nep-int New Economics Papers
on International Trade
Issue of 2009‒12‒19
25 papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. Two and a Half Theories of Trade By Neary, J. Peter
  2. Measuring the Gains from Trade under Monopolistic Competition By Robert C. Feenstra
  3. A Touch of Sophistication: FDI and Unit Values of Exports By Harding, Torfinn; Smarzynska-Javorcik, Beata
  4. The links between internationalization, skills and wages: evidence from Italian firms trading with different countries By Francesco Serti; Chiara Tomasi; Antonello Zanfei
  5. Self-selection along different export and import markets By Francesco Serti; Chiara Tomasi
  6. Destinations of Irish Exports:A Gravity Model Approach By Lawless, Martina
  7. South Africa’s Trade and Growth By Przemyslaw Kowalski; Ralph Lattimore; Novella Bottini
  8. International Trade and Local Outsourcing By Marjit, Sugata; Yang, Lei; Xu, Xinpeng
  9. The Causes and Effects of International Labor Mobility: Evidence from OECD Countries 1980-2005 By Ortega, Francesc; Peri, Giovanni
  10. Reconciling Climate Change and Trade Policy By Aaditya Mattoo; Arvind Subramanian; Dominique van der Mensbrugghe; Jianwu He
  11. General Trading Costs in Pure Theory of International Trade By Marjit, Sugata; Mandal, Biswajit
  12. Clarifying Trade Costs: Maritime Transport and its Effect on Agricultural Trade By Jane Korinek; Patricia Sourdin
  13. Trade in Goods and Services between the EU and the BRICs By Peter Havlik; Olga Pindyuk; Roman Stöllinger
  14. Margins of international banking: is there a productivity pecking order in banking, too? By Buch, Claudia M.; Koch, Cathérine Tahmee; Koetter, Michael
  15. The distance puzzle revisited: a new interpretation based on geographic neutrality By Arribas, Iván; Pérez, Francisco; Tortosa-Ausina, Emili
  16. Reconciling Climate Change and Trade Policy By Aaditya Mattoo; Arvind Subramanian; Dominique van der Mensbrugghe; Jianwu He
  17. International Differences in Emissions Intensity and Emissions Content of Global Trade By Stratford Douglas; Shuichiro Nishioka
  18. The Consumption Terms of Trade and Commodity Prices By Martin Berka; Mario J. Crucini
  19. Technology and economic inequality effects on international trade By Inés Granda; Antonio Fonfría
  20. Complements or Substitutes? Preferential and Multilateral Trade Liberalization at the Sectoral Level By Ando, Mitsuyo; Estevadeordal, Antoni; Volpe Martincus, Christian
  21. Exports and Financial Shocks By Amiti, Mary; Weinstein, David E.
  22. Mapping the Tariff Waters By Diakantoni, Antonia; Escaith, Hubert
  23. Effects of Terms of Trade Gains and Tariff Changes on the Measurement of U.S. Productivity Growth By Robert C. Feenstra; Benjamin R. Mandel; Marshall B. Reinsdorf; Matthew J. Slaughter
  24. When Does It Hurt? The Exchange Rate "Pain Threshold" for German Exports By Ansgar Belke; Matthias Goecke; Martin Guenther
  25. Skills and Industrial Competitiveness By Robert Stehrer; Terry Ward; Sebastian Leitner; Michael Landesmann

  1. By: Neary, J. Peter
    Abstract: This paper discusses the place of oligopoly in international trade theory, and argues that it is unsatisfactory to ignore firms altogether, as in perfectly competitive models, or to view large firms as more productive clones of small ones, as in monopolistically competitive models. Doing either fails to account for the "granularity" in the size distribution of firms and for the dominance of large firms in exporting. The paper outlines three ways of developing more convincing models of oligopoly, which allow for free entry but do not lose sight of the grains in "granularity": heterogeneous industries, natural oligopoly, and superstar firms.
    Keywords: GOLE (General Oligopolistic Equilibrium); granularity; heterogeneous firms; international trade and market structure
    JEL: F10 F12
    Date: 2009–12
  2. By: Robert C. Feenstra
    Abstract: Three sources of gains from trade under monopolistic competition are: (i) new import varieties available to consumers; (ii) enhanced efficiency as more productive firms begin exporting and less productive firms exit; (iii) reduced markups charged by firms due to import competition. The first source of gains can be measured as new goods in a CES utility function for consumers. We argue that the second source is formally analogous to the producer gain from new goods, with a constant-elasticity transformation curve for the economy. We suggest that the third source of gain can be measured using a translog expenditure function for consumers, which in contrast to the CES case, allows for finite reservation prices for new goods and endogenous markups.
    JEL: F12
    Date: 2009–12
  3. By: Harding, Torfinn; Smarzynska-Javorcik, Beata
    Abstract: The debate on trade and growth increasingly focuses on the composition of exports. Exports of more "sophisticated" products appear to be positively correlated with growth, and upgrading the quality of exports is high on the policy agenda of many countries. This study presents evidence suggesting that attracting inflows of FDI offers potential for upgrading a country’s export basket. The empirical analysis relates unit values of exports measured at the 4-digit SITC level to data on sectors treated by investment promotion agencies as priority in their efforts to attract FDI. The sample covers 116 countries over the period 1984-2000. The findings are consistent with a positive effect of FDI on unit values of exports in developing countries. However, such a relationship is less evident in developed countries. These results suggest that FDI can help bridge gaps in production and marketing techniques between developing and high income economies.
    Keywords: exports; FDI; industrial policy; investment promotion; quality; unit values
    JEL: F10 F21 F23 L52
    Date: 2009–12
  4. By: Francesco Serti; Chiara Tomasi; Antonello Zanfei
    Abstract: Using firm level data on Italian manufacturing industry, we examine how trade activities are related to workforce composition and wages. We add to the existing literature in two ways. First, we consider the engagement of firms in international transaction, either by means of exports, imports or a combination of the two. We show that failing to control for the importing activities may bias upward the exporters premia. Second, we look at how the wage and the employment structure of trading firms change with the country of destination and origin of trade flows. Our evidence suggests that quality heterogeneity is a relevant determinant of trade behavior. Indeed, to rationalize our results one needs to refer to multi-attribute trade models in which both quality and efficiency requirements play a role and in which firms are active both in the import and export market
    Keywords: heterogeneous firms; exports; imports; productivity; market of destination and origin
    JEL: F10 F16 J21
    Date: 2009–12–10
  5. By: Francesco Serti; Chiara Tomasi
    Abstract: How are firms' performances influenced by the specific characteristics of markets where exports are directed and imports originate from? Using a rich database on Italian manufacturing firms, this essay adds new evidence on the relationship between trade status and firm characteristics. First, exploiting firm-level information on the destination of export and the origin of imports, we observe the heterogeneity among firms trading with different type of markets. We show that different destinations of exports and different origins of imports map into distinctive firm characteristics. Second, we test the hypothesis that the self-selection mechanisms occur market to market. We observe that firms exporting to and importing from high income countries face higher sunk costs than those trading with less developed markets. Third, we investigate the underlying sources of these ex-ante differences by looking at how countries' characteristics such as population, exchange rate, productivity and distance may impact on firms' performances.
    Keywords: heterogeneous firms; exports; imports; productivity; market of destination and origin
    JEL: F10 F16 J21
    Date: 2009–12–10
  6. By: Lawless, Martina (Central Bank and Financial Services Authority of Ireland)
    Abstract: This paper uses a gravity model approach in order to analyse the geographical patterns of Irish exports. The gravity model in international trade has been demonstrated to be an extremely robust empirical method. The gravity model is first applied to aggregate Irish exports from 1980 to 2007. Distance is found to have a strong negative effect on exports. On the other hand, exports are positively related to sharing a common language and when communications infrastructure is well developed. The gravity model is shown to fit the data extremely well. We then use firm-level data on indigenous Irish exporters to divide the effects of trade costs into how they influence the number of firms exporting to each market and the average exports per firm. Finally the firm data is divided into four broad sectors to examine if there is any sectoral variation in the standard results.
    Date: 2009–11
  7. By: Przemyslaw Kowalski; Ralph Lattimore; Novella Bottini
    Abstract: This paper examines key trade and trade related issues facing South Africa. It describes South Africa‘s re-entry into the global trade architecture and its economic growth in the context of its trade performance, as well as the composition and performance of South African exports at the product and sector level in the period from the early 1990s to 2006. The study also assesses South Africa‘s comparative trade performance based on a gravity model of international trade and discusses some key historical and recent trade policy developments. Finally, the study provides an econometric assessment of the impact of South Africa‘s trade liberalisation during the period from 1988 to 2003 on labour and total factor productivity across its industrial sectors. It shows that while South African trade performance has been good in recent years there is significant room to liberalise further as an adjunct to labour market reforms. Further trade policy liberalisation would bring about important equity and efficiency gains. Multilateral trade liberalisation has the potential to maximise the gains and ease the transition to freer trade for South Africa but unilateral liberalisation also deserves consideration.
    Keywords: dynamic gains from trade, gravity model, productivity, regional integration, revealed comparative advantage, South Africa, tariffs, trade network, trade performance, trade
    Date: 2009–09–07
  8. By: Marjit, Sugata; Yang, Lei; Xu, Xinpeng
    Abstract: This paper establishes a crucial link between international trade and local organization of production. By using the standard Heckscher-Ohlin-Samuelson model we show that international trade promotes fragmentation, entrepreneurship and outsourcing due to the capital cost effect and the scale effect. We also unveil one source of productivity and formalize a link between trade and productivity. We illustrate that both the scale effect and the flourish of entrepreneurial talent due to capital cost effect contribute to the improvement of productivity. For the import competing sector the productivity effect and the scale effect move against each other. Accordingly, the impacts of international trade on local outsourcing in export sector are different from that in import competing sector. Further, we find that the above findings still hold in a world where the intermediate goods are tradable. In addition, we demonstrate that a higher trading cost involved in trading the intermediate goods encourages fragmentation and local outsourcing.
    Keywords: Trade; Outsourcing; Entrepreneurship; Productivity
    JEL: D23 O47 F11 J54
    Date: 2009–11
  9. By: Ortega, Francesc; Peri, Giovanni
    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 show that bilateral migration flows are increasing in the income per capita gap between origin and destination. We also find that bilateral flows decrease significantly when the 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 only in the gravity equation. We find that immigration increases employment one for one, implying no crowding-out of natives. In addition, investment responds rapidly and vigorously, and total factor productivity is not affected. These results imply that immigration increases the total GDP of the receiving country in the short-run one-for-one, without affecting average wages or labor productivity. We also find that the effects of immigration are less beneficial when the receiving economy is in bad economic times.
    Keywords: international Migration; Push and Pull factors; Migration costs; Employment; Investment; Productivity
    JEL: J6 O15 J0
    Date: 2009–03–01
  10. By: Aaditya Mattoo (World Bank); Arvind Subramanian (Peterson Institute for International Economics); Dominique van der Mensbrugghe; Jianwu He
    Abstract: There is growing clamor in industrial countries for additional border taxes on imports from countries with lower carbon prices. While this paper confirms the findings of other research that unilateral emissions cuts by industrial countries will have minimal carbon leakage effects, output and exports of energy-intensive manufactures are projected to decline, potentially creating pressure for trade action. A key factor affecting the impact of any border taxes is whether they are based on the carbon content of imports or the carbon content of domestic production. The paper's quantitative estimates suggest that the former action when applied to all merchandise imports would address competitiveness and environmental concerns in high income countries but with serious consequences for trading partners. Border tax adjustment based on the carbon content in domestic production would broadly address the competitiveness concerns of producers in high income countries and less seriously damage developing country trade.
    Keywords: trade, trade policy, environment, climate change
    JEL: F13 F18 H23 Q56
    Date: 2009–12
  11. By: Marjit, Sugata; Mandal, Biswajit
    Abstract: We use the HOS model of international trade to find a link between trading (including domestic trading or retailing) costs and pattern of trade, not just its effect on volume of trade. Even if we use symmetric iceberg type trading costs, unlike conventional unit cost approach, we generate relative price effects and prove that higher trading costs in labor-abundant countries will restrict volume of world trade by working against factor endowment bias and conversely for the capital-abundant nation if the trading sector is labor intensive and vice versa. Asymmetric trading cost between goods may have paradoxical output effects. Relatively capital-abundant country will be worse off with increasing trading cost, whereas once engaged in trade the labor-abundant country may gain from further increase in trading cost.
    Keywords: International Trade; Factor-intensity; General equilibrium.
    JEL: D5 F1
    Date: 2009–09
  12. By: Jane Korinek; Patricia Sourdin
    Abstract: Maritime transport costs have a significant impact on the trade in agricultural goods. Maritime transport costs represent a high proportion of the imported value of agricultural products -- 10% on average, which is a similar level of magnitude as agricultural tariffs. This study shows that a doubling in the cost of shipping is associated with a 42% drop in trade on average in agricultural goods overall. The tendency to source imports from countries with low transport costs is therefore strong. Trade in some products is particularly affected by changes in maritime transport costs, in particular cereals and oilseeds, which are shipped in bulk. Time spent in transit also has a strong effect on trade: an extra day spent at sea on an the average sea voyage of 20 days implies a 4.5% drop in trade between a given pair of trading partners. Not only cost but also efficiency in getting agricultural goods to market are therefore important factors in explaining trade flows.
    Date: 2009–09–28
  13. By: Peter Havlik (The Vienna Institute for International Economic Studies, wiiw); Olga Pindyuk (The Vienna Institute for International Economic Studies, wiiw); Roman Stöllinger (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: This policy paper, prepared as part of the Background Study for the European Competitiveness Report 2009, analyses the external trade in goods and services between the EU and the BRICs. The paper starts with the analysis of the global position of the EU and the BRICs in world trade (using the IMF DOT and UN COMTRADE databases) and moves subsequently to a more detailed analysis of regional (individual EU countries' trade with the BRICs), commodity and industry-specific trade specialization patterns, using the Eurostat Comext database. The key features of services trade are addressed as well.
    Keywords: foreign trade, trade specialization, competitiveness, European Union, Brazil, Russia, India, China, Industry, International Trade and Competitiveness, Services
    JEL: F10 F14 F23
    Date: 2009–11
  14. By: Buch, Claudia M.; Koch, Cathérine Tahmee; Koetter, Michael
    Abstract: Modern trade theory emphasizes firm-level productivity differentials to explain the cross-border activities of non-financial firms. This study tests whether a productivity pecking order also determines international banking activities. Using a novel dataset that contains all German banks' international activities, we estimate the ordered probability of a presence abroad (extensive margin) and the volume of international assets (intensive margin). Methodologically, we enrich the conventional Heckman selection model to account for the self-selection of banks into different modes of foreign activities using an ordered probit. Four main findings emerge. First, similar to results for non-financial firms, a productivity pecking order drives bank internationalization. Second, only a few non-financial firms engage in international trade, but many banks hold nternational assets, and only a few large banks engage in foreign direct investment. Third, in addition to productivity, risk factors matter for international banking. Fourth, gravity-type variables have an important impact on international banking activities. --
    Keywords: International banking,extensive and intensive margin,productivity pecking order,ordered probit,selection models
    JEL: F3 G21
    Date: 2009
  15. By: Arribas, Iván; Pérez, Francisco; Tortosa-Ausina, Emili
    Abstract: One of the most remarkable features of globalization is the boost undergone by international trade triggered off by advances in technology that have contributed to reduce the cost of trade (e.g., transportation and communication costs). Under these circumstances, the importance of distance should have diminished over time, which would constitute a boon for countries located far from the main centers of economic activity. However, one of the best-established empirical results in international economics is that bilateral trade decreases with distance. This apparent contradiction has been labeled as the “missing globalization puzzle”. We propose yet another explanation to this apparent contradiction based on the concept of geographic neutrality, which we use to construct international trade integration indicators for two different scenarios, namely, when distance matters and when it does not. Our results indicate that the importance of distance varies greatly across countries, as revealed by disparate gaps between distance-corrected and distance-uncorrected trade integration indicators for different countries. Some factors rooted in the literature explain away the discrepancies, but their importance varies according to the trade integration indicator considered —trade openness or trade connection.
    Keywords: Geographic Neutrality; Globalization; Gravity Models; Network Analysis; Remoteness
    JEL: F15 F02 Z13
    Date: 2009
  16. By: Aaditya Mattoo; Arvind Subramanian; Dominique van der Mensbrugghe; Jianwu He
    Abstract: There is growing clamor in industrial countries for additional border taxes on imports from countries with lower carbon prices. A key factor affecting the impact of these taxes is whether they are based on the carbon content of imports or the carbon content in domestic production. Our quantitative estimates suggest that the former action when applied to all merchandise imports would address competitiveness and environmental concerns in high income countries but with serious consequences for trading partners. For example, China’s manufacturing exports would decline by one-fifth and those of all low- and middle-income countries by 8 percent; the corresponding declines in real income would be 3.7 percent and 2.4 percent. In contrast, border tax adjustment based on the carbon content in domestic production, especially if applied to both imports and exports, would broadly address the competitiveness concerns of producers in high income countries without seriously damaging developing-country trade. Therefore, as part of a comprehensive agreement on climate change, new WTO rules could be negotiated that would prohibit the extreme form of action while possibly allowing trade actions based on domestic carbon content as a safety valve.
    Keywords: trade; trade policy; environment; climate change
    JEL: F13 F18 H23 Q56
    Date: 2009–11
  17. By: Stratford Douglas (Department of Economics, West Virginia University); Shuichiro Nishioka (Department of Economics, West Virginia University)
    Abstract: Understanding international differences in the emissions intensity of trade and production is essential to understanding the effects of greenhouse gas limitation policies. We develop data on emissions from 48 industrial sectors in 32 countries and estimate the CO2 emissions intensity of production and trade. We find no evidence that developing countries specialize in emissions-intensive sectors; instead, emissions intensities differ systematically across countries because of differences in production techniques. Northern and Western European countries have the lowest emissions-intensity, while Southern and Eastern European countries and China have the highest emissions-intensity. Developed countries such as Japan and the United States whose trading partners are mostly developing countries import the most emissions.
    Keywords: Heckscher-Ohlin; Emissions Technique; CO2 Emissions; Environment
    JEL: F18 Q27 Q56
    Date: 2009
  18. By: Martin Berka; Mario J. Crucini
    Abstract: The national terms of trade, defined as the ratio of an export price index to an import price index has been extensively studied empirically. In this paper we construct an alternative measure, which we call the consumption terms of trade. This measure recognizes the fact that consumers and firms face different prices for the same items and consume different items. Using micro-data from the Economist Intelligence Unit at the retail level, we conduct a forensic analysis of the variation of the terms of trade of 38 countries. Using a novel variance decomposition method, we find that the bulk of terms of trade variation is accounted for by oil, automobiles and medicine. The other goods in our construct tend to exhibit balanced trade, providing a natural hedge against world price fluctuations. We find the consumption terms of trade at local prices is more volatile than at world prices, but the two are strongly positively correlated. The same commodities dominate the variance decomposition in both constructs, but variance shifts from oil to medicine, when local prices are used, presumably due to larger LOP deviations in the latter than the former. The significant differences in time paths of producer (conventional) and consumer terms of trade suggests the need to adapt the elasticities approach to trade balance adjustment to recognize different prices and baskets at the consumer and producer level.
    JEL: F0
    Date: 2009–12
  19. By: Inés Granda (Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales); Antonio Fonfría (Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales)
    Abstract: The notion that technology plays a key role in explaining trade performed was supported in the last decades by many empirical studies. In this paper we use a different perspective trying to analyse the effects of technology and economic inequalities on international trade inequalities. The theoretical framework where we built our empirical analysis is the technological gap aproach. We considered eight European countries and 13 manufacture industries in the time period 1995-2002. We made a panel data model with a cross-sectional unit of analysis: the Euclidean distance among countries in each industry. We considered the Euclidian distance as a proxy of inequality among countries in each industry. We observed that technology and economic inequalities affect trade inequality and that the effect depends on the technological contend of each industry.
    Keywords: Technology inequality, trade inequality, Euclidean distance, technological contend.
    Date: 2009
  20. By: Ando, Mitsuyo (Keio University); Estevadeordal, Antoni (Inter-American Development Bank); Volpe Martincus, Christian (Inter-American Development Bank)
    Abstract: This paper explores the relationship between preferential and multilateral trade liberalization at the sectoral level using a unique dataset that includes data on most favored nation (MFN) and bilateral preferential tariffs at the 4-digit ISIC level for 11 Latin American countries over the period 1985–2005. We find evidence of heterogeneity across sectors. While in some industries, complementary effects between both kinds of trade liberalization are observed, in others no significant links are detected and—in a few cases—even substitutability seems to prevail. Variation across sectors appears to be systematically related to both import demand elasticities and countries’ sectoral comparative advantages.
    Keywords: Trade liberalization; regionalism; Latin America
    JEL: C20 F13 F14
    Date: 2009–11–01
  21. By: Amiti, Mary; Weinstein, David E.
    Abstract: A striking feature of many financial crises is the collapse of exports relative to output. In the 2008 financial crisis, real world exports plunged 17 percent while GDP fell 5 percent. This paper examines whether the drying up of trade finance can help explain the large drops in exports relative to output. This paper is the first to establish a causal link between the health of banks providing trade finance and growth in a firm’s exports relative to its domestic sales. We overcome measurement and endogeneity issues by using a unique data set, covering the Japanese financial crises of the 1990s, which enables us to match exporters with the main bank that provides them with trade finance. Our point estimates are economically and statistically significant, suggesting that trade finance accounts for about one-third of the decline in Japanese exports in the financial crises of the 1990s.
    Keywords: exports; financial crisis; financial shocks; Japan; trade finance
    JEL: E32 E44 F40 G21
    Date: 2009–12
  22. By: Diakantoni, Antonia; Escaith, Hubert
    Abstract: Tariff water –the difference between bound and applied duties– provides relevant information on domestic trade policy and WTO trade negotiations. This paper examines the general and sectoral tariff structure of 120 economies, using exploratory data analysis. The analysis identifies the countries having similar overall structures across sectors, then analyses the specific patterns for each particular product sector. Finally, the degree of influence of countries' regional and socio-economic characteristics on their tariff structure is evaluated. A first element of conclusion is that tariff policies seem to protect more the labour intensive sectors, with some variations in the case of agriculture, rather than pursuing traditional protectionist industrial policies through "effective protection". A second element of conclusion is that the distinction between developing and developed countries is broadly relevant to characterize tariff policies, but not overly determinant.
    Keywords: Commercial Policy; Taxation; Tariff Duty; GATT-WTO; International Trade Agreements; MFN; Bound Tariff; Tariff Water.
    JEL: F13 H2
    Date: 2009–12–01
  23. By: Robert C. Feenstra; Benjamin R. Mandel; Marshall B. Reinsdorf; Matthew J. Slaughter
    Abstract: Since 1995, growth in productivity in the United States appears to have accelerated dramatically. In this paper, we argue that part of this apparent speed-up actually represents gains in the terms of trade and tariff reductions, especially for information-technology products. We demonstrate how unmeasured gains in the terms of trade and declines in tariffs can cause conventionally measured growth in real output and productivity to be overstated. Building on the GDP function approach of Diewert and Morrison, we develop methods for measuring these effects. From 1995 through 2006, the average growth rates of our alternative price indexes for U.S. imports are 1.5% per year lower than the growth rate of price indexes calculated using official methods. Thus properly measured terms-of-trade gain can account for close to 0.2 percentage points per year, or about 20%, of the 1995-2006 apparent increase in productivity growth for the U.S. economy. Bias in the price indexes used to deflate domestic output is a question beyond the scope of this paper, but if upward bias were also present in those indexes, this could offset some of the effects of mismeasurement of gains in terms of trade.
    JEL: F43 O47
    Date: 2009–12
  24. By: Ansgar Belke; Matthias Goecke; Martin Guenther
    Abstract: This paper deals with the impact of the $/Euro 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 $/Euro 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: 2009–10
  25. By: Robert Stehrer (The Vienna Institute for International Economic Studies, wiiw); Terry Ward; Sebastian Leitner (The Vienna Institute for International Economic Studies, wiiw); Michael Landesmann (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: This study has been prepared for the European Commission (Framework Contract B2/Entr/05/091) and is composed of five sections. The first three sections all deal with assessing the role of skills in the European economy: Section 1 undertakes a number of econometric exercises to analyse the relationship between skills and two indicators of competitiveness, productivity growth and exports. This and the next section represent new research effort in that a disaggregated database (by NACE 2-digit industries) has been used to analyse this relationship. Section 2 extends the analysis towards the relationship between skills and economic growth by analysing the role of skills in the context of a growth accounting exercise where skill changes are separately identified in affecting the 'quality of labour services' and hence the contribution of labour input to value added. Again the analysis exploits the detailed, disaggregated database made recently available through the EU KLEMS project. Section 3 presents an overview of skill compositional changes in different groups of EU economies. We distinguish between EU Northern economies, EU South (composed of Greece, Portugal and Spain) and the New Member States (restricted to only four countries, the Czech Republic, Hungary, Slovakia and Slovenia, for data reasons). In this section aggregate, economy-wide skill upgrading is decomposed into 'within' and 'between' (industry) changes in skill composition and the results show interesting patterns distinguished for more advanced and catching-up types of economies. The last two sections move away from the topic of reviewing the impact of skills on economic performance and the tracking of changing skill demands in EU economies. In section 4, a literature overview is provided of empirical studies regarding returns to skill acquisition through schooling and training. The idea behind this section is that returns to schooling and training reflect both skill shortages and also provide the basis for decisions with regard to skill acquisition. Finally, section 5 presents a country-by-country overview of how information is gathered with regard to skill gaps in different EU economies. The methodologies and sources for assessing skill shortages are reviewed. These are a necessary ingredient into any attempt of designing policies in relation to skill planning and the design of schooling and training institutions. The section closes with a recommendation on useful extension of European-wide vacancy statistics.
    Keywords: skills, competitiveness, European industry, Industry, International Trade and Competitiveness, Labour and Migration
    JEL: D24 F14 J24 O47 O52
    Date: 2009–08

This nep-int issue is ©2009 by Alessia A. Amighini. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.