Search

This paper investigates empirically the extent to which the ten new countries of the recent EU enlargement are ready to join the European Monetary Union (EMU). We assess the prospects of successful accession into the EMU using cointegration and commontrends analysis on the nominal convergence criteria specified by the Maastricht Treaty as well as on real exchange rates and real per capita GDPs. The empirical results indicatethat the enlargement countries are partially ready to join the Eurozone, and need further adjustments in their government policies to be fully prepared for joining the EMU.

We study the role and drivers of persistence in the extensive margin of bilateral trade. Motivated by a stylized heterogeneous firms model of international trade with market entry costs, we consider dynamic three-way fixed effects binary choice models and study the corresponding incidental parameter problem. The standard maximum likelihood estimator is consistent under asymptotics where all panel dimensions grow at a constant rate, but it has an asymptotic bias in its limiting distribution, invalidating inference even in situations where the bias appears to be small. Thus, we propose two different bias-corrected estimators. Monte Carlo simulations confirm their desirable statistical properties. We apply these estimators in a reassessment of the most commonly studied determinants of the extensive margin of trade. Both true state dependence and unobserved heterogeneity contribute considerably to trade persistence and taking this persistence into account matters significantly in identifying the effects of trade policies on the extensive margin., CEPA Discussion Papers; 36

This paper uses cointegration and common trends techniques to investigate empirically the expectations hypothesis of the term structure of interest rates for the 10 new EU countries, along with Bulgaria and Romania. The empirical results support the expectations theory of the term structure for all countries except Malta. By decomposing each term structure into its transitory and permanent components, we also analyze short run and long run interdependence among the term structures of interest rates in these countries. Our results indicate weak linkages among the term structures of the 10 new EU countries, and strong linkages between Bulgaria and Romania that hope to join the EU in 2007. JEL Classification: E43, F15, F42

This paper uses cointegration and common trends techniques to investigate empirically the expectations hypothesis of the term structure of interest rates among the original 15 EU countries. By decomposing each term structure into its transitory and permanent components, we also examine whether the short or the long rate is weakly exogenous and thus determine the long run behavior of each term structure. The empirical results support the expectations theory of the term structure of interest rates for all the EU-15 countries. They also indicate that the long term interest rates are weakly exogenous for almost all the countries in our sample. Further, we investigate if the expectation theory of the term structure of interest rates is affected by other exogenous variables such as nominal and real exchange rates, inflation rates, inflation variance, money growth and its variance. Our evidence suggests that the inclusion of the other exogenous variables does not affect the expectations hypothesis for most of the EU-15 countries. Also available for download here: http://ideas.repec.org/p/crt/wpaper/0611.html

We present cross-country empirical evidence on the role of natural resources in explaining long-run differences in private investment as a share of GDP in a sample of 78 developing countries. Our empirical results suggest important differences between fossil fuels and non-fuel resources. While significant fuel exports tend to increase private (and public) investment, there is also a robust negative effect from a measure of export concentration. After controlling for these two aspects of export structure, there is little additional information in other natural resource indicators, or in other suggested investment determinants, such as measures of the quality of institutions, political instability or macroeconomic volatility. Copyright 2009 Oxford University Press 2009 All rights reserved, Oxford University Press.

This paper shows that the WTO's Article XXIV increases the likelihood of free trade, but may worsen world welfare when free trade is not reached and customs unions (CUs) form. We consider a model of many countries. Article XXIV prevents a CU from raising its common external tariff, which makes CU formation less attractive and explains why free trade is more likely. In an equilibrium where two CU's do form, one is necessarily larger than the other. We show that Article XXIV has a composition effect on CU formation, whereby CUs are (endogenously) less asymmetric in size so more goods are subject to tariff distortions as they move between CUs; thus Article XXIV may be 'bad' for world welfare.

What is the impact of joining the European Union on a small, less developed economy? This is the general question driving this research paper. In particular, the role of factor movements in explaining real wage behavior in Portugal after its entry in the European Union (EU) is evaluated. Based on these results, counterfactual exercises are performed to measure the impact of foreign investment and emigration on skilled and unskilled wages between 1985 and 1999. We find a small role for labor movements, and a more important one for capital inflows. This should constitute a good starting point to think about the consequences of the Eastern enlargement of the EU and of other integration experiences that abolish barriers to factor mobility.

We provide a general characterization of which firms will select alternative ways of serving a market. If and only if firms' maximum profits are supermodular in production and market-access costs, more efficient firms will select into the activity with lower market-access costs. Our result applies in a range of models and under a variety of assumptions about market structure. We show that supermodularity holds in many cases but not in all. Exceptions include FDI (both horizontal and vertical) when demands are "sub-convex" (i.e., less convex than CES), fixed costs that vary with access mode, and R&D with threshold effects.

We show that relaxing the assumption of CES preferences in monopolistic competition has surprising implications when trade is restricted. Integrated and segmented markets behave very differently, the latter typically implying a form of reciprocal dumping. Globalization and lower trade costs have very different effects: the former reduces spending on all existing varieties, the latter switches spending from home to imported varieties; in the plausible case where demands are less convex than CES, globalization raises firm output whereas lower trade costs reduce it. Finally, calibrating gains from trade is harder. Many more parameters need to be calibrated than in the CES case, while import demand elasticities are likely to overestimate the true elasticities, and so underestimate the gains from trade.

To explain the links between population distribution and economic integration, we construct a spatial economics model with endogenous fertility. A higher population concentration increases real wages and child-raising costs, thus lowering the fertility rate. However, people migrate to more populated regions to obtain higher real wages. We show that mobility across regions results in more people flowing into highly populated regions, but lowers fertility rates there. The population growth path resembles a logistic curve in the early phase, but population decreases in the last phase. Additionally, economic integration leads to population concentration and decreases population size in the whole economy.

We use a panel of 20 OECD countries over a 30-year period to investigate empirically the implications of international capital mobility for aggregate unemployment dynamics. To this aim, we employ standard regression analysis and dynamic simulations to illustrate the channels through which international capital mobility impacts unemployment adjustments to productivity shocks and in turn quantify its effect on unemployment volatility. We find that capital mobility plays a significant role in generating unemployment responses to idiosyncratic productivity shocks which are wider but less persistent. Moreover, the evidence we provide suggests that the responsive- ness effect dominates the persistence effect, implying a net increase in unemployment volatility due to higher international capital mobility. Finally, if we simulate the effects of an increase of international capital mobility of the same order of magnitude of that occurred in the OECD countries after the mid-80s, we obtain a rise in the volatility of unemployment rate which is comparable to that observed in those countries in the same years.

How large are the benefits of transportation infrastructure projects, and what explains these benefits? To shed new light on these questions, I collect archival data from colonial India and use it to estimate the impact of India's vast railroad network. Guided by six predictions from a general equilibrium trade model, I find that railroads: (1) decreased trade costs and interregional price gaps; (2) increased interregional and international trade; (3) eliminated the responsiveness of local prices to local productivity shocks (but increased the transmission of these shocks between regions); (4) increased the level of real income (but harmed neighboring regions without railroad access); (5) decreased the volatility of real income; and (6), a sufficient statistic for the effect of railroads on welfare in the model accounts for virtually all of the observed reduced-form impact of railroads on real income. I find similar results from an instrumental variable specification, no spurious effects from over 40,000 km of lines that were approved but never built, and tight bounds on the estimated impact of railroads. These results suggest that transportation infrastructure projects can improve welfare significantly, and do so because they allow regions to exploit gains from trade.

Intermediaries and wholesalers play an important role in international trade. This paper develops a two-country model of international trade with heterogeneous …rms that oers an explanation for the existence of wholesalers. All exporting …rms have to pay a …xed cost of establishing a distribution network in the foreign market. However, wholesalers possess a technology dierent to normal manufacturing …rms: they can buy manufacturing goods domestically and sell in foreign markets and handle more than one good. A wholesaler therefore faces an additional …xed cost which is convex and monotonically increasing in the number of goods it ships. The entry of wholesale …rms leads to productivity sorting. The most productive …rms export on their own, as in the standard model, by paying a …xed cost to do so, while the least productive …rms do not export. However, a range of …rms with intermediate productivity levels export through international wholesalers. The existence of wholesale …rms increases total exports and the number of …rms that export. Moreover, a higher …xed cost of exporting leads to (i) a higher share of the total value of exports that is distributed by wholesalers, and (ii) a higher share of exported product scope that is distributed by wholesalers. A higher …xed cost of exporting gives wholesalers a larger role since these can spread the …xed cost across more than one good. The wholesale technology therefore exhibits economies of scope. Moreover, a larger …xed cost of exporting increases the scope of each wholesaler …rm. Finally, a gravity model is developed with more than two countries. The "multilateral resistance variable" is found to include the number of wholesalers of trading partners and their presence lowers a country's price index as well as mitigates the positive eect that …xed trade costs have on the price level. Empirical evidence from Swedish …rms'export patterns supports the main predictions of the model.

One possible explanation for the European sovereign debt crises is that the European Economic and Monetary Union (EMU) gave rise to consolidation fatigue or even deliberate over-borrowing. This paper explores the validity of this explanation by studying how three decisive stages in the history of the EMU affected public borrowing in EU member states: the signing of the Maastricht Treaty, the introduction of the Euro, and the suspension of the Stability and Growth Pact (SGP). The methodology relies on difference-in-difference regressions for 26 OECD countries over the 1975–2009 period. The findings indicate that the Maastricht treaty reduced deficits especially in traditionally high-deficit countries. In contrast, the introduction of the Euro and the watering down of the original SGP led on average to higher borrowing. These results indicate that the introduction of the Euro and the suspension of the SGP led to soft budget constraints in the EMU.

We develop a multi-country, multi-sector trade model with labor market frictions and equilibrium unemployment. Trade opening leads to a reduction in unemployment if it raises real wages and reallocates labor towards sectors with lower-than-average labor market frictions. We estimate sector-specific labor market frictions and trade elasticities using employment data from 25 OECD countries and worldwide trade data. We then quantify the potential unemployment and real wage effects of implementing the Transatlantic Trade and Investment Partnership (TTIP) or the Trans-Pacific Partnership (TPP), and of eliminating trade imbalances worldwide. The unemployment and real wage effects work in conflicting directions for some countries under some trade regimes, such as the US under TTIP. We introduce a welfare criterion that accounts for both effects and splits such ties. Accordingly, US welfare is predicted to decrease under TTIP and increase under TPP.

In this paper, we document the presence of “technology-induced” trade in France between 1997 and 2007 and assess its impact on consumer welfare. We use the staggered roll-out of broadband internet to estimate its causal effect on the importing behavior of affected firms. Using an event-study design, we find that broadband expansion increases firm-level imports by around 25%. We further find that the “sub-extensive” margin (number of products and sourcing countries per firm) is the main channel of adjustment and that the effect is larger for capital goods. Finally, we develop a model where firms optimize over their import strategy and which yields a sufficient statistics formula for the quantification of the effects of broadband on consumer welfare. Interpreted within this model, our reduced-form estimates imply that broadband internet reduced the consumer price index by 1.7% and that the import-channel, i.e. the enhanced access to foreign goods that is allowed by broadband, accounts for a quarter of that effect.

This paper studies the incentives that developing countries have to protect intellectual properties rights (IPR). On the one hand, free-riding on rich countries technology reduces their investment cost in R&D. On the other hand, firm that violates IPR cannot legally export in a country that enforces them. Moreover free-riders cannot prevent others to copy their own innovation. The analysis predicts that the willingness to enforce IPR is U-shaped in a country GDP: small/poor countries are willing to respect IPR to access advanced economies markets, while large emerging countries are more reluctant to do so because technological transfers from the West boost their production capacity and their domestic markets. Universal enforcement of IPR yields a higher level of innovation and global welfare only if the developing country does not innovate. A partial enforcement of IPR, strict in the north and lax in the south, is socially better if the developing country invests enough in R&D and if its interior market is large. The theoretical predictions of the model are tested with the help of panel data. The empirical analysis supports the theoretical results.

espanolAunque durante mucho tiempo se ha reconocido que la gestion activa es un tema importante en el area de la evaluacion del rendimiento de los fondos de inversion, el consenso alcanzado acerca de la contribucion al valor anadido de los fondos por las habilidades de los directivos es limitado. Este estudio intenta explorar tanto las caracteristicas de los gestores como las de los propios fondos en si mismos con el fin de entender su influencia en la eficiencia conseguida para una muestra de fondos de inversion espanoles. Estos temas son explorados a traves de un enfoque de dos etapas, teniendo en cuenta los estimadores de fronteras parciales (orden-m y el orden α-) para evaluar el desempeno en la primera etapa, y asi como un enfoque de regresion cuantil para analizar los determinantes de la eficiencia en la segunda etapa. Nuestros resultados son relevantes especialmente desde el punto de vista de los inversores, al encontrar diferencias notables entre la influencia de los gestores de los fondos y las propias caracteristicas de los fondos. Nuestro analisis proporciona algunos argumentos como guia en la seleccion de fondos, asi como algunas caracteristicas de los gestores a tener en cuenta. Ademas, algunas de las diferencias de rendimiento entre los fondos encontrados son complejas, debido a que tanto la magnitud de los coeficientes de regresion estimados como su significado varian en funcion del cuantil de la distribucion del rendimiento de los fondos evaluado. EnglishWhile it has long been recognized that active management is an important issue in the area of mutual fund performance, little consensus has been reached about the value managers’ abilities can add. This study attempts to explore both fund and manager characteristics in order to understand their influence on the efficiency achieved for a sample of Spanish mutual funds. We explore these issues in a two-stage approach, considering partial frontier estimators (order-m and order-α) to assess performance in the first stage, and regression quantiles to isolate the determinants of efficiency in the second stage. Our findings shed light mainly on investors’ concerns, since differences do indeed arise among both funds and managers. Our analysis provides some arguments as a guide in selecting funds and some managerial features to be taken into account. In addition, some of the performance differences found among funds are rather intricate because both the magnitude of the estimated regression coefficients and their significance varies depending on the quantile of the distribution of fund performance.

In the Belle Époque, Belgium recorded an unprecedented trade boom, but growth in output per capita was lackluster. We seek to reconcile this ostensible paradox. Because of the sharp decline in both fixed and variable trade costs, the trade boom was as much about the expansion in the number of products delivered and markets served as it was about shipping more of the same old products. We use a new highly disaggregated data set on bilateral exports at the product level to illustrate these claims. In line with new trade theory, the effect of trade on productivity was mediated by sector-level firm heterogeneity and product differentiation. In new technology sectors, like tramways, the high degree of firm heterogeneity amplified the effect of trade on productivity. But in other sectors, mainly old staple industries like cotton textiles, a high level of firm uniformity muted the effect of trade. Into the twentieth century, old staples trumped new technology sectors, per capita income growing modestly as a result.

Selling internationally requires products that resonate with an international customer base and therefore an approach to markets that is in keeping with diverse cultures (i.e., relational capital). As emphasized by international business studies, this relational capital is in turn related to the successful teaming of a diverse workforce, as this process teaches employees to operate in multicultural environments. This knowledge becomes like an intangible asset to which firms can resort, also when engaging in international transactions. We explore this channel empirically, investigating the impact of workforce diversity on firms' exporting performances and find that ethnic diversity further justifies firms' different presence in international markets. Since hiring is not a random practice, and firms ultimately select into ethnically different labor forces, we exploit the EU enlargement of 2004 to instrument for the diversity of the pool of workers locally recruitable. Because migrants tend to settle where the attitude toward them is most favorable, we use the median voter's political ideology at firm's location to measure the hostility at time of settlement. This gives our instrument spatial variation besides time variation.

Effects of direct flights on trade costs are investigated using micro price data at the city level. After controlling for local retail/distribution costs, traded input prices are obtained to be further used in the measurement of trade costs across cities through arbitrage conditions. The existence of a direct flight enters trade costs regressions negatively and significantly. The results are shown to be robust to the consideration of many control variables, nonlinearities in the effects of distance on trade costs, possible endogeneity of having direct flights between cities and alternative definitions of the data. The direct flights that are shown to be determined by bilateral air services agreements are further shown to reduce trade costs through an endogeneity analysis; the main policy implications are twofold: (i) international trade policies through aviation services, such as Open Skies Agreements of the U.S., are alternative trade policy tools to reduce international trade barriers; (ii) direct flights facilitate the integration of internal markets as in the case of European Union.

We use Chinese manufacturing firm data to estimate the causal effect of increased imported intermediate input use on firm export outcomes. To account for the endogeneity of import decisions, we pursue an IV strategy that utilizes instruments for import costs connected to intermediate input import tariffs, exchange rates, and firm differences in fixed trade costs. We find that firms that expanded their intermediate input imports expanded the volume and scope of their exports. Further, we find that the benefit of imported inputs differed along a number of dimensions including initial trade status, import source country, export destination, firm ownership, and industry R&D intensity. Although increased imports of intermediates boosted exports by all firms, we find that the effects were largest when they were purchased by private firms or firms that started out as non-traders. In addition, intermediate inputs from the higher-income G7 countries were especially helpful in facilitating firm exports to the presumably more-demanding G7 export markets. Taken together, these results suggest that product upgrading facilitated by technology or quality embedded in imported inputs helped Chinese firms to increase the scale and breadth of their participation in export markets.

This paper examines the implications of the European Union (EU) regional trade preferences for processed food trade between Greece and its EU partners, and between Greece and non-EU countries. The empirical analysis relies on the gravity model, and uses different estimation techniques. The results show that the EU regional trade preferences led to substantial increases in processed food trade between Greece and its EU partners, emphasizing trade creation effects. The magnitudes of these increases are higher than the intra-EU average, and are more pronounced for Greece's imports than for Greece's exports. The results also indicate that the EU regional trade preferences brought about decreases in processed food trade between Greece and non-EU countries, implying trade diversion effects. The Greek food processing industry could benefit from competitiveness-promoting strategies (e.g., upgrading innovation activities, marketing and distribution channels, and production efficiency) to expand exports to the EU market and to counter import competition in the domestic market. JEL Classification: F13, F14, F15.

Over recent decades, the Association of Southeast Asian Nations (ASEAN) has advanced a policy of regional integration, starting with the ASEAN Free Trade Area, followed by the ASEAN+1 free trade agreements with its six main trading partners, and now with ASEAN+6. For ASEAN to further advance regional integration in the East Asian context, it should continue to focus on trade in goods, investment, and services, to smooth out the process of trade creation and investment realisation. East Asian integration is designed not to be just an ‘extensive regional trade agreement’, but more a ‘responsive vehicle’ that consists of trade and investment commitments combined with facilitation, to improve the effectiveness of the implementation of trade and investment agreements and the liberalisation agenda for all members. To keep regional integration viable, it should adopt an open regionalism policy.

This paper empirically investigates and theoretically derives the implications of two frictions, market friction and nominal rigidity, on the dynamic properties of intra-national relative prices, with an emphasis on the interaction of the two frictions. By analyzing a panel of retail prices of 45 products for 48 cities in the U.S., we make two major arguments. First, the effect of each type of friction on the dynamics of intercity price gaps is quite different. While market frictions arising from physical distance and transportation costs contribute significantly to volatile and persistent movements of intercity price disparities, nominal rigidity is associated with higher persistence, but not with a greater volatility of the intercity price disparity. This empirical evidence is different from what is predicted by standard theoretical models based on price stickiness. Second, the strength of the marginal effect of a market friction hinges on the extent of nominal rigidity, in a counteracting manner. The marginal effect of a market friction dwindles as the extent of price stickiness increases. We provide an alternative theoretical explanation for this finding by extending the state- dependent pricing(SDP)model of Dotsey et al.(1999) and show that our two-city model with nominal rigidity andd market frictions can successfully explain the salient features of the dynamic behavior of intercity price differences.

Our objective in this paper is threefold. First, to identify the major common shocks that hit these countries upon entry into the EMU. Second, taking Greece as our case study, to construct a simple macroeconomic model of the policies Greek governments pursued in the presence of these shocks, and to employ its solution so as to highlight the outcomes that were expected to result. From this endeavor, we find that the policies which were put in place led unavoidably to a severe economic crisis and eventual bankruptcy. Finally, in view of these findings and what happened in 2009,we raise and attempt to answer questions like, for example: How can we explain the policies that were adopted in the advent of monetary union shocks? Could they have been anticipated? And if so, why did they escape the attention of the designers of the Maastricht Treaty? The answer to which we are led by the analysis is that the shocks in all these countries were perceived by their governments as opportunities to hold on to their entrenched positions. That this happened, we conclude, reflects a failure in the mechanisms of economic convergence that were embedded in the Maastricht Treaty as well as in the effectiveness of European Union (EU) institutions that were empowered with their enforcement.

The European integration process is ongoing. Europe is still heterogeneous. Within this context, the paper addresses the question of whether policies in the EU should head towards autonomy, coordination or harmonization. Taking the path dependence effect into account, in the papers’ opinion, Europe has gone too far in its integration process to be able to continue with policies fully under the competencies of individual member countries. Furthermore, the establishment of the common currency in the EU as a result of deep harmonization in the monetary policy area is an unambiguous precedent with many consequences. First of all, the habitual question still arises in the literature: does fiscal policy need to be harmonized to a comparable level, as these two policies necessarily complement each other? The paper argues that it does not. First, the authors build on the theory of fiscal federalism, which often recommends the strengthening of the stabilization function of public finance; typically in the form of rules and surveillance institutions (e.g., Fiscal Compact, the Six-Pac, European Semester). And on the contrary, they usually refute the intensification of the redistribution function, due to the fact that intergovernmental transfers in contemporary Europe are highly unpopular. Second, Europe is still too heterogeneous and it will continue to be so in the future, simply because of the different cultures, mentalities, traditions, social relations and ways of thinking it harbours. In our context, this means that there are significantly different regimes of welfare states and extents of social policies among European countries, which strongly determine the character of public finance. And third, the tax systems across Europe are also highly divergent, with many different features of continued tax competition. Therefore, a top-down harmonization path towards a full fiscal union is neither politically enforceable, nor economically rational. On the other hand, in order to keep the European integration process viable, it is necessary to reduce behaviour with features of moral hazard and free ride and strengthen joint responsibility for the fiscal development of public finances in the EU. In addition to the discussed matter of joint responsibility and fiscal discipline, the paper points out the open coordination method as an approach towards a sustainable alternative path between a fragmented Europe and a European super state.

In the face of trade liberalization domestic firms are often forced out of the market, whereas others adapt and survive. In this paper we focus on a new channel of adaptation, namely the shift toward increased provision of services in lieu of goods production. We exploit variation in EU trade policy to show that lower manufacturing tariffs cause firms to shift into services provision and out of goods production. Additionally, we find that a successful transition is strongly associated with higher firm-level R&D stocks whereas higher physical capital stocks slow the shift into services provision.

Since the seminal contribution of McCallum (1995) economists have tried to estimate the border effect for other countries than the United States and Canada, but have been confronted with a key data problem: data on regional trade flows are extremely rare. The different approaches put forward to overcome this lack of information have been shown to hinge crucially on certain distance measures. The main purpose of this paper is to develop a method that allows us determining border effects with a high degree of accuracy in the absence of intra-national trade data. We show how to improve the estimation of border effects with the example of France and Germany using data on regional transportation flows. Our results indicate that France trades about eight times more and Germany about three times more with itself than with other EU countries, respectively, compared to the predictions of the gravity equation.

The arrival of global retail chains in developing countries is causing a radical transformation in the way that households source their consumption. This paper draws on a new collection of Mexican microdata to estimate the effect of foreign supermarket entry on household welfare. The richness of the microdata allows us to estimate a general expression for the gains from retail FDI, and to decompose these gains into several distinct channels. We find that foreign retail entry causes large and significant welfare gains for the average household that are mainly driven by a reduction in the cost of living. About one quarter of this price index effect is due to pro-competitive effects on the prices charged by domestic stores, with the remaining three quarters due to the direct consumer gains from shopping at the new foreign stores. In contrast, we find little evidence of significant changes in average municipality-level incomes or employment. We do, however, find evidence of store exit, adverse effects on domestic store profits and reductions in the incomes of traditional retail sector workers. We also show that the gains from retail FDI are on average positive for all income groups but regressive, and quantify the opposing forces that underlie this finding. Finally, we find that the estimated gains are specific to foreign entry, rather than being driven by the entry of modern store formats more generally.

This paper investigates the effect of trade integration on military conflict. Our empirical analysis,based on a large panel data set of 290,040 country-pair observations from 1950 to 2000, confirms that an increase in bilateral trade interdependence and global trade openness significantly promotes peace. It also suggests that the effect of trade openness varies depending on the geographical proximity of countries. The peace-promotion effect of bilateral trade integration is significantly higher for contiguous countries that are likely to experience more conflicts. The analysis shows, however, that an increase in global trade openness reduces the probability of conflict more for countries far apart from each other than it does for countries sharing borders. The results also show that military conflict between countries significantly reduces not only bilateral trade interdependence but also multilateral trade integration. The main finding of the peace-promotion effect of bilateral and global trade integration holds robust when controlling for the natural and geopolitical characteristics of dyads of states that may influence the probability of military conflict and for the simultaneous determination of trade and peace.

In a seminal article, Rose (2004) found that the assumed positive impact of the WTO on international trade was questionable. This finding has been scrutinised and modified in subsequent research, using different data sets, econometric methods and separating the WTO from other forms of trade agreements. A key characteristic of the subsequent literature is the rather simplistic way in which trade agreements are treated whereby all trade agreements are lumped together. Trade agreements come, however, in many different forms and shapes. This study addresses these differences in trade agreements. Using a unique database of 296 trade agreements, we distinguish 17 trade-related policy domains and indicate whether the agreements contain legally enforceable commitments. This extensive and novel taxonomy of trade agreements enables us to allow for the possible heterogeneity of the impact of trade agreements on international trade. Using a gravity model, we find that trade agreement heterogeneity indeed matters for international trade and that countries experience significant trade increases due to comprehensive trade agreements even if not all participants are in the WTO.

Diese Arbeit beinhaltet eine Untersuchung der Effekte einer einheitlichen Anwendung der Gefährdungshaftung als Grundprinzip der Produkthaftung bei länderübergreifendem Handel. Der Schwerpunkt der Analyse basiert auf einem Rahmen unvollkommenen Wettbewerbs bei heterogenen Konsumenten und Produktdifferenzierung seitens der Unternehmen. Trotz vollkommener Information der Konsumenten zeigt sich, dass eine einzelstaatliche Einführung der Gefährdungshaftung zu Verzerrungen führen kann, die durch eine einheitliche Anwendung der Gefährdungshaftung vermieden werden können. Jedoch scheint die Bedeutung dieses Effektes begrenzt, wenn man die vereinfachenden Modellannahmen aufhebt.

In this paper, we test the Frankel & Rose hypothesis of Optimum Currency Area for the Maghreb countries by demonstrating how the co-movements of outputs would respond to a trade integration process. In particular, by using panel analysis over the period 1980~2010, we evaluate if a monetary integration project across these countries is endogenous. Our main result suggests that while trade intensity may help to harmonize business cycles, the magnitude of this harmonization is lower for the Maghreb countries than for industrial countries. This result is robust even when we take into consideration many control variables including intra-industry trade, economic diversification, and financial integration. Therefore, we suggest that an acceleration of trade linkage as well as product diversification should take place prior to any move towards monetary union across the Maghreb countries.

Does the size of a country affect its economic growth rate? Theory suggests that the existence of a national scale effect is favouring large countries and that small countries may overcome the impediments of smallness once their markets become internationally more integrated. So far, empirical evidence of a distinct impact of country size on economic growth is rather limited. The present study sheds light on this impact from a European perspective. Country size indeed correlates with economic growth and European economic integration enhances the convergence process of the countries. It is further shown that the impact of size varies according to a country’s individual level of economic integration, suggesting that the long-term economic growth path is characterized by multiple transition points. This finding is particularly important given the prevailing imperfections of the European Union Single Market and the increasing number of small European Union member states.

We examine the optimal rules of origin (ROO) in a free trade area/agreement (FTA) by employing a stylized three-country partial equilibrium model of an international duopoly. We incorporate compliance costs of the ROO into the model. In particular, compliance costs are higher for a firm located in a non-member country of the FTA than for a firm (an internal firm) located in an FTA member country, whereas marginal production costs are lower for the former. The FTA member countries set the optimal level of ROO to maximize their joint welfare. An importing country within the FTA imposes tariffs on imports that do not comply with the ROO. We show that the optimal ROO may have a protectionist bias in the sense that they are set for only the internal firm to comply. ROO may also cause low utilization of FTAs when they are set such that even the internal firm does not comply with them. These cases arise depending on parameter values.

The article presents the results of analysis on the pattern of agricultural income structure and changes in EU Member States related to the enlargement impact, highlighting gaps and major contributions. While marked differences appear between the EU-15 and post 2004 acceded countries, the major contribution of the Romanian agriculture to the EU economy and the proportion of employment in agriculture, are indicators of a divergent sector development. With a substantial contribution to the UAA, i.e. the 7.9% share in arable land places Romania among the first 6 countries, while the 8.3% share in the area of permanent pasture reveal a potential advantage for livestock grazing. Nevertheless agriculture remaining the foremost source of income for rural households in Romania, its importance has been evidenced a decreasing trend in the post-accession period of time 2007-2013, by comparing to the previous period of time 2001-2006.

Purpose – The purpose of this paper is to examine the relationship between trade liberalisation and intra-regional trade in some selected ECOWAS member countries, with particular focus on the role of applied and most favoured nation import tariffs. Design/methodology/approach – Data utilized were sourced from the World Bank's World Development and Governance Indicators, Mayer and Zignago (2006) distance index as well as the World Trade Organisation's World Integrated Trade System (WiTs). The sample period consists of 8 countries covering the years 1998 to 2011. Predicated on a gravity framework, system and difference generalised method of moments dynamic panel data estimators were relied upon. Findings – The empirical results showed that trade liberalisation has contributed to intra-regional trade in the West African sub-region. The potency of trade liberalisation was relatively more pronounced through the use of most favoured nation import tariff compared to applied import tariff rates. Our results also showed that improved institutional quality and infrastructure are associated with higher intra-ECOWAS trade. Furthermore, using alternative measures of institutional quality and infrastructure as well as fixed and random effect estimators validated our findings. Research limitations/implications – Data limitations led to the inclusion of only 8 out of the 15 ECOWAS member countries in the sample. The research was also limited to tariff barriers as measure of trade liberalisation. The same methodology can be applied as data becomes available while a consideration of non-tariff barriers could provide more insights on the dynamics of intra-ECOWAS trade. Originality/value – The findings reinforce the notion that removal of trade restrictions particularly in the manufacturing sector, good governance and infrastructural developments enhance trade amongst ECOWAS countries.

Recent studies have concluded that R&D grants can induce firms to export and that exporting and innovating can be complementary activities at the firm level. Yet the trade literature has paid little attention to the scope of innovation policy as a stimulus to both trade and innovation. To investigate this question we rely on a general work-horse model of trade and firm heterogeneity with firm investments in R&D activities. The multiplicity of equilibria together with the interplay of innovation and trade policies uncover novel results. In particular, we show that the effects of either policy depend on the degree of protectionism in a country. Therefore, countries can respond differently to the same policy, and similarly to different policies. In such a context, different governments may face different degrees of freedom regarding how to achieve a given target. This finding leads us to discuss the issue of policy coordination.

The present paper aims to determine the effects of different levels of economic integration on the intensive and the extensive margins of trade. Specifically, the analysis focuses on the case of Latin America. It is of great importance for development policies in the region since the extensive margin can be defined as those exports that provide new market entrants, while the intensive margin is due to continued growth in sales of old exporters to the same destinations. Therefore, obtained results have important policy implications related to diversification strategies. The long-term period considered will allow us to determine whether different effects on trade margins might arise in the following two sub-periods: 1962~1989 and from 1990 onwards, i.e. before and after the spread of regional integration agreements and the deepening of the liberalization process in the region. Finally, we focus on those specific sectors in which Latin American countries present a higher relative participation of trade. The obtained results show that the effect of economic integration is both time and period sensitive. The main positive effects are found to be reflected in the intensive margin for all different types of agreements. Moreover, we find that deeper economic integration agreements have the greatest effect on trade margins. The authors thank Maria Victoria Barone for her active and valuable research assistance. We also thank German Gonzalez and Pedro Degiovanni for their participation in database processing, and very gratefully acknowledge the support and collaboration of SECYT, Universidad Nacional de Córdoba, Universitat Jaume I and Generalitat Valenciana (SECYT 05/E349; P1•1B2013-06; PROMETEOII/2014/053). We would also like to thank Jesica De Angelis, Juan Carlos Hallak and Jordi Paniagua, an anonymous referee, the editor and the participants in the ETSG held in Birmingham in September 2013, the Annual Meeting of the Asociación Argentina de Economía Política held in Rosario in November 2013, and in the X Conference on Economics Integration (INTECO) held in Castellón de la Plana in November 2013, for their very helpful comments and suggestions.

This paper aims at investigating the role of different trade regimes in determining the bilateral trade of Western Balkan countries and the enlarged European Union between 2001—2010. Special focus is laid on the intra-regional trade of Western Balkan countries and complementarities of this sub-regional trade integration and the EU accession process. Using panel data, we estimated the gravity model of bilateral exports from Western Balkan and Central Eastern European countries to the core EU members in the 2001–2010 period. The results confirm the importance of EU membership for the development of acceding countries’ trade and shed light on asymmetrical trade regimes as important factors of boosting the bilateral trade flows. Additionally, CEFTA 2006 has a significant contribution to intra-regional Western Balkans trade.

This paper focuses on the trade relations between Romania and the PIIGS (Portugal, Italy, Ireland, Greece, and Spain) in order to verify whether the exports of Romania have been positively or negatively affected by the austerity measures adopted by these Eurozone periphery countries, thus diminishing Romania’s export performance in such markets. Hence, our main research question is whether austerity measures harm or affect in any way the inflows and outflows of international trade in the studied countries. To assess this hypothesis, we focused on the external trade relations, and their linkages with the macroeconomic environment, rather than the competitiveness of a state explained by a detailed sectoral analysis. In this respect, we use comparative and descriptive statistics in order to observe the consequences of the internal devaluation, and implicitly austerity measures, on the PIIGS-Romanian trade relations. Our findings suggest that the effects of austerity measures are not homogenous because they depend on the scale of trade exchanges and on the way in which the austerity measures were applied.

With effect from 1 January 2014, the Polish Parliament introduced amendments to the Polish Corporate and Personal Income Tax Acts, which primarily affect the taxation of a partnership limited by shares (SKA) by including it into the category of corporate income tax subjects. Under the new regulations the general partners of an SKA should be treated in the same way as partners of any other Polish partnership and thus their income should be effectively taxed only once. In order to ensure the single-level taxation of general partner’s income a tax credit mechanism has been introduced. Though, the new Polish provisions permit the application of the tax credit mechanism only in relation to national cases. In the authors’ view this may constitute a restriction on freedom of establishment. This article analyses whether the new tax credit method is compatible with EU Law.

This paper's main objective is to research the effect of liberalization of trade with the European Union (EU) and its impact on the reduction in trade balance deficit of CEFTA 2006 (Central European Free Trade Agreement). It utilizes panel data time-series in the interval from 2007 to 2013. It applies economical gravity model and econometric dynamic panel data techniques: panel data models (PD), fixed effects models (FE) and random effects models (RE). It has been concluded that trade liberalization positively impacts the reduction in trade balance deficit of CEFTA 2006 countries, i.e. that export and import between the exporting country and the importing country within time period , gross domestic product of the country , gross domestic product per capita of the country within time period , distance between the country and country , dummy variables (free trade agreements and sharing a common border) are statistically significant. Additionally, it has been determined that FE is more favorable than RE when it comes to achieving better assessment of the effects of independent variables on a dependent variable.

An increasing number of studies on the convergence attempted to answer the question whether the poorer economies will overtake the economies of the richer ones in time. Also, they attempted to determine whether European integration will have a positive or negative impact on the long term growth of the member countries. In such a context, any measure of inequalities between countries or regions presents great interest. The academic literature attempted a substantiation of quantitative criteria on the measurement of real economic convergence. In the first part of the study we conducted a brief review of the literature devoted to the analysis of real convergence. It also presented the research methodology of cluster analysis, followed in the second part of the study by analysis of the distance between Member EU-28 and the 19 Eurozone to highlight similarities between these states through clustering. The time frame allowed emphasizing some of the effects of the economic crisis on the degree of real convergence.

In this paper, we examine trade policy determinants and trade reform in a developing country setting by using a political economy of trade policy model where the government determines tariffs by balancing the political support from the producers against consumers and places a higher political weight on producers' welfare relative to average citizens. We then expand it in several directions to guide our subsequent estimations at the three-digit industry level for Colombia between 1983 and 1998. We account for import substitution motives for protection and the government's move away from these policies leads to unilateral trade liberalization. We innovatively allow the political weights to vary based on key industry variables beyond a common denominator. The sectors with higher employment, labor cost, and preferential trade agreement (PTA) import shares receive a larger political weight compared to otherwise similar sectors. The novelty of our approach is estimating the effect of sectoral characteristics on protection filtered through the political weights. We obtain more realistic estimates for these weights and provide some evidence for a slowing down effect of PTAs for trade liberalization.

We show that endogenous firm selection provides a new welfare margin for heterogeneous firm models of trade (relative to homogeneous firm models). Under some parameter restrictions, the trade elasticity is constant and is a sufficient statistic for welfare, along with the domestic trade share. However, even small deviations from these restrictions imply that trade elasticities are variable and differ across markets and levels of trade costs. In this more general setting, the domestic trade share and endogenous trade elasticity are no longer sufficient statistics for welfare. Additional empirically observable moments of the micro structure also matter for welfare. (JEL F12, F13, F41) Over the last decade, new theories of trade with heterogeneous firms in differentiated product markets have been developed. These theories were designed to account for features of disaggregated trade data: only some firms export, exporters are more productive than non-exporters, and trade liberalization induces intra-industry reallocations of resources between those different types of firms. These reallocations represent a new potential channel for the gains from trade. However, the implications of these models for aggregate welfare (combining together all welfare channels) were left unanswered. In a recent paper, Arkolakis, Costinot, and Rodriguez-Clare ( 2012)—henceforth, ACR—show that there exists a class of heterogeneous and homogeneous firm models in which a country’s domestic trade share and the elasticity of trade with respect to variable trade costs are sufficient statistics for the aggregate welfare gains from trade. Therefore, if the different models within this class are calibrated to the same domestic trade share and the same trade elasticity, they imply the same welfare gains from trade. Based on this result, ACR ( 2012, p. 94) summarizes the contribution of new theories of heterogeneous firms to the aggregate welfare implications of trade as “So far, not much.”

Over the last 20 years the trade literature repeatedly documented the trade-reducing effects of inter- and intra-national borders. Thereby, the puzzling size and persistence of observed border effects from the beginning raised doubts on the role of underlying political borders. However, when observed border effects are not caused by political trade barriers, why should their spatial dimension then inevitably coincide with the geography of present or past political borders? This paper identifies a "border effect" in the absence of a border. Thereby, the finding that trade between East- and West-Japan is 23.1% - 51.3% lower than trade within both country parts, is established in the absence of an obvious east-west division due to historical borders, cultural differences or past civil wars. From a rich set of explanatory variables post-war agglomeration processes, reflected by the contemporaneous structure of Japan's business and social networks, rather than cultural differences, shaped by long-lasting historical shocks, are identified as an explanation for the east-west bias in intra-Japanese trade.

У здійсненому дослідженні наголошується на постійно триваючій у світовій господарській системі безкомпромісній боротьбі за переділ сфер впливу із застосуванням політичних, ідеологічних, психологічних, військових, економічних, інформаційних та інших методів. Розглянуто основи міжнародної економічної інтеграції у рамках СОТ та зміни, що відбуваються під впливом кризи неоліберальної моделі глобалізації. Розкрито особливості розробки і реалізації регіональних торгових угод для здійснення політики вибіркової лібералізації торгівлі на противагу дії протекціоністських сил у міжнародній торгівлі, що виступає певним гальмом у розвитку міжнародних економічних відносин. Розвиток інтеграційних процесів у світовій торгівлі розглядається на прикладі Асоціації держав Південно-Східної Азії – АСЕАН. Наведено основні мотиви та головні цілі країн при намірі заснування АСЕАН (прискорення економічного, соціального і культурного розвитку країн-учасниць на основі співпраці і взаємодопомоги; підтримка і розширення взаємовигідного співробітництва із загальними та регіональними міжнародними організаціями тощо). Здійснена загальна характеристика соціально-економічного розвитку “десятки»” країн АСЕАН за низкою критеріїв. Виявлено тенденції становлення та розвитку економічних відносин між окремими країнами зазначеної регіональної міжурядової організації, а також в цілому в АСЕАН в рамках створеної зони вільної торгівлі. Визначено особливості співробітництва АСЕАН з основними торговельно-економічними партнерами і міжнародними економічними організаціями. Досліджуються напрями зміцнення Співтовариства АСЕАН – від торгівлі товарами і послугами до вирішення соціальних та екологічних проблем. Здійснено оцінку стану та перспектив поглиблення торговельно-економічних відносин між країнами АСЕАН і Україною. Наголошується на можливості та необхідності розширювати взаємовигідні економічні відносини як в агропромисловій сфері, так і в галузях машинобудування, у військово-технічній сфері, залученні інвестицій, реалізації освітніх програм. The research carried out emphasizes continuously in the global economic system an uncompromising struggle for redistribution of spheres of influence with the use of political, ideological, psychological, military, economic, information and other methods. The basis of international economic integration within the framework of the WTO and changes taking place under the influence of the crisis of the neoliberal model of globalization are considered. The features of the development and implementation of regional trade agreements for the implementation of the policy of selective trade liberalization, in contrast to the effect of protectionist forces in international trade, are being identified, which is a certain obstacle to the development of international economic relations. The development of integration processes in world trade is considered by the Association of Southeast Asian Nations – ASEAN. The main motives and main goals of the countries are set out with the intention of establishing ASEAN (accelerating the economic, social and cultural development of the participating countries on th e basis of cooperation and mutual assistance, support and expansion of mutually beneficial cooperation with general and regional international organizations, etc.). A general description of the socio-economic development of the dozens of ASEAN countries has been carried out on a number of criteria. The tendencies of formation and development of economic relations between the individual countries of the mentioned regional intergovernmental organization, as well as in the whole of ASEAN within the framework of the created free trade zone, were revealed. The features of ASEAN cooperation with major trade and economic partners and international economic organizations are determined. Areas of the strengthening of the ASEAN Community – from trade in goods and services to solving social and environmental problems – are being explored. The assessment of the state and prospects of deepening of trade and economic relations between the countries of ASEAN and Ukraine is carried out. It emphasizes the possibilities and necessity to expand mutually beneficial economic relations both in the agro-industrial sphere and in the branches of machine-building, military-technical sphere, investment attraction and implementation of educational programs.

This article revisits the long-term economic effects of being landlocked. The conventional wisdom, which also prevails in policy circles, is that landlockedness hurts development by reducing trade. Gravity models of bilateral trade seem to confirm this view. However, there is no evidence in cross-country data of a systematic relationship between landlockedness and country's trade to GDP ratio. Drawing on this stylised fact, the paper explores the possibility that landlockedness might affect GDP independently from its effect on trade. Theoretical considerations suggest that institutional quality could be a relevant transmission mechanism. The estimation of a system of three equations confirms that landlockedness has a negative effect on GDP and that this negative effect is transmitted through institutions rather than trade. Moreover, after controlling for the transmission via institutions and trade, landlockedness has a further negative effect on GDP. These findings call for a review of the policy approach to the development of landlocked countries.