Research

[Publications]

Global value chains as determinants of non-tariff measures

(with Achim Vogt)

The organization of modern production into complex, cross-border networks raises the question of whether countries’ value chain linkages determine their trade-related policies. In this paper, we show that increases in domestic value-added into foreign final goods lead to decreases in regulatory stringency measured as tariffs but also as technical nontariff measures. Trade-network structures incentivize regulatory harmonization to avoid harming domestic producers.

Patterns of regulatory differences in international trade: intensity coverage and structure

(with Achim Vogt)

With falling tariffs, the role of regulatory heterogeneity in international trade has become central in recent debates on regional integration and trade costs. However, few studies explicitly take into account the specific nature of the underlying regulatory differences. Thus, we propose distinguishing regulatory heterogeneity with respect to the intensity, coverage, and structure of regulations, and present indicators reflecting each one of these dimensions. Enabled by detailed product-level regulatory data based on coded reviews of national legislation, we illustrate the different channels of regulatory heterogeneity at the country- and sector-level. We construct well-established descriptive indicators and more recently developed measures of regulatory distance to identify patterns of non-tariff measures via principal component analysis, clustering techniques, and association analysis. The findings motivate separate treatment of the different heterogeneity dimensions in the assessment of non-tariff measures in international trade. Outputs of the analysis are transferred to a database available at different sectoral aggregations that can be used for example in gravity-type analysis.

[Working papers]

[Modeling heterogeneous direct and third-country effects of the trade policy network]

(with Dr. Octavio Fernández-Amador)

This paper presents a structural Melitz-type gravity model with firm heterogeneity featuring heterogeneous trade cost elasticities to estimate the modular effects of trade agreements. We provide a structural underpinning for heterogeneous third-country—trade diversion and reverse diversion—effects. The correct estimation strategy when using approximated multilateral resistances in panels is shown. We analyze the components of the indirect effects of agreements, and two simulations highlight the quantitative importance of indirect effects. Third-country effects from the network of agreements in place can be economically significant. Governments should consider third-country effects when analyzing potential strategic integration scenarios.

This paper received the away for the best research paper presented by a young scholar at the 24th conference on international economics held at the university of Alcalá (Spain).-

[Market Access Uncertainty and Trade in Services]

(with Prof. Dr. Joseph Francois & Peter H. Egger & Miriam Manchin)

We develop an analytical/empirical framework bridging the decision under uncertainty and recent gravity-based empirical trade literature. We examine the impact of policy uncertainty on services trade, focusing on binding overhang (the gap between market access commitments and actual applied policy). The government’s ability to change policies within this gap yields uncertainty for firms regarding market access. Results point to average services trade costs averaging from 6.66% (high-income countries) to 8.51% (low and middle-income countries) and negative average trade volume effects (58.87%-75.22%) due to existing binding overhang. This is comparable to estimates of other regulatory barriers to trade.

[Trade cost estimates of the EU single market]

(with Prof. Dr. Joseph Francois)

The past fifty years have witnessed an upsurge in trade integration which has crystallized in the multiplication in the number of economic integration agreements. However, in the last decade, fears of de-globalization and disintegration of current international structures have spurred across the world and particularly impacted the European Union after Brexit. Nowadays, trade agreements go beyond tariff reductions and include also non-tariff and trade facilitation measures. In this context, proper quantification exercises of the consequences that a possible European disintegration would have are of utmost importance. We propose departing from a structural gravity model to estimate the effects of trade agreements in Europe to include the negative values of these estimated shocks into a general equilibrium model consistent with firm heterogeneity à la Melitz to analyze the effects of disintegration on all European and third-countries regarding trade and welfare measures.