nep-int New Economics Papers
on International Trade
Issue of 2008‒09‒29
seventeen papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. Trade Expansion of China and India: Threat or Opportunity By Qureshi, M.S.; Wan, Guanghua
  2. Trade costs in Africa : barriers and opportunities for reform By Portugal-Perez, Alberto; Wilson, John S.
  3. WHY DO TRADE COSTS VARY? By Richard Pomfret; Patricia Sourd in
  4. Marginal Intra-Industry Trade and Adjustment Costs - A Hungarian-Polish Comparison By Imre Ferto; Károly Attila Soos
  5. The Optimal Distance to Port for Exporting Firms By Gries, Thomas; Naude, Wim; Matthee, Marianne
  6. Financial Factors and the Margins of Trade: Evidence from Cross-Country Firm-Level Data By Nicolas Berman; Jérôme Héricourt
  7. The euro's influence upon trade - Rose effect versus border effect. By Gianluca Cafiso
  8. Duration of trade of former communist countries at the EU By Imre Ferto; Károly Attila Soos
  9. Export Productivity and Specialization in China, Brazil, India and South Africa By Santos-Paulino, Amelia U.
  10. Trade, Wages, and Productivity By Behrens, Kristian; Mion, Giordano; Murata, Yasusada; Suedekum, Jens
  11. Measuring the Competitive Threat from China By Jenkins, Rhys
  12. Regional Assessment of Openness and Productivity Spillovers in China from 1979 to 2006: A Space-Time Model By Sélin Ozyurt
  13. Globalisation and the competitiveness of the euro area By Filippo di Mauro; Katrin Forster
  14. China?s Exports in ICT and its Impact on Asian Countries By Xing, Yuqing
  15. The changing role of the exchange rate in a globalised economy. By Filippo di Mauro; Rasmus Rueffer; Irina Bunda
  16. Learning by Exporting and High-tech Capital Deepening in Singapore Manufacturing Industries, 1974-2006 By Aekapol Chongvilaivan
  17. The Impact of FDI, Cross Border Mergers and Acquisitions and Greenfield Investments on Economic Growth By Paula Neto; António Brandão; António Cerqueira

  1. By: Qureshi, M.S.; Wan, Guanghua
    Abstract: By exploring the export performances and specialization patterns of China and India, we assess their trade competitiveness and complementarity vis-.-vis each other as well as with the rest of the world. Our analysis indicates that (i) India faces tough competition from China in the third markets especially in clothing, textile and leather products; (ii) there is a moderate potential for expanding trade between the two countries; (iii) China poses a challenge for the East Asian economies, the US, and most of the European countries especially in medium technology industries; (iv) India appears to be a competitor mainly for its neighbouring South Asian countries; and (v) complementarity exists between the imports of China and India, and the exports of the US, some European states and East Asian countries, especially Japan, Korea, Malaysia, Singapore and Thailand, implying opportunities for trade expansion; and finally (vi) the export structure of China is changing with the exports of skill intensive and high technology products increasing and those of labour-intensive products decreasing gradually. This suggests that challenges created by China in traditional labour-intensive products might reduce in the long run
    Keywords: international trade, export competition, China, India
    Date: 2008
  2. By: Portugal-Perez, Alberto; Wilson, John S.
    Abstract: This paper reviews data and research on trade costs for Sub-Saharan African countries. It focuses on: border-related costs, transport costs, costs related to behind-the border issues, and the costs of compliance with rules of origin specific to preferential trade agreements. Trade costs are, on average, higher for African countries than for other developing countries. Using gravity-model estimates, the authors compute ad-valorem equivalents of improvements in trade indicators for a sample of African countries. The evidence suggests that the gains for African exporters from improving the trade logistics half-way to the level in South Africa is more important than a substantive cut in tariff barriers. As an example, improving logistics in Ethiopia half-way to the level in South Africa would be roughly equivalent to a 7.5 percent cut in tariffs faced by Ethiopian exporters.
    Keywords: Transport Economics Policy&Planning,Free Trade,Economic Theory&Research,Trade Policy,Trade Law
    Date: 2008–09–01
  3. By: Richard Pomfret (School of Economics, University of Adelaide); Patricia Sourd in
    Abstract: Trade theorists and policymakers have until recently ignored trade costs, but as tariffs have fallen it is apparent that trade costs are a significant obstacle to trade and they are not simply determined by geography or commodity characteristics. We analyse country-by-country variations in trade costs using disaggregated Australian import data. In Australia average trade costs are about 5% of the value of imports, compared to an average tariff of under 4%. Controlling for distance from Australia and the bulkiness of commodities, the paper examines other determinants of international trade costs in terms of exporting country characteristics. Country-specific characteristics which influence the size of trade costs may provide a direct link between institutions and economic growth.
    Date: 2008–09
  4. By: Imre Ferto (Institute of Economics, Hungarian Academy of Sciences); Károly Attila Soos (Institute of Economics, Hungarian Academy of Sciences)
    Abstract: The structure of trade expansion in Hungary and Poland over the period 1990-1998 and its implications for labour-market adjustment is examined. An econometric analysis of trade and employment data suggests that changes in domestic consumption and productivity have significant influence on employment changes. But our results do not provide support for the smooth-adjustment hypothesis of intra-industry trade.
    Keywords: Intra-industry trade, adjustment costs
    JEL: F19
    Date: 2008–08
  5. By: Gries, Thomas; Naude, Wim; Matthee, Marianne
    Abstract: Success in international trade depends, amongst other things, on distance from markets. Most new economic geography models focus on the distance between countries. In contrast much less theorizing and empirical analysis have focused on how distances within a country?for instance due to the location behaviour of exporting firms?matter to international trade. In this paper we contribute to the literature on the latter by offering a theoretical model to explain the optimal distance that an export-oriented firm would locate from a port. We present empirical evidence from South Africa in support of the model.
    Keywords: distance, transport costs, manufactured exports
    Date: 2008
  6. By: Nicolas Berman (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, European University Institute - European University Institute); Jérôme Héricourt (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, EQUIPPE - Université de Lille - Université des Sciences et Technologies de Lille - Lille I)
    Abstract: Using a large cross-country, firm level database containing 5,000 firms in 9 developing and emerging economies, we study how financial factors affect both firms' export decisions and the amount exported by firm. First, our results stress an important impact of firms' access to finance on their entry decision into the export market. However, a better financial health neither increases the probability of remaining an exporter once the firm has entered, nor the size of exports. Second, we find that financial constraints create a disconnection between firms' productivity and their export status: productivity is a significant determinant of exporting decision only if the firm has a sufficient access to external finance. Finally, an increase in a country's financial development dampens this disconnection, thus acting positively both on the number of exporters and on the exporters' selection process. These results contribute to the literature documenting the role of fixed cost and of the extensive margin of trade in total trade adjustment, and provide micro evidence of the positive impact of financial development on trade found by previous literature.
    Keywords: Export decision, margins of trade, financial constraints
    Date: 2008–09
  7. By: Gianluca Cafiso (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.)
    Abstract: This paper assesses the Euro’s influence upon European trade by estimating two different indicators. The first is the so-called “Rose Effect”, while the second is the “Border Effect”. The former measures how much a country within a currency union trades more with its partners than with non-member countries, the latter measures the integration of a country with its trade partners. This study of the Euro’s influence by means of the Border Effect is a novelty in the literature, it reveals that the Euro’s influence upon trade is not so clear as papers focused only on the Rose Effect claim. This casts doubts about the consequences of the Euro introduction for the European Single Market. Both indicators are estimated by means of a gravity model for bilateral trade flows using a panel of manufacture exports among twenty-four OECD countries. JEL Classification: F10, F14, F15.
    Keywords: Euro, European Integration, Trade, Rose Effect, Border Effect.
    Date: 2008–09
  8. By: Imre Ferto (Institute of Economics, Hungarian Academy of Sciences); Károly Attila Soos (Institute of Economics, Hungarian Academy of Sciences)
    Abstract: The article analyses the duration of exports of individual products of former communist countries to the enlarged European Union (EU25) employing survival analysis. The results show that the duration of trade differs across EU10 and EU15 markets, for the majority of countries the length of trade is higher in EU10 markets than in the EU15 markets. The estimations suggest that differentiated products are traded for more extended periods than homogenous products. In addition, trade relationships starting with large initial sales are more likely to survive the observed five year period than those starting with small values. Finally, the estimations are robust to both markets segments.
    Keywords: trade, former communist countries, EU
    JEL: F10 F14
    Date: 2008–08
  9. By: Santos-Paulino, Amelia U.
    Abstract: This paper analyses the patterns of export productivity and trade specialization profiles in the China, Brazil, India and South Africa, and in other regional groupings. In doing so, the investigation calculates a time varying export productivity measure using highly disaggregated product categories. The findings indicate that export productivity is mainly determined by real income and human capital endowments. Importantly, the study reveals significant differences in the export productivity and specialization patterns of countries with comparable per capita income levels. For instance, China?s export productivity and implied export sophistication is in line with that of countries with higher per capita incomes, including some OECD industrial economies.
    Keywords: export productivity, trade specialization, comparative advantage
    Date: 2008
  10. By: Behrens, Kristian (University of Québec at Montréal); Mion, Giordano (CORE, Catholic University of Louvain); Murata, Yasusada (Nihon University); Suedekum, Jens (University of Duisburg-Essen)
    Abstract: We develop a new general equilibrium model of trade with heterogeneous firms, variable demand elasticities and endogenously determined wages. Trade integration favors wage convergence, intensifies competition, and forces the least efficient firms to leave the market, thereby affecting aggregate productivity. Since wage and productivity responses are endogenous, our model is well suited to study the impacts of trade integration on aggregate productivity and factor prices. Using Canada-U.S. interregional trade data, we first estimate a system of theory-based gravity equations under the general equilibrium constraints generated by the model. Doing so allows us to measure 'border effects' and to decompose them into a 'pure' border effect, relative and absolute wage effects, and a selection effect. Using the estimated parameter values, we then quantify the impacts of removing the Canada-U.S. border on wages, productivity, markups, the share of exporters, the mass of varieties produced and consumed, and welfare. We finally provide a similar quantification with respect to regional population changes.
    Keywords: monopolistic competition, general equilibrium, gravity equations, heterogeneous firms, variable demand elasticities
    JEL: F12 F15 F17
    Date: 2008–09
  11. By: Jenkins, Rhys
    Abstract: In recent years there has been a growing literature that analyses the threat which Chinese exports pose to the exports of other developing countries. The paper provides a critique of the standard measures of export similarity which have been used to estimate the threat from China in these studies. Two alternative indices, the static and the dynamic index of competitive threat, are developed and estimated for 18 developing countries and compared with estimates for the standard measures. It is shown that the latter tend to underestimate the extent to which countries are threatened by China. They also distort both the rankings of countries according to the extent to which they face competition from China and the direction of change in the competitive threat over time.
    Keywords: China, competition, export similarity, exports, trade
    Date: 2008
  12. By: Sélin Ozyurt
    Abstract: This study investigates the impact of inward foreign direct investment (FDI) flows and international trade on labour productivity in 30 Chinese provinces over the period 1979-2006. Since China launched the “open door” policy in 1978, the country has been attracting a growing share of FDI flows and its international trade has been expanding considerably. China’s accession into the WTO in 2001 has also started a new era in its integration into the world economy. In this paper, we model labour productivity as dependent on FDI, foreign trade and other traditional variables such as capital intensity, infrastructure and human capital development. Our empirical analysis improves the existing wide literature by taking into account spatial effects and potential econometric issues they imply. Using recently developed spatial data analysis tools, we explore the pattern, (weather it be negative or positive) and the extent of spatial interaction of labour productivity between regions. Thereby, we extend previous research by testing the explanatory power of additional variables such as spatially lagged independent and dependent variables. The explicit consideration of spatial dependence in the modelling scheme provides us a better understanding of the regional spillovers process. Our results indicate a general trend of spatial autocorrelation in labour productivity during the study period. Put differently, in China, the productivity of a given region is highly determined by those of surrounding regions. In addition, our empirical outcomes yield support for positive and significant impacts of FDI and foreign trade on labour productivity. Furthermore, in China, FDI and trade exhibit a positive spatial pattern and give rise to interregional productivity spillovers among provinces. These findings are robust to a number of alternative spatial weighting matrix specifications.
    Date: 2008–09
  13. By: Filippo di Mauro (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Katrin Forster (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.)
    Abstract: Against the background of increasing competition and other significant structural changes implied by globalisation, maintaining and enhancing competitiveness has evolved into one of the prime concerns in most countries. Following up on previous work (see in particular ECB Occasional Papers No. 30 and No. 55), this Occasional Paper examines the latest developments and prospects for the competitiveness and trade performance of the euro area and the euro area countries. Starting from an analysis of most commonly used, traditional competitiveness indicators, the paper largely confirms the findings of previous studies that there have been substantial adjustments in euro area trade. Euro area firms have taken advantage of the new opportunities offered by globalisation, and have at the same time been increasingly challenged by emerging economies. This is primarily reflected in the loss of export market shares which have been recorded over the last decade. While these can partly be related to the losses in the euro area’s price competitiveness, further adjustment also seems warranted with regard to the export specialisation. Compared with other advanced competitors, the euro area remains relatively more specialised in labourintensive categories of goods and has shown only a few signs of a stronger specialisation in research-intensive goods. Nevertheless, the paper generally calls for a more cautious approach when assessing the prospects for euro area competitiveness, as globalisation has made it increasingly difficult to define and measure competitiveness. Stressing the need to take a broader view on competitiveness, specifically with a stronger emphasis on productivity performance, the paper also introduces a more elaborate framework that takes into account the interactions between country-specific factors and firm-level productivity. It thus makes it possible to construct more broadly defined competitiveness measures. Pointing to four key factors determining the global competitiveness of euro area countries – market accessibility, market size, technological leadership of firms and institutional set-up – the analysis provides further arguments for continuing efforts to increase market integration and strengthen the competitive environment within Europe as a mean of enhancing resource allocation and coping with the challenges globalisation creates. JEL Classification: F15, F43, O52
    Keywords: Globalisation, competitiveness, productivity
    Date: 2008–09
  14. By: Xing, Yuqing
    Abstract: This paper analyses China?s ICT exports growth in its two major markets Japan and the US from 1992 to 2004. It focuses on ICT products classified in SITC 75, 76 and 77. The empirical results show that Chinese exports had maintained two-digit annual growth during the period. The growth was much higher than the corresponding growth of the overall markets. By 2004, Chinese ICT exports accounted for 26 per cent of the total Japanese imports and 19 per cent of the total imports of the US in ICT products. In addition, the paper investigates whether the rapid growth of Chinese ICT exports crowded out that of other Asian countries: Indonesia, Malaysia, Philippines, Singapore, South Korea and Thailand. The empirical analysis shows that the crowding out effect differs across countries and products. The exports of Singapore and Philippines have been negatively affected by the growth of Chinese exports, but no crowding effect existed at all with Indonesia?s exports.
    Keywords: China, exports, ICT, Asia
    Date: 2008
  15. By: Filippo di Mauro (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Rasmus Rueffer (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Irina Bunda (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.)
    Abstract: In addition to its direct effects on the global trading and production structure, the ongoing process of globalisation may have important implications for the interaction of exchange rates and the overall economy. This paper presents evidence regarding possible changes in the role of exchange rates in a more globalised economy. First, it analyses the link between exchange rates and prices, showing that there is at most a moderate decline in exchange rate pass-through for the euro area. Next, it turns to the effect of exchange rate changes on trade flows. The findings indicate that the responsiveness of euro area exports to exchange rate changes may have declined somewhat as a result of globalisation, reflecting mainly shifts in the geographical and sectoral composition of trade flows. The paper also provides a firm-level analysis of the impact of exchange rate changes on corporate profits, which suggests that overall this relationship appears to be relatively stable over time, although there are important crosscountry differences. In addition, it studies the overall impact of exchange rates on GDP and the potential role of valuation effects as a transmission channel in the case of the euro area. JEL Classification: E3, F15, F31.
    Keywords: Globalisation, exchange rate, trade exchange rate pass-through, valuation effects.
    Date: 2008–09
  16. By: Aekapol Chongvilaivan (Singapore Centre for Applied and Policy Economics, Department of Economics, National University of Singapore)
    Abstract: A number of fundamental factors enhance the growth of industries’ productivity. Among others, the export-led and high-tech capital deepening strategies are widely adopted by developing economies. This paper attempts to empirically investigate the extent to which both industrial development policies affect the total factor productivity growth (TFPG) in Singapore manufacturing industries from 1974 to 2006. Using the panel data estimations, I find that both development strategies bring about TFPG via non-neutral technological growth, and the former more largely explains TFPG than does the latter. The present study captures the measure of learning by exporting by the lagged export intensity and therefore contributes to the literature, in which only whether or not firms are active in export markets is conventionally employed. Methodologically, my main contributions are a more detailed treatment of (non-neutral) technological changes, and an improved measure of export intensity.
    Keywords: Learning by exporting; High-tech Capital Deepening; Total Factor Productivity Growth; Neutral and Factor-biased Technological Progress
    JEL: F13 F14 L6
    Date: 2008–05–06
  17. By: Paula Neto (ISCA, Universidade de Aveiro); António Brandão (Faculdade de Economia, Universidade do Porto); António Cerqueira (Faculdade de Economia, Universidade do Porto)
    Abstract: This paper investigates whether aggregate foreign direct investment (FDI), cross border mergers and acquisitions (M&A) and greenfield investments affects economic growth based on a panel data of 53 countries over the period 1996-2006. Both causality tests and single growth equations are applied to examine this relationship. The evidence suggests that there is bidirectional causality between FDI, M&A and growth. We can also conclude that economic growth Granger causes greenfields, but the reverse is not true. The estimation of the growth equation leads us to conclude that FDI through greenfield investments exerts a positive impact on economic growth in both developed and developing countries. Oppositely, M&A has a negative effect on the economic growth of developing countries, but insignificant on developed countries.
    Keywords: Foreign Direct Investment, Cross Border Mergers and Acquisitions, Greenfield Investments, Economic Growth
    JEL: F23 F40 G34 O40
    Date: 2008–09

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