nep-int New Economics Papers
on International Trade
Issue of 2007‒11‒03
eleven papers chosen by
Martin Berka
Massey University

  1. China's Exports and Employment By Robert C. Feenstra; Chang Hong
  2. Country Size, Productivity and Trade Share Convergence: An Analysis of Heterogenous Firms and Country Size Dependent Beachhead Costs By Akerman, Anders; Forslid, Rikard
  3. Do Autocratic States Trade Less? By Toke S. Aidt; Martin Gassebner
  4. How Remote is the Offshoring Threat? By Head, Charles Keith; Mayer, Thierry; Ries, John
  5. Export-Supporting FDI By Sebastian Krautheim
  6. The Missing Globalization Puzzle : Another Explanation By Boriss Siliverstovs; Dieter Schumacher
  7. The Spatial Pattern of FDI: Some Testable Hypotheses By Pamela Bombarda
  8. Globalization and Inflation Dynamics: the Impact of Increased Competition By Argia M. Sbordone
  9. Investigation on the Determinants of Turkish Export-Boom in 2000s By Aysan, Ahmet Faruk; Hacihasanoglu, Yavuz Selim
  10. Employment and Export Specialization Patterns versus GDP Per Capita Performance - Unifying Approach By Aleksandra PARTEKA
  11. The Competitiveness of Turkey with Respect to the Slovak Republic for the 1995-1999 Period By Aysan, Ahmet Faruk; Hacihasanoglu, Yavuz Selim

  1. By: Robert C. Feenstra; Chang Hong
    Abstract: Dooley et al (2003, 2004a,b,c) argue that China seeks to raise urban employment by 10-12 million persons per year, with about 30% of that coming from export growth. In fact, total employment increased by 7.5-8 million per year over 1997-2005. We estimate that export growth over 1997-2002 contributed at most 2.5 million jobs per year, with most of the employment gains coming from non-traded goods like construction. Exports grew much faster over the 2000-2005 period, which could in principal explain the entire increase in employment. However, the growth in domestic demand led to three-times more employment gains than did exports over 2000-2005, while productivity growth subtracted the same amount again from employment. We conclude that exports have become increasingly important in stimulating employment in China, but that the same gains could be obtained from growth in domestic demand, especially for tradable goods, which has been stagnant until at least 2002.
    JEL: F1 O1 R15
    Date: 2007–10
  2. By: Akerman, Anders; Forslid, Rikard
    Abstract: This paper modifies the heterogenous firms and trade model by Melitz (2003) by explicitly modelling the entry cost of a firm in a new market as a function of market size. This leads to several new predictions compared to the standard model: The productivity of non exporters and exporters depends on market size. Moreover, manufacturing export shares vary inversely with country size. However, export shares converge (upwards) as markets are integrated. The empirical part of the paper offers support for our model specification.
    Keywords: beachhead costs; heterogenous firms; market size
    JEL: D21 F12 F15
    Date: 2007–10
  3. By: Toke S. Aidt (Faculty of Economics, University of Cambridge, Cambridge U.K); Martin Gassebner (Department of Management, Technology, and Economics, ETH Zurich)
    Abstract: The paper analyzes whether the political regime of a country influences its involvement in international trade. Firstly, we develop a theoretical model that predicts that autocracies trade less than democracies. Secondly, we test the predictions of the model empirically using a panel of more than 130 countries for the years 1962 to 2000. In contrast to the existing literature, we use data on individual importing and exporting countries, rather than a dyadic set-up. In line with the model, we find that autocracies import substantially less than democ- racies, even after controlling for ocial trade policies. This finding is very stable and does not depend on a particular set-up or estimation technique
    Keywords: international trade, democracy, autocracy, gravity model
    JEL: F13 F14 O24 P45 P51
    Date: 2007–09
  4. By: Head, Charles Keith; Mayer, Thierry; Ries, John
    Abstract: Advances in communication technology make it possible for workers in India to supply business services to head offices located anywhere. This has the potential to put high-wage workers in direct competition with much lower paid Indian workers. Service trade, however, like goods trade, is subject to strong distance effects, implying that the remote supply of services remains limited. We investigate this proposition by deriving a gravity-like equation for service trade and estimating it for a large sample of countries and different categories of service trade. We find that distance costs are high but are declining over time. Our estimates suggest that delivery costs create a significant advantage for local workers relative to competing workers in distant countries.
    Keywords: distance; gravity; services; trade
    JEL: F10 F14 F15 F16
    Date: 2007–10
  5. By: Sebastian Krautheim
    Abstract: Wholesale trade affiliates account for a considerable fraction of the sales of Multinational Companies (MNCs). However, this and similar types of FDI, aiming at facilitating export activities, have received little attention in the literature. In this paper export-supporting FDI (ESFDI) which is characterized by destination-market specific export-supporting distribution and service activities in the foreign market, keeping production in the home country, is introduced as a theoretical concept. It is included into a model of international trade and FDI with heterogeneous firms. In equilibrium lower trade costs increase ESFDI. This implies that both FDI activitiesand trade volumes increase at the same time. The model thus provides a rationale for the positive correlation between trade and FDI activity observed in the 1990s and the prevalence of intra Euro-area investments in the FDI activities of Euro-area MNCs, which are both at odds with the 'proximity-concentration trade-off' governing standard models of horizontal FDI.
    Keywords: exports, horizontal FDI, multinational companies, wholesale trade
    JEL: F12 F23
    Date: 2007
  6. By: Boriss Siliverstovs; Dieter Schumacher
    Abstract: This study suggests another explanation of the "missing globalization puzzle" typically observed in the empirical gravity models. In contrast to the previous research that focused on aggregated trade flows, we employ the trade flows in manufacturing products broken down by 25 three-digit ISIC Rev.2 categories. We estimate the distance coefficient using the log-linear specification of the standard as well as the generalized gravity equations. Our data set comprises trade flows for 22 OECD countries that span the time period from 1970 till 2000. We observe a substantial decline in the value of the distance elasticity in most manufacturing industries.
    Keywords: Gravity model, missing globalization puzzle, distance coefficient
    JEL: F12
    Date: 2007
  7. By: Pamela Bombarda (IUHEI)
    Abstract: This paper is a simple extension of the standard FDI model of Markusen and Horstmann (1992). This latter predicts firms would supply nearby markets with exports but far away markets with FDI. Nevertheless, this does not match the spatial pattern in the data for many home nations and industries. We propose a model with heterogeneous firms where the spatial pattern of FDI depends upon distance-linked communications costs as well as trade costs; the resulting model lines up both with the aggregate knowledge-capital model evidence and the firm-level evidence of Helpman-Melitz-Yeaple, while still allowing individual firms to engage in FDI in nearby markets while supplying distant markets via exports.
    Date: 2007–10
  8. By: Argia M. Sbordone
    Abstract: This paper analyzes the potential effect of global market competition on inflation dynamics. It does so through the lens of the Calvo model of staggered price-setting, which implies that inflation depends on expected future inflation and a measure of marginal costs. I modify the assumption of a constant elasticity of demand, standard in this model, to provide a channel through which an increase in the number of traded goods may affect the degree of strategic complementarity in price setting, and hence alter the dynamic response of inflation to marginal costs. I first discuss the behavior of the variables that drive the impact of trade openness on this response, and then I evaluate whether an increase in the variety of traded goods of the size observed in the US in the `90s might have a sizable quantitative impact. I find that it is difficult to argue that such an increase in trade should have generated an increase in US market competition leading to a decline in the slope of the inflation-marginal cost relation.
    JEL: E31
    Date: 2007–10
  9. By: Aysan, Ahmet Faruk; Hacihasanoglu, Yavuz Selim
    Abstract: This paper investigates the causes of Turkish export-boom after 2000 in the manufacturing sector. We mainly concentrate on cost and productivity aspects of the production in the manufacturing sector. Effects of productivity, wage and exchange rate are analyzed in the framework of the augmented unit labor cost model. Following the Edwards and Golub (2004) paper we use the dynamic panel data techniques for the analysis. In addition, the importance of the above mentioned factors is examined for the rising and declining sectors. We find that manufacturing export is negatively related to the unit labor cost (ULC). Decomposition of ULC into its two components also shows that an improvement in productivity increases export while an increase in nominal wages decreases it. We also find that nominal wage is an important factor in the declining sectors while productivity is the stimulus in rising sectors.
    Keywords: Manufacturing export; unit labor cost; wage; productivity; real effective exchange rate
    JEL: F15 F14 F16
    Date: 2007
  10. By: Aleksandra PARTEKA (Universita' Politecnica delle Marche, Dipartimento di Economia)
    Abstract: The underneath motivation of this study is based on the findings confirming that specialisation is non neutral on a country's growth performance. Consequently, it seems important to analyse the evolution of;specialization patterns along the process of economic development. The scope of the paper is twofold: first of all, it aims at understanding if the evolution of employment specialisation is reflected in the same;manner in trade specialisation patterns. Secondly, it explores the link between the degree of specialization on one side and cross country GDP per capita performance on the other. The paper challenges other;empirical studies present in the specialization literature and contributes by presenting simultaneously the evolution of sectoral dispersion patterns emerging from employment and trade data. The sample of;countries (32 world economies on different stages of economic development), the time span (1980 onwards) and the sectoral composition of the two datasets are retained constant. By comparing the results obtained with various inequality indicators, including a wide range of absolute and relative measures, we demonstrate the relevance of the methodological setting used for the assessment of economic activity;dispersion. Next, we perform nonparametric and semiparametric estimations in order to reveal the `specialization curve' which describes the evolution of specialization along the development path. We find a support for nonlinear relationship between the two dimensions of specialization and GDP per capita levels, with a tendency towards despecialization in the initial phase of economic growth.
    Keywords: comparative advantage, industrial specialisation, trade specialisation
    JEL: F16 J31 L6
    Date: 2007–10
  11. By: Aysan, Ahmet Faruk; Hacihasanoglu, Yavuz Selim
    Abstract: This paper examines Turkey’s international cost competitiveness in manufacturing with respect to the Slovak Republic, and quantitatively investigates the relationship between Turkish cost competitiveness and the exports of manufactured goods at an industry level. The Relative Unit Labor Cost (RULC) measure and dynamic panel data techniques are employed for this analysis. We find that Turkey is not competitive with respect to Slovakia for the 1995-1999 period. The Competitiveness of Slovakia mainly depends on its relatively higher level of labor productivity.
    Keywords: Manufacturing export; competitiveness; relative unit labor cost; wage; productivity
    JEL: F15 F14 F16
    Date: 2007

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