The relationship between trade openness and economic growth: Some new insights on the openness measurement issue

Empirical results on the links between trade openness and economic growth often suggest that, in the long run, more outward‐oriented countries register better economic growth. However, a similar level of trade openness can hide different types of trade structures. The aim of this paper was to enrich the way of measuring trade openness taking into account two different dimensions of countries’ integration in world trade: export quality and export variety. Based on the estimation of an endogenous growth model on a panel of 169 countries between 1988 and 2014 using a generalised method of moments estimator, our results confirm that countries exporting higher quality products and new varieties grow more rapidly. More importantly, we find a non‐linear pattern between the export ratio and the quality of the export basket, suggesting that openness to trade may impact growth negatively for countries which are specialised in low‐quality products. A non‐linear relationship between export variety, the export ratio and growth is also found, suggesting that countries increasing their exports will grow more rapidly after reaching a certain degree of the extensive margin of exports.     

The Chinisation of Africa: The Case of Angola

(1249) Renato Aguilar and Andrea Goldstein The relationship between the Asian Drivers and Angola has attracted an attention only paralleled by the one surrounding interactions with Sudan. Three closely related perspectives are important. First, the rapid expansion of the Chinese and Indian economies has sustained the world price for oil, of which Angola is the second‐largest producer in sub‐Saharan Africa. In the process, China has also become Angola’s third‐largest trading partner, with a sizeable trade surplus favouring Angola. Second, from an international financing perspective, China’s keen interest to diversify the portfolio of assets in which to invest its huge international reserves is only matched by Angola’s need to find alternatives to normal and concessional sources of international financing, from which it is excluded due to the lack of progress in negotiating with the Bretton Woods institutions. Third, all these issues must be understood in the broader and possibly more complex scenario of the political economy of the relationship between Angola and the world. Because of the country’s size and control over huge oil resources, the growing presence of China in Angola has reverberations across the rest of Africa. And Angola has also joined OPEC in late 2006.     

The Political Economy of Strategic Trade Policy and the Brazil–Canada Export Subsidies Saga

In this paper we study the on‐going trade dispute between Canada and Brazil on export subsidies in the aircraft industry and the reasons for its escalation. This is a peculiar case of strategic trade policy insofar as the good, i.e. regional jets, is heavily dependent on sub‐systems that are imported in the two countries. The hypothesis that the dispute solely derives from the search for rents and externalities is therefore incomplete. Without downplaying the role of interest politics, we argue that in both countries ideas about the goals of trade policy have an important place in explaining why this dispute drags on. For Canada, the belief in a rules‐based trading regime has led it to strongly oppose violations, while insecurity about its competitiveness has led to a variety of government schemes to support firms in advanced sectors like aerospace. For Brazil, its place as a leader of the developing world acted as a rallying point for government and firms alike. The research also argues that the WTO process has actually made a resolution of the dispute more difficult by making it too costly for firms and countries to comply with the costs of losing.     

Variation in Corporate Governance and Firm Valuation – an International Study

In this paper, we investigate the types of firms that are likely to deviate from common practice in corporate governance of their home countries and examine how the deviation is correlated with firm value. Our results show that firms with higher institutional holdings, lower insider holdings, and higher sales growth are more likely to deviate from common practice in civil law countries, whereas, in common law countries, especially in the USA, firms with lower institutional holdings, higher insider holdings, and lower sales growth are likely to deviate from common practice. We document a strong positive correlation between governance deviation and firm value in civil law countries. This relationship is robust to different testing and sample selection methods. The results, however, are mixed for US firms and not significant in other common law countries. Using the deviation from common practice as a proxy of firm‐level impact on corporate governance, our results provide evidence that firm‐level effect matters in governance quality and the effect varies across countries.     

FDI,Productivity and Financial Development

This paper examines the effect of foreign direct investment (FDI) on growth by focusing on the complementarities between FDI inflows and financial markets. In our earlier work, we found that FDI is beneficial for growth only if the host country has well‐developed financial institutions. In this paper, we investigate whether this effect operates through factor accumulation and/or improvements in total factor productivity (TFP). Factor accumulation – physical and human capital – does not seem to be the main channel through which countries benefit from FDI. Instead, we find that countries with well‐developed financial markets gain significantly from FDI via TFP improvements. These results are consistent with the recent findings in the growth literature that shows the important role of TFP over factors in explaining cross‐country income differences.     

The Trade Effects of the EU–Turkey Customs Union

In the present study we argue that the salient features of both the EU‐15 countries and Turkey are conducive to making the effects of the 1995 EU–Turkey customs union asymmetric among the incumbent EU countries. In order to support our argument we rely on a model in which trade involves the exchange of vertically differentiated products. This model generates the prediction that the more contiguous an incumbent country is to the joining country in terms of technological sophistication, the larger will be the crowding out of this country's exports to the other incumbent countries as a result of the CU expansion. Using a gravity model we estimate the effects of the customs union between Turkey and the EU‐15 by differentiating between exports from (a) lower‐technology EU‐15 countries (we term this group of countries ‘South’) to higher‐technology EU‐15 countries (the ‘North’), (b) North to South, (c) South to Turkey, (d) North to Turkey, and (e) Turkey to EU‐15. Our econometric results indicate that, in contrast to North's exports to the other EU‐15 countries (which have remained intact), the Southern countries’ exports to the other EU‐15 countries have declined as a result of the CU. Moreover, the extra penetration of the Turkish market by the EU‐15 countries has not been more favourable to the Southern group.     

Are Imports and Exports Cointegrated? An International Comparison

In this paper we use the Johansen and Juselius cointegration technique to examine the long‐run convergence between imports and exports for a number of industrialized countries. The results indicate that there exists a long‐run steady‐state relationship between imports and exports for most countries in the sample. The policy implications of our findings are that the countries are not in violation of their international budget constraints and, more importantly, there is no productivity gap between the domestic economy and the rest of the world, implying a lack of permanent technological shocks to the domestic economy.     

Foreign Direct Investment and Economic Growth in SSA: The Role of Institutions

This article examines the relationship among foreign direct investment (FDI), institutions and economic growth in sub‐Saharan Africa in different country environs. We employ a two‐step generalized methods of moments estimator with Weidmeijer corrected standard errors and orthogonal deviations to examine the empirical relations. In the full sample, we do not find evidence that FDI promotes growth. We also do not find a significant relationship between institutions and economic growth. Finally, we do not find convincing evidence that institutions alter favorably the effect of FDI on economic growth. In the subsample that excludes countries with developed financial markets, again we do not find a significant relation between FDI and economic growth. However, we find evidence suggesting that institutions play a direct role in spurring economic growth. Further, the quality of institutions seems to alter favorably the relationship between FDI and economic growth. Finally, in the sample that excludes countries with abundant natural resources, we find a direct and positive relationship between FDI and economic growth. We also find a direct relationship between institutions and economic growth. The growth‐enhancing effects of FDI, however, seem to reduce as the quality of institutions improves. The major implication from our study is that countries should take into consideration their own realities when they fashion policies to benefit from FDI in terms of achieving better growth outcomes. © 2016 Wiley Periodicals, Inc.     

Export Premium,Self‐selection and Learning‐by‐Exporting: Evidence from Chinese Matched Firms

This study empirically focuses on examining the hypotheses of export premium (exporters are more productive than non‐exporters), selection‐into‐exporting (more productive firms are ones that tend to become exporters) and learning‐by‐exporting (new export market entrants have higher productivity growth than non‐exporters in the post‐entry period). The propensity score matching method is used to adjust for observable differences of firm characteristics between exporters and non‐exporters, allowing an adequate ‘like‐for‐like’ comparison. We also use the difference‐in‐difference matching estimator to capture the magnitude of different productivity growth between matched new export market entrants and non‐exporters in the post‐entry period up to two years. Drawing on 2,340 Chinese firms in the period 2000–02, we find evidence for export premium and self‐selection, and once the firm has entered the export market there is additional productivity growth from the learning effect, in particular in the second year after entry.     

Cursed by Resources or Institutions?

Natural resource‐abundant countries constitute both growth losers and growth winners, and the main difference between the success cases and the cases of failure lies in the quality of institutions. With grabber‐friendly institutions more natural resources push aggregate income down, while with producer‐friendly institutions more natural resources increase income. Such a theory finds strong support in data. A key question we also discuss is if resources in addition alter the quality of institutions. When that is the case, countries with bad institutions suffer a double resource curse – as the deterioration of institutions strengthens the negative effect of more natural resources.     

基于报复角度的国际反倾销分析

国内外学者通过研究发现一国(地区)遭受反倾销后,有可能对别国(地区)进行报复性反倾销,这样会导致国际反倾销的日益增加。我们通过整理WTO公布的1995-2010年间的反倾销数据,从反倾销的国别或地区、行业和年份等方面进行了研究,认为:印度、美国、欧盟和阿根廷的反倾销报复能力比较强,已经成为全球反倾销的主要国家(地区),中国和韩国的反倾销报复能力比较弱,已经成为全球被反倾销的主要国家(地区)。进一步地,我们将主要反倾销国家(地区)与主要被反倾销国家(地区)之间的反倾销案件进行比较后,认为一国(地区)遭受反倾销特别是来自于主要反倾销国家(地区)的反倾销时,若没有进行有效的反倾销报复,其他国家(地区)也会加入对该国(地区)的反倾销队伍中来,使其面临更多的反倾销。     

Foreign Ownership and the Extensive Margins of Exports: Evidence for Manufacturing Enterprises in Germany

We examine how foreign ownership of a firm affects the variety of goods that the firm exports and the number of countries it trades with. We construct a simple theoretical model of how foreign ownership may affect these extensive margins of exports and take this model to data from Germany, one of the leading actors on the world market for goods. In line with theoretical predictions we find that foreign‐owned firms do export more goods to more countries after controlling for firm size, productivity and industry affiliation. These differences between foreign‐owned firms and domestically controlled firms are highly statistically significant, and they are large from an economic point of view, with foreign‐owned firms exporting up to 39 per cent more goods to up to 31 per cent more countries.     

EMU and Trade Revisited: Long‐Run Evidence Using Gravity Equations

In this paper, we present evidence of the long‐run effect of the euro on trade for the twelve initial EMU countries for the period 1967–2008 from a double perspective. First, we pool all the bilateral combinations of trade flows among the EMU countries in a panel cointegration gravity specification. Second, we estimate a gravity equation for each of the EMU members vis‐à‐vis the other eleven partners. We apply panel cointegration techniques based on factor models that account for cross‐dependence and structural breaks. Whereas the joint gravity equation provides evidence on the aggregate effect of the euro on intra‐European trade, by isolating the individual countries, we assess which of the member countries have obtained a larger benefit from the euro. The results show that the euro has had a positive though small effect on trade. Belgium and Luxembourg, France and Italy are the countries more benefited from the introduction of the euro. The effects for exports to third countries are in general more moderate, and, with the exception of Greece, there is no evidence of diversion effects.     

The gravity model,African Growth and Opportunity Act (AGOA) and US trade relations with sub-Saharan Africa

The United States of America enacted the African Growth and Opportunity Act (AGOA) in 2000 to grant sub-Saharan African countries (SSA) a preferential treatment in their exports to the USA. With this Act, most of the exports from SSA can now enter the USA duty-free, and this is expected to boost the exporting and manufacturing sectors in SSA. Hopefully, this singular act of assistance from the USA will spur entrepreneurship in SSA, thereby creating jobs and jump starting meaningful economic growth in the region. Since trade is a major catalyst in economic development, AGOA is arguably the most meaningful intervention from a developed country to an under-developed region such as SSA in recent times. Has AGOA had any impact on US trade with SSA? This paper sheds some light on this issue by examining the flow and composition of trade between the USA and AGOA countries. The analysis uses trade data (US imports) for 36 countries over 12 years. Empirical estimations based on the gravity model show that receiving AGOA status has a strong positive and significant impact on overall trade with the US. Interestingly, however, the analysis also shows a disproportionate impact of crude oil imports from the oil-producing countries of Angola, Gabon, and Nigeria, which is clearly not the intent of the Act.     

Migrants’ Remittances and Financial Development: Macro‐ and Micro‐Level Evidence of a Perverse Relationship

Financial development is commonly identified as an important condition for fostering investment and economic growth. It is also believed that migrants’ remittances stimulate financial development in the receiving economy, contributing indirectly to economic growth. We explore the relationship between remittances and financial development using macro‐ and micro‐level data. From cross‐country panel data, we find evidence of a negative relationship between remittances and financial deepening in developing countries. Using household survey data from a study of migrants’ remittances in two CIS countries, Azerbaijan and Kyrgyzstan, we also investigate the relationship between remittances, financial intermediation and ‘financial literacy’ among remittance‐receiving households. While we find some evidence of a positive, albeit weak, relationship for Kyrgyzstan, in Azerbaijan, the relatively more financially developed economy, we uncover a strong perverse relationship. Remittances appear to deter bank intermediation and use of formal banking services. Possible reasons are explored and areas for further investigation identified.     

Real Exchange Rate and Economic Growth: New Empirical Evidence

The article empirically analyses the relationship between real exchange rate (RER) and growth rate of output. We first estimate the effect of the index of RER undervaluation on the rate of output growth in two samples of countries from 1978 to 2007. Our contribution is the use of a different dataset that increases the number of countries in the sample, as well as the number of available control variables. In doing so, the article adds to the literature by applying a method that allows for the control of income levels (quantile regressions). So, we present new findings on a non‐linear relationship the RER‐growth nexus. We conclude that maintaining a competitive level of RER has positive effects on growth rate.     

Economic and Political Determinants of the Effects of FDI on Growth in Transition and Developing Countries

This study investigates the role of human capital and political development in determining the magnitude of the effects of foreign direct investment (FDI) on growth for a panel of 61 transition and developing countries for the period 1989 to 2013. A baseline growth model incorporating these variables is tested and then extended to include FDI interaction effects with human capital (measured using secondary school enrollment data) and political development (based on Economist Intelligence Unit Democracy Index scores). These growth interaction effects between FDI and human capital vary according to regime type. Political development in conjunction with FDI appears to suppress the effects of FDI on growth in authoritarian countries while enhancing them in hybrid democracies. For more democratic countries, domestic investment is a more important driver of growth. The effects of FDI on growth in the ten transition economies included in the sample data set are found to be insignificant. Although this result might seem to differ from a priori expectations, it is in line with the findings of most earlier studies that cover the period up to 2004. The paper also provides no strong evidence that a critical threshold of human capital is required to generate beneficial spillover growth effects from inflows of FDI. The paper provides new and more detailed insights into the effects of FDI on growth with particular respect to human capital and political regime covering a large number of transition and developing countries based on an up‐to‐date data set covering a 25‐year period to 2013. © 2016 Wiley Periodicals, Inc.     

The true art of the tax deal: Evidence on aid flows and bilateral double tax agreements

Of a total of 2,976 double tax agreements (DTA s), some 60% are signed between a developing and a developed economy. As DTA s shift taxing rights from capital‐importing to capital‐exporting countries, the latter inherently benefit more from the agreements. In this paper, we argue that capital exporters use foreign aid to incite capital importers into signing DTA s. We demonstrate in a theoretical model that in a deal, one country does not trump the other, but that the deal must be mutually beneficial. In the case of an asymmetric DTA , this requires compensation from the capital‐exporting country to the capital‐importing country. Examining DTA s that are signed between donor and recipient countries between 1991 and 2012, and using a fixed effects Poisson model, we find that bilateral foreign aid commitments increase by 22% in the year of the signature of a DTA . Evaluated at the sample mean, this translates into around US$ six million additional aid commitments in a DTA signatory year.     

Thick and Thin Borders in the European Union: How Deep Internal Integration is Within Countries,and How Shallow Between Them

The existence of large border effects is one of the main puzzles of international macroeconomics. The seminal paper by McCallum found that trade between any two Canadian provinces was (on average) 22 times greater than trade between any Canadian province and any US state. Although various authors have estimated internal and external border effects for the whole European Union and some specific European countries, none has done so in the manner that McCallum's seminal paper, stymied by lack of data on region‐to‐region international trade flows. This study uses a novel data set that captures intra and international truck shipments between Spanish regions and regions in seven European countries during the period 2004–11. It computes internal and external border effects, offering novel results for aggregate flows and the importing countries, and estimates several specifications of the gravity equation, so as to tackle such issues as the multilateral resistance term, heteroscedasticity, and zero flows and non‐linear relation between trade and distance. The paper also adds a detailed analysis on the external border effect for each Spanish exporting region and each of the seven European countries considered. By means of this analysis, we shed new light on the relative integration between regions of these seven countries and Spanish exporting regions. Finally, we conduct an extrapolation exercise, computing the ‘trade potentials’ that would be expected in a fully integrated Europe and estimating how long full integration would take to achieve between each Spanish exporting region and each European importing country. To this regard, two alternative scenarios are considered: one using the growth rates of the Spanish exports before the crisis (2001–08) and other considering the post‐crisis growth rates (2011–13).