Working Papers:
Geo-Spatial Proximity and Cross Border Effects on Location Choice in a Globalised Economy
Geo-Spatial Proximity and Cross Border Effects on Location Choice in a Globalised Economy
Author: Supriyo Mondal
Abstract:
Economic activity often clusters spatially, reinforcing regional inequality through agglomeration economies. At the same time, the fragmentation of production through Global Value Chains (GVCs) creates new opportunities for lagging regions to integrate into the global economy. This paper investigates how country-level characteristics shape not only a country’s own participation in GVCs but also that of its spatially proximate neighbours. Building on a theoretical framework, we show that productivity improvements can have ambiguous effects on another country’s integration into global production networks. Nonetheless, holding other factors constant, spatial proximity generates positive cross-border spillovers in GVC participation. \\
To substantiate our hypothesis, using bilateral value-added trade data for 76 countries over the period 2000–2019, we document strong spatial dependence in GVC engagement, suggesting that the benefits of GVC integration diffuse across borders, particularly focusing on the mechanism of path-dependent location choice in a world with barriers to trade. Employing a two-stage empirical strategy, we combine structural gravity estimation with a spatial autoregressive specification to quantify interdependencies in GVC participation and value-added exports. Therefore, we examine how productivity shocks in one country affect the GVC participation and location choices of firms in neighbouring economies. Our results highlight both the positive spillovers among spatially proximate economies that arise from productivity changes, underscoring the spatial complexity of global production networks. By explicitly incorporating geospatial interdependencies, this study contributes to the trade literature and offers novel insights into the cross-border implications of technological change.
Discreet Ties: Regional Trade Agreements and Their Trade Impact on Member and Non-Member Nations
Author(s): Supriyo Mondal, Manish Chauhan, Somesh Kumar Mathur
Abstract:
Regional Trade Agreements (RTAs) influence not only the signatory countries but also have substantial implications for non-member trading partners. For the non-member trading partners, these RTAs define both bilateral trade and trade policy relations with other countries. Our study investigates the effects of RTAs on both member and non-member countries, using appropriate weight matrices. Utilising these weight matrices, we present an innovative approach to analyse the impact of a RTA on the trade of a non-member nation and the trade policies of a member nation with non-member countries. These weight matrices can be interpreted as an averaging procedure that computes the proportion of other nations with which each trading pair has a RTA. Furthermore, this paper is motivated to investigate whether RTA serves as a stepping stone or hindrance towards successful multilateral trade negotiation and liberalisation. In this paper, we discuss that trade policies are often determined in response to the trade policy strategies of other nations, and ignoring these relations might lead to the problem of endogeneity and biased estimates. Also, we acknowledge that the impact of a RTA depends on its depth, ranging from Free Trade Agreements (FTA) and Customs Unions (CU) to Common Markets (CM) and Economic and Monetary Unions (EMU). Using a comprehensive panel dataset of trade flows between 76 countries from 2002 to 2019, including intranational trade data, we ensure our model aligns with theoretical expectations.
Dynamics of Comparative Cost Advantage and the Development Paradox
Author(s): Supriyo Mondal
Abstract:
We study the impact of trade in shaping the domestic factor market and the influence it has on an individual’s decision to acquire a particular skill level using a General Equilibrium framework. We assume that individuals cannot foresee the future skill requirement perfectly but make an estimate based on their network through which information about the current job market and the future skill requirement is transmitted. The network is restricted within the economy due to the immobility of labour across regions. This influence on the skill acquirement determines the comparative cost advantage and the direction of trade, forming a pattern. Hence, we discover the possibility of a development trap. This paper also indicates towards the possibility of unemployment in both the developed and less developed nations due to offshoring of a fraction of the production, and that the missing opportunities in South coupled with higher wages for similarly skilled workers (specially high skilled) in the global North could explain a higher skill bias among migrants in the South.