Papers by Andrea Fracasso
Economia Politica
Recent years have witnessed a resurgence of trade protectionism, either vocally used as an electo... more Recent years have witnessed a resurgence of trade protectionism, either vocally used as an electoral tool or more discretely implemented within WTO rules. On the one hand, the US-China trade war that has erupted in 2018 over steel and aluminium has often made the news, helped by the size of the two contenders. The reciprocal, unilateral imposition of tariffs has spilled over to other products, from agricultural commodities to 5G technology, and other countries as well, with the US threatening to sanction automotive imports from the EU and Japan on national security grounds. On the other hand, a less vocal yet more pervasive trend has started in the aftermath of the 2007-2008 financial crisis, with several countries imposing discriminatory measures to favour domestic firms (Evenett 2019), and has gained prominence in the context of the fight against the COVID-19 pandemic, when many countries have resorted to trade restrictions ranging from export licenses to outright export bans (Pauwelyn 2020) in the attempt to secure domestic availability of necessary goods such as protective garments, medical equipment, or simply food. The context where these events take place is one where the rule-based system that has governed international trade flows since the Bretton Wood era, built around the GATT and the WTO, is in jeopardy. Since the mid-2000, the lack of progress in the Doha round of multilateral negotiations signalled the difficulties associated with each country holding a de facto veto power. Moreover, the WTO dispute settlement crisis that erupted in 2019, with the Appellate Body unable to function for a lack of This special section originates from the 14th meeting of the International Study Group on Export and Productivity (ISGEP), held in Trento in September 2019. The guest editors would like to thank Chiara Tomasi and Min Zhu, who contributed to the organisation of the workshop.
Cluster Advantage and Firm Performance, 2018
We carry out a firm-level empirical analysis to evaluate the economic impact of the sequence of e... more We carry out a firm-level empirical analysis to evaluate the economic impact of the sequence of earthquakes occurred in 2012 in the Italian region of Emilia-Romagna, and to address the question of whether the localization of a firm within an industrial district mitigated or exacerbated this impact. We estimate the effect of the earthquake on firms' performance via two alternative methods: Difference-In-Differences and Propensity Score Matching in levels and first-differences. Our findings suggest that the earthquake reduced turnover, production, value added, and return on sales of the surviving firms, at least in the short-term. In addition, the debt over sales ratio grew significantly more in the firms located in the areas affected by the earthquake. The empirical evidence also suggests that the negative impact of the earthquake was slightly higher for the firms located in industrial districts, thereby suggesting that, at least in the short-term, the usually positive cumulative processes associated with localization within an agglomerated area could have reversed and magnified the negative impact of a disruptive exogenous supply shock.
SSRN Electronic Journal, 2000
ABSTRACT The aim of the paper is to investigate the main determinants of the bilateral virtual wa... more ABSTRACT The aim of the paper is to investigate the main determinants of the bilateral virtual water (water used in the production of a commodity or service) flows associated with international trade in agricultural goods across the Mediterranean basin. We consider the bilateral gross flows of virtual water in the area and study what export-specific and import-specific factors are significantly associated with virtual water flows. We follow a sequential approach. Through a gravity model of trade, we obtain a "refined" version of the variable we aim to explain, one that is free of the amount of flows due to pair-specific factors affecting bilateral trade flows and that fully reflects the impact of country-specific determinants of virtual water trade. A number of country-specific potential explanatory variables, ranging from water endowments to trade barriers, from per capita GDP to irrigation prices, is presented and tested. To identify the variables that help to explain the bilateral flows of virtual water, we adopt a model selection procedure based on model averaging. Our findings confirm one of the main controversial results in the literature: larger water endowments do not necessarily lead to a larger 'export' of virtual water, as one could expect. We also find some evidence that higher water irrigation prices reduce (increase) virtual water 'exports' ('imports'). Copyright © 2015. Published by Elsevier B.V.
The global crisis burst in 2007 has revived the growth-rebalancing debate and backed the position... more The global crisis burst in 2007 has revived the growth-rebalancing debate and backed the position of those advocating a fast reduction of the global imbalances centered on the symbiotic US-China relationship. In this work, we develop a two-country two-stage growth model reproducing the main features of the Sino-American co-dependency and we analyze alternative (medium- and long-term) scenarios for its evolution. We show that altering the Chinese exchange rate policy and down-sizing the US external deficits with a view to moving the production of tradables toward the US may imply some relevant costs. If exchange rate and fiscal policies are not properly tuned in both countries, the rebalancing process may lead to the emergence of structural unemployment in the US (due to the greater labor intensity of growth recorded in the nontradable sector than in the tradable sector) and to a slow-down in the process whereby the Chinese labor force is gradually absorbed in the modern sectors of t...
After addressing definitional issues on the concepts of concentration and specialization, the pap... more After addressing definitional issues on the concepts of concentration and specialization, the paper reviews the justifications for and the interpretation of some indicators of localization economies used in the empirical literature on agglomeration economies: specialization indexes and location quotients. A simulation exercise shows under what conditions certain specifications lead to biased estimations of dynamic localization (MAR) externalities. The results suggest that applied researchers can choose among the size of the local industry, the specialization index and the location quotient to proxy for these externalities as far as they also encompass a correct proxy for the size of the local economy.
We examine whether the spread of an exporting strategy can be characterized as a diffusion proces... more We examine whether the spread of an exporting strategy can be characterized as a diffusion process using a general framework that accounts for attrition and changes in the pool of potential adopters and allows the diffusion rate to vary according to firm and market characteristics. Our findings indicate that the diffusion of exporting is described well by the internal model of diffusion. Thus, this framework may be useful in modeling the spread of other strategies. The diffusion rate is found to be strongly related both to firm characteristics and to past adopter performance. Copyright 2009 The Author 2009. Published by Oxford University Press on behalf of Associazione ICC. All rights reserved., Oxford University Press.
Wealth, Income Inequalities, and Demography, 2014
SSRN Electronic Journal, 2000
ABSTRACT The aim of the paper is to investigate the main determinants of the bilateral virtual wa... more ABSTRACT The aim of the paper is to investigate the main determinants of the bilateral virtual water (water used in the production of a commodity or service) flows associated with international trade in agricultural goods across the Mediterranean basin. We consider the bilateral gross flows of virtual water in the area and study what export-specific and import-specific factors are significantly associated with virtual water flows. We follow a sequential approach. Through a gravity model of trade, we obtain a "refined" version of the variable we aim to explain, one that is free of the amount of flows due to pair-specific factors affecting bilateral trade flows and that fully reflects the impact of country-specific determinants of virtual water trade. A number of country-specific potential explanatory variables, ranging from water endowments to trade barriers, from per capita GDP to irrigation prices, is presented and tested. To identify the variables that help to explain the bilateral flows of virtual water, we adopt a model selection procedure based on model averaging. Our findings confirm one of the main controversial results in the literature: larger water endowments do not necessarily lead to a larger 'export' of virtual water, as one could expect. We also find some evidence that higher water irrigation prices reduce (increase) virtual water 'exports' ('imports'). Copyright © 2015. Published by Elsevier B.V.
The crisis of 2008 has shown the unsustainability of the global imbalances centered on the US-Chi... more The crisis of 2008 has shown the unsustainability of the global imbalances centered on the US-China symbiotic relationship that characterized the previous decade. This has revived the so-called growth-rebalancing debate. In particular, the new emerging consensus calls for a re-orientation of the US economy away from consumption and toward exports, and for policy shifts that can help China to reduce its dependence on external demand and inefficiently high rates of capital accumulation. In this essay, we discuss the economic and political feasibility of the proposed patterns of re-adjustment by focusing on the short-and long-term trade-offs faced by the policymakers. We argue that the rebalancing will be gradual and partial because of the costs associated with a radical shift in the growth strategies of both countries. We also believe that this scenario will be consistent with a world economy expanding at lower rates than in the past decade.
ABSTRACT It has been argued that China may stop financing the US external deficit, appreciate the... more ABSTRACT It has been argued that China may stop financing the US external deficit, appreciate the currency, increase consumption and move its economy away from tradables and towards nontradables. Our two-country model shows that paradoxically this policy option is unattractive if the US authorities keep monetary policy sufficiently loose, thus reducing the real value of the US liabilities held by China. As long as the American and Chinese authorities pursue complementary objectives, the current China-US arrangement continues. In addition, an untimely appreciation of China’s real exchange rate may have negative consequences on employment in the US and in China.
There is a widespread consensus that China needs to rebalance its export-driven growth paradigm t... more There is a widespread consensus that China needs to rebalance its export-driven growth paradigm towards a more consumption-based one and that such process is to be accompanied by the transition towards the renminbi's full convertibility. However, the Chinese authorities have so far acted with great caution because this transition cannot but accelerate the slowdown of China's growth which will likely occur because of other structural factors. We address these issues by means of a two-country two-stage (before and after the renminbi's full convertibility) model, which reproduces some qualitative features of China's growth pattern and its relationship with the US. We analyze the extent to which altering the Chinese exchange rate regime, as well as other policies affecting sensitive social and economic issues, may impact on the short-, medium-and long-term evolution of the Chinese economy. The paper shows that by lifting the controls on the capital account and letting the currency float, the Chinese authorities will renounce those policy instruments for controlling the allocation of the national resources and the dynamics of China's economy.
Journal of International Economics, 96(1), 138-149, May 15, 2015
Departing from the usual tenets of proportionality between cross-border trade flows and knowledge... more Departing from the usual tenets of proportionality between cross-border trade flows and knowledge spillovers, we investigate whether relatively intense trade relationships are associated with particularly large international R&D spillovers. A nonlinear specification nesting the hypothesis of global and trade-unrelated R&D spillovers is estimated on a sample of 24 advanced countries over 1971-2004. We find evidence that trade patterns positively affect the international
transmission of knowledge, in particular when we consider bilateral trade flows that, thanks to the estimation of an auxiliary gravity model, are normalized for the size and the distance of the trading partners. Finally, we discuss the patterns of the bilateral relationships characterized by both relatively intense trade and large R&D spillovers.
The Chinese growth model has generated domestic imbalances and social problems. The Chinese leade... more The Chinese growth model has generated domestic imbalances and social problems. The Chinese leadership is aware of the urgency to address these problems and improve the quality of the growth process. Engineering a successful change (ensuring more even distribution of national income, as well as a rebalancing of the economy away from exports and investment and towards domestic consumption), however, is politically and economically difficult as it may be associated with a slow-down in the rate of growth and the Communist Party’s prerogatives. The Japanese experience can help to interpret the current state of China and several insights can be drawn. Japan had to
change its growth strategy while preserving high GDP growth at least three times in the past: at the end of the 1960s, when the mobilization of surplus labour was completed; in the mid-1980s, when Japan faced a dramatic appreciation of the yen and liberalized financial flows, moving the economy away from exports; in the 1990s, after the burst of the real estate and stock exchange bubbles. This work addresses whether a parallel between present-China and Japan in the past can be meaningfully made. It considers a long time span for Japan to show that interesting insights can be drawn from various periods of its experience. Short of claiming that China and Japan can be juxtaposed, this contribution takes stock of the Japanese experience to inform the Chinese authorities and those interested in the Chinese economic development. A comparative approach may serve to identify the successful actions and reforms which contributed to make Japan an advanced country after only a few decades from the end of the Second World War and may help to avoid those mistakes that contributed to turn Japan into a stagnating economy.
We investigate how a country’s absorptive capacity and relative backwardness affect the impact of... more We investigate how a country’s absorptive capacity and relative backwardness affect the impact of international R&D spillovers on domestic Total Factor Productivity (TFP). To account for nonlinearities, we adopt a Panel Smooth Transition Regression approach, where a country’s TFP elasticity to the foreign R&D stock is allowed to change smoothly across various identified extreme values, and the change is related to observable transition variables: human capital (capturing the country’s absorptive capacity) and relative backwardness. The results suggest that absorptive capacity is positively associated with international R&D spillovers. In contrast with previous results, relative backwardness is instead found to have a negative and significant impact on international knowledge spillovers.
Whether international R&D spillovers are global and trade-related is still a debated issue. By ad... more Whether international R&D spillovers are global and trade-related is still a debated issue. By adopting two specifications that nest models previously estimated in the literature, we test the hypothesis that international R&D spillovers are global and trade-unrelated for a sample of OECD countries over the period 1971-2004. In particular, via a randomization exercise, we reject the null hypothesis of a “global pool of technology” and show that there are partitions of countries associated with relatively strong/weak knowledge spillovers. Then, we estimate a nonlinear specification that includes simultaneously geographical distance and international trade among the determinants of domestic TFP. We find robust evidence that both factors affect how foreign knowledge impacts on the domestic productivity of each recipient country.
This work investigates the systemic factors behind cross-country variability in the transnational... more This work investigates the systemic factors behind cross-country variability in the transnational media coverage of foreign news in the EU in 2010. Using a large dataset on the transnational coverage of news by 148 EU national media, the paper maps the network of EU transnational citations and performs a quantitative assessment of their systemic determinants via the estimation of a gravity model of news. Nine empirical hypotheses are tested. Size and economic development of the target (source) country are positively (negatively) associated with the probability of coverage. Historical, linguistic and economic ties increase this probability. The evidence on the effect of the countries’ participation in the currency union is weak: once the historical levels of trade integration and the effects of the sovereign debt crisis are accounted for, there is no robust evidence of a higher integration of the media spheres within the euro area.
Abstract: In a much cited paper, Wolfgang Keller (Are International R&D Spillovers Trade-Related?... more Abstract: In a much cited paper, Wolfgang Keller (Are International R&D Spillovers Trade-Related? Analyzing Spillovers Among Randomly Matched Trade Partners, European Economic Review, 48, 1469-1481, 1998) claims that international R&D spillovers are global and trade-unrelated. In following works, Keller revisits his position and maintains that spillovers are localized because the tacit nature of knowledge favors the direct interaction among agents.
This work investigates the determinants of virtual water trade (VWT) flows by means of an estimat... more This work investigates the determinants of virtual water trade (VWT) flows by means of an estimated gravity model of trade applied to the virtual water embodied in the agricultural goods exchanged across countries. In line with the recent literature on the gravity model, the paper presents a battery of estimation methods: cross-section and panel, OLS and pseudo maximum likelihood, with and without two-way fixed effects. The analysis shows that bilateral VWT flows are affected by the classical determinants of trade, but also by national water endowments as well as by the level of pressure on water resources. These general findings are robust, even though some variation can be observed across the estimation methods and, in particular, when smaller sub-samples of countries (such as continents and regional groups) are considered. This contributes to account for the mixed evidence in the literature on the importance of water endowments for the VWT flows.
The paper analyzes the impact of localization, urbanization and competition on firm-level TFP, us... more The paper analyzes the impact of localization, urbanization and competition on firm-level TFP, using a large sample of Italian rm-level data from 1999 to 2007. In particular, the paper explores the nonlinearities of such eff ects, accounting for the possible presence of critical masses and/or congestion effects. We adopt a Panel Smooth Transition Regression model, so that the TFP elasticities are free to vary smoothly across two or more extreme values. Results show that
localization economies and Jacobian externalities materialize only for values of, respectively, intra-industry spatial agglomeration and extra-sectoral local diversity above a certain threshold. The data instead shows no evidence of
diseconomies of agglomeration at work. As for competition, we find a positive impact of local competition on productivity, even though the marginal impact shrinks at high levels of competition.
The large current account imbalances in the eurozone reflect persistent diverging trends between ... more The large current account imbalances in the eurozone reflect persistent diverging trends between core and periphery countries, also fed by low interest rates and abundant capital flows brought about by the introduction of the euro. With the global financial crisis, the market sentiment has changed, and capital has left the periphery countries suffering from debt and growth problems due to their failure to bring price–wage dynamics into uniformity with those of the more disciplined countries. Germany is called upon to provide financial assistance and additional external demand; however, though the euro is at stake, Germans are recalcitrant. This article investigates the rationale of the German stance in light of the (corporatist-etatist, neo-mercantilist) German socio-economic model and the widespread concern about losing the competitiveness that Germany regained through painful reforms and changes in the last two decades.
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Papers by Andrea Fracasso
transmission of knowledge, in particular when we consider bilateral trade flows that, thanks to the estimation of an auxiliary gravity model, are normalized for the size and the distance of the trading partners. Finally, we discuss the patterns of the bilateral relationships characterized by both relatively intense trade and large R&D spillovers.
change its growth strategy while preserving high GDP growth at least three times in the past: at the end of the 1960s, when the mobilization of surplus labour was completed; in the mid-1980s, when Japan faced a dramatic appreciation of the yen and liberalized financial flows, moving the economy away from exports; in the 1990s, after the burst of the real estate and stock exchange bubbles. This work addresses whether a parallel between present-China and Japan in the past can be meaningfully made. It considers a long time span for Japan to show that interesting insights can be drawn from various periods of its experience. Short of claiming that China and Japan can be juxtaposed, this contribution takes stock of the Japanese experience to inform the Chinese authorities and those interested in the Chinese economic development. A comparative approach may serve to identify the successful actions and reforms which contributed to make Japan an advanced country after only a few decades from the end of the Second World War and may help to avoid those mistakes that contributed to turn Japan into a stagnating economy.
localization economies and Jacobian externalities materialize only for values of, respectively, intra-industry spatial agglomeration and extra-sectoral local diversity above a certain threshold. The data instead shows no evidence of
diseconomies of agglomeration at work. As for competition, we find a positive impact of local competition on productivity, even though the marginal impact shrinks at high levels of competition.
transmission of knowledge, in particular when we consider bilateral trade flows that, thanks to the estimation of an auxiliary gravity model, are normalized for the size and the distance of the trading partners. Finally, we discuss the patterns of the bilateral relationships characterized by both relatively intense trade and large R&D spillovers.
change its growth strategy while preserving high GDP growth at least three times in the past: at the end of the 1960s, when the mobilization of surplus labour was completed; in the mid-1980s, when Japan faced a dramatic appreciation of the yen and liberalized financial flows, moving the economy away from exports; in the 1990s, after the burst of the real estate and stock exchange bubbles. This work addresses whether a parallel between present-China and Japan in the past can be meaningfully made. It considers a long time span for Japan to show that interesting insights can be drawn from various periods of its experience. Short of claiming that China and Japan can be juxtaposed, this contribution takes stock of the Japanese experience to inform the Chinese authorities and those interested in the Chinese economic development. A comparative approach may serve to identify the successful actions and reforms which contributed to make Japan an advanced country after only a few decades from the end of the Second World War and may help to avoid those mistakes that contributed to turn Japan into a stagnating economy.
localization economies and Jacobian externalities materialize only for values of, respectively, intra-industry spatial agglomeration and extra-sectoral local diversity above a certain threshold. The data instead shows no evidence of
diseconomies of agglomeration at work. As for competition, we find a positive impact of local competition on productivity, even though the marginal impact shrinks at high levels of competition.