nep-int New Economics Papers
on International Trade
Issue of 2007‒05‒26
fourteen papers chosen by
Martin Berka
Massey University

  1. Poverty and Inequality Impacts of Trade Policy Reforms in South Africa By Ramos Mabugu; Margaret Chitiga
  2. Are Shocks to the Terms of Trade Shocks to Productivity? By Timothy J. Kehoe; Kim J. Ruhl
  3. Rural Nonfarm Employment Under Trade Reform Evidence From Vietnam, 1993-2002 By Pham, T.H.
  4. The Impacts of Trade Liberalization on Poverty in Nigeria: Dynamic Simulations in a CGE Model By Manson Nwafor; Adeola Adenikinju; Kanayo Ogujiuba
  5. Bilateral Trade and Per Capita Income Convergence of Selected South Asian countries and among their ‘Major Trade Partners’ By Bashir Ahmad Fida; Ahmed Nawaz Hakro
  6. Globalization, De-Industrialization and Mexican Exceptionalism 1750-1879 By Galvarriato, Aurora Gómez; Gonzales, Rafael Dobado; Williamson, Jeffrey G
  7. Exports and Productivity Growth: First Evidence from a Continuous Treatment Approach By Helmut Fryges; Joachim Wagner
  8. Oil Shocks and External Balances By Kilian, Lutz; Rebucci, Alessandro; Spatafora, Nikola
  9. Globalization and Employment: Imported Skill Biased Technological Change in Developing Countries By Andrea Conte; Marco Vivarelli
  10. Power in the Multinational Corporation in Industry Equilibrium By Marin, Dalia; Verdier, Thierry
  11. Service Offshoring and the Demand for Less-Skilled Labor: Evidence from Germany By Deborah Schöller
  12. Standards-as-Barriers versus Standards-as-Catalysts: Assessing the Impact of HACCP Implementation on U.S. Seafood Imports By Sven Anders; Julie Caswell
  13. History Matters for the Export Decision Plant Level Evidence from Turkish Manufacturing Industry By Sule Ozler; Erol Taymaz; Kamil Yilmaz
  14. U.S. external adjustment: is it disorderly? Is it unique? Will it disrupt the rest of the world? By Steven B. Kamin; Trevor A. Reeve; Nathan Sheets

  1. By: Ramos Mabugu; Margaret Chitiga
    Abstract: South Africa has undergone significant trade liberalization since the end of apartheid. Average protection has fallen while openness has increased. However, economic growth has been insufficient to make inroads into the high unemployment levels. Poverty levels have also risen. The country's experience presents an interesting challenge for many economists that argue that trade liberalization is pro-poor and pro-growth. This study investigates the short and long term effects of trade liberalization using a dynamic microsimulation computable general equilibrium approach. Trade liberalization has been simulated by a complete removal of all tariffs on imported goods and services, and by a combination of tariff removal and an increase of total factor productivity. The main findings are that a complete tariff removal on imports has negative welfare and poverty reduction impacts in the short run which turns positive in the long term due to the accumulation effects. When the tariff removal simulation is combined with an increase of total factor productivity, the short and long run effects are both positive in terms of welfare and poverty reduction. The mining sector (highest export orientation) is the biggest winner from the reforms while the textiles sector (highest initial tariff rate) is the biggest loser. African and Colored households gain the most in terms of welfare and numbers being pulled out of absolute poverty by trade liberalization.
    Keywords: Sequential dynamic CGE, microsimulation, trade liberalization, total factor productivity, poverty, welfare, growth, South Africa
    JEL: D58 E27 F17 I32 O15 O55
    Date: 2007
  2. By: Timothy J. Kehoe; Kim J. Ruhl
    Abstract: International trade is frequently thought of as a production technology in which the inputs are exports and the outputs are imports. Exports are transformed into imports at the rate of the price of exports relative to the price of imports: the reciprocal of the terms of trade. Cast this way, a change in the terms of trade acts as a productivity shock. Or does it? In this paper, we show that this line of reasoning cannot work in standard models. Starting with a simple model and then generalizing, we show that changes in the terms of trade have no first-order effect on productivity when output is measured as chain-weighted real gross domestic product. The terms of trade do affect real income and consumption in a country, and we show how measures of real income change with the terms of trade at business cycle frequencies and during financial crises.
    JEL: E23 F41 F43
    Date: 2007–05
  3. By: Pham, T.H. (Poverty Research Unit at Sussex, Department of Economics, University of Sussex)
    Abstract: Vietnam?s rural economy has substantially diversified over the past two decades. The rural nonfarm sector has grown rapidly and became an important source of employment and income for rural households. This growing nonfarm employment was associated with radical changes in the trade policy reform that has put the country to the top two or three performers in the developing world. This paper examines the potential effect of the trade policy reform on nonfarm employment in rural Vietnam during the period 1993-2002. It proposes two trade openness indices that allow changes in the trade policy at the macro level to be transmitted to rural households. The results reveal that the trade policy reform does have a material impact on rural nonfarm employment. While a more liberalized agricultural sector encourages nonfarm diversification, a lower protection level in the nonfarm sector discourages individual participation in nonfarm income-generating activities.
    Keywords: Trade liberalization, trade policy reform, rural nonfarm employment, Vietnam
    JEL: F13 F16 J21
    Date: 2007–01
  4. By: Manson Nwafor; Adeola Adenikinju; Kanayo Ogujiuba
    Abstract: The study examines the effects that trade liberalization will have on poverty in Nigeria. Previous studies have been limited by static and partial equilibrium analysis. We use a Dynamic Computable General Equilibrium Model to analyze this issue. The more favorably affected sectors are capital intensive; therefore, capital income improves over time while land and labor income reduce. This has positive implications for urban households and negative implications for rural households due to the dependence of the latter on mostly land and labor income. As a result, urban poverty decreases in the short and long run while rural poverty increases in both periods. Policies to improve the agricultural sector will thus have to be implemented before or concurrently with trade liberalization in order for it to have a pro-poor effect. In this way, the rural areas which obtain most of their income from this sector will respond more positively to trade liberalization.
    Keywords: CGE Model, Trade liberalisation, Nigeria, Poverty, Dynamic, ECOWAS, Import tariffs
    JEL: D58 F13 I32 C68
    Date: 2007
  5. By: Bashir Ahmad Fida; Ahmed Nawaz Hakro
    Abstract: This study determines the existence and magnitude of bilateral convergence of per capita income of ‘selected’ South Asian countries and among their ‘major trade partners’1. Bilateral convergence is characterized by reduction in income differentials within the group of trading partners. Three approaches; intra-trade convergence, bilateral trade convergence, and difference approach (fixed and common forms) have been used. The results of fixed effect model- trade increases between the groups, per capita income differential decreases. Results of bilateral convergence approach demonstrate that bilateral trade ratio does not seem to affect the bilateral income difference significantly in any direction. Under difference in difference approach convergence rates-sigma convergence of per capita income convergence both pre-post liberalization periods has converged. However, convergence occurred only in post liberalization period for Asian economies. The panel data of sigma convergence by using fixed effect model demonstrate that convergence rate has been accelerated in Asian economies. However, the rate of convergence process has been decelerated over the postliberalization period in whole sample countries.
  6. By: Galvarriato, Aurora Gómez; Gonzales, Rafael Dobado; Williamson, Jeffrey G
    Abstract: Like the rest of the poor periphery, Mexico had to deal with de-industrialization forces between 1750 and 1913, those critical 150 years when the economic gap between the industrial core and the primary-product-producing periphery widened to such huge dimensions. Yet, from independence to mid-century Mexico did better on this score than did most countries around the periphery. This paper explores the sources of Mexican exceptionalism with de-industrialization. It decomposes those sources into those attributable to productivity events in the core and to globalization forces connecting core to periphery, and to those attributable to domestic forces specific to Mexico. It uses a neo-Ricardian model (with non-tradable foodstuffs) to implement the decomposition, and advocates a price dual approach, and develops a new price and wage data base 1750-1878. There were three forces at work that account for Mexican exceptionalism: first, the terms of trade and Dutch disease effects were much weaker; second, Mexico maintained secular wage competitiveness with the core; and third, Mexico had the autonomy to devise effective ways to foster industry. The first appears to have been the most important.
    Keywords: deindustrialization; globalization; growth; Mexico; trade
    JEL: F1 N7 O2
    Date: 2007–05
  7. By: Helmut Fryges (ZEW Mannheim); Joachim Wagner (Leuphana University of Lüneburg and IZA)
    Abstract: A recent survey of 54 micro-econometric studies reveals that exporting firms are more productive than non-exporters. On the other hand, previous empirical studies show that exporting does not necessarily improve productivity. One possible reason for this result is that most previous studies are restricted to analysing the relationship between a firm’s export status and the growth of its labour productivity, using the firms’ export status as a binary treatment variable and comparing the performance of exporting and non-exporting firms. In this paper, we apply the newly developed generalised propensity score (GPS) methodology that allows for continuous treatment, that is, different levels of the firms’ export activities. Using the GPS method and a large panel data set for German manufacturing firms, we estimate the relationship between a firm’s export-sales ratio and its labour productivity growth rate. We find that there is a causal effect of firms’ export activities on labour productivity growth. However, exporting improves labour productivity growth only within a sub-interval of the range of firms’ export-sales ratios.
    Keywords: export-sales ratio, labour productivity, continuous treatment, dose-response function
    JEL: F14 F23 L60
    Date: 2007–05
  8. By: Kilian, Lutz; Rebucci, Alessandro; Spatafora, Nikola
    Abstract: This paper studies the effects of demand and supply shocks in the global crude oil market on several measures of countries’ external balance, including the oil trade balance, the non-oil trade balance, the current account and changes in net foreign assets (NFA) during 1975–2004. We explicitly take a multilateral and global perspective. In addition to the United States, the Euro area and Japan, we consider a number of regional aggregates including oil-exporting economies and middle-income oil-importing economies. Our first result is that the effect of oil shocks on the merchandise trade balance and the current account, which depending on the source of the shock can be large, depends critically on the response of the non-oil trade balance, and differs systematically between the United States and other oil importing countries. Second, using the Lane-Milesi-Ferretti NFA data set, we document the presence of large and systematic (if not always statistically significant) valuation effects in response to oil shocks, not only for the United States, but also for other oil-importing economies and for oil exporters. Our estimates suggest that increased international financial integration will tend to cushion the effect of oil shocks on NFA positions for major oil exporters and for the United States, but may amplify it for other oil importers.
    Keywords: Balance of payments; External balances; International financial integration; Oil demand shocks; Oil prices; Oil supply shocks
    JEL: F32 F36 O16 O57 Q43
    Date: 2007–05
  9. By: Andrea Conte (University of Turin and Max Planck Institute of Economics Jena); Marco Vivarelli (Catholic University of Milan, CSGR Warwick, Max Planck Institute of Economics Jena and IZA)
    Abstract: This paper discusses the occurrence of Skill-Enhancing Technology Import (SETI), namely the relationship between imports of embodied technology and widening skill-based employment differentials in a sample of low and middle income countries (LMICs). In doing so, this paper provides a direct measure of technology transfer at the sector level from high income countries (HICs), namely those economies which have already experienced the occurrence of skill-biased technological change, to LMICs. GMM techniques are applied to an original panel dataset comprising 28 manufacturing sectors for 23 countries over a decade. Econometric results provide robust evidence of the determinants of widening employment differentials in LMICs. In particular, capital-skill complementarity represents a source of relative skill-bias while SETI provides an absolute skill-bias effect on the employment trends of skilled and unskilled workers witnessed in these countries.
    Keywords: skill biased technological change, capital skill complementarity, GMM estimation, general industrial statistics, world trade analyzer
    JEL: F16 J23 J24 O33
    Date: 2007–05
  10. By: Marin, Dalia; Verdier, Thierry
    Abstract: Recent theories of the multinational corporation introduce the property rights model of the firm and examine whether to integrate our outsource firm activities locally or to a foreign country. This paper focus instead on the internal organization of the multinational corporation by examining the power allocation between headquarters and subsidiaries. We provide a framework to analyse the interaction between the decision to serve the local market by exporting or FDI, market acces and the optimal mode of organization of the multinational corporation. We find that subsidiary managers are given most autonomy in their decision how to run the firm at intermediate levels of local competition. We then provide comparative statics for changes in fixed FDI entry costs and trade costs, information technology, the number of local competitors, and in the size of the local market.
    Keywords: foreign direct investment; power allocation in the firm; international trade and the organization of production
    JEL: D23 F1 F2
    Date: 2007–05
  11. By: Deborah Schöller
    Abstract: Besides material offshoring, economists have started to analyze the impact of service offshoring on domestic employment. Services are of particular interest since their significance has grown in terms of both quantity and quality. One decade ago, most services were considered non-tradable, but the emergence of new information and communication technologies has contributed to overcoming geographical distance. The move towards the liberalization of international service trade has further accelerated this process. The empirical part of this paper first calculates German service offshoring intensities on a sectoral basis using input-output data. This measurement represents the proportion of imported service inputs used in home production. Germany’s average service offshoring intensity more than doubled from 1991 to 2003. In a next step, the impact of service offshoring on the demand for heterogeneous labor in Germany is estimated at a sectoral level including 28 manufacturing sectors. The partial static equilibrium model is based on a variable unit cost function in the general translog form allowing for quasi-fixed input factors. Two different skill-levels are taken into account. The estimation results indicate that service offshoring reduced the relative demand for less-skilled labor in the German manufacturing sectors by on average -0.06 to -0.16% per year between 1991 and 2000.
    Keywords: service offshoring; labor demand; less-skilled labor; globalization; technological change
    JEL: F1 F2
    Date: 2007–05
  12. By: Sven Anders (Department of Rural Economy, University of Alberta Edmonton); Julie Caswell (Department of Resource Economics, University of Massachusetts, Amherst, MA)
    Abstract: The United States mandated a Hazard Analysis Critical Control Points (HACCP) food safety standard for seafood in 1997. Panel model results for the period 1990 to 2004 suggest that HACCP introduction had a negative and significant impact on overall seafood imports from the top 33 suppliers. While the effect for developed countries was positive, the negative HACCP effect for developing countries supports the view of “standards-as-barriers” versus ”standards-as-catalysts.” When the effect is analyzed at an individual country level a different perspective emerges. Regardless of development status, leading seafood exporters generally gained sales volume with the U.S., while most other smaller trading partners faced losses or stagnant sales.
    Keywords: food standards, international trade, developed and developing countries
    JEL: Q18 F14 L51
    Date: 2007–05
  13. By: Sule Ozler (Department of Economics, UCLA); Erol Taymaz (Department of Economics, METU); Kamil Yilmaz (Department of Economics, Koc University)
    Abstract: In a dynamic panel data framework, we investigate the factors influencing the export decision of the Turkish manufacturing plants over the 1990-2001 period. Our results support the presence of high sunk costs of entry to export markets, as well as the hypothesis that the full history of export participation matters for the current export decision. We further show that the effect of the past export experience on current export decision rapidly depreciates over time: Recent export market participation matters more than the participation further in the past. Finally, we show that while persistence in exporting helps lower the costs of re-entry today, there are diminishing returns to export experience. Our results are robust to plant characteristics (plant size, technology, composition of the employment), the spillovers from the presence of exporters in the same industry, as well as industry and year effects.
    Keywords: Export decision, productivity, sunk costs, plant characteristics
    JEL: F14 D21
    Date: 2007–03
  14. By: Steven B. Kamin; Trevor A. Reeve; Nathan Sheets
    Abstract: In recent years, a number of studies have analyzed the experiences of a broad range of industrial economies during periods when their current account deficits have narrowed. Such studies identified systematic aspects of external adjustment, but it is unclear how good a guide the experience of other countries may be to the effects of a future narrowing of the U.S. external imbalance. In contrast, this paper focuses in depth on the historical experience of external adjustment in the United States. Using data from the past thirty-five years, we compare economic performance in episodes during which the U.S. trade balance deteriorated and episodes during which it adjusted. We find trade balance adjustment to have been generally benign: U.S. real GDP growth tended to fall, but not to a statistically significant extent; housing construction slumped; inflation generally rose modestly; and although nominal interest rates tended to rise, real interest rates fell. The paper then compares these outcomes to those in foreign industrial economies. We find that the economic performance of the United States during periods of external adjustment is remarkably similar to the foreign experience. Finally, we also examine the performance of the foreign industrial economies during the periods of U.S. deterioration and adjustment. Contrary to concerns that U.S. adjustment will prove injurious to foreign economies, our analysis suggests that the foreign economies fared reasonably well during past periods when the U.S. trade deficit narrowed: the growth of domestic demand and real GDP abroad generally strengthened during such episodes, although inflation and interest rates tended to rise as well.
    Date: 2007

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