Browsing by Subject "international trade"

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  • Zhang, Liangying (1999)
    The recently continuing proliferation of regional Preferential Trade Agreements (PTAs) and the glowing trend of emerging tri-bloc (Europe, America, Asia) raise the concern that the regional trade arrangements may challenge the world trading system embodied in the General Agreement on Tariff and Trade (GATT) and World Trade Organisation (WTO). In response to this background, this thesis reviews both the old and new key theoretical contributions on PTAs. The emphasis is put on the new one, which addresses the direct effect of regional arrangement on multilateral process. Basic international trade theory and policy, terminology and background are provided at the beginning to facilitate reading. While the paper does not attempt to put normative judgement on PTAs, it does call for more effort on multilateral process in the conclusion. Among the old literature, this paper reviews the classical work of Viner. Viner had a doubt on the welfare improvement Customs Union by raising the concept of trade diversion and trade creation. His model implies that unambiguous gain can only be obtained when the partner countries are the sole source of import even in the initial equilibrium. Among the recent literature, this paper reviews the analyses from the viewpoint of 'new political economy' which view trade policy as being determined by lobbying of the concentrated interest groups. Two models, Grossman-Helpman's and Krishna's, are introduced. Grossman-Helpman's small union model, which takes a specific factor model with n+1 goods in a political economy framework, addresses the incentive for the government to conclude a Free Trade Area, and reaches conclusion that free trade agreement could more likely be reached when it affords enhanced protection. Krishna's Cournot oligopoly model uses a similar framework of Grossman and Helpman's, however examines further the direction relation between the regional arrangement and multilateral process besides the incentive, and concludes the trade-diversion incentive and harmful effect of regional trade agreement on multilateral trade liberalisation.
  • Mayer, A.L.; Kauppi, P.E.; Tikka, P.M.; Angelstam, P.K. (Elsevier, 2006)
    Among wealthy countries, increasing imports of natural resources to allow for unchecked consumption and greater domestic environmental conservation has become commonplace. This practice can negatively affect biodiversity conservation planning if natural resource harvest is merely pushed across political borders. As an example, we focus on the boreal forest ecosystem of Finland and northwest Russia. While the majority of protected forests are in northern Finland, the majority of biodiversity is in southern Finland, where protection is more difficult due to high private ownership, and the effectiveness of functioning conservation networks is more uncertain due to a longer history of land use. In northwest Russia, the current protected areas are inadequate to preserve most of the region’s naturally dynamic and old growth forests. Increased importation of wood from northwest Russia to Finland may jeopardize the long-term viability of species in high diversity conservation areas in both Russia and Finland, through isolating conservation areas and lowering the age of the surrounding forest mosaic. The boreal forest ecosystem of Fennoscandia and northwest Russia would thus be best conserved by a large scale, coordinated conservation strategy that addresses long-term conservation goals and wood consumption, forest industries, logging practices and trade.
  • Kähkönen, Mikko (2000)
    The objective of this study is to analyse the effects of an enlargement of a common market on economic growth and incomes. The analytical framework is developed by Uwe Walz (1998). The underlying growth model draws on the work of Grossman and Helpman (1991). Growth is explained with continuous developing of new differentiated intermediate inputs in an R&D sector. The use of these intermediates yields economies of scale and further, productivity gains in final goods production. The countries' specialisation patterns are determined together with the mentioned scale economies and agglomeration advantages and disadvantages arising from transport costs. The new country to the common market is considered to be technologically lagging compared to the initial countries. The differences in technology are of such magnitude that the entrant cannot take part in the R&D activity at all. The study of the enlargement is divided into two sequences: liberalisation of trade and liberalisation of migration. The result of removing the barriers to trade is faster economic growth and income convergence between the initial common market countries. The enhanced welfare is observed as better wages in the new member state. The specialisation patterns become less drastic, with the reallocation of resources leading to the innovating activity being more evenly distributed. In the case of labour mobilisation, faster growth is achieved with qualifications. The migration of unskilled workers to the initial common market countries slows down growth. The immigration of skilled workers in turn leads to faster growth if and only if it was used relatively less intensively in the new member country prior to the enlargement. In this case wages converge. The starting point of the study consists of the following papers: Grossman, G. M. & Helpman, E. (1991): Innovation and Growth in the Global Economy. The MIT Press, Cambridge, Ma. USA. Walz, U. (1998): Does an Enlargement of a Common Market Stimulate Growth and Convergence? Journal of International Economics 45, 297-321. Walz, U. (1996): Transport costs, Intermediate Goods, and Localized Growth. Regional science and Urban Economics 26, 671-695.
  • Al-Khail, Mohammed Aba (Svenska handelshögskolan, 2003)
    Economics and Society
    Investors significantly overweight domestic assets in their portfolios. This behavior which is commonly called “home bias” contradicts the prescriptions of portfolio theory. This thesis explores potential reasons for the “home bias” by examining the characteristics of the investing and the target countries and features of the interaction between them. A common theme of the four essays is a focus on the importance of information about foreign markets in explaining the share of these markets in investors’ portfolios. The results indicate that the size of the equity ownership in another country strongly relates to the distance to the financial capital of that country, and to trade in goods with and direct investments (FDI) to that country. The first essay empirically investigates the relationship between trade in real goods and portfolio investments. Overall, the evidence indicates a substantial role for trade in reducing the information cost relating to portfolio investments. The second essay examines the implications of the launch of the European Monetary Union (EMU) on international portfolio investments. The evidence on the allocation of Finnish international portfolio investments is more consistent with an information-based than a diversification motive explanation. The third essay employs new data for a large number of countries and further explores the role of trade on international portfolio investments. The results indicate that trade provides important information especially on firms in countries in which the corporate governance structure and the information environment of firms generate less reliable information. The fourth essay examines the relationship between direct investments (FDI) and portfolio investments. In contrast to the predications of portfolio theory, it provides evidence that FDI is a complement rather than a substitute for portfolio investments.
  • Kiljunen, Kimmo (Suomen metsätieteellinen seura, 1986)
  • Gangnuss, Danila (2005)
    The European Union has created a massive market for goods, services, capital and labour. In principle, goods and services as well as factors of production can move freely across the national borders within the European Union. Migration of the factors of production is driven by the country-specific differences in marginal productivity. As a result of this, migration ensures the most efficient use of the factors of production and therefore promotes the general welfare. However, international mobility of the factors of production might threaten national welfare of the countries that participate in economic integration. For some of the countries, this raises concerns about loosing factors of production in favor of the other member-states of the European Union. The purpose of this thesis is to analyze how mobility of skilled labour affects income taxation decisions in the countries that face economic integration. The thesis identifies optimal patterns of taxes and of public expenditures in the countries that face international agglomeration of industry. It poses the question of whether there exists an optimal size of the public sector in the presence of economic integration. Starting with the core-periphery models of Krugman (1991a), Fujita et al. (1999) and Forslid (1999), the thesis considers a new economic geography model of tax competition (Andersson and Forslid 2001), where two initially identical countries compete for internationally mobile skilled workers. The model contains two types of equilibria. In the dispersed equilibrium, manufactured production and skilled workers are located in both countries. In the agglomerated equilibrium, manufactured production and skilled workers are concentrated in one of the countries. For both types of equilibrium we construct taxes, which are optimal for the purpose of preserving current distribution of manufactured production and of skilled workers. We show that it is always optimal to tax the income of skilled workers at some positive rate. In the dispersed equilibrium, taxes on the income of skilled workers cannot be increased above some critical level without producing agglomeration of industry. However, in the agglomerated equilibrium, economic integration decreases sensitivity of skilled workers with respect to fiscal incentives. As a result of this, the scope for income taxation of skilled workers in the agglomerated equilibrium does not monotonically decline with trade costs. We also show that taxes on the income of unskilled workers determine the size of the public sector in the dispersed equilibrium but not in the agglomerated equilibrium. It is interesting that in the country, which contains agglomeration of industry, taxes on the income of unskilled workers can be decreased without reducing the size of the public sector.
  • Runeberg, L. (Suomen metsätieteellinen seura, 1946)
  • Kerko, Santtu (Helsingin yliopisto, 2020)
    When dependent firms trade with one another, no usual market incentives apply to the pricing decision. Prices determined in such a case are called transfer prices. Global differences in corporate tax rates encourage multinational enterprises to manipulate their transfer prices to shift profits to avoid taxes. It is estimated that one third to over half of global trade value is between related parties, making potential tax gains large from transfer mispricing. Literature has proposed transfer mispricing to be one of the major channels for international profit shifting. This thesis examines whether transfer mispricing can be found in export prices of Finnish multinational enterprises. The data set is obtained by merging Finnish Customs data on International Trade in Goods in 2014-2017 and Statistics Finland Enterprise Group Register. By combining the two data sets, information on export prices on firm, product and destination level are tagged with information on dependencies in the destination country. This allows comparing intra-firm trade prices with independent trade prices. The model used to distinguish transfer mispricing is a fixed effects difference-in-differences regression, where differences in independent and dependent export prices are compared in their response to destination tax differences. Information on firm, product, export date and destination characteristics are used to control for differences between independent and dependent trade prices that are not explained by tax motivations. The results provide evidence of transfer mispricing in magnitude comparable to the previous research. A 10 percent decrease in destination tax rate is estimated to lead to 1.2 percent decrease in intra-firm export prices of Finnish multinational enterprises. This implies 0.8 billion euros of underreported exports in 2017, totaling 160 million euros of corporate tax losses. These results are questioned by using a more robust method than applied in previous empirical literature. According to the more conservative estimates, the main evidence of transfer mispricing loses statistical significance. The results give broad confidence intervals for transfer mispricing of Finnish multinational enterprises, which do not cancel out either large-scale profit shifting or nonexistent price manipulation. They encourage further research on the subject exploiting more detailed data on transaction level dependencies. In addition, the role of foreign affiliates in transfer mispricing calls for more detailed data.