nep-int New Economics Papers
on International Trade
Issue of 2006‒05‒06
fourteen papers chosen by
Martin Berka
Massey University

  1. What Can Account for Fluctuations in the Terms of Trade? By Marianne Baxter; Michael A. Kouparitsas
  2. Import Protection as Export Destruction By Hiroyuki Kasahara; Beverly Lapham
  3. Trends in tariff reforms and trends in wage inequality By Porto, Guido G.; Galiano, Sebastian
  4. Trade and Labor Outcomes in Latin America's Rural Areas: A Cross-Household Surveys Approach By Leonardo Gasparini; Federico Gutiérrez; Guido G. Porto
  5. Inequality, Nonhomothetic Preferences, And Trade: A Gravity Approach By Vitor Trindade; Muhammed Dalgin; Devashish Mitra
  6. Trade Structure, Industrial Structure and International Business Cycles By Marianne Baxter; Michael A. Koupritsas
  7. Trade, Urban Systems, and Labor Markets By Abdel-Rahman, Hesham M.
  8. Trade in Capital Goods By Jonathan Eaton; Samuel Kortum
  9. Technology, Trade, and Growth: A Unified Fremework By Jonathan Eaton; Samuel Kortum
  10. Productivity differentials in the U.S. and EU distributive trade sector: statistical myth or reality By Timmer, Marcel; Inklaar , Robert
  11. A Search Model of Centralzied and Decentralized Trade By Jianjun Miao;
  12. Power Inside the Firm and the Market: A General Equilibrium Approach By Dalia Marin; Thierry Verdier
  13. Skill-biased Technology Adoption: Evidence for the Chilean manufacturing sector By Olga M. Fuentes; Simon Gilchrist
  14. A Re-examination of the Exchange Rate Disconnect Puzzle: Evidence from Japanese Firm Level Data By Robert Dekle; Hyeok Jeong; Heajin Ryoo

  1. By: Marianne Baxter (Institute for Economic Development, Boston University); Michael A. Kouparitsas (Federal Reserve Bank of Chicago)
    Keywords: Terms of Trade; International business cycles
    JEL: E32 F41
  2. By: Hiroyuki Kasahara (University of Western Ontario); Beverly Lapham (Queen's University)
    Abstract: This paper develops an open economy model with heterogeneous final goods producers who simultaneously choose whether to export their goods and whether to use imported intermediates. The model highlights mechanisms whereby import policies affect aggregate productivity, resource allocation, and industry export activity along both the extensive and intensive margins. Using the theoretical model, we develop and estimate a structural empirical model that incorporates heterogeneity in productivity and shipping costs using Chilean plant-level manufacturing data. The estimated model is consistent with the key features of the data regarding productivity, exporting, and importing. We perform a variety of counterfactual experiments to assess quantitatively the positive and normative effects of barriers to trade in import and export markets. These experiments suggest that there are substantial aggregate productivity and welfare gains due to trade. Furthermore, because of import and export complementarities, policies which inhibit the importation of foreign intermediates can have a large adverse effect on the exportation of final goods.
    Keywords: exporting; importing; firm heterogeneity; aggregate productivity; resource allocation
    JEL: O40 F12 E23 C23
    Date: 2006
  3. By: Porto, Guido G.; Galiano, Sebastian
    Abstract: The authors provide new evidence on the impacts of trade reforms on wages and wage inequality in developing countries. While most of the current literature on the topic achieves identification by comparing outcomes before and after one episode of trade liberalization across industries, they propose a stronger identifying strategy. The authors explore the recent historical record of policy changes adopted by Argentina: from significant protection in the early 1970s, to the first episode of liberalization during the late 1970s, back to a slowdown of reforms during the 1980s, to the second episode of liberalization in the 1990s. These swings in trade policy comprise broken trends in trade reforms that they can compare with observed trends in wages and wage inequality. After setting up unusual historical data sets of trends in tariffs, trends in wages, and trends in wage inequality, the evidence supports two well-known hypotheses: trade liberalization, other things being equal, (1) has reduced wages, and (2) has increased wage inequality.
    Keywords: Free Trade,Economic Theory & Research,Trade Policy,Export Competitiveness,Labor Markets
    Date: 2006–05–01
  4. By: Leonardo Gasparini (Centro de Estudios Distributivos, Laborales y Sociales (CEDLAS) - Universidad Nacional de La Plata); Federico Gutiérrez (Centro de Estudios Distributivos, Laborales y Sociales (CEDLAS) - Universidad Nacional de La Plata); Guido G. Porto (Development Research Group, The World Bank.)
    Abstract: This paper explores the potential link between trade and labor outcomes in rural areas in Latin America by estimating cross household-survey regression models with microdata from 60 Latin American household surveys and country aggregate data. We find a significant positive association between labor outcomes in rural areas and some measures of international trade, in particular exports, trade as a share of GDP, and the price of exports. International trade has been associated with higher wages and labor income in rural areas, in particular for those workers located in the bottom quantiles of the conditional wage distribution. Instead, our results suggest that all individuals in rural areas benefit about the same due to higher export prices. Results for urban areas are rarely statistically significant.
    Keywords: trade, wages, labor, rural, Latin America
    JEL: F02 F16 J31 J43
    Date: 2005–07
  5. By: Vitor Trindade (Department of Economics, University of Missouri-Columbia); Muhammed Dalgin; Devashish Mitra
    Abstract: We construct the first direct classification of goods as luxuries or necessities that is compatible with international trade data. We then use it to test an idea that has not been tested directly in the literature: countries’ income distributions are important determinants of their import demand, and in particular of the difference in their import demands of luxuries versus necessities. We interpret this result with the aid of a model in which preferences are nonhomothetic, thus relaxing a long-held and standard – but empirically dubious – assumption in the theory of international trade. Our model is strongly borne out by the results: imports of luxuries increase with importing country’s inequality, and imports of necessities decrease with it. Our calculations imply that if income distribution in the United States became as equal as in Canada, the US would import about 9 – 13% less in luxury goods and 13 – 19% more in necessity goods.
    Keywords: nonhomothetic tastes, gravity equation, inequality, luxuries, necessities
    JEL: D12 F12
    Date: 2006–05–26
  6. By: Marianne Baxter (Institute for Economic Development, Boston University); Michael A. Koupritsas (Federal Reserve Bank of Chicago)
  7. By: Abdel-Rahman, Hesham M. (University of New Orleans)
    Abstract: This paper investigates the impacts of free trade on the structure of urban systems, skill distribution, and income disparities. The paper proposes a model that integrates international trade theory and the theory of urban system. This is done in a two sector, spatial general equilibrium model of a North-South trade. Each country is populated with a continuum of unskilled workers with heterogeneous potential ability. Through differential training costs, workers with different potential ability can achieve the same productivity. Workers can acquire a skill by investing in training. Thus, skill distribution in both countries is determined endogenously in the model through self-selection. The economy produces a final good with the use of a high-tech intermediate input and unskilled workers. Horizontally differentiated skilled workers produce the high-tech intermediate input. Cities are formed in this model as a result of investment in setup cost, i.e., public infrastructures. I characterize two different types of spatial equilibria: a closed-economy equilibrium, in which each country consists of a system of cities without trade, and a free-trade equilibrium, in which we allow for trade between cities and countries.
    Keywords: Potential ability, Training, Cities
    JEL: R13 R51 F16
    Date: 2005–11
  8. By: Jonathan Eaton (Institute for Economic Development, Boston University); Samuel Kortum (Institute for Economic Development, Boston University)
    JEL: F43 F21 O33 O47
  9. By: Jonathan Eaton (Institute for Economic Development, Boston University); Samuel Kortum (Institute for Economic Development, Boston University)
    JEL: F11 F17 O31 O33 O40
  10. By: Timmer, Marcel; Inklaar , Robert (Groningen University)
    Abstract: In this paper we asses whether productivity growth differentials between the U.S. and Europe in the distributive trade sector are real or mainly a statistical myth. New estimates of retail trade productivity are constructed, taking into account purchase prices of goods sold. We also adjust U.S. wholesale productivity growth for the upward bias due to the use of constant-quality prices of ICT-goods sales. We find that multifactor productivity growth in the U.S. has been higher than in Europe after 1995, but that this lead is smaller than suggested by national accounts based estimates. This finding is robust for various productivity measurement models.
    Date: 2005
  11. By: Jianjun Miao (Institute for Economic Development, Boston University);
    Keywords: searching, matching and bargaining, bid-ask spread, liquidity, welfare, Walrasian equilibrium
  12. By: Dalia Marin (Department of Economics, Ludwigstr. 28, 80539 Munich, phone: +49-89-2180-2446, fax: +49-89-2180-6227, e-mail address:; Thierry Verdier (DELTA, Paris)
    Abstract: Recent years have witnessed an enormous amount of reorganization of the corporate sector in the US and in Europe. This paper examines the role of market competition for this trend in corporate reorganization. We find that at intermediate levels of competition the CEO of the corporation decides to have less power inside the firm and to delegate control to lower levels of the firms’ hierarchy. Thus, workers empowerment and the move to flatter firm organizations emerge as an equilibrium when competition is not too tough and not too weak. The model predicts merger waves or waves of outsourcing when countries become more integrated into the world economy as the corporate sector reorganizes in response to an increase in international competition.
    Keywords: monopolistic competition, international trade, corporate reorganisation, flattening firm hierarchies
    JEL: F12 D23 L22 L1
    Date: 2001–12
  13. By: Olga M. Fuentes (Institute for Economic Development,Boston University); Simon Gilchrist (Institute for Economic Development,Boston University)
    Abstract: We examine the evolution of the demand for skilled workers relative to unskilled workers in the Chilean manufacturing sector following Chile’s liberalization of trade in the late 1970’s. Following such trade reforms, the standard Heckscher-Olin model predicts that a low labor-cost country like Chile should experience an increased demand for low skilled workers relative to high skilled workers. Alternatively, if trade liberalization is associated with the adoption of new technologies, and technology is skill-biased, the relative demand for skilled workers may rise. Using a newly available plant-level data set that spans the sixteen year period 1979-1995, we find that the relative demand for skilled workers rose sharply during the 1979-1986 period and then stabilized. The sharp increase in demand for skilled workers coincided with an increased propensity to adopt new technologies as measured by patent usage. Plant-level analysis of labor demand confirms a significant relationship between the relative demand for skilled workers and technology adoption as measured by patent usage and other technology indicators. Our results suggest that skill-biased technological change is a significant determinant of labor demand and wage structures in developing economies.
  14. By: Robert Dekle; Hyeok Jeong; Heajin Ryoo
    Abstract: The empirical literature examining aggregate data has generally found small or insignificant effects of exchange rate fluctuations on export volumes. This lack of association between real quantities, such as export volumes and the exchange rate is the so-called “exchange rate disconnect puzzle.” Using firm level data, however, the relationship between export volumes and exchange rates turns to significantly negative. This paper attempts to reconcile these aggregate and firm level findings, using firm level data from Japan. We estimate a simple microeconomic model of exports to show that an appreciation of the exchange rate reduces export volumes at the firm level. After consistent aggregation, the relationship still remains significant at aggregate levels. However, we show that the omission of some key productivity variables, or ignoring the distributions of heterogeneous firm level characteristics biases the elasticity of exports to exchange rates toward zero.

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