F - International Economics
Limited attention and selective memory are key behavioral factors identified in the literature on cognitive biases and economic outcomes. We investigate how events trigger selective recall and thus change economic behavior. Following public disagreement between German and Greek politicians, Greek consumers drastically reduced their purchased of German automobiles - especially in areas affected by German reprisals during World War II.
Since the extent of both outsourcing and offshoring varies by sector and country, we develop a set of country-sector level measures of global value chains (GVCs) in terms of average production length, intensity of participation, and relative upstream positions on a production network. We distinguish production activities that are inside a country, and that cross borders once or multiple times. Using these measures, we characterize cross-country production sharing patterns and their evolutions for 35 sectors and 40 countries over 17 years.
This paper examines how regional inequality evolves when a country becomes increasingly isolated from economic sanctions. I hypothesize three channels: regional favoritism by the ruling elites, reallocation of commerce that reflects the change in relative trade costs, and import substitution. Using nighttime lights from North Korea, I find that the capital city, trade hubs near China, and manufacturing cities become relatively brighter when sanctions increase. However, production shifts away from capital-intensive goods, deterring industrial development.
We study how opening to trade affects economic growth in a model where heterogeneous firms can choose to adopt a new technology already in use by other firms. We characterize the growth rate using summary statistics of the profit distribution—the ratio of profits between the average and marginal adopting firm. Opening to trade increases the spread in profits through increased export opportunities and foreign competition, induces more rapid technology adoption, and generates faster growth.
This paper examines, both theoretically and empirically, how the presence of foreign-invested firms (i.e., foreign direct investment, FDI) affects the product quality of domestic firms. In a monopolistically competitive market with Melitz (2003) style heterogeneous firms, we show that, if consumers derive higher utility from consuming higher quality products, then despite the fact that product quality is not directly observable, one can identify the impact of FDI on product quality from its impact on firm revenue and cut-off capability.
We explore the implications of trade liberalization in economies with State Owned enterprises (SOEs) and shirking. SOEs are modelled as controlled by the members of the enterprise who determine output and effort levels, while facing output prices and wage rates set by government. Enterprise members must collectively meet a budget constraint that the value of sales equals the enterprise wage bill plus an exogenous enterprise commitment to the state budget. Labour can shirk either through low on the job effort (leisure), or through moonlighting to second jobs in the private sector.
The thesis uses the end of the Multi-Fibre Agreement to test the theory of quality-upgrading, which states that firms facing quotas will export higher-quality products to generate the greatest economic rent from each individual exported good. The Multi-Fibre Agreement (MFA) is a set of quantitative restrictions placed by the US on textile exports from Asian nations that began in 1974 and ended January 1, 2005.
This paper examines two major risks to foreign investors: default on sovereign debt and expropriation of foreign direct investment, which we refer to collectively as “sovereign theft.” Using a series of formal models, we analyze how the incentives to engage in sovereign theft vary with the state of the economy, the risk aversion of political leaders, and the nature of punishments for default and expropriation. We then document patterns of sovereign theft and foreign investment across much of the twentieth century.
This paper analyzes on the evolution of international monetary system based on the concept of international monetary power, holds that the collapse of the Bretton Woods System was resulted from not only its internal instability but also American desire to strive for more monetary power. The float exchange rate and the real dollar standard have been expanding American monetary power. However, the expansion of American monetary power brings reflective shock to the system. Asia crisis was the most momentum episode.
This paper develops a North-South product cycle model in which innovation, imitation, and the flow of FDI are all endogenously determined. In the model, a strengthening of IPR protection in the South reduces the rate of imitation and it increases the flow of FDI. Indeed, the increase in FDI more than o¤sets the decline in the extent of production undertaken by Southern imitators so that the South's share of the global basket of goods increases.
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