nep-int New Economics Papers
on International Trade
Issue of 2007‒01‒14
37 papers chosen by
Martin Berka
Massey University

  1. The Impact of Migration on Foreign Trade: A Developing Country Approach By Canavire Bacarreza, Gustavo Javier; Ehrlich, Laura
  2. Intra-Industry Trade, Multilateral Trade Integration, and Invasive Species Risk By Anh Tu; John C. Beghin
  3. Trade Facilitation Needs and Customs Valuation in Fiji By Biman Chand Prasad
  4. Proposed Rules of Origin in Emerging Asia-Pacific Preferential Trade Agreements: Will PTAs Promote Trade and Development? By William E. James
  5. Trade Liberalization or Oil Shocks: Which Explains Structural Breaks in International Trade Ratios? By Suleiman Abu-Bader; Aamer Abu-Qarn
  6. Determinants of AFTA Members’ Trade Flows and Potential for Trade Diversion By Indira M. Hapsari; Carlos Mangunsong
  7. Tomatoes or Tomato Pickers? Free Trade and Migration in the NAFTA Case By Amaranta Melchor del Río; Susanne Thorwarth
  8. Trade Liberalisation, Process and Product Innovation, and Relative Skill Demand By Sebastian Braun
  9. Dynamics of Malawi’s trade flows: a gravity model approach By Simwaka, Kisu
  10. Linking Trade and Transport Statistics: the Dutch Case By G.J.M. Linders; M.E.P. Odekerken-Smeets
  11. Nontariff Barriers By John C. Beghin
  12. Does Africa Really Benefit from Trade? By Matthias Busse; José Luis Groizard
  13. Good Governance, Trade and Agglomeration By Candau, Fabien
  14. Dynamics, Welfare and Migration in Open Economies By Espinosa, Alexandra M.
  15. Technology Trade in Economic Development By Matthias Busse; José Luis Groizard
  16. Trade Costs and the Open Macroeconomy By Novy, Dennis
  17. Trade Potential in SAFTA: An Application of Augmented Gravity Model By Mustafizur Rahman; Wasel Bin Shadat; Narayan Chandra Das
  18. Testing Trade-led-Growth Hypothesis for Romania By Pop-Silaghi, Monica Ioana
  19. EU Market Access for Mediterranean Fruit and Vegetables : A Gravity Model Assessment By Emlinger, C.; Chevassus Lozza, E.; Jacquet, F.
  20. Institutional Quality and Trade in Pacific Island Countries By Azmat Gani; Biman Chand Prasad
  21. Customs Valuation in India: Identifying Trade Facilitation related Concerns By Sachin Chaturvedi
  22. Enhancing the movement of natural persons in the ASEAN region: Opportunities and constraints By Tereso S. Tullao, Jr.; Michael Angelo A. Cortez
  23. Technological Change and Outsourcing: Competing or Complementary Explanations for the Rising Demand for Skills during the 1980s? By Anton Tchipev
  24. Estimation of the Gravity Equation of Bilateral Trade in the Presence of Zero Flows By G.J.M. Linders
  25. The Impact of ISO 9000 Diffusion on Trade and FDI: A New Institutional Analysis By Joseph A. Clougherty; Michal Grajek
  26. Euro-Mediterranean Economic Integration: An Empirical Investigation of Trade Flows. By Giorgio Fazio
  27. Intermediate Products, Specialization and the Dynamics of Wage Inequality in the US By Anton Tchipev
  28. Skilled migration and growth. Testing brain drain and brain gain theories By José Luis Groizard; Joan Llull
  29. Economic Determinants for China’s Industrial SO2 Emission: Reduced vs. Structural form and the role of international trade By Jie He
  30. The real exchange rate of the rand and competitiveness of South Africa's trade By Mtonga, Elvis
  31. Trade, Envy and Growth: International Status Seeking in a Two-Country World By Valente, Simone
  32. Market Potential and Border Effects in Europe By Peter Huber; Michael Paffermayr; Yvonne Wolfmayr
  33. Tourism and Growth: Evidence for Spain and Italy By Isabel Cortes-Jimenez; Manuela Pulina
  34. Trade Shocks in Brazil: An Investigation of Effects on Regional Manufacturing Wages By Filipe Lage-De-Sousa
  35. How strong is the impact of exports and other demand components on German import demand? Evidence from euro-area and non-euro-area imports By Stirböck, Claudia
  36. The German-Czech border region after the fall of the Iron Curtain : Effects on the labour market : an empirical study using the IAB Employment Sample (IABS) By Moritz, Michael; Gröger, Margit
  37. Wage Inequality in a Dual Economy and International Mobility of Factors: DO Factor Intensities always matter? By Chaudhuri, Sarbajit

  1. By: Canavire Bacarreza, Gustavo Javier; Ehrlich, Laura
    Abstract: While the causal relationship between migration and trade has not been studied thoroughly, estimation results of gravity model approach suggest that important aspects determining trade volumes can be missed if additional factors, including migration, are not considered. The current paper aims at testing the impact of migration on foreign trade in a relatively closed small economy. We use the data of Bolivia, for the years 1990–2003. We apply gravity model, adding a migration variable to the explanatory variables. We test the impact of both, immigration and emigration on exports and imports and also on intra-industry trade. We use panel estimation including data of 30 trade partners (selected according to higher trade intensity with Bolivia). We control for the economic size and geographical location of trade partners, and for changes in terms of trade. Previous studies show an increasing effect of immigration on both exports and imports elasticities. Some studies find larger exports elasticity compared to imports elasticity, some vice versa. We could not find any studies on emigration impact on trade. Our results show relatively similar impact of both immigration and emigration on foreign trade. Positive significant effect of immigration on exports and imports is confirmed also in Bolivia, even when the migration flows in Bolivia are not as high as in the case of most countries analyzed previously. We can conclude positive effect of migration flows also on intra-industry trade. In the following analysis, we intend to control for the impact of trade agreements and openness of trade partners. We will also try to broaden the sample of trade partners used in the current estimation and to test the hypotheses on other developing countries.
    Keywords: migration; trade; gravity model; Bolivia
    JEL: C33 F22 F10
    Date: 2006–01–03
  2. By: Anh Tu; John C. Beghin (Center for Agricultural and Rural Development (CARD); Food and Agricultural Policy Research Institute (FAPRI))
    Abstract: We analyze the linkage between protectionism and invasive species (IS) hazard in the context of two-way trade and multilateral trade integration, two major features of real-world agricultural trade. Multilateral integration includes the joint reduction of tariffs and trade costs among trading partners. Multilateral trade integration is more likely to increase damages from IS than predicted by unilateral trade opening under the classic Heckscher-Ohlin-Samuelson (HOS) framework because domestic production (the base susceptible to damages) is likely to increase with expanding export markets. A country integrating its trade with a partner characterized by relatively higher tariff and trade costs is also more likely to experience increased IS damages via expanded domestic production for the same reason. We illustrate our analytical results with a stylized model of the world wheat market.
    Keywords: exotic pest, intra-industry trade, invasive species, liberalization, trade cost, trade integration, trade protection, two-way trade.
    Date: 2006–12
  3. By: Biman Chand Prasad (The University of the South Pacific)
    Abstract: In line with most developing countries, the last decade has seen Fiji adopt an export oriented, outward-looking approach to trade relations. Import restrictions have been largely lifted in favour of export promotion, and as such Fiji now has a more liberalized or open economy with increased volumes of both exports and imports
    Keywords: Trade Facilitation, Customs Valuation, Fiji
    JEL: F1
    Date: 2006–12
  4. By: William E. James (Nathan Associate, Inc)
    Abstract: World trade is increasingly being dominated by preferential trade agreements that have taken precedence over multilateral trade negotiations. Within Asia and the Pacific an explosion of bilateral deals is taking place that seems likely to produce a tangle of hub-spoke trade blocs centered on major Asian or Pacific countries.
    Keywords: Rules of Origin, Preferential Trade Agreements
    JEL: F1
    Date: 2006–08
  5. By: Suleiman Abu-Bader (Department of Economics, Ben-Gurion University of the Negev); Aamer Abu-Qarn (Department of Economics, Ben-Gurion University of the Negev)
    Abstract: Ben-David and Papell's (1997) tests for structural breaks in international trade ratios over the post-WWII period revealed that trade ratios exhibited structural breaks in their paths and that postbreak trade averages exceeded prebreak averages. They attributed these breaks to trade liberalization policies executed during the postwar period. We reevaluate their results by comparing the postbreak trade ratios with extrapolated ratios based on the prebreak trend, and testing for structural breaks in the relative prices of imports (exports). We find that oil shocks rather than trade liberalization were the major factor behind the structural breaks in trade ratios.
    Keywords: International trade, Trade Liberalization, Structural change, Oil shocks, Kennedy Round
    JEL: C22 F1
    Date: 2006–12
  6. By: Indira M. Hapsari; Carlos Mangunsong (Centre for Strategic and International Studies)
    Abstract: The objective of this paper, therefore, is to investigate the determinants of trade flows of AFTA members, including the impact of creation of AFTA on its intra-regional and extra-regional trade flow by comparing trade patterns of AFTA countries with AFTA members and non-members.
    Keywords: AFTA,RTA,CEPT
    JEL: F1
    Date: 2006–11
  7. By: Amaranta Melchor del Río (University of Heidelberg, Department of Economics); Susanne Thorwarth (Centre for European Economic Research (ZEW))
    Abstract: This paper examines the relationship between trade liberalisation and migration in the case of Mexico. The increasing bilateral trade between Mexico and the United States after signing the North American Free Trade Agreement (NAFTA) was supposed to stem the illegal Mexican migration flow by contributing to economic growth and job creation in both countries. Twelve years after the treaty has come into effect questions emerge to what extent NAFTA was able to reduce the migration pressure: are trade and migration substitutes like the policy-makers had assumed or are they complements? Using monthly data from 1966 until 2004 we estimate a distributed lag model with the number of apprehensions at the US-Mexican border as a proxy for illegal migration. The results indicate that increasing trade flows cause larger illegal migration from Mexico to the United States.
    Keywords: Migration; International Trade; Distributed Lag Model; Mexico; NAFTA
    JEL: C22 F00 F10 F22
    Date: 2006–10
  8. By: Sebastian Braun
    Abstract: The interaction between trade liberalisation, product and process innovation, and relative skill demand is analysed in a model of international oligopoly. Lower trading barriers increase the degree of foreign competition. The competing enterprises respond by investing more aggressively in lowering marginal costs of production. Moreover, firms reduce the substitutability of their products through additional investment in product innovation. The paper also shows that the relative demand for skilled workers may increase as a result.
    Keywords: Intra-industry Trade; Process Innovation; Product Innovation; Relative Skill Demand; Trade Liberalisation
    JEL: F12 F15 F16 O32
    Date: 2007–01
  9. By: Simwaka, Kisu
    Abstract: The paper attempts to examine Malawi’s trade with her major trading partners using an econometric gravity model. In the model, the bilateral trade is a linear function of economic size of the country, geographical distance, and exchange rate volatility, among other factors. Preliminary results show that the fixed effects model is favourable over the random effects gravity model. Specifically, Malawi’s bilateral trade is positively determined by the size of the economies (GDP of the importing country) and similar membership to regional integration agreement. On the other hand, transportation cost, proxied by distance, is found to have a negative influence on Malawi’s trade. Likewise, exchange rate volatility depresses Malawi’s bilateral trade whereas regional economic groupings have had insignificant effect on the flow of bilateral trade. The implications of these results are many. First, all kinds of barriers to trade must be liberalized to a greater extent to enhance Malawi’s trade. One of the main problems of bilateral trade in Africa is transport infrastructure network. Improvement in infrastructure may be a necessary step for successful trade flows within Africa. Second, Malawi can do better if the country trades more with its neighbours. Third, greater stability in the international exchange system would help increase prospects for trade and investments for Southern African countries. Finally, the flow of trade in regional blocks is constrained by problems of compensation issues, overlapping membership, policy harmonization and poor private sector participation.
    Keywords: Malawi’s trade dynamics; gravity model; panel data; fixed effects model
    JEL: F15
    Date: 2006–10–10
  10. By: G.J.M. Linders; M.E.P. Odekerken-Smeets
    Abstract: International trade flows are important for a trading nation such as the Netherlands. They are an important source of income, value added, and welfare. Trade flows are strongly related to transport flows of goods to and from a country. However, not all international transport flows through a country are registered as merchandize trade flows. For example, transit flows of goods are not recorded in international merchandize trade statistics. Such flows can just as well serve as a basis for value added, though. For example, goods transferred in Rotterdam harbour and transported and distributed by Dutch logistics firms create a basis for value added in services trade. Moreover, transport flows of goods entail costs as well, such as the costs of traffic congestion and environmental pollution. Therefore, it is of interest to have good information on the value and quantities of goods transported through countries, and the modes of transport used for various types of flows. For this purpose, we need integrated statistics on trade flows and transport flows in goods. To be able to match trade and transit flows with transport statistics, complete and plausible information on mode of transport and gross weight is needed. This paper describes the scope and coverage of trade statistics in comparison to transport statistics for the Netherlands. We use transport statistics to allocate the plausible mode of transport to trade and transit flows. Creating an integrated view on trade and transport flows in goods, the paper intends to contribute to an improved understanding of the impact of merchandize trade and transit flows on the economy, both in terms of domestic value added and in terms of potential social costs related to congestion and the emission of pollutants.
    Date: 2006–08
  11. By: John C. Beghin (Center for Agricultural and Rural Development (CARD); Food and Agricultural Policy Research Institute (FAPRI))
    Abstract: Nontariff barriers (NTBs) refer to the wide range of policy interventions other than border tariffs that affect trade of goods, services, and factors of production. Most taxonomies of NTBs include market-specific trade and domestic policies affecting trade in that market. Extended taxonomies include macro-economic policies affecting trade. NTBs have gained importance as tariff levels have been reduced worldwide. Common measures of NTBs include tariff-equivalents of the NTB policy or policies and count and frequency measures of NTBs. These NTB measures are subsequently used in various trade models, including gravity equations, to assess trade and/or welfare effects of the measured NTBs.
    Keywords: externality and trade, nontariff barrier, NTB, protectionism, sanitary and phytosanitary, SPS, standards, TBT, technical barrier to trade.
    Date: 2006–12
  12. By: Matthias Busse (Hamburg Institue of International Economics (HWWA)); José Luis Groizard (Universitat de les Illes Balears)
    Abstract: We empirically analyse the impact of trade on income levels in the sub-Saharan Africa countries. The results indicate that the linkage between both variables is negative for these countries. This outcome may explain the negative sign of the Africa dummy in income (or growth) regressions.
    Keywords: Trade, Income Levels, Sub-Saharan Africa.
    JEL: F1 O24 O40
    Date: 2006
  13. By: Candau, Fabien
    Abstract: The contribution of this paper is twofold. Firstly, we explore the e¤ects of trade liberalization and commuting costs on the location of entrepre- neurs. The model reveals a dispersion-agglomeration-dispersion con…g- uration when trade gets freer. Furthermore we prove that when both commuting costs and trade integration are high, then dispersion Pareto dominates agglomeration. Secondly, we use this framework to investigate the e¤ect of trade on corruption at di¤erent levels of democracy and in- stability. We show that corruption is bell-shaped with respect to trade liberalization in stable and democratic regimes but also in unstable dic- tatorships.
    Keywords: Economic geography; Cities; Trade; Corruption.
    JEL: R12 H25
    Date: 2006–05–31
  14. By: Espinosa, Alexandra M.
    Abstract: In this work we analyze the importance of dynamics in the determination of the distribution of gains from free trade and migration. Given a transition dynamic, free trade might worsen a country relatively to autarchy. Moreover, some individuals might lose welfare during the transition dynamics. In both case, individuals find incentives to migrating, given the lost in the welfare relatively to the autarchy; given the lost in welfare relatively to another country; or, given the intertemporal lost in welfare. Then, inequalities in the distribution of the benefits from free trade matters. Finally, we find out that population size and specialization in production matters in the determination of the distribution of gains from free trade and migration.
    Keywords: Migration; free trade; welfare; transition dynamics.
    JEL: J61 J6
    Date: 2006
  15. By: Matthias Busse (Hamburg Institue of International Economics (HWWA)); José Luis Groizard (Universitat de les Illes Balears)
    Abstract: Recent evidence on the respective contributions of institutions and trade to income levels across countries has demonstrated that – once endogeneity is considered – institutional quality clearly dominates the effect of trade. We argue that overall trade is not the most appropriate measure for technology diffusion as a source of productivity growth and propose to focus on imports of research and development (R&D) intensive goods instead. Overall, we confirm previous findings that institutions matter most and that overall trade is not positively associated with per-capita income levels. Yet this does not hold for technology trade, as there is a positive and significant linkage between technology imports and income levels. This outcome is robust to various model specifications, including an instrumental variable approach.
    Keywords: Growth, Technology Diffusion, Trade, R&D Spillovers.
    JEL: F10 O11 O40
    Date: 2006
  16. By: Novy, Dennis (University of Warwick)
    Abstract: Trade costs are known to be a major obstacle to international economic integration. Following the approach of New Open Economy Macroeconomics, this paper explores the effects of international trade costs in a micro-founded general equilibrium model that also allows for pricing to market. Trade costs are shown to create an endogenous home bias in consumption and reduce cross-country consumption correlations. In addition, trade costs magnify exchange rate volatility in response to monetary shocks and typically turn a monetary expansion into a beggar-thy-neighbor policy. It is striking that trade costs generally lead to these results both under producer and local currency pricing.
    Keywords: Trade Costs ; New Open Economy Macroeconomics ; Pricing to Market ; Exchange Rates ; Consumption Correlations
    JEL: F12 F31 F41
    Date: 2006
  17. By: Mustafizur Rahman; Wasel Bin Shadat; Narayan Chandra Das
    Abstract: The present paper investigates the trade creation and trade diversion effects of a number of RTAs, with special focus on the SAFTA, by using a gravity model. Apart from the traditional gravity variables, the model is augmented by some other import variables (e.g. bilateral exchange rate, bilateral free trade agreement). To capture the individual country effect, along with the impact of overall RTA, a set of additional dummy variable has been introduced. The model developed in this paper is estimated by using panel data approach with country-pair specific as well as year specific fixed effects. Two stages estimation technique is deployed to arrive at the estimates. The first stage is estimated using Tobit Model, while OLS is applied in the second stage. The study finds significant intra-bloc export creation in SAPTA; however, at the same time there is evidence of net export diversion in the SAPTA. Bangladesh, India and Pakistan are expected to gain from joining the RTA, while Nepal, Maldives and Sri Lanka are likely to be negatively affected. Among the other RTAs covered under the present study, AFTA, NAFTA, SADC, MERCOSUR, CAN, EAC are associated with intra-bloc export creation and net export diversion. EU and Bangkok agreement (APTA) are found to be intra-bloc export diverting and net export diverting. BIMSTEC is found to be intra-bloc export diverting but there is no evidence of net export creation or diversion. Although none of the RTAs covered by the study was found to be net export creating, more than one third of the members of these RTAs are found to be positively affected by joining the RTAs.
    Keywords: Trade potential, SAFTA, RTA, Gravity Model, Bangladesh, India, Pakisthan, Sri Lanka, Nepal, Maldives
    Date: 2006–12
  18. By: Pop-Silaghi, Monica Ioana
    Abstract: This paper tests the relationship between trade and economic growth for the case of Romania, during 1998-2004. We employed cointegration and Granger-causality tests on stochastic systems composed of exports, imports and GDP. In order to have some degree of significance, we performed our tests on quarterly data. We found that exports do not Granger-cause GDP in the Romania’s case, while the inverse relationship holds. The presence of imports in the stochastic models does not affect significantly the results. For validating our results, we performed the same tests on the 10 countries that entered EU on 1 May 2005, Bulgaria and EU with 15 members and EU with 25 members. We found that only in few cases – Czech Republic, EU 15 and Bulgaria, export-led-growth hypothesis is verified. Bi-directional causality found for exports and output in the case of Czech Republic and EU 15 is implying a virtuous circle of growth and exports, case that should be desirable for all the countries from the sample. The analyzed countries have situations which differ from case to case and a unified framework can not be applying for a generalization of the results.
    Keywords: growth; trade; causality; cointegration; time series
    JEL: C32 O57 F43
    Date: 2006–03
  19. By: Emlinger, C.; Chevassus Lozza, E.; Jacquet, F.
    Abstract: Since 1995, a liberalization process - the so-called Barcelona Process - has taken place in the Mediterranean area. Its aim is to establish by 2010 a free trade area in the Mediterranean Basin. For the moment full liberalization concerns trade in industrial products, but agriculture remains sensitive. Among agricultural products, the fruit and vegetables (F&V) sector is essential for Mediterranean countries, and the EU is their major trading partner. In this context, two questions arise: firstly, to what extent does protection influence trade for the Mediterranean countries compared to other countries? Secondly, what impact would greater liberalization in the F&V trade between the EU and Mediterranean Countries have? Our model, based on the new developments of the gravity trade model, focuses on the difficulties Mediterranean countries face in entering the EU market, compared to other EU partners, considering the relative impact of the different trade costs. The model is estimated at the product level, in a sector which is highly specific: some products may be very perishable and thus particularly time-sensitive. The Mediterranean basin appears as a highly heterogeneous country bloc. Beside the actual level of preferences allowed by the EU, two main elements vary according to the exporting country: its tariff sensitivity and its "non-tariff" trade resistance. Thus, with respect to Euromed liberalization, the higher the tariff sensitivity, the higher the impact liberalization has on trade, and this impact can be limited by a high trade resistance (NTB, logistic constraints...). ...French Abstract : Depuis 1995, le processus de Barcelone est à l'origine d'une libéralisation progressive des échanges de part et d'autre de la Méditerranée. Alors que ce processus a pour objectif l'établissement en 2010 d'une zone de libre échange dans le bassin Méditerranéen, cette libéralisation est pour l'instant assez restreinte en ce qui concerne les produits agricoles. Malgré certaines préférences, ceux-ci se heurtent encore à des protections importantes et complexes, tout particulièrement pour les fruits et légumes (F&L) (prix d'entrée, contingent, calendriers). L'importance de ces produits dans ces échanges et leur rôle dans l'économie des Pays Tiers Méditerranéens (PTM) nous amène à nous poser la question du rôle des protections dans la détermination des échanges. Dans quelle mesure ces protections influencent elles le commerce de F&L en provenance des PTM, comparé aux autres pays ? Plus généralement, quels seraient les impacts d'une plus grande libéralisation des échanges de F&L entre l'Union Européenne et les PTM ? Notre modèle, basé sur les récents développements du modèle de gravité mesure l'accès au marché européen pour les PTM, comparé aux autres fournisseurs de l'Union Européenne, en considérant en particulier l'impact relatif des différentes " résistances " aux échanges. Le modèle est estimé à un niveau désagrégé (niveau " produit ") et prend en compte une des principales caractéristiques du secteur des fruits et légumes qui est la périssabilité des produits. Cette spécificité joue un rôle essentiel dans la détermination des coûts de transport pour les différents produits. Les résultats mettent en évidence une importante hétérogénéité du bassin Méditerranéen en ce qui concerne l'accès au marché Européen. En effet, si le niveau des préférences accordées par l'UE pour les différents PTM est variable, la sensibilité des exportations aux protections ainsi que les barrières aux échanges autres que tarifaires sont également très variables selon les pays. Ainsi, si les impacts d'une libéralisation des échanges sont d'autant plus élevés que la sensibilité des échanges aux protections est importante, ces impacts peuvent être limités par les autres résistances aux échanges (BNT, contraintes logistiques...).
    JEL: F13 F17 Q17 Q18
    Date: 2006
  20. By: Azmat Gani; Biman Chand Prasad (the University of the South Pacific)
    Abstract: This research examines the impact of institutional quality on trade in selected Pacific Island Countries (PICs). Four indicators of institutional quality are chosen: government effectiveness, rule of law, regulatory quality and control of corruption; for six PICs: Fiji, Kiribati, Samoa, Solomon Islands, Tonga and Vanuatu.
    Keywords: Institutional Quality on Trade
    JEL: F1
    Date: 2006–10
  21. By: Sachin Chaturvedi (Research and Information System for Developing Countries)
    Abstract: India has introduced several trade facilitation related measures in the last couple of years. The pro-active strategy adopted by the Central Board of Excise and Customs (CBEC) has helped in introducing several policy measures which have not only streamlined the role of the customs department but has also helped industry in a major way without compromising collection of revenue.
    Keywords: Trade Facilitation, Customs Valuation, India
    JEL: F1
    Date: 2006–12
  22. By: Tereso S. Tullao, Jr.; Michael Angelo A. Cortez (De La Salle University)
    Abstract: The overall objective of the movement of natural persons (MNP) in the ASEAN region is to contribute to expanding trade in services and to deepening economic integration. However, the regional movement of human resources has proceeded beyond the expansion of trade and has persisted in response to labor market imbalances.
    Keywords: Movement of Natural Persons (MNP),ASEAN Framework Agreements on Services (AFAS)
    JEL: F1
    Date: 2006–12
  23. By: Anton Tchipev (Istituto di Ricerche Economiche (IRE), Facoltà di Scienze Economiche, Università della Svizzera Italiana)
    Abstract: This paper combines two of the popular approaches used in the trade versus technology debate: the factor content approach and the cost-share regression across manufacturing industries. The resulting method allows to decompose skill upgrading at the industry level into a component attributed to outsourcing and a residual. Surprisingly, computer investment explains the component attributed to outsourcing better than the residual suggesting that technological change may have contributed to higher disintegration of production already during the 1980s.
    Keywords: wage inequality, technological change, intermediate products, outsourcing, factor content
    JEL: F16 J31
    Date: 2006–12–18
  24. By: G.J.M. Linders
    Abstract: The gravity model is the workhorse model to describe and explain variation in bilateral trade empirically. Consistent with both Heckscher-Ohlin models and models of imperfect competition and trade, this versatile model has proven to be very successful, explaining a large part of the variance in trade flows. However, the loglinear model cannot straightforwardly account for the occurrence of zero-valued trade flows between pairs of countries. This paper investigates the various approaches suggested to deal with zero flows. Apart from the option to omit the zero flows from the sample, various extensions of Tobit estimation, truncated regression, probit regression and substitutions for zero flows have been suggested. We argue that the choice of method should be based on both economic and econometric considerations. The sample selection model appears to fit both considerations best. Moreover, we show that the choice of method may matter greatly for the results, especially if the fraction of zero flows in the sample is large. In the end, the results surprisingly suggest that the simplest solution, to omit zero flows from the sample, often leads to acceptable results, although the sample selection model is preferred theoretically and econometrically.
    Date: 2006–08
  25. By: Joseph A. Clougherty; Michal Grajek
    Abstract: The effects of ISO 9000 diffusion on trade and FDI have gone understudied. We employ panel data reported by OECD nations over the 1995-2002 period to estimate the impact of ISO adoptions on country-pair economic relations. We find ISO diffusion to have no effect in developed nations, but to positively pull FDI (i.e., enhancing inward FDI) and positively push trade (i.e., enhancing exports) in developing nations. <br> <br> <i>ZUSAMMENFASSUNG - (Der Einfluss der Verbreitung des ISO 9000 Standards auf Außenhandel und ausländische Direktinvestitionen: eine neue institutionelle Analyse) <br>Die Folgen der Verbreitung des ISO 9000 Standards auf den Außenhandel und ausländische Direktinvestitionen wurden bislang noch nicht ausreichend untersucht. In diesem Papier werden Datensätze von OECD-Mitgliedsstaaten im Zeitraum von 1995 - 2002 verwendet, um die Auswirkung von ISO-Einführungen auf bilaterale Außenhandelsaktivitäten zu untersuchen. Es zeigt sich, dass die Anwendung der ISO-Norm keine Auswirkungen auf den Handel zwischen entwickelten Ländern hat. In Entwicklungsländern dagegen führt die Einführung der ISO 9000 Norm dazu, dass die ins Land geholten ausländischen Direktinvestitionen (FDI) steigen und dass der Außenhandel - messbar an der Steigerung des Exportvolumens - positiv beeinflusst wird.</i>
    Keywords: FDI, Trade, Transaction Costs, Institutions
    JEL: C51 F23 L31
    Date: 2006–12
  26. By: Giorgio Fazio
    Abstract: Greater trade and financial integration are implicitly identified by the Barcelona Conference as the mechanism to promote “peace and shared prosperity†and “sustainable and balanced economic and social development†in the Euro-Mediterranean Area. Indeed, the Conference has identified the establishment of the Euro-Mediterranean Free Trade Area (FTA) as the essential element to build the Euro-Mediterranean partnership. The main objective of this paper is to verify the extent of economic integration between the countries that will form the FTA and assess the impact of European integration and enlargement on the process of Mediterranean economic integration. In particular, the use of a gravity model specification seems particularly well suited in order to compare actual and potential integration between the Euro-Mediterranean countries and estimate the integrating/disintegrating effect of EU integration and enlargement before the establishment of the Euro-Mediterranean FTA.
    Date: 2006–08
  27. By: Anton Tchipev (Istituto di Ricerche Economiche (IRE), Facoltà di Scienze Economiche, Università della Svizzera Italiana)
    Abstract: This paper attempts to reconcile the slowdown in wage inequality in the 1990s with the view that international trade was a major factor contributing to the sharp increases in inequality during the 1980s. I present a model that highlights the importance of intermediate products and attributes the trend reversal of inequality to the restructuring of the economy. The model is supported by evidence on the evolution of the imports of intermediate products.
    Keywords: wage inequality, intermediate products, outsourcing
    JEL: F16 J31
    Date: 2006–12
  28. By: José Luis Groizard (Universitat de les Illes Balears); Joan Llull (Universitat de les Illes Balears)
    Abstract: The economic effects of the migration of skilled workers from developing countries are highly controversial in the theoretical literature. Traditional models on the brain drain phenomenon stress the negative impact on growth, while new models introduce the possibility of a brain gain for labor exporting economies through indirect channels (i.e. increased incentives for those individuals left behind to accumulate human capital), or direct channels (such as remittances, return migration or FDI and trade linkages). Using a new dataset on the educational level of the migration workforce into the OECD, we test the hypothesis of brain gain estimating a growth equation and a human capital equation. We reject the hypothesis of brain gain in all the cases. The results confirm that countries which export high skilled labor to rich economies tend to have a lower level of human capital and, hence, worse economic performance.
    Keywords: Human capital formation, international migration, skilled workers, development, source country effects, instrumental variables.
    JEL: C30 F22 J24 O15
    Date: 2006
  29. By: Jie He (GREDI, Département d'économique, Université de Sherbrooke)
    Abstract: This paper discusses the validity of the Environmental Kuznets Curve hypothesis for the case of China’s industrial SO2 emission through both reduced and structural model. The estimated Chinaspecific EKC curve for per capital industrial SO2 emission predicts the turning point of 9000 yuan (2750 USD, PPP). However, given China’s fast population expansion speed, the decreasing trend in the per capita emission will not bring an immediate reduction in total industrial SO2 emission. Our structural EKC model succeeds in decomposing industrial SO2 emission density into the contribution from its three famous structural determinants and a marginal impact from international trade. The latter is actually composed of a significantly negative direct impact and indirect ones going through the composition effect, which further depends on the current capital/labour abundance ratio and the actual income level of a province.
    Keywords: : China, EKC, international trade, SO2 emission, decomposition, pollution haven.
    JEL: Q53 Q56 O13
    Date: 2006
  30. By: Mtonga, Elvis
    Abstract: In the last 10 years since South Africa transformed into a democracy, the rand has seen an increase in volatility of its real exchange rate. These fluctuations in the rand’s real exchange rate have raised questions as to whether they signify significant misalignment of the currency and thereby undermine competitiveness of South Africa’s exports abroad. This is a pertinent question in the South African context because foreign trade has been critical to the growth of the economy. Efforts to address current high levels of unemployment and widespread poverty among the majority of the population have depended upon this growth. This study investigates the extent to which fluctuations in the rand’s real exchange rate have impacted on the competitiveness of South African trade flows by determining whether, at some point, the rand had been misaligned, and the likely consequences of such a misalignment. Using data from 1972 to 2003, and an equilibrium correction model of the rand’s real exchange rate drawn on existing literature, the study finds that, from 1994 to 1996, and also in 1998, the rand’s real exchange rate became undervalued by an average 10%. By early 2002, the extent of overshooting had reached 20%. However, the strong recovery of the rand at the start of 2002 reversed this overshooting and instead pushed the real exchange rate above its equilibrium by an average 16 to 17% at the end of 2003. This suggests significant loss of trade competitiveness during 2003 and needed a nominal depreciation to correct the imbalance.
    Keywords: Real exchange rate; South African rand; trade competitiveness
    JEL: F41 F31 F3
    Date: 2006–12–15
  31. By: Valente, Simone
    Abstract: This paper analyzes international status seeking in a two-country model of endogenous growth: utility of agents in developing countries is affected by consumption gaps with the average consumer in advanced economies. By distorting terms of trade, status seeking: (i) may compensate for structural gaps in physical productivity, inducing convergence; (ii) may revert the link between trade and growth; and (iii) induces divergence when interacting with technological catching-up. In particular, envy in conjunction with catching-up predicts switchovers of growth leadership: when the advanced economy is both status- and technology-leader in the short run, convergence in interest rates - e.g. due to R&D spillovers - implies that the initially lagging economy becomes growth-leader in the long run, due to permanent price distortions induced by envy.
    Keywords: Endogenous Growth; International Trade; Consumption Externalities; Productivity Di¤erences; Status Seeking; Technology Diffusion
    JEL: O33 F12 D91
    Date: 2006–07
  32. By: Peter Huber; Michael Paffermayr; Yvonne Wolfmayr
    Abstract: We estimate a linear approximation of the market potential function for Europe as derived in geography and trade models. Using a spatial econometric estimation approach, border effects are identified by a differential impact of nearby regions' purchasing power, depending on whether two regions are located within the EU15 or outside the EU15. Our results reveal substantial market potential effects on nominal wage rates. We also find significant border effects between EU15 and non-EU15 countries. Our estimation results suggest that the enlargement of the EU in May 2004 may lead to pronounced wage effects in the new member states, but to relatively small ones for the existing members and that regional disparities within new member states will increase.
    Date: 2006–08
  33. By: Isabel Cortes-Jimenez; Manuela Pulina
    Abstract: International tourism is a major foreign exchange earner and a principal export for many low income countries as well as for developed ones. Nowadays many developing countries focus economic policies on promoting international tourism as a potential source of economic growth for the country However, the understanding of the relationship between exports and economic growth is still ongoing and, while cross-section studies support the hypothesis that exports promote growth, time series studies have been less conclusive. This paper has the objective to assess if exports and tourism have really promoted growth at an aggregated level for the two main developed countries in the Mediterranean area, namely Italy and Spain, that represent important countries regarding the expansion of tourism. The methodology applied in this work is a cointegration methodology and the Granger causality test.
    Date: 2006–08
  34. By: Filipe Lage-De-Sousa
    Abstract: Brazil has experienced two trade shocks in the 90’s: unilateral liberalization, which weighted average nominal tariff reduced from 37.7% in 1988 to 10.2% in 1994; drastically real devaluation of 47% in the exchange rate in 1999. These two effects has influenced the location of industry in Brazil, since the industry center of Brazil, Sao Paulo State, reduced its participation in the industry sector from 52% in 1985 to 43% in 2002. This occurs when the dispersion forces overcome the agglomeration ones. The main dispersion force evidenced by the literature is the increase of competition, not only in the goods market (a new product), but also in the factor market (demand of labor, which increases wages). In a trade agreement, the most common trade shock, these two forces occurred simultaneously. At this case, it is possible to distinguish between two dispersion forces: competition of the imported goods (first shock); competition in the labor market (second shock). One way to evaluate these effects can be by investigating the effectiveness of transport cost to understand the regional differences in wages and if it has reduced (or increased) its explanation power after the trade shock. In order to do that, the methodology of Hanson 1997 will be used as a basic framework. It is possible to analyze the effects of these trade shocks in the disparities of regional wages in Brazil with his methodology. However, there will be some differences to his framework. First, Hanson uses state level data and this paper has a more disaggregated regional data (microregion, which divides Brazil into more than 500 parts). Second, Hanson doesn’t take into account any change in educational level, infrastructure improvement or government intervention, which are considered in this investigation. The first results show that transport cost is important to understand differences in wages between Brazilian microregions and trade shocks have influenced in some sense these disparities, but not so consistently as transport costs. Moreover, it seems that dispersion force of the second shock was greater than the first one, therefore, competition to hire new employees expel more plants to lower wages regions than comptetion with new products.
    Date: 2006–08
  35. By: Stirböck, Claudia
    Abstract: This paper presents a single error-correction analysis of German total, euro-area (intra) and non-euro-area (extra) import demand for the 1980-2004 period and the more recent 1993-2004 period. German import demand is mainly driven by domestic demand and foreign demand for German goods; by contrast, the price sensitivity of German imports is low. We note a greater propensity to import with respect to an increase in investment compared to a rise in consumption, yet find that export goods have the highest marginal import content. The influence of export demand on the German economy’s import demand is growing, with the marginal propensity to import being higher for extra imports than for intra imports; in addition, the reagibility of the former has intensified perceptibly since the 1990s. The price sensitivity of intra imports is not only higher but, unlike that of extra imports, is also significant and has increased at the current end.
    Keywords: Import demand intra and extra euro-area imports import content, single equation error-correction
    JEL: C22 E20 F41
    Date: 2006
  36. By: Moritz, Michael (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]); Gröger, Margit
    Abstract: "Using the IAB Employment Sample (IABS) covering 1980-2001 we investigate what impact the fall of the Iron Curtain has had on the skill structure of employment and wages in the western German districts neighbouring the Czech Republic. The introduction of free trade in this region, which has one of the world's largest spatial wage differentials, can be seen as a natural experiment. We presume that changes in skill and wage structures are particularly apparent in the regions situated immediately on the open border. Distinguishing three skill categories we obtain unexpected results. Though we observe a general shift from low-skilled jobs towards skilled jobs and a convergence trend of border regions towards the national average, we do not find a special effect for the period after the opening of the border, neither concerning the skill structure nor the wage differentials." (author's abstract, IAB-Doku) ((en))
    Keywords: Grenzgebiet, Qualifikationsstruktur, Lohnhöhe, osteuropäischer Transformationsprozess - Auswirkungen, IAB-Beschäftigtenstichprobe, Bayern, Tschechische Republik, Bundesrepublik Deutschland
    JEL: R23 J31 F16
    Date: 2007–01–09
  37. By: Chaudhuri, Sarbajit
    Abstract: The paper develops a three-sector specific factor model with Harris-Todaro type unemployment to examine the consequences of international factor mobility on the skilled-unskilled wage inequality and urban unemployment of unskilled labour in a small open dual economy. The theoretical analysis shows that the consequences of international factor mobility on wage inequality may not necessarily depend on the difference in the factor intensity condition. Only when the unskilled wage in the low-skill urban sector is positively related to the rural wage, factor intensity conditions do matter. An emigration of skilled labour or an inflow of foreign capital may move the wages in favour of the unskilled labour and lower the magnitude of urban unemployment only if the low-skill urban sector is capital-intensive (in a special sense). But, an immigration of unskilled labour produces exactly the opposite effects. The paper argues that provided the government undertakes supplementary measures to curb trade union power and prevent illegal immigration of unskilled labour, abundant inflows of foreign capital might be a solution to both deteriorating wage inequality and increasing unemployment of unskilled labour in the liberalized regime.
    Keywords: Skilled labour; unskilled labour; foreign capital; wage inequality; Harris-Todaro type unemployment; Emigration (immigration) of labour; unionized wage
    JEL: F21 F22
    Date: 2006–09–01

This nep-int issue is ©2007 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.