Trade Liberalization, Input Intermediaries and Firm Productivity: Evidence from China

We investigate theoretically and empirically the role of wholesalers in mediating the productivity effects of trade liberalization. Intermediaries provide indirect access to foreign produced inputs. The productivity effects of input tariff cuts on firms that do not directly import therefore depends on the extent that wholesalers are a feature of input supply within an industry. Using firm level data from China, we document that wholesalers play no such role for direct importers. However, other firms experience productivity gains from reducing input tariffs if trade intermediation of foreign inputs within their sector is high. They suffer efficiency losses otherwise

The political economyof trade policy: Gone for good? Subsidies with export share requirements in China: 2002-13

This paper presents a simple model of subsidies with export share requirements (ESR) in a heterogeneous firm environment. A two-country general equilibrium version of the model with a single 100% ESR is calibrated using firm-level data from the 2002 wave of the Business Environment and Enterprise Performance Survey collected by the World Bank for China. The calibrated model is used to gauge the change in subsidies with ESR that is consistent with the fall in the share of 'pure exporters', firms exporting all their output, observed in China, from 25.7% in 2002 to 11.1% in 2013. Our results indicate that a 6.9% reduction in the ad-valorem subsidy rate available to firms that export all their output is consistent with the observed fall in their share of exporting firms. Expenditure in subsidies (as a share of value-added) falls by 66% and welfare in China increases by 1.76% while real income in the rest of the world falls by 0.59%

Does the Elimination of Export Requirements in Special Economic Zones A ect Export Performance? Evidence from the Dominican Republic

Special economic zones, one of the most important instruments of industrial policy in developing countries, often feature export share requirements. That is, firms located in these zones are obliged to export more than a certain stated share of their output to enjoy the wide array of incentives available there, a practice prohibited by the World Trade Organization. This paper exploits the staggered removal of export requirements across products and over time in the special economic zones of the Dominican Republic to evaluate whether the importance of exports originating from the zones was affected by the elimination of export requirements. The findings show that entry increased among firms in special economic zones, while the average value of export transactions fell for existing exporters following the reforms. At the same time, continuous exporters were unaffected by the policy change, possibly because these firms were not constrained by the export requirement. Overall, special economic zones became more important with respect to the number of exporters based there but not in terms of the value of exports. The findings suggest that the elimination of performance requirements made it more attractive for firms to be based in special economic zones

Supplier Search and Re-matching in Global Sourcing - Theory and Evidence from China

In this paper, we consider a dynamic search-and-matching problem of a firm with its intermediate input supplier. In our model, a headquarter currently matched with a supplier, has an interest to find and collaborate with a more efficient partner. However, supplier switching through search and re-matching is costly. Given this trade-off between the fixed costs and the expected gains from continued search, the process will stop whenever the headquarter has found a sufficiently efficient supplier. Using firm-product-level data of fresh Chinese exporters to the United States, we obtain empirical evidence in line with the predictions of our theory. In particular, we find that the share of short-term collaborations is higher in industries with more supplier-cost dispersion, an indication of higher expected search opportunities

Subsidies with Export Share Requirements in China

A subsidy is subject to an export share requirement (ESR) when firms must export more than a certain share of their output to receive it. Such incentives are frequently found in free trade zones, export processing regimes and measures targeted at foreign investors, both in China and other developing countries. In this paper we provide the first quantitative assessment of the effect that using subsidies with ESR has on exports, the intensity of competition and welfare, both in the enacting country and its trading partners, using a two-country model of trade with heterogeneous firms. We find that the subsidy with ESR boosts exports more than an equivalent unconditional subsidy available to all exporters. Crucially, the subsidy with ESR provides greater protection to low-profitability firms, while the unconditional subsidy does the opposite. The combination of export promotion and lower intensity of domestic competition generated by the subsidy with ESR can be described as “protectionism through exporting.” The imposition of an ESR, however, greatly exacerbates the welfare loss associated with subsidizing exporters

Twin Peaks

Received wisdom suggests that most exporters sell the majority of their output domestically. In this paper, however, we show that the distribution of export intensity not only varies substantially across countries, but in a large number of cases is also bimodal, displaying what we refer to as twin peaks. We reconcile this new stylized fact with an otherwise standard, two-country model of trade in which firms are heterogeneous in terms of the demand they face in each market. We show that when firm-destination-specific revenue shifters are distributed lognormal, gamma, or Frechet with sufficiently high dispersion, the distribution of export intensity has two modes in the boundaries of the support and their height is determined by a country's size relative to the rest of the world. We estimate the deep parameters characterizing the distribution of export intensity. Our results show that when the conditions for the existence of twin peaks are met, differences in relative market size can explain most of the observed variation in the distribution of export intensity across the world

Special Economic Zones, Global Value Chains, and the Degree of Economic Linkages in the Dominican Republic

The Dominican Republic is often considered an example of the successful implementation of Special Economic Zones (henceforth SEZs) in the Western hemisphere. The zones fueled economic growth during the 1980s and 1990s and, while they experienced a sharp decline in employment due in part to the expiry of the end of the Multi-Fiber Agreement and stronger international competition in the textile and apparel industry in 2005, signs of recovery have been observed since 2009. Surgical equipment, chemicals and plastics, and footwear have recently emerged as the new drivers of export dynamism in the zones (World Bank, 2015). The objective of this report is to inform the policy discussion around the developmental impact of SEZs in the Dominican Republic by empirically assessing i) the implications of regulatory reforms aimed at complying with WTO disciplines regarding the elimination of incentives conditioned on export performance for SEZs firms, ii) the extent to which SEZs participate in Global Value Chains, and iii) their linkages with domestic suppliers. The report is organized as follows: The second section presents the historical importance of SEZ as an engine of economic growth in the country. The third section depicts the structural shift in terms of production in SEZs and evaluates the degree of value addition taking place in the Dominican Republic. The fourth section evaluates the degree and evolution of linkages between SEZs and local firms. The fifth section shows the impact of the regulatory changes in the SEZ regimen undertaken to comply with WTO disciplines. Finally, some conclusions and policy recommendations are presented in section six

Mangroves facing climate change: landward migration potential in response to projected scenarios of sea level rise

Mangrove forests prominently occupy an intertidal boundary position where the effects of sea level rise will be fast and well visible. This study in East Africa (Gazi Bay, Kenya) addresses the question of whether mangroves can be resilient to a rise in sea level by focusing on their potential to migrate towards landward areas. The combinatory analysis between remote sensing, DGPS-based ground truth and digital terrain models (DTM) unveils how real vegetation assemblages can shift under different projected (minimum (+9 cm), relative (+20 cm), average (+48 cm) and maximum (+88 cm)) scenarios of sea level rise (SLR). Under SLR scenarios up to 48 cm by the year 2100, the landward extension remarkably implies an area increase for each of the dominant mangrove assemblages except for Avicennia marina and Ceriops tagal, both on the landward side. On the one hand, the increase in most species in the first three scenarios, including the socio-economically most important species in this area, Rhizophora mucronata and C. tagal on the seaward side, strongly depends on the colonisation rate of these species. On the other hand, a SLR scenario of +88 cm by the year 2100 indicates that the area flooded only by equinoctial tides strongly decreases due to the topographical settings at the edge of the inhabited area. Consequently, the landward Avicennia-dominated assemblages will further decrease as a formation if they fail to adapt to a more frequent inundation. The topography is site-specific; however non-invadable areas can be typical for many mangrove settings

Special Economic Zones and WTO Compliance: Evidence from the Dominican Republic

Special economic zones (SEZ), one of the most important instruments of industrial policy used in developing countries, often impose export share requirements (ESR). That is, firms located in SEZ are required to export more than a certain share of their output to enjoy a wide array of incentives -apractice prohibited by the World Trade Organization's Agreement on Subsidies and Countervailing Measures. In this paper we exploit the staggered removal of ESR across products and over time in the SEZ of the Dominican Republic -a reform driven by external commitments to comply with WTO disciplines on subsidies- to evaluate how ESR effect export performance at the product- and firm-level. Using customs data on international trade transactions from the period 2006 to 2014, we find that making the Dominican SEZ regime WTO-compliant made SEZ more attractive locations for exporters to be based in. The reform, however, did not have a significant effect on the country's exports nor on the share of export value originating from SEZ

The Seven-sphere and its Kac-Moody Algebra

We investigate the seven-sphere as a group-like manifold and its extension to a Kac-Moody-like algebra. Covariance properties and tensorial composition of spinors under $S^7$ are defined. The relation to Malcev algebras is established. The consequences for octonionic projective spaces are examined. Current algebras are formulated and their anomalies are derived, and shown to be unique (even regarding numerical coefficients) up to redefinitions of the currents. Nilpotency of the BRST operator is consistent with one particular expression in the class of (field-dependent) anomalies. A Sugawara construction is given.Comment: 22 pages. Macropackages used: phyzzx, epsf. Three epsf figure files appende