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on International Trade |
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Issue of 2025–09–29
eleven papers chosen by Nicola Daniele Coniglio, Università degli Studi di Bari “Aldo Moro” |
| By: | Pinelopi K. Goldberg; Michele Ruta |
| Abstract: | This paper revisits the relationship between international trade, trade policy, and development in light of the structural, policy, and geopolitical shifts that have transformed globalization over the past decade. While trade has historically supported development through both static and dynamic channels, we argue that the latter—those inducing structural transformation and institutional change—have been far more consequential for long-run development. Through access to global markets, participation in global value chains, and knowledge and technology transfers, and by providing an anchor for reform, trade and trade agreements have contributed to productivity gains, technological progress, quality and skill upgrading, and institutional change in many low- and middle-income countries. Yet, the conditions that enabled these effects—technologically driven declines in transportation and communication costs, fragmentation of the production process, liberal trade regimes, multilateralism and geopolitical stability—are changing. Automation, digitization, climate change, the return of industrial policy in advanced economies, and the rise of geopolitical rivalry are reshaping the global trade environment. In this new context, the scope for replicating past export-led growth successes is unlikely as two key growth mechanisms, access to the lucrative markets of advanced economies and knowledge sharing, are under threat. We discuss whether trade in services and the green transition may offer new opportunities, emphasizing that future prospects will depend on policy choices in large economies and the adaptability of developing countries. |
| JEL: | F1 O1 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34283 |
| By: | Mulabdic, Alen; Yotov, Yoto V. |
| Abstract: | This paper studies the impact of geopolitical risks on international trade, using the Geopolitical Risk (GPR) index of Caldara and Iacoviello (2022) and an empirical gravity model. The impact of spikes in geopolitical risk on trade is negative, strong, and heterogeneous across sectors. The findings show that increases in geopolitical risk reduce trade by about 30 to 40 percent. These effects are equivalent to an increase of global tariffs of up to 14 percent. Services trade is most vulnerable to geopolitical risks, followed by agriculture, and the impact on manufacturing trade is moderate. These negative effects are partially mitigated by cultural and geographic proximity, as well as by the presence of trade agreements. |
| Date: | 2025–09–23 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:11219 |
| By: | Lorenzo Caliendo (Yale University); Samuel Kortum (Yale University); Fernando Parro (University of Rochester) |
| Abstract: | We develop a dynamic multi-country Ricardian trade model with aggregate uncertainty, where trade imbalances emerge as countries exchange goods and assets. We introduce a method for computing counterfactuals in this setting, which doesn't require specifying the stochastic process of shocks or solving for asset prices. Applying the model to tariff shocks, we quantify their effects on prices, income, spending, and trade imbalances. We find that higher U.S. tariffs reduce the U.S. trade deficit through general equilibrium adjustments, but raise domestic prices and lower real consumption. Our findings highlight that movements in trade imbalances are shaped by the structure of global trade and finance, and that attempts to influence external balances through changes in trade barriers carry significant implications for real economic outcomes. |
| Date: | 2025–08–25 |
| URL: | https://d.repec.org/n?u=RePEc:cwl:cwldpp:2448r1 |
| By: | Joseph B. Steinberg |
| Abstract: | I use a dynamic general-equilibrium model with supply-chain adjustment frictions to study the effects of tariffs on manufacturing employment. The model has four distinct manufacturing sectors: upstream goods with high trade elasticities (“oil”); upstream goods with low trade elasticities (“steel”); downstream goods with high trade elasticities (“toys”); and downstream goods with low trade elasticities (“cars”). I find that tariffs can increase overall manufacturing employment in the long run, but are likely to reduce it in the short run, and cause more reallocation of workers across these individual sectors than overall employment growth |
| JEL: | F11 F13 F15 F17 F41 F66 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34236 |
| By: | Tianyu Fan; Mai Wo; Wei Xiang |
| Abstract: | This paper systematically estimates and quantifies how geopolitical alignment shapes global trade across three distinct eras: the Cold War, hyper-globalization, and contemporary fragmentation. We construct a novel measure of bilateral alignment using large language models to compile and analyze 833, 485 political events spanning 193 countries from 1950 to 2024. Our analysis reveals that trade flows systematically track geopolitical alignment in both bilateral relationships and aggregate patterns. Using local projections within a gravity framework, we estimate that a one-standard-deviation improvement in geopolitical alignment increases bilateral trade by 20 percent over ten years. Integrating these elasticities into a quantitative general equilibrium model, we find that deteriorating geopolitical relations have reduced global trade by 7 percentage points between 1995 and 2020. Our findings provide empirical benchmarks for evaluating the costs of geopolitical fragmentation in an era of renewed great power competition. |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2509.12084 |
| By: | Nicolas Apfel; Holger Breinlich; Nick Green; Dennis Novy; J. M. C. Santos Silva; Tom Zylkin |
| Abstract: | Gravity equations are often used to evaluate counterfactual trade policy scenarios, such as the effect of regional trade agreements on trade flows. In this paper, we argue that the suitability of gravity equations for this purpose crucially depends on their out-of-sample predictive power. We propose a methodology that compares different versions of the gravity equation, both among themselves and with machine learning-based forecast methods such as random forests and neural networks. We find that the 3-way gravity model is difficult to beat in terms of out-of-sample average predictive performance, further justifying its place as the predominant tool for applied trade policy analysis. However, when the goal is to predict individual bilateral trade flows, the 3-way model can be outperformed by an ensemble machine learning method. |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2509.11271 |
| By: | Dominick G. Bartelme; Yuyang Jiang; Konstantin Kucheryavyy; Andrés Rodríguez-Clare |
| Abstract: | This paper studies the equilibrium and welfare implications of quantitative trade models with sector-level external economies of scale (EES). While empirical evidence highlights the importance of EES, prior work has examined their effects only in models without input-output linkages. Focusing on a small open economy, we derive an intuitive condition for equilibrium uniqueness that links trade elasticities, scale elasticities, and input-output coefficients. We further show that this same condition guarantees positive gains from trade, regardless of a country’s pattern of specialization. |
| JEL: | D51 F10 F11 F12 F60 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34258 |
| By: | Klaus Gründler; Niklas Potrafke; Ramona Schmid; Jan-Egbert Sturm |
| Abstract: | Legal rights continue to differ between women and men, particularly in developing countries. In this paper, we examine whether economic integration can improve gender equality by law. We design a novel instrumental variable strategy based on regional waves of globalization, which serve as strong exogenous predictors of national globalization trends. Our main estimate suggests that an increase of one-third in the globalization index, equivalent to a permanent transition from Indonesia to the United States, is associated with a 12.1% increase in gender equality, measured by the extent to which men and women are treated equally by law. We also find that this effect is almost entirely driven by de facto globalization. Linking globalization to more than 300, 000 individuals from about 100 countries, we provide evidence for a microfoundation of the macroeconomic effects. |
| Keywords: | gender equality, globalization, economic integration, culture |
| JEL: | F68 F61 O11 O57 K38 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12138 |
| By: | Charles Kenny (Center for Global Development) |
| Abstract: | This paper examines the changing shape of Chinese investment in Africa, as it evolves from large scale infrastructure toward small scale manufacturing. It looks at the opportunity for the region in the context of a deepening manufacturing labor shortage in China; discusses barriers to that opportunity in both China and the Africa region; and the potential response of Western countries. It may be possible for at least some economies in Africa to benefit from a combination of Chinese investment in manufactured export and processed commodity industries and preferential access to economies including the US and China if geopolitics allow, but there are many reasons this could fail and the geopolitics are increasingly hostile. A backup plan for regional growth would be wise. |
| Date: | 2025–06–09 |
| URL: | https://d.repec.org/n?u=RePEc:cgd:ppaper:359 |
| By: | Kimberly A. Clausing (Peterson Institute for International Economics); Maurice Obstfeld (Peterson Institute for International Economics) |
| Abstract: | The year 2025 brought a remarkable shift in the role of tariffs in the US economy, as the Trump administration simultaneously escalated the use of broad tariffs and ensured that Congress enacted large income tax cuts. This fiscal switch has important implications for the US tax system. While maintaining tariff rates at summer 2025 levels would generate large government revenues, such broad tariffs have significant downsides: Efficiency losses would approach one-third of revenues raised, the tax system would be less progressive, and there would be serious tax administration concerns. The fiscal shift also has significant macroeconomic implications, although probably not the intended ones. Broad tariffs generate a large negative supply shock, simultaneously raising prices and reducing macroeconomic activity. |
| Keywords: | Tariffs, revenue, deadweight loss, optimal tariff, pass-through, rentseeking, retaliation, redistribution, industrial policy |
| JEL: | F13 F32 F38 F42 F52 H21 H23 H26 H68 L52 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:iie:wpaper:wp25-19 |
| By: | Broadbent, Ben; Di Pace, Federico; Drechsel, Thomas; Harrison, Richard; Tenreyro, Silvana |
| Abstract: | The UK economy experienced significant macroeconomic adjustments following the 2016 referendum on its withdrawal from the European Union. To understand these adjustments, this paper presents empirical facts using novel UK macroeconomic data and estimates a small open economy model with tradable and non-tradable sectors. We demonstrate that the referendum outcome can be interpreted as news about a future decline in productivity growth in the tradable sector. An immediate fall in the relative price of non-tradable goods induces a temporary “sweet spot” for tradable producers. Economic activity in the tradable sector expands in the short run, while the non-tradable sector contracts. Aggregate output, consumption and investment growth decelerate. |
| JEL: | E32 F17 F41 F43 O16 |
| Date: | 2024–07–01 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:118569 |