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on International Trade |
| By: | Blanchard, Pierre; Gaigne, Carl; Mathieu, Claude |
| Abstract: | We study the impact of trade liberalization on the international strategy of firms (to export and/or invest abroad as well as the number of varieties to be produced) when product differentiation is endogenous. By considering product differentiation as a strategic variable, our analysis sheds new light on the impact of trade barriers on the decision to produce abroad and on the choice of product range, in accordance with recent empirical evidence. We show, even though technology exhibits the same productivity for each variety, firms drop some of varieties with trade integration. In addition, our results reveal that, contrary to the standard theoretical literature, the relationship between the decision to export and trade costs is non-linear. When trade costs are relatively high, firms may export and be multi-product. Finally, the choice of producing abroad results from either a prisoner’s dilemma game or a chicken game. |
| Keywords: | Foreign direct investment, exports, multi-product competition, endogenuos differentiation product, trade integration, International Relations/Trade, F12, F23, L11, L25, |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:ags:ulavwp:121117&r=int |
| By: | Pauline Bourgeon (Centre d'Economie de la Sorbonne - Paris School of Economics et Banque de France); Jean-Charles Bricongne (Banque de France); Guillaume Gaulier (Banque de France) |
| Abstract: | Using a very detailed set of French firms' data on trade flows and balance sheets, this paper analyses to what extent firms' financial frictions, considered as the interaction of financial dependence and financial constraints, and trading time affect their trade flows. In this empirical study the main indicator taken for firm's financial constraint, namely payment incident occurring at firm's partner is exogenous, whereas "traditional" financial indicators in other studies are not. The notion of trading time encompasses the whole time-lag between the production of export goods and the receiving of the revenues generated by these exports (time in transit, time at borders, etc.). In estimations, we both use distance as a proxy and a precise indicator computed by adding shipping time and average time spent at borders (only available for a sub-sample of extra-EU countries). The empirical results obtained so bring evidence that trading time amplifies the negative effect of financial restrictions on trade. By computing the marginal effect of financial constraint over bilateral trade we confirm that it represents a significant barrier to export for destinations beyond 3500 kilometers away. |
| Keywords: | Distance interaction, financial frictions, gravity equations, trade patterns, trading time. |
| JEL: | F02 F10 |
| Date: | 2012–03 |
| URL: | http://d.repec.org/n?u=RePEc:mse:cesdoc:12016&r=int |
| By: | Willem Thorbecke (Asian Development Bank Institute); Atsuyuki Kato |
| Abstract: | This paper investigates how exchange rates affect Japanese exports. This is difficult because many of Japan’s exports are used to produce goods for re-export. An appreciation in the importing country that decreases exports can decrease its imported inputs from Japan. To correct for this bias we examine consumption exports. Using a panel dataset of Japan’s consumption exports to 17 countries over the 1988–2009 period, we find that a 10% appreciation of the yen would reduce Japan’s consumption goods exports by 9%. These results indicate that the large swings in the value of the yen over the last decade have caused large swings in the volume of Japanese exports |
| Keywords: | exchange rates, Japanese exports, effects of the exchange rate, Japan, trade |
| JEL: | F30 F32 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:eab:tradew:23238&r=int |
| By: | Paolo Guerrieri (Sapienza, University of Rome); Filippo Vergara Caffarelli (Bank of Italy) |
| Abstract: | This paper analyses the relationship between international fragmentation of production, trade openness and global export performance in the European Union from 2000 to 2009. As most trade models featuring international production sharing show, the higher the level of fragmentation and related international openness the better the export performance of a country. Our econometric analysis confirms this hypothesis. We estimate an error correction model based on panel data on the EU Member States and find that inter-European fragmentation and openness significantly improve their long-run export performance. Policy implications could be that restrictive policies preventing firms from internationalizing production would weaken a country’s position in global production networks, with long-term negative effects on domestic jobs and growth. |
| Keywords: | international fragmentation of production, trade openness, export performance, European Union |
| JEL: | F14 L23 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:wptemi:td_855_12&r=int |
| By: | Aaditya Mattoo (Word Bank); Prachi Mishra (International Monetary Fund); Arvind Subramanian (Peterson Institute for International Economics) |
| Abstract: | This paper estimates the impact of China’s exchange rate changes on exports of competitor countries in third markets, known as the “spillover effect.” Recent theory is used to develop an identification strategy in which competition between China and its developing country competitors in specific products and destinations plays a key role. The variation is used—afforded by disaggregated trade data—across exporters, importers, product, and time to estimate this spillover effect. The results show robust evidence of a statistically and quantitatively significant spillover effect. Estimates suggest that, on average, a 10 percent appreciation of China’s real exchange rate boosts a developing country’s exports of a typical 4-digit Harmonized System (HS) product category to third markets by about 1.5 to 2 percent. The magnitude of the spillover effect varies systematically with product characteristics as implied by theory. |
| Keywords: | exchange rates, exports, China, spillover |
| JEL: | F13 F14 O53 |
| Date: | 2012–03 |
| URL: | http://d.repec.org/n?u=RePEc:iie:wpaper:wp12-4&r=int |
| By: | Sándor Richter |
| Abstract: | In this paper regional integration among the countries of the Middle East and North Africa (MENA) is addressed. There are a number of economic and integration blocs with one or more MENA countries’ participation, but there is no one overarching agreement that would cover the whole MENA region. The results of various gravity model calculations suggest that intra-MENA trade is below its potential. Intra-MENA trade is a small fraction (5.9% in exports, 5.1% in imports) of the MENA countries’ total trade. Exports to the EU are ten times, imports from the EU eight times more relevant than intra-MENA trade flows. The most recent goal of the EU-MENA cooperation has been the creation of a deep Euro-Mediterranean Free Trade Area, aimed at a substantial liberalization of trade between both the EU and Southern Mediterranean countries (North-South), and Southern Mediterranean countries themselves (South-South). Recent research result point out that a successful revival of intra-regional trade in Central Europe was conditional upon these countries’ close integration with the EU. In the case of the Central European countries close integration meant full EU membership, what is for the MENA not available currently. Nevertheless a provision of some of the main attributes of deep integration with the EU, even without full membership, may facilitate intra-MENA trade to a similar way as it did for Central Europe. |
| Date: | 2012–03 |
| URL: | http://d.repec.org/n?u=RePEc:wsr:pbrief:y:2012:i:014&r=int |
| By: | Giorgio Barba Navaretti (University of Milan); Matteo Bugamelli (Bank of Italy); Riccardo Cristadoro (Bank of Italy); Daniela Maggioni (Università Politecnica delle Marche) |
| Abstract: | This paper asks whether and why advanced countries differ in their ability to export to China and India. We exploit a newly collected, comparable cross-country survey of 15,000 European manufacturing firms (EFIGE). The dataset contains information on firms’ international activities and characteristics such as size and productivity, governance and management structure, workforce, innovation and research activity. We identify the firm characteristics that are correlated with exporting activity in general as well as with exporting to China and India conditional on being an exporter. In line with existing literature, we prove that larger, more productive and innovative firms are more likely to become exporters and to export more. Our results also provide new evidence on the role of governance: while there is not a strong negative effect of family ownership, a higher percentage of family management reduces a firm’s export propensity and export volumes. Regarding China and India, we find that firms exporting there are on average larger, more productive and more innovative than firms exporting elsewhere. |
| Keywords: | exports, productivity, firm size, management. |
| JEL: | F1 L2 M2 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:opques:qef_112_12&r=int |
| By: | Mattoo, Aaditya; Mishra, Prachi; Subramanian, Arvind |
| Abstract: | This paper estimates how changes in China's exchange rates would affect exports from competitor countries in third-country markets -- in other words, the"spillover effect."The authors use recent theory to develop an identification strategy, with a key role for the competition between China and its developing country competitors in specific products and export destinations. Using disaggregated trade data, they estimate the spillover effect by exploiting the variation across different exporters, importers, products, and time periods. They find a spillover effect that is statistically and quantitatively significant. Their estimates suggest that a 10-percent appreciation of China's real exchange rate boosts a developing country's exports of a typical four-digit Harmonized System product category to third markets by about 1.5 to 2 percent on average. The magnitude of the spillover effect varies systematically with the characteristics of products, such as the extent to which they are differentiated. |
| Keywords: | Debt Markets,Emerging Markets,Economic Theory&Research,Currencies and Exchange Rates,Markets and Market Access |
| Date: | 2012–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:5989&r=int |
| By: | Omar Feraboli (Chemnitz University of Technology, Germany) |
| Abstract: | This paper deals with the economic effects and the policy implications of trade liberalisation on the Jordanian economy, with emphasis on welfare, income distribution and real wages of heterogeneous households, by using a neoclassical dynamic computable general equilibrium (CGE) model. Specifically the paper assesses the impacts of preferential trade liberalisation with the European Union (EU) and compare them with those brought about by broad and non-discriminatory trade liberalisation. |
| Keywords: | Dynamic CGE Models, Heterogeneous households, Trade liberalisation, Jordan |
| JEL: | C68 F11 I32 D31 |
| Date: | 2012–03 |
| URL: | http://d.repec.org/n?u=RePEc:rim:rimwps:08_12&r=int |
| By: | Erasmus K. Kersting (Department of Economics and Statistics, Villanova School of Business, Villanova University) |
| Abstract: | This paper presents a North-South model with differentiated goods being produced in the North. Each differentiated final good requires both management and manufacturing services as inputs, and firms are heterogeneous with regard to their productivity levels in providing these inputs. Moving manufacturing to the South lowers part of a firm's variable costs. Two scenarios, which are interpreted to correspond to vertical FDI and offshoring, are investigated. In both cases there is a minimum level of management productivity required for firms to benefit from relocation of manufacturing to the South. In the case of offshoring, productivity and profit gains are relatively larger for firms with low initial manufacturing productivity. In addition, firms with very high initial productivity in both aspects choose not to offshore due to the presence of fixed costs. The model is subsequently used to examine the implications of changes in economic integration on the type of firms that exit an industry, change production location or keep manufacturing domestically. |
| Keywords: | Firms; Offshoring; Vertical FDI |
| JEL: | F15 F23 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:vil:papers:17&r=int |
| By: | Selin Özyurt; Timo Mitze |
| Abstract: | Since the introduction of its “open door” policy in the late 1970s, China has been attracting a growing share of FDI inflows and its international trade integration has advanced considerably. In this study, we take a closer look at the regional growth impact of the Chinese internationalization activity on labour productivity over the period 1979-2006. Our empirical analysis thereby extends the existing empirical literature by considering the likely spatial effects associated with Trade- and FDI-led growth in a dynamic error correction modelling framework. Our results indicate that, in the long-run relationship, regional labour productivity is indeed driven by direct and indirect spatial effects of FDI and trade activity next to further supply side factors such as the regional infrastructure equipment and human capital endowment. Similarly, in the short-run, changes in FDI activity and especially human capital variables are found to matter for the regional growth dynamics. |
| Keywords: | Trade; FDI; productivity growth; spatial spillovers; China |
| JEL: | O11 O18 P20 R10 |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:rwi:repape:0308&r=int |
| By: | Christian Gormsen (Centre d'Economie de la Sorbonne - Paris School of Economics) |
| Abstract: | Buyers are typically unaware of the full set of offers when making a purchase. This paper examines how international trade interacts with this problem of market intransparency. Sellers must communicate their offers through costly advertising, but cannot reach all buyers. Consequently, no market clearing price exists, and sellers randomize over an equilibrium price distribution. Sellers will wish to spread advertisement costs across markets, leading to international trade, which would not take place under complete information. Buyers then receive more offers, leading to lower prices and buyer surplus gains. Sellers in the model are identical, but appear heterogeneous due to their price randomization. If sellers differ slightly, these differences will be greatly magnified. Finally, the model rationalizes very infrequent exporters as firms offering disadvantageous, but profitable, deals to foreign buyers. |
| Keywords: | Advertising, intra-industry trade, firm heterogeneity, price dispersion. |
| JEL: | F12 D83 D43 M37 |
| Date: | 2012–03 |
| URL: | http://d.repec.org/n?u=RePEc:mse:cesdoc:12017&r=int |
| By: | Christian Arndt; Julia Spies |
| Abstract: | While quantifying the foreign ownership premium has received a lot of attention in the empirical literature, there is only little known about productivity variations between foreign affiliates of multinational firms. In order to enhance the understanding of the economic causes of this heterogeneity we analyze the impact of various institutional and economic characteristics of the countries in which the multinational parent companies are located on the productivity of their affiliates. Using a full record of the population of foreignowned affiliates in Germany we find that affiliates’ mean performances differ markedly when grouped by the country of their parent firm. We show that gravitational forces and institutional characteristics of the country of the parent, such as the availability of credit and the freedom to trade internationally, co-determine the foreign-owned affiliates’ performances in a significant way. Moreover, the intensity of the impact depends on the intensity of the ownership link between the parent and its affiliate. Some residual impact of nationality remains. |
| Keywords: | foreign direct investment & productivity spillover & investor country characteristics |
| JEL: | F2 O2 O1 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:iaw:iawdip:798&r=int |
| By: | Rahul Anand; Saurabh Mishra; Nicola Spatafora |
| Abstract: | A new dataset on export sophistication reveals that in many countries the importance of modern services, and the sophistication of manufactured and service exports, has increased over time. However, this trend was less pronounced in LICs. Sophisticated sectors are more likely to act as a catalyst for broad-based economic growth, rather than turning into isolated enclaves, when the economy is liberalized, the exchange rate is not overvalued, and there are good information flows. An educated workforce, external liberalization, and good information flows are important prerequisites for developing sophisticated goods and services. An appropriate macroeconomic policy is particularly important for goods, skilled labor and good information flows for services. |
| Keywords: | Economic growth , Exports , Low-income developing countries , Manufacturing sector , Production , Productivity , Services sector , |
| Date: | 2012–02–28 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:12/59&r=int |
| By: | Szekely, Miguel |
| Abstract: | This paper offers a medium-term perspective for analysing the trade opennessâ..inequality relationship in Latin America. We present three contributions. The first is that we assemble a database on income distribution indicators systematically estimated from household surveys with emphasis on within-country consistency of methodology, definitions, and coverage for the years 1980-2010. This 30-year database allows observing clearly that the increases in inequality throughout the 1980s and 1990s decades have been almost totally counteracted by the improvements during the first 10 years of the twenty-first century: 75 per cent of the deterioration in income distribution was reversed in the first decade of 2000. The second is an estimation of the association between trade openness and income distribution over the 30-year period. Our central conclusion in this regard is that greater trade openness is associated with contemporaneous increases in inequality in the region. The third is that trade openness contributedâ..â..together with other factorsâ..â..to the increase in inequality during the 1980s and 1990s, but once fully implemented, it did not lead to further rises in inequality, and did not represent a permanent obstacle to improvements in income distribution triggered by other factors such as greater education levels across the population. |
| Keywords: | inequality, education, trade |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:unu:wpaper:wp2012-03&r=int |
| By: | Willem Thorbecke (Asian Development Bank Institute (ADBI)); Nimesh Salike |
| Abstract: | We recount East Asia’s experience with foreign direct investment (FDI). We document that, contrary to the Rybczynski theorem, capital flows in the region cause the host country’s labor-intensive industry to expand and its capital-intensive industry to decline. We also present narrative evidence that sheds light on how FDI is affected by the host’s country’s locational advantages, whether Asian FDI is footloose, and how the PRC has become the center of Factory Asia. Finally, we show that the evolution of production networks in the region can be explained partly by changes in the service cost of linking geographically separated production blocks relative to the cost saving arising from slicing up the value chain. |
| Keywords: | foreign direct investment, FDI, East Asia, Asian FDI, global production networks |
| JEL: | F21 F23 O53 |
| Date: | 2011–06 |
| URL: | http://d.repec.org/n?u=RePEc:eab:tradew:23246&r=int |
| By: | Bhaumik, Sumon K. (Aston University); Dimova, Ralitza (University of Manchester) |
| Abstract: | The stylized literature on foreign direct investment suggests that developing countries should invest in the human capital of their labour force in order to attract foreign direct investment. However, if educational quality in developing country is uncertain such that formal education is a noisy signal of human capital, it might be rational for multinational enterprises to focus more on job-specific training than on formal education of the labour force. Using cross-country data from the textiles and garments industry, we demonstrate that training indeed has greater impact on firm efficiency in developing countries than formal education of the work force. |
| Keywords: | human capital, training, firm-level efficiency, multinational enterprises |
| JEL: | F23 I25 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp6382&r=int |
| By: | Mukim, Megha |
| Abstract: | This paper examines locational factors that increase the odds of a firm's entry into export markets and affect the intensity of its participation. It differentiates between two different sources of spillovers: clustering of general economic activity and that of export-oriented activity. It also focuses on the effect of the business environment and that of institutions at the spatial unit of districts in India. The study disentangles the within-industry effect from the within-firm effect. A simple logit specification is used to model the probability of entry. The analysis is based on a panel of manufacturing firms in India, which allows for the introduction of firm-specific controls and a battery of fixed effects. The findings suggest that exporter-specific clustering, general economic agglomeration, and institutional factors affect firms'export behavior. |
| Keywords: | Microfinance,Transport Economics Policy&Planning,Water and Industry,Economic Theory&Research,E-Business |
| Date: | 2012–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:5979&r=int |
| By: | Carike Claassen; Elsabé Loots; Henri Bezuidenhout |
| Abstract: | The eyes of the world have, in recent years, been steadfastly focused on China’s economic progress. As China has in recent years emerged as a major player on the world economic stage, its growing relations with other developing regions received much attention. Of particular note is the way in which Sino-African relations have increased since 2000. This paper aims to put Chinese FDI in Africa into perspective and provide some answers on the nature and possible impact of these flows to the continent. The research discloses that China’s outward FDI to Africa is concentrated in diversified, medium growth economic performers, with Southern Africa being the most popular regions for Chinese outward FDI. A literature survey on Chinese investment deals concluded in Africa demonstrates a definite Chinese interest in mining, oil and infrastructure in Africa. The empirical analysis of Chinese FDI in Africa reveals that agricultural land, market size and oil are important determinants of Chinese FDI. Though agricultural land and oil conform to the general notion of resource-driven Chinese FDI in Africa, the fact that market size is important indicates that Chinese investment is not solely resource-driven. As regards the possibility that Chinese FDI could positively contribute towards economic growth in Africa, causality tests conclude that the relationship between African GDP and Chinese FDI is bi-directional, while uni-directional relationships were established between Chinese FDI and African infrastructure and corruption, respectively. |
| JEL: | F21 O16 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:rza:wpaper:261&r=int |