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on International Trade |
| By: | Jürgen Bitzer (Free University Berlin Department of Economics & Institute for East European Studies); Ingo Geishecker (Free University Berlin Department of Economics & Institute for East European Studies) |
| Abstract: | Our paper decomposes knowledge-diffusing trade flows and estimates their impacts separately. Overall, trade generates positive knowledge spillovers, but the effects of intra-industry trade are ambiguous. With regard to sectoral import penetration, we find that potential positive spillovers are dominated by negative competition effects. This, however, masks the significant positive spillover effects of intra-industry trade that corresponds to international outsourcing. |
| Keywords: | R&D, trade, productivity, spillovers, competition |
| JEL: | F20 O30 O40 D62 |
| Date: | 2005–12–14 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpit:0512010&r=int |
| By: | Christopher Bowdler (Nuffield college); Luca Nunziata (University of Padua) |
| Abstract: | This paper examines the impact of union membership rates on inflation in OECD countries. A positive effect of union density is estimated, even after controlling for fixed effects and time dummies. Additional institutional characteristics, for example union coordination, employment protection laws and central bank independence, do not affect inflation directly in a panel setting, but do influence the size of the unionisation coefficient via interaction terms. The results are robust to controlling for potential common causes such as oil price shocks and the political stance of the government, and to using GMM/IV techniques to handle possible endogeneity biases. |
| JEL: | E31 J51 |
| Date: | 2005–12 |
| URL: | http://d.repec.org/n?u=RePEc:pad:wpaper:0009&r=int |
| By: | Erkki Koskela; Rune Stenbacka |
| Abstract: | We investigate the implications of product market imperfections on profit sharing, wage negotiation and equilibrium unemployment. The optimal profit share, which the firms use as a wage-moderating commitment device, is below the bargaining power of the trade union. Intensified product market competition decreases profit sharing, but increases the negotiated base wage, because the wage-increasing effect of reduced profit sharing dominates the wage-reducing effect associated with a higher wage elasticity of labor demand. Finally, we show that intensified product market competition does not necessarily reduce equilibrium unemployment, because it induces both higher wage mark-ups and lower optimal profit shares. |
| Keywords: | product market competition, profit sharing, wage bargaining, equilibrium unemployment |
| JEL: | J33 J51 L11 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_1603&r=int |
| By: | Steven Brakman; Harry Garretsen; Charles van Marrewijk |
| Abstract: | By combining two large data sets (on international trade flows and on mergers and acquisitions - M&As), we are able to test two implications of Neary’s (2003, 2004a) recent theoretical work. Analyzing M&As in a General Oligopolistic Equilibrium (GOLE) model incorporating strategic interaction between firms in a general equilibrium setting, we argue that: (i) M&As follow revealed comparative advantage as measured by the Balassa index, and (ii) M&As come in waves. We find convincing support for both hypotheses, thus showing for the first time that there is an empirical connection between export performance and mergers and acquisitions. |
| Keywords: | comparative advantage, cross border mergers and acquisitions, merger waves, general oligopolistic equilibrium model |
| JEL: | F10 F12 L13 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_1602&r=int |
| By: | Isabelle Bensidoun; Sebastien Jean; Aude Sztulman |
| Abstract: | This paper reconsiders the evidence concerning the influence of international trade on income distribution. Our analysis is based on a theoretical model which does not make any restrictive assumption about how trade specialization is linked to factor endowments. In this framework, the influence of international trade changes on income distribution is captured by a specific definition of the factor content of net export changes. Our main empirical finding is that the factor content of net export changes, expressed relatively to the country's factor endowment, does have a significant impact on income distribution, but the sign and magnitude of this impact is conditional on country’s income level or on the share of non-educated in the population. |
| Keywords: | International trade; income distribution; international integration; globalization; growth |
| JEL: | F11 F16 D30 |
| Date: | 2005–10 |
| URL: | http://d.repec.org/n?u=RePEc:cii:cepidt:2005-17&r=int |
| By: | Sebastian Stolorz (University of Oregon) |
| Abstract: | The paper addresses the question, whether the increasing current account deficit has negative impact on American economy and society. Using data for American economy in years 1967 – 2005, it will be shown that perceived welfare effects, as measured by changes in Consumer Confidence, asymmetrically reflect changes in exports and imports. The provided VAR analysis allowed to filter out potential output and cyclical movements in endogenous factors and to describe the remaining error in terms of external trade volatility. Keeping information on exports and imports as external factors allowed to estimate a structure of the model, where the responsiveness of perceived welfare in respect to simulated changes in current account was studied. The provided analysis shows that opening the economy enhanced observed volatility of the Consumer Confidence, while presence of the current account deficit allowed to obtain superior welfare. |
| Keywords: | Current Account, Trade Liberalization, Welfare |
| JEL: | F16 |
| Date: | 2005–12–15 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpit:0512013&r=int |
| By: | Sven W. Arndt (Lowe Institute of Political Economy, Claremont McKenna College) |
| Abstract: | This paper examines the repercussions of cross-border production sharing for the welfare effects of preferential trade liberalization. In a general-equilibrium context, a free trade agreement (FTA), which incorporates production sharing, raises the likelihood of welfare improvement. Thus, two members of a free trade area, who each have comparative disadvantage in the production of a final product relative to a non-member, may nevertheless enjoy net trade creation if they jointly possess comparative advantage in key components of that product. At a minimum, crossborder production sharing reduces the trade-diverting elements of an FTA. It follows, that rules of origin, viewed as constraints on cross-border fragmentation, augment the negative, trade-diverting elements of free trade areas. |
| Keywords: | Trade Diversion, Free Trade Areas, Fragmentation, Production Networks |
| JEL: | F11 F13 F15 |
| Date: | 2004 |
| URL: | http://d.repec.org/n?u=RePEc:loi:wpaper:0401&r=int |
| By: | Knud Jørgen Munk; Bo Sandemann Rasmussen (Department of Economics, University of Aarhus, Denmark) |
| Abstract: | For a small open economy where the government is restricted to raise revenue using border taxes only, the optimal structure of border taxes is considered. As a matter of normalization exports and the supply to the market of the primary factor may be assumed to be untaxed, but that the household use of the primary factor and domestic consumption of the export good cannot be taxed is nevertheless a constraint; this insight provides the key to understanding what determines the optimal tariff structure. The optimal border tax structure is derived for both exogenous and endogenous labour supply, and the results are interpreted in the spirit of the Corlett-Hague results for the optimal tax structure in a closed economy and compared with results from CGE models. |
| Keywords: | Border taxes, small open economy, labour supply, Corlett-Hague. |
| JEL: | H21 F13 |
| Date: | 2005–12–15 |
| URL: | http://d.repec.org/n?u=RePEc:aah:aarhec:2005-22&r=int |
| By: | Dalia Marin (Department of Economics, Ludwigstrasse 28, D-80539 Munich, phone: ++4989/2180-2446, fax: ++4989/2180-6227. dalia.marin@lrz.uni-muenchen.de) |
| Abstract: | Europe is reorganizing its international value chain. I document these changes in Europe’s international organization of production with new survey data of Austrian and German firms investing in Eastern Europe. I show estimates of the share of intrafirm trade between Austria or Germany on the one hand and Eastern Europe on the other. Furthermore, I present empirical evidence of the drivers of the new division of labor in Europe. I find among other things that falling trade costs and reduced levels of corruption as well as improvements in the contracting environment in Eastern Europe are affecting the level of intrafirm imports from that region. These factors also favor outsourcing over offshoring. In contrast, low organizational costs of hierarchies and large costs of holdup (when there are no alternative investors in Old Europe or no alternative suppliers in Eastern Europe) favor offshoring over outsourcing. Tax holidays granted by host countries in Eastern Europe also mildly affect the organizational choice. |
| Keywords: | the empirics of global sourcing, intrafirm trade, contract enforcement, comparative advantage in Eastern Europe, empirical test of the theory of the firm |
| JEL: | D23 D51 F11 L14 O11 |
| Date: | 2005–09 |
| URL: | http://d.repec.org/n?u=RePEc:trf:wpaper:80&r=int |
| By: | Andzelika Lorentowicz; Dalia Marin; Alexander Raubold |
| Abstract: | Feenstra and Hanson (1997) have argued in the context of the North American Free Trade Agreement that US outsourcing to Mexico leads to an increase in the skill premium in both the US and Mexico. In this paper we show on the example of Austria and Poland that with the new international division of labour emerging in Europe Austria, the high income country, is specializing in the low skill intensive part of the value chain and Poland, the low income country, is specializing in the high skill part. As a result, skilled workers in Austria are losing from outsourcing, while gaining in Poland. In Austria, relative wages for human capital declined by 2 percent during 1995-2002 and increased by 41 percent during 1994-2002 in Poland. In both countries outsourcing contributes roughly 35 percent to these changes in the relative wages for skilled workers. Furthermore, we show that Austria's R&D policy has contributed to an increase in the skill premium there. |
| JEL: | F21 F23 J31 P45 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_1616&r=int |
| By: | Lahcen ACHY (INSEA, Rabat, Morocco); Juliette Milgram (Grenade University, Spain) |
| Abstract: | The purpose of this paper is to investigate simultaneously the potential effects of European Union's Association Agreement with Morocco and the adoption of the Euro as a single currency on exchange rate regime of Moroccan Dirham. Since Morocco depends heavily on EU as a market for its exports and a source for its imports, limited variability of the DH against the Euro seems à priori, to be an appropriate policy option. This option may even be strengthened within the FTA. However, the nature and the composition of Moroccan exports are typical of North-South trade with little diversification and high concentration on textiles and agricultural products. From this perspective, the risk of asymmetric shocks is more likely, which reduces the expected gains from nominal anchorage. This paper aims at contributing to the future exchange rate regime in Morocco and focuses on three main issues. The first issue is to investigate the potential effects of the FTA on trade structure and industrial specialization in Morocco. To this end, a computable general equilibrium model is used to simulate macroeconomic and sectoral effects of the implementation of the FTA on industrial sector. The second issue is to estimate the real exchange rate equilibrium based on macroeconomic fundamentals and assess the degree of misalignment of the actual value of the Dirham. Finally, the question of exchange rate arrangement is examined by combining the expected effects of free trade area between Morocco and the European Union, the existing degree of misalignment of the Dirham, and considering the adoption of the Euro as a single currency in 12 European countries. Our results seem to suggest that the implementation of a FTA may lead to a reallocation of industrial production toward an even more specialization in labor-intensive products. Under such circumstances, the symmetry of shocks, as an important condition for anchoring the DH to the Euro, is not satisfied making this option non-desirable. |
| Keywords: | Free Trade Area, CGE Model, Exchange rate |
| JEL: | F1 F2 |
| Date: | 2005–12–14 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpit:0512012&r=int |
| By: | Antoine Bouet; Lionel Fontagne; Sebastien Jean |
| Abstract: | This working paper aims to clarify the specific issues raised by trade preferences, in particular non-reciprocal ones, as they pertain to the Doha round. We evaluate the extent of tariff preferences through both a measure of the "true" preferential margin and an assessment of tariff-rate quota rents. We find that the threat of preference erosion following the Doha round is real, insofar as trade preferences are now playing a key role in the world trading system, and in particular in the pro-poor policies undertaken by rich countries. Although the problem is focused on a handful of products and on a limited number of countries, our analysis suggests that the magnitude of forthcoming difficulties for poor countries could be significant in many cases. |
| Keywords: | Preferential trade arrangements (PTAs); erosion; Doha development agenda; Computable General Equilibirum (CGE) model; international trade; trade negotiations; WTO; agriculture; trade policy |
| JEL: | F12 F13 D58 Q17 O19 |
| Date: | 2005–09 |
| URL: | http://d.repec.org/n?u=RePEc:cii:cepidt:2005-14&r=int |
| By: | Hedi Bchir; Sebastien Jean; David Laborde |
| Abstract: | Trade negotiations deal with possible cuts in bound duties, which differ substantially from applied preferential duties, and even from MFN applied duties. Based on WTO’s Consolidated Tariff Schedules (CTS) database and on national sources, this paper proposes a systematic assessment of ad valorem-equivalent bound duties at the detailed product level, for almost all WTO members. Fully consistent with the assessment of applied protection provided in the MAcMap-HS6 database (Bouet et al., 2004), this work allows the full structure of protection –bound, MFN applied, preferential applied duties- to be accurately assessed. We are thus able to provide with the first ever worldwide assessment of the binding overhang, i.e. the gap between bound and applied MFN tariffs. We also assess the likely applied-protection impact of an agreement in the Doha Round, based on the Harbinson Proposal for agricultural products, and on the Girard Proposal for nonagricultural products. In all cases, we show the difference between bound and applied protection to be key in understanding both the structure of protection worldwide, and the possible impact of liberalisation scenario cutting bound duties, as uses to be the case in multilateral liberalisations. |
| Keywords: | Bound tariffs; applied tariffs; ad valorem equivalent; WTO; liberalisation; trade liberalization; MAcMaps; MFN; trade preference; protection |
| JEL: | F13 |
| Date: | 2005–10 |
| URL: | http://d.repec.org/n?u=RePEc:cii:cepidt:2005-18&r=int |
| By: | Sven W. Arndt (Lowe Institute of Political Economy, Claremont McKenna College) |
| Abstract: | This paper examines the implications of cross-border component sourcing and production networks for trade competitiveness and welfare. Offshore sourcing of components in which it has comparative disadvantage, enables a country to enhance its comparative advantage in the final product. This option provides emerging countries with an important alternative to capital accumulation and technical change as paths to economic development. In addition, production sharing changes the nature of trade-balance accounting and tends to reduce the sensitivity of trade flows to movements in exchange rates. This has important implications for trade policy and for the choice of exchange-rate regime. In the context of regional trade areas, for example, deeper integration allowing for production sharing has welfare effects superior to those of standard preferential trade liberalization. |
| Keywords: | cross-border sourcing, trade integration, production sharing, exchange rate elasticities |
| JEL: | F11 F15 F32 |
| Date: | 2004 |
| URL: | http://d.repec.org/n?u=RePEc:loi:wpaper:0403&r=int |
| By: | Sven W. Arndt; Alex Huemer (Lowe Institute of Political Economy, Claremont McKenna College) |
| Abstract: | This paper examines the effect of cross-border production sharing on the sensitivity of trade to the exchange rate and to other key variables. Theoretically, the response of a country's exports to the exchange rate should decline as the share of exported components for use in the manufacture of its imports rises. Similarly, the response of its imports of end products should decline as the share of its exported components in those imports rises. The response of a country's imports to domestic GDP should decline and the response to the exporting country's GDP should rise as the share of imported components for use in the manufacture of exports rises. These propositions are tested for trade between the U.S. and Mexico, using OLS and VEC techniques and allowing for the impact of NAFTA. The findings broadly confirm the aforementioned priors. In addition to their implications for trade-balance adjustment, these results have potentially important implications for the choice of exchange-rate regime. |
| Keywords: | trade balance; fragmentation; intra-industry trade; exchange rates; NAFTA. |
| JEL: | F14 F15 F32 |
| URL: | http://d.repec.org/n?u=RePEc:loi:wpaper:0502&r=int |
| By: | Sebastien Jean; David Laborde; Will Martin |
| Abstract: | This paper assesses the impacts of alternative approaches to liberalizing agricultural market access within the broad guidelines provided by July 2004 Framework Agreement for the Doha Development Agenda. Computations are carried out at the finest level available on an internationally comparable basis, and take into account non-ad valorem tariffs, tariff preferences and the gap between bound and applied duties. Examination of different tiered formulas shows that only formulas that bring about very deep cuts in bound rates will have a substantial impact on applied tariffs and hence on market access. Another key finding is the extraordinary sensitivity of the results to self-selected sensitive and special products. |
| Keywords: | Doha development agenda; flexibility; sensitive products; bound tariffs; applied tariffs; political economy; agriculture; trade negotiations |
| JEL: | D58 F13 P17 Q17 |
| Date: | 2005–09 |
| URL: | http://d.repec.org/n?u=RePEc:cii:cepidt:2005-15&r=int |
| By: | Lahcen ACHY (INSEA, Rabat, Morocco); Khalid SEKKAT (ULB, Brussels, Belgium) |
| Abstract: | This paper uses firm level data to investigate the impact of trade liberalization on manufacturing sector employment in Morocco. This paper extends the existing research in various dimensions. First, it analyses the effect of trade openness on different skill levels of the manufacturing labor force. Second, the paper investigates the role of technology in explaining the magnitude of employment response following trade liberalization reforms. Our empirical results indicate that technology, as measured by capital intensity, and the share of new capital matters relatively more than trade in accounting for employment changes. In terms of policy implications, trade protection does not appear to be an effective tool in terms of saving jobs. Moreover, Moroccan commitments to further liberalize its trade means that manufacturing firms will have to face more competitive pressures on both domestic and foreign markets. Those firms that are endowed with upgraded technology are more likely to maintain or potentially raise their market shares, and hence create more jobs. Our results indicate that openness to foreign trade induces a significant skill composition effect. However, it also appears that skilled labor demand is highly sensitive to relative wages, which is consistent with the dominance of low value added products in the Moroccan manufacturing industries for which labor cost largely matters. The challenge for policy-makers is to design an appropriate support policies that stimulate domestic firms to invest and upgrade their technologies, ensure some degree of labor market flexibility, and create a business environment attractive for foreign investment. |
| Keywords: | Trade liberalization, Employment, Firm-level analysis |
| JEL: | F1 F2 |
| Date: | 2005–12–14 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpit:0512011&r=int |
| By: | Sebastian Stolorz (University of Oregon) |
| Abstract: | The paper addresses the question, whether the increasing current account deficit has negative impact on American economy and society. Using data for American economy in years 1967 – 2005, it will be shown that perceived welfare effects, as measured by changes in Consumer Confidence, asymmetrically reflect changes in exports and imports. The provided VAR analysis allowed to filter out potential output and cyclical movements in endogenous factors and to describe the remaining error in terms of external trade volatility. Keeping information on exports and imports as external factors allowed to estimate a structure of the model, where the responsiveness of perceived welfare in respect to simulated changes in current account was studied. The provided analysis shows that opening the economy enhanced observed volatility of the Consumer Confidence, while presence of the current account deficit allowed to obtain superior welfare. |
| Keywords: | Current Account, Trade Liberalization |
| JEL: | F42 |
| Date: | 2005–12–15 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpla:0512009&r=int |
| By: | Chi-Yung Ng; John Whalley |
| Abstract: | We discuss global options for initiatives intended to ameliorate adverse impacts of visa and work permit systems used by national governments around the world. We first describe and document some of their effects, noting the relative lack of other research work on these issues. We then discuss proposals for a new and supplemental global visa structure which have been made as part of the Mode 4 GATS negotiations in the WTO, suggesting that the GATS/WTO may be an imperfect institutional location for negotiating on these matters. We then evaluate other approaches, including what realistically could be possible if a new body specifically created for global negotiation in the area were to be used. |
| JEL: | D78 F22 J61 J71 O24 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_1614&r=int |
| By: | Geir Haakon Bjertnæs |
| Abstract: | The desirability for production efficiency is re-examined in this study, where agents choose occupation based on lifetime income net of tuition costs. Efficient revenue raising implies that the government should trade off efficiency in production for efficiency in intertemporal consumption, as capital income is taxed in optimum. The subsequent wage difference between high- and low-skilled occupations is increased compared to a production efficient outcome, which is in contrast to previous results in the literature. |
| Keywords: | optimal income taxation, subsidies for tuition, skill formation, production efficiency |
| JEL: | H21 H24 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_1627&r=int |