Search results for "Gravity"

Migration and fdi: the role of job skills

2018

Abstract Using a multi-country gravity framework, this paper models and quantifies the relevance of migrants' job position in fostering Foreign Direct Investment (FDI). High-skilled migrants are defined as those individuals born in the investors' home/host country occupying managerial or professional positions in the host/home country of investment. Our estimates show that higher shares of migrants with management skills in a given country promote FDI into that country. In contrast, an increase in the share of migrants in non-qualified positions (regardless of their educational attainment) has a negative impact on FDI decisions. These findings highlight that the FDI-enhancing effect of migr…

Warning: Bilateral trade agreements do not create trade

2021

TERRORISM AND INTERNATIONAL TOURISM: NEW EVIDENCE

2008

This paper analyses the impact of terrorist activity on international tourist flows. To this end, we have estimated a cross‐sectional gravity equation for tourism from the G‐7 countries to a sample of 134 destinations over the period 2001–2003. Within this framework, we evaluate the deviation from ‘normal’ tourist flows due to terrorist activity, which is considered as negative advertising for the affected country. The analysis suggests that both domestic victims and international attacks are relevant factors when foreign tourists make their choice. This result is robust under alternative specifications. Moreover, the impact of terrorism is more severe in developing countries. The author is…

Trade Costs, Trade Balances, and Current Accounts: an application of Gravity to Multilateral Trade

2005

In this paper we test the well-known hypothesis of Obstfeld and Rogoff (NBER Macroeconomics Annual 7777:339–390, 2000) that trade costs are the key to explaining the so-called Feldstein–Horioka puzzle. Our approach has a number of novel features. First, we focus on the interrelationship between trade costs, the trade account and the Feldstein–Horioka puzzle. Second, we use the gravity model to estimate the effect of trade costs on bilateral trade and, third, we show how bilateral trade can be used to draw inferences about desired trade balances and desired intertemporal trade. Our econometric results provide strong support for the Obstfeld and Rogoff hypothesis and we are also able to recon…

Competitiveness and interregional as well as international trade: The case of Catalonia

2010

Recent years have seen a surge of interest among industrial organization economists in using data on international trade flows as windows into competitiveness. For countries that are at least mid sized (e g., Spain), interregional trade tends to be as large as or significantly larger than international trade. The case of Catalonia, a Spanish region, illustrates how ignoring interregional flows can lead to erroneous inferences about a region's external competitiveness. Accounting for Catalonia's interregional as well as international flows shifts what is generally assessed to be a chronic trade deficit in goods into a surplus and changes diagnoses of which Catalan sectors generate external s…

Cultural Distance and International Trade in Services: A Disaggregate View

2020

Abstract In this paper, we estimate the effect of “cultural distance” on bilateral trade in services. The measure of cultural distance we use is based on scores that reflect country averages of individuals’ attitudes towards inequality, self-orientation, competition, uncertainty, traditions, and indulgence. Controlling for standard ingredients of gravity equations, we show that an aggregate measure of cultural distance has a significantly negative effect on total bilateral services trade. Once we take a more disaggregate view, we find that the strength of this effect differs across various types of services and various aspects of cultural distance.

Trade effects of monetary agreements: Evidence for OECD countries

2008

Abstract This paper analyses the effects of monetary agreements on trade flows using a sample of 25 OECD countries over the period 1950–2004. We find that these agreements have boosted intra-bloc trade. This result especially applies to the case of the euro. More importantly, in contrast to regional trade agreements, all monetary agreements analysed show evidence of trade-creating effects with third countries. Finally, only the euro shows a symmetric impact for the trade-creating effect with non-members, that is, using the euro promotes both the Eurozone's exports and its imports to non-Eurozone markets to a similar extent.

Do credit constraints reduce foreign jobs? A note on foreign direct employment

2014

This article studies the effect of credit constraints on the jobs created by multinational enterprises in host countries. Although most FDI is labour intensive, few studies delve into the determinants of foreign direct employment (FDE). This article constructs a model of limited commitment between the financed and financing parties to explain how FDE is affected by financial frictions. Moreover, this study examines FDE’s determinants empirically on a global data set including FDE data from 161 countries during 2003–2010 by means of the gravity equation. Results show that credit constraints during the Great Recession roughly halved FDE, tripling the effect on FDI and suggesting that domestic…

Do foreign workers reduce trade barriers? Microeconomic evidence

2015

This paper provides evidence that foreign workers reduce firms' trade costs and thus increase the probability that firms export. This informs both the literature on trade costs and the microeconomic literature on firms' export behaviour. We identify the nationality of each worker in a large sample of German establishments, and relate this to the exporting behaviour of these establishments. We allow for the possible endogeneity of an establishment's workforce by instrumenting the share of foreign workers with the regional distribution of foreign workers in the wider labour market. We find a significant effect of worker nationality on exporting which is not driven by the industrial, occupatio…

Regional inequalities as drivers of affective polarization

2022

This paper investigates divergences in levels of affective polarization across Belgian regions around the 2019 elections. Elaborating on the relative deprivation theory, we analyse the role of current and long-term socio-economic regional inequalities and of geographical distance separating regions. Empirically, we aggregate individual-level measures of affective polarization at the Belgian NUTS-3 level and use a gravity approach to explore the determinants of regional divergences. Our results show that regional variations in affective polarization are best explained by a current rural–urban divide and by how regions have performed economically in the last years. We also show that geographi…