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on International Trade |
| By: | Roc Armenter; Miklos Koren |
| Abstract: | Exporters are few-less than one-fifth among U.S. manufacturing firms-and are larger than non-exporting firms-about 4-5 times more total sales per firm. These facts are often cited as support for models with economies of scale and firm heterogeneity as in Melitz (2003). The authors find that the basic Melitz model cannot simultaneously match the size and share of exporters given the observed distribution of total sales. Instead exporters are expected to be between 90 and 100 times larger than non-exporters. It is easy to reconcile the model with the data. However, a lot of variation independent of firm size is needed to do so. This suggests that economies of scale play only a minor role in determining a firm's export status. The authors show that the augmented model also has markedly different implications in the event of a trade liberalization. Most of the adjustment is through the intensive margin and productivity gains due to reallocation are halved. |
| Keywords: | Exports ; Economies of scale |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedpwp:09-15&r=int |
| By: | Hess, Wolfgang (Department of Economics, Lund University); Persson, Maria (Department of Economics, Lund University) |
| Abstract: | In the existing literature, the duration of trade has typically been analyzed using either descriptive Kaplan-Meier methods or a Cox regression approach. While the latter has the advantage of allowing for explanatory variables, it is designed for the analysis of continuous duration times, whereas trade flows are observed for discrete time intervals. The purpose of this paper is to point out why it is inappropriate to analyze the duration of trade with continuous- rather than discrete-time models, and to illustrate the implications of the model choice in an empirical application to EU trade. Briefly, there are three major problems with the continuous-time models. First, such models face problems in the presence of many tied duration times, with a risk of biased estimation coefficients and standard errors. Second, it is very difficult to properly control for unobserved heterogeneity, which can cause spurious duration dependencies, as well as parameter biases. Third, the Cox model – which, by far, is the most commonly used model – imposes the restrictive and empirically questionable assumption of proportional hazards. By contrast, discrete-time models, such as probit, logit and complementary log-log models have no difficulty dealing with ties; unobserved heterogeneity can easily be controlled for; and one is not forced to assume proportional hazards. Applying both continuous- and discrete-time models to detailed data on imports to EU15 countries from 139 exporters for the period 1962-2006, we find evidence in support of the arguments against the Cox model, and conclude that researchers that use a Cox model might run a serious risk of getting incorrect results. |
| Keywords: | Duration of Trade; Continuous-Time versus Discrete-Time Hazard Models; Unobserved Heterogeneity; European Union |
| JEL: | C41 F10 F14 |
| Date: | 2009–08–17 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:lunewp:2009_012&r=int |
| By: | Joseph Francois (Johannes Kepler University Linz); Olga Pindyuk (wiiw (Vienna)); Julia Woerz (Austrian National Bank (OENB)) |
| Abstract: | This paper builds upon an updated database of international trade and FDI in services (Trade in Services Database Ð TSD) to provide an overview of recent trends in volume and modes of trade in services. The database combines, through concordance to a common classification scheme, data from a number of sources on trade and FDI stocks and flows. The re-classification of these data into a broadly comparable BOPS-based classification scheme yields 15 individual service sectors (and 16 sectors for FDI data). The data sources include the OECD, the IMF, Eurostat, and UNCTAD. The time span ranges broadly from 1994-2006, with earlier data available for individual countries. Cross-border trade flows with the world are available for 188 countries, while bilateral data and FDI data are reported by a narrower set of countries. For countries that do not report bilateral trade directly, a partial dataset is included based on mirror flows from reporter countries. On this basis, while only 30 countries report bilateral flows directly, we have at least partial information on bilateral trade flows for 64 countries, and aggregate trade data for up to 188 countries. NOTE the zip archive includes the dataset in STATA9 format, the paper documenting the dataset, and *.do files for producing a mapping to GTAP service sectors and for producing a larger dataset using mirror flows. |
| Keywords: | Services trade, Services database, TSD, bilateral services trade |
| JEL: | F14 F21 |
| Date: | 2009–08 |
| URL: | http://d.repec.org/n?u=RePEc:lnz:wpaper:20090802&r=int |
| By: | Mario Larch; Wolfgang Lechthaler |
| Abstract: | We introduce unemployment and endogenous selection of workers into different skill-classes in a trade model with two sectors and heterogeneous firms. This allows us to study the distributional consequences and the skill-specific unemployment effects of trade liberalization. We show that the gains from trade will be distributed very unequally. While unskilled workers loose in terms of real wages and employment levels in the skilled labor intensive sector, skilled workers loose in terms of real wages and unemployment levels in the unskilled labor intensive sector. However, the inequality of workers between sectors is much larger for skilled labor than for unskilled labor. On average, unemployment among unskilled workers increases when a skill-abundant country opens up to trade |
| Keywords: | Comparative advantage; heterogeneous firms; labor market frictions; unemployment; trade liberalization |
| JEL: | F11 F12 F16 J64 L11 |
| Date: | 2009–08 |
| URL: | http://d.repec.org/n?u=RePEc:kie:kieliw:1538&r=int |
| By: | Gabriel Felbermayr; Mario Larch; Wolfgang Lechthaler |
| Abstract: | We introduce search and matching unemployment into a model of trade with differentiated goods and heterogeneous firms. Countries may differ with respect to size, geographical location, and labor market institutions. Contrary to the literature, our single-sector perspective pays special attention to the role of income effects and shows that bad institutions in one country worsen labor market outcomes not only in that country but also in its trading partners. This spill-over effect is conditioned by trade costs and country size: smaller and/or more centrally located nations suffer less from inefficient policies at home and are more heavily affected from spill-overs abroad than larger and/or peripheral ones. We offer empirical evidence for a panel of 20 rich OECD countries. Carefully controlling for institutional features and for business cycle comovements between countries, we confirm our qualitative theoretical predictions. However, the magnitude of spill-over effects is larger in the data than in the theoretical model. We show that introducing real wage rigidity can remedy this problem |
| Keywords: | Spill-over effects of labor market institutions; unemployment; international trade; search frictions; heterogeneous firms |
| JEL: | F11 F12 F16 J64 L11 |
| Date: | 2009–08 |
| URL: | http://d.repec.org/n?u=RePEc:kie:kieliw:1540&r=int |
| By: | Hayakawa, Kazunobu |
| Abstract: | The role of importer access to the finished goods market in intermediate goods trade is examined by estimating the gravity-like equation derived from the NEG model. Importer access to demand for finished goods is calculated by using the estimates in the gravity equation for finished goods trade, and then intermediate goods trade is regressed on the importer access. Results indicate that imports of intermediate goods are sensitive not only to the magnitude of importer demand for finished goods but also to the demand of neighboring countries. Using results of the regression, the impact of US finished goods market expansion on intermediate goods trade in each country is simulated. |
| Keywords: | Gravity, Intermediate Goods Trade, OECD, Trade theory |
| JEL: | F12 F14 R12 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:jet:dpaper:dpaper208&r=int |
| By: | Joseph Francois (Johannes Kepler University Linz); Hanna Norberg (Lund (School of Economics and Business) and IIDE); Miriam Manchin (University College London); Annette Pelkmans Balaoing (Erasmus University Rotterdam) |
| Abstract: | We analyze the effects of potential measures to liberalize trade between the European Union and ASEAN using a computable general equilibrium (CGE) model of world trade. The results on the whole point to positive effects for most of ASEAN under all scenarios, and small but positive effects over the long-run for the European Union. Throughout the study, some negative results are observed for other ASEAN countries (Brunei, Cambodia, Laos, and Myanmar). As expected, income and trade gains increase as liberalization deepens and as more dynamic effects are taken into account. The latter is particularly important for ASEAN, whose growth is often constrained by insufficient capital resources. In terms of income effects, the EU and Singapore gain the most, 51 and 78 percent of these gains, respectively, are due to the removal of the barriers to Services trade. It is Vietnam, however, that reaps the largest rise in GDP growth, while the EU, followed by Thailand, gains the most from the removal of non-tariff barriers. For the EU, about 87 percent of the income rise between these two scenarios is due to direct and indirect effects of trade facilitation alone. The productivity effects of an EU-ASEAN FTA are also visible in the form of higher wages both for skilled and unskilled workers. This is particularly important for ASEAN as this would mean that the employment increase in key growth sectors will outstrip the reduction of employment in contracting sectors. In terms of exports, the strong export performance of ASEAN projected here is largely driven by the export growth of ASEANÕs new members, i.e., Vietnam (35%), Cambodia, Laos & Myanmar (13%). There are negative effects for third countries, however. Indeed the net gains for most of ASEAN in the long-run are mirrored by comparable losses in third countries, much of which is carried by India and Pakistan. However, one must note that even in the scenario where the potential of trade diversion is the greatest, the effects are negative but rather trivial. Under the most ambitious trade liberalization scenario between the EU and ASEAN, it is PakistanÕs exports that are largely affected, with its exports falling by 2.4 percent. For the rest of the world, exports fall by just 0.05 percent, so that trade diversion effects can indeed be considered minimal. |
| Keywords: | CGE, EU-ASEAN Free Trade Area, GTAP |
| JEL: | F13 F15 |
| Date: | 2009–08 |
| URL: | http://d.repec.org/n?u=RePEc:lnz:wpaper:20090801&r=int |
| By: | Finicelli, Andrea; Pagano, Patrizio; Sbracia, Massimo |
| Abstract: | We introduce a novel methodology to measure the relative TFP of the tradeable sector across countries, based on the relationship between trade and TFP in the model of Eaton and Kortum (2002). The logic of our approach is to measure TFP not from its "primitive" (the production function) but from its observed implications. In particular, we estimate TFPs as the productivities that best fit data on trade, production, and wages. Applying this methodology to a sample of 19 OECD countries, we estimate the TFP of each country's manufacturing sector from 1985 to 2002. Our measures are easy to compute and, with respect to the standard development-accounting approach, are no longer mere residuals. Moreover, they do not yield common "anomalies", such as the higher TFP of Italy relative to the US. |
| Keywords: | Multi-factor productivity; TFP measurement; Eaton-Kortum model |
| JEL: | F1 D24 O4 |
| Date: | 2009–08 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:16951&r=int |
| By: | Joseph Francois (Johannes Kepler University Linz); Miriam Manchin (University College London) |
| Abstract: | We evaluate the effects of potential measures to liberalize trade between the EU and the CIS using a computable general equilibrium (CGE) model. We look at the CIS as an aggregate and we also present results for individual CIS countries. Our CGE model takes different underlying industry specific market structures and elasticities into account. Furthermore, the model incorporates estimated non-tariff trade barriers to trade in services. The results are compared to a baseline that incorporates recent developments in the trade policy environment, i.e. the phase out of ATC, enlargement of the EU and CIS accessions to the WTO. The analysis takes agricultural liberalization, liberalization in industrial tariffs, and liberalization in services trade as well as trade facilitation measures into account. While there is important heterogeneity in the impact of FTAs on individual countries, the results indicate that the CIS as a whole would experience a negative income effect if the FTA would be limited only to trade in goods. This is due to strong trade diversion effects. The CIS states have high tariffs, and these would remain against third countries under an FTA. This implies that the CIS would most likely to benefit from an FTA with the EU if it would incorporate deeper forms of integration not being limited to liberalization of tariffs in goods, or if it is accompanied by a general reduction in CIS tariffs against third countries. |
| Keywords: | CGE, EU-CIS Free Trade Area, Russia, Ukraine, CIS |
| JEL: | F13 F15 |
| Date: | 2009–08 |
| URL: | http://d.repec.org/n?u=RePEc:lnz:wpaper:20090805&r=int |
| By: | Finicelli, Andrea; Pagano, Patrizio; Sbracia, Massimo |
| Abstract: | We analyze the foundations of the relationship between trade and TFP in the Ricardian model. Under general assumptions about the autarky distributions of industry productivities, trade openness raises TFP. This is due to the selection effect of international competition --- driven by comparative advantages --- which makes "some" high- and "many" low-productivity industries exit the market. We derive a model-based measure of this effect that requires only production and trade data. For a sample of 41 countries, we find that Ricardian selection raised manufacturing TFP by 11% above the autarky level in 2005 (6% in 1985), with a neat positive time trend and large cross-country differences. |
| Keywords: | selection effect; Eaton-Kortum model; international competition |
| JEL: | F1 D24 O4 |
| Date: | 2009–08 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:16950&r=int |
| By: | Edwards, Lawrence; Rankin, Neil A.; Schöer, Volker |
| Abstract: | Policies to stimulate export growth and diversify the composition of exports in South Africa are now high on the government’s agenda. In order to understand exporting and its impact on job creation, one needs to understand how firms function, what determines, or constrains, exporting at the firm level and the links between export behaviour and labour demand. An understanding of these relationships, particularly over time, is also essential for the implementation and evaluation of export related policies. This paper reviews the evidence on South African exporting firms, highlighting what we know, and what we do not know. A key conclusion is that our understanding of firm level export behaviour is severely constrained by the lack of adequate firm data, particularly panel data. |
| Keywords: | South Africa; exports; firms |
| JEL: | D21 F12 F14 D24 F19 |
| Date: | 2008–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:16906&r=int |
| By: | Böckerman, Petri; Riihimäki, Elisa |
| Abstract: | We examine the employment effects of international outsourcing by using firm-level data from the Finnish manufacturing sector. A major advantage of our data is that outsourcing is defined based on firms’ actual use of intermediate inputs from foreign trade statistics. The estimates show that intensive outsourcing (more than two times the 2-digit industry median) does not reduce employment nor have an effect on the share of low-skilled workers. |
| Keywords: | International outsourcing; offshoring; labour demand; propensity score matching |
| JEL: | F16 F23 |
| Date: | 2009–08–21 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:16903&r=int |
| By: | Joseph Francois (Johannes Kepler University Linz); Hanna Norberg (Lund (School of Economics and Business) and IIDE); Miriam Manchin (University College London) |
| Abstract: | We analyze the effects of potential measures to liberalize trade between the European Union and India using a computable general equilibrium (CGE) model of world trade. Overall, our analysis shows that there are potential gains to be reaped from signing a bilateral FTA between the EU and India. For all scenarios, the FTA is expected to yield positive real income effects for both economies, both in the short- and long-run. The effects are, however, quite small due to the low levels of bilateral trade. In the short run, the real income gains in the EU are expected to range between Û3 and Û4,4 billion (higher for more ambitious liberalization scenarios), which amount to less than 0.1 percent of GDP. In the long run, the effects of an FTA in the EU are much smaller. For the Indian economy, the short-term income effects in absolute measure are similar to those in the EU, but due to differences in the size of economies, the relative effect is bigger in India (ranging from 0.1 to 0.3 percent of GDP). In the long-run, the effects on the Indian economy are expected to be larger. |
| Keywords: | CGE, EU-India Free Trade Area, GTAP |
| JEL: | F13 F15 |
| Date: | 2008–09 |
| URL: | http://d.repec.org/n?u=RePEc:lnz:wpaper:20080601&r=int |
| By: | Joseph Francois (Johannes Kepler University Linz); H. Keith Hall (U.S. Bureau of Labor Statistics) |
| Abstract: | This technical report brings together two papers on the linear and non-linear versions of the multi-region trade simulation model known as GSIM. It outlines a modeling strategy for the partial equilibrium analysis of tariff and antidumping policy on a global level. The framework is scalable, employs national product differentiation, and allows for the simultaneous assessment of trade policy changes (duties and undertakings), at the industry level, on a global, regional, or national level. Results allow the assessment of importer and exporter effects related to tariff revenues, exporter (producer) surplus, and importer (consumer) surplus. With additional data, national employment effects can also be fit into the basic framework. NOTE the *.zip archive includes Excel template models, and the technical papers that explain the model. |
| Keywords: | GSIM, antidumping, partial equilibrium model, trade policy modeling, simulation model, global markets |
| JEL: | F17 F14 F21 |
| Date: | 2009–08 |
| URL: | http://d.repec.org/n?u=RePEc:lnz:wpaper:20090803&r=int |
| By: | Toru Kikuchi (Graduate School of Economics, Kobe University); Kazumichi Iwasa (Kyoto Institute of Economic Research, Kyoto University) |
| Abstract: | The main purpose of this study is to illustrate, with simple trade theory, the relationship between competing industrial standards and trade liberalization. We assume that there are two competing industrial standards in an international context, each of which applies to a group of differentiated products. A product can be used only in combination with other products based on the same industrial standard.We examine the impact of trade liberalization (i.e., a decline in trade costs) on consumersf choice of a standard. It will be shown that the degree of indirect network effects, captured with substitution between differentiated products, plays an important role as a determinant of the impact of trade liberalization. |
| Date: | 2009–08 |
| URL: | http://d.repec.org/n?u=RePEc:koe:wpaper:0913&r=int |
| By: | Aoife Hanley; Ingrid Ott |
| Abstract: | Formulating a model which summarises transportation costs, uncertainty and price, we describe how a switch to ICT procurement can impact more readily procured services rather than materials. Uncertainty represents a catch-all factor describing the dovetailing of operations between two neither culturally nor geographically proximate, independent firms. Using a 3-year panel, we find that ICT ‘switchers’ report increases in services offshored by between 1.9 and 1.6 percent. Uniquely, we also report a 2-3 percent reduction in the level of materials offshoring following a switch to internet procurement |
| Keywords: | Offshoring, heterogeneous inputs, uncertainty, price, transportation costs |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:kie:kieliw:1537&r=int |
| By: | Ehsan U. Choudhri; Lawrence L. Schembri |
| Abstract: | The paper examines how the Balassa-Samuelson hypothesis is affected by a modern variation of the standard model that allows product differentiation (within the traded and nontraded goods sectors) with the number of firms determined exogenously or endogenously. The hypothesis is found to be fragile in the modified framework. Small variations in the elasticity of substitution between home and foreign traded goods (within the range of estimates suggested in the literature), for example, can make the effect of a traded-goods productivity improvement on the real exchange rate negative or positive, as well as small or large. This result provides a potential explanation of the mixed empirical results that have been obtained on the relationship between productivity and the real exchange rate. |
| Keywords: | Exchange rates; Productivity |
| JEL: | F41 F31 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:09-22&r=int |
| By: | Joseph Francois (Johannes Kepler University Linz; U.S. Bureau of Labor Statistics) |
| Abstract: | This technical report brings together two papers on the linear and non-linear versions of the multi-region trade simulation model known as GSIM. It outlines a modeling strategy for the partial equilibrium analysis of tariff and antidumping policy on a global level. The framework is scalable, employs national product differentiation, and allows for the simultaneous assessment of trade policy changes (duties and undertakings), at the industry level, on a global, regional, or national level. Results allow the assessment of importer and exporter effects related to tariff revenues, exporter (producer) surplus, and importer (consumer) surplus. With additional data, national employment effects can also be fit into the basic framework. NOTE the *.zip archive includes Excel template models, and the technical papers that explain the model. |
| Keywords: | GSIM, antidumping, partial equilibrium model, trade policy modeling, simulation model, global markets |
| JEL: | F17 F14 F21 |
| Date: | 2009–08 |
| URL: | http://d.repec.org/n?u=RePEc:lnz:wpaper:20090803a&r=int |
| By: | Johansson, Börje (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Lööf, Hans (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology) |
| Abstract: | During a sequence of decades we can observe a co-evolution of globalization through network formation of multinational (MNE) firms and concentration in specific places due to agglomerative forces. First, innovation ideas arrive at a faster speed to firms with past experience of innovation activities and with established export market contacts. Second, innovativeness is strongly dependent on corporate and ownership structure. Third, the returns to innovation efforts are positively influenced by firms’ capability to exploit extended markets. All these phenomena can be theoretically explained by MNE’s capacity to coordinate global supply chains and orchestrate localized R&D activities and knowledge flows. The paper illuminates how attributes of MNEs and non-MNEs differ, and how these differences affect the productivity and export intensity. It also shows how agglomeration economies affect MNEs and non-MNEs. |
| Keywords: | globalization; agglomeration; corporate ownership structure; innovation; exports; productivity |
| JEL: | C16 F14 L25 O33 R12 R30 |
| Date: | 2009–08–26 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:cesisp:0187&r=int |
| By: | Tomáš Havránek (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic) |
| Abstract: | This paper presents an updated meta-analysis of the effect of currency unions on trade, focusing on the Euro area. Using meta-regression methods such as funnel asymmetry test, evidence for strong publication bias is found. The estimated underlying effect for non-Euro studies reaches about 50%. However, the Euro's trade promoting effect corrected for publication bias is insignificant. The Rose effect literature shows signs of the economics research cycle: reported t-statistic is a quadratic function of publication year. Explanatory meta-regression (robust fixed effects and random effects) suggests that some authors produce predictable results. Interestingly, proxies for authors' IT skills were also found significant. |
| Keywords: | Rose effect; Trade; Currency union; Euro; Meta-analysis; Publication bias |
| JEL: | C42 F15 F33 |
| Date: | 2009–08 |
| URL: | http://d.repec.org/n?u=RePEc:fau:wpaper:wp2009_20&r=int |
| By: | Hayakawa, Kazunobu; Hiratsuka, Daisuke; Shiino, Kohei; Sukegawa, Seiya |
| Abstract: | It is noted that utilization of AFTA is low by international standards. In order to clarify the reasons for such low utilization, this paper investigates what kinds of Japanese affiliates in ASEAN are more likely to use FTAs in their exporting, by employing unique affiliate-level data. Our findings are as follow. First, the larger the affiliate is, or the more diversified its procurements’ origins are, the more likely it is to utilize an FTA scheme in its exporting. Second, affiliates exporting actively to developing countries are more likely to use FTAs than those exporting to developed countries. Third, there are clear differences in FTA utilization depending on affiliates’ locations and sectors. These results afford a clue to the reasons for the low FTA utilization in East Asia. |
| Keywords: | FTA, Micro data, ASEAN, International trade, Regional economic cooperation, International economic integration |
| JEL: | F15 F53 O53 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:jet:dpaper:dpaper207&r=int |