nep-int New Economics Papers
on International Trade
Issue of 2007‒04‒28
sixteen papers chosen by
Martin Berka
Massey University

  1. Trade, Knowledge, and the Industrial Revolution By Kevin H. O'Rourke; Ahmed S. Rahman; Alan M. Taylor
  2. Market Access, Openness and Growth By John Romalis
  3. Rethinking Trade Preferences: How Africa Can Diversify its Exports By Collier, Paul; Venables, Anthony J.
  4. Offshoring: General Equilibrium Effects on Wages, Production and Trade By Baldwin, Richard; Robert-Nicoud, Frédéric
  5. Output Volatility and Openness to Trade: A Reassessment By Eduardo Cavallo
  6. Why are people more pro-trade than pro-migration? By Anna Maria Mayda
  7. The Free Trade Agreement Between the United States and Morocco. The Importance of a Gradual and Assymetric Agreement By Lahsen Abdelkmalki; Mustapha Sadni Jallab; René Sandretto
  8. Infrastructure and trade preferences for the livestock sector : empirical evidence from the beef industry in Africa By Iimi, Atsushi
  9. Are antidumping duties for sale? case-level evidence on the Grossman-Helpman Protection for Sale Model By Carolyn L. Evans; Shane M. Sherlund
  10. Declining Export Prices due to Increased Competition from NIC - Evidence from Germany and the CEEC By Sebastian Gundel
  11. Flying geese or sitting ducks: China’s impact on the trading fortunes of other Asian economies By Alan G. Ahearne; John G. Fernald; Prakash Loungani; John W. Schindler
  12. Avian influenza is a deadly disease that can spread rapidly through poultry. By David Vanzetti
  13. Barriers to Exit By Alberto Chong; Gianmarco León
  14. Globalization, Growth and Distribution in Spain 1500-1913 By Joan R. Rosés; Kevin H. O'Rourke; Jeffrey G. Williamson
  15. Formal finance and trade credit during China ' s transition By Tian Zhu; Lixin Colin Xu; Cull, Robert
  16. Modelling the reporting discrepancies in bilateral data By Arie ten Cate

  1. By: Kevin H. O'Rourke; Ahmed S. Rahman; Alan M. Taylor
    Abstract: Technological change was unskilled-labor-biased during the early Industrial Revolution of the late eighteenth and early nineteenth centuries, but is skill-biased today. This fact is not embedded in extant unified growth models. We develop a model of the transition to sustained economic growth which can endogenously account for both these facts, by allowing the factor bias of technological innovations to reflect the profit-maximising decisions of innovators. Endowments dictated that the initial stages of the Industrial Revolution be unskilled-labor biased. The transition to skill-biased technological change was due to a growth in "Baconian knowledge" and international trade. Simulations show that the model does a good job of tracking reality, at least until the mass education reforms of the late nineteenth century.
    JEL: F15 J13 J24 N10 O31 O33
    Date: 2007–04
  2. By: John Romalis
    Abstract: This paper identifies a causal effect of openness to international trade on growth. It does so by using tariff barriers of the United States as instruments for the openness of developing countries. Trade liberalization by a large trading partner causes an expansion in the trade of other countries. Trade expansion induced by greater market access appears to cause a quantitatively large acceleration in the growth rates of developing countries. Eliminating existing developed world tariffs would increase developing country trade to GDP ratios by one third and growth rates by 0.6 to 1.6 percent per annum.
    JEL: F13 F43
    Date: 2007–04
  3. By: Collier, Paul; Venables, Anthony J.
    Abstract: This paper argues that the contribution of trade preferences to economic development needs to be reappraised in light of the growth of globalized trade in manufactures. Trade preferences may be able to act as a catalyst for manufacturing exports, leading to rapid growth in exports and employment. To do so, preferences need to be designed to be consistent with international trade in fragmented ‘tasks’ (as opposed to complete products) and need to be open to countries with sufficient levels of complementary inputs such as skills and infrastructure. Recent experience with the African Growth and Opportunities Act shows that, in the right conditions, Sub-Saharan African countries have had large manufacturing export supply response to trade preferences.
    Keywords: AGOA; EBA; export diversification; rules of origin; Trade preferences
    JEL: F12 F13 F14 O14
    Date: 2007–04
  4. By: Baldwin, Richard; Robert-Nicoud, Frédéric
    Abstract: A simple model of offshoring, which depicts offshoring as ‘shadow migration,’ permits straightforward derivation of necessary and sufficient conditions for the effects on wages, prices, production and trade. We show that offshoring requires modification of the four classic international trade theorems, so econometricians who ignore offshoring might reject the Heckscher-Ohlin theorem when a properly specified version held in the data. We also show that offshoring is an independent source of comparative advantage and can lead to intra-industry trade in a Walrasian setting. The model is extended to allow for two-way offshoring between similar nations, and to allow for monopolistic competition.
    Keywords: inter-industry trade; intra-industry trade; offshoring; shadow migration; trade theorems
    JEL: F02 F12 L22 R11
    Date: 2007–04
  5. By: Eduardo Cavallo (Inter-American Development Bank)
    Abstract: This paper presents new empirical evidence that suggests that the net effect of trade openness on output volatility is stabilizing. The methodology employed seeks to correct for the likely endogeneity of trade in this setting using gravity estimates as instrumental variables. The results confirm that exposure to trade raises output volatility through the terms-of-trade channel, as previously documented in the literature, but also shows that this is counteracted by a quantitatively larger stabilizing effect. Additional evidence is presented showing that the latter effect comes (at least in part) through the financial channel. Splitting the sample into countries that are more exposed to capital flows and countries that are less exposed, the paper shows that the stabilizing effect of commercial trade predominates in the first sub-sample.
    Keywords: openness to trade, output volatility, financial crises, gravity equation.
    JEL: F36 F40
    Date: 2007–04
  6. By: Anna Maria Mayda (Economics Department and School of Foreign Service, Georgetown University)
    Abstract: I analyze individual attitudes towards trade and immigration in comparative terms. I find that individuals are on average more pro-trade than pro-immigration across several countries. I identify a key source of this difference: the cleavage in trade preferences, absent in immigration attitudes, between individuals working in traded as opposed to non-traded sectors.
    Keywords: Immigration Attitudes, Trade Attitudes, Political Economy
    JEL: F22 F1 J61
    Date: 2006–07
  7. By: Lahsen Abdelkmalki (GATE - Groupe d'analyse et de théorie économique - [CNRS : UMR5824] - [Université Lumière - Lyon II] - [Ecole Normale Supérieure Lettres et Sciences Humaines]); Mustapha Sadni Jallab (UNECA - United Nations Economic Commission for Africa - [United Nations]); René Sandretto (GATE - Groupe d'analyse et de théorie économique - [CNRS : UMR5824] - [Université Lumière - Lyon II] - [Ecole Normale Supérieure Lettres et Sciences Humaines])
    Abstract: The agreement recently signed between Morocco and the United States foresees several modalities in dismantling tariffs. Our simulations show that the various modalities of trade liberalization may have different impacts on the welfare, the rate of growth and the sectoral trade balance of these two countries. More precisely, our findings justify the interest of a gradual and asymmetrical agreement. In addition, the FTA between the US and Morocco will have a significant impact not only on trade between the two countries, but also on their trading relationships with other countries. The most important trade diversion will affect the EU and particularly France, which is Morocco's largest trading partner. It will also adversely affect the other North African countries. The FTA will thus offer the opportunity to Morocco to diversify its markets and its capabilities, which are currently focused on the EU, particularly on France and Spain.
    Keywords: CGE Model ; free trade agreement ; Morocco ; simulation ; trade liberalisation ; trade policy ; United States
    Date: 2007–04–19
  8. By: Iimi, Atsushi
    Abstract: Trade preferences are expected to facilitate global market integration and offer the potential for rapid economic growth and poverty reduction for developing countries. But those preferences do not always guarantee sustainable external competitiveness to beneficiary countries and may risk discouraging their efforts to improve underlying productivity. This paper examines the EU beef import market where several African countries have been granted preferential treatment. The estimation results suggest that profitability improvement achieved by countries under the Cotonou protocol compares unfavorably with the returns to nonbeneficiary countries in recent years. Rather, it shows that public infrastructure, such as paved roads, has an important role in lowering production costs and thus increasing external competitiveness and market shares.
    Keywords: Livestock & Animal Husbandry,Economic Theory & Research,Markets and Market Access,Transport Economics Policy & Planning,Free Trade
    Date: 2007–04–01
  9. By: Carolyn L. Evans; Shane M. Sherlund
    Abstract: As successive rounds of global trade liberalization have lowered broad industry-level tariffs, antidumping duties have emerged as a WTO-consistent means of protecting certain industries. Using the Grossman-Helpman (GH) "Protection for Sale" model, we examine the extent to which political contributions affect the outcomes of decisions in antidumping cases. We find that antidumping duty rates tend to be higher for politically-active petitioners. The relationship between the import penetration ratio and duties imposed depends on whether or not petitioners in a case are politically active. Consistent with the predictions of the GH model, antidumping duties are positively correlated with the import penetration ratio for politically inactive petitioners, but negatively correlated for politically active petitioners. Thus, our paper supports the predictions of the Grossman-Helpman model using a fresh set of data that allows us to avoid some of the compromises made in previous empirical work.
    Date: 2006
  10. By: Sebastian Gundel
    Abstract: In this paper the export demand and supply of German manufacturing industry is estimated for the period 1993:1 through 2005:4. The Johansen (1991, 1994) procedure is applied to estimate the long-run relationship in a VECM. Special attention is pointed on the development of the German export price being exposed to the competitive environment of fast growing countries like Hungary, the Czech Republic and Poland. Since they offer similar high-technology products on international export markets and are gaining market share Germanys export price suffers downward pressure.
    Keywords: Manufactured Exports, New Competition, Cointegration, VECM
    JEL: C32 F10 F14
    Date: 2007–04–23
  11. By: Alan G. Ahearne; John G. Fernald; Prakash Loungani; John W. Schindler
    Abstract: This paper updates our earlier work (Ahearne, Fernald, Loungani and Schindler, 2003) on whether China, with its huge pool of labor and an allegedly undervalued exchange rate, is hurting the export performance of other emerging market economies in Asia. We continue to find that while exchange rates matter for export performance, the income growth of trading partners matters far more. This suggests the potential for exports of all Asian economies to grow in harmony as long as global growth is strong. We also examine changes in export shares of Asian economies to the U.S. market and find evidence that dramatic changes in shares are taking place. Many of these changes are consistent with a 'flying geese' pattern in which China moves into the product space vacated by the Asian NIEs or with greater integration of trade across Asia in the production of final goods. Nevertheless, China’s dramatic gains in recent years do increase the pressure on Asian economies, particularly in ASEAN and South Asia, to seek areas of comparative advantage.
    Date: 2006
  12. By: David Vanzetti
    Abstract: There are many documented cases of transmission from birds to people, but as yet only rare instances of human to human transmission. Nonetheless, public health officials are concerned about the possibility of a human pandemic, and many countries have policies of banning imports of live birds and poultry meat from infected regions. The potential impacts on Indonesia of a production shock, a shift in consumption or a trade ban are assessed using a heterogeneous product model where imports are differentiated by source. Empirical results suggest the likely trade impacts in Indonesia are minimal because its trade is a small share of production.
    JEL: F13 Q17
    Date: 2007
  13. By: Alberto Chong (Inter-American Development Bank); Gianmarco León (Inter-American Development Bank)
    Abstract: Unlike previous empirical studies that focus on barriers to entry in international trade, we focus on barriers to exit as measured by passport costs for a cross-section of countries. We test four common theories on the determinants of such exit barriers and find that macroeconomic and brain-drain explanations do explain high barriers to exit. However, institutional and cultural hypotheses do not appear to be empirically robust explanations of such high barriers. Our findings hold when applying instrumental variables, changes in specification, and changes in cross-country periods.
    Keywords: International Trade; Passport Costs; Barriers to Exit; Development; Labor
    JEL: O1
    Date: 2006–08
  14. By: Joan R. Rosés; Kevin H. O'Rourke; Jeffrey G. Williamson
    Abstract: The endogenous growth literature has explored the transition from a Malthusian world where real wages, living standards and labor productivity are all linked to factor endowments, to one where (endogenous) productivity change embedded in modern industrial growth breaks that link. Recently, economic historians have presented evidence from England showing that the dramatic reversal in distributional trends -- from a steep secular fall in wage-land rent ratios before 1800 to a steep secular rise thereafter -- must be explained both by industrial revolutionary growth forces and by global forces that opened up the English economy to international trade. This paper explores whether and how the relationship was different for Spain, a country which had relatively poor productivity growth in agriculture and low living standards prior to 1800, was a late-comer to industrialization afterwards, and adopted very restrictive policies towards imports for much of the 19th century. The failure of Spanish wage-rental ratios to undergo a sustained rise after 1840 can be attributed to the delayed fall in relative agricultural prices (due to those protective policies) and to the decline in Spanish manufacturing productivity after 1898.
    JEL: F1 N7 O4
    Date: 2007–04
  15. By: Tian Zhu; Lixin Colin Xu; Cull, Robert
    Abstract: Using a large panel dataset of Chinese industrial firms, the authors examine the determinants of access to loans from formal financial intermediaries and extension of trade credit. Poorly performing state-owned enterprises were more likely to redistribute credit to firms with less privileged access to loans through trade credit, a pattern consistent with some of the extension of trade credit being involuntary. By contrast, profitable private domestic firms were more likely to extend trade credit than unprofitable ones. Trade credit likely provided a substitute for loans for these private firms ' customers that were shut out of formal credit markets. As biases in lending became less severe, the amount of trade credit extended by private firms declined.
    Keywords: Investment and Investment Climate,Economic Theory & Research,Banks & Banking Reform,Financial Crisis Management & Restructuring,Financial Intermediation
    Date: 2007–04–01
  16. By: Arie ten Cate
    Abstract: The discrepancies in reported bilateral statistical data ("mirror data") are used to estimate the accuracy of the reporters. The estimated accuracies are to be used to compute optimal combinations of mirror data. <P> Two models of the discrepancies are presented: (a) unbiased reporting with inaccurate reporters having a large variance, and (b) biased reporting with inaccurate reporters having a large bias (either positive or negative). Estimation methods are least squares regression and maximum likelihood. <P> A numerical illustration is given, using data of the international trade in services. It is shown how to judge the two models empirically. <P> Research has been continued after the publication. In particular about the maximum likelihood estimation of the variance model.
    Keywords: discrepancies; mirror; mirror data; bilateral; international trade; services; GTAP; GAMS
    JEL: C82
    Date: 2007–04

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