nep-int New Economics Papers
on International Trade
Issue of 2008‒02‒02
sixteen papers chosen by
Martin Berka
Massey University

  1. Trade and Empire By Kris James Mitchener; Marc Weidenmier
  2. Is Protection Really for Sale? A Survey and Directions for Future Research By Susumu Imai; Hajime Katayama; Kala Krishna
  3. Remedies in the WTO: An economic perspective By Kyle Bagwell
  4. Realizing the gains from trade : export crops, marketing costs, and poverty By Porto, Guido; Brambilla, Irene; Balat, Jorge
  5. The Terms of Trade and Domestic Spending By Macdonald, Ryan
  6. China's and India's roles in global trade and finance - twin titans for the new millennium? By Matthieu Bussière; Arnaud Mehl
  7. Trading Population for Productivity: Theory and Evidence By Oded Galor; Andrew Mountford
  8. Agro-manufactured export prices, wages and unemployment By Porto, Guido
  9. The impact of regional liberalization and harmonization in road transport services : a focus on Zambia and lessons for landlocked countries By Giersing, Bo; Kunaka, Charles; Raballand, Gael
  10. On the Use of FTAs by Japanese Firms By TAKAHASHI Katsuhide; URATA Shujiro
  11. Can a Preferential Trade Agreement Benefit Neighbor Countries without Compensating Them? By Masahiro Endoh; Koichi Hamada; Koji Shimomura
  12. Variety expansion and fertility rate By Akiko Maruyama; Kazuhiro Yamamoto
  13. South-South Migration: The Impact of Nicaraguan Immigrants on Earnings, Inequality and Poverty in Costa Rica By Gindling, T. H.
  14. Exports and productivity comparable evidence for 14 countries By International Study Group on Exports and Productivity
  15. The Missing Point in CAFTA By Jose Antonio Reyes
  16. Broad Cross-License Agreements andPersuasive Patent Litigation: Theory andEvidence from the Semiconductor Industry By Alberto Galasso

  1. By: Kris James Mitchener; Marc Weidenmier
    Abstract: Although many modern studies find large and significant effects of prior colonial status on bilateral trade, there is very little empirical research that has focused on the contemporaneous impact of empire on trade. We employ a new database of over 21,000 bilateral trade observations during the Age of High Imperialism, 1870-1913, to quantitatively assess the effect of empire on trade. Our augmented gravity model shows that belonging to an empire roughly doubled trade relative to those countries that were not part of an empire. The positive impact that empire exerts on trade does not appear to be sensitive to whether the metropole was Britain, France, Germany, Spain, or the United States or to the inclusion of other institutional factors such as being on the gold standard. In addition, we examine some of the channels through which colonial status impacted bilateral trade flows. The empirical analysis suggests that empires increased trade by lowering transactions costs and by establishing trade policies that promoted trade within empires. In particular, the use of a common language, the establishment of currency unions, the monetizing of recently acquired colonies, preferential trade arrangements, and customs unions help to account for the observed increase in trade associated with empire.
    JEL: F15 F33 N20 N23 N40
    Date: 2008–01
  2. By: Susumu Imai (Queen's University); Hajime Katayama (University of Sydney); Kala Krishna (Pennsylvania State University and NBER)
    Abstract: This paper critically and selectively surveys the literature on protection for sale and discusses directions for future research in this area. It suggests that the standard approach need to be augmented to provide more compelling tests of this model.
    Keywords: Common agency, Political economy, Protection for sale, Quotas, Non tariff barriers
    JEL: F13 D72 F17
    Date: 2007–12
  3. By: Kyle Bagwell (Department of Economics, Columbia University)
    Abstract: The WTO dispute settlement system represents a major achievement of the Uruguay Round. By most accounts, this system has worked very well. In the ongoing dispute settlement understanding (DSU) review, WTO Members are considering proposals that might lead to further improvements in the functioning of the dispute settlement system. Many of these proposals concern different kinds of remedies that might be used in response to a violation. An evaluation of proposals for remedy reform requires a perspective as to the purpose of the WTO. In this essay, I describe and then apply the terms-of-trade theory of trade agreements. I argue that this theory offers a coherent interpretation of the purpose and design of the WTO. The theory also offers novel insights with respect to proposed reforms of the WTO remedy system.
    Date: 2007
  4. By: Porto, Guido; Brambilla, Irene; Balat, Jorge
    Abstract: This paper explores the role of export costs in the process of poverty reduction in rural Africa. The authors 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 . They test the model using data from the Uganda National Household Survey. The findings show that: i) farmers living in villages with fewer outlets for sales of agricultural exports are likely to be poorer than farmers residing in marketendowed villages; ii) market availability leads to increased household participation in export cropping (coffee, tea, cotton, fruits); and iii) households engaged in export cropping are less likely to be poor than subsistence-based households. The authors conclude that the availability of markets for agricultural export crops helps 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.
    Keywords: Transport Economics Policy & Planning,Markets and Market Access,Rural Poverty Reduction,Crops & Crop Management Systems
    Date: 2008–01–01
  5. By: Macdonald, Ryan
    Abstract: This paper empirically illustrates the impact of ongoing changes to Canada's terms of trade. It provides a discussion of how the terms of trade are measured and how to interpret terms of trade shifts. Examples of two major factors affecting Canada's terms of trade are provided, followed by an empirical analysis of how the terms of trade improvements that began in early 2003 have affected consumption, investment and import activity. The paper concludes by illustrating why final domestic demand growth has outpaced real GDP growth since 2003.
    Keywords: Economic accounts, Gross domestic product, Income and expenditure accounts
    Date: 2008–01–17
  6. By: Matthieu Bussière (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Arnaud Mehl (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.)
    Abstract: This paper analyses the integration of China and India into the global economy. To this end, it presents estimates from a gravity model to gauge the overall degree of their trade intensity and the depth of their bilateral trade linkages, as well as selected measures of revealed comparative advantage and economic distance. The paper also reviews the key characteristics of the two countries’ domestic economies that are relevant to their global integration and analyses their financial linkages with the rest of the world. Four main fi ndings stand out. First, considering trade in goods, the overall degree of China’s trade intensity is higher than fundamentals would suggest, whereas the converse is true for India. Second, Chinese goods exports seem to compete increasingly with those of mature economies, while Indian exports remain more low-tech. Third, China’s exports of services tend to complement its exports of goods, while India’s exports are growing only in deregulated sectors, such as IT-related services. Last, China’s and India’s roles in the global financial system are still relatively limited and often complementary to their roles in global trade. JEL Classification: E44, F3, C5.
    Keywords: China, India, global trade, gravity models, competitiveness indicators, global finance.
    Date: 2008–01
  7. By: Oded Galor; Andrew Mountford
    Abstract: This research argues that the di¤erential e¤ect of international trade on the demand for human capital across countries has been a major determinant of the distribution of income and population across the globe. In developed countries the gains from trade have been directed towards investment in education and growth in income per capita, whereas a signi?cant portion of these gains in less developed economies have been channeled towards population growth. Cross-country regressions establish that indeed trade has positive e¤ects on fertility and negative e¤ects on education in non-OECD economies, while inducing fertility decline and human capital formation in OECD economies.
    Date: 2008
  8. By: Porto, Guido
    Abstract: This paper estimates the impacts of world agricultural trade liberalization on wages, employment and unemployment in Argentina, a country with positive net agricultural exports and high unemployment rates. In the estimation of these wage and unemployment responses, the empirical model allows for individual labor supply responses and for adjustment costs in labor demand. The findings show that a 10 percent increase in the price of agricultural exports would cause an increase in the Argentine employment probability of 1.36 percentage points, matched by a decline in the unemployment probability of 0.75 percentage points and an increase in labor market participation of 0.61 percentage points. Further, the unemployment rate would decl ine by 1.23 percentage points (by almost 10 percent). Expected wages would increase by 10.3 percent, an effect that is mostly driven by higher employment probabilities. This indicates that the bulk of the impacts of trade reforms originates in household responses in the presence of adjustment costs, and that failure to account for them may lead to significant biases in the welfare evaluation of trade policy.
    Keywords: Labor Markets,Labor Policies,Economic Theory & Research,,Markets and Market Access
    Date: 2008–01–01
  9. By: Giersing, Bo; Kunaka, Charles; Raballand, Gael
    Abstract: Based on a detailed empirical study, this paper argues that regional liberalization of trucking services has had an important effect on transport costs and tariffs for Zambia ' s economy. Zambia is a peculiar example in Southern Africa as it benefits from relatively low transport costs compared with other landlocked countries in Africa. This is mainly because of competition between Zambian and other regional, mainly South African, operators and because of South African investments in Zambia ' s trucking industry. As a result, the costs of operators registered in Zambia and South Africa are similar. The study also demonstrates that enhancing trucking interoperability in Southern Africa would significantly impact positively the Zambian trucking industry ' s competitiveness. The main measures to significantly increase trucking competitiveness in the region would more likely derive from reducing fuel costs in Zambia, improving border-post operations, and relaxing South African truck import rules.
    Keywords: Transport Economics Policy & Planning,Rural Roads & Transport,Roads & Highways,Common Carriers Industry,Transport and Trade Logistics
    Date: 2008–01–01
  10. By: TAKAHASHI Katsuhide; URATA Shujiro
    Abstract: The paper examines the use of free trade agreements (FTAs) by Japanese firms. The analysis utilizes information collected by way of a questionnaire survey. The analysis finds that the use of FTAs by Japanese firms is very limited. Many Japanese firms do not take advantage of free trade via FTAs as they think that benefits are small because their trade volume with FTA partner countries is small and because the tariff differentials between most favored nation (MFN) rates and FTA rates are rather small for many products. Probit analysis of the determinants of the use of FTAs reveals that large rather than small firms do use FTAs, reflecting the high cost of such practice. In addition, firms with close trade and FDI relationships with FTA partner countries are found to use FTAs. Our findings indicate the need to reduce costs of using FTAs in order to expand their use by simplifying application procedures and by providing assistance through public and semi-public institutions such as the Ministry of Industry, Trade and Economy (METI); the Japan External Trade Organization (JETRO); and the Japan Chamber of Commerce and Industry. The paper also argues that the Japanese government should establish FTAs with Japan's large trading partners, including the United States and China.
    Date: 2008–01
  11. By: Masahiro Endoh (Keio University); Koichi Hamada (Economic Growth Center, Yale University); Koji Shimomura (Kobe University)
    Abstract: PTAs are generally negotiated without any tariff concessions or transfers to non-member countries. Can such a PTA benefit the neighbors’ welfare? In a two-good competitive equilibrium model in the absence of an entrepot, a PTA without concessions to the outsider will hurt the outsider’s welfare when goods are normal. If one of the member countries is an entrepot, however, it definitely improves the neighbors’ welfare. In a multiple-good model, a PTA without concessions deteriorates the neighbors’ welfare, provided that all the goods are normal and substitutes, and that initial tariff levels are small.
    Keywords: PTA, Neighbor’s Welfare, Kemp-Wan theorem, WTO, GATT Article 24, Entrepot
    JEL: F11 F13 F15
    Date: 2008–01
  12. By: Akiko Maruyama (Graduate School of Economics, Kwansei Gakuin University); Kazuhiro Yamamoto (Graduate School of Economics, Osaka University)
    Abstract: To investigate how fertility rates interrelate with the modern economy, we construct a simple model in which variety expansion of consumption goods reduces fertility rates. In our model, variety expansion reduces the relative price of a composite of di?erentiated goods compared to child- rearing costs. Thus, parents raise the expenditure share for differentiated goods and lower the number of children. We show that this model can be applied to a growth model in which economic growth progresses with variety expansion of consumption goods and fertility rates decrease with economic growth. In addition, we show that international trade, which raises consumption variety, lowers fertility rates. Thus, we show a new mechanism for fertility decline, and this mechanism can be applied to growth and international trade models.
    Keywords: Fertility rates; Variety expansion; Economic growth; Interna- tional trade
    JEL: J13 O10 F12
    Date: 2007–07
  13. By: Gindling, T. H. (University of Maryland, Baltimore County)
    Abstract: More than half of those who emigrate from developing countries move to other developing countries, yet there have been few studies of the impact of this South-South migration. In this paper, we examine the impact of migration from one developing country, Nicaragua, on the labor market in another developing country, Costa Rica. We find little evidence to support the hypothesis that Nicaraguan migration to Costa Rica was an important factor contributing to falling earnings, increased inequality or stagnating poverty in Costa Rica.
    Keywords: inequality, earnings, migration, Latin America, Costa Rica, poverty
    JEL: J61 O15
    Date: 2008–01
  14. By: International Study Group on Exports and Productivity
    Abstract: We use comparable micro level panel data for 14 countries and a set of identically specified empirical models to investigate the relationship between exports and productivity. Our overall results are in line with the big picture that is by now familiar from the literature: Exporters are more productive than non-exporters when observed and unobserved heterogeneity are controlled for, and these exporter productivity premia tend to increase with the share of exports in total sales; there is strong evidence in favour of self-selection of more productive firms into export markets, but nearly no evidence in favour of the learning-by-exporting hypothesis. We document that the exporter premia differ considerably across countries in identically specified empirical models. In a meta-analysis of our results we find that countries that are more open and have more effective government report higher productivity premia. However, the level of development per se does not appear to be an explanation for the observed cross-country differences.
    Keywords: Exports, productivity, micro data, international comparison
    JEL: D21 F14
    Date: 2007
  15. By: Jose Antonio Reyes (L.L.M., Washington College of Law, American University)
    Abstract: Ports are a crucial element in any Free Trade Agreement because of their role in moving goods. Unfortunately, the port situation in Central America was not considered during Free Trade Agreement negotiations with the United States (CAFTA). Although CAFTA is intended to provide benefits for exporters and importers, these benefits will not be fully realized due to the region’s high port costs. These high costs, along with concerns regarding infrastructure, security, efficiency, and productivity, can diminish CAFTA’s potential benefits. Central America must therefore enact legal reforms to privatize port operations, as the private sector possesses the resources necessary to invest in those ports and make them competitive.
    Date: 2007–10
  16. By: Alberto Galasso
    Abstract: In many industries broad cross-license agreements are considered a useful method toobtain freedom to operate and to avoid patent litigation. In this paper I study thepreviously neglected dynamic trade-off between litigating and cross-licensing that firmsface to protect their intellectual property. I present a model of bargaining with learning inwhich firms' decisions to litigate or crosslicense depend on their investments intechnology specific assets. In particular the model predicts that where firms' sunk costsare higher, their incentive to litigate and delay a cross-license agreement is lower. Inaddition, the bargaining game shows how firms with intermediate values of assetspecificity tend to engage in inefficient "persuasive litigation". Using a novel dataset onthe US semiconductor industry I obtain empirical results consistent with those suggestedby the model. Combining model intuition with some empirical figures, I evaluate possibleeffects of the currently debated patent litigation reform.
    Keywords: cross-license, patent litigation, bargaining, semiconductors.
    JEL: C78 L63
    Date: 2007–07

This nep-int issue is ©2008 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.