How much do cultural biases affect economic exchange? We answer this question by using data on bilateral trust between European countries. We document that this trust is affected not only by the characteristics of the country being trusted, but also by cultural aspects of the match between trusting country and trusted country, such as their history of conflicts and their religious, genetic, and somatic similarities. We then find that lower bilateral trust leads to less trade between two countries, less portfolio investment, and less direct investment, even after controlling for the characteristics of the two countries. This effect is stronger for goods that are more trust intensive. Our results suggest that perceptions rooted in culture are important (and generally omitted) determinants of economic exchange.

/pdf/cultural-biases-in-economic-exchange-3ua64u4b8w.pdf

Cultural Biases in Economic Exchange

We discuss recent empirical research on how globalization has affected income inequality in developing countries. We begin with a discussion of conceptual issues regarding the measurement of globalization and inequality. Next, we present empirical evidence on the evolution of globalization and inequality in several developing countries during the 1980s and 1990s. We then examine the channels through which globalization may have affected inequality discussing theory and evidence in parellel. We conclude with directions for future research.

https://papers.ssrn.com/sol3/Delivery.cfm/nber_w12885.pdf?abstractid=961806&mirid=1&type=2

Distributional Effects of Globalization in Developing Countries

https://www.econstor.eu/bitstream/10419/74870/1/dp151.pdf

Do exports generate higher productivity? Evidence from Slovenia

This paper assesses the current state of evidence on the impact of trade policy reform on poverty in developing countries. There is little empirical evidence addressing this question directly, but a lot of related evidence on specific aspects. We summarize this evidence using an analytic framework addressing four key areas: economic growth and stability; households and markets; wages and employment and government revenue. Twelve key questions are identified and empirical studies and results are discussed. We argue that there is no simple generalizable conclusion about the relationship between trade liberalization and poverty, and the picture is much less negative than is often suggested. In the long run and on average, trade liberalization is likely to be strongly poverty alleviating, and there is no convincing evidence that it will generally increase overall poverty or vulnerability. But there is evidence that the poor may be less well placed in the short run to protect themselves against adverse effects and take advantage of favorable opportunities.

/pdf/trade-liberalization-and-poverty-the-evidence-so-far-59kawhxtwc.pdf

Trade Liberalization and Poverty: The Evidence So Far

This book explores whether the world economy is breaking up into regional trading and currency blocs centred on the European Community, Japan and the United States. Frankel uses trade, investment and financial data to assess this issue. He concludes with an analysis of how trends in regional economic integration can be used as building blocks for a stronger multilateral system.

Regional Trading Blocs in the world economic system, reseñado por Antonio Ortiz-Mena L.N.

The objective of this paper is to provide indicators of trade restrictiveness that include both measures of tariff and nontariff barriers for 91 developing and industrial countries. For each country, the authors estimate three trade restrictiveness indices. The first one summarizes the degree of trade distortions that each country imposes on itself through its own trade policies. The second one focuses on the trade distortions imposed by each country on its import bundle. The last index focuses on market access and summarizes the trade distortions imposed by the rest of the world on each country's export bundle. All indices are estimated for the broad aggregates of manufacturing and agriculture products. Results suggest that poor countries (and those with the highest poverty headcount) tend to be more restrictive, but they also face the highest trade barriers on their export bundle. This is partly explained by the fact that agriculture protection is generally larger than manufacturing protection. Nontariff barriers contribute more than 70 percent on average to world protection, underlying their importance for any study on trade protection.

/pdf/estimating-trade-restrictiveness-indices-nolnnrx999.pdf

Estimating Trade Restrictiveness Indices

http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2008/12/18/000158349_20081218090306/Rendered/PDF/WPS4797.pdf

Trade Policy, Trade Costs, and Developing Country Trade

To study the effects of tariffs on gross domestic product (GDP), one needs import demand elasticities at the tariff line level that are consistent with GDP maximization. These do not exist. The authors modify Kohli's (1991) GDP function approach to estimate demand elasticities for 4,625 imported goods in 117 countries. Following Anderson and Neary (1992, 1994) and Feenstra (1995), they use these estimates to construct theoretically sound trade restrictiveness indices, and GDP losses associated with existing tariff structures. Countries are revealed to be 30 percent more restrictive than their simple or import-weighted average tariffs would suggest. Thus, distortion is nontrivial. GDP losses are largest in China, Germany, India, Mexico, and the United States.

/pdf/import-demand-elasticities-and-trade-distortions-3qmzx055ow.pdf

Import Demand Elasticities and Trade Distortions

The database described in this article provides researchers with a broad set of data on trade, production, and protection for 28 manufacturing sectors at the three-digit level of the international standard industrial classification. The database covers up to 100 developing and developed countries over the period 1976-2004, but data availability varies by country and year. The trade, production, and protection database includes annual data on trade flows (exports and imports), domestic production (output, value added, employment), and trade protection (tariffs and nontariff barriers) for up to 100 countries over the period 1976-2004. The main contribution of this database is that it merges data from different sources in a common industry classification.

Trade, production, and protection database, 1976-2004

To study the effects of tariffs on gross domestic product (GDP), one needs import demand elasticities at the tariff line level that are consistent with GDP maximization. These do not exist. Kee, Nicita, and Olarreaga modify Kohli's (1991) GDP function approach to estimate demand elasticities for 4,625 imported goods in 117 countries. Following Anderson and Neary (1992, 1994) and Feenstra (1995), they use these estimates to construct theoretically sound trade restrictiveness indices and GDP losses associated with existing tariff structures. Countries are revealed to be 30 percent more restrictive than their simple or import-weighted average tariffs would suggest. Thus, distortion is nontrivial. GDP losses are largest in China, Germany, India, Mexico, and the United States. This paper - a product of the Trade Team, Development Research Group - is part of a larger effort in the group to measure trade restrictiveness.

Alessandro Nicita

Papers

Estimating Trade Restrictiveness Indices

Trade Policy, Trade Costs, and Developing Country Trade

Import Demand Elasticities and Trade Distortions

Trade, production, and protection database, 1976-2004

Import Demand Elasticities and Trade Distortions