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on International Trade |
| By: | Jaan Masso; Priit Vahter |
| Abstract: | Recent empirical studies of international trade have stressed that firm level decisions about the number of export products or markets represent an important margin of adjustment in response to globalization and changes in economic conditions. We investigate how decisions about the export product mix are associated with aggregate export dynamics and productivity of firms. For that purpose we use detailed product data and export market level data of the full population of Estonia’s firms. Decomposition analysis of trade flows shows that both the relative importance of firms starting exporting and the role of product level churning (firms adding and dropping products) in total Estonian export growth increases significantly after accession to the EU in 2004. We show that starting to export and adding and dropping export products in the same period is associated with higher firm productivity compared to exporters that keep their export mix unchanged or decrease its breadth. Dropping peripheral products is associated with higher productivity only in the case of firms with a relatively large number of export products. |
| Keywords: | exporting, multi-product exporters, extensive margin of trade |
| JEL: | F10 F14 D24 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:mtk:febawb:86&r=int |
| By: | Allen Sørensen (Department of Economics and Business, Aarhus University, Denmark) |
| Abstract: | This paper addresses welfare effects from trade liberalization in a heterogeneous-fi?rms trade model including the empirically important per-unit (i.e. additive) trade costs in addition to the conventional iceberg (i.e. multiplicative) and fi?xed trade costs. The novel contribution of the paper is the result that the welfare gain for a given increase in trade openness is higher for reductions in per-unit (additive) trade costs than for reductions in iceberg (multiplicative) trade costs. The ranking derives from differences in intra-industry reallocations and in particular from dissimilar impacts on the number of exporters (i.e., the extensive margin of trade). |
| Keywords: | iceberg trade costs, per-unit |
| JEL: | F12 F13 F15 |
| Date: | 2012–02–21 |
| URL: | http://d.repec.org/n?u=RePEc:aah:aarhec:2012-07&r=int |
| By: | Corcos, G.; Irac, D.; Mion, G.; Verdier, T. |
| Abstract: | How well does the theory of the firm explain the choice between intrafirm and arms' length trade? This paper uses firm-level import data from France to look into this question. We find support for three key predictions of property-rights theories of the multinational firm. Intrafirm imports are more likely: (i) in capital- and skill-intensive firms; (ii) in highly productive firms; (iii) from countries with well-functioning judicial institutions. We further bridge previous aggregate findings with our investigation by decomposing intrafirm imports into an extensive and intensive margin. Doing so we uncover interesting patterns in the data that require further theoretical investigation. |
| Keywords: | intrafirm trade; outsourcing; firm heterogeneity; incomplete contracts; internationalization strategies; quality of institutions, extensive margin, intensive margin. |
| JEL: | F23 F12 F19 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:362&r=int |
| By: | Jose Luis Groizard (Department of Economics, Universitat de les Illes Balears); Priya Ranjan (Department of Economics, University of California-Irvine); Jose Antonio Rodriguez-Lopez (Department of Economics, University of California-Irvine) |
| Abstract: | We present theory and evidence of the impact of input trade costs on job flows. Our heterogeneous-firm model with heterogeneous offshoring costs derives effects of input trade costs on both the extensive (due to births and deaths of firms) and intensive (due to expansions and contractions of firms) margins of employment. After a decline in input trade costs, the model predicts job destruction by death and contraction for non-offshoring firms, an ambiguous response for offshoring firms, a decline in the number of firms, and overall job destruction. Using a longitudinal database containing the universe of manufacturing establishments in California from 1992 to 2004, we find strong support for the model's establishment-level predictions, and mild support for the industry-level predictions. |
| Keywords: | Input trade costs; Offshoring; Heterogeneous firms; Job flows |
| JEL: | F12 F14 F16 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:irv:wpaper:111208&r=int |
| By: | Jonathan Eaton; Samuel S. Kortum; Sebastian Sotelo |
| Abstract: | A recent literature has introduced heterogeneous firms into models of international trade. This literature has adopted the convention of treating individual firms as points on a continuum. While the continuum offers many advantages this convenience comes at some cost: (1) Shocks to individual firms can never have an aggregate effect. (2) It is hard to reconcile the small (sometimes zero) number of firms engaged in selling from one country to another with a continuum. (3) For such models to deliver finite solutions for aggregates, such as the price index, requires restrictions on parameter values that may not hold in the data. We show how a standard heterogeneous-firm trade model can be amended to allow for only an integer number of firms. The model overcomes the deficiencies of the continuum model enumerated above. Taking the model to aggregate data on bilateral trade in manufactures among 92 countries and to firm-level export data for a much narrower sample shows that it accounts for both the large share of a small number of firms in sales around the world and for zeros in bilateral trade data while maintaining the good fit of the standard gravity equation among country pairs with thick trade volumes. Randomness at the firm level adds substantially to aggregate variability. |
| JEL: | F1 F12 L16 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17864&r=int |
| By: | Joachim Wagner (Leuphana University Lüneburg, Germany) |
| Abstract: | This paper uses comprehensive high-quality panel data from official statistics for exporting enterprises to investigate the micro-structure of the recent export collapse in manufacturing industries in Germany during the crisis of 2008/2009. Almost all of the decline in exports was due to negative changes of exports in firms that continue to export (i.e. at the so-called intensive margin) while the decrease of exports due to export stoppers (at the so-called extensive margin) was tiny. It is shown that Idiosyncratic shocks to very large firms played a decisive role in shaping the export collapse. |
| Keywords: | Exports, great trade collapse, granular economy, Germany |
| JEL: | F14 E32 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:lue:wpaper:233&r=int |
| By: | Shuhei Nishitateno |
| Abstract: | The difficulty in finding the substitution effects on exports of foreign direct investment has posed challenges to empirical analysts. In analysing newly-constructed product-level data that enable endogeneity and aggregation bias to be addressed simultaneously, this study finds that auto part exports from Japan are positively correlated with overseas operations by Japanese automakers but negatively correlated with overseas operations by Japanese suppliers. However, the evidence on the latter is rather weak consistent with the fact that Japanese suppliers predominantly sell their products to Japanese automakers at the initial stage but that they are expanding their business with non-Japanese firms in host countries over time. |
| Keywords: | Foreign Direct Investments, Trade, Automobile, Japan |
| JEL: | F14 F23 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:hst:ghsdps:gd11-225&r=int |
| By: | Kubo, Koji |
| Abstract: | While the trade statistics of Myanmar show surpluses for 2007 through 2010, the corresponding statistics of trade partner countries indicate deficits. Such discrepancies in mirror trade statistics are analyzed in connection with the ‘export-first and import-second’ policy provisioning import permissions on permission applicants possessing a sufficient amount of the export-tax-deducted export earnings. Under this policy, the recorded imports and exports of the private sector have been maintaining equilibrium, whereas discrepancies in the mirror statistics have fluctuated. This suggests that traders adjusted mis-reporting in accordance with the supply and demand of the export earnings. |
| Keywords: | Myanmar, Trade policy, Trade problem, Trade Policies, Mis-invoicing, Smuggling |
| JEL: | F13 F14 K42 O17 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:jet:dpaper:dpaper326&r=int |
| By: | Altomonte, C.; Di Mauro, F.; Ottaviano, G.; Rungi, A.; Vicard, V. |
| Abstract: | This paper analyzes the performance of global value chains during the trade collapse. To do so, it exploits a unique transaction-level dataset on French firms containing information on cross-border monthly transactions matched with data on worldwide intra-firm linkages as defined by property rights (multinational business groups, hierarchies of firms). This newly assembled dataset allows us to distinguish firm-level transactions among two alternative organizational modes of global value chains: internalization of activities (intra-group trade/trade among related parties) or establishment of supply contracts (arm’s length trade/trade among unrelated parties). After an overall assessment of the role of global value chains during the trade collapse, we document that intra-group trade in intermediates was characterized by a faster drop followed by a faster recovery than arm’s length trade. Amplified fluctuations in terms of trade elasticities by value chains have been referred to as the "bullwhip effect" and have been attributed to the adjustment of inventories within supply chains. In this paper we first confirm the existence of such an effect due to trade in intermediates, and we underline the role that different organizational modes can play in driving this adjustment. |
| Keywords: | trade collapse, multinational firms, global value chains, hierarchies of firms, vertical integration. |
| JEL: | F23 F15 L22 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:364&r=int |
| By: | Christian Gormsen (Centre d'Economie de la Sorbonne - Paris School of Economics) |
| Abstract: | Although Foreign Direct Investments (FDI) are as important to the world economy as exports, the extensive literature on trade costs has no strong parallel for FDI. Data are hard to come by, and many of the barriers to FDI are unobservable. This paper circumvents the problem by inferring the barriers to FDI that are consistent with observed FDI data. I describe the distribution and evolution of these barriers to FDI between pairs of 28 OECD countries from 1985 to 2008. On average, barriers to FDI were halved every 4.8 years. Geography is a key determinant, but GDP per capita also plays a leading role. Decomposing the growth in FDI, I show that it has mainly been driven by lower bilateral barriers (75%), not by economic growth, and that bilateral FDI stocks will tend to crowd each other out, lowering their yearly growth by -3%. |
| Keywords: | Foreign direct investment, economic integration, gravity. |
| JEL: | F15 F21 F23 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:mse:cesdoc:12015&r=int |
| By: | Shawn ARITA; TANAKA Kiyoyasu |
| Abstract: | During the recent decade of declining foreign direct investment (FDI) barriers, small domestic firms disproportionately contracted while large multinational firms experienced a substantial growth in Japan's manufacturing sector. This paper quantitatively assesses the impact of FDI globalization on intra-industry reallocations and its implications for aggregate productivity. We calibrate the firm-heterogeneity model of Eaton, Kortum, and Kramarz (2011) to micro-level data on Japanese multinational firms facing fixed and variable costs of foreign production. Estimating the structural parameters of the model, we demonstrate that the model can strongly replicate entry and sales patterns of Japanese multinationals. Counterfactual simulations show that declining FDI barriers lead to a disproportionate expansion of foreign production by more efficient firms relative to less efficient firms. A hypothetical 20% reduction in FDI barriers yields a 30.7% improvement in aggregate productivity. |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:12010&r=int |
| By: | Giorgio Rampa (Department of Economics and Quantitative Methods, University of Pavia) |
| Abstract: | Using a long-run series of I-O tables, some simple facts are explored with respect to the Italian trade balance in the period 1960-2000. The analysis confirms that the Italian economy underwent a de-specialisation process before the Euro era. This phenomenon weakened our export capacity, and in addition worsened significantly our dependence on non-oil imports. |
| JEL: | C67 E01 F14 |
| Date: | 2011–06 |
| URL: | http://d.repec.org/n?u=RePEc:pav:wpaper:148&r=int |
| By: | Xiong, Bo; Beghin, John C. |
| Abstract: | We provide an ex-post econometric examination of the harmonization and tightening of the EU Maximum Residues Limit (MRL) on aflatoxins in 2002, and its impact on African exports of groundnut products. We show that the MRL set by the EU has no significant trade impact on groundnut exports from Africa across various methods of estimation. African domestic supply plays an important role in the determination of the volumes of trade and the propensity to trade. Our findings suggest that the trade potential of African groundnut exporters is more constrained by domestic supply issues rather than by limited market access. |
| Keywords: | food safety; standards; aflatoxin; MRL; groundnut; Africa; EU; market access |
| JEL: | F13 Q17 |
| Date: | 2011–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:isu:genres:34936&r=int |
| By: | Pierluigi Montalbano; Silvia Nenci |
| Abstract: | The main goal of this article is to provide an ex ante assessment of the long-run average treatment e¤ect of ENP on EU-MED FTA. The novelty of this work is twofold: to present nonparametric matching estimators along with gravity estimates; to assume, as a counterfactual, the ex-post treatment e¤ect of the EAs. Our empirical outcomes show a strong and robust impact on EU-MED trade integration of the new "deep integra- tion" e¤orts made by the EU. This empirical evidence is relevant both to policymaking and to strengthen the empirical assessment of the EU "policy impact" in the Mediterranean Area. |
| Keywords: | Trade policy, European integration, Gravity Model, Match- ing econometrics, Southern Mediterranean Countries |
| JEL: | F13 F15 F17 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:rtr:wpaper:0147&r=int |
| By: | Eddy Bekkers; Joseph Francois; Miriam Manchin |
| Abstract: | We compare three theoretical explanations for the positive empirical relationship between importer income per capita and traded goods prices. A first explanation is that consumers with higher incomes demand higher quality goods with higher prices. A second explanation is that wealthier people exhibit an increased willingness to pay for necessary goods as more goods enter the consumption set in a hierarchic demand system, and can thus be charged higher markups. A third explanation is that consumers with higher incomes are more finicky regarding their preferred variety in an ideal variety framework and can thus be charged higher markups. We discriminate between these three theories by focusing on the effect of income inequality on trade prices. Based on a large dataset with bilateral HS6 level data on 1260 final goods categories from more than 100 countries between 2000 and 2004, we find a highly significant negative effect of income inequality on unit values. This contradicts both the demand for quality and finickyness theories, while providing support for the increased willingness to pay theory linked to hierarchic demand. These findings on income inequality do not falsify the quality expansion model and the ideal variety model per se. However, the results do argue for place of importance of hierarchic demand. |
| Keywords: | Unit Values, Importer Characteristics, Quality Expansion, Hierarchic Demand, Ideal Variety |
| JEL: | F12 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:jku:econwp:2012_03&r=int |
| By: | Schmerer, Hans-Jörg (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]) |
| Abstract: | "This paper proposes a simple multi-industry trade model with search frictions in the labor market. Unimpeded access to global financial markets enables capital owners to invest abroad, thereby fostering unemployment at the extensive industry margin. Whether a country benefits from FDI in terms of unemployment depends on the respective country's net-FDI, measured as the difference between in- and outward FDI. The derived FDI and unemployment nexus is tested employing macroeconomic data for 19 OECD countries on unemployment, FDI, and labor market institutions. Results support the model in that net-FDI is robustly associated with lower rates of aggregate unemployment." (Author's abstract, IAB-Doku) ((en)) |
| Date: | 2012–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:iab:iabdpa:201204&r=int |
| By: | Yin-Wong Cheung; Menzie D. Chinn; XingWang Qian |
| Abstract: | We find that Chinese trade flows respond to economic activity and relative prices – as represented by a trade weighted exchange rate – but the relationships are not always precisely or robustly estimated. Chinese exports are generally well-behaved, rising with foreign GDP and decreasing as the Chinese renminbi (RMB) appreciates. However, the estimated income elasticity is sensitive to the treatment of time trends. Estimates of aggregate imports are more problematic. In many cases, Chinese aggregate imports actually rise in response to a RMB depreciation and decline with Chinese GDP. This is true even after accounting for the fact a substantial share of imports are subsequently incorporated into Chinese exports. We find that some of these counter-intuitive results are mitigated when we disaggregate the trade flows by customs type, commodity type, and the type of firm undertaking the transactions. However, for imports, we only obtain more reasonable estimates of elasticities when we allow for different import intensities for different components of aggregate demand (specifically, consumption versus investment), or when we include a relative productivity variable. |
| JEL: | F4 |
| Date: | 2012–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17875&r=int |
| By: | Eddy Bekkers; Joseph Francois |
| Abstract: | We study the labor market effects of bilateral exchange rate realignment. We place emphasis on the composition of trade, the role of intermediates, and the underlying conditions of the labor market. Employment effects hinge on the fraction exported to and imported from the trading partner. A larger fraction exported to and a smaller fraction imported from the trading partner make it more likely that appreciation has beneficial effects. Furthermore, more sticky price expectations in wage formation, a smaller fraction of intermediates in the production process, and a lower rate of importer pass through make it more likely that appreciation of the exchange rate of the trade partner has positive employment effects. At a more technical level, the scope for substitution away from higher priced inputs, either toward other sources of supply, or toward value added, is also important to the direction and magnitude of changes in employment. |
| Keywords: | bilateral exchange rates, devaluation, exchange rates and trade, trade and employment |
| JEL: | F32 F41 |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:jku:econwp:2012_02&r=int |
| By: | Mitchell H. Kellman (Department of Economics and Business,The City College of The City University of New York); Yochanan Shachmurove (Department of Economics and Business, The City College of The City University of New York) |
| Abstract: | From 1980-2009 the Polish economy experienced structural dislocation. The growth and success of the Solidarity movement represented the shift in manufacturing from Soviet bloc trade to membership in the European Union. This paper examines four independent metrics that measure the changing “sophistication” of trade patterns during this modal shift. The common theme underlying the analysis of these indices is that the Polish economy is resilient and adaptable. Poland is expected to compete effectively in its new economic environment after a period of adjustment and progress. |
| Keywords: | Trade Patterns in a Transition Economy, Machinery and Transport Equipment, Exports, Poland, Solidarity, Structural Change, Sophistication Indices, Trade Specialization Index, Intra-Industry Trade, Shock Therapy, Revealed Comparative Advantage, Herfendahl-Hirschman Index, Standard International Trade Classification, Compositional Shifts, Data Aggregation, Dispersion; Market Power |
| JEL: | F0 F1 L0 L1 L6 N0 N6 O1 O52 P2 R1 |
| Date: | 2012–02–08 |
| URL: | http://d.repec.org/n?u=RePEc:pen:papers:12-004&r=int |
| By: | Thi-Hong-Hanh Pham (LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - Université de Nantes : EA4272) |
| Abstract: | Since the inception of economic reforms, China in 1978 and Vietnam in 1986, both countries have become successful examples of transition to a market economy. Over their courses of reform, attracting substantial and rising amounts of inward FDI has been a key focus of their market-oriented policy reforms. Yet, the last two decades have experienced a widening gap in inward FDI between these two countries even though the context and characteristics of their economic reform are relatively similar. Therefore, this paper aims to address the question "What has caused the substantial gap in FDI inflows between China and Vietnam?" through a comparative study of the FDI determinants. In other words, this paper revisits the determinants of FDI into China and Vietnam by employing an augmented gravity model and using a panel dataset containing information on bilateral FDI and a large set of acroeconomic variables over the period 1994-2008. The main finding is that the widening gap in inward FDI flows between China and Vietnam can be explained by two broad sets of main factors: one related to institutions and another to domestic macroeconomic stability. |
| Keywords: | Foreign direct investment ; Gravity model ; China ; Vietnam |
| Date: | 2012–02–17 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-00671568&r=int |
| By: | Giorgio Matteucci (Dipartimento di Informatica e Sistemistica "Antonio Ruberti" Sapienza, Universita' di Roma); Pierfrancesco Reverberi (Dipartimento di Informatica e Sistemistica "Antonio Ruberti" Sapienza, Universita' di Roma) |
| Abstract: | It is widely argued that international arbitrage, or parallel trade (PT), trades off static against dynamic efficiency so that, compared with a national exhaustion regime of intellectual property rights, worldwide consumer surplus rises at the expense of R&D investment. We show that this common wisdom is rather the exception than the rule. Indeed, quality investment often rises under international exhaustion, since it strengthens vertical differentiation between the original product and parallel imports. In this case, there is no trade-off at all, so that encouraging PT improves welfare, or the reverse trade-off occurs where investment increases and consumer surplus declines, while PT has ambiguous welfare effects. We find that, when allowed to use dual pricing, the R&D firm artificially restores national exhaustion. We also find that the expected trade-off never occurs under non-linear pricing and when the foreign country is regulated, although in such cases welfare rises when PT is banned. |
| Keywords: | Parallel trade; Intellectual Property Rights; R&D investment; Vertical contract; Regulation |
| JEL: | L12 L43 F15 O34 |
| Date: | 2011–05 |
| URL: | http://d.repec.org/n?u=RePEc:aeg:wpaper:2011-5&r=int |
| By: | Daniele Condorelli; Andrea Galeotti |
| Abstract: | We study an incomplete-information model of sequential bargaining for a single object, with the novel feature that agents are located in a network. In each round of trade, the current owner of the object either consumes it or makes a take-it-or-leave-it offer to some connected trader. Traders may buy in order to consume or to resale to others. We show that the equilibrium price dynamics is non-monotone and that traders that intermediate the object arise endogenously and attain a pro t. We also provide insights on how traders' equilibrium payoffs depend on their location in the network. |
| Date: | 2011–12–14 |
| URL: | http://d.repec.org/n?u=RePEc:esx:essedp:704&r=int |
| By: | Cesar A. Hidalgo |
| Abstract: | What are East Africa's industrial opportunities? In this article we explore this question by using the Product Space to study the productive structure of five south-east African countries: Kenya, Mozambique, Rwanda, Tanzania and Zambia. The Product Space is a network connecting products that tend to be exported by the same sets of countries. Since countries are more likely to develop products that are close by in the Product Space to the ones that they already produce, the Product Space can be used to help anticipate a country's industrial opportunities. Our results suggest that the most natural avenue for future product diversification for these five south-east African nations resides in the agricultural sector, since all of these nations appear to have productive structures that are pre-adapted to the production of many agricultural products that none of them are currently exporting. We conclude this paper by exploring the potential benefits of further regional economic integration by doing an exercise in which we pull together the productive structures of these five countries. This exercise shows that the products that become more accessible in the combined economy are once again predominantly agricultural. These results suggest that while diversification into all sectors should remain an important long-term goal of the region, the path towards increased diversification in the near future may well lie in a more empowered and diverse agricultural sector. |
| Date: | 2012–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1203.0163&r=int |