nep-int New Economics Papers
on International Trade
Issue of 2024‒03‒18
33 papers chosen by
Luca Salvatici, Università degli studi Roma Tre

  1. Simulating the Constant Cost Trade Model By Nazif Durmaz; Henry Thompson
  2. Free Trade Agreements and the Movement of Business People By Mayer, Thierry; Rapoport, Hillel; Umana-Dajud, Camilo
  3. Trade War and Peace: U.S.-China Trade and Tariff Risk from 2015–2050 By George A. Alessandria; Shafaat Y. Khan; Armen Khederlarian; Kim J. Ruhl; Joseph B. Steinberg
  4. Are the Happy Few still happy? Exporter heterogeneity during the COVID-19 pandemic in Italy By Gloria Allione; Claire Giordano
  5. Tariff spillovers and new rules for multilateral tariff negotiations By Bekkers, Eddy; Keck, Alexander
  6. Trade in the time of COVID-19: an empirical analysis based on Italian data By Gianmarco Cariola
  7. Inputs in geopolitical distress: a risk assessment based on micro data By Alessandro Borin; Gianmarco Cariola; Elena Gentili; Andrea Linarello; Michele Mancini; Tullia Padellini; Ludovic Panon; Enrico Sette
  8. Robots and extensive margins of exports: Evidence for manufacturing firms from 27 EU countries By Wagner, Joachim
  9. Invoice Currency Choice in Intra-Firm Trade: A Transaction-Level Analysis of Japanese Automobile Exports By Taiyo Yoshimi; Uraku Yoshimoto; Kiyotaka Sato; Takatoshi Ito; Junko Shimizu; Yushi Yoshida
  10. Cross-border investment into low-carbon infrastructure: An empirical glance By OECD
  11. The indirect effect of the Russian-Ukrainian war through international linkages: early evidence from the stock market By Biermann, Marcus; Leromain, Elsa
  12. The gravity of Offshore Financial Centers: estimating real FDIs using a binary choice model By Marco Albori; Alessio Anzuini; Fabrizio Ferriani; Luca Rossi
  13. It's a match! Linking foreign counterparts in Italian customs data to their balance sheets By Crispino Marta; Francesco Paolo Conteduca
  14. Boosting trade through flexible rules of origin in preferential agreements* By Jaime de Melo; Julien Gourdon; Karin Gourdon
  15. Trade and climate change: How to design better climate-related provisions in Preferential Trade Agreements By Brandi, Clara; Holzer, Kateryna; Morin, Jean-Frédéric; van Asselt, Harro; Weber, Katharina
  16. The Feldstein-Horioka Puzzle or Paradox after 44 Years: A Fallacy of Composition By Charles Yuji Horioka
  17. The impact of trade on income inequality in Mexico By Andrea Bernini; Olaf J. de Groot
  18. Bilateral investment treaties and portfolio investment By Eichler, Stefan; Nauerth, Jannik A.
  19. From BRICS to BRICS+: Sheer More Members is not a Challenge to G7 By Kamin, Katrin; Langhammer, Rolf J.
  20. Clever planning or unfair play? Exploring the economic and statistical impacts of tax avoidance by multinationals By Alessio Anzuini; Elena Pisano; Luca Rossi; Alessandra Sanelli; Enrico Tosti; Ernesto Zangari
  21. Interactions in a High Immigration Context By Diego Aycinena; Francisco B. Galarza Arellano; Javier Torres
  22. Constraints on Trade in the LAC Region By Ms. Rina Bhattacharya; Samuel Pienknagura
  23. Does a Tragic Event Affect Different Aspects of Attitudes toward Immigration? By Heizler (Cohen), Odelia; Israeli, Osnat
  24. Theoretical Considerations Regarding the Know-How Contract from the Perspective of the European Union Legislation and the Romanian Transposition Legislation By Elise-Nicoleta Valcu
  25. The European energy crisis and the consequences for the global natural gas market By Simone Emiliozzi; Fabrizio Ferriani; Andrea Gazzani
  26. On the effect of investment disputes on bilateral portfolio investment in emerging markets By Nauerth, Jannik A.
  27. Semiconductor Competition Between China and Taiwan By Moustafa Hamil
  28. Monopsony Power, Offshoring, and a European Minimum Wage By Hartmut Egger; Udo Kreickemeier; Jens Wrona
  29. Foreign ownership and bribery in Chinese listed firms: An institutional perspective By Wei Jiang; Daokang Luo; Liwen W.L. Wang; Kevin Zheng Zhou
  30. Beyond Language Proficiency: Understanding the Role of National Identification in Shaping Attitudes toward Immigrants By Akira IGARASHI; Charles CRABTREE; Yoshikuni ONO
  31. Taxing Top Wealth: Migration Responses and their Aggregate Economic Implications By Katrine Jakobsen; Henrik Kleven; Jonas Kolsrud; Camille Landais; Mathilde Muñoz
  32. Forecasting Imports in OECD Member Countries and Iran by Using Neural Network Algorithms of LSTM By Soheila Khajoui; Saeid Dehyadegari; Sayyed Abdolmajid Jalaee
  33. The Feldstein-Horioka Puzzle or Paradox after 44 Years: A Fallacy of Composition By Charles Yuji Horioka

  1. By: Nazif Durmaz; Henry Thompson
    Abstract: This paper simulates the constant cost trade model with labor inputs for three and five regions and products aggregated from the World Input-Output Database. The regions start with America, Asia, and Europe trading Resources, Manufactures, and Services. Each region maximizes Cobb-Douglas utility based on global consumption shares subject to balanced trade and global material balance. Simulated autarky and trade with the rest of the world lead to the full model with multiple potential equilibria. Diversified exports and import competition characterize the trade patterns with the gains from trade relative to autarky up to 20% for the five regions.
    Keywords: comparative advantage; relative prices; simulation; constant cost trade
    JEL: F10 F14
    Date: 2024–02
  2. By: Mayer, Thierry (Sciences Po, Paris); Rapoport, Hillel (Paris School of Economics); Umana-Dajud, Camilo (CEPII, Paris)
    Abstract: Using provisions to ease the movement of business visitors in trade agreements, we show that removing barriers to the movement of business people promotes trade. We document the increasing complexity of Free Trade Agreements and develop an algorithm that combines machine learning and text analysis techniques to examine the content of FTAs. We use the algorithm to determine which FTAs include provisions to facilitate the movement of business people and whether these are included in dispute settlement mechanisms. We show that provisions facilitating business travel are effective in promoting them and eventually increase bilateral trade flows.
    Keywords: text analysis, machine learning, free trade agreements, business travel, migration
    JEL: F13 F22 F23
    Date: 2024–02
  3. By: George A. Alessandria; Shafaat Y. Khan; Armen Khederlarian; Kim J. Ruhl; Joseph B. Steinberg
    Abstract: We use the dynamics of U.S. imports across goods in the period around the U.S.-China trade war with a model of exporter dynamics to estimate the dynamic path of the probability of transiting between Normal Trade Relations and a trade war state. We find (i) there was no increase in the likelihood of a trade war before 2018; (ii) the trade war was initially expected to end quickly, but its expected duration grew substantially after 2020; and (iii) the trade war reduced the likelihood that China would face Non-Normal Trade Relations tariffs in the future. Our findings imply that the expected mean future U.S. tariff on China rose more under President Biden than under President Trump. We also show that the trade response to the trade war is similar to the response to the 1980 liberalization that initially granted China access to U.S. markets at NTR terms and was expected to be quickly reversed.
    JEL: F12 F13 F14
    Date: 2024–02
  4. By: Gloria Allione (Bank of Italy); Claire Giordano (Bank of Italy)
    Abstract: By using highly granular monthly customs data and firm balance sheets, we document how firm heterogeneity mattered significantly in explaining Italy's 2020-21 goods export dynamics. Via a trade margin decomposition, we show how the exporters in the top 1 per cent of the export distribution (the ‘Happy Few’) were responsible for both the 2020 pandemic collapse and the slowdown in the second half of 2021 triggered by global input shortages. These firms operated mainly at the intensive margin and only partly by exiting some countries during the first wave of the pandemic. The relatively weaker performance of the Happy Few is confirmed when controlling for product and geographical specialization via econometric shift-share regressions. One possible explanation is the high share of top exporters participating in global value chains (GVCs). Exporters strongly integrated in GVCs were indeed hurt more by the two shocks than non-GVC firms were. Moreover, the exports of GVC firms that resorted more intensely to just-in-time business models with low inventory levels were more adversely affected by the 2021 supply chain disruptions.
    Keywords: firm heterogeneity, global value chains, inventory management, trade margins, shift-share decomposition
    JEL: D22 F14
    Date: 2023–11
  5. By: Bekkers, Eddy; Keck, Alexander
    Abstract: Some countries have voiced unease about differences between their own tariff rates and those of major trading partners, calling for more "reciprocity". These calls raise the question how large the negative spillover effects of countries' tariffs on others have become over time. Given a presumed sense of "reciprocity" at the end of the Uruguay Round and for subsequent WTO accessions, an important question for the future of multilateral trade negotiations may be how cross-cutting formulae or "rules" could be developed that might address such spillovers. In this paper we (i) analyze the spillover effects of tariffs and (ii) explore possible tariff liberalization rules and their economic effects, employing the WTO Global Trade Model. We measure the spillover effects of tariffs by the export or terms of trade losses incurred by trading partners. The analysis shows that there are large differences in the per capita spillover effects of tariff rates and that about 70% of the spillover effects can be explained by initial tariff rates, the share in global imports, population, and a product's trade elasticity. Five possible tariff liberalization rules are introduced, with the fifth one being based on the determinants of the negative spillover effects on other countries. Simulating the tariff liberalization rules shows that they would address such spillovers to different extents and lead to global export increases of about 3%, with increases of more than 20% for some countries. Real income effects are positive in most regions, although welfare does not increase in all regions because of negative terms of trade effects. Under the fifth rule, real income and terms of trade effects are related to the adverse spillover effects imposed in other countries, i.e. regions generating larger adverse spillover effects benefit from smaller real income gains or incur larger real income losses. However, this relation is not perfect, suggesting that flexibility may be needed in the implementation of the rule.
    Keywords: Tariff negotiations, reciprocity, terms of trade effects, CGE-modelling
    JEL: F14
    Date: 2024
  6. By: Gianmarco Cariola (Bank of Italy)
    Abstract: This study aims to analyze the impact of the COVID-19 pandemic on international trade. To do so, we used a new panel database that included information on imports and exports at the firm, product, country, year, and month level for the entire population of Italian trading firms. We merged it with additional data sources that provided further details on the characteristics of firms and on the lockdown stringency and death rate of COVID-19, both in foreign countries and Italian provinces. After presenting a descriptive analysis, we identified how the pandemic in foreign countries affected Italian firms’ international trade; our results suggest that the impact on imports and exports was significant during the first wave, mainly driven by the stringency of the restrictions rather than by the death rate of COVID-19. Second, we analyzed how the local containment policies implemented by the Italian authorities affected trade flows and found that their effect was not significant. Finally, we showed that the varieties that were traded less intensively had a higher probability of being dropped in the aftermath of the COVID-19 crisis and those that were displaced in 2020 had a higher probability of not being traded one year later. This suggests that the pandemic affected the set of varieties traded by Italian firms and that its effects on the composition of imports and exports might be non-transitory.
    Keywords: trade, global value chains, COVID-19, Italian customs data
    JEL: D22 F14 I10
    Date: 2023–11
  7. By: Alessandro Borin (Bank of Italy); Gianmarco Cariola (Bank of Italy); Elena Gentili (Bank of Italy); Andrea Linarello (Bank of Italy); Michele Mancini (Bank of Italy); Tullia Padellini (Bank of Italy); Ludovic Panon (Bank of Italy); Enrico Sette (Bank of Italy)
    Abstract: Using customs and balance sheet data for Italy, we identify foreign-dependent products (FDPs) and quantify the effect of any disruptions to those products. Our framework allows us to assess how geoeconomic fragmentation affects value added at different levels of aggregation. Our baseline calibration suggests that a reduction in the imports of FDPs from high geopolitical risk countries would result in a 2 per cent drop in GDP, with sizable heterogeneity across firms, regions, and sectors. Our findings highlight that the short-term costs of supply disruptions for critical inputs can be substantial, especially when firms cannot easily substitute away from those products.
    Keywords: Geoeconomic fragmentation, international trade, imported inputs, global value chain
    JEL: F10 F14
    Date: 2023–11
  8. By: Wagner, Joachim
    Abstract: The use of robots by firms can be expected to go hand in hand with higher productivity, higher product quality and more product innovation, which should be positively related to export activities. This paper uses firm level data from the Flash Eurobarometer 486 survey conducted in February - May 2020 to investigate the link between the use of robots and export activities in manufacturing enterprises from the 27 member countries of the European Union. Applying standard parametric econometric models and a new machine-learning estimator, Kernel-Regularized Least Squares (KRLS), we find that firms which use robots do more often export, do more often export to various destinations all over the world, and do export to more different destinations. The estimated robots premium for extensive margins of exports is statistically highly significant after controlling for firm size, firm age, patents, and country. Furthermore, the size of this premium can be considered to be large. Extensive margins of exports and the use of robots are positively related.
    Keywords: Robots, exports, firm level data, Flash Eurobarometer 486, kernel-regularized leastsquares (KRLS)
    JEL: D22 F14
    Date: 2024
  9. By: Taiyo Yoshimi; Uraku Yoshimoto; Kiyotaka Sato; Takatoshi Ito; Junko Shimizu; Yushi Yoshida
    Abstract: This study empirically investigates how the invoice currency choice differs between intra-firm and arm’s-length exports. We also examine whether other firm- and product-level characteristics affect the choice of invoice currency. This study is the first to be granted access to highly disaggregated transaction-level trade data for Japan. Focusing on Japanese automobile exports to France, we demonstrate that the importer’s currency tends to be chosen in intra-firm export invoicing based on a panel logit estimation. Our empirical findings remain robust when different types of intra-firm export variables and other conventional explanatory variables are introduced, such as firm and product market share, exchange rate volatility, euro-invoiced imports, labor productivity, and research and development intensity. Given growing intra-firm trade and expanding global value chains, Japanese parent firms tend to invoice in the importers’ currency, assuming the foreign exchange risk that arises from intra-firm trade. Thus, exchange rate risk management is a significant consideration for Japanese parent firms.
    JEL: F14 F30 F31
    Date: 2024–02
  10. By: OECD
    Abstract: This working paper provides a granular overview of investments into low-carbon infrastructure, both in the real economy and financial market. The descriptive analysis shows that there is room to scale up cross-border infrastructure investment and to shift investment into low-carbon assets. Specifically, low-carbon cross-border investment can be increased by shifting infrastructure investments, that currently flow into the financial economy, to the real economy and by incentivising the use of financing instruments, i.e., securitised products, that bundle projects and meet different liquidity tastes of investors. The analysis also highlights the important role of foreign direct investment (FDI) into infrastructure from foreign real economy companies.
    Keywords: Infrastructure, investment
    JEL: F21 Q56 H54
    Date: 2024–03–04
  11. By: Biermann, Marcus; Leromain, Elsa
    Abstract: This paper investigates how firms' international linkages to Russia and Ukraine affected investors' expectations following the escalation of the Russian-Ukrainian war. For this, we perform an event study around the Russian invasion of Ukraine on February 24, 2022, finding that firms with significant trade activity with Russia experienced a substantial reduction in cumulative returns. The effect on cumulative returns is especially pronounced for firms that are dependent on Russian commodities. The impact on the aggregate stock market performance of third countries was on average 0.8 percentage points. The highest losses were borne by European countries.
    Keywords: russia-ukraine war; trade linkages; multinationals; stock market; event study; ukraine
    JEL: F15 F23 G14 G15
    Date: 2023–01–26
  12. By: Marco Albori (Bank of Italy); Alessio Anzuini (Bank of Italy); Fabrizio Ferriani; Luca Rossi (Bank of Italy)
    Abstract: Offshore Financial Centers (OFCs) exert a profound distortion on economic analyses based on cross-border capital flows reported in official statistics, as a large share of those investments is known to be solely due to tax and regulatory avoidance purposes. Notwithstanding the importance of this phenomenon, scant information is available concerning its actual magnitude. This paper focuses on Foreign Direct Investments (FDIs) and fills this gap by using an extensive list of FDI determinants and estimating a gravity-like binary choice specification to assess how much bilateral FDIs are driven by economic integration motives versus profit shifting opportunities. We find that the share of so-called phantom FDIs, after rising in 2010-15, stabilized at around 40% of total FDIs in recent years and that this share is systematically larger in OFCs, reconciling available evidence on the abnormal amount of recorded FDIs in OFCs.
    Keywords: Foreign Direct Investments, FDI network, tax havens, gravity models
    JEL: C33 F21 F23
    Date: 2023–10
  13. By: Crispino Marta (Bank of Italy); Francesco Paolo Conteduca (Bank of Italy)
    Abstract: This paper describes the methodology underlying the matching between non-EU counterparts in the Italian Customs and Monopolies Agency data and firms in the Bureau van Dijk Orbis database. Through different validation exercises, we show that the matches stemming from our proposed procedure are largely correct regarding both records and transaction values. The resulting corresponding tables can serve as a useful tool to shed light on the features of the counterparts of Italian firms active in international trade.
    Keywords: record linkage, big data integration, customs data, balance sheet data, name harmonization, blocking, entity matching
    JEL: C81 F14 D22 C55 C88
    Date: 2023–12
  14. By: Jaime de Melo (FERDI - Fondation pour les Etudes et Recherches sur le Développement International, UNIGE - Université de Genève = University of Geneva); Julien Gourdon (AFD - Agence française de développement); Karin Gourdon (The World Bank)
    Abstract: Rules of origin are critical components of preferential trade agreements designed to stop products coming in under insufficient transformation or through the partner that applies the lowest tariff. But in practice, these rules are often needlessly complex, undoing the benefits of market access associated with trade agreements. This column reports research showing that the adoption of more flexible productspecific rules of origin within preferential agreements would give a significant boost to global trade.
    Abstract: Les règles d'origine sont des éléments essentiels des accords commerciaux préférentiels, conçus pour empêcher les produits d'entrer sous une transformation insuffisante ou par l'intermédiaire du partenaire qui applique les droits de douane les plus bas. Cependant, dans la pratique, ces règles sont souvent inutilement complexes, ce qui réduit à néant les avantages de l'accès au marché associés aux accords commerciaux. Cet article présente des recherches montrant que l'adoption de règles d'origine plus flexibles et spécifiques aux produits dans le cadre des accords préférentiels donnerait un coup de fouet au commerce mondial.
    Keywords: Rules of origin, Preferential trade agreements, Règles d'origine
    Date: 2024–02–08
  15. By: Brandi, Clara; Holzer, Kateryna; Morin, Jean-Frédéric; van Asselt, Harro; Weber, Katharina
    Abstract: Linking trade to environmental goals is gaining momentum. Ever more discussion about trade and climate interlinkages are prevalent in both the trade and climate policy communities. The dedicated Trade Day at the 28th Conference to the Parties (COP28) of the United Nations Framework Convention on Climate Change (UNFCCC) underlines the growing interest in trade and climate interlinkages. Given the urgency of the climate crisis, using the toolbox of trade policies to help tackle climate change should be a priority. Preferential Trade Agreements (PTAs) are a promising trade policy tool to accelerate the transition toward greener economies and help address the climate crisis. PTAs - agreements that reduce trade barriers among their parties - are mushrooming around the world and they include an increasing number of environmental provisions. These provisions in PTAs can help reduce environmentally harmful subsidies, incentivise the green transition, and favour the diffusion of environmental technologies. But so far, climate-related environmental provisions in PTAs have not been designed in ways that enable them to live up to this potential. Many such climate provisions in PTAs remain vague, weak, and not very innovative. This policy brief outlines why we should use PTAs as a policy tool; discusses pitfalls of their current design; and shows how negotiators should improve the design of climate-related provisions to unlock their full potential. We discuss three types of provisions that have the potential to strengthen climate protection through PTAs: ossil fuel subsidies: Climate provisions in PTAs should seek to eliminate or phase down fossil fuel subsidies, provide for Special and Differential Treatment (SDT) for developing countries, and increase transparency on fossil fuel subsidies. Environmental goods and services (EGS): Climate provisions in PTAs should eliminate tariffs and non-tariff trade barriers for EGS, offer SDT for developing countries in the context of EGS, and should incentivise limate-friendly production through preferential tariffs. Investment: Climate provisions in PTAs should be designed so as to shield climate policy measures from legal challenges by providing a treaty-wide exception specifically for climate policy measures, reaffirming the right to regulate explicitly in relation to climate policy measures or carving out measures taken to address climate change from the application of Investor State Dispute Settlement (ISDS). We also outline five general policy recommendations for promoting the effectiveness of climate provisions in PTAs: 1) Prioritise win-win solutions; 2) facilitate the participation of non-state actors; 3) strengthen capacity-building and assistance; 4) enhance impact assessment, and knowledge diffusion; and 5) promote compliance and enforcement.
    Keywords: trade & investment, climate change
    Date: 2023
  16. By: Charles Yuji Horioka (Research Institute for Economics and Business Administration, Kobe University, Asian Growth Research Institute, Institute of Social and Economic Research, Osaka University, JAPAN, School of Economics, University of the Philippines, Diliman, PHILIPPINES, and National Bureau of Economic Research, JAPAN)
    Abstract: The finding of Feldstein and Horioka (1980) that domestic saving and domestic investment are highly correlated across countries despite the rapid globalization and liberalization of financial markets in recent decades has been regarded as a Puzzle or Paradox. However, in this paper, we show that countries as a whole may not be able to transfer their capital abroad and that the Feldstein-Horioka Finding of domestic saving and domestic investment being highly correlated across countries may arise even if there are no frictions in financial markets and even if individual investors can freely transfer their capital abroad if there are frictions in goods markets such as transport costs, tariffs, nontariff barriers, the cost of regulatory compliance, etc. In fact, there is evidence that frictions in goods markets are a more serious impediment to countries as a whole being able to transfer their capital abroad than frictions in financial markets, especially in the short run.
    Keywords: Capital controls; Fallacy of composition; Feldstein-Horioka finding; Feldstein-Horioka Puzzle or Paradox; Frictions in financial markets; Frictions in goods markets; Global interest rate; Globalization and liberalization of financial markets; Interest parity; Interest rate equalization; International capital flows; International capital mobility; Saving-investment correlations; Saving retention coefficient; Trade costs; Trade frictions
    JEL: F15 F21 F32 F36 F41 G15
    Date: 2024–02
  17. By: Andrea Bernini; Olaf J. de Groot
    Abstract: Income inequality remains a significant concern in Mexico, despite a slight decrease in its measure in recent decades. This paper investigates the impact of changes in trade patterns resulting from the North American Free Trade Agreement (NAFTA) on income inequality in Mexico over the past 20 years. Through a decomposition into within- and between-sector inequality, this paper reveals that the contribution of the latter has increased in an environment characterized by decreasing overall income inequality. Trade accounts for approximately 14.5% of the total change in between sector income inequality, representing the most substantial contribution among the factors identified in this study.
    Date: 2024–02–20
  18. By: Eichler, Stefan; Nauerth, Jannik A.
    Abstract: We analyze the effect of bilateral investment treaties (BITs) on bilateral foreign portfolio investment in equity and debt securities. We find that expropriation risk and the level of a BIT's investor protection are complementary. Applying a Poisson Pseudo-Maximum-Likelihood model to a panel of 60 home and 39 host countries from 2002 to 2017, we find that host countries receive 40% more bilateral equity investment when they protect foreign investors with a BIT. This effect almost doubles when investment protection of BITs is strong, and the political risk of the host country is high.
    Keywords: Bilateral investment treaties, Bilateral portfolio investment, Political risk, Investor protection, Emerging markets
    JEL: F32 G15 K33
    Date: 2024
  19. By: Kamin, Katrin; Langhammer, Rolf J.
    Abstract: The global economic landscape is undergoing a transformative shift, as evidenced by the BRICS nations’ increasing dominance. This development raises questions about the emergence of economic and political blocks and their potential leverage. China and India, as the world’s most populous nations within the group, are instrumental in driving global economic demand. The expansion of BRICS, with new members possessing vast natural resources, amplifies the group’s influence. However, the BRICS face a monetary and financial Achilles heel, especially in the case of China, hindering their ability to act independently. As the BRICS gain geopolitical significance, the G7 responds with infrastructure initiatives and trade agreements, though success hinges on reciprocal concessions. The BRICS thus serve as a wake-up call for the G7, prompting considerations of rejuvenating political and economic links amidst a shifting global landscape.
    Keywords: BRICS+, global order, International Trade, strategic resources, Monetary Policy
    JEL: F02 F15 F36 F40 F59
    Date: 2023
  20. By: Alessio Anzuini (Bank of Italy); Elena Pisano (Bank of Italy); Luca Rossi (Bank of Italy); Alessandra Sanelli (Bank of Italy); Enrico Tosti (Bank of Italy); Ernesto Zangari (Bank of Italy)
    Abstract: Following the 2007-8 financial crisis, increasing concern surrounding tax avoidance by multinational enterprises (MNEs) drew attention from academia and policy circles alike. Profit shifting practices not only impact revenue and fairness, but also exacerbate global tax competition and generate economic distortions. Tax avoidance by MNEs is achieved through several complex strategies, in which tax havens and offshore financial centres typically play a prominent role. Policy initiatives adopted under the aegis of the G20 and the OECD, including the BEPS plan and the Two-Pillar agreement, attempt to address this issue, but their final impact remains uncertain. The interplay between the tax strategies of MNEs and governments' efforts to attract investments also distorts external economic statistics. Indeed, residency-based reporting blurs the distinction between profit-driven and genuine investments. Recent economic literature has developed methods to better allocate foreign direct investments (FDIs) and portfolio investments, revealing a different picture of international capital flows, both internationally and in Italy, where external statistics show a high incidence of tax havens.
    Keywords: profit shifting, tax avoidance, BEPS, Two Pillars, global minimum tax, official statistics, cross-border investments
    JEL: F53 H2 K20 K34 M48
    Date: 2023–10
  21. By: Diego Aycinena; Francisco B. Galarza Arellano; Javier Torres
    Abstract: Sudden massive migration influxes have been a new driving force of migration increases in recent decades. These types of migration flows present potential challenges to social and economic integration. In this paper we study socioeconomic integration using controlled laboratory experiments in a context of massive inflow of Venezuelan migrants in Peru, where the share of Venezuelan immigrants in the country’s population increased from almost zero in 2016 to 2.5 percent in 2019. Using adult (non-student) native-born Peruvians and Venezuelan immigrants as subjects, we conducted homogeneous (same nationality) and mixed (different nationality) experimental sessions in Lima, to examine interactions that require cooperation, coordination, trust, and reciprocity to achieve a Pareto efficient outcome. We find no evidence of in-group versus out-group (based on nationality) difference in those measures of pro-social behavior. Within this context, we also find no differentials in normative or empirical expectations in behavior of non-nationals relative to those of nationals, and only small to moderate implicit bias. This lack of differential treatment is suggestive of short-run economic integration between immigrants and natives, in a challenging context of massive influxes of migrants.
    Keywords: Immigration, Cooperation, Coordination, Trust, Economic Interactions, Lab Experiments
    Date: 2024–02
  22. By: Ms. Rina Bhattacharya; Samuel Pienknagura
    Abstract: This paper studies Latin America and the Caribbean’s (LAC) trade performance in recent years and estimates the salience of key country-specific factors in explaining underperformance in some sub-regions within LAC. First, the paper documents that, while the average country in the region displays aggregate trade values that are consistent with a standard gravity model, there is substantial heterogeneity across sub-regions and product-types. The paper then estimates an augmented gravity specification that includes proxies for the quality of infrastructure, the availability and quality of factors of production, and governance. Results point to infrastructure and customs regulation as key factors explaining undertrading in manufacturing in most sub-regions. Factors of production partly explain South America’s underpeformance in manufacturing while governance explains undertrading across most product groups, but neither set of factors play a significant role in other sub-regions.
    Keywords: Trade; Constraints; Latin America and the Caribbean
    Date: 2024–02–16
  23. By: Heizler (Cohen), Odelia (Academic College of Tel-Aviv Yaffo); Israeli, Osnat (Ashkelon College)
    Abstract: Dramatic events can evoke feelings of compassion, fear, or threat, and can affect public opinion regarding controversial issues. Such an event was the drowning of 3-year-old Alan Kurdi, a Syrian boy whose body washed up on a Turkish shore, and was photographed, producing an iconic image that was seen worldwide. The image evoked empathy and compassion that neuroscience and psychological research associate with a motivation to help. This paper examines the impact of this event on four different aspects of attitudes toward immigration, some of which are more closely linked to pro-social behavior than others. The timing of the European Social Survey in Portugal allowed us to use this tragic event as a natural experiment. Our results show that Kurdi's drowning had a significant effect on emotion-related sentiments, but no such impact was detected on other attitudes. The results suggest that the event did not change the respondents' opinion regarding the possible negative consequences of immigration on the host country's economy, crime level, or culture, nor did it change their perception of the skills required by immigrants. On the other hand, the empathy induced by the tragic event increased their willingness to have a less restrictive immigration policy and their openness to having close social relationships with immigrants.
    Keywords: European Social Survey, anti-immigration attitudes, natural experiment, social distance, threat perceptions
    JEL: F22 J15
    Date: 2024–02
  24. By: Elise-Nicoleta Valcu (University of Pitesti, Romania)
    Abstract: The investment made in generating and applying intellectual capital is a determining factor in terms of competitiveness and performance related to innovation, regardless of whether we consider a cross-border or a national market. In most cases, marketers resort to different means to appropriate the results of their own innovation activities. One of these means is the use of intellectual property rights, such as patents, design rights or copyright. Another means of protecting innovation results is to protect access to information that has some value to an entity and is not widely known. In the context of Union law, mentioning in this regard Directive (EU) 2016/943 on the protection of know-how and undisclosed business information (trade secrets) know-how and valuable undisclosed business information which is intended to remain confidential are called trade secrets. In the context of an increasingly dynamic and technological Union and international market, trade secrets, characterized by the fact that they go beyond the framework of technological knowledge and include commercial data, such as customer and supplier information, business plans and studies and strategies market, are as important as patents and other forms of intellectual property rights. The issue of commercial secrecy is regulated in Romanian legislation under OG 25/2019 on the protection of know-how and undisclosed business information that constitutes secrets. Therefore, this research aims to address the issue of commercial secrecy as a variation of the know-how from the EU and Romanian legislative perspective of transposition.
    Keywords: trade secret, technical procedures, trade secret holder, infringer
    Date: 2023–06
  25. By: Simone Emiliozzi (Bank of Italy); Fabrizio Ferriani (Bank of Italy); Andrea Gazzani (Bank of Italy)
    Abstract: The Russian invasion of Ukraine in February 2022 led to severe disruptions in the European gas market, with significant repercussions on a global scale. The conflict caused a surge in energy prices, a major reshuffling of global natural gas flows, and a shift in the policy-makers' agendas towards energy supply security. This paper describes the global gas market and analyses the consequences of the war, focusing in particular on the European gas market and on global LNG trade flows. We first review the characteristics of the gas market in terms of both pricing benchmarks and contractual terms. Next, we analyse the changes to LNG and natural gas production, consumption, and trade flows throughout the 2022-23 energy crisis. Finally, we review the main policy response to the energy crisis and present some considerations on the gas market outlook.
    Keywords: natural gas, energy crisis, LNG, fragmentation
    JEL: L95 P28 Q35
    Date: 2023–12
  26. By: Nauerth, Jannik A.
    Abstract: This paper investigates the effect of arbitral proceedings on bilateral portfolio equity investments in emerging markets. Investment disputes may deter foreign investors as they reveal a government's poor behavior towards foreign investors. The analysis investigates the effects of the first initiation of arbitral proceedings, the first outcome in favor of the investor, and the first outcome in favor of the respondent state of arbitration proceedings. The database is an unbalanced panel of 55 home and 36 host countries from 2001 to 2018. Estimations do not reveal an unconditionally significant effect of arbitral proceedings on bilateral portfolio equity holdings. The impact becomes significant considering the interplay with bilateral investment treaties and political risk.
    Keywords: Investment disputes, Arbitration proceeding, Bilateral portfolio investment, Bilateral investment treaty, Investment protection, Emerging markets
    JEL: F32 F53 G15 K33
    Date: 2023
  27. By: Moustafa Hamil (University of Kasdi Merbah Ouargla, Algeria)
    Abstract: This paper explores the competition between China and Taiwan in the semiconductor industry. It discusses the current state of the industry in both countries, their competitive advantages, and the strategies employed to gain an edge. The research also examines the global implications of this competition, the key factors shaping the rivalry, and possible avenues for cooperation to enhance the semiconductor industry's competitiveness and efficiency. The relationship between China and Taiwan is experiencing intense competition over the electronics sector, including semiconductors and electronic chips. Taiwan plays a significant role in the high-tech and electronics industry, which makes it a target of China's economic and technological hegemony strategies. China seeks to achieve superiority in these industries and gain control over the global supply chain, which gives it great strategic power. Its policy is to try to increase its influence on Taiwan, both by diplomatic pressure and by constant military threats. China seeks to achieve "national unity" and restore Taiwan under its control. This geopolitical escalation is increasing simultaneously with the rivalry between China and the USA. The United States stands by Taiwan through its political and military support, which further aggravates the tension between the two states. This competitiveness manifests itself in multiple areas, including technology, security and economics. In short, the conflict between China and Taiwan over semiconductors and electronic chips reflects the rising geopolitical tensions in the region, with the overlap of economic, political and technological factors, the ongoing rivalry between China and the United States further complicates the scene.
    Keywords: China, Taiwan, semiconductor, competition, challenges
    Date: 2023–08
  28. By: Hartmut Egger; Udo Kreickemeier; Jens Wrona
    Abstract: This paper sets up a two-country model of offshoring with monopolistically competitive product and monopsonistically competitive labour markets. In our model, an incentive for offshoring exists even between symmetric countries, because shifting part of the production abroad reduces local labour demand and allows firms to more strongly execute their monopsonistic labour market power. However, offshoring between symmetric countries has negative welfare effects and therefore calls for policy intervention. In this context, we put forward the role of a common minimum wage and show that the introduction of a moderate minimum wage increases offshoring and reduces welfare. In contrast, a sizable minimum wage reduces offshoring and increases welfare. Beyond that, we also show that a sufficiently high common minimum wage cannot only eliminate offshoring but also inefficiencies in the resource allocation due to monopsonistic labour market distortions in closed economies.
    Keywords: offshoring, minimum wage, welfare effects
    JEL: F12 F16 F23 J42
    Date: 2024
  29. By: Wei Jiang (Xiamen University); Daokang Luo (HKU - The University of Hong Kong); Liwen W.L. Wang (Shenzhen Univerisity [Shenzhen]); Kevin Zheng Zhou (HKU - The University of Hong Kong)
    Abstract: While financial globalization serves to diffuse positive corporate practices worldwide, there remains a scarcity of studies investigating the potential of foreign ownership in alleviating corporate bribery-a pervasive illegal practice in emerging markets. This study, rooted in institutional theory, examines how foreign ownership affects corporate bribery expenditures in emerging markets, incorporating crucial factors that encapsulate local regulatory, normative, and cognitive pressures. Leveraging longitudinal panel data on Chinese listed firms, our findings reveal that foreign ownership significantly reduces corporate bribery expenditures, underscoring the disciplining role of foreign investors. Moreover, such effect is weakened by regional corruption and regional gambling prevalence, yet amplified by the overseas experience of top executives. These findings yield insights into how international investors affect bribery in investee firms, considering the intricate fabric of local institutional contexts.
    Keywords: bribery, foreign ownership, regional corruption, regional gambling prevalence, overseas experience, emerging markets, bribery foreign ownership regional corruption regional gambling prevalence overseas experience emerging markets
    Date: 2024–03
  30. By: Akira IGARASHI (Faculty of Human Sciences, Osaka University); Charles CRABTREE (Department of Government, Dartmouth College); Yoshikuni ONO (Faculty of Political Science and Economics, Waseda University)
    Abstract: Many studies argue that intergroup relations between immigrants and natives are influenced by perceptions of cultural distance. They claim that natives tend to favor immigrants who are fluent in the host society’s language, which is operationalized by researchers as a sign of cultural assimilation and identification with the host society. This work assumes that language proficiency is a reasonable manifest indicator of the latent trait of national identification, even though these two concepts, although potentially related, are theoretically distinct. Our study aims to disentangle the relationship between immigrants’ language proficiency and their national identification in the context of the United States. We conducted pre-registered vignette and conjoint experiments to achieve this goal with national samples of 3, 325 and 4, 201, respectively. The results from the vignette experiment indicate that natives exhibit a preference for immigrants who not only possess fluent English skills but also independently strongly identify with the United States. Notably, the effect size for national identification is significantly larger than for language proficiency. These findings are further supported by the results from the conjoint experiment, which incorporates a broader range of immigrant attributes. Our results highlight the interrelated yet distinct nature of national identification and language proficiency. The broader takeaway is that relying solely on language proficiency as a measure of national identification can yield biased results and lead to misleading conclusions. Our findings have implications for the literatures on immigration and for experiments that use language proficiency as an experimental treatment.
    Keywords: immigrants; national identification; language proficiency; survey experiments
    Date: 2024–03
  31. By: Katrine Jakobsen; Henrik Kleven; Jonas Kolsrud; Camille Landais; Mathilde Muñoz
    Abstract: Using administrative data on wealth, firm ownership structure, and migration in Sweden and Denmark, we document international migration patterns among the very wealthy, their impact on the economy, and how they respond to wealth taxation. We show that more than 20% of taxpayers liable to pay wealth tax are business-owners, and that the employment, investments, and value-added of these businesses are negatively affected when their owner migrates out of the country. Exploiting three large reforms, we then isolate the causal effect of wealth taxation on the international location choices of the wealthy. We find significant effects on out-migration flows from increases in the effective wealth tax. But, we also document that the overall level of these migration flows is remarkably small, with annual net-migration rates below .01%. As a result, we find that the aggregate economic effects of tax-induced migration are modest in Scandinavia: a one percentage point increase in the average wealth tax rate on the top 2% decreases the stock of wealthy taxpayers by at most 2% in the long run, and lead to a reduction of at most .03% in aggregate employment and at most .1% in aggregate value- added. Hence, our results suggest that trickle-down effects of tax-induced migration by the wealthy do exist, but that they are quantitatively small.
    JEL: D31 E21 H20 H31 L26
    Date: 2024–02
  32. By: Soheila Khajoui; Saeid Dehyadegari; Sayyed Abdolmajid Jalaee
    Abstract: Artificial Neural Networks (ANN) which are a branch of artificial intelligence, have shown their high value in lots of applications and are used as a suitable forecasting method. Therefore, this study aims at forecasting imports in OECD member selected countries and Iran for 20 seasons from 2021 to 2025 by means of ANN. Data related to the imports of such countries collected over 50 years from 1970 to 2019 from valid resources including World Bank, WTO, IFM, the data turned into seasonal data to increase the number of collected data for better performance and high accuracy of the network by using Diz formula that there were totally 200 data related to imports. This study has used LSTM to analyse data in Pycharm. 75% of data considered as training data and 25% considered as test data and the results of the analysis were forecasted with 99% accuracy which revealed the validity and reliability of the output. Since the imports is consumption function and since the consumption is influenced during Covid-19 Pandemic, so it is time-consuming to correct and improve it to be influential on the imports, thus the imports in the years after Covid-19 Pandemic has had a fluctuating trend.
    Date: 2024–01
  33. By: Charles Yuji Horioka
    Abstract: The finding of Feldstein and Horioka (1980) that domestic saving and domestic investment are highly correlated across countries despite the rapid globalization and liberalization of financial markets in recent decades has been regarded as a Puzzle or Paradox. However, in this paper, we show that countries as a whole may not be able to transfer their capital abroad and that the Feldstein-Horioka Finding of domestic saving and domestic investment being highly correlated across countries may arise even if there are no frictions in financial markets and even if individual investors can freely transfer their capital abroad if there are frictions in goods markets such as transport costs, tariffs, nontariff barriers, the cost of regulatory compliance, etc. In fact, there is evidence that frictions in goods markets are a more serious impediment to countries as a whole being able to transfer their capital abroad than frictions in financial markets, especially in the short run.
    Date: 2024–02

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