nep-int New Economics Papers
on International Trade
Issue of 2007‒08‒27
thirty-one papers chosen by
Martin Berka
Massey University

  1. International Trade and Economic Growth in Developing Countries By Tobias Bidlingmaier
  2. Trade Openness and Inflation in Latin American Countries By Rajagopal
  3. Innovation, firm dynamics, and international trade By Andrew Atkeson; Ariel Burstein
  4. Outsourcing and International Production of a Multinational: A Theoretical Model and Empirical Evidence from Toyota, Thailand By Witada Anukoonwattaka
  5. Structural Estimation and Solution of International Trade Models with Heterogeneous Firms By Russell H. Hillberry; Edward J. Balistreri; Thomas F. Rutherford
  6. The Impacts of Free Trade Agreements on Trade Flows: An Application of the Gravity Model Approach By URATA Shujiro; OKABE Misa
  7. Globalization and Distribution of Exports By Nilsson, Desirée; Johansson, Börje
  8. The growth of China and India in world trade : opportunity or threat for Latin America and the Caribbean? By Soloaga, Isidro; Olarreaga, Marcelo; Lederman, Daniel
  9. Globalization, EU Enlargement and Income Distribution By Fritz Breuss
  10. Market access asymmetry in food trade By Alessandro Olper; Valentina Raimondi
  11. Die Another Day: Duration in German Import Trade By Volker Nitsch
  12. Terms of Trade Shocks and Endogenous Search Unemployment: A Two-sector Model with Non-Traded goods By Yu Sheng; Xingpeng Xu
  13. Market Potential and Income Inequality By Nilsson, Desirée
  14. Institutions and Trade: Competitors or Complements in Economic Development? By Sambit Bhattacharyya; Steve Dowrick; Jane Golley
  15. Specialization and adjustment during the growth of China and India : the Latin American experience By Rubiano, Eliana; Olarreaga, Marcelo; Lederman, Daniel
  16. Patterns of Migration, Trade and Foreign Direct Investment across OECD Countries By Ben Dolman
  17. Outsourcing and Trade Imbalances: The U.S: - China Case By Henryk Kierzkowski; Lurong Chen
  18. International Trade and Retailing: Diversity versus Accessibility and the Creation of \"Retail Deserts\" By Carsten Eckel
  19. Competitiveness – Residency Base versus Ownership Base – in Case of Japan By Kazuo Inaba
  20. Trade Liberalisation, Exit, and Output and Employment Adjustments of Australian Manufacturing Establishments By Alfons Palangkaraya; Jongsay Yong
  21. Issues of Dual Use and Reviewing Product Coverage of Environmental Goods By Joy A. Kim
  22. A Tale of Two Countries: Openness and Growth in China and India By Chee Kian Leong
  23. A New Look at Offshoring and Inequality: Specialization Versus Competition By Ekholm, Karolina; Ulltveit-Moe, Karen-Helene
  24. Technological Leaders and Followers in a World Economy By Testsugen Haruyama; Ken-ichi Hashimoto
  25. North Korea’s External Economic Relations By Stephan Haggard; Marcus Noland
  26. A Two-countries Two-R&D-sectors Model of Growth and Trade By Gilles Koléda
  27. Economic Development and Technology Diffusion By Kurt Hafner
  28. What determines Financial Development? Culture, Institutions, or Trade By Nils Herger; Roland Hodler; Michael Lobsinger
  29. Northern and Southern Patent Novelty Requirement Harmonization, Growth and Trade By Gilles Koléda
  30. Assessing General and Partial Equilibrium Simulations of Doha Round Outcomes using Meta-Analysis By Sebastian Hess; Stephan von Cramon-Taubadel
  31. Changing Export Structure According to Income Elasticity - Kaldor revisited By Nilsson, Desirée

  1. By: Tobias Bidlingmaier
    Date: 2007–06
  2. By: Rajagopal (Tecnológico de Monterrey, Campus Ciudad de México)
    Abstract: In the pre-reforms period the trade policy in Latin America had involved very high levels of protection and government intervention. The recent trade liberalization policies of the Latin American countries have sought to reverse the protectionist policies and open the scope for foreign direct investment and joint ventures in the public and private sector industries. This paper discusses the impact of trade openness policy on tariff structure, export competitiveness, inflation and economic growth of Latin American countries. The relationship between the trade openness and general price level as an indicator of inflation and robustness of this relationship has been explored in the study.
    Keywords: Trade openness, export competitiveness, institutional reforms, economic growth, trade blocs, trade agreements, neo-regionalism, inflationary trend, foreign investment, and economic welfare
    JEL: C21 C33 C51 E31 F13 F F43
    Date: 2007–08
  3. By: Andrew Atkeson; Ariel Burstein
    Abstract: We present a general equilibrium model of the decisions of firms to innovate and to engage in international trade. We use the model to analyze the impact of a reduction in international trade costs on firms' process and product innovative activity. We first show analytically that if all firms export with equal intensity, then a reduction in international trade costs has no impact at all, in steady-state, on firms' investments in process innovation. We then show that if only a subset of firms export, a decline in marginal trade costs raises process innovation in exporting firms relative to that of non-exporting firms. This reallocation of process innovation reinforces existing patterns of comparative advantage, and leads to an amplified response of trade volumes and output over time. In a quantitative version of the model, we show that the increase in process innovation is largely offset by a decline in product innovation. We find that, even if process innovation is very elastic and leads to a large dynamic response of trade, output, consumption, and the firm size distribution, the dynamic welfare gains are very similar to those in a model with inelastic process innovation.
    JEL: F1 L11 L16 O3
    Date: 2007–08
  4. By: Witada Anukoonwattaka
    Abstract: A stylised partial equilibrium model of an MNC is developed. The model incorporates key aspects of outsourcing in a world of falling trade costs. The multinational, with firm-specific capital operates in two countries that differ in factor prices; it produces final goods with firm specific capital but can source multiple intermediate goods internally from each subsidiary (produced with firm-specific capital and labour), or outsource them from domestic or foreign suppliers. There is a potential trade off between scale of final good production and scope of in-house component production. Trade liberalization can affect both country and organization choices of the firm’s component sourcing and final-good production. We also use a previously unused data set on component trade of Toyota in Southeast Asia to conduct an empirical investigation informed by the model insights.
    Keywords: Intra-firm Trade, Trade in intermediate inputs, direct foreign investment, multinational corporations and outsourcing
    Date: 2007–06
  5. By: Russell H. Hillberry; Edward J. Balistreri; Thomas F. Rutherford
    Abstract: We present an empirical implementation of a general-equilibrium model of international trade with heterogeneous manufacturing firms. The theory underlying our model is consistent with Melitz (2003) and Bernard et al. (2004). A nonlinear structural estimation procedure identifies a set of core structural parameters and unobserved firm-level trade frictions which best fit the geographic pattern of trade. Once the parameters are identified, we utilize a decomposition technique for computing general-equilibrium counterfactuals. We illustrate this technique using trade and protection data from the Global Trade Analysis Project (GTAP). In our calculations we first assess the economic effects of reductions in measured tariffs, and we then compare this impact with reductions in estimated fixed trade costs.
    JEL: C68 F12
    Date: 2007–06
  6. By: URATA Shujiro; OKABE Misa
    Abstract: The proliferation of FTAs appears to have affected economic conditions in many countries through foreign trade. We attempt to discern the impacts of FTAs on foreign trade by using two approaches. One approach is to examine the changes in trade patterns before and after an FTA by using indicators of intra-FTA interdependence. The second approach is the estimation of a gravity equation to discern the impacts of FTAs on bilateral trade flows, i.e. trade creation and diversion effects. In the latter approach we extend the previous studies by enlarging the sample size in terms of the time-period, and also undertake an analysis by disaggregating the trade data with a presumption that the impact of FTAs is different for different sectors. The results of the analysis revealed several interesting observations. Our analysis of the total trade indicates that FTAs bring about trade creation effect and that trade diversion effect is limited. Besides, the results of our analysis of disaggregated trade data show different patterns among different products, and they identify trade diversion effect for many products in the case of the EU, the NAFTA, and the MERCOSUR but not for the case of the AFTA.
    Date: 2007–08
  7. By: Nilsson, Desirée (CESIS and JIBS); Johansson, Börje (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: During the 1980s many economists started to use the term globalisation as a catchword for an increased interaction between countries in world trade. The literature does not provide a clear definition of globalisation. We set up a number of criteria and formulate hypotheses about globalisation that we explore for Swedish export flows during the years 1965-2000. Globalisation, in this study, is referred to as increases in country diversity, extended transport radii, less effect of distance on trade flows, and the ratio of exports to the importing countries’ incomes. The results from the empirical analysis do not support the hypotheses of increasing trade globalisation It is rather the case that export flows are becoming more internationally regionalised.
    Keywords: Globalisation; Country Diversity; Transaction Distance; Proportional Distribution
    JEL: F01 F10
    Date: 2007–08–08
  8. By: Soloaga, Isidro; Olarreaga, Marcelo; Lederman, Daniel
    Abstract: This paper studies the relationship between the growth of China and India in world merchandise trade and Latin American and Caribbean commercial flows from two perspectives. First, the authors focus on the opportunity that China and India ' s markets have offered Latin American and Caribbean exporters during 2000-2004. Second, empirical analyses examine the partial correlation between Chinese and Indian bilateral trade flows and Latin American and Caribbean trade with third markets. Both analyses rely on the gravity model of international trade. Econometric estimations that control for the systematic correlation between expected bilateral trade volumes and the size of their regression errors, as well as importer and exporter fixed effects and year effects, provide consistent estimates of the relevant parameters for different groups of countries in Latin America and the Caribbean. Results suggest that the growth of the two Asian markets has produced large opportunities for Latin American and Caribbean exporters, which nevertheless have not been fully exploited. The evidence concerning the effects of Chinese and Indian trade with third markets is not robust, but there is little evidence of negative effects on Latin American and Caribbean exports of non-fuel merchandise. In general, China ' s and to a large extent India ' s growing presence in world trade has been good news for Latin America and the Caribbean, but some of the potential benefits remain unexploited.
    Keywords: Economic Theory & Research,Free Trade,Currencies and Exchange Rates,Trade Policy,Markets and Market Access
    Date: 2007–08–01
  9. By: Fritz Breuss (WIFO)
    Abstract: Advanced industrial countries have been exhibiting a steady decline of the labor income shares in the last two decades. We explain this phenomenon by resorting to the old Stolper-Samuelson theorem. The conclusions concerning the impact of free trade on the income distribution are unambiguous in a Heckscher-Ohlin world with two countries, two goods and two factors of production (capital and labor). In contrast, the consequences of FDI from the capital abundant country (EU) to the labor abundant CEECs are ambiguous. Both scenarios are investigated theoretically and then simulated with a hypothetical two country CGE model, including the EU and the CEECs. A panel regression for both regions separately, helps to decide empirically which influences on the development of the labor income shares are at work. Globalization, measured by revealed comparative advantage (increase in global net trade) has contributed to a decline in the labor income shares in the EU. Additionally, those countries which are engaged more in trade with the CEECs can expect a sharper decline in the wage share. Global net FDI outflow also exerts a negative influence on the labor income share in the EU. In the CEECs the increase in global net trade had a positive influence on the labor income share, trade with the EU, however, dampened the labor income share. FDI inflow increased the labor income share in the CEECs.
    Keywords: Globalisation, EU Enlargement, Income distribution
    Date: 2007–06–28
  10. By: Alessandro Olper; Valentina Raimondi
    Abstract: Using a bilateral trade equation derived from a monopolistic competition model, we investigated market access reciprocity in food trade among the US, Canada, the EU and Japan. We explore country and industry–specific market access asymmetry through the border effect approach, re-challenging the underlying main explanations. Our findings reveal marked asymmetry in reciprocal trade openness; indeed, access to the food markets of the US and Japan appears significantly easier than reciprocal access to both Canada and, especially, the EU. Policy trade barriers, firstly in the forms of NTBs, the degree of product differentiation and ‘home bias’ in preferences, are all important factors in explaining border effects. Moreover, several stylized facts suggest that border effect interpretation should also be based on political economy arguments.
    Keywords: gravity, market access, asymmetry, food trade, NTBs
    JEL: F13 F14 Q17
    Date: 2007
  11. By: Volker Nitsch
    Abstract: International trade patterns at the product level are surprisingly dynamic. The majority of trade relationships exist for just a few, often only two to four, years. In this paper, I examine empirically the duration in German import trade at the 8-digit product level from 1995 to 2005. I find that survival probabilities are affected by product type, exporter characteristics and market structure. Specifically, I show that the duration of exporting a product to Germany is longer for differentiated products, for products with a low elasticity of substitution, for products obtained from a large exporter that is geographically close to the German market, and for products in markets with increasing import demand.
    Keywords: Survival, product, relationship, pattern
    Date: 2007–06
  12. By: Yu Sheng; Xingpeng Xu
    Abstract: We develop a simple and tractable two-sector search model featuring a non-traded sector and endogenous search unemployment to examine the impact of terms of trade shocks on unemployment. We show that changes in terms of trade will not only lead to employment reallocation across sectors, as in the traditional trade models, but more importantly, impact upon search unemployment within each sector. Specifically, we show that an improvement (deterioration) of terms of trade reduces (increases) unemployment rates in both traded and non-traded sectors.
    Keywords: two-sector search model, trade and unemployment, non-traded good
    JEL: F16 F23 J64
    Date: 2007–06
  13. By: Nilsson, Desirée (JIBS and CESIS)
    Abstract: This study assumes that non-homothetic preferences determine the flow of international trade. Empirical studies of international trade have commonly only considered demand from a representative consumer. This would not provide a complete picture of the aggregate market demand. Because of the prevalence of non-homothetic preferences in demand, firms that contemplate exports should consider the distribution of income within a country as an attribute of the corresponding market. This study evaluates the effect that income inequality may exert on a firm’s probability of selecting a particular export market. The theoretical framework is supported by discrete choice theory, and the empirical analysis uses export statistics for the OECD countries. The results indicate that uneven income distribution is perceived as an attractive feature of destinations for exports.
    Keywords: market potential; income inequality; discrete choice theory
    JEL: D31 F10
    Date: 2007–08–08
  14. By: Sambit Bhattacharyya; Steve Dowrick; Jane Golley
    Abstract: A recent paper by Dowrick and Golley (2004) finds that the impact of trade on growth varies with income. In particular, during the period 1980-2000, trade is observed to yield larger benefits for the more advanced economies. This result is backed up by Dejong and Ripoll (2005) who show that the richer countries benefit more from tariff reduction than the poorer countries. These findings raise the question, what is it about high levels of per capita income that enable richer economies to take better advantage of trade? It appears that the reason behind the success of the high income economies is the high quality institutions. These institutions not only boost growth directly but they impact economic performance indirectly by improving trade. We capture the complementarity between institutions and trade by estimating an empirical growth model which includes an interactive term involving these two variables. Better quality institutions are indicative of lower transaction costs which facilitates trade. It also ensures better distribution of the gains from trade paving the way for further trade and growth.
    Date: 2007–06
  15. By: Rubiano, Eliana; Olarreaga, Marcelo; Lederman, Daniel
    Abstract: This paper examines the extent to which the growth of China and India in world markets is affecting the patterns of trade specialization in Latin American economies. The authors construct Vollrath ' s measure of revealed comparative advantage by 3-digit ISIC sector, country, and year. This measure accounts for both imports and exports. The empirical analyses explore the correlation between the revealed comparative advantage of Latin America and the two Asian economies. Econometric estimates suggest that the specialization pattern of Latin A-with the exception of Mexico-has been moving in opposite direction of the trade specialization pattern of China and India. Labor-intensive sectors (both unskilled and skilled) probably have been negatively affected by the growing presence of China and India in world markets, while natural resource and scientific knowledge intensive sectors have probably benefited from China and India ' s growth since 1990.
    Keywords: Free Trade,Economic Theory & Research,Trade Policy,Water and Industry,Agricultural Knowledge & Information Systems
    Date: 2007–08–01
  16. By: Ben Dolman
    Abstract: Previous studies have shown that countries trade and invest more with partner countries from which they have received more migrants, presumably because migrant networks provide information on financial opportunities abroad. This literature focusing on migrants within individual countries is extended by constructing a dataset covering 28 OECD countries and up to 162 trading partners and the results confirm these bilateral correlations. The effect of migrants on trade flows is also found to be smaller where countries exchange greater direct investment, suggesting that more formal business networks partly displace the effects of migrant networks. The data set also allows analysis of whether migrants increase the aggregate trade and investment of their country-of-residence, a question not previously addressed in the literature. This paper shows that migrants have a much larger effect on the directions of international trade and investment than on aggregate volumes. In the case of trade, this is shown to be consistent with the theory underpinning the gravity equation.
    Date: 2007–06
  17. By: Henryk Kierzkowski; Lurong Chen
    Date: 2007–06
  18. By: Carsten Eckel
    Abstract: The retail sectors in many industrialized countries have experienced a large increase in concentration and the appearance of so-called \"retail deserts\", areas of low retail provision. This study addresses the role of international trade in this process. The analysis shows that by raising product diversity, international trade also raises the costs of provision in retailing and leads to a consolidation in this industry. As a consequence, surviving retailers have larger catchment areas and consumers have to travel longer distances for their errands. These adjustments in retailing create a trade-off between diversity and accessibility, and international trade is not unambiguously welfare improving.
    Keywords: International Trade, Retailing, Diversity, Accessibility, Retail Deserts
    JEL: F12 L11 L81
    Date: 2007–08–15
  19. By: Kazuo Inaba
    Abstract: This paper examines the competitiveness of Japanese firms in the manufacturing sector since the middle of 1980s when the Japanese FDI outflow was accelerated. Instead of a standard residency-based balance of trade, we use the idea of ownership-based net foreign sales introduced by DeAnne Julius (1990, 1991). The calculated results show that the Japanese overseas activities have made the firms with foreign affiliates abroad become more competitive through selling their products in the local market of the foreign country. Major exporting sectors such as electric machinery and transport machinery have sustained strong competitiveness. The competitiveness of Japanese firms is also confirmed by upward tendency of profit rate in foreign affiliates abroad. Using Dunning terminology the ownership advantages the Japanese firms acquired abroad would mainly come from their inherent management and production system.
    Keywords: Japanese Direct Foreign Investment, International Competitiveness, Intra-firm Trade, Foreign Trade, Foreign Sales, Ownership Advantages
    Date: 2006–09–05
  20. By: Alfons Palangkaraya; Jongsay Yong
    Abstract: Using Australian manufacturing establishment data from 1993-94 and 1996-97, we study three possible sources of productivity gains from trade liberalisation: the exit of inefficient establishments, economies of scale from output expansion, and reduction in employment. We find weak evidence that establishments in industries with greater reductions in effective rate of assistance are more likely to exit, strong evidence that they reduce employment, and no evidence for economies of scale through output expansion. Thus the productivity gains appear to come more from the pro-competitive effects which forces establishments to reduce their slackness rather than from the exit of less efficient establishments.
    Keywords: Productivity, Trade Liberalisation, Australia, Manufacturing, Establishment, Exit, Employment
    JEL: D21 F21
    Date: 2007–06
  21. By: Joy A. Kim
    Abstract: Importing "environmental" goods which are also used for other than environmental purposes and ensuring that they represent the most appropriate technology for a particular environmental problem are key concerns to be addressed in the approaches currently being discussed under paragraph 31(iii) of the Doha Agenda. By drawing lessons from experiences with WTO sectoral agreements such as the Agreements on Information Technology (ITA), Trade in Pharmaceutical Products and Trade in Civil Aircraft as well as relevant national schemes, this paper explores possible options to address these two issues.
    Keywords: WTO, environmental goods
    Date: 2007–03–29
  22. By: Chee Kian Leong
    Abstract: The policy by China and India to open their markets to international trade has been touted as the reason for their phenomenal growth. This paper investigates the impact of opening up the China and Indian economy on economic growth in these countries using new panel data sets for both the national economies and the regional economies of China. The policy change to a more liberalized economy is explicitly identified using instrumental variables. The results provide support that export growth does have a positive and statistically significant effect on economic growth in these countries. However, the growth rates of these countries are export and FDI inelastic, in the sense that a one percentage point increase in growth rate of export or FDI will have a less than one percentage point increase in economic growth rate of these countries. In the case of the Chinese regions, the presence of export processing zones may exert positive effect on the regional growth rate but the increase in regional growth is even more export inelastic than at the national level. The results dispel the popular view that adopting a policy of more openness in the economy has a “multiplier” effect on economic growth. Of the two phases of liberalization in both countries, the second stage is statistically significant. One possible reason is that the scale of liberalization is greater in the second phase. Additionally, increasing the number of SEZs has very negligible effect on economic growth. Taken together, these results suggest that what contributes to greater growth is a greater scale of liberalization, rather than increasing the number of SEZs.
    Date: 2007–06
  23. By: Ekholm, Karolina; Ulltveit-Moe, Karen-Helene
    Abstract: The received wisdom is that a rising skill premium accompanied by a simultaneous rise in skill intensity characterises relative wages and the employment structure in US manufacturing. However, we present evidence to show that recent developments in the USA do not conform to this pattern, and that the evolution of relative wages over the last three decades has in fact been bell-shaped. We argue that this bell-shaped evolution of wage inequality can be linked to globalization and a rise in offshoring. To analyse the relationship between globalization, offshoring and relative wages, we have developed a general equilibrium model of trade and offshoring. This reveals that globalization and offshoring have two opposing effects on relative wages: greater vertical specialization increases wage inequality, while greater international competition increases wage equality. The result is a bell-shaped relationship between wage inequality and offshoring when globalization is driven by falling trade costs for goods. However, it can also be seen that if the globalization process continues as a result of the reduced costs of fragmentation, a U-shaped relationship emerges. Consistent with recent observations, our analysis suggests that fears related to offshoring and inequality may prove unjustified in the short term although the long-term effects may be quite different.
    Keywords: globalization; offshoring; trade; wage inequality
    JEL: F12 F15 J31 O33
    Date: 2007–07
  24. By: Testsugen Haruyama; Ken-ichi Hashimoto
    Abstract: This paper develops a dynamic general equilibrium model of North-South trade and economic growth in a world economy with a continuum of countries. Countries are different in research productivity. Innovation, imitation and the relative wage between countries are endogenously determined as well as the number of the country that specialize in innovative or imitative R&D. We investigate how equilibrium is affected by globalization, intellectual property right protection, industrial policy, competition and migration. The model is also extended to introduce foreign direct investment.
    Keywords: Innovation, imitation, growth, trade, North, South
    JEL: O11 O14 O31 F12 F43
    Date: 2007–06
  25. By: Stephan Haggard (University of California, San Diego Graduate School of International Relations and Pacific Studies); Marcus Noland (Peterson Institute for International Economics)
    Abstract: North Korea’s international transactions have grown since the 1990s famine period. Illicit transactions appear to account for a declining share of trade. Direct investment is rising, but the county remains significantly dependent on aid to finance imports. Interdependence with South Korea and China is rising, but the nature of integration with these two partners is very different: China’s interaction with North Korea appears to be increasingly on market-oriented terms, while South Korea’s involvement has a growing noncommercial or aid component. These patterns have implications for North Korea’s development, the effectiveness of UN sanctions, and its bargaining behavior in nuclear negotiations.
    Keywords: North Korea, sanctions, political economy, aid, transitional economies
    JEL: F5 P3 F14
    Date: 2007–08
  26. By: Gilles Koléda
    Abstract: This paper presents a two-countries dynamic model of Schumpeterian growth with two innovative R&D sectors in each country: a vertical R&D sector that improves the quality of existing differentiated products and a horizontal R&D sector that creates new differentiated products. The two countries exchange differentiated products and beneficiate from knowledge spillovers, possibly from the other country. We opt for an endogenous growth without scale effect specification à la Howitt (1999) and explore the consequence on home research and production of an increase of research capacities in foreign country (possibly impulsed by R&D subsidies).
    Keywords: Endogenous growth without scale effect, innovation, Trade, spillovers, R&D subsidies
    JEL: F43 O31 O34 O40
    Date: 2007–06
  27. By: Kurt Hafner
    Abstract: I first present a New Economic Geography model and analyze the impact of R&D on economic development of integrating countries. I find that technology diffusion and skilled labor migration stimulates economic development through fix cost reduction on a firm level. As the inclusion of foreign technology matters for structurally backward countries, I second use time series data for Greece, Portugal, Spain and Ireland representing European integration during the 1980s and 1990s. In considering three different technology diffusion channels, estimates, however, reduces to Portugal as test procedures confirm nonstationarity and cointegration only for this country. I find empirical evidence for bilateral trade as a diffusion channel but not for FDI or foreign patents.
    Keywords: Economic Geography, Agglomeration, Technology Diffusion, Nonstationary Time Series
    Date: 2007–06
  28. By: Nils Herger; Roland Hodler; Michael Lobsinger
    Abstract: This paper endeavours to explain the vast differences in the size of capital markets across countries, by drawing together theories emphasising cultural values, dysfunctional institutions, or impediments to trade as obstacles to financial development. To account for endogeneity, instrumental variables pertaining to culture, geography, and colonial history are employed. We find that trade openness and institutions constraining the political elite from expropriating financiers exhibit a strong positive effect on the size of capital markets. Conversely, cultural beliefs and the cost of enforcing financial contracts seem not to introduce significant obstacles for financial development.
    Keywords: Financial Development, Culture, Institutional Quality, Trade
    Date: 2007–06
  29. By: Gilles Koléda
    Abstract: We study the incentive that governments have to protect IPR in a trading world economy, focusing on the patent novelty requirement and its effect on growth and trade. We consider a world economy with ongoing innovation in two regions. The North is assumed to have a higher wage than the South and a greater capacity for innovation, the South is assumed to have a larger population than the North. We introduce heterogeneity in innovation size together with the obligation, imposed by Patent Office inside each region, that innovation size must be higher than the patent novelty requirement. This patent characteristic stands to be a useable instrument to promote innovation and growth, and also a strategic trade policy instrument. We numerically determine the Nash equilibrium of the strategic game that results of the patent novelty requirement setting by each regional authority. We then compare, in terms of welfare, the non-cooperative equilibrium with the equilibrium that results from the patent novelty requirement harmonization, when the level of this common patent novelty requirement is set by a supra-regional organization.
    Keywords: patent novelty requirement, innovation, growth, quality ladders, harmonization, North and South
    JEL: O34 O40 F43
    Date: 2007–06
  30. By: Sebastian Hess; Stephan von Cramon-Taubadel
    Abstract: Applied general and partial equilibrium models are widely used tools for ex ante analysis of trade policy changes. However, simulation results seem to exhibit significant variation across publications, and the often criticised ‘black box’ character of applied trade models makes meaningful comparisons of simulation results very difficult. As a potential remedy, this paper presents a meta-analysis of simulation-based Doha round publications. The meta-regression explains simulated welfare changes as a function of model characteristics, base-data and policy experiments. Regression results show that a major share of the variation within the dependent variable is explained by the covariates, and estimated coefficients show plausible signs and magnitudes. However, results also reveal that many model-based studies lack systematic documentation of their experimental settings.
    Keywords: Meta-analysis, Partial equilibrium, General equilibrium, Trade liberalisation, WTO, Doha
    JEL: C00 C23 C68 F10
    Date: 2007–08–15
  31. By: Nilsson, Desirée (CESIS and JIBS)
    Abstract: The competition for market shares has taken various routes over the years. The first factor that perhaps spring to mind is prices. Studies have also shown that advanced technology and superior quality of products are important in the competition for market shares. The purpose of this study is to explore whether changes in export and production structures in the OECD countries tend to incorporate the income sensitivity of demand for products and if a strategy of this kind is beneficial for the development of market shares. The theoretical framework is provided by Kaldor (1957, 1967 and 1970) and by the concept of non-homothetic preferences, first established by Engel (1857 and 1881). The results show that there has been an increased focus on high-income elastic products among the OECD countries. The strategy of concentrating export and production to the high income elastic products also seems to generate increases in market shares
    Keywords: export structure; income elasticity of export demand; competitiveness; market shares; Nicholas Kaldor
    JEL: F10 F14
    Date: 2007–08–08

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.