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42. FDI Spillover Effects on Innovation Activities of Knowledge-using and Knowledge-creating Firms: Evidence from an Emerging Economy
- Author:
- Iraj Hashi, Mehtap Hisarciklilar, Slavo Radošević, Nebojša Stojčić, and Nina Vujanović
- Publication Date:
- 03-2022
- Content Type:
- Working Paper
- Institution:
- The Vienna Institute for International Economic Studies (WIIW)
- Abstract:
- The beneficial effects of innovation for firms’ performance and competitiveness are well documented, but it has been suggested in recent years that innovation regimes differ between advanced and emerging economies. While advanced economies rely on knowledge generation, their emerging counterparts follow mainly a knowledge-use regime through the application of existing knowledge and technology. Climbing up the technological ladder can be helped through spillovers from foreign investors to local firms. We investigate whether FDI spillovers influence different phases of the innovation process (from decision to innovate to productivity) among knowledge-using and knowledge-creating firms in an emerging European economy. The results show that the innovation process in emerging economies is closer to the imitation than the creation of novel products. Local firms benefit from foreign counterparts in the early phase of the innovation process. Stronger FDI effects are found among firms that undertake innovation through knowledge use rather than through knowledge generation.
- Topic:
- Emerging Markets, International Trade and Finance, Foreign Direct Investment, Economy, Investment, and Knowledge Systems
- Political Geography:
- Europe
43. Cutting through the Value Chain: The Long-Run Effects of Decoupling the East from the West
- Author:
- Gabriel Felbermayr, Alexander Sandkamp, and Hendrik Mahlkow
- Publication Date:
- 03-2022
- Content Type:
- Working Paper
- Institution:
- Kiel Institute for the World Economy (IfW)
- Abstract:
- With ever-increasing political tensions between China and Russia on one side and the EU and the US on the other, it only seems a matter of time until protectionist policies cause a decoupling of global value chains. This paper uses a computable general equilibrium trade model calibrated with the latest version of the GTAP database to simulate the effect of doubling non-tariff barriers - both unilateral and reciprocal - between the two blocks on trade and welfare. Imposing trade barriers almost completely eliminates bilateral imports. In addition, changes in price levels lead to higher imports and lower exports of the imposing country group from and to the rest of the world. The targeted country group increases exports to the rest of the world and reduces imports. Welfare falls in all countries involved, suggesting that governments should strive to cooperate rather than turning away from each other. By imposing a trade war on Russia, the political West could inflict severe damage on the Russian economy because of the latter’s smaller relative size.
- Topic:
- International Cooperation, International Trade and Finance, European Union, Conflict, Trade Wars, Protectionism, and Rivalry
- Political Geography:
- Russia, China, Europe, Asia, North America, and United States of America
44. Potential Impacts of Sanctions against Russia on the Non-oil Exports of Azerbaijan
- Author:
- Eldayag Mustafayev
- Publication Date:
- 04-2022
- Content Type:
- Working Paper
- Institution:
- Center for Economic and Social Development (CESD)
- Abstract:
- By using statistical descriptive analysis, this article analyzes how the isolation of Russia from the international trade and finance system, as a result of the Western sanctions, will affect the Russian trade turnover and what type of future challenges and opportunities it may provide for the non-oil export base of Azerbaijan. In terms of the opportunities, Azerbaijan can further focus on its main non-oil export goods such as agricultural and chemical industrial products to capture an additional share in the semi-abandoned Russian market, along with considering possible competition pressure coming from the other non-western Russian trade partners. Re-exporting opportunities currently are limited in scale and have a risk of facing international sanctions and criticism.
- Topic:
- International Trade and Finance, Sanctions, Exports, and Russia-Ukraine War
- Political Geography:
- Russia and Azerbaijan
45. EU in Search of a WTO-Compatible Carbon Border Adjustment Mechanism
- Author:
- Cecilia Bellora and Lionel Fontagné
- Publication Date:
- 05-2022
- Content Type:
- Working Paper
- Institution:
- Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
- Abstract:
- To meet the targets of the EU’s ”Fit for 55” package, the European Commission proposes to implement a Carbon Border Adjustment Mechanism (CBAM). The CBAM is firstly intended to avoid carbon leakages, but it also deals with the thorny issue of the compliance by European producers in carbon-intensive industries. In addition, its design, as voted by the European Council on March 15, 2022, questions the compatibility of the CBAM with World Trade Organization (WTO) rules. The CBAM puts a price on carbon contained in imported products whose production-related emissions have not been taxed (or not at the same level as in the European Union) by the exporter country, in order to offset the difference in carbon prices at the border. This paper aims to quantify the economic and environmental impacts of different CBAM design choices with the aim of complying with WTO rules. Different from the previous literature, we evaluate the various options with a dynamic general equilibrium model featuring imperfect competition, global value chains, green-house gas emissions and endogenous price of emission quotas. We show that CBAM is effective in reducing carbon leakages. But its design leads to an increase in the price of carbon quotas in the European Emission Trading System (ETS) market. Losses in competitiveness on export markets are expected, also for downstream sectors not covered by the EU ETS nor the CBAM. Eventually, offsetting the difference in carbon prices at the border comes at a cost to the enforcing jurisdiction, suggesting that the CBAM was not designed as a beggar-thy-neighbour policy.
- Topic:
- Energy Policy, International Trade and Finance, Regional Cooperation, European Union, Carbon Emissions, WTO, and Green Transition
- Political Geography:
- Europe
46. The Role of Storage in Commodity Markets: Indirect Inference Based on Grains Data
- Author:
- Christophe Gouel and Nicolas Legrand
- Publication Date:
- 07-2022
- Content Type:
- Working Paper
- Institution:
- Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
- Abstract:
- Understanding commodity prices dynamics is of crucial importance for assessing the persistence of cost-push costs or for countries dependent on commodity exports. Unfortunately, despite decades of research, the workhorse theoretical model in the field, the rational expectations storage model, is yet to be empirically validated. This paper provides the first full empirical test of the storage model. We first build a new storage model featuring a supply response, long-run demand and cost trends, and four structural shocks. We then develop a flexible empirical approach which relies on the indirect inference method and exploits the joint dynamics of prices and quantities unlike previous estimations which only use price information. The information contained in quantities is essential to relax restrictive identifying assumptions and empirically assess the overall consistency of the model's new features. Finally, we carry out a structural estimation on the aggregate index of the world most important staple food products: maize, rice, soybeans, and wheat. The results show that our extended storage model is consistent with most of the moments in the data, including the high price autocorrelation of which up to 42% can be explained by the transfer of inventories over time. They also show that, although for these commodities supply shocks are the main drivers of market dynamics, over the past 60 years all price spikes have been associated with large positive demand shocks.
- Topic:
- Agriculture, International Trade and Finance, Commodities, and Price
- Political Geography:
- Global Focus
47. The Culture-Promotion Effect of Multinationals on Trade: the IKEA case
- Author:
- Dylan Bourny, Daniel Mirza, and Jamel Saadaoui
- Publication Date:
- 07-2022
- Content Type:
- Working Paper
- Institution:
- Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
- Abstract:
- In this paper, we investigate how some MNEs which spread their home culture over time and space to the rest of the world are affecting, in turn, trade flows from home. By selling products embodying cultural information related to their country of origin, those MNEs embrace the role of ambassadors of their home country. We argue that IKEA offers an ideal case to identify a multinational's culture-promotion effect on trade. We build a dataset on IKEA's presence in foreign markets between 1995 and 2015 and merge it with disaggregated product level trade between pairs of countries. We find solid evidence of an externality linked to IKEA: a setting of an IKEA new store in a destination increases trade flows by around 2% from Sweden for products that resemble to what the multinational offers (despite being completely unrelated to that multinational). This result is driven primarily by the products identified to encompass a high-cultural content. Other robustness checks and tests seem to be very much consistent with the hypothesis of IKEA promoting the Swedish culture to the world.
- Topic:
- Globalization, International Trade and Finance, Culture, and Multinational Corporations
- Political Geography:
- Global Focus
48. Regional Diffusion of Foreign Demand Shocks Through Trade and Ownership Networks
- Author:
- Lionel Fontagné and Gianluca Santoni
- Publication Date:
- 09-2022
- Content Type:
- Working Paper
- Institution:
- Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
- Abstract:
- International demand shocks are transmitted within the trade and ownership firms' networks and impact directly or indirectly domestic firm productivity and labor misallocation. Considering manufacturing firms for Italy, Spain and France over the period 2009-2017, we quantify these transmission channels from the global economy to the domestic firms, and within the domestic economy across locations, sectors and firms. We compute in a shift share fashion international demand shock at the district-sector-year level as plausibly exogenous to individual firms. Our results confirm that global shocks are transmitted through trade networks and that this transmission is largely mediated by firms' ownership networks both across and within the borders of the three countries.
- Topic:
- Economics, International Trade and Finance, Demand, and Productivity
- Political Geography:
- Europe, France, Spain, and Italy
49. Analysis of Cameroon – Nigeria Trade and Prospects for the African Continental Free Trade Area
- Author:
- Henri Kouam and Vera Kum
- Publication Date:
- 01-2022
- Content Type:
- Working Paper
- Institution:
- The Nkafu Policy Institute
- Abstract:
- Free trade between Cameroon and Nigeria is about reducing barriers to cross-border trade between the two countries by allowing traders on both sides of the spectrum to explore a larger market and private sector producers to expand their business. This policy brief examines the nature of Cameroon and Nigeria’s trade whilst illustrating the benefits of free trade on living standards, employment, and income inequality. It recommends that Cameroon and Nigeria cooperate on trade facilitation measures to increase the benefits of the African Continental Free Trade Area.
- Topic:
- Economics, International Trade and Finance, Regional Cooperation, Bilateral Relations, and Free Trade
- Political Geography:
- Africa, Nigeria, and Cameroon
50. Biden, Israel, and China: Making a Difficult Threesome Work
- Author:
- Steven R. David
- Publication Date:
- 05-2022
- Content Type:
- Working Paper
- Institution:
- Jerusalem Institute for Strategy and Security (JISS)
- Abstract:
- It is wrong to expect Israel, a middle-level economy, to decouple from China when far wealthier countries (including the United States) show no signs of following suit. Israeli companies should not be subject to restrictions not placed on companies elsewhere, including the United States itself.
- Topic:
- Diplomacy, International Trade and Finance, Hegemony, and Conflict
- Political Geography:
- China, Middle East, Israel, Asia, North America, and United States of America