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on International Trade |
| By: | Claustre Bajona; Timothy J. Kehoe |
| Abstract: | This paper studies the properties of a dynamic Heckscher-Ohlin model—a combination of a static two-good, two-factor Heckscher-Ohlin trade model and a two-sector growth model—with infinitely lived consumers where international borrowing and lending are not permitted. We obtain two main results: First, even if factor prices are equalized, countries that differ only in their initial endowments of capital per worker may converge or diverge in income levels over time, depending on the elasticity of substitution between traded goods. Divergence can occur for parameter values that would imply convergence in a world of closed economies and vice versa. Second, factor price equalization in a given period does not imply factor price equalization in future periods. |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedmsr:378&r=int |
| By: | Claustre Bajona; Timothy J. Kehoe |
| Abstract: | This paper contrasts the properties of dynamic Heckscher-Ohlin models with overlapping generations with those of models with infinitely lived consumers. In both environments, if capital is mobile across countries, factor price equalization occurs after the initial period. In general, however, the properties of equilibria differ drastically across environments: With infinitely lived consumers, we find that factor prices equalize in any steady state or cycle and that, in general, there is positive trade in any steady state or cycle. With overlapping generations, in contrast, we construct examples with steady states and cycles in which factor prices are not equalized, and we find that any equilibrium that converges to a steady state or cycle with factor price equalization has no trade after a finite number of periods. |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedmsr:377&r=int |
| By: | Tehmina S. Khan |
| Abstract: | Total factor productivity (TFP) of 14 manufacturing sectors in France has kept up with that of the United States during 1980-2002 and remained well above that of the United Kingdom. Estimates using a dynamic panel equilibrium correction model indicate that sectors further behind the technological frontier experience faster productivity growth and that spending on research and development and trade with technologically advanced economies positively influences TFP growth, but not the speed of convergence. Conversely, TFP growth is negatively related to some key labor market variables, namely the replacement ratio and the ratio of the minimum wage to the median wage. |
| Keywords: | Economic growth , Total Factor Productivity (TFP) , Research and Development (R&D) , labor market institutions , trade , technological convergence , |
| Date: | 2006–10–20 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:06/230&r=int |
| By: | Hans P. Lankes; Azim M. Sadikov; Jean-Jacques Hallaert; Dustin Smith; Katrin Elborgh-Woytek |
| Abstract: | The paper contributes to the discussion about the revenue implications of trade reform by assessing the approximate fiscal revenue impact of different liberalization formulae under consideration in multilateral trade negotiations for a group of low- and middle-income countries. The study applies a linear optimization framework to data for bound tariffs, applied tariffs, and imports at the HS-6 digit level for 58 developing countries, and simulates results for different sets of import demand elasticities and developing country "flexibilities." While only a small number of countries face a significant impact, results point toward the need for complementary fiscal measures in the countries most affected by revenue loss. |
| Keywords: | Taxation , Trade Negotiations , Trade Policy. Doha Round , Trade Taxes. , |
| Date: | 2006–09–19 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:06/203&r=int |
| By: | Virginia Di Nino, Rosen Marinov, Nadia Rocha (IUHEI, The Graduate Institute of International Studies, Geneva) |
| Abstract: | This paper tests an empirical implication of Melitz (2003) in the context of falling trade costs, using the EU’s intensive liberalization phase (1993-2002) as a natural experiment. Contrary to the model’s predictions, firms that switch from non-exporting to exporting over the studied period are not concentrated in a particular size range. Our findings, based on a rich data set of French manufacturing enterprises, suggest scope for fine-tuning of the theoretical framework. |
| Keywords: | Entry, Size Distribution of Firms, Intra-industry trade |
| JEL: | F12 F14 L11 |
| Date: | 2006–10 |
| URL: | http://d.repec.org/n?u=RePEc:gii:giihei:heiwp19-2006&r=int |
| By: | Toshihiro Okubo (IUHEI, The Graduate Institute of International Studies, Geneva) |
| Abstract: | This paper studies the impact of trade costs reduction on geographical concentration in the presence of firm heterogeneity and overhead type of export fixed costs. Firm heterogeneity with the export fixed costs hampers full agglomeration through weakening the forward and backward linkages and fortifying the market crowding effect. Rather than catastrophic agglomeration that the standard new economic geography models have long suggested, trade liberalisation causes gradual agglomeration. Also, trade liberalisation never produces a perfect convergence in welfare for the periphery, which loses, and the core, which gains. Even free trade never equalises the welfare between core and periphery, i.e. trade liberalisation does not eliminate inequality among nations. |
| Keywords: | heterogeneous firms, economic geography, spatial sorting effect, non-full agglomeration, non-catastrophic agglomeration, trade liberalisation. |
| JEL: | H32 P16 |
| URL: | http://d.repec.org/n?u=RePEc:gii:giihei:heiwp16-2006&r=int |
| By: | Gian Maria Milesi-Ferretti; Philip R. Lane |
| Abstract: | We examine the evolution of the net external asset positions of Central and Eastern Europe (CEEC) countries over the past decade, with a strong emphasis on the composition of their international balance sheets. We assess the extent of their international financial integration, compared with the advanced economies and other emerging markets, and highlight the salient features of their external capital structure in terms of the relative importance of FDI, portfolio equity, and external debt. In addition, we briefly describe the country and currency composition of their external liabilities. Finally, we explore the implications of the accumulated stock of external liabilities for future trade and current account balances. |
| Keywords: | trade balance , rates of return , net external position , FDI , Capital flows , Eastern Europe , Balance of trade , Current account , Foreign direct investment , |
| Date: | 2006–08–15 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:06/188&r=int |
| By: | Alberto Amurgo Pacheco (IUHEI, The Graduate Institute of International Studies, Geneva) |
| Abstract: | The paper investigates how Preferential Trade Agreements (PTAs) affect the range of goods exported by a nation. We use the Melitz model and highly dis-aggregated data on Euro-Mediterranean trade to measure the effect of preferential trade liberalization on the range of traded products. By focusing on the zeros in the trade matrix, the paper finds evidence that at the time when the Euro-Mediterranean FTA started there was an expansion in the range of products traded by its members. |
| Keywords: | International Economics, Melitz model, Trade policy, development, developing countries, new goods, Euro-Med, Mediterranean, European Union, Euro-Mediterranean FTA, trade matrix, range exported products, FTA, preferential trade liberalization, zeros |
| JEL: | F13 F14 F15 |
| Date: | 2006–10–09 |
| URL: | http://d.repec.org/n?u=RePEc:gii:giihei:heiwp18-2006&r=int |
| By: | Richard Baldwin Virginia Di Nino (IUHEI, The Graduate Institute of International Studies, Geneva) |
| Abstract: | This paper tests whether trade in new goods were partially responsible for the pro-trade effects of the euro and provides a measure of the size of the effect. It works with a very large data (about 16 million observations) set covering twenty countries at the most disaggregated level of trade data that is publicly available. Using predictions from a heterogeneous-firms trade model in a multi-country environment to structure our empirical model, we find that the euro had a positive impact on trade overall. Our findings provide supportive but not conclusive evidence for the new-goods hypothesis. We also determined the pro-trade effect of euro-usage on non-Euroland nations trading with euro-users. We confirmed the absence of trade diversion for non-Eurozone EU members with sizeable overall increase comparable to that of members. |
| Keywords: | heterogeneous firms, Eurozone trade effects, Melitz model, extensive margin. |
| JEL: | F4 F21 F12 F33 |
| Date: | 2006–09 |
| URL: | http://d.repec.org/n?u=RePEc:gii:giihei:heiwp21-2006&r=int |
| By: | M. Ali Choudhary (University of Surrey); Paul Temple (University of Surrey); Lei Zhao (University of Surrey) |
| Abstract: | In this paper we develop models of intra-industry trade in which the technological infrastructure associated with measurement activity plays a role in determining the ability of firms to differentiate their products, making them more marketable, and hence promoting intra-industry trade. We observe that public support for the measurement infrastructure is an important element of public support for industry, while publicly available technical standards provide a significant means by which firms make use of this infrastructure. As an empirical test for the importance of the measurement infrastructure, we consider bi-lateral intra-industry trade flows between economies in the EU and find that both a measure of the cross industry importance of the measurement infrastructure – as proxied by standards - as well as the degree of investment in the ability to measure – as proxied by the use of instruments – are important correlates of intraindustry trade. The econometric analysis suggests that differences in national measurement infrastructures continue to play an important role in determining EU trade flows. |
| Keywords: | Intra-industry trade, technology, product differentiation, manufacturing |
| JEL: | F12 F14 F15 L1 L60 |
| Date: | 2006–08 |
| URL: | http://d.repec.org/n?u=RePEc:sur:surrec:1406&r=int |
| By: | Moser, Christoph; Nestmann, Thorsten; Wedow, Michael |
| Abstract: | Political risk represents an important hidden transaction cost that reduces international trade. This paper investigates the claim that German public export credit guarantees (Hermes guarantees) mitigate this friction to trade flows and hence promote exports. We employ an empirical trade gravity model, where we explicitly control for political risk in the importing country in order to evaluate the effect of export guarantees. The idea behind export promotion through public export credit agencies (ECAs) is that the private market is unable to provide adequate insurance for all risks associated with exports. As a consequence, firms' export activities are limited in the absence of insurance provision. Using a novel data set on guarantees we estimate the effect of guarantees in a static and dynamic panel model. We find a statistically and economically significant positive effect of public export guarantees on exports which indicates that export promotion is indeed effective. Furthermore, political risk turns out to be a robust determinant of exports and hence should be taken into account in any empirical model of trade. |
| Keywords: | public export credit guarantees, political risk, panel regression |
| JEL: | C23 F13 H81 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bubdp1:5110&r=int |
| By: | Jean-Marie Grether (University of Neuchâtel); Nicole A. Mathys (University of Lausanne); Jaime de Melo (University of Geneva and CEPR) |
| Abstract: | This paper contributes to the debate on the existence of pollution haven effects by systematically measuring the pollution content of trade (measured by the polluction content of imports (PCI)) and decomposing it into three components: a ‘deep’ (i.e. unrelated to the environmental debate) component and two components (factor endowments and environmental policies) that occupy centerstage in the debate on trade and the environment. The decomposition is carried out for 1986-88 for an extensive data set covering 10 pollutants, 48 countries and 79 ISIC 4-digit sectors. Illustrative decompositions presented for 3 of the 10 pollutants in the data set indicate a significant pollution haven effect and highlight the role of factor endowments in each region’s PCI. However, because the bulk of trade is intra-regional with a high North-North share, these effects are small relative to the ‘deep’ determinants of the worldwide pollution content of trade. |
| Keywords: | Trade and the Environment, Pollution Haven |
| JEL: | F18 |
| Date: | 2006–10 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2006.122&r=int |
| By: | Alberto AMURGO PACHECO (IUHEI, The Graduate Institute of International Studies, Geneva) |
| Abstract: | The paper presents a simple theory model showing the implications of Mutual Recognition Agreements (MRAs) for excluded nations. We show that MRAs harm third country exports (e.g. North-North MRAs can harm South) because of a trade-diversion effect. We use highly dis-aggregated trade data from developed and developing nations to test the model. We find empirical evidence in support of the model; North-North MRAs harm exports from developing countries. |
| Keywords: | International Economics, economic integration, Trade Policy, economic development, mutual recognition agreements, MRA, standards, trade diversion, zeros, cournot, quality, inspection, Canada, Mexico, USA, EU, European Union, FTA, TBT, regionalism |
| JEL: | F13 F15 O12 |
| Date: | 2006–10–26 |
| URL: | http://d.repec.org/n?u=RePEc:gii:giihei:heiwp20-2006&r=int |
| By: | Tommaso Valletti (Imperial College London, University of Rome "Tor Vergata" and CEPR); Stefan Szymanski (Imperial College London) |
| Abstract: | This paper analyses the issue of parallel trade (arbitrage) for products protected by intellectual property rights. We discuss a basic trade-off that arises between the ex post better allocation that typically occurs under parallel trade when demand dispersion is not too high, and the ex ante reduced product quality because of lower investment. We show that the size of the welfare effects is significantly affected by the presence of a "generic" product, which represents a form of competition for the monopolist. The monopolist will introduce a "fighting brand" to compete with the generic, which dilutes but does not eliminate the result on the adverse effects of parallel trade on investments. |
| Keywords: | Parallel trade, price discrimination, investments |
| JEL: | L12 F13 O34 |
| Date: | 2006–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:rtv:ceisrp:75&r=int |
| By: | Hamid Faruqee; Douglas Laxton; Dirk Muir; Paolo Pesenti |
| Abstract: | In the evolving debate and analysis of global imbalances, a commonly overlooked issue pertains to rising protectionism. This paper attempts to fill that gap, examining the macroeconomic implications of trade policy changes through the lens of a dynamic general equilibrium model of the world economy encompassing four regional blocs. Simulation exercises are carried out to consider the imposition of uniform and discriminatory tariffs on trading partners as well as the case of tariff retaliation. We also discuss a scenario in which a 'globalization backlash' lowers the degree of competition in import-competing sectors, and compare the implications of higher markups in the product and labor markets. |
| JEL: | E66 F32 F47 |
| Date: | 2006–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12704&r=int |
| By: | T.S. Jayne (Department of Agricultural Economics, Michigan State University); Robert J. Meyers; James Nyoro |
| Abstract: | The objectives of this paper are to determine the effects of NCPB maize trading activity and the maize import tariff on wholesale maize market price levels and volatility. The analysis uses monthly maize price and trade data covering the period January 1990 to September 2004. Results are based on a vector autoregression (VAR) approach that allows estimation of a counterfactual set of maize prices that would have occurred over the 1990-2004 period had the NCPB not existed and trade restrictions been removed. Assessed are the separate impacts of policy on wholesale prices in Kitale, a major surplus-producing area, and Nairobi, the major urban demand center in the country. |
| Keywords: | food security, food policy, maize marketing trade policies, Kenya |
| JEL: | Q18 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:msu:icpwrk:ke-tegemeo-wp-015&r=int |
| By: | Paolo Dudine; Luzmaria Monasi; Joerg Zeuner; James John; Mark Lewis; Helaway Tadesse |
| Abstract: | This paper examines the impact of the 2003-05 oil price increase on the balance of payments positions and IMF financing needs of low-income country oil importers. It finds that stronger exports reflecting favorable global conditions, a compression of oil import volumes due to the pass-through of world prices to domestic consumers, and a large increase in capital inflows helped low-income countries cope with the oil price shock. Preliminary data suggest that reductions in oil import volumes have not harmed growth. While fiscal balances generally improved, quasi-fiscal liabilities may be building. Lower demand for IMF assistance may reflect broader trends, but further oil price increases could put pressure on additional countries in 2006 and beyond. |
| Keywords: | Oil , oil shock , balance of payments , adjustment , fiscal , quasi-fiscal , pass-through , low-income country , IMF financing , Oil , Low income developing countries , Balance of payments , Oil prices , Use of Fund resources , |
| Date: | 2006–07–25 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:06/171&r=int |
| By: | Jaime Marquez; John W. Schindler |
| Abstract: | The rising current account deficit in the USA has attracted considerable attention in recent years. We use the "business cycle accounting" methodology to identify the principal distortions that have affected the external accounts of the US. In particular, we measure distortions in the optimality conditions of a simple two-country general equilibrium model using data from the US and the other G7 countries. We then feed these measured distortions into the model individually and use the simulated counterfactual paths of the current account to determine the contribution of each of these "wedges" to the overall external imbalance of the USA. We find that no single wedge in isolation can account closely for the observed current account. However, a combination of productivity differences and deviations from risk-sharing between the US and the rest of the G7 does the best job in accounting for most of the measured movement of the US current account. |
| Keywords: | Foreign exchange rates - China ; Trade ; Econometric models |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedfwp:2006-41&r=int |
| By: | Beata S. Javorcik; Çaglar Özden; Mariana Spatareanu; Cristina Neagu |
| Abstract: | While there exists a sizeable literature documenting the importance of ethnic networks for international trade, little attention has been devoted to studying the effects of networks on foreign direct investment (FDI). The existence of ethnic networks may positively affect FDI by promoting information flows across international borders and by serving as a contract enforcement mechanism. This paper investigates the link between the presence of migrants in the US and US FDI in the migrants’ countries of origin, taking into account the potential endogeneity concerns. The results suggest that US FDI abroad is positively correlated with the presence of migrants from the host country. The data further indicate that the relationship between FDI and migration is driven by the presence of migrants with college education. |
| Keywords: | migration, foreign direct investment, ethnic networks |
| JEL: | F22 F23 |
| Date: | 2006–11 |
| URL: | http://d.repec.org/n?u=RePEc:run:wpaper:2006-003&r=int |
| By: | Törbjörn I. Becker; Paolo Mauro |
| Abstract: | Output drops are usually associated with major disruption for the residents of affected countries, both directly and often through ensuing, prolonged growth slowdowns. Using a century of data, we document that output drops are more frequent in countries at a lower stage of economic development. We then turn to a more in-depth analysis of the post-1970 era, examining output drops in a large panel of countries, and systematically relating them to a variety of shocks. We compute the expected cost of each type of shock as a function of the shock's frequency, the likelihood that the shock will be associated with a drop in output, and the size of the output drop. The largest costs are associated with external financial shocks (notably, sudden stops in financial flows) for emerging markets, and with real external shocks (in particular, terms-of-trade shocks) for developing countries. |
| Keywords: | Growth , output collapse , external shocks , volatility , crises , Economic growth , Financial crisis , Capital flows , Emerging markets , Trade , |
| Date: | 2006–07–25 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:06/172&r=int |
| By: | Peter Blair Henry |
| Abstract: | Writings on the macroeconomic impact of capital account liberalization find few, if any, robust effects of liberalization on real variables. In contrast to the prevailing wisdom, I argue that the textbook theory of liberalization holds up quite well to a critical reading of this literature. The lion's share of papers that find no effect of liberalization on real variables tell us nothing about the empirical validity of the theory, because they do not really test it. This paper explains why it is that most studies do not really address the theory they set out to test. It also discusses what is necessary to test the theory and examines papers that have done so. Studies that actually test the theory show that liberalization has significant effects on the cost of capital, investment, and economic growth. |
| JEL: | E6 F3 F4 G15 O16 G12 G14 G18 G3 G31 G38 O11 O16 O19 O24 O4 |
| Date: | 2006–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12698&r=int |