nep-int New Economics Papers
on International Trade
Issue of 2009‒05‒02
nine papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. Does trade facilitation matter in bilateral trade ?. By Chahir Zaki
  2. The Impact of Trade Costs on Firm Entry, Exporting, and Survival in Korea By Kim, Sooil; Reimer, Jeffrey J.; gopinath, Munisamy
  3. China's exchange rate policy and Asian trade By Alicia García-Herrero; Tuuli Koivu
  4. Firms' Exporting Behavior under Quality Constraints By Juan Carlos Hallak; Jagadeesh Sivadasan
  5. Outward FDI Effects on the Portuguese Trade Balance 1996-2007 By Miguel Fonseca, António Mendonça and José Passos
  6. Trade based on economies of scale under monopolistic competition: a clarification of Krugman's model By Emanuel R. Leão and Pedro R. Leão
  7. Trade Reforms and Market Selection: Evidence from Manufacturing Plants in Colombia By Marcela Eslava; John C. Haltiwanger; Adriana D. Kugler; Maurice Kugler
  8. Export, Productivity and Product Switching: The Case of Italian Manufacturing Firms By Sergio de Nardis; Carmine Pappalardo
  9. Intra-industry trade and labor costs: The smooth adjustment hypothesis By Horácio Faustino and Nuno Leitão

  1. By: Chahir Zaki (Paris School of Economics - Centre d'Economie de la Sorbonne)
    Abstract: This paper estimates an augmented gravity model incorporating different aspects of Trade Facilitation in develop and developing countries. Trade Facilitation is defined as measures that aim at making international trade easier by eliminating administrative delays, simplifying commercial procedures, increasing transparency, security and the place of new technologies in trade. This paper provides new theoretical and empirical enhancements. On the one hand, the model is based on theoretical foundations related to monopolistic competition and border effects. The orginality of this paper is that Trade Facilitation facets are included in the model. On the other hand, the empirical achievement of the paper is that it uses different databases allowing us to take into account many features of Trade Facilitation. I use several databases coming from different sources : Doing business (World Bank) and Institutional Profiles (CEPII). My main findings show that transaction time for imports and number of documents for exports have a negative impact on trade. Our sample is split into sub-samples in order to take into account the impact of development level. It turns out that Trade Facilitation aspects have not the same impact on developed and developing countries. Finally, we conclude that some perishable (food and beverages), seasonal (wearing apparels) and high-value added products are more sensitive to import time than other products. Hard industries are rather sensitive to export documents.
    Keywords: Border effects, gravity models, trade facilitation.
    JEL: F10 F12 F15
    Date: 2008–11
  2. By: Kim, Sooil; Reimer, Jeffrey J.; gopinath, Munisamy
    Abstract: This study uses a unique firm-level dataset to examine how falling trade costs from 1993-2001 affected entry, exit, productivity, and exporting in the Korean manufacturing sector. We verify many of the predictions of recent heterogeneous-firm models of international trade. For example, falling trade costs reduced entry by new Korean firms, increased their probability of exit, and reduced the market share of surviving firms. We also find that small firms had a particularly high level of dynamism over the sample period. Small firms were more likely to enter and exit, and marginally more likely to gain market share, enter export markets for the first time, and improve their productivity.
    Keywords: Employment, Exit, Exports, Firm deaths, Survival, Trade costs, Agribusiness, Industrial Organization, International Development, International Relations/Trade, Labor and Human Capital, Marketing, Production Economics, Productivity Analysis, Research and Development/Tech Change/Emerging Technologies, F10, D24,
    Date: 2009
  3. By: Alicia García-Herrero; Tuuli Koivu
    Abstract: This paper shows empirically that China's trade balance is sensitive to fluctuations in the real effective exchange rate of the renminbi. However, the current size of the trade surplus is such that exchange rate policy alone will probably not be able to address the imbalance. The potential reduction in the trade surplus resulting from an increase in the renminbi exchange rate is limited mainly because Chinese imports do not react as expected to a renminbi appreciation - they tend to fall rather than increase. By estimating bilateral import equations for China and its major trade partners, we find that the reaction for imports is generally confirmed for China's trade with Southeast Asian countries. That result might be attributable to Asia's vertical integration, as a large share of Chinese imports from Southeast Asia are re-exported. We also find that total exports from a number of Asian countries react negatively to a renminbi appreciation, which points to a dependence of Asian countries' exports on those of China.
    Keywords: China, trade, exports, real exchange rate
    Date: 2009–04
  4. By: Juan Carlos Hallak; Jagadeesh Sivadasan
    Abstract: We develop a model of international trade with export quality requirements and two dimensions of firm heterogeneity. In addition to "productivity", firms are also heterogeneous in their "caliber" -- the ability to produce quality using fewer fixed inputs. Compared to single-attribute models of firm heterogeneity emphasizing either productivity or the ability to produce quality, our model provides a more nuanced characterization of firms' exporting behavior. In particular, it explains the empirical fact that firm size is not monotonically related with export status: there are small firms that export and large firms that only operate in the domestic market. The model also delivers novel testable predictions. Conditional on size, exporters are predicted to sell products of higher quality and at higher prices, pay higher wages and use capital more intensively. These predictions, although apparently intuitive, cannot be derived from single-attribute models of firm heterogeneity as they imply no variation in export status after size is controlled for. We find strong support for the predictions of our model in manufacturing establishment datasets for India, the U.S., Chile, and Colombia.
    JEL: F10 F12 F14
    Date: 2009–04
  5. By: Miguel Fonseca, António Mendonça and José Passos
    Abstract: Given the increased internationalisation of the Portuguese economy through outward Foreign Direct Investment (FDI), particularly on the Portuguese-speaking countries, our main objective is to discuss the empirical relationship between this outward FDI and trade. We use panel data analysis within a framework of gravity equations for exports and imports, with a sample composed by EU-15, U.S.A., Brazil, Angola, Japan and China, for the period 1996-2007. Our main conclusion is that the empirical evidence for Portugal is consistent with a substitution hypothesis between direct investment abroad and trade, and consequently we detect a negative trade balance effect with the majority of countries in our sample, excepting Angola and, in a lesser extension, Spain.
    Keywords: Foreign Direct Investment, Trade, Gravity Model, Portugal.
    JEL: F21 C23 F14
    Date: 2009–03
  6. By: Emanuel R. Leão and Pedro R. Leão
    Abstract: Although a major contribution to trade theory, Krugman’s 1979 demonstration that ‘trade can arise and lead to mutual gains even when countries are similar’ fails to make explicit the economic mechanisms that lead up to this result. The current paper attempts to fill this gap by addressing several questions that are implicit in Krugman’s demonstration but which he does not explicitly analyze: - What is the effect of trade upon the demand curve faced by the typical firm in each nation? - How do firms react to the change in the demand curves they face, and what is the short-term outcome of their behaviour? - Why do some firms fail? - What is the role of the failure of firms in the adjustment to the final free trade equilibrium?
    Keywords: Krugman, intra-industry trade, economies of scale, monopolistic competition.
    JEL: F12
    Date: 2009–03
  7. By: Marcela Eslava; John C. Haltiwanger; Adriana D. Kugler; Maurice Kugler
    Abstract: We use plant output and input prices to decompose the profit margin into four parts: productivity, demand shocks, mark-ups and input costs. We find that each of these market fundamentals are important in explaining plant exit. We then use variation across sectors in tariff changes after the Colombian trade reform to assess whether the impact of market fundamentals on plant exit changed with increased international competition. We find that greater international competition magnifies the impact of productivity, and other market fundamentals, on plant exit. A dynamic simulation that compares the distribution of productivity with and without the trade reform shows that improvements in market selection from trade reform help to weed out the least productive plants and increase average productivity. In addition, we find that trade liberalization increases productivity of incumbent plants and improves the allocation of activity within industries.
    JEL: F43 L25 O47
    Date: 2009–04
  8. By: Sergio de Nardis (ISAE-Institute for Studies and Economic Analyses); Carmine Pappalardo (ISAE-Institute for Studies and Economic Analyses)
    Abstract: During the first half of the current decade, with rising competitive pressures, Italian manufacturing firms were forced to undertake a process of restructuring which had positive repercussions on export performance. This paper carries out empirical analysis using a panel of exporting firms obtained by matching firm-level information gathered by ISTAT and ISAE surveys. Two main channels of adjustment are investigated: inter and intra-firm. On the inter-firm side, we find that exporters were actually more productive: exporting was an essential outcome of pre-existing productivity advantages that led to self-selection of more productive businesses in international markets. As for the intra-firm adjustment, we show that the high frequency of product switching behaviour within exporting firms was significantly correlated with firm-level productivity growth, and that it contributed to a reallocation of economic activity within firms to more productive uses.
    Keywords: heterogeneity, exporting, productivity, product switching.
    JEL: F10 J24 L11 L25
    Date: 2009–03
  9. By: Horácio Faustino and Nuno Leitão
    Abstract: According to the smooth adjustment hypothesis (SAH), the labor-market adjustment costs in the form of unemployed resources will be lower if trade expansion is intra-industry rather than inter-industry in nature. This is what we attempt to test empirically using the Brulhart (1994) marginal intra-industry trade (MIIT) index and a dynamic panel data analysis. Considering the contemporaneous effect the results do not support the SAH. However, if we consider the one- year and-two years lags effects, the conclusion is different and it is sensitive to the size of the lag. Comparing with other empirical studies our results suggest that the validity of SAH depends on the variable choose as adjustment labor cost index, the time lag structure and the set of control variables. KEY Words: Adjustment costs; labor market; marginal intra-industry trade.
    JEL: C33 F16 J30
    Date: 2009–03

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