Trade crisis - what trade crisis?

Giordano Mion and colleagues investigate whether the trade collapse of 2008-09 reflected a crisis of international trade itself

Spatial Externalities and Empirical Analysis: The Case of Italy

In the last ten years the space issue, i.e. the study of the role played by space in economic phenomena, has attracted a lot of interest from many economic fields. The combination of increasing returns, market imperfections, and trade costs creates forces that, together with factor endowments, determine the distribution of economic activities. The aim of this work is to estimate a model of economic geography, using a space-time panel data on Italian provinces, in order to both test the empirical relevance of this theory, and try to give a measure of the geographic extent of spatial externalities. Particular attention has been devoted to address rigorously those endogeneity issues that naturally arises when dealing with both structural models and spatial data. Our results are consistent with the hypothesis that product-market linkages actually influence the geographic concentration of economic activities and that their spread over space is, contrary to previous findings, not negligible. --Economic Geography,Spatial Externalities,Market Potential

Estimating the impact of Brexit on European countries and regions. Bertelsmann Policy Paper, March 2019

In this paper we provide quantitative insights into the economic impact of Brexit on European countries and regions. More specif- ically, we evaluate the impact of a soft and a hard Brexit on pro- ductivity, markups, product variety, welfare and the distribution of population across European countries and regions. We employ a model characterized by costly trade, love of variety, heterogeneous firms, labour mobility as well as endogenous markups and produc- tivity. We quantify the model using goods and services trade data as well as GDP and population for EEA countries/regions plus BRIC countries and other OECD countries. We finally compute, starting from the observed initial situation in the year 2016, counterfactual economic changes stemming from changes in trade costs related to the implementation of both a soft and a hard Brexit. We find that Brexit would have a significant impact on the UK and EU economies. A hard Brexit could lead to annual welfare losses of 57 billion euros in the UK and about 40 billion euros in other EU countries. A soft Brexit would strongly mitigate these losses. Productivity losses and markup increases drive the simulated effects

The Single Market, welfare and population size – an analysis of EU countries and regions. Bertelsmann Policy Brief

The Single Market (SM) constitutes the world’s largest economic area. Its trade liberalization policies can bring about significant income gains: Fewer barriers to trade are likely to increase competition and boost the productivity of firms – which would positively impact upon wage growth. Moreover, heightened competition decreases markups and reduces the prices of goods and services, which fosters consumer welfare. Through these channels, the SM increases the size of the “economic pie” and contributes to stronger economic growth across European countries and regions. These welfare gains can be deemed as “direct” or “first round” as fewer trade barriers and thus lower trade costs due to the SM directly translate into higher productivity and lower prices. Empirically, these welfare gains have been documented in a number of recent studies (e.g., Ponattu and Mion, 2019a)

The impact of UKTI trade services on value of goods exported by supported firms

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Estimating economic benefits of the Single Market for European countries and regions. Bertelsmann Stiftung Policy Paper, May 2019 Separate pdf Technical Appendix for Policy Paper Estimating economic benefits of the Single Market for European countries and regions

This study provides insights into the economic benefits of the Eu- ropean Single Market (SM) for countries and regions across Europe. Specifically, we evaluate the impact of the trade boosting effects of the SM on productivity, markups, product variety, welfare and the dis- tribution of population across European countries and regions. We employ a model characterized by costly trade, love of variety, hetero- geneous firms, labour mobility as well as endogenous markups and productivity. The model is quantified using trade as well as GDP and population data for European countries and regions as well as other countries. We compute counterfactual economic changes stemming from changes in trade costs related to the SM. The findings suggest that on average, EU citizens’ per capita welfare gains from the SM amount to 840 euros per year. We uncover a strong heterogeneity of gains: Countries and regions in the geographic core of the EU see gains of up to 3,600 euros per capita (a 4.7% increase) while gains in some peripheral regions can be as small as 150 euros (about 2%). We also shed light on regional variation of welfare gains from the SM within individual EU countries

Trade in services : IT and task content

In this paper we investigate the determinants of the dramatic increase in services tradability focusing on the extensive margin of the phenomenon. We use balance sheet and firm-level service trade information over the period 1995-2005 provided by the National Bank of Belgium and we merge it with information on the evolution of information technology use and tasks performed by workers from the qualification and career survey provided by the BIBB-IAB. We show that technological change, measured either by the more intensive use of information technologies or by changes in the task content of jobs, has substantially contributed to the increase in the number of service-trading firms. Interestingly, we find evidence of a churning effect. While technological change has induced net entry into service trading, it has also increased the likelihood of both gross entry and exit of firms. Furthermore, our evidence suggests that due to the peculiar nature of services provision, the change in the tasks content of jobs is a better measure of technological change than the use of information technologies. Our results are robust to controlling for service trade liberalization and offshoring.trade in services; extensive margin; technological change; task content

The spatial sorting and matching of skills and firms

Using a matched employer-employee database for Italy we look at the spatial distribution of wages across provinces. This rich database allows us to contribute at opening the black box of agglomeration economies exploiting the micro dimension of the interaction among economic agents, both individuals and firms. We provide evidence that firm size and particularly skills are sorted across space, and explain a large portion of the spatial wage variation that could otherwise be attributed to aggregate proxies of agglomeration externalities. Our data further support the assortative matching hypothesis, that we show not to be driven by co-location of "good" workers and firms. Finally, we point out that this assortative matching is negatively related to local market size.Spatial Externalities; Panel-Data; Skills; Firms' Heterogeneity; Sorting; Matching

Import Competition from and Outsourcing to China: A Curse or Blessing for Firms?

We use Belgian manufacturing firm-level data over the period 1996- 2007 to analyze the impact of imports from different origins on firm growth, exit, and skill upgrading. For this purpose we use both industry-level and firm-level imports by country of origin and distinguish between firm-level outsourcing of final versus intermediate goods. Results indicate that China is different from both other low-wage and OECD countries. Industry-level import competition and firm-level outsourcing to China reduce firm employment growth and induce skill upgrading. In contrast, industry-level imports have no effect on Belgian firm survival, while firm-level outsourcing of finished goods to China even increased firm's probability of survival. In terms of skill upgrading, the effect of Chinese imports is large. Import competition from China accounts for 42% (20%) of the within firm increase in the share of skilled workers (non-production workers) in Belgian manufacturing over the peri od of our analysis, but these effects, as well as the employment reducing effect, remain mainly in low-tech industries. Firm-level outsourcing to China further accounts for a small but significant increase in the share of non-production workers. This change in employment structure is in line with predictions of recent model of trade-induced technological change and offshoring.import competition, outsourcing, China, skill upgrading, technological change