nep-int New Economics Papers
on International Trade
Issue of 2008‒08‒31
ten papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. China's integration into global production networks and its implications for export-led growth strategy in other countries in the region By Prema-Chandra Athukorala
  2. A New Trade Theory of GATT/WTO Negotiations By Ralph Ossa
  3. The Impact of Production Fragmentation on Skill Upgrading: New Evidence from Japanese Manufacturing By Nobuaki Yamashita
  5. Export Dynamics in Colombia: Firm-Level Evidence By Eaton, Jonathan; Eslava, Marcela; Kugler, Maurice; Tybout, James
  6. Can production subsidies explain China's export performance? Evidence from firm level data By Zhihong Yu; Yundan Gong; Sourafel Girma; Holger Görg
  7. Linkages between Financial Deepening,Trade Openness and Economic Development: Causality Evidence from Sub-Saharan Africa By Thomas Gries; Manfred Kraft; Daniel Meierrieks
  8. Financial Deepening, Trade Openness and Economic Growth in Latin America and the Caribbean By Thomas Gries; Manfred Kraft; Daniel Meierrieks
  9. The Balance of Payments as a Constraint on Turkey’s Growth: 1960-2004 By Secil Pacaci Elitok; Al Campbell
  10. Enlarging the EMU to the East: What Effects on Trade? By Belke, Ansgar; Spies, Julia

  1. By: Prema-Chandra Athukorala
    Abstract: TThis paper examines the implications of China's rapid integration into global production networks for export performance of countries in Southeast Asia. In a clear departure from the conventional practice, the trade flow analysis of the paper is based on a careful disaggregation of reported trade data into components and final goods, with a view to delineating supply-side complementarities arising from cross-border production fragmentation. There is clear evidence that network-related trade in components has strengthened Southeast Asia's trade links with China, opening up new opportunities for the expansion of component production/assembly writhing vertically integrated global industries. However, these trade links with China have not lessoned the dependence of growth dynamism of these countries on the global economy; the dynamism of regional cross-border production networks depends inexorably on China's trade in final goods with North America and the European Union.
    Keywords: China, Southeast Asia, production fragmentation, global production networks
    JEL: F14 F23 O53
    Date: 2008
  2. By: Ralph Ossa
    Abstract: I develop a novel theory of GATT/WTO negotiations. This theory provides new answers totwo prominent questions in the trade policy literature: first, what is the purpose of tradenegotiations? And second, what is the role played by the fundamental GATT/WTO principlesof reciprocity and nondiscrimination? Relative to the standard terms-of-trade theory ofGATT/WTO negotiations, my theory makes two main contributions: first, it builds on a 'newtrade' model rather than the neoclassical trade model and therefore sheds new light onGATT/WTO negotiations between similar countries. Second, it relies on a productionrelocation externality rather than the terms-of-trade externality and therefore demonstratesthat the terms-of-trade externality is not the only trade policy externality which can beinternalized in GATT/WTO negotiations.
    Keywords: Trade negotiations, GATT/WTO, New trade theory
    JEL: F12 F13
    Date: 2008–06
  3. By: Nobuaki Yamashita
    Abstract: This paper examines the hypothesis that industries engaged in international fragmentation of production experience greater skill upgrading using a panel dataset of Japanese manufacturing over the period 1980-2000. The novelty of the study comes from the use of a newly constructed index using trade data on parts and components to measure intraindustry variations in the degree of international vertical specialization (fragmentation intensity of trade). It also employs a methodology designed to embody peculiarities of Japan's fragmentation trade pattern. While the findings of existing studies are inconclusive, it is found that the expansion of fragmentation trade with developing East Asian countries has had a significant impact on the skills composition of Japanese manufacturing employment. At the same time, fragmentation trade with high income countries has had a skill downgrading effect.
    Keywords: Production Fragmentation; Skill Upgrading; Japanese Manufacturing
    JEL: F14 F16 J31
    Date: 2008
  4. By: Sambit Bhattacharyya; Steve Dowrick; Jane Golley
    Abstract: In this paper we contribute to the debate over the empirical relationship between trade openness and economic development. Unlike previous studies which treat trade openness and institutions as competitors in economic development, we find evidence that they are in fact complements. We also find that in order for a country to benefit from trade, its institutional quality has to be above a threshold level. These results are suggestive of a very important complementary role of both trade openness and institutions in economic development.
    Keywords: Trade; Institutions; Economic Development
    JEL: F1 O1
    Date: 2008
  5. By: Eaton, Jonathan (New York U); Eslava, Marcela (Universidad de Los Andes); Kugler, Maurice (Harvard U); Tybout, James (Pennsylvania State U)
    Abstract: Using transactions-level customs data from Colombia, we study firm-specific export patterns over the period 1996-2005. Our data allow us to track firms' entry and exit into and out of individual destination markets, as well as their revenues from selling there. We find that, in a typical year, nearly half of all Colombian exporters were not exporters in the previous year. These new exporters tend to be extremely small in terms of their overall contribution to export revenues, and most do not continue exporting in the following year. Hence export sales are dominated by a small number of very large and stable exporters. Nonetheless, out of each cohort of new exporters, a fraction of firms go on to expand their foreign sales very rapidly, and over the period of less than a decade, these successful new exporters account for almost half of total export expansion. Finally, we find that new exporters begin in a single foreign market and, if they survive, gradually expand into additional destinations. The geographic expansion paths they follow, and their likelihood of survival as exporters, depend on their initial destination market.
    JEL: F10
    Date: 2007–10
  6. By: Zhihong Yu; Yundan Gong; Sourafel Girma; Holger Görg
    Abstract: It is widely accepted that China has been experiencing an export-led growth approach. However, the question whether government can reshape industry structure through production subsidies to enhance export performance has not been answered. This paper analyses the impact of production subsidies on firms’ export performance using a very comprehensive and recent firm level database and controlling for the endogeneity of subsidies. It documents robust evidence that production subsidies stimulate export activity, although this effect is conditional on firm characteristics. In particular, the beneficial impact of subsidies is found to be more pronounced amongst profit-making firms, firms in capital intensive industries and those located in non-coastal regions. Compared to firm characteristics, the extent of heterogeneity across ownership structure (SOEs, collectives and privately-owned firms) proves to be relatively less important
    Keywords: Exporting, subsidies, China, endogenous Tobit
    JEL: F1 O2 P3
    Date: 2008–07
  7. By: Thomas Gries (University of Paderborn); Manfred Kraft (University of Paderborn); Daniel Meierrieks (University of Paderborn)
    Abstract: This contribution tests for causality between financial deepening, trade openness and economic development for 16 Sub-Saharan African countries. An advanced econometric methodology is used to add to existing empirical evidence. Only limited support is found for finance promoting regional development. In particular, support for the popular hypothesis of finance-led growth is not substantial. In general, it is found that financial deepening and trade openness have swayed regional development only marginally. Thus, development strategies prioritizing financial sector or trade liberalization cannot be supported. Instead, a holistic policy approach taking into account other fundamental development factors is advocated.
    Keywords: Financial Markets, Economic Growth, Openness, Hsiao’s Granger Causality, Sub- Saharan Africa
    JEL: C32 O16 O55
    Date: 2008–04
  8. By: Thomas Gries (University of Paderborn); Manfred Kraft (University of Paderborn); Daniel Meierrieks (University of Paderborn)
    Abstract: This contribution investigates the direct and indirect causal interactions between financial deepening, trade openness and economic growth for 13 Latin American and Caribbean countries. Using a rather general approach to identify indicators for financial deepening and to detect Granger causality within a VAR/VECM framework, we find almost no evidence for the popular hypothesis of finance-led growth. Evidence of bidirectional finance-growth causality is stronger but mostly unstable in the long run. Most results indicate a demand-following or insignificant relationship between finance and growth in Latin America. This finding seems to be consistent with regard to the weakness and deficiencies of the region's financial systems. Further, there is no evidence that finance indirectly and unilaterally induces growth via the channel of trade openness. Thus, policies that prioritize financial and trade liberalization cannot be supported by this study. Instead, a holistic policy approach seems to be preferable that promotes the determinants of both real sector growth and financial development. As a result, financial factors may positively and significantly contribute to economic development in the region.
    Keywords: Financial Markets, Economic Growth, Openness, Hsiao’s Granger Causality, Latin America and Caribbean
    JEL: C32 O16 O55
    Date: 2008–08
  9. By: Secil Pacaci Elitok; Al Campbell
    Abstract: The aim of this study is to test the existence of balance of a payments constraint on the long run economic growth of the Turkish economy. The balance of payments constrained growth (BPCG) model which was developed by Thirlwall (1979) and extended by Thirlwall and Hussain (1982) is tested over the period of 1960-2004 using OLS. Empirical findings of this paper support the BPCG model for the whole period under consideration. For the different sub-periods, there are either different essential economic relations or behaviors behind the BOP constraint.
    Keywords: Balance of payments constraint, Turkey, economic growth, international trade, elasticity, neo-liberalism
    JEL: F14 F15 F41 F43 E12
    Date: 2008
  10. By: Belke, Ansgar (University of Duisburg-Essen); Spies, Julia (Institut für Angewandte Wirtschaftsforschung (IAW))
    Abstract: The purpose of this paper is to assess the implications of the Economic and Monetary Union (EMU) accession of eight Central and Eastern European Countries (CEECs) on their share in EMU-12 imports. Overcoming biases related to endogeneity, omitted variables and sample selection, our results indicate that the common currency has boosted intra-EMU imports by 7%. Under the assumption that the same relationship between the explanatory variables and imports will hold for EMU-CEEC trade, we are able to predict the future impact of the Euro. Our findings suggest that except for the least integrated countries, Poland, Latvia and Lithuania, all CEECs can expect increases in the EMU-12 import share.
    Keywords: Central and Eastern European countries, Euro area enlargement, gravity model, panel estimation
    JEL: F15 F41
    Date: 2008–08

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