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Begin New Search Topic International Political Economy Content Type Working Paper

31. Corporate tax avoidance and industry concentration

Author:
Farid Toubal, Mathieu Parenti, and Julien Martin
Publication Date:
07-2020
Content Type:
Working Paper
Institution:
Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:
This paper argues that tax avoidance by large corporations has contributed to the 25% increase in concentration among U.S. firms since the mid-1990s. Corporate tax avoidance gives large firms a competitive edge, which translates into larger market shares and an increase in the granularity of the economy. We develop IV and difference-in-differences strategies that show the causal impact of tax avoidance on firm-level sales. Had firms not resorted to tax avoidance in 2017, our results imply that the average industry concentration would have been 8.3% lower, which is around its early 2000 level.
Topic:
Economics, International Political Economy, Markets, Tax Systems, Corporations, Tax Evasion, and Corporate Tax
Political Geography:
United States and Global Focus

32. Grey Zones in Global Finance: the Distorted Geography of Cross-Border Investments

Author:
Vincent Vicard, Amélie Guillin, and Anne-Laure Delatte
Publication Date:
05-2020
Content Type:
Working Paper
Institution:
Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:
Tax avoidance schemes generate artificially complex cross-border financial structures inflating measured international investment stocks in tax havens. Using a standard gravity framework, we estimate that about 40% of global assets (FDI, portfolio equity and debt) are `abnormal' – unexplained – stocks. Abnormal stocks are increasing over time and concentrated in a limited number of jurisdictions. Six jurisdictions including three European countries are the largest contributors: Cayman, Bermuda, Luxembourg, Hong Kong, Ireland and the Netherlands. Interestingly, the Luxleaks in 2014 do not appear to have diverted cross-border investments away.
Topic:
Economics, International Political Economy, International Trade and Finance, Finance, Borders, Investment, and Stock Markets
Political Geography:
Global Focus

33. Private Credit under Political Influence: Evidence from France

Author:
Anne-Laure Delatte, Adrien Matray, and Noémie Pinardon-Touati
Publication Date:
04-2020
Content Type:
Working Paper
Institution:
Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:
Formally independent private banks change their supply of credit to the corporate sector for the constituencies of contested political incumbents in order to improve their reelection prospects. In return, politicians grant such banks access to the profitable market for loans to local public entities among their constituencies. We examine French credit registry data for 2007--2017 and find that credit granted to the private sector increases by 9%--14% in the year during which a powerful incumbent faces a contested election. In line with politicians returning the favor, banks that grant more credit to private firms in election years gain market share in the local public entity debt market after the election is held. Thus we establish that, if politicians can control the allocation of rents, then formal independence does not ensure the private sector's effective independence from politically motivated distortions.
Topic:
Economics, International Political Economy, Private Sector, Credit, and Banking
Political Geography:
France

34. Currency Misalignments and Exchange Rate Regimes in Latin American countries: A Trade-Off issue

Author:
Jorge Carrera, Blaise Gnimassoun, Valérie Mignon, and Romain Restout
Publication Date:
04-2020
Content Type:
Working Paper
Institution:
Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:
This paper conducts an in-depth empirical investigation on the impact of the exchange rate regime (ERR) on real currency misalignments in a panel of 17 Latin American countries over the 1970-2016 period. We consider explicitly the two dimensions of misalignments, size and persistence, and evaluate four different ERR classifications. We also pay attention to cross-sectional dependencies across countries that appear to be important in Latin America, and provide several robustness checks. Our main findings show that, although fixed ERR perform well in limiting the size of misalignments – and in reducing inflation and fiscal deficit – the disequilibria are more persistent. On the contrary, allowing for more flexibility reduces persistence but increases the size of misalignments. Overall, we show that Latin American countries face a crucial trade-off when they have to choose their ERR.
Topic:
Economics, International Political Economy, Exchange Rate Policy, and Currency
Political Geography:
Latin America

35. Immigration and Worker-Firm Matching

Author:
Gianluca Orefice and Giovanni Peri
Publication Date:
03-2020
Content Type:
Working Paper
Institution:
Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:
The process of matching between firms and workers is an important mechanism in determining the distribution of wages. In a labor market characterised by large dispersion of workers' productivity and worker-firm complementarity, high quality firms have strong incentives to screen for the quality of workers. This process will increase the positive quality association of firm-worker matches known as positive assortative matching (PAM). Immigration in a local labor market, by increasing the variance of workers abilities, may drive stronger PAM between firms and workers. Using French matched employer-employee (DADS) data over the period 1995-2005 we document that positive supply-driven changes of immigrant workers in a district increased the strength of PAM. We then show that this association is consistent with causality, is quantitatively significant, and is associated with higher average productivity and firm profits, but also with higher wage dispersion. We also show that the increased degree of positive assortative matching is mainly reached by high-productive firms "losing" lower quality workers and "attracting" higher quality workers.
Topic:
Economics, International Political Economy, Labor Issues, Immigration, Immigrants, and Migrant Workers
Political Geography:
France

36. Cross-border Investments and Uncertainty Firm-level Evidence

Author:
Rafael Cezar, Timothée Gigout, and Fabien Tripier
Publication Date:
03-2020
Content Type:
Working Paper
Institution:
Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:
This paper studies the impact of uncertainty on cross-border investments. We build a data-set of firm-level outward Foreign Direct Investments between 2000 and 2015. We create a time and country varying measure of uncertainty based on the dispersion of idiosyncratic investment returns. An increase in uncertainty delays cross-border flows to the affected country. Yet, this average effect hides strong heterogeneity. Firms with low ex-ante performance durably reduce their foreign investments. Meanwhile high-performing firms increase their investments after the initial shock. We interpret these results as the evidence of a cleansing effect of uncertainty shocks among multinational firms in the presence of financial frictions.
Topic:
Economics, International Political Economy, Foreign Direct Investment, Borders, and Investment
Political Geography:
Global Focus

37. Weather Shocks and Migration Intentions in Western Africa: Insights from a Multilevel Analysis

Author:
Simone Bertolia, Frédéric Docquier, Hillel Rapoport, and Ilse Ruyssen
Publication Date:
02-2020
Content Type:
Working Paper
Institution:
Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:
We use a multilevel approach to characterize the relationship between weather shocks and (internal and international) migration intentions. We combine individual survey data on migration intentions with measures of localized weather shocks for Western African countries over 2008-2016. A meta-analysis on results from about 310,000 regressions is conducted to identify the specification of weather anoma-lies that maximizes the goodness of fit of our empirical model. We then use this best specification to document heterogeneous mobility responses to weather shocks, which can be due to differences in long-term climatic conditions, migration percep- tions, or adaptation capabilities. We find that droughts are associated with a higher probability of migration intentions in Senegal, Niger and Ivory Coast. The effect on international migration intentions are only significant in Niger. These effects are amplified, but qualitatively similar, when restricting the sample to rural low-skilled respondents.
Topic:
Economics, International Political Economy, Migration, Labor Issues, Skilled Labor, and Weather
Political Geography:
West Africa, Senegal, Ivory Coast, and Niger

38. Does Birthplace Diversity affect Economic Complexity? Cross-country Evidence

Author:
Dany Bahar, Hillel Rapoport, and Riccardo Turati
Publication Date:
01-2020
Content Type:
Working Paper
Institution:
Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:
We empirically investigate the relationship between a country’s economic complexity and the diversity in the birthplaces of its immigrants. Our cross-country analysis suggests that birthplace diversity is strongly and positively associated with economic complexity. This holds particularly for diversity among highly educated migrants and for countries at intermediate levels of economic complexity. The results are robust to accounting for previous trends in birthplace diversity as well as to using alternatives diversity measures. We address endogeneity concerns by instrumenting diversity through predicted stocks from a pseudo-gravity model as well as from a standard shift-share approach. Finally, we provide evidence suggesting that birthplace diversity boosts economic complexity by increasing the diversification of the host country’s export basket.
Topic:
Economics, International Political Economy, Multiculturalism, Immigrants, Diversity, and Economic Complexity
Political Geography:
Global Focus

39. The Investment Screening Regulation and its screening ground "security or public order": how the WTO law understanding undermines the Regulation's objectives

Author:
Jens Velten
Publication Date:
01-2020
Content Type:
Working Paper
Institution:
Centre for Trade and Economic Integration, The Graduate Institute (IHEID)
Abstract:
The EU adopted Regulation 2019/452 (Regulation) as part of a more robust Common commercial policy to strengthen and defend its interests in a shifting global order. More concretely, the Regulation has two objectives: protecting domestic assets from harmful foreign investor interests, and equipping the EU with leverage to achieve more favourable treatment of EU investors abroad. Therefore, the Regulation provides Member States with an option to adopt foreign direct investment (FDI) screening mechanisms on the grounds of “security or public order”. However, the Regulation misses its objectives. The Regulation’s vague screening ground “security or public order” must be interpreted in accordance with WTO law. A detailed analysis finds that the relevant WTO notions of essential security interests and public order are rather narrow. The Regulation’s screening ground “security or public order” therefore only allows the screening of a few, high-profile cases of FDI. Such a narrow scope undermines the Regulation’s objectives.
Topic:
International Political Economy, International Trade and Finance, Foreign Direct Investment, and WTO
Political Geography:
Europe and European Union

40. Effects of interest rate caps on microcredit: evidence from a natural experiment in Bolivia

Author:
María José Roa, Alejandra Villegas, and Ignacio Garrón
Publication Date:
09-2020
Content Type:
Working Paper
Institution:
Institute for Advanced Development Studies (INESAD)
Abstract:
This paper evaluates the imposition of caps on microcredit lending rates through directed credit policies for productive sectors. This financial inclusion intervention provides a unique quasi-experiment, allowing to estimate its causal effect following a difference-in-differences analysis. Our results suggest that the imposition of interest rate ceilings negatively affected the portfolio balance of new microcredits and loans to SMEs granted by MFIs. Particularly, we find robust results indicating that the balance of the microcredit and SME loans portfolio granted by MFIs, relative to the company portfolio granted by banks, decreased by 26.1% for an average MFI for the period 2011-2018.
Topic:
International Political Economy, Microcredit, Credit, and Lending
Political Geography:
Latin America and Bolivia