nep-int New Economics Papers
on International Trade
Issue of 2009‒11‒14
twenty-one papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. Importing, Exporting and Productivity in Irish Manufacturing By Fergal McCann
  2. Migration and Trade: Theory with an Application to the Eastern-Western European Integration By Peri, Giovanni; Iranzo, Susana
  3. South Asian Free Trade Area: Implications for Bangladesh By Hossain, Sharif M.
  4. The Economics of Trade Agreements in the Linear Cournot Delocation Model By Kyle Bagwell; Robert W. Staiger
  5. The Causes and Effects of International Migrations: Evidence from OECD Countries 1980-2005 By Ortega, Francesc; Peri, Giovanni
  6. Rethinking regional competitiveness: Catalonia's international and interregional trade, 1995-2006 By Ghemawat, Pankaj; Llano, Carlos; Requena, Francisco
  7. Breach, Remedies and Dispute Settlement in Trade Agreements By Giovanni Maggi; Robert W. Staiger
  8. SMEs in Argentina: Who are the Exporters By Gianmarco I.P. Ottaviano; Christian Volpe Martincus
  9. The Immigration and Trade Link in the European Union Integration Process By Nuno Gonçalves; Ana Paula Africano
  10. Rose Effect and the Euro: Is the Magic Gone? By Havranek, Tomas
  11. The role of macroeconomic performance in individual’s attitudes towards protectionism By Natalia Melgar; Juliette Milgram; Máximo Rossi
  12. The role of foreign firms in domestic exporting By Sun, Sizhong
  13. Financial health, exports, and firm survival: A comparison of British and French firms By Marina-Eliza Spaliara; Holger Görg
  14. The Internationalization of Inventive Activity: A Gravity Model Using Patent Data By Picci, Lucio
  15. FDI, R&D and Innovation Output in the Chinese Automobile Industry By Chen, Fang; Mohnen, Pierre
  16. A Two-dimensional Analysis of the Impact of Outward FDI on Performance at Home: Evidence from Japanese manufacturing firms By OBASHI Ayako; HAYAKAWA Kazuo; MATSUURA Toshiyuki; MOTOHASHI Kazuyuki
  17. Trade Liberalization in T&C: An Overview of the Welfare Effects By Dimitrios Dadakas; Stelios D Katranidis
  18. Trade liberalization in a Heckscher–Ohlin model: Does public skill formation change the conventional results? By Rossana Patrón
  19. Price Categories Used in International Trade By Paliu-Popa, Lucia
  20. When Does It Hurt?: The Exchange Rate "Pain Threshold" for German Exports By Ansgar Belke; Matthias Göcke; Martin Günther
  21. International Outsourcing's Role in International Technology Diffusion - The Irish Case By Fergal McCann

  1. By: Fergal McCann (University College Dublin)
    Abstract: The impact of international trade on firm productivity is tested by accounting for firms' import as well as export status for a large panel of Irish manufacturing firms. Two-way traders and exporters-only are found to be the most productive firms, with a significant gap between them and importers-only and non-traders. tfp is calculated using a modified version of the Olley and Pakes (1996) estimator, taking account of a four-category trade status. Selection of the most productive firms into exporting or importing is not found in any robust sense. Fixed effects, as well as Propensity Score Matching with Difference in Differences, are used to calculate productivity improvements from entering into international trade. These improvements are found to be highly contingent on export status, with import status being unimportant. The key finding of the paper is that the gains from trade, for Ireland at least, appear to lie on the export side. Interestingly, quitting trade leads to a mirror image effect to that of entry for all trade statuses.
    Keywords: Trade orientation, heterogeneous firms, productivity
    Date: 2009–11–01
  2. By: Peri, Giovanni (Universitat Rovira Virgili); Iranzo, Susana (University of California, Davis and CESifo, Munich)
    Abstract: The remarkable increase in trade flows and in migratory flows of highly educated people are two important features of globalization of the last decades. This paper extends a two-country model of inter- and intra-industry trade to a rich environment featuring technological differences, skill differences and the possibility of international labor mobility. The model is used to explain the patterns of trade and migration as countries remove barriers to trade and to labor mobility. We parameterize the model to match the features of the Western and Eastern European members of the EU and analyze first the effects of the trade liberalization which occurred between 1989 and 2004, and then the gains and losses from migration which are expected to occur if legal barriers to labor mobility are substantially reduced. The lower barriers to migration would result in significant migration of skilled workers from Eastern European countries. Interestingly, this would not only benefit the migrants and most Western European workers but, via trade, it would also benefit the workers remaining in Eastern Europe.
    JEL: F12 F22 J61
    Date: 2009–03
  3. By: Hossain, Sharif M.
    Abstract: The current thesis has analyzed the impact of South Asian Free Trade Area (SAFTA) on Bangladesh in terms of export generation within member countries. A standard gravity model has been used to analyze Bangladesh’s export potential using cross section data. From the estimated result, it is observed that Bangladesh has huge export potential to South Asia in general, and India in particular. If SAFTA agreement is properly implemented then Bangladesh’s exports within this region would be much higher than the estimated potential export. In terms of imports, Bangladesh has exceeded its potential level. Therefore, the expected increase in import by Bangladesh from SAFTA member countries might not be as large as the expected increase in export. But it should be mentioned that the expected results can only be achieved by free trade in real sense i.e. goods and services can move freely across countries without any tariff and non-tariff barriers.
    Keywords: SAFTA; Gravity Model; Bangladesh’s Export Potential
    JEL: F1
    Date: 2009–07
  4. By: Kyle Bagwell; Robert W. Staiger
    Abstract: Existing theories of trade agreements suggest that GATT/WTO efforts to reign in export subsidies represent an inefficient victory for exporting governments that comes at the expense of importing governments. Building from the Cournot delocation model first introduced by Venables (1985), we demonstrate that it is possible to develop a formal treatment of export subsidies in trade agreements in which a more benign interpretation of efforts to restrain export subsidies emerges. And we suggest that the gradual tightening of restraints on export subsidies that has occurred in the GATT/WTO may be interpreted as deriving naturally from the gradual reduction in import barriers that member countries have negotiated. Together with existing theories, the Cournot delocation model may help to provide a more nuanced and complete understanding of the treatment of export subsidies in trade agreements.
    JEL: F12 F13
    Date: 2009–11
  5. By: Ortega, Francesc (Universitat Pompeu Fabra); Peri, Giovanni (University of California, Davis)
    Abstract: This paper contains three important contributions to the literature on international migrations. First, it compiles a new dataset on migration flows (and stocks) and on immigration laws for 14 OECD destination countries and 74 sending countries for each year over the period 1980-2005. Second, it extends the empirical model of migration choice across multiple destinations, developed by Grogger and Hanson (2008), by allowing for unobserved individual heterogeneity between migrants and non-migrants. We use the model to derive a pseudo-gravity empirical specification of the economic and legal determinants of international migration. Our estimates clearly show that bilateral migration flows are increasing in the income per capita gap between origin and destination. We also find that bilateral flows decrease when destination countries adopt stricter immigration laws. Third, we estimate the impact of immigration flows on employment, investment and productivity in the receiving OECD countries using as instruments the "push" factors in the gravity equation. Specifically, we use the characteristics of the sending countries that affect migration and their changes over time, interacted with bilateral migration costs. We find that immigration increases employment, with no evidence of crowding-out of natives, and that investment responds rapidly and vigorously. The inflow of immigrants does not seem to reduce capital intensity nor total factor productivity in the short-run or in the long run. These results imply that immigration increases the total GDP of the receiving country in the short-run one-for-one, without affecting average wages and average income per person.
    JEL: E25 F22 J61
    Date: 2009–03
  6. By: Ghemawat, Pankaj (IESE Business School); Llano, Carlos (Universidad Autonoma de Madrid); Requena, Francisco (Universidad de Valencia)
    Abstract: Studies of competitiveness tend to focus on a local economy's global interactions, particularly its international trade. But for countries that are at least mid-sized (such as Spain), interregional trade tends to be as large as or significantly larger than international trade. The case of Catalonia illustrates the importance of interregional flows in truly analyzing and devising strategies for a region's external competitiveness. Accounting for interregional trade changes and performing analyses of Catalonia's overall merchandise trade balance, which sectors generate external surpluses as opposed to deficits, and who Catalonia's key trading partners are, and the use of a gravity-model approach to estimate external border effects at the regional level for Catalonia and the rest of Spain, reveal significant variations by sector and by trading partner, generally higher external border effects for exports than imports, and declines in border effects over time - but with a discernible flattening in recent years.
    Keywords: Border Effect; Gravity Model; Interregional trade; transport flows;
    JEL: F14 F17 F21 L14
    Date: 2009–07–11
  7. By: Giovanni Maggi (Cowles Foundation, Yale University); Robert W. Staiger (Dept. of Economics, Stanford University)
    Abstract: We provide a simple but novel model of trade agreements that highlights the role of transaction costs, renegotiation and dispute settlement. The model allows us to characterize the appropriate remedy for breach and whether the agreement should be structured as a system of "property rights" or "liability rules." We then study how the optimal rules depend on the underlying economic and contracting environment. Our model also delivers predictions about the outcome of trade disputes, and in particular about the propensity of countries to settle early versus "fighting it out."
    Keywords: International trade agreements, Breach remedies, Dispute settlement
    JEL: D02 D86 F13 K12 K33
    Date: 2009–10
  8. By: Gianmarco I.P. Ottaviano (Bocconi University DEP-KITeS, FEEM and CEPR); Christian Volpe Martincus (Inter-American Development Bank)
    Abstract: There exists a growing body of literature which looks at export decisions made by firms. Most studies focus on developed countries and do not explore whether different behavioral patterns prevail over the firm size distribution. This paper aims at filling this gap in the literature by analyzing the export behavior of a statistically representative sample of 192 Small and Medium-Size Enterprises (SMEs) in a developing country, Argentina, over the period 1996-1998. We find that the level of employment, sourcing from abroad, investment in product improvement and average productivity are associated with a higher probability of exporting. Training activities for employees are important to export outside of MERCOSUR.
    Keywords: SME, Exports, Argentina
    JEL: F10 F14 D21 L60
    Date: 2009–10
  9. By: Nuno Gonçalves (Faculdade de Economia, Universidade do Porto); Ana Paula Africano (CEF.UP and Faculdade de Economia, Universidade do Porto)
    Abstract: The aim of this paper is to analyse the link between immigration and trade among EU countries, particularly, in the context of the enlargement in 2004. The study tests if increasing stock of immigrants from New Member States has any impact on the exports of EU-15 to those markets, or not. To that end the study applies an extended gravity model of international trade to panel data for three countries – Germany, Denmark and Portugal. The results show that increasing immigration from New Member States has a positive impact on the exports of both Portugal and Denmark. The results also suggest that less restrictive immigration policies have a positive impact on exports. Finally these results do not hold in the case of Germany.
    Keywords: Comércio internacional, imigração, União Europeia, integração económica, modelo gravitacional
    JEL: C33 F14 F15 F22 O24
    Date: 2009–11
  10. By: Havranek, Tomas
    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 currency unions other than Eurozone reaches more than 60%. However, according to the meta-regression analysis, 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 concave function of publication year. Explanatory meta-regression (robust fixed effects and random effects), that can explain about 70% of the heterogeneity in the literature, suggests that results published by some authors might consistently differ from the mainstream output and that study outcomes are systematically dependent on study design (usage of panel data, short- or long-run nature, number of countries in the dataset).
    Keywords: Rose effect; Trade; Currency union; Euro; Meta-analysis; Publication bias
    JEL: F15 C42 F33
    Date: 2009–05–05
  11. By: Natalia Melgar (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República); Juliette Milgram (Departamento de Teoría e Historia Económica - Universidad de Granada); Máximo Rossi (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República)
    Abstract: In this paper we investigate some factors shaping individual support for protectionism that have not been studied previously. We examine a heterogeneous sample of thirty countries which includes both small and large and developed and developing countries using data from the 2003 International Social Survey Program (ISSP). We confirm the influence of social status (education, age and relative income), values and attachments on preferences for trade policies and the fact that skilled people are also more likely to be pro-trade. We also verify previous findings concerning the fact that individual’s opinions match with how their revenue could be affected in the medium or long term by trade liberalization. We highlight other important factors influencing public opinion towards protectionism: individual support for protectionism is also affected by the macroeconomic context and size of their country of residence.
    Keywords: Preferences, protectionism support, free trade, mercantilist, nationalism
    JEL: D01 F13
    Date: 2009–07
  12. By: Sun, Sizhong
    Abstract: This paper investigates the impact of foreign firms on exports of domestic exporting firms. We show that domestic firms respond to an increase in the presence of foreign firms by increasing their exports, despite the increase in foreign presence can drive up the production cost and make domestic market more profitable. This hypothesis is then tested in China, where we find a 1 per cent increase in foreign presence causes domestic firms to increase their exports by 0.74 per cent. This finding sheds light on understanding China’s massive exports and fast inflow of foreign investment observed in the past three decades.
    Keywords: Export; Foreign Firm; FDI; Spillovers; China
    JEL: D21 F10 L20
    Date: 2009–11
  13. By: Marina-Eliza Spaliara (Dept of Economics, Loughborough University); Holger Görg (Kiel Institute for the World Economy, CEPR)
    Abstract: We examine the differential effects of financial status and exporting activity on the likelihood of survival for firms in the UK and France - two countries with different financial systems. We aim to answer two main questions: What is the direct impact of financial characteristics and different facets of exporting activity on the likelihood of survival? Do the sensitivities of survival incidence to financial variables vary with the exporting status of firms? We find strong evidence that continuous exporters face a higher probability of survival compared to starters, continuous non-exporters and firms exiting the exporting market. Further, important sensitivities of survival prospects to financial indicators are observed for the UK firms which might be explained by the ''market based'' economy. Finally, a within and across countries comparison reveals that the survival of exporting groups varies substantially depending on firms' financial status, the financial system and the prolonged participation in the export market.
    Date: 2009–11
  14. By: Picci, Lucio
    Abstract: This paper discusses the extent and the determinants of the internationalization of European inventive activity, between 1990 and 2005, using an innovative method to treat the information contained in the European Patent Office's Patstat database. We introduce a new set of indicators measuring internationalized patent applications that are fully coherent with the principle of fractional counting. The observed level of internationalization of inventive activities, while being rather low, has steadily increased over time. The amount of collaboration between actors residing in different countries is assessed by means of a gravity model. The amount of bilateral collaboration is positively affected by the presence of a common language, a common border and by more similar cultural characteristics. International collaboration is negatively affected by distance, with estimated elasticities that are significantly smaller than the ones that characterize international trade.
    Keywords: Gravity models, R&D, patents, internationalization
    JEL: F15 C51 O30 C24
    Date: 2009–10–15
  15. By: Chen, Fang (Chinese Academy of Sciences); Mohnen, Pierre (UNU-MERIT, Maastricht University, and CIRANO)
    Abstract: After joining the World Trade Organization (WTO), China witnessed a major inflow of Foreign Direct Investment (FDI). Many famous automobile firms of developed countries were attracted to invest in China to cooperate with domestic firms. This paper uses firm-level data of the Chinese automobile industry to analyze the determinants of, and the interrelationships between, innovation input and innovation output, and in particular whether FDI had any influence on these two aspects of innovation. A generalized tobit model will be estimated for both R&D and the share of innovative sales for 2002/2003 and 2005/2006. The findings show that FDI firms are less R&D intensive but, when they innovate in new products, they are more product innovative than domestic-funded firms.
    Keywords: FDI, China, R&D, innovation, automobile industry
    JEL: O14 L62 F21
    Date: 2009
  16. By: OBASHI Ayako; HAYAKAWA Kazuo; MATSUURA Toshiyuki; MOTOHASHI Kazuyuki
    Abstract: This paper empirically investigates two areas of changes in firm behavior and performance at home before and after investing abroad. The first is the type of foreign direct investment (FDI): horizontal FDI or vertical FDI. The second is the firm's domestic activities of interest: production activity and non-production activity. From a theoretical standpoint, the impact of outward FDIs differs not only by type, but according to the firmfs activities. By exploiting two types of firm-level data that enable us to distinguish between production and non-production activities, our work provides a detailed picture of the intra-firm changes in behavior and performance that occur as a result of globalizing production.
    Date: 2009–10
  17. By: Dimitrios Dadakas (Department of Economics, University of Macedonia); Stelios D Katranidis (Department of Economics, University of Macedonia)
    Abstract: This paper examines the effects of trade liberalization on cotton-yarn producer’s welfare in Greece, Portugal, Spain and Turkey. We perform a comparative analysis of the price-induced welfare effects using multi-market theory, a single-market approach and bootstrapping techniques. Results show that after the 1995 implementation of the plan for the gradual elimination of quotas (Agreement on Textiles and Clothing, ATC, 1995-2005) producers in all four countries suffered substantial welfare losses.
    Keywords: VMulti-Market, Single-Market Approach, Applied Welfare Analysis, Bootstrap, Textiles and Clothing, Trade Liberalization, MFA, ATC.
    JEL: C39 D60 F10
    Date: 2009–11
  18. By: Rossana Patrón (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República)
    Abstract: Standard trade theory suggests that trade liberalization produces opposite effects on human capital accumulation in developed and developing countries, reducing the incentives to invest in education in skill-scarce countries. How would conventional wisdom be modified if we introduce public provision of education in the standard framework? This paper develops a simple model for this purpose, showing that when skills formation depends on public provision of education, trade liberalization affects the human capital accumulation process depending on the economic structure; thus, in contrast to the previous literature, this framework explains convergence or divergence in the accumulation of skills between trading countries.
    Keywords: public education, trade liberalization, Heckscher–Ohlin
    JEL: F11 I20 O15
    Date: 2009–09
  19. By: Paliu-Popa, Lucia
    Abstract: In the current world economy conditions, development of any state can not be based solely on internal sources and the national economy results. Increased volume and diversification of cross-border transactions in goods and services, the dynamics of international capital flows, and the fast spread of technology, gives multiple values of foreign trade leading to growth of economic interlinks across the world countries. Through the foreign trade activity is carried out exchange of goods and services on the international market and ensure the participation of states in international economic cooperation. In today's global world economy, operation and coordinated sustainable development of economic systems involve, necessarily, to obtain the highest results and meeting/satisfy the needs of present without compromising the ability of national economies to satisfy their own requirements in the future more or less distant. A determining factor in business relationships and their success, regardless of export choosen manner and the type of contract used, is the price, contributing to the size of revenues from export, revenues that allow, among other things, make investments in infrastructure leading to raising living standards and social security. Starting from the importance of prices in achieving incomes related to international trade, in this article I will address the main categories of prices used in the export and import activity, also the models/patterns on the composition of the external price of export and import in terms of delivery conditions FOB, CIF and CAF.
    Keywords: price; international trade; export; import; delivery condition; custom value
    JEL: E64 P42 E3
    Date: 2009–10–01
  20. By: Ansgar Belke; Matthias Göcke; Martin Günther
    Abstract: This paper deals with the impact of the $/€ exchange rate on German exports in the period from 1995Q1 to 2008Q4. Our main aim is to identify "pain thresholds" for German exporters. We rely on a non-linear model according to which suddenly strong spurts of exports occur when changes of the EXR go beyond a kind of "play" area (analogous to a mechanical play). We implement an algorithm describing play-hysteresis into a regression framework. A unique "pain threshold" of the $/€ exchange rate does not exist, since the borders of the play area and, thus, also the "pain threshold" (as the upper border) depend on the historical path of the whole process. We come up with an estimate of a play area width of 24 US dollar cent per euro. At the end of our estimation period, the previous exchange rate movements had shifted the upper bound of the play area to about 1.55 US dollar per euro. In our interpretation, this is the current "pain threshold", where a strong spurt reaction of exports to a further appreciation of the euro is expected to start.
    Keywords: exchange rate movements, play hysteresis, modelling techniques, switching regression, export demand
    JEL: C51 C63 E24 F41
    Date: 2009
  21. By: Fergal McCann (University College Dublin)
    Abstract: This paper analyses how international outsourcing affects plant productivity, with the major contribution lying in the identification of heterogeneous effects for firms with differing internationalisation status. The results point to a striking pattern: the status of being an outsourcer matters strongly for indigenous non-exporters, while for exporters and foreign affiliates, tfp increases are lower, insignificant and sometimes negative. On the other hand, a higher intensity of outsourcing matters for both exporters and foreign affiliates, but not for indigenous non-exporters. Similarly, in dynamic analysis, indigenous non-exporters are found to increase tfp for two periods after entering into international outsourcing, while indigenous exporters experience one more weakly significant period of growth. The key message of the paper is thus: outsourcing's role as a channel of technology diffusion is most pronounced when it serves as a first exposure to international markets.
    Keywords: Outsourcing, Productivity, Firm Structure
    Date: 2009–11–01

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