The Impact of trade preferences on export prices in the European Union - who captures the preference rent?

Preferential Trade Agreements (PTAs) aim at increasing trade flows via reductions on applied tariffs and the incentives created by the difference between the applied and the most favoured nation (MFN) tariff, the preference margin. An often omitted element in PTAs evaluation is the possibility that the wedge between preferential and MFN tariffs may induce a preference rent. This paper analyses empirically who captures the preference rent by exploiting a unique dataset of imports in the European Union at a highly disaggregated level (CN-10) linked to information on the preferential regime used and the tariff applied. In order to remove potential bias and measurement errors from comparing preferential prices from specific countries and products with average MFN prices, this paper uses the prices from the same country, product and year. This is possible since we observe in the database a large number of cases where in the same year a preferential regime is both utilised and non-utilised. Our main findings suggest that on average an exporter obtain a larger price margin under a preferential regime than under MFN. However, this preference rent is only partially appropriated by exporters with a pass-through coefficient from preference to price margins that oscillates between 0.16 and 0.5.Preferential Trade Agreements; Unilateral preference; GSP; EBA; Price margins; Preference rent

The Economic Engagement Footprint of Rising Powers in Sub-Saharan Africa: An Analysis of Trade, Foreign Direct Investment and Aid Flows

Rising powers such as Brazil, China, India, South Africa, the Gulf states or Turkey have entered the development arena through their expanding relationships with low-income countries (LICs). One region where this engagement has been increasing more significantly is sub-Saharan Africa (SSA). Estimates suggest that over the last decade both trade and foreign direct investment (FDI) from emerging economies to Africa ballooned. However, some views suggest that the importance of engagement from these countries is still small compared to traditional OECD donors, and highlight that established relationships can sometimes be more likely to satisfy the commercial and economic interests of these new donors. The objective of this report is to understand and measure the engagement of rising powers in SSA.1 Specifically, the report attempts to clarify the importance and nature of their engagement and the distinctiveness of their economic relationships with SSA, among the rising powers themselves and also in relation to traditional OECD donors, and to start analysing their likely development footprint arising from their economic engagement.DFI

Distortions to Agricultural Incentives in Mozambique

Distorted incentives, agricultural and trade policy reforms, national agricultural development, Agricultural and Food Policy, International Relations/Trade, F13, F14, Q17, Q18,

Explaining the Diversification Path of Exporters in Brazil: How Similar and Sophisticated are New Products?

A stylised fact of the economic literature suggests that export diversification is good for economic growth and is associated with economic development. In addition, there is evidence suggesting that the level of sophistication of countries’ exports “matters” for growth and development. This paper contributes to this literature by analysing two unexplored dimensions of export diversification: the degree of relatedness (similarity) and sophistication of new products in relation to existing ones. The objective of this paper is to understand the mechanisms through which firms are able to diversify to less related and more sophisticated activities. We do so using a unique dataset that links data on exports, innovation and firms’ characteristics at the firm level in Brazil. The main findings suggest that i) diversification occurs in very closely related activities, where firms have some core competences, ii) most diversification occurs in new products with lower level of sophistication than existing exports, iii) the degree of diversification and innovativeness of the production basket, and the position that the firm has developed in the domestic market appear to matter for diversification towards more or less distant products.Diversification; Relatedness; Sophistication; Trade; Innovation; Brazil

What is the Economic Engagement Footprint of Rising Powers in Africa?

The role of rising powers has become increasingly important in international development. Some of these countries base their development assistance strategy on the ‘South–South Cooperation’ framework, centred on a notion of equal partner relationships and extending cooperation beyond aid flows. Our research shows that rising powers’ economic engagement with countries in sub-Saharan Africa (SSA) is not that different to that of OECD countries in relation to sector and country allocations of aid, trade and Foreign Direct Investment (FDI). As such, the ‘South–South’ cooperation framework does not yet appear to be distinctive when looking at aggregate economic flows.DFI

Innovation Patterns and Their Effects on Firm-Level Productivity in South Asia

This paper describes and benchmarks innovation activities for a sample of countries in the South Asia region, as well as the impact of these activities on firm-level productivity. The evidence gathered suggests that countries in the South Asia region can be divided into two groups, both in terms of the magnitude and composition of the innovation activities: leaders (Bangladesh and India) and laggards (Nepal and Pakistan). Leaders present higher rates of innovation activities than laggards and focus more on process innovation than in product innovation. Also, differences across-firms within all countries tend to present similar patterns when considering both leaders and laggards; with the acquisition of knowledge capital (e.g., R&D, investments in equipment, training) highly concentrated in few firms, and mature, exporter, and foreign-owned firms as the most innovative of the region. The evidence also suggests a positive impact of innovation on productivity, primarily via incremental innovation, especially in India

The impact of preferences on developing countries’ exports to the European Union: bilateral gravity modelling at the product level

Unilateral preferences aim at increasing exports from developing countries via reductions on applied tariffs and the incentives created by the preference margin. After decades of existence the evidence as to the extent to which preferential schemes have been genuinely effective in increasing exports is mixed. This paper evaluates the impact of the European Union’s (EU) unilateral preferential regimes on the exports of developing countries using a bilateral gravity model at the product level. We use a unique dataset that allows us to determine the actual tariff rate paid by each export flow at the product level (Combined Nomenclature CN-10 digits) to the EU and the preferential regime of entry. This allows us to accurately specify the impact of each trade regime and to properly address the issue of utilisation and non-utilisation of trade preferences. The most important findings of the paper are that unilateral preferences have been effective in increasing exports to the EU both as a result of the direct effect of lower tariffs and positive preference margin, and because of secondary effects associated with the preference regimes; although the outcome of these secondary effects depends on the margin of trade considered

Firm behaviour and the introduction of new exports : evidence from Brazil

This paper contributes to understanding the process of export diversification by analysing firm level determinants in Brazil during the period 2000–2009. The first objective of the paper is to establish the set of firm characteristics and processes that are more conductive to new exports; the second, to identify different pathways to diversification regarding relatedness and sophistication and, which firm level behaviours can be associated to the different paths. We answer these questions using a unique dataset that links data on exports, innovation and firms characteristics at the firm level. The paper contributes to the literature on export diversification and on preparation for exporting by identifying firm level behaviours that contribute to the process of diversification. In particular, the findings suggest that firms prepare for diversification by first gaining power in the domestic market and more importantly that they do so by adopting specific innovation and learning efforts. Keywords: diversification; relatedness; sophistication; trade; innovation; Brazil JEL: F14; L2

Explaining differences in the returns to R&D in Argentina: the role of contextual factors

Argentinean firms’ investments in R&D are well below its regional peers. One potential explanation for this fact is the existence of low and heterogeneous returns for these investments. This paper uses novel microdata to estimate the returns to R&D and analyse the role of contextual factors in shaping its heterogeneity. The findings confirm that returns are indeed heterogeneous and depend on some important factors related to the market context, such as measures of uncertainty; and the knowledge context, such as knowledge spillovers. Acknowledging that heterogeneity of returns depends on firms’ context is crucial for designing innovation policies to boost private R&D returns.Fil: Arza, Valeria. Consejo Nacional de Investigaciones Científicas y Técnicas; Argentina. Universidad Nacional de San Martin. Escuela de Economia y Negocios. Centro de Investigaciones Para la Transformacion.; ArgentinaFil: Cirera, Xavier. The World Bank; Estados UnidosFil: Lopez, Emanuel. Consejo Nacional de Investigaciones Científicas y Técnicas; Argentina. Universidad Nacional de San Martin. Escuela de Economia y Negocios. Centro de Investigaciones Para la Transformacion.; ArgentinaFil: Colonna, Agustina. Universidad Nacional de San Martin. Escuela de Economia y Negocios. Centro de Investigaciones Para la Transformacion.; Argentin