Please do not hesitate to contact me if you do not have access to any of the journals to get a copy of the papers.
What Drives Interdependence of FDI among Host Countries?
The Role of Geographic Proximity and Similarity in Public
Debt, Economic Modelling, 2016, (58) November, 466-474, joint with Luisa Alamá-Sabater, Eduardo Jiménez-Fernández and Laura Márquez-Ramos
We investigate the drivers of interdependence between flows of foreign direct investment (FDI), focusing on two potential channels: interdependence between geographically close FDI destination countries, and between destination countries with similar levels of public debt. Using data on bilateral FDI flows between the 27 EU member countries in 2007, we find that in addition to geographic proximity, similarity in public debt levels drives cross-country correlation in FDI inflows. The public debt threshold of 60 percent of GDP prescribed by the Maastricht Treaty is a crucial driver of interdependence between FDI inflows. FDI inflows are correlated within the group of compliant countries as well as within the group of non-compliers. This is consistent with the fact that foreign investors distinguish between countries which violate this Maastricht criterion and those that do not.
FDI in Space Revisited: The Role of Spillovers on Foreign Direct Investment within the European Union, joint with Luisa Alamá-Sabater, Eduardo Jiménez-Fernández and Laura Márquez-Ramos
Growth and Change (forthcoming)
We estimate a spatial econometric interaction model for bilateral aggregate FDI stock data between 25 European Union member countries in 2010. We find evidence for spatial spillovers of foreign direct investments for three different types of spatial dependence. Our results document FDI spillovers between neighboring countries of FDI origin countries, neighboring countries of FDI destination countries as well as between neighboring countries of both FDI origin and destination countries. Relying on recently developed methods, we provide the first model-consistent interpretation of marginal effects of market size (measured by GDP) as well as GDP per capita on bilateral FDI activity. Our research highlights the importance of taking into account spatial lags when estimating bilateral FDI gravity models.
Gravity with Unemployment, Journal of International Economics, 2016, 101(June), 70-85, joint with Mario Larch
Quantifying the welfare effects of trade liberalization is a core issue in international trade. Existing frameworks assume perfect labor markets and therefore ignore the effects of aggregate employment changes for welfare. We develop a quantitative trade framework which explicitly models labor market frictions. To illustrate, we assess the effects of trade and labor market reforms for 28 OECD countries. Welfare effects of trade agreements are typically magnified when accounting for employment changes. While employment and welfare increase in most countries, some experience higher unemployment and lower welfare. Labor market reforms in one country have small positive spillover effects on trading partners.
Spatial Exporters, Journal of International Economics, 2015, 95(1), 145-156,
joint with Fabrice Defever and Mario Larch
In this paper, we provide evidence that expanding firms tend to serve new markets which are geographically close and culturally related to their prior export destinations. We quantify the impact of this spatial pattern using a Chinese firm-level data set. To ensure an exogenous set of potential new destinations (25 EU countries, US and Canada) and an exogenous timing of entry, we focus on firms that benefited from the abrupt end of the textile quota restrictions in 2005. Controlling for firm-product and destination specific effects and accounting for possible multiple new export destinations we show that the probability to export to a country increases by 15 to 38 percent for each prior export destination with a geographical or cultural link with this country.
Macroeconomic potentials of transatlantic free trade: a high resolution perspective for Europe and the world, Economic Policy, 2015, 30(83), joint with Gabriel Felbermayr, Mario Larch and Erdal Yalcin
Critics of the proposed Transatlantic Trade and Investment Partnership (TTIP) dismiss its potential welfare gains as small compared with its risks. We contribute to this debate by investigating the driving forces behind the magnitudes of the estimated welfare gains using the structurally estimated general equilibrium trade model by Egger and Larch (2011) for 173 countries. In our baseline scenario, the TTIP amounts to a reduction of ad valorem trade costs across the Atlantic between 16 and 26 percentage points. We find that the TTIP could yield substantial gains for the EU (3.9%), the United States (4.9%), and the world (+1.6%). While welfare gains are heterogeneous within the EU, the TTIP does not systematically favour richer or more central member states. The majority of third countries would be negatively affected (0.9% on average). We identify as key drivers for the magnitudes of the welfare effects different assumptions about trade cost specifications, about the assumed trade cost reducing potential of the TTIP, about different levels of aggregation, and about the regulatory spill-overs of the TTIP on third countries. Our insights on the drivers for the welfare effects help to understand differences across current evaluations of the TTIP.
The Rise of the Maquiladoras: A Mixed Blessing, Review of Development Economics, 2013, 17(2), 252-267, joint with Mario Larch and Alejandro Riaño
Mexico experienced a tremendous expansion of its export-processing maquila sector during the 1990s. Since one of the main objectives of the maquiladora program was to increase formal employment, we study how the rapid increase in maquiladora activity has affected labor market outcomes and welfare in Mexico. We develop a heterogeneous-firm model with imperfect labor markets that captures salient features of the Mexican economy such as the differences between maquila and non-maquila manufacturing plants and the existence of an informal sector. We calibrate the model's parameters to match key cross-sectional moments characterizing the Mexican economy. We find that the expansion of the maquila sector during the 1990s was a mixed blessing for Mexico. Our quantitative model indicates that the skill premium decreased by 2.7%, informality increased by 0.9% and overall welfare decreased by 3.7%.
Income and Democracy: Evidence from System GMM Estimates, Economics Letters, 2012, 116(2), 166-169, joint with Julian Langer and Mario Larch
Does higher income cause democracy? Accounting for the dynamic nature and high persistence of income and democracy, we find a statistically significant positive relation between income and democracy for a postwar period sample of up to 150 countries. Our results are robust across different measures of democracy and instrumentation strategies.
Migration, Trade and Unemployment, Economics - The Open-Access, Open Assessment E-Journal, 2012, 4, 1-40, joint with Mario Larch
A source of anxiety of policy makers and the public in general is the detrimental impact of trade and immigration on unemployment. The transitory restrictions for worker migration after the EU enlargements of 2004 and 2007 exemplify the supposed negative effect of immigration on labor markets. This paper aims to identify the effects of immigration alongside trade on unemployment controlling for the high correlation between immigration and goods flows in order to prevent an omitted variable bias. The authors use data from 24 OECD countries over the period from 1997 to 2007 and employ instrumental variables, fixed effects and dynamic panel estimators in order to account for unobserved heterogeneity as well as the potential endogeneity of migration flows and the high persistence of unemployment. We find no significant effect of immigration on unemployment on average.