nep-int New Economics Papers
on International Trade
Issue of 2009‒03‒07
five papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. On the impact of trade on industrial structures: The role of entry cost heterogeneity By Daisuke Oyama; Yasuhiro Sato; Takatoshi Tabuchi; Jacques-François Thisse
  2. Competition and Political Organization: Together or Alone in Lobbying for Trade Policy? By Matilde Bombardini; Francesco Trebbi
  3. Exploring Determinants of the Firm Boundary for Swedish Multinationals By Thede, Susanna; Lindvert, Markus
  4. Is the WTO's Article XXIV Bad? By Monika Mrazova; David Vines; Ben Zissimos
  5. Industry similarities and comparative advantages in Portugal: an empirical assessment based on 2005 trade data By Miguel Lebre de Freitas; Susana Salvado

  1. By: Daisuke Oyama; Yasuhiro Sato; Takatoshi Tabuchi; Jacques-François Thisse
    Abstract: This paper investigates the impacts of progressive trade openness, technological externalities, and heterogeneity of individuals on the formation of entrepreneurship in a two-country occupation choice model. We show that trade opening gives rise to a non-monotonic process of international specialization, in which the share of entrepreneurial firms in the large (small) country first increases (decreases) and then decreases (increases), with the global economy exhibiting first de-industrialization and then re-industrialization. When countries have the same size, we also show that strong technological externalities make the symmetric equilibrium unstable, generating equilibrium multiplicity, while sufficient heterogeneity of individuals leads to the stability and uniqueness of the symmetric equilibrium.
    Date: 2009
  2. By: Matilde Bombardini; Francesco Trebbi
    Abstract: This paper employs a novel data set on lobbying expenditures to measure the degree of within-sector political organization and to explore the determinants of the mode of lobbying and political organization across U.S. industries. The data show that sectors characterized by a higher degree of competition (more substitutable products and a lower concentration of production) tend to lobby more together (through a sector-wide trade association), while sectors with higher concentration and more differentiated products lobby more individually. The paper proposes a theoretical model to interpret the empirical evidence. In an oligopolistic market, firms can benefit from an increase in their product-specific protection measure, if they can raise prices and profits. They find it less profitable to do so in a competitive market where attempts to raise prices are more likely to reduce profits. In competitive markets firms are therefore more likely to lobby together thereby simultaneously raising tariffs on all products in the sector.
    JEL: D7 F13 L13
    Date: 2009–03
  3. By: Thede, Susanna (Department of Economics, Lund University); Lindvert, Markus (Swedish Institute for Growth Policy Studies)
    Abstract: This paper empirically examines the foreign internalisation decision of multinational corporations. The purpose of the paper is to identify determinants of the firm boundary, where within-boundary production takes the form of foreign direct investments (FDI) and outside-boundary production takes place through international outsourcing, with reference to recently developed general-equilibrium trade theories incorporating firm behaviour. The empirical investigation is performed for 2246 multinationals production engagements in 148 foreign countries under the 1997 to 2006 period. The primary contribution of the paper is the investigation of firm behaviour per se instead of industry level implications of firm behaviour.
    Keywords: Foreign Direct Investment; International Outsourcing; Firm-level Evidence
    JEL: F10 F23 L23
    Date: 2009–02–27
  4. By: Monika Mrazova (Department of Economics and Balliol College, University of Oxford); David Vines (Department of Economics and Balliol College, University of Oxford); Ben Zissimos (Department of Economics, Vanderbilt University)
    Abstract: This paper shows that the WTO's Article XXIV increases the likelihood of free trade, but may worsen world welfare when free trade is not reached and customs unions (CUs) form. We consider a model of many countries. Article XXIV prevents a CU from raising its common external tariff, which makes CU formation less attractive and explains why free trade is more likely. In an equilibrium where two CUs do form, one is necessarily larger than the other. We show that Article XXIV has a composition effect on CU formation, whereby CUs are (endogenously) less asymmetric in size so more goods are subject to tariff distortions as they move between CUs; thus Article XXIV may be 'bad' for world welfare.
    Keywords: Coalition formation game, customs union, protection, trade block, trade liberalization <br><br>
    JEL: F02 F13 F15
    Date: 2009–01
  5. By: Miguel Lebre de Freitas (Universidade de Aveiro, NIPE, GEE); Susana Salvado (FEUNL, GEE)
    Abstract: Following Hidalgo et. al., (2007), we use the structure of international trade in 2005 to estimate a measure of “revealed relatedness” for each pair of products, which intends to capture similarities in terms of the capabilities they use in production. Our method departs from the original since we run a PROBIT model, instead of computing conditional probabilities. In particular, we estimate “Revealed Relatedness Indexes” (RRI), defined as the increment in the probability of a country having revealed comparative advantage (RCA) in one product given that the same country has RCA in another product. Contrary to Hidalgo et. al., (2007), our measure of product relatedness is subject to a statistical scrutiny and can be either positive or negative. We find that a large number of RRIs (83.9%) are not statistically significant and that most significant relations (97.6%) have a positive sign. For some products in which Portugal currently has RCA, we build measures assessing how related they are to products with higher “income content”. We then investigate the extent to which “upscale” products in which Portugal didn’t develop RCA are related to the set of products in which the country already has developed RCA. These measures are used to characterize the Portuguese specialization pattern, on a comparative basis.
    Keywords: International trade, Structural Transformation, Industry Heterogeneity, The Portuguese Economy
    JEL: C14 F14
    Date: 2009–02

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