nep-int New Economics Papers
on International Trade
Issue of 2005‒11‒19
24 papers chosen by
Martin Berka
Massey University

  1. General Equilibrium Analysis of the Eaton-Kortum Model of International Trade By Fernando Alvarez; Robert E. Lucas
  2. A Gravity Model under Monopolistic Competition By Kari E.O.Alho
  3. Hub-and-Spoke or Else? Free Trade Agreements in the Enlarged EU - A Gravity Model Estimate By Luca De Benedictis; Roberta De Santis; Claudio Vicarelli
  4. Distance and Trade: Disentangling unfamiliarity effects and transport cost effects By Rocco Huang
  5. Buyer Investment, Product Variety, and Intrafirm Trade By Robert C. Feenstra; Yongmin Chen
  6. On the Benefits of Exchange Rate Flexibility under Endogenous Tradedness of Goods By Kanda Naknoi; Michael Kumhof; Douglas Laxton
  7. Has Trade any Importance in the Transmission of Currency Shocks? By Roberta De Santis
  8. Economic Effects of Free Trade between the EU and Russia By Pekka Sulamaa; Mika Widgrén
  9. A Tale of Parallel Integration Processes. A Gravity Analysis of EU Trade with Mediterranean and Central and Eastern European Countries By Anna Ferragina; Giorgia Giovannetti; Francesco Pastore
  10. On the Distributional Effects of Trade Policy: A Macroeconomic Perspective By Luis San Vicente Portes
  11. Adaptive Agent Modeling as a Tool for Trade and Development Theory By Timothy R. Gulden
  13. Trade liberalization, export orientation and employment in Argentina, Brazil and Mexico By Christoph Ernst
  14. Expansionary Fiscal Shocks and the Trade Deficit By Christopher Erceg; Luca Guerrieri
  15. Taxes, Mobile Capital, and Economic Dynamics in a Globalising World By Lucas Bretschger
  16. The Determinants of Child Labor: The Role of Primary Product Specialization By Leonardo Becchetti; Giovanni Trovato
  17. The end of the Multi-Fibre Agreement and its implication for trade and employment By Christoph Ernst, Alfonso Hernández Ferrer and Daan Zult
  18. WTO General Council Decision of July 31, 2004: Interpreting from Bangladesh Perspective By Mustafizur Rahman; Ananya Raihan
  19. Scale Externalities of the G7 Countries By Juergen Antony
  21. Fair Trade: A 'Third Generation' Welfare Mechanism to Make Globalisation Sustainable By Fabrizio Adriani; Leonardo Becchetti
  22. ESTIMATING EXPORT EQUATIONS By B Bhaskara Rao; Rup Singh
  23. Performance of Exporters: Scale Effects or Continuous Productivity Improvements By Crt Kostevc
  24. Road to Hong Kong Ministerial of the WTO: Anticipating the “First Approximations” from Bangladesh Perspective By Debapriya Bhattacharya; Mustafizur Rahman; Uttam Kumar Deb; Fahmida Khatun; Ananya Raihan

  1. By: Fernando Alvarez; Robert E. Lucas
    Abstract: We study a variation of the Eaton-Kortum model, a competitive, constant-returns-to-scale multicountry Ricardian model of trade. We establish existence and uniqueness of an equilibrium with balanced trade where each country imposes an import tariff. We analyze the determinants of the cross-country distribution of trade volumes, such as size, tariffs and distance, and compare a calibrated version of the model with data for the largest 60 economies. We use the calibrated model to estimate the gains of a world-wide trade elimination of tariffs, using the theory to explain the magnitude of the gains as well as the differential effect arising from cross-country differences in pre-liberalization of tariffs levels and country size.
    JEL: F0 F1
    Date: 2005–11
  2. By: Kari E.O.Alho (ETLA, the Research Institute of the Finnish Economy)
    Abstract: This paper presents an alternative derivation of the gravity equation for foreign trade, which is explicitly based on monopolistic competition in the export markets and which is more general than previously seen in the literature. In contrast with the usual specification, our model allows for the realistic assumption of asymmetry in mutual trade flows. The model is estimated for trade in Europe, producing evidence that trade flows and barriers do indeed reveal strong asymmetry. We then carry out a simulation, based on the estimated model, of the general equilibrium effects (through trade) of the UK’s possible entrance into the economic and monetary union.
    Keywords: Gravity model, trade barriers, asymmetry
    JEL: F12 F15
    Date: 2005–03
  3. By: Luca De Benedictis (University of Macerata, Italy); Roberta De Santis (ISAE, Instituto di Studi e Analisi Economica); Claudio Vicarelli (ISAE, Instituto di Studi e Analisi Economica)
    Abstract: The aim of this paper is to estimate the effect of the EU’s eastern enlargement on the trade patterns of the Central and Eastern European countries (CEECs) that joined the Union in May 2004. In particular, the paper investigates whether and how the EU’s free trade agreements (FTAs) with the CEECs have affected centre-periphery and intra-periphery trade flows. It also evaluates whether the EU-membership factor has had the added positive effects on exports from the CEECs as anticipated. The analysis focuses on bilateral trade flows between eight CEECs and the EU-23, for which a gravity equation is estimated using a system GMM dynamic panel data approach. The results support the assumptions that gravity forces and ‘persistence effects’ do indeed matter. With respect to the effect of FTAs, evidence is found that FTAs between EU countries and CEECs matter. Yet there is also evidence that the presence of intra-periphery agreements have helped to expand intra-periphery trade and limit the emergence of a hub-and-spoke relationship between the EU and the CEECs. These results have important policy implications for the trade strategy of EU candidate countries in south-eastern Europe as well as in the southern Mediterranean. According to the empirical results, these countries should move towards a regional free trade area as exemplified by the Central European Free Trade Agreement and the Baltic Free Trade Agreement to avoid hub-and-spoke effects.
    Keywords: trade flows, regional integration, EU enlargement, gravity model, dynamic panel data
    JEL: F13 F15 C13 C23
    Date: 2005–06
  4. By: Rocco Huang (The World Bank & The University of Amsterdam)
    Abstract: This paper provides evidence supporting Grossman’s (1996) claim that not only transport costs but also unfamiliarity can explain the negative correlation between geographic distances and bilateral trade volumes. A gravity model that controls for as many natural causes of trade as possible reveals that countries high in uncertainty-aversion (based on Hofstede’s survey) export disproportionately less to distant countries (with which they are presumably less familiar). More important, this result is mainly driven by differentiated products, not by products with international organized exchanges or with reference prices. For transport costs alone to explain such a trade pattern, one would have to assume that distance-related ad valorem transport costs are higher when a trade route originates from a high uncertainty-aversion country, which is unlikely. This trade pattern is easy to explain, however, if one accepts that geographic distance is a proxy for unfamiliarity and that exporters in high uncertainty-aversion countries are more sensitive to informational ambiguity. A further result is that high uncertainty- aversion countries trade less and thus grow more slowly in the long run, which suggests that cultural factors are as important as geographic ones in determining trade openness.
    JEL: F1 F2
    Date: 2005–11–12
  5. By: Robert C. Feenstra; Yongmin Chen
    Abstract: This paper studies a simple model of buyer investment and its effect on the variety and vertical structure of international trade. A distinction is made between two types of buyer investment: "flexible" and "specific." Their interactions with the entry and pricing incentives of suppliers are analyzed. It is shown that (i) there can be multiple equilibria in the variety of products traded, and (ii) less product variety is associated with more intrafirm trade. The possibility of multiple equilibria is consistent with the observation that some similar economies, such as Taiwan and South Korea, differ substantially in their export varieties to the U.S. A formal empirical analysis confirms the negative correlation between product variety and intrafirm trade.
    JEL: F1
    Date: 2005–11
  6. By: Kanda Naknoi; Michael Kumhof (Modeling Division, Research Department International Monetary Fund); Douglas Laxton
    Abstract: Previous efforts to compare the costs and benefits of fixed versus flexible exchange rate regimes have ignored the fact that it takes significant resources and time to develop export markets, and they have not included an analysis of the firm-level decision to enter or exit export markets. This paper develops a dynamic stochastic general equilibrium model to analyze the effects of endogenous tradedness of goods on the welfare gains from exchange rate flexibility. The actual range of traded goods in our model depends on the producers who choose to enter and exit export markets taking into account trade costs and relative productivities. A novel feature of the model is that it takes both time and resources to develop export markets and as a consequence expenditure-switching effects can be slow and will depend on a host of factors such as country size, trading costs and the competitive environment that producers face. Interestingly, because the model integrates a model of trade into a monetary business cycle model with sticky prices and wages, it is possible to study the interaction of macro and structural policies. However, in this study we focus initially on how different levels of trading costs can affect the structure of the economy and result in welfare costs of excessive exchange rate volatility
    JEL: E52 F41
    Date: 2005–11–11
  7. By: Roberta De Santis (ISAE, Instituto di Studi e Analisi Economica)
    Abstract: The object of this study is to assess the role of trade in the transmission of currency shocks across geographically close countries. The analysis will focus on identifying and comparing the degree of vulnerability of new EU member states from the Central and Eastern European countries (CEECs) to currency shocks. We interpret the interactions that a centre-periphery model identifies for periphery countries as a possible description of existing interdependencies among CEECs. According to the centre periphery model discussed by Corsetti et al. (1998b), “if there is no pass-through, then direct bilateral trade links may play a more important role than competition in the third market in determining the transmission of exchange rate shocks in the periphery. If there is full pass-through, a high share of bilateral trade within a region can actually limit the extent of beggar-thy-neighbour effects.” These effects are emphasised by a high degree of export similarity among the countries in the periphery. As a result of the heterogeneity in pass-through and trade structures, it is very difficult to derive a unitary policy implication on the potential sustainability of the exchange rate mechanism (ERM) II. Yet it is possible to single out the country pairs in which the likelihood of transmitting currency shocks is higher. Preliminary results point out that (other things being equal and given the contained intra-periphery trade) the transmission of currency disturbances is lower if the disturbance originates in countries with low a pass-through rate (the Slovak and Czech Republics, Estonia and Latvia) and higher if it originates in countries with a high pass-through rate (Poland, Hungary and Slovenia).
    Keywords: currency crises, trade and contagion
    JEL: F31 F32 F41
    Date: 2004–07
  8. By: Pekka Sulamaa (ETLA, the Research Institute of the Finnish Economy); Mika Widgrén (ETLA, the Research Institute of the Finnish Economy)
    Abstract: This study simulates the economic effects of eastern enlargement of the EU and an EU-Russian free trade area. The main emphasis of the paper is on the effect this would have on the Russian economy. The simulations were carried out with a GTAP computable general equilibrium model, using the most recent GTAP database 6.0 beta, which takes the former Europe agreements between the EU-15 and the eight new Central and Eastern European member states into account. The results confirm the earlier findings that a free trade agreement with the EU is beneficial for Russia in terms of total output but not necessarily in terms of economic welfare when measured by equivalent variation. The main reason behind this is the deterioration that would occur in Russia’s terms of trade. Improved productivity in Russia would, however, make the free trade agreement with the EU advantageous.
    Keywords: EU, Russia, free trade, integration
    JEL: F15 F17
    Date: 2005–05
  9. By: Anna Ferragina (ISSM-CNR); Giorgia Giovannetti (University of Florence and Italian Foreign Trade Commission); Francesco Pastore (Seconda Università di Napoli and IZA Bonn)
    Abstract: Despite the EU emphasis on the 1995 Barcelona process, trade integration with the Mediterranean (MED) countries is still underdeveloped. To contrast the success of EU integration with MED countries and that with the new EU members, we compute the trade potential of these EU partners from 1995 to 2002 using an “out-of-sample” methodology. The coefficients are taken from different panel estimators of the gravity equation relative to intra- EU trade. Our analysis suggests the existence of sizeable, unexploited trade potential with both groups of partners, although the ratio of potential to actual trade with the MED countries is much larger (from 1.7 to 2.5 times), more dispersed and stable compared to that with the CEECs. Moreover, the potential tends to converge to actual trade in a much longer time in the case of MED countries.
    Keywords: MED agreements, EU eastward enlargement, gravity equation, trade potential
    JEL: C23 F15 F17 P45 P52
    Date: 2005–11
  10. By: Luis San Vicente Portes (Economics Georgetown University)
    Abstract: This paper develops a theoretical model to explore the relationship between openness to trade and long-term income inequality. Empirical evidence on the issue is mixed, though greater inequality is often cited as a possible cost of trade liberalization. To quantify the effect of liberalization on inequality I calibrate a two-sector (agriculture and non-agriculture) open-economy macroeconomic model to the Mexican economy. Agents in the model are subject to idiosyncratic, uninsurable labor income risk, and precautionary saving generates endogenous distributions of wealth and income. When preferences are characterized by subsistence floor for food consumption, trade liberalization implies large welfare gains for low wealth agents. At the same time, liberalization increases long-run wealth and income inequality. After liberalization land-owners are worse off since the price of land falls along with the relative price of the agricultural commodity. When tariff revenue must be replaced by an alternative instrument, higher labor taxes are preferred to higher taxes on consumption or capital
    Keywords: Free trade; inequality; agriculture
    JEL: E60 F13 F40 O13
    Date: 2005–11–11
  11. By: Timothy R. Gulden (School of Public Policy University of Maryland)
    Abstract: This paper makes use of an adaptive agent framework to extend traditional models of comparative advantage in international trade, illustrating several cases which make theoretical room for industrial policy and the regulation of trade. Using an agent based implementation of the Hecksher-Ohlin trade model, the paper confirms Samuelson’s 2004 result demonstrating that the principle of comparative advantage does not ensure that technological progress in one country benefits its trading partners. It goes on to demonstrate that the presence of increasing returns leads to a situation with multiple equilibra, where free market trading policies can not be relied on to deliver an outcome which is efficient or equitable, with first movers in development enjoying permanent advantage over later developing nations. Finally, the paper examines the impact of relaxation of the Ricardian assumption of capital immobility on the principle of comparative advantage. It finds that the dynamics of factor trade are radically different from the dynamics of trade in goods and that factor mobility converts a regime of comparative advantage into a regime of absolute advantage, thus obviating the reassuring equity results which stem from comparative advantage.
    Keywords: Agent-based modeling; comparative advantage; increasing returns; international trade
    JEL: O19
    Date: 2005–11–11
  12. By: Sarbajit Chaudhuri (Dept. of Economics, Calcutta University); Ujjaini Mukherjee (Dept. of Economics, Calcutta University)
    Abstract: The paper develops a three-sector general equilibrium model with two informal sectors with complete mobility of labour between these sectors and with a positive relationship between wage income and labour's efficiency to show that the results relating to foreign capital inflow and removal of protectionism may be counterintuitive to the conventional wisdom. The paper is also devoted to explain why some developing countries implement tariff reforms very slowly compared to others, even after formally choosing free trade as their development strategies, in a more general fashion than the existing tariff-jumping theory.
    Keywords: Foreign capital inflow, tariff reduction, mobility of labour, wage efficiency hypothesis, tariff-jumping theory
    JEL: F10 F13 F21 O17
    Date: 2005–11–11
  13. By: Christoph Ernst
    Abstract: This paper discusses the new export-oriented development strategy adopted by the countries in the late 1980s and early 1990s, which involved trade liberalization, regional trade agreements and the curtailment of government industrial policy. In particular, this paper assesses the outcome of this policy shift on trade specialization as well as the labour market, in particular on employment and wages. The study finds that in general trade liberalization and regional integration did not have the expected strong positive impact on production or employment during the period of analysis. Instead, there was a steep rise in imports and little export dynamism. Exchange rate appreciation contributed to the rise in imports while hurting exports which, coupled with a lack of public support to firms during the adjustment process, meant that export growth, measured in quantity or by type of exports, was not as dynamic as had been foreseen. Only Mexico experienced an export boom in manufacturing production and employment due to growth in the maquiladora sector. Argentina and Brazil, on the other hand, decreased their specialization in dynamic products vis-à-vis the world market, mainly maintaining their specialization in primary and semi-processed primary products. Moreover, the exports of more sophisticated products, in particular from the maquiladora industry, did not lead to value chain upgrading, since the import content of exports also rose significantly. With the exception of the maquiladora industry, restructuring in manufacturing was not particularly beneficial to job growth as there were few new production plants and the job-creating sectors were of low labour intensity.
    Date: 2005–10
  14. By: Christopher Erceg; Luca Guerrieri
    Abstract: In this paper, we use an open economy DGE model (SIGMA) to assess the quantitative effects of fiscal shocks on the trade balance in the United States. We examine the effects of two alternative fiscal shocks: a rise in government consumption, and a reduction in the labor income tax rate. Our salient finding is that a fiscal deficit has a relatively small effect on the U.S. trade balance, irrespective of whether the source is a spending increase or tax cut. In our benchmark calibration, we find that a rise in the fiscal deficit of one percentage point of GDP induces the trade balance to deteriorate by less than 0.2 percentage point of GDP. Noticeably larger effects are only likely to be elicited under implausibly high values of the short-run trade price elasticity
    Keywords: DGE Models, Open-Economy Macroeconomics
    JEL: F32 F41 E62
    Date: 2005–11–11
  15. By: Lucas Bretschger (Institute of Economic Research (WIF), Swiss Federal Institute of Technology Zurich (ETH))
    Abstract: This contribution provides evidence for the hypothesis that trade increases growth through its curbing effect on capital taxes. The analysed trade-growth channel includes a negative impact of open- ness on corporate taxes and a negative effect of taxes on growth. The paper explores the two steps theoretically and empirically, taking into account the critical points of recent studies in this field. Estimations with panel data for a sample of 12 OECD countries in the period 1965-1999 confirm a significant and robust impact of trade on growth through corporate taxes.
    Keywords: Trade and Growth, Tax Competition, Capital Taxes and Mobility, OECD Countries
    JEL: F43 O40 H71
    Date: 2005–09
  16. By: Leonardo Becchetti (University of Rome II - Faculty of Economics); Giovanni Trovato (University of Rome II - Faculty of Economics)
    Abstract: The paper tests predictions of a traditional intra-household bargaining model which, under reasonable assumptions, shows that lack of bargaining power in the value chain significantly reduces the capacity of obtaining benefits from increased product demand arising from trade liberalization and therefore is positively associated with child labor. Cross-sectional and panel negative binomial estimates in a sample of emerging countries support this hypothesis showing that proxies of the labor force bargaining power in the international division of labor (such as the share of primary product exports) are significantly related to child labor, net of the effect of traditional controls such as parental income, the quality of education, international aid and trade liberalization. The positive impact of the share of primary product exports on child labor outlines a potential paradox. The paradox suggests that trade liberalisation has not always straightforward positive effects on social indicators and that its short run effects on income distribution and distribution of skills and market power across countries need to be carefully evaluated.
    Keywords: child labor, distribution and growth, trade liberalisation
    JEL: D1 F1 F4
    Date: 2004–10–13
  17. By: Christoph Ernst, Alfonso Hernández Ferrer and Daan Zult
    Abstract: This paper illustrates the global evolution and performance of trade and employment in the textiles and clothing industry until 2005 and tries to forecast, with the help of a gravity model, its evolution after the end of the Agreement on Textiles and Clothing. The phasing out of the quota regime will mean a sharp reduction of distortions to trade in textiles and clothing and more transparency, but it also implies employment shifts. The study shows the already leading and increasing export position of China, including Hong Kong, SAR, and Macao, SAR, in particular in clothing, Pakistan’s dominant position in textiles, and the generally good trade performance of South and South East Asia. Other countries in both regions, smaller and less competitive, could potentially benefit from the new situation applying the right policies. The T&C industry of a number of other countries will suffer from increased competition, but they may have the capacity to survive in niche markets, mainly countries close to the US and EU market. Nevertheless, some countries will have great difficulties to maintain their T&C industry and will have to diversify their industrial production. This is a major concern for small and less developed countries previously benefiting from privileged access to the US and EU market, for example, sub-Saharan African countries. A fast adjustment of production to the new situation should be combined with active and passive labour market policies for workers during the transition period, to reduce the social cost of adjustment. It will be vital to coordinate, macro, trade and industrial policies with labour market policies.
    Date: 2005–10
  18. By: Mustafizur Rahman; Ananya Raihan
    Abstract: The present paper titled WTO General Council Decision of July 31, 2004: Interpreting from Bangladesh Perspective was prepared under the CPD’s Trade Policy Analysis (TPA) programme. The TPA programme of CPD was initiated in 1999 in response to a felt need to enhance Bangladesh’s capacity to more effectively deal with the emerging trade issues in the face of deregulation, liberalisation and globalisation. The successful completion of the Uruguay Round Agreement in 1994 and the establishment of the WTO in 1995 was expected to have crucial implications for the LDCs such as Bangladesh. In the 1990s Bangladesh economy was becoming increasingly open and trade related policy making and trade negotiations were assuming critical importance for Bangladesh’s future development. In view of the emerging challenges in the context of the ongoing process of globalisation, the objective of CPD’s Trade Policy Analysis programme is to monitor the impact of the evolving trading regime under the WTO on Bangladesh economy with a view to support trade related capacity building process in the country by strengthening CPD’s institutional capacity in the areas of (a) trade related research, (b) preparation of policy briefs, (c) organisation of dialogues, (d) organisation of workshop and training, (e) strengthening trade related documentation, and (f) trade related publication and networking. The present paper on WTO General Council Decision of July 31, 2004: Interpreting from Bangladesh Perspective has been prepared by Professor Mustafizur Rahman, Research Director of CPD and Dr. Ananya Raihan, Research Fellow of CPD. The paper looks at the salient features of July 31 text, identification of departure of it from the Cancun draft text (progression or regression) from an LDC perspective and to put forward some suggestions as regards issues which Bangladesh could pursue in the course of future negotiations in the run up to the Sixth Ministerial Meeting to be held in Hong Kong by the end of 2005.
    Keywords: WTO-General Council, Bangladesh
    JEL: F10
    Date: 2005–01
  19. By: Juergen Antony (University of Augsburg, Department of Economics)
    Abstract: Scale effects in per capita production are an outcome of many theoretical economic models like second generation growth models, models of the new trade theory or the new economic geography. The prediction is that larger economies should have a higher per capita production than smaller economies. However, in an open economy context the scale of the economy is less important because countries can participate in the scale of other countries through trade. This paper develops an open economy growth model of the second generation type which shows the relevance of the scale of the trading partners in technology goods for per capita production. This model is empirically tested using a cross section of 88 countries for the year 2000. The scale of these economies is measured by a weighted sum of scales of the G7 countries, since these are the countries spending most on R&D and are thus the main origin of technology. The results show that there is a significant effect of this scale variable on per capita production.
    Keywords: growth and scale effects, international trade
    JEL: O47 F43 F12
    Date: 2005–10
  20. By: Jaime Marquez
    Abstract: I use the automated search algorithm to address practical issues that arise in estimating income and price elasticities for U.S. trade in services: specification of dynamics, specification of the search strategy, simultaneity biases, and aggregation biases. Specifically, starting from a general, autoregressive distributed lag formulation, I use automated specification algorithms to obtain a specific formulation. I assess simultaneity biases by applying OLS, IV, and FIML. I assess aggregation biases by comparing the aggregate of the elasticities to the elasticity of the aggregate. Ignoring these considerations results in a formulation that cannot explain the divergence of service and merchandise balances
    Keywords: Automated Search, Simultaneity and Aggregation Bias
    JEL: C51 F41
    Date: 2005–11–11
  21. By: Fabrizio Adriani (University of Rome II - Centre for International Studies on Economic Growth (CEIS)); Leonardo Becchetti (University of Rome II - Faculty of Economics)
    Abstract: Globalisation of product and labour markets has dramatically evidenced the market failure generated by the monopsonistic/oligopsonistic power of exporters dealing with unskilled workers (subcontractors). The absence of a global benevolent planner and unequal representation mechanisms in international institutions prevent the reduction of imbalances in the bargaining power between employers and unskilled workers. In a model of North-South trade we suggest that, under the existence of a share of altruistic consumers in the North, the effects of market imperfections and the absence of a global benevolent planner may be partially alleviated by a bottom-up welfare approach directly promoted by consumers of the final product. Our results also show that ethical concerns of consumers in the North might end up with reducing the welfare of workers in the South unless ethical concerned producers enter the market.
    Keywords: monopsony, social responsibility, fairness
    JEL: F02 F13 L31
    Date: 2004–11–26
  22. By: B Bhaskara Rao (University of the South Pacific); Rup Singh (University of the South Pacific)
    Abstract: Accurate estimates of the price and income elasticities of exports are valuable for growth policies based on trade promotion. However, not sufficient attention seems to have been paid to the specification of the relative price variable in some influential empirical works. This paper estimates the export equation for Fiji to show that inappropriate specification of the relative price variable may give under estimates of the price elasticity and over estimates of the income elasticity.
    Keywords: Exports, Price and Income Elasticities, Export-lead Growth Policy.
    JEL: E
    Date: 2005–11–11
  23. By: Crt Kostevc
    Abstract: Following along the lines of a growing literature on the causal link between exporting and productivity this paper analyzes the existence of 'learning-by-exporting'in Slovenian manufacturing between 1994 and 2002. This paper asks whether in addition to good firms self-selecting into exports and multinational production exporting (multinational production) further improves their performance compared with non-exporters. I develop a simple model of trade and international production with heterogeneous firms that generates learning effects through competition in the export markets. The estimations performed on the Slovenian sample indicate that more productive firms tend to self-select into more competitive markets, while there is no conclusive evidence of learning-by-exporting. Namely, although new exporters experienced a surge in productivity in the initial year of exports the effect dissipates in the following years. This leads me to conclude that the perceived learning effects are in fact only a consequence of more efficient utilization of available production capacity brought forth by the opening of an additional market.
    Keywords: Firm heterogeneity, exports, multinational firm, learning-by-exporting, difference-in-differences, martching
    JEL: D24 F12 F14
  24. By: Debapriya Bhattacharya; Mustafizur Rahman; Uttam Kumar Deb; Fahmida Khatun; Ananya Raihan
    Keywords: WTO-General Council, Bangladesh
    JEL: F10
    Date: 2005–05

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