Browsing by Subject "International trade"

Now showing 1 - 12 of 12

Does immigration boost per capita income?
(2008) Sala, Davide; Felbermayr, Gabriel J.; Hiller, Sanne
Using a cross-section of countries, we adapt Frankel and Romer's (1999) IV strategy to international labor mobility. Controlling for institutional quality, trade, and financial openness, we establish a robust and non-negative causal effect of immigration on real percapita income.
Domestic support payments and trade distortions : the neglected issue in global general equilibrium modeling
(2016) Urban, Kirsten Gunver; Brockmeier, Martina
The domestic support payments provided to agricultural producers are frequently the subject of heated debate because they distort industry and trade structures causing efficiency losses and welfare redistribution. In recent years, high-income countries have initiated several reforms of their agricultural policies to decrease such distortions. These reforms are partly enforced by the requirements to reduce distorting domestic support, as agreed upon by the World Trade Organ-ization (WTO). A prominent example of such a heavily criticized policy is the agricultural sup-port of the Common Agricultural Policy (CAP) of the European Union (EU). In 2005, the EU introduced the Single Farm Payment (SFP), which is supposedly decoupled from production, to decrease the production stimulating effects of its CAP, and thus to reduce the distortions caused by the domestic support payments. However, these policy instruments are also contro-versial because the extent to which decoupled payments, such as the SFP, distort trade is still unclear. Domestic support provided to agricultural producers comprises a multitude of different and country-specific agricultural policy instruments, which makes it difficult to analyze the corresponding effects on domestic and third countries’ industry structure, trade, and welfare. The most common approach for evaluating the impacts from alternative policy options is based on Computable General Equilibrium (CGE) models. Nevertheless, the attention to detail re-garding the complex structure and country specific properties of domestic support, and in par-ticular the SFP, in such models has been largely neglected. Objective of this cumulative thesis is to analyze the effects of domestic support payments on industry output, international trade and welfare, with a particular focus on the impact of vary-ing assumptions of the SFP’s degree of decoupling in CGE modeling. Furthermore, this thesis aims to evaluate the trade-distorting effect of domestic support over time and provide a cross-countries comparison. Therefore, the standard Global Trade Analysis Project (GTAP) modeling framework is ex-tended to enable a much more detailed representation of domestic support payments based on the OECD Producer Support Estimate (PSE) database and considering the requirements re-garding production that trigger the eligibility for specific subsidies. Applying a complex updat-ing procedure, using the EU CAP as an example, a set of 21 databases accounting for various assumptions about the SFP’s degree of coupling to output levels is created. These databases are then used to investigate the extent to which various assumptions of the SFP’s degree of decou-pling and the corresponding modeling cause differences in results when a 100% removal of the SFP is simulated. In addition, a theoretically sound index based on the Mercantilist Trade Re-strictiveness Index (MTRI) is developed that measures the overall trade effects of domestic support in a general equilibrium framework. The new index named “MTRI of domestic support payments” (MTRI-DS) enables the measurement of the trade restrictiveness of domestic sup-port payments over time and across countries. Analyses’ results show: • Strong impacts of the SFP on factor allocation and thus industry output, market prices, trade structure and welfare in EU member states. • Significant variations due to alterations in the assumptions underlying the SFP’s de-gree of decoupling. • A decrease in trade distortion caused by the implementation of decoupled support in the EU. Thus, the MTRI-DS provides an appealing measure for evaluating the effects of agricultural policy reforms by summarizing the changes in the composition of domestic support payments, and thus, it might be of particular use in the support of trade negotiations.
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.
Kyoto and the carbon content of trade
(2010) Felbermayr, Gabriel; Aichele, Rachel
A unilateral tax on CO2 emissions may drive up indirect carbon imports from non-committed countries, leading to carbon leakage. Using a gravity model of carbon trade, we analyze the effect of the Kyoto Protocol on the carbon content of bilateral trade. We construct a novel data set of CO2 emissions embodied in bilateral trade flows. Its panel structure allows dealing with endogenous selection of countries into the Protocol. We find strong statistical evidence for Kyoto commitments to affect carbon trade. On average, the Kyoto protocol led to substantial carbon leakage but its total effect on carbon trade was only minor.
The effect of culture on trade over time : new evidence from the GLOBE data set
(2018) Frank, Jonas
In this essay I use the GLOBE research study by House et al. (2013) as a proxy for measuring cultural distance. Unlike other studies, GLOBE introduces nine cultural dimensions and focuses exclusively on managers, allowing for a distinct glimpse into the values of people actually making trade decisions. I make use of a state-of-the-art PPML approach using data on international trade flows together with intra-national trade flows (Yotov, 2012) and a comprehensive set of fixed effects to consistently es- timate a gravity equation using a panel from 1995 to 2004. I distinguish between different industries by following the goods classiffcation introduced by Rauch (1999). The results show that cultural differences indeed affect trade values differently over time, but their size and impact depends on the chosen measure of cultural distance and on the industry classification.
The effects of economic sanctions on trade : new evidence from apanel PPML gravity approach
(2018) Frank, Jonas
Economic sanctions are a popular diplomatic tool for countries to enforce political demands abroad or to punish non-complying countries. There is an ongoing debate in the literature about whether this tool is effective in reaching these goals. This paper looks at the consequences of sanctions for bilateral trade values between 1987 and 2005. In order to quantify the direct effects of sanctions on the trade flows between countries I use PPML as well as several other econometric specifications to estimate the gravity equation with country pair, sender-time, and target-time fixed effects. Following Heid et al. (2015) I include intra-national as well as international trade flows, to reduce the endogeneity bias of trade policy instruments. The estimates reveal that there is a signifucant decrease in the value of trade after the introduction of sanctions, which turns out to be driven by moderate sanctions. I also check whether countries that are affected by sanctions switch to other trade partners, but here is no robust evidence for behavior like this.
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.
Trade and unemployment : what do the data say?
(2009) Felbermayr, Gabriel; Prat, Julien; Schmerer, Hans-Jörg
This paper documents a robust empirical regularity: in the long-run, higher trade openness is causally associated to a lower structural rate of unemployment. We establish this fact using: (i) panel data from 20 OECD countries, (ii) cross-sectional data on a larger set of countries. The time structure of the panel data allows to deal with endogeneity concerns, whereas cross-sectional data make it possible to instrument openness by its geographical component. In both setups, we carefully purge the data from business cycle effects, include a host of institutional and geographical variables, and control for within-country trade. Our main finding is robust to various definitions of unemployment rates and openness measures. The preferred specification suggests that a 10 percent increase in total trade openness reduces unemployment by about one percentage point. Moreover, we show that openness affects unemployment mainly through its effect on TFP and that labor market institutions do not appear to condition the effect of openness.
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.
Unemployment in an interdependent world
(2009) Felbermayr, Gabriel; Larch, Mario; Lechthaler, Wolfgang
We introduce search and matching unemployment into a model of trade with differentiated goods and heterogeneous firms. Countries may differ with respect to size, geographical location, and labor market institutions. Contrary to the literature, our single-sector perspective pays special attention to the role of income effects and shows that bad institutions in one country worsen labor market outcomes not only in that country but also in its trading partners. This spill-over effect is conditioned by trade costs and country size: smaller and/or more centrally located nations suffer less from inefficient policies at home and are more heavily affected from spill-overs abroad than larger and/or peripheral ones. We offer empirical evidence for a panel of 20 rich OECD countries. Carefully controlling for institutional features and for business cycle comovements between countries, we confirm our qualitative theoretical predictions. However, the magnitude of spill-over effects is larger in the data than in the theoretical model. We show that introducing real wage rigidity can remedy this problem.