nep-int New Economics Papers
on International Trade
Issue of 2007‒09‒16
fourteen papers chosen by
Martin Berka
Massey University

  1. Export Entry, Export Exit, and Productivity in German Manufacturing Industries By Joachim Wagner
  2. Realizing the Gains From Trade: Export Crops, Marketing Costs, and Poverty By Jorge Balat; Irene Brambilla; Guido Porto
  3. Trade with Heterogeneous Beliefs By Elchanan Ben-Porath
  4. Real Effects of Common Currencies in East Asia By Kazuko Shirono
  5. Exports and Productivity Growth - First Evidence from a Continuous Treatment Approach By Helmut Fryges; Joachim Wagner
  6. The Endogeneity of optimum currency area criteria, intraindustry trade and EMU enlargement By Fidrmuc , Jarko
  7. The Gravity Equation in International Trade By Michele Fratianni
  8. Europe and Global Imbalances By Gian Maria Milesi-Ferretti; Philip R. Lane
  9. Accession Countries’ Comparative Advantage in the Internal Market: A Trade and Factor Analysis By Kaitila , Ville
  10. Current Account Adjustment: Some New Theory and Evidence By Jiandong Ju; Shang-Jin Wei
  11. Auctioning Immigration Visas By Collie, David R.
  12. WTO Dispute Settlement: General Appreciation and the Role of India By Zimmermann, Thomas A.
  13. Determinants of Tax Revenue Efforts in Developing Countries By Abhijit Sen Gupta
  14. Export Processing Zones in Madagascar: the impact of the dismantling of clothing quotas on employment and labour standards By Jean-Pierre Cling; Mireille Razafindrakoto; François Roubaud

  1. By: Joachim Wagner (University of Lueneburg; Max Planck Institute of Economics)
    Abstract: This paper contributes to the flourishing literature on exports and productivity by using a unique newly available panel of exporting establishments from the manufacturing sector of Germany from 1995 to 2004 to test three hypotheses derived from a theoretical model by Hopenhayn (Econometrica 1992): (H1) Firms that stop exporting in year t were in t-1 less productive than firms that continue to export in t. (H2) Firms that start to export in year t are less productive than firms that export both in year t-1 and in year t. (H3) Firms from a cohort of export starters that still export in the last year of the panel were more productive in the start year than firms from the same cohort that stopped to export in between. While results for West Germany support all three hypotheses, this is only the case for (H1) and (H2) in East Germany.
    Keywords: export entry, export exit, productivity
    JEL: F14 L60
    Date: 2007–09–12
  2. By: Jorge Balat; Irene Brambilla; Guido Porto
    Abstract: This paper explores the role of export costs in the process of poverty reduction in rural Africa. We claim that the marketing costs that emerge when the commercialization of export crops requires intermediaries can lead to lower participation into export cropping and, thus, to higher poverty. We test the model using data from the Uganda National Household Survey. We show that: i) farmers living in villages with fewer outlets for sales of agricultural exports are likely to be poorer than farmers residing in market-endowed villages; ii) market availability leads to increased household participation in export cropping (coffee, tea, cotton, fruits); iii) households engaged in export cropping are less likely to be poor than subsistence-based households. We conclude that the availability of markets for agricultural export crops help realize the gains from trade. This result uncovers the role of complementary factors that provide market access and reduce marketing costs as key building blocks in the link between the gains from export opportunities and the poor.
    JEL: F10 F14
    Date: 2007–09
  3. By: Elchanan Ben-Porath
    Date: 2007–09–03
  4. By: Kazuko Shirono
    Abstract: Since the 1997 Asian currency crisis, new interest has emerged in the formation of a common currency area in East Asia. This paper provides estimates of trade and welfare effects of East Asian currency unions, using a micro-founded gravity model. Counter-factual experiments to assess the effects of various hypothetical currency arrangements for East Asia suggest that an East Asian currency union will double bilateral trade in the region, but the resulting welfare effects will be moderate. However, if Japan, a major trade partner for East Asia, is included in the union, welfare effects increase substantially. The evidence thus suggests that certain regional currency arrangements in East Asia will stimulate regional trade rigorously and can generate economically significant welfare gains.
    Date: 2007–07–17
  5. By: Helmut Fryges (Centre for European Economic Research (ZEW)); Joachim Wagner (University of Lueneburg and Max Planck Institute of Economics)
    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: 2007–09–12
  6. By: Fidrmuc , Jarko (BOFIT)
    Abstract: This paper tests an endogeneity hypothesis of optimum currency area (OCA) criteria (Frankel and Rose, 1998) on a cross-section of OECD countries between 1990 and 1999. The findings indicate that convergence of business cycles relates to intra-industry trade, but has no direct relation between business cycles and bilateral trade intensity. As far as intra-industry trade is positively correlated with trade intensities, this result confirms the OCA endogeneity hypothesis. The endogeneity of OCA linkage criteria implies extensive business cycle harmonization between CEECs and EU countries in the medium term.
    Keywords: optimum currency area; EMU; trade; business cycle; CEECs
    JEL: F15 F41
    Date: 2007–09–12
  7. By: Michele Fratianni (Department of Business Economics and Public Policy, Indiana University Kelley School of Business)
    Abstract: This chapter offers a selective survey of the gravity equation (GE) in international trade. This equation started in the Sixties as a purely empirical proposition to explain bilateral trade flows, without little or no theoretical underpinnings. At the end of the Seventies, the GE was "legitimized" by a series of theoretical articles that demonstrated that the basic GE form was consistent with various models of trade flows. Empirical applications of GE expanded to cover a variety of issues, such as the impact of regional trade agreements, national borders and currency unions on trade, as well as the use of the equation to sort out the relative merit of alternative trade theories. A new wave of studies is now concentrating on the general equilibrium properties of the GE and finer econometrics points. The renewed interest of the academic profession in the development of the GE is undoubtedly driven by the equation’s empirical success.
    Keywords: gravity equation, trade theories, borders, regional trade agreement, currency unions
    JEL: E58 F15 F33 G15
    Date: 2007–08
  8. By: Gian Maria Milesi-Ferretti; Philip R. Lane
    Abstract: Although Europe in the aggregate is a not a major contributor to global current account imbalances, its trade and financial linkages with the rest of the world mean that it will still be affected by a shift in the current configuration of external deficits and surpluses. We assess the macroeconomic impact on Europe of global current account adjustment under alternative scenarios, emphasizing both trade and financial channels. Finally, we consider heterogeneous exposure across individual European economies to external adjustment shocks.
    Keywords: Working Paper , Financial integration , Capital flows , Europe , Current account balances ,
    Date: 2007–06–28
  9. By: Kaitila , Ville (BOFIT)
    Abstract: We analyse trade between Central and Eastern European (CEE) countries and the European Union during 1993-1998 using three methods. First, we calculate the share of intra-industry trade to determine the extent to which two countries trade in similar products. Second, we calculate similarity indices to determine the extent to which the structure of the exports of two countries is similar to a third country. Third, we calculate the revealed comparative advantage of CEE countries in the EU internal market and analyse the results in a two-dimensional space showing relative labour-skills and capital-intensity. We also depict how the factor intensity of comparative advantage has changed since 1993. With this last approach, we find that the comparative advantage of various CEE countries have developed in quite different directions. Some countries have evolved comparative advantage in industries requiring much skilled labour, while others have moved in the opposite direction. This differentiation is also reflected in degrees of capital intensity. A few CEE countries have not shifted in this two-dimensional space.
    Keywords: EU; eastern enlargement; comparative advantage; factor intensity
    Date: 2007–09–12
  10. By: Jiandong Ju; Shang-Jin Wei
    Abstract: This paper aims to provide a theory of current account adjustment that generalizes the textbook version of the intertemporal approach to current account and places domestic labor market institutions at the center stage. In general, in response to a shock, an economy adjusts through a combination of a change in the composition of goods trade (i.e., intra-temporal trade channel) and a change in the current account (i.e., intertemporal trade channel). The more rigid the labor market, the slower the speed of adjustment of the current account towards its long-run equilibrium. Three pieces of evidence are provided that are consistent with the theory.
    JEL: E00 F3 F4
    Date: 2007–09
  11. By: Collie, David R. (Cardiff Business School)
    Abstract: Freeman (2006) suggested that auctioning immigration visas and redistributing the revenue to native residents in the host country would increase migration from low-income to high-income countries. The effect of the auctioning of immigration visas, in the Ricardian model from Findlay (1982), on the optimal level of immigration for the host country is considered. It is shown that auctioning immigration visas will lead to a positive level of immigration only if the initial wage difference between the host country and the source country is substantial. The cost of the immigration visa is more than half the earnings of the immigrant worker.
    Keywords: Immigration; migration; international trade
    JEL: F22 F12 J61
    Date: 2007–08
  12. By: Zimmermann, Thomas A.
    Abstract: ABSTRACT On 1 January 1995, the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) entered into force. Until August 2006, the DSU has since been applied to 348 complaints – more cases than dispute settlement under the GATT 1947 had dealt with in nearly five decades. The system is perceived, both by practitioners and in academic literature, to work generally well. However, it has also revealed some flaws. Negotiations to review and reform the DSU have been taking place since 1997 ("DSU review"), however, without yielding any result so far. In the meantime, WTO Members and adjudicating bodies managed to develop the system further through evolving practice. While this approach may remedy some practical shortcomings of the DSU text, the more profound imbalance between relatively efficient judicial decision-making in the WTO (as incorporated in the DSU) and nearly blocked political decision-making evolves into a serious challenge to the sustainability of the system. This article provides an overview of the first eleven years of DSU practice and the current DSU review negotiations. An outlook for future challenges to the system is also given. Moreover, specific chapters of the text focus on the role of India in WTO dispute settlement, her use of the system and her participation in the DSU review negotiations. JEL Classification: F02, F13, K33, K41
    Keywords: International Trade; Trade Policy; WTO; Dispute Settlement; Dispute Settlement Understanding; DSU Review Negotiations; India
    JEL: F13 K33 K41 F02
    Date: 2007
  13. By: Abhijit Sen Gupta
    Abstract: This paper contributes to the existing empirical literature on the principal determinants of tax revenue performance across developing countries by using a broad dataset and accounting for some econometric issues that were previously ignored. The results confirm that structural factors such as per capita GDP, agriculture share in GDP, trade openness and foreign aid significantly affect revenue performance of an economy. Other factors include corruption, political stability, share of direct and indirect taxes etc. The paper also makes use of a revenue performance index, and finds that while several Sub Saharan African countries are performing well above their potential, some Latin American economies fall short of their revenue potential.
    Date: 2007–07–26
  14. By: Jean-Pierre Cling (DIAL); Mireille Razafindrakoto (DIAL, IRD, Paris); François Roubaud (DIAL, IRD, Paris)
    Abstract: (english) The success of Export Processing Zones (EPZs) or the Zone Franche in Madagascar is, with the exception of Mauritius, an isolated and unrecognized case in Africa. The Zone Franche has had a highly significant macroeconomic impact in terms of exports and jobs. Madagascar became the number two clothing exporter in sub-Saharan Africa. At its peek in 2004, the Zone Franche employed 100,000 employees. The final phase-out of the Multi-Fibre Arrangements in 2005 has had a negative impact on the Zone Franche. The export and employment growth has come to a halt. Our econometric estimates, based on first-hand data, show that average wages in the Zone Franche have become lower than in the formal industrial sector, other things being equal; labor standards are higher than average but are progressively being reduced in a context of increased international competition. As the example of Madagascar shows, EPZs can no longer be placed at the core of development and employment policies in Africa since the end of clothing quotas, although no alternative strategy has emerged yet. _________________________________ (français) Le succès de la Zone franche malgache est un cas méconnu et unique en Afrique sub-saharienne, si on excepte l'Ile Maurice. La Zone franche a eu un impact macro-économique important en termes d'exportations et d'emplois. Madagascar est ainsi devenu le deuxième exportateur de produits de l'habillement en Afrique sub-saharienne. A son maximum en 2004, la Zone franche comptait 100.000 employés. Le démantèlement final des quotas imposes dans le cadre des Accords Multi- Fibres depuis le début de 2005 a eu un impact négatif sur la Zone franche. La croissance des exportations et de l'emploi s'est interrompue. Nos estimations économétriques, basées sur des données individuelles auprès des ménages de première main, montre que les salaires dans la Zone franche sont devenus inferieurs a leur niveau dans le reste du secteur industriel formel, toutes choses égales par ailleurs. Par ailleurs, les normes de travail hors salaires restent meilleures mais cet avantage est en réduction progressive, dans un contexte de concurrence internationale accrue. Comme le montre l'exemple de Madagascar, les zones franches d'exportation ne peuvent plus être mises au centre d'une stratégie de développement et d'emploi en Afrique depuis la fin des quotas textiles, bien qu'aucune alternative n'ait encore émerge.
    Keywords: Export processing zones, employment, wages, labour standards, Madagascar, zones franches, emploi,salaires, normes de travail.
    JEL: E24 F16 J32 J81 O55
    Date: 2007–09

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