nep-int New Economics Papers
on International Trade
Issue of 2009‒09‒19
ten papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. Export-Supporting FDI By Krautheim, Sebastian
  2. Export Prices and Heterogeneous Firm Models By Kalina Manova; Zhiwei Zhang
  3. Income Distribution, Product Quality, and International Trade By Pablo D. Fajgelbaum; Gene M. Grossman; Elhanan Helpman
  4. Entrepreneurship and aggregate merchandise trade growth in New Zealand By Richard Fabling; Lynda Sanderson
  5. Trade negotiations when market access matters By Monika Mrazova
  6. Changes in cross-border trade costs in the Pan-Arab free trade area, 2001-2008 By Hoekman, Bernard; Zarrouk, Jamel
  7. Firm Heterogeneity and Different Modes of Internationalization: Evidence from Japanese Firms By Ryuhei Wakasugi; Ayumu Tanaka
  8. Technology adoption and factor proportions in open economies : theory and evidence from the global computer industry By Cusolito , Ana P.; Lederman, Daniel
  9. Assessing the adjustment implications of trade policy changes using TRIST (tariff reform impact simulation tool) By Brenton, Paul; Saborowski, Christian; Staritz, Cornelia; von Uexkull, Erik
  10. Location and organization choice of firms By Kenmei Tsubota

  1. By: Krautheim, Sebastian
    Abstract: Wholesale and retail trade affiliates owned by parent firms in manufacturing account for a considerable fraction of overall affiliate sales. Although quantitatively important, this Export-Supporting FDI (ESFDI) activity has received little attention in the literature. This paper includes ESFDI into a model of trade and horizontal FDI with heterogeneous firms. ESFDI is characterized by export-supporting distribution and service activities in the foreign market while production remains in the home country. This introduces some complementarity between trade and FDI. In the model falling trade costs lead to an increase in both overall trade and overall FDI activity. This provides a possible explanation for the simultaneous rise in trade and FDI in the data. An empirical analysis using German firm level FDI data confirms the quantitative importance of ESFDI. The data also support crucial implications of the theoretical model. Parents choosing ESFDI are smaller than firms choosing to produce in the foreign market. And the importance of ESFDI relative to horizontal FDI is strongest when variable trade costs are low.
    Keywords: Exports,horizontal FDI,multinational companies,wholesale trade
    JEL: F12 F23
    Date: 2009
  2. By: Kalina Manova; Zhiwei Zhang
    Abstract: This paper examines the variation in export prices across firms, products and destinations to distinguish between alternative heterogeneous firm models of international trade. We establish five stylized facts using new data on the universe of Chinese trading firms. First, firms charging higher export prices earn larger revenues within each destination, have greater worldwide sales, and export to more markets. Second, firms that pay higher import prices set higher export prices, have greater worldwide sales, and export to more markets. Third, firms offer higher prices in larger, richer and more distant markets. Fourth, there is a positive correlation between export price and revenue across destinations within a firm. Finally, firms that export more to more countries pay a wider range of import prices and offer a broader menu of export prices. None of the heterogeneous firm models in the literature can match all of these patterns. Our results are instead consistent with quality differentiation across firms (stylized facts 1 and 2) and firms adjusting both quality and mark-ups across destinations in response to market toughness (stylized facts 3, 4 and 5).
    JEL: F10 F12 F14 L11 L16
    Date: 2009–09
  3. By: Pablo D. Fajgelbaum; Gene M. Grossman; Elhanan Helpman
    Abstract: We develop a framework for studying trade in horizontally and vertically differentiated products. In our model, consumers have heterogeneous incomes and heterogeneous tastes. They purchase a homogeneous good as well as making a discrete choice of quality and brand of a differentiated product. The distribution of preferences in the population generates a nested logit demand structure. These demands are such that the fraction of consumers who buy a higher-quality product rises with income. We use the model to study the pattern of trade between countries that differ in size and income distributions but are otherwise identical. Trade---which is driven primarily by demand factors---derives from "home market effects" in the presence of transport costs. When these costs are sufficiently small, goods of a given quality are produced in a single country. The model provides a tractable framework for studying the welfare consequences of trade, transport costs, and trade policy for different income groups in an economy.
    JEL: F12
    Date: 2009–09
  4. By: Richard Fabling; Lynda Sanderson (Reserve Bank of New Zealand)
    Abstract: We present a descriptive analysis of firm-level merchandise trade, focussing on the role of entrepreneurial exporting behaviour. We document two aspects of the dynamics of trade – the contribution of novel export activity to aggregate trade growth and, conversely, the substantial exit rates of new trade relationships. The unique contribution of this paper lies in the detailed and comprehensive data we have available on market and product choices. Specifically, we make use of shipment-level goods trade data, linked to information for the universe of economically active New Zealand manufacturers,to examine trade at the firm-level and at the product-country-firm nexus. Our growth decomposition and survival analysis suggest several themes: (a) novel market entry is a significant contributor to aggregate export growth; (b) the study of international entrepreneurial behaviour should encompass not just de novo entrants, but the broad range of trade innovations initiated by incumbent exporters; (c) much expansion in trade appears to be incremental in nature; (d) despite this, such innovations appear to be inherently risky; and (e) experience and scale appear to be key factors in overcoming these risks (or at least proxies for such factors).
    JEL: D21 F10 L25
    Date: 2009–09
  5. By: Monika Mrazova
    Abstract: This paper analyses GATT/WTO trade negotiations in an oligopolistic multi-country setting and identifies a new rationale for trade agreements. When set unilaterally, tariffs are inefficiently high, both for familiar terms-of-trade reasons, but also to restrict market access of foreign firms. Trade agreements neutralise both the terms-of-trade and the market-access externalities and help countries reach efficient tariff levels. The paper further studies various kinds of asymmetries in trade negotiations. It is shown that the multilateral negotiations system can sustain only a certain level of free-riding which suggests why multilateralism was successful in the past, but is currently stalling.
    Keywords: Trade negotiations, Trade liberalization, GATT/WTO, Multilateralism
    JEL: F02 F13 F15
    Date: 2009
  6. By: Hoekman, Bernard; Zarrouk, Jamel
    Abstract: The Pan-Arab Free Trade Area, negotiated under auspices of the Arab League, came into force in 1997. Under the agreement all tariffs on goods of Arab origin were to be removed by January 1, 2005. This paper summarizes the results of a firm-level survey in nine countries regarding the implementation of the Pan-Arab Free Trade Area. A majority of respondent companies report that tariffs on intra-regional trade have largely been removed, and that there has been a marked improvement in customs clearance-related procedures. Costs associated with administrative red tape and weaknesses in transport-related infrastructure services are ranked as the most important constraints to intra-regional trade. This suggests that from a policy perspective, efforts to reduce real trade costs deserve priority, including transportation and logistics services. Periodic monitoring and assessment of trade incentives and performance would help governments to benchmark performance and identify priority areas for action, at both the national and the sub-regional levels.
    Keywords: Transport Economics Policy&Planning,Trade Law,Free Trade,Trade Policy,Transport and Trade Logistics
    Date: 2009–08–01
  7. By: Ryuhei Wakasugi (Institute of Economic Research, Kyoto University); Ayumu Tanaka (Graduate School of Economics, Kyoto University)
    Abstract: This paper examines how differently productivity heterogeneity of firms sorts their export and foreign direct investment (FDI) between North and South as well as between single and multiple destinations. The empirical examinations based on 12,000 Japanese firm-level data present new findings; the rank of productivity differently sorts the internationalization modes between North (North America and Europe) and South (East Asia); the productivity of firms internationalizing in both North America and Europe is remarkably higher than that of firms internationalizing in either North America or Europe, regardless the modes of internationalization, export or FDI, even if the productivity of firms internationalizing in North America is similar to the productivity of firms in Europe. This paper confirms that the difference in wage rate or fixed costs causes different modes of internationalization from the standard theoretical prediction based on the Helpman-Melitz-Yeaple model.
    Keywords: productivity-cutoff, export, FDI, North, South, East Asia
    JEL: F10 F14 F23
    Date: 2009–09
  8. By: Cusolito , Ana P.; Lederman, Daniel
    Abstract: Theories of international trade assume that all countries use similar and exogenous technologies in the production of any good. This paper relaxes this assumption. The marriage of literatures on biased technical change and trade yields a tractable theory, which predicts that differences in factor endowments and intellectual property rights bias technical change toward particular factor intensities, and thus unit factor input requirements can vary across economies. Using data on net exports of a single industry, computers, intellectual property rights and factor endowments for 73 countries during 1980-2000, the paper shows that once technological choices are considered, countries with different factor endowments can become net exporters of the same product.
    Keywords: Technology Industry,Economic Theory&Research,ICT Policy and Strategies,E-Business,Labor Policies
    Date: 2009–09–01
  9. By: Brenton, Paul; Saborowski, Christian; Staritz, Cornelia; von Uexkull, Erik
    Abstract: TRIST is a simple, easy to use tool to assess the adjustment implications of trade reform. It improves on existing tools. First, it is an improvement in terms of accuracy because projections are based on revenues actually collected at the tariff line level rather than simply applying statutory rates. Second, it is transparent and open; runs in Excel, with formulas and calculation steps visible to the user; and is open-source and users are free to change, extend, or improve according to their needs. Third, TRIST has greater policy relevance because it projects the impact of tariff reform on total fiscal revenue (including VAT and excise) and results are broken down to the product level so that sensitive products or sectors can be identified. And fourth, the tool is flexible and can incorporate tariff liberalization scenarios involving any group of trading partners and any schedules of products. This paper describes the TRIST tool and provides a range of examples that demonstrate the insights that the tool can provide to policy makers on the adjustment impacts of reducing tariffs.
    Keywords: Trade Policy,Free Trade,Debt Markets,International Trade and Trade Rules,Economic Theory&Research
    Date: 2009–09–01
  10. By: Kenmei Tsubota (Institute of Economic Research, Kyoto University)
    Abstract: We construct a two-region model of monopolistic competition with mobile entrepreneurs. Typical implicit assumption on increasing returns to scale sector is that firms can produce and sale only at one place. We explicitly introduce multi-plant case and examine location equilibrium with decreasing transpiration costs. The difference between single-plant and multi-plant firms lies in export-fixed cost and set-up fixed cost of multi-plant. We find that at certain transportation costs, firms change their organization type from multi-plant to single-plant and, with further decrease in transportation costs, firms concentrate in one region.
    Keywords: Economic Integration, Organization of Production, Horizontal FDI, Export Fixed Cost, Transaction Cost
    JEL: D21 F12 L23 R12
    Date: 2009–08

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