nep-int New Economics Papers
on International Trade
Issue of 2024‒03‒11
thirty-six papers chosen by
Luca Salvatici, Università degli studi Roma Tre

  1. Designing Effective Carbon Border Adjustment with Minimal Information Requirements. Theory and Empirics By Alessia Camplomi; Harald Fadinger; Chiara Forlati; Sabine Stillger; Ulrich J. Wagner
  2. Reducing the reliance on global value chains by strengthening backward linkages By Abamu, Bamituni Etomi
  3. Are global value chains for sale? On business-state relations in the MENA region By Aboushady, Nora; Zaki, Chahir
  4. Trade hyperglobalization is dead. Long live...? By Arvind Subramanian; Martin Kessler; Emanuele Properzi
  5. Unilateral Carbon Pricing and Heterogeneous Firms By Robin Sogalla
  6. Nafta: More Than A Regıonal Trade Agreement By Uner, Firat; OĞULTÜRK, Assoc. Prof. Dr.M. Cem
  7. Geopolitics and International Trade: The Democracy Advantage By Mr. Serhan Cevik
  8. Trade Theory with Behavioral Agents By Wisarut Suwanprasert
  9. The macroeconomic effects of global supply chain reorientation By Clancy, Daragh; Smith, Donal; Valenta, Vilém
  10. Global Value Chains and Productivity: Causal Evidence for Firms Worldwide By Antonia Lopez Villavicencio; Ivan Ledezma
  11. Tariff Rate Uncertainty and the Structure of Supply Chains By Sebastian Heise; Justin R. Pierce; Georg Schaur; Peter K. Schott
  12. New but used: The electric vehicle transition and the global second-hand car trade By ITF
  13. Multinationals, robots and the labor share By Leone, Fabrizio
  14. Trade and Domestic Distortions: The Case of Informality By Rafael Dix-Carneiro; Pinelopi Koujianou Goldberg; Costas Meghir; Gabriel Ulyssea
  15. Technology and the Global Economy By Jonathan Eaton; Samuel S. Kortum
  16. Japan’s Supply Chain Policy and its Implications for South Korea By KIM, Gyu-Pan
  17. Supply chains in a modern geopolitical environment By Fargher, Ben
  18. COVID-19, trade, and health: this changes everything? Comment on "What generates attention to health in trade policy-making? Lessons from success in tobacco control and access to medicines: a qualitative study of Australia and the (comprehensive and progressive) Trans-Pacific Partnership" By Barlow, Pepita
  19. The Israel-Hamas War, Oil Price Volatility, and Anticipated Impacts: Implications for Korean Industries By Lee, Sora; Lee, Minju
  20. What Drives U.S. Import Price Inflation? By Mary Amiti; Oleg Itskhoki; David Weinstein
  21. Optimal Monetary Policy, Tariff Shocks and Exporter Dynamics By Masashige Hamano; Francesco Pappadà; Maria Teresa Punzi
  22. The Effect of Migration on Careers of Natives: Evidence from Long-term Care By Peter Haan; Izabela Wnuk
  23. Are Trade Rules Undermining Taxation of the Digital Economy in Africa? By Banga, Karishma; Beyleveld, Alexander
  24. Chinese firms and adherence to global Environmental, Social and Governance (ESG) standards in developing countries: Is there potential to create common ground? By Morris, Mike
  25. Technological Push and Pull Factors of Bilateral Migration By Antea Barišić; Mahdi Ghodsi; Michael Landesmann
  26. How do we measure trade elasticity for services? By Satoshi Nakano; Kazuhiko Nishimura
  27. How COVID-19 Pandemic has Impacted the Supply Chain in the Electronics Industry By Christopher Lim
  28. The hidden role of small-scale farmers in global food security By Taherzadeh, Oliver; Mogollón, José
  29. The global corporate minimum tax and MNE home countries By Avi-Yonah, Reuven S.
  30. EU-US Agreement on Combating Cybercrime By Simona Franguloiu; Nicoleta-Elena Heghes
  31. Should I stay or should I go? Return migration from the United States By Alan Manning; Graham Mazeine
  32. Keep Your Friends Close and Your Enemies Closer: Network externality and tax competition By OKOSHI Hirofumi; MUKUNOKI Hiroshi
  33. Foreign economic policy uncertainty shocks and real activity in the Euro area By Arigoni, Filippo; Lenarčič, Črt
  34. Global health governance and geopolitics: How Germany can contribute to a new global health architecture after Covid-19 amid growing geopolitical tensions By Bayerlein, Michael; Villarreal, Pedro A.
  35. Dynamic Effects of Corporate Taxation in Open Economy By Olivier Cardi; Fatma Hoke; Romain Restout
  36. Right to Regulate and Japan’s Major International Investment Agreements By FUKUNAGA Yuka

  1. By: Alessia Camplomi; Harald Fadinger; Chiara Forlati; Sabine Stillger; Ulrich J. Wagner
    Abstract: To prevent carbon leakage induced by unilateral carbon pricing, the EU has designed a Carbon Border Adjustment Mechanism (CBAM) that taxes imports based on their carbon content. Since estimating the carbon content of imports is very complex, CBAM will be applied only to a few emissionintensive sectors. We argue that, as a consequence of its limited applicability, CBAM is unlikely to effectively eliminate leakage. We propose a simple alternative route towards leakage prevention with significantly lower information requirements and administrative burden which can be applied to all tradable sectors: the Leakage Border Adjustment Mechanism (LBAM). LBAM offsets the cost disadvantages of domestic producers relative to foreign competitors induced by unilateral carbon pricing by implementing import tariffs and, potentially, export subsidies that hold trade constant at the level before the introduction of carbon pricing. LBAM requires knowledge only about domestic product-specific output-to-emissions elasticities and import demand and export supply elasticities but does not depend upon information on the carbon content of imports. To quantify the welfare and emission effects of LBAM and to compare it to CBAM, we simulate a unilateral carbon-price increase in the EU using a granular structural trade model with 57 countries and 121 sectors. We find that LBAM is very effective in preventing leakage, while the EU CBAM is not.
    Keywords: Carbon Border Adjustment, Carbon leakage, Emission trading, Carbon taxation, Trade policy
    JEL: F13 F64 Q54 Q56
    Date: 2024–01
  2. By: Abamu, Bamituni Etomi
    Abstract: This Perspective explores the consequences of the ECJ decision in the Xella case over the protection of EU security from threats linked to indirect FDI. While the judgement excludes them from the scope of the EU FDI Screening Regulation, this Perspective offers a solution to include them under its scope.
    Date: 2023
  3. By: Aboushady, Nora; Zaki, Chahir
    Abstract: We use new data on political connections from the World Bank Enterprise Surveys to examine the impact of connections on firms' participation in global value chains (GVCs) for six MENA countries (Morocco, Tunisia, Egypt, the West Bank and Gaza, Jordan, and Lebanon). In addition to political connections, we construct several measures of "political influence" based on available data on lobbying and grand corruption. We also explore whether political connections help firms overcome barriers to trade and investment and increase their participation in GVCs at the extensive and intensive margins. Our findings suggest that political connections do matter for firms' GVC participation. The impact is more pronounced for firms that combine political connections with informal payments to influence policymaking. Our findings on the significance of trade and investment barriers for GVC participation for different categories of firms' political influence are - however - inconclusive.
    Keywords: GVCs, political connections, bribes, MENA region
    JEL: F10 F14 P00
    Date: 2023
  4. By: Arvind Subramanian (Peterson Institute for International Economics); Martin Kessler (Finance for Development Lab); Emanuele Properzi (Finance for Development Lab)
    Abstract: This paper examines the evolving landscape of global trade since the global financial crisis. It argues that a new era--characterized by the deglobalization of goods and the slower yet persistent globalization of services--has supplanted the era of hyperglobalization. It posits that the halt in manufacturing's shrinking share in global value added may have mitigated even stronger deglobalization caused by a number of influences such as slowing income convergence, financial deglobalization, and more restrictive trade policies. The paper also documents the end of disruptive North-South trade and highlights a new China puzzle, in which sharp internal trade contraction coexists with surging global export shares. It also reveals a positive correlation between mercantilism and both trade and growth at the global level.
    Keywords: Global Value Chains; Globalization; Current Account; China
    JEL: F60 F62 F30 F13 F14
    Date: 2023–11
  5. By: Robin Sogalla
    Abstract: Several empirical studies document the relevance of firm heterogeneity to assess the effect of trade and environmental policy. This paper develops a multi-country and -sector general equilibrium trade model with heterogeneous firms and analyzes the effect of domestic carbon pricing as well as carbon border adjustments. In the presence of heterogeneous firms, these unilateral carbon pricing tools affect the emission intensity both via within- and across-firm adjustments. I show that the across-firm reallocation of market shares can be quantified ex-ante using publicly available data on the share of exporting firms. Applying the model to EU climate policy, I find that emission reductions arise mainly through a lower emission intensity of production within firms, while the reallocation channel is negligible. Scale economies aggravate the output loss of emission-intensive manufacturing and the reduction of real income due to more stringent climate policy, but increase the effectiveness of border adjustments to counter carbon leakage. The selection of heterogeneous plays a more limited role for aggregate effects.
    Keywords: International Trade and the Environment, Firm Heterogeneity, Unilateral Climate Policy, Carbon Leakage
    JEL: F12 F13 F18 Q56 Q54
    Date: 2023
  6. By: Uner, Firat; OĞULTÜRK, Assoc. Prof. Dr.M. Cem
    Abstract: Trade is one of the fundamental reasons underlying the relationships between societies. Commercial interactions have contributed to the establishment of a specific international system worldwide through the trade relations between empires and states. In the 20th century, interstate trade led to the formation of certain agreements, some of which gave rise to regional-scale trade alliances. The North American Free Trade Agreement (NAFTA) is one of the regional trade agreements documented among North American countries, holding significant importance not only in increasing trade volume among signatory nations but also in terms of fostering regional cooperation and closer political relations.Despite being criticized by many since its signing date, NAFTA underwent substantial changes in 2020 and was restructured under the name The United States-Mexico-Canada Agreement (USMCA). Despite controversies and criticisms, NAFTA played a significant role in strengthening regional economic, social, and political ties, becoming one of the prominent examples of the rising regional trade agreements worldwide after the 1990s. In this study, the motivation behind NAFTA's inception, its historical development, member countries, and the positive impacts on the region are discussed. The contributions of NAFTA to the North American economy and regional development are examined through the analysis of gathered data, reports, and academic studies. The study aims to discuss the findings on the impact of NAFTA not only as a trade agreement but also on regional social and political developments.
    Keywords: NAFTA, USA, Mexico, Canada, Trade
    JEL: H0
    Date: 2024–01–01
  7. By: Mr. Serhan Cevik
    Abstract: Do political regimes determine how geopolitics influence international trade? This paper provides an empirical answer to the question by analyzing the joint impact of democracy and geopolitical distance between countries with an augmented gravity model of bilateral trade flows and an extensive dataset of more than 4 million observations on 59, 049 country-pairs over the period 1948–2018. Implementing the Poisson Pseudo-Maximum Likelihood regression and the two-stage least squares with instrumental variable approach, I find that geopolitical developments are not as important as income and geographical distance in determining bilateral trade flows and that democracy fosters international trade and moderates the potential negative impact of geopolitics. While the impact of democracy and its interaction with geopolitical distance are significant across all countries, the magnitude of these effects is substantially larger in advanced economies than in developing countries, reflecting the greater strength of democratic institutions, on average, in advanced economies.
    Keywords: Geopolitics; democracy; international trade; gravity model
    Date: 2024–02–02
  8. By: Wisarut Suwanprasert
    Abstract: I develop a theoretical framework to study gains from trade and optimal tariffs in the presence of behavioral biases. I introduce a sufficient statistic, called “behavioral wedge, †that generalizes the model to capture various types of behavioral biases, including utility misperceptions and inattention. First, I explore how behavioral biases influence gains from trade, demonstrating potential welfare losses from trade for behavioral agents. Second, I characterize optimal tariffs and behavioral nudges in the presence of behavioral biases. I show that small open economies can leverage trade policy to mitigate the welfare losses from behavioral biases, whereas larger economies might use nudges to manipulate the world’s terms of trade. Finally, I discuss the role of behavioral biases in shaping public support for the 2018 China–United States trade war and Brexit.
    Keywords: Trade theory; Behavioral economics; Gains from trade; Optimal tariffs; Nudges
    JEL: D9 F1 H2
    Date: 2024–02
  9. By: Clancy, Daragh; Smith, Donal; Valenta, Vilém
    Abstract: Policymakers around the world are encouraging the local production of key inputs to reduce risks from excessive dependencies on foreign suppliers. We analyse the macroeconomic effects of supply chain reorientation through localisation policies, using a global dynamic general equilibrium model. We proxy non-tariff measures, such as the stricter enforcement of regulatory standards, which reduce import quantity but do not directly alter costs and prices. These measures have, so far, been a key component of attempts to reshore production and are an increasingly popular trade policy instrument in general. Focusing on the euro area, we find that localisation policies are inflationary, imply transition costs and generally have a negative long-run effect on aggregate domestic output. The size (and sign) of the impact depends on whether these policies are implemented unilaterally or induce a retaliation from trade partners, and the extent to which they reduce domestic competition and productivity. We provide some recommendations for policymakers considering implementing a localisation agenda. JEL Classification: F13, F41, F45, F62
    Keywords: general equilibrium, reshoring, strategic autonomy
    Date: 2024–02
  10. By: Antonia Lopez Villavicencio; Ivan Ledezma
    Abstract: We study how global value chain participation causally affects productivity at the firm level. We utilize an extensive dataset encompassing firms from countries of different income levels over the period 2006-2021, together with matching approaches to control for endogeneity. Our primary finding underscores that the simultaneous coordination of importing and exporting activities within a single firm leads to an increase in labor productivity. Positive effects on TFP are significant only within the subgroup of firms in the less developed countries and those operating in low-tech industries. Increased capital intensity appears as a plausible explanation of labor productivity gains. We also find higher innovation propensity, quality enhancements, and labor-cost reductions for two-way traders as channels through which GVC participation influences firms' technical change. The lower responsiveness of TFP in advanced countries can be explained by the different nature of technical change for firms operating closer to the world technology frontier.
    Keywords: Global value chains, productivity, firm, development, endogeneity
    JEL: C31 D24 F14 F15 O5
    Date: 2024
  11. By: Sebastian Heise; Justin R. Pierce; Georg Schaur; Peter K. Schott
    Abstract: We show that reducing the probability of a trade war promotes long-term importer-exporter relationships that ensure provision of high-quality inputs via incentive premia. Empirically, we introduce a method for distinguishing between these Japanese versus spot-market (i.e., American) relationships in customs data, show that their use varies intuitively across trading partners and products, and find that Japanese importing from China increases after a reduction in the possibility of a trade war. Extending the standard general equilibrium trade model to encompass potential trade wars and relational contracts, we estimate that eliminating Japanese procurement reduces welfare about a third as much as moving to autarky.
    JEL: F13 F15
    Date: 2024–02
  12. By: ITF
    Abstract: This report analyses the global trade in used cars and how the transition to electric vehicles may impact it. The analysis explores the quality and age of used vehicles traded globally and maps out how they are traded from developed economies to emerging markets. The report reviews recent importer and exporter policy announcements and uses quantitative analysis, for the first time, to understand how policies may impact the flows of used vehicles between countries. It evaluates potential scenarios of electric vehicle adoption in emerging economies through used vehicle imports.
    Date: 2023–12–05
  13. By: Leone, Fabrizio
    Abstract: Using a panel of Spanish manufacturing firms covering the 1990-2017 period, this paper shows that firms acquired by multinational enterprises experience a reduction in the labor share. Acquisitions drive significant changes in the production process of affiliates. One of the key aspects of this reorganization is the systematic adoption of robots, which allow affiliates to scale up production and expand into foreign markets but reallocate income away from labour. The results are supported by a model of automation choices with heterogeneous firms and are robust to accounting for selection into multinational ownership and robot adoption. Counterfactual results indicate that, in the absence of multinationals and robots, the manufacturing labor share would be at its level of two decades ago. These findings shed new light on how globalization and technological change jointly contribute to the decline in the labor share.
    Keywords: multinational enterprises; industrial robots; labour share; globalization; technological change
    JEL: F23 O33 F00
    Date: 2023–02–06
  14. By: Rafael Dix-Carneiro (Duke University); Pinelopi Koujianou Goldberg (Yale University); Costas Meghir (Yale University); Gabriel Ulyssea (University College London)
    Abstract: We examine the effects of international trade in the presence of a set of domestic distortions giving rise to informality, a prevalent phenomenon in developing countries. In our quantitative model, the informal sector arises from burdensome taxes and regulations that are imperfectly enforced by the government. Consequently, smaller, less productive firms face fewer distortions than larger, more productive ones, potentially leading to substantial misallocation. We show that in settings with a large informal sector, the gains from trade are significantly amplified, as reductions in trade barriers imply a reallocation of resources from initially less distorted to more distorted firms. We confirm findings from earlier reduced-form studies that the informal sector mitigates the impact of negative labor demand shocks on unemployment. Nonetheless, the informal sector can exacerbate the adverse welfare effects of economic downturns, amplifying misallocation. Last, our research sheds light on the relationship between trade openness and cross-firm wage inequality.
    Date: 2024–02
  15. By: Jonathan Eaton; Samuel S. Kortum
    Abstract: Interpreting individual heterogeneity in terms of probability theory has proved powerful in connecting behaviour at the individual and aggregate levels. Returning to Ricardo's focus on comparative efficiency as a basis for international trade, much recent quantitative equilibrium modeling of the global economy builds on particular probabilistic assumptions about technology. We review these assumptions and how they deliver a unified framework underlying a wide range of static and dynamic equilibrium models.
    JEL: F0 O3 O4
    Date: 2024–01
    Abstract: This WEB paper analyzed Japan's supply chain policy in line with the implementation of Japan's Economic Security Promotion Act in May 2022, and presented policy implications such as supply chain cooperation be-tween Korea and Japan. First, this paper analyzed the US-led reorganization of the global supply chain and the Japanese government's response to it. In particular, the Japanese government's economic security policy was evaluated from the perspective of how Japan approaches the US-led the global supply chain reorganization. Second, the Japanese government's supply chain policy was analyzed, focusing on the supply chain policy for some critical materials under the Economic Security Promotion Act. Finally, this paper proposed ways for Korea and Japan to cooperate in reshaping the global supply chain led by the United States.
    Keywords: Japan’s Supply Chain Policy; Japans Economic Security Promotion Act
    Date: 2024–02–22
  17. By: Fargher, Ben
    Abstract: Global food security in a riskier world is a vitally important topic. Nearly 830 million people are food insecure – there are real and urgent challenges facing the global food system. Topics such as market access and the empowerment of people, especially as it relates to smallholder agriculture in the Asia Pacific region, are critical. As Cargill sits at the centre of the global agricultural supply chain, working alongside farmers, producers, manufacturers, retailers, governments, and other organisations, the presentation will raise solutions for resilient food and nutrition systems, with particular emphasis on the supply chain. It will explain the Cargill experience of the implications for farmers of disruptions to global supply chains in a modern geopolitical environment including from rising demand, climate and geopolitical conflict. Experiences from COVID-19 lockdowns and the more recent disruptions due to the war in Ukraine, have had significant implications for farmers and agribusiness and strategies for diversification of markets, more flexible and resilient supply chains, and planning for resilience to reduce future vulnerability for the benefit of consumers and growers will be considered. One if not the most urgent challenge is the climate crisis. Cargill is committed to reducing the climate impact of agriculture and agriculture is part of the solution to this challenge. Working with suppliers, customers, and partners, action-oriented, lasting solutions and several practical examples will be outlined.
    Keywords: Agribusiness, Agricultural and Food Policy, Crop Production/Industries, International Relations/Trade
    Date: 2024–02
  18. By: Barlow, Pepita
    Abstract: Townsend and colleagues highlighted the myriad political forces which fostered attention to health issues during negotiations to establish a new trans-pacific trade deal in Australia (the CP-TPP [Comprehensive and Progressive Agreement for Trans-Pacific Partnership], formerly known as TPP). Among the factors they identify, exporter interests and exogenous events helped to generate attention to trade-related concerns about tobacco and access medicines, and limited attention to nutrition and alcohol. These are important considerations as the United Kingdom negotiates a trade deal with the United States in haste, whilst at the same time attempting to manage the ongoing coronavirus disease 2019 (COVID-19) pandemic. In this commentary, I reflect on changing attention to trade and nutrition during the COVID-19 pandemic in light of Townsend and colleagues’ analysis. I explore scope for greater attention to nutrition in US-UK trade negotiations, and the challenges created by the vested interests of major UK and US processed food exporters. I further discuss the utility of the theoretical tools employed by Townsend and colleagues for wider debates in the political economy of health.
    Keywords: nutrition; political economy of health; trade liberalisation; United Kingdom; Covid-19; coronavirus
    JEL: L81
    Date: 2022–04–01
  19. By: Lee, Sora (Korea Institute for Industrial Economics and Trade); Lee, Minju (Korea Institute for Industrial Economics and Trade)
    Abstract: The Israel-Hamas War began when Hamas attacked Israel on October 7, 2023. The international community remains alertly attuned to the war’s developments, not least because conflicts in the Middle East have historically tended to fuel oil price hikes. Thus far, however, the war has not yet exerted a significant effect on global oil prices, as neither belligerent in the conflict is an oil producer. However, if a third-party country such as Iran enters the war, the international price of oil could well rise to USD 150 per barrel. Rising oil prices exert inflationary pressure first by directly increasing import prices. In South Korea, rising oil prices have been associated with higher prices of imported raw materials and intermediate goods since 2000. Higher input costs significantly raise the cost of business for Korean firms. Should business revenues fail to rise at the same pace as costs, firms stand to experience losses. Our analysis of different Korean industries reveals that rising prices have significantly elevated material costs for the chemical, primary metal, and petroleum refinery industries, with the impacts on the profitability of the chemical industry particularly severe. Our analysis also shows that the income terms of trade worsened especially for Korean chemical and steel exports under war-induced oil price hikes, while the income terms of trade for the semiconductor and automotive industries actually improved over the same period of time. Geopolitical factors can lead to abrupt fluctuations in oil prices, making it is critical to remain abreast of developments in the Israel-Hamas War. Moreover, the Korean government needs to monitor oil prices closely so as to take timely and proactive policy actions that ensure stability in domestic oil prices. Policy support should also be tailored to the needs of industries that are especially vulnerable than to oil price hikes, while measures should be introduced to enhance the competitiveness of their products. In the long run, more investment should be made in developing alternative and renewable energy sources.
    Keywords: Israel; Hamas; Israel-Hamas war; Middle East; oil; oil prices; oil price volatility; inflation; global trade; renewable energy; KIET; Korea
    JEL: F13 F51 F52 Q31 Q34 Q35 Q37 Q38 Q41
    Date: 2023–10–31
  20. By: Mary Amiti; Oleg Itskhoki; David Weinstein
    Abstract: Inflation has risen sharply in many countries since the COVID-19 outbreak. Economists have debated the underlying causes. In this paper, we examine the drivers of the global import price inflation, which peaked at approximately 11 percent a year. We find that a common global component closely tracks movements in aggregate U.S. import prices until late 2022. Afterward, idiosyncratic U.S. demand shocks started to dominate.
    JEL: E31 F14 F42
    Date: 2024–02
  21. By: Masashige Hamano (Waseda University); Francesco Pappadà (Ca’ Foscari University of Venice and Paris School of Economics); Maria Teresa Punzi (Sim Kee Boon Institute, Singapore Management University)
    Abstract: In this paper, we explore the response of optimal monetary policy to uncoordinated trade policies (foreign tariff shocks). We first provide a simple model of open economy with heterogeneous firms and derive a closed-form solution for the optimal monetary policy response to tariff shocks in presence of nominal rigidities. We show that optimal monetary policy is expansionary following foreign tariff hikes. Under nominal rigidities, uncertainty about foreign tariff hikes induces sluggish adjustments in the labor market reallocation between exporters and domestic firms, leading to an incentive for monetary authority to intervene and mitigate the impact of tariff shocks. In an extended model, we then show the response of our economy to a tariff shock under the Ramsey monetary policy, a Taylor Rule and a fixed exchange rate regime. Finally, we provide empirical evidence for the response of domestic monetary policy to foreign tariff shocks using data on Global Antidumping from the US.
    Keywords: Optimal Monetary Policy; Tariff Shocks; Exporter Dynamics
    JEL: E3 E6 Q54 R1
    Date: 2023–12
  22. By: Peter Haan; Izabela Wnuk
    Abstract: This paper examines the effect of increasing foreign staffing on the labor market outcomes of native workers in the German long-term care sector. Using administrative social security data covering the universe of long-term care workers and policy-induced exogenous variation, we find that increased foreign staffing reduces labor shortages but has diverging implications for the careers of native workers in the sector. While it causes a transition of those currently employed to jobs with better working conditions, higher wages, and non-manual tasks, it simultaneously diminishes re-employment prospects for the unemployed natives with LTC experience.
    Keywords: Immigration, shift-share instrument, long-term care, EU Enlargement
    JEL: J61 I11
    Date: 2024
  23. By: Banga, Karishma; Beyleveld, Alexander
    Abstract: African countries are currently considering provisions in the AfCFTA and at the WTO to liberalise digital trade. As they face mounting fiscal pressures, it is imperative that they beware the implications of digital trade provisions for their ability to tax their digital economy. In this paper, we develop a comprehensive framework for analysing the impact of trade rules on tax regimes in the digital economy, with a focus on Kenya, Rwanda, and South Africa. We explore how trade rules ostensibly shape tax policies and their implications for revenue generation. By examining rules regulating trade in services and the imposition of customs duties on electronic transmissions, we identify how these rules may directly impact tax policies and limit revenue generation possibilities. Moreover, digital trade rules, such as those related to data flows, localisation, and source code sharing, have the capacity to produce both indirect and administrative effects on tax measures. These rules can alter tax structures, taxation rights, data collection, and the capacity to monitor and implement tax measures. Our findings shed light on the complex interplay between trade rules and tax measures, highlighting potential challenges and opportunities for revenue generation from the digital economy in African countries.
    Date: 2024
  24. By: Morris, Mike
    Abstract: This paper focuses on analysing how Chinese firms operate in Latin America, Asia and Africa in regard to ESG (environmental, social and governance) standards and sustainability issues. How do they respond to the increasing global value chain requirement to incorporate and maintain ESG standards? Is their space for an alignment between Western development cooperation ESG policies, frameworks, strategies and practices and Chinese political and economic stakeholders in the developing world? The paper uses a variety of case studies covering Chinese firms (disaggregated into SOEs (state-owned enterprises) and large, medium and small private sector firms) operating in various sectors in countries across the developing world. It uses a three dimensional framework to analyse different types of Chinese firms in terms of value chain operations covering many of the ESG standards they are required to meet: 1. Supply chain relations (i.e. approach to supporting upgrading of local suppliers); 2. Internal firm processes (i.e. approach to local labour, training and upskilling); 3. Social licence to operate (i.e. approach to meaningfully engaging with local communities taking account of their social and economic needs). There are examples of Chinese firms behaving according to the negative type casting that has dominated much of the literature. However, Chinese firms in developing countries are fairly flexible and more willing to adapt to ESG standards than conventionally assumed. There are sufficient instances of Chinese firms in host developing countries showing significant movement to alignment on ESG dimensions. Unlike the industrialised world, these firms are not driven by civil society socio-political pressure within China. China's relationship to ESG has instead been driven by a) geo-political considerations involving the Chinese government's global presence, and b) primarily economic risk considerations of Chinese lead firms operating internationally - risk relating to raising finance and ensuring that business operations in developing countries can avoid major disruption. For many Chinese lead firms operating in the developing world, ESG is increasingly being perceived as a fundamental risk mitigation tool assisting them to ensure that they are able to maintain continuous, consistent, and predictable economic operations. These tendencies can only be expected to grow much stronger as the Chinese government adopts more ESG standards within guidelines and regulatory frameworks and enforces compliance on Chinese firms operating abroad. As Chinese firms become more open to ESG compliance, this creates a foundation for potential development cooperation alignment with the Chinese government and Chinese lead firms operating in the developing world.
    Keywords: ESG, Global Value Chains, Chinese Firms, Developing World, Chinese FDI, Globalisation
    Date: 2023
  25. By: Antea Barišić; Mahdi Ghodsi (The Vienna Institute for International Economic Studies, wiiw); Michael Landesmann (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: This paper explores the complex interplay between technology adoption, specifically robotisation and digitalisation, and international migration within the EU and other advanced economies, including Australia, the UK, Japan, Norway and the US, over the period 2001-2019. Utilising a gravity model approach grounded in neoclassical migration theory, the study analyses how technological advancements influence migration flows. It examines two key technological variables the extent of digitalisation, represented by ICT capital per person employed, and the adoption of industrial robots, measured by the stock of robots per thousand workers. The research uniquely integrates these technological factors into migration analysis, considering both push and pull effects. Additionally, it accounts for various other migration determinants such as macroeconomic conditions, demography and policy factors. The findings reveal insightful dynamics about the relationships between technological progress, labour market conditions and migration patterns, contributing significantly to the current literature and informing future migration policies and the impact of technology adoption.
    Keywords: Robot adoption, digitalisation, novel innovation, migrant workers
    JEL: O33 F22 D24
    Date: 2024–02
  26. By: Satoshi Nakano; Kazuhiko Nishimura
    Abstract: This paper is about our attempt of identifying trade elasticities through the variations in the exchange rate, for possible applications to the case of services whose physical transactions are veiled in the trade statistics. The regression analysis to estimate the elasticity entails a situation where the explanatory variable is leaked into the error term through the latent supply equation, causing an endogeneity problem for which an instrumental variable cannot be found. Our identification strategy is to utilize the normalizing condition, which enables the supply parameter to be identified, along with the reduced-form equation of the system of demand and supply equations. We evaluate the performances of the method proposed by applying to several different tangible goods, whose benchmark trade elasticities are estimable by utilizing the information on their physical transactions.
    Date: 2023–11
  27. By: Christopher Lim (San Jose State University, USA)
    Abstract: For many decades, a relatively stable supply chain has endured for global industries. The Thailand floods, Japan’s Tsunami leading to a nuclear plant leak in 2011, and Iceland’s volcano eruption in the same year severely disrupted the global supply chain with the electronics manufacturing companies, but only for a short period of time. These natural disasters were confined to certain geographical sectors and the operational interruptions were short-lived. The COVID-19 pandemic has, however, presented companies with a radical set of challenges that will require a transformational shift in the supply chain strategy and operations management for all industries. By associating the VUCA (Volatility, Uncertainty, Complexity, Ambiguity) theoretical framework with the global supply chain challenges experienced in the COVID-19 pandemic, research hypotheses regarding future supply chain strategies for the electronics and semi-conductor industry players were developed and tested. Sample data was gathered with industry practitioners utilizing a convenience sampling. The results demonstrate that industry practitioners, research institutions, and the Biden administration have touted the need to re-shore manufacturing and reduce dependency on foreign countries. Outsourcing decisions justified through a cost-benefit-risk analysis must constantly be applied. Just-In-Time (JIT) and Lean, a prevalent strategy, has turned into an Achilles heel during the COVID-19 pandemic times. The trade-off analysis to maintain a safety stock of critical components has become an essential variable for decision-making. Single-sourcing is abhorred, while multiple-sourcing supported by increased data visibility with effective ERP systems has become a strategic imperative. Partnerships with vendors, suppliers, logistics providers, and all stakeholders must be strengthened and continuously enhanced in the VUCA supply chain for the years to come. The primary takeaway from the research is that top management and supply chain leaders must focus their efforts on building an agile and resilient global supply chain network as the days of relying on offshore manufacturing and an absolute JIT and Lean strategy is behind us.
    Keywords: electronics, manufacturing, supply chain, outsourcing, lean
    Date: 2023–11
  28. By: Taherzadeh, Oliver; Mogollón, José
    Abstract: In our globalised food system, farmers meet domestic and transboundary food needs. As a result, the contribution of farmers to domestic food production is a poor proxy for their role in national food security. This study offers the first global assessment of how small-, medium-, and large-scale farmers contribute to global food security. We find that the role of small-scale farmers in national and global food security has been significantly underestimated due to the localised focus of previous studies, particularly in high-income nations. Future research must account for the differentiated roles, impacts, and vulnerabilities of farmers within a global context.
    Date: 2024–01–26
  29. By: Avi-Yonah, Reuven S.
    Abstract: This Perspective explores the implications for the home countries of large MNEs of the agreement reached by over 140 countries in 2021 to enact a corporate minimum tax of 15%. It argues that the corporate minimum tax complements the trend to reduce the negative impact of unfettered globalization on labor, and it protects the ability of home countries to finance a robust social safety net. Home countries should adopt the corporate minimum tax, and that includes the US, which last year failed to adapt its Global Intangible Low-Taxed Income approach to the corporate minimum tax.
    Date: 2024
  30. By: Simona Franguloiu (Transilvania University BraÈ™ov, România); Nicoleta-Elena Heghes (“Dimitrie Cantemir†Christian University of Bucharest, Romania)
    Abstract: Combating and preventing the commission of particularly serious offences, especially those related to cybercrime, requires a tailored response, which means making prevention work more effective, through the work of bodies and institutions with specific powers in this area, but also of judicial bodies that must cooperate, so that the existence of international instruments has become an absolute necessity. These are intended to strengthen international judicial cooperation (in addition to other activities) by coordinating efforts and actions to dismantle organized crime groups. Given the importance of electronic evidence in the investigation and prosecution of offenders in this area, in June 2019, the Council authorized the European Commission to start the procedure to start negotiating an agreement on behalf of the EU with the US on access to and collection of electronic evidence, negotiations which are ongoing. Of course, the subject matter of the agreement and the negotiated clauses are not public at the moment, but the European Commission regularly informs the Council on the state of these negotiations, so we intend to highlight the advantages of concluding this agreement as soon as possible from the perspective of international judicial cooperation.
    Keywords: cybercrime, EU-US agreement, international judicial cooperation, Budapest Convention, Second Additional Protocol, criminal investigation, electronic evidence, cross-border access
    Date: 2023–11
  31. By: Alan Manning; Graham Mazeine
    Abstract: Return migration is important, but how many migrants leave and who is poorly understood. This paper proposes a new method for estimating return migration rates using aggregated repeated cross-sectional data, treating the number of migrants in a group who arrived in a particular year as an unobserved fixed effect, and the observed number (including, importantly, observed zeroes) in the arrival or subsequent years as observations from a Poisson distribution. Compared to existing methods, this allows us to estimate return rates for many more migrant groups, allowing more in-depth analysis of the factors that influence return migration rates. We apply this method to US data and find a decreasing hazard, with most returns occurring by eight years after arrival, when about 13% of migrants have left. The return rate is significantly lower for women, those who arrive at a young age, and those from poorer; it is higher for those on non-immigrant visas for work or study. We also provide suggestive evidence that, conditional on their country of origin, those with lower education are more likely to return.
    Keywords: return migration
    Date: 2024–02–12
  32. By: OKOSHI Hirofumi; MUKUNOKI Hiroshi
    Abstract: This study investigates the effects of network externality on the policy competition between two countries regarding their attempts to attract a multinational enterprise (MNE). The two countries have different numbers of consumers and endogenously set a tax/subsidy on the MNE. The larger country has a local firm with a large market. Network externality makes the larger country with the local firm more attractive to the MNE because the resulting larger supply amplifies the network size. The MNE's location in the larger country can also benefit the local firm despite fiercer competition with the MNE while also benefiting consumers in all countries. Fiscal competition increases the likelihood of a larger country hosting the MNE when the network externality is large, but it promotes the MNE's location in a small country when the network externality is small. A location change from a smaller to a larger country, induced by fiscal competition, improves both countries' welfare or their joint welfare when the network externality is significant.
    Date: 2024–02
  33. By: Arigoni, Filippo; Lenarčič, Črt
    Abstract: This paper estimates a Bayesian VAR model on Euro area data and quantifies the reaction of real activity to economic policy uncertainty shocks that originate abroad. Our findings show that US and Chinese uncertainty explains larger shares of fluctuations than European uncertainty. In an extended set-up, we perform a counterfactual simulation and verify the presence of a foreign economic policy uncertainty spillovers channel that magnifies the real effects of US and Chinese uncertainty shocks. The simulation also documents a non-negligible role played by bilateral trading activities in the transmission mechanism of Chinese shocks. In an application with Dutch data, we highlight that structural domestic factors shape region and country-specific uncertainty in the propagation of foreign economic policy uncertainty shocks onto the economy.
    Keywords: Uncertainty shocks, Euro area spillovers, real activity, US, China, Bayesian VAR
    JEL: C32 E30 Q54
    Date: 2023–08
  34. By: Bayerlein, Michael; Villarreal, Pedro A.
    Abstract: The development of a new global health architecture in the wake of Covid-19 will require important decisions to be made, especially when it comes to negotiating a pandemic accord and creating robust supply chains. Against the backdrop of their systemic rivalry, the US and China view global health policy as a field of geopolitical competition. This jeopardises the implementation of lessons learned from the Covid‑19 pandemic, not to mention global health in general. The question for Germany is to what extent it needs to adapt its multilateral approach to global health in order to respond to increasing geopolitical tensions. To this end, Germany should develop independent leverage to shape global health policy while also being a reliable, multi­lateral partner to all countries willing to improve in this field
    Keywords: global health architecture, Covid-19, systemic rivalry US and China, pandemic prevention, pandemic accord, World Health Organization (WHO), Emergency Plan for AIDS Relief (PEPFAR)
    Date: 2023
  35. By: Olivier Cardi; Fatma Hoke; Romain Restout
    Abstract: By exploiting the downward trend of profits' taxation observed in OECD countries which is rooted into international competition to attract capital, we identify exogenous variations in the corporate income tax rate. Estimating a SVAR model with long-run restrictions for a panel of eleven OECD countries over 1973-2017, we find that a permanent decline in profits' taxation leads to significant technology improvements which are concentrated in traded industries. The corporate tax cut has also an expansionary effect on hours concentrated in non-traded industries. The country-split shows that technology significantly improves in English-speaking and Scandinavian countries only while hours persistently increase only in continental European countries. To account for the dynamic effects of a corporate tax cut, we consider a two-sector open economy model with tradables and non-tradables and endogenous technology decisions where both capital and technology can be used more intensively. The model can account for the magnitude of technology improvements we estimate empirically as long as the traded sector is intensive in R&D, experiences low costs in the use of the stock of knowledge and also highly benefits from international R&D spillover. While large elasticities of utilization-adjusted-TFP w.r.t. the domestic and international stock of knowledge must be assumed in English-speaking and Scandinavian countries, in accordance with our estimates, we have to allow for sticky wages in continental European countries to account for our evidence.
    Keywords: Corporate taxation, SVAR, Open economy, Endogenous technological change, R&D, Hours worked, Tradables and non-tradables, Labor reallocation, Wage stickiness
    JEL: E23 E62 F11 F41 H25 O33
    Date: 2024
  36. By: FUKUNAGA Yuka
    Abstract: Japan has been actively negotiating and concluding international investment agreements (IIAs) with a view to protecting and promoting investments by Japanese investors overseas. The Japanese government’s pro-investor, pro-investment IIA policy is strongly supported by the Japanese industry. However, the time may have finally come for Japan to revisit and review its IIA policy as climate change challenges are increasingly urgent and national security has become an essential element in the economic policy and diplomacy of states. These trends have important policy implications for Japan, not only as the home state of investors but also as the host state of foreign investments. It is essential to make sure that Japan’s IIAs not only protect Japanese investors’ investments overseas, but also preserve the Japanese government’s right to regulate climate change and national security at home. This short paper examines whether Japan’s major IIAs properly preserve Japan’s right to regulate climate change and national security.
    Date: 2024–02

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