nep-int New Economics Papers
on International Trade
Issue of 2009‒01‒17
thirteen papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. An Elementary Theory of Comparative Advantage By Arnaud Costinot
  2. Trade and Expropriation: A Factor Proportions Approach By Arghya Ghosh; Peter Robertson
  3. The Role of Quality Ladders in a Ricardian Model of Trade with Nonhomothetic Preferences By Esteban Jaimovich; Vincenzo Merella
  4. Technological Change, Trade, and Endogenous Factor Endowments By Erich Gundlach; Albert de Vaal
  5. Has emerging Asia decoupled? An analysis of production and trade linkages using the Asian international input-output table By Gabor Pula; Tuomas A. Peltonen
  6. Gravity, Productivity and the Pattern of Production and Trade By James E. Anderson
  7. Regional Integration in Asia and Its Effects on the EU and North America By Hiro Lee; Robert F. Owen; Dominique van der Mensbrugghe
  8. Policy Choice: Theory and Evidence from Commitment via International Trade Agreements By Nuno Limão; Patricia Tovar
  9. Welfare Impact of Trade Liberalization By Sang-Wook (Stanley) Cho; Julian P. Diaz
  10. Export quality in the machinery sector: Some evidence from main competitors By Ricotta, Fernanda; Mannarino, Lidia; Pupo, Valeria; Succurro, Marianna
  11. The Internationalization of Inventive Activity: A Gravity Model Using Patent Data By Picci, Lucio
  12. Exporting and Firm Performance: Chinese Exporters and the Asian Financial Crisis By Albert Park; Dean Yang; Xinzheng Shi; Yuan Jiang
  13. FDI and productivity convergence in central and eastern Europe - an industry-level investigation By Martin Bijsterbosch; Marcin Kolasa

  1. By: Arnaud Costinot
    Abstract: Comparative advantage, whether driven by technology or factor endowment, is at the core of neoclassical trade theory. Using tools from the mathematics of complementarity, this paper offers a simple, yet unifying perspective on the fundamental forces that shape comparative advantage. The main results characterize sufficient conditions on factor productivity and factor supply to predict patterns of international specialization in a multi-factor generalization of the Ricardian model to which we refer as an "elementary neoclassical economy." These conditions, which hold for an arbitrarily large number of countries, goods, and factors, generalize and extend many results from the previous trade literature. They also offer new insights about the joint effects of technology and factor endowments on international specialization.
    JEL: F10 F11
    Date: 2009–01
  2. By: Arghya Ghosh (School of Economics, The University of New South Wales); Peter Robertson (School of Economics, The University of New South Wales)
    Abstract: An extended small open economy model is developed and used to examine the effect of trade on the illicit expropriation of incomes and the provision of legal services. We derive conditions under which trade liberalization will reduce expropriation activities. We also derive sufficient conditions for the gains from trade to be amplified or muted relative to the standard model. The signs of these effects depend on factor intensity rankings and factor abundance ratios. Thus the results show that trade liberalization will be beneficial to countries that export labor intensive goods by reducing the incentives for illicit expropriation and reducing the costs of providing legal services. The model also shows that trade liberalization can increase expropriation, particularly for countries that import labor intensive goods and have labor intensive crime problems.
    Keywords: Expropriation; Factor Proportions; Gains from Trade; Legal Services
    JEL: F1 K42
    Date: 2008–10
  3. By: Esteban Jaimovich (Collegio Carlo Alberto); Vincenzo Merella (Department of Economics, City University, London)
    Abstract: The literature on North-South trade has explored conditions under which international trade might be a factor magnifying income disparities between the advanced North and the backward South. Little attention has yet been placed on the e¤ect of trade on countries that do not display substantial dissimilarities concerning capital endowments. We show that even when no single country is technologically more advanced than any other one and productivity changes are uniform and identical in all countries, international trade may still be a source of income divergence. Income divergence will be experienced when comparative advantages induce patterns of specialisation that, although optimal for each country at some initial point in time, do not o¤er the same scope for improvements in terms of subsequent quality upgrading of ?nal products
    Keywords: International Trade, Quality Ladders, Nonhomothetic Preferences
    JEL: F11 F43
    Date: 2009–01
  4. By: Erich Gundlach; Albert de Vaal
    Abstract: Factor endowments are usually taken as given in trade theoretical analyses of technological change. We use the Deardorff (1974) diagram to show how the steady state capital labor ratio endogenously adjusts to technology shocks in a two-sector small open economy, an effect which has largely been neglected in trade theory literature. We show that ignoring the endogeneity of the capital labor ratio with respect to technology shocks leads to biased predictions of changes in sectoral production and trade. Imposing stylized facts of growth as restrictions, we assess the relative size of the implied prediction bias that appears to matter for empirical studies of trade
    Keywords: Deardorff diagram, technology shock, factor endowments, factor bias, sector bias
    JEL: F11 O41
    Date: 2008–12
  5. By: Gabor Pula (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Tuomas A. Peltonen (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.)
    Abstract: Due to the emergence of global production networks, trade statistics have became less accurate in describing the dependence of emerging Asia on external demand. This paper analyses, using an update of the Asian International Input-Output (AIO) table, the interdependence of emerging Asian countries, the United States, the EU15, and Japan via trade and production linkages. According to the results, we do not find evidence of the decoupling of emerging Asia from the rest of the world. On the contrary, we find evidence on increasing trade integration, both globally and regionally. Nonetheless, our analysis indicates that emerging Asia’s dependence on exports is only about one-third of its GDP, i.e. well below the 50% exposure suggested by trade data. This finding can be explained by the high import content of exports in these economies, which is a result of the increasing segmentation of production across the region. JEL Classification: F14, C67, E23.
    Keywords: Emerging Asia, Asian International Input-Output table, real linkages, decoupling, resilience.
    Date: 2009–01
  6. By: James E. Anderson
    Abstract: The aggregated incidence of bilateral trade costs is derived from the gravity model. Incidence is equivalent to a TFP penalty. Sectoral and national differences in TFP have sharp implications for the equilibrium pattern of production and trade in a specific factors model of production. Unskilled labor is intersectorally mobile. Skilled labor acquires sector specific skills. Productivity shocks cause incidence shock that induce ex post inefficient allocation of skilled labor. Below (above) average TFP sectors produce less and have below (above) average skill premia. Ex ante efficient allocation is lower in sectors with riskier TFP incidence, despite risk neutrality.
    JEL: D24 F10
    Date: 2009–01
  7. By: Hiro Lee (Osaka School of International Public Policy (OSIPP),Osaka University); Robert F. Owen (Institute of Economics and Management of Nantes, University of Nantes); Dominique van der Mensbrugghe (Senior Economist, The World Bank)
    Abstract: Consequences of free trade agreements (FTAs) among the ASEAN+3 countries and ASEAN+6 countries are explored using a dynamic computable general equilibrium (CGE) model. Quantitative assessments of intra and extra-regional effects on welfare, trade and output are offered. When both trade facilitation and endogenously determined productivity are included in the FTA scenarios, Singapore, other ASEAN countries and China would be able to realize relatively large welfare gains, while the welfare effects on the EU and North America are negligible. The trade and output effects on the latter two regions are also relatively small, with the notable exception of crops, other than rice, in North America.
    Keywords: Regional integration, FTA, East Asia, welfare effects, CGE model
    JEL: C68 F15 F17
    Date: 2008–12
  8. By: Nuno Limão; Patricia Tovar
    Abstract: Why do governments employ inefficient policies to redistribute income towards special interest groups (SIGs) when more efficient ones are available? To address this puzzle we derive and test predictions for a set of policies where detailed data is available and an efficiency ranking is feasible: tariffs vs. non-tariff barriers (NTBs). In our policy choice model a government bargaining with domestic SIGs can gain by constraining tariffs through international agreements even if this leads to the use of the less efficient NTBs. This generates two key testable predictions (i) there is imperfect policy substitution, i.e. tighter tariff constraints are not fully offset by the higher NTBs they generate and (ii) the decision to commit to constraints depends on the government’s bargaining power relative to SIGs. Using detailed data, we confirm that tariff constraints in trade agreements increase the likelihood and restrictiveness of NTBs. We also provide a structural estimate that indicates NTBs are less efficient than the tariffs they imperfectly replace. Moreover, we find parametric and non-parametric evidence that the higher the government bargaining power relative to a SIG the more relaxed the tariff constraint it chooses. This result is stronger for organized industries, which further supports the theory. The main theoretical insights and empirical approach can be applied to other policies to provide additional evidence on inefficient redistribution.
    JEL: C7 D7 F13 F14 F15 H2
    Date: 2009–01
  9. By: Sang-Wook (Stanley) Cho (School of Economics, The University of New South Wales); Julian P. Diaz (Department of Economics, Bowdoin College)
    Abstract: This paper constructs a static Applied General Equilibrium Model and analyzes the distributional impact of trade reforms. To calibrate our model, we work with the Household Expenditure Survey to disaggregate household groups by income, age, and skill intensity, and the Input-Output table to construct a Social Accounting Matrix. Our benchmark simulation looks at Slovenia joining the European Union. We then compare with two alternative scenarios: a free trade agreement between Slovenia and the EU, and an alternative fiscal arrangement of distributing tariff revenues under the EU. While trade reforms lead to falling prices in the import sector, rising production in the export sector, and improvement in aggregate welfare, the distributional impacts across household groups vary in its degree.
    Keywords: Trade Liberalization; Free Trade Agreement; Customs Union; Social Accounting Matrix; Household welfare
    JEL: D58 F14 F15
    Date: 2008–10
  10. By: Ricotta, Fernanda; Mannarino, Lidia; Pupo, Valeria; Succurro, Marianna
    Abstract: The paper compares the export quality of Italy, Germany, Japan and China. The empirical analysis is based on export unit value for a sample of machinery products exported to the USA over the decade 1996-2006. The results point to four stylised facts. First, Italy, Germany and Japan are positioned in production with high unit value. Second, some evidence of qualitative upgrading of Italian exports is found in the machinery industry. Third, German exports show the highest quality in all the machinery divisions. Finally, China has dramatically increased its medium-high technology exports in the course of the decade, but these are concentrated in the lowest quality segment of the market. Nevertheless, Chinese unit value of machinery exports are rising over time, suggesting a qualitative catching-up.
    Keywords: Export Quality; Machinery Sector; Index Numbers
    JEL: C43 F14 L1
    Date: 2008–10
  11. By: Picci, Lucio
    Abstract: This paper discusses the extent and the determinants of the internationalization of European inventive activity, between 1990 and 2004, using an innovative method to treat the information contained in the European Patent Office's Patstat database. The observed level of internationalization of inventive activities, while being rather low, has steadily increased over time. The amount of collaboration between actors residing in different countries is assessed by means of a "gravity model", as it is familiar in the literature on international trade. The amount of bilateral collaboration is positively affected by the presence of a common language and a common border, and by the common participation in the European Union. Participation in the Euro Zone is also found to have a (marginally) negative effect. International collaboration is negatively affected by distance, with estimated elasticities that are significantly smaller than the ones that characterize international trade. Contrary to the rumors about the "death of distance", this effect has become stronger in recent years.
    Keywords: Gravity models; R&D; patents; internationalization
    JEL: F15 C51 O30 C24
    Date: 2008–12–15
  12. By: Albert Park; Dean Yang; Xinzheng Shi; Yuan Jiang
    Abstract: We ask how export demand shocks associated with the Asian financial crisis affected Chinese exporters. We construct firm-specific exchange rate shocks based on the pre-crisis destinations of firms' exports. Because the shocks were unanticipated and large, they are a plausible instrument for identifying the impact of exporting on firm productivity and other outcomes. We find that firms whose export destinations experience greater currency depreciation have slower export growth, and that export growth leads to increases firm productivity and other firm performance measures. Consistent with "earning-by-exporting", the productivity impact of export growth is greater when firms export to more developed countries.
    JEL: D24 F10 F31 L60
    Date: 2009–01
  13. By: Martin Bijsterbosch (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Marcin Kolasa (National Bank of Poland, Economic Institute, ul. Swietokrzyska 11/21, 00-919 Warsaw, Poland.)
    Abstract: This paper presents empirical evidence of the effect of FDI inflows on productivity convergence in central and eastern Europe, using industry-level data. Four conclusions stand out. First, there is a strong convergence effect in productivity, both at the country and at the industry level. Second, FDI inflow plays an important role in accounting for productivity growth. Third, the impact of FDI on productivity critically depends on the absorptive capacity of recipient countries and industries. Fourth, there is important heterogeneity across countries, industries and time with respect to some of the main findings. JEL Classification: C23, F21, O33.
    Keywords: Productivity convergence, FDI, absorptive capacity.
    Date: 2009–01

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