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1. Trade Liberalization along the Firm Size Distribution: The Case of the EU-South Korea FTA

Author:
Sonali Chowdhry and Gabriel Felbermayr
Publication Date:
02-2021
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
In 2011, the EU-South Korea Free Trade Agreement (EUKFTA) entered into force. With its focus on non-tariff barriers (NTBs), it is a leading example of a deep new generation agreement. Using detailed French customs data for the period 2000 to 2016, we investigate how exporters of different size have gained from the agreement. Applying a diff-in-diff strategy that makes use of the rich dimensionality of the data, we find that firms with larger pre-FTA sizes benefit more from the FTA than firms at the lower end of the size distribution, both at the extensive (product) and the intensive margins of trade. The latter finding is in surprising contrast to leading theories of firm-level behavior. Moreover, we find that our main result is driven by NTB reductions rather than tariff cuts. In shedding light on the distributional effects of trade agreements within exporters, our findings highlight the need for effective SME-chapters in FTAs.
Topic:
Economics, International Political Economy, Treaties and Agreements, Tariffs, and Trade
Political Geography:
Europe, South Korea, and European Union

2. Restructuring Sovereign Bonds: Holdouts, Haircuts and the Effectiveness of CACs

Author:
Chuck Fang, Julian Schumacher, and Christoph Trebesch
Publication Date:
01-2021
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
Sovereign debt crises are difficult to solve. This paper studies the “holdout problem”, meaning the risk that creditors refuse to participate in a debt restructuring. We document a large variation in holdout rates, based on a comprehensive new dataset of 23 bond restructurings with external creditors since 1994. We then study the determinants of holdouts and find that the size of creditor losses (haircuts) is among the best predictors at the bond level. In a restructuring, bonds with higher haircuts see higher holdout rates, and the same is true for small bonds and those issued under foreign law. Collective action clauses (CACs) are effective in reducing holdout risks. However, classic CACs, with bond-by-bond voting, are not sufficient to assure high participation rates. Only the strongest form of CACs, with single-limb aggregate voting, minimizes the holdout problem according to our simulations. The results help to inform theory as well as current policy initiatives on reforming sovereign bond markets.
Topic:
Debt, Economics, International Political Economy, Law, and Credit
Political Geography:
Global Focus

3. Tracing the evolution of service robotics: Insights from a topic modeling approach

Author:
Ingrid Ott, Ivan Savin, and Chris Konop
Publication Date:
01-2021
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
Taking robotic patents between 1977 and 2017 and building upon the topic modeling technique, we extract their latent topics, analyze how important these topics are over time, and how they are related to each other looking at how often they are recombined in the same patents. This allows us to differentiate between more and less important technological trends in robotics based on their stage of diffusion and position in the space of knowledge, where some topics appear isolated while others are highly interconnected. Furthermore, we propose a novel approach to match the constructed topics to the IFR classification of service robots based on frequency and exclusivity of words overlapping between them. We identify around 20 topics belonging to service robotics. Our results corroborate earlier findings, but also provide novel insights on the content and stage of development of application areas in service robotics. With this study we contribute to a better understanding of the highly dynamic field of robotics and contribute to new practices of utilizing the topic modeling approach.
Topic:
International Political Economy, Science and Technology, Robotics, and Models
Political Geography:
Global Focus

4. Fostering the Development of the Coffee Global Value Chain

Author:
Dennis Görlich, Aoife Hanley, Wan-Hsin Liu, and Finn Ole Semrau
Publication Date:
12-2020
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
The overarching aim of the study is to investigate the key factors that determine how and how intensively countries can be integrated into the coffee global value chain (GVC) and thus can better reap the globalization benefits. The empirical analysis shows how the international trade in coffee has developed across regions/countries over the past three decades. It provides evidence-based insights into the key determinants of countries’ GVC integration in the coffee industry. It discusses countries’ functional and product upgrading for their GVC integration. Based on the empirical results obtained, policy implications are derived to support the further development of the coffee GVC. This study serves as a background study for the Coffee Development Report 2020 in preparation by the International Coffee Organisation.
Topic:
International Political Economy, Food, Global Value Chains, Coffee, and Value Chains
Political Geography:
Global Focus

5. Foreign exchange intervention: A new database

Author:
Marcel Fratzscher, Tobias Heidland, Lukas Menkhoff, Lucio Sarno, and Maik Schmeling
Publication Date:
11-2020
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
We construct a novel database of monthly foreign exchange interventions for 49 countries over up to 22 years. We build on a text classification approach that extracts information about interventions from news articles and calibrate our procedure to data about actual interventions. Our new dataset allows us to document stylized facts about the use of foreign exchange interventions for countries that neither publish their data nor make them available to researchers. Moreover, we show that foreign exchange interventions are used in a complementary way with capital controls and macroprudential regulation.
Topic:
Economics, Foreign Exchange, International Political Economy, Data, and Capital Controls
Political Geography:
Global Focus

6. Why are Africa’s Female Entrepreneurs not Playing the Export Game? Evidence from Ghana

Author:
Charles Ackah, Holger Görg, Aoife Hanley, and Cecília Hornok
Publication Date:
10-2020
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
We explore the export performance of Africa’s underperforming female entrepreneurs, using the Ghanaian ISSER-IGC panel, a comprehensive dataset of manufacturing firms for 2011–2015. Uniquely, the data provides information about the severity of key business constraints, across both male and female entrepreneurs. We find that females are less likely to export (and optimize their exporting) than their male peers. Although reduced access to finance seriously constrains the exports of female entrepreneurs, this limitation does not explain their relative inability to leverage value from exports. Consistent with related work, we find that certain social and cultural constraints, in particular constraints linked to bribes and security concerns, are more deeply felt by female entrepreneurs. This may hint at the exclusion of Africa’s females (voluntarily or involuntarily) from male-dominated networks or business practices.
Topic:
International Political Economy, Women, Entrepreneurship, and Exports
Political Geography:
Ghana

7. On the Heterogeneous Trade and Welfare Effects of GATT/WTO Membership

Author:
Gabriel Felbermayr, Mario Larch, Erdal Yalcin, and Yoto V. Yotov
Publication Date:
09-2020
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
We build on the latest developments in the structural gravity literature to quantify the partial and general equilibrium effects of GATT/WTO membership on trade and welfare. Using an extensive database covering manufacturing trade for 186 countries over the period 1980-2016, we find that the average impact of GATT/WTO membership on trade among member counties is large, positive, and significant. We contribute to the literature by estimating country-specific estimates and find them to vary widely across the countries in our sample with poorer members benefitting more. Using these estimates, we simulate the general equilibrium effects of GATT/WTO on welfare, which are sizable and heterogeneous across members, and relatively small for non-member countries. We show that countries not experiencing positive trade effects from joining GATT/WTO can still gain in terms of welfare, due to beneficial terms-of-trade effects.
Topic:
International Political Economy, Trade, WTO, and GATT
Political Geography:
Global Focus

8. Corona Politics: The cost of mismanaging pandemics

Author:
Helios Herrera, Maximilian Konradt, Guillermo Ordoñez, and Christoph Trebesch
Publication Date:
09-2020
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
The Covid-19 pandemic is a major test for governments around the world. We study the political consequences of (mis-)managing the Covid crisis by constructing a highfrequency dataset of government approval for 35 countries. In the first weeks after the outbreak, approval rates for incumbents increase strongly, consistent with a global “rally around the flag” effect. Approval, however, drops again in countries where Covid cases continue to grow. This is especially true for governments that do not implement stringent policies to control the number of infections. Overall, the evidence suggests that loose pandemic policies are politically costly. Governments that placed more weight on health rather than short-term economic outcomes obtained higher approval.
Topic:
Government, Health, International Political Economy, Health Care Policy, Pandemic, and COVID-19
Political Geography:
Global Focus

9. Covid-19 Shocking Global Value Chains

Author:
Peter Eppinger, Gabriel Felbermayr, Oliver Krebs, and Bohdan Kukharsky
Publication Date:
09-2020
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
In early 2020, the disease Covid-19 caused a drastic lockdown of the Chinese economy. We use a quantitative trade model with input-output linkages to gauge the effects of this adverse supply shock in China on the global economy through international trade and global value chains (GVCs). We find moderate welfare losses in most countries outside of China, while a few countries even gain from the shock due to trade diversion. As a key methodological contribution, we quantify the role of GVCs (in contrast to final goods trade) in transmitting the shock. In a hypothetical world without GVCs, the welfare loss due to the Covid-19 shock in China is reduced by 40% in the median country. In several other countries, the effects are magnified or reversed for several countries. Had the U.S. unilaterally repatriated GVCs, the country would have incurred a substantial welfare loss while its exposure to the shock would have barely changed.
Topic:
International Political Economy, Trade, Pandemic, Global Value Chains, COVID-19, and Supply Chains
Political Geography:
China and Global Focus

10. Institutional design and spatial (in)equality: the Janus face of economic integration

Author:
Ingrid Ott and Susanne Soretz
Publication Date:
08-2020
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
This paper analyzes within a spatial endogenous growth setting the impact of public policy coordination on agglomeration. Governments in each of the two symmetric regions provide a local public input that becomes globally effective due to integration. Micro-foundation of governmental behavior is based on three different coordination schemes: autarky, full or partial coordination. Scale effects act as agglomeration force and in addition to private capital agglomeration increase the concentration of the public input. Integration promotes dispersion forces with respect to the distribution of physical capital which are based on decreasing private returns. However, within the governments’ decision on the concentration of the public input, increasing integration reinforces agglomeration because it promotes the interregional productive use of the public input. Taking feedback effects between the private and the public sector into account leads to mutual reinforcement, hence agglomeration forces almost always dominate and the spreading equilibrium becomes unstable. If convergence is a separate (additional) political objective, it needs sustained additional political effort.
Topic:
Government, International Political Economy, Economic Growth, Public Policy, Private Sector, and Capital
Political Geography:
Global Focus

11. Endogenous Growth, Skill Obsolescence and Output Hysteresis in a New Keynesian Model with Unemployment

Author:
Wolfgang Lechthaler and Mewael F. Tesfaselassie
Publication Date:
08-2020
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
We embed human capital-based endogenous growth into a New-Keynesian model with search and matching frictions in the labor market and skill obsolescence from long-term unemployment. The model can account for key features of the Great Recession: a decline in productivity growth, the relative stability of inflation despite a pronounced fall in output (the "missing disinflation puzzle"), and a permanent gap between output and the pre-crisis trend output. In the model, lower aggregate demand raises unemployment and the training costs associated with skill obsolescence. Lower employment hinders learning-by-doing, which slows down human capital accumulation, feeding back into even fewer vacancies than justified by the demand shock alone. These feedback channels mitigate the disinflationary effect of the demand shock while amplifying its contractionary effect on output. The temporary growth slowdown translates into output hysteresis (permanently lower output and labor productivity).
Topic:
International Political Economy, Global Recession, Labor Issues, Economic Growth, Inflation, Keynes, and Capital
Political Geography:
Global Focus

12. Mask Wars: China's Exports of Medical Goods in Times of COVID-19

Author:
Andreas Fuchs, Lennart Kaplan, Krisztina Kis-Katos, Sebastian Schmidt, Felix Turbanisch, and Feicheng Wang
Publication Date:
08-2020
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
The COVID-19 outbreak has cut China's supply of and raised the world's demand for face masks, disinfectants, ventilators, and other critical medical goods. This article studies the economic and political factors that are associated with China's exports of medical equipment during the first two months of the global pandemic. Regression results show that—controlled for demand factors—countries with stronger past economic ties with China import more critical medical goods from China at both the national level and the level of Chinese provinces. Friendly political relations, such as the twinning of provinces, appear to work as a substitute for pre-existing economic ties at the provincial level. These findings imply that, to secure access to medical equipment in crises, countries are well advised to either diversify their sources or to develop closer relations with Beijing and China's provinces.
Topic:
International Political Economy, Exports, Pandemic, COVID-19, and Medicine
Political Geography:
China

13. Overconfidence and Hygiene Non-compliance in Hospitals

Author:
Katharina Lima de Miranda, Lena Detlefsen, and Michael Stolpe
Publication Date:
07-2020
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
Among measures to fight hospital acquired infections, an emerging epidemic in many countries around the world, adoption of appropriate hand hygiene practices by healthcare workers is considered a priority. Despite their simplicity and effectiveness, healthcare workers’ compliance is poor, with most empirical studies finding compliance rates well below 50% in many countries. Management strategies to increase compliance are often based on the notion that non-compliance is a moral hazard problem, characterized by asymmetric information between hospital management and healthcare workers. In this study, we provide empirical evidence that an individual behavioral characteristic, known as overconfidence, induces many healthcare workers to overestimate their hand hygiene compliance and hence to underperform unknowingly and unintentionally.
Topic:
Health, International Political Economy, Health Care Policy, and Hospitals
Political Geography:
Global Focus

14. Reliable Real-time Output Gap Estimates Based on a Modified Hamilton Filter

Author:
Josefine Quast and Maik H. Wolters
Publication Date:
06-2020
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
We propose a simple modification of Hamilton’s (2018) time series filter that yields reliable and economically meaningful real-time output gap estimates. The original filter relies on 8 quarter ahead forecast errors of a simple autoregression of real GDP. While this approach yields a cyclical component that is hardly revised with new incoming data due to the one-sided filtering approach, it does not cover typical business cycle frequencies evenly, but mutes short and amplifies medium length cycles. Further, as the estimated trend contains high frequency noise, it can hardly be interpreted as potential GDP. A simple modification based on the mean of 4 to 12 quarter ahead forecast errors shares the favorable real-time properties of the Hamilton filter, but leads to a much better coverage of typical business cycle frequencies and a smooth estimated trend. Based on output growth and inflation forecasts and a comparison to revised output gap estimates from policy institutions, we find that real-time output gaps based on the modified and the original Hamilton filter are economically much more meaningful measures of the business cycle than those based on other simple statistical trend-cycle decomposition techniques, such as the HP or bandpass filter, and should thus be used preferably.
Topic:
International Political Economy, GDP, and Economic Growth
Political Geography:
Global Focus

15. Higher economic growth in poor countries, lower migration flows to the OECD: Revisiting the migration hump with panel data

Author:
David Benček and Claas Schneiderheinze
Publication Date:
06-2020
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
Comparing emigration rates of countries at different stages of economic development, an inverse u-shape emerges. Although merely based on cross-sectional evidence, the“migration hump” is widely interpreted as a causal relationship. Therefore, economic progress in developing countries is assumed to increase migration. For policy makers in destination countries that implies a sensitive trade-off between supporting development and reducing immigration pressures. In this paper we investigate whether the migration hump holds up to more scrutiny, finding that the cross-sectional pattern is misleading. Using 35 years of data on migration flows to OECD destinations, we successfully reproduce the hump-shape in the cross-section. However, more rigorous fixed effects panel estimations that exploit the variation over time consistently show a negative association between income and emigration. This result is independent of the level of income a country starts out at and thus casts doubt on any causal interpretation of the migration hump.
Topic:
Development, International Political Economy, Migration, Economic Growth, Economic Development, Organisation for Economic Co-operation and Development, and Emigration
Political Geography:
Global Focus

16. Coping with Disasters: Two Centuries of International Official Lending

Author:
Sebastian Horn, Carmen M. Reinhart, and Christoph Trebesch
Publication Date:
06-2020
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
Official (government-to-government) lending is much larger than commonly known, often surpassing total private cross-border capital flows, especially during disasters such as wars, financial crises and natural catastrophes. We assemble the first comprehensive long-run dataset of official international lending, covering 230,000 loans, grants and guarantees extended by governments, central banks, and multilateral institutions in the period 1790-2015. Historically, wars have been the main catalyst of government-to-government transfers. The scale of official credits granted in and around WW1 and WW2 was particularly large, easily surpassing the scale of total international bailout lending after the 2008 crash. During peacetime, development finance and financial crises are the main drivers of official cross-border finance, with official flows often stepping in when private flows retrench. In line with the predictions of recent theoretical contributions, we find that official lending increases with the degree of economic integration. In crises and disasters, governments help those countries to which they have greater trade and banking exposure, hoping to reduce the collateral damage to their own economies. Since the 2000s, official finance has made a sharp comeback, largely due to the rise of China as an international creditor and the return of central bank cross-border lending in times of stress, this time in the form of swap lines.
Topic:
Debt, International Political Economy, War, History, Financial Crisis, Trade, and Banking
Political Geography:
Global Focus

17. Assessing Asia: Sub-Saharan Africa Global Value Chain Linkages

Author:
Heiwai Tang, Douglas Zhihua Zeng, and Albert Zeufack
Publication Date:
06-2020
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
This paper studies the relationship between Asia’s economic engagements in Africa and individual African nations’ participation in global value chains (GVC) over the past two decades. We find that while overall exports from Africa to Asia are still highly concentrated in resource-intensive sectors, a few African countries have exploited the emerging opportunities to diversify export portfolios through exporting to Asia. Each African nation has a distinct main trade partner in Asia, in contrast to the common view that China has become the dominant trade partner of most African nations. Using a panel data set for 46 African countries over 16 years from 2000 and 2015, we find that exports to Asia are positively correlated with exports to the rest of the world, suggesting that in contrast to trade diversion, trade with Asia complements exports to other countries. Asian economic engagement in the continent is associated with countries’ exports “moving up the value chain”, as measured by the upstreamness index proposed by Antras et al. (2012). However, such process was accompanied by a reduction in the length of their production chains, implying that fewer stages and countries are now involved in the production of exported goods.
Topic:
Development, International Political Economy, Natural Resources, Partnerships, Exports, Trade, Global Value Chains, and Data
Political Geography:
Africa, Asia, and Global Focus

18. Extreme weather events and economic activity: The case of low water levels on the Rhine river

Author:
Martin Ademmer, Nils Jannsen, and Saskia Mösle
Publication Date:
04-2020
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
In this paper, we exploit exogenous variation in navigability of the Rhine river to analyze the impact of weather-related supply shocks on economic activity in Germany. Our analysis shows that low water levels lead to transportation disruptions that cause a significant and economically meaningful decrease of economic activity. In a month with 30 days of low water, industrial production in Germany declines by about 1 percent, ceteris paribus. Our analysis highlights the importance of extreme weather events for business cycle analysis and contributes to gauging the costs of extreme weather events in advanced economies. Furthermore, we provide a specific example for an idiosyncratic supply shock to a small sector that amplifies to an economically meaningful effect at the macroeconomic level.
Topic:
International Political Economy, Economic Growth, Macroeconomics, Supply Chains, and Weather
Political Geography:
Europe and Germany

19. Comparative Advantage in (Non-)Routine Production

Author:
Liza Archanskaia, Johannes Van Biesebroeck, and Gerald Willmann
Publication Date:
04-2020
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
We illustrate a new source of comparative advantage that is generated by countries’ different ability to adjust to technological change. Our model introduces substitution of workers in codifiable (routine) tasks with more efficient machines, a process extensively documented in the labor literature, into a canonical 2 × 2 × 2 Heckscher-Ohlin model. Our key hypothesis is that labor reallocation across tasks is subject to frictions, the importance of which varies by country. The arrival of capital-augmenting innovations triggers the movement of workers out of routine tasks, and countries with low labor market frictions become relatively abundant in non-routine labor. In the new equilibrium, more flexible countries specialize in producing goods that use non-routine labor more intensively. We document empirically that the ranking of countries with respect to the routine intensity of their exports is strongly related to labor market institutions and to cultural norms that influence adjustment to technological change, such as risk aversion or long-term orientation. The explanatory power of this mechanism for trade flows is especially strong for intra-EU trade.
Topic:
International Political Economy, Science and Technology, Innovation, Trade, and Trade Policy
Political Geography:
Global Focus and European Union

20. IPR Policies and Membership in Standard Setting Organizations: A Social Network Analysis

Author:
Jiaming Jiang, Rajeev K. Goel, and Xingyuan Zhang
Publication Date:
04-2020
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
Whereas technical standards and Standard Setting Organizations (SSOs) are omnipresent and essential to mass production and mass communications, relatively little is formally known about the propensity of firms to belong to certain SSOs. This paper uses a social network analysis technique to empirically analyze the behavior of market participants and their propensities to belong to SSOs. We concentrate our study on standard setting organizations features and their intellectual property rights (IPR) policies such as licensing rules, disclosure requirements, as well as the features of the decision process of standards. Using data on more than 1060 member firms as participants in 28 SSOs, we are able to uniquely graph the membership of firms in SSOs by highlighting some important characteristics. Finally, a multinomial logit regression analysis studies the propensities of firms to belong to four SSOs and member firms’ network communities.
Topic:
International Political Economy, Intellectual Property/Copyright, and Networks
Political Geography:
Global Focus

21. Skills in African Labor Markets and Implications for Migration to Europe

Author:
Andreas Backhaus
Publication Date:
04-2020
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
This paper assesses the potential for skilled labor migration from sub-Saharan Africa to Europe. It utilizes representative surveys from Ghana and Kenya to shed light on the quality and distribution of skills in the labor markets of these countries. Skills in both countries are found to be unevenly distributed, with significant parts of the labor force being essentially unskilled. Similarly designed surveys from France, Germany, and the UK further allow comparing skills and formal education between the African and the European countries. On average, the labor force in the sub-Saharan African countries is less skilled and less educated than the European labor force. Importantly, even at the same levels of formal education, workers in Ghana and Kenya are substantially less skilled than workers in Europe. The paper further considers a number of hypothetical scenarios for skilled labor migration from the African to the European countries. It is demonstrated that the European countries would have to recruit workers from the very top end of the African skill distribution to match European demands for skills. In turn, the average worker from the African labor markets would fit only into the low end of the European skill distribution where employment rates are low. Hence, more regular and skilled labor migration from African countries will unlikely be a remedy for skill shortages in Europe unless migrants are positively selected on their skills. In that case, however, additional opportunities for skilled labor migration would risk a brain drain from African countries that could harm economic development there. Improving the quality of education in sub-Saharan Africa on a broad scale remains indispensable for mutually beneficial migration between Africa and Europe.
Topic:
International Political Economy, Migration, Labor Issues, Migrant Workers, and Skilled Labor
Political Geography:
Kenya, Africa, Europe, Ghana, and Sub-Saharan Africa

22. Estimating the prevalence: Properties of the estimator regarding specificity and sensitivity of the underlying test

Author:
Jens Boysen-Hogrefe and Vincent Stamer
Publication Date:
03-2020
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
We provide a calculation tool to assess the properties of a maximumlikelihood (ML) estimator that extrapolates the true prevalence of an infectious disease from a random sample. The tools allow the researcher to correct for the specificity and sensitivity of the underlying medical test, calculate the standard deviation of the estimator and to plan the needed sample size. This document explains the underlying methods of the calculation tools and provides instructions for their proper use. We apply an adaption of the epidemiological SEIR-model to show that ML-estimators from random sampling tests provide a more realistic rate of infection than common approaches.
Topic:
Economics, International Political Economy, and Infectious Diseases
Political Geography:
Global Focus

23. Labor force participation, job search effort and unemployment insurance in the laboratory

Author:
Wolfgang Lechthaler and Patrick Ring
Publication Date:
03-2020
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
How the provision of unemployment benefits affects employment and unemployment is a debated issue. In this paper, we aim at complementing theoretical and empirical contributions to this debate with a laboratory experiment: We simulate a job market with search effort and labor force participation decisions while varying the maximum length of unemployment benefit eligibility. Our results reveal two separable, opposing effects: Individuals within the labor force search with lower effort when unemployment benefits are extended. However, individuals are more likely to participate in the labor force and to actively search for a job. Concerning employment, the second effect dominates so that unemployment benefits raise employment.
Topic:
Economics, International Political Economy, Markets, Labor Issues, Employment, Unemployment, and Job Creation
Political Geography:
Global Focus

24. The dynamic impact of FX interventions on financial markets

Author:
Lukas Menkhoff, Malte Rieth, and Tobias Stöhr
Publication Date:
03-2020
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
Evidence on the effectiveness of FX interventions in the prevailing higher frequency approaches leaves a gap at horizons going beyond a few days. This is addressed by identifying a structural vector autoregressive model for the daily frequency with an external instrument. Using Japanese data, we find that FX interventions significantly affect exchange rates, although the effect is smaller than in emerging markets, and this impact persists for up to a year. There is no major effect on interest rates, but stock prices increase in line with currency devaluation, in particular those of large (exporting) firms. The results qualitatively hold for US and UK interventions.
Topic:
International Political Economy, Exports, Data, and Models
Political Geography:
United States, Japan, and United Kingdom

25. Does the Belt and Road Initiative stimulate Chinese Exports? The Role of State-Owned Enterprises

Author:
Holger Görg and Haiou Mao
Publication Date:
02-2020
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
This paper evaluates firms’ exporting responses to BRI and considers their heterogeneity in ownership types, product types, regional origin and trade mode. This is done by analyzing firm-product-destination level customs data from 2011 to 2015 in a gravity model framework. Our empirical results show that aggregate export behavior did not change significantly after BRI. However, ownership matters when evaluating firms’ reactions. SOEs increase their total exporting and average export value (the intensive margin) to BRI countries, while private domestic firms show no reaction to BRI at any margin. Further, our results on regional heterogeneity suggests that “open through the west”, i.e., boosting the development of western regions in China, did not appear to work in the short term. Our findings show clearly the implications of BRI’s impact from a firm level perspective.
Topic:
International Political Economy, Belt and Road Initiative (BRI), Exports, Trade, and Economic Development
Political Geography:
China and Global Focus

26. The US–China trade deal and its impact on China’s key trading partners

Author:
Sonali Chowdhry and Gabriel Felbermayr
Publication Date:
02-2020
Content Type:
Policy Brief
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
The US–China Economic and Trade Agreement (ETA) entered into force on 14th February 2020, marking a new phase in their protracted trade and geopolitical rivalry. The ETA includes specific targets for increased Chinese imports of US goods and services, amounting to 200 bn USD over 2020 and 2021. The authors show that these purchase commitments can generate substantial trade diversion effects and market share shifts for China’s top trading partners. In manufacturing, Germany is likely to experience the greatest trade diversion effects in a number of industries such as vehicles (-1.28 bn USD), aircraft (-1.59 bn USD) and industrial machinery (-0.72 bn USD). Moreover, developing countries will be hit if China re-directs its imports towards US suppliers. E.g. Brazil could experience a reduction of 4.95 bn USD in soybeans exports to China in 2021 as a result of the ETA.
Topic:
International Political Economy, International Trade and Finance, Exports, Trade, Trade Policy, and Imports
Political Geography:
United States and China

27. The EU Self-Surplus Puzzle: An Indication of VAT Fraud?

Author:
Martin T. Braml and Gabriel Felbermayr
Publication Date:
01-2019
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
The world runs a trade surplus with itself: Exporters report larger values of exports than what importers report as imports. This is a logically impossible but well known empirical fact. Less well known, in recent years, more than 80 percent of the global surplus is a trade surplus that the EU has with itself. In this paper, we show that this self-surplus of the EU amounts to a striking 307 billion Euro in 2018. It persists in goods, services, and secondary income accounts. It also exists within the Euro Area, and is strongest between neighboring countries. Around the 2004 Eastern Enlargement the EU’s self-surplus quadrupled. Balance of payments data from the United Kingdom appear highly distorted. We argue that the phenomenon is not only due to measurement error. Rather, a large fraction of the EU’s self-surplus puzzle seems related to fraud in value added tax. The loss in tax income could amount to as much as 64 billion Euro per year.
Topic:
International Political Economy, European Union, Trade, and Trade Policy
Political Geography:
Europe