nep-int New Economics Papers
on International Trade
Issue of 2006‒06‒24
ten papers chosen by
Martin Berka
Massey University

  1. The role of geography and size By David Hummels
  2. Border Effect Estimates for France and Germany Combining International Trade and Intra-national Transport Flows By Matthias Helble
  3. Institutional Quality, Trade, and the Changing Distribution of World Income By Brigitte Desroches; Michael Francis
  4. Environmental Policies and Trade Liberalization: a Time Consistency Issue By CALMETTE, Marie-Françoise
  5. Productivity Growth in Backward Economies and the Role of Barriers to Technology Adoption By Hildegunn Ekroll Stokke
  6. People Flows in Globalization By Richard B. Freeman
  7. U.S. Sugar Policy Options and Their Consequences under NAFTA and Doha By Abler, David; Beghin, John C.; Blandford, David; Elobeid, Amani
  8. Globalization, De-Industrialization and Mexican Exceptionalism 1750-1879 By Rafael Dobado González; Aurora Gómez Galvarriato; Jeffrey G. Williamson
  9. International Trade and Economic Growth: A Possible Methodology for Estimating Cross-Border R&D Spillovers By Lawrence R. McNeil; Barbara M. Fraumeni
  10. The internationalisation of the French aerospace industry in the 1990s: a break with the past? (In French) By Christophe CARRINCAZEAUX (e3i-IFReDE-GRES); Vincent FRIGANT (e3i-IFReDE-GRES)

  1. By: David Hummels
    Abstract: This report focuses on issues for Latin America and the Caribbean from China's expanding presence in the world economy, with a particular interest in questions related to China's size and proximity to markets.The authors begin with a basic overview of facts, including a characterization of trade and trade growth for China and Latin America and the Caribbean (LAC). Next, the following issues are addressed: Relative proximity of China and LAC countries to major markets. Detailed data on shipping costs to address the size of the import wedge, the price of goods at the exporter's departure port telative to the importing destination and the size of the sourcing wedge and its determinants. LAC's proximity to the US market. Overview of literature discussing the importance of country size
    Keywords: Trade, Goods transport, Transport costs, China, Latin America
    JEL: F13 F16
    Date: 2006–04
  2. By: Matthias Helble (IUHEI, The Graduate Institute of International Studies, Geneva)
    Abstract: Since the seminal contribution of McCallum (1995) economists have tried to estimate the border effect for other countries than the US and Canada, but have been confronted with a key data problem: data on regional trade flows are extremely rare. The different approaches put forward to overcome this lack of information have been shown to hinge crucially on certain distance measures. The main purpose of this paper is to develop a method that allows us determining border effects with a high degree of accuracy in the absence of intra-national trade data. We show how to improve the estimation of border effects at the example of France and Germany using data on regional transportation flows. Our results indicate that France trades about eight times more and Germany about three times more with itself than with other EU countries compared to the predictions of the gravity equation.
    Keywords: Border Effect, Gravity Equation, Transport Infrastructure
    JEL: F15
    Date: 2006–01–25
  3. By: Brigitte Desroches; Michael Francis
    Abstract: Conventional wisdom holds that institutional changes and trade liberalization are two main sources of growth in per capita income around the world. However, recent research (e.g., Rigobon and Rodrik 2004) suggests that the Frankel and Romer (1999) trade and growth finding is not robust to the inclusion of institutional quality. In this paper, the authors argue that this "trade and growth puzzle" can be explained once institutional quality is acknowledged as a determinant of the willingness to save and invest, and hence acknowledged as a determinant of long-run comparative advantage. The paper consists of two parts. First, the authors develop a theoretical model which predicts that institutions determine a country's underlying comparative advantage: countries that have good institutions will tend to export relatively more capital-intensive (or sophisticated) goods compared with countries that have poor institutions; trade can magnify the effect of institutional quality on income, leading to greater income divergence than if countries remain in autarky. Second, using a panel of over eighty countries and twenty years of data, the authors find empirical support for their hypotheses.
    Keywords: International topics; Development economics
    JEL: F11 F15 O11 P48
    Date: 2006
  4. By: CALMETTE, Marie-Françoise
    JEL: F12 F18 H21
    Date: 2005–11
  5. By: Hildegunn Ekroll Stokke (Department of Economics, Norwegian University of Science and Technology)
    Abstract: We offer a barrier model of growth with a broader understanding of the sources of productivity growth. Organizational change is suggested as an alternative to innovation and technology adoption. Domestic and international barriers (related to the level of human capital and the trade share) determine the timing and pace of technological catch-up, and as opposed to the catchingup hypothesis backward economies may get stuck in a poverty trap. Growth in lagging economies is not driven by adoption of foreign technology due to inappropriateness. The large technological distance forces the economy to rely more on own productivity improvements through organizational change. Trade liberalization in backward economies does not give the expected boost to productivity growth, because of low capability to take advantage of the frontier technology. Economies can escape the poverty trap by reducing trade barriers, but the benefits from an open economy is highest in middle-income economies, which have both the potential and capability to adopt foreign technology.
    Keywords: gold price boom;Dutch disease;trade barriers;fiscal response;deindustrialization
    JEL: O33 O41 O55 Q33
    Date: 2006–05–22
  6. By: Richard B. Freeman
    Abstract: People flows refers to the movement of people across international borders in the form of immigration, international student flows, business travel, and tourism. Despite its peripheral status in debates over globalization, the movement of people from low income to high income countries is fundamental in global economic development, with consequences for factor endowments, trade patterns, and transfer of technology. In part because people flows are smaller than trade and capital flows, the dispersion of pay for similarly skilled workers around the world exceeds the dispersion of the prices of goods and cost of capital. This suggests that policies that give workers in developing countries greater access to advanced country labor markets could raise global economic well-being considerably. The economic problem is that immigrants rather than citizens of immigrant-receiving countries benefit most from immigration. The paper considers "radically economic policies" such as auctioning immigration visas or charging sizeable fees and spending the funds on current residents to increase the economic incentive for advanced countries to accept greater immigration.
    Date: 2006–06
  7. By: Abler, David; Beghin, John C.; Blandford, David; Elobeid, Amani
    Abstract: We analyze the potential impact of continuing the existing U.S. sugar program, replacing it with a standard program, and implementing the standard program with multilateral trade liberalization. Under the North American Free Trade Agreement (NAFTA), duty-free sugar imports from Mexico will undermine the program’s ability to operate on a “no-cost” basis to U.S. taxpayers. As the Mexican beverage industry is likely to expand considerably its high-fructose corn syrup use, the sugar thereby displaced will seek a market in the United States. Under these conditions, marketing allotments could not be utilized under current legislation and prices would likely fall to the loan rate. The government would accumulate significant sugar stocks. The replacement of the current sugar program by one similar to other major U.S. crop programs would solve the problem of stock accumulation and accommodate further trade liberalization under a new World Trade Organization (WTO) agreement or future bilateral trade agreements. Our analysis of recent WTO proposals suggests that a WTO agreement is unlikely to impose significant adjustment pressures on the U.S. sugar market beyond those created by NAFTA. The adoption of a standard program would make it easier for the United States to meet its commitments under a new WTO agreement in terms of reductions in trade-distorting amber-box support. Moving to a standard program would increase the costs of the program for taxpayers but would lower costs for sugar users. Given reasonable assumptions about program parameters, the principal program cost would likely be through direct payments rather than through countercyclical or loan-deficiency payments. These costs could be lower than the maximum estimated here, because of limitations on payments to individual producers.
    Keywords: Doha, NAFTA, policy, sugar, U.S. sugar program.
    Date: 2006–06–13
  8. By: Rafael Dobado González; Aurora Gómez Galvarriato; Jeffrey G. Williamson
    Abstract: Like the rest of the poor periphery, Mexico had to deal with de-industrialization forces between 1750 and 1913, those critical 150 years when the economic gap between the industrial core and the primary-product-producing periphery widened to such huge dimensions. Yet, from independence to mid-century Mexico did better on this score than did most countries around the periphery. This paper explores the sources of Mexican exceptionalism with de-industrialization. It decomposes those sources into those attributable to productivity events in the core and to globalization forces connecting core to periphery, and to those attributable to domestic forces specific to Mexico. It uses a neo-Ricardian model (with non-tradable foodstuffs) to implement the decomposition, and advocates a price dual approach, and develops a new price and wage data base 1750-1878. There were three forces at work that account for Mexican exceptionalism: first, the terms of trade and Dutch disease effects were much weaker; second, Mexico maintained secular wage competitiveness with the core; and third, Mexico had the autonomy to devise effective ways to foster industry. The first appears to have been the most important.
    JEL: F1 N7 O2
    Date: 2006–06
  9. By: Lawrence R. McNeil; Barbara M. Fraumeni (Bureau of Economic Analysis)
    Abstract: The Bureau of Economic Analysis (BEA) has initiated a National Science Foundation (NSF) funded project to produce an official BEA/NSF R&D Satellite Account (R&DSA). This paper presents a possible trade-based methodology for estimating cross-border R&D spillovers, which reflects an important component of the overall project because spillovers may be formally integrated into the official BEA/NSF R&DSA. Beginning with Coe and Helpman (1995), we evaluate four methodologies used to estimate the impact of international R&D spillovers on economic growth and select Xu and Wang (1999) as the model most appropriate for calculating net outward spillovers. Based on our calculations, we conclude that including cross-border R&D spillovers would increase 1990 U.S. Gross Domestic Product by 0.33%.
    JEL: E60
    Date: 2005–03
  10. By: Christophe CARRINCAZEAUX (e3i-IFReDE-GRES); Vincent FRIGANT (e3i-IFReDE-GRES)
    Abstract: The 1990s are often described as the decade when the aerospace industry broke with the past. The drop in military orders that occurred early in the decade, the adoption in both the defence and civil markets of more competitive modes of regulation, the arrival at maturity of several big civil programmes and a host of privatisations - all had a durable impact on the aerospace industry in France. A general consensus exists about these changes, but few empirical studies have actually tried to measure the extent of their impact on the sector. To make up for this, we have carried out a statistical study of the structural transformations befalling the aerospace industry through the analysis of one specific problem: firms’ internationalisation. We have used four databases, including for the first time the EEIG survey of intra-firm trade, to assess whether French firms did in fact deeply modify their internationalisation behaviour over the period 1993-1999. We come to mixed conclusions, the suggestion being that what the sector experienced was more of an evolution than a major upheaval. Although certain components of firms’ internationalisation trajectories were clearly altered (like the French State’s presence in the sector or sales internationalisation), others evolved much more slowly (like foreign companies’ penetration in France and French companies’ productive internationalisation). Summarily, we can say that productive internationalisation remained modest in comparison with sales internationalisation.
    Keywords: Globalization, Aerospace industry, Privatization, Multinational Firms
    JEL: F2 F23 L62
    Date: 2006

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.