nep-int New Economics Papers
on International Trade
Issue of 2006‒07‒02
twenty-two papers chosen by
Martin Berka
Massey University

  1. International Trade in Manufactured Products: A Ricardo-Heckscher-Ohlin Explanation with Monopolistic Competition By Dalia Hakura; Ehsan U. Choudhri
  2. Relating Productivity and Trade 1980-2000: A Chicken and Egg Analysis By Eleanor Doyle; Inmaculada Martínez-Zarzoso
  3. PPP and the Balassa Samuelson Effect: The Role of the Distribution Sector By Luca Antonio Ricci; Ronald MacDonald
  4. China in the international fragmentation of production: Evidence from the ICT industry By Alessia Amighini
  5. Environmental tax and trade liberalization in a mixed duopoly By Shuichi Ohori
  6. How Are Canadian Regions Adjusting to a Larger and More Integrated North American Market? By Gu, Wulong; Sawchuk, Gary
  7. Do exporters really pay higher wages? First evidence from German linked employer-employee data By Thorsten Schank; Claus Schnabel; Joachim Wagner
  8. Imports as Product and Labor Market Discipline By Hervé Boulhol; Sabien Dobbelaere; Sara Maioli
  9. Domestic Taxes and International Trade: Some Evidence By Murtaza H. Syed; Michael Keen
  10. Hub-and-Spoke or else? Free trade agreements in the 'enlarged' European Union By Luca De Benedictis; Roberta De Santis; Claudio Vicarelli
  11. Africa in the Doha Round: Dealing with Preference Erosion and Beyond By Yongzheng Yang
  12. Moving forward faster : trade facilitation reform and Mexican competitiveness By Mejia, Alejandro; Wilson, John S.; Soloaga, Isidro
  13. Services policies in transition economies : on the European Union and the World Trade Organization as commitment mechanisms By Hoekman, Bernard; Eschenbach, Felix
  14. Trade, Peace and Democracy: An Analysis of Dyadic Dispute By Solomon W. Polachek; Carlos Seiglie
  15. Does the Liberalization of Trade Advance Gender Equality in Schooling and Health? By T. Paul Schultz
  16. Does antidumping use contribute to trade liberalization? : an emipirical analysis By Moore,Michael O.; Zanardi,Maurizio
  17. Protectionist but globalised? Latin American custom duties and trade during the pre-1914 belle époque By M. del Mar Rubio Varas
  18. The Implications of Trade Barriers for Sectoral Diversification and Macroeconomic Stability in Developing Economies By Gabriel Srour
  19. Africa's Trade Revisted By Arvind Subramanian; Natalia T. Tamirisa
  20. Market access, supplier access, and Africa ' s manufactured exports : an analysis of the role of geography and institutions By Zeufack, Albert; Mengistae, Taye; Elbadawi, Ibrahim
  21. Regional approaches to better standards systems By Aldaz-Carroll, Enrique
  22. Price and Income Elasticities of Russian Exports By Bernardina Algieri

  1. By: Dalia Hakura; Ehsan U. Choudhri
    Abstract: A large data set on trade in manufactured products is used to evaluate the performance of a model that combines both the Ricardian and Heckscher-Ohlin effects and incorporates monopolistic competition. The paper estimates a relation implied by the model to explain relative sectoral exports of major countries to a number of important markets, using 1970-90 data for nine manufacturing sectors. The relation fits the data well and variables suggested by both traditional and new trade models play an important role in explaining relative exports.
    Keywords: Competition , International trade , Production , Economic models ,
  2. By: Eleanor Doyle (University College Cork / Ireland); Inmaculada Martínez-Zarzoso (Georg-August-Universität Göttingen / Germany and Universitat Jaume I , Castellón / Spain)
    Abstract: Given the nature and range of investigations of the trade/productivity relationship, we now know that possible reverse causation must be a consideration in empirical research. Indeed, some research finds that estimates of productivity gains attributed to trade capture instead the roles of institutions and geography. Here we estimate the relationship between productivity and trade for a panel of countries over the period 1980 to 2000 using instrumental-variables estimation of a productivity equation. The endogeneity of trade and institutional quality is accounted for by using instruments. We extend the specification used by Frankel and Romer (1999) using real openness as the measure of trade (following Alcala and Ciccone, 2004). The trade instrument is based on a gravity equation. The instruments for institutional quality come from Gwartney, Holcombe and Lawson (2004). This approach allows for identification of channels through which trade and production scale affect productivity.
    Date: 2006–06–27
  3. By: Luca Antonio Ricci; Ronald MacDonald
    Abstract: This paper investigates the impact of the distribution sector on the real exchange rate, controlling for the Balassa-Samuelson effect, as well as other macro variables. Long-run coefficients are estimated using a panel dynamic OLS estimator. The main result is that an increase in the productivity and competitiveness of the distribution sector with respect to foreign countries leads to an appreciation of the real exchange rate, similarly to what a relative increase in the domestic productivity of tradables does. This contrasts with the result that one would expect by considering the distribution sector as belonging to the non-tradable sector. One explanation may lie in the use of the services from the distribution sector in the tradable sector. Our results also contribute to explaining the so-called PPP puzzle.
    Keywords: Purchasing power parity , Exchange rates , Trade , Prices , Economic models ,
  4. By: Alessia Amighini
    Abstract: This paper investigates the position of China in the international fragmentation of production in the ICT industry, the most dynamic and globally dispersed sector in the world economy. The evidence shows that during the 1990s China dramatically increased its market shares in ICT products and now ranks among the top three world exporters. Moreover, China has upgraded from mere assembly of imported inputs to the manufacturing of high-tech intermediate goods. As a result, import dependence has declined and the domestic value added of exports has increased. This supports the hypothesis that industrial upgrading occurred in some tradable sectors through technological learning associated with processing trade. Therefore, a pattern of specialization initially dominated by processing trade could be favourable to a country's long-term development, to the extent that entering at the lower end of high-tech sectors is promotive of catching up in more sophisticated technology-intensive production
    JEL: F02 F14 L63 N60
    Date: 2005–12–07
  5. By: Shuichi Ohori (Institute of Economic Research, Kyoto University)
    Abstract: This paper studies the environmental tax and trade liberalization in a mixed duopolistic market wherein environmental damage is associated with consumption. In particular, we consider the effect of privatization on environmental tax and the effect of trade liberalization on the environment in an importing country. The results show that the optimal environmental tax in a mixed duopoly is higher than the Pigouvian level and the optimal tax in a pure duopoly. Furthermore, trade liberalization does not alter the environment.
    Date: 2006–06
  6. By: Gu, Wulong; Sawchuk, Gary
    Abstract: This paper relates to two understudied, but increasingly important concerns: the measurement of regional integration, and the regional benefits to North American economic integration. The objective is to measure Canada's regional integration in manufacturing industries with that of the United States, and examine the regional impact of growing trade integration on productivity growth and select other economic performance variables. Our research shows that Canada and each of its regions are becoming more integrated in trade in manufactures with the United States, but Ontario is much more integrated than the rest of Canada. While all regions have benefited through improved productivity performance, higher wages and higher output growth, Ontario has been the principal beneficiary. No evidence was found that increased trade integration in manufactures with the United States caused anything more than short-run adjustment losses in employment. Canada and each of its regions have expanded their share of North American manufacturing which stands in sharp contrast to the supposition that it would be the United States that would experience a growth in North American production share (Krugman, 1980).
    Keywords: National accounts, Trade, Manufacturing, Economic conditions, International trade, Manufacturing industries
    Date: 2006–05–31
  7. By: Thorsten Schank (Institute of Economics, Friedrich-Alexander-University Erlangen-Nürnberg); Claus Schnabel (Institute of Economics, Friedrich-Alexander-University Erlangen-Nürnberg); Joachim Wagner (Institute of Economics, University of Lüneburg)
    Abstract: Many plant-level studies find that average wages in exporting firms are higher than in non-exporting firms from the same industry and region. This paper uses a large set of linked employer-employee data from Germany to analyze this exporter wage premium. We show that the wage differential becomes smaller but does not completely vanish when observable and unobservable characteristics of the employees and of the work place are controlled for. For example, blue-collar (white-collar) employees working in a plant with an export-sales ratio of 60 percent earn about 1.8 (0.9) percent more than similar employees in otherwise identical non-exporting plants.
    Keywords: Export, wages, exporter wage premium, linked employer-employee data, Germany
    JEL: F10 D21 L60
    Date: 2006–06–21
  8. By: Hervé Boulhol (IXIS-CIB and CES, University Paris I Panthéon-Sorbonne); Sabien Dobbelaere (Ghent University, LICOS K.U. Leuven and IZA Bonn); Sara Maioli (GEP, University of Nottingham)
    Abstract: This paper tests the pro-competitive effect of trade in the product and labor markets of UK manufacturing sectors between 1988 and 2003 using a two-stage estimation procedure. In the first stage, we use data on 9820 firms from twenty manufacturing sectors to simultaneously estimate mark-up and workers’ bargaining power parameters according to sector, firm size and period. We find a significant drop in both the mark-up and the workers’ bargaining power in the mid-nineties. In the second stage, we relate our parameters of interest to trade variables. Our results show that imports from developed countries have significantly contributed to the decrease in both mark-ups and workers’ bargaining power.
    Keywords: workers’ bargaining power, mark-ups, pro-competitive effect
    JEL: C23 F16 J51 L13
    Date: 2006–06
  9. By: Murtaza H. Syed; Michael Keen
    Abstract: The effects on trade performance of corporate taxes and the value-added tax (VAT) continue to excite controversy but have received little empirical attention. This paper uses panel data for OECD countries from 1967 to 2003 to examine the effects of these taxes on export performance, paying particular attention to the potentially complex dynamic effects to which theory points. It finds that increased reliance on VAT revenue tends to be associated with a sharp reduction in net exports, which quickly fades. This may reflect unrelated movements in consumption, and our preferred specifications point to no trade effects of the VAT in either the short or the long run. Our results also point, however, to powerful and complex effects from the corporate tax, the pattern of which is as theory would predict from a source-based tax of this kind. Increases in corporate taxation-whether measured by revenues or the statutory rate-are associated with sharp short-run increases in net exports (consistent with induced capital flows abroad); these are then subsequently and quickly reversed (consistent with increased income from investments abroad), leaving an increase in net exports that converges to zero.
    Keywords: Taxation , Value added tax , International trade , Economic models ,
    Date: 2006–03–02
  10. By: Luca De Benedictis; Roberta De Santis; Claudio Vicarelli
    Abstract: The object of this paper is to estimate if and how the Central European Free Trade Agreement (CEFTA) and the Baltic Free Trade Agreement (BFTA) exerted a significant impact on intra-European trade, effectively reducing the influence of the European Association Agreements (EAs) in shaping the European trade structure as a hub-and-spoke system - with the EU15 being the hub and the CEECs the spoke. This paper analyses bilateral trade flows between eight CEECs and EU-23. We estimate a gravity equation using a system GMM dynamic panel data approach. Results support the assumptions that gravity forces and "persistence effects" matter. With respect to the effect of free trade agreements, evidence is found that Free trade agreements between CEECs matter: There is evidence that the presence of intra-periphery agreements helped expand intra-periphery trade and limited the emergence of a "hub-and-spoke" relationship between CEECs and EU. This results have important policy implications for the trade strategy of "future" EU members of the Southeastern European Countries as well as of the Southern Mediterranean Countries. According to the empirical results, these countries should move towards a regional free-trade area as exemplified by the CEFTA and the BFTA to avoid "hub-and-spoke" effects.
    JEL: C23 C13 F15 F13
    Date: 2005–12–07
  11. By: Yongzheng Yang
    Abstract: Improving market access in industrial countries and retaining preferences have been Africa's two key objectives in the Doha Round trade negotiations. This paper argues that African negotiators may have overlooked the potential market access gains in developing countries, where trade barriers remain relatively high and demand for African imports has expanded substantially over the past decades. As reductions in most-favored-nation tariffs in industrial countries will inevitably lead to preference erosion, African countries need to ensure that the Doha Round leads to liberalization in all sectors by all World Trade Organization (WTO) members, so that the resulting gains will offset any losses. Such an outcome is more likely if African countries also offer to liberalize their own trade regimes and focus on reciprocal liberalization as a negotiation strategy rather on preferential and differential treatment.
    Keywords: Multilateral trade negotiations , Africa , World Trade Organization ,
    Date: 2005–11–28
  12. By: Mejia, Alejandro; Wilson, John S.; Soloaga, Isidro
    Abstract: Improved competitiveness is at the top of the agenda for Mexico as it moves to leverage economic progress made over the past decade. The authors evaluate the impact of changes in trade facilitation measures on trade for main industrial sectors in Mexico. They use four indicators of trade facilitation: port efficiency, customs environment, regulatory environment, and e-commerce use by business (as a proxy for service sector infrastructure). The authors use gravity model results to consider how much trade among countries might be increased under various scenarios of improved trade facilitation. They follow a simulation strategy that uses a formula to design a unique program of reform for each country in the sample, and apply it to the case of Mexico. The formula brings the below-average countries in the group half-way to the average for the entire set of countries. After simulating these improvements in trade facilitation in all four areas, the authors find that the total increase in trade flow in manufacturing goods is estimated to be $348.2 billion (about 7.4 percent of total world trade). The analysis indicates that Mexico has a large scope for trade promotion from trade facilitation reform: overall increments from domestic reforms are expected to be on the order of $31.8 billion, equivalent to 22.4 percent of total Mexican manufacturing exports for 2000-03. On the imports side, these figures are $17.1 billion and 11.2 percent, respectively. In total exports as well as in textiles, increases in exports result from improvements in port efficiency and the regulatory environment (that is, the perception of corruption). In turn, exports of transport equipment are expected to get a greater increment from improvements in port efficiency, whereas exports of food and machinery seem to be more related to improvements in the regulatory environment. On the imports side, Mexican improvements in port efficiency appear to be the most important factor, although for imports of transport equipment improvements in service sector infrastructure are also of relative importance.
    Keywords: Free Trade,Trade Policy,Economic Theory & Research,Common Carriers Industry,Transport and Trade Logistics
    Date: 2006–06–01
  13. By: Hoekman, Bernard; Eschenbach, Felix
    Abstract: The authors analyze the extent to which the EU-15 and 16 transition economies used the WTO General Agreement on Trade in Services (GATS) to commit to service sector policy reforms. They compare GATS commitments with the evolution of actual policy stances over time. While there is substantial variance across transition economies on both actual policies and GATS commitments, the authors find an inverse relationship between the depth of GATS commitments and the " quality " of actual services policies as assessed by the private sector. In part this can be explained by the fact that the prospect of EU accession makes GATS less relevant as a commitment device for a subset of transition economies. But for many of the non-EU accession candidates, the WTO seems to be a weak commitment device. One explanation is that the small size of the markets concerned generates weak external enforcement incentives. The authors ' findings suggest greater collective investment by WTO members in monitoring and the need for transparency to increase the benefits of WTO membership to small countries.
    Keywords: Trade and Services,Trade Law,World Trade Organization,Trade and Regional Integration,Free Trade
    Date: 2006–06–01
  14. By: Solomon W. Polachek (State University of New York at Binghamton and IZA Bonn); Carlos Seiglie (Rutgers University)
    Abstract: At least since 1750 when Baron de Montesquieu declared "peace is the natural effect of trade," a number of economists and political scientists espoused the notion that trade among nations leads to peace. Employing resources wisely to produce one commodity rather than employing them inefficiently to produce another is the foundation for comparative advantage. Specialization based on comparative advantage leads to gains from trade. If political conflict leads to a diminution of trade, then at least a portion of the costs of conflict can be measured by a nation's lost gains from trade. The greater two nations' gain from trade the more costly is bilateral (dyadic) conflict. This notion forms the basis of Baron de Montesquieu's assertion regarding dyadic dispute. This paper develops an analytical framework showing that higher gains from trade between two trading partners (dyads) lowers the level of conflict between them. It describes data necessary to test this hypothesis, and it outlines current developments and extensions taking place in the resulting trade-conflict literature. Crosssectional evidence using various data on political interactions confirms that trading nations cooperate more and fight less. A doubling of trade leads to a 20% diminution of belligerence. This result is robust under various specifications, and it is upheld when adjusting for causality using cross-section and time-series techniques. Further, the impact of trade is strengthened when bilateral import demand elasticities are incorporated to better measure gains from trade. Because democratic dyads trade more than non-democratic dyads, democracies cooperate with each other relatively more, thereby explaining the "democratic peace" that democracies rarely fight each other. The paper then goes on to examine further extensions of the trade-conflict model regarding specific commodity trade, foreign direct investment, tariffs, foreign aid, country contiguity, and multilateral interactions.
    Keywords: trade, conflict, cooperation, interdependence, gains from trade, dyadic dispute, democratic peace, democracy
    JEL: F01 F51 F59 D74
    Date: 2006–06
  15. By: T. Paul Schultz (Economic Growth Center, Yale University)
    Abstract: This paper assesses the empirical relationship between the liberalization of international trade and the economic status of women. Although historically globalization is not generally linked to the advancement of women, several recent country studies find export led growth in middle and low income countries is associated with improvements in women’s employment opportunities. Does intercountry empirical evidence confirm this association across a wider range of countries, and suggest the mechanisms by which it operates? Measures of wages for men and women are an unreliable basis for study of gender inequality in many low-income countries, and thus schooling and health are analyzed here as indicators of productivity and welfare and gender gaps. For a sample of 70 countries observed at five year intervals from 1965 to 1980, tariff, quota, and foreign exchange restrictions are found to be inversely associated with trade, and with the levels of education and health, especially for women. Natural resource exports, although providing foreign exchange for imports, appear to reduce investments in schooling and health, and delay the equalization of these human capital investments between men and women. Liberalization of trade policy is consequently linked in the cross section to increased trade, to greater accumulation of human capital, and to increased gender equality.
    Keywords: Trade Liberalization, Schooling, Health, Gender Equality
    JEL: I12 J16 I21
  16. By: Moore,Michael O.; Zanardi,Maurizio (Tilburg University, Center for Economic Research)
    Abstract: Some supporters of antidumping have argued that this procedure serves as a kind of "safety valve" for protectionist pressure. This paper examines whether there is any empirical evidence that the use of antidumping actions has contributed to tariff reductions in a sample of 35 developing and developed countries. There is very little evidence that such a relationship might exist among the 27 developing countries in the sample. We do find some weak but inconsistent evidence for antidumping helping liberalization efforts in the experience of developed countries, which have been the traditional users of antidumping.
    Keywords: Antidumping;Trade Liberalization;Commercial Policy
    JEL: F13 F14
    Date: 2006
  17. By: M. del Mar Rubio Varas
    Abstract: While it is true that Latin American republics had no rival on maximising revenues from custom collection during the belle époque, this paper shows that Latin American countries were also generous importers, only behind the larger commercial countries of Western Europe in terms of imports per capita. Latin American citizens were much more linked to international trade than citizens of most regions of the world. Their relation to the world economy was tighter both via their imports and their exports relative to their population and income levels. This paper comes to show that there is no contradiction between the high custom collection by the Latin American republics and their high level of interaction with the global economy in the pre-1914 belle époque, although large country differences can be observed when descending from the regional to the national level.
    Keywords: First globalisation, Imports, Exports, Custom duties, Protectionism, Latin America
    JEL: F1 N77
    Date: 2006–06
  18. By: Gabriel Srour
    Abstract: The paper examines the implications of lower trade barriers for sectoral diversification and macroeconomic stability in developing economies with a large primary goods sector. It shows that lower trade barriers can have ambiguous effects on macroeconomic stability. It shows also that diversification, in the form of equal distribution of resources between nonprimary sectors, may be counterproductive. In fact, investment in the nonprimary sector with lower trade barriers unambiguously enhances macroeconomic stability in a developing economy that is subject to substantial primary shocks.
    Date: 2006–03–07
  19. By: Arvind Subramanian; Natalia T. Tamirisa
    Abstract: The popular impression that Africa has not integrated into world trade, as suggested by the evolution in simple indicators, has been called into question recently by more formal analysis. This paper refines and generalizes this analysis, but lends support to the popular view of disintegration. Africa, especially Francophone Africa, is currently under-exploiting its trading opportunities and has witnessed disintegration over time, a trend that is most pronounced in its trade with the technologically advanced countries.
    Keywords: Trade , Africa , Globalization ,
  20. By: Zeufack, Albert; Mengistae, Taye; Elbadawi, Ibrahim
    Abstract: In a large cross-country sample of manufacturing establishments drawn from 188 cities, average exports per establishment are smaller for African firms than for businesses in other regions. The authors show that this is mainly because, on average, African firms face more adverse economic geography and operate in poorer institutional settings. Once they control for the quality of institutions and economic geography, what in effect is a negative African dummy disappears from the firm level exports equation they estimate. One part of the effect of geography operates through Africa ' s lower " foreign market access: " African firms are located further away from wealthier or denser potential export markets. A second occurs through the region ' s lower " supplier access: " African firms face steeper input prices, partly because of their physical distance from cheaper foreign suppliers, and partly because domestic substitutes for importable inputs are more expensive. Africa ' s poorer institutions reduce its manufactured exports directly, as well as indirectly, by lowering foreign market access and supplier access. Both geography and institutions influence average firm level exports significantly more through their effect on the number of exporters than through their impact on how much each exporter sells in foreign markets.
    Keywords: Free Trade,Markets and Market Access,Economic Theory & Research,Access to Markets,Foreign Direct Investment
    Date: 2006–06–01
  21. By: Aldaz-Carroll, Enrique
    Abstract: Developing countries face an increasing need to upgrade the standards of their domestic markets and of their exports. This paper examines different approaches available to them for upgrading their standards and conformity assessment procedures. It focuses particularly on those followed within the context of regional trade agreements (RTAs), as these are yielding promising results. Based on interviews performed in Latin America and on previous literature, the paper draws common features of a RTA standard and conformity assessment upgrading and harmonization process, identifies some of its main challenges, and suggests principles that developing countries could follow in such a process.
    Keywords: Trade and Regional Integration,Environmental Economics & Policies,Public Sector Regulation,Standards and Technical Regulations,Administrative & Regulatory Law
    Date: 2006–06–01
  22. By: Bernardina Algieri
    Abstract: The paper gauges export demand elasticities for Russia using an Error Correction technique within a cointegration framework. An extended version of the Imperfect Substitutes Model has been implemented to estimate the sensitivity of Russian exports without oil components to price and to Russian and world income. Our results suggest a robust and negative long run cointegration relationship between the real effective exchange rate, defined as the weighted average of the rouble's exchange rates versus a basket of the three currencies with the largest share in the trade turnover adjusted to incorporate inflation rate differences (the ratio of the domestic price indices to the foreign price indices), and Russian exports. An increase in exports by 24 % is caused by a real depreciation by 10 %. Furthermore, a 10 % growth in world income leads to a 33 % rise in exports. Finally, exports drop by 14 % whenever a 10 % increase in domestic income occurs.
    JEL: F19 P27 C22
    Date: 2004–12–01

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