International Trade and Investment:theory and empirics (International Trade and Investment:theory and empirics)

Abstract:

The purpose of the proposed activity is to explore the possibility of developing a linked Sino-Danish trade dataset that could address previously unanswered questions in the field of international trade and investment.The inclusion of China into WTO in 2001 led Danish firms, as all other firms in the world, to increase their engagement in the Chinese market both by selling their products in the rapidly growing Chinese market but also by offshoring/outsourcing production activities in China. While the detail Danish statistics on firms' trade capture this increased activity, they cannot distinguish whether this trade is within firm or not. That is, we do not know whether Danish firms trade with other independent firms (in which case the trade value reported is trustworthy), or whether they trade with affiliate firms (in which case the trade value reported may not be trustworthy due to incentives that different tax systems provide). By developing a linked Sino-Danish trade dataset we will be able to make this distinction, opening thereby a black box in the economics of trade and investment. To guide our empirical work new theory will be developed concerning the exporting vs. direct investment choices firms make when entering markets with different corporate taxes.The proposed activity consists of mutual visits of researchers. Through these visits, researchers from one side will have the opportunity to acquire a better understanding of the other side's dataset. It is expected that after the proposed activity we will identify the way to construct the desired dataset and start research collaborations using either this new dataset or other existing datasets.