nep-int New Economics Papers
on International Trade
Issue of 2009‒12‒05
eighteen papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. Trade in Services and Trade in Goods: Differences and Complementarities By Carolina Lennon
  2. The Distance Effect and the Regionalization of the Trade of Low-Income Countries By Céline CARRERE; Jaime MELO DE; John WILSON
  3. Exporting and Product Innovation at the Firm Level By Bratti , Massimiliano; Felice, Giulia
  4. OECD Imports: Diversification and quality search By Olivier CADOT; Céline CARRERE; Madina KUKENOVA; Vanessa STRAUSS-KHAN
  5. Contract Incompleteness, Globalization and Vertical Structure: an Empirical Analysis By Luigi Pascali
  6. Heterogeneous firms or heterogeneous workers? Implications for the exporter premium and the impact of labor reallocation on productivity By Irarrazabal, Alfonso; Moxnes, Andreas; Ulltveit-Moe, Karen-Helene
  7. Firm Heterogeneity, Origin of Ownership and Export Participation By Matthew A Cole; Robert J R Elliott; Supreeya Virakul
  8. Innovation, Productivity and Export: the case of Hungary By László Halpern; Balázs Muraközy
  9. A Concordance Between Ten-Digit U.S. Harmonized System Codes and SIC/NAICS Product Classes and Industries By Justin R. Pierce; Peter K. Schott
  10. Productivity effects of innovation modes By Polder, Michael; Leeuwen, George van; Mohnen, Pierre; Raymond, Wladimir
  11. The Determinants of State-Level Antitrust Enforcement By Benjamin H. Liebman; Kara M. Reynolds
  12. International Trade and Domestic Regulation By Robert W. Staiger; Alan O. Sykes
  13. Corruption, Governance and FDI Location in China: A Province-Level Analysis By Matthew A Cole; Robert J R Elliott; Jing Zhang
  14. Revisiting Barriers to Trade: Do Foregone Health Benefits Matter? By Zhang, Sidi; Kerr, William A.
  15. The Impact of Trade Barriers on Mandated Biofuel Consumption in Canada By Le Roy, Danny; Elobeid, Amani E.; Klein, K.K.
  16. Endogenous Market Structure and Foreign Market Entry By Markusen, James R.; Stähler, Frank
  17. Why Migrants' Remittances Reduce Income Inequality in some Countries and not in Others? By Christian EBEKE; Maëlan LE GOFF
  18. The Doha Round and Market Access for LDCs: Scenarios for the EU and US Markets By Céline CARRERE; Jaime MELO DE

  1. By: Carolina Lennon (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: The purpose of this paper is twofold. First, we explore empirically to what extent the determinants of trade in services differ from those of trade in goods. Second, by the use of instrumental variables, we explore potential complementarities between bilateral trade in goods and bilateral trade in services. Using a gravity framework, the main results show that bilateral trust and contract enforcement environment, networks, labour market regulations and variables denoting technology of communication have a higher impact on services trade than on goods trade. Finally, after using instrumental variables, we find that bilateral trade in goods explains bilateral trade in services: the resulting estimated elasticity is close to 1. Reciprocally, bilateral trade in services also affects bilateral trade in goods, though to a lesser extent: we find an estimated (positive) elasticity of 0.46.
    Keywords: international trade in services, trade in goods, gravity equations
    JEL: F12 F15 L8
    Date: 2009–04
  2. By: Céline CARRERE (Centre d'Etudes et de Recherches sur le Développement International); Jaime MELO DE (Université Genève); John WILSON
    Abstract: The "distance effect" measuring the elasticity of trade flows to distance has been to be rising since the early 1970s in a host of studies based on the gravity model, leading observers to call it the "distance puzzle". We review the evidence and explanations. Using an extensive data set of 124 countries over the period 1970-2005, we confirm the existence of this puzzle and identify that it only applies to poor countries (the bottom third in per capita income terms in our sample—i.e. the low-income countries according to the World Bank classification, 2006). We show that this group has intensified trade with closer partners and have chosen new partners that are closer than existing partners, leading to a regionalization of their trade at both extensive and intensive margins (regionalization of trade is absent for the other countries). Combining several methods on cross-section and panel estimates of the gravity equation, we estimate that low-income countries exhibit a significant rising distance effect on their trade around 15% between 1970 and 2006 while there is no more distance "puzzle" for trade within richer countries (the top third in per capita income terms in our sample). We dispose of previous explanations of the puzzle, and note that this regionalization could well be a reflection of both increased integration of this group of countries in the world economy or a greater marginalization.
    Keywords: Distance Effect, Gravity Model, international trade
    Date: 2009
  3. By: Bratti , Massimiliano; Felice, Giulia
    Abstract: Past research showed that exporters perform better than non-exporters in several domains, micro-level empirical evidence on the innovation-enhancing effect of export is, however, very scant. In this paper, we analyze the relationship between a firm's export status and its product innovation activity by using a rich firm-level survey on Italian manufacturing. First, we find that the positive effect of exporting on product innovativeness is robust to controlling for many sources of firm's observable heterogeneity and to allowing export activity to be endogenous. Second, we report evidence that the effect of exporting on product innovation is likely to be demand-driven, that is to originate from the interaction between domestic firms and foreign customers.
    Keywords: Exporting; Firms; Italy; Manufacturing; Product Innovation
    JEL: F1 O31
    Date: 2009–11–29
  4. By: Olivier CADOT (HEC Lausanne); Céline CARRERE (Centre d'Etudes et de Recherches sur le Développement International); Madina KUKENOVA; Vanessa STRAUSS-KHAN
    Abstract: This paper explores the evolution of OECD imports over time and as a function of income levels, measuring the concentration of those imports across origin countries at the product level. We find evidence of diversification followed, in the very last years of the sample period (post-2000), by a slight reconcentration. This reconcentration is entirely explained by the growing importance of Chinese products in OECD imports. We also find evidence of relatively more volatile concentration levels for differentiated goods, consistent with a simple model of adverse selection and screening of suppliers by OECD buyers. Finally, we find that "accession" to OECD markets occurs directly (rather than after acquiring prior export experience on other markets) for more than half of the (extra-OECD) exporter/product pairs, but that one to eight years of experience enhances subsequent survival on OECD markets. Exports that reach OECD markets after more than eight years of experience elsewhere tend to survive less.
    Keywords: Import diversification, OECD, international trade
    Date: 2009
  5. By: Luigi Pascali (Boston College)
    Abstract: This paper studies the effects of international openness and contracting institutions on vertical integration. It first derives a number of predictions regarding the interactions between trade barriers, contracting costs, technology intensity, and the extent of vertical integration from a simple model with incomplete contracts. Then it investigates these predictions using a new dataset of over 14000 firms from 45 developing countries. Consistent with theory, the effect of technology intensity of domestic producers on their likelihood to vertically integrate is decreasing in the quality of domestic contracting institutions and in international openness. Contract enforcing costs are particularly high in developing countries and their effects on the vertical structure of technological intensive firms may have significant welfare costs. If improving domestic contracting institutions is not feasible an equivalent solution is to increase openness to international trade. This would discipline domestic suppliers reducing the need for vertical integration.
    Keywords: Vertical integration, Hold-up, Incomplete contracts, Trade openness
    JEL: D23 F15 L14
    Date: 2009–11–23
  6. By: Irarrazabal, Alfonso; Moxnes, Andreas; Ulltveit-Moe, Karen-Helene
    Abstract: We expect trade liberalization to give rise to aggregate productivity gains, as the least efficient firms are forced out, and labor is reallocated towards the best performing firms. But the positive intra-industry reallocation effects rely on the stark assumption that exporters’ superior performance is due to intrinsic firm efficiency. We investigate the importance of intrinsic firm efficiency relative to input quality as sources of exporters’ productivity premium, employing a matched employer-employee data set for Norwegian manufacturing. Augmented measures of total factor productivity which take worker characteristics into account, indicate that up to 67 percent of the exporter premium reflects differences in workforce rather than true efficiency. Simulating the labor dynamics proceeding firm exits, we illustrate that the benign impact on aggregate productivity from firm exits may be reduced because of worker reallocation.
    Keywords: exporters; firm heterogeneity; labor reallocation; productivity measurement; worker heterogeneity
    JEL: D24 F12 F14 F16
    Date: 2009–11
  7. By: Matthew A Cole; Robert J R Elliott; Supreeya Virakul
    Abstract: This paper investigates the relationship between firm heterogeneity and a firm's decision to export, using the annual survey of Thai manufacturing firms from 2001 to 2004. A significant contribution of this paper is that we are, for the first time, able to break down FDI by country of origin to observe whether the behavior of MNEs differs by region of origin. We find that entry sunk costs and firm characteristics are important factors in explaining a firm's decision to export. Another important determinant is the ownership structure of the firm, with foreign owned firms having a higher probability of exporting than domestically owned firms although this differs across country of ownership with potentially important policy implications. Export platform FDI is used to explain the behavior of foreign firms that invest in Thailand. Using three measures of total factor productivity, we also find that highly productive firms self-select into the export market. The implication for governments of developing countries is the need to think carefully about how and to whom they target their inward FDI policies as a means of growth. The heterogeneous behavior of multinationals from different nations means that policies targeting specific regions or countries may be preferable to general tax concessions or the implementation of special economic zones that are open to all.
    Keywords: FDI, exports, firm heterogeneity, development
    JEL: D21 D24 F14 F23 O12 O14 O53
    Date: 2009–11
  8. By: László Halpern; Balázs Muraközy
    Abstract: This paper estimates the relationship between innovation and firm performance by using Community Innovation Survey data for Hungary. It exploits the possibility of linking the innovation data to ownership and disaggregated trade data. Innovative firms are more productive, more likely to trade and export into more countries. Foreign firms are more likely to innovate compared to similar domestic firms, but the amount of R&D is a weaker predictor of the innovative output of foreign firms.
    Date: 2009–12–02
  9. By: Justin R. Pierce; Peter K. Schott
    Abstract: This paper provides and describes concordances between the ten-digit Harmonized System (HS) categories used to classify products in U.S. international trade and the four-digit SIC and six-digit NAICS industries that cover the years 1989 to 2006. We also provide concordances between ten-digit HS codes and the five-digit SIC and seven-digit NAICS product classes used to classify U.S. manufacturing production. Finally, we briefly describe how these concordances might be applied in current empirical international trade research.
    JEL: F1
    Date: 2009–11
  10. By: Polder, Michael; Leeuwen, George van; Mohnen, Pierre; Raymond, Wladimir
    Abstract: Many empirical studies have confirmed the positive impact of innovation on productivity at the firm level. The focus tends to be either on R&D driven techno-logical innovation on the one hand, or on organisational changes complemented by ICT on the other. To investigate the effect of different types of innovations on produc-tivity, we propose a model with two innovation input equations (R&D and ICT) that feed into a knowledge production function consisting of a system of three innovation output equations (product innovation, process innovation and organisational innova-tion), which ultimately feeds into a productivity equation. We find that ICT is an im-portant driver of innovation in both manufacturing and services. Doing more R&D has a positive effect on product innovation in manufacturing. Organisational innova-tion has the strongest productivity effects. We only find positive effects of product and process innovation when combined with an organisational innovation.
    Keywords: technological innovation; non-technological innovation; ICT; R&D; productivity; trivariate probit; CDM model;
    JEL: O30 D24
    Date: 2009
  11. By: Benjamin H. Liebman; Kara M. Reynolds
    Abstract: We perform the first empirical study to focus on the relationship between trade protection and investment in Research and Development. Our results support predictions from the theoretical literature that temporary tariffs stimulate research and development, although we find no evidence that this effect diminishes as the termination of protection approaches as predicted by some theoretical models. We also find little evidence that quotas reduce research and development as predicted by multiple theoretical works. Finally, our results indicate that temporary tariffs result in decreased capital investment, perhaps because firms use periods of temporary protection to shutdown unprofitable facilities. This reveals an important distinction in firm behavior with regard to investment in tangible versus intangible capital during periods of trade protection.
    Keywords: Research and Development, Strategic Protection
    JEL: F13
    Date: 2009–09
  12. By: Robert W. Staiger; Alan O. Sykes
    Abstract: Existing formal models of the relationship between trade policy and regulatory policy suggest the potential for a regulatory race to the bottom. WTO rules and disputes, however, center on complaints about excessively stringent regulations. This paper bridges the gap between the existing formal literature and the actual pattern of rules and disputes. Employing the terms-of-trade framework for the modeling of trade agreements, we show how "large" nations may have an incentive to impose discriminatory product standards against imported goods once border instruments are constrained, and how inefficiently stringent standards may emerge under certain circumstances even if regulatory discrimination is prohibited. We then assess the WTO legal framework in light of our results, arguing that it does a reasonably thorough job of policing regulatory discrimination, but that it does relatively little to address excessive nondiscriminatory regulations.
    JEL: F13 K33
    Date: 2009–11
  13. By: Matthew A Cole; Robert J R Elliott; Jing Zhang
    Abstract: China's rapid growth in recent years has been matched by large increases in exports and foreign direct investment (FDI). However, within China considerable regional disparities in FDI flows exist. In this paper we use detailed province level data for China to examine the determinants of intra-country FDI flows. Specifically, we investigate whether FDI is attracted to those regions that exhibit good governance and are most strongly engaged in the fight against corruption. We first construct proxies for provincial government efficiency and the extent of a region's anti-corruption effort. Our subsequent regression results confirm that FDI is attracted to provinces with relatively high levels of government efficiency and those that are actively involved in the fight against corruption.
    Keywords: FDI, corruption, governance
    JEL: O13 L60 Q21 Q25 Q28
    Date: 2009–11
  14. By: Zhang, Sidi; Kerr, William A.
    Keywords: trade health wto policy, Agricultural and Food Policy, Food Consumption/Nutrition/Food Safety, International Relations/Trade, Political Economy,
    Date: 2009–10
  15. By: Le Roy, Danny; Elobeid, Amani E.; Klein, K.K.
    Keywords: biofuel ethanol trade canada, Agricultural and Food Policy, Demand and Price Analysis, International Relations/Trade,
    Date: 2009–10
  16. By: Markusen, James R.; Stähler, Frank
    Abstract: Models dealing with cross-border acquisitions versus greenfield investment usually assume that the entry of a foreign firm into a market has effects on the outputs of all domestic firms in that market, but exit or entry of local firms is not considered. The purpose of this paper is to re-examine the acquisition versus greenfield versus exporting question under fixed versus free entry assumptions for local firms. Our finding is that greenfield entry and exporting options are more attractive relative to acquisition when the local market structure adjusts to foreign entry through local entry or exit than when it is fixed. The entering foreign firm may do better or worse under free entry versus a fixed market structure depending on its optimal choice under the latter assumption.
    Keywords: Cross-border acquisitions; endogenous market structures; foreign direct investment; multinational firms
    JEL: F12 F23
    Date: 2009–11
  17. By: Christian EBEKE; Maëlan LE GOFF
    Abstract: According to the literature, the effect of remittances on income inequality in origin countries of migrants is not clear, whatever empirical approach is used. Aiming at clearing up this ambiguity, some authors took into account the historical, social or economic context of the home countries considered. The underlying idea of most of these studies is actually that the impact of remittances on income inequality depends on whom migrates, i.e. on the location migrants occupy in income distribution in their home country. However, to our knowledge, no macroeconomic study examining the remittances effect on inequality, consider the composition of migratory flows. To reveal at the macroeconomic level the position of migrants in income distribution at origin, we introduce in our equation of inequality non-linearities in the level of development of the recipient countries, in the costs of migration and in the level of brain drain. Using a panel sample of 80 developing countries over the period 1970-2000, and even by factoring in the endogeneity of remittances, this paper provides evidence of some characteristics of countries of origin in which there is an inequality-decreasing effect of remittances on income inequality. It turns out that countries belonging to the Mediterranean Basin have the characteristics revealed.
    Keywords: Brain drain, Income, Mediterranean basin, Migrants' remittances, income inequality, instrumental variables, migration costs
    Date: 2009
  18. By: Céline CARRERE (Centre d'Etudes et de Recherches sur le Développement International); Jaime MELO DE (Université Genève)
    Abstract: It was a hope of LDCs that the DOHA round would bring them greater market access in OECD countries than for non-LDCs. Using HS-6 tariff level data for the US and the EU for 2004, this paper estimates that, once the erosion from preferential access into the EU to non-LDCs are taken into account, LDCs have about a 3% preferential margin in the EU market. In the US market, in spite of preferences under AGOA, on a trade-weighted basis, LDCs are discriminated against. Under various "Swiss formulas" for tariff cuts, effective market access for LDCs in the EU will be negligible and still negative in the US. If the US were to apply a 97% rule (i.e. duty-free, quota-free access for all but three percent of the tariff lines), LDCs could increase exports by 10% or about $1billion annually. Effective market access is further reduced by complicated Rules of Origin (RoO) applied by the EU and the US. Furthermore, generally, the most restrictive RoO fall on products in which LDCs have the greatest preferential market access.
    Keywords: LDCs, Rules of Origin, market access
    Date: 2009

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