|
on International Trade |
|
Issue of 2025–10–06
sixteen papers chosen by Nicola Daniele Coniglio, Università degli Studi di Bari “Aldo Moro” |
| By: | Matteo Neri-Lainé; Gianluca Orefice; Michele Ruta |
| Abstract: | This paper studies the effect of regional trade agreements on firms' exports using detailed information on the content of trade agreements and firm-level exports for 31 developing countries between 2000 and 2020. Moving from shallow to deep trade agreements - i.e. agreements that regulate border and behind-the-border policies - boosts firms' exports, on average, by 3.6 percent. In line with models of trade with heterogeneous firms, this effect is stronger for large firms and firms involved in global value chains and (weakly) negative for small firms, suggesting a competition effect of deep trade agreements with significant welfare consequences for signatory countries. An Instrumental Variable strategy and a battery of robustness tests confirm the causal interpretation of the results. |
| Keywords: | Regional Trade Agreements;Exports;Firm Heterogeneity;Developing Countries |
| JEL: | F13 F14 F15 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:cii:cepidt:2025-11 |
| By: | John Lewis (Centre for Macroeconomics (CFM)); Edoardo Tolva (University of Warwick) |
| Abstract: | We estimate the effect of the Brexit process on UK-EU goods trade flows using bilateral trade data for 50 countries at the HS2 product level. Under a variety of ways of de-trending the data, we find that the effect of the short-term effect of shifting from EU membership trading arrangements to those of the “Trade and Cooperation Agreement” resulted in a fall in UK-EU trade of 17-18%. Both are highly robust to differences in how the model accounts for trends. By contrast, the longer-run effect on UK-EU trade, comparing pre-referendum with post-TCA flows, is sensitive to whether and how trends are included. Splitting the results by product type, we find that the effects associated with TCA implementation work via consumer goods and intermediate goods, with no significant effect on capital goods. Splitting by trade elasticity, we find no apparent correlation between the effect on trade and the canonical estimates of the goods level trade elasticity of Fontagné et al. (2022). |
| Keywords: | Trade Policy, Brexit, Gravity |
| JEL: | F1 F14 F15 |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:cfm:wpaper:2502 |
| By: | Pierluigi Murro; Valentina Peruzzi |
| Abstract: | This paper examines whether judicial enforcement shapes firms' participation in global value chains (GVCs). Exploiting Italy's 2013 court reorganization as a natural experiment, we combine firm-level survey data with administrative records and implement a spatial discontinuity IV design. We find that longer trials significantly reduce the probability of GVC participation: even delays of just a few weeks in civil proceedings translate into sizeable declines, underscoring the economic value of timely enforcement. The effect is concentrated among downstream firms and in trade with advanced markets, and operates through external finance, product complexity, and firm opacity |
| Keywords: | Global value chains; Judicial enforcement; Regional development; Product complexity |
| JEL: | F10 F61 K41 R11 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:sap:wpaper:wp264 |
| By: | Andrés Rodríguez-Clare; Feodora A. Teti; Mauricio Ulate; Jose P. Vasquez; Roman D. Zarate; Feodora Teti; Feodora Teti |
| Abstract: | We use detailed tariff data and a dynamic trade and reallocation model with downward nominal wage rigidities to quantitatively assess the economic consequences of the recent increase in U.S. import tariffs and the responses of its trading partners. Higher tariffs trigger an expansion in U.S. manufacturing and agricultural employment, but this comes at the expense of a decline in service employment, with overall employment declining as lower real wages reduce labor-force participation. For the United States as a whole, real income falls around 0.1% by 2028, the last year we assume the high tariffs are in effect. Importantly, our analysis disaggregates the U.S. into its 50 states, while incorporating cross-state redistribution of the tariff-generated fiscal revenue, allowing us to analyze which states gain or lose more from the shock. Some of the most populous states, like California, New York, and Texas, suffer real income declines of up to 1.4%. On the flip side, 34 states gain, in some cases as much as 1.9%. Turning to cross-country results, some close U.S. trading partners - like Canada, Mexico, and Ireland - suffer the largest real income losses. |
| Keywords: | tariff changes, U.S. Tariffs, liberation day, canada, Mexico, China |
| JEL: | F10 F11 F13 F16 F40 F42 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12179 |
| By: | Nicola Rebmann; Konstantin M. Wacker (The Vienna Institute for International Economic Studies, wiiw) |
| Abstract: | This paper re-examines foreign direct investment motives in the ‘FDI gravity’ model (Kleinert and Toubal, 2010), focusing on the role of distance. More precisely, we investigate whether aggregate and pooled gravity models for FDI obscure relevant heterogeneities across sectors. This is possible through the novel MREID dataset, which provides us with FDI data at the 2-digit NAICS level for 184 countries over the period 2010 to 2020. Our results reveal that aggregate and pooled models mask significant sector heterogeneities in two aspects (i) in the importance of horizontal versus vertical FDI motives, and (ii) in the distance elasticity. The latter reflects that distance potentially captures more complex sector-specific components than are captured in the current gravity model for FDI. |
| Keywords: | Gravity model, foreign direct investment, sector heterogeneity |
| JEL: | F21 F23 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:wii:wpaper:268 |
| By: | Cubel Montesinos, Antonio; Solaz, Marta; Sanchís Llopis, M. Teresa |
| Abstract: | This paper studies the pattern of world trade in capital goods during the two key decades following World War II (1954-1973) by applying the Network Analysis methodology to study world trade as proposed by De Benedictis and Tajoli (2011). Departing from the technological superiority of US and Germany in machinery and transport equipment industries, their role asthe world main exporters is unquestionable. However, their relative presence in the world market, and more specifically in the European market, changed along the Golden Age period. While exports from the US dominated the European markets in the aftermath of the Second World War, the way the reconstruction was addressed and the new order favorable to tradeliberalization consolidated a network less dependent on the quasi-aboslute dominace of the United States prevailing after the war. |
| Keywords: | Bilateral trade; Equipment; Golden Age; Network analysis |
| JEL: | F43 F21 O33 O51 |
| Date: | 2025–09–30 |
| URL: | https://d.repec.org/n?u=RePEc:cte:whrepe:48102 |
| By: | Barthélémy Bonadio; Zhen Huo; Elliot Kang; Andrei A. Levchenko; Nitya Pandalai-Nayar; Hiroshi Toma; Petia Topalova |
| Abstract: | We adopt a data-driven approach to measure trade fragmentation over the period 2015-2023. Countries are classified into three groups according to changes in their trade costs with the US and China: those shifting toward the US bloc, those shifting toward the China bloc, and those with no change in alignment. Roughly one-quarter of countries moved toward each bloc, while about half showed no realignment. We document that while cross-bloc trade costs rose, they were accompanied by falling within-bloc trade costs. We use a quantitative model to compute the real income effects of this reconfiguration of the global trade costs. The median country in the world, and the median country within each bloc, has 0.4-0.6% higher real income as a result of the observed decoupling, contrary to the widespread belief that fragmentation has been welfare-reducing. Finally, we find a modest amount of bloc misalignment: the median country moving to the US bloc would actually be better off moving to the China bloc, and vice versa. These results suggest that trade decoupling does not always follow trade-driven economic interests. |
| JEL: | F41 F44 F62 L16 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34302 |
| By: | Camilo Umana Dajud |
| Abstract: | This paper documents a fundamental problem in applied gravity estimation: the variance of gravity estimates becomes prohibitively large when policy regressors are parse. I define sparse regressors as dummy variables that equal one in fewer than 100 to 500 observations depending on the setting; a common characteristic of trade policies such as free trade agreements. Through Monte Carlo simulations calibrated to match previously established data generating processes in the literature, I demonstrate that the variance of coefficient estimates is approximately inversely proportional to the number of treated observations, making reliable statistical inference impossible when policy variables are infrequent. This variance problem is distinct from well-known issues related to high-dimensional fixed effects and affects both OLS and PPML estimators regardless of specification complexity. The severity of this variance problem depends on the magnitude of the true underlying coefficient: the variance problem is severe and practically prohibitive for moderate coefficients (such as those typically found for many trade policy effects), but becomes negligible for large effects. To address this issue, I propose Ridge regularization as a practical solution that reduces estimate variance while introducing minimal bias. The main contribution however is not advocating for Ridge regularization, but rather highlighting that variance is often the dominant source of uncertainty in gravity estimation when dealing with sparse policy variables, underscoring fundamental limitations of gravity models for evaluating infrequent policies with moderate effect sizes. These findings have implications not only for the international trade literature but also for other fields that employ gravitytype specifications, including migration and macroeconomics. |
| Keywords: | Gravity Model;Variance;Ridge Regression;Trade Policy |
| JEL: | F10 F14 C23 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:cii:cepidt:2025-12 |
| By: | Grzana, Marta Helena |
| Abstract: | Who bears the predominant cost of U.S. semiconductor export controls? Using CPI and import price data, and a difference-in-differences design, I conclude that it is the U.S. government. I find that export controls decreased the price paid by customers for semiconductor-based electronics yet increased the import price of semiconductors. I adapt theoretical frameworks by Mazzucato and Atkinson & Ezell to evaluate how policymakers can shape innovation markets through positive and negative measures. I evaluate export controls as an innovation policy and their effect on domestic and foreign innovation processes. My findings suggest that there should be greater consideration of foreign policy reactions in shaping innovation policy. |
| Keywords: | trade; imports; export controls; semiconductor |
| JEL: | J1 L81 |
| Date: | 2025–09–22 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:129662 |
| By: | Luis Espinoza (Texas A&M University); Jose Morales-Arilla (School of Government and Public Transformation, Tecnológico de Monterrey) |
| Abstract: | We examine how geographic proximity can substitute for contract-enforcement institutions in enabling international exports of specialized goods. When ex-porters must meet buyers’ specific product requirements, successful trade de-pends on either strong contract enforcement or close buyer-seller relationships that enable monitoring and trust. We argue that geographic proximity facilitates such relationships by reducing the costs of frequent business travel. Our theoretical framework predicts that institutional quality should primarily affect specialized trade over longer distances, as proximity-based relationship-building becomes prohibitively expensive. Using bilateral, product-specific export data in a gravity model, we find strong empirical support for this prediction. Consistent with our theory, we also show that business travel expenses and passenger flights decline more sharply with distance when destination countries have weak contract enforcement institutions. |
| Keywords: | International trade, Contract enforcement, Relationship-specific trade, specialized goods, Gravity model, Business travel. |
| JEL: | D72 D83 L82 O54 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:gnt:wpaper:10 |
| By: | Philippe Andrade; Alexander Dietrich; John Leer; Xiao Lin; Raphael Schoenle; Jenny Tang; Egon Zakrajšek |
| Abstract: | Amid evolving global trade policy and rising tariff uncertainty, understanding how small and medium-sized businesses (SMBs) form expectations about future costs and adjust their pricing is critical for assessing how the recently imposed tariffs on US imports could impact consumer prices. To that end, we analyze several waves of a survey of owners and other decision-makers at a nationally representative sample of US SMBs, defined as companies that employ 500 or fewer workers. We focus on waves conducted during the period of December 2024 to August 2025. |
| Keywords: | business expectations; surveys; tariffs; cost pass-through; inflation |
| JEL: | C83 E31 F13 F14 F40 |
| Date: | 2025–09–29 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedbcq:101819 |
| By: | Sebastian Bustos (Center for International Development at Harvard University); Ellie Jackson (Harvard's Growth Lab); David Torun; Brendan Leonard (Harvard's Growth Lab); Nil Tuzcu (Harvard's Growth Lab); Piotr Lukaszuk; Annie White (Harvard's Growth Lab); Ricardo Hausmann (Harvard's Growth Lab); Muhammed A. Yildirim (Center for International Development at Harvard University) |
| Abstract: | Bilateral trade data informs foreign and domestic policy decisions, serves as a growth indicator, determines tariffs, and is the basis for financial and investment decisions for corporations. Accurate trade data translates into better decision-making. However, the raw bilateral trade data reported by UN Comtrade suffer from two structural problems: reporting differences between country partners and countries reporting in different product classification systems, which require product-level harmonization to compare data across countries. In this paper, we address these challenges by combining a mirroring technique and a data-driven concordance method. Mirroring reconciles importer and exporter differences by imputing country reliability scores and applying a weighted country-pair average to calculate the estimated trade value. We harmonize product classifications across vintages by calculating conversion weights that reflect a product’s market share. The resulting publicly available datasets mitigate issues in raw trade statistics, reducing reporting inconsistencies while maintaining product-level granularity across six decades. |
| Keywords: | Trade, Foreign Direct Investment |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:glh:wpfacu:251 |
| By: | Huijun Yan; Randall Morck |
| Abstract: | On April 2nd 2025, after markets closed, the United States announced steep “Liberation Day” tariffs against most of its trading partners, many of which announced retaliatory tariffs. Market uncertainty spiked, consistent with the magnitudes and scope of the tariffs being unexpected. The prospect of a global trade war sent US stock markets down over ten percent until the US “paused” its tariffs on April 9th 2025, whereupon markets recovered. Portfolios of the stocks of firms headquartered in “redder” (more Republicans per Democrat) counties lost more value during this window. |
| JEL: | F1 F16 G1 G40 R1 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34299 |
| By: | Khalil, Makram; Rouillard, Pierre; Strobel, Felix |
| JEL: | E23 E32 F13 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:vfsc25:325404 |
| By: | Peter S. Epinger (University of Oldenburg); Bohdan Kukharskyy (City University of New York); Alireza Naghavi (University of Bologna, Kyoto University); Gianmarco I. P. Ottaviano (Bocconi University) |
| Abstract: | We propose the idea that firms slice up global production processes to protect their know-how. By sourcing fewer inputs from a given supplier, firms avoid the concentration of information in the hands of any individual supplier and thereby reduce the risk of imitation. We study this phenomenon using global and highly granular data on firm-to-firm trade in automotive components. The data reveal a U-shaped relationship between the number of components per supplier (concentration) and intellectual property rights (IPR) protection. This U-shape can be rationalized by a combination of a protective effect and a compositional effect of IPR protection: In countries with very weak IPR protection, firms source only low-tech components, for which imitation is not an issue and concentration is optimal to save fragmentation costs. Improvements in IPR protection induce firms to source more high-tech components, which are susceptible to imitation, so firms ‘slice to protect’ production at intermediate levels of IPR protection. Further improvements in IPR institutions mitigate the imitation risk and increase concentration. |
| Keywords: | Intellectual property rights, global value chains, production, imitation, automotive industry, fragmentation, multinational firms |
| JEL: | F L |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:inf:wpaper:2025.16 |
| By: | Utsoree Das (University of Geneva); Erik Katovich (University of Connecticut); Jonah M. Rexer (The World Bank) |
| Abstract: | Empirical evidence and economic theory suggest multinational firms are more productive than their local counterparts. What explains the persistence of local firms and the recent surge in local content policies? Using a global database of corporate ownership changes for 35, 567 commercial mines between 2000-2022, we test whether local firms have a comparative advantage in dealing with weak institutions, corruption, and conflict, which could attenuate or reverse the multinational advantage. We confirm that, on average, output declines by 8% after mines are taken over by local firms. Localized assets also exhibit higher air pollution, indicating lower operational quality. However, in states with weak governance, localization increases mine output by 8%. Local firms also generate more economic activity, urbanization, and non-agricultural employment around mines, indicating stronger local linkages. While multinational mining firms exhibit increasing returns to scale, local firms exhibit decreasing returns, suggesting they may grow based on their ability to navigate institutional weaknesses rather than their productivity. Results highlight the role of institutions in determining relative advantages of multinational versus local firms. |
| Keywords: | Resources, governance, firm ownership, foreign investment, conflict |
| JEL: | F L O Q |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:inf:wpaper:2025.15 |