions, economic integration
    JEL: F14 F15 P16
    Date: 2023–01
  7. By: Jaerim Choi; Jay Hyun; Ziho Park
    Abstract: This paper shows that the ancestry composition shaped by century-long immigration to the US can explain the current structure of global supply chain networks. Using an instrumental variable strategy, combined with a novel dataset that links firm-to-firm global supply chain information with a US establishment database and historical migration data, we find that the co-ethnic networks formed by immigration have a positive causal impact on global supply chain relationships between foreign countries and US counties. Such a positive impact not only exists in conventional supplier-customer relationships but also extends to strategic partnerships and trade in services. Examining the causal mechanisms, we find that the positive impact is stronger for counties in which more credit-constrained firms are located and that such a stronger effect becomes even more pronounced for foreign firms located in countries with weak contract enforcement. Collectively, the results suggest that co-ethnic networks serve as social collateral to overcome credit constraints and facilitate global supply chain formation.
    JEL: F14 F22 F36 F60 G30 J61 L14
    Date: 2023–04
  8. By: Haishi Li
    Abstract: Did multinational production (MP) exacerbate or mitigate the collapse of international trade during the Great Recession? What role did MP and trade links play in propagating economic shocks across countries? I resolve the “Multinationals’ Resilience Puzzle” during the Great Recession by documenting that while MP declined less than GDP in an average country, MP declined more in larger countries and GDP declined more in countries with a high MP intensity. Thus, MP declined as a percentage of GDP at the global level. To understand the sources of MP and trade collapse, I build a model of MP, trade, and sectoral linkages. The model highlights the frictions that multinational enterprises (MNEs) face when they source from and sell to countries other than their headquarters. These parameters determine MNEs’ vertical/horizontal-ness and govern the rich interactions between MP and trade. According to the model with MP, supply-side productivity shocks contributed to the collapse of trade almost as much as demand shocks. The majority of the collapse in MP (both globally and cross-country) was attributed to shocks that affected aggregate productivity and were specific to multinationals in a few key headquarters countries. The MP links significantly amplified the impact of these shocks on the rest of the world, which had a much greater impact than if the shocks had been propagated solely through trade.
    Date: 2023
  9. By: Nadia Accoto (Bank of Italy); Valerio Astuti (Bank of Italy); Costanza Catalano (Bank of Italy)
    Abstract: The Ultimate Host Economies (UHEs) of a given country are defined as the ultimate destinations of Foreign Direct Investment (FDI) originating in that country. Bilateral FDI statistics struggle to identify them due to the non-negligible presence of conduit jurisdictions, which provide attractive intermediate destinations for pass-through investments due to favorable tax regimes. At the same time, determining UHEs is crucial for understanding the actual paths followed by FDI among increasingly interdependent economies. In this paper, we first reconstruct the global FDI network through mirroring and clustering techniques, starting from data collected by the International Monetary Fund. Then we provide a method for computing an (approximate) distribution of the UHEs of a country by using a probabilistic approach to this network, based on Markov chains. More specifically, we analyze the Italian case.
    Keywords: foreign direct investment, ultimate host economies, Special Purpose Entities, network reconstruction, clustering, absorbing Markov chains
    JEL: C51 C60 F23 G15
    Date: 2023–04
  10. By: Puzikova, Valentyna
    Abstract: The Ukrainian economy cannot ensure economic reconstruction after the war and needs new opportunities for its development. Foreign direct investment (FDI) is an important instrument that can help. FDI provides capital relevant for increasing the profitability of economic sectors. FDI is also part of political investment - should be given priority in government activities. For this reason, it triggers economic growth and improves macroeconomic performance when it is used to develop the market and its infrastructure. In this article, I give an overview of the understanding of FDI and its actual situation in Ukraine. The arguments reflect mainly an investor's point of view. This helps to emphasize the importance of realistic and informative data for assessing the attractiveness of Ukraine. A first step in this direction is made with reference to international indices. I will try to review a reflection of relevant indices, which provide an assessment of the macroeconomic situation in Ukraine. The main results of the article: an overview of the real situation with FDI in Ukraine and the importance of using international indices during the FDI processes. The benefits of FDI do not appear automatically. It depends on the investment policy of host countries, especially Ukraine. My contribution to this article is to draw attention to the current situation with FDI in Ukraine and the issue of the lack of systematic use of international indices during the FDI processes. Without a clear understanding of these issues, it is impossible to answer the following questions that need to be studied, such as how to solve the challenges with FDI and attract new foreign capital to Ukraine. The article will be of interest to those who are interested in the issue of investment policy in the context of Ukraine, study this issue at the scientific level, and practically develop and implement the strategy of investment policy in Ukraine. The main conclusion of the article is to show the importance of revising the approaches to political investment in Ukraine, taking into account the international evaluation indices.
    Keywords: FDI; FDI net inflows; long-lasting linkns; economic growth; investment
    JEL: F21 F60
    Date: 2023–04
  11. By: Aggarwal, Sakshi
    Abstract: The analysis computed the trends and determinants of India’s bilateral composite IIT as well as sectoral IIT with select trade partners. In particular, Grubel - Lloyd Corrected (Grubel and Lloyd, 1975) and Aquino (1997) indices have been used for the empirical analysis involving bilateral aggregate and bilateral sectoral IIT respectively. The empirical results provide evidence for a major part of actual IIT to be explained outside the framework of the neoclassical theories of international trade. The major findings are as follows. First, India’s aggregate as well as sectoral IITs in general displayed a positive time trend with the ROW. This signifies that the country’s two-way manufacturing trade in general and its IPN participation with partners in particular has considerably deepened over the period. Second, the regression analysis indicates that several demand-related (e.g., income difference), supply-oriented (e.g., technology difference), friction-led (e.g., distance, trade facilitation, contiguity, language) and sector-specific (e.g., average labour productivity, vertical product differentiation) factors display a strong statistical relationship with IIT as expected. Third, the empirical analysis strongly underlines the importance of trade facilitation measures in enhancing IIT, which needs to be viewed in a wider perspective. As presence of poor connectivity framework raises transport costs and discourage trade in parts and components (i.e., the relatively low value-added items) significantly, the two-way trade (i.e., IIT) in a wide range of manufacturing product segment can be affected. Fourth, as diversification of product baskets (i.e., product differentiation) happens to be a significant driver of IIT, there is a strong case to focus on technological innovation through research and development (R&D), for maintaining intra-sectoral manufacturing trade flows.
    Keywords: Trade Policy, international trade, LPI, trade facilitation, machine learning
    JEL: F11 F13 F16
    Date: 2023–04–20
  12. By: Kshitiz Dahal (South Asia Watch on Trade, Economics and Environment); Neelu Thapa (South Asia Watch on Trade, Economics and Environment)
    Abstract: This policy brief investigates the roles of subnational governments in trade policy formulation and implementation, the level of mainstreaming of trade in subnational governments' plans, policies, and strategies, and coherence and complementarity in the trade-related policies and strategies of federal and subnational governments. The policy brief highlights the need for clear articulation of roles for subnational governments regarding trade policy formulation and implementation, necessary capacity building, and updating or revising important trade policy documents to reflect the roles of subnational governments.
    Keywords: Trade Policy Mainstreaming, Federal Nepal, Subnational Governments, Policy coherence
    Date: 2022–12
  13. By: Heitor S. Pellegrina; Sebastian Sotelo
    Abstract: Exploiting a large migration of farmers to the West of Brazil between 1950 and 2010, we study how migration shapes aggregate and regional comparative advantage. We document that farmers emigrating from regions with high employment in an activity are more likely to work in that activity and have higher income than other migrants doing so. We incorporate this heterogeneity into a quantitative model and find that, by reshaping comparative advantage, declines in migration costs contributed substantially to Brazil’s rise as a leading commodity exporter. Opportunities to migrate, moreover, account for a substantial share of the gains from trade.
    Keywords: International Trade, Migration, Comparative Advantage
    Date: 2022–12
  14. By: Isaac K. Ofori (University of Insubria, Varese, Italy); Francesco Figari (University of Eastern Piedmont, Novara, Italy.); Nathanael Ojong (York University, Toronto, Canada)
    Abstract: This study contributes to the environmental and socioeconomic sustainability literature by examining three important issues. First, the study examines the effects of foreign direct investment (FDI) and economic freedom on inclusive green growth (IGG) in sub-Saharan Africa (SSA). Second, we investigate whether economic freedom interacts with FDI to promote IGG. Third, we identify minimum the thresholds required for economic freedom to cause FDI to foster IGG. The findings are based on macro data for 20 SSA countries. Evidence, based on instrumental variable regression, show that, unconditionally, FDI is not statistically significant for promoting IGG. Second, the study finds that SSA’s ‘Mostly unfree’ economic architecture conditions FDI to reduce IGG. Third, results from our threshold regression reveal that the minimum threshold required for economic freedom to cause FDI to foster IGG is 66.2% (Moderately free). The study sheds new light on investments necessary for SSA’s economic architecture to form relevant synergies with FDI to promote IGG.
    Keywords: Economic Freedom; FDI; Government Integrity; Inclusive Green Growth; Sustainable Development; sub-Saharan Africa
    JEL: F21 F6 H1 P1 O55 Q01 Q56
    Date: 2023–01
  15. By: Simplice A. Asongu (Yaounde, Cameroon); Nicholas M. Odhiambo (Pretoria, South Africa)
    Abstract: This study complements the extant literature by assessing economic sector and globalization channels for gender economic inclusion. The study is focused on 35 countries in sub-Saharan Africa for the period 1995-2019 and the empirical evidence is based on fixed effects regressions. The following findings are established. First, economic and political globalization positively affect female employment in agriculture and the positive effect of economic globalization is driven by the trade globalization dynamic while social globalization negatively affects female employment in agriculture and the negative effect of social globalization is driven by cultural and informational globalization dynamics. Second, aggregate globalization and sub-components (i.e. economic globalization, social globalization and political globalization) negatively affect gender employment in the industry and the negative effect is driven by the financial globalization sub-component of economic globalization and by the informational and cultural components of social globalization. Third, aggregate globalization and sub-components positively affect gender employment in the service sector and the corresponding positive effect is driven by the trade globalization sub-component of economic globalization and by all sub-components (i.e. interpersonal, informational and cultural dimensions) of social globalization. In the terms of policy implications, policy makers should focus on promoting dimensions of globalization that are established to positively influence female employment as well as put in place measures that are designed to reverse the negative incidence of globalization dynamics that have been established to affect female employment. Moreover, policy makers should also be aware of the fact that when formulating the corresponding policies, the effect of globalization is contingent on globalization dynamics as well as on various economic sectors.
    Keywords: Globalization; female; gender; labour force participation; sub-Saharan Africa
    JEL: E60 F40 F59 D60 O55
    Date: 2023–01
  16. By: Mr. Jiaqian Chen; Marijn A. Bolhuis; Benjamin R Kett
    Abstract: We construct a new database which covers production and trade in 136 primary commodities and 24 manufacturing and service sectors for 145 countries. Using this new more granular data, we estimate spillover effects from plausible trade fragmentation scenarios in a new multi-country, multi-sector, general-equilibrium model that accounts for unique demand and supply characteristics of commodities. The results show fragmentation-induced output losses can be sizable, especially for Low-Income-Countries, although the magnitudes vary according to the particular scenarios and modelling assumptions. Our work demonstrates that not accounting for granular commodity production and trade linkages leads to underestimation of the output losses associated with trade fragmentation.
    Keywords: Commodities; international trade; sanctions; spillovers; fragmentation
    Date: 2023–03–24
  17. By: Jeff Biddle; Elior Cohen
    Abstract: An era of mass immigration into the United States ended with the onset of World War I in Europe, followed by the passage of restrictive immigration laws in 1921 and 1924. We analyze various sources of wage data collected in the 1910-1929 period to explore the impact of this significant disruption of the flow of immigration on the wages of unskilled labor. Our approach to identification entails examining differences in wages across local labor markets and industries differentially exposed to the disruptions in immigration due to different ethnic compositions of their immigrant populations in the pre-war era. We find evidence strongly suggesting that during the 1920s, industries and regions more affected by the disruptions in immigration experienced larger reductions in flows of immigrants that resulted in increased wages of unskilled labor.
    Keywords: immigration; wages; labor force
    JEL: J3 J61 N31 N32
    Date: 2022–09–27
  18. By: Alonso Alfaro-Urena; Benjamin Faber; Cecile Gaubert; Isabela Manelici; Jose P Vasquez
    Abstract: Multinational enterprises (MNEs) increasingly impose "Responsible Sourcing" (RS) standards on their suppliers worldwide, including requirements on worker compensation, benefits and working conditions. Are these policies just "hot air" or do they impact exposed suppliers and their workers? What is the welfare incidence of RS in sourcing countries? To answer these questions, we develop a quantitative general equilibrium (GE) model of RS and combine it with a unique new database. In the theory, we show that the welfare implications of RS are ambiguous, depending on an interplay between what is akin to an export tax (+) and a labor market distortion (-). Empirically, we combine the near-universe of RS rollouts by MNE subsidiaries in Costa Rica since 2009 with firm-to-firm transactions and matched employer-employee microdata. We find that RS rollouts lead to significant reductions in firm sales and employment at exposed suppliers, an increase in their salaries to initially low-wage workers and a reduction in their low-wage employment share. We then use the estimated effects and the microdata to calibrate the model and quantify GE counterfactuals. We find that while MNE RS policies have led to significant gains among the roughly one third of low-wage workers employed at exposed suppliers ex ante, the majority of low-wage workers lose due to adverse indirect effects on their wages and the domestic price index.
    Keywords: multinational enterprises, supply chains, low-wage workers, Costa Rica
    Date: 2023–03–29
  19. By: Kirill Borusyak; Xavier Jaravel
    Abstract: What is the nature of the distributional effects of trade? This paper demonstrates conceptually and empirically the importance of "trade-induced horizontal inequality, " i.e., inequality brought about by trade shocks that occurs among workers with the same level of earnings prior to the shock. While this type of inequality does not affect the income distribution, it generates winners and losers at all income levels and may thus affect political support for trade policy. To quantify the horizontal inequality and changes in the income distribution induced by trade in a data-driven way, we develop a characterization of the welfare impacts, governed by simple and intuitive statistics of labor market and consumption exposure to trade. This characterization holds in a class of quantitative trade models allowing for a broad set of preferences, including non-homothetic, and production functions. Taking this framework to U.S. data, we find substantial heterogeneity in exposure and thus in the welfare effects of trade shocks across workers, with horizontal inequality as the dominant force. Over 99% of the variance of welfare changes from trade shocks arise within income deciles, rather than across. This finding runs against a popular narrative that "trade wars are class wars".
    Keywords: trade liberalization, distributional effects, inequality
    Date: 2023–04–04
  20. By: METİN, İsmail
    Abstract: Today, despite the severe level of competition between businesses, companies dealing with foreign trade spend an enormous effort to sell their products overseas. Before taking the first step toward the act of exporting, companies are obliged to take some critical decisions. One of the strategic decisions is to determine the target market selection. This study aims to apply the Entropy and the Multi - Moora methods to define the target market selection strategy of a company that produces and plans to export cold storage and pre-cooling systems to foreign markets. The weights of the criteria that would be used in the evaluation and the selection phases of the study have been measured with the Entropy method. Alternative markets have been seized upon by using the Multi - Moora method and the most appropriate target market has been chosen accordingly. Upon the detailed calculations, Georgia has been observed to be the target market country that provided the related criteria at the most appropriate level. Romania and Kazakhstan follow this country, respectively.
    Date: 2023–04–04
  21. By: Alicia García-Herrero; Robin Schindowski
    Abstract: In this paper, we have analysed the sentiment towards the Belt and Road Initiative in the world using a large open-access dataset, namely GDELT.
    Date: 2023–04
  22. By: Julian Costas-Fernandez (University College London); Simon Lodato (Middlesex University London)
    Abstract: We present evidence whereby immigration increases labour productivity while reducing the labour share, thus redistributing income from workers to employers. This result is unlikely in competitive markets with skill-neutral capital, where labour share is orthogonal to immigration shocks in the long run. Instead, our empirical evidence better matches predictions from imperfect labour market models where immigrant and native workers are heterogeneous in both skills and labour supply elasticities.
    Keywords: Immigration, Productivity, Labour Share, Imperfect Labour Markets, FactorIncome Distribution
    JEL: D33 J21 J24 J42 J61 O47
    Date: 2023–01
  23. By: Nadia Accoto (Bank of Italy); Giuseppina Marocchi (Bank of Italy); Silvia Sabatini (Bank of Italy)
    Abstract: The rapid development of a globalized world has dramatically increased the number, complexity and variety of possible intra-group operations. More and more frequently, companies are involved in corporate inversions or decide to move their domicile to other countries in order to benefit from more favourable tax and administrative conditions. These operations imply significant problems in compiling external statistics, particularly in terms of foreign direct investment flows and stocks but also other balance of payments items. The purpose of this paper is to highlight these challenges through the analysis of some real cases observed in Italy.
    Keywords: multinational enterprises, external statistics, foreign direct investment
    JEL: F21 F23
    Date: 2023–04
  24. By: GOTO Mizuki; HAYAKAWA Kazunobu; KOIBUCHI Satoshi; YOSHIMI Taiyo
    Abstract: This study examines the determinants of invoice currency with a focus on the effect of export experience, based on a questionnaire survey of Japanese small and medium enterprises (SMEs) in the manufacturing industry. We find that exporters with extensive export experience tend to switch the invoice currency from the Japanese yen to foreign currencies. The interpretation is that export experience mitigates the exchange rate uncertainty faced by firms and enables them to use foreign currency in their exports. This effect persists even if firms intermittently export from their first exports. We also find that the yen is more likely to be chosen as the first export when the age of the exporter is higher, the sales value of the exporter is smaller, the exporter has an initiative to determine the invoice currency, and the exporter started exporting before the global financial crisis in 2007.
    Date: 2023–04
  25. By: Renzo Castellares Añazco
    Abstract: This study estimates the Bilateral Real Exchange Rate (BRER) impact on Non-Traditional Exports (NTX) of Chilean and Peruvian firms. Different from previous works about Chile and Peru, this paper considers a heterogeneous impact of the BRER on firm’s exports, depending on firm’s productivity. In addition, we estimate the impact of the real exchange rate of countries whose exports compete against Peruvian and Chilean exports in third markets. This variable has been barely used in the literature and its omission causes a downward bias on the estimation of the BRER elasticity on exports. To do this, we use detailed firm-level information of products and destinations of Chilean exports from 2004 to 2011, and Peruvian exports from 2007 to 2014.
    Keywords: Bilateral real exchange rate, productivity, exports, competitors, Peru, Chile
    Date: 2022–12
  26. By: Ilpo Kauppinen; Panu Poutvaara
    Abstract: We analyze self-selection and sorting of emigrants from Finland, using full-population administrative data from Statistics Finland. We analyze emigration events lasting at least five years and decompose migrant self-selection into education, occupation, and unobserved abilities. Our analysis focuses on Finnish citizens satisfying three criteria: they were between 25-54 years of age; they had no immigrant background; and they were employed. We find that emigrants from Finland are strongly positively self-selected in terms of education and earnings. We also find strong evidence of sorting: men who emigrate outside Nordic countries are considerably better educated and have higher earnings and residual earning than men who emigrate to Nordic countries. Most of the self-selection in terms of higher earnings can be explained by emigrants being more educated. Adding occupational controls increases the fraction of explained self-selection only marginally. While men are positively self-selected also with respect to residual earnings, women are not.
    Keywords: international migration, self-selection, Roy model, education, residual earnings
    JEL: F22 I26 J31
    Date: 2023
  27. By: Khan, Haider
    Abstract: The debate about the Belt and Road Initiative (BRI) in the west seems to have reached an impasse. At least three issues require sustained analysis. These are: 1. Trade, investment and growth prospects both in PRC and other countries, but particularly in the Global South; 2. Distributional issues and the possibilities of advancing arrangements that can enhance people’s well-being in various BRI countries; 3. The geopolitical consequences and how to avoid a new cold war. On the trade and investment side, BRI promises to create a multilateral trading and investment area under Chinese leadership. Both preexisting US hostility and fears generated by such prospects summed up under the paranoid term “China’s Sharp Power”, have given BRI a bad press in the west in the absence of any model-based scientific analysis. In order to assess the impact of BRI using consequentialist logic, it is desirable to have model-based counterfactual results. In order to lend concreteness to a Geoeconomic and Geopolitical analysis of BRI, this short article presents some results from a regional economy wide model developed by the author. Aggregate consequences for the Chinese economy in terms of economic growth, output and employment impacts are estimated for two BRI scenarios—a high investment and demand scenario and the current low investment and demand scenario. Some important dynamic econometric issues are discussed in an appendix of the paper on which this section is based. Also, a more complex economic systems model with explicit banking and financial sectors for the Chinese economy is presented for further, more sophisticated modeling work can be found in the same technical paper. As a first approximation, the current modeling results show that BRI will certainly not harm the Chinese economy; but the low demand scenario does not translate into great gains either. The high demand longer term scenario is much more attractive for the economic policymakers in China. But for the global south---particularly Africa--- prospects for a new deal is there. Achieving a more equitable distribution and enhancing the capabilities of the great majority of people there will require favorable political conditions. While the Chinese do not try to promote democracy, they also do not try to overthrow existing governments. Therefore, progressive political forces of the global south need to organize around a pro-people political, social and economic agenda. Finally, in the sphere of international relations, even in the instance the economic consequences alone cannot justify the strategic importance given to BRI by the Chinese rulers, or perhaps especially in that situation, the prospects for a new cold war are real. One possible conclusion is that although the original investment impetus came largely from balance of payment surplus, excess capacity in PRC and the profit seeking by its private sector firms, by now the geopolitical motives are the main drivers of BRI with modest prospects of economic gains but real prospects of energy security and overall trade and investment security. But this is a delicate and fraught game in geoeconomics and geopolitics in the 21st century. So far, the US response lacks subtlety and nuance . Such responses fueled by fear and insecurity on the part of the US can lead to a dangerous geopolitical conflict.
    Keywords: Keywords: Belt and Road Initiative, China, East Asia, The Global South, Africa, Input-Output Matrix, Social Accounting Matrix, Finance, Trade and Geopolitics, Economic Impact Modeling and Analysis, Sharp Power.
    JEL: F5 F53 O3
    Date: 2023–04–15
  28. By: Giulia Bettin (Marche Polytechnic University and MoFiR); Amadou Jallow (University of the Gambia); Alberto Zazzaro (University of Naples Federico II, CSEF and MoFiR)
    Abstract: The literature on the impact of natural disasters on remittances has provided mixed evidence so far, with identification remaining a key challenge. This paper studies the insurance role of remittances by investigating their dynamic response in the aftermath of a disaster. We use a novel and rich panel dataset of monthly remittance flows from Italy to 81 developing countries for the period 2005 to 2015. We find that monthly remittance flows on average increase by 2% due to natural disasters in migrants' home countries. The response gets significant a few months after the event and tends to disappear within a year from the disaster occurrence. The intensity and timing of remittances' responsiveness are heterogeneous according to the nature of the disaster, the receiving country's characteristics, and migrants' socio-economic conditions in the host country.
    Keywords: migrants' remittances, international migration, natural disasters
    JEL: F24 F22 Q54
    Date: 2023–04
  29. By: Lucrezia Fanti; Marcelo C. Pereira; Maria Enrica Virgillito
    Abstract: Drawing on the labour-augmented K+S agent-based model, this paper develops a two-country North-South ABM wherein the leader and the laggard country interact through the international trade of capital goods. The model aims to address sources of asymmetries and possible converge patterns between two advanced economies that are initially differentiated in terms of the education level they are able to provide. Education is modeled as a national-level policy differently targeting the three usual levels, that is primary, secondary and tertiary. After being educated and entering the labour force, workers face a segmented market, divided into three types of job qualification, and the resulting position levels inside firms, i.e., elementary, technical and professional occupations. The three resulting labour market segments are heterogeneous in terms of both requested education level and offered wages. To address the role of trade and education, we experiment with different education-policy and trade settings. Ultimately, we are interested in understanding the coupling effects of asymmetries in education, which reverberate in segmented labour markets and differentiated growth patterns. Notably, our focus on capital-goods trade, rather than consumption goods, allows us to assess a direct link between productive capabilities in producing complex products and country growth prospects.
    Keywords: Agent-Based Model; Education; International Trade; Technology Gap; Labour Market.
    Date: 2023–04–27
  30. By: Kshitiz Dahal (South Asia Watch on Trade, Economics and Environment)
    Abstract: The Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) is a regional organization consisting of seven countries in South and Southeast Asia, cooperating in several areas, including trade, investment, energy, tourism, and more. This issue brief highlights the weak state of BIMSTEC connectivity and regional integration and introduces BIMSTEC’s plan—BIMSTEC Master Plan for Transport Connectivity—promulgated to enhance transport connectivity in the region. This strategic document aims to enhance transport connectivity between member states over a ten-year period from 2018 to 2028. The brief provides a brief description of each sector covered by the Master Plan and its importance for connectivity in the region. Moreover, the brief discusses the opportunities created by the Master Plan, identifies gaps in the Master Plan, and challenges in implementation.
    Keywords: Bay of Bengal Initiative, BIMSTEC, regional integration, trade, transport connectivity, BIMSTEC Master Plan for Transport Connectivity, Master Plan.
    Date: 2022–12
  31. By: Kshitiz Dahal (South Asia Watch on Trade, Economics and Environment)
    Abstract: This issue brief, drawing primarily from the World Bank publication “Regional Investment Pioneers in South Asia: The Payoff of Knowing Your Neighbors†and the presentation of its findings delivered in a webinar, focuses on enhancing intraregional investment in South Asia, which is one of the fastest-growing regional economies but also one of the least integrated regions in the world. The brief highlights the challenges and opportunities for intraregional investment and identifies weak knowledge connectivity as a significant barrier to intra-regional investment flows.
    Keywords: South Asia, intraregional investment, FDI, OFDI, IFDI, regional integration, economic integration, knowledge connectivity
    Date: 2022–12
  32. By: Roya Taherifar (University of Waikato); Mark J. Holmes (University of Waikato); Gazi M. Hassan (University of Waikato)
    Abstract: Despite increasing academic attention on the income distributional impact of financial development, the debate has remained controversial. Hence, this study argues that economic openness to international trade and capital flows may impact the nexus between financial development and income inequality. Using a panel of 71 developing and developed countries for 1994–2017, we first use split-sampling and interaction analyses to examine the role of the country's level of openness on the relationship between financial development and income inequality. However, these two approaches do not provide specific information on the threshold value, if any, at which the effect changes. For this reason, we also employ the dynamic panel threshold method to investigate whether a financial or trade openness threshold exists beyond which financial development worsens income inequality. We find evidence that financial development generally fosters income inequality, but the level of financial and trade openness impacts the inequality effect of financial development. Our results assert that a higher level of financial and trade openness strengthens the pro-inequality impact of financial development.
    Keywords: Financial Development;Income Inequality;Trade Openness;Financial Openness
    JEL: D31 D63 F02 O11
    Date: 2023–04–18
  33. By: Waliu O. Shittu (University of Waikato); Gazi M. Hassan (University of Waikato); Frank G. Scrimgeour (University of Waikato)
    Abstract: The role of remittances has received considerable attentions at various national and regional economies due to their significant influence on growth and development indicators. Because of COVID-19, however, re-examining this relationship is necessary given the realities to trade and investment occasioned by the pandemic. Also, the extant literature has largely measured the effects of this variable on economic growth and development without expansion into sustainable development. Observing this relationship is, thus, considered appropriate due to the global outcry on climate change and the environment, which sustainable development better captures. Given these, this research measures the impact of COVID-19 on the nexus between remittances and sustainable development in SSA. Based on both static and dynamic estimators on a panel data from thirty-eight SSA countries, the empirical findings suggest that remittances raise sustainable development, though a negative effect sets in where remittances exceed 0.388 percent of the SSA region’s adjusted net savings. More so, the sign of the coefficient of COVID-19 is negative and the magnitude shows a severe impact. Finally, the interaction effect of remittances with COVID-19 is such that COVID-19 reduces the positive effect of remittances on sustainable development. The appropriate polices are discussed based on the findings of the study.
    Keywords: Remittances;COVID-19;sustainable development;instrumental variables;Sub-Saharan Africa
    JEL: C26 F24 G01 Q01
    Date: 2023–04–20
  34. By: International Food Policy Research Institute (IFPRI)
    Abstract: In 2022, the world faced multiple crises. Disruptions to food systems from the protracted COVID-19 pandemic, major natural disasters, civil unrest and political instability, and the growing impacts of climate change continued, as the Russia-Ukraine war and inflation exacerbated a global food and fertilizer crisis. The growing number of crises, their increasing impact, and rising numbers of hungry and displaced people have galvanized calls to rethink responses to food crises, creating a real opportunity for change.
    Keywords: agriculture; development; food security; hunger; policy; resilience; crises
    Date: 2023
  35. By: Joel M. David; Romain Rancière; David Zeke
    Abstract: How does growing international financial diversification affect firm-level and aggregate labor shares? We study this question using a novel framework of firm labor choice in the face of aggregate risk. The theory implies a cross-section of labor risk premia and labor shares that appear as markups in firm-level data. International risk sharing leads to a reallocation of labor towards riskier/low labor share firms alongside a rise in within-firm labor shares, matching key micro-level facts. We use cross-country firm-level data to document a number of empirical patterns consistent with the theory, namely: (i) riskier firms have lower labor shares and (ii) international financial diversification is associated with a reallocation towards risky/low labor share firms. Our estimates suggest the reallocation effect has dominated the within effect in recent decades; on net, increased financial integration has reduced the corporate labor share in the US by about 2.5 percentage points, roughly one-third of the total decline since the 1970s.
    JEL: F2 F21 F23 F4 F66
    Date: 2023–04

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