nep-int New Economics Papers
on International Trade
Issue of 2007‒12‒15
24 papers chosen by
Martin Berka
Massey University

  1. The Effect of Facilitation on Sectoral Trade By Inmaculada Martínez-Zarzoso; Laura Márquez-Ramos
  2. Regional integration in South Asia : what role for trade facilitation ? By Otsuki, Tsunehiro; Wilson, John S.
  3. Trust-Based Trade By Luis Araujo; Emanuel Ornelas
  5. Trade Liberalisation is Good for You if You are Rich By Charles Ackah,; Oliver Morrissey
  6. Trade Policy and Industrial Structure By Facundo Albornoz; Paolo Vanin
  7. Trade Liberalization, Outsourcing, and Firm Productivity By Ralph Ossa
  8. Country-Specific Determinants of Intra-Industry Trade in Portugal By Horácio Faustino; Nuno Carlos Leitão
  9. The Growth Effects of Openness to Trade and the Role of Institutions: New Evidence from African Countries By Baliamoune-Lutz, Mina; Ndikumana, Léonce
  10. Implications of the WTO on Indian Marine Industry, Issues and Policy Perspectives By Kamat, Manasvi; Kamat, Manoj
  11. Who Gains from Trade Protection in Ghana? A Household-Level Analysis By Charles Ackah,; Oliver Morrissey,; Simon Appleton
  12. The Impact of China's Import Demand Growth on Sectoral Specialization in Brazil: A CGE Assessment By Willenbockel, Dirk
  13. International Trade and Unemployment: Theory and Cross-National Evidence By Pushan Dutt; Devashish Mitra; Piya Ranjan
  14. Micro-foundations of individual preferences for protectionism in Canada and Uruguay By Natalia Melgar
  15. Effects of exchange rate policy on bilateral export trade of WAMZ countries By Balogun, Emmanuel Dele
  16. Freedom Fries By Guy Michaels; Xiaojia Zhi
  17. Relative Export Structures and Vertical Specialization: A Simple Cross-Country Index By Amador, Joao; Cabral, Sonia; Ramos Maria, Jose
  18. The Optimal Design of Trade Policy Flexibility in the WTO By Simon Schropp, Kornel Mahlstein
  19. Burley Tobacco Clubs in Malawi: Nonmarket Institutions for Exports By Negri, Mariano; Porto, Guido
  20. Tax Evasion in Kenya and Tanzania:Evidence from Missing Imports By Levin, Jörgen; Widell, Lars
  21. Export processing Zones: Past and Future Role in Trade and Development By Michael Engman; Osamu Onodera; Enrico Pinali
  22. Estimating Gravity Equations : To Log or not to Log? By Boriss Siliverstovs; Dieter Schumacher
  23. Commodity Funds: How To Fix Them? By Daniel Cohen; Thibault Fally; Sébastien Villemot
  24. R&D Accessibility and Comparative Advantages in Quality Differentiated Goods By Johansson, Sara

  1. By: Inmaculada Martínez-Zarzoso (Ibero-Amerika Institut für Wirtschaftsfoschung, Georg-August Universität Göttingen / Germany); Laura Márquez-Ramos (Instituto de Economía Internacional, Castellón / Spain)
    Abstract: This paper aims to analyse the effect of trade facilitation on sectoral trade flows. We use data from the World Bank’s Doing Business Database on the fees associated with completing the procedures to export or import goods in a country, on the number of documents needed and on the required time to complete all the administrative procedures to import and export. An augmented gravity equation is estimated for 13 exporters and 167 importers using a number of estimation techniques, namely OLS, PPML and the Harvey model. A common result is that trade flows increase by lowering transport costs and the number of days required to trade. The outcome supports multilateral initiatives, as that in the WTO, which encourages countries to assess their trade facilitation needs and priorities and to improve them. The measures adopted will not only benefit the country that improves trade facilitation, but also its trading partners.
    Keywords: gravity model, trade facilitation, time, trade cost
    JEL: F10
    Date: 2007–12–06
  2. By: Otsuki, Tsunehiro; Wilson, John S.
    Abstract: The trade performance of countries in South Asia over the past two decades has been poor relative to other regions. Exports from South Asia have doubled over the past 20 years to approximately USD 100 billion. In contrast, East Asia ' s exports grew ten times over the same period. The low level of intraregional trade has contributed to weak export performance in South Asia. The empirical analysis in this paper demonstrates gains to trade in the region from reform and capacity building in trade facilitation at the regional level. When considering intraregional trade, if countries in South Asia raise capacity halfway to East Asia ' s average, trade is estimated to rise by USD 2.6 billion. This is approximately 60 percent of the total intraregional trade in South Asia. Countries in the region also have a stake in the success of efforts to promote capacity building outside its borders. If South Asia and the rest of the world were to raise their levels of trade facilitation halfway to the East Asian average, the gains to the region would be estimated at USD 36 billion. Out of those gains, about 87 percent of the total would be generated from South Asia ' s own efforts (leaving the rest of the world unchanged). In summary, we find that the South Asian region ' s expansion of trade can be substantially advanced with programs of concrete action to address barriers to trade facilitation to advance regional goals.
    Keywords: Transport Economics Policy & Planning,Transport and Trade Logistics,Common Carriers Industry,Trade Policy,Free Trade
    Date: 2007–12–01
  3. By: Luis Araujo; Emanuel Ornelas
    Abstract: Weak enforcement of international contracts can substantially reduce international trade. Wedevelop a model where agents build reputations to overcome the difficulties that thisinstitutional failure causes in a context of incomplete information. The model describes the interplay between institutional quality, reputations and the dynamics of international trade.We find that the conditional probability that a firm will stop exporting decreases and itsforeign sales increase as the firm acquires greater export experience. The reason is that theinformational costs that an exporter faces fall as the exporter becomes more confident about the reliability of its distributor. An improvement in the institutional quality of a country affects its imports through several distinct channels, as it changes the incentives of bothcurrent and potential exporters. Trade liberalization induces current exporters to increase their sales. It could induce entry as well, but this will happen only when the initial tariff is high and/or the institutional quality of the country is low.
    Keywords: International trade, Export dynamics, Contract enforcement
    JEL: F10 F13 L14
    Date: 2007–08
  4. By: Pedro Cavalcanti Ferreira; Alberto Trejosy
    Date: 2007
  5. By: Charles Ackah,; Oliver Morrissey
    Abstract: This paper investigates the relationship between trade policy and growth using a dynamic panel regression model with GMM estimates for data on 44 developing countries over 1980-1999. Trade policy is captured by measures of tariffs, import and export taxes. Typically, the average effects of changes in such policy variables have been investigated. However, from a policy perspective, the differential effects on high-or low-income countries may be of more interest. Our preferred specification for growth thus includes as an explanatory variable an interaction term between trade barriers and initial income levels to capture the non-linearity in the relationship. This specification reveals a significant interaction effect under which the marginal impactof tariffs on growth is declining in initial income. In particular, for low-income countries tariffs appear to be associated with higher growth, whereas only for middle-income and richer countries is there a negative impact of tariffs on growth. The impact of a marginal change in protection on growth changes from positive to negative as income increases beyond a threshold level of GDP per capita (below which, in rough terms, a country would be classed as low-income). Put differently, trade liberalisation seems to offer the possibility of achieving faster growth only in relatively richer countries.
    Keywords: Growth; Openness; Trade barriers; Cross-country analysis
  6. By: Facundo Albornoz; Paolo Vanin
    Abstract: In a small open economy with heterogeneous firms, in which tariffs determine the mass of active firms, the gains from trade liberalization depend positively on the level of firm vertical heterogeneity and negatively on transportation costs. The benefits from temporary protection depend on the level of backwardness: for a given mass of backward firms, the relative gains from protection increase with their quality and decrease with the quality of advanced firms; for given production quality levels, the relative advantage of protection increases with the mass of backward firms.
    Keywords: Trade policy, Production network, Learning externalities, Infant Industry
    JEL: D51 D62 F12 F13
    Date: 2007–11
  7. By: Ralph Ossa
    Abstract: Empirical evidence suggests that trade liberalization increases firm productivity. This paperoffers a novel explanation for this finding. I develop a simple general equilibrium model oftrade in which trade liberalization leads to outsourcing as firms focus on their corecompetencies in response to tougher competition. Since firms are the better at performingtasks the closer they are to their core competencies, this outsourcing increases firmproductivity. Moreover, I also investigate the links between various technological parametersand outsourcing. In particular, I analyze how technological progress, changes in fixed costs,and changes in internal governance costs affect firms' integration decisions.
    Keywords: Trade Liberalization, Outsourcing, Productivity
    JEL: F10 F12 L22 L25
    Date: 2007–07
  8. By: Horácio Faustino; Nuno Carlos Leitão
    Abstract: Based on the theoretical models of Helpman and Krugman (1985), Falvey and Kierzkowski (1987) and Flam and Helpman (1987) and on the empirical studies of Greenaway, Hine and Milner (1994) and Hummels and Levinsohn (1995), we use a static and dynamic panel data approach to test the country-specific determinants of Portuguese intra-industry trade (IIT). We include income variables together with supply-side variables in order to test the demand similarity and factor endowments difference hypotheses. The results suggest that the Linder hypothesis is confirmed and that differences in income levels have a positive (negative) effect on vertical IIT (horizontal IIT and IIT). However, our findings only partially confirm Helpman and Krugman’s theoretical predictions.
    Keywords: intra-industry trade; horizontal intra-industry trade; vertical intra-industry trade; Linder hypothesis; dynamic panel data.
    JEL: F12 C2 C3 L1
    Date: 2007
  9. By: Baliamoune-Lutz, Mina; Ndikumana, Léonce
    Abstract: In this paper, we explore the argument that one of the causes for the limited growth effects of trade openness in Africa may be the weakness of institutions. We also control for several major factors and, in particular, for export diversification, using a newly developed dataset on Africa. Results from Arellano- Bond GMM estimations on panel data from African countries show that institutions play an important role in enhancing the growth effects of trade. Moreover, we find that the joint effect of institutions and trade has a U-shape, suggesting that as openness to trade reaches high levels, institutions play a critical role in harnessing the trade-led engine of growth. The results from this paper are informative about the missing link between trade liberalization and growth in the case of African countries.
    JEL: O11 F43
    Date: 2007
  10. By: Kamat, Manasvi; Kamat, Manoj
    Abstract: The outcomes of WTO negotiations under the Doha round, Hong Kong development round and the changing European Union regulations are likely to place new hurdles on the marine exports emerging from developing economies like India. In the light of the above, we attempt to discuss the impact of WTO-GATS on the Indian Marine Trade and Service industry, analyze the challenges faced by the developing countries, and suggest way-outs to respond them. Many other WTO-GATS related aspects have repercussions on the marine exports from the developing countries in Asia and India in particular; namely the outcomes from the Dispute Settlement Mechanism (DSM), the relation between trade rules and Multilateral Environmental Agreements (MEAs), Technical Assistance and Capacity Building (TA & CB) and the provisions for Special and Differential Treatment (SDT). The impact of GATS and the implications on Indian marine trade & services are specifically assessed in context of Tariff barriers, Non-tariff measures, Subsidies and Eco-labeling. Relevant policy implications follow the issues discussed.
    Keywords: WTO; GATS; India; Marine Industry; Fisheries; Trade and Non-trade Barriers; NAMA; Implications; Policy Suggestions
    JEL: P5 F2 F1 L7
    Date: 2007–06–21
  11. By: Charles Ackah,; Oliver Morrissey,; Simon Appleton
    Abstract: In this paper, we present one of the first direct microeconometric studies of the impact of trade protection on household income in Ghana. Tariff measures at the two-digit ISIC level are matched to Ghanaian household survey data for 1991/92 and 1998/99 to represent the tariff for the industry in which the household head is employed. We examine the possibility that the effect of protection on income might not be uniform across households characterized by different skill levels. Specifically, we allow the relationship between welfare and trade policy to differ for households with different levels of education. In the absence of suitable panel data, the analysis applies pseudo-panel econometric techniques to our repeated cross-section data. This method has rarely been used in poverty analysis. The results suggest that higher tariffs are associated with higher incomes for households employed in the sector, so tariff reductions may reduce incomes (and increase poverty), at least in the short run, but with differing effects across skill groups. We find that this positive effect of protection is disproportionately greater for low skilled labour households, suggesting an erosion of welfare of unskilled labour households would result from trade liberalization. We conclude that contemplating trade liberalization without recognizing the complementary role of human capital investment may be a sub-optimal policy for the poor, at least in the short-run.
    Keywords: Tariffs; Trade liberalisation; Household welfare; Pseudo-panel; Ghana
  12. By: Willenbockel, Dirk
    Abstract: Brazil’s trade with China has expanded at a tremendous pace over the past few years. Between 1999 and 2004, its exports to China have grown by 800 percent in value terms while the value of its imports from China has more than tripled. China is now Brazil’s third most important export destination and its fourth most important import source. While the Brazilian government actively pursues closer trade and investment links with China, critics fear that potential resulting shifts in specialization patterns towards low-value-added activities with low human capital and technology intensity may adversely affect Brazil’s long-run growth prospects, given that Brazilian exports to China consist primarily of primary commodities, while imports from China increasingly compete with domestic manufacturing output in home and third-country markets. To which extent are fears that China’s emergence as a global player in international trade pushes Brazil back into raw material corner warranted? This paper aims to provide a partial answer to this question by focusing on the impact of China’s growth in demand for Brazilian exports from 2001 to 2006 on the sectoral structure of the Brazilian economy. The analytical framework is a 34-sector computable general equilibrium model. The model is calibrated to a 2001 dataset and shocked with the growth in Brazilian exports to China by sector over the period 2001 to 2006. The simulation results provide an indication of the strength of the resource pull effects due to this shock in isolation from all other exogenous influences on the Brazilian economy.
    Keywords: Brazil; Applied general equilibrium analysis; China; Dutch disease;Computable general equilibrium analysis
    JEL: C63 F17 O54 F14 F1
    Date: 2007–11
  13. By: Pushan Dutt (INSEAD); Devashish Mitra (Department of Economics, Syracuse University); Piya Ranjan (Department of Economics, University of California-Irvine)
    Abstract: In this paper, we present two alternative models of trade and unemployment, in which unemployment is generated through a search mechanism. The basic framework of the first model is Ricardian in that the only factor of production is labor and trade is based on relative technological differences. The second model has a Heckscher-Ohlin (H-O) framework with two factors of production, namely labor and capital that are intersectorally mobile. Using cross-country data on various measures of trade policy, unemployment and a variety of controls, we find strong evidence for the Ricardian prediction that unemployment and trade openness are negatively related (protection and unemployment are positively related). We do not find any support for the H-O prediction that this relation between trade openness and unemployment changes from negative to positive as we move from labor-abundant to capital-abundant countries. Our results are robust to the inclusion of controls for labor market institutions and macroeconomic distortions. They hold for both ordinary least squares and instrumental-variables approaches, where the latter accounts for the endogeneity of trade policy to unemployment and possible measurement errors in trade policy variables.
    Keywords: Unemployment; International trade; Cross-country data
    JEL: F11 F16
    Date: 2007–12
  14. By: Natalia Melgar (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República)
    Abstract: Even when the majority of economists agree on the benefits of free trade, everywhere we turn to,trade is restricted. In contexts where politicians offer different policy options and voters demand them based on their individual preferences, one may ask what determines personal preferences on trade policy; which economic, cultural, social elements shape them. The goal of this paper is to answer these questions in the case of two different economies: Canada and Uruguay. The data source is the module on National Identity (2003) which was carried out in accordance with the International Social Survey Program. Based on probit models, the main conclusion of this paper is that the evidence does not support the conclusions on preference formation of the Hecksher-Ohlin trade model, while elements such as religion, political preferences, and nationalism, as well as demographic characteristics, have a significant impact on trade policy preferences.
    Keywords: Preferences, micro-foundations, protectionism, rationality, ISSP
    JEL: D01 F13
    Date: 2007–11
  15. By: Balogun, Emmanuel Dele
    Abstract: This study examines the effect of exchange rate policy on the bi-lateral intra-WAMZ and global inter-WAMZ export trade, with a view to gauging its relative veracity among other determinants. The regression results show that the coefficient estimates of bilateral exchange rate (variable of interest in this study) was not significant in explaining the changes in the bilateral intra-WAMZ exports. This is not the case with the world inter-WAMZ regression results in which one of the partner’s exchange rate is significant and positively influences their collective exports to the rest of the world. This result is considered interesting as it tends to validate the assertion that exchange rates does not matter much to intra-WAMZ exports to warrant its use as an instrument of bilateral trade stimulation, but can potentially be useful as a common tool of balance of payment adjustment against the rest of the world (third parties). In conclusion, the study inferred that the maintenance of independent flexible exchange rate policy by either party to the bilateral trade makes no difference in terms of export performance, and may indeed constitute an impediment to free trade within the WAMZ region. Among the impediments identified are the microeconomic costs of foreign exchange conversion and high incident of trade diversion associated with it.
    Keywords: Exchange rate policy; export trade; panel data regression model; WAMZ.
    JEL: F42 F1 F31
    Date: 2007–12–11
  16. By: Guy Michaels; Xiaojia Zhi
    Abstract: Do firms choose inputs that minimize their cost of production, ignoring the attitudes of their owners and employees? We examine this question using an episode of worsening relations between the USand France: from February 2002 to March 2003, France's favorability rating in US public opinionpolls fell from 83 percent to 35 percent. Very negative attitudes towards France became common evenamong college educated Americans with high levels of income, so they were likely prevalent amongmanagers. Using data from 1999-2005, we find that the worsening relations reduced US imports fromFrance by about 15 percent and US exports to France by about 8 percent, compared to other Eurozoneor OECD countries. This decline was due in large part to a fall in France's share of the quantity ofinputs traded between the Eurozone and the US; this decline is significant even after we control for changes in the product composition of trade flows. We also find that the decline in trade w as accompanied by a similar drop in both business trips and tourist visitations of US residents to Francecompared to Western Europe. Taken together, our findings suggest that competition cannot eliminatethe effect of attitudes on firms' choice of inputs.
    Keywords: Trade, Discrimination
    JEL: J15 F14
    Date: 2007–07
  17. By: Amador, Joao; Cabral, Sonia; Ramos Maria, Jose
    Abstract: Relative export structures have changed substantially over the last forty years. We map these changes using a new cross-country specialization index - the B* -, defined as the export weight of a given product on total domestic exports, "normalized" by the average weight across all countries of the world. This indicator is close to the Revealed Comparative Advantage index suggested in Balassa (1965); it has been used as an intermediate calculation in some papers but it has never been highlighted or interpreted as an alternative index in its own right. We provide empirical evidence on the shape of the distribution of the B* for different technological sectors (high, medium-high, medium-low and low-technology sectors), how it has evolved through time and how its intra-distribution dynamics behave. The results indicate a relatively important degree of persistence, although the cross-country specialization distributions depict substantial differences as we move up the technology ladder. Special attention is given to the G5 countries and China. These economies are relatively more specialized in high-tech and medium high-tech products. China shows a striking increase in specialization in high-tech products and a substantial decrease in low-tech. Finally, by computing the B* for both exports and imports, we have identified countries with significant vertical specialization activities. These activities are predominant in high-tech industries and seem to be geographically concentrated in East-Asia.
    Keywords: International Trade; Export Specialization; Balassa Index; Distribution Dynamics; Vertical Specialization
    JEL: C14 F14 O50
    Date: 2007–01
  18. By: Simon Schropp, Kornel Mahlstein (IUHEI, The Graduate Institute of International Studies, Geneva)
    Abstract: This paper is a contribution to the literature on rational design of trade agreements. The World Trade Organization (WTO) is an incomplete contract among sovereign states. Incomplete contracts contain gaps. Ex post, contractual gaps may leave gains from trade unrealized; they may create “regret” in signatories once unanticipated contingencies or sudden protectionist backlashes have occurred. Trade policy flexibility mechanisms, such as the “safeguards clause” under Art. XIX GATT, are geared towards seizing ex post regret by allowing parties affected by a protectionist shock to partially and temporarily withdraw from previously made trade liberalization concessions – given that they compensate the victim(s) of such backtracking behavior. This paper examines the somewhat understudied issue of optimal trade policy flexibility design in the WTO: In particular, we analyze whether ex post escape should be organized by means of a unilateral opt-out clause (a “liability rule” of escape), or a bilateral renegotiation provision (a “property rule” of escape). Modeling the WTO as a fully non-contingent tariff liberalization contract with contingencies (or “states of nature”) asymmetrically revealed, we find that a liability rule backed by expectation remedies payable to the affected victim Pareto-dominates both a renegotiation clause, as well as any other remedy arrangement connected to a liability rule. Only the remedial design of liability-cum-expectation damages yields the desirable incentives to liberalize ex ante, and to default ex post and therewith is able to replicate the outcomes of the hypothetical contracting ideal of the complete contingent contract.
    Keywords: Incomplete contracts, remedies, enforcement, WTO, trade renegotiations, WTO Dispute Settlement,
    JEL: F02 F13 F51 F53 K00 K33 K42
    Date: 2007–12
  19. By: Negri, Mariano; Porto, Guido
    Abstract: This paper studies nonmarket institutions that facilitate exports. In Malawi, as in many other developing countries, farmers face numerous constraints that disconnect them from export markets. We explore the role of a local institution, the burley tobacco clubs, in bridging smallholders to exports. Burley clubs potentially enable farmers to increase their tobacco farming productivity by providing services related to institutional access, collective action, economies of scale, and supporting networks. Using matching methods and instrumental variable techniques, we find that tobacco club membership causes an increase of between 40-74 percent in output per acre and an increase of between 45-89 percent in tobacco sales per acre. Instead, neither the land share allocated to tobacco nor the unit value obtained by the producers is affected by club membership.
    Keywords: institutional access; collective action and economies of scale; supporting networks; tobacco exports; trade facilitation
    JEL: F10 O17 Q17
    Date: 2007–11
  20. By: Levin, Jörgen (Department of Business, Economics, Statistics and Informatics); Widell, Lars (Department of Business, Economics, Statistics and Informatics)
    Abstract: In this paper we estimate the amount of tax evasion in customs authorities in both Kenya and Tanzania by calculating measurement errors in reported trade flows between the two countries and correlate those errors with tax rates. We find that the measurement error is correlated with the tax rates in both Kenya and Tanzania. According to the Transparency International Corruption Perceptions Index, Kenya is more corrupt than Tanzania, but we find that the coefficient on tax is higher in Tanzania compared to Kenya implying that tax evasion on imported goods is higher in Tanzania compared to the Kenya. We also introduced a third country into our analysis, the United Kingdom, and tax evasion seems to be more severe in trade flows between Kenya and Tanzania compared to trade flows between the United Kingdom and Kenya/Tanzania. Finally we also find that the tax evasion coefficient is lower in the Kenya-United Kingdom case compared to the Tanzanian-United Kingdom case which supports our previous finding that tax evasion is more severe in the Tanzanian customs authority.
    Keywords: Tax evasion; corruption; trade; Kenya; Tanzania
    JEL: F14 H26
    Date: 2007–11–01
  21. By: Michael Engman; Osamu Onodera; Enrico Pinali
    Abstract: This paper studies export processing zones (EPZs) which have become increasingly popular as a policy tool for development and export-oriented growth, and can be found in 130 countries around the world. The report consists of four parts. Part I provides a broad overview on the current use of EPZs, including the evolution of EPZ policy, their objectives and how these are achieved, and the incentives commonly offered. It presents case studies from China, India and Russia illustrating new trends and policies. Part II then provides a review of the economic costs and benefits of EPZs with particular focus on their trade and employment implications. Part III presents an analysis of how common EPZ policies relate to trade rules. It reviews the relationship between EPZs and the WTO Agreements such as the WTO Agreement on Subsidies and Countervailing Measures (ASCM), followed by a discussion of how EPZs are commonly treated in RTAs. Part IV concludes. EPZs are a sub-optimal policy from an economic point of view since it benefits the few and distorts resource allocation, but may be useful as a stepping stone to trade liberalisation on a national basis. Governments should consider all available policy options, and conduct a thorough cost/benefit analysis before implementation.
    Date: 2007–05–23
  22. By: Boriss Siliverstovs; Dieter Schumacher
    Abstract: This study compares two alternative approaches to estimate parameters in gravity equations. We compare the traditional OLS approach applied to the log-linear form of the gravity model with the Poisson Quasi Maximum Likelihood (PQML) estimation procedure applied to the non-linear multiplicative specification of the gravity model. We use the trade flows for all products, for all manufacturing products as well as for manufacturing products broken down by three-digit ISIC Rev.2 categories. We base our conclusions on the generalised gravity model of Bergstrand (1989) that allows us to investigate differences in factor-proportions and home-market effects at the industry level. In addition, we compare the effects of other explanatory variables such as exporter and importer total income, distance, preferential trade agreements, common border, historical ties, and common language on the volume of trade. Our study provides comprehensive evidence on likely qualitative and/or quantitative differences in the values of estimated coefficients as a result of application of an alternative estimation method. Our main conclusion is that both estimation results as well as results of the regression misspecification tests provide supporting evidence for the PQML estimation approach over the OLS estimation method.
    Keywords: generalised gravity equation, Poisson regression
    JEL: F12
    Date: 2007
  23. By: Daniel Cohen; Thibault Fally; Sébastien Villemot
    Abstract: Poor countries are and will remain for some time vulnerable to external shocks, whether to export prices or from natural disasters. The lowest-income countries have a higher incidence of shocks than other developing countries and tend to suffer larger damages when shocks occur. For the poorest countries, the average number of disasters between 1997 and 2001 has been one every 2.5 years. Commodity price shocks are also more severe for poor countries. Low-income countries experience this type of shock on average every 3.3 years. About 26 highly-indebted countries have an export concentration of more than 50 per cent in three or fewer commodities, while 62 per cent of the total exports of the least developed countries are unprocessed primary commodities. Exogenous shocks on commodity prices have significant direct adverse effects on growth and the multiplier effects of negative terms of trade shocks can also be large. Collier and Sewn (2001) show, for a sample of cases where the direct income loss averaged 6.8 per cent of GDP, the total correlated loss of income amounted to about twice that much, to 14 per cent of GDP. Research shows that these negative shocks increase the incidence of poverty. The shocks also have a significant impact on fiscal and external balances. An IMF study shows that terms-of-trade shocks and adverse weather conditions have played an important role in exacerbating debt problems3.
    Date: 2007–02
  24. By: Johansson, Sara (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: This paper analyzes the influences of human capital and technology transfers from R&D activities on regional export specialization along the range of product quality. Previous literature on specialization and trade in quality differentiated goods concludes that the production of high quality product varieties is intensive in knowledge and R&D. This study contributes to previous research by addressing the influence of spatial knowledge flows on the observed patterns of regional quality specialization. A theoretical model of endogenous quality choice derives regional comparative advantages to the presence of external knowledge flows from R&D activities. These knowledge transfers are modeled by accessibility variables, which deduce the presence of technology transfers from R&D activities to the geographical distribution of R&D activities and the observed patterns of spatial interaction. The impacts of regional R&D accessibility on regions’ revealed comparative advantages in high quality segments are subsequently examined in a two-dimensional cross-regional regression analysis. The results of this empirical work show significant positive effects of human capital and R&D accessibility on the revealed comparative advantages in production of high quality goods in Swedish regions. The empirical analysis also provides evidences of technology spillovers from abroad, as the presence of multinational firms increases the region’s specialization in high-quality segments. These results are robust over four different specifications of above-average product qualities. However, the sizes of estimated coefficients for R&D accessibility rises slightly with the quality level considered. This suggests that technological advantages becomes of larger importance the more superior are the levels of product quality considered.
    Keywords: Product quality; vertical differentiation; Knowledge; Accessibility; Spatial dependence; comparative advantage; technology
    JEL: F12 F14 R12 R32
    Date: 2007–12–11

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