nep-int New Economics Papers
on International Trade
Issue of 2006‒04‒08
28 papers chosen by
Martin Berka
Massey University

  1. China's Long-Term International Trade Statistics: By Commodity, 1952-1964 and 1981-2000 By Kyoji Fukao; Kozo Kiyota; Ximing Yue
  2. Tariff Equivalent of Technical Barriers to Trade with Imperfect Substitution and Trade Costs By Chengyan Yue; John C. Beghin; Helen H. Jensen
  3. Estimating Trade Restrictiveness Indices By Kee, Hiau Looi; Nicita, Alessandro; Olarreaga, Marcelo
  4. The Global Chilling Effects of Antidumping Proliferation By Vandenbussche, Hylke; Zanardi, Maurizio
  5. Optimal Tariffs: The Evidence By Broda, Christian; Limão, Nuno; Weinstein, David E
  6. Welfare and Poverty Impacts of Tariff Reforms in Bangladesh: a General Equilibrium Approach By Bazlul Khondker; Mustafa Mujeri; Selim Raihan
  7. Trade and Economic Geography: The Impact of EEC Accession on the UK By Overman, Henry G.; Winters, L Alan
  8. WTO's Doha Cotton Initiative: A Tale of Two Issues By Anderson, Kym; Valenzuela, Ernesto
  9. Trade, FDI and the Organization of Firms By Helpman, Elhanan
  10. Trade Technology and Employment: A case Study of South Africa By J. Paul Dunne; Lawrence Edwards
  11. Endogenous Trade Policies in a Developing Economy By N.M. Hung; N.V. Quyen
  12. Scared by Foreigners and their Products? Survey Evidence from France By Cadot, Olivier; Geoffard, Pierre-Yves; Suwa Eisenmann, Akiko; Verdier, Thierry
  13. Managing the Noodle Bowl: The Fragility of East Asian Regionalism By Baldwin, Richard
  14. Trade and Growth with Heterogenous Firms By Baldwin, Richard; Robert-Nicoud, Frédéric
  15. Tariff Retaliation versus Financial Compensation in the Enforcement of International Trade Agreements By Limão, Nuno; Saggi, Kamal
  16. Sugar prices, labor income, and poverty in Brazil By Olarreaga, Marcelo; Krivonos, Ekaterina
  17. GM Cotton Adoption, Recent and Prospective: A Global CGE Analysis of Economic Impacts By Anderson, Kym; Jackson, Lee Ann; Valenzuela, Ernesto
  18. The Relative Importance of Global Agricultural Subsidies and Market Access By Anderson, Kym; Martin, Will; Valenzuela, Ernesto
  19. Exports and Productivity: A survey of the evidence from firm level data By Joachim Wagner
  20. Bundling under the Threat of Parallel Trade By CRAMPES, Claude; HOLLANDER, Abraham; MACDISSI, Charbel M.
  21. Cross-Border Merger Waves By Fumagalli, Eileen; Vasconcelos, Helder
  22. Do Sovereign Defaults Hurt Exporters? By Eduardo Borensztein; Ugo Panizza
  23. Hurricanes: Intertemporal Trade and Capital Shocks By John C. Bluedorn
  24. International Firm Activities and Innovation: Evidence from Knowledge Production Functions for German Firms By Joachim Wagner
  25. Industrial Productivity in 51 Countries, Rich and Poor By Causa, Orsetta; Cohen, Daniel
  26. The Geography of Output Volatility By Malik, Adeel; Temple, Jonathan
  27. Exports, foreign direct investment, and productivity: Evidence from German firm level data By Joachim Wagner
  28. Development in the Indonesia-Malaysia-Singapore Growth Triangle By Toh Mun Heng

  1. By: Kyoji Fukao; Kozo Kiyota; Ximing Yue
    Abstract: International trade has been a key engine driving Chinese economic growth in recent decades. Yet, long-term analyses of China's trade are still difficult because the country's trade statistics for the post-war period up to the mid-1980s have many shortcomings For example, official customs statistics published by the Chinese government during this period, if they were published at all, do not provide any breakdown by commodity classification. Against this background, we recently compiled new statistics of China's trade during 1952-1964 and 1981-2000 at the 3-digit level of the Standard International Trade Classification, Revision 1 (SITC-R1). The statistics for 1952-1964 and 1981-1987 are based on data we purchased from China's National Statistical Bureau. The data for 1988-2000 are compiled from the Commodity Trade Statistics of the United Nations (UN Comtrade) as a part of our joint work with scholars at the Institute of Development Economies, Japan External Trade Organization (IDE-JETRO). In this paper, we provide an overview of existing statistics of China's international trade and present our newly compiled statistics.
    Date: 2006–03
  2. By: Chengyan Yue; John C. Beghin (Center for Agricultural and Rural Development (CARD); Food and Agricultural Policy Research Institute (FAPRI)); Helen H. Jensen (Center for Agricultural and Rural Development (CARD); Midwest Agribusiness Trade Research and Information Center (MATRIC))
    Abstract: The price-wedge method yields a tariff-equivalent estimate of technical barriers to trade (TBT). An extension of this method accounts for imperfect substitution between domestic and imported goods and incorporates recent findings on trade costs. We explore the sensitivity of this revamped tariff-equivalent estimate to its determinants (substitution elasticity, preference for home good, trade cost, and to the reference data chosen). We use the approach to investigate the ongoing U.S.-Japan apple trade dispute and find that removing the Japanese TBT would yield limited export gains to the United States. We then draw policy implications of our findings.
    Keywords: apple trade, Japan, price wedge, sanitary and phytosanitary (SPS), tariff equivalent, technical barriers to trade (TBT), trade cost, trade dispute.
    JEL: F1 F18 Q17 Q18
    Date: 2005–11
  3. By: Kee, Hiau Looi; Nicita, Alessandro; Olarreaga, Marcelo
    Abstract: The objective of this paper is to provide indicators of trade restrictiveness that include both measures of tariff and non-tariff barriers for 91 developing and developed countries. For each country, we estimate three trade restrictiveness indices. The first one captures the extent to which trade policies at home affect domestic welfare. This follows the work of Anderson and Neary (1992, 1994 and 1996). The second index captures the impact of trade distortions on each country’s import bundle. This follows the work of Anderson and Neary (2003). The last index focuses on market access and summarizes the trade distortions imposed by the rest of the world on each country’s export bundle. All indices are estimated for the broad aggregates of manufacturing and agriculture products. Results suggest that poor countries (and those with the highest poverty headcount) tend to be more restrictive, but they also face the highest trade barriers on their export bundle. This is partly explained by the fact that agriculture protection is generally larger than manufacturing protection. NTBs contribute more than 70 percent on average to world protection, underlying their importance for any study on trade protection.
    Keywords: trade restrictiveness indices
    JEL: F10 F11 F13
    Date: 2006–03
  4. By: Vandenbussche, Hylke; Zanardi, Maurizio
    Abstract: Advocates of antidumping (AD) laws downplay their effects by arguing that the trade flows that are subject to AD are small and their distortions negligible. This paper is the first to counter that notion by quantifying the worldwide effect of AD laws on aggregate trade flows. The recent proliferation of AD laws across countries provides us with a natural experiment to estimate the trade effects of adopting versus using AD laws; differences in the intensity of use among countries with older AD laws allow us to investigate reputation effects. For this purpose, we estimate worldwide trade flows using a gravity equation spanning 21 years (1980-2000) of annual observations. Our estimates confirm that AD effects are not small. Among other findings, new tough users have their aggregate imports depressed by US$15.7bn a year (or 6.7%) as a result of the AD measures they have imposed. For a traditional user like the United States, current AD measures depress annual imports by almost US$20bn on top of the cumulative negative effect of reputation. For some countries, the dampening effects of AD laws on trade flows are found to nearly offset the gains from trade liberalization.
    Keywords: antidumping; gravity equation; trade flows; trade liberalization
    JEL: F13 F14
    Date: 2006–04
  5. By: Broda, Christian; Limão, Nuno; Weinstein, David E
    Abstract: The theoretical debate over whether countries can and should set tariffs in response to export elasticities goes back over a century to the writings of Edgeworth (1894) and Bickerdike (1907). Despite the optimal tariff argument's centrality in debates over trade policy, there exists no evidence about whether countries actually apply it when setting tariffs. We estimate disaggregate export elasticities and find evidence that countries that are not members of the World Trade Organization systematically set higher tariffs on goods that are supplied inelastically. The result is robust to the inclusion of political economy variables and a variety of model specifications. Moreover, we find that countries with higher aggregate market power have on average higher tariffs. In short, we find strong evidence in favour of the optimal tariff argument.
    Keywords: GATT; international trade; optimal tariffs; trade policy; WTO
    JEL: F13 F14 H21
    Date: 2006–03
  6. By: Bazlul Khondker; Mustafa Mujeri; Selim Raihan
    Abstract: This paper examined welfare and poverty impacts of trade liberalization in Bangladesh. By using a computable general equilibrium model based on a social accounting matrix, an empirical investigation of the transmission channels linking trade liberalisation to the rest of the economy was carried out by conducting three simulations. In the first two simulations full tariff removal was accompanied by respective increase in production tax rates and income tax rate to ensure revenue neutrality. Third simulation resembles the actual tariff reforms undertaken in the country. This entailed the decline in both the spread and effective average duty rates, thereby reducing the mean rates and variance. The patterns of welfare losses are progressive for rural households but regressive for urban households in the first two simulations. In the third simulation, a clear regressive pattern is observed amont the urban households but it is ambiguous for the rural households. Rural poverty declined due to tariff-income tax reforms and tariff rationalization but worsened in the case of tariff-production tax reforms. Except for the second simulation, the urban poverty headcount, gap and severity all worsen in other two simulations. This confirms that the benefits of tariff rationalization accrue more to the urban rich households compared to their poored counterparts.
    Keywords: Trade liberalization, Poverty, Bangladesh, Computable General Equilibrium (CGE) Model
    JEL: D33 D58 E27 F13 F14 I32 O15
    Date: 2006
  7. By: Overman, Henry G.; Winters, L Alan
    Abstract: This paper combines establishment level production data with international trade data by port to examine the impact of accession to the EEC on the spatial distribution of UK manufacturing. We use this data to test the predictions from economic geography models of how external trade affects the spatial distribution of employment. Our results suggest that accession changed the country-composition of UK trade and via the port-composition induced an exogenous shock to the economic environment in different locations. In line with theory, we find that better access to export markets and intermediate goods increase employment while increased import competition decreases employment.
    Keywords: economic geography; EEC; UK manufacturing
    JEL: F14 F15 R12
    Date: 2006–03
  8. By: Anderson, Kym; Valenzuela, Ernesto
    Abstract: Four West African nations have demanded the WTO’s Doha Development Agenda include a Cotton Initiative that involves two issues: cutting cotton subsidies and tariffs, and assisting farm productivity growth in Africa. This paper provides estimates of the potential economic impacts of (a) complete or partial cotton subsidies and import tariffs globally and (b) cotton productivity growth through the adoption of genetically modified (GM) cotton varieties. Use is made of the latest version of the GTAP database and model. Our results confirm that – unlike for other agricultural subsidies and tariffs – for cotton it is subsidy reductions rather than tariff cuts that would make by far the largest impact. For Sub-Saharan Africa the potential gains are huge relative to the effects on them of reforming other merchandise trade policies. And they could be more than doubled if that reform provided the cash for farmers to take advantage of the biotechnology revolution and adopt GM cotton varieties. But those potential gains, and the affordability of switching to costly GM seed, depend crucially on the extent to which high-income countries are willing to lower domestic support to their cotton farmers.
    Keywords: computable general equilibrium modeling; cotton biotechnology; economic welfare; GMOs; subsidy and tariff reform
    JEL: D58 F17 Q16 Q17
    Date: 2006–03
  9. By: Helpman, Elhanan
    Abstract: New developments in the world economy have triggered research designed to better understand the changes in trade and investment patterns, and the reorganization of production across national borders. Although traditional trade theory has much to offer in explaining parts of this puzzle, other parts required new approaches. Particularly acute has been the need to model alternative forms of involvement of business firms in foreign activities, because organizational change has been central in the transformation of the world economy. This paper reviews the literature that has emerged from these efforts. The theoretical refinements have focused on the individual firm, studying its choices in response to its own characteristics, the nature of the industry in which it operates, and the opportunities afforded by foreign trade and investment. Important among these choices are organizational features, such as sourcing strategies. But the theory has gone beyond the individual firm, studying the implications of firm behavior for the structure of industries. It provides new explanations for trade structure and patterns of FDI, both within and across industries, and has identified new sources of comparative advantage.
    Keywords: comparative advantage; foreign direct investment; heterogeneity; incomplete contracts; international trade; organization of production
    JEL: D23 F1 F2
    Date: 2006–03
  10. By: J. Paul Dunne (School of Economics, University of the West of England); Lawrence Edwards (School of Economics, University of Cape Town)
    Abstract: This paper provides a comprehensive analysis of the impact of trade on employment in South Africa. Firstly, it considers the correlation between trade liberalisation and factor demand in South African manufacturing during the 1990s. Secondly, it investigates the impact of trade on labour using a Chenery (1979) style decomposition technique, following Edwards (2001a, 2001b, 2005b) and Jenkins (2002). It develops the earlier work by exploring both the indirect and the indirect effects and investigating variations in the regional impact of trade on factor demand during the 1990s. This suggests that technological change accounts for the bulk of jobs lost in manufacturing during the 1990s. To investigate, whether this reflects exogenous technological change or trade-induced technological change requires undertaking an econometric analysis and this explores the impact of trade on technological change through an induced labour demand model. This finds a strong effect of exogenous technological progress but only limited evidence that increased trade flows and trade liberalisation induced improvements in labour productivity.
    Keywords: Trade; technology; employment; industrial panel
    Date: 2006–03
  11. By: N.M. Hung; N.V. Quyen
    Abstract: Consider a small developing economy with a manufacturing sector opened to international trade, and an agricultural sector having limited, not to say any, access to world markets. We modify the Grossman and Helpman's influence-driven model of trade policy formation to allow for an endogenously determined wage rate in a three-sector economy where the manufacturing sector can lobby policy makers for favorable policies. Beside protectionist policies, namely an import tariff or an export subsidy, we show that the owners of the specific factor in agriculture - a non-lobby group - have to bear a consumption tax imposed on their products. This would further strengthen the trade protectionist measure, and imply possibly undesirable general equilibrium repercussions: there will be a reallocation of labor to the manufacturing sector which enjoys an output expansion, an output contraction in the agricultural sector, and a lower workers' "real" income.
    JEL: F13
    Date: 2006
  12. By: Cadot, Olivier; Geoffard, Pierre-Yves; Suwa Eisenmann, Akiko; Verdier, Thierry
    Abstract: The paper studies attitudes toward immigration and trade using an opinion survey of two thousand French individuals. We find that, beyond usual Stolper-Samuelson effects (skilled individuals are more pro-free trade than others, as in other countries) attitudes toward trade and immigration are correlated and both are ideologically loaded. Right-wing affiliation is robustly associated with protectionism. Moreover, right-wing protectionism concerns not just agriculture but appears to be a broader attitude. It may help explain the predominantly anti-trade rhetoric of France's right-wing governments, although outsiders would expect them to pursue more pro-market and pro-free trade policies than left-wing ones.
    Keywords: France; migration; political economy; protectionism; trade
    JEL: F1 F22
    Date: 2006–03
  13. By: Baldwin, Richard
    Abstract: The paper argues that East Asian regionalism is fragile since (i) each nation's industrial competitiveness depends on the smooth functioning of 'Factory Asia' - in particular on intra-regional trade; (ii) the unilateral tariff-cutting that created 'Factory Asia' is not subject to WTO discipline (bindings); (iii) there is no 'top-level management' to substitute for WTO discipline, i.e. to ensure that bilateral trade tensions - tensions that are inevitable in East Asia - do not spillover into region-wide problems due to lack of cooperation and communication. This paper argues that the window of opportunity for East Asian 'vision' was missed; what East Asia needs now is 'management' not vision. East Asia should launch a 'New East Asian Regional Management Effort' with a reinforced ASEAN+3 being the most likely candidate for the job. The first priority should be to bind the region's unilateral tariff cuts in the WTO.
    Keywords: East Asia; management not vision; noodle bowl; regionalism
    JEL: F1 F13 F15
    Date: 2006–03
  14. By: Baldwin, Richard; Robert-Nicoud, Frédéric
    Abstract: This paper explores the impact of trade on growth when firms are heterogeneous. We find that greater openness produces anti-and pro-growth effects. The Melitz-model selection effects raises the expected cost of introducing a new variety and this tends to slow the rate of new-variety introduction and hence growth. The pro-growth effect stems from the impact that freer trade has on the marginal cost of innovating. The balance of the two effects is ambiguous with the sign depending upon the exact nature of the innovation technology and its connection to international trade in goods and ideas. We consider five special cases (these include the Grossman-Helpman, the Coe-Helpman and Rivera-Batiz-Romer models) two of which suggest that trade harms growth; the others predicting the opposite.
    Keywords: dynamic versus static efficiency; heterogeneous firms; trade and endogenous growth
    JEL: F15 F43
    Date: 2006–03
  15. By: Limão, Nuno; Saggi, Kamal
    Abstract: We analyze whether financial compensation is preferable to the current system of dispute settlement in the World Trade Organization that permits member countries to impose retaliatory tariffs in response to trade violations committed by other members. We show that monetary fines are more efficient than tariffs in terms of granting compensation to injured parties when there are violations in equilibrium. However, fines suffer from an enforcement problem since they must be paid by the violating country. If fines must ultimately be supported by the threat of retaliatory tariffs, they fail to yield a more cooperative outcome than the current system. We also consider the use of bonds as a means of settling disputes. If bonds can be posted with a third party, they do not have to be supported by retaliatory tariffs and can improve the negotiating position of countries that are too small to threaten tariff retaliation.
    Keywords: bonds; concessions; dispute settlement; monetary fines; reciprocity; tariffs; WTO
    JEL: F12 F23
    Date: 2006–03
  16. By: Olarreaga, Marcelo; Krivonos, Ekaterina
    Abstract: This paper assesses the impact that a potential liberalization of sugar regimes in OECD countries could have on household labor income and poverty in Brazil. The authors first estimate the extent of price transmission from world markets to 11 Brazilian states to capture the fact that some local markets may be relatively more isolated from changes in world prices. They then simultaneously estimate the impact that changes in domestic sugar prices have on regional wages and employment depending on worker characteristics. Finally, they measure the impact on household income of a 10 percent increase in world sugar prices. Results suggest that workers in the sugar sector and in sugar-producing regions have better employment opportunities and experience larger wage increases. More interestingly, households at the top of the income distribution experience larger income gains due to higher wages, whereas households at the bottom of the distribution experience larger income gains due to movements out of unemployment.
    Keywords: Markets and Market Access,Economic Theory & Research,Agribusiness & Markets,Ag ricultural Trade,Agricultural Industry
    Date: 2006–04–01
  17. By: Anderson, Kym; Jackson, Lee Ann; Valenzuela, Ernesto
    Abstract: This paper provides estimates of the economic impact of initial adoption of genetically modified (GM) cotton and of its potential impacts beyond the few countries where it is currently common. Use is made of the latest version of the GTAP database and model. Our results suggest that by following the lead of China and South Africa, adoption of GM cotton varieties by other developing countries – especially in Sub-Saharan Africa – could provide even larger proportionate gains to farmer and national welfare than in those first-adopting countries. Furthermore, those estimated gains are shown to exceed those from a successful campaign under the WTO’s Doha Development Agenda to reduce/remove cotton subsidies and import tariffs globally.
    Keywords: computable general equilibrium modeling; cotton biotechnology; economic welfare; GMOs; subsidy; tariff reform
    JEL: D58 F17 Q16 Q17
    Date: 2006–03
  18. By: Anderson, Kym; Martin, Will; Valenzuela, Ernesto
    Abstract: The claim by global trade modelers that the potential contribution to global economic welfare of removing agricultural subsidies is less than one-tenth of that from removing agricultural tariffs puzzles many observers. To help explain that result, this paper first compares the OECD and model-based estimates of the extent of the producer distortions (leaving aside consumer distortions), and shows that 75 percent of total support is provided by market access barriers when account is taken of all forms of support to farmers and to agricultural processors globally, and only 19 percent to domestic farm subsidies. We then provide a back-of-the-envelope (BOTE) calculation of the welfare cost of those distortions. Assuming unitary supply and demand elasticities, that BOTE analysis suggests 86 percent of the welfare cost is due to tariffs and only 6 percent to domestic farm subsidies. When the higher costs associated with the greater variability of trade measures relative to domestic support are accounted for, the BOTE estimate of the latter’s share falls to 4 percent. This is close to the 5 percent generated by the most commonly used global model (GTAP) and reported in the paper’s final section.
    Keywords: agricultural protection; computable general equilibrium modeling; economic welfare; trade policy reform
    JEL: C68 D58 Q17 Q18
    Date: 2006–03
  19. By: Joachim Wagner (Institute of Economics, University of Lüneburg)
    Abstract: While the role of exports in promoting growth in general, and productivity in particular, has been investigated empirically using aggregate data for countries and industries for a long time, only recently have comprehensive longitudinal data at the firm level been used to look at the extent and causes of productivity differentials between exporters and their counterparts which sell on the domestic market only. This papers surveys the empirical strategies applied, and the results produced, in 45 microeconometric studies with data from 33 countries that were published between 1995 and 2004. Details aside, exporters are found to be more productive than non-exporters, and the more productive firms self-select into export markets, while exporting does not necessarily improve productivity.
    Keywords: Exports, productivity, literature survey, micro data
    JEL: F14 D21
    Date: 2005–03–02
  20. By: CRAMPES, Claude; HOLLANDER, Abraham; MACDISSI, Charbel M.
    Abstract: This paper examines the use of bundling by a firm that sells in two national markets and faces entry by parallel traders. The firm can bundle its main product, - a tradable good- with a non-traded service. It chooses between the strategies of pure bundling, mixed bundling and no bundling. The paper shows that in the low-price country the threat of grey trade elicits a move from mixed bundling, or no bundling, towards pure bundling. It encourages a move from pure bundling towards mixes bundling or no bundling in the high-price country. The set of parameter values for which the profit maximizing strategy is not to supply the low price country is smaller than in the absence of bundling. The welfare effects of deterrence of grey trade are not those found in conventional models of price arbitrage. Some consumers in the low-price country may gain from the threat of entry by parallel traders although they pay a higher price. This is due to the fact that the firm responds to the threat of arbitrageurs by increasing the amount of services it puts in the bundle targeted at consumers in that country. Similarly, the threat of parallel trade may affect some consumers in the hight-price country adversely.
    Keywords: rallel trade, bundling, arbitrage
    JEL: F12 L12 L41
    Date: 2006
  21. By: Fumagalli, Eileen; Vasconcelos, Helder
    Abstract: This paper proposes a sequential merger formation game with cost synergies to study how trade policy can influence firms' choice between domestic and cross-border mergers in an international Cournot oligopoly. We find that the equilibrium market structure depends heavily on: (i) the level of trade costs; and (ii) whether or not active antitrust authorities are incorporated within the sequential merger game. In addition, it is shown that whenever mergers occur in equilibrium, they occur in waves and the merger wave comprises at least one cross-border merger. We also analyze how the equilibrium market structures are affected by the presence of lobbying efforts.
    Keywords: endogenous mergers; merger waves; tariff-jumping FDI
    JEL: F10 F13 L13 L41
    Date: 2006–03
  22. By: Eduardo Borensztein (InterAmerican Development Bank); Ugo Panizza (InterAmerican Development Bank)
    Abstract: This paper uses a difference-in-difference methodology similar to the one originally proposed by Rajan and Zingales (1998) to test whether defaulting hurts the more export-oriented industries. Strong support for this hypothesis was found, but contrary to the findings of previous studies, our estimations suggest that the effect of defaults is short-lived.
    Keywords: Sovereign Debt; Default; Trade
    JEL: F34 F10
    Date: 2006–03
  23. By: John C. Bluedorn (Dept of Economcis, University of Oxford)
    Abstract: Hurricanes in the Caribbean and Central-America represent a natural experiment to test the intertemporal approach to current account determination. The intertemporal approach allows for the possibility of intertemporal trade, via international borrowing. Previous tests of intertemporal current account (ICA) models have typically relied upon the identification of shocks in a VAR framework with which to trace the current account response. Hurricane shocks represent exactly the kind of temporary, country-specific shock required by the theory, allowing for the intertemporal current account response to be estimated without recourse to a VAR shock decomposition. Using data on the economic damages attributable to a hurricane, I estimate the economy's response to a hurricane-induced capital shock within a fixed effects panel model. The current account response qualitatively conforms to the S-shaped response predicted by the theory, indicating that countries are engaging in intertemporal trade. However, the exact timing and magnitude of the response differs from a standard ICA model's smooth behavior. A hurricane which destroys capital valued at one year's GDP pushes the current account over GDP into deficit by 5 percentage points initially. 3-8 years after such a hurricane, the current account over GDP moves into surplus at 2.7 percentage points.
    Keywords: hurricanes, natural experiment, current account dynamics
    JEL: F32 F41
    Date: 2005–05–01
  24. By: Joachim Wagner (Institute of Economics, University of Lüneburg)
    Abstract: Using a knowledge production framework and a rich set of plant level data this study demonstrates that in Germany firms that are active on international markets as exporters or foreign direct investors do generate more new knowledge than firms which sell on the national market only. These differences are not only due to a larger firm size, or different industries, or the use of more researchers in these firms, but due to the fact these globally engaged firms learn more from external sources, too. The importance of these knowledge sources varies with the type of innovation. These results, which are broadly in line with the findings of a recent study using UK firm level data, can help to explain the strong positive correlation between productivity and international activities of firms. Firms that are active on markets beyond the national borders generate higher levels of new knowledge that feed into higher productivity.
    Keywords: Exports, foreign direct investment, knowledge production function, Germany
    JEL: F14 F23 O31
    Date: 2006–03–01
  25. By: Causa, Orsetta; Cohen, Daniel
    Abstract: This Discussion Paper analyses 23 industrial sector in a sample of 51 developed and developing countries. It distinguishes the contribution of five factors: private capital, infrastructure, education, trade integration, and net efficiency. Several relatively small handicaps, combined multiplicatively, can make a country poor or very poor. In average, the average productivity of the industrial sector is indeed the product of about five times 70%. But 0.70 to the power of five is 17%. The least productive country in the sample, Bangladesh, has a productivity level worth about 2% of that of the richest nations. From this perspective, industry is not much different from aggregate GDP such as analysed in Cohen and Soto (2004) where a similar picture emerged The paper then sheds light on the effect of TFP differential between industry and GDP at large on the relative price of manufactured goods. We show that productivity differentials explain about half of the relative price discrepancy. It then analyses the extent to which this is an explanation of the Lucas Paradox. So far as manufacturing is concerned the paper highlights an "anti-Lucas" paradox whereby the capital output ratio is higher in poor countries than in rich countries. This result tends to deflate the theories according to which fear of expropriation is the critical explanation of the low level of capital in the economy at large.
    Keywords: industry; Lucas Paradox; productivity
    JEL: F15 L16
    Date: 2006–03
  26. By: Malik, Adeel; Temple, Jonathan
    Abstract: This paper examines the structural determinants of output volatility in developing countries, and especially the roles of geography and institutions. We investigate the volatility effects of market access, climate variability, the geographic predisposition to trade, and various measures of institutional quality. We find an especially important role for market access: remote countries are more likely to have undiversified exports and to experience greater volatility in output growth. Our results are based on Bayesian methods that allow us to address formally the problem of model uncertainty and to examine robustness across a wide range of specifications.
    Keywords: Bayesian model averaging; geography; institutions; volatility
    JEL: E30 O11
    Date: 2006–02
  27. By: Joachim Wagner (Institute of Economics, University of Lüneburg)
    Abstract: This paper presents the first empirical test with German establishment level data of a hypothesis derived by Helpman, Melitz and Yeaple in a model that explains the decision of heterogeneous firms to serve foreign markets either trough exports or foreign direct investment: only the more productive firms choose to serve the foreign markets, and the most productive among this group will further choose to serve these markets via foreign direct investments. Using a non-parametric test for first order stochastic dominance it is shown that, in line with this hypothesis, the productivity distribution of foreign direct investors dominates that of exporters, which in turn dominates that of national market suppliers.
    Keywords: Exports, foreign direct investment, productivity, heterogeneous firms, stochastic dominance
    JEL: F14 F23 D21
    Date: 2005–03–10
  28. By: Toh Mun Heng (Department of Business Policy, Faculty of Business Administration, National University of Singapore, Singapore)
    Abstract: In this article, we explore whether regional economic cooperation in the form of growth triangle, made popular during the late 1980s, can continue to be relevant in the face of more formal arrangements as in free trade agreements (FTAs) and other bilateral ‘closer economic partnerships’ (CEPs) initiatives in the recent years. In particular, the discussion is focussed on the Indonesia-Malaysia-Singapore growth triangle (IMS-GT) which is the pioneering arrangement in Southeast Asia. IMS-GT continues to be a successful mode of cooperation among the three countries and will remain a key and subtle framework for regional economic collaboration amidst the plethora of initiatives relating to FTAs and CEPs. This paper put forth a thesis that GT is part of a spectrum of regional cooperation efforts with convergence interest to be in synchrony with the global value chain. As long as the formation and implementation of GT contribute to the creation of value, it can co-exist with more formal arrangements like the FTAs and CEPs.

This nep-int issue is ©2006 by Martin Berka. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.