nep-int New Economics Papers
on International Trade
Issue of 2009‒03‒14
ten papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. Structural Gravity Equations with Intensive and Extensive Margins By Matthieu Crozet; Pamina Koenig
  2. The World Trade Network By Luca De Benedictis; Lucia Tajoli
  3. Intra-Industry Trade Between Japan and Korea: Vertical Intra-Industry Trade, Fragmentation and Export Margins By Yushi Yoshida
  4. Product Complexity, Quality of Institutions and the Pro-Trade Effect of Immigrants By Briant, Anthony; Combes, Pierre-Philippe; Lafourcade, Miren
  5. Gravity with zeros: estimating trade potential of CIS countries By Oleksandr Shepotylo
  6. Second Thoughts on Exporter Productivity By Philipp J.H. Schröeder; Allan Sørensen
  7. A New Evidence for Exchange Rate Pass-through: Disaggregated Trade Data from Local Ports By Yushi Yoshida
  8. Industry Location and Variety Growth: Empirical Examination of Regional Exports By Yushi Yoshida
  9. Technological diffusion and dynamic gains from trade By Cavallaro, Eleonora; Mulino, Marcella
  10. Impact of Foreign Direct Investments on Industrial Productivity: A Subnational Study of India By Vadlamannati, Krishna Chaitanya

  1. By: Matthieu Crozet; Pamina Koenig
    Abstract: Recent trade models with heterogenous firms have considerable consequences on the interpretation of gravity equations. Chaney (2008) shows that the effect of distance on trade margins incorporates three parameters: the elasticity of substitution between goods, the elasticity of trade costs with respect to distance, and the degree of firm heterogeneity. We structurally estimate the parameters of trade flows in Chaney’s model using French firm-level export data for 1986-1992, and controlling for the fixed costs of exporting. Our estimated parameters are consistent, for 27 out of 34 industries, with the theoretical model. They also allow us to evaluate the effects of transport cost separately from the effects of tarifs, without having to resort to detailed data on trade frictions.
    Keywords: Gravity equations; international trade; firm heterogeneity
    JEL: F12
    Date: 2008–12
  2. By: Luca De Benedictis (University of Macerata); Lucia Tajoli (Politecnico di Milano)
    Abstract: <p><p> </p></p><p align="left">This paper uses the tools of network analysis and graph theory</p><p align="left">to graphically and analytically represent the characteristics of world</p><p align="left">trade. The structure of the World Trade Network is compared over</p><p align="left">time, detecting and interpreting patterns of trade ties among countries.</p><p align="left">In particular, we assess whether the entrance of a number of</p><p align="left">new important players into the world trading system in recent years</p><p align="left">has changed the main characteristics of the existing structure of world</p><p align="left">trade, or whether the existing network was simply extended to a new</p><p align="left">group of countries. We also analyze whether the observed changes in</p><p align="left">international trade flow patterns are related to the multilateral or the</p><p align="left">regional liberalization policies. The results show that trade integration</p><p align="left">at the world level has been increasing but it is still far from being</p><p align="left">complete, with the exception of some areas, that there is a strong</p><p align="left">heterogeneity in the countries’ choice of partners, and that the WTO</p><p align="left">plays an important role in trade integration. The role of the extensive</p><p align="left">and the intensive margin of trade is also highlighted.</p>
    Keywords: Network analysis,International Trade,WTO,Extensive and Intensive Margins of Trade,Gravity
    JEL: O1 O11
    Date: 2009–03
  3. By: Yushi Yoshida (Faculty of Economics, Kyushu Sangyo University)
    Abstract: This paper contributes to the existing empirical investigation of Japan-Korea international trade by providing new evidence of intra-industry trade between Korea and Japanese sub-regions. Taking advantage of a Japanese international trade dataset disaggregated by sub-regions, we calculate the Grubel-Lloyd intra-industry trade index for 41 regions of Japan with respect to Korea for the period between 1988 and 2006. By restricting the flows of intra-industry trade to sub-regions, the Grubel-Lloyd index is more likely to capture the effect of the fragmentation of production than the traditional index, which is based on the national level. By using Japanese prefecture international trade data, it is revealed that intra-industry trade is still pervasive even when it is restricted to trade flows between prefectures and Korea. In intra-industry trade regression models, we introduce extensive and intensive margins of prefecture exports as new explanatory variables. We find that a rise in intra-industry trade is driven by the introduction of a new variety of exports, while intra-industry trade is discouraged by an increase in the trade value of products already exported.
    Keywords: Export variety; Fragmentation; Intra-firm trade; Intra-industry trade; Regional trade; Japan; Korea
    JEL: F14
    Date: 2008–08
  4. By: Briant, Anthony; Combes, Pierre-Philippe; Lafourcade, Miren
    Abstract: The paper assesses the trade-creating impact of foreign-born residents on the international imports and exports of the French regions where they are settled. The pro-trade effect of immigrants is investigated along two intertwined dimensions: the complexity of traded goods and the quality of institutions in partner countries. The trade-enhancing impact of immigrants is, on average,more salient when they come froma country with weak institutions. However, this positive impact is especially large on the imports of simple products. When we turn to complex goods, for which the information channel conveyed by immigrants is the most valuable, immigration enhances imports regardless of the quality of institutions in the partner country. Regarding exports, immigrants substitute for weak institutions on both simple and complex goods.
    Keywords: gravity; immigration; product complexity; quality of institutions; trade
    JEL: F14 F22 R12
    Date: 2009–03
  5. By: Oleksandr Shepotylo (Kyiv School of Economics and Kyiv Economics Institute)
    Abstract: Arguably, the Commonwealth of Independent States (CIS) countries are not as integrated into the world markets as the EU countries or Southeast Asian countries. Trade flows of the CIS countries are not well diversified in terms of either trading partners or composition of exports. In order to compare the degree of export diversification of the CIS countries relative to other countries, we employ the gravity model that proved to be very successful in explaining geographical patterns of trade across countries. The gravity equation is estimated ‘out-of-sample’, meaning that we do not include data on trade flows of the CIS countries in the sample while calculating parameters of the gravity equation. Egger (2002) argued forcefully that the ‘in-sample’ estimation of the trade potential based on the deviation of residuals from the linear prediction is incorrect because large deviations of residuals in the gravity equation based on the in-sample method is not evidence of large deviations of trade from its potential, but rather an indicator of the model misspecification. In addition, we explicitly deal with the problems of zero trade flows and firm’s heterogeneity that become more severe at higher levels of disaggregation such as at the level of sectors of the economy.
    Keywords: Gravity model, trade potential, out-of-sample predictions
    JEL: F12 F14 F17
    Date: 2009–03
  6. By: Philipp J.H. Schröeder (Aarhus School of Business, University of Aarhus, Denmark); Allan Sørensen (School of Economics and Management, University of Aarhus, Denmark)
    Abstract: Empirical literature has established a positive link between firm productivity and export status, yet notable exceptions exist. The present paper shows that the underlying theory (Melitz, 2003) is in fact able to accommodate the rule as well as the exception. The fulcrum of the argument is the tension between empirical work measuring productivity based on average cost information, and theoretical work representing productivity by marginal cost. In a heterogeneous firms trade model, we compute productivity based on average cost and find that around the export-indifferent firm, exporters will be less productive than non-exporters. Furthermore, we show that this effect may feed through at the industry level.
    Keywords: Intra-industry trade, firm productivity, monopolistic competition, heterogeneous firms
    JEL: F12 F13 F15
    Date: 2009–02–09
  7. By: Yushi Yoshida (Faculty of Economics, Kyushu Sangyo University)
    Abstract: For the estimation of exchange rate pass-through (henceforth ERPT), except for few evidences based on firm-level data, even the most disaggregated level of national export data is still biased with aggregation over sub-regions within an exporting country. We investigate to what extent this aggregation within product category is biased by comparing ERPT estimates across local ports. We use monthly exports at the HS 9-digit level from January 1988 to December 2005 for five major Japanese ports. In a panel data regression framework we control for exporting industry and importing country. Statistical tests provide strong evidence that export prices are set at different levels across local ports and that they correspond differently with respect to fluctuations of exchange rates.
    Keywords: Exchange rate pass-through; Firm heterogeneity; Japanese trade; Port-level trade; pricing-to-market
    JEL: F14 F31 F41
    Date: 2008–07
  8. By: Yushi Yoshida (Faculty of Economics, Kyushu Sangyo University)
    Abstract: Recognizing goods produced in different sub-regions within a country as distinct differentiated products, we offer new evidence of variety expansion in nationfs export. We decompose Japanese national exports into prefecture sub-regions and construct extensive margins and intensive margins of exports for sub-regions for the period between 1988 and 2005. In this study we examine exports of over 41 sub-regions of Japan in over 7,000 product categories. First, we examine to what extent the empirical findings of the extensive margin in Hummels and Klenow (2005) for cross-country samples applies to sub-regions within a country. We find that extensive margin accounts for over 60 percent of the greater exports of larger sub-regions. Second, we examine heterogeneous growth of exports variety among sub-regions for the sample periods. We find export variety of most prefectures expands in our sample periods, but decreasing in variety can also be found for prefectures positioned in either high variety or lowest variety group in 1988. We conclude that export expansion in terms of new exports from sub-regions within a country can account significant portion of product variety and export production is being dispersed among regions rather than going through the process of agglomeration.
    Keywords: Agglomeration; Export Variety; Extensive Margin; Japan; Regional Export
    JEL: F12 F43
    Date: 2008–03
  9. By: Cavallaro, Eleonora; Mulino, Marcella
    Abstract: We consider a technologically backward country and analyse the implications on competitiveness and long-run growth of the quality content of traded goods. We build an endogenous growth model where quality improvements stem from research activity taking place in the R&D sector, and where the relative quality content of goods matter for export and import demand functions. We show that the possibility of an optimal growth with a balanced current account and no adverse terms-of-trade effects is closely related to the evolution of the country’s technological distance with respect to the trade partner: with an unfavourable quality-dynamics the country cannot engage successfully in “non-price” competition. Thus, long-run growth is coupled with an adverse export to import ratio, and a balanced trade requires a continuous offsetting fall in relative prices, either through devaluations or wage deflations. We then allow for international knowledge spillovers that increase the productivity of labour resources devoted to research in a way which is proportional to the technological distance between the countries. We show that the greater the country’s ability to absorb foreign knowledge and improve upon foreign technologies, the greater the gains in competitiveness, and the benefits to long-run growth. A numerical simulation confirms our findings.
    Keywords: Vertical innovation; Technological change and catching up; Economic growth of open economies
    JEL: O33 F43
    Date: 2008–12
  10. By: Vadlamannati, Krishna Chaitanya
    Abstract: The paper uses unique aggregate industry-level dataset at subnational level from India to measure the effects of foreign investments on the productivity of domestic firms. Using pooled regression analysis with fixed effects for the period 2002 – 2005, we find that: (a) foreign investments have significant positive effect on productivity of domestic firms. However, the coefficient values of FDI are smaller, suggesting that the positive effects are marginal. (b) When FDI inflows are controlled for in the cross-section productivity regression, the relationship between the share of foreign technical collaborations and productivity of domestic firms increases significantly. This supports the argument that foreign technical collaborations increase productivity in part through its effect on the FDI inflows. (c) Another interesting finding is that there is no strong evidence to show that this positive effect is state-heterogeneous. In turn, we find partial effects of FDI are marginally higher in non-industrial states. Thus, we suggest that domestic firms can reap rich dividends if the FDI inflows are evenly distributed across the regions, particularly concentrating the efforts on attracting FDI into non-industrial states.
    Keywords: FDI; Productivity; India
    JEL: O1 O4
    Date: 2009–03–03

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