Trade, conflicts and political integration : explaining the heterogeneity of regional trade agreements

This paper investigates the determinants of the shape of regional trade agreements (RTAs). Because the world is constituted by independent political entities, international trade flows take place in a system where property rights are unsecured and RTAs should be understood as regulation mechanisms. In this theoretical framework, trade and security issues interact in the formation of RTAs, so that their determinants differ according to their level of political integration, defined by their ability to promote the negotiated settlement of conflicts. Empirical results confirm that countries more subject to interstate disputes and naturally more opened to trade are more likely to create politically integrated regional agreements, such as common markets or custom unions. On the contrary, international insecurity deters less integrated agreements implying a weak institutional framework, such as preferential or free trade agreements.International conflicts, political integration, regionalism, trade, war.

Trade, Conflicts, and Political Integration: the Regional Interplays

This paper investigates the determinants of the different forms taken by regional integration in different parts of the world. This raises the issue of the relationship between economic and political integration. The theoretical model shows that, in an insecure world, the interplays between security and economic forces shape the decision to form a regional trading agreement (RTA) and its institutional design. Empirical results confirm that regionalism should be understood as a regulation mechanism: countries experiencing more interstate disputes are more likely to create a deep RTA, such as custom union or common market, whereas international insecurity deters the formation of preferential and free trade agreements.conflict, trade, regionalism, political integration

Foreign direct investment and bilateral investment treaties, an international political perspective

URL des Documents de travail :http://ces.univ-paris1.fr/cesdp/CESFramDP2007.htmDocuments de travail du Centre d'Economie de la Sorbonne 2007.45 - ISSN : 1955-611XMost of the literature dealing with the location of foreign direct investment (FDI) has ignored the fact that multinational enterprises (MME) are not stateless and that their activities take place within an international political system : the return on their FDI can be influenced by the quality of interstate political relations between their home and host countries. This paper investigates whether the quality of interstate political relations between countries influences the volume of bilateral FDI. Thanks to the construction of a new indicator of the quality of interstate political relations, it is found that better interstate political relations foster bilateral FDI, through the signature of a bilateral investment treaty (BIT) may dampen the impact of their fluctuations. In addition, the effect of a variation in the quality of domestic institutions increases with the entry into force of a BIT, suggesting that the latter signals the credibility of an institutional improvement. Overall, when both indirect effects are considered, the entry into force of a BIT increases bilateral FDI stocks by 16%, on average, a lower impact than those found in previous studies. This effect nevertheless significantly differs according to the quality of both interstate political relations and domestic institutions.La littérature sur la localisation des investissements directs à l'étranger (IDE) ignore, en grande partie, le fait que les entreprises multinationales ne sont pas apatrides et que leurs activités prennent place dans le système politique international. Leur retour sur investissement peut ainsi être grandement affecté par la qualité des relations politiques entre leur pays d'origine et le pays hôte de leurs investissements. Cet article étudie dans quelle mesure la qualité des relations politiques entre Etats influence le volume des IDE bilatéraux. En construisant un nouvel indicateur de la qualité des relations politiques internationales, nous montrons qu'entretenir de bonnes relations politiques favorise les IDE bilatéraux. La signature d'un traité bilatéral d'investissement (TBI) limite cependant la pertinence des relations politiques pour les décisions d'investissement. Par ailleurs, l'effet d'une amélioration des institutions domestiques augmente avec l'entrée en application d'un TBI, ce qui suggère que ces accords signalent la crédibilité des institutions domestique. Dans l'ensemble, lorsque ces deux effets sont pris en compte, l'entrée en vigueur d'un TBI augmente les stocks bilatéraux d'IDE de 16% en moyenne, un impact moins important que ceux trouvés dans les études précédentes. L'ampleur de cet effet varie cependant beaucoup selon la qualité des relations politiques entre Etats et des institutions domestiques

Demand learning and firm dynamics: evidence from exporters

This paper provides direct evidence that learning about demand is an important driver of firms' dynamics. We present a model of Bayesian learning in which firms are uncertain about their idiosyncratic demand in each of the markets they serve, and update their beliefs as noisy information arrives. Firms are predicted to update more their beliefs to a given demand shock, the younger they are. We test and empirically confirm this prediction, using the structure of the model together with exporter-level data to identify idiosyncratic demand shocks and the firms' beliefs about future demand. Consistent with the theory, we also find that the learning process is weaker in more uncertain environments

Global value chains during the great trade collapse: a bullwhip effect?

This paper analyzes the performance of global value chains during the trade collapse. To do so, it exploits a unique transaction-level dataset on French firms containing information on cross-border monthly transactions matched with data on worldwide intra-firm linkages as defined by property rights (multinational business groups, hierarchies of firms). This newly assembled dataset allows us to distinguish firm-level transactions among two alternative organizational modes of global value chains: internalization of activities (intra-group trade/trade among related parties) or establishment of supply contracts (arm's length trade/trade among unrelated parties). After an overall assessment of the role of global value chains during the trade collapse, we document that intra-group trade in intermediates was characterized by a faster drop followed by a faster recovery than arm's length trade. Amplified fluctuations in terms of trade elasticities by value chains have been referred to as the "bullwhip effect" and have been attributed to the adjustment of inventories within supply chains. In this paper we first confirm the existence of such an effect due to trade in intermediates, and we underline the role that different organizational modes can play in driving this adjustment. JEL Classification: F23, F15, L22.Trade collapse, multinational firms, global value chains, hierarchies of firms , vertical integration.

Exports and sectoral financial dependence: evidence on French firms during the great global crisis

The unprecedented drop in international trade during the last quarter of 2008 and the first quarter of 2009 has mainly been analysed at the macroeconomic or sectoral level. However, exporters who are heterogeneous in terms of productivity, size or external financial dependence should be heterogeneously affected by the crisis. This issue is examined in this paper by using data on monthly exports at the product and destination level for some 100,000 individual French exporters, up to 2009M4. We show that the drop in French exports is mainly due to the intensive margin of large exporters. Small and large exporters are evenly affected when sectoral and geographical specialisations are controlled for. Lastly, exporters (small and large) in sectors structurally more dependent on external finance are the most affected by the crisis. JEL Classification: F02, F10, G01financial crisis, firms’ heterogeneity, intensive and extensive margins, international trade

Global Value Chains During the Great Trade Collapse: A Bullwhip Effect?

This paper analyzes the performance of global value chains during the trade collapse. To do so, it exploits a unique transaction-level dataset on French firms containing information on cross-border monthly transactions matched with data on worldwide intra-.rm linkages as defined by property rights (multinational business groups, hierarchies of firms). This newly assembled dataset allows us to distinguish firm-level transactions among two alternative organizational modes of global value chains: internalization of activities (intra- group trade/trade among related parties) or establishment of supply contracts (arm's length trade/trade among unrelated parties). After an overall assessment of the role of global value chains during the trade collapse, we document that intra-group trade in intermediates was characterized by a faster drop followed by a faster recovery than arm's length trade. Amplified fluctuations in terms of trade elasticities by value chains have been referred to as the "bullwhip effect" and have been attributed to the adjustment of inventories within supply chains. In this paper we first con.rm the existence of such an effect due to trade in inter- mediates, and we underline the role that different organizational modes can play in driving this adjustment.trade collapse, multinational firms, global value chains, hierarchies of firms, vertical integration

One size does not fit all... : Panel data : Bayesian model averaging and data poolability

We show in this paper why researchers ought to pay particular attention to the issues of model uncertainty, data poolability, and country heterogeneity in their panel data applications. We focus on the identification of robust determinants of current account balances (CABs). Applying Bayesian Model Averaging, we adopt a flexible modelling approach to highlight that (i) many determinants have limited relevance when accounting for model uncertainty; (ii) OECD and non-OECD countries cannot be pooled together when accounting for slope heterogeneity; iii) cross-sectional and time-series relationships can diverge. Using a novel approach which allows us to control for country fixed effects in a cross-sectional setting, we demonstrate that this last finding is the outcome of substantial unobserved country heterogeneity and not diverging responses across time horizons. Our methodologies offer direct solutions to the issues raised in this paper and have broad applications

The Cost of Non-Europe, Revisited

In this paper we quantify the “Cost of Non-Europe”, i.e. the trade-related welfare gains each country member has reaped from the European Union. Thirty years after the terminology of Non-Europe was used to give estimates of the gains from further integration, we use modern versions of the gravity model to estimate the trade creation implied by the EU, and apply those to counterfactual exercises where for instance the EU returns to a “normal”, shallow-type regional agreement, or reverts to WTO rules. Those scenarios are envisioned with or without the exit of the United Kingdom from the EU (Brexit) happening, which points to interesting cross-country differences and potential cascade effects in doing and undoing of trade agreements