To Örebro University

In this paper, we consider aid payments as a possible explanation for tariff overhangs. We set up a theoretical model in which rich countries use development aid to pay for tariff concessions by poorer countries. The more aid they receive as compensation, the more poor countries reduce the applied tariff below the bound tariff rate. Anticipating this mechanism, countries can negotiate a bound tariff rate that induces the joint optimal applied tariff and aid as outcomes. We empirically examine the relationship between tariff overhangs and donor aid preferences using detailed data on WTO members’ bound and applied tariff rates under the Uruguay agreement. The data sample contains a predominant majority of WTO members that are aid recipients under the Uruguay agreement. Our results provide support for the model’s aid-for-trade mechanism.

In this paper, we provide novel evidence on the adjustment of multinational enterprises (MNEs) to corrupt environments. We examine if the corruption barrier to entry is reduced by corruption experience (i.e., previous investment in a corrupt system) using a rich enterprise data set on Swedish manufacturers' activities in the 1997-2015 period. A mixed logit model, which accounts for enterprise-specific market substitution patterns, is used to ensure the accuracy of estimates. Our findings show that a strong deterrent effect of corruption is counteracted by corruption experience, which implies that MNEs learn to adjust to reduce corruption entry costs. Multinational enterprises that acquire corruption experience gain a competitive advantage over other enterprises.

The purpose of this paper is to study the role of social insurance design in a comparative-advantage model of offshoring and trade. To do so, we incorporate social insurance into a modified version of the Grossman and Rossi-Hansberg (Am Econ Rev 98(5):1978–1997, 2008) model by formalizing its administrative, compensation, cost, labor-supply and productivity effects. The compensation and productivity effects, which are novel, give rise to important offshoring and trade implications that can contribute to explain how social insurance provision can be sustained under globalization pressure and why similar globalization pressure can lead to different skill premia developments in Western economies.

In recent years, there has been growing concern that multinational enterprises (MNEs) engage in strategic tax planning in order to shift profits to low-tax jurisdictions. This common perception is generally confirmed by empirical evidence, which is foremost provided for countries with high corporate taxes and relatively complex tax systems. We investigate whether multinational firms in a country with a comparatively more competitive tax system undertake profit shifting. We do this using detailed census data from corporate income statements and balance sheets filed by Swedish manufacturing firms between 1997 and 2007. We detect profit shifting by comparing MNEs with (purely) domestic firms. In particular, we identify systematic differences in tax payments, earnings (before interest and taxes) and equity ratios between multinational and comparable domestic firms based on propensity score matching. In addition, we examine the tax behavioural impact of acquiring multinational status using difference-in-differences estimations and/or propensity score matching. Our results reveal that the extent to which multinational firms have lower tax payments than their domestic counterparts depends on their production characteristics and foreign market outreach. In particular, we find evidence indicating that firms operating in few foreign markets and firms that become multinational engage in profit shifting from Sweden.

There is stark evidence that many policies which influence firm gains from engaging in FDI (such as tax and trade policies) are targeted by lobbying groups and that corruption can be an important determinant of market attractiveness. The scarce research that exists on firm behaviour, corruption and lobbying shows that these activities can be regarded as alternative, and interdependent, influence forms. This paper provides the novel contribution of investigating how the market infiltration of corruption and lobbying affects the firm's investment decision. We identify the interdependent effects using census data for Swedish manufacturing firms that allows a complete identification of the firm's market selection. Our results reveal that these private-public sector links influence the firm's investment decision differently, as market selection is deterred by corruption and stimulated by lobbying, and that they function as substitutes. We show that the stimulating lobbying effect largely can be attributed to its interdependency with corruption, which suggests that firms are more shielded from corruption in lobbying environments. Further investigation reveals that the corruption and lobbying effects are not always representative of larger firms: The largest firms are undeterred by corruption in markets where lobbying forms an integral part of the business environment and larger firms are not stimulated by lobbying in markets largely void of corruption.

This paper empirically investigates predictions of recently developed property-rights theories on the firm’s foreign internalization decision (Antràs and Helpman, Journal of Political Economy, 112(3), 552–580, 2004; Antràs and Helpman, The Organisation of Firms in a Global Economy. Harvard University Press, 2008). Using census data on Swedish manufacturing firms for the 1997–2007 time period, we provide novel and complementary evidence on the topic. In particular, our data enables us to investigate the firm’s foreign internalization decision directly in a sample that is not subject to sample selection bias. Our estimation results provide stark evidence in favor of the predicted impact of firm heterogeneity and foreign contracting enforcement that lies at the heart of the reference theories. Firms in industries with larger within-industry firm variation, as depicted by the variation in TFP levels, are more prone to integrate offshored production. We also provide novel evidence on the interplay of firm heterogeneity and property-rights factors at the firm level. In particular, the estimation results confirm the Antràs and Helpman (2008) prediction that foreign legislative institutions in support of headquarter provision favor the firm’s foreign internalization decision.

The purpose of this paper is to empirically explore two dimensions of the firm hierarchy of international market-specific linkages, using data on Swedish manufacturing firms from 1997 to 2007. First, we investigate the productivity ordering with respect to three international linkages; importing, exporting and investing abroad. Second, we explore whether differences in the productivity ordering across industries correlates with industry and country characteristics. Our findings support a general productivity hierarchy from importing to exporting and from exporting to investing abroad, as well as from a low to a high number of linkages (measuring the complexity of firms' international linkages). However, an industry-by-industry examination shows that the hierarchical structure is only generally upheld when it comes to the number of international linkages, while the ordering of import, export and investment linkages does not exhibit the same regularity across industries. Extending the analysis, we find that the lack of a hierarchical structure is more likely in industries focusing on larger and less distant markets.

We analyze empirically export-price strategies across export destinations using detailed firm-product data. Most recent studies using disaggregated data to investigate why firms charge different prices for the same product on different markets focus on the cost component of prices and neglect the markup component. In this paper, we concentrate on the markup component and examine how variations in firms' export prices may reflect price discrimination by comparing the markup of firms with different pricing strategies. We make use of detailed firm-level data for exporting firms in the Swedish food sector consisting of both manufacturing and intermediary trading firms. The paper documents the export-price variations within the two sub-sectors and explores how different price strategies correlate with markups. The results offer new information beyond the fact that exporters tend to have a higher markup. In particular, we find that firms in the food-processing sector with a greater ability to discriminate across markets mark their products up even more. This result points to the importance of underlying firm decisions in order to explain differences in export premiums across firms. In addition, the results reveal that markups are a complex function of firm and destination characteristics, and that the relationship between markups and pricing strategies in the manufacturing sector is not necessarily observed in other sectors of the supply chain.