Browsing by Person "Jung, Benjamin"

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Applied policy research through the lens of new quantitative trade models
(2021) Walter, Timo; Jung, Benjamin
This cumulative dissertation consists of four essays focusing on the applied policy research in international trade. I conduct policy research on current and relevant trade subjects using state-of-the-art quantitative trade models. In the first two essays I analyze the impact of potential trade policies before they are implemented (ex-ante), while in the two later essays I examine policy issues and their effects after they were implemented (ex-post). The first essay is dedicated to the exploration of the trade and welfare effects of a potential free trade agreement (FTA) between the United States and Japan. Examining the effects of this bilateral FTA is of economic relevance as Japan is the largest trading partner for the United States without an established FTA. Based on the new quantitative trade model of Caliendo and Parro (2015) I consider various trade policy scenarios of such a potential FTA. In my counterfactual analysis I focus on the decrease of tariffs as well as on the reduction of different levels of non-tariff barriers. My findings indicate that the largest trade effects are driven by the reduction of non-tariff barriers. Furthermore, I compare the impact of a bilateral “Deep FTA” with the impact of the Trans-Pacific Partnership (TPP). The results show that the United States would prefer joining TPP; Japan would benefit the most of a “Deep FTA”. The second essay of my dissertation project concentrates on the abolition of import tariffs in the automotive sector between the EU and the United States. To study the potential policy implications of the so-called “Zero Tariff Solution”, this essay applies the Caliendo and Parro (2015) framework and the empirical approach of the first essay. Hereby, several possible trade policy scenarios are analyzed. The key result clearly shows that the highest welfare gains would be achieved by the “grand solution” where the EU and the United States reduce the automotive tariffs for all WTO countries. At the heart of the third essay lies the question about the underlying reasons for the steady decline of unemployment in Germany since the peak in 2005. In particular, I dissect the employment effect of the “rise of the East” (rise in trade between Germany and Eastern Europe) and that of the fourth stage of the German labor market reform (“Hartz IV"). By extending the Caliendo et al. (2019) dynamic trade model I can show that the “Hartz IV" reform decreases the short-term unemployment by 0.4 percent. I examine the productivity growth of Germany and Eastern Europe as potential drivers for the increased trade. I discover that the German productivity growth leads to a decrease in short-term unemployment, whereas the productivity growth in Eastern Europe enhances the German short-term unemployment slightly. Thus, the overall effect of the “rise of the East” driven by the productivity growth of Germany and Eastern Europe contributed to a slight decrease in German short-term unemployment. The fourth essay investigates social welfare in Germany while taking income inequality into account. The essay consists of two parts: In the first part (closed economy setting) we study the welfare effects of the German “Tax-Reform 2000”, the largest tax reform of the last decades. In the second part (open economy setting) we concentrate on the social welfare effects of the trade liberalization in Germany between 1995 and 2014. We apply the Antràs et al. (2017) approach which considers income inequality when focusing on social welfare. The results demonstrate that the “Tax-Reform 2000” contribute to a minor average annual social welfare growth. However, this additional social welfare growth strongly varies with the social planer’s inequality aversion. Additionally, we identify the optimal tax-progressivity for each year of the period. Furthermore, when studying the trade liberalization, we find support that a counterfactual move of the German economy of the year 2014 to the trade openness of 1995 would severely reduce the social welfare.
Ethnic networks, information, and international trade : revisiting the evidence
(2009) Felbermayr, Gabriel; Jung, Benjamin; Toubal, Farid
Influential empirical work by Rauch and Trindade (REStat, 2002) finds that Chinese ethnic networks of the magnitude observed in Southeast Asia increase bilateral trade by at least 60%. We argue that this estimate is upward biased due to omitted variable bias. Moreover, it is partly related to a preference effect rather than to enforcement and/or the availability of information. Applying a theory-based gravity model to ethnicity data for 1980 and 1990, and focusing on pure network effects, we find that the Chinese network leads to a more modest amount of trade creation of about 15%. Using new data on bilateral stocks of migrants from the World Bank for the year of 2000, we extend the analysis to all potential ethnic networks. We find, i.a., evidence for a Polish, a Turkish, a Mexican, or an Indian network. While confirming the existence of a Chinese network, its trade creating potential is dwarfed by other ethnic networks.
Input-output linkages and monopolistic competition : input distortion and optimal policies
(2021) Kohler, Wilhelm; Jung, Benjamin
In this paper, we provide a detailed analysis of a mechanism that distorts production towards too much use of primary factors like labor and too little use of intermediate inputs. The distortion results from two ingredients that are cornerstones of modern quantitative trade theory: monopolistic competition and input-output linkages. The distortion as such is unrelated to trade, but has important consequences for trade policy, including a positive first-order welfare effect from an import subsidy. For a crystal-clear view on the distortion, we first look at it in a single-sector, closed economy where the monopolistic competition equilibrium would be efficient without the presence of input-output linkages. We compare the social-planner-solution with the decentralized market equilibrium, and we identify first-best policies to correct the distortion. To analyze the trade policy implications we then extend our analysis to a setting with trade between two symmetric countries. We identify first-best cooperative policies, featuring nondiscriminatory subsidies of intermediate input use, aswell as non-cooperative trade policies where countries use tariffs to weigh terms of trade effects against benefits from correcting the input distortion.
The heterogeneous effects of China’s accession to the world trade organization
(2020) Jung, Benjamin
China’s accession to the World Trade Organization (WTO) in 2001 was a massive boostfor the multilateral trading system. We present descriptive evidence on the trade effects of China’s WTO accession. Moreover, we combine the most recent approaches from the gravity literature of international trade to provide a causal analysis of the effects of China’s WTO accession on bilateral trade with other WTO members. We find that the trade effectis positive on average. Moreover, we document substantial heterogeneity in the trade ef-fects across China’s trading partners. These findings seem to be consistent with China’sposition in global value chains.
The pro-trade effect of the brain drain : sorting out confounding factors
(2008) Jung, Benjamin; Felbermayr, Gabriel J.
We sort out confounding factors in the empirical link between bilateral migration and trade. Using newly available panel data on developing countries? diaspora to rich OECD nations in a theory-grounded gravity model, we uncover a robust, causal pro-trade effect. Moreover, we do not find evidence in favor of strong differences across education groups.
The trade effects of cultural distance and economic sanctions : a structural gravity approach
(2018) Frank, Jonas; Jung, Benjamin
In this doctoral thesis, I set out to empirically analyze the impact of different trade barrieres on the value of bilateral trade by means of a structural gravity approach.
Trade integration, global capital flows and the link to institutional quality from a North-South perspective
(2020) Schneider, Sophie Therese; Jung, Benjamin
This doctoral thesis is a cumulative dissertation containing three essays. In the first essay, I create a panel data set of North-South preferential trade agreements (PTAs) building on the comprehensive database on the design of trade agreements (DESTA). I analyze the effects of the depth and number of PTAs signed on the quality of institutions in developing countries, the global South, measured as the political risk component investment profile of the ICRG database. I show that the system GMM is the appropriate estimator to apply for my empirical analysis to account for various sources of endogeneity. I show that signing deep North-South PTAs positively affects institutions in the South. The results differ with respect to the type of agreement and region. The second essay deals with the determinants of PTAs focusing on institutional distance as a driving factor and regarding PTAs as an instrument to compensate for missing institutions. I argue that the effect of institutional distance is specifically important (1) in a North-South trade relationship where institutional distance is particularly large and (2) if countries trade a large share of contract-intensive goods. For this analysis I create a panel data set including a large number of developing countries and a variable to measure the difference of the share of bilateral contract-intensive exports and show that a linear probability model for discrete choice panel data is a suitable estimator to be used. I address endogeneity using an instrument variable (IV) approach. I show that institutional distance promotes the formation of PTAs. Comparing this effect for North-North, North-South, and South-South country pairs reveals that the positive effect of institutional distance on the probability of PTA formation is specifically high for the formation of North-South PTAs. Furthermore, I find that the effect is nonlinear and that trading contract-intensive goods reinforces the positive effect of institutional distance for the formation of North-South PTAs and may offset negative effects. Robustness checks with regard to the underlying sample reveal that the effect of institutional distance is driven by North-South relationships involving the EU. Essay 3 is dedicated to global investment flows and aims at deriving a global model to determine the factors of foreign direct investment (FDI) by considering investment flows between and within North and South. We empirically estimate and assess global FDI models, namely the gravity and knowledge capital (KK) model, based on the new CDIS data set by the IMF, which includes a large number of developing and transition countries. This allows us to detect potential vertical motives for FDI and to address the global trend of increasing FDI from and to the global South. We find the gravity model to achieve the best theory-consistent out-of-sample prediction, particularly when parameter heterogeneity of South and North FDI is allowed for. Controlling for surrounding market potential is important to recover the horizontal effect of the gravity model. Including institutional, cultural, or financial factors does not improve the model performance distinctly although results for those variables are mostly in line with theory.
Trade intermediation and the organization of exporters
(2009) Felbermayr, Gabriel; Jung, Benjamin
The business literature shows that exporting rms typically require the help of foreign trade intermediaries or need to set up own foreign wholesale affiliates. In contrast, conventional trade theory models assume that producers can directly access foreign consumers. This paper models the endogenous emergence of intermediaries in an international trade model where producers differ with respect to productivity as well as regarding their varieties' perceived quality and tradability. We assume that trade intermediation is prone to frictions due to the absence of enorceable cross-country contracts while own wholesale subsidiaries require capital investment. We derive the sorting pattern of rms according to their degree of competitive advantage and show how the relative prevalence of intermediation depends on the degree of heterogeneity among producers, on the importance of market-specificity of goods, or on expropriation risk. We use US export data for 50 sectors and 133 destination countries to check the empirical validity of this predictions and find robust empirical support.