Alessandra Bonfiglioli, Rosario Crinò, Gino Gancia, 10 June 2018

To date there has been little systematic evidence on the role of firms in explaining country performance. This column explores how the products of firms from all over the globe fare in competition in the US market. Results show that the countries that capture larger market shares have more exporters, producing higher-quality products, with a more dispersed distribution of firm attributes. Larger and richer markets are characterised by a more dispersed distribution of sales and quality, and a higher incidence of superstar firms.

Mário Centeno, Miguel Castro Coelho, 06 June 2018

Portugal has turned a corner. Having gone through a mild boom, a slump, and a severe recession, all packed into less than two decades, the Portuguese economy has re-emerged with a newfound strength. This column examines this recovery in detail, focusing on important structural reforms that have taken place in the last couple of decades in key areas such as skills, investment, export orientation, labour market, financial intermediation, and public finances. The effects of these reforms were compounded by time as well as efforts to reignite demand.

Stéphanie Brunelin, Jaime de Melo, Alberto Portugal-Perez, 27 April 2018

Rules of origin play a crucial role in preferential trade agreements, and they can also deny intended market access for preference receivers. This column examines a relaxation by the EU of the origin requirements for selected products from Jordan, which is intended to create 200,000 job opportunities for Syrian refugees. While the relaxation decision may have an effect on the refugee crisis in Jordan, further simplifications in RoO requirements are called for.

Koen De Backer, Sébastien Miroudot, Davide Rigo, 19 April 2018

Multinational enterprises that produce goods rely on services to organise their value chain, so barriers to investment in services are likely to affect their production. The column uses a new and comprehensive OECD database to measure the share of services in the exports of multinational enterprises, and also in the output of their foreign affiliates. The results suggest that policymakers may need to focus more on the services that support manufacturing industries.

Naomitsu Yashiro, Konstantins Benkovskis, Jaan Masso, Olegs Tkacevs, Priit Vahter, 13 April 2018

Participation in global value chains provides emerging economies with opportunities for fast-track development and technological upgrading. This column argues that countries need to diversify their exports into knowledge-intensive products and services that generate high value added to make the most out of learning by exporting. Countries that specialise in standardised, generic products or services may not enjoy sufficient improvements in productivity, even if such exports channel knowledge transfer.

Gábor Békés, Balázs Muraközy, 28 March 2018

Globalisation has provided firms with many ways to serve their foreign customers. This column suggests that the set of internationalisation modes can be described as a ladder, with the higher rungs associated with higher levels of productivity and innovation. This ladder has three main steps – indirect exports, direct exports and outsourcing, and service and manufacturing foreign direct investment – and may provide an important source of flexibility for managers to adapt to policy shocks.

Tadashi Ito, Ryohei Nakamura, Manabu Morita, 13 February 2018

For regional firms to survive, they need to find export markets using wholesalers as intermediaries. This column uses a dataset of export activity in Japan to show that this type of indirect export activity occurs predominantly from metropolitan areas, with the probability of direct exports negatively correlated with the distance between manufacturer and wholesaler. Wholesaler productivity (though not manufacturer productivity) was correlated with the probability of these indirect exports, suggesting that wholesalers search for suitable manufacturers, but not vice versa.

Emine Boz, Gita Gopinath, Mikkel Plagborg-Moller, 11 February 2018

In international macroeconomics, it is typically assumed that the exchange rate between two trading partners matters most for trade prices, quantities, and terms of trade. This column presents evidence supporting an alternate view – that a country’s exchange rate relative to the US dollar is most important. This is because invoicing in dollars is common, even when the US is not part of a transaction. The findings have important implications for the conduct of monetary and exchange rate policies.

Stephen Redding, David Weinstein, 02 January 2018

Existing research on export heterogeneity between countries has typically focused on the importance of individual factors. This column presents a unified framework for understanding these contributions in concert. Using US and Chilean data, it demonstrates that products within firms, firms within sectors, and sectors in aggregate are indeed imperfect substitutes. It further shows that models that assume no quality shifts and no changes in variety perform poorly on trade data.

Filippo di Mauro, Vlad Demian, Jan-Paul van de Kerke, 08 December 2017

It is well-established in theoretical and empirical models that an exchange rate movement affects exports, but we are far from a consensus on the size and relevance of this effect. Macro-based analyses tend to yield very low values for the elasticity of exports to the exchange rate, while micro- or sectoral-based estimations tends to be higher. This column shows that one reason for the disagreement is that macro estimations fail to incorporate the characteristics of the underlying distribution of firm productivity and its asymmetries. Doing so generates higher elasticity estimates than the macro estimations, and greater country-level diversification.

Fabrice Defever, Alejandro Riaño, 01 December 2017

Received wisdom suggests that the majority of exporters in a country sell most of their output domestically. This column presents recent research that casts doubt on this assumption. The distribution of export intensity varies substantially and in most countries there are ‘twin peaks’, with some firms exporting a lot of their output, and others a little. This would be consistent with a standard model of international trade if the model were adjusted to recognise that firms differ in the demand they face in each market.

Francisco Costa, Jason Garred, João Pessoa, 24 September 2017

In addition to being a competitor for other countries’ industries, China has also become an increasingly important consumer of goods produced elsewhere. This column looks at how the steep rise in ‘commodities-for-manufactures’ trade with China has affected workers in Brazil. While the analysis confirms a negative effect of Chinese import competition on employees of manufacturing firms, it also suggests that growth in trade with China has created some winners in Brazil, with wages rising more quickly in parts of the country benefiting more from increasing Chinese demand.

Kalina Manova, Zhihong Yu, 22 September 2017

Pinpointing how multi-product firms organise their operations is key for understanding the drivers of global competitiveness. This column presents a theory on the behaviour of multi-product firms when cost and quality competitiveness jointly determine export performance. Using Chinese data, it finds that firms’ production and sales activity across products and markets is governed by a product hierarchy based on quality. This phenomenon also determines how firms respond to economic shocks.

Beata Javorcik, Alessia Lo Turco, Daniela Maggioni, 29 June 2017

Recent research suggests that foreign direct investment makes it more likely that host countries upgrade production. Using the example of Turkey, this column shows that while the presence of foreign affiliates does not seem to affect the propensity of firms to innovate, it is positively correlated with the complexity level of products newly introduced by local supplier firms. Foreign direct investment inflows appear to act as a catalyst to develop sophisticated manufacturing, and should be promoted as part of a domestic industrial policy.

Wolfgang Keller, Will Olney, 09 June 2017

Growing income inequality has been a hallmark of developed economies over the past few decades. Despite a large empirical literature exploring the determinants of this trend, to date few studies have explored the role of globalisation. Using US data on executive compensation, this column argues that while firm size, technology, and poor governance have all contributed to the growth in top incomes, globalisation is just as important in explaining the trend.

Doireann Fitzgerald, Stefanie Haller, Yaniv Yedid-Levi, 25 March 2017

Tariffs across the world may be set to increase for the first time in generations, but the impact of this on trade will depend on the way in which exporters and potential exporters make decisions. Using data on Ireland's manufacturing exports, this column describes how the evolution of quantities and prices for export entrants suggests an important role for the customer base in explaining exporter behaviour. 

Giordano Mion, Luca David Opromolla, Alessandro Sforza, 21 January 2017

Despite the seemingly obvious link between good management and firm performance, establishing a causal link between the two is actually rather tricky. This column examines how Portuguese firms responded to the sudden and unexpected end to the civil war in Angola in 2002, and discovers an immediate spike in export entry rates for firms with at least one manager with previous experience of exporting to Angola. This finding on the impact of acquired knowledge on performance is especially useful for firms looking to operate in foreign markets.

Yoshio Higuchi, Kozo Kiyota, Toshiyuki Matsuura, 04 December 2016

There is a belief among the general public that employment volatility tends to be greater for firms with higher foreign exposure, but the relationship between the two is ambiguous in theory. This column uses firm-level data for Japan to compare the impact of foreign exposure on employment volatility for multinational, trading, and non-trading firms; for manufacturing and wholesale and retail trade; and for intra-firm and inter-firm trade. In manufacturing, the effect of exports on the volatility of employment varies, depending on the share of intrafirm exports to total sales. In wholesale retail, the effect of exports is generally insignificant. 

Richard Pomfret, Patricia Sourdin, 23 September 2016

Joining a customs union is supposed to reduce trade with third countries. But after 2004, the largest EU accession countries actually increased their trade with Australia, especially their exports. This column argues that new regional value chains made accession country industries more competitive, especially in the auto industry. Trade with Australia has also been facilitated by a drop in the costs of bilateral international trade.

Reda Cherif, Fuad Hasanov, Min Zhu, 03 September 2016

Amid a persistent fall in oil prices, many oil-exporting countries are realising that economic diversification should be a top priority. One important pathway is to create a dynamic export sector. This column argues the standard policy of structural reforms – which mostly tackle ‘government failures’ rather than ‘market failures’ – are not sufficient. The state needs to intervene to change the incentive structure of firms and workers, and impose a strict accountability framework.

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