Airports and Urban Growth: Evidence from a Quasi-Natural Policy Experiment

While significant work has been done to examine the determinants of regional development, there is little evidence on the contribution of air services toward this outcome. This paper exploits the unexpected market changes induced by the 1978 Airline Deregulation Act to bring new evidence on the link between airline traffic and local economic growth. Using data for almost 300 Metropolitan Statistical Areas (MSAs) over a two decade time period centered around the policy change, we exploit time variation in long-run growth rates to identify the effects of airline traffic on population, income and employment growth. Our results suggest that air service has a significant positive effect on regional growth, with the magnitude of the effects differing by MSA size and industrial specialization

Airports and Urban Growth: Evidence from a Quasi-Natural Policy Experiment

While significant work has been done to examine the determinants of regional development, there is little evidence on the contribution of air services toward this outcome. This paper exploits the unexpected market changes induced by the 1978 Airline Deregulation Act to bring new evidence on the link between airline traffic and local economic growth. Using data for almost 300 Metropolitan Statistical Areas (MSAs) over a two decade time period centered around the policy change, we exploit time variation in long-run growth rates to identify the effects of airline traffic on population, income and employment growth. Our results suggest that air service has a significant positive effect on regional growth, with the magnitude of the effects differing by MSA size and industrial specialization

Foreign Direct Investment, Aggregate Demand Conditions and Exchange Rate Nexus: A Panel Data Analysis of BRICS Economies

In this study, we attempt to provide underlying theoretical and empirical explanations for exchange rate appreciation due to foreign capital influx and aggregate demand conditions in the BRICS economies. The empirical analysis is based on a panel dataset of BRICS countries over the time period 1992–2013 to substantiate our theoretical findings. For panel co-integration, Pedroni and Johansen-Fisher panel co-integration tests are conducted to compare co-integration among panel countries. We also analyze the results from Dumitrescu-Hurlin panel causality test among variables and use Granger Causality to test for the causal patterns in each of the individual countries. Our findings showed that the exchange rate volatility is directly affected by the flows of FDI, GDP per capita, Capital formulation and House hold consumption. The results have profound implications in terms of exchange rate stability in the BRICS countries and associated risks

The Effect of Tax Treaties on Multinational Firms: New Evidence from Microdata

This paper uses affiliate level data from Swedish multinationals to examine the impact of tax treaties on both overall affiliate sales and the composition of those sales. In line with previous results, we find little evidence for an effect of treaties on the level of total sales. We do, however, find that a tax treaty increases the probability of investment by a firm in a given country. In addition, we find that a treaty reduces exports to the parent but increases imports of intermediate inputs from the parent. This is consistent with treaties increasing the effective host tax. This suggests that tax treaties impact the behavior of multinationals along some dimensions but not along others

The Impact of Exchange Rate on FDI and the Interdependence of FDI Over Time

The paper examines the impact of exchange rates on foreign direct investment (FDI) inflows into the United States in the context of a model that allows for the interdependence of FDI over time. Interdependence is modeled as a two-state Markov process where the two states can be interpreted as either a favorable or an unfavorable environment for FDI in an industry. Unbalanced industry-level panel data from the US wholesale trade sector are used in the analysis and yield two main results. First, the paper finds evidence that FDI is interdependent over time. Second, under a favorable FDI environment, the exchange rate has a positive and significant effect on the average rate of FDI inflows

Vertical Specialization, Tariff Shirking and Trade

The core idea behind the paper is that trade policy matters for the organization of global value chains, a notion largely neglected by economists but which has important implications for our understanding of trade and the international transmission of trade policy shocks. We develop a theoretical model in which a firm's ability to spatially separate manufacturing from headquarter services gives them the flexibility to circumvent economy-specific tariff changes by switching their assembly location abroad. We show that tariff shirking increases the elasticity of bilateral trade to economy-specific tariff hikes due to an extra extensive margin effect. Furthermore, we show that tariff shirking affects the vulnerability of headquarter services and manufacturing to trade policy shocks in opposite ways. While tariff shirking dampens the vulnerability of headquarter services to trade policy shocks, it amplifies the vulnerability of manufacturing to trade policy shocks. Using firm-level and province-level export data from the People's Republic of China, we provide evidence in line with the theoretical model

Effects of Trade Cost on the Textile and Apparel Market: Evidence from Asian Countries

Global textile and apparel industry has since the 1950s been subjected to various forms of trade policy measures. Well noted among these are tariffs and non-tariff barriers (NTB)/policy indicators. Understanding the dynamics in such relevant policy indicators and the implications they yield for trade is a vital step toward informing relevant policy formulation and agribusiness investment decisions. With the textile and apparel industry being the primary grounds on which development in most Asian countries is founded, we for the first time in literature assess effects of various trade cost indicators on global textile and apparel imports from 37 Asian countries using a ‘cost-incorporated’ gravity model for the period 1988–2004. Estimates from this study affirm theory-based associations between trade, distance, cultural linkage, tariffs, and non-tariffs barriers. We however discovered quite interesting associations regarding effects of tariff increments and existence of NTB. Although both are primarily imposed/instilled to restrict trade flow, effect of tariff increments was consistently negative across all models, but that for NTB was consistently positive, although significant only in the case of apparel imports. Plausible reasons behind the implications for tariffs and NTB are elaborated on in this article. A keen discovery from this study, however, is that imports of apparels are more responsive than textile imports to dynamics in various trade-related cost, geographic and economic indicators