nep-int New Economics Papers
on International Trade
Issue of 2007‒11‒17
25 papers chosen by
Martin Berka
Massey University

  2. Productivity response to reduction in trade barriers: Evidence from Turkish manufacturing plants By Kamil Yılmaz; Şule Özler
  3. South Africa Trade Liberalization and Poverty in a Dynamic Microsimulation CGE Model By Ramos Mabugu; Margaret Chitiga
  4. Immigration, Information, and Trade Margins By Shan (Victor) Jiang
  5. Exporters, Importers and Two-way Traders: the Links between Internationalization, Skills and Wages By Francesco Serti; Chiara Tomasi; Antonello zanfei
  6. Determinants of South Africa’s Exports of Leather Products By André C. Jordaan; Joel Hinaunye Eita
  7. Comparing the Networks of Ethnic Japanese and Ethnic Chinese in International Trade By Kumagai, Satoru
  8. Does Openness to Trade Make Countries More Vulnerable to Sudden Stops, or Less? Using Gravity to Establish Causality By Eduardo Cavallo; Jeffrey Frankel
  9. Delay and Dynamics in Labor Market Adjustment: Simulation Results By Erhan Artuç; Shubham Chaudhuri; John McLaren
  10. Impact of the South Korea-U.S. Free Trade Agreement on the U.S. Livestock Sector By Fabiosa, Jacinto F.; Hayes, Dermot J.; Dong, Fengxia
  11. Export-Total Factor Productivity Growth Nexus in East Asian Economies By Hailin Liao; Xiaohui Liu
  12. Dynamic Effects of Agriculture Trade in the Context of Domestic and Global Liberalisation: A CGE Analysis for Pakistan By Rizwana Siddiqui
  13. Is Increased Agricultural Protection Beneficial for South Africa? By Margaret Chitiga; Ramos Mabugu
  14. Heterogeneous Exporter Behaviour: Exploring the Evidence for Sunk-Costs and Hysteresis By Anne Marie Gleeson; Frances Ruane
  15. Trade, Technique and Composition Effects: What is Behind the Fall in World-Wide SO2 Emissions 1990-2000? By Jean-Marie Grether; Nicole A. Mathys; Jaime de Melo
  16. South Africa’s Wood Export Potential Using a Gravity Model Approach By Joel Hinaunye Eita; André C. Jordaan
  17. A Computable General Equilibrium Micro-Simulation Analysis of the Impact of Trade Policies on Poverty in Zimbabwe By Margaret Chitiga; Ramos Mabugu; Tonia Kandiero
  18. Evaluation of Non-Survey International IO Construction Methods with the Asian-Pacific Input-Output Table By Oosterhaven, Jan; Stelder, Dirk; Inomata, Satoshi
  19. History Matters for the Export Decision: Plant Level Evidence from Turkish Manufacturing Industry By Kamil Yılmaz; Şule Özler; Erol Taymaz
  20. The impact of the Central America free trade agreement on the Central American textile maquila industry: By Jansen, Hans G.P.; Morley, Sam; Kessler, Gloria; Piñeiro, Valeria; Sánchez, Marco; Torero, Maximo
  21. Where do MNEs Expand Production: Location Choices of the Pharmaceutical Industry in Europe after 1992 By Frances Ruane; Xiaoheng Zhang
  22. Testing the Export-Led Growth Hypothesis for Botswana: A Causality Analysis By André C. Jordaan; Joel Hinaunye Eita
  23. Border Industry in Myanmar: Turning the Periphery into the Center of Growth By Kudo, Toshihiro
  24. Impacts of Competitive Position on Export Propensity and Intensity: An Empirical Study of Manufacturing Firms in China By Fung, Hung-gay; Gao, Gerald Yong; Lu, Jiangyong; Mano, Haim
  25. The Effect of Tax Treaties on Multinational Firms: New Evidence from Microdata By Ronald B Davies; Pehr-Johan Norbäck; Ayça Tekin-Koru

  1. By: Giorgio Fazio; Ronald MacDonald; Jacques Melitz
    Abstract: In this paper we test the well-known hypothesis of Obstfeld and Rogoff (2000) that trade costs are the key to explaining the so-called Feldstein-Horioka puzzle. Our approach has a number of novel features. First, we focus on the interrelationship between trade costs, the trade account and the Feldstein-Horioka puzzle. Second, we use the gravity model to estimate the effect of trade costs on bilateral trade and, third, we show how bilateral trade can be used to draw inferences about desired trade balances and desired intertemporal trade. Our econo-metric results provide strong support for the Obstfeld and Rogoff hypothesis and we are also able to reconcile our results with the so-called home bias puzzle.
    Keywords: Feldstein-Horioka puzzle; trade costs; gravity model; home bias puzzle; current account; trade balance
    JEL: F10 F32
    Date: 2007–07
  2. By: Kamil Yılmaz (Department of Economics, Koç University); Şule Özler (UCLA)
    Abstract: We examine the effects of trade policy changes on the evolution of plant productivity. Plant level productivities are estimated for the 1983-96 period following the procedure of Olley and Pakes (1996). Industry averages indicate that productivity gains are largest in import competing industries with highest gains reaching to 8% per year during periods of rapid decline in protection rates. A decomposition of industry level productivity gains also suggests important differences across sectors by trade orientation. Though reallocation of market shares to more productive plants are important in both export oriented, and import competing sectors, within plant productivity improvements are significant only in export-oriented sectors. We also investigate the effects of changes in protection rates on plant level productivities using regressions that control for endogeneity of protection rates (tariff and non-tariff). We find that productivity improvements resulting from declining protection levels are statistically significant and economically important, especially in import competing sectors. This analysis also suggests that there is a huge degree of heterogeneity, measured by plant size, in response to changes in protection rates.
    Keywords: Production function; semi-parametric estimation; protection; import penetration; domestic competition.
    JEL: F13 D24 C14
    Date: 2004–07
  3. By: Ramos Mabugu (Financial and Fiscal Commission); Margaret Chitiga (Department of Economics, University of Pretoria)
    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: 2007–09
  4. By: Shan (Victor) Jiang
    Abstract: Recent theories suggest that better information in destination countries could reduce firm’s fixed export costs,lower uncertaintyo f trade policy responses,and improve policy making processes.To identify the relation betweeninformation and fixed export costs,I investigate how information, measured by immigration, affects extensive and intensive margins.The theoretical model predicts that higher fixed export costs reduce trade along the extensive margin,and higher variable export costs lower trade along both margins.Using a gravity model of Canada’s trade data with 125 partners over 1988-2004,I find immigrant stocks residing in Canada mainly affect the extensive margin rather than the intensive margin.This is evidence that information primarily affects fixed export costs.
    JEL: F12 F16 F22 C13 C32
    Date: 2007–10–31
  5. By: Francesco Serti (Scuola Superiore S. Anna, Pisa); Chiara Tomasi (Scuola Superiore S. Anna, Pisa & Università di Urbino); Antonello zanfei (Istituto di Scienze Economiche, Università degli Studi di Urbino "Carlo Bo")
    Abstract: How do trade activities affect firms’ employment and wages structures? Using firm level data on Italian manufacturing firms, this paper adds to the existing literature, by assessing how the degree of involvement in international trade impacts on workforce composition, earning levels and wage inequality. We differentiate firms involved in both trading activities - namely two-way traders - from firms that only export, and from those that only import. We show that two-way traders have a higher propensity to employ non-production workers, exhibit significant wage gaps, but also pay higher wages for both production and non production workers, relative to non internationalized firms and to firms which are involved only in either export or import. The paper also looks at how the wages and the skill structure of the trading firms change with the country of destination and origin and with the firms’ sectoral and geographical diversification.
    Keywords: heterogeneous firms; exports; imports; wage inequality; skills.
    JEL: F10 F16 J21
    Date: 2007–10
  6. By: André C. Jordaan (Investment and Trade Policy Centre, University of Pretoria); Joel Hinaunye Eita (Investment and Trade Policy Centre, University of Pretoria)
    Abstract: This paper analysed the determinants of South African exports of raw hides and skins (other than fur skins) and leather (H41) using annual data covering the period 1997 to 2004 for 32 main trading partners. The results show that importer’s GDP, South Africa’s GDP, importer’s population, South Africa’s population, infrastructure of South Africa and importing country and some regional trade agreements are the main determinants of raw hides and skins (other than fur skins) and leather exports. The paper then investigated if there is unexploited trade potential. The investigation revealed that among others, South Korea, United Kingdom, USA, Zambia and Zimbabwe have unexploited export potential. It is important to focus efforts on the unexploited trade potential to accelerate growth and alleviate poverty in South Africa.
    Keywords: gravity model, fixed effects, export potential
    JEL: C01 C23 F10 F17 F47
    Date: 2007–10
  7. By: Kumagai, Satoru
    Abstract: In this paper I re-examined the trade enhancing effects of ethnic Chinese networks, found by Rauch and Trindade (2002), on a newer and extended data set. The effects are estimated by the gravity equation with the product of the population ratio (or absolute number) of the ethnic Chinese in both the importing and exporting countries, and are reaffirmed positive and statistically significant. I also compared the effects of two different ethnic Japanese networks, i.e., the networks of long-term Japanese stayers in foreign countries, and the networks of permanent Japanese residents in foreign countries. It is found that the former has stronger trade enhancing effects than the latter. This shows that the effects of ethnic networks on international trade can be generalized beyond the ethnic Chinese, and the ’cohesiveness’ of the ethnic network matters to the trade enhancing effects of the network.
    Keywords: Trade, Networks, East Asia, China, Japan, International trade, Overseas Chinese, Overseas Japanese
    JEL: F10
    Date: 2007–07
  8. By: Eduardo Cavallo (Inter-American Development Bank); Jeffrey Frankel (Harvard University)
    Abstract: Openness to trade is one factor that has been identified as determining whether a country is prone to sudden stops in capital inflows, crashes in currencies, or severe recessions. Some believe that openness raises vulnerability to foreign shocks, while others believe that it makes adjustment to crises less painful. Several authors have offered empirical evidence that having a large tradable sector reduces the contraction necessary to adjust to a given cut-off in funding. This would help explain lower vulnerability to crises in Asia than in Latin America. Such studies may, however, be subject to the problem that trade is endogenous. Using the gravity instrument for trade openness, which is constructed from geographical determinants of bilateral trade, this paper finds that openness indeed makes countries less vulnerable, both to severe sudden stops and currency crashes, and that the relationship is even stronger when correcting for the endogeneity of trade.
    Keywords: Sudden Stops, Current Account Adjustment, Trade, Gravity Model
    JEL: F32 F36 F41
    Date: 2007–10
  9. By: Erhan Artuç (Department of Economics, Koç University); Shubham Chaudhuri (East Asia and Pacific Poverty Reduction and Economic Management Department, The World Bank); John McLaren (University of Virginia)
    Abstract: We simulate numerically a trade model with labor mobility costs added, modeled in such a way as to generate gross flows in excess of net flows. Adjustment to a trade shock can be slow with plausible parameter values. In our base case, the economy moves 95% of the distance to the new steady state in approximately eight years. Gross flows have a large effect on this rate of adjustment and on the normative effects of trade. Announcing and delaying the liberalization can build – or destroy – a constituency for free trade. We study the conditions under which these contrasting outcomes occur.
    Keywords: Labor Mobility, Gross Flows, Delayed Trade Liberalization
    JEL: F16
    Date: 2007–01
  10. By: Fabiosa, Jacinto F.; Hayes, Dermot J.; Dong, Fengxia
    Abstract: The recently signed Korea-U.S. Free Trade Agreement (KORUS FTA) grants the U.S. livestock industry with preferential access to South Korea’s import market. This study evaluates the likely impacts of the KORUS FTA on the U.S. livestock sector. Using the Food and Agricultural Policy Research Institute’s modeling system, we find that livestock prices increase by 0.5% to 3.8% under the agreement. And together with an expansion by 381 to 883 million pounds in meat exports, the value of U.S. exports increase by close to U.S.$2 billion, or a 15.2% increase. Because of differential baseline starting market shares and differential rates and staging specifications, the beef sector results are primarily driven by trade diversion impacts, while a combination of trade diversion and trade creation characterizes the results in pork and poultry sectors.
    Keywords: dairy, free trade agreement, livestock, poultry, trade creation and diversion.
    Date: 2007–11–08
  11. By: Hailin Liao (Dept of Economics, Loughborough University); Xiaohui Liu (Business School, Loughborough University)
    Abstract: Despite increasing interest in the relationship between trade and macroeconomic performance in development economics, very limited studies have been conducted on the causal links between exports and productivity growth in Asian economies. This paper examines empirically the interplay between exports and productivity growth for eight East Asian economies in a multivariate framework by applying bound tests and modified Wald tests. The results indicate that causality is bi-directional in the case of Korea, Singapore and Taiwan, while unidirectional from productivity to exports for Mainland China, Hong Kong, Indonesia, Malaysia and the Philippines. These findings provide little support for the conventional export-led growth hypothesis.
    Keywords: TFP, exports, bound tests, lag-augmented VAR, East Asian economies
    Date: 2007–11
  12. By: Rizwana Siddiqui (Pakistan Institute of Development Economics, Islamabad.)
    Abstract: This paper studies dynamic effects of agriculture trade in the context of domestic and global liberalisation. Being the largest sector of the economy, the agriculture sector contributes substantially to the growth process. Using a small CGE model for Pakistan and a 2002 Pakistan Social Accounting Matrix as data base, the simulations are conducted to measure the effects of domestic agriculture trade liberalisation in isolation and in conjunction with changes in the world economy. The novelty of this paper is that it introduces dynamics in the Pakistani CGE model through capital accumulation. The results illuminate the greater effectiveness of agriculture trade liberalisation in promoting the overall growth process, given increased market access because of liberalisation in the world economy.
    Keywords: International Trade, Growth, Dynamic CGE
    JEL: O4 F15 F14
    Date: 2007
  13. By: Margaret Chitiga (Department of Economics, University of Pretoria); Ramos Mabugu (Financial and Fiscal Commission)
    Abstract: This paper focuses on the effects that a higher tariff on agriculture and food imports could have on poverty and the macroeconomy using a top down computable general equilibrium microsimulation model. This question is of broader relevance to developing countries that may be contemplating the use of World Trade Organisation permissible trade barriers so as to achieve a domestic policy objective. Generally speaking, the results suggest that doubling protection of agriculture and food would lead to a reallocation of labour toward the sectors with high initial protection and those with high domestic orientation. Agriculture and food sectors are harmed by increased protection if the government chooses to use indirect tax rates to compensate for revenue changes because of induced demand contraction by the indirect tax adjustment. Exports and imports in general decline. The analysis also shows that increasing food and agricultural protection has very negligible but negative effects on welfare and poverty.
    Keywords: CGE model; microsimulation, trade policy, special and differential treatment, poverty, welfare, South Africa
    JEL: D33 D58 E27 F17 I32 O15 O55
    Date: 2007–09
  14. By: Anne Marie Gleeson (Trinity College Dublin); Frances Ruane (Economic and Social Research Institute (ESRI))
    Abstract: Recent economic literature suggests the importance of sunk costs and hysteresis in explaining export patterns in international trade. To explore their empirical importance, we present a new conceptual framework that distinguishes six different types of exporter behaviour, and apply this framework to a unique longitudinal data set on Irish manufacturing. Our analysis allows us to identify significant numbers of manufacturers who engage in ‘exporter re-switching behaviour’. The magnitude of these numbers leads us to question the widespread importance of sunk costs. In response to export-market shocks, we find strong evidence of both heterogeneous exporter responses and hysteresis.
    Keywords: heterogeneous exporters, sunk costs, re-switching behaviour
    JEL: E32 F14
    Date: 2007–07
  15. By: Jean-Marie Grether (University of Neuchâtel); Nicole A. Mathys (University of Lausanne and EPFL); Jaime de Melo (University of Geneva and CEPR)
    Abstract: Combining unique data bases on emissions with sectoral output and employment data, we study the sources of the fall in world-wide SO2 emissions and estimate the impact of trade on emissions. Contrarily to concerns raised by environmentalists, an emission-decomposition exercise shows that scale effects are dominated by technique effects working towards a reduction in emissions. A second exercise comparing the actual trade situation with an autarky benchmark estimates that trade, by allowing clean countries to become net importers of emissions, leads to a 10% increase in world emissions with respect to autarky in 1990, a figure that shrinks to 3.5% in 2000. Additionally, back-of-the-envelope calculations suggest that emissions related to transport are of the same magnitude. In a third exercise, we use linear programming to simulate extreme situations where world emissions are either maximal or minimal. It turns out that effective emissions correspond to a 90% reduction with respect to the worst case, but that another 80% reduction could be reached if emissions were minimal.
    Keywords: Trade, Growth, Environment, Decomposition, Embodied Emissions in Trade, Transport
    JEL: F11 Q56
    Date: 2007–10
  16. By: Joel Hinaunye Eita (Investment and Trade Policy Centre, University of Pretoria); André C. Jordaan (Investment and Trade Policy Centre, University of Pretoria)
    Abstract: Under the Accelerated Shared Growth Initiative for South Africa (ASGISA), the South African government identified priority sectors that need to be promoted and developed in order to accelerate growth and reduce unemployment and poverty by the year 2014. Among these, the wood sector was identified as a priority sector that needs to be developed for this purpose. The development of this sector may contribute towards achieving this objective by higher levels of economic participation and income generation. This paper analyses the determinants of exports of wood and articles of wood using a gravity model approach. It further investigates whether there is unexploited trade potential between South Africa and its trading partners within this sector. The analysis has shown that there is unexploited trade potential among some of South Africa’s trading partners which could stimulate growth to alleviate unemployment and poverty.
    JEL: C01 C23 F10 F17 F47
    Date: 2007–10
  17. By: Margaret Chitiga (Department of Economics, University of Pretoria); Ramos Mabugu (Department of Economics, University of Pretoria); Tonia Kandiero (National Treasury)
    Abstract: The paper uses a micro-simulation computable general equilibrium (CGE) model to study the impact on poverty of a complete removal of tariffs in Zimbabwe. The model incorporates 14006 households derived from the 1995 Poverty Assessment Study Survey. This paper’s novelty is that it is one among a small group of papers that incorporates individual households in the CGE model as opposed to having representative households. Using individual households allows for a comprehensive analysis of poverty. The complete removal of tariffs favours exporting sectors. Poverty falls in the economy while inequality hardly changes. The results differ between rural and urban areas.
    Keywords: Computable General Equilibrium, Trade Liberalisation, Micro-simulation, Poverty, Inequality
    JEL: C68 D31 D58 I32
    Date: 2007–09
  18. By: Oosterhaven, Jan; Stelder, Dirk; Inomata, Satoshi
    Abstract: This paper presents four non-survey methods to construct a full-information international input-output table from national IO tables and international import and export statistics, and this paper tests these four methods against the semi-survey international IO table for nine East-Asian countries and the USA, which is constructed by the Institute of Developing Economies in Japan. The tests show that the impact on the domestic flows of using self-sufficiency ratios is small, except for Singapore and Malaysia, two countries with large volumes of smuggling and transit trade. As regards the accuracy of the international flows, all methods show considerable errors, of 10%-40% for commodities and of 10%-70% for services. When more information is added, i.e. going from Method 1 to 4, the accuracy increases, except for Method 2 that generally produces larger errors than Method 1. In all, it seems doubtful whether replacing the semi-survey Asian-Pacific IO table with one of the four non-survey tables is justified, except when the semi-survey table itself is also considered to be just another estimate.
    Keywords: Non-survey estimates, International trade, Input-output tables, East-Asia, Southeast Asia, United States
    JEL: C81 D57 R15
    Date: 2007–07
  19. By: Kamil Yılmaz (Department of Economics, Koç University); Şule Özler (Economics Department, UCLA); Erol Taymaz (Department of Economics, METU)
    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 efect 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 efects.
    Keywords: Export decision, productivity, sunk costs, plant characteristics
    JEL: F14 D21
    Date: 2007–03
  20. By: Jansen, Hans G.P.; Morley, Sam; Kessler, Gloria; Piñeiro, Valeria; Sánchez, Marco; Torero, Maximo
    Abstract: "While the Central America Free Trade Agreement (CAFTA) remains a hotly debated issue in all five Central American countries that are part of the treaty, most discussions are based on preconceived opinions rather than grounded in research-based results. The point of departure of the paper is that the provisions in the agreement concerning the textile maquila industry are likely to have a significant impact on household welfare, despite the already existing preferential access of textile maquila exports to the U.S. market under the rules of origin set by the Caribbean Basin Initiative (CBI) and the U.S.–Caribbean Basin Trade Partnership Act (CBTPA). What CAFTA does for maquila production in Central America is to make permanent and expand the liberalized rules of origin (granted temporarily and unilaterally by the United States and likely to be revoked in 2008) for inputs to the maquila industry. Therefore, to assess the true impact of the maquila provisions in CAFTA, we need to compare the situations without CAFTA or the CBI/CBTPA with the situation that includes CAFTA, instead of the situations before and after CAFTA. The objectives of the paper are to analyze the likely impacts of CAFTA on the apparel value chain in Central America; assess the bottlenecks and constraints to productivity growth in the apparel industry; and identify the requirements for continuing success in the value chain. In researching the paper, we made use of a variety of methodologies, including literature review, Internet sourcing, field visits, and personal interviews with key players in the sector in all five Central American CAFTA countries. We also used computable general equilibrium (CGE) models and combined these with microsimulations based on household surveys, in order to quantify the likely effect of the maquila provisions in CAFTA on economic growth, employment, and poverty. The results suggest that, depending on the country, the maquila provisions in CAFTA add between 0.01% and 1.4% to annual economic growth and between 0.005% and 1.4% per year to employment of particularly female unskilled labor. As a result and depending on the specific country, the rate of total poverty is likely to fall by between virtually zero (Costa Rica) and 0.73% (Honduras) per year relative to a situation without CAFTA's maquila provisions. However, the model-based analyses do not take account of the fact that the quota system for textiles and clothing (the so-called Agreement on Textiles and Clothing, or ATC) expired January 1, 2005, greatly improving the access of China and other low-cost exporters to the U.S. market. Although China has so far voluntarily restricted its apparel exports to the U.S. market, in the longer term market share will increasingly go to countries with the highest comparative advantage. The qualitative analysis in the paper suggests that a survival strategy for the Central American maquila industry should consist of two main elements. First, and in order to make maximum use of the liberalized rules of origin under CAFTA, countries should increasingly move toward full-package production instead of pure assembly. Second, identification of market niches that demand higher-quality apparel produced by firms that respect socially responsible production conditions and are able to deliver fast responsiveness is a crucial means by which the Central American textile industry can develop a comparative advantage vis-à-vis Asian suppliers, needed to survive in an increasingly competitive export market." from Authors' Abstract
    Keywords: Apparel industry, Central America Free Trade Agreement (CAFTA), CGE model, Maquila,
    Date: 2007
  21. By: Frances Ruane (Economic and Social Research Institute (ESRI)); Xiaoheng Zhang (The Institute for International Integration Studies, Trinity College Dublin)
    Abstract: Differences in regulations, technical standards and national medical cultures across EU member states created a highly segmented pharmaceutical market in Europe prior to the implementation of the Single Market Programme. The subsequent reduction in non-tariff barriers to trade would be expected to have an impact on where pharmaceutical multinationals locate production within the EU. Using discrete-choice models, we study the determinants of multinationals’ location choices in terms of expanded production at existing facilities. Our results support the findings of New Economic Geography models that predict reduced rather than increased agglomeration in the face of trade-cost reductions.
    Keywords: Economic geographic, location choice, discrete choice models, European integration, FDI
    JEL: F15 F23 R12
    Date: 2007–10
  22. By: André C. Jordaan (Investment and Trade Policy Centre, University of Pretoria); Joel Hinaunye Eita (Investment and Trade Policy Centre, University of Pretoria)
    Abstract: This paper investigates the causal relationship between export and economic growth for Botswana, using quarterly data for the period 1995.1-2005.4. It uses two measures of economic growth namely, GDP and GDP excluding export. When GDP is used as a proxy for economic growth, the investigation reveals that GDP causes export. However, when using GDP excluding export as a proxy for economic growth, the results show that there is bi-directional causality between export and economic growth. The results suggest that Botswana can promote its economic growth by exporting more products. The results also suggest that export in Botswana can be raised by increasing economic growth.
    Keywords: Africa, Botswana, Exports, Granger Causality, Growth, Cointegration
    Date: 2007–10
  23. By: Kudo, Toshihiro
    Abstract: The Myanmar economy has not been deeply integrated into East Asia’s production and distribution networks, despite its location advantages and notably abundant, reasonably well-educated, cheap labor force. Underdeveloped infrastructure, logistics in particular, and an unfavorable business and investment environment hinder it from participating in such networks in East Asia. Service link costs, for connecting production sites in Myanmar and other remote fragmented production blocks or markets, have not fallen sufficiently low to enable firms, including multi-national corporations to reduce total costs, and so the Myanmar economy has failed to attract foreign direct investments. Border industry offers a solution. The Myanmar economy can be connected to the regional and global economy through its borders with neighboring countries, Thailand in particular, which already have logistic hubs such as deep-sea ports, airports and trunk roads. This paper examines the source of competitiveness of border industry by considering an example of the garment industry located in the Myanmar-Thai border area. Based on such analysis, we recognize the prospects of border industry and propose some policy measures to promote this on Myanmar soil.
    Keywords: Myanmar (Burma), Greater Mekong Sub-region (GMS), Regional cooperation, Border industry, Cross-border trade, Migrant workers, Logistics, Center-periphery, Regional economic cooperation, International trade, Apparel industry, Migrant labor
    JEL: F15 F22 J31 L67
    Date: 2007–10
  24. By: Fung, Hung-gay; Gao, Gerald Yong; Lu, Jiangyong; Mano, Haim
    Abstract: We examine the impacts of competitive industry position on firms’ export propensity and intensity in China. Drawing on the resource-based view and the structure-conduct-performance paradigm of firm behavior, we investigate whether firms with competitive industry position through cost leadership or differentiation strategy have different export behaviors. We use a longitudinal data of 213,662 manufacturing firms in China from 1998 to 2005 to show that firms that have developed competitive advantages in the domestic market are more likely to export and have higher levels of export intensity. Indigenous and foreign manufacturing firms exhibit different patterns of export behaviors. Foreign firms with differentiation advantages focus on local market expansion instead of seeking opportunity in export markets.
    JEL: F18
    Date: 2007–07
  25. By: Ronald B Davies (University of Oregon); Pehr-Johan Norbäck (Research Institute of Industrial Economics); Ayça Tekin-Koru (Oregon State University)
    Abstract: This paper uses affiliate level data from Swedish multinationals to examine the impact of tax treaties on both overall affiliate sales and the composition of those sales. In line with previous results, we find little evidence for an effect of treaties on the level of total sales. We do, however, find that a tax treaty increases the probability of investment by a firm in a given country. In addition, we find that a treaty reduces exports to the parent but increases imports of intermediate inputs from the parent. This is consistent with treaties increasing the effective host tax. This suggests that tax treaties impact the behavior of multinationals along some dimensions but not along others.
    Keywords: Tax Treaties, Multinational Firms, Foreign Direct Investment
    JEL: F21 F23 H25
    Date: 2007

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.