nep-int New Economics Papers
on International Trade
Issue of 2009‒04‒13
eight papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. Revisiting Ricardo: Can productivity differences explain the pattern of trade between EU countries? By Wilfried Altzinger; Jože P. Damijan
  2. Services Trade and Policy By Joseph F. Francois; Bernard Hoekman
  3. FDI and International Trade Relations: A Theoretical Approach By Grigoris Zarotiadis
  4. Trade Specialisation and Economic Convergence : Evidence from Two Eastern European Countries By Guglielmo Maria Caporale; Christophe Rault; Robert Sova; Anamaria Sova
  5. Trade Impacts of Selected Regional Trade Agreements in Agriculture By Jane Korinek; Mark Melatos
  6. Asymmetric cointegration relationship between real exchange rate and trade variables: The case of Malaysia By Duasa, Jarita
  7. Subsidies and Exports in Germany: First Evidence from Enterprise Panel Data By Girma, Sourafel; Görg, Holger; Wagner, Joachim
  8. Determinants of Export Behaviour of German Business Services Companies By Alexander Eickelpasch; Alexander Vogel

  1. By: Wilfried Altzinger; Jože P. Damijan
    Abstract: In this paper we revise the empirical tests of the Ricardian model by testing properly the Ricardian hypotheses on bilateral trade flows. Our tests are based on NACE 2-digit industry aggregation of productivity and of bilateral trade flows between 21 EU member states for the period 1994-2004. We compare the matchings between relative bilateral sectoral productivity rankings and bilateral sectoral exports-to-imports ratio rankings for each of 21 x 20 country pairs. We find that the Ricardian hypothesis is surprisingly good at predicting the static pattern of bilateral trade between individual EU member states even after controlling for the Heckscher-Ohlin type of capital-to-labor ratios. Long-term changes in the bilateral trade patterns, however, do not seem to be explained consistently neither by the variation in changes of relative productivity nor by the variation in changes of capital-to-labor ratios. Furthermore, we find quite a strong autoregressive impact of initial trade patterns on the long-term comparative advantages in the bilateral trade among countries. This implies that comparative advantages are structural by nature and that Ricardian differences in relative productivity can account for a good part of their static representation. Explaining their dynamic evolution over time, however, requires further research.
    Keywords: international trade, productivity, Ricardian hypothesis, empirical tests
    JEL: D24 F14
    Date: 2009
  2. By: Joseph F. Francois; Bernard Hoekman
    Abstract: Since the mid-1980s a substantial body of research has taken shape on trade in services. Much of this is inspired by the WTO or regional trade agreements, especially the EU. However, an increasing number of papers focus on the impacts of unilateral services sector liberalization. The literature touches on important linkages between trade and FDI in services and the general pattern of productivity growth and industrial development. This paper surveys the literature on services trade, focusing on contributions that investigate the determinants of international trade and investment in services, the potential gains from greater trade (and liberalization) and efforts to cooperate to achieve such liberalization through trade agreements. There is increasing evidence that services liberalization is a major potential source of welfare gains, and that the performance of service sectors, and thus services policies, may be an important determinant of trade volumes, the distributional effects of trade, and economy-wide growth. At the same time, they are also an important source of increasing political unease about the impacts of globalization on labor markets.
    Keywords: trade in services, WTO, GATS, trade agreements, economic development, services and growth, modes of supply, trade and FDI linkages, foreign affiliates trade
    JEL: F1 F2 F5 L80
    Date: 2009–03
  3. By: Grigoris Zarotiadis (Department of Economics, University of Ioannina, Greece)
    Abstract: The mainstay theory provides arguments for both complementary and substitute links between FDI and international trade. In accordance to that, a number of empirical investigations indicate a replacement of trade flows by FDI, while other studies reveal a complementary effect between the two. The present study models autarky and trade between two countries in a manner that resembles the real world trade patterns. The objective is to provide the theoretical basis upon which one may introduce bilateral FDI flows. The model follows Fujita's et al. (1999) logic which is based on a spatial transformation of the Dixit-Stiglitz approach with monopolistic competition, increasing returns to scale and iceberg-type transport costs. We introduce capital as an additional production factor and assign marginally different capital intensity to each different industry. Letting capital (and/or labor) be mobile provides a framework that incorporates different relations between FDI and trade, at each level of aggregation, offering interesting theoretical conclusions. In the following, we discuss the features and the dynamics of a simplified version of the model, with no trade-costs and with a specific value for consumers' preferences for variety (ρ=5). It allows for different effects at the level of each firm, of each industry (in terms of the notation used in previous pages, branch i) and of the whole manufacturing sector (economy-wide). Therefore, although simplified, the models provides us with a picture where, as capital (and/or labor) flows from one country to the other, it generates well-defined, but at the same time partly non-monotone and contradictory, effects on trade flows. This paper was presented May 23, 2008, at the 18th International Conference of the International Trade and Finance Association, meeting at Universidade Nova de Lisboa, Lisbon, Portugal.
    Date: 2008–08–17
  4. By: Guglielmo Maria Caporale; Christophe Rault; Robert Sova; Anamaria Sova
    Abstract: This paper analyses trade specialisation dynamics in two Eastern European countries (Romania and Bulgaria - EEC-2) vis-à-vis the core EU member states (EU-15) over the period 1990-2006. Specifically, we focus on whether there is a shift towards intra-industry trade leading to economic convergence and technological catch-up. We use recently developed static (FEM, REM and FEVD) and dynamic (GMM) panel data methods which take into account possible heterogeneity. Our empirical results indicate that intra-industry trade has indeed increased, but it is of the vertical rather than the horizontal type, resulting in complementary rather than competitive production patterns.
    Keywords: Gravity models, panel data models, trade specialisation, comparative advantage
    JEL: F13 F15 C23
    Date: 2009
  5. By: Jane Korinek; Mark Melatos
    Abstract: This paper provides an in-depth examination of the trade effects of three regional trade agreements (RTAs) – the ASEAN Free Trade Agreement (AFTA), the Common Market for Eastern and Southern Africa (COMESA) and the Southern Cone Common Market (MERCOSUR) -- in the agricultural sector. Results from a gravity model suggest that the creation of AFTA, COMESA and MERCOSUR have increased trade in agricultural products between their member countries. There is no robust indication of trade diversion with respect to imports from outside the region. The agreements are therefore net trade creating. There is no robust indication however that there has been strong trade creation with non-members in the case of any of the RTAs under study. In some cases, lack of transport and communications infrastructure, in addition to supply constraints, lessens the effect of the RTA on trade flows. Trade costs such as transport and logistics seem to remain important factors in determining agricultural trade flows. In some RTAs, countries have a comparative advantage in exporting many of the same agricultural products, thereby decreasing the impact of the preferential market access. A number of implications for South-South RTAs can be drawn from examining these very different agreements.
    Keywords: tariffs, trade liberalisation, RTA, regional trade agreements, agricultural trade, gravity model, AFTA, COMESA, Mercosur, ASEAN, access, South-South, trade diversion, preferential market access, trade creation
    JEL: F13 F53
    Date: 2009–04–03
  6. By: Duasa, Jarita
    Abstract: The present study attempts to analyze the long-run equilibrium relationship between real exchange rate and trade balance, imports and exports demand by cointegration tests assuming asymmetric adjustment. Following Enders and Siklos (2001), the Engle-Granger two-step cointegration test is expanding to incorporate an asymmetric error correction term. It is found that there exists asymmetric cointegration between balance of trade and real exchange rate when momentum-threshold autoregressive (M-TAR) model is conducted and the study also found asymmetric cointegration between import volume and real exchange rate under threshold autoregressive (TAR) model. From estimation of M-TAR error-correction trade balance model, the adjustment back to equilibrium is more rapid following relative increase in trade balance (above long-run value) compared to relative decrease in trade balance (below long-run value). From TAR error-correction import demand model, the model suggests quick adjustment of import demand once it is below long-run value. The results reflect the evidence of persistence of trade balance deficit in the case of Malaysia which probably due to policies to defend an overvalued exchange rate by protectionist trade policies or capital controls. In addition, the shock of exchange rate on import demand is likely to be temporary in nature.
    Keywords: Asymmetric cointegration; Trade balance; Threshold autoregressive; Momentum-threshold autoregressive.
    JEL: C32 F10 F41
    Date: 2009–03
  7. By: Girma, Sourafel (University of Nottingham); Görg, Holger (Kiel Institute for the World Economy); Wagner, Joachim (University of Lüneburg)
    Abstract: We use newly available representative panel data for manufacturing enterprises in West and East Germany to investigate the link between production-related subsidies and exports. We document that only a small fraction of enterprises is subsidized, and that exports and subsidies are positively related. Using a matching approach to investigate the causal effect of subsidies on export activities we find no impact of subsidies on the probability to start exporting, and only weak evidence for an impact of subsidies on the share of exports in total sales in West Germany but no evidence in East Germany.
    Keywords: subsidies, export, Germany, enterprise panel data
    JEL: F13 F14 H29
    Date: 2009–03
  8. By: Alexander Eickelpasch; Alexander Vogel
    Abstract: The determinants of export behaviour at firm level have been widely investigated for manufacturing companies. By contrast, what has remained largely neglected is a detailed investigation in the service sector. As aggregate statistics show, international trade in services has grown significantly over the last few years. However, it is unclear why some companies export and others do not. This paper presents some initial results about the German business services sector at firm level. Using a unique panel dataset of enterprises from the business services sector (transport, storage and communication, real estate, renting and business activities) for the years 2003 to 2005, we analysed the impact of several firm-specific characteristics such as size, productivity, human capital, experience on the national market in Germany, etc. on the firms' export performance. Further, we used the pooled fractional probit estimator, recently introduced by Papke & Wooldridge, an approach that considers both the special nature of the export intensity variable and in addition unobserved time-invariant characteristics. When there is no control for fixed enterprise effects the overall results are in line with previous studies. When there is a control for unobserved heterogeneity, the positive effects of productivity and human capital disappear, indicating that these variables are not per se positively related to export performance, but rather to time-constant characteristics that are unobserved. Size and product diversification still have a positive and significant effect.
    Keywords: Business services sector, export behaviour, firm performance
    JEL: F14 F23 L80
    Date: 2009

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