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on International Trade |
| By: | Hartmut Egger; Peter Egger; James R. Markusen |
| Abstract: | We formulate a two-country model with monopolistic competition and heterogeneous firms to reconsider labor market linkages in open economies. Labor-market imperfections arise by virtue of country-specific real minimum wages. Two principal experiments are considered. First, we show that trade liberalization under minimum wages differs significantly from trade liberalization under standard assumptions. In the former case, there is effectively a perfectly elastic supply of labor to production whereas in the conventional case it is assumed that aggregate labor supply is perfectly inelastic. Standard effects on marginal and average firm productivity are reversed in our model, yet there are significant gains from trade arising from employment expansion, an effect quite different from the source of gains from trade in the conventional approach. Second, we show that with firm heterogeneity an increase in one country's minimum wage triggers firm exit in both countries and thus harms workers at home and abroad. In an extension to our baseline model, we illustrate that offshoring production from the high-wage to the low-wage country within multinational firms lowers the scope for exporting the costs of a higher minimum wage to the trading partner. |
| JEL: | F12 F15 F16 F23 J30 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:15196&r=int |
| By: | Jan De Loecker; Frederic Warzynski |
| Abstract: | Estimating markups has a long tradition in industrial organization and international trade. Economists and policy makers are interested in measuring the effect of various competition and trade policies on market power, typically measured by markups. The empirical methods that were developed in empirical industrial organization often rely on the availability of very detailed market-level data with information on prices, quantities sold, characteristics of products and more recently supplemented with consumer-level attributes. Often, both researchers and government agencies cannot rely on such detailed data, but still need an assessment of whether changes in the operating environment of firms had an impact on markups and therefore on consumer surplus. In this paper, we derive an estimating equation to estimate markups using standard production plant-level data based on the insight of Hall (1986) and the control function approach of Olley and Pakes (1996). Our methodology allows for various underlying price setting models, dynamic inputs, and does not require measuring the user cost of capital or assuming constant returns to scale. We rely on our method to explore the relationship between markups and export behavior using plant-level data. We find that i) markups are estimated significantly higher when controlling for unobserved productivity, ii) exporters charge on average higher markups and iii) firms’ markups increase (decrease) upon export entry (exit).We see these findings as a first step in opening up the productivity-export black box, and provide a potential explanation for the big measured productivity premia for firms entering export markets. |
| JEL: | F10 L10 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:15198&r=int |
| By: | Takanori Tanaka (Institute of Social and Economic Research, Osaka University) |
| Abstract: | This article examines whether trade credit provides credible information about borrowerfs creditworthiness, thereby facilitating provision of bank credit. Using data on Japanese manufacturing firms over the period 1990-1995, our empirical analyses reveal that trade payables as a credible signal about borrowerfs creditworthiness facilitate the provision of short-term credit by less-informed banks. Consequently, in the firms that have armfs-length relations with banks, trade payables play an important role in mitigating asymmetric information problems between firms and banks, thereby facilitating extension of bank credit. |
| Keywords: | trade credit; bank credit |
| JEL: | G32 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:osk:wpaper:0922&r=int |
| By: | Mariana Spatareanu; Vlad Manole |
| Abstract: | This study uses a new, innovative measure of trade protection and finds that less trade protection is associated with higher income per capita, using data from 131 developed and developing countries. |
| Keywords: | trade restrictiveness, tariff aggregators, income per capita |
| JEL: | F10 F13 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:lic:licosd:24309&r=int |
| By: | Penélope Pacheco-López; A.P. Thirlwall |
| Abstract: | The paper reviews the evidence of the impact of trade liberalisation on the economic performance of poor developing countries with respect to poverty reduction, the distribution of income within countries, the distribution of income between countries, trade and the balance of payments, and economic growth, and finds that liberalisation has not delivered the benefits expected. Economic theory, and the historical and contemporary evidence, all provide arguments for protection of industrial activities in developing countries. |
| Keywords: | Trade liberalisation; trade policy; income distribution; poverty |
| JEL: | F10 F13 F43 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:ukc:ukcedp:0911&r=int |
| By: | Kris James Mitchener; Masato Shizume; Marc D. Weidenmier |
| Abstract: | Why did policymakers adopt the gold standard? Although previous research has identified ex post effects of gold standard adoption on trade and bond yields, few studies have sought to understand whether these were the actual outcomes of interest to policymakers at the time of adoption. We examine the political economy of Japan’s adoption of the gold standard in 1897 by exploring the ex ante motives of policymakers as well as how the legislative decision to adopt gold won approval. We then link the beliefs of contemporaneous policymakers to data so that we can test the economic effects of adoption. In contrast to previous studies examining bond yields, we find little evidence that joining the gold standard reduced Japan’s country risk or investors anticipated a dramatic decline in borrowing rates for the government. Moreover, we find no evidence of a domestic investment boom or that investors anticipated one and bid it into stock prices. However, as some policymakers suggested, we find that membership in the gold standard increased Japan’s exports by lowering transactions costs and because the price of gold fell relative to silver, making exports to silver standard countries more competitive. While Japan also received a boost in exports to its regional trading partners when it switched from paper to silver, going onto gold allowed Japan to tap into the growing share of global trade that was centered on the gold standard: by the late 1890s nearly 60 percent of Japanese exports and total trade were with members of the gold club. |
| JEL: | E58 F33 N15 N25 N75 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:15195&r=int |
| By: | Vlad Manole; Mariana Spatareanu |
| Abstract: | This study uses a new, innovative measure of trade protection and finds that less trade protection is associated with higher income per capita, using data from 131 developed and developing countries. |
| Keywords: | trade restrictiveness, tariff aggregators, income per capita |
| JEL: | F10 F13 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:run:wpaper:2009-002&r=int |
| By: | Pablo , Agnese; Joan Enric , Ricart |
| Abstract: | Offshoring has lately received wide attention. Its potential effects, mainly to be materialized in employment and productivity dislocations, are yet to be fully assessed. However, some consensus has been attained as to how to proxy its theoretical definition at an aggregate level. Here we review the most conventional indices the economic literature has so far produced, and employ them to provide an overview of the extent of the phenomenon for a group of countries. Contrary to common beliefs, our data reveal that offshoring is not exclusive of large developed economies. Further, we highlight the continuing prominence of the manufacturing over the services sector, and observe that while services offshoring is on the rise, it still represents a small fraction of total offshoring. |
| Keywords: | offshoring; intermediate trade; aggregate data |
| JEL: | F40 F14 |
| Date: | 2009–06–30 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:16503&r=int |