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on International Trade |
| By: | Toshihiro Okubo (Research Institute for Economics and Business Administration, Kobe University); Pierre M. Picard (University of Manchester (United Kingdom) and CORE, Université catholique de Louvain (Belgium)); Jacques-François Thisse (CORE, Université catholique de Louvain (Belgium), PSE (France) and CEPR) |
| Abstract: | The aim of this paper is to study the spatial selection of firms once it is recognized that heterogeneous firms typically choose different locations in respond to market integration of regions having different sizes. Specifically, we show that decreasing trade costs leads to the gradual agglomeration of efficient firms in the large region because these firms are able to survive in a more competitive environment. In contrast, high-cost firms seek protection against competition from the efficient firms by establishing themselves in the small region. However, when the spatial separation of markets ceases to be a sufficient protection against competition from the low-cost firms, high-cost firms also choose to set up in the larger market where they have access to a bigger pool of consumers. This leads to the following prediction: the relationship between economic integration and interregional productivity differences first increases and then decreases with market integration. |
| Keywords: | firm heterogeneity; spatial selection; trade liberalization |
| JEL: | F12 H22 H87 R12 |
| Date: | 2008–09 |
| URL: | http://d.repec.org/n?u=RePEc:kob:dpaper:229&r=int |
| By: | Carolina Lennon |
| Abstract: | The purpose of this paper is double. First, we empirically explore to what extent the determinants of trade in services differs from those of trade in goods and, second, by the use of instrumental variables, we explore for potential complementarities between bilateral trade in goods and bilateral trade in services. By the use of gravity equations, the main results show that "bilateral trust and contract enforcement environment", "networks", "labor markets" and "technology and technology of communication" have higher impact on service trade than on trade in goods; finally, after instrumenting for endogeneity, we found that bilateral trade in goods explains bilateral trade in services: the resulting estimated elasticity is close to 1. Reciprocally, though to a lesser extent, bilateral trade in services affects positively bilateral trade in goods: a 10% increase in trade in services raises traded goods by 4.6%. |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:pse:psecon:2008-52&r=int |
| By: | Carolina Lennon |
| Abstract: | The purpose of this paper is to empirically investigate the relationship between cross border trade in services (Mode 1) and commercial presence in services (Mode 3). I postulate that these two modes of supply facilitate each other, and that, in contrast to the manufacturing sector, this complementarity might occur even at the level of horizontal investment. For the empirical analysis I make use of bilateral data on US majority-owned foreign affiliate operations (MOFAs). The same exercise is carried for the case of goods sectors. After using two different estimating techniques, results confirm the intuition, not only Mode1 and Mode 3 in services are complements but also the complementarity relationship is stronger than that found in the case of goods. Moreover, the complementarity between this two modes of supply, for the case of services, is also found at the level of horizontal FDI. |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:pse:psecon:2008-53&r=int |
| By: | Aaditya Mattoo (World Bank); Arvind Subramanian (Peterson Institute for International Economics) |
| Abstract: | A fundamental shift is taking place in the world economy to which the multilateral trading system has failed to adapt. The Doha process focused on issues of limited significance while the burning issues of the day were not even on the negotiating agenda. This paper advances five propositions: (1) the traditional negotiating dynamic, driven by private-sector interests largely in the rich countries, is running out of steam; (2) the world economy is moving broadly from conditions of relative abundance to relative scarcity, and so economic security has become a paramount concern for consumers, workers, and ordinary citizens; (3) international economic integration can contribute to enhanced security; (4) addressing these new concerns—relating to food, energy, and economic security—requires a wider agenda of multilateral cooperation, involving not just the World Trade Organization but other multilateral institutions as well; and (5) despite shifts in economic power across countries, the commonality of interests and scope for give-and-take on these new issues make multilateral cooperation worth attempting. |
| Keywords: | WTO, Doha, trade, security |
| JEL: | F13 F2 F41 |
| Date: | 2008–10 |
| URL: | http://d.repec.org/n?u=RePEc:iie:wpaper:wp08-8&r=int |
| By: | Mario Larch; Wolfgang Lechthaler |
| Abstract: | In the presence of increasing specialization of workers it becomes more and more difficult for firms to find the most suitable workers. In such an environment a multinational corporation has an advantage because it can exchange workers between plants in different countries. In this way it can draw on a larger labor market pool, reducing the mismatch of its workforce. This paper analyzes the consequences of this advantage for production, employment and, most prominently, wages. We are able to disentangle the effects of worker heterogeneity and firm heterogeneity on wages and show that the latter is important to explain why multinationals typically pay higher wages |
| Keywords: | Heterogeneous labor; Multinational, firms; Intra-wage distribution; Heterogeneous firms |
| JEL: | F23 F12 J41 |
| Date: | 2008–10 |
| URL: | http://d.repec.org/n?u=RePEc:kie:kieliw:1454&r=int |
| By: | Wolf, Nikolaus (The University of Warwick, CEPR and CESifo) |
| Abstract: | When did Germany become economically integrated? Within the framework of a gravity model, based on a new data set of about 40,000 observations on trade flows within and across the borders of Germany over the period 1885 – 1933, I explore the geography of trade costs across Central Europe. There are three key results. First, the German Empire before 1914 was a poorly integrated economy, both relative to integration across the borders of the German state and in absolute terms. Second, this internal fragmentation resulted from cultural heterogeneity, from administrative borders within Germany, and from geographical barriers that divided Germany along natural trade routes into eastern and western parts. Third, internal integration improved, while external integration worsened after World War I and again with the Great Depression, in part because of border changes along the lines of ethno-linguistic heterogeneity. By the end of the Weimar Republic in 1933, Germany was reasonably well integrated. |
| Keywords: | Germany ; Economic Integration ; Aggregation Bias ; Border Effects |
| JEL: | F15 N13 N14 N90 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:wrk:warwec:871&r=int |
| By: | Marina Murat; Barbara Pistoresi |
| Abstract: | A significant number of empirical studies, focusing on different countries, have found a positive link between migration and trade. This paper studies the relationship between emigration, immigration and trade using Italian data. The sample regards 51 foreign trading partners and spans from 1990 to 2005. The results suggest that: networks of Italian emigrants in foreign countries boost bilateral trade. The effects of immigrants are weak, on exports, or negative, on imports. Results do not change when the cultural and institutional dissimilarities between countries are considered. |
| Keywords: | International Migration, Italian Bilateral Trade |
| JEL: | F10 F22 F23 |
| Date: | 2007–09 |
| URL: | http://d.repec.org/n?u=RePEc:mod:recent:003&r=int |
| By: | Pflüger, Michael P. (University of Passau); Tabuchi, Takatoshi (University of Tokyo) |
| Abstract: | This paper is motivated by the fact that, contrary to its importance in practice, the role of land for production has received no attention in the new trade theory and the new economic geography. We set up a simple monopolistic competition model and we show that, due to the factor proportions effect which emerges when land is used as a productive factor besides labor, a number of tenets of the new trade and geography literature no longer hold. We also show that in order to explain the stylized facts, notably that wages are higher in larger locations, land-use for production and housing has to be taken into account. Our analysis furthermore implies that market-size based agglomeration forces are too weak to overcome the very strong congestion force associated with competition for land, unless the consumers' desire of variety (as expressed by a low elasticity of substitution) is very strong. This suggests that further agglomeration forces have to be invoked to explain the agglomeration of economic activity observed in the real world. |
| Keywords: | trade and location, land for production, agglomeration, relative wage, home market effect |
| JEL: | F12 F22 R12 |
| Date: | 2008–09 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp3716&r=int |