John Ries

Immigration and Trade Creation: Econometric Evidence from Canada

Immigrants may expand trade with their country of origin, owing to superior knowledge of, or preferential access to, market opportunities. The authors test this proposition using Canadian trade data with 136 partners from 1980 to 1992. In an augmented gravity equation, they find that a 10 percent increase in immigrants is associated with a 1 percent increase in Canadian exports to the immigrants home country and a 3 percent increase in imports. They also find that, among the primary categories of immigrants, independents have the greater influence on trade. Immigration via the entrepreneur class appears to have less impact on trade than all other classes except refugees.

Attracting foreign manufacturing: Investment promotion and agglomeration

Abstract We study Japanese investments between 1980 and 1992 to assess the effectiveness of US state promotion efforts in light of strong agglomeration effects in Japanese investment. The provision of foreign trade zones, lower taxes, and job-creation subsidies have statistically significant effects on the location of investment. Simulations indicate that unilateral withdrawal of promotion would have caused individual states to lose substantial amounts of Japanese investment. However, because state promotional policies tended to offset each other, their impact on the geographic distribution of Japanese investment appears small.

Offshore production and skill upgrading by Japanese manufacturing firms

Abstract We investigate the influence of offshore production by Japanese multinationals on domestic skill intensity. Identifying relationships based on within variation in a panel of 1070 firms, we find that additional foreign affiliate employment in low-income countries raises skill intensity. The positive effect of FDI on domestic skill intensity, however, diminishes as investment shifts towards high-income countries. Increases in affiliate employment in low-income countries also raise a firm’s reliance on finished goods purchases, suggesting that overseas employment affects domestic skill intensity because imports of final goods from foreign affiliates displace domestic production.

FDI as an Outcome of the Market for Corporate Control: Theory and Evidence

Much foreign direct investment (FDI) takes the form of mergers and acquisitions (M&A). It is commonplace in finance to view acquisitions as manifestations of the market for corporate control. Following on that insight we propose a model of FDI in which headquarters bid to control overseas assets. We derive an equation for bilateral FDI stocks that resembles the recently developed fixed effects approach to modelling bilateral trade flows. We estimate the model and use its parameters to construct benchmarks for evaluating multilateral inward and outward FDI.

Rationalization effects of tariff reductions

Abstract We analyze a panel of 230 Canadian manufacturing industries to investigate whether trade liberalization promotes efficiency through increased scale. During the six years following the Free Trade Agreement with the United States, Canadian manufacturing exhibited substantial rationalization – a decline in the number of plants accompanied by increases in output per plant. We find that the bilateral tariff reductions had opposing effects on scale. Contraction induced by lower Canadian tariffs largely offset the 10% scale increase caused by U.S. tariff cuts. The observed increase in scale arose due to currency depreciation, compositional shifts towards high-scale industries, and undercounting of small establishments.

International Mergers and Welfare under Decentralized Competition Policy

In this paper, the authors investigate the welfare consequences of horizontal mergers and other production relationships between firms based in different nations. They specify the critical share of consumption a nation must represent to veto mergers that raise price and reduce world welfare. The authors show that, when mergers do not generate costs saving, it will be in the national interest for existing competition agencies to block most world welfare-reducing combinations. When mergers generate cost savings, national welfare-maximizing regulators cannot be relied upon to prevent mergers that lower world welfare.

Do Trade Missions Increase Trade

In an effort to stimulate trade, Canada has conducted regular trade missions starting in 1994, often led by the Prime Minister. According to the Canadian government, these missions generated tens of billions of dollars in new business deals. This paper uses bilateral trade data to assess this claim. We find that Canada exports and imports above-normal amounts to the countries to which it sent trade missions. However, the missions do not seem to have caused an increase in trade. In the preferred specification, incorporating country-pair fixed effects, trade missions have small, negative, and mainly insignificant effects.

School Quality and Residential Property Values: Evidence from Vancouver Rezoning

This study utilizes changes in the catchment areas of public schools in Vancouver, British Columbia, to measure the residential price capitalization of school quality. Specifications that employ repeat sales methods to control for time-invariant neighborhood effects and disaggregated price indexes to capture time-varying neighborhood price appreciation reveal significant effects of secondary school performance on residential prices. However, when we add controls for long-run price trends in rezoned areas, only prices of residences likely to be purchased by high-income families appear to have been affected by changes in school quality induced by rezoning.

Windfall Profits and Vertical Relationships: Who Gained in the Japanese Auto Industry from VERs?

This paper employs an event study to analyze the effect of the 1981 voluntary export restraint agreements on profits in the Japanese automobile industry. Stock price movements of seven Japanese automakers and sixty-nine of their suppliers are examined. The results indicate that the profits of Japans producers of passenger cars rose as a result of the voluntary export restraints, while only some suppliers, large ones and those producing specialized parts or services, appear to have shared the benefits. Voluntary export restraints increased profits for some firms in the Japanese auto industry but many suppliers did not share the windfall. Copyright 1993 by Blackwell Publishing Ltd.

Voluntary export restraints, profits, and quality adjustment

This paper develops a model of vertical differentiation to assess the impact of output constraints on the profits and quality choices of firms subject to them. A competitive environment is developed with the automobile industry in mind--multiproduct oligopolists producing differentiated goods who behave as Cournot competitors. The results show that an output constraint will not induce constrained firms to upgrade their product line when their unconstrained competitors produce higher quality models. It is also shown that an output constraint can raise the profits of constrained firms despite output increases by unconstrained firms.