The Belt and Road Initiative (BRI) is a key platform for China to deepen economic cooperation and promote shared development with participating countries. This paper develops a general equilibrium model with production and R&D sectors and biased technological change to examine how OFDI to BRI countries affects skill-biased technological change (SBTC) in China's manufacturing industry. Using provincial-level manufacturing panel data for 2007-2021, the study finds that technological change in China's manufacturing industry is gradually shifting toward skilled labor, and that gradient-conforming OFDI to BRI countries significantly promotes SBTC. Mechanism analysis shows that industrial structure upgrading and R&D scale expansion serve as mediating channels. Heterogeneity analysis indicates that this effect is stronger for OFDI directed toward middle-development-level BRI countries and is more pronounced in China's coastal and BRI provinces. Further analysis shows that stronger policy coordination with BRI countries, greater local government attention to the BRI, and improved intellectual property protection significantly amplify the SBTC-promoting effect of gradient-conforming OFDI. These findings provide empirical evidence and policy implications for leveraging the BRI's resource advantages to foster SBTC.
Against the backdrop of technological dependence and a technology embargo, this study investigates the impact of digital product imports on firm innovation in China's manufacturing sector. Using data from Chinese listed manufacturing firms, we find that digital product imports significantly enhance both the quality and quantity of firms' patent output. Our analysis shows that digital product imports promote innovation by supporting digital transformation, lowering internal costs, and improving the efficiency of information exchange between firms, rather than via technology spillovers. This finding diverges from previous research on imported products and innovation, underscoring the distinctive intelligence-driven and information-rich characteristics of digital products. Furthermore, heterogeneity analyses reveal that the innovation-enhancing effect of digital product imports is more pronounced in firms with higher human capital, lower productivity, greater labor intensity, and non-state ownership. These findings provide valuable insights for policymakers in developing countries aiming to promote innovation through digital trade.
The global arms trade has received growing scholarly attention against the backdrop of increasing regional conflicts worldwide. Using social network analysis and the stochastic actor-oriented model, we test a theoretical framework for understanding the evolutionary mechanisms of the global arms trade network. Our study reveals the scale-free properties and hierarchical stratification of the global arms trade network. We find that the United States and Russia maintain their dominant positions in global arms exports, while countries such as China and India have gained significantly higher standing within the network. Endogenous network effects, bilateral relations, and national characteristics simultaneously shape the evolutionary trajectory of global arms trade. Transitivity, preferential attachment, geographic distance, defense cooperation, political stability, and military expenditure exert differential impacts on the evolution of the global arms trade network. Our findings reveal the evolutionary characteristics of global arms trade and provide a more explanatory analytical framework to elucidate the determinants of its evolution.
This paper identifies a distinct financial channel through which openness affects inflation in a simple model of a bank and a goods-producing firm. Greater financial openness leads to lower inflation if it is cheaper for the bank to borrow abroad than at home. This hypothesis is tested on cross-section data in a sample of 75 countries over the 1973-2016 period. While there is no robust evidence for lower CPI inflation in financially more open economies in all the countries studied, we do find such an inverse link in a subsample comprising OECD countries only. By contrast, the more common measure of openness, trade openness, matters only in non-OECD countries where greater trade openness is negatively related to CPI inflation.
US-China trade simultaneously generates job gains and losses in the US, making the net employment effect uncertain. This paper explores the impact of China trade shock on US labor market outcomes across business functions. We first adjust employment measures for productivity differences to ensure cross-country comparability and consistency. Based on this adjustment, we assess the net employment effect for the US by comparing the positive effect of US export expansion with the negative effect of import competition from China. We then examine whether the rise in decoupling would offset the negative employment effects of China trade shock on the US, by evaluating the potential impact of a partial decoupling from China. Importantly, employment is disaggregated by business function, including R&D, marketing, management, and fabrication. Our empirical results indicate net job losses for the US, the bulk of which arise from fabrication activities. However, the US experiences net job gains in knowledge-intensive R&D and management functions that can be attributed to China. Scenario analysis shows that partial decoupling of the US from China would only alleviate symptoms rather than fully resolve the problems, particularly for fabrication employment.
Industry 4.0 is characterized by intelligence. This paper examines the impact of regional trade agreements (RTAs) on the intelligent transformation of manufacturing exporters by using a sample of Chinese manufacturing exporters. This paper finds that the entry into force of RTAs can promote the intelligent transformation of manufacturing exporters. This is because: (1) RTAs promote the export of manufacturing exporters, which need to undergo intelligent transformation to meet the demand of export growth; (2) RTAs facilitate the international knowledge spillover, which enhances the intelligent upgrading of high-tech manufacturing exporters; (3) RTAs increase the technological complexity of export products, which induces the intelligent transformation of low-tech manufacturing exporters. Heterogeneity analysis shows that the effect of RTAs on intelligent transformation is more pronounced for enterprises with foreign capital, low financial constraints, high resource allocation concentration, and high capital intensity of the product, and that this effect depends on low trade policy uncertainty. This paper offers new insights and empirical evidence on the role of trade in driving the intelligent transformation of manufacturing industries.
This paper aims to contribute to a better understanding of the relationship between sectoral concentration and export competitiveness, using countries' annual share of world exports (1995-2021) as a proxy for competitiveness. Results are also discussed for a specification estimated without China, treated as a structural outlier, to explore potential heterogeneity among developing economies. To achieve these objectives, we employ panel-data econometric techniques using G2SLS and IV-GMM estimators. Our main results reveal a positive relationship between sectoral specialization and export competitiveness. However, the impact of specialization is conditional upon (i) the degree of diversification relative to the global portfolio and (ii) the share of primary products in the export basket. Specifically, the findings indicate that international competitiveness is enhanced when specialization targets products with high global demand, contingent on a productive structure with a greater manufacturing share in GDP.
This study examines the impact of cultural distance on the bilateral trade of cultural products using a structural gravity model. We provide empirical evidence that cultural distance significantly hinders bilateral trade, while comparative advantage remains a crucial determinant, consistent with classical trade theory. In particular, the interaction between cultural distance and comparative advantage has a positive effect on bilateral trade when analyzed at the category level of cultural products. This finding suggests that the influence of comparative advantage strengthens as cultural distance increases. Additional analysis comparing East Asian and non-East Asian countries reveals that cultural distance has no significant effect among culturally similar countries, but plays a more pronounced role in shaping trade flows between culturally distant countries.
This research aims to explore the impact of the Arab Spring on the total foreign aid provided to countries affected by this event. The primary focus is on how financial assistance is distributed by donors, distinguishing between support for government and civil society, and contrasting it with humanitarian aid and other types of assistance. In addition, this research investigates the potential indirect effect of the Arab Spring on the distribution of foreign aid to Arab countries that were not directly affected by the event. The aim is to assess whether foreign assistance has been reallocated, from unaffected Arab nations to those affected by the Arab Spring after 2010, and vice versa. The paper uses the synthetic difference-in-differences method (SDID), a new causal inference method that combines the synthetic control and difference-in-differences method to accomplish these goals. The results underscore foreign aid allocations' intricate and dynamic characteristics following transformative events like the Arab Spring. Unforeseen shifts defy the study's initial assumptions, emphasizing the crucial influence of contextual factors in shaping donor decisions.
This study examines the impact of European Union (EU) border rejections triggered by non-tariff measure (NTM) compliance failures on African exports of edible fruits and vegetables between 2008 and 2018. Using data from the EU's Rapid Alert System for Food and Feed (RASFF) and export statistics from 45 African countries (UN WITS), we employ a structural sectoral gravity model to address key econometric challenges, including endogeneity of border rejections and zero trade flows. The analysis reveals that NTM-related rejections, often due to exceedances of pesticide or aflatoxin maximum residue limits, and presence of unauthorized substances such as dichlorvos, carbendazim, or dead insects, significantly reduce both the number of European trade partners and the export value of African vegetables. Conversely, fruit exports show a modest increase in trade partners and export value following rejections, suggesting possible adaptive strategies or shifts in trade dynamics. The study also identifies spillover effects, where rejections in one product category lead to increased rejections in related categories in subsequent years. These findings underscore the need for African countries to strengthen compliance with EU sanitary and phytosanitary (SPS) requirements, invest in regional testing and certification capacity, and improve coordination between exporters and regulatory authorities.
The successful adoption of innovative digital technologies, exponential information growth and knowledge accumulation empower modern civilization to merge into global networks, aligning with worldwide progress. Economic globalization integrates the national economies into the global market. Variations in economic globalization intensity across economies prompt this analysis to investigate the effects of digitalization, science and technology, and international trade in information and communication technology (ICT) on the intensity of economic globalization in two groups of countries. The dataset comprises data from 33 European countries gathered over the period from 2010 to 2019, categorized by the KOF globalization index. The statistical methodology employed in this study is based on the application of partial least squares structural equation modeling (PLS-SEM). The Multi-Group Analysis (MGA) is used to identify differences in patterns of influence in countries with varying intensities of economic globalization divided into frontiers and catch-up countries. Research findings indicate positive effects of digitalization, science and technology, and ICT trade on economic globalization in pooled data, but the link for digitalization is not statistically significant. However, MGA results uncovered that statistically significant differences between analyzed groups of countries exist in path coefficients reflecting the impact of digitalization and science and technology on economic liberalization.
Our study focuses on the effect of financial development and institutional quality on economic growth across the globe. We employed the system General Methods of Moments and dynamic panel threshold regression on 182 countries from 2000 to 2021. We found that financial development and institutional quality stimulate economic growth in Africa and developing economies. We also find evidence that institutional quality moderates the relationship between financial development and economic growth in the full sample and developed economics. We also find evidence of insti-tutional quality threshold effect on economic growth, with the impact of institutional quality on growth being positive above a certain threshold value. However, below the threshold, we found a negative effect of institutional quality on economic growth in Africa and developing economies. We also find evidence that at a higher level of insti-tutional quality, financial development positively influences economic growth in Africa, developing and developed economies. Policymakers should focus on simultaneously enhancing financial development and institutional quality in Africa and developing economies.
Chinese firms are facing a dilemma where innovation is growing rapidly in quantity but is of low quality. This paper utilizes the revision of the 'Catalogue for the Guidance of Foreign Direct Investment (FDI) Industries' in 2002 as a quasi-natural experiment and examines the effect of FDI deregulations on the innovation quality of domestic firms using firm-level data from 1998 to 2007. Employing a difference-in-differences strategy, we find that FDI deregulations significantly expand the firms' patent breadth, indicating an enhancement in innovation quality. Our empirical evidence further indicates that FDI deregulations do not lead to significant negative competition effects; instead, technology spillovers play a dominant role. FDI inflows strengthen firms' absorptive capacity and promote the shift of labor from foreign-invested enterprises to domestic firms. More importantly, we distinguish between two types of FDI liberalization policies and find that policies encouraging FDI entry serve as a driving force for enhancing firm innovation quality. This paper emphasizes the significance of FDI deregulations for firm innovation, offering empirical evidence on how developing countries can undertake FDI regulatory reforms to enhance innovation quality.
This study employs complex network modeling to examine the impact of cross-border data flow regulations on the structure of the global new energy vehicle (NEV) industrial chain. Using CPEII-BACI data from 2007 to 2022, trade networks across various NEV industrial chain segments are constructed and analyzed from both static and dynamic perspectives. The empirical analysis shows that the network position of data flow regulations significantly strengthens the structure of the NEV industrial chain, with more pronounced effects under conditions of linguistic dissimilarity, economic inequality, restricted trade openness, and deeper regulatory commitments. The mechanism analysis reveals that regulatory centrality strengthens the structure by reducing institutional transaction costs and spatial dependency costs.
A trend of deindustrialization and increased trade openness through bilateral, regional, and multilateral trade arrangements have been a recent phenomenon in several African economies. Developments in trade openness and market integration, on the one hand, and manufacturing activity, on the other hand, beg the question of whether the two phenomena are related. This study seeks to investigate whether intra-regional trade flows influenced manufacturing activity in Africa. Towards that end, an econometric model of manufacturing production is specified, which is estimated using the ARDL method on data drawn from 42 African countries over the period 1995-2020. The estimates suggest that intra-African merchandise trade openness has a positive and statistically significant long run impact on the level of manufacturing output. In contrast, the effect of extra-African trade openness on manufacturing is found to be unfavorable and dominates the positive effect of intra-African trade, causing the impact of the total (i.e. multiregional) trade openness to be negative. Our findings justify the merit of distinguishing between intra- and extra-African trade to characterize the effect of cross-border trade on manufacturing activity and highlight the importance of augmenting the intensity and scope of market integration or intra-African trade in promoting industrialization on the continent.
The informal economy is often seen as a sector that hampers economic growth in many developing economies, of which sub-Saharan Africa is no exception. However, it is an important feature of sub-Saharan African economies which can accelerate economic growth, provided the sector is moderated by institutional quality, which is a knowledge gap. This study examines the moderating effect of quality of institutions in the informality-economic growth relationship. This paper uses a cross-country panel dataset for 43 sub-Saharan African economies over the years 2002 to 2018 and employs the two-step system generalised method of moments technique for the analysis. The results show that, in both the short and the long run, improvement in institutional quality is not only essential for economic progress but is also crucial in complementing informality to improve economic growth in sub-Saharan Africa. Additionally, the results of the study suggest that capital per labour, human capital and trade significantly and positively affect economic growth in SSA, while inflation, government expenditure and financial depth are detrimental to economic growth in SSA.
As a global manufacturing leader and an emerging digital economy power, China faces increasingly complex challenges from cross-border data flow restrictions imposed by its export destination countries. This study uses panel data spanning 2005-2022 and adopts a two-way fixed-effects model to examine the impact of these restrictions on the quality of China's manufacturing exports. The findings indicate a significant adverse effect: a one standard deviation increase in the destination country's restriction index is associated with a 0.018 standard deviation decline in export quality (p < 0.01). The mechanism analysis reveals that this effect primarily manifests through increased trade costs and reduced imports of intermediate goods. Furthermore, disparities in internet infrastructure and governance capabilities between China and its trading partners exacerbate these adverse effects, whereas participation in international policy agreements (e.g. digital trade frameworks) can alleviate them. Heterogeneity analysis indicates that the adverse impacts are more pronounced for indirect and high-level restrictions, especially in low- and middle-income countries and economies with low import dependence on China. High-tech manufacturing sectors are particularly vulnerable. These findings provide crucial insights for Chinese enterprises to strategically navigate market selection, mitigate risks, and promote high-quality export development amid global data governance challenges.
Inward foreign direct investment (FDI) has played a crucial role in local labour markets, contributing to poverty alleviation and economic development across many host countries. While the evidence of higher female representation within foreign firms is well documented, examining spillover effects of FDI on domestic firms' female employment remains largely under-explored. This study attempts to fill the gap both theoretically and empirically. Our theoretical model shows that FDI presence simultaneously exerts two contrasting forces on domestic firms' expected female employment, namely a direct spillover effect and an indirect cut-off effect. We then specify and estimate an empirical model, using a rich firm-level panel dataset of a fast-growing service industry in Vietnam. The data suggest that on average, foreign firms are twice more female-intensive and the estimation results reveal strong evidence of positive spillovers from FDI. The effect is profound among privately owned firms, while being insignificant among state-owned counterparts. Our findings carry major implications to local workforce, firms and policymakers concerning the labour market effects of inward FDI.
This paper studies how strategic political game conflicts between large countries affect firms' decisions to import technologically complex products and engage in outward foreign direct investment (OFDI) by building a three-phase decision-making theoretical model and testing. It is found that the importation of technologically complex products by high-technology firms under strategic political game conflicts leads to a reduction in future OFDI, which is obvious when the pyhsical and institutional distance between the host country and the home country is large. Lower labour productivity and higher fixed costs are the main channels through which the import of technologically complex products under the conflict of the great power political game leads to a reduction in future OFDI by high-tech firms. Imports of technologically complex products by non-state-owned firms in the context of great power political game conflicts lead to a greater reduction in future OFDI than those for state-owned firms. As a result, firms will reduce imports of technologically complex products in order to increase OFDI under games of conflict between major powers, and firms will have an incentive to promote bilateral and multilateral cooperation.
This study explores how institutional quality modulates the effect of foreign direct investment inflows into agriculture on the agricultural exports of emerging nations. The main purpose of our analysis is to find and quantify the export effects of foreign direct investment in the sector as well as the modulating effects of institutional quality on the foreign direct investment - agricultural export nexus. The study used secondary data from various sources covering 44 sub-Saharan African (SSA) countries for the period 2000 to 2020. The data were analyzed using the fixed effect model (FEM) and general moment method in system (SGMM) for robustness. The findings suggest that a given level of institutional quality is needed to attract foreign direct investment to improve agricultural exports. Thresholds of institutional quality needed for the foreign direct investment to promote agricultural exports are also provided. The established thresholds are as follows: (i) 1.000 'government effectiveness'; (ii) 0.200 'political governance'; (iii) 0.375 'economic governance'; (iv) 0.444 'institutional governance' and (v) 0.500 'general governance.' Policies aimed at strengthening institutional quality in SSA countries should be backed by measures aimed at avoiding foreign direct investment mismanagement to improve agricultural exports.
