The seminar is part of the activities of FIW, the Centre of Competence in International Economics. Regular lecture series on current issues in international economics.

Location: wiiw Wiener Institut für Internationale Wirtschaftsvergleiche, Rahlgasse 3, 1060 Wien

June 27th, 4 pm

Konstantin M. Wacker (with Yuko Hashimoto), Vienna University of Economics and Business Administration; University of Göttingen

Abstract

In this paper we investigate whether better information about the macroeconomic environment of an economy has a positive impact on its capital inflows, namely portfolio and foreign direct investment (FDI). The purpose of our study is to explicitly quantify information asymmetries by compliance with the IMF's Special Data Dissemination Standard (SDDS). For FDI, we find statistically significant and robust support for this hypothesis: SDDS subscription increased inflows by an economically relevant magnitude of about 60 percent. We also find evidence of aversion against political and macroeconomic risk as determinants of portfolio and FDI flows and use a non-parametric test for spatial correlation in the residual of capital flows.

Keywords: determinants of capital flows, information, panel data, risk, SDDS, IMF, FDI, portfolio investment, spatial econometrics

JEL Classification: C33, F21, G14

June 6th, 4 pm

Ian Wooton (with Julia Darby and Ben Ferrett), University of Strathclyde

Abstract

We set up a trade model where three countries compete for an exogenous number of firms. Our innovation lies in the geography of the model. Of the three countries, one is the hub through which all trade takes place. We establish the initial allocation of industry across the countries in the absence of tax competition. We then examine the implications for corporate tax levels when the countries compete with each other to attract firms and determine the resulting location of economic activity.

We find that, even when all countries are the same size, the ‘centrality’ of the hub gives it an advantage in tax setting, such that its equilibrium tax rate can be larger than that of the spokes and yet it still attracts a disproportionate share of industry. Thus geographic advantage in tax competition has a second dimension, centrality in addition to size.

Keywords: corporate taxes, devolution, trade costs

JEL Classification: F15, F23, H25, H73

May 16th, 4 pm

Abstract

Recent years have seen the emergence of mega-regionalism, meaning large scale, ambitious agreements involving large high and middle income countries. This contrasts with the earlier wave of regionalism in the 1990s, which was more focused on narrow North-South trade agreements. These new agreements, involving the full OECD as well as middle income countries, have gained attention even as multilateral negotiations in Geneva have ground to a halt. This study examines recent regional initiatives from an EU perspective. This includes not only the EUs position as an insider (EU-US) but also as an outsider, as in the Trans-Pacific Partnership. Potential economic effects of the reduction of barriers to trade and investment between the EU and the US are discussed in the context of a multi-region, multi-sector global CGE model.

Keywords: mega-regionalism, RTAs, EU, US, CGE-modeling

JEL Classification: F15, F17, F20, C68

April 18h, 4 pm

Harald Oberhofer (University Salzburg)

Abstract

This study empirically investigates the key firm- and industry-specific restrictions to internationalization of service activities. For this purpose, we use firm level data from French firms operating in service industries over the time period 1998 to 2007 and formulate two-part models consisting of (i) (dynamic) export equations and (ii) (dynamic) export share equations. Our main results confirm the view that small service firms are less likely to engage in any export activities. Conditional on exporting, smaller firms, however tend to export larger shares of their overall services. In line with the new-new trade theory our baseline results also indicate that more productive firms serve foreign markets with a higher probability and to a larger extent. Moreover, export decisions are estimated to be extremely persistent implying that scarce export promotion budgets should be directed towards already exporting firms. Finally, our estimates also reveal substantial heterogeneity across different types of services.

Keywords: Export activities, small and medium sized enterprises (SMEs), service

industries, new-new trade theory, dynamic export equations

JEL Classification: C23, C25, F14, F23, L80, L90

March 14th, 4 pm

Rafael Lata (with Thomas Scherngell and Thomas Brenner)

Austrian Institute of Technology (AIT)

Abstract

This study focuses on integration processes in European R&D by analyzing the spatio-temporal dimension of three different R&D collaboration networks across Europe. The studied networks cover different types of knowledge creation, namely project based R&D networks within the EU Framework Programmes (FPs), co-patent networks and co-publication networks. Integration in European R&D – one of the main pillars of the EU Science Technology and Innovation (STI) policy – refers to the harmonization of fragmented national research systems across Europe and to the free movement of knowledge and researchers. The objective is to describe and compare spatio-temporal patterns at a regional level, and to estimate the evolution of separation effects over the time period 1999-2006 that influence the probability of cross-region collaborations in the distinct networks under consideration. The study adopts a spatial interaction modeling perspective, econometrically specifying a panel generalized linear model relationship, taking into account spatial autocorrelation among flows by using Eigenfunction spatial filtering methods. The results show that geographical factors are a lower hurdle for R&D collaborations in FP networks than in co-patent networks and co-publication networks. Further it is shown that the geographical dynamics of progress towards more integration is higher in the FP network.

Keywords: R&D networks, European Framework Programme, European Research

Area, Spatial interaction modelling, Eigenvector spatial filtering

JEL Classification: O38, L14, R15

February 28th, 4 pm

Svetlana Ledyaeva (with Päivi Karhunen and John Whalley)

Helsinki School of Economics

Abstract

In this paper we study the phenomenon of round-trip investment between Russia and key offshore financial centers (OFCs), namely, Cyprus and British Virgin Islands, which is now a significant part of foreign investment into Russia. Using firm-level data we study differences in location strategies between round-trip and genuine foreign investors into Russia and the factors which determine the fraction of round-trip investment in total foreign investment into Russian regions. In empirical analysis we also distinguish between different firm size and industries. We conclude that round-trip investors tend to invest more in corrupt and resource abundant Russian regions compared to genuine foreign investors. Furthermore, the share of round-trip investment in total foreign investment is significantly higher in corrupt Russian regions. In general, these results point to the corruption component of round-trip investment. Second, we find that genuine foreign investors tend to invest more in regions with higher level of skilled labour and use sea ports more compared to round-trip investors. The former result indicates that genuine foreign investment is more technologically advanced than round-trip. The latter result indicates that round-trip investment is more oriented towards local market while for genuine foreign investors it is more towards international markets (in

inward and backward linkages).

Keywords: Russia, round-trip investment, capital flight, foreign investment

JEL Classification: F21, F23