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on International Trade |
| By: | Kishore Gawande; Pablo Pinto; Santiago Pinto |
| Abstract: | Congressional districts are political entities with heterogeneous trade policy preferences due to their diverse economic structures. Representation of these interests in Congress is a crucial aspect of trade policymaking that is missing in canonical political economy models of trade. In this paper, we underscore the influence of districts by developing a political economy model of trade with region-specific factors. Using 2002 data from U.S. Congressional Districts, we first characterize the unobserved district-level demand for protection. Extending the model beyond the small country assumption to account for export interests as a force countering protection, we develop a model of national tariff-setting. The model predictions are used to estimate the welfare weights implied by tariff and non-tariff measures enacted nationally. Our supply-side explanation for trade policy, while complementing Grossman and Helpman (1994), reveals district and industry-level patterns of winners and losers, central to understanding the political consequences of trade and the backlash against globalization. |
| Keywords: | Trade Policy; Political Economy; Districts; Tariffs; NTMs; Legislature |
| JEL: | F13 F14 D72 D78 |
| Date: | 2023–03 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedrwp:97295&r=int |
| By: | Mahlkow, Hendrik; Wanner, Joschka |
| Abstract: | International trade is highly imbalanced both in terms of values and in terms of embodied carbon emissions. We show that the persistent current value trade imbalance patterns contribute to a higher level of global emissions compared to a world of balanced international trade. Specifically, we build a Ricardian quantitative trade model including sectoral input-output linkages, trade imbalances, fossil fuel extraction, and carbon emissions from fossil fuel combustion and use this framework to simulate counterfactual changes to countries' trade balances. For individual countries, the emission effects of removing their trade imbalances depend on the carbon intensities of their production and consumption patterns, as well as on their fossil resource abundance. Eliminating the Russian trade surplus and the US trade deficit would lead to the largest environmental benefits in terms of lower global emissions. Globally, the simultaneous removal of all trade imbalances would lower world carbon emissions by 0.9 percent or 295 million tons of carbon dioxide. |
| Keywords: | Carbon emissions, international trade, gravity |
| JEL: | F14 F18 Q56 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:wuewep:279808&r=int |
| By: | Wang, Junbo; Ma, Zhenyu; Fan, Xiayang |
| Abstract: | Amid the escalating global climate crisis, the European Union (EU) has assumed a prominent role by introducing the Carbon Border Adjustment Mechanism (CBAM). This initiative aims to bolster climate action and mitigate carbon leakage. Nevertheless, considerable debate surrounds the practical efficacy of this measure and its conformity with World Trade Organization (WTO) regulations. This paper's objective is to quantitatively evaluate the welfare and carbon abatement effects of CBAM on the EU and other prominent economies. We develop a comprehensive multi-country, multi-sector general equilibrium model that incorporates EU carbon tariffs, global production networks, and carbon emissions to achieve this goal. The estimation of key parameters is conducted through a structural methodology that directly evaluates the impacts on welfare and carbon emissions resulting from unilateral or multilateral low-carbon policies. The analysis revealed that CBAM would enhance the welfare of the EU, Japan, South Korea, Norway, Switzerland, and the United States. Conversely, all other economies would experience a reduction in welfare, with Russia suffering the most significant loss and China the least. Furthermore, despite CBAM's effective global carbon emission reduction, its impact on the EU's domestic carbon reduction is limited. Counterfactual analyses indicate that global carbon emissions decrease in scenarios involving a globally standardized carbon pricing mechanism, China's elevation of carbon pricing alongside a carbon tariff, and the European Union's extension of taxation to all sectors. However, these scenarios result in substantial disparities in welfare levels among countries, with the most substantial reduction in global carbon emissions occurring exclusively with a globally harmonized carbon price, accompanied by the most minor overall welfare loss. In conclusion, this paper advocates for enhanced international collaboration and dialogue among nations to foster harmonizing carbon pricing policies and adopt a universally standardized carbon pricing mechanism. |
| Keywords: | EU CBAM; Carbon leakage; Carbon abatement; Welfare analysis; Quantitative trade model |
| JEL: | F17 F64 Q56 Q58 |
| Date: | 2023–09–08 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:118978&r=int |
| By: | Niramaya Laksmitaningtyas (Central Bank of Indonesia, Bangka Belitung Province Representatative Office); Wisnu Setiadi Nugroho (Department of Economics, Faculty of Economics and Business, Universitas Gadjah Mada) |
| Abstract: | To recognize the importance of investment flows as one of the components of development, ASEAN member countries have created the ASEAN Economic Community (AEC) 2015 blueprint as guidelines for setting up a free and open investment regime in ASEAN. The enactment of AEC makes the issue of foreign direct investment (FDI) in Indonesia more attractive. However, an increase in FDI is followed by uneven absorption of FDI in various regions of Indonesia. The implementation of regional autonomy, which gives more authority to governors, allegedly influence investors’ decision to invest. This study aims to determine whether the disclosure of openness and the presidential election have an influence on FDI inflows across 30 provinces of Indonesia. This study employs panel data regression with a fixed effect model. The findings suggest that the level of openness and political variables contribute to the absorption rate of FDI inflows in the regions. |
| Keywords: | Foreign Direct Investment, Openness, Political Variables |
| JEL: | C5 O1 R5 |
| Date: | 2023–03 |
| URL: | http://d.repec.org/n?u=RePEc:gme:wpaper:202303003&r=int |
| By: | Jason Dunn; Fernando Leibovici |
| Abstract: | Skeptics have raised questions about the future of globalization. Could divisions over the war provide insights into the strength of global trade ties? |
| Keywords: | globalization; Russian invasion of Ukraine; global trade |
| Date: | 2022–03–29 |
| URL: | http://d.repec.org/n?u=RePEc:fip:l00001:94124&r=int |
| By: | García Seimandi, Luis Alejandro; Almiray Jaramillo, Víctor Manuel |
| Abstract: | This document provides a technical and legal assessment of paperless cross-border trade in Mexico, based on a methodology developed by the Economic and Social Commission for Asia and the Pacific (ESCAP). It concludes that Mexico has a solid legal framework that fully recognizes electronic transactions and the principles of technological neutrality, autonomy of will, international compatibility, and functional equivalence of data messages and electronic signatures. Regarding the degree to which the technical environment facilitates paperless cross-border trade, the country has several electronic systems, including the Customs Electronic System and the Single Window for Mexican Foreign Trade, which promote a national paperless environment that has evolved over the last 30 years. Continuous improvement of electronic systems and the automation of processes related to international trade have positioned the country as a benchmark in the region. The document also presents several recommendations to highlight areas of opportunity and promote continuous improvement. |
| Date: | 2023–11–02 |
| URL: | http://d.repec.org/n?u=RePEc:ecr:col022:68665&r=int |
| By: | Alan Wm. Wolff (Peterson Institute for International Economics); Joseph W. Glauber (International Food Policy Research Institute) (International Food Policy Research Institute) |
| Abstract: | Russia's invasion of Ukraine, a major supplier of grain to the Middle East and Africa, has triggered deep concerns over access to affordable food across the globe. The alarming rise in food insecurity across the world due to conflicts makes it increasingly urgent to set ground rules for sharing food in global markets and getting food to places most in need to avoid starvation and famine. The most glaring and relevant gap in the rules of the world trading system pertains to sharing food in times of scarcity. The authors recommend using the World Trade Organization's (WTO) long-standing accords on agriculture as a basis to provide guidelines for supplying food to global markets, especially areas in need. The most obvious shortcoming in the rules is that WTO members are largely free to restrict exports of food. The WTO rules need to be updated to take into account climate change, extreme weather, military conflicts, pandemics, and other factors that interfere with food production. The WTO can specify factors that an exporting country must take into account when imposing an export restriction on food, and it can require consultations to deal with severe disruptions in world food trade. It can also serve to mediate the interests of food exporters and importers in enhancing food security. |
| Date: | 2023–10 |
| URL: | http://d.repec.org/n?u=RePEc:iie:pbrief:pb23-15&r=int |
| By: | Megan Hogan (Peterson Institute for International Economics); Gary Clyde Hufbauer (Peterson Institute for International Economics) |
| Abstract: | The United States and China hit record trade levels in 2022, despite a prickly relationship, suggesting that calls for severe or even total economic decoupling between the world's two economic superpowers may be ill-advised, say Hogan and Hufbauer. The dollar value of US-China trade grew significantly between 2019 and 2022, notwithstanding declines in trade flows of certain products such as semiconductors and aircraft due to the trade war. The persistence and even growth of the two countries' total trade despite political and economic disputes reflects the mutual benefit that private firms see in this commercial relationship. The authors conclude that partial decoupling between the United States and China has not, so far, redrawn the world trade map. Nor does it seem likely to do so on an aggregate trade basis between now and 2025. |
| Date: | 2023–10 |
| URL: | http://d.repec.org/n?u=RePEc:iie:pbrief:pb23-14&r=int |
| By: | Qayoom Khachoo (CDE–IEG Visiting Postdoc fellow); Ridwan Ah Sheikh (Department of Economics, Delhi School of Economics) |
| Abstract: | Utilizing a novel cross-country dataset on patent filings, this study employs an augmented version of gravity model to explore the impact of preferential trade agreements (PTAs) on non-resident patent filings in emerging market economies of BRICS. PTAs, however, vary in terms of content and design, we therefore analyse their differential impact on patent filings while focussing on deep and shallow PTAs. The PPML estimates suggest that PTAs have a positive and statistically significant impact on non-resident patent filings in BRICS. In particular, country-pairs with PTAs increase their patent flows by 43% relative to control group (dyads with no PTAs). Further, compared to shallow PTA, deep PTAs appear to induce foreign patenting upsurge in BRICS. Shallow PTAs exhibit positive effects in the medium-term but negative effects in the long- term on patent flows, whereas deep PTAs unveil positive anticipatory effects. Key Words: Gravity model, Multilateral resistance, Preferential trade agreements, Patent filings, PPML JEL Codes: F00, O3 |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:cde:cdewps:341&r=int |
| By: | Ms. Zeina Hasna; Ms. Florence Jaumotte; Jaden Kim; Samuel Pienknagura; Gregor Schwerhoff |
| Abstract: | Innovation in low-carbon technologies (LCTs), which is essential in the fight against climate change, has slowed in recent years. This Staff Discussion Note shows that a global climate policy strategy can bolster innovation in, and deployment of, LCTs. Countries that expand their climate policy portfolio exhibit higher (1) climate-change-mitigation-patent filings, (2) LCT trade flows, and (3) “green” foreign direct investment flows. Importantly, boosting innovation in, and deployment of, LCTs yields medium-term growth, which mitigates potential costs from climate policies. This note stresses the importance of international policy coordination and cooperation by showcasing evidence of potential climate policy spillovers. |
| Keywords: | Low-carbon technologies; green innovation; technological diffusion and deployment; environmental policies; economic performance; portfolio exhibit; green FDI inflow; Policy implication; LCT trade; policy coordination; Climate policy; Foreign direct investment; Emerging and frontier financial markets; Climate change; Global |
| Date: | 2023–11–06 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfsdn:2023/008&r=int |
| 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: | 2022–11–30 |
| URL: | http://d.repec.org/n?u=RePEc:cep:poidwp:046.pdf&r=int |
| 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: | 2022–11–16 |
| URL: | http://d.repec.org/n?u=RePEc:cep:poidwp:042&r=int |
| By: | Justin R. Pierce; David Yu |
| Abstract: | Globalization increased steadily for decades following the end of World War II, with trade as a percentage of global GDP rising from 20 percent in the early post-war period to nearly 60 percent just before the Global Financial Crisis (GFC) (Aiyar et al., 2023). Since the GFC, however, this move toward globalization has stalled, and recent events—U.S.-China trade tensions, the Covid-19 pandemic, and the Russian invasion of Ukraine—have raised the prospect of a reversal. |
| Date: | 2023–11–03 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfn:2023-11-03&r=int |
| By: | K. Pun Winichakul; Ning Zhang |
| Abstract: | To what extent have immigrants contributed to the growth of the United States arts sector? In this paper, we explore the impact of immigration during the Age of Mass Migration on the development of the arts in the U.S. over the past century. In the short run, our results suggest that immigration helped produce greater numbers of native artists. Over a century later, the bene fits to the arts persist. Counties with greater historical immigration house more arts businesses and nonprofit organizations that generate more revenue, employ a larger proportion of the community, and earn more federal arts grants. When considering potential mechanisms, our analysis suggests that greater interaction between the aggregate immigrant population and natives led to increased exposure to new arts experiences and ideas, creating arts markets that persisted in the long run. This channel is further supported by positive links between the presence of immigrants from certain countries of origin and the growth of art forms popular in those countries, and evidence of long-run benefits to the arts that cannot be attributed to higher income in a causal mediation analysis. Altogether, our results highlight the important role that immigrants played in the development of the arts in America. |
| Date: | 2022–12–06 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:wpaper:993&r=int |
| By: | Philippe Aghion; Antonin Bergeaud; Matthieu Lequien; Marc J. Melitz; Thomas Zuber |
| Abstract: | We decompose the "China shock" into two components that induce different adjustments for firms exposed to Chinese exports: an output shock affecting firms selling goods that compete with similar imported Chinese goods, and an input supply shock affecting firms using inputs similar to the imported Chinese goods. Combining French accounting, customs, and patent information at the firm-level, we show that the output shock is detrimental to firms' sales, employment, and innovation. Moreover, this negative impact is concentrated on low-productivity firms. By contrast, we find a positive effect - although often not significant - of the input supply shock on firms' sales, employment and innovation. |
| Keywords: | Competition shock, patent, firms, import |
| Date: | 2022–11–30 |
| URL: | http://d.repec.org/n?u=RePEc:cep:poidwp:047&r=int |
| By: | David Hemous; Simon Lepot; Thomas Sampson; Julian Scharer |
| Abstract: | This paper provides a first comprehensive quantitative analysis of optimal patent policy in the global economy. We introduce a new framework, which combines trade and growth theory into a tractable tool for quantitative research. Our application delivers three main results. First, the potential gains from international cooperation over patent policies are large. Second, only a small share of these gains has been realized so far. And third, the WTO's TRIPS agreement has been counterproductive, slightly reducing welfare in the Global South and for the world. Overall, there is substantial scope for policy reform. |
| Keywords: | trade policy, innovation, growth, patents, TRIPS |
| Date: | 2023–11–13 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1958&r=int |
| By: | Jacob Funk Kirkegaard (Peterson Institute for International Economics) |
| Abstract: | The European Union managed to overcome Russian energy blackmail in 2022 and used the political motivation from this national security crisis to accelerate its decarbonization process. The planned dramatic increase in the scope of carbon pricing in the European Union can herald the total decarbonization of sectors covered in the EU Emissions Trading System and expand into important new ones. The interplay between the EU carbon border adjustment mechanism (CBAM) and the US Inflation Reduction Act may cause transatlantic trade friction. But these two approaches could also offer a path to greater cooperation. Kirkegaard outlines proposals for how both the European Union and the United States can implement additional policies to secure their comprehensive decarbonization. |
| Date: | 2023–09 |
| URL: | http://d.repec.org/n?u=RePEc:iie:pbrief:pb23-13&r=int |
| By: | Fabio Ashtar Telarico (University of Ljubljana) |
| Abstract: | Studies built on dependency and world-system theory using network approaches have showed that international trade is structured into clusters of 'core'; and 'peripheral'; countries performing distinct functions. However, few have used these methods to investigate how sanctions affect the position of the countries involved in the capitalist world-economy. Yet, this topic has acquired pressing relevance due to the emergence of economic warfare as a key geopolitical weapon since the 1950s. And even more so in light of the preeminent role that sanctions have played in the US and their allies' response to the Russian-Ukrainian war. Applying several clustering techniques designed for complex and temporal networks, this paper shows that a shift in the pattern of commerce away from sanctioning countries and towards neutral/friendly ones. Additionally, there are suggestions that these shifts may lead to the creation of an alternative 'core' that interacts with the world-economy's periphery bypassing traditional 'core' countries such as EU member States and the US. |
| Abstract: | Les études fondées sur la théorie de la dépendance et du système mondial utilisant des approches de réseau ont montré que le commerce international est structuré en groupes de pays "centraux" et "périphériques" remplissant des fonctions distinctes. Cependant, peu d'entre elles ont utilisé ces méthodes pour étudier la manière dont les sanctions affectent la position des pays impliqués dans l'économie mondiale capitaliste. Pourtant, ce sujet est devenu d'une actualité brûlante en raison de l'émergence de la guerre économique en tant qu'arme géopolitique clé depuis les années 1950. Et ce d'autant plus que les sanctions ont joué un rôle prépondérant dans la réponse des États-Unis et de leurs alliés à la guerre russo-ukrainienne. En appliquant plusieurs techniques de regroupement conçues pour les réseaux complexes et temporels, cet article montre que la structure du commerce s'éloigne des pays sanctionnés et se rapproche des pays neutres ou amis. En outre, il est suggéré que ces changements peuvent conduire à la création d'un "noyau" alternatif qui interagit avec la périphérie de l'économie mondiale en contournant les pays du "noyau" traditionnel tels que les États membres de l'UE et les États-Unis. |
| Abstract: | Исследования, построенные на основе теории зависимости и теории мировых систем с использованием сетевых подходов, показали, что международная торговля структурирована на кластеры "ядра" и "периферии" - стран, выполняющих различные функции.Однако мало кто использовал эти методы для изучения того, как санкции влияют на положение стран-участниц в капиталистической мир-экономике.Между тем эта тема приобрела особую актуальность в связи с появлением с 1950-х годов экономической войны как одного из основных видов геополитического оружия.И тем более в свете той важнейшей роли, которую санкции сыграли в реакции США и их союзников на российско-украинскую войну. Применяя несколько методов кластеризации, разработанных для сложных и временных сетей, в данной работе показано, что в структуре торговли происходит смещение от стран, применяющих санкции, в сторону нейтральных/дружественных стран.Кроме того, высказываются предположения, что эти сдвиги могут привести к созданию альтернативного "ядра", взаимодействующего с периферией мировой экономики в обход традиционных стран "ядра", таких как государства - члены ЕС и США. |
| Abstract: | Студије засноване на теоријизависности и светског система користећимрежне приступе показале су да јемеђународна трговина структурисана укластере ‘језгра' и ‘периферних' земаља којеобављају различите функције. Међутим малоњих је користило ове методе да би истражилокако санкцијe утичу на положај земаљаукључених у капиталистичку светскуекономију. Ипак ова тема је постала хитназбог појаве економског сукоба као кључноггеополитичког оружја 1950-их и још више усветлу превасходне улоге коју су санкцијеодиграле у одговору САД и њихових савезникана руско-украјински рат. Примењујућинеколико техника груписања дизајнираних засложене и временске мреже, овај рад показујепомак у обрасцу трговине од земаља којесанкционишу ка неутралним/пријатељскимземљама. Поред тога постоје сугестије да овепромене могу довести до стварањаалтернативног „језгра" које је у интеракцијиса периферијом светске економије заобилазећитрадиционалне „језгро" земље као што судржаве чланице ЕУ и САД. |
| Keywords: | International trade, Dynamic networks, Blockmodeling, Russia, Iran, World-system theory, Sanctions |
| Date: | 2023–09 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-04238902&r=int |
| By: | Chad P. Bown (Peterson Institute for International Economics); Kathleen Claussen (Georgetown University Law Center) |
| Abstract: | The US-Mexico-Canada Agreement (USMCA) introduced a new compliance institution for labor rights in trade agreements: the facility-specific Rapid Response Labor Mechanism (RRM). The RRM was developed to tackle one particular thorn in the side of North American integration-labor rights for Mexican workers--which had had detrimental, long-term political-economic consequences for the two countries' trade relationship. This paper reviews the unique political-economic moment in the United States and Mexico that prompted the creation of this tool. It describes how the RRM works and the considerable financial and human resources the two governments have brought to bear to operationalize it. The paper then reports a number of stylized facts on how governments used the RRM during its first three years, largely in the auto sector. It proposes paths of potentially fruitful political-economic research to understand the full implications of the RRM and concludes with preliminary lessons as well as a discussion of the potential for policymakers to transpose facility-specific mechanisms for labor or other issues, such as the environment, into future economic agreements. |
| Keywords: | USMCA, RRM, labor, auto industry, unions, collective bargaining, dispute resolution |
| JEL: | F13 |
| Date: | 2023–10 |
| URL: | http://d.repec.org/n?u=RePEc:iie:wpaper:wp23-9&r=int |
| By: | Sauvant, Karl P. |
| Abstract: | On July 6, 2023, 112 WTO members concluded text negotiations on an Investment Facilitation for Development Agreement. This Perspective outlines its contents, identifies its benefits and suggests further actions that should be taken. |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:colfdi:363&r=int |
| By: | Jean Chateau; Antonela Miho; Martin Borowiecki |
| Abstract: | This study analyses the economic effects of the EU's ‘Fit for 55’ climate mitigation policies using the OECD ENV-Linkage model, a dynamic, global Computable General Equilibrium model. The model projects macroeconomic, sectoral, energy and emission trends for the EU, and for the five largest EU economies separately, up to 2035. Policy scenarios combine carbon pricing with regulations to reach the ‘Fit For 55’ emission reduction target in 2030. Additional scenarios analyse i) harmonised carbon pricing across countries and sectors, ii) different forms of revenue recycling from carbon pricing, iii) the effect of the EU’s proposed Carbon Border Adjustment Mechanism on competitiveness, and iv) the effect of Russia’s war against Ukraine on mitigation costs. Given the short time horizon of the analysis (until 2035), the model does not assess the positive economic benefits associated with fewer climate impacts and extreme climate events. ‘Fit for 55’ policies are projected to lead to a loss of GDP per capita of 2.1% in 2035 compared to the reference scenario (pre-‘Fit for 55’ policies), reflecting increasing production costs on the back of higher carbon pricing. Higher carbon pricing is also projected to lead to a loss of competitiveness in energy-intensive industries. The EU’s proposed Carbon Border Adjustment Mechanism may only partly mitigate the loss of competitiveness of energy-intensive industries. Harmonising carbon pricing across sectors would help limit the loss to GDP per capita, as a uniform carbon price is lower and allows for directing emission reduction efforts to sectors and countries with the lowest abatement costs. Finally, Russia’s war against Ukraine has not substantially increased the GDP costs of mitigation. Without the war, lower fossil fuel import prices would have led to higher fossil fuel demand, ultimately requiring more stringent mitigation action. |
| Keywords: | climate change mitigation, Computable General Equilibrium Model, energy, European Union |
| JEL: | C68 H23 Q42 Q48 Q58 R48 |
| Date: | 2023–11–20 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:1775-en&r=int |
| By: | Tafese, Tevin; Lay, Jann; Van Tran |
| Abstract: | Vietnam has integrated into global value chains through the establishment of special economic zones (SEZs). This paper examines the local labour-market impacts of this programme, building on a unique dataset of SEZs in combination with labour force survey (LFS) data. Using historical satellite imagery, we trace the built-up area of SEZs over time to construct a continuous measure of SEZ exposure, which we link to the LFSs at the districtyear level for 2013-2019. In a difference-in-differences design with continuous treatment, we find that SEZs have led to a rapid shift in employment from agriculture and services to manufacturing and to an improvement in the quality of employment through higher wages and more formal employment. Foreign firms drive these effects, but there are positive spillovers to workers in domestic firms in agriculture and services. The effects are particularly strong for women, and younger individuals with low and medium levels of education. |
| Keywords: | Vietnam, Special Economic Zones, foreign direct investment, labour markets, structural change, informality |
| JEL: | J23 J24 J30 J80 O14 O17 O19 P33 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:gigawp:279817&r=int |
| By: | Fuchs, Andreas; Gröger, André; Heidland, Tobias; Wellner, Lukas |
| Abstract: | In response to surging immigration pressure in Europe and the United States, Western policymakers advocate foreign aid as a means to fight the 'root causes' of irregular migration. This article provides the first global evidence of the effects of aid on migration preferences, migration flows, and possible underlying mechanisms, both in the short and longer term. We combine newly geocoded data on World Bank aid project allocation at the subnational level over the period 2008--2019 with exceptionally rich survey data from a sample of almost one million individuals across the entire developing world and data on migration and asylum seeker flows to high-income countries. Employing two distinct causal estimation strategies, we show that in the short term (after the announcement of a World Bank project and within two years after project disbursement), foreign aid improves individual expectations about the future and trust in national institutions in aid-receiving regions, which translate into reduced individual migration preferences and asylum-seeker flows. In the longer term (between three to five years after disbursement), foreign aid fosters improvements in individual welfare through poverty reduction and income increases, resulting in larger regular migration to high-income countries. Our findings show that aid can cause a short-lived reduction in migration aspirations, except in fragile Sub-Saharan African contexts where aid appears largely ineffective. In contrast, foreign aid enhances individual capabilities over the longer term, contributing to greater regular migration, consistent with the 'mobility transition' theory. |
| Keywords: | Foreign aid, World Bank, aid effectiveness, international migration, asylum seeking, migration preferences, Gallup World Poll |
| JEL: | F22 F35 F53 H77 O15 O19 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ifwkwp:279785&r=int |
| By: | Ricardo Correa; Julian di Giovanni; Linda S. Goldberg; Camelia Minoiu |
| Abstract: | This paper uses U.S. loan-level credit register data and the 2018–2019 Trade War to test for the effects of international trade uncertainty on domestic credit supply. We exploit cross-sectional heterogeneity in banks’ ex-ante exposure to trade uncertainty and find that an increase in trade uncertainty is associated with a contraction in bank lending to all firms irrespective of the uncertainty that the firms face. This baseline result holds for lending at the intensive and extensive margins. We document two channels underlying the estimated credit supply effect: a wait-and-see channel by which exposed banks assess their borrowers as riskier and reduce the maturity of their loans, and a financial frictions channel by which exposed banks facing relatively higher balance sheet constraints contract lending more. The decline in credit supply has real effects: firms that borrow from more exposed banks experience lower debt growth and investment rates. These effects are stronger for firms that are more reliant on bank finance. |
| Keywords: | trade uncertainty; bank loans; trade finance; global value chains; trade war |
| JEL: | F34 F42 G21 |
| Date: | 2023–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:97289&r=int |
| By: | Wagner, Joachim |
| Abstract: | This paper uses firm level data from the World Bank Enterprise surveys conducted in 2019 and from the COVID-19 follow-up surveys conducted in 2020 in eight European countries to investigate the link between exporting before the pandemic and firm survival until 2020. The estimated effect of exports is positive and statistically significant ceteris paribus after controlling for various firm characteristics that are known to be related to firm survival. Furthermore, the size of this estimated effect can be considered to be large on average. Exporting helped firms to survive. |
| Keywords: | Exports, firm survival, COVID-19, World Bank Enterprise Surveys, Robit regression |
| JEL: | D22 F14 L20 L25 L29 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:kcgwps:279794&r=int |
| By: | Hites Ahir; Nicholas Bloom; Davide Furceri |
| Abstract: | We construct the World Uncertainty Index (WUI) for an unbalanced panel of 143 individual countries on a quarterly basis from 1952. This is the frequency of the word "uncertainty" in the quarterly Economist Intelligence Unit country reports. Globally, the Index spikes around major events like the Gulf War, the Euro debt crisis, the Brexit vote and the COVID pandemic. The level of uncertainty is higher in developing countries but is more synchronized across advanced economies with their tighter trade and financial linkages. In a panel vector autoregressive setting we find that innovations in the WUI foreshadow significant declines in output. This effect is larger and more persistent in countries with lower institutional quality, and in sectors with greater financial constraints. |
| Date: | 2022–03–31 |
| URL: | http://d.repec.org/n?u=RePEc:cep:poidwp:031&r=int |
| By: | Sim, Soonhyung (Korea Institute for Industrial Economics and Trade); Kim, Mi Jung (Korea Institute for Industrial Economics and Trade) |
| Abstract: | In 2022, South Korea achieved an unprecedented milestone in defense exports, as orders surged to an impressive USD 17.3 billion, a record- breaking achievement in its history as an arms exporter. This remarkable growth can be attributed to growing global defense expenditures in the wake of the Russia-Ukraine war and the increased demand in Europe. The military aid to Ukraine created shortage of defense products, which has further increased demand. The Korean defense industry has capitalized on this opportunity, bolstered by its competitive edge in swift product delivery, a well-established mass production infrastructure, and an outstanding price-to-quality ratio. Of note is the surge in demand for Korean arms from Eastern European nations, which has propelled the country into the ranks of the world’s top five defense exporters. Future export prospects are promising. Global defense spending is expected to continue its upward trajectory amid the escalating geopolitical crisis in Europe, despite the effects of the COVID-19 pandemic and slowing economic growth. Germany, for instance, has decided to invest EUR 100 billion in a special defense fund to modernize and expand its armed forces. Furthermore, defense spending as a percentage of GDP in Eastern Europe and the three Baltic states is poised to exceed the NATO requirement of two percent by 2024. Should the current trend persist, Korea could eventually rank among the world’s top four defense exporters. However, achieving this goal will necessitate a nuanced and refined policy approach. Conducting a comprehensive assessment of the economic impact of growing defense exports is the first step toward positioning the defense industry as a driver of growth. In this paper, I project changes in defense sales and employment under the assumption that the value of annual export orders eventually reaches USD 20 billion. Furthermore, I offer a set of policy recommendations aimed at propelling Korea into the upper echelons of the world’s defense exporters and harnessing the full potential of the burgeoning defense industry as an engine of economic prosperity. Thank you for reading this abstract of a report from the Korea Institute for Industrial Economics and Trade! Visit us on YouTube: https://www.youtube.com/watch?v=Q36v30l5CV0 Visit us on Instagram: https://www.instagram.com/worldkiet/ Visit our website: http://www.kiet.re.kr/en |
| Keywords: | defense sector; defense industry; defense spending; defense manufacturing; defense contracting; arms exports; weapons exports; Russia-Ukraine war; defense sector employment; arms trade; manufacturing; Korea |
| JEL: | F17 F52 L64 O38 |
| Date: | 2023–10–31 |
| URL: | http://d.repec.org/n?u=RePEc:ris:kieter:2023_023&r=int |
| By: | Dreier, Silas; Liu, Wan-hsin |
| Abstract: | By analyzing a unique dataset from Germany's evaluation of COVID-19 antigen rapid tests, we show that Chinese firms can excel under today's global competition and produce tests at quality levels higher than China's income level would suggest. We find these achievements are positively associated with China's rising innovation capability and robust industrial base. Further strengthening China's innovation and industrial base to support Chinese firms' future accomplishments is what the Chinese government clearly aims for. This would intensify the challenges facing Western economies that strive for technological sovereignty and eagerly seek to de-risk their economic relations with China. |
| Keywords: | China, product quality, technological sophistication, trade, COVID-19 |
| JEL: | F10 O10 O30 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:kcgwps:279819&r=int |
| By: | Jang, Won-Joon (Korea Institute for Industrial Economics and Trade); Park, Hea Ji (Korea Institute for Industrial Economics and Trade) |
| Abstract: | The South Korean government has been more willing as of late to accommodate demands for export financing and other support from Poland and other major buyers of Korean defense products. But it has at the same time avoided pursuing similar offsets in large import deals with the United States and other countries, for example in the second phase of the F-35 fighter jets acquisition program, despite being well within its rights to maximize its position in such deals. Over the five years from 2016 to 2020, South Korea managed to win nearly USD 800 million in offsets against defense contracts, or about 10 percent of what the country used to reap from 2011 to 2015. Reasons for this rapid decline include domestic conflict over whether or not to abolish the legal offset requirement following a 2018 audit by the Board of Audit and Inspection, a reluctance to request offsets against large-scale foreign military sales (FMS) contracts with the US, the absence of a well-established offset banking policy compared to other countries, the lack of a consistent and comprehensive strategy applicable across the government and the military that prioritizes the national interest, and ongoing interdepartmental disputes and infighting regarding the necessity of offsets. Turkiyë, the Netherlands, Norway, Taiwan, and the United Arab Emirates (UAE) actively pursue offsets against weapons deals, including in their FMS contracts with the United States, and have achieved successes in enhancing the capabilities of their own defense industries, creating jobs and supporting the growth of their own R&D, production, and small and medium enterprises (SMEs) exports. For Korea to achieve its vision of becoming one of the four largest global defense exporters, the Korean government needs to reinforce the status and importance of offsets. Korean lawmakers should ensure that the legal requirement stays in place and actively encourage offsets against FMS contracts with the United States. Moreover, the government needs to tackle resolve existing difficulties in seeking offsets against large-scale FMS and non-competitive contracts by establishing a comprehensive, pan-government offset negotiation strategy and also by adopting an offset banking scheme. Finally, the organization in charge of handling the offset program must be expanded, and the government should redouble efforts to host divisions of leading foreign defense contractors at local governments’ defense innovation clusters domestically. |
| Keywords: | weapons manufacturing; weapons exports; arms exports; defense exports; defense industry; defense goods; weapons systems; defense R&D; defense competitiveness; defense market; Korea |
| JEL: | F10 F13 F50 F51 F52 F59 L64 O31 O32 O34 O38 |
| Date: | 2023–07–28 |
| URL: | http://d.repec.org/n?u=RePEc:ris:kietrp:2023_008&r=int |
| By: | Jang, Won-Joon (Korea Institute for Industrial Economics and Trade); Park, Hea Ji (Korea Institute for Industrial Economics and Trade) |
| Abstract: | The South Korean government has been more willing as of late to accommodate demands for export financing and other support from Poland and other major buyers of Korean defense products. But it has at the same time avoided pursuing similar offsets in large import deals with the United States and other countries, for example in the second-phase of the F-35 fighter jets acquisition program, despite being well within its rights to maximize its position in such deals.Over the five years from 2016 to 2020, South Korea managed to win nearly USD 800 million in offsets against defense contracts, or about 10 percent of what the country used to reap from 2011 to 2015. Reasons for this rapid decline include domestic conflict over whether or not to abolish the legal offset requirement following a 2018 audit by the Board of Audit and Inspection, a reluctance to request offsets against large-scale foreign military sales (FMS) contracts with the US, the absence of a well-established offset banking policy compared to other countries, the lack of a consistent and comprehensive strategy applicable across the government and the military that prioritizes the national interest, and ongoing interdepartmental disputes and infighting regarding the necessity of offsets. For Korea to achieve its vision of becoming one of the four largest global defense exporters, the Korean government needs to reinforce the status and importance of offsets. Korean lawmakers should ensure that the legal requirement stays in place and actively encourage offsets against FMS contracts with the United States. Moreover, the government needs to tackle resolve existing difficulties in seeking offsets against large-scale FMS and non-competitive contracts by establishing a comprehensive, pan-government offset negotiation strategy and also by adopting an offset banking scheme. Finally, the organization in charge of handling the offset program must be expanded, and the government should redouble efforts to host divisions of leading foreign defense contractors at local governments’ defense innovation clusters domestically. Thank you for reading this abstract of a report from the Korea Institute for Industrial Economics and Trade! Visit us on YouTube: https://www.youtube.com/watch?v=Q36v30l5CV0 Visit us on Instagram: https://www.instagram.com/worldkiet/ Visit our website: http://www.kiet.re.kr/en |
| Keywords: | weapons manufacturing; weapons exports; arms exports; defense exports; defense industry; defense goods; weapons systems; defense R&D; defense competitiveness; defense market; Korea |
| JEL: | F10 F13 F50 F51 F52 F59 L64 O31 O32 O34 O38 |
| Date: | 2023–07–28 |
| URL: | http://d.repec.org/n?u=RePEc:ris:kietrp:2023_011&r=int |
| By: | Javad Shamsi |
| Abstract: | This paper examines which types of firms are hit by multi-layered sanctions, quantifies the extent of the economic impact on the affected firms, and identifies the channels through which these effects are propagated. To this end, I use a text-based approach from computational linguistics to gauge the exposure of publicly listed Iranian firms to sanctions, validating this measure through its anticipated fluctuation over time and across industries. The findings reveal three key insights. First, Iranian firms report significant challenges due to sanctions, exceeding COVID-19 concerns by up to 20%. Second, politically-connected and non-connected firms suffer equally from sanctions; for every $1 loss inflicted on connected firms, an externality of $5 is imposed on non-connected firms, considering their economic scale. This contradicts the idea that sanctions only inflict harm on political decision-makers. Third, sanctions are hurtful; firms with higher exposure to sanctions endure greater losses in stock market value in the wake of unanticipated sanction events. Sanctions also lead to reduced sales, investment and hiring. Furthermore, the study reveals that sanctions impact firms via several mechanisms, the primary one being the limitation of access to export destinations. |
| Keywords: | economic sanctions, firms, text-as-data, computational linguistics |
| Date: | 2023–11–07 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1956&r=int |
| By: | Martin Kahanec; Martin Guzi |
| Abstract: | The welfare magnet hypothesis, also referred to as welfare shopping or welfare tourism, that migrants make location choices based on the provision of welfare benefits in alternative destinations, has resonated in the academic as well as public discourse on migration. This chapter summarizes theoretical models behind the welfare magnet hypothesis and reviews the empirical evidence on welfare-induced migration. The literature is inconclusive on the matter. Whereas there are theoretical arguments why welfare might matter for migration flows and several studies find a small positive association between welfare and migration, other studies find no such effects. In particular, some studies show that controlling for the endogeneity of welfare in the welfare-migration nexus reduces or eliminates the effect of welfare generosity on immigration. On the other hand, recent quasi-experimental studies demonstrate some effects of welfare on the location choices of asylees and refugees. Exploring a unique European dataset, this chapter contributes to this literature by providing some evidence that better accessibility of social assistance for immigrants is associated with larger immigrant inflows. Overall, the consensus in the literature is that the effects of welfare on migration are relatively small compared to other drivers of migration. The chapter concludes with highlighting the broader implications of the welfare magnet hypothesis and provides guidance for future research about it. |
| JEL: | H53 J15 J61 J68 |
| Date: | 2023–11–21 |
| URL: | http://d.repec.org/n?u=RePEc:cel:dpaper:65&r=int |
| By: | Jesse LaBelle; Ana Maria Santacreu |
| Abstract: | To reduce their tax exposure, multinationals may seek to shift profits to countries with lower tax rates. Do patents play a role in this strategy? |
| Keywords: | patents; corporate taxes; multinational corporations |
| Date: | 2022–08–09 |
| URL: | http://d.repec.org/n?u=RePEc:fip:l00001:94643&r=int |
| By: | Hokkanen, Topi |
| Abstract: | Carbon leakage is one of the major issues facing policymakers today when designing environmental regulation. While the empirical and trade literature on carbon leakage is rich, much less is known about the implications of carbon leakage risk on optimal regulatory policies under asymmetric information. To this end, I derive the optimal incentive compatible mechanism to regulate polluting firms under asymmetric information of both their abatement costs and carbon leakage risk, which I model as type-dependent outside options. The resulting regulatory distortions depend on the affiliation between the firm's abatement and relocation costs. The optimal policy is less strict than first-best whenever this affiliation is negative or mildly positive, whereas under strong positive affiliation I find a novel upwards distortion in the optimal policy. My results imply that rather than being a byproduct of unsuccessful regulation, carbon leakage may be the optimally induced outcome of incentive compatible regulation, contrasting with the received wisdom in policy debate. |
| Keywords: | carbon leakage, mechanism design, externalities, asymmetric information |
| JEL: | D62 D82 L51 Q54 Q58 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bofrdp:279565&r=int |
| By: | Elhanan Helpman |
| Abstract: | Empirical studies have found that enhanced foreign competition can encourage or discourage innovation. To address this relationship, I examine a market structure in which a small number of large multi-product oligopolists compete with a large number of small single-product firms in the same industry. The single-product firms are short-lived while the multi-product firms live forever, and the large firms invest in innovation in order to enlarge their product spans. All firms export. I show that an increase in the competitiveness of foreign firms can increase or reduce innovation efforts of a large multi-product firm. Moreover, changes in the incentives to innovate can be different for more-productive and less-productive oligopolists. As a result, aggregate sectoral innovation may rise or decline, depending on the productivity distribution of the oligopolists. I also show that changes in short-term operating profits may not be aligned with changes in the incentives to invest in innovation. |
| JEL: | D43 F1 L1 |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:31840&r=int |
| By: | Serdar Birinci; Fernando Leibovici; Kurt See |
| Abstract: | A cross-country analysis found immigrants were more likely than natives to work in fields like food service and less likely to be in fields like engineering. |
| Keywords: | immigration; employment; labor market |
| Date: | 2022–08–11 |
| URL: | http://d.repec.org/n?u=RePEc:fip:l00001:94644&r=int |
| By: | Rashad, Ahmed |
| Abstract: | The regulatory and institutional environment of a nation plays a critical role in shaping the level of entrepreneurship. By creating a conducive regulatory and institutional environment, governments can encourage entrepreneurial activity, leading to job creation, innovation, and economic growth. The United Arab Emirates has recently deregulated the ownership rules for more than 1, 000 commercial and industrial activities, allowing full ownership of commercial companies in the UAE without requiring a partnership with a national sponsor. Before the introduction of these amendments, foreign ownership was not permitted to exceed 49% of the total assets of a company outside the free zones, with the majority stake being held by an Emirati partner. This study represents the first attempt to assess the short-term impact of the liberalization of business ownership rules on the number of newly registered firms in the UAE. The study collects unique data that covers all types of business activity in Dubai, using monthly data on the number of newly issued business licenses. We developed a difference-in-difference model with a treatment and a control group using panel data regression models. Our findings suggest that the liberalization of the ownership rules has led to a significant surge in the number of new business licenses in the sectors impacted by the liberalization policy. This early evidence suggests that relaxing the restrictions on business ownership may stimulate entrepreneurial activity and business creation in the Gulf region. |
| Keywords: | New Firms, Gulf region, regulatory reform, entrepreneurship |
| JEL: | G18 G38 L51 M13 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:esprep:279749&r=int |
| By: | Felix Hugger; Ana Cinta González Cabral; Pierce O’Reilly |
| Abstract: | The effective taxation of corporate profits is at the centre of an active public and academic debate. This debate is often focused on the extent of low-taxed profit of multinational enterprises (MNEs) in jurisdictions with low statutory tax rates or low average effective tax rates (ETRs). However, some affiliates in high tax jurisdictions may also be subject to low ETRs, due to tax incentives or other provisions. To date, a global accounting of the ETRs paid by MNEs that incorporates within-country heterogeneity has been missing. Using a new dataset on the global activities of large MNEs, this paper provides new estimates of the distribution of effective tax rates of large MNEs across and within jurisdictions. The results show that low tax profit is common, and that substantial low-taxed profit exists outside low tax jurisdictions. We estimate that high tax jurisdictions (jurisdictions with average ETRs of above 15%) account for more than half (53.2%) of global profits taxed below 15%, much more than very low tax jurisdictions (those with average ETRs below 5%) which only account for 18.7% of low-taxed profits. This suggests that an assessment of global low-taxed profit that focuses only on jurisdictions with low average ETRs could potentially miss out on more than half of global low-taxed profit. |
| JEL: | H F |
| Date: | 2023–11–21 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ctpaaa:67-en&r=int |
| By: | Kaiser, Ulrich (University of Zurich); Grimpe, Christoph (Copenhagen Business School); Sofka, Wolfgang (Copenhagen Business School) |
| Abstract: | Wage discrimination against women remains a major obstacle to fair economic opportunities for women and a grand challenge constraining economic growth in many countries. Existing research is ambivalent about whether foreign MNC subsidiaries as employers of women offer a solution to this grand challenge. On the one hand, foreign MNC subsidiaries can pay higher wages to women because they are outsiders to the host country and can deviate from social norms that disadvantage women. On the other hand, they suffer from the liabilities of foreignness that limit their attractiveness as employers for women relative to domestic firms. We theorize that the latter factor becomes less important as the level of wage discrimination against women by domestic employers increases, so that foreign MNC subsidiaries become more attractive employers when women change jobs. We isolate two boundary conditions for this effect based on (a) whether women can observe wage premiums at foreign MNC subsidiaries in local labor markets and (b) when foreign MNC subsidiaries deviate from social norms in the labor market by relying more on female top managers than domestic employers. We test and support these hypotheses for 123, 343 female professionals/managers who changed jobs in Denmark between 2000 and 2016. |
| Keywords: | gender pay gap, female employee mobility, MNC wages, employer attractiveness |
| JEL: | J5 J16 |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp16580&r=int |