nep-int New Economics Papers
on International Trade
Issue of 2008‒07‒30
twelve papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. Foreign Direct Investment in Vietnam: Is There Any Evidence Of Technological Spillover Effects By Anh Ngoc Nguyen; Nguyen Thang; Le Dang Trung; Ngoc Quang Pham; Chuc Dinh Nguyen; Nhat Duc Nguyen
  2. FDI Horizontal and Vertical Effects on Local Firm Technical Efficiency By Chuc Dinh Nguyen; Gary Simpson; David Saal; Anh Ngoc Nguyen; Ngoc Quang Pham
  3. The Macroeconomic Determinants of Cross Border Mergers and Acquisitions and Greenfield Investments By Paula Cristina da Silva Ferreira Neto Rodrigues; António Abílio Garrido Brandão; António de Melo Cerqueira
  4. The Location of Foreign Direct Investment in the Central and Eastern European Countries: A Mixed Logit and Multilevel Data Approach By Simona Rasciute; Eric J. Pentecost
  5. Development and Migration: Lessons from Southern Europe. By Alessandra Venturini; Riccardo Faini
  6. Services Offshoring and Wages: Evidence from Micro Data By Geishecker, Ingo; Görg, Holger
  7. Contribution of Trade Openness to the Steady State Growth of Selected East Asian Countries: A Panel Data Approach (Revised & re-estimated version) By Rao, B. Bhaskara; Singh, Rup
  8. Tradable and Nontradable Expenditure and Aggregate Demand for Import in an Emerging Market Economy By Guncavdi, Oner; Ulengin, Burc
  9. Aggregate Imports and Expenditure Components in Turkey: Theoretical and Empirical Assessment By Guncavdi, Oner; Ulengin, Burc
  10. A Simple Model of Trade with Heterogeneous Firms and Trade Policy By Fukushima, Marcelo; Kikuchi, Toru
  11. Openness to Trade and Structural Changes in the Sources of Economic Growth and Labour Demand in Turkey By Guncavdi, Oner; Kucukcifci, Suat
  12. Vertical specialization across the world: a relative measure By Amador, João; Cabral, Sónia

  1. By: Anh Ngoc Nguyen (Development and Policies Research Center (DEPOCEN), 216 Tran Quang Khai Street, Hanoi, Vietnam); Nguyen Thang (Center for Analysis and Forecasting (CAF), No1 Lieu Giai Street, Hanoi, Vietnam); Le Dang Trung (Center for Analysis and Forecasting (CAF), No1 Lieu Giai Street, Hanoi, Vietnam); Ngoc Quang Pham (Development and Policies Research Center (DEPOCEN), 216 Tran Quang Khai Street, Hanoi, Vietnam); Chuc Dinh Nguyen (Aston Business School, Aston University, UK); Nhat Duc Nguyen (Development and Policies Research Center (DEPOCEN), 216 Tran Quang Khai Street, Hanoi, Vietnam)
    Abstract: In the context of integrating more deeply into the world economy the Vietnamese policy makers have undertaken several measures to attract foreign direct investment to the country, with the culmination of FDI inflows in 2007 reaching over USD 20 billion, an increase of 69% over 2006. The policy has been taken on the ground that the FDI inflows will create employment and bring along the much needed technological advances, which will spill over to domestic firms. In this paper, we use a firm-level panel data constructed from the Census 2000-2005 to investigate not only the horizontal spillovers but also the backward and forward linkages. Adding to the current literature which focused mainly on the spillovers in the manufacturing sector, our paper provide the first estimates of the spillover effects in the service sector (at least in the context of developing countries). We also distinguish between the horizontal output spillovers (which capture demonstration effects and competition effects) and the horizontal employment spillover (which captures the labour mobility effect). The results obtained from our regression models are mixed. Different channels of spillovers are at work for the manufacturing and the service sectors. We find evidence of the positive backward technological spillovers for the manufacturing and positive horizontal spillovers for the service sector.
    Keywords: Foreign Direct Investment, Vietnam, technological spillovers
    Date: 2008–01
  2. By: Chuc Dinh Nguyen (Aston Business School, Aston University, UK); Gary Simpson (Aston Business School, Aston University, UK); David Saal (Aston Business School, Aston University, UK); Anh Ngoc Nguyen (Development and Policies Research Center (DEPOCEN), 216 Tran Quang Khai Street, Hanoi, Vietnam); Ngoc Quang Pham (Development and Policies Research Center (DEPOCEN), 216 Tran Quang Khai Street, Hanoi, Vietnam)
    Abstract: Differencing from previous studies on foreign direct investment (FDI) spillovers to domestic enterprises which mainly focus on productivity, in this paper we take a different perspective by analysing the impacts of FDI to technical efficiency of domestic firms. The paper goes beyond the current literature to shed some light on the spillover effects of FDI to technical efficiency of small and medium enterprises in a developing country. By exploiting a firm-level panel dataset and using SFA models following Battese and Coelli (1995), the paper is able to analyse horizontal spillovers through imitation and competition and labour mobility as well as vertical spillovers through backward and forward linkages on technical efficiency. The paper contributes to the understanding of potential effects on foreign invested enterprises on domestic economy in general and local enterprises performance in particular. Thus it importantly assists policy making by the government of developing countries, where FDI is believed to create technical spillovers on domestic enterprises.
    Keywords: Technical Efficiency, Foreign Direct Investment, Spillovers
    Date: 2008
  3. By: Paula Cristina da Silva Ferreira Neto Rodrigues (Universidade de Aveiro); António Abílio Garrido Brandão (Faculdade de Economia, Universidade do Porto); António de Melo Cerqueira (Faculdade de Economia, Universidade do Porto)
    Abstract: When a company decides to invest abroad, it can do it through the establishment of a new firm (greenfield investment) or by the purchase of an already existing firm. Although there is a vast empirical literature on the macroeconomic determinants of aggregate FDI, there are just a few studies examining the location-specific determinants of each entry mode. The aim of this study is to extend the previous work by Globerman and Shapiro (2005) through the analysis of panel data of 53 countries over the period 1996-2006, in order to identify the potential location-specific determinants of both M&A and greenfields. We have found evidence that there is a group of mode-encompassing variables which are common to all entry modes (such as economy’s size, openness, governance and human development index) and mode-specific variables. Investor’s protection and cultural variables seem to play an important role in the explanation of M&A and greenfields, respectively.
    Keywords: Foreign Direct Investment, Cross Border Mergers and Acquisitions, Greenfield Investments
    JEL: F23 F40 G34
    Date: 2008–06
  4. By: Simona Rasciute (Dept of Economics, Loughborough University); Eric J. Pentecost (Dept of Economics, Loughborough University)
    Abstract: This paper uses the Mixed logit (ML) model and a novel three-level dataset to examine the factors explaining 1,108 foreign direct investment (FDI) location decisions into 13 Central and Eastern European countries (CEECs) over an eleven-year period between 1997 and 2007. The ML model approach is superior to other discrete choice methods in that it allows for random taste variation, unrestricted substitution patterns and correlation in unobserved factors over time. The highly significant empirical results, based on a general underlying economic model of imperfect competition, show that the responsiveness of the probabilities of choices to invest in a particular country in CEE to country-level variables differs both across sectors and across firms of different sizes and profitability. The results generalise previous studies that used only country-level data or only industry- and firm-level data to give a more accurate explanation of the firm-specific investment location decisions.
    Keywords: Mixed logit model, random parameters, foreign direct investment, multi-level data, Halton draws
    JEL: F23 P33
    Date: 2008–07
  5. By: Alessandra Venturini; Riccardo Faini
    Abstract: Policy-makers in OECD countries appear to be increasingly concerned about growing migration pressure from developing countries. At the same, at least within Europe, they typically complain about the low level of internal labor mobility. In this paper, we try to shed some light on the issues of both internal and external labor mobility. We investigate the link between development and migration and argue, on both theoretical and empirical grounds, that it is likely be non linear. More precisely, we find that, in a relatively poor sending country, an increase in income will have a positive impact on the propensity to migrate, even if we control for the income differential with the receiving country, because the financial constraint of the poorest become less binding. Conversely, if the home country is relatively better off, an increase in income may be associated with a fall in the propensity to migrate even for an unchanged income differential. Econometric estimation for Southern Europe over the period 1962-1988 provides substantial support to this approach. We estimate first the level of income for which the financial constraint is no longer binding, around 950$, and then the level of income for which the propensity to migrate declines, which is around $ 4300 in 1985 prices. We therefore predict a steady decline in the propensity to migrate from Southern European countries. Similarly, our results highlight the possibility that the pressure to migrate from Northern African countries and other developing countries may increase with further growth.
    Keywords: migration, growth
    JEL: O15
    Date: 2008–06
  6. By: Geishecker, Ingo (University of Göttingen); Görg, Holger (Kiel Institute for the World Economy)
    Abstract: This paper investigates the effects of services offshoring on wages using individual level data combined with industry information on offshoring. Our results show that services offshoring affects the real wage of low and medium skilled individuals negatively. By contrast, skilled workers benefit from services offshoring in terms of higher real wages. Hence, offshoring has contributed to a widening of the wage gap between skilled and less skilled workers. This result is obtained while controlling for individual and sectoral observed and unobserved heterogeneity. In particular, our empirical model also controls for the impact of technological change and offshoring of materials.
    Keywords: services offshoring, individual wages
    JEL: F16 J31 C23
    Date: 2008–07
  7. By: Rao, B. Bhaskara; Singh, Rup
    Abstract: Panel data methods are used to estimate the contribution of openness of trade to the long term or the steady state rate of growth of output (SSGR) of selected East Asia countries viz., Singapore, Malaysia, Thailand, Hong Kong, Korea and the Philippines. Since SSGR is unobservable, its estimates are derived by estimating modified production functions and by imposing the equilibrium conditions of the Solow (1956) growth model. Panel cointegration tests showed that there is a well defined long run relation between output, trade ratio and capital. Growth accounting exercise showed that factor accumulation is the dominant contributor to the SSGR of this region. Openness of trade, however, has made a significant contribution to SSGR by 1999-2003.
    Keywords: Panel unit root and cointegration tests; Trade Openness; Total Factor Productivity and East Asian Countries.
    JEL: C13 C21 C01
    Date: 2007
  8. By: Guncavdi, Oner; Ulengin, Burc
    Abstract: The Turkish economy has recently showed a remarkable performance in economic growth. This performance is particularly meaningful because it has occurred just after the worst economic crisis of the economy. Among other factors, the availability of high liquidity in international markets has played an important role in the easy access to foreign savings, and also increased domestic expenditure in the Turkish economy. This paper examines the importance of international liquidity usage in financing domestic aggregate expenditure. In this regard, we divide this expenditure into nontradable and tradable expenditure in terms of their income generation capability in different currencies. Nontradable expenditure generates income in local currency whereas tradable expenditure has the capability to generate income in foreign currency through trade. This division of the domestic expenditure components is particularly important if domestic expenditure is increasingly financed from capital inflow and if the nontradable component in domestic expenditure rises. Since nontradable expenditure creates income in local currency, and as its importance in Turkey has recently become high, the dependency of the economy on foreign exchange earning has also increased. This is shown by estimating the import demand function which includes the effects of disaggregated domestic expenditure. Empirically we found that nontradable expenditure is as crucial as tradable expenditure in generating import demand in the short run. This empirical finding makes us particularly sceptical regarding the positive effects of capital inflows which are closely related to the use of these inflows in tradable economic activities.
    JEL: O11 O24 F14 F43
    Date: 2008–06–23
  9. By: Guncavdi, Oner; Ulengin, Burc
    Abstract: After the economic turmoil in 2001, the Turkish economy quickly recovered, and exhibited distinguished economic performance in successive years without any interruption. This success can be considered as a product of favourable international economic conditions, sound macroeconomic reforms, the beginning of the accession talks with the EU and political stability with a single party government. All these favourable conditions have allowed the Turkish economy to not have experienced any financial restraints in financing this distinguished economic performance. While increased expenditure, particularly in consumption and investment, together with high foreign demand for Turkish production, appear to have played an important role in these growth rates, the economy has begun to experience a large surge in imports and current account deficits in response to an increase in domestic expenditure. The purpose of this paper is to examine the role of macroeconomic components of aggregate expenditure in determining import demand in Turkey. Along with the empirical assessment, the paper also suggests a theoretical model of import demand, which is built upon a utility maximization of a country subject to budget constraints. The empirical model derived as a dynamic form of linear expenditure system was estimated with quarterly data from the Turkish economy for the period of 1987-2006. The results show that consumption and expenditure are two important demand components in determining imports in the long run whereas only the growth rates of consumption and investment are dominant factors in the short run. Public expenditure appeared to have no significant impact on import demand in Turkey.
    Keywords: Aggregate Imports; Linear Expenditure System; Turkey; Error-Correction Model.
    JEL: O11 O24 F14 F43
    Date: 2008–02–01
  10. By: Fukushima, Marcelo; Kikuchi, Toru
    Abstract: This paper builds a Ricardian-Chamberlinian two-country model with heterogeneous firms in a monopolistically competitive sector in which every new entrant faces increasing fixed costs of production. There are efficiency gaps between countries in marginal and fixed costs and a country unilaterally imposes an import tariff. It is shown that an increase in tariff increases the number of firms of the tariff imposing country while decreases the number of firms of the tariff-imposed country, possibly reverting the position of net exporter of varieties. A tariff is detrimental to the tariff-imposed country. A small tariff may be beneficial to the tariff-imposing country.
    JEL: F12
    Date: 2008
  11. By: Guncavdi, Oner; Kucukcifci, Suat
    Abstract: The Turkish economy has undergone drastic structural changes since 1980. While the effects of the Turkish adjustment programme have drawn considerable attention, a few studies have investigated its employment impacts. Unlike neoclassical expectation behind the structural adjustment programme, some studies for Turkey have showed that this policy change in 1980 caused a decline in employment. Results show that the Turkish industrialisation strategy cannot be regarded as export-led industrialisation strategy. Extra output created by exports has been very limited during the post-liberalisation period. However domestic final demand has continued to be the most dominant determinant of output growth. A Surprising result of the paper appears for the period of 1985-1990 when import substitution in final demand created output growth particularly in technology-intensive manufacturing and other manufacturing sectors. However import penetration in final and intermediate goods overwhelmingly important factors creating de-industrialisation in the period of 1990-1996. This paper, however, examines the sources of changes in employment. Despite neoclassical expectations, the reform period after 1982 witnessed large factor substitution against labour, even in the tradable goods sector. Additionally, labour demand also appears to response to output growth less in the post-liberalisation period than before.
    Keywords: Structural changes; employment; input-output; trade reform; Turkey
    JEL: D57 O16 F14 R15
    Date: 2008–07–07
  12. By: Amador, João; Cabral, Sónia
    Abstract: This paper investigates a specific aspect of international production linkages that, following Hummels et al. (2001), is commonly designated as vertical specialization (VS) - the use of imported inputs to produce goods that are afterwards exported. We propose a relative measure of VS-based trade that combines information from Input-Output matrices and international trade data, producing results for a large sample of individual countries and geographical areas with a detailed product breakdown over the 1967-2005 period. This measure identifies a country’s trade flow as associated with VS activities when the share of exports of a good relatively to the world average is above a given threshold and it is accompanied by a relative share of imports of a related intermediate product that is also above the threshold. The quantification of VS-based trade for each country/product pair in each period is made in a relative and conservative manner, since it includes only the value of intermediate imports that surpasses what is implied by the chosen international threshold. The detailed results can be subsequently added up to get any product or geographical breakdown desired. We illustrate this measure by showing the evolution of VS activities at the world level over the last four decades using a product breakdown by technological intensity and a geographical breakdown by main areas. The results point to a substantial increase of VS in high-technology products over the last two decades. There is also empirical evidence on the sharp increase of VS activities in East Asia.
    Keywords: International Trade; International Fragmentation of Production; Vertical Specialization; Globalization
    JEL: F15 F14 O50 F1
    Date: 2008–07–18

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