|
on International Trade |
| By: | Liyan Han; Lei Li; Huiyi Liao; Libo Yin |
| Abstract: | We study the asset pricing implications of firms’ participation in the global supply chain. A firm’s global sourcing strategy serves as an option to hedge its value against trade shocks. Higher output tariffs increase firm value through reduced import competition, whereas higher input tariffs decrease firm value through higher input costs. The negative effects of input tariffs are more substantial for firms more reliant on foreign suppliers. We test the theoretical predictions in the context of the US-China trade war and quantify the impact of trade protectionism on Chinese firm value. One standard deviation increase of input tariff reduces the daily stock return by 0.12 percent for firms importing inputs, more than offsetting the gains from raising output tariffs by one standard deviation. The negative effect of input tariffs is larger for firms with high import intensity and low import substitutability. The welfare loss of the Chinese retaliatory tariffs was as much as $5.50 billion, 0.81% of the total value added of Chinese listed firms. |
| Keywords: | Trade War, Global Supply Chain, Firm Value |
| JEL: | F13 F14 G12 G14 |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2024_531&r=int |
| By: | CHOI , Jangho (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)); CHOI, Yoojeong (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)) |
| Abstract: | This article analyzes North Korea-China trade trends and statistics in 2023 to evaluate the extent of North Korea's trade normalization and its performance. North Korea's trade with China increased by more than 120% compared to the previous year as the country declared a COVID-19 Endemic and gradually eased border controls, but did not recover to 2018-19 levels, the year before the outbreak of COVID-19. Imports to China recorded 2.00 billion, 124.1% higher than the 0.89 billion in 2022. North Korea's imports from China in 2023 are estimated to be the maximum achievable given the lack of a full resumption of over-land trade. However, as the negative impact of UN sanctions on the North Korean economy is ongoing, making it difficult to normalize industrial production. North Korea mainly imported raw materials for processing trade (textile and garment raw materials), staple foods (rice and sugar), agricultural materials (fertilizer), and construction materials from China in 2023. North Korea’s exports to China stood at 0.29 billion, up 118.4% from 0.13 billion in 2023. Exports remain at the 16.9% of the level before the tightening of UN sanctions on North Korea, as the country has failed to diversify its products and expand exports of major export items. Exports were highly dependent on specific products, wigs and false eyelashes, a labor-intensive industry, accounting for 57.1% of total exports. In spite of increasing wigs export, North Korea failed to further expand its amount and diversify the export items in the second half of the year. According to the analysis of trade statistics, the main goals of North Korea's 2023 US foreign economic policy are: (1) resuming smuggling trade in textiles and clothing, (2) building irrigation canals in preparation for summer floods, (3) implementing state-led grain distribution, (4) building living houses in a rural area, and (5) increasing metal production for Russian arms exports. Despite the increase in imports from China in the transition to the coronavirus pandemic, it is difficult to say that it has yet led to the recovery of industrial production and economic development. The future of North Korea's trade with the rest of the world in 2024 will be determined by whether North Korea fully opens its borders and improves its relations with China. In 2024, both North Korea's exports and imports are expected to be slightly higher than in 2023. North Korea's exports are unlikely to increase significantly, as North Korea-Russia military cooperation is expected to continue and China is likely to maintain its checks on the growing Sino-Russian alignment. Increased imports will lead to a larger trade deficit, but it will be within North Korea's ability to manage for one to two years. |
| Keywords: | North Korea; North Korea and China Relation; Trade of North Korea; DPRK |
| Date: | 2024–03–26 |
| URL: | http://d.repec.org/n?u=RePEc:ris:kiepwe:2024_009&r=int |
| By: | Ruxue Bai; Lei Li; Ying Li; Libo Yin |
| Abstract: | This paper investigates how multi-product firms narrow their product scope and target fewer export destinations in response to increased demand. Focusing on the effects of quota removal, we show that an increase in demand for quota-bound products crowds out quota-free products through cannibalization, and reduces exports to quota-free destinations through capacity constraint. Consistent with the theory, our findings reveal a 25% increase in product concentration and a 2% increase in destination concentration among Chinese exporters after the removal of externally imposed quotas on textile and clothing exports. The increasing concentration is due to the export shifts from quota-free to quota-bound products and destinations. Subsequently, affected firms exhibit better capital market performances, with a 5% higher abnormal return within the three-day event window. |
| Keywords: | Import quota, multi-product firms, cannibalization effect, diversification, demand linkages, supply linkages, exports, stock market |
| JEL: | F12 F13 F14 |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2024_533&r=int |
| By: | Rodolfo G. Campos; Benedikt Heid; Jacopo Timini |
| Abstract: | The Cold War was the defining episode of geopolitical fragmentation in the twentieth century. Trade between East and West across the Iron Curtain (a symbolical and physical barrier dividing Europe into two distinct areas) was restricted, but the severity of these restrictions varied over time. We quantify the trade and welfare effects of the Iron Curtain and show how the difficulty of trading across the Iron Curtain fluctuated throughout the Cold War. Using a novel dataset on trade between the two economic blocs and a quantitative trade model, we find that while the Iron Curtain at its height represented a tariff equivalent of 48% in 1951, trade between East and West gradually became easier until the fall of the Berlin Wall in 1989. Despite the easing of trade restrictions, we estimate that the Iron Curtain roughly halved East-West trade flows and caused substantial welfare losses in the Eastern bloc countries that persisted until the end of the Cold War. Conversely, the Iron Curtain led to an increase in intra-bloc trade, especially in the Eastern bloc, which outpaced the integration of Western Europe in the run-up to the formation of the European Union. |
| Keywords: | international trade, Cold War, Iron Curtain, geopolitical fragmentation, trade costs of borders |
| JEL: | F13 F14 N74 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_11057&r=int |
| By: | Nagengast, Arne (Deutsche Bundesbank); Rios-Avila, Fernando (Levy Economics Institute); Yotov, Yoto (Drexel University) |
| Abstract: | We use heterogeneity-robust difference-in-differences (DiD) methods to evaluate the impact of membership in the European Union (EU) Single Market on international trade. On the policy front, we provide evidence that: (i) On average, the EU has been very effective in promoting trade among its member states; (ii) The trade effects of the EU have been long-lasting, but heterogeneous across EU cohorts; and (iii) While the EU has benefited both `old' and `new' members, the increase in the exports from the `old' members to the `new' joiners has been disproportionately larger. From a methods and practical perspective, the contribution of this paper is to introduce a new, fast, and flexible estimation command that combines leading estimation techniques from the gravity literature with recent methods from the heterogeneity-robust DiD literature. |
| Keywords: | EU membership; Staggered Difference-in-Differences; Gravity Model; Estimation Command |
| JEL: | C13 C23 F10 F13 F14 |
| Date: | 2024–04–30 |
| URL: | http://d.repec.org/n?u=RePEc:ris:drxlwp:2024_005&r=int |
| By: | Amador, João; Mehl, Arnaud; Schmitz, Martin; Garcia, Joana |
| Abstract: | We analyze, for the first time, how firms choose the currency in which they price transactions in international trade of services and investigate, using direct evidence, whether the US dollar (USD) plays a dominant role in services trade. Drawing on a new granular dataset on extra-European Union exports of Portuguese firms broken down by currency, we show that currency choices in services trade are active firm-level decisions. Firms that are larger and rely more on inputs priced in foreign currencies are less likely to use the domestic currency to export services. Importantly, we show that the USD has a dominant role as a vehicle currency in trade of services – but to a lesser extent than in trade of goods – and that this is not just due to differences in the geography of trade. An external validity test based on macro data available for Portugal and six other European countries confirms this finding. In line with predictions from recent theoretical models, our results are consistent with the lower prevalence of USD in services trade arising from a lower openness of services markets and a stronger reliance of services on domestic inputs. JEL Classification: F14, F31, F41 |
| Keywords: | dominant currency paradigm, international trade, services |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20242932&r=int |
| By: | Arni, Patrick (University of Bristol); Egger, Peter (ETH Zurich); Erhardt, Katharina (Heinrich Heine University Düsseldorf); Gubler, Matthias (Swiss National Bank); Sauré, Philip (CEPR) |
| Abstract: | This paper identifies the causal effects of trade shocks on worker outcomes. We exploit a unique setting based on three pillars: (i) a large, unanticipated appreciation of the Swiss franc in 2015, (ii) detailed data with firm-level exposure to trade via output markets (both domestic and foreign) and imported inputs (distinguished by their foreign labor content), which we match to (iii) worker-level panel data with rich information on labor-market outcomes. We find that increased competition in output markets induces negative effects on earnings for workers of affected firms. Conversely, a price drop of foreign inputs generates positive effects for workers of importing firms, but less so the higher the labor content of these imported inputs. All these patterns are consistent with a parsimonious model of task-based production. Moreover, positive and negative earnings effects are especially strong for workers in the lower tail of the within-firm wage distribution and, in particular, for workers who change their employer, pointing at involuntary (voluntary) job separations from firms that are negatively (positively) affected by the exchange rate appreciation. |
| Keywords: | trade and labor, exchange rate shock, matched employer-employee data |
| JEL: | F14 F16 J46 |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp16895&r=int |
| By: | Levai, Adam (LISER); Turati, Riccardo (Universitat Autònoma de Barcelona) |
| Abstract: | The existing literature investigating the labor market impact of immigration assumes, implicitly or explicitly, that the law or labor regulation is exogenous to immigration. To test this assumption, we build a novel workers' protection measure based on 36 labor law variables that capture labor regulation over a sample of 70 developed and developing countries from 1970 to 2010. Exploiting a dynamic panel setting using both internal and external instruments, we establish a new result: immigrants' norms and experience of labor regulation influence the evolution of host countries labor law regulation. This effect is particularly strong for two components of workers' protection: worker representation laws and employment forms laws. Our main results are consistent with suggestive evidence on the transmission of preferences from migrants to their offspring (vertical transmission), and from migrants to natives or local political parties (horizontal transmission). Finally, we find that the size of the immigrant population per se has a small and negligible impact on host country labor market regulation. |
| Keywords: | international migration, labor market institutions, labor regulation, legal transplants |
| JEL: | J61 K31 F22 |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp16929&r=int |
| By: | Mamun, Abdullah; Laborde Debucquet, David |
| Abstract: | This paper investigates the drivers of export restrictions on agricultural products based on an original dataset developed at IFPRI. We focus on four food price crises when export restrictions (e.g., ban, tax, licensing etc.) were applied: the 2008 and 2010 food price crises, the COVID-19 pandemic, and the 2022 crisis associated with the Russia-Ukraine war. Although the justifications for such trade policies have been discussed in the literature, the ability to forecast their implementation remains understudied. The probit model used in this study suggests that the inflation rate has a higher power to predict export restrictions than do international commodity prices. The probability of export restrictions increases more when price change is measured from a reference level in the long interval than the short interval. Among the covariates, agricultural land per capita, commodity share in production and export, weather condition increases the chances of imposing export restrictions. Per capita income, population density, share of agriculture in GDP, urbanization rate, political economy indicators - all have a negative influence on this likelihood. |
| Keywords: | agricultural products; commodities; COVID-19; export controls; international trade; war; trade liberalization; exports |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:fpr:ifprid:2246&r=int |
| By: | Benjamin Hilgenstock; Elina Ribakova; Guntram B. Wolff; Anna Vlasyuk |
| Abstract: | Russian imports of battlefield goods that are subject to export controls, including from Western producers, have surged since mid-2022 |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:bre:wpaper:node_9925&r=int |
| By: | Thiago C. Silva; Paulo V. B. Wilhelm; Diego R. Amancio |
| Abstract: | This study examines the effects of de-globalization trends on international trade networks and their role in improving forecasts for economic growth. Using section-level trade data from nearly 200 countries from 2010 to 2022, we identify significant shifts in the network topology driven by rising trade policy uncertainty. Our analysis highlights key global players through centrality rankings, with the United States, China, and Germany maintaining consistent dominance. Using a horse race of supervised regressors, we find that network topology descriptors evaluated from section-specific trade networks substantially enhance the quality of a country's GDP growth forecast. We also find that non-linear models, such as Random Forest, XGBoost, and LightGBM, outperform traditional linear models used in the economics literature. Using SHAP values to interpret these non-linear model's predictions, we find that about half of most important features originate from the network descriptors, underscoring their vital role in refining forecasts. Moreover, this study emphasizes the significance of recent economic performance, population growth, and the primary sector's influence in shaping economic growth predictions, offering novel insights into the intricacies of economic growth forecasting. |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2404.08712&r=int |
| By: | Adriana Peluffo (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía); Alvaro Brunini (Uruguay XXI) |
| Abstract: | Exporting plays a central role in economic growth, especially in small economies. In this work we analyze an industrial policy aimed at fostering exports: the Temporary Admission Regime (TA). To this aim we use a panel of Uruguayan firms for the period 2005-2016. We use two evaluation techniques: binary treatment effects on matched firms and continuous treatment effects. These techniques allow controlling for selectivity into the treatment and selection bias. We find positive effects of Temporary Admission on trade performance, and particularly on export performance, while there are no clear effects on the firm’s total factor productivity and employment. |
| Keywords: | industrial policy, temporary admission, export performance, productivity, causal effect |
| JEL: | F13 F14 F16 O24 |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:ulr:wpaper:dt-02-24&r=int |
| By: | Kien Ngoc Do (FTU - Foreign Trade University, Hanoi, Vietnam); Huong Nguyen Giang (FTU - Foreign Trade University, Hanoi, Vietnam); Le Huy (FTU - Foreign Trade University, Hanoi, Vietnam); Nguyen Kim Phuong Thuy (FTU - Foreign Trade University, Hanoi, Vietnam) |
| Abstract: | This study disentangles the relationship between GVC participation and the technical efficiency of SMEs in Vietnam. We combine panel data obtained from the GSO Enterprise Census survey of SMEs in Vietnam including 567, 866 enterprises observations from 2015 to 2018. Regarding global value chain participation (GVC), TiVA databases by OECD are used to track GVC integration at sectoral level. We employ Stochastic frontier analysis (SFA) to gauge the relationship between a firm's technical efficiency and GVC participation in two modes of participation: backward integration and forward integration. The findings show the positive impacts of backward participation in rising technical efficiency levels. However, SMEs in sectors with deeper forward participation tend to have low technical efficiency. We find the heterogeneity in firm efficiency regarding firm-specific factors and location. |
| Keywords: | GVC participation, SMEs, Technical efficiency |
| Date: | 2023–10 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-04528712&r=int |
| By: | Agostina Brinatti; Mingyu Chen; Parag Mahajan; Nicolas Morales; Kevin Shih |
| Abstract: | We study how random variation in the availability of highly educated, foreign-born workers impacts firm performance and recruitment behavior. We combine two rich data sources: 1) administrative employer-employee matched data from the US Census Bureau; and 2) firm-level information on the first large-scale H-1B visa lottery in 2007. Using an event-study approach, we find that lottery wins lead to increases in firm hiring of college-educated, immigrant labor along with increases in scale and survival. These effects are stronger for small, skill-intensive, and high-productivity firms that participate in the lottery. We do not find evidence for displacement of native-born, college-educated workers at the firm level, on net. However, this result masks dynamics among more specific subgroups of incumbents that we further elucidate. |
| Keywords: | Immigration; Firm Dynamics; productivity; H-1B visas; High-skill immigration |
| JEL: | F22 J61 |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedrwp:98171&r=int |
| By: | Naser Amanzadeh; Amir Kermani; Timothy McQuade |
| Abstract: | We bring to bear a novel dataset covering the employment history of about 450 million individuals from 180 countries to study return migration and the impact of skilled international migration on human capital stocks across countries. Return migration is a common phenomenon, with 38% of skilled migrants returning to their origin countries within 10 years. Return migration is significantly correlated with industry growth in the origin and destination countries, and is asymmetrically exposed to negative firm employment growth. Using an AKM-style model, we identify worker and country-firm fixed effects, as well as the returns to experience and education by location and current workplace. For workers in emerging economies, the returns to a year of experience in the United States are 59-204% higher than a year of experience in the origin country. Migrants to advanced economies are positively selected on ability relative to stayers, while within this migrant population, returnees exhibit lower ability. Simulations suggest that eliminating skilled international migration would have highly heterogeneous effects across countries, adjusting total (average) human capital stocks within a range of -60% to 40% (-3% to 4%). |
| JEL: | F22 J61 O15 |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:32352&r=int |
| By: | Antonella Nocco; Gianmarco Ottaviano; Matteo Salto; Atsushi Tadokoro |
| Abstract: | Due to markup distortions, in international trade models with monopolistic competition and heterogeneous firms the market equilibrium is inefficient unless demand exhibits constant elasticity of substitution. When it does not, global welfare maximization generally requires policy intervention that is firm specific, and consequently of limited practical relevance due to its information requirements, discriminatory nature and susceptibility to rent seeking. We assess whether there are particular conditions under which countries can coordinate on the common use of policy tools that are not firm-specific but still maximize global welfare. We show that a demand system implying constant absolute pass-through from marginal cost to price is both necessary and sufficient for the existence of welfare-maximizing nondiscriminatory policies that can level the global playing field with a one-size-fits-all approach for all firms selling in a given market, eventually complemented by a global tax rate on corporate profits. |
| Keywords: | international trade policy, firm heterogeneity, monopolistic competition, multilateralism, level playing field |
| JEL: | D40 D60 F10 L00 L10 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_11060&r=int |
| By: | Antonella Nocco; Gianmarco I. P. Ottaviano; Matteo Salto; Atsushi Tadokoro |
| Abstract: | Due to markup distortions, in international trade models with monopolistic competition and heterogeneous firms the market equilibrium is inefficient unless demand exhibits constant elasticity of substitution. When it does not, global welfare maximization generally requires policy intervention that is firm specific, and consequently of limited practical relevance due to its information requirements, discriminatory nature and susceptibility to rent seeking. We assess whether there are particular conditions under which countries can coordinate on the common use of policy tools that are not firm-specific but still maximize global welfare. We show that a demand system implying constant absolute pass-through from marginal cost to price is both necessary and sufficient for the existence of welfare-maximizing non-discriminatory policies that can level the global playing field with a one-size-fits-all approach for all firms selling in a given market, eventually complemented by a global tax rate on corporate profits. |
| Keywords: | international trade policy, firm heterogeneity, monopolistic competition, multilateralism level playing field |
| Date: | 2024–04–17 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1992&r=int |
| By: | Timothy Meyer |
| Abstract: | U.S. equity outperformance and sustained dollar appreciation have led to large valuation gains for the rest of the world on the U.S. external position. I construct their global distribution, carefully accounting for the role of tax havens. Valuation gains are concentrated and large in developed countries, while developing countries have been mostly bypassed. To assess the welfare implications of these capital gains, I adopt a sufficient statistics approach. In contrast to the large wealth changes, most countries so far did not benefit much in welfare terms. This is because they did not rebalance their portfolios and realize their gains, while they were further hurt by rising import prices from the strong dollar. |
| Keywords: | Foreign Assets, Global Imbalances, Valuation Effects |
| JEL: | F21 F32 F40 G15 |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2024_534&r=int |
| By: | Gianmarco I. P. Ottaviano; Davide Suverato |
| Abstract: | Fantastic beasts are magical creatures that cannot be seen unless one looks for them with the eye of the wizard, but that still play a significant role in the world. The fantastic beasts we hunt and find in the present paper are welfare changes induced by resource shocks that are invisible in quantitative trade models with monopolistic competition and heterogeneous firms if one relies on the pervasive assumption of demand exhibiting constant elasticity of substitution. We argue that, for fantastic beasts to materialize, markups have to vary across firms and firm heterogeneity has to vary across sectors. This is shown both theoretically and empirically exploiting a panel of 76 countries and 17 manufacturing industries for the period 1995-2020. |
| Keywords: | quantitative trade models, variable markups, incomplete pass-through, resource shocks, immiserizing growth |
| Date: | 2024–04–12 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1989&r=int |
| By: | Yang, Dongkyu |
| Abstract: | Economic adjustments through trade and migration can mitigate environmental shocks but may also propagate them to other parts of the economy. Using a dynamic spatial general equilibrium model, I quantify the transmission of environmental shocks by capitalizing on the 1930s American Dust Bowl. The counterfactual analysis shows that the Dust Bowl decreased aggregate U.S. welfare by 3.80% per capita by 1940. The local shock in agriculture more than proportionally transmitted to consumer services, while the tradable goods-producing sec-tor mitigated the shock. Such a disparity hindered structural change to services in the Dust Bowl region. Instead, economy-wide adjustments relied on the spatial reallocation of workers. Moreover, the Dust Bowl region exported price increases in agricultural goods, leading to a sizeable welfare loss in the non-Dust Bowl region despite the relative increases in real income. |
| Date: | 2024–04–02 |
| URL: | http://d.repec.org/n?u=RePEc:osf:socarx:jxz2b&r=int |
| By: | M. Magnani |
| Abstract: | In this paper we study the process of self-selections undertaken by asylum seekers hosted in temporary reception center in Italy, in the Province of Parma. In particular, by differentiating migrants on the basis of their countries of origin and of their countries of destination we identify different groups in the sample population: refugees and illegal migrants, people directed to Europe and people directed outside Europe. Leveraging on the randomness of the sample with regard to both the dimensions previously mentioned, we compare these groups to identify their specific characteristics. The relevance of this distinction introduced in the population of asylum seekers is then tested with respect to integration outcomes. In particular, we consider the proficiency in the Italian language and the effort exerted by migrants for labour market integration. In both areas, refugees obtain performances which are worse than those of illegal migrants. This result has potentially sizable policy implications as the country of origin of asylum seekers is an information which is recorded soon after arrival. This knowledge can be used to design integration policies which are different for refugees and illegal migrants. |
| Keywords: | migrant self-selection; asylum seekers; integration policies |
| JEL: | F22 J61 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:par:dipeco:2024-ep01&r=int |
| By: | Antonio Afonso; Valérie Mignon; Jamel Saadaoui |
| Abstract: | We assess the impact of China’s bilateral political relations with three main trading partners—the US, Germany, and the UK—on current account balances and exchange rates, over the 1960Q1- 2022Q4 period. Relying on the lag-augmented VAR approach with time-varying Granger causality tests, we find that political relationships with China strongly matter in explaining the dynamics of current accounts and exchange rates, supporting the “trade follows the flag” view. Such relationships cause the evolution of the exchange rate (except in the UK) and the current account; these causal links being time-varying for the US and the UK and robust over the entire period for Germany. These findings suggest that policymakers should account for bilateral political relationships to understand the global macroeconomic consequences of political tensions. |
| Keywords: | Political relations; time-varying causality; lag-augmented vector autoregression; China. |
| JEL: | C22 F51 Q41 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:ulp:sbbeta:2024-17&r=int |
| By: | Andreas Hauer (Seminar for Economic Policy, LMU); Hayato Kato (Graduate School of Economics, Osaka University) |
| Abstract: | The Global Minimum Tax (GMT) is applied only to firms above a certain size threshold. We set up a simple model of tax competition and profit shifting by heterogeneous multinational firms to evaluate the e ects of this partial coverage of the GMT. A non-haven and a haven country are bound by the GMT rate for large multinationals, but can set tax rates for firms below the threshold non-cooperatively. We show that the introduction of the GMT with a moderate tax rate increases tax revenues in both the non-haven and the haven countries. Gradual increases in the GMT rate, however, trigger a sudden change in the tax competition equilibrium from a uniform to a split corporate tax rate, at which tax revenues in the non-haven country decline. In contrast, gradual increases in the coverage of the GMT never harm the non-haven country. We also discuss the quantitative e ects of introducing a 15% GMT rate in a calibrated version of our model. |
| Keywords: | multinational firms; tax avoidance; profit shifting; tax competitionInput-output |
| JEL: | F23 H25 H87 |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:osk:wpaper:2406&r=int |
| By: | OECD |
| Abstract: | In recent years, concerns have increased about the use of, or threatened use of, acts of economic coercion, often in the form of trade and investment-related measures. While economic coercion has been the subject of growing attention in fora such as the G7, limited information has been developed on the impacts on affected economies and other trading partners. This work provides an initial, objective economic analysis of economic coercion with a view to helping generate greater awareness and a basis for further discussions on this issue. |
| Keywords: | Economic analysis, Economy, Investment |
| Date: | 2024–05–03 |
| URL: | http://d.repec.org/n?u=RePEc:oec:traaab:281-en&r=int |
| By: | Valeria Merlo; Georg Wamser |
| Abstract: | This chapter reviews the literature providing empirical estimates on the tax elasticity of multinational profits and discusses the challenges faced when attempting to quantify tax-motivated profit shifting. We first use micro-level data to show that multinational corporations hold a disproportionately large share of profits and financial assets in tax havens, relative to real activities in these countries. We then argue that tax notches associated with anti-tax avoidance legislation may be exploited to better understand tax-motivated profit shifting. This approach suggests a semi-tax elasticity of pre-tax profits of about 0.22, which is substantially smaller than estimates provided in earlier studies. |
| Keywords: | corporate income taxes, profit shifting, tax havens, multinational corporations |
| JEL: | H25 H26 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_11045&r=int |
| By: | Andreas HAUFLER; KATO Hayato |
| Abstract: | The Global Minimum Tax (GMT) is applied only to firms above a certain threshold size. We set up a simple model of tax competition and profit shifting by heterogeneous multinational firms to evaluate the effects of this partial coverage of the GMT. A non-haven and a haven country are bound by the GMT rate for large multinationals, but can set tax rates for firms below the threshold non-cooperatively. We show that the introduction of the GMT with a moderate tax rate increases tax revenues in both the non-haven and the haven countries. Gradual increases in the GMT rate, however, trigger a sudden change in the tax competition equilibrium from a uniform corporate tax rate to a split rate, at which tax revenues in the non-haven country decline. In contrast, gradual increases in the coverage of the GMT never harm the non-haven country. We also discuss the quantitative effects of introducing a 15% GMT rate in a calibrated version of our model. |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:24051&r=int |
| By: | Walke, Adam |
| Abstract: | Classical political economists developed several different explanations for what they saw as an inherent tendency for the rate of profit to decline over time. In the second quarter of the nineteenth century, some British advocates of colonization developed a corollary to those theories, suggesting that exporting capital to colonies could help arrest and reverse the decline. That argument was championed by the English political economist and promoter of colonization projects Edward Gibbon Wakefield, and it was systematized by John Stuart Mill. Ironically, the view that capital export and colonization played crucial roles in sustaining the rate of profit in advanced economies was later adopted by some Marxist theorists. Parallels between Karl Marx and J.S. Mill may help explain the remarkable theoretical continuity on this topic between nineteenth-century British advocates of colonization and early-twentieth-century Marxist critics of colonialism. |
| Date: | 2024–04–12 |
| URL: | http://d.repec.org/n?u=RePEc:osf:socarx:3v8wd&r=int |
| By: | Bergquist, Ann-Kristin (Department of Economic History, Uppsala University); David, Thomas (University of Lausanne) |
| Abstract: | This paper engages with the literature that has looked at the historical response to climate change among industries positioned to have had a far-reaching impact on changing the course of the climate crisis. While much of the historical research in this domain has focused on the role of big oil companies, the utility industry and conservative think tanks in the manufacturing of doubt regarding climate science and opposing ambitions climate policies, our focus is on the International Chamber of Commerce (ICC) – the world’s largest transnational business association. Unlike individual multinational corporations, the ICC developed a close ties and collaborations with the United Nations Environment Programme (UNEP), which made ICC positioned to influence international policy discussions. This study finds that the ICC developed a dual strategy, which set aside climate change as the focus for discussion and business action. One strategy, led by ICC Environment Committee, involved intense collaboration with the United Nations and developing a business agenda for sustainable development. At the same time, the creation of the International Panel of Climate Change (IPCC) in 1988 and the Intergovernmental Negotiating Committee for a Framework Convention on Climate Change (INC) in 1991, gave rise to a parallel strategy, led by ICC’s related oil companies. As this study finds, the ICC’s Energy Committee developed close ties to the Global Climate Coalition, a front group designed to combat the scientific evidence of climate change. The paper concludes that the ICC was able to delay meaningful regulatory response to climate change the between 1988-1992 by forming a broad coalition of competing interests and collaborating with agencies established under the auspices of the United Nations. |
| Keywords: | International Chamber of Commerce; United Nations; Climate Governance; Sustainability; Climate Delay |
| JEL: | N40 N50 N80 P18 |
| Date: | 2024–02–29 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:uuehwp:2024_015&r=int |
| By: | Chee, Liberty (Ca' Foscari University of Venice) |
| Abstract: | This draft contains parts of the conclusion of the book manuscript with the same title as above. The book unpacks the “market logic” of private recruitment and employment agencies as actors in migration governance. It looks into why these actors play such an outsized role in domestic worker migration, and examines their relations with employers, workers and state apparatuses. The book argues that these relations comprise neoliberal migration governance – a governmental rationality that cedes authority to the market. |
| Date: | 2024–04–12 |
| URL: | http://d.repec.org/n?u=RePEc:osf:socarx:qsyn3&r=int |
| By: | Honorati, Maddalena; Testaverde, Mauro; Totino, Elisa |
| Abstract: | Forced displacement has become more frequent in the last decades, with refugees often spending many years abroad. While international responses often focus on immediate needs, investment in refugees’ longer-term integration is increasingly important to support their transition to self-sufficiency. This paper documents the key features of German integration system and its adaptations following the Ukrainian crisis. The emerging evidence suggests that while refugees’ labor market integration in Germany is at first slower than in other EU countries, early investment in refugees’ human capital, especially in language skills, allows access to better jobs in the medium-term. Years of investment in a strong integration eco-system was key to quickly start a process that turns short-term integration costs into long-term economic opportunities. |
| Date: | 2024–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:hdnspu:189759&r=int |
| By: | Lisa Capretti (CEIS, University of Rome "Tor Vergata"); Joanna A. Kopinska (University of Rome La Sapienza); Rama Dasi Mariani (University of Roma Tre); Furio Camillo Rosati (CEIS & DEF, University of Rome "Tor Vergata") |
| Abstract: | This paper investigates the impact of migrant-provided home-based care on elderly health in Italy, analysing hospitalisation frequency, duration, and mortality. Using an instrumental variable approach to mitigate endogeneity between local health status and migratory flows, we show that migrant-provided home-based care reduces the frequency of hospital admissions (extensive margin) and their duration (intensive margin). Regarding the former, a one percentage point increase in the immigrant-to-elderly population ratio leads to a 4% decrease in long-term and rehabilitation (LR) stays, with no effect on acute stays. Concerning the latter, we find that a similar change in the migrant inflows translates to a 1.5% reduction in admission duration, with LR admissions reaching a 3.3% decline. These effects primarily stem from traumatic injuries, musculoskeletal disease, and genitourinary disorders, particularly linked to home-based mobility and treatment management. Our back-of-the-envelope calculations suggests that a 1.3 percentage point increase in the migrant-to-elderly population ratio registered in our analysis period could potentially reduce LR elderly hospitalisation costs by approximately 8% and yield annual public budget savings equivalent to around 0.59% of total hospitalisation expenditures |
| Date: | 2024–04–19 |
| URL: | http://d.repec.org/n?u=RePEc:rtv:ceisrp:573&r=int |