Asymmetries in Heterogeneous Integrated Areas: Evidence from Intra-EU Sectoral Trade

This paper estimates gravity models for both directions of trade between the EU-15 and the CEEC-10. The two groups form a heterogeneous integrated area (EU-27) with respect to country size, income levels, relative factor endowments and a different history of economic systems. The estimation was conducted on industries with different degrees of scale economies and factor-intensities in the presence of both spatial (distance and borders) and non-spatial (Eastern enlargements and Euro membership) trade costs. The results highlight the asymmetry in intra-bloc trade when the latter is heterogeneous: country size, income, factor endowments and the various trade barriers or facilitators are found to be significant determinants of intra-EU trade but to an extent that is country and industry-specific. The results also show how this heterogeneity eliminates the equivalence between exports and imports as the dependent variable in gravity models and makes the results sensitive to the definition of the bilateral flows to be estimated.asymmetry, gravity model, trade, EU enlargement

The "New" Economic Theories

This paper has two main goals. The first is to study the links between the “new” economic theories, this is, the “new” trade theory, the “new” growth theory and the “new” economic geography. These are three apparently distinct strands of economics, yet they have a common motivation: the role of increasing returns and the consequent market structure (imperfect/monopolistic competition). The second goal is to present the “new” economic theories as case studies in what concerns the debate over modelling and its role in the progress of economics. Since these theories contribute fundamentally by applying new modelling techniques to old real world problems, they add something to economic knowledge to the extent that we accept formalisation as a source of progress in economics.Krugman, new growth theory, new trade theory, new economic geography, history of economic thought.

Sectoral impact of free intra-EU migration in the presence of unemployment benefits

This paper builds a multi-sector, three country (centre and two peripheries), New Economic Geography model, where industrial sectors differ in the degree of scale economies and skill-intensity. The model incorporates, for the first time in this class of models, payments to the unemployed in each country. The model is used to evaluate the impact of migration in the enlarged EU, and would also be directly relevant for the NAFTA countries, under a range of possible migration scenarios involving three types of workers: skilled, unskilled, and unemployed. Full migration is the only scenario in which the central country obtains an increase in both skilled and unskilled wages and employment levels. The obverse is true for the two peripheral countries, they lose firms and real wages decline. As a consequence, the central country has an interest in allowing for full migration but the two peripheral countries have an interest in restricting migration.new economic geography, migration, EU enlargement, unemployment, human capital

Sectoral Exchange Rate Pass-through: A Tale of Two Policy Regimes in India

This paper uses panel data to analyse the extent to which the prices of India’s imports and exports in nine product groups react to exchange rate changes before (1980-90) and after (1991-2001) a change in policy that included the adoption of a flexible exchange rate regime and an acceleration of trade liberalisation. It finds that for all the nine groups of Indian industries the null hypothesis of complete pass-through from exchange rate changes into import prices cannot be rejected. On the contrary, the results suggest that Indian exporters appear to have to some degree passed through exchange rate changes into foreign currency export prices in three industry groups in the 1980s and in six groups of industries in the 1990s. The increase in the number of sectors exhibiting some degree of pass-through in the 1990s, relative to the 1980s, may be partly attributable to the elimination of currency and trade controls. Whilst the pass-through into import prices does not exhibit a structural break around 1991, a Chow test revealed the existence of such structural break in pass-through into export prices. The pass-through to import prices seems to be exogenous (determined by external factors), but the pass-through to export prices appears to be endogenous (driven by internal factors, mostly trade and exchange rate policies).sectoral exchange rate pass-through, pricing-to-market, panel estimation, India

Trade Effects of the Europe Agreements

The eastern enlargement of the European Union (EU) brought and will bring full membership to countries whose trade barriers with the EU had to a large extent already been removed under Free Trade Agreements (FTAs) during the 1990s. We employ a theory-based new version of a gravity equation, whose specification allows for an assessment of the impact of the arrangements on extra- and intra-group imports. We find robust evidence that the agreements have substantially increased intra-group trade, in the case of the Czech and Slovak Republic at the expense of the Rest of the World (ROW).Free Trade Agreements; Gravity equation; Central and Eastern Europe; Panel data

Regional inflation dynamics using space-time models

This paper provides empirical evidence of the role of spatial factors on the determination of inflation dynamics for a representative set of tradable commodities in Chile. We present a simple model that explains inflation divergence across regions in a monetary union with similar preferences as a consequence of the geographical allocation of producers in the different regions. Our results indicate that spatial allocation together with transport costs are important determinants of regional inflation while macroeconomic common factors do not play an important role in this process. Existing literature had obtained the opposite result for Europe and the reasons for that difference warrant further investigation. Moreover, we find that geographical distance seems to be a more appropriate measure of neighbourhood than the adjacency of regions.regional inflation dynamics, space-time models, Chile

Deixai Vir a Mim os Meninos Perdidos, Que Sou o Liber

" O sentimento é filho da matéria."2 O Liber é matéria esculpida, milagre de Pigmalião, sonho encarnado, fonte de vida, carnalidade leitosa do sentimento do homem, deleitoso alimento: patriarca do livro. O livro, ser palpitante de sangue preto, pesado de substância universal, reservatório de sonhos solitários e adormecidos, espera, no seu corpo branco, por muitos renascimentos. Ventre fértil, preto sobre branco, verdade limpa, espera uma travessia temperada de orvalhadas fecundas. Uma criança virá. À chuva-seiva, vinda de ao pé do luar, via láctea, há-de reunir o fogo vivo

Migration creation and diversion in the EU: Are CEECs immigrants crowding-out the rest?

This paper applies the concept of trade creation and diversion to immigration into the EU-15 in the 1980s and 1990s. In particular, the 1990s process of East-West integration, culminating in the May 2004 enlargement, could potentially create immigration from the new member countries and at the same time divert migration from non-EU countries. In this context, the question this paper tries to answer is fundamentally whether the extension of the EU Single Market to the new member countries has the potential to crowd-out non-EU immigrants. The analysis is carried out using trend analysis, Truman shares, and panel data gravity models. The results are quite robust to a range of regression methods, model specifications, dependent variables, and time periods. They broadly support the migration creation hypothesis, but the evidence on the migration diversion hypothesis is mixed. There is evidence of some diversion away from other non-member European countries, such as ex-USSR and ex-Yugoslavia countries, in favour of the new Central and Eastern European members. However, the evidence of diversion away from non-European countries is much weaker, if at all existent. The high impact of a common language, when compared to distance or even a common border, may help preserving migration channels from outside Europe. Within Europe, shorter distances and common borders become more relevant

The skilled U-shaped Europe: is it really and on which side does it stand?

This paper derives from a New Economic Geography model, and estimates, a quadratic sectoral real wage equation for the member countries of the enlarged EU. When significant, the real wages U-shaped curve is increasing and concave with respect to market access, but decreasing and convex with respect to access to skilled labour. Real wages in Chemicals, Wood Products, Leather Products and Textiles do not react to market access, and only those sectors with low degree of scale economies and low-skill intensity are U-shaped with respect to access to skilled labour. At the present GDP levels, EU geography is still in the divergence-inducing side of the U-curve. In addition, EU real wages are significantly determined by country-specific characteristics other than geography that push Northern real wages upward and pull Eastern real wages downward

The "new" economic theories

This paper has two main goals. The first is to study the links between the “new” economic theories, this is, the “new” trade theory, the “new” growth theory and the “new” economic geography. These are three apparently distinct strands of economics, yet they have a common motivation: the role of increasing returns and the consequent market structure (imperfect/monopolistic competition). The second goal is to present the “new” economic theories as case studies in what concerns the debate over modelling and its role in the progress of economics. Since these theories contribute fundamentally by applying new modelling techniques to old real world problems, they add something to economic knowledge to the extent that we accept formalisation as a source of progress in economics