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on International Trade |
| By: | RIEBER Arsène (Center for Analysis and Research in Economics (CARE), University of Rouen); TRAN Thi Anh-Dao (Economics Centre of University Paris-North (CEPN, University Paris 13) and Center for Analysis and Research in Economics (CARE), University of Rouen) |
| Abstract: | Relying on a North-South model of economic geography, our paper attempts to discuss the management of global pollution issues such as greenhouse gas emissions. As firms are increasingly mobile, they become sensitive to differences in environmental standards across countries and subject the regulatory power of a country to the rule of competition. In this context, we first evaluate the consequences of a passive ecological dumping from the South. We find that the Northern region undergoes a phenomenon of industrial relocation with a fall in its real income. In addition, the outcomes on global pollution abatement appear ambiguous. Globalization of the world economy, by changing the location decisions of firms, can make global pollution even worse. This calls for international cooperation between the North and the South. We then turn to investigate the outcomes of a harmonization of environmental policies. Although better from an ecological point of view, this second scenario harms the South both in terms of industrial relocation and real income. |
| Keywords: | Economic geography, Global pollution, Environmental competition |
| JEL: | F12 Q20 R10 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:dpc:wpaper:0208&r=int |
| By: | José García-Solanes (Universidad de Murcia); Jesús Rodríguez (Universidad Pablo de Olavide); José L. Torres (Universidad de Málaga) |
| Abstract: | This paper studies the current account dynamics in the G-7 countries plus Spain. We estimate a SVAR model which allows us to identify three different shocks: supply shocks, real demand shocks and nominal shocks. We use a different identification procedure from previous work based on a microfounded stochastic open-economy model in which the real exchange rate is a determinant of the Phillips curve. Estimates from a structural VAR show that real demand shocks explain most of the variability of current account imbalances, whereas, contrary to previous findings, nominal shocks play no role. The results we obtain are consistent with the predictions of a widely set of open-economy models and illustrate that demand policies are the main responsible of trade imbalances. |
| Keywords: | Current account, SVAR |
| JEL: | F3 |
| Date: | 2007–06 |
| URL: | http://d.repec.org/n?u=RePEc:aee:wpaper:0704&r=int |
| By: | Pierola, Martha Denisse; Amurgo-Pacheco, Alberto |
| Abstract: | This paper uses highly disaggregated trade data to investigate geographic and product diversification patterns across a group of developing nations for the period from 1990 to 2005. The econometric investigation shows that the gravity equation fits the observed differences in diversification across nations. The analysis shows that exports at the intensive margin account for the most important share of overall trade growth. At the extensive margin, geographic diversification is more important than product diversification, especially for developing countries. Taking part in free trade agreements, thereby reducing trade costs, and trading with countries in the North are also found to have positive impacts on export diversification for developing countries. |
| Keywords: | Economic Theory & Research,Free Trade,Trade Policy,Emerging Markets,Achieving Shared Growth |
| Date: | 2008–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:4473&r=int |
| By: | Rosario Crinò (CESPRI - Bocconi University, Milan, Italy.) |
| Abstract: | This paper studies the e¤ects of service offshoring on the skill composition of labor demand in Western Europe, using comparable data for nine economies during the 1990s. A short-run translog cost function allows derivation of demand elasticities for three labor inputs. Potential endogeneity and measurement error in service offshoring are accounted for by using instruments based on EBRD indexes of telecommunication reform in Eastern Europe. Results show that service offshoring is skill-biased, because it raises relative labor demand for high skilled workers. |
| Keywords: | Service Offshoring, Labor Demand, Instrumental Variable Estimation. |
| JEL: | F16 J23 J31 |
| Date: | 2007–10 |
| URL: | http://d.repec.org/n?u=RePEc:cri:cespri:wp205&r=int |
| By: | John J. Heim (Department of Economics, Rensselaer Polytechnic Institute, Troy, NY 12180-3590, USA) |
| Abstract: | Falling exchange rates reduce the purchasing power of the dollar, increasing import prices. Higher import prices have two effects. (1) A substitution effect that shifts demand from imported to domestically produced goods. (2) An income effect that reduces the total amount of real income available for spending on domestic goods and foreign goods. Based on U.S. 1960 - 2000 data, this paper estimates an econometric model that finds that the income effects of falling exchange rates overwhelms the substitution effects, causing a net negative influence on the GDP and income. Results indicate demand for both imported and domestic consumer and investment goods is adversely affected because the income effect is so dominant.. For investment goods, there was virtually no substitution effect out of imported goods when import prices rose due to a falling exchange rate. Declining real income also caused decreased demand for domestically produced investment goods. For consumer goods, the substitution effect stimulated domestic demand, but was more than offset by the negative effect of declining income. The decrease in demand for domestic goods and services was 3.6 times as large as the decrease in demand for imports. Therefore, the trade deficit fell far less in dollars than the GDP. The study estimates that, other things equal, the trade deficit would fall from 4.3% to 2.1% of the GDP as a result of a large twenty percent weakening of the dollar, such as occurred 2000-07. Had the exchange rate not fallen during this period, we estimate the average annual growth rate of the U.S. economy would have been 3.7%, not the 2.7% it has actually averaged, assuming sufficient capital and labor availability to do so. Finally, we find that a falling trade deficit induced by falling exchange rates, reduces the size of the annual transfer of U.S. assets to foreigners needed to finance the deficit, but does not result in a faster rate of net growth for U.S. assets, because declining income also reduces domestic savings by a comparable amount. |
| JEL: | E00 F40 F43 |
| Date: | 2008–01 |
| URL: | http://d.repec.org/n?u=RePEc:rpi:rpiwpe:0801&r=int |
| By: | Maria Bas; Yvan Ledezma |
| Abstract: | Using bilateral trade flow data from 1979 to 1999, we estimate trade integration between Chile and its principal trading partners during the period (European Union, United States and Latin America). Our estimates are based on a gravity specification, theoretically grounded on a monopolistic competition framework with increasing returns. Trade barriers are measured following the border effect methodology by comparing inter-national imports to intra-national ones. Our results are consistent with the agenda of trade integration followed by Chile. Moreover, trade integration turns out to be heterogeneous across industries and over the time. We also find asymmetries between export and import oriented policies as well as between partners. All these features are usually missing when one uses direct measures of trade policies. |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:pse:psecon:2007-50&r=int |
| By: | Nana Bourtchouladze (IUHEI, The Graduate Institute of International Studies, Geneva) |
| Abstract: | The home market effect (HME) is commonly defined as a more than proportional supply response to a demand shock. Recent theoretical literature, however, shows that predictions from the traditional two-country framework do not always survive in multi-country settings. This is because ‘third’ country effects may reverse the positive impact that an increase in domestic demand has on its production. As such, empirical implementations of the HME hypothesis are problematic. In this paper, we try to fill this gap by proposing a revised version of the HME test, robust to an arbitrary number of countries. Using Behrens et al. (2004), which extends Krugman (1980) model to a multi-country world, we derive a theory-founded empirical specification that accounts for a complete geographical structure of demand and proximity incentives offered to firms when choosing location sites to set up production facilities. We estimate the evolution of production structure in the EU countries for 24 manufacturing sectors over 1979-1999. We find support for the presence of the HME in a number of industries. The results also emphasize the importance of countries access to foreign markets. |
| Keywords: | New trade theory, multi-country models, economic geography, home market effect, market potential, market access |
| JEL: | F12 F14 F17 R11 R12 |
| Date: | 2007–02 |
| URL: | http://d.repec.org/n?u=RePEc:gii:giihei:heiwp16-2007&r=int |
| By: | GianPaolo Mariutti (Department of Economics (University of Verona)) |
| Abstract: | Since (at least) Ricardo, international trade has been perceived as a positive-sum-gain – any partner involved in the international activity of exchange would be at the end better off, no matter how bad was its previous economic position. The Ricardian principle of comparative advantages (RPCA) allows to explain why this would be so. Though the principle is still perceived as being a non-trivial-truth-for-certain, the paper discusses critically its application by adopting a dynamic multisectoral production model of a pure labour economy. Though abstract, the features of the model seem sufficiently realistic: differentiated sectors, with different technological, demand, and productivity levels; unemployment threats, demand constraints, uneven dynamics of all the above variables. If the unit of analysis is the individual country, rather than the international system as a whole, we show that the RPCA assures only a static “once for all” drop of the level of prices. It may not assure gains from trade in seven out of eight variables examined. Employment, productivity, per capita income and their respective rates of change, plus the rate of inflation, may turn out after trade worst than they would have been without trade. Hence, the RPCA is in many respects inconclusive. An individual country may specialize according to this principle and still arm its economy. Static as well as dynamic losses from trade are just a possibility as they are static and dynamic gains. |
| Keywords: | comparative advantages, structural change, international specialization, economic growth. |
| JEL: | O41 F41 F43 |
| Date: | 2007–12 |
| URL: | http://d.repec.org/n?u=RePEc:ver:wpaper:44&r=int |
| By: | John J. Heim (Department of Economics, Rensselaer Polytechnic Institute, Troy, NY 12180-3590, USA) |
| Abstract: | Falling exchange rates reduce the purchasing power of the dollar, increasing import prices. Higher import prices have two effects. (1) A substitution effect that shifts demand from imported to domestically produced goods. (2) An income effect that reduces the total amount of real income available for spending on domestic goods and foreign goods. Based on U.S. 1960 - 2000 data, this paper estimates an econometric model that finds that the income effects of falling exchange rates overwhelms the substitution effects, causing a net negative influence on the GDP and income. Results indicate demand for both imported and domestic consumer and investment goods is adversely affected because the income effect is so dominant.. For investment goods, there was a substitution effect into imported goods when import prices rose due to a falling exchange rate, presumably because the negative income effect so reduced income that demand was pushed toward cheaper imports, despite the fact that their own prices had recently risen, causing the U.S. real income decline. Declining real income also caused decreased demand for domestically produced investment goods, presumably for the same reason. For consumer goods, the substitution effect stimulated domestic demand, but was more than offset by the negative effects of declining income. The decrease in demand for domestic goods and services was 3.5 times as large as the decrease in demand for imports. In short, the trade deficit appears to fall far less than the GDP when the exchange rate drops. The study estimates that, other things equal, the trade deficit would have fallen from 4.3% to 2.8% of the GDP as a result of a 12.5 point (12%) weakening of the dollar against the Broad trade weighted real exchange rate, such as occurred 2000-07. Had the exchange rate not fallen during this period, we estimate the average annual growth rate of the real U.S. economy would have been 3.4%, not the 2.7% it has actually averaged, assuming sufficient capital and labor availability to do so. Finally, we find that a falling trade deficit induced by falling exchange rates, reduces the size of the annual transfer of U.S. assets to foreigners needed to finance the deficit, but does not result in a faster rate of net growth for U.S. – owned assets, because declining income also reduces domestic savings by about the same amount. |
| JEL: | E00 F40 F43 |
| Date: | 2008–01 |
| URL: | http://d.repec.org/n?u=RePEc:rpi:rpiwpe:0803&r=int |
| By: | John J. Heim (Department of Economics, Rensselaer Polytechnic Institute, Troy, NY 12180-3590, USA) |
| Abstract: | Falling exchange rates reduce the purchasing power of the dollar, increasing import prices. Higher import prices have two effects. (1) A substitution effect that shifts demand from imported to domestically produced goods. (2) An income effect that reduces the total amount of real income available for spending on domestic goods and foreign goods. Based on U.S. 1960 - 2000 data, this paper estimates an econometric model that finds that the income effects of falling exchange rates overwhelms the substitution effects, causing a net negative influence on the GDP and income. Results indicate demand for both imported and domestic consumer and investment goods is adversely affected because the income effect is so dominant.. For investment goods, there was a 2.52 billion substitution effect out of imported goods when import prices rose due to a one point drop in the nominal Broad exchange rate. Declining real income also caused decreased demand for domestically produced investment goods. For consumer goods, the substitution effect stimulated domestic demand, but was more than offset by the negative effect of declining income. The decrease in demand for domestic goods and services was 2.0 times as large as the decrease in demand for imports. Therefore, the trade deficit fell less in dollars ($198B) than the GDP ($321B) in real dollars. The study estimates that, other things equal, the trade deficit would fall from 4.3% to 2.3% of the GDP as a result of a large 16.1 percent drop in the nominal Broad exchange rate index, such as occurred 2000-07. Had the exchange rate not fallen during this period, we estimate the average annual growth rate of the U.S. economy would have been 3.2%, not the 2.7% it has actually averaged, assuming sufficient capital and labor availability to do so. Finally, we find that a falling trade deficit induced by falling exchange rates ($12.31B per point drop in the rate), reduces the size of the annual transfer of U.S. assets to foreigners needed to finance the deficit by the same amount, but does not result in an equally large change upward by the end of the period in U.S. ownership of assets, because about 2/3 of this gain is offset by an income – decline related drop in savings ($8.28B per point decline in the index) during the same period. |
| JEL: | E00 F40 F43 |
| Date: | 2008–01 |
| URL: | http://d.repec.org/n?u=RePEc:rpi:rpiwpe:0802&r=int |
| By: | Shafaeddin, Mehdi |
| Abstract: | Abstract The purpose of this study is to examine the potential impact of oil revenues on the economy of Sudan and the challenges facing the Government in policy making, particularly trade policy and allocation of oil revenues for long-run development and diversification of the production and export structure of the economy. The exploitation of oil resources has been accompanied by impressive liberalization of the economy by the Government of Sudan. Since then the country has been integrating into the world economy rapidly based on oil revenues. Yet, little has been achieved so far in integrating various sectors of the domestic economy despite relatively rapid GDP growth based on oil revenues. Rapid economic growth and diversification of the economy are among the main objectives of the Government. Therefore, the challenge facing the Government is to design and implement a long-term development strategy in order to build up a solid industrial and agricultural sector for sustainable development and expansion of non-oil exports. In such a strategy the design, and implementation, of trade and industrial policies and the way oil revenues are allocated, takes, inter alia, importance. Developing a conceptual framework of analysis, the author will argue that while export of petroleum provides financial resources for the acceleration of investment and growth, prospects for sustained growth and diversification will be still limited by some physical and institutional bottlenecks which can not be easily overcome by ample oil revenues. Trade in oil itself may have some detrimental socio-economic effects, including the attitude and policies of the Government, on the prospects for development and diversification of the economy in the long-run. Therefore, the Government policies, particularly trade policies, and the way oil revenues are allocated may not be necessarily conducive to long-run development and diversification of production and export structure. Proposing an alternative long-run trade and industrial policy for the country, the author will also outline the practical problems of its implementation under current international trade rules. ---------- *The author is a development economist with D.Phil from Oxford Univsity. He is currently an international consultant affiliated to the Institute of Economic Research, University of Neuchatel, Switzerland. He is the former Head, Macroeconomic and Development Policies Branch, UNCTAD and the author of a large number of articles, published in international journals, on trade and industrial policies, economic reform and other development policy issues. His latest book is: Trade Policy at the Crossroads; the recent experience of developing countries, Macmillan, 2005. This paper is developed on the basis of a part of a study undertaken for the World Bank under a DTSI project financed by the same Organization. The author benefited from interviews with Government authorities and comments from Mr. P. Shuler to whom goes his thanks. Comments are welcome and can be sent to author: M.Shafaeddin@Gmail.com. |
| Keywords: | Oil economies; trade policy; Sudan; economic development; diversification |
| JEL: | F4 F0 O5 O2 Q2 Q4 Q1 F3 F1 |
| Date: | 2007–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:6720&r=int |