nep-int New Economics Papers
on International Trade
Issue of 2009‒05‒23
eleven papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. Quality sorting and trade: Firm-level evidence for French wine By Crozet, Matthieu; Head, Keith; Mayer, Thierry
  3. Employment Growth and International Trade: A Small Open Economy Perspective By Ibsen, Rikke; Warzynski, Frederic; Westergård-Nielsen, Niels
  4. Quantitative Evaluation of Determinants of Export and FDI: Firm-level evidence from Japan By TODO Yasuyuki
  5. Small Open Economy Firms in International Trade: Evidence from Danish Transactions-Level Data By Eriksson, Tor; Smeets, Valerie; Warzynski, Frederic
  6. Domestic transport cost reductions and firms’ export behaviour By Pedro Albarrán; Adelheid Holl; Raquel Carrasco
  7. International Trade and Labor Income Risk in the United States By Pravin Krishna; Mine Zeynep Senses
  8. Policy Liberalization and US Merchandise Trade Growth, 1980--2006 By Matthew Adler; Gary Clyde Hufbauer
  9. RCAs within Western Europe By Jens Oelgemöller; Andreas Westermeier
  10. Preferential trade agreements between the monetary community of Central Africa and the European Union: Stumbling or building blocks? A general equilibrium approach By Ngeleza, Guyslain K.; Muhammad, Andrew
  11. Does wealth inequality reduce the gains from trade? By Caselli, Mauro

  1. By: Crozet, Matthieu; Head, Keith; Mayer, Thierry
    Abstract: Investigations of the effect of quality differences on heterogeneous performance in exporting have been limited by lack of direct measures of quality. We examine exports of French wine, matching the exporting firms to producer ratings from two wine guides. We show that high quality producers export to more markets, charge higher prices, and sell more in each market. More attractive markets are served by exporters that, on average, make lower rated Champagne. Market attractiveness has a weakly negative effect on prices and a strongly positive effect on quantities, confirming the sign predictions of a simple quality sorting model. Methodologically, we make several contributions to the literature. First, we propose an estimation method for regressions of firm-level exports on ability measures and use Monte Carlo simulations to show that it corrects a severe selection bias present in OLS estimates. Second, we show how the means of quality, price, and quantity for exporters to a given market can be used to recover estimates of core parameters (which we compare with firm-level estimates) and discriminate between productivity and quality-sorting versions of the Melitz model. Our new method regresses country means on an index of each country's attractiveness and the fixed costs of entering it. We compare our method, which utilizes explanatory variables estimated in the firm-level regressions, to the conventional approach that relies on a reduced-form relationship with proxies for attractiveness and fixed costs.
    Keywords: gravity; heterogeneity; quality; trade
    JEL: F12
    Date: 2009–05
  2. By: Anthony Briant (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - Ecole des Hautes Etudes en Sciences Sociales - Ecole Nationale des Ponts et Chaussées - Ecole Normale Supérieure de Paris); Pierre-Philippe Combes (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales - CNRS : UMR6579); Miren Lafourcade (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - Ecole des Hautes Etudes en Sciences Sociales - Ecole Nationale des Ponts et Chaussées - Ecole Normale Supérieure de Paris)
    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 from a 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: MAUP; concentration; agglomeration; wage equations; gravity
    Date: 2009–05–07
  3. By: Ibsen, Rikke (Department of Economics, Aarhus School of Business); Warzynski, Frederic (Department of Economics, Aarhus School of Business); Westergård-Nielsen, Niels (Department of Economics, Aarhus School of Business)
    Abstract: In this paper, we use a detailed dataset containing information about all international trade transactions of the population of Danish firms over more than a decade to analyze the relationship between export and import decisions and employment growth. We further distinguish between imports of final goods and imports of intermediate products. We find that both imports and exports decisions are positively related to employment growth. Interestingly, both finished goods and intermediate goods imports have a positive link. We also control for the re-exporting process, i.e. firms importing final goods to re-export them afterwards.
    Keywords: international trade; employment growth; offshoring
    JEL: F16
    Date: 2009–05–01
  4. By: TODO Yasuyuki
    Abstract: This paper examines determinants of the export and FDI decision, using firm-level data for Japan. Contributions of this paper are twofold. First, this paper employs a mixed logit model to incorporate unobserved characteristics of firms. Second, special attention is paid to quantitative evaluation of effects of the covariates. We find that the impact of productivity on the export and FDI decision is positive and statistically significant but economically negligible in size, despite the theoretical prediction of recent heterogeneous-firm trade models. The impact of the firm size and information spillovers from experienced neighboring firms in the same industry are also positive but small in size. Quantitatively, the dominant determinants of the export and FDI decision are firms' status on internationalization in the previous year and unobserved firm characteristics. The evidence suggests that there may be some kind of inefficiency in the selection process of exporters and FDI firms.
    Date: 2009–05
  5. By: Eriksson, Tor (Department of Economics, Aarhus School of Business); Smeets, Valerie (Department of Economics, Aarhus School of Business); Warzynski, Frederic (Department of Economics, Aarhus School of Business)
    Abstract: In this paper, we use a rich dataset disaggregating imports and exports decisions by product and origin/destination of all Danish companies for the period 1993-2003 to provide key elements in characterizing Danish firms in international trade. Most evidence to date emanates from the U.S. or developing economies like Columbia or Mexico. Benchmarking on these studies, we find some similarities but also differences which we think are representative of European-type, small open economies. We find that Danish exporters make up a fairly small fraction of the total of firms, but that this fraction is higher than in e.g., the U.S. Firms engaged in exporting have the same positive performance characteristics – size, capital and skilled labour intensity, labour as well as total factor productivity, and wages – found in also in previous studies. But most exporter premia are significantly larger in Denmark than in the U.S. There are few traces of the European Union’s Single Market Program and the adoption the Euro in 1998. We observe no impact of these changes on the number of exporters, but some signs of impacts on the number of products and export destination countries. Finally, we find that trade is positively related to productivity of firms. The association between productivity and the firm’s imports of intermediate goods is particularly strong.
    Keywords: Exporters; exporter premium; firm heterogeneity
    JEL: D21 F14 F23
    Date: 2009–05–15
  6. By: Pedro Albarrán; Adelheid Holl; Raquel Carrasco
    Abstract: Transport infrastructure investment reduces the cost of distance and enables firms to establish and maintain contacts over larger distances. Spain has developed an ambitious road building programme over the last decades, which has considerably reduced transport costs to access European markets. In this paper we depart from the traditional aggregate approach in analysing the impacts of transport infrastructure investment. In particular, we examine the export decision of Spanish manufacturing firms and test how domestic transport cost reductions affect firms’ probability of becoming exporters. We estimate models that control for unobserved heterogeneity among firms, endogeneity and initial conditions problems. Our results provide some support for a positive effect of domestic transport improvements on firms’ exporting probability. However, the magnitude of this effects is small, being the strongest effect the one due to previous export experience which suggests high entry costs into export markets.
    Date: 2009–03
  7. By: Pravin Krishna; Mine Zeynep Senses
    Abstract: This paper studies empirically the links between international trade and labor income risk faced by workers in the United States. We use longitudinal data on workers to estimate time-varying individual income risk at the industry level. We then combine our estimates of persistent labor income risk with measures of exposure to international trade to analyze the relationship between trade and labor income risk. Importantly, by contrasting estimates from various sub-samples of workers, such as those who switched to a different industry (or sector) with those who remained in the same industry throughout the sample, we study the relative importance of the different channels through which international trade affects individual income risk. Finally, we use these estimates to conduct a welfare analysis evaluating the benefits or costs of trade through the income risk channel. We find import penetration to have a statistically significant association with labor income risk in the United States, with economically significant welfare effects.
    JEL: F1 F16 F4
    Date: 2009–05
  8. By: Matthew Adler (Peterson Institute for International Economics); Gary Clyde Hufbauer (Peterson Institute for International Economics)
    Abstract: This working paper draws on historical and contemporary data on tariffs, nontariff barriers, and transportation costs (for the United States and its major trading partners) to estimate the role of policy liberalization in US merchandise trade growth over the period 1980 to 2006. Both partial equilibrium analysis and computable general equilibrium analysis are used to make the estimates. Both methods indicate that roughly 25 percent of US trade growth since 1980 can be attributed to policy liberalization. Policy liberalization plays a larger role in US export growth (35 to 40 percent) than US import growth (25 percent). According to these estimates, policy liberalization accounts for almost all US merchandise growth in excess of growth that can be explained by expanding GDP in the United States and abroad.
    Keywords: International trade, policy liberalization, tariff liberalization, nontariff barriers, transportation costs
    JEL: F1 F13 F15 F17 C68
    Date: 2009–05
  9. By: Jens Oelgemöller; Andreas Westermeier
    Abstract: This paper analyses the revealed comparative advantage for six European countries: Austria, France, Germany, Italy, the Netherlands and the UK. The results can be summarized as the follows: Italy always had a trade specialisation index which was well above average. Apart from Italy, whose trade performance index decreased substantially, changes in the trade performance index were fairly small. Austria, Germany and the Netherlands faced increasing average RCA-values (but they remain positive), while France, Italy and the United Kingdom faced decreasing average RCA-values. Italy’s RCA-value correlated negatively with the other countries (except for the correlation between Italy and France), while the other countries (Austria, France, Germany, the Netherlands and the United Kingdom) faced a positive correlation with each other. The top ten sectors with the highest RCA-value, shared about 50 % of total exports in France, Germany and the Netherlands. In the other three countries, the share was less than 40%. Regarding the top five sectors, specialization can be found only in Germany (>40 %) and the Netherlands (>30 %) whereas in the other countries the share was less than 20%. Germany and the Netherlands were the countries, in which most of the top 10 export sectors in 2005 also had CCA. The other countries had several top 10 export sectors with RCA-indicators significantly below the CCA-benchmarks.
    Keywords: Revealed Comparative Advantage, Comparative Cost Advantage, Trade
    JEL: F14
    Date: 2009–04–06
  10. By: Ngeleza, Guyslain K.; Muhammad, Andrew
    Abstract: "This paper uses a computable general equilibrium approach to simulate two opposing views describing regional trade agreements either as building blocks for or stumbling blocks to multilateral trade liberalization. This study focuses on the free trade agreement (FTA) between the Economic and Monetary Community of Central Africa (CEMAC) and the European Union (EU). Results show that although a regional trade agreement may slightly raise welfare among the members of the agreement, the cost to nonmembers can be high. In this paper we argue that multilateral liberalization and a regional free trade agreement between the EU and CEMAC are not mutually exclusive. Regional trade agreements should be complementary and consistent with a multilateral agreement, not an attempt to replace it. The regional breakdown in our design considers 14 regions, allowing for country-specific analysis for one least-developed country (Democratic Republic of Congo) and one non-least-developed country (Cameroon). Multilateral liberalization amplifies welfare gain for Cameroon. The Democratic Republic of Congo, with its weaker institutional capacity, is affected negatively. An EU-CEMAC FTA without multilateralism produces gains for both Cameroon and the Democratic Republic of Congo. The gain for Cameroon is, however, moderate compared with that achieved when the EU-CEMAC FTA is accompanied with a multilateral agreement." from authors' abstract
    Keywords: Regional trade, multilateral trade, Computable General Equilibrium Models, European Union, Development strategies,
    Date: 2009
  11. By: Caselli, Mauro
    Abstract: Panel data on 54 developing countries between 1960 and 2000 are used to investigate how the impact of opening to trade on economic growth is affected by wealth inequality. The results suggest (a) that opening to trade tends to accelerate growth but (b) that the addition to growth depends inversely on the level of wealth inequality prior to opening. These findings confirm the general importance for rapid growth in developing countries of reducing inequalities of opportunity.
    Keywords: growth; inequality; openness; trade; developing countries
    JEL: O1 F1
    Date: 2009–04

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