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on International Trade |
| By: | Andrew Bernard; Stephen Redding; Peter Schott |
| Abstract: | We develop a methodology for identifying departures from relative factor price equality across regions that is valid under general assumptions about production, markets and factors. Application of this methodology to the United States reveals substantial and increasing deviations in relative skilled wages across labor markets in both 1972 and 1992 . These deviations vary systematically with labor markets’ industry structure both in cross section and over time. |
| Keywords: | Factor Price Equality, Regional Wages, Neoclassical Trade Theory, Labor Market Areas |
| JEL: | F16 J30 R23 C14 |
| Date: | 2005–10 |
| URL: | http://d.repec.org/n?u=RePEc:cen:wpaper:05-21&r=int |
| By: | Karacaovali, Baybars |
| Abstract: | There is a growing literature that investigates the effect of trade liberalization on productivity. Nearly all such studies assume that trade policy is determined independently of productivity, hence it is exogenous. The author shows that this assumption is not valid in general, both theoretically and empirically, and that researchers may be underestimating the positive effect of liberalization on productivity when they do not account for the endogeneity bias. On the theory side, he demonstrates that under a standard political economy model of trade protection, productivity directly influences tariffs. Moreover, this productivity-tariff relationship partly determines the extent of liberalization across sectors even in the presence of a large exogenous unilateral liberalization shock that affects all sectors. The link between productivity and tariffs is maintained after the author includes in his political economy model a learning-by-doing motive of protection, which also serves as the source of liberalization. On the empirical side, he examines total factor productivity (TFP) estimates obtained at the firm level for Colombia between 1983 and 1998, and finds that more productive sectors receive more protection within this period. In estimating the effect of productivity on tariffs, he controls for the endogeneity of the two main right-hand-side variables-the inverse import penetration to import demand elasticity ratio and productivity-by using materials prices, the capital to output ratio, a measure of scale economies, and the TFP of the upstream industries as robust instruments. The author also accounts for the large trade liberalization between 1990 and 1992, and finds that the sectors with a higher productivity gain are liberalized less. Finally, he illustrates a system of equations estimation and shows that the positive impact of liberalization on productivity grows stronger when corrected for the endogeneity bias. |
| Keywords: | Economic Theory & Research,Free Trade,Political Economy,Trade Policy,Trade Law |
| Date: | 2006–05–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:3925&r=int |
| By: | Rolf Maier |
| Abstract: | This paper analyzes empirically the impact of trade policy and sector specific openness on pro-poor growth in a cross-country approach to answer the question, whether the poorest 20 and 20 to 40 percent benefit from trade openness. To capture this issue, we estimate the distribution effect of eight different openness indicators, six adjusted trade sector indicators (agricultural raw materials exports and imports, food exports and imports, manufactures exports and imports) and two tariff indicators (export duties and imports duties). In addition, we estimate the total effect, i.e. the distribution and growth effect, to analyze potential trade-offs between the impact of trade liberalization on poverty via overall economic growth and distribution. To test the poverty effects, we collect an irregular and unbalanced panel of time-series cross-country data on the first and second quintile share in 72 countries for the period 1971 to 1999 and apply two econometric specifications, a growth equation and a system GMM equation. We estimate the poverty effects of trade policy for all countries and, separately, for developing/transitional and industrial countries due to considerable differences in economic structure. Finally, we estimate poverty effects of trade liberalization with respect to the level of the countries’ development. Combining empirical findings of the system GMM estimation for both the distribution and total effect, estimation results suggest the importance of sector specific trade policy for the poorest 20 and 20 to 40 percent. First, liberalization in agricultural raw material exports is very important for the poorest 40 percent of low income developing countries due to both the distribution and total effect. In addition, liberalizing imports in agricultural raw materals is highly positively related to the mean income of the poor without changing the distribution. Second, trade reforms in food exports affect negatively the mean income of the poorest 40 percent in low income developing countries through the growth effect. However, higher food imports are associated with positive distribution effects, but without total effects on the poorest 20 percent in low income developing countries. Third, promotion of manufactures exports lead to a positive total effect on the poorest 40 percent in developing countries via the growth effect, while trade reforms in manufactures imports are never relevant. Finally, reduced export and import duties affect positively the mean income of the poorest 40 percent in low income developing countries, an effect primarily driven by the growth effect. Findings for agriculture exports, food exports, export and import duties, however, are only relevant if we exploit information on both the cross-country and within-country variation of the income of the poor in a system GMM estimator. In addition, results of the growth equation suggest positive total effects of agriculture imports on the poorest 20 and 20 to 40 percent in development countries driven by the growth effect alone. Thus, empirical findings suggest the following policy recommendations with respect to poverty-reducing trade reforms in low-income developing countries. While results are not always consistent between the growth equation and the system GMM estimation, liberalization of agricultural raw material exports and imports seems to be the most promising approach. On the other hand, liberalization in food markets and manufactures imports are not associated with poverty alleviation in low- income developing countries. Finally, a promotion of manufactures exports and a reduction of export and import duties seem to increase mean income of the poorest 40 percent in low-income developing countries only via the growth effect. |
| Keywords: | Pro-Poor Growth, Trade Policy |
| JEL: | F1 F2 |
| Date: | 2005–04–21 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpit:0504007&r=int |
| By: | Kevin H. O'Rourke; Alan M. Taylor |
| Abstract: | Does democracy encourage free trade? It depends. Broadening the franchise involves transferring power from non-elected elites to the wider population, most of whom will be workers. The Hecksher-Ohlin-Stolper-Samuelson logic says that democratization should lead to more liberal trade policies in countries where workers stand to gain from free trade; and to more protectionist policies in countries where workers will benefit from the imposition of tariffs and quotas. We test and confirm these political economy implications of trade theory hypothesis using data on democracy, factor endowments, and protection in the late nineteenth century. |
| JEL: | F11 F13 N70 |
| Date: | 2006–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12250&r=int |
| By: | J. Bradford Jensen; Andrew Bernard; Peter Schott |
| Abstract: | This paper provides an integrated view of globally engaged U.S. firms by exploring a newly developed dataset that links U.S. international trade transactions to longitudinal data on U.S. enterprises. These data permit examination of a number of new dimensions of firm activity, including how many products firms trade, how many countries firms trade with, the characteristics of those countries, the concentration of trade across firms, whether firms transact at arms length or with related parties, and whether firms import as well as export. Firms that trade goods play an important role in the U.S., employing more than a third of the U.S. workforce. We find that the most globally engaged U.S. firms, i.e. those that both export to and import from related parties, dominate U.S. trade flows and employment at trading firms. We also find that firms that begin trading between 1993 and 2000 experience especially rapid employment growth and are a major force in overall job creation. |
| Keywords: | Exporters, Importers, Multinationals, Related-Party Trade |
| JEL: | F23 |
| Date: | 2005–10 |
| URL: | http://d.repec.org/n?u=RePEc:cen:wpaper:05-20&r=int |
| By: | Rönnbäck, Klas (Department of Economic History, School of Business, Economics and Law, Göteborg University) |
| Abstract: | Sugar was of the utmost importance for the development of a transatlantic trade during the early modern era. This working paper explores the impact of institutions and institutional changes of the colonial trade in sugar focusing on one country on the European semi-periphery, namely Sweden. Through protectionist policies, Swedish merchants were able to catch a significant share of the Baltic trade in colonial goods, despite the country having no colonies of its own. This in turn enabled a diversification of the sources of colonial goods. Trade in sugar became highly flexible during the period, rapidly changing in response to a changing international market. Protectionist policies also enabled the development of a domestic sugar manufacture, which flourished during the late 18th and early 19th century. When Swedish trade policy was liberalized around the 1850s, the domestic industry went through hard times from the international competition. The introduction of sugar beet would however have even more far-reaching consequences for the international trade in sugar. Swedish sugar imports collapsed by more than 98 per cent in less than ten years when domestic production of sugar beet had gotten off to a start at the end of the 19th century. The preliminary conclusions form the first output from the work on a thesis concerned with the trade in colonial goods of actors in the European semi-periphery. One future aim is to compare the colonial trade in sugar of Sweden and Denmark. <p> |
| Keywords: | Economic History; Mercantilism; Protectionism; Colonialism; Colonial trade; Transatlantic trade; Colonial goods; Sugar; Sweden |
| JEL: | F13 F54 N43 N73 |
| Date: | 2006–05–31 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:gunhis:0004&r=int |
| By: | J. Bradford Jensen; Andrew Bernard; Peter Schott |
| Abstract: | This paper examines the role of international trade in the reallocation of U.S. manufacturing within and across industries from 1977 to 1997. Motivated by the factor proportions framework, we introduce a new measure of industry exposure to international trade that focuses on where imports originate rather than on their overall level. We find that plant survival and growth are negatively associated with industry exposure to low-wage country imports. Within industries, we show that manufacturing activity is disproportionately reallocated towards capital-intensive plants. Finally, we provide the first evidence that firms adjust their product mix in response to trade pressures. Plants are more likely to switch industries when exposure to low-wage countries is high. |
| Keywords: | Low-Wage Country Import Competition, Manufacturing Plant, Comparative Advantage |
| JEL: | F11 F14 L25 L60 |
| Date: | 2005–10 |
| URL: | http://d.repec.org/n?u=RePEc:cen:wpaper:05-19&r=int |
| By: | Amina Lahrèche-Révil (University of Picardie); Juliette Milgram (Department of Economic Theory and Economic History, University of Granada.) |
| Abstract: | Compared to the new European members (NEM) and to the new candidate countries, the Middle-East and North African (MENA) countries are a very heterogeneous and fragmented EU frontier. As far as monetary issues are concerned, exchange rate regimes are very different and bilateral exchange rates quite volatile. Moreover, weak trade integration and generalized capital controls constitute major obstacles to economic and financial integration. Existing works yet suggest that anchoring to the euro would undoubtedly be the best exchange-rate strategy for most MENA countries. Monetary integration and trade integration are interdependent. This is especially the case when trade flows are sensitive to the volatility of exchange rates or to movements in relative prices. The objective of this paper is to evaluate the potential of monetary integration in the South Mediterranean area, in a context of trade liberalization and of a strong orientation of trade flows towards the EU. The empirical part of the paper would rely on a gravity equation of trade which would include exchange rates volatility and relative prices, in order to gauge the impact of de facto exchange-rate and monetary conditions on trade integration. The sample of countries is large (OECD, NEM, MENA and Asian countries) in order both to have robust estimates and to investigate whether the MENA countries exhibit a specific sensitivity of trade flows to exchange-rate volatility and exchange-rate misalignments. The impact of the competitiveness of third countries will also be investigated. This latter issue is especially important, though seldom assessed, when it comes to the potential trade-diverting effect of the latest EU enlargement on MENA trade wit the EU. The gravity setting also allows simulating the consequences for the trade of MENA countries of a deeper monetary integration, by comparing the impact on trade of a regional monetary integration and of a euro peg. |
| Keywords: | Exchange rate regime, trade, regional integration, Euro, MENA |
| JEL: | F15 F31 F33 |
| Date: | 2006–05–31 |
| URL: | http://d.repec.org/n?u=RePEc:gra:wpaper:06/07&r=int |
| By: | Evdokia Moïsé |
| Abstract: | Annex D of the July 2004 Decision of the WTO General Council indicates that "the principle (of special and differential treatment for developing and least-developed countries) should extend beyond the granting of traditional transition periods for implementing commitments. In particular, the extent and the timing of entering into commitments shall be related to the implementation capacities of developing and least-developed Members." The objective of this study is to offer reflections on how special and differential treatment for trade facilitation may be shaped by the cost implications of measures included in the future agreement. It is based on findings of OECD work on the costs of trade facilitation measures, which confirms that different countries - even at an equivalent level of development - face different situations and present differing implementation capacities, and points to the relative complexity of implementation of the different measures proposed for inclusion in a future trade facilitation agreement. |
| Keywords: | developing countries, capacity building, benefits, costs, trade facilitation, special and differential treatment, least developed countries, implementation |
| Date: | 2006–03–28 |
| URL: | http://d.repec.org/n?u=RePEc:oec:traaab:32-en&r=int |
| By: | Katja Funke (International Monetary Fund, 700 19th Street, N.W., Washington, D. C. 20431, USA.); Christiane Nickel (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.) |
| Abstract: | This paper analyses the empirical relationship between fiscal policy and the trade account. Research prior to this paper did not consider that the components of private and public demand in the import demand equation exhibit different elasticities. Using pooled mean group estimation for annual panel data of the G7 countries for the years 1970 through 2002, we provide empirical evidence that the composition of overall demand – i.e. the distribution among public demand, private demand and export demand – has an impact on the magnitude of the trade account deficit. |
| Keywords: | Fiscal policy, trade account, trade elasticities, panel cointegration. |
| JEL: | F32 E62 F41 |
| Date: | 2006–05 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20060620&r=int |
| By: | David Rigby; Sebastien Breau |
| Abstract: | Over the past twenty-five years, earnings inequality has risen dramatically in the US, reversing trends of the preceding half-century. Growing inequality is closely tied to globalization and trade through the arguments of Heckscher-Ohlin. However, with only few exceptions, empirical studies fail to show that trade is the primary determinant of shifts in relative wages. We argue that lack of empirical support for the trade-inequality connection results from the use of poor proxies for worker skill and the failure to control for other worker characteristics and plant characteristics that impact wages. We remedy these problems by developing a matched employer-employee database linking the Decennial Household Census (individual worker records) and the Longitudinal Research Database (individual manufacturing establishment records) for the Los Angeles CMSA in 1990 and 2000. Our results show that trade has a significant impact on wage inequality, pushing down the wages of the less-skilled while allowing more highly skilled workers to benefit from exports. That impact has increased through the 1990s, swamping the influence of skill-biased technical change in 2000. Further, the negative effect of trade on the wages of the less-skilled has moved up the skill distribution over time. This suggests that over the long-run, increasing levels of education may not insulate more skilled workers within developed economies from the impacts of trade. |
| Date: | 2006–04 |
| URL: | http://d.repec.org/n?u=RePEc:cen:wpaper:06-12&r=int |
| By: | Joachim Wagner |
| 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: | 2006–05 |
| URL: | http://d.repec.org/n?u=RePEc:esi:egpdis:2006-15&r=int |
| By: | John H Munro |
| Abstract: | A recurrent and indeed persistent problem in European economic history – a veritable deus ex machina -- from medieval to modern times, is Europe’s supposed ‘balance of payments’ problem in trade with the ‘East’. This supposed problem has often been couched in Mercantilist overtones: namely, that export of supposedly large volumes of precious metals, especially, silver to conduct trade with, first the Levant, and then with the rest of Asia meant a serious drainage of wealth from western Europe. This seems to be particularly true in the debate about the late-medieval ‘Great Depression’ in which some contend that this balance of payments ‘deficit’ led to monetary contraction, deflation, and then economic depression. This paper, while not denying periodic problems of monetary contraction and indeed deflation, provides a non-Mercantilist perspective on not just European but global trade from the fourteenth to early eighteenth centuries. It offers the following related theses: (1) That late-medieval monetary contraction was far more related to falling outputs of mined silver and to reductions in the income-velocity of coined money and the related problem of hoarding, the roots of which were the growth of international warfare from the 1290s, significantly financed by coinage debasements; and together they provided serious barriers to the international flow of specie and bullion, and indeed to the emergence of bullionist philosophies, which are the very core of Mercantilism. (2) That, insofar as such monetary contractions did lead to deflation, that deflation, in augmenting the purchasing power of silver (gram for gram), provided the profit motive for the technological solutions to this very same problem: namely, innovations in both mechanical and chemical engineering that produced the South German silver-copper mining boom, which quintupled Europe’s silver supplies from the 1460s to the 1540s, when even cheaper supplies of silver were arriving from the Spanish Americas. (3) That South German silver-copper mining boom, controlled by German merchant bankers who also controlled the now thriving fustian-textile (linen-cotton) industry, had two related consequences: (a) it was a major factor in the revival and expansion of the European economy in general and the growth of the Antwerp market in particular, via new transcontinental trading routes from Venice through Germany to the Brabant Fairs, based on a tripod of English woollens, South German metals, and Portuguese spices. (b) at the same time, it promoted a great expansion in Venetian trade with the Levant, to acquire not only Asian spices but also large quantities of Syrian cotton to feed the booming German fustians industry. (4) While the 15th-century Venetian trade with the Levant did indeed require large amounts of silver, perhaps enough to pay for two thirds of goods acquired in the Levant, the 16th century commerce with not just the Levant but the far larger Ottoman Empire benefited from a very new trade: the exports of fine quality Venetian woollens. This paper examines the reasons for both the rise and fall of the Venetian cloth industry (5) While traditional explanations for the rapid decline of the Venetian cloth industry in the 17th century have focused on Venice’s own ‘internal faults’, this paper offers an alternative explanation: how England’s new Levant Company and the English cloth industries so successfully gained a major share of Ottoman and Persian markets, at the direct expense of Venice: through a combination of diplomacy and superior naval technology. Their success meant that even less silver was required to conduct this trade with the Ottoman Empire, than had been true for Venice. (6) A further major factor in the decline of Venice in the 17th century was the final loss of the Asian spice trades, which had involved close Venetian ties with the Ottomans, to the Dutch and the English, who succeeded where the Portugese had failed. That story in turn allows us, with much more ample data, to examine the nature of vastly larger ‘balance of payments deficits’, so that as much as 80 percent of Asian goods had to be acquired with silver. That silver came not from Europe but principally from the Spanish Americas. Thus the major thesis of the paper is that first the South German and then the Spanish American silver mining booms greatly benefited Europe by promoting a vast increase in truly global trade. |
| Keywords: | Venice, Levant, Ottoman Empire, South Germany, Antwerp, Portugal, England, Asia, East Indies, balance of payments, gold, silver, international trade, |
| JEL: | E3 E4 F14 F20 F37 F40 H56 L67 L71 L90 N13 N43 N73 |
| Date: | 2006–04–10 |
| URL: | http://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-224&r=int |
| By: | Douglas C. Lippoldt |
| Abstract: | The purpose of this paper is to consider the preferential trade arrangements available to developing countries exporting into the Australian market. The paper opens with an overview of these arrangements, followed by a detailed statistical review. It then moves to examine several topics of particular interest in the discussion of Australian preferences. A simulation of the welfare impacts of preference erosion is then presented, followed by some brief concluding remarks. |
| Keywords: | tariffs, developing countries, nonreciprocal preferences, preference erosion |
| Date: | 2006–05–17 |
| URL: | http://d.repec.org/n?u=RePEc:oec:traaab:33-en&r=int |