nep-int New Economics Papers
on International Trade
Issue of 2009‒10‒24
ten papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. Export diversification across industries and space: do CIS countries diversify enough? By Oleksandr Shepotylo
  2. Trade Policy: Home Market Effect vs Terms of Trade Externality By Alessia Campolmi; Harald Fadinger; Chiara Forlati
  4. Imported Intermediate Inputs and Domestic Product Growth: Evidence from India By Pinelopi Goldberg; Amit Khandelwal; Nina Pavcnik; Petia Topalova
  5. Estimating the Impact of Trade and Offshoring on American Workers Using the Current Population Surveys By Avraham Ebenstein; Ann Harrison; Margaret McMillan; Shannon Phillips
  6. Firms and Products in International Trade: Data and Patterns for Hungary By Gábor Békés; Péter Harasztosi; Balázs Muraközy
  7. East Asian Exports in the Global Economic Crisis: The Decoupling Fallacy and Post-crisis Policy Challenges By Prema-chandra Athukorala; Archanun Kohpaiboon
  8. Regional Trade Agreements: An African perspective of Challanges for Customs Policies and Future Strategies By Chiumya, Chiza
  9. Regional inequality and growth: the role of interregional trade in the Brazilian economy By Aline Souza Magalhães; Edson Domingues
  10. Modes of International Sourcing and the Competitiveness of Firms: An Analysis of European Survey Data By Marcus Neureiter; Peter Nunnenkamp

  1. By: Oleksandr Shepotylo (Kyiv School of Economics and Kyiv Economics Institute)
    Abstract: Despite the importance of industrial and geographical diversification of exports, the literature says little about what a “normal” level of diversification is. This paper takes a step in this direction and develops a methodology to measure a normal level of diversification along industry and space dimensions. The degree of export diversification is computed conditional on country characteristics and bilateral trade costs. The methodology combines several approaches that recently received attention in the trade literature. First, an industry-level gravity model of exports is estimated using a two-stage estimation procedure that accounts for a sample-selection bias and firm-level heterogeneity. Second, the Hausman-Taylor method is applied for a large panel of countries. Finally, the trade projections are generated out-of-sample. The methodology is applied to measure the degree of export diversification of the CIS countries. In terms of export potential, the results demonstrate substantial deviations of trade from the levels predicted by the gravity model. All CIS countries except Georgia lag behind the region leaders in terms of the degree of export diversification. In particular, the CIS countries extensively engaged in the export of raw materials have the most concentrated export structure among all the transition countries in terms of their industrial composition. In terms of geographical diversification, Belarus has the least diversified exports among all transition countries.
    Keywords: Gravity model, trade potential, trade policy analysis, diversification
    JEL: F12 F14 F17
    Date: 2009–10
  2. By: Alessia Campolmi; Harald Fadinger; Chiara Forlati (Chair of International Finance, Ecole Polytechnique Federale de Lausanne (EPFL), Switzerland)
    Abstract: We study trade policy in a two-sector Krugman type model of trade. We conduct a general analysis allowing for three different instruments: tariffs, export taxes and production subsidies. For each instrument we consider unilateral trade policy without retaliation. When carefully disentangling the different effects that determine policy makers' choices and modeling general equilibrium effects of taxes/tariffs, we find that production subsidies are always inefficiently low and driven by terms of trade effects. In the cases of tariffs and export taxes the home market effect prevails for some parameter combinations but mostly trade policy is determined by terms of trade effects and the desire to reduce distortions arising from monopolistic competition. Hence, our analysis sheds new light on trade policy in a model of intra-industry trade.
    Keywords: Home Market Effect, Terms of Trade, Tariffs and Subsidies
    JEL: F12 F13 F42
    Date: 2009–02
  3. By: Crozet, Matthieu; Head, Keith; Mayer, Thierry
    Abstract: Quality sorting and trade: Firm-level evidence for French wine 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: Industrial Organization, F12,
    Date: 2009–07
  4. By: Pinelopi Goldberg (Princeton University); Amit Khandelwal (Columbia GSB); Nina Pavcnik (Dartmouth College); Petia Topalova (IMF)
    Abstract: New goods play a central role in many trade and growth models. We use detailed trade and firm-level data from a large developing economy—India—to investigate the relationship between declines in trade costs, the imports of intermediate inputs and domestic firm product scope. We estimate substantial static gains from trade through access to new imported inputs. Accounting for new imported varieties lowers the import price index for intermediate goods on average by an additional 4.7 percent per year relative to conventional gains through lower prices of existing imports. Moreover, we find that lower input tariffs account on average for 31 percent of the new products introduced by domestic firms, which implies potentially large dynamic gains from trade. This expansion in firms' product scope is driven to a large extent by international trade increasing access of firms to new input varieties rather than by simply making existing imported inputs cheaper. Hence, our findings suggest that an important consequence of the input tariff liberalization was to relax technological constraints through firms’ access to new imported inputs that were unavailable prior to the liberalization.
    Keywords: Intermediate Inputs, Firm Scope, Multi-product Firms, Product Growth, Gains from Variety, Endogenous Growth, Trade Liberalization, India
    Date: 2009–09
  5. By: Avraham Ebenstein; Ann Harrison; Margaret McMillan; Shannon Phillips
    Abstract: In this paper, we link industry-level data on offshoring activities of U.S. multinational firms, import penetration, and export shares with individual level worker data from the Current Population Surveys. We examine whether increasing globalization through offshoring or trade has led to reallocation of labor, both within and out of manufacturing, and measure its impact on the wages of domestic workers. We also control for the "routineness" of individual occupations. Our results suggest that (1) offshoring to high wage countries is positively correlated with U.S. manufacturing employment (2) offshoring to low wage countries is associated with U.S. employment declines (3) wages for workers who remain in manufacturing are generally positively affected by offshoring; in particular, we find that wages are positively associated with an increase in U.S. multinational employment in high income locations (4) much of the negative effects of globalization operate through downward pressure on wages of workers who leave manufacturing to take jobs in agriculture or services and (5) the downward pressure on aggregate U.S. wages operating through import competition has been quite important for some occupations. This effect has been overlooked because it operates across, not within, industries.
    Date: 2009
  6. By: Gábor Békés; Péter Harasztosi; Balázs Muraközy
    Abstract: This paper provides a detailed description of Hungarian trade data and key patters drawn at the firm and product level. The IEHAS-CEFiG Hungary dataset is an almost universal panel of balance sheet information (1992-2006) merged with firm-product-country level customs data (1992-2003) taken until the 2004 EU accession. In the Bernard et al (2007) tradition, statistics describe the prevalence of trading activity, typology of firms by internationalisation, concentration of trade volume within and across sectors as well as geographical features of activities. The aim of this paper is both to offer background statistics to existing studies and to stimulate future research on firms and trade by offering a great deal of descriptive statistics. After describing datasets, the prevalence of trading activity across sectors, concentration of trading volume across and within sectors, spatial distribution on trade and principal trading partners are described. Stylised facts show that trading activity is heavily concentrated, both exporters and importers show better performance than non-traders, and multi-product and multi-county firms are responsible for the bulk of trade volume.
    Date: 2009–10–12
  7. By: Prema-chandra Athukorala; Archanun Kohpaiboon
    Abstract: This paper examines the export experience of East Asian economies in the aftermaths of the global financial crisis against the backdrop of pre-crisis trade patterns. The analysis is motivated by the ‘decoupling’ thesis, the notion that the East Asian region has become a self-contained economic entity with potential for maintaining its own growth dynamism independent of the economic outlook for the traditional developed market economies. The findings suggests that the East Asian trade integration story that underpinned the decoupling thesis is simply a statistical artifact and that there is little room for the East Asian countries for an integrated policy response that marks a clear departure from the pre-crisis policy stance favoring export-oriented growth.
    Keywords: East Asian trade, global economic crisis, decoupling thesis, China
    JEL: F01 F14 O53
    Date: 2009
  8. By: Chiumya, Chiza
    Abstract: The proliferation of Regional Trade Agreements (RTAs) has not spared the African Continent. The formation of RTAs in Africa is championed by the Regional Integration agenda under the auspices of the Regional Economic Communities. The challenges that Customs Administrations face when their countries become members of RTAs depend on whether the RTA is Trade Creating or Diverting. It is the trade-creating RTA that presents the Customs Administration with the greater challenges. This paper looks at these challenges and areas where they require Customs Administrations to concentrate their policies and strategies.
    Keywords: Regional Trade Agreements; Customs Administrations
    JEL: F15 F1
    Date: 2009–06–04
  9. By: Aline Souza Magalhães (Cedeplar-UFMG); Edson Domingues (Cedeplar-UFMG)
    Abstract: This paper deals with interregional trade in the Brazilian Economy, estimating its role on efficiency, international competitiveness and regional inequality. Our modeling encompasses much detail. Firstly, we use a large-scale multi-regional computable general equilibrium (CGE) model of Brazil. The model is bottom-up for Brazil's 27 states. Despite the high level of regional disaggregation, the level of sectoral disaggregation is also high, at 36 sectors. Applying the CGE model in simulation exercises, we explore the impacts of reducing transport costs among Brazilian states, identifying the most relevant links for different economic goals (national growth, production costs and regional inequality). The procedure is similar to the “field of influence” approach in the input-output literature (Hewings et al, 2005). We find that trade among most developed states have impact on national growth and international competitiveness, but can also increase regional inequality.
    Keywords: CGE modeling, regional trade, inequality
    JEL: R11 R13
    Date: 2009–09
  10. By: Marcus Neureiter; Peter Nunnenkamp
    Abstract: We draw on a recent survey of European companies to differentiate between alternative modes of international outsourcing as possible determinants of market, cost and knowledge-related aspects of the competitiveness of firms. We find that internalized modes are often superior to outside options, and using existing subsidiaries tends to be more (cost) effective than undertaking new greenfield FDI
    Keywords: international sourcing, FDI, competitiveness of firms, market access, cost reduction, core and support functions
    JEL: F23 L24 L25
    Date: 2009–10

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