Trade barriers in government procurementBook chapterAlen Mulabdic and Lorenzo Rotunno, In: The Economics of Deep Trade Agreements, Ana Fernandes, Nadia Rocha and Michele Ruta (Eds.), 2021-06, pp. 99-106, CEPR Press, 2021

This paper estimates trade barriers in government procurement, a market that accounts for 12% of world GDP. Using data from inter-country input-output tables in a gravity model, we find that home bias in government procurement is significantly higher than in trade between firms. However, this difference has been shrinking over time. Results also show that trade agreements with provisions on government procurement increase cross-border flows of services, whereas the effect on goods is small and not different from that in private markets. Provisions containing transparency and procedural requirements drive the liberalizing effect of trade agreements.

Weight gains from trade in foods: Evidence from MexicoJournal articleOsea Giuntella, Matthias Rieger and Lorenzo Rotunno, Journal of International Economics, Volume 122, pp. 103277, 2020

In this paper, we investigate the effects of trade in foods on obesity in Mexico. To do so, we match data on Mexican food imports from the U.S. with anthropometric and food expenditure data. Our findings suggest that exposure to food imports from the U.S. can explain up to 20% of the rise in obesity prevalence among Mexican women between 1988 and 2012. Pro-obesity effects are driven by areas more exposed to unhealthy food imports. We also find evidence in favour of a price mechanism. By linking trade flows to obesity, the paper sheds light on an important channel through which globalisation may affect health. (C) 2019 Elsevier B.V. All rights reserved.

Wage inequality and skill supplies in a globalised worldJournal articleLorenzo Rotunno and Adrian Wood, Journal of Comparative Economics, Volume 48, Issue 3, pp. 529-547, 2020

We investigate empirically, and explain theoretically, how the relative wages of skilled and unskilled workers vary with their relative supplies in open economies. Our results combine the insights of simple labour market and trade models. In countries that trade, relative wages respond inversely to variation in skill supplies, but the response decreases with the degree of openness to trade and is small in very open countries. To reconcile our results with standard estimates of the elasticity of substitution between skilled and unskilled workers, we allow also for the influence of directed technical change and income elasticity of demand for skill-intensive goods.

Israel's open-secret tradeJournal articleLorenzo Rotunno and Pierre-Louis Vézina, Review of World Economics (Weltwirtschaftliches Archiv), Volume 153, Issue 2, pp. 233-248, 2017

Abstract This paper uncovers and quantifies Israel's exports to countries that ban trade with Israel. Israel exported a total of $6.4 billion worth of merchandise to boycott countries between 1962 and 2012, and most of this trade is illicit, i.e. not recorded by the importers. We find that electronic exports to Malaysia account for the lion's share of this trade but it also includes a wide array of products from footwear to fruit and vegetables. Our estimates suggest Israel's exports to these countries would be 10 times larger without the boycott. On top of providing further evidence on the unintended consequences of unilateral trade bans, this paper provides a case study on the role of politics in international trade.

Heckscher-Ohlin: Evidence from Virtual Trade in Value AddedJournal articleTadashi Ito, Lorenzo Rotunno and Pierre-Louis Vézina, Review of International Economics, Volume 25, Issue 3, pp. 427-446, 2017

The fragmentation of production chains across borders has been one of the most distinctive features of globalization since the 1980s. Nonetheless, our understanding of its implications for trade theory and policy is only in its infancy. We suggest that trade in value added should follow theories of comparative advantage more closely than gross trade, as value-added flows capture where factors of production, e.g. skilled and unskilled labor, are used along the global value chain. We find empirical evidence that Heckscher–Ohlin theory does predict manufacturing trade in value-added, and it does so better than for gross shipment flows. While countries export across a broad range of sectors, they contribute more value-added in techniques using their abundant factor intensively.

Political stability and trade agreements: Evidence for ‘endgame FTAs’Journal articleLorenzo Rotunno, European Journal of Political Economy, Volume 45, Issue C, pp. 133-148, 2016

This paper empirically examines the idea that Free Trade Agreements (FTAs) are more likely to be signed by governments playing ‘endgames’; that is, when governments are about to lose power. Two empirical strategies shed light on this hypothesis. One relies on events that increase the probability of political turnover, the other on term limits. I find that countries are more likely to sign FTAs after the unexpected exit of their leaders, when political instability is high. The key finding is partly confirmed in the term-limits strategy as governments are found to form more FTAs during their last term in office.

Quota-Hopping In-Bond DiversionJournal articleLorenzo Rotunno and Pierre-Louis Vézina, Economic Inquiry, Volume 53, Issue 1, pp. 34-48, 2015

type="main" xml:id="ecin12128-abs-0001"> We show that the U.S. in-bond system of imports may be used by firms to illegally avoid trade barriers, a practice known as in-bond diversion. The illicit scheme involves declaring Chinese exports bound for Mexico but diverting them to the U.S. market while in transit, thus creating a gap between Chinese and Mexican reports. Using the phaseout and removal of U.S. quotas at the end of the Multifiber Agreement as a policy experiment, as well as variation in quota bindingness across products, we show that quota-bound products were associated with larger trade gaps which shrunk following the quota removals. ( JEL F13, O17, O19)

The rise and fall of (Chinese) African apparel exportsJournal articleLorenzo Rotunno, Pierre-Louis Vézina and Zheng Wang, Journal of Development Economics, Volume 105, Issue C, pp. 152-163, 2013

During the final years of the Multifiber Agreement (2001–2005) the US imposed quotas on Chinese apparel while it gave African apparel duty- and quota-free access. We argue that the combination of these policies led to a rapid but ephemeral rise of African exports that can be explained in part by ethnic-Chinese firms using Africa as a quota-hopping export platform. We first provide a large body of anecdotal evidence on the ethnic-Chinese apparel wave in Africa. Second, we show that Chinese exports to Africa predict US imports from the same countries and in the same apparel categories but only where transhipment incentives are present, i.e. for products facing US quotas and in countries with preferential access to the US unconstrained by rules of origin. Our estimates indicate that direct transhipment may account for around 22% of Africa's apparel exports during 2001–2008.

Chinese Networks and Tariff EvasionJournal articleLorenzo Rotunno and Pierre-Louis Vézina, The World Economy, Volume 35, Issue 12, pp. 1772-1794, 2012

In this paper we combine the tariff evasion analysis of Fisman and Wei (2004) with Rauch and Trindade’s (2002) study of Chinese trade networks. Chinese networks are known to act as trade catalysts by enforcing contracts and providing market information. As tariff evasion occurs outside the law, market information is scant and formal institutions inexistent, rendering networks the more important. We find robust evidence that Chinese networks, proxied by ethnic Chinese migrant populations, increase tariff evasion, i.e. the tariff semi-elasticity of Chinese missing imports. We suggest the effects takes place through matching of illicit-minded traders, identification of corrupt customs agents and enforcement of informal contracts. (This abstract was borrowed from another version of this item.)