Edgar Morgenroth

Infrastructure, Transport Costs and Trade

Abstract This paper examines the role of infrastructure in a bilateral trade model with transport costs. Transport costs are assumed to depend inversely on the level of infrastructure. The accumulation of infrastructure, however, is subject to a resource cost technology which includes both fixed and variable components. It is shown that, depending on geography and endowments, equilibria with or without infrastructure can be obtained. For pairs of countries for which investment in infrastructure is optimal, the model predicts a positive relationship between the level of infrastructure and the volume of trade. The paper offers empirical evidence, utilising an augmented gravity model and data from European countries, which strongly supports this prediction of the theory.

Exchange rates and trade: the case of Irish exports to Britain

This paper examines the effect of changes in the Punt/Sterling exchange rate on exports from Ireland to Britain. The approach used here differs significantly from that used in most other studies in that the long-run neutrality of the Punt/Sterling exchange rate with regard to exports from Ireland to Britain is tested using a recently developed technique. There is strong evidence that the exchange rate is neutral in the long run.

Estimating the value of lost telecoms connectivity

We describe a practical method for estimating the economic cost of outages in electronic communications networks, accommodating temporal, geographical and sectoral variations in incidence. The method is illustrated with two types of examples: a hypothetical outage of the main fixed line network operator in Ireland, and seven examples of outages affecting individual local exchanges in areas with concentrations of technology-intensive employment or dense residential population. The national fixed line outage has an estimated cost of @?42-50 per household-day arising from effects on the productive and residential sectors, with possible further losses from effects on retail payments and high societal value facilities such as emergency services. Estimated quantifiable economic costs from outages affecting a single local exchange range from @?370,000 to @?1.1 million per day.

The impact of broadband and other infrastructure on the location of new business establishments

This paper analyses the impact of broadband infrastructure, along with a range of other local characteristics such as motorways and other infrastructure, availability of human capital and access to third level educational facilities, on the location of new business establishments. The sample period spans the introduction and recent history of broadband in Ireland, and during this period 86% of the current motorway network was constructed. Availability of broadband infrastructure is a significant determinant, but its effects may be mediated by the presence of sufficiently high human capital in the area. This indicates that ICT infrastructure is a necessary, but not sufficient factor in new firm formation.

Corporate tax and location choice for multinational firms

ABSTRACT This article examines the effects of corporate tax on these location decisions of newly established multinational subsidiaries across 26 European countries over an 8-year period. We contribute to the existing literature by examining the effects of a non-linear response of firm location decisions to changes in the tax rate. We also show that there are large variations in the sensitivity to tax rates across sectors and firm size groups. In particular, financial sector firms are more than twice as sensitive to changes in corporation tax rates relative to other sectors. Our baseline result is a finding that a 1% increase in the statutory or policy rate of corporation tax would lead to a reduction in the conditional location probability of 0.68%. Using the effective average tax rate, the marginal effect implies a reduction in the location probability of 1.15% following a 1% increase in the tax rate. Although overall tax has the expected negative effect on location probability, the marginal effect of an increase is lower at higher rates of tax.