Rodolfo Helg

The actual impact on trade flows of preferential trade agreements (PTAs) has been debated for a long time. In light of the " deepening " occurring in PTAs, increasingly including beyond-the-border measures and non-economic goals, we reassess their effects by estimating a gravity model of trade including a large set of countries, and specifically treating the EU as a unique entity. We control for the depth of the agreements using different sets of measures. Our results confirm the positive impact of PTAs on bilateral trade flows, but also show that the larger and more complex the included provisions, the weaker is the marginal effect on trade.

Growing shares of international trade flows consist of intermediate and unfinished goods shipped from one country to another to combine manufacturing or services activities at home with those performed abroad. This configuration of the productive structure has been named "internationally fragmented." The purpose of our work is to analyze the labor market effects of international fragmentation of production, looking at how it affects relative labor demand. Models of trade due to fragmentation of production suggest that when international fragmentation takes place we might observe changes in factor proportions in the affected industries. We use outward-processing-trade data - specifically related to international fragmentation of production - to test if the shift in the ratio of skilled and unskilled labor employed in Italy and Germany during the 1990s is related to fragmentation.

Would you expect twins to reach different heights? The comparison is perhaps not so accurate, but inthe early 1950s Abruzzo and Sicily were economically very similar. Both were “full members” of theu n d e rdeveloped Mezzogiorno, with little industry, few natural re s o u rces, poor transport infrastru c t u re ,high agricultural employment and a low standard of living. Yet, while Abruzzo has managed asubstantial catch-up, Sicily has remained a lagging region. Consider regional GDP per capitac o m p a red to that in the North of Italy as the single most powerful indicator of this. From the early1950s to the mid-1990s, Abruzzo increased its relative position by almost 25 percentage points. Overthe same period, Sicily managed to climb up by only 2 percentage points relative to the nort h .This paper assesses the determinants of the diverging paths between these regions. It is organisedas follows. After having provided a broader overview of the development of the Mezzogiorno inthe next section, Section 3 focuses in more detail on the performances of Abruzzo and Sicily.Growth accounting exercises will show that the role of total factor productivity growth -technological change - had a much more important role in Abruzzo than it did in Sicily. At the sametime, Abruzzo had a much broader based development, including a range of manufacturingactivities and market services. Development in Sicily was much more specialised, and relied heavilyon investment in a few capital intensive industries. Section 4 discusses the implications of thesedifferent development strategies, and tries to identify the role of government policy in the process.Section 5 summarises and concludes.

In this paper we analyse the dynamics of trade patterns in the six largest industrialised countries and in eight fast growing Asian economies. For each of these countries we study the shape of the sectoral distribution of an index of trade specialisation and its evolution over time. Our analysis shows a marked difference between the advanced and the emerging countries as far as the degree of persistence is concerned: the former have in fact a highly persistent trade pattern, whereas the latter show a rapidly changing trade specialisation. However, the two groups of countries are more similar as far as the evolution of the degree of specialisation is concerned. Although emerging countries are still more specialised than the industrialised countries, both groups show a tendency toward a reduced polarisation and a more symmetric distribution of the specialisation index. This evidence is in line with the traditional trade theory, in which changing comparative advantage is the determinant of a changing trade pattern. Contrarily, this evidence does not support the idea that self-reinforcing mechanisms are prominent in international trade specialisation.

International economic integration is often blamed for the deteriorating fortunes of unskilled workers in industrial countries. We look at the labor market impact of trade and foreign direct investment in the case of Italy. Our empirical framework allows for trade, technology and factor supply effects. We find that international trade did not contribute to Italy’s labor market problems. Indeed, given that Italy holds quite a distinct pattern of trade specialization, compared to other industrialized countries, international integration as reflected in falling import prices may have boosted the demand for labor there. We also argue that the inability of the Mezzogiorno’s economy to adjust to the changing international environment is one of the main stumbling blocks in Italy’s economy. Finally, we find that greater firm’s mobility may have weakened the power of trade unions and contributed to wage moderation.

To what extent do European countries differ with respect to the sources of cyclical fluctuations of industrial output? We look at output data disaggregated by industry for 11 European countries, and on the basis of a cointegrated vector autoregression model we examine the correlation of output innovations at the industry and country levels. We also discuss to what extent output innovations can be considered ‘symmetric’ or ‘asymmetric’. Our results point to the fact that, on average, more variance of output innovations is explained at the country, rather than the industry level. We also find that the importance of asymmetric disturbances is quite varied among the 11 countries, and we identify a ‘core’ of countries with a higher degree of symmetry.