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  • Author: Medin Hege
  • Publication Date: 01-2014
  • Content Type: Working Paper
  • Institution: Norwegian Institute of International Affairs
  • Abstract: This paper presents a simple new trade theory model with results that contradict those from standard model. A home market effect in domestic sales of manufactured goods is found to co-exist with a reversed home market effect in exports of manufactured goods. In consequence, for a small country the number of manufacturing firms that sell in the domestic market is lower than proportional whereas the number of exporters is higher than proportional to country size. The proportion of firms that export, decreases with relative size of the home market. Empirical support for the latter prediction is found in a cross-sectional dataset on firm level exports for 116 countries.
  • Topic: International Relations, Economics, International Political Economy, International Trade and Finance
  • Author: Innwon Park
  • Publication Date: 03-2014
  • Content Type: Working Paper
  • Institution: Norwegian Institute of International Affairs
  • Abstract: Both intra - and inter-regional trade agreements are proliferating in East Asia. Deepening regional interdependence through trade and investment, and the necessity for stability and revitalization of the regional economy since the East Asian financial crisis in the late 1990s led the East Asian countries to adopt discriminatory RTAs. Accordingly, East Asian commercial policy stance has shifted from unilateral to bilateral to mega-lateral liberalization. This report attempts to assess the East Asian countries' efforts to liberalize the regional market by cooperating with each other. We investigate (i) why RTAs have been proliferating in East Asia, (ii) what the main characteristics of East Asian RTAs are, (iii) whether the East Asian countries are natural trading partners for each other to enhance welfare gains from RTAs, and (iv) whither East Asian RTAs. From our analysis, we recommend following policy options. First, East Asian RTAs should follow an expansionary RTA path (for example, AFTA and five ASEAN+1 FTAs → RCEP and/or TPP → FTAAP). Second, as we consider the high dependence on external economies through global trade and investment, East Asia needs to cooperate with major external trading partners by forming cross-regional RTAs with the EU and US. Third, in order to enable East Asian economies to take the more desirable expansionary RTA path, harmonizing or simplifying ROO, the cumulation of value contents among the RTA members in East Asia, and enhancing trade facilitation should be a prerequisite considering the complicated web of RTAs, regional production networks, and the consolidation of the FTAAP.
  • Topic: Economics, International Trade and Finance, Regional Cooperation
  • Political Geography: East Asia, Asia
  • Author: Rich Karl, Magda Rich, P.G. Chengappa
  • Publication Date: 03-2014
  • Content Type: Working Paper
  • Institution: Norwegian Institute of International Affairs
  • Abstract: Despite estimates that the global butterfly trade generates over US$100 million annually in sales of pupae for exhibitions and deadstock for a range of collector and artisanal uses, almost no research has been conducted that unpacks the dynamics of these value chains. This paper remedies this gap by highlighting the governance structure of the value chain, with important implications on the benefits for chain participants, upgrading strategies, sectoral sustainability, and the potential for new market entrants. This research on live butterfly chains reveals the fragility of current modes of economic organization that promote overproduction as threatening the long-term viability for the industry as a whole. The authors propose an alternative governance model based on the use of individually transferrable quotas, or ITQs, as a means of improving the performance of certain butterfly value chains.
  • Topic: Economics, Government, International Trade and Finance, Governance
  • Author: Rich Karl, Magda Rich, P.G. Chengappa, Arun Muniyappa, Yadava C.G, Ganashruthi M.K., Pradeepa Babu B.N., Shubha Y.C.
  • Publication Date: 03-2014
  • Content Type: Working Paper
  • Institution: Norwegian Institute of International Affairs
  • Abstract: Certification programs has been employed in many agricultural products as a means to encourage and communicate compliance with standards associated with various attributes, such as organic, fair-trade, GMO free, and eco-friendly, among others. Such programs further seek to provide added value, through a price premium, to producers and supply chain actors associated with the label. In this paper, we review a number of global labeling and certification programs that could add value for coffee farms in India through the promotion of conservation and environmental protection. We provide results from a survey conducted on a sample of coffee farms in Coorg district, India to assess their awareness and perceptions related towards certified coffee and environmental conservation in general. Survey results illustrate strong positive associations with the environment by coffee planters, particularly among certified and organic producers. However, price premiums for certified and organic coffee are relatively small. While the potential of conservation-oriented certification for coffee in Coorg could be relatively limited outside of a few individual-level niches, branding Coorg more generally as a conservation-oriented region could hold promise, leveraging and personalizing the uniqueness of the natural offerings from Coorg and tapping into burgeoning associations with place and region in India.
  • Topic: Agriculture, Economics, Environment, International Trade and Finance
  • Political Geography: India
  • Author: Medin Hege
  • Publication Date: 04-2014
  • Content Type: Working Paper
  • Institution: Norwegian Institute of International Affairs
  • Abstract: The new trade theory, which emerged in the early 1980s, emphasised economies of scale and market failures as driving forces behind international trade. As opposed to the earlier theory, which mainly assumed perfect competition, the new trade theory provided a rationale for industrial policy. This article shows how industrial policy targeting specific firms or industries may be socially desirable within the new trade theory framework. Models from new economic geography and the more recent 'new' new trade theory with heterogeneous firms are also discussed. The main focus is put on models with pecuniary externalities.
  • Topic: Economics, International Cooperation, International Trade and Finance, Political Economy, Politics
  • Author: Fulvio Castellacci, Christine Mee Lie
  • Publication Date: 07-2013
  • Content Type: Working Paper
  • Institution: Norwegian Institute of International Affairs
  • Abstract: This paper presents a survey of the micro-econometric literature on the effects of R tax credits on firms' innovation activities. The authors focus on one specific aspect that has not received sufficient attention in previous research: the sectoral dimension. Our meta-regression analysis (MRA) sets up a new database collecting a large number of firm-level studies on the effects of R tax credits and investigates the factors that may explain differences in the estimated effects that are reported in the literature. The main result of the MRA analysis is indeed that sectors matter. Micro-econometric studies that have focused on a sub-sample of high-tech industries have on average obtained a smaller estimated effect of R tax credits. The paper proposes a simple framework to investigate why the effects of R tax credits vary across sectors and points out new directions and hypotheses for future research.
  • Topic: Development, Economics, International Trade and Finance, Markets
  • Author: Jens Chr.1 Andvig
  • Publication Date: 08-2013
  • Content Type: Working Paper
  • Institution: Norwegian Institute of International Affairs
  • Abstract: This is a conceptual paper that seeks to dig out some of the distinct understandings of corporate social responsibility (CSR) and relate them to basic economic and ethical choices and theories. Most of the discussion is focused on enterprise choice of tax payment in a context where both enterprise production activities as well as their tax payment may be allocated between constituencies where the state of public governance and poverty levels may differ widely. The presentation is non-formal, but mostly stylized and empirical information is mostly presented in the footnotes.
  • Topic: Economics, International Trade and Finance, Markets, Poverty, Political Theory, Governance
  • Author: Brian D. Perry
  • Publication Date: 02-2012
  • Content Type: Working Paper
  • Institution: Norwegian Institute of International Affairs
  • Abstract: This report is part of a broad study of trade preferences and market conditions between various developing countries and Norway, conducted under the auspices of the Norwegian Institute of International Affairs and funded by the Norwegian Ministry of Foreign Affairs. Norway's Generalized System of Preferences (GSP) was established in 1971. From 2002 Norway has provided duty and quota free market access (DQF-MA) for all goods from all the 50 least developed countries (LDCs3). In 2005 the results of a review of Norway's GSP were published (Melchior, 20054), which showed that agricultural products from developing countries other than LDCs were still subject to substantial tariffs, and this contrasted dramatically with advantages given to European trading partners. As a result, from 1 January 2008 changes were made to Norway's GSP5. An important adjustment was that 14 low income countries that were not part of the LDC group were included in the provision for duty and quota-free market access (DQFMA). Consequently, 64 low income countries now benefit from DQFMA to Norway for all their goods.
  • Topic: Agriculture, Development, Economics, International Trade and Finance, Markets
  • Political Geography: Kenya, Africa, Norway, Ethiopia
  • Author: Arne Melchior, Karl M. Rich, Brian D. Perry
  • Publication Date: 02-2012
  • Content Type: Working Paper
  • Institution: Norwegian Institute of International Affairs
  • Abstract: Norway has traditionally operated a rather closed, managed market for beef importsnder WTO-auspices, Norway operates a tariff-rate quota (TRQ) for beef that allows the entry of a small amount of product at a relatively low tariff rate, with higher rates of duty imposed on imports over the quota. There are several different TRQs of relevance to boneless beef. The main quota is the WTO quota, which allows for the annual import of 1,084 tons of frozen beef at an in-quota duty rate of NOK 33,60/kg for boneless cuts. Countries with ordinary GSP access receive a 30 percent discount on this duty, so that the in-quota GSP tariff is NOK 23,52/kg. The WTO quota is administered once per year by an auction system – table 6 provides a list of the prices and volumes for the 2011 WTO quota. For imports outside the WTO quota, the duty is 119,01 NOK/kg, with GSP countries paying 10 percent less at NOK 107,11/kg.
  • Topic: Development, International Trade and Finance, Markets
  • Political Geography: Norway
  • Author: Fulvio Castellacci, Martin Blom, Arne Martin Fevolden
  • Publication Date: 05-2012
  • Content Type: Working Paper
  • Institution: Norwegian Institute of International Affairs
  • Abstract: The paper investigates the trade-off between innovation and defence industrial policy. It presents an agent-based simulation model calibrated for the Norwegian defence industry that compares different policy scenarios and examines the effects of a pending EU market liberalization process. The paper points to two main results. (1) It finds that a pure scenario where national authorities focus on, and provide support exclusively for, either a) international competitiveness or b) national defence and security objectives, is more Pareto efficient than a corresponding mixed strategy where policy makers simultaneously pursue both international competitiveness and defence and security objectives. (2) Under the conditions of the new EU liberalization regime, it finds that a stronger and more visible trade-off will emerge between international competitiveness and national defence and security objectives. Policy makers will have to choose which to prioritise, and set a clear agenda focusing on one of the two objectives.international competitiveness or b) national defence and security objectives, is more Pareto efficient than a corresponding mixed strategy where policy makers simultaneously pursue both international competitiveness and defence and security objectives. (2) Under the conditions of the new EU liberalization regime, it finds that a stronger and more visible trade-off will emerge between international competitiveness and national defence and security objectives. Policy makers will have to choose which to prioritise, and set a clear agenda focusing on one of the two objectives.
  • Topic: Security, Defense Policy, International Trade and Finance, Markets
  • Political Geography: Europe
  • Author: Per Botolf Maurseth, Roger Svensson
  • Publication Date: 04-2012
  • Content Type: Working Paper
  • Institution: Norwegian Institute of International Affairs
  • Abstract: International patenting is increasing in importance. Patents protection is sought in the inventors' homeland but increasingly also in other countries. Globalization, high growth rates in high-tech industries, growing emerging markets and harmonization of patent institutions across countries have stimulated increased international patenting. We use a simple model of international patenting developed by Eaton and Kortum(1996) where the decision to patent in a country depends on country characteristics and the quality of the patented invention. With access to a unique database on Swedish firms' patents and patent behavior we are able to estimate some of these relations and test their validity. Our results indicate that the propensity to apply for international patent protection increases with indicators of the value of the invention and indictors of technological rivalry and market size in the markets where patent applications are submitted.
  • Topic: Globalization, International Law, International Trade and Finance, Markets, Intellectual Property/Copyright
  • Author: Arne Melchior
  • Publication Date: 08-2012
  • Content Type: Working Paper
  • Institution: Norwegian Institute of International Affairs
  • Abstract: Using data for more than 200 countries, split into nine regions, we study world trade in goods during 1970-2010. The largest changes are the declining relative importance of Western Europe, and the increasing role for Asia. The intra-regional trade of Asia grew particularly fast; from 4 to 16% of world trade. Due to growing intra-regional trade in Europe and Asia, world trade became more intra-regional until 1995. Manufacturing trade is more regionalised, whereas commodity trade is more globalised. After 1995, extra-regional trade flows grew faster so there was “globalisation” with trade travelling longer distances and a rising share for commodities. From 2000, smaller trade regions such as Africa and Latin America have increased their shares of world trade; reversing the trend over the 30 preceding years.
  • Topic: Globalization, International Political Economy, International Trade and Finance, Markets, Regional Cooperation, International Affairs
  • Political Geography: Europe, Asia, Western Europe
  • Author: Fulvio Castellacci
  • Publication Date: 10-2012
  • Content Type: Working Paper
  • Institution: Norwegian Institute of International Affairs
  • Abstract: The paper presents an empirical analysis of the innovative activities of business groups in Latin America. It compares the innovativeness of group-affiliated firms (GAFs) and standalone firms (SAFs), and it investigates how country-specific institutional factors – financial, legal, and labor market institutions – affect the group-innovation relationship. The empirical analysis is based on the most recent wave of the World Bank Enterprise Survey (period 2010-2011), and it focuses on a sample of 6500 manufacturing firms across 20 Latin American countries. The econometric results point out two major conclusions. First, GAFs are more innovative than SAFs: we estimate the innovation propensity of GAFs to be 9% higher than that of SAFs. Secondly, across countries, the innovativeness of GAFs is higher for national economies with a better institutional system than for countries with a less efficient institutional set up.
  • Topic: Economics, Globalization, International Trade and Finance, Markets
  • Political Geography: Latin America
  • Author: Fulvio Castellacci
  • Publication Date: 06-2011
  • Content Type: Working Paper
  • Institution: Norwegian Institute of International Affairs
  • Abstract: This paper introduces service innovation in the proximity-concentration trade-off model of trade and FDI (Helpman, Melitz and Yeaple, 2004). The idea is that innovation will have two main effects on service firms' choice between exports and FDI. First, innovative firms will on average have higher productivity levels than non-innovative enterprises. Secondly, innovators will have to pay a higher relational distance cost for undertaking export activities, and they will therefore prefer to avoid (or reduce) these costs by choosing a FDI strategy instead. We test the empirical relevance of this idea on a new survey dataset for a representative sample of firms in all business service sectors in Norway. The results show that firms are more likely to choose FDI rather than export the greater their productivity level and the higher the relational distance costs they face.
  • Topic: Industrial Policy, International Trade and Finance, Foreign Direct Investment
  • Author: Per Botolf Maurseth
  • Publication Date: 02-2010
  • Content Type: Working Paper
  • Institution: Norwegian Institute of International Affairs
  • Abstract: A stylised fact from the large and growing literature on relationships between trade and growth is that liberal trade policies may stimulate growth. However, there is no academic consensus that liberal trade policies are either necessary or sufficient ingredients in growth promoting policies. In this paper, the relationships between trade policy and growth are investigated. The paper adds some new findings. My measure of trade policy is not only applied average tariff rates which have been used by others, but such tariff rates for agriculture and manufacturing separately. The results indicate opposite results of the two: Protection of manufacturing correlates negatively with growth, while tariffs on agriculture imports seem to have a weaker though positive correlation. These results are robust in the sense that they remain significant with the same sign independently of different specifications and inclusions of various control variables.
  • Topic: Agriculture, Economics, Industrial Policy, International Trade and Finance
  • Author: Karl M. Rich, Brian D. Perry
  • Publication Date: 07-2010
  • Content Type: Working Paper
  • Institution: Norwegian Institute of International Affairs
  • Abstract: Market access for livestock products from Africa has traditionally been limited by the presence of certain infectious diseases that pose risks to animal and human health. However, an increasingly discussed option for increasing market access for African meat exports is the concept of commodity-based trade (CBT) that focuses on the health and safety attributes of the product rather than the disease status of the country of origin. While this concept is gaining traction in international policy circles, there have been few analyses on the potential economic impacts and unintended consequences of such an approach. This paper examines the principles behind a dramatic shift in approach to trading opportunities that CBT might bring, exploring both technical and economic considerations.
  • Topic: Agriculture, International Trade and Finance, International Affairs
  • Political Geography: Africa
  • Author: Arne Melchior
  • Publication Date: 10-2010
  • Content Type: Working Paper
  • Institution: Norwegian Institute of International Affairs
  • Abstract: Using a world trade model with India subdivided into states, the paper examines how regional disparities are affected by domestic inter-state trade as well as international trade. According to the analysis, international liberalisation promotes decentralisation and convergence, not divergence, so trade is not to blame for India's growing regional disparities. High economic growth within India makes domestic markets more important and the geographical effect of this is opposite to that of globalisation. This may counterbalance the geographical impact of international liberalisation and explain why recent changes in geographical clustering in India are limited. The empirical results are consistent with this. They also indicate that Indian services expansion is largely driven by increases in domestic demand due to growth, and that domestic market integration is essential for India's manufacturing sector. We argue that for larger nations, the domestic inter-regional trade is important and India should have a trade policy that addresses domestic as well as international market integration.
  • Topic: Development, Globalization, International Trade and Finance
  • Political Geography: South Asia, India, Asia
  • Author: Chen Taifeng
  • Publication Date: 07-2009
  • Content Type: Working Paper
  • Institution: Norwegian Institute of International Affairs
  • Abstract: The simultaneous emergence of rapidly developing RTAs and a strengthened and more encompassing MTS attracts worldwide attention. “Complementary Competition” is the very essence of the RTA/MTS relationship. Both compete complementarily in trade liberalization and economic integration initiatives. Since joining the WTO, China has pursued a “three-pronged” economic and trade development strategy of pushing forward regional trade cooperation and bilateral trade cooperation while enhancing multilateral trade and cooperation. After joining the WTO, China has basically developed a spatial landscape of “focusing on Asia-Pacific and reaching out globally” with regard to its participation in the RTA.By participating in RTAs, China can obtain the same benefits of market openness and trade and investment liberalization as other countries do. It is important for China not to act too hastily, but to push forward regional cooperation step by step from adjacent to remote regions and level by level, from easy to difficult regions. Asia is especially important to China, and Asian economic cooperation is the foundation of China's RTA policy.
  • Topic: Economics, International Trade and Finance, Markets
  • Political Geography: China, Asia
  • Author: Fulvio Castellacci
  • Publication Date: 09-2009
  • Content Type: Working Paper
  • Institution: Norwegian Institute of International Affairs
  • Abstract: This paper presents a survey of theoretical models of heterogeneity, growth and competitiveness. We compare two main theoretical traditions, evolutionary economics and mainstream heterogeneity models, in order to investigate whether the incorporation of heterogeneous agents has made the recent wave of mainstream models more similar to the evolutionary modelling style and results. The results of our survey exercise can be summarized as follows. On the one hand, we observe some increasing similarities and converging aspects between the evolutionary and the mainstream approaches to the study of heterogeneity. On the other hand, however, there are still some fundamental differences between them, which mainly relate to the distinct set of theoretical assumptions and methodological frameworks in which these heterogeneity models are set up and rooted. In short, the evolutionary approach emphasizes the complexities of the growth process and makes an effort to provide a realistic description of it, whereas the mainstream approach does instead follow a modelling methodology that emphasizes the analytical power and tractability of the formalization, even if that implies a somewhat simplified and less realistic description of the growth process.
  • Topic: Development, Economics, Industrial Policy, International Trade and Finance, Markets
  • Author: Fulvio Castellacci
  • Publication Date: 04-2008
  • Content Type: Working Paper
  • Institution: Norwegian Institute of International Affairs
  • Abstract: This paper looks at the convergence clubs literature from a Schumpeterian perspective, and it follows the idea that cross-country differences in the ability to innovate and to imitate foreign technologies determine the existence of clustering, polarization and convergence clubs. The study investigates the characteristics of different technology clubs and the growth trajectories that they have followed over time. The cross-country empirical analysis first explores the existence of multiple regimes in the data by means of cluster analysis techniques. It then estimates a technology-gap growth equation in a dynamic panel model specification. The empirical results identify three distinct technology clubs, and show that these are characterized by remarkably different technological characteristics and growth behavior.
  • Topic: Development, Economics, International Trade and Finance, Science and Technology