Papers highlighted this week:

Clustering of foreign and domestic firms boosted growth in Ireland

DP3969 Coagglomeration and Growth

Authors: Salvador Barrios (Catholic University of Louvain), Luisito Bertinelli (Catholic University of Louvain) and Eric Strobl (Catholic University of Louvain)

July 2003

Using plant-level data for the Irish manufacturing sector over the period 1983-98, the authors of CEPR Discussion Paper No. 3969 study the clustering or coagglomeration of domestic plants and foreign multinationals in Ireland. An often-cited fact is that the recent Irish economic boom has largely been influenced by huge foreign direct investment (FDI) inflows.

One of the major objectives of Irish policy-makers in attracting FDI has been to stimulate the development of the domestic sector through spillovers from multinationals. This study uses exhaustive information on domestic and foreign plants' locations in 27 counties of Ireland for the period 1972-1998. The Paper shows that for a large number of sectors coagglomeration between domestic and foreign plants has been considerable and persistent, and has coincided with the influx of FDI since the early 1970s. To find if coagglomeration has helped the development of domestic industry, the authors estimate plant-level employment growth. The results support the existence of positive local spillovers from multinational companies on domestic employment growth. The study also finds that such spillovers only take place for industries where there has been considerable clustering of domestic and foreign plants over the period 1983-1998.

A strong exchange rate and falling growth give rise to antidumping claims

DP3981 Business Cycles, the Current Account and Administered Protection in Mexico

Authors: Joseph Francois (Erasmus University Rotterdam and CEPR) and Gunnar Niels (Erasmus University Rotterdam)

July 2003

The pressure for import protection often increases during economic downturns or periods of exchange-rate appreciation. In part, this is because positive injury findings may be easier to make in a downturn.

Francois and Niels explore the evidence for Mexico, one of the main 'new' antidumping-using countries. Injury determination is also critical in Mexico's antidumping policy, as a majority of unsuccessful complaints have been rejected because of negative injury findings rather than negative findings of dumping. Working with data from 1987 through 2000, they provide evidence for a relationship between economic factors and antidumping complaints, including current account and exchange rate movements, and both local and global general macroeconomic conditions. The findings of this Paper support the conclusions of similar studies for the EU and USA. The number of anti-dumping complaints rises when the real exchange rate appreciates or the current account widens, and when growth in manufacturing output slows down. The authors also argue that, because of the structure of antidumping law, both factors raise the likelihood that domestic industries will be found to be suffering injury, regardless of whether imports are actually dumped or not.

11 Discussion Papers by CEPR this week: