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on International Trade |
| By: | Devashish Mitra (The Maxwell School of Citizenship & Public Affairs, Syracuse University); Priya Ranjan (Department of Economics, University of California-Irvine) |
| Abstract: | We construct a model of offshoring with externalities and firm heterogeneity. Due to the presence of externalities, temporary shocks like the Y2K problem can have permanent effects, i.e., they can permanently raise the extent of offshoring in an industry. Also, the initial advantage of a country as a potential host for outsourcing activities can create a lock in effect, whereby late movers have a comparative disadvantage. Furthermore, the existence of firm heterogeneity along with externalities can help explain the dynamic process of offshoring, where the most productive firms offshore first and the others follow later. Finally, we show the possibility of complementarity between two modes of offshoring: FDI and offshore outsourcing. |
| JEL: | F1 |
| Date: | 2005–10 |
| URL: | http://d.repec.org/n?u=RePEc:irv:wpaper:050605&r=int |
| By: | Sedef Akgüngör (Department of Economics, Faculty of Business, Dokuz Eylül University); Pinar Falcioglu (Department of Management, Isik University) |
| Abstract: | The dynamics of industrial agglomeration across the regions and the reasons for such agglomeration have been the focus of interest particularly in exploring the effects of economic integration of regions on the spatial distribution of economic activity. In this context, following the predictions of the literature on economic geography, Turkey’s integration with the European Union as a candidate member is a likely cause of changes in economic dispersion of the economic activity over the years. The major objective of the study is to complement the findings of the studies on industrial agglomeration in Turkey’s manufacturing industry by exploring whether specialization and concentration patterns have changed over time and to expose the driving forces of geographic concentration in Turkey’s manufacturing industry, particularly during Turkey’s economic integration process with the European Union under the customs union established in 1996. Industrial concentration and regional specialization are measured by GINI index for NUTS 2 regions at the 2-digit level for the years between 1992 and 2001. To investigate which variables determine industry concentration, the systematic relation between the characteristics of the industry and geographical concentration is tested. A regression equation is estimated, where the dependent variable is GINI concentration index and the independent variables are the variables that represent the characteristics of the sectors. The major finding of the study is that Turkey’s manufacturing industry has a tendency for regional specialization. Increase in the average value for regional specialization supports the prediction developed by Krugman that regions become more specialized with regional integration. But there is no evidence for increased industrial concentration in Turkish manufacturing industry, contrary to the expectations. As for the answer to which variables determine industry concentration, the analysis supports the hypothesis that the firms tend to cluster in regions where there are economies of scale and there are significant linkages between firms, supporting the predictions of new trade theory and economic geography. |
| Keywords: | Regional specialization, geographical concentration, economic integration, geographical economics |
| JEL: | L60 R10 R11 R12 R15 |
| Date: | 2005–11–23 |
| URL: | http://d.repec.org/n?u=RePEc:deu:dpaper:0501&r=int |
| By: | Kyoji Fukao; Keikok Ito; Hyeg Ug Kwon; Miho Takizawa |
| Abstract: | Using Japanese firm-level data for the period from 1994-2002, this paper examines whether a firm is chosen as an acquisition target based on its productivity level, profitability and other characteristics and whether the performance of Japanese firms that were acquired by foreign firms improves after the acquisition. In our previous study for the Japanese manufacturing sector, we found that M&As by foreigners brought a larger and quicker improvement in total factor productivity (TFP) and profit rates than M&As by domestic firms. However, it may argued that firms acquired by foreign firms showed better performance simply because foreign investors acquired more promising Japanese firms than Japanese investors did. In order to address this potential problem of selection bias problem, in this study we combine a difference-in-differences approach with propensity score matching. The basic idea of matching is that we look for firms that were not acquired by foreign firms but had similar characteristics to firms that were acquired by foreigners. Using these firms as control subjects and comparing the acquired firms and the control subjects, we examine whether firms acquired by foreigners show a greater improvement in performance than firms not acquired by foreigners. Both results from unmatched samples and matched samples show that foreign acquisitions improved target firms' productivity and profitability significantly more and quicker than acquisitions by domestic firms. Moreover, we find that there is no positive impact on target firms' profitability in the case of both within-group in-in acquisitions and in-in acquisitions by domestic outsiders. In fact, in the manufacturing sector, the return on assets even deteriorated one year and two years after within-group in-in acquisition, while the TFP growth rate was higher after within-group in-in acquisitions than after in-in acquisitions by outsiders. Our results imply that in the case of within-group in-in acquisitions, parent firms may be trying to quickly restructure acquired firms even at the cost of deteriorating profitability. |
| Keywords: | FDI, TFP, Acquisition, Selection bias, Propensity score matching, Average treatment effect |
| JEL: | C14 D24 F21 F23 |
| Date: | 2006–07 |
| URL: | http://d.repec.org/n?u=RePEc:hst:hstdps:d06-174&r=int |
| By: | Mugele, Christian; Schnitzer, Monika |
| Abstract: | We develop a model in which multinational investors decide about the modes of organization, the locations of production, and the markets to be served. Foreign investments are driven by market-seeking and cost-reducing motives. We further assume that investors face costs of control that vary among sectors and increase in distance. The results show that (i) production intensive sectors are more likely to operate a foreign business independent of the investment motive, (ii) that distance may have a non-monotonous effect on the likelihood of horizontal investments, and (iii) that globalization, if understood as reducing distance, leads to more integration. |
| Keywords: | Multinationals; Joint ventures; Technology spillovers; Distance; Horizontal and vertical investments; Ownership structure |
| JEL: | F23 L24 L22 L23 D23 |
| Date: | 2006–02 |
| URL: | http://d.repec.org/n?u=RePEc:lmu:muenec:893&r=int |
| By: | David Roodman |
| Abstract: | A challenge in the development of aggregate indexes of trade protection is finding weights to put on various tariffs that a) reflect their importance to exporters and b) are not endogenous to the protection being measured. One common basis for weights is actual imports; but these, as is well-known, are endogenous. Various authors have worked to correct this endogeneity, but doing so is difficult in product areas where protection is both high and widespread. For this reason, I develop a new set of estimates of overall protection in rich countries with respect to developing ones that eschews import weights as much as possible in favor of weights based on the value of exporter’s total production in each product area. The results are generally much higher than those from the Bouët et al. (2004) “MAcMap” data set; there, weights are based on imports of large reference groups of countries. I conclude that product areas in which protection is high and widespread are systematically de-emphasized when using pure MAcMap weights to aggregate across major product groups. In particular, when gauging rich-country protection with respect to developing countries, agriculture is de-emphasized. I also develop estimates of trade-distorting subsidies by country and commodity and translate these into tariffequivalents with the methodology of Cline (2004) in order to estimate overall protection levels. Agricultural tariffs dominate subsidies in trade-distorting effect, and agricultural protection in turn dominates goods protection generally. Japan is most protective, largely because of rice tariffs near 900%, followed by Norway and Switzerland. Because of their greater reliance on agriculture, the poorest countries face higher trade barriers than wealthier developing countries, despite tariff preferences. |
| Keywords: | Doha Round, measuring trade openness, agricultural subsidies |
| JEL: | F13 O19 H25 |
| Date: | 2005–08 |
| URL: | http://d.repec.org/n?u=RePEc:cgd:wpaper:66&r=int |
| By: | Alireza Naghavi (University of Modena) |
| Abstract: | This paper investigates the link between trade and environment by exploring the effects of green tariffs on the location of firms, innovation and the environment. It shows that tariffs levied on polluting goods could result in less global pollution than harmonization of environmental standards by inducing more pollution abatement R&D, generating lower unit emissions from production, and reducing competition. Green tariffs reduce pollution by (1) shifting production to the region where environmental standards are respected, (2) strategically inducing abatement R&D by the Northern firm by granting the latter a higher market share, (3) creating abatement R&D by deterring delocation. |
| Keywords: | Environmental Standards, Multinationals, Location of Firms, Pollution Abatement R&D, Green Tariffs |
| JEL: | F13 F18 F23 H23 Q21 R38 |
| Date: | 2006–06 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2006.92&r=int |
| By: | Daniel Seidmann (University of Nottingham) |
| Abstract: | We analyze a three-country model of trade negotiations in which countries can form bilateral free trade areas, customs unions or a trilateral preferential trading arrangement, and can continue negotiating after reaching an agreement. In contrast to the literature on multilateral bargaining, the set of agreements can form a (nonpartitional) network; while in contrast to the network literature, players can reach multilateral agreements. We show that patient enough countries reach bilateral arrangements if and only if insiders gain more than outsiders; and we characterize conditions under which a hub and spoke pattern emerges. We also use variants on the model to explain why a US commitment not to bargain bilaterally sustained progress at GATT negotiations; and the rarity of open access preferential trading arrangements. |
| Date: | 2006–04 |
| URL: | http://d.repec.org/n?u=RePEc:cdx:dpaper:2006-09&r=int |
| By: | Corrado Di Maria (CentER and Tilburg University); Edwin van der Werf (CentER and Tilburg University) |
| Abstract: | A common critique to the Kyoto Protocol is that the reduction in emissions of CO2 by countries who comply with it will be (partly) offset by the increase in emissions on the part of other countries (carbon leakage). This paper analyzes the effect of technical change on carbon leakage in a two-country model where only one of the countries enforces an exogenous cap on emissions. Climate policy induces changes in relative prices, which cause carbon leakage through a terms-of-trade effect. However, these changes in relative prices in addition affect the incentives to innovate in different sectors. We allow entrepreneurs to choose the sector for which they innovate (directed technical change). This leads to a counterbalancing induced-technology effect, which always reduces carbon leakage. We therefore conclude that the leakage rates reported in the literature so far may be too high, as these estimates neglect the effect of relative price changes on the incentives to innovate. |
| Keywords: | Climate Policy, Carbon Leakage, Directed Technical Change, International Trade |
| JEL: | F18 O33 Q54 Q55 |
| Date: | 2006–06 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2006.94&r=int |