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on International Trade |
| By: | Kikuchi, Toru; Shimomua, Koji |
| Abstract: | The present note shows the interaction between technological differences between countries and the level of trade costs as a determinant of trade patterns. It takes the work of Kikuchi et al.(2008)'s Chamberlinian-Ricardian model as its point of departure, and extends the analysis to include both a continuum of industries, as did Dornbusch et al. (1977), and iceberg transport costs. It will be shown that trade liberalization drastically changes the nature of trade patterns, particularly the emergence of intra-industry trade. |
| JEL: | F12 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:8199&r=int |
| By: | Michele Fratianni (Department of Business Economics and Public Policy, Indiana University Kelley School of Business); Francesco Marchionne (Universita Politecnica delle Marche,) |
| Abstract: | We test the hypothesis that higher economic development is associated with lower trade costs. Using different methods to control for multilateral resistance, we apply two alternative gravity equations (GE). In the first, we estimate total exports from 103 Italian provinces to 188 countries over the period 1995-2004. In the second, we estimate sectoral exports and then construct provincial trade cost elasticities. Italian provinces are heterogeneous with respect to trade costs. The two versions of GE are qualitatively the same but quantitatively different suggesting that other factors than trade costs are at play, possibly agglomeration externalities. |
| Keywords: | trade costs, heterogeneity, distance, gravity equation |
| JEL: | F10 F14 O52 R12 |
| Date: | 2008–02 |
| URL: | http://d.repec.org/n?u=RePEc:iuk:wpaper:2008-03&r=int |
| By: | Mohamed Abdelbasset Chemingui; Chokri Thabet |
| Abstract: | The study tries to answer the following questions: Will exposure to world agricultural prices generate more poverty or less? To what extent will households be affected by changes in agricultural trade polices? Do multilateral agricultural liberalization matter more than bilateral changes? Results of simulations using a computable general equilibrium (CGE) model linked to household survey data suggest that trade liberalization has only modest effects on the level of GDP, but it has a substantial effect in reducing poverty. Moreover, the combined effects of global and domestic liberalization are more pro-poor thant the effect of domestic liberalization alone. As a net importer of agricultural commodities, Tunisia may be expected to experience terms-of-trade losses from higher world agricultural prices. However, given Tunisia's significant agricultural import protection policies, it is expected that the agricultural sector will lose from trade liberalization that removes this protection. |
| Keywords: | Tunisia, agriculture, trade liberalization, general equilibrium model, micro-simulation, poverty |
| JEL: | F1 I3 Q1 C68 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:lvl:mpiacr:2008-03&r=int |
| By: | Jacinto F. Fabiosa (Center for Agricultural and Rural Development (CARD); Food and Agricultural Policy Research Institute (FAPRI)) |
| Abstract: | Highlighted in the "battle in Seattle" in 1999, anti-trade sentiments still persist, even with development considerations placed at the core of reform negotiations at the World Trade Organization, in which two-thirds of the members are developing countries. In this paper, the impact of agricultural trade liberalization on food consumption through changes in income and prices is considered. First, agricultural trade liberalization is estimated to raise economic growth by 0.43% and 0.46% in developing and industrialized countries, respectively. Since food consumption of households with lower income are more responsive to changes in income, their food consumption increases more under a trade liberalization regime. Second, trade liberalization is expected to raise world commodity prices in the range of 3% to 34%. Since, in general, border protection is much higher in developing countries and the level of their tariff rates are likely to exceed the rate of price increases, 87% to 99% of the 83 to 98 countries examined would have lower domestic prices under liberalization. Again, given that low-income countries are more responsive to changes in prices, food consumption in these countries would increase more. Finally, empirical evidence shows that if there is any harm on small net selling producers in a net importing country, it is neither large in scale nor widespread because the substitution effect dominates the net income effect from the lower domestic prices. |
| Keywords: | agricultural trade liberalization, income and price elasticity, income distribution, developing countries. |
| Date: | 2008–04 |
| URL: | http://d.repec.org/n?u=RePEc:ias:cpaper:08-wp466&r=int |
| By: | Fabiosa, Jacinto F. |
| Abstract: | Highlighted in the “battle in Seattle” in 1999, anti-trade sentiments still persist, even with development considerations placed at the core of reform negotiations at the World Trade Organization, in which two-thirds of the members are developing countries. In this paper, the impact of agricultural trade liberalization on food consumption through changes in income and prices is considered. First, agricultural trade liberalization is estimated to raise economic growth by 0.43% and 0.46% in developing and industrialized countries, respectively. Since food consumption of households with lower income are more responsive to changes in income, their food consumption increases more under a trade liberalization regime. Second, trade liberalization is expected to raise world commodity prices in the range of 3% to 34%. Since, in general, border protection is much higher in developing countries and the level of their tariff rates are likely to exceed the rate of price increases, 87% to 99% of the 83 to 98 countries examined would have lower domestic prices under liberalization. Again, given that low-income countries are more responsive to changes in prices, food consumption in these countries would increase more. Finally, empirical evidence shows that if there is any harm on small net selling producers in a net importing country, it is neither large in scale nor widespread because the substitution effect dominates the net income effect from the lower domestic prices. |
| Keywords: | agricultural trade liberalization, income and price elasticity, income distribution, developing countries. |
| Date: | 2008–04–04 |
| URL: | http://d.repec.org/n?u=RePEc:isu:genres:12894&r=int |
| By: | Francesco Serti; Chiara Tomasi Author-Name : Antonello Zanfei |
| 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 international- ized 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 |
| Date: | 2008–03–28 |
| URL: | http://d.repec.org/n?u=RePEc:ssa:lemwps:2008/05&r=int |
| By: | Michele Fratianni (Department of Business Economics and Public Policy, Indiana University Kelley School of Business); Chang Hoon Oh (Faculty of Business, Brock University) |
| Abstract: | We test the relationship between the size of regional trade agreements (RTA) and openness by using a gravity equation with multilateral trade factors. Our sample includes eleven RTAs, seven with constant membership and four with expanding membership. Regional trade bias declines with the size of the club; three of the four expanding RTAs have already surpassed their ‘optimal’ size. We also explore the link between openness of the RTA and the geographic strategy of the multinational enterprise. We find strong evidence in favor of the regionalization strategy, which has been enhanced by the presence of RTAs. |
| Keywords: | Trade Blocks, Regional Integration, Multinational Enterprises (MNEs), Plurilateral RTAs, Trade Creation, Trade Diversion |
| JEL: | F13 |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:iuk:wpaper:2008-02&r=int |
| By: | Miren Lafourcade; Elisenda Paluzie |
| Abstract: | This paper uses an augmented gravity model to investigate whether the 1978-2000 process of European integration has changed the geography of trade within France, with a particular focus on the trends experienced by border regions. We support the conclusion that, once controlled for bilateral distance, origin- and destination-specific characteristics, French border regions trade on average 72% more with nearby countries than predicted by the gravity norm. They perform even better (114%) if they have good cross-border transport connections to the neighboring country. However, this outperformance eroded drastically for the French border regions located at the periphery of Europe throughout integration. We show that this trend is partly due to a decreasing propensity of foreign affliates to trade with their home country. This trade reorientation is less pronounced for the Belgian-Luxembourgian and German firms located in the regions which have better access to the EU core. |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:pse:psecon:2008-13&r=int |
| By: | Racem Mehdi (Centre d'Economie de la Sorbonne et ESSECT - Université de Tunis) |
| Abstract: | The purpose of this paper is to examine the international trade cooperation in order to determine the sustainable cooperative tariff rates in a political economy perspective. This paper establishes a tariff-setting game among two countries as a two-phase game : negotiation phase and implementation phase. Our results show the following points. First, the sustainable cooperative tariff rate depends on the political weight placed by government on domestic import-competing industry, on the political influence of the foreign export industry and on the economic stakes of domestic tariff policy in these two sectors. Second, international cooperation is sustainable when governments involved in tariff negotiation are patient enough. Third, difference in patience affects the relative bargaining power of governments. |
| Keywords: | Trade negotiation, political economy, repeated game. |
| JEL: | F13 D72 |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:mse:cesdoc:r08018&r=int |
| By: | Hervé Boulhol (Centre d'Economie de la Sorbonne et Paris School of Economics) |
| Abstract: | There is ample evidence that a country's labour market institutions are important determinants of unemployment. This study generalises Davis' (1998) idea according to which the institutions of the trade partners matter also for a country's equilibrium unemployment rate as they generate comparative advantages. Moreover, the empirical investigation provides some evidence that the interactions between bilateral trade and relative labour market regulations affect the equilibrium unemployment rate. Given data limitations in this area, the ambition of this paper is merely to draw the attention to the general relevance of these interactions as complementing factors to other explanations of unemployment. Another interesting finding is that a fairly low regulated country like Canada can be negatively affected because its main trading partner is even less regulated, while a high regulated country like Germany appears rather sheltered because its trading partners are also highly regulated. |
| Keywords: | Unemployment, trade, labour market institutions. |
| JEL: | F16 J50 F10 F41 |
| Date: | 2008–01 |
| URL: | http://d.repec.org/n?u=RePEc:mse:cesdoc:bla08016&r=int |
| By: | Shombe, Nicolaus Herman |
| Abstract: | This paper, investigates causal relationships among agriculture, manufacturing and export in Tanzania by using time series data for the period between 1970 and 2005. The empirical results show in both sectors there is Granger causality where agriculture causes both exports and manufacturing. Exports also cause both agricultural GDP and manufacturing GDP and any two variables out of three jointly cause the third one. There is also some evidence that manufacturing does not cause export and agriculture. Regarding cointegration, pairwise agricultural GDP and export are cointegrated, export and manufacture are cointegrated. Agriculture and manufacture are cointegrated but they are lag sensitive. However, three variables, manufacturing, export and agriculture both together are cointegrated showing that they share long run relation and this has important economic implications. |
| Keywords: | Causality, Agricultural and manufacturing GDP, Export, Tanzania, Gross domestic product, Agriculture, Manufacturing industries |
| JEL: | C12 C32 C5 F14 F40 |
| Date: | 2008–02 |
| URL: | http://d.repec.org/n?u=RePEc:jet:dpaper:dpaper136&r=int |
| By: | Kikuchi, Toru |
| Abstract: | This paper considers a two-period model of market entry with homogeneous products and switching costs. It is shown that the pro-competitive effect of a foreign firm's entry (i.e., unilateral trade liberalization) emerges before the entry. Also, conditions that are conducive to a competitive environment in the second-period are shown to yield a less competitive outcome in the first-period. That is, when the marginal cost of the foreign entrant is relatively low, the first-period output of a domestic monopolist is relatively low as well. |
| Keywords: | Switching Costs; Foreign Firm's Entry |
| JEL: | F12 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:8093&r=int |
| By: | Waldkirch, Andreas |
| Abstract: | Foreign Direct Investment (FDI) into Mexico has increased dramatically since the inception of the North American Free Trade Agreement (NAFTA), raising questions about its effect on the Mexican economy. This paper studies the impact of FDI on industry productivity and wages over the first ten years of NAFTA, paying particular attention to the source country and destination industry of investments. It also offers a detailed description of the evolution of FDI, its components, sectoral composition, and sources from 1994-2005. There is evidence of a positive effect of FDI on productivity, particularly total factor productivity (TFP). The effect on wages is negative or zero at best, suggesting a divergence from productivity over this time period. The positive productivity effect stems largely from U.S. FDI into non-maquiladora industries, which receive over two thirds of manufacturing FDI. There is no evidence that more distant source countries have a differential effect. Consistent with theoretical expectations, FDI into maquiladoras benefits unskilled workers at the expense of skilled workers. This effect may be strong enough to dampen income inequality. |
| Keywords: | Foreign Direct Investment; Mexico; NAFTA; Productivity; Wages; Income Inequality |
| JEL: | F15 F23 O15 F21 |
| Date: | 2008–03–28 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:7975&r=int |
| By: | Federico Bonaglia; Andrea Goldstein |
| Abstract: | Technological change and organisational advancements have made possible the greater participation of developing country producers in international trade, in a wide range of goods and services. However, firms based in industrial countries often determine the scope for insertion and upgrading of those producers in global value chains (GVCs). * This Policy Insights introduces the Business for Development: Fostering the Private Sector report. |
| Date: | 2007–05 |
| URL: | http://d.repec.org/n?u=RePEc:oec:devaac:49-en&r=int |
| By: | Vito Amendolagine (University of Bari.); Rosa Capolupo (University of Bari.); Giovanni Ferri (University of Bari.) |
| Abstract: | Being the G-7 country with the largest shadow-economy share, we posit that Italy's manufacturing firms - to counter emerging economies' competition - could alternatively offshore or enter the shadow economy. Within this context, we investigate, in a sample of Italian firms, whether internationalised firms outperform purely domestic firms in terms of efficiency, innovativeness and skill composition. Using propensity-score-matching and difference-in-difference techniques we find evidence that: (i) offshoring impacts TFP negligibly but, (ii) labour cost relocation robustly causes offshoring; (iii) offshoring firms are more likely innovative and R&D-oriented; (iv) firms in high- shadow -economy provinces less likely offshore. It is also evidenced that the latter firms show lower TFP and R&D expenditure. |
| Keywords: | trade integration, offshoring, empirics of global sourcing, shadow economy |
| JEL: | F13 F21 O19 E26 |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:bai:series:wp0021&r=int |
| By: | Higashi, Shigeki |
| Abstract: | This paper analyzes Japanese bilateral EPA negotiations, focusing on the areas that each country decided were most important, as well as which actors played the most important roles in each set of negotiations. The negotiations with Mexico and Thailand, which tried to increase agricultural exports to Japan through FTAs, will be discussed. Japan, one should note, still seeks to protect its agricultural sector in spite of the spread of liberalization. The Philippines, Thailand and Malaysia’s efforts to improve and compete in developing their automotive industries, in the face of the completion of AFTA in 2010, are also examined. In addition, this paper discusses whether economic cooperation, the essential Japanese strategy in EPA negotiations, alters the negotiation process in any significant way. |
| Keywords: | FTA (Free Trade Agreement), EPA (Economic Partnership Agreement), Policy making, Japan, ASEAN, Southeast Asia, International economic relations, International agreements, International cooperation |
| JEL: | D78 F13 L52 |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:jet:dpaper:dpaper138&r=int |
| By: | Wolfgang Keller; Carol H. Shiue |
| Abstract: | We study the relative importance of technology and institutions as factors determining the size of markets. The setting of 19th century Europe presents a unique opportunity to address this issue, since it witnessed fundamental change in both dimensions. First, Germany went from around 1,800 customs borders to none through the Zollverein customs treaties. Second, it moved from a situation of monetary disorder to currency unification. And third, the 19th century saw the introduction of steam trains, the key technology that revolutionized transportation between markets. Changes in market integration are studied in terms of the spatial dispersion of grain prices in 68 markets with more than 10,000 observations, located in five different countries and fifteen different German states. We find that the emergence of integrated commodity markets in 19th century Europe is in major part due to the transportation revolution in form of the railways. There is evidence that also customs liberalizations and, more so, currency agreements improved trade possibilities. However, the impact of trains was larger than the effect of these institutions: about three times larger over the long horizon, and around 50% larger for the relatively short time horizon of twenty-five years. These results suggest that as significant as institutional factors were for the expansion of markets, technology factors may have been even more important. |
| JEL: | F1 F3 N10 O24 O3 |
| Date: | 2008–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13913&r=int |
| By: | Yalcin, Erdal (International Economics) |
| Abstract: | The underlying model combines the proximity-concentration trade-off framework with the real option approach. In contrast to the latest trade models, uncertainty is introduced as a continuous phenomenon. Furthermore, the model contains the innovation of comparing two option values simultaneously. The implementation of goods price uncertainty turns out to reduce the probability of entering a new market as an exporter. FDI becomes the optimal entry mode with increasing uncertainty. Additionally, the model is extended by implementing exchange rate uncertainty in a period of appreciation |
| Keywords: | Export; FDI; Uncertainty; Real Option Approach |
| JEL: | D81 D92 F17 F21 F23 |
| Date: | 2008–03–18 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:aareco:2008_003&r=int |