nep-int New Economics Papers
on International Trade
Issue of 2008‒06‒13
twelve papers chosen by
Martin Berka
Massey University

  1. Made in America? The New World, the Old, and the Industrial Revolution By Gregory Clark; Kevin H. O'Rourke; Alan M. Taylor
  2. Estimating the Productivity Selection and Technology Spillover Effects of Imports By Ram C. Acharya; Wolfgang Keller
  3. Trade and Empire, 1700-1870 By Kevin H. O'Rourke; Leandro Prados de la Escosura; Guillaume Daudin
  4. The Theories of Trade, FDI and Technology Transfer: A Survey By Hoi Quoc Le
  5. Globalization, 1870-1914 By Guillaume Daudin; Matthias Morys; Kevin H. O'Rourke
  6. On the Role and Design of Dispute Settlement Procedures in International Trade Agreements By Giovanni Maggi; Robert W. Staiger
  7. Firm Heterogeneity and the Structure of U.S. Multinational Activity: An Empirical Analysis By Stephen Yeaple
  8. Much Ado About Nothing: American Jobs and the Rise of Service Outsourcing to China and India By Runjuan Liu; Daniel Trefler
  9. Exchange Rate Volatility and Exports: New Empirical Evidence from the Emerging East Asian Economies By Chit, Myint Moe; Rizov, Marian; Willenbockel, Dirk
  10. A Pragmatic Approach to Capital Account Liberalization By Eswar S. Prasad; Raghuram Rajan
  11. Education and the Age Profile of Literacy into Adulthood By Elizabeth Cascio; Damon Clark; Nora Gordon

  1. By: Gregory Clark; Kevin H. O'Rourke; Alan M. Taylor
    Abstract: For two decades, the consensus explanation of the British Industrial Revolution has placed technological change and the supply side at center stage, affording little or no role for demand or overseas trade. Recently, alternative explanations have placed an emphasis on the importance of trade with New World colonies, and the expanded supply of raw cotton it provided. We test both hypotheses using calibrated general equilibrium models of the British economy and the rest of the world for 1760 and 1850. Neither claim is supported. Trade was vital for the progress of the industrial revolution; but it was trade with the rest of the world, not the American colonies, that allowed Britain to export its rapidly expanding textile output and achieve growth through extreme specialization in response to shifting comparative advantage.
    JEL: F11 F14 F43 N10 N70 O40
    Date: 2008–06
  2. By: Ram C. Acharya; Wolfgang Keller
    Abstract: In the wake of falling trade costs, two central consequences in the importing economy are, first, that stronger competition through increased imports can lead to market share reallocations among domestic firms with different productivity levels (selection). Second, the increase in imports might improve domestic technologies through learning externalities (spillovers). Each of these channels may have a major impact on aggregate productivity. This paper presents comparative evidence from a sample of OECD countries. We find that the average long run effect of an increase in imports on domestic productivity is close to zero. If the scope for technological learning is limited, the selection effect dominates and imports lead to lower productivity. If, however, imports are relatively technology-intensive, imports also generate learning that can on net raise domestic productivity. Moreover, there is somewhat less selection when the typical domestic firm is large. The results support models in which trade triggers both substantial selection and technological learning.
    JEL: F1 F2 O3 O33
    Date: 2008–06
  3. By: Kevin H. O'Rourke; Leandro Prados de la Escosura; Guillaume Daudin
    Abstract: This paper surveys the rise and fall of the European mercantilist system, and the transition to the modern, well-integrated international economy of the 19th century. It also surveys the literature on the links between trade and economic growth during the period, and on the economic effects of empire.
    Keywords: trade, empire, history
    JEL: N43 N73
    Date: 2008–05
  4. By: Hoi Quoc Le (School of Economics, University of Adelaide, SA 5000, Australia)
    Abstract: This paper surveys the most relevant theoretical studies on the relationship between trade, FDI and technology transfer. Its aim is to give an analysis of theoretical models, highlighting their implications for the growth performance of globally integrated economies relative to that of more autarchic economies. The main conclusion coming from the theoretical literature surveyed is that international trade and FDI play a key role in technology transfer and economic growth, but additional research is needed to completely understand the mechanisms driving technology transfer from trade and FDI.
    Keywords: Trade, FDI, Technology transfer, Technology spillovers
    JEL: O4 F2
    Date: 2008
  5. By: Guillaume Daudin; Matthias Morys; Kevin H. O'Rourke
    Abstract: This paper surveys the causes and consequences of late 19th century globalization, as well as the anti-globalization backlash of that period.
    Keywords: Trade, Migration, Capital Flows, History
    JEL: N73 N33 N23
    Date: 2008
  6. By: Giovanni Maggi; Robert W. Staiger
    Abstract: Formal economic analysis of trade agreements typically treats disputes as synonymous with concerns about enforcement. But in reality, most WTO disputes involve disagreements of interpretation concerning the agreement, or instances where the agreement is simply silent. And some have suggested that the WTO's Dispute Settlement Body (DSB) might serve a useful purpose by granting "exceptions" to rigid contractual obligations in some circumstances. In each of these three cases, the role played by the DSB amounts to "completing" various dimensions of an incomplete contract. Moreover, there is a debate among legal scholars on whether or not precedent-setting in DSB rulings may enhance the performance of the institution. All of this points to the importance of understanding the implications of the different possible degrees of activism in the role played by the DSB. In this paper we bring formal analysis to bear on this broad question. We characterize the choice of contractual form and DSB role that is optimal for governments under various contracting conditions. A novel feature of our approach is that it highlights the interaction between the design of the contract and the design of the dispute settlement procedure, and it views these as two components of a single over-arching institutional design problem.
    JEL: D02 D78 D86 F13 K12 K33
    Date: 2008–06
  7. By: Stephen Yeaple
    Abstract: We use firm-level data for U.S. multinational enterprises (MNE) and the model of firm heterogeneity first presented in Helpman, Melitz, and Yeaple (2004) to make four empirical contributions. First, we show that the most productive U.S. firms invest in a larger number of foreign countries and sell more in each country in which they operate. Second, we assess the importance of firm heterogeneity in the structure of MNE activity. Third, we use the model to identify the mechanisms through which country characteristics affect the structure of MNE activity. Finally, we provide a systematic assessment of the model's shortcomings in order to inform the development of new theory.
    JEL: F1 F23
    Date: 2008–06
  8. By: Runjuan Liu; Daniel Trefler
    Abstract: We examine the impact on U.S. labor markets of offshore outsourcing in services to China and India. We also consider the reverse flow or 'inshoring' which is the sale of services produced in the United States to unaffiliated buyers in China and India. Using March-to-March matched CPS data for 1996-2006 we examine the impacts on (1) occupation and industry switching, (2) weeks spent unemployed as a share of weeks in the labor force, and (3) earnings. We precisely estimate small positive effects of inshoring and smaller negative effects of offshore outsourcing. The net effect is positive. To illustrate how small the effects are, suppose that over the next nine years all of inshoring and offshore outsourcing grew at rates experienced during 1996-2005 in business, professional and technical services i.e., in segments where China and India have been particularly strong. Then workers in occupations that are exposed to inshoring and offshore outsourcing (1) would switch 4-digit occupations 2 percent less often, (2) would spend 0.1 percent less time unemployed, and (3) would earn 1.5 percent more. These are not annual changes – they are changes over nine years – and are thus best described as small positive effects.
    JEL: F16
    Date: 2008–06
  9. By: Chit, Myint Moe; Rizov, Marian; Willenbockel, Dirk
    Abstract: This paper examines the impact of bilateral real exchange rate volatility on real exports of five emerging East Asian countries among themselves as well as to thirteen industrialised countries. We explicitly recognize the specificity of the exports between the emerging East Asian and industrialised countries and employ a generalized gravity model that combines a traditional long-run export demand model with gravity type variables. In the empirical analysis we use a panel comprising 25 years of quarterly data and perform unit-root and cointegration tests to verify the long-run relationship among the regression variables. The results provide strong evidence that exchange rate volatility has a negative impact on the exports of emerging East Asian countries. These results are robust across different estimation techniques and do not depend on the variable chosen to proxy exchange rate uncertainty.
    Keywords: Trade; uncertainty; exchange rate fluctuations; East Asia;
    JEL: O53 O24 F14 F31
    Date: 2008–03
  10. By: Eswar S. Prasad; Raghuram Rajan
    Abstract: Cross-country regressions suggest little connection from foreign capital inflows to more rapid economic growth for developing countries and emerging markets. This suggests that the lack of domestic savings is not the primary constraint on growth in these economies, as implicitly assumed in the benchmark neoclassical framework. We explore emerging new theories on both the costs and benefits of capital account liberalization, and suggest how one might adopt a pragmatic approach to the process.
    JEL: F21 F31 F36 F43
    Date: 2008–06
  11. By: Elizabeth Cascio; Damon Clark; Nora Gordon
    Abstract: It is widely documented that U.S. students score below their OECD counterparts on international achievement tests, but it is less commonly known that ultimately, U.S. native adults catch up. In this paper, we explore institutional explanations for differences in the evolution of literacy over young adulthood across wealthy OECD countries. We use an international cross-section of micro data from the International Adult Literacy Survey (IALS); these data show that cross-country differences in the age profile of literacy skills are not due to differences in individual family background, and that relatively high rates of university graduation appears to explain a good part of the U.S. "catch up." The cross-sectional design of the IALS prevents us from controlling for cohort effects, but we use a variety of other data sources to show that cohort effects are likely small in comparison to the differences by age revealed in the IALS. We go on to discuss how particular institutional features of secondary and postsecondary education correlate, at the country level, with higher rates of university completion.
    JEL: F0 I2
    Date: 2008–06
  12. By: Guglielmo Maria CAPORALE,; Christophe Rault; Robert SOVA; Ana Maria SOVA
    Abstract: The expansion of regionalism has spawned an extensive theoretical literature analyzing the effects of Free Trade Agreements (FTAs) on trade flows. In this paper we focus on FTAs (also called European agreements) between the European Union (EU-15) and the Central and Eastern European countries (CEEC-4, i.e. Bulgaria, Hungary, Poland and Romania) and model their effects on trade flows by treating the agreement variable as endogenous. Our theoretical framework is the gravity model, and the econometric method used to isolate and eliminate the potential endogeneity bias of the agreement variable is the fixed effect vector decomposition (FEVD) technique.
    Keywords: Regionalisation, European integration, Panel data methods.
    JEL: E61 F13 F15 C25
    Date: 2008–03–01

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