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on International Trade |
| By: | Kenichi Kawasaki (National Graduate Institute for Policy Studies, Tokyo, Japan) |
| Abstract: | Intracontinental trade intensity and concentration are observed worldwide. It has been suggested that supply chain resilience to unexpected shocks be strengthened by enhancing international diversification of input sources. The major objective of this paper is to try to investigate the impact of trade liberalization and disruption on trade and supply chains by means of simulation studies using a computable general equilibrium (CGE) model of global trade, with the introduction of a few trade indicators. World import deviation from the expected least distorted state of trade would be reduced by trade liberalization but expanded by trade disruption, though to a small extent. That said, those impacts on import concentrations and deviations would be mixed at the regional levels. Regional tariff removals would create more import deviations, depending on the economy. The impact of trade disruption on import deviations would vary by economy. It is advised that supply chain resilience be considered by economy and by sector. Meanwhile, the development of analytical methodologies for study of the impact of policy measures on supply chains would be seen as issues for further study. |
| Keywords: | Asia-Pacific, supply chain, Trans-Pacific Partnership (TPP), Regional Comprehensive Economic Partnership (RCEP), US tariff hikes, trade sanctions on Russia, mining price increases, computable general equilibrium (CGE) model |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:ngi:dpaper:24-04&r= |
| By: | Santana, Roy; Dobhal, Adeet |
| Abstract: | This paper studies the under-explored yet critical role of WTO's regular bodies, particularly focusing on the discussions of "trade concerns" within the Goods Council, its subsidiary bodies, as well as the General Council. These discussions are pivotal for the governance of international trade and are key in resolving trade frictions among WTO Members, going beyond the conventional realms of diplomatic negotiation and legal adjudication. By scrutinizing trade concerns deliberated within these bodies over the past 29 years, this paper provides insights into their indispensable function in enhancing policy transparency, facilitating constructive dialogue on trade measures, and offering a platform for members to voice concerns over the trade practices of others. Our analysis, based on a new methodology that focuses on the number of interventions rather than the number of trade concerns, uncovers a growing trend where Members are increasingly leveraging these discussions to navigate and mitigate trade tensions, even amidst institutional challenges such as the Appellate Body impasse, and illustrates how different groups of Members participate in these bodies. This phenomenon underscores the Goods Council's strategic position within the WTO structure, above the technical bodies and below its most political body, which has enabled it to become a useful barometer for the shifting dynamics of global trade frictions. |
| Keywords: | Economic cooperation, Goods Council, trade concerns, specific trade concerns (STCs), trade disputes, trade frictions, transparency, development, trade diplomacy, WTO governance |
| JEL: | F02 F13 F53 F55 K33 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:wtowps:297995&r= |
| By: | Wanissa Suanin; Panit Wattanakoon |
| Abstract: | The global demographic shift to an ageing society poses challenges for the international food trade. People in different age groups have different dietary preferences, nutritional needs, and income levels, which influence consumer preference and purchasing power. This study examines the impact of global demographic shifts towards silver economies on international food imports using structural gravity analysis. The findings suggest that silver economies will shift consumer preferences to import healthier food, resulting in increased income elasticity of demand for these imports. The primary target markets for healthy food trade are developed countries, particularly Japan, the EU, and the US, where income elasticity is high and remains near or greater than one. Although consumers in developing countries may not prefer healthy foods, their income elasticity for healthy food imports will rise as the elderly population grows. |
| JEL: | F10 F14 J10 Q18 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:pas:papers:2024-5&r= |
| By: | Polanco Lazo, Rodrigo |
| Abstract: | This Perspective explores how the Investment Facilitation for Development Agreement (IFDA), recently made public at the World Trade Organization's 13th ministerial conference, could be used as a starting point to include additional home state measures to facilitate outward investment in other international investment agreements or national regulations. |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:colfdi:297236&r= |
| By: | PHAM PHUONG NGOC (Diplomatic Academy of Vietnam, Hanoi, Vietnam); DAINN WIE (National Graduate Institute for Policy Studies, Tokyo, Japan) |
| Abstract: | Trade can significantly reduce informality in developing countries by fostering economic growth and creating formal employment opportunities. A large proportion of workers in developing countries such as Vietnam work in the informal sector, making them vulnerable and less productive. This study examines the short-term impact of the US– China trade war as a positive demand shock on the informality of Vietnam's labor market, using nationally representative data from the Vietnam Labor Force Survey from 2017 to 2019. We create an industry-level measure based on variations in tariff increases applied to Chinese goods, representing the tariff advantages granted to Vietnamese firms. The estimation results show that workers in industries with higher tariff advantages are less likely to be employed as informal or uninsured workers. By applying Goldberg and Pavcnik’s (2003) framework, we interpret these findings as indicating that Vietnamese firms perceived the US–China trade shock as a positive and permanent demand shock. To our knowledge, the empirical evidence presented in this study represents a rare investigation into the effects of the trade war on the labor market of a non-participating country. Additionally, the findings offer important implications for other developing countries by showing how Vietnam’s labor market and informality improved as firms took advantage of the new trade opportunities created by trade diversion. |
| Keywords: | labor market informality; trade war; trade diversion, tariffs |
| Date: | 2023–09 |
| URL: | http://d.repec.org/n?u=RePEc:ngi:dpaper:23-09&r= |
| By: | Prema-chandra Athukorala; Raveen Ekanayake |
| Abstract: | The expansion of global manufacturing value chains (GMVCs) as a major mode of economic globalization opens up opportunities for latecomer countries to industrialize and carve out niches to specialize within the value chain, instead of producing a good from start to finish within their national boundaries. However, whether this provides a pathway for self-sustained industrialization remains a debatable issue. Sceptics argue that, since multinational enterprises (MNEs), which are the ‘lead firms’ of GMVCs, dominate upper-end activities of the value chain such as product design, research and development, global marketing, and after-sales care and services, a country located lower rungs of the value chain has little room for industrial upgrading. This paper aims to contribute to this debate through an in-depth case study of industrial transformation over the past six decades in Singapore, the first country to embark on an MNE-led export-oriented industrialization strategy based on the prophetic foresight of unfolding opportunities for global economic integration within GMVCs. The findings suggest that, while Singapore had some country-specific advantages, it was hard-headed national development policy that was instrumental in transforming the country from ‘the third world to the first’ within a generation. The key general lesson from the Singaporean experience is that industrialization success within GMVCs requires embedding FDI promotion in a comprehensive national development strategy that makes the country an attractive location for international production and continuously monitoring and recalibrating the development strategy in line with evolving patterns of international production. |
| JEL: | F21 F23 O24 O53 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:pas:papers:2024-4&r= |
| By: | Dainauskas, J.; Lastauskas, P. |
| Abstract: | We show that U.S. trade protectionism shocks cause the cyclical component of the aggregate U.S. price markup to increase significantly over time. However, if trade barrier announcements are covered by the media, which may help form expectations about the future, we find that the aggregate U.S. price markup response is zero upon impact, if not negative, before it eventually rises. We develop a simple canonical model of trade adjustment dynamics driven by habits in consumer preferences that replicates these empirical responses and use it to quantify the welfare implications. In the model, firms cut markups preemptively in anticipation of future trade barriers by factoring in the time that it takes to wean addicted consumers off of imported varieties. |
| Keywords: | Trade Adjustment Dynamics, Trade Protectionism, Announcements, Anticipation, Deep Habits, Welfare Gains from Trade. |
| JEL: | C11 C32 F13 F17 F62 |
| Date: | 2024–06–12 |
| URL: | https://d.repec.org/n?u=RePEc:cam:camdae:2431&r= |
| By: | Martin M. Guzman; Joseph E. Stiglitz |
| Abstract: | This paper analyzes frameworks for the design of the rules for international trading, assuming that it is possible to have some rule of law. In the Arrow-Debreu benchmark, where there is no economic power and political power is seemingly irrelevant, there is no need for trade agreements – free trade is the optimal policy for each country. But under even minimal deviations from that benchmark, trade agreements matter. We focus on environments in which there are market failures, technology is endogenous, and there is political power. Power dynamics play, for instance, a critical role in the design, implementation, and enforcement of agreements, with the latter being a critical difference between international agreements and domestic contracts and a key determinant of the feasibility and consequences of agreements. With endogenous technology, trade rules proscribing industrial policies may lead to lower growth and greater cross-country inequalities. Finally, we develop a framework which may be useful in the design and implementation of trade rules. |
| JEL: | B17 F13 F15 F50 O24 Q56 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32533&r= |
| By: | Kenichi Kawasaki (National Graduate Institute for Policy Studies, Tokyo, Japan) |
| Abstract: | In the Asia-Pacific, free trade agreements (FTAs) and economic partnership agreements (EPAs) have been implemented intensively. However, a few major economies have been lagging behind that trend, and recent agreements have not always agreed on 100% tariff removals. This paper presents an overview of the development of EPAs in the Asia-Pacific and investigates quantitatively the relative significance of the impact of the expansion of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), using a Computable General Equilibrium (CGE) model based on the most recent trade database and tariff data. The results of model simulations suggest that the impact of China joining CPTPP would be larger than that of the United States (US) joining, in terms of macroeconomic benefits to the CPTPP economies on average. That said, the macroeconomic effects of the US and/or China joining CPTPP vary in terms of both magnitude and direction among the CPTPP economies. Meanwhile, the impact at the sector level would also vary among those scenarios. The impact estimated by model simulations would also be dependent on the structure of the CGE model used. The impacts of EPAs in alternative scenarios are worth simulating (using the same model version) and comparing. |
| Keywords: | Asia-Pacific, Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), Computable General Equilibrium (CGE) model |
| Date: | 2023–10 |
| URL: | http://d.repec.org/n?u=RePEc:ngi:dpaper:23-10&r= |
| By: | Borusyak, Kirill; Jaravel, Xavier |
| Abstract: | What is the nature of the distributional effects of trade? This paper demonstrates conceptually and empirically the importance of “trade-induced horizontal inequality, ” i.e. inequality that occurs among workers with the same level of earnings before the trade shock. This type of inequality does not affect the income distribution but generates winners and losers at all income levels. To quantify the horizontal inequality and changes in the income distribution induced by trade in a data-driven way, we develop a characterization of the welfare impacts, governed by simple and intuitive statistics of labor market and consumption exposure to trade. In the U.S., we find substantial heterogeneity in exposure and thus in the welfare effects of trade shocks across workers. Over 99% of the variance of welfare changes from trade shocks arises within income deciles. These findings run against a popular narrative that “trade wars are class wars.” |
| Keywords: | trade liberalization; distributional effects; inequality; EP/X016056/1; Elsevier deal |
| JEL: | F14 F16 D63 |
| Date: | 2024–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:122606&r= |
| By: | Patrick Arni (University of Bristol, United Kingdom); Pether H. Egger (ETH Zurich, Switzerland); Katharina Erhardt (University of Düsseldorf, Germany); Matthias Gubler (SNB, Switzerland); Philip Sauré (Johannes Gutenberg University) |
| 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: | 2024–03–28 |
| URL: | https://d.repec.org/n?u=RePEc:jgu:wpaper:2409&r= |
| By: | Riandy Laksono; Arianto A. Patunru |
| Abstract: | Labour share of income in developing economies has generally declined with increased engagement in international trade, raising concern about adverse distributional consequences of trade for workers. Using a panel dataset of Indonesian manufacturing firms from 1990 to 2015, we evaluate how trade affects the dynamics of labor share from a micro-level perspective. We find that trade liberalization contributes to declining labor share, mainly by shifting market share towards better-performing firms with already-low labor share. While this is in line with the superstar firm framework, such model fails to characterize the labor share dynamics in a developing economy like Indonesiawhere aggregate markups and concentration do not rise. Instead, this study supports a trade-based explanation for labor share decline. |
| JEL: | F61 F63 F66 J30 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:pas:papers:2024-3&r= |
| By: | Sandkamp, Alexander-Nikolai |
| Abstract: | In the aftermath of the Covid-19 pandemic, China's share in European trade has fallen continuously. Nevertheless, the country remains the EU's largest source of imports (20.5 percent in 2023) and its third largest export destination (8.7 percent). • This apparent dominance of China is put into perspective when incorporating intra-EU trade. For example, Germany - Europe's largest economy - sent 6.1 percent of its exports to China, but 55 percent to EU members states. For imports, the Chinese and European shares are 11.5 percent and 52.7 percent, respectively. • Decoupling the EU from China (i.e. almost eliminating bilateral trade) would permanently reduce European real income by 0.8 percent in the long-run. In terms of gross domestic product in 2023, the EU would forego 136 billion EUR of value added every year. Short-term effects are likely to be stronger. • China dominates global production of important products such as laptops and mobile phones as well as raw materials including Germanium and Gallium that are critical for the green energy transition. A trade disruption might thus both delay the energy transition and increase its costs. • To reduce specific dependencies, the EU should intensify its efforts to diversify procurement by increasing the attractiveness of alternative suppliers. Finding the courage to move forward in the negotiation of free trade agreements with potential strategic partners such as Australia and the Mercosur countries would strengthen the EU's geopolitical position and increase prosperity among partners. |
| Abstract: | Im Nachgang der Covid-19-Pandemie ist der Anteil Chinas am europäischen Handel kontinuierlich gesunken. Dennoch bleibt das Land die größte Importquelle der EU (20, 5 Pro-zent im Jahr 2023) und ihr drittgrößtes Exportziel (8, 7 Prozent). • Diese scheinbare Dominanz Chinas relativiert sich, wenn man den Intra-EU-Handel mit einbezieht. Deutschland - die größte europäische Volkswirtschaft - lieferte beispielsweise 6, 1 Prozent seiner Ausfuhren nach China, aber 55 Prozent in die EU-Mitgliedstaaten. Bei den Einfuhren liegen die chinesischen und europäischen Anteile bei 11, 5 Prozent bzw. 52, 7 Prozent. • Eine Abkopplung der EU von China (d.h. ein weitgehender Wegfall des bilateralen Handels) würde das europäische Realeinkommen langfristig um 0, 8 Prozent senken. Bezogen auf das Bruttoinlandsprodukt im Jahr 2023 würde die EU jährlich auf 136 Milliarden EUR an Wertschöpfung verzichten. Kurzfristig dürften die Auswirkungen stärker sein. • China dominiert die weltweite Produktion von wichtigen Produkten wie Laptops und Mobiltelefonen sowie von Rohstoffen wie Germanium und Gallium, die für die grüne Energiewende entscheidend sind. Eine Handelsunterbrechung könnte daher sowohl die Energiewende verzögern als auch deren Kosten erhöhen. • Um spezifische Abhängigkeiten zu verringern, sollte die EU ihre Bemühungen um eine Diversifizierung der Beschaffung verstärken, indem sie die Attraktivität alternativer Lieferanten erhöht. Den Mut zu finden, die Verhandlungen über Freihandelsabkommen mit potenziellen strategischen Partnern wie Australien und den Mercosur-Ländern voranzutreiben, würde die geopolitische Position der EU stärken und den Wohlstand aller Beteiligten erhöhen. |
| Keywords: | China, European Union, Germany, international trade, decoupling, China, Europäische Union, Deutschland, internationaler Handel, Entkopplung |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:ifwkpb:297975&r= |
| By: | Kamila Kuziemska-Pawlak; Jakub Mućk |
| Abstract: | This paper proposes an extension of the fundamental equilibrium exchange rate (FEER) model that accounts for the trade linkages within the Global Value Chains (GVCs). In the modified FEER framework, both backward and forward linkages are taken into consideration. To demonstrate the empirical relevance of the complex nature of existing trade linkages, the proposed FEER model is applied to analyze exchange rate fluctuations of the selected Central and Eastern European countries against the euro. It is documented that in Czechia, Hungary, and Poland the standard FEER framework predicts rapid appreciation of the equilibrium exchange rate after 2010, which implies deepening undervaluation of the actual real exchange rate towards the end of the analysed period. Instead, when the GVCs' linkages are taken into account in the framework, actual real exchange rates are broadly in line with the fundamental equilibrium exchange rates, and hence the missing real appreciation of the Czech krone, the Hungarian forint and the Polish zloty is to a large extent an equilibrium phenomenon. |
| Keywords: | exchange rate, current account, foreign trade, Global Value Chains |
| JEL: | C32 C33 F12 F31 F32 |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:sgh:kaewps:2024100&r= |
| By: | Yasuhiro Nakamoto (Faculty of Informatics, Kansai University); Kazuo Mino (Institute of Economic Research, Kyoto University); Yunfang Hu (Graduate School of Economics, Kobe University) |
| Abstract: | This study integrates the dynamic 2×2×2 Hechscher-Ohlin model with the neoclassical growth model, considering heterogeneous households, to explore the relationship between preference structures, wealth distribution, and international trade in a unified setting. We demonstrate that if households have homothetic utility functions, the long-run trade pattern depends solely on the initial distribution of capital between two countries. Conversely, if preferences are non-homothetic, the initial distribution of wealth among households also influences long-run trade patterns. Numerical examples further examine the wealth distribution in each country, showing that the initially poor can catch up with the initially rich. |
| Keywords: | Dynamic Hecksher-Ohlin model, Non-homothetic preference, Heterogeneous households, Wealth distribution |
| JEL: | D31 E20 F11 F43 O41 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:kyo:wpaper:1105&r= |
| By: | Huremovic, Kenan; Nurarelli, Federico; Serti, Francesco; Vega-Redondo, Fernando |
| Abstract: | Using data on the Spanish firm-level production network we show that firmslearn about international trade opportunities and related business know-how from their production network peers. Our identification strategy leverages the panel structure of the data, import origin variation, and network structure. We find evidence of both upstream and downstream network effects, even after accounting for sectoral and geographical spillovers. Larger firms are better at absorbing valuable information but worse at disseminating it. Connections with geographically distant firms provide more useful information to start importing. |
| Keywords: | Production Network; Learning; Spillovers; Import |
| Date: | 2024–06–06 |
| URL: | https://d.repec.org/n?u=RePEc:cte:werepe:43951&r= |
| By: | Sonali Chowdhry |
| Abstract: | This paper investigates the heterogeneous responses of exporters to policy reforms undertaken by the People’s Bank of China to internationalize the Renminbi (RMB). Using detailed customs data from France for the initial years of these reforms (2011-2017), it documents several novel stylized facts on RMB adoption, highlighting both the growth and extreme skewness in RMB’s uptake across firms and varieties. It further examines various mechanisms underpinning self-selection into RMB and proposes a novel channel that strongly predicts RMB adoption. This channel exploits information on firms’ invoicing currency strategies in existing markets and is observed to be a valid instrument for RMB adoption. Leveraging this new instrument, the paper shows that invoicing in RMB significantly boosted exports for varieties sold to China. Overall, the findings suggest that early RMB adoption, although limited across firms, provided an important competitive edge when exporting to China. |
| Keywords: | Firm heterogeneity, invoicing currency, trade transactions, China |
| JEL: | F14 F23 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:diw:diwwpp:dp2085&r= |
| By: | PHAM PHUONG NGOC (Diplomatic Academy of Vietnam, Hanoi, Vietnam); DAINN WIE (National Graduate Institute for Policy Studies, Tokyo, Japan); HANOL LEE (Southwestern University of Finance and Economics, Sichuan, China) |
| Abstract: | This study investigates the impact of a large demand shock on the timing of women’s marital decisions and first childbirth experiences in Vietnam. Using the US-Vietnam Bilateral Trade Agreement (BTA) in 2001 as an exogenous shock, we hypothesize that the reduction in women’s and men’s self-employment would delay family formation and childbirth, with the ultimate impact on marriage remaining ambiguous. Analyzing data from the Vietnam Household Living Standards Surveys, we find that both men and women are less likely to be self-employed in the face of a substantial trade shock. Notably, the decreasing impact on women's self-employment becomes more pronounced than that for men post-2012, a decade after the agreement's enforcement. Employing the Multiple Indicator Cluster Survey and survival analysis, we empirically demonstrate that increased exposure to trade postpones women's timing of marriage and first childbirth. On average, in 2013, the BTA resulted in a 4.43- and 4.45%-point decrease in the probability of entering marriage and becoming a mother, respectively. We also present suggestive evidence that increased exposure to trade liberalization eventually increases the likelihood of marriage and the number of children among women over 40. |
| Keywords: | trade liberalization, fertility, marriage, Vietnam |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:ngi:dpaper:23-12&r= |
| By: | Kiser, Jimena Villanueva (Brigham Young University); Wilson, Riley (Brigham Young University) |
| Abstract: | Exploiting variation created by Deferred Action for Childhood Arrivals (DACA), we document the effects of immigrant legalization on mobility investments and economic outcomes. DACA increased both geographic and job mobility of young immigrants, leading them to high paying labor markets and licensed occupations. Employing these shifts, we examine whether these gains to immigrants are offset by losses among U.S.- born workers. Employment of U.S.-born workers grows in the occupations that DACA recipients shifted into after DACA is implemented, even when controlling for local demand. Spillover estimates are consistent with worker complementarities and suggest that immigrant legalization generates broader economic benefits. |
| Keywords: | legal status, DACA, immigration, geographic mobility, job mobility, occupational licensing, local labor markets |
| JEL: | J15 K37 R23 |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp16968&r= |
| By: | Eric Lob (Florida International University); Hakan Yilmazkuday (Department of Economics, Florida International University) |
| Abstract: | This paper provides a political economy analysis of the bilateral trade relations and patterns of exchange that existed between Iran and Sub-Saharan Africa (SSA) from 1962 to 2021. The paper contributes to the growing literature on Iran-Africa relations by empirically delineating not just the changes, but also the continuities between Iran and its African trading partners before and after the Iranian Revolution. It also adds nuance to the broader scholarship on South-South cooperation by showing the disparity between the rhetoric of South-South solidarity and reciprocity between Iran and SSA, on one side, and their low and fluctuating trade volumes, on the other. These volumes resulted from historical inertia or path dependency and structural factors, including trade complementarities and geopolitical conditions, more than demographic, cultural or religious realities. They were also shaped by the agency and decision-making of Iranian and African leaders and officials regarding the extent to economically engage with each other. |
| Keywords: | Iran, Prebisch-Singer Hypothesis, South-South Cooperation, Sub-Saharan Africa, Trade Patterns |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:fiu:wpaper:2405&r= |
| By: | Manzoni, Elena (University of Bergamo); Murard, Elie (University of Trento); Quercia, Simone (University of Verona); Tonini, Sara (Universidad de Alicante) |
| Abstract: | How do emotions affect policy views on immigration? How do they influence the way people process and respond to factual information? We address these questions using a survey experiment in Italy, which randomly exposes around 7, 000 participants to (i) sensational news about immigrant crimes, (ii) statistical information about immigration, or to (iii) the combination of both. First, we find different effects of news depending on the severity of the reported crime: while the news of a rape against a young woman significantly increases the demand for anti-immigration policies, there is no impact of the news of a petty theft. Consistent with a causal role of emotions, we find that the rape news triggers a stronger emotional reaction than the theft news, while having a similar effect on factual beliefs. Second, we document that information provision corrects beliefs, irrespective of whether participants are also exposed to the rape news. Yet, the exposure to the rape news strongly influences whether belief updating translates into change in policy views: when presented in isolation, information tends to reduce anti-immigration views; when combined with the rape news, the impact of the latter dominates and participants increase their anti-immigration views to the same extent as when exposed to the rape news only. This evidence suggests that, once negative emotions are triggered, having more accurate factual knowledge no longer matters for forming policy views on immigration. |
| Keywords: | news, information, immigration, experiment, belief, emotions |
| JEL: | F22 C90 D91 D72 D83 J15 |
| Date: | 2024–05 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17017&r= |
| By: | Roshen Fernando |
| Abstract: | Climate change continues to be an existential threat to humanity. With intrinsic linkages to the natural environment, food and energy supply chains are two fundamental channels via which climate risks could spill over into the economy. This paper explores the global economic consequences of the physical climate impacts on agriculture and energy. Firstly, we construct a range of chronic and extreme climate risk indicators. Secondly, we incorporate those climate risk indicators, alongside the historical data on global agriculture and energy, in machine learning algorithms to estimate the historical responsiveness of agriculture and energy to climate risks. Thirdly, we project agriculture and energy production changes under three Shared Socioeconomic Pathways (SSPs). Finally, the derived shocks are introduced as economic shocks to the G-Cubed model, which is a global multisectoral intertemporal general equilibrium model. We evaluate the G-Cubed model simulation results for various economic variables, including real GDP, consumption, investment, exports and imports, real interest rates, and sectoral production. We observe substantial losses to all economies and adjustments to consumption and investment under the SSPs. The losses worsen with warming. Developing countries are disproportionately affected. However, we observe the potential for double dividends from transitioning to sustainable livestock production and renewable energy sources, preventing further warming and physical damages, and enhancing the resilience of food and energy supply chains to climate risks. |
| Keywords: | climate change, extreme events, physical climate risks, macroeconomics, CGE, DSGE, machine learning |
| JEL: | C51 C53 C54 C55 C68 F41 Q51 Q54 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:een:camaaa:2024-37&r= |
| By: | Allan Hsiao; Jacob Moscona; Karthik Sastry |
| Abstract: | Do governments systematically intervene in agricultural markets in response to climate shocks? If so, what are the aggregate and distributional consequences? We construct a global dataset of agricultural policies and extreme heat exposure by country and crop since 1980. We find that extreme heat shocks to domestic production lead to increased consumer assistance. This effect is persistent, primarily implemented via border policies, and stronger in election years when politicians are particularly responsive to constituent demands. Shocks to foreign production lead to increased producer assistance, consistent with policymakers' targeting redistribution rather than price stabilization. Interpreted via a model, the estimates imply that policy responses almost fully stabilize prices in shocked markets, reducing losses to domestic consumers by 97% while increasing those to domestic producers and foreign consumers by 55% and 105%, respectively. Responsive policy exacerbates overall welfare losses from projected end-of-century climate shocks by 14%. |
| JEL: | Q18 Q54 Q56 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32539&r= |
| By: | Graña-Colella, Santiago; Silva Neira, Ignacio |
| Abstract: | Extensive economic literature has covered the effect of a natural resource boom on the performance of the manufacturing sector. Specifically, the Dutch Disease hypothesis establishes that increases in commodity prices should lead to a decrease in manufacturing exports, due to significant inflows of foreign currency that subsequently appreciate the real exchange rate. In 2003, a substantial increase in commodity prices, coupled with a pronounced appreciation of the real exchange rate, triggered a process of export primarization in Latin American countries. The paper aims to empirically assess whether the Dutch Disease framework can provide a suitable explanation for this phenomenon in Argentina and Chile. Despite both countries heavily depending on natural resources, they exhibit notable differences in economic scale, composition, and evolution of manufacturing exports, as well as their economic policy approaches throughout the designated period. This task is performed through the estimation of one VAR model for each country (2003-2019). The main results indicate that while there is insufficient evidence to assert that Argentina suffered from the Dutch Disease, the evidence for Chile remains inconclusive. These divergent results could potentially find clarification in an examination of disparities in export composition and integrated technology and thereby suggest a broader analysis regarding the policy implications. |
| Keywords: | Dutch Disease, VAR models, Argentina, Chile, manufacture export, commodity price boom |
| JEL: | C32 E12 F31 F41 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:ipewps:296489&r= |
| By: | Gueyon Kim; Cassandra Merritt; Giovanni Peri |
| Abstract: | The evolution of work is of emerging importance to advanced economies' growth. In this study, we develop a new semantic-distance-based algorithm to identify “new work, ” namely the new types of jobs introduced in the US. We characterize how “new work” relates to task content of jobs and skill characteristics of workers and document its geographic distribution and association with employment growth. Then, we analyze whether local factors associated in the previous literature with agglomeration economies and productivity growth as well as local exposures to global shocks—technology, trade, immigration, and population aging—predict the creation of “new work.” We find local supply of college educated in 1980 as the strongest predictor of “new work.” Using the historical location of 4-year colleges, a strong instrument for local college share, we find a positive and significant causal effect of local supply of human capital on “new work.” |
| JEL: | F1 J11 J14 J23 J24 J61 O33 |
| Date: | 2024–05 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32526&r= |
| By: | Omid Asadollah (Florida International University); Linda Schwartz Carmy (Florida International University); Md. Rezwanul Hoque (Florida International University); Hakan Yilmazkuday (Department of Economics, Florida International University) |
| Abstract: | This paper investigates the effects of global geopolitical risks and global supply chain pressures on global inflation for the monthly period of 1999M1-2022M12. The investigation is based on a structural vector autoregression model, where the effects of global oil prices and global monetary policy are controlled for. Four alternative measures of inflation are used, including headline, core, food, and energy inflation. The empirical results show that disruptions in global supply chains are the main drivers of global inflation in the long run as the corresponding shocks explain the lion's share of volatilities in headline inflation (by 32%), core inflation (by 30%) and food inflation (by 22%), followed by oil price shocks and policy rate shocks. In comparison, energy inflation is explained the most by oil price shocks (by 55%) followed by supply chain shocks and policy rate shocks. Positive supply chain pressure and oil price shocks have positive and statistically significant effects on headline inflation even after five years, whereas positive policy rate shocks have negative and statistically significant effects on headline inflation in the long run. In contrast, positive shocks to geopolitical risk result in higher headline inflation only up to one year, with insignificant effects in the long run. Several policy implications follow. |
| Keywords: | Geopolitical Risk, Supply Chains, Global Inflation, Oil Prices, Policy Rates |
| JEL: | E31 E52 E58 F62 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:fiu:wpaper:2406&r= |
| By: | Karol Szafranek; Michał Rubaszek |
| Abstract: | The Russian invasion of Ukraine triggered severe disruptions in the European energy markets and caused significant shifts in global natural gas flows. In this paper we investigate to what extent this European shock has affected the dynamics and altered the estimates of the elasticities on the U.S. natural gas market. For that purpose, we use the Bayesian Structural Vector Autoregression framework proposed by Baumeister and Hamilton (2019, BH) for the crude oil market and applied by Rubaszek, Uddin, and Szafranek (2021, RSU) to analyze the dynamics of U.S. natural gas market till year 2020. We modify the RSU model to account for natural gas trade and next derive the posterior of the model using observations till 2023. This allows us to approximate the impact of the European energy crisis on the U.S. market. Our result are twofold. First, we show that due to our modification the RSU model the estimates of the elasticities on the U.S. natural gas market change, while simply updating the same prior beliefs with most recent data impacts the posterior estimates to a very limited extent. Second, we find that even as major shock as the European energy crisis has only marginally contributed to the dynamics of the U.S. natural gas market. This result confirms earlier studies, which show that the U.S. natural gas market is barely affected by shocks to the European natural gas market. |
| Keywords: | Natural gas market, structural VAR, Impulse-response function, Bayesian inference |
| JEL: | C11 C32 Q31 Q43 |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:sgh:kaewps:2024099&r= |
| By: | Mohaddes, K.,; Raissi, M. |
| Abstract: | We estimate country-specific annual per-capita GDP losses from global warming using the most recent climate scenarios of the Intergovernmental Panel on Climate Change (IPCC) under different mitigation, adaptation, and climate variability assumptions. Our results indicate that without significant mitigation and adaptation efforts, global GDP per capita could decline by up to 24 percent under the high-emissions climate scenarios by 2100. These income losses vary significantly across the 174 countries in our sample, depending on the projected paths of temperatures and their variability. |
| Keywords: | Climate Change, Economic Growth, Mitigation, Adaptation, Counterfactual Analysis |
| JEL: | C33 O40 O44 Q51 Q54 |
| Date: | 2024–06–04 |
| URL: | https://d.repec.org/n?u=RePEc:cam:camdae:2429&r= |
| By: | Colicev, A.; Hoste, J.; Konings, J. |
| Abstract: | We use retailer scanner data to analyze the impact of a large and sudden exchange rate shock on the cost of living of consumers. While the marginal cost of foreign-sourced products increases by 7 percent more than the costs of locally-sourced products, the retail markup on foreign products decreases by 4 percent relative to local products. At the same time, we document increased entry and exit of both foreign and local varieties around the depreciation. To analyze the impact on consumers we decompose the change in the cost of living into a cost, a retail markup, a substitution, and a variety effect. As richer consumers spend, on average, more on foreign varieties, we find that they are disproportionally affected by the cost effect. However, lower retail markups on foreign products offset this relative cost increase. Since richer consumers have lower elasticities of substitution and benefit more from changes in product variety, their cost of living increased only by 16 percent, while for poor consumers the cost of living increased by 24 percent. |
| Keywords: | Currency depreciation, Pass-through into consumer prices, Cost-of-living |
| JEL: | F33 F61 |
| Date: | 2024–06–12 |
| URL: | https://d.repec.org/n?u=RePEc:cam:camjip:2419&r= |
| By: | David Lam (University of Michigan); Murray Leibbrandt (SALDRU, University of Cape Town) |
| Abstract: | The world is projected to add 2.5 billion people to the total population and 1.1 billion people to the working-age population between 2020 and 2100. Almost all of the additional working-age people will be added in Sub-Saharan Africa, a dramatic change from previous decades, when the growth of the working-age population was concentrated in Asia. This chapter analyzes the demography of the African labor force in the coming decades using the latest United Nations population projections. We show that by 2050 Africa will be the only region in the world with a growing working-age population and will be the only region in which the ratio of dependents to working-age population is falling. These dramatic differences are the result of Africa’s later and slower fertility decline, with fertility still high in many African countries. Being the only region with a growing working-age population may create opportunities for investment and economic growth in Africa. This growing working-age cohort and especially its females have higher years of schooling than any previous generation. But the quality of their education still lags other regions. On the demand side, Africa needs to produce 2 million jobs per month by 2040 to keep up with the growth of the working-age population. This rate of job creation is similar to that produced in Asia during the period in which its working-age population was growing at similar rates. Still, this remains a daunting challenge for Africa in the coming decades. The dominance of the informal sector in all African labor markets, with the exception of a few upper middle-income contexts, implies that formally measured unemployment rates are not likely to provide telling metrics of African success. Rather, the focus for growth and improved development outcomes has to be on formal sector job creation alongside notably stronger linkages into the informal sector than has been the case to this point. |
| Date: | 2023 |
| URL: | https://d.repec.org/n?u=RePEc:ldr:wpaper:303&r= |