nep-int New Economics Papers
on International Trade
Issue of 2008‒08‒21
seven papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. Market Penetration Costs and the New Consumers Margin in International Trade By Costas Arkolakis
  2. International Trade Negotiations and the Trans-Border Movement of People: A Review of the Literature By A. Strutt; J. Poot; J. Dubbeldam
  3. Do Financial Constraints Matter for Foreign Market Entry? – A Firm-Level Examination By Joel Stiebale
  4. A Note on Trade Costs and Distance By Martina Lawless; Karl Whelan
  5. Trade Unions go global! By Alejandro Donado; Klaus Wälde
  6. Entry to Export Markets and Productivity: Analysis of Matched Firms in Turkey By Altan Aldan; Mahmut Gunay
  7. Offshoring and Productivity: Evidence from Japanese Firm-level Data By ITO Banri; WAKASUGI Ryuhei; TOMIURA Eiichi

  1. By: Costas Arkolakis
    Abstract: I develop a new theory of marketing costs and introduce it into a model of trade with product differentiation and firm productivity heterogeneity. In this model, a firm enters a market if it makes profits by reaching a single consumer there and pays an increasing marginal cost to access additional consumers. This market penetration cost introduces an extensive margin of new consumers in firms' sales. I calibrate the key parameters of the model to match data on French firms from Eaton, Kortum and Kramarz, in particular the higher sales in France of firms that choose to export to more destinations. The model predicts that most firms do not export, and that a large proportion of firms that export in particular markets do so in small amounts. These predictions are in line with the French data, but together create a puzzle for models with a fixed cost of exporting, such as those of Melitz and Chaney. Looking at the comparative statics of trade liberalization, I find that the model predicts large increases in trade in goods with positive but little previous trade, in line with Kehoe and Ruhl. The model implies that these increases can contribute to new trade significantly more than the corresponding increases due to new exporters.
    JEL: F12 F15 L11 M3
    Date: 2008–08
  2. By: A. Strutt (University of Waikato); J. Poot (University of Waikato); J. Dubbeldam (University of Waikato)
    Abstract: We review the international and New Zealand literatures on the two-way interaction between international migration and agreements designed to enhance cross-border trade or investment. Benefits and costs of migration, to the extent that these may feature in trade and migration negotiations, are discussed. While trade and migration can be substitutes in some contexts, they will be complements in other contexts. Liberalisation of services and the movement of people are likely to offer much more significant gains than liberalisation of remaining barriers to goods trade. Significant scope for liberalisation under GATS mode 4 (the movement of natural persons) may remain. However, temporary migration is already promoted on a unilateral and bilateral basis within immigration policy frameworks that may provide greater flexibility than GATS mode 4. With respect to both trade and migration, the more diverse the exchanging countries are, the greater the economic benefits tend to be. However, greater diversity may also imply greater social costs. This paradox of diversity needs to be addressed through appropriate social policies accompanying enhanced temporary and permanent migration.
    Keywords: international trade; migration; outsourcing; temporary workers; e-labour; GATS; negotiation
    JEL: D60 F13 F15 F22 F51
    Date: 2008–06–30
  3. By: Joel Stiebale
    Abstract: Recent theoretical and empirical contributions stress the importance of financial development for international trade. This paper investigates whether financial constraints matter for foreign market entry at the firm level using dynamic panel data techniques.The empirical framework is applied to a panel of French manufacturing firms over the years 1998–2005. Although financial indicators are significantly correlated with export status and export share, there is no evidence that financial constraints have a direct impact on foreign market participation or sales in foreign markets once observed and unobserved firm heterogeneity is controlled for. This result also holds for subgroups of firms that are more likely to face financial constraints and industries that are more dependent on financial factors.
    Keywords: Exports, financial constraints, sunk costs
    JEL: F14 D92 C23
    Date: 2008–07
  4. By: Martina Lawless (Central Bank); Karl Whelan (University College Dublin)
    Abstract: One of the most famous and robust findings in international economics is that distance has a strong negative effect on trade. Bernard, Jensen, Redding, and Schott (2007) discuss how this can be decomposed into an effect due to the number of products and an effect due to average exports per product. Using US firm-level data, they show that distance has a strong negative effect on the number of products exported. However, they find that the intensive margin—average sales of individual products—is increasing with distance. We show that this apparently puzzling finding is consistent with models featuring firm heterogeneity in productivity and fixed costs associated with exporting to each market. We also show how evidence of this type can be used to derive new estimates of how distance affects fixed and variable trade costs and how these two costs combine to generate the distance effect on trade.
    Date: 2007–11–17
  5. By: Alejandro Donado; Klaus Wälde
    Abstract: Worker movements played a crucial role in making workplaces safer. Workplace safety is costly for firms but increases labour supply. A laissez-faire approach leav- ing safety of workplaces unknown is suboptimal. Safety standards set by better- informed trade unions are output and welfare increasing. Trade between a country with trade unions (the North) and a union-free country (the South) can imply a reduction in work standards in the North. When trade unions are established in the South, the North, including northern unions, tend to lose. Quantitatively, these effects are small and overcompensated by gains in the South.
    Keywords: occupational health and safety, trade unions, international trade, welfare
    JEL: J51 J81 F16 F21
    Date: 2008–07
  6. By: Altan Aldan; Mahmut Gunay
    Date: 2008
  7. By: ITO Banri; WAKASUGI Ryuhei; TOMIURA Eiichi
    Abstract: It is noteworthy that multinational firms are beginning to offshore a wide range of operations. Theoretical studies have showed that offshoring contributes to a higher productivity. This paper aims to provide evidence of the effect of offshoring on productivity, on the basis of original 2006 survey data of offshore sourcing of Japanese firms. Our estimation shows that the offshoring of tasks for production of intermediates goods and final assembly, as well as the offshoring of tasks for R&D and information services, positively affects productivity growth, while the outsourcing of other service tasks has no significant impact on productivity. It also shows that firms outsourcing to the United States or Europe have realized high production efficiency, followed by firms outsourcing to Asia, in comparison with non-offshoring firms.
    Date: 2008–08

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