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on International Trade |
| By: | Herwartz, Helmut; Weber, Henning |
| Abstract: | Microfoundations of the euro’s effect on euro area trade hinge on the timing, the speed and the size of adjustment in trade costs. We estimate timing, speed and size of adjustment in trade costs for sectoral trade data. Our approach allows for sector specific impacts of trade costs on sectoral trade while controlling for unobserved but time-variant variables at the sector level. We find that, due to falling trade costs, trade within the euro area increases between the years 2000 and 2003 by 10 to 20 percent compared with trade between European countries that are not members of the euro area. Adjustment of individual sectors is extremely fast whereas aggregate adjustment spreads out because different sectors adjust at distinct times. |
| JEL: | C31 C33 F13 F15 F33 F42 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cauewp:7412&r=int |
| By: | Mitze, Timo; Alecke, Björn; Untiedt, Gerhard |
| Abstract: | We analyse the evolution of German Trade and FDI activity within the EU27 using a simultaneous equation gravity approach for imports, exports, in- and outward FDI stocks based on German regional data (NUTS1-level) for 1993-2005. Our approach seeks to explore the main long-run driving forces of both trade/FDI and identify the likely linkages among them. Our motivation for a joint system estimation rests on the observation of a significant cross-equation residual correlation for single equation trade/FDI gravity models, which in turn opens up the possibility for enhancing estimation efficiency in a full information approach. 'On the fly' the simultaneous equation model also allows us to derive a measure for trade/FDI linkages based on the variance-covariance matrix of the system's error term. Adopting both a Hausman-Taylor (1981) IV approach (3SLS-GMM) and a rival non-IV estimator (the system extension to the Fixed Effects Vector Decomposition model recently proposed by Plümper \& Tröger, 2007) our main results are: We find empirical support for the chosen gravity setup as an appropriate framework in explaining German trade and FDI patterns with a prominent role given to trade costs (proxied by geographical distance). Looking at cross-variable linkages we find a substitutive link between trade (both ex-/imports) and outward FDI for the average of German states in line with earlier evidence for Germany, while imports and inward FDI are found complement each other. We also analyse the sensitivity of the results for regionally disaggregated sub-aggregates among the total pool of German state - EU27 country pairs. The results hint at structural differences among the trade and FDI activity of the two German Eastern and Western macro regions on the one hand, and also their interaction with the 'core' EU15 member states opposed to the overall EU27 aggregate on the other hand. Taking the West German - EU27 trade \& FDI relationship as an example, the identified pairwise linkages between the four variables closely follow the predictions of the New Trade theory model of Baldwin \& Ottaviano (2001): That is, when trade is merely of intra industry type with non-zero trade costs, the latter shift production abroad and lead to export replacement effects of FDI. However, at the same time outward FDI may stimulates trade via reverse good imports. For the West German - EU15 aggregate we even reveal complementaries among export and FDI activity, which have not been identified for German data before. This strongly advocates the importance of the regional dimension in analysing cross-variable linkages among trade and FDI. |
| Keywords: | Trade; FDI; Panel Data; Simultaneous equations |
| JEL: | F14 F21 C33 |
| Date: | 2008–12–17 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:12245&r=int |
| By: | Holger Breinlich; Chiara Criscuolo |
| Abstract: | We provide a novel set of stylized facts on firms engaging in international trade in services, usingunique firm-level data on services exports and imports in the United Kingdom in 2000- 2005. Lessthan 10% of firms trade in services but they can be found in all sectors of the UK economy. While theservices sector accounts for 80% of total exports and imports, the frequency and trade intensity ofservices traders is often higher in sectors such as high- tech manufacturing. Services traders arebigger, more productive and are more likely to be foreign owned or part of a multinational enterprise.These 'trade premia' are smaller then for goods traders, however, with the exception of skill intensitywhich is higher among services traders. There are also significant differences between exporters andimporters of services. Furthermore, we show that most firms only export or import a single servicetype and trade with a small number of countries. Trade volume, employment, turnover and valueadded are highly concentrated among a small group of firms trading with many countries and/or inmany services types. These firms are characterised by bigger size and higher than averageproductivity, all of which seem to be principally correlated with more trade along the intensive margin(trade per services and country) .although there are a number of noteworthy exceptions. Interestingly,trade is also concentrated within .rms. The top export and import destination make up 70% of theaverage firm's total trade and the top services type around 90%. This strong concentration is stillpresent among firms trading with many countries and/or in many products. |
| Keywords: | International trade, services, firm-level evidence |
| JEL: | F14 F19 F23 |
| Date: | 2008–12 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp0901&r=int |
| By: | Thierry Mayer; Keith Head; John Ries |
| Abstract: | The majority of independent nations today were part of empires in 1945. Using bilateral trade data from 1948 to 2006, we examine the effect of independence on post-colonial trade. On average, there is little short run effect of trade with the colonizer (metropole). However, after three decades trade declines more than 60%. We also find that trade between former colonies of the same empire erodes as much as trade with the metropole, whereas trade with third countries exhibits small and unsystematic changes after independence. Hostile separations lead to larger and more immediate reductions. Trade deterioration over extended time periods suggests the depreciation of some form of trading capital such as business networks or institutions. |
| Keywords: | Colonies; gravity; trade |
| JEL: | F15 |
| Date: | 2008–12 |
| URL: | http://d.repec.org/n?u=RePEc:cii:cepidt:2008-27&r=int |
| By: | Jonathan Eaton; Samuel Kortum; Francis Kramarz |
| Abstract: | We examine the sales of French manufacturing firms in 113 destinations, including France itself. Several regularities stand out: (1) the number of French firms selling to a market, relative to French market share, increases systematically with market size; (2) sales distributions are very similar across markets of very different size and extent of French participation; (3) average sales in France rise very systematically with selling to less popular markets and to more markets. We adopt a model of firm heterogeneity and export participation which we estimate to match moments of the French data using the method of simulated moments. The results imply that nearly half the variation across firms that we see in market entry can be attributed to a single dimension of underlying firm heterogeneity, efficiency. Conditional on entry, underlying efficiency accounts for a much smaller variation in sales in any given market. Parameter estimates imply that fixed costs eat up a little more than half of gross profits. We use our results to simulate the effects of a counterfactual decline in bilateral trade barriers on French firms. While total French sales rise by around US$16 billion, sales by the top decile of firms rise by nearly US$23 billion. Every lower decile experiences a drop in sales, due to selling less at home or exiting altogether. |
| JEL: | F12 F14 F15 F17 L11 L25 |
| Date: | 2008–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:14610&r=int |
| By: | Holger Breinlich (University of Essex and Centre for Economic Performance, LSE); Alessandra Tucci (Centre for Economic Performance, LSE) |
| Abstract: | A large body of literature in International Economics has analysed the impact of increased import competition on domestic firms. The link between firm-level exports and changes in the competitive environment on foreign markets is less well understood, however. This is despite the fact that exports make up a significant and growing share of total manufacturing production in most countries. We derive a theory-based econometric specification linking destination-specific exports to foreign demand and the degree of competitiveness or “crowdedness” of a foreign market. The latter is a summary measure of the number and productive efficiency of firms competing in a given market and the barriers impeding their access, such as tariffs or physical distance. We estimate this specification on a large sample of Italian manufacturing firms in 1992-2003 and use the results for a series of counterfactual experiments. Our findings indicate that increased numbers and efficiency of foreign firms and improvements in their access to destination markets have reduced Italian exports by around 0.2-0.4% per year. This is similar to the effects of tariff reductions for Italian firms (+0.3%/year) but smaller than the impact of higher unit labour costs (-1.4%/year) and less favourable exchange rates (-2.0%/year). By far the most important determinant of export performance was foreign demand growth, however, raising Italian exports by up to 5.3% per year or almost 60% over the sample period. Our results also indicate that China’s impact on Italian export performance is small and if anything positive. Much more important in explaining the loss of export market shares in recent years has been the relatively slow demand growth in Italy’s main export market, the EU15. |
| Keywords: | International Trade, Competition, Exporters, Foreign Markets |
| JEL: | F12 F13 F15 |
| Date: | 2008–10–27 |
| URL: | http://d.repec.org/n?u=RePEc:csl:devewp:258&r=int |
| By: | Chahir Zaki (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris) |
| Abstract: | This paper estimates an augmented gravity model incorporating different aspects of Trade Facilitation in develop and developing countries. Trade Facilitation is defined as measures that aim at making international trade easier by eliminating administrative delays, simplifying commercial procedures, increasing transparency, security and the place of new technologies in trade. This paper provides new theoretical and empirical enhancements. On the one hand, the model is based on theoretical foundations related to monopolistic competition and border effects. The orginality of this paper is that Trade Facilitation facets are included in the model. On the other hand, the empirical achievement of the paper is that it uses different databases allowing us to take into account many features of Trade Facilitation. I use several databases coming from different sources : Doing business (World Bank) and Institutional Profiles (CEPII). My main findings show that transaction time for imports and number of documents for exports have a negative impact on trade. Our sample is split into sub-samples in order to take into account the impact of development level. It turns out that Trade Facilitation aspects have not the same impact on developed and developing countries. Finally, we conclude that some perishable (food and beverages), seasonal (wearing apparels) and high-value added products are more sensitive to import time than other products. Hard industries are rather sensitive to export documents. |
| Keywords: | Trade facilitation, gravity models, border effects. |
| Date: | 2008–11 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-00348924_v1&r=int |
| By: | Jean Marie Grether (University of Neuchatel); Nicole A. Mathys (University of Neuchatel); Jaime de Melo (University of Geneva, CERDI and CEPR) |
| Abstract: | A growth-decomposition (scale, technique and composition effect) covering 62 countries and 7 manufacturing sectors over the 1990-2000 period shows that trade, through reallocations of activities across countries, has contributed to a 2-3 percent decrease in world SO2 emissions. However, when compared to a constructed counterfactual no-trade benchmark, depending on the base year, trade would have contributed to a 3-10 percent increase in emissions. Finally adding emissions coming from trade-related transport activities, global emissions are increased through trade by 16 percent in 1990 and 13 percent in 2000, the decline being largely attributable to a shift of dirty activities towards cleaner countries. |
| Keywords: | embodied emissions in trade, environment, growth decomposition, transport, world trade |
| JEL: | F18 Q56 |
| Date: | 2008–10–27 |
| URL: | http://d.repec.org/n?u=RePEc:csl:devewp:263&r=int |
| By: | Robert W. Staiger; Alan O. Sykes |
| Abstract: | Central bank intervention in foreign exchange markets may, under some conditions, stimulate exports and retard imports. In the past few years, this issue has moved to center stage because of the foreign exchange policies of China. China has regularly intervened to prevent the RMB from appreciating relative to other currencies, and over the same period has developed large global and bilateral trade surpluses. Numerous public officials and commentators argue that China has engaged in impermissible "currency manipulation," and various proposals for stiff action against China have been advanced. This paper clarifies the theoretical relationship between exchange rate policy and international trade, and addresses the question of what content can be given to the concept of "currency manipulation" as a measure that may impair the commitments made in trade agreements. Our conclusions are at odds with much of what is currently being said by proponents of counter-measures against China. For example, it is often asserted that China's currency policies have real effects that are equivalent to an export subsidy. In fact, however, if prices are flexible the effect of exchange rate intervention parallels that of a uniform import tariff and export subsidy, which will have no real effect on trade, an implication of Lerner's symmetry theorem. With sticky prices, the real effects of exchange rate intervention and the translation of that intervention into trade-policy equivalents depend critically on how traded goods and services are priced. The real effects of China's policies are potentially quite complex, are not readily translated into trade-policy equivalents, and are dependent on the time frame over which they are evaluated (because prices are less "sticky" over a longer time frame). |
| JEL: | F02 F13 F31 K33 |
| Date: | 2008–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:14600&r=int |
| By: | Gregory Corcos (Norwegian School of Economics and Business Administration); Delphine M. Irac (Bank of France); Giordano Mion (Université Catholique de Louvain); Thierry Verdier (Paris School of Economics and CEPR) |
| Abstract: | This paper analyzes the determinants of the intra-firm vs arms’length sourcing mode of imported inputs. We build a unique French dataset of 1,141,393 import transactions at the firm, country and product levels in the year 1999 that allow us to distinguish the different sourcing modes. We study the firms-, country- and product- determinants of intra-firm trade. We confirm a number of theory-based predictions building on the residuals property rights approach and provide some empirical facts that can be used to further refine this as well as alternative theories. In particular, we highlight the fact that firms’ heterogeneity needs to be evaluated across different dimensions. Furthermore, we point out that complex goods are more likely to be produced within the firm boundaries suggesting that those material and immaterial attributes that characterized a product play a key role in globalized sourcing strategies. |
| Keywords: | Internationalization strategies; intra-firm trade; outsourcing; firm heterogeneity |
| JEL: | F23 F12 F19 |
| Date: | 2008–11–30 |
| URL: | http://d.repec.org/n?u=RePEc:csl:devewp:267&r=int |
| By: | Giorgio Barba Navaretti; Riccardo Faini; Alessandra Tucci |
| Abstract: | This paper examines whether the export decision of firms is affected by their ownership structure,specifically it looks at whether family control is an obstacle to entering foreign markets. Theunderlying assumption is that family firms are risk averse. Risk aversion may be an obstacle toentering foreign markets, as far as these are perceived as more volatile and risky than the domesticone, particularly when such choice entices bearing relatively high sunk costs. We develop anillustrative theoretical model that shows how the combination between high risk aversion and lowinitial productivity may hinder family firms' decision to enter foreign markets, particularly distantones. The empirical analysis, based on a detailed panel data set of Italian firms covering the yearsfrom 1995 to 2003, confirms such predictions by showing that family controlled firms do indeedexport less than other type of companies even after controlling for firm heterogeneity in productivity,size, technology and access to credit. |
| Keywords: | firm structure, foreign markets, family firms, exports |
| JEL: | F1 F14 L2 |
| Date: | 2008–11 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp0896&r=int |
| By: | Paola Conconi (Université Libre de Bruxelles, ECARES and CEPR); Patrick Legros (Université Libre de Bruxelles, ECARES and CEPR); Andrew F. Newman (Boston University and CEPR) |
| Abstract: | We embed a simple incomplete-contracts model of organization design in a standard two-country perfectly-competitive trade model to examine how the liberalization of product and factor markets affects the ownership structure of firms. In our model, managers decide whether or not to integrate their firms, trading off the pecuniary benefits of coordinating production decisions with the private benefits of operating in their preferred ways. The price of output is a crucial determinant of this choice, since it affects the size of the pecuniary benefits. In particular, non-integration is chosen at “low” and “high” prices, while integration occurs at moderate prices. Organizational choices also depend on the terms of trade in supplier markets, which affect the division of surplus between managers. We obtain three main results. First, even when firms do not relocate across countries, the price changes triggered by liberalization of product markets can lead to significant organizational restructuring within countries. Second, the removal of barriers to factor mobility can lead to inefficient reorganization and adversely affect consumers. Third, “deep integration” the liberalization of both product and factor markets leads to the convergence of organizational design across countries. |
| Keywords: | Firms, Contracts, Globalization |
| JEL: | D23 F13 F23 |
| Date: | 2008–10–27 |
| URL: | http://d.repec.org/n?u=RePEc:csl:devewp:262&r=int |
| By: | Christian Arndt (Institute for Applied Economic Research, IAW); Claudia M. Buch (University of Tubingen and CESifo); Anselm Mattes (Institute for Applied Economic Research, IAW) |
| Abstract: | Recent literature stresses the importance of low productivity as a barrier to the international expansion of firms. But financial frictions or adverse employment conditions at home could matter as well. In this paper, we present new empirical evidence on the importance of these factors. We use a detailed micro-level dataset of German firms which simultaneously provides information on exports, financial frictions, and labor market conditions. Our paper has three main findings. First, in line with earlier literature, we find a positive impact of size and productivity on firms’ export activities. Second, financial constraints affect the entry into foreign market (extensive margin) more than the volume of exports (intensive margin). Third, labor market conditions have a mixed impact on export activities. The most consistent finding is that firms covered by collective bargaining agreements are less likely to be exporters and export less. |
| Keywords: | multinational firms, exports, firm heterogeneity, productivity |
| JEL: | F2 G2 |
| Date: | 2008–11–30 |
| URL: | http://d.repec.org/n?u=RePEc:csl:devewp:268&r=int |
| By: | Artjoms Ivlevs (University of Nottingham); Jaime de Melo (University of Geneva, CERDI and CEPR) |
| Abstract: | This paper explores the links between the patterns of migration (high vs. low-skill), trade policy, and foreign direct investment (FDI) from the standpoint of sending countries. A skeleton general equilibrium model with a non-traded good and sector-specific labour is used to explore the effects of the skill-composition of exports on FDI. The model suggests that if exports are low-skill intensive, emigration of high- skill labour leads to positive FDI, suggesting that migration and FDI are complements. Cross-sectional analysis using FDI and emigration data for 103 migration-sending countries over the period 1990-2000 finds some support for this conjecture. |
| Keywords: | Migration, FDI, Brain Drain |
| JEL: | F22 F13 F16 |
| Date: | 2008–10–27 |
| URL: | http://d.repec.org/n?u=RePEc:csl:devewp:261&r=int |
| By: | Fryges, Helmut; Wagner, Joachim |
| Abstract: | Using unique recently released nationally representative high-quality longitudinal data at the enterprise level for Germany, this paper presents the first comprehensive evidence on the relationship between exports and profitability. It documents that the positive profitability differential of exporters compared to non-exporters is statistically significant, though rather small, when observed firm characteristics and unobserved firm specific effects are controlled for. In contrast to nearly all empirical studies on the relationship between productivity and exports we do not find any evidence for selfselection of more profitable firms into export markets. Due to the sampling frame of the data used we cannot test the hypothesis that firms which start exporting perform better in the years after the start than their counterparts which do not start. Instead, we use a newly developed continuous treatment approach and show that exporting improves the profitability almost over the whole range of the export-sales ratio. Only firms that generate 90 percent and more of their total sales abroad do not benefit from exporting in terms of an increased rate of profit. This means, that the usually observed higher productivity of exporters is not completely absorbed by the extra costs of exporting or by higher wages paid by internationally active firms. |
| Keywords: | exports, profitability, micro data, Germany |
| JEL: | D21 F14 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:7427&r=int |