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Politics of global value Chains
Joint Authors
Source
Economic Research Forum : Working Paper Series
Issue
Vol. 2016, Issue 979-1073 (31 Dec. 2016), pp.1-29, 29 p.
Publisher
Economic Research Forum for the Arab Countries Iran and Turkey
Publication Date
2016-12-31
Country of Publication
Egypt
No. of Pages
29
Main Subjects
Economics & Business Administration
Abstract EN
The proliferation of global value chains makes the domestic production of goods increasingly dependent on inputs from foreign sources.
Political tensions between countries have an impact on trade costs as they affect the international enforceability of contracts or result in impediments from authorities in the shipment or production process.
By expanding their portfolio of foreign suppliers, firms and by extension entire economies are thus increasingly prone to the trade effects of adverse bilateral political shocks.
In this paper, we aim to reassess the role of political relations on trade flows in light of these new developments and propose a new channel.
We hypothesize that political relations matter more for imports of strategic inputs.
Strategic inputs refer to inputs that a country uses intensively in its production process.
We construct a simple model exhibiting input-output linkages to clarify the mechanisms at play.
Using a new measure for countries’ dependence on these strategic inputs, we then test the proposed mechanism empirically by interacting the measure with an indicator of political relations in a structural gravity model.
To address potential endogeneity issues we then perform an event study, in which the treatment is an exogenous adverse political shock.
Using a new dataset on the status of diplomatic representation and monthly trade data, we exploit the recalling or summoning of the ambassador of a country as a shock to bilateral political relations.
Results from both analyses confirm an economically and statistically significant effect that varies conditionaly on the dependence of the country on the imported input.
American Psychological Association (APA)
Hinz, Julian& Leromain, Elsa. 2016. Politics of global value Chains. Economic Research Forum : Working Paper Series،Vol. 2016, no. 979-1073, pp.1-29.
https://search.emarefa.net/detail/BIM-701230
Modern Language Association (MLA)
Hinz, Julian& Leromain, Elsa. Politics of global value Chains. Economic Research Forum : Working Paper Series No. 979-1073 (Dec. 2016), pp.1-29.
https://search.emarefa.net/detail/BIM-701230
American Medical Association (AMA)
Hinz, Julian& Leromain, Elsa. Politics of global value Chains. Economic Research Forum : Working Paper Series. 2016. Vol. 2016, no. 979-1073, pp.1-29.
https://search.emarefa.net/detail/BIM-701230
Data Type
Journal Articles
Language
English
Notes
Includes appendices : p. 19-29
Record ID
BIM-701230