International trade

Marvin Suesse, 17 December 2018

While much has been written on why states disintegrate, we know little about the consequences of state breakup. Using data from the breakup of the Soviet Union, this column studies the short-run economic costs of its collapse. It demonstrates how political disintegration can lead to the dissolution of trade links, and to a correspondingly large fall in output. In the Soviet case, this mechanism helps to explain the disappointing performance of its successor states in the 1990s. The uncertainty surrounding secessions is an important driver of the fall in present output.

Alexis Antoniades, Sofronis Clerides, 16 December 2018

Understanding how firms respond to demand shocks has important insights on firm and consumer behaviour. To date, firm responses have been mostly been examined in isolation. This column uses scanner data to explore how Danish firms and their competitors responded to a boycott in ten Arab states in 2006. Results show that Danish firms responded on the intensive margin by lowering prices, while their competitors responded on the extensive margin by introducing new products.

Mauro Boffa, Marion Jansen, Olga Solleder, 15 December 2018

In a world where trade policies and trade alliances are changing, global value chains are likely to be affected, with implications for policymakers seeking economic development through value chain integration.This column combines information on the value-added decomposition of gross exports with information from the World Bank’s Content of Preferential Trade Agreements Database to examine which policy mixes are more conducive for value chain activity. Value-chain players are found to prefer more integrated regions. 

Simon Evenett, Johannes Fritz, 14 December 2018

Presidents Trump and Xi effectively declared a truce in their trade war at the recent G20 Summit in Buenos Aires, giving their trade negotiators three months to settle their differences. This column argues that focusing on the bilateral trade war overlooks similarities in the trade distortions facing Chinese and American exporters worldwide in the form of export incentives, subsidies to domestic firms, and import tariff increases. It concludes that these two trading giants have more in common than they may realise.

Wen Chen, Bart Los, Marcel Timmer, 10 December 2018

Intangibles are on the rise, yet their measurement is elusive. This column argues that a global value chain perspective on factor incomes provides new insights. It documents a rapid increase in the share of ‘factorless’ income in global value chains in the 2000s and argues that this period should be seen as an exceptional period in the global economy during which multinational firms benefitted from reduced labour costs through offshoring, while capitalising on firm-specific intangibles at little marginal cost.

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