nep-int New Economics Papers
on International Trade
Issue of 2010‒01‒23
twenty-six papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. Market Potential and Development By Thierry Mayer
  2. Trade, Foreign Inputs and Firms’ Decisions: Theory and Evidence By Maria Bas
  3. How do Different Exporters React to Exchange Rate Changes? Theory, Empirics and Aggregate Implications By Nicolas Berman; Philippe Martin; Thierry Mayer
  4. Local Export Spillovers in France By Pamina Koenig; Florian Mayneris; Sandra Poncet
  5. Spatial Price Discrimination in International Markets By Julien Martin
  6. Ethnic Networks, Information, and International Trade: Revisiting the Evidence By Gabriel J. Felbermayr; Benjamin Jung; Farid Toubal
  7. Do trade preferential agreements enhance the exports of developing countries? Evidence from the EU GSP By Aiello, Francesco; Demaria, Federica
  8. Trade, markup heterogeneity and misallocations By Paolo Epifani; Gino Gancia
  9. Export Sophistication and Economic Performance: Evidence from Chinese Provinces By Joachim Jarreau; Sandra Poncet
  10. Quality Sorting and Trade: Firm-Level Evidence for French Wine By Matthieu Crozet; Keith Head; Thierry Mayer
  11. Evolution of EU and its Member States' Competitiveness in International Trade By Louise Curran; Soledad Zignago
  12. EU15 Trade with Emerging Economies and Rentier States: Leveraging Geography By Guillaume Gaulier; Francoise Lemoine; Deniz Unal
  13. Spillovers from Multinationals to Heterogeneous Domestic Firms: Evidence from Hungary By Gabor Bekes; Jorn Kleinert; Farid Toubal
  14. Economic Crisis and Global Supply Chains By Agnes Benassy-Quere; Yvan Decreux; Lionel Fontagne; David Khoudour-Casteras
  15. Oil Prices, Geography and Endogenous Regionalism: Too Much Ado About (Almost) Nothing By Daniel Mirza; Habib Zitouna
  16. Welfare Effects of Trade Liberalization with Intra-industry Reallocations: The Importance of Preferences and Market Failures By Allan Sørensen
  17. Assessing Barriers to Trade in the Distribution and Telecom Sectors in Emerging Countries By Lionel Fontagne; Cristina Mitaritonna
  18. Look Before You Leap: The Economics of Free Trade and Income Redistribution By Erich Gundlach; Albert de Vaal
  19. A Picture of Tariff Protection Across the World in 2004 MAcMap-HS6, Version 2 By Houssein Boumellassa; David Laborde Debucquet; Cristina Mitaritonna
  20. Trade Impact of European Measures on GMOs Condemned by the WTO Panel By Anne-Celia Disdier; Lionel Fontagne
  21. Immigration, Income and Productivity of Host Countries: a Channel Accounting Approach By Mariya Aleksynska; Ahmed Tritah
  22. FDI AND SPILLOVERS IN CHINA: NON-LINEARITY AND ABSORPTIVE CAPACITY By Chen , Taotao; Kokko, Ari; Gustavsson Tingvall, Patrik
  23. Outsourcing and Technological Change By Bartel, Ann P.; Lach, Saul; Sicherman, Nachum
  24. Is Agglomeration really good for Growth? Global Efficiency and Interregional Equity By Fabio Cerina; F. Mureddu
  25. Malta and the Nineteenth Century Grain Trade: British free trade in a microcosm of Empire? By Paul Sharp
  26. Exporting, Capital Investment and Financial Constraints By Vlad Manole; Mariana Spatareanu

  1. By: Thierry Mayer
    Abstract: This paper provides evidence on the long-term impact of market potential on economic development. It derives from the New Economic Geography literature a structural estimation where the level of factors’ income of a country is related to its export capacity, labeled Market Access (MA) by Redding and Venables (2004), or Real Market Potential (RMP) by Head and Mayer (2004). The empirical part evaluates this market potential for all countries in the world with available trade data over the 1960-2003 period and relates it to income per capita. Overall results show that market potential is a powerful driver of increases in income per capita.
    Keywords: Market potential; economic geography; gravity; development
    JEL: F12
    Date: 2009–10
  2. By: Maria Bas
    Abstract: We investigate the effect of different channels through which input trade liberalization affects firms’ export decisions. We develop a trade model with heterogeneous firms and sectors of varying imported input intensity that reproduces different mechanisms through which the access to foreign inputs affects the performance of domestic firms. In industries with lower input tariffs (or more intensive in imported intermediate goods), more firms become exporters and export larger volumes. The effect of firm productivity on export status and export sales is greater for firms producing in these industries. The export selection process is reinforced by the access to foreign inputs. We provide strong empirical evidence in support of these theoretical predictions based on plant-level panel data from Argentina (1992-2001) and Chile (1990-1999). Our findings suggest that the impact of firm productivity on the probability of exporting and on the volume of exports is more pronounced for firms producing in industries that have a greater access to foreign inputs.
    Keywords: Firm heterogeneity; input trade liberalization; foreign intermediate goods; firm productivity and plant panel data
    JEL: F10 F12 F41
    Date: 2009–12
  3. By: Nicolas Berman; Philippe Martin; Thierry Mayer
    Abstract: This paper analyzes the reaction of exporters to exchange rate changes.We present a model where, in the presence of distribution costs in the export market, high and low productivity firms react differently to a depreciation. Whereas high productivity firms optimally raise their markup rather than the volume they export, low productivity firms choose the opposite strategy. Hence, pricing to market is both endogenous and heterogenous. This heterogeneity has important consequences for the aggregate impact of exchange rate movements. The presence of fixed costs to export means that only high productivity firms can export, firms which precisely react to an exchange rate depreciation by increasing their export price rather than their sales. We show that this selection effect can explain the weak impact of exchange rate movements on aggregate export volumes. We then test the main predictions of the model on a very rich French firm level data set with destination-specific export values and volumes on the period 1995-2005. Our results confirm that high performance firms react to a depreciation by increasing their export price rather than their export volume. The reverse is true for low productivity exporters. Pricing to market by exporters is also more pervasive in sectors and destination countries with higher distribution costs. Consistent with our theoretical framework, we show that the probability of firms to enter the export market following a depreciation increases. The extensive margin response to exchange rate changes is modest at the aggregate level because firms that enter, following a depreciation, are smaller relative to existing firms.
    Keywords: Gravity; heterogeneity; exchange rate; trade
    JEL: F12
    Date: 2009–12
  4. By: Pamina Koenig; Florian Mayneris; Sandra Poncet
    Abstract: This paper investigates the presence of local export spillovers on both the extensive (the decision to start exporting) and the intensive (the export volume) margins of trade, using data on French individual export flows, at the product-level and by destination country, between 1998 and 2003. We investigate whether the individual decision to start exporting and exported volume are influenced by the presence of nearby product and/or destination specific exporters, using a gravity-type equation estimated at the firmlevel. Spillovers are considered at a fine geographical level corresponding to employment areas (348 in France). We control for the new economic geography-type selection of firms into agglomerated areas, and for the local price effects of firms agglomeration. Results show evidence of the presence of export spillovers on the export decision but not on the exported volume. We interpret this as a first evidence of export spillovers acting through the fixed rather than the variable cost. Spillovers on the decision to start exporting are stronger when specific, by product and destination, and are not significant when considered on all products-all destinations. Moreover, export spillovers exhibit a spatial decay within France: the effect of other exporting firms on the export decision is stronger within employment areas and declines with distance.
    Keywords: Firm-level export data; product and destination specific spillovers; agglomeration
    JEL: F1 R12 L25
    Date: 2009–09
  5. By: Julien Martin
    Abstract: This paper presents a theoretical discussion and an empirical investigation of the impact of distance on the spatial pricing policy of exporting firms. The theoretical part points out the importance of transport costs formulation to determine how distance impacts fob prices. Assuming additive or iceberg transport costs might imply opposite predictions concerning this relationship. The empirical analysis is based on French export data providing us with bilateral export unit values at the firm and product level. The main empirical result is that French exporters set higher prices toward the more remote markets. This finding goes against the predictions of the main models of international trade (with or without quality) predicting either a nil or a negative impact of distance on prices at the firm level. It also questions the use of iceberg transport costs. A way to reconcile theory with the data is to introduce additive transport costs.
    Keywords: Spatial price discrimination; export prices; distance; firm level data
    JEL: F10 F14 L11
    Date: 2009–09
  6. By: Gabriel J. Felbermayr; Benjamin Jung; Farid Toubal
    Abstract: Influential empirical work by Rauch and Trindade (REStat, 2002) finds that Chinese ethnic networks of the magnitude observed in Southeast Asia increase bilateral trade by at least 60%. We argue that this estimate is upward biased due to omitted variable bias. Moreover, it is partly related to a preference effect rather than to enforcement and/or the availability of information. Applying a theory-based gravity model to ethnicity data for 1980 and 1990, and focusing on pure network effects, we find that the Chinese network leads to a more modest amount of trade creation of about 15%. Using new data on bilateral stocks of migrants from the World Bank for the year of 2000, we extend the analysis to all potential ethnic networks. We find, i.a., evidence for a Polish, a Turkish, a Mexican, or a Pakistani network. While confirming the existence of a Chinese network, its trade creating potential is dwarfed by other ethnic networks. The large heterogeneity in the trade-creating potential of different networks is, among other things, explained by the share of high-skilled immigrants, the degree of ethnic fragmentation, and GDP per capita.
    Keywords: Gravity model; international trade; network effects; international migration
    JEL: F12 F22
    Date: 2009–12
  7. By: Aiello, Francesco; Demaria, Federica
    Abstract: The EU grants preferential access to its imports from developing countries under several trade agreements. The widest arrangement, in terms of country and product coverage, is the Generalised System of Preferences (GSP) through which, since 1971, virtually all developing countries have received preferential treatment when exporting to world markets. This paper evaluates the impact of GSP in enhancing developing countries’ exports to EU markets. It is based on the estimation of a gravity model for a sample of 769 products exported from 169 countries to EU over the period 2001-2004. While, from an econometric point of view, the estimation methods take into account unobservable country heterogeneity as well as the potential selection bias which zero-trade values pose, the empirical setting considers an explicit measure of trade preferences, the margin of preferences. The analysis offers new empirical evidence that the impact of GSP on developing countries’ agricultural exports to the EU is positive.
    Keywords: Trade Preferences; Developing Countries; Agricultural Trade
    JEL: F13 C33
    Date: 2009–12–15
  8. By: Paolo Epifani; Gino Gancia
    Abstract: Markups vary widely across industries and countries, their heterogeneity has increased overtime and asymmetric exposure to international trade seems partly responsible for this phenomenon. In this paper, we study how the entire distribution of markups a¤ects resource misallocation and welfare in a general equilibrium framework encompassing a large class of models with imperfect competition. We then identify conditions under which trade opening, by changing the distribution of markups, may reduce welfare. Our approach is novel both in its generality and in the emphasis on the second moment of the markup distribution. Two broad policy recommendations stand out from the analysis. First, whenever there is heterogeneity in markups, be it due to trade or other distortions, there is also an intersectoral misallocation, so that the equilibrium can be improved upon with an appropriate intervention. This suggests that trade liberalization and domestic industrial policy are complementary. Second, ensuring free entry is a crucial precondition to prevent adverse effects from asymmetric trade opening.
    Keywords: Markups, dispersion of market power, procompetitive effect, trade and welfare
    JEL: F12 F15
    Date: 2010–01
  9. By: Joachim Jarreau; Sandra Poncet
    Abstract: We consider the effect of export sophistication on economic performance using regional variations within a single country (China) over the period 1997-2007. We confirm Hausmann, Hwang and Rodrik (2007)’s prediction that regions that engage in the cost discovery process of developing sophisticated goods grasp greater gains from globalization and grow faster. We find that these gains are limited to to export activities undertaken by domestic entities. Direct gains do not appear to derive from foreign entities typically engaged in processing trade even though they are the main contributors to the global upgrading of China’s exports. Our findings globally suggest that the expected gains from exporting higher productivity goods are not unconditional, they are greater for provinces already blessed by high incomes, better market centrality and higher trade performance and Foreign Direct Investment attractiveness. These features consistent with evidence of increasing returns to sophistication are unfortunately likely to contribute further to the current widening of spatial economic disparities across China.
    Keywords: Export sophistication; economic growth; outward orientation; China
    JEL: F1 O1 R1
    Date: 2009–12
  10. By: Matthieu Crozet; Keith Head; Thierry Mayer
    Abstract: Firm-level regressions show that Champagne producers that receive better ratings from wine guides also export to more markets, charge higher prices, and sell more in each market. Our method corrects for a severe selection bias predicted by the model. By using direct measures of quality, we can recover estimates of parameters from a Melitz-based model of heterogeneous firms. We then regress averages of the quality, price, and quantity shipped to a country on measures of its attractiveness and entry costs. Champagne exhibits quality-sorting: more attractive markets tend to have lower average qualities and prices, but higher quantities.
    Keywords: Gravity; heterogeneity; quality; trade
    JEL: F12
    Date: 2009–07
  11. By: Louise Curran; Soledad Zignago
    Abstract: After a long period of domination by the industrialised countries of the North, international trade is today driven by the dynamism of developing countries. This work seeks to analyse how the EU is performing in the light of this emerging competitive threat, by comparing the EU’s export performance on the world market with that of its key competitors between 1995 and 2004. The figures show that the EU has performed particularly well in the more upmarket, expensive and high tech levels of the market. Most notably, Europe is the market leader in up-market products, with almost 31% of the world market in 2004 (versus 20% of the market for all goods). In addition, there is evidence that the EU’s recent enlargement has helped it to maintain a strong performance, thanks to an increasing division of labour within the region. The new member states have become important suppliers of intermediate goods to key EU producers, and in particular German firms, thus becoming increasingly vital to EU competitiveness.
    Keywords: EU; competitiveness; market shares; export prices
    JEL: F1
    Date: 2009–06
  12. By: Guillaume Gaulier; Francoise Lemoine; Deniz Unal
    Abstract: During the past ten years, the emerging economies, exporters of manufactured products or services, and the rentier states, exporters of primary products, have eroded the dominant position of the developed countries in world markets. The EU15 has lost less ground than the US or Japan. The EU15 has taken advantage of its geographical location to enhance its exports to the emerging and rentier countries located in Europe & Periphery. Regional integration has also favoured the upgrading of the EU15 imports from its emerging neighbours. The EU15 trade with emerging markets in Asia have strengthened the latter’s specialisation in high-technology products at low price, and the EU15 specialisation in hightechnology and high-quality products.
    Keywords: Trade; emerging economies; rentier states; European Union; export prices
    JEL: F1 F14 F5
    Date: 2009–10
  13. By: Gabor Bekes; Jorn Kleinert; Farid Toubal
    Abstract: Technological and informational spillovers from multinational firms can be particularly beneficial to domestic firms especially in less developed economies. The technological superiority and management experience of foreign multinational firms yield various opportunities for learning. Yet, the importance of foreign firm’s spillovers might vary with respect to the different intensities of the linkage between the multinational and the domestic firm, the differences in firms’ absorptive capacity and their ability to face competition. We show using firm-level Hungarian data that positive spillovers from multinationals depend on the level of productivity and the exporting status of the domestic firm. Larger and more productive firms are more able to reap spillovers from multinationals than smaller and less productive firms. The export status, in contrast, is of minor importance.
    Keywords: FDI; multinationals; productivity; spillover; quantile regression
    JEL: F23 D21 D24 R12 R30
    Date: 2009–12
  14. By: Agnes Benassy-Quere; Yvan Decreux; Lionel Fontagne; David Khoudour-Casteras
    Abstract: Much attention has been paid to the sharp fall in world trade associated with the economic crisis during the last quarter of 2008 and the first quarter of 2009. Alarming forecasts have been published for the whole year of 2009 and several explanations have been offered. In particular, beyond the credit crunch and the global drop in demand, it has been argued that, due to globalisation and the fragmentation of supply chains, world trade will inevitably overshoot the shock in world GDP. We contest this view using both simple accounting calculations and a simulation of the multi-region, multi-sector Computable General Equilibrium (CGE) model, which explicitly models input-output relations within and between sectors. Using the CGE MIRAGE, we ask whether the most recent forecasts of GDP change, together with a twist in the composition of demand (to the detriment of capital goods), a halt in the trend towards the reduction in trade costs and a collapse in the oil price can replicate a very similar multiplier effect on world trade to that currently being experienced. Firstly, we find that, when trade flows are deflated by the price of the world GDP, the order of magnitude for trade decline in 2009 is 8.9 percent in our exercise. However, when trade flows are deflated by the sector-specific trade prices computed by the model, the drop in world trade is much more limited (-2.4 percent). Hence a large part of the fall in trade predicted by the model comes from a relative price effect. Secondly, while this fall is still more than the –1.3% drop in world GDP forecast by the IMF in April 2009, even this magnification effect disappears when GDPs are aggregated using current exchange rates, which is the appropriate reference, rather than PPP weights. Thirdly, while, our paper does not support the hypothesis of a systematic over-shooting of trade due to globalisation and the fragmentation of supply chains, it seems likely that additional factors such as the credit shortage must have played a role in the short run to explain the sharp fall in world trade.
    Keywords: International trade; global crisis; global supply chains; CGE modelling
    JEL: F17 F43
    Date: 2009–07
  15. By: Daniel Mirza; Habib Zitouna
    Abstract: This paper studies the effect of oil prices on the geography of international trade. We model transport costs as a function of variable and fixed costs. By affecting the first cost component, oil prices can then modify the structure of transportation costs across partners. This, we argue, acts as a factor of distortion in relative prices, thereby creating a reallocation of trade at the expense of remote countries. In that respect, an increase in oil prices should favor regionalism. This mechanism is empirically tested using data on US bilateral imports and transportation costs. The empirical results are consistent with the theoretical intuition. But, the elasticity of freight rates to oil prices, directly linked to geographical distance, appears to be low: between 0.088 for close to US countries and 0.103 for faraway ones. We then estimate the contribution of the dramatic increase in oil prices, in recent years, to relative changes in the countries’ probability to export to the US (extensive margins) along with their relative market shares (intensive margins). We find that the recent oil price increases that took place after 1999 have had only a maigre contribution: the last oil shock had contributed marginally to increase Canada and Mexico’s relative performance.
    Keywords: Regionalism; oil prices; geography; transport
    JEL: F15 F19 F20 L91
    Date: 2009–10
  16. By: Allan Sørensen (School of Economics and Management, University of Aarhus, Denmark)
    Abstract: This paper shows that the novel gains from trade liberalization driven by intra-industry reallocations (Melitz (2003)) are not robust to changes in the preference structure. In the Melitz (2003) setting the unambigousness of the welfare effect depends crucially on the assumption of traditional CES pref- erences, which ensures equivalence of the market equilibrium and the social planner solution. For other preferences this equivalence is broken and trade liberalization may reduce welfare by magnifying market failures. An exact condition for trade liberalization to reduce overall welfare is derived under the assumptions of generalized CES preferences and a specific distribution (Pareto) of firm heterogeneity.
    Keywords: Heterogenous firms, monopolistic competition, trade liberalization, welfare
    JEL: D6 F12 F15
    Date: 2010–01–14
  17. By: Lionel Fontagne; Cristina Mitaritonna
    Abstract: We compute ad valorem equivalents (AVEs) for the regulation in three service sectors (i.e. fixed telecom, mobile telecom, distribution) applied by selected emerging countries. We start with qualitative information on the restrictions applied by each country in each sector on the basis of which we apply a multivariate statistical approach, to transform this qualitative data into a trade restrictiveness synthetic index (STRI). In a second stage we estimate the average impact of STRI on price cost margins, using a method avoiding the usual two-stage estimation. In the third stage, this impact is used to calculate the AVE of the STRI estimated in the first step. It is shown that the STRI has a significant effect on the price-cost margins of the individual firms only when controlled for Regional trade Agreements and exception to the MFN clause in the considered sector. Lastly, we compute tariff equivalents for the STRIs previously calculated using the estimated impact. More than half our AVEs are larger than 50% and one AVE out of six is above 100%.
    Keywords: Services; ad valorem equivalents
    JEL: F13
    Date: 2009–12
  18. By: Erich Gundlach; Albert de Vaal
    Abstract: Economists tend to exalt the virtues of free international trade, while politicians are more skeptical. This paper suggests that this is the case because politicians mainly worry about the income distribution effects of trade liberalization, while economists focus on efficiency. Using textbook economic analyses we show that compensating the income distribution effects of free trade may be more complicated and hazardous than is often assumed, at least from a comparative static point of view. Hence politicians may favor trade liberalization only when distributional effects are ignored. By using a multitude of analytical tools and approaches, our paper also makes a useful teaching case for undergraduate students to test and gear their thinking about trade policy issues
    Keywords: Trade policy, income distribution, compensation schemes, undergraduate teaching
    JEL: A20 F13 H20
    Date: 2010–01
  19. By: Houssein Boumellassa; David Laborde Debucquet; Cristina Mitaritonna
    Abstract: MAcMap-HS6v2 is a comprehensive database providing detailed protection data at the 6 digit level of the harmonized system (HS6), i.e. more than 5000 products, for the year 2004. It includes ad valorem equivalents on MFN tariffs for 169 importing countries, as well as bilateral applied protection, together with preferential provisions for 220 partners. Specific and compound tariffs and tariff rate quotasdata are also provided, at the same level of detail. In this paper we present the methodology used for building this new database, paying attention to the consequences from such choices. We then provide evidence on the world applied protection in 2004. Finally we investigate variations in tariffs occurred between 2001 and 2004.
    Keywords: Trade policies; tariffs; database; ad valorem equivalent
    JEL: F13
    Date: 2009–09
  20. By: Anne-Celia Disdier; Lionel Fontagne
    Abstract: In May 2003, the United States, Canada and Argentina launched a World Trade Organization (WTO) case against the European Union concerning its authorization regime for biotech products. In November 2006, the WTO condemned this regime. Using a gravity equation, we estimate the reduction in exports of potentially affected products from the complainants to the European Union. Our results suggest that the European moratorium and product-specific measures have a negative effect on trade, as do safeguard measures adopted by Germany, Italy and Greece.
    Keywords: GMOs; protection; WTO panels; environment
    JEL: F13 F18
    Date: 2009–07
  21. By: Mariya Aleksynska; Ahmed Tritah
    Abstract: This paper investigates the contribution of immigration to income and productivity of host countries. Using a dataset constructed from census data and labor force surveys for 20 OECD countries in the period from 1960 to 2005, we explore the information on age and educational attainment of immigrants to assess the contribution of immigration to income components: changes in physical capital, human capital, employment, and total factor productivity. We combine level accounting approach with panel income regressions, and also account for the endogeneity of migration choices to productivity shocks. Our main findings are that, overall, higher shares of immigrants over natives have a positive effect on income and productivity of their host countries. Under the assumption that older immigrants are also the ones with the longest duration of stay, this effect is due to the long run changes in TFP, and is robust to educational disparities between immigrants and natives. The decomposition by age and education suggests that only unskilled immigrants have a non-neutral impact on income and productivity, which is negative in the short run but positive, and larger in magnitude, in the long run. We also find a dispersed impact of the presence of other immigrant groups on some income channels.
    Keywords: International migration; productivity; income; employment; instrumental variable; channel accounting
    JEL: F22 J24 J31 O31
    Date: 2009–10
  22. By: Chen , Taotao (School of Economics and Management); Kokko, Ari (China Economic Research Center); Gustavsson Tingvall, Patrik (China Economic Research Center)
    Abstract: Using a fixed effect variance decomposition model, we estimate SUR models to analyze FDI spillovers from contagion and spillovers from competition on local firms in China. While the former type of spillover mainly depends on the degree of foreign presence in the local industry, the latter kind is related to how foreign and local firms interact. The main conclusion is that FDI has been beneficial for the Chinese economy, but that spillovers are not evenly distributed across firms and industries. Spillovers from contagion tend to exhibit an inverse U-shaped pattern with respect to the degree of foreign presence at the industry level, whereas spillovers from competition exhibit a more linear pattern with respect to the level of technological sophistication in foreign firms. Industries with high absorptive capacity and/or high efficiency are the ones best equipped to take advantage of spillovers from foreign-owned firms. Moreover, there are signs of substantial competition between foreign-owned firms: an increase in the foreign capital share in an industry seems to have a stronger effect on incumbent foreign-owned firms than on domestic firms.
    Keywords: Spillovers; China; FDI; Fixed effect variance decomposition
    JEL: C33 F21 F23 O53
    Date: 2010–01–01
  23. By: Bartel, Ann P. (Columbia University); Lach, Saul (Hebrew University, Jerusalem); Sicherman, Nachum (Columbia University)
    Abstract: We present a dynamic model where the probability of outsourcing production is increasing in the firm’s expectation of technological change. As the pace of innovations in production technologies increases, the less time the firm has to amortize the sunk costs associated with purchasing and adopting new technologies to produce in-house. Therefore, purchasing from market suppliers, who can afford to use the latest technology, becomes relatively cheaper. The predictions of the model are tested using a panel dataset on Spanish firms for the time period 1990 through 2002. In order to address potential endogeneity problems, we use an exogenous proxy for technological change, namely the number of patents granted by the U.S. patent office classified by technological class. We map the technological classes to the Spanish industrial sectors in which the patents are used and provide causal evidence of the impact of expected technological change on the likelihood and extent of production outsourcing. No prior study has been able to provide such causal evidence. Our results are robust to the inclusion of detailed characteristics of the firms as well as firm fixed effects.
    Keywords: outsourcing, technological change
    JEL: J21 L23 L24 O33
    Date: 2009–12
  24. By: Fabio Cerina; F. Mureddu
    Abstract: We propose a New Economic Geography and Growth (NEGG) model able to reconcile theory with empirical evidence and current regional policy rules. By extending Baldwin et al. (2001) with an additional non-tradable services sector which benefits from localized intersectoral knowledge spillovers coming from the industrial sector, we show that aggregate growth and interregional equity do not necessarily conflict. In particular, we show that an equal distribution of industrial activities among regions is good for aggregate real growth when: 1) the importance of services in agents’ preferences 2) the spatial range of localized intertemporal knowledge spillovers and 3) the intensity of localized intersectoral knowledge are all large enough. Unlike other NEGG works, these results are consistent with the empirical evidence according to which the trade-off between aggregate growth and interregional equity loses relevance in more advanced stages of development. Moreover, our model provides a theoretical basis to EU and US regional policies which favour dispersion of industrial activities. Finally, an important by-product of our model is that we show that regional growth rates of real income always diverge when agglomeration takes place, being lower in the periphery. These results have strong policy implications as they suggest that concentrating industrial activities in only one region may be welfare – harming for both the less industrialized region and at the aggregate level.
    Keywords: Economic geography; efficiency-equity trade-off; intersectoral localized knowledge spillovers; non tradables; growth.
    JEL: O33 O41 R10
    Date: 2009
  25. By: Paul Sharp (Department of Economics, University of Copenhagen)
    Abstract: It is often assumed that Britain’s colonies followed the British doctrine of free trade in the second half of the nineteenth century. Malta, which became a British colony in 1814, did indeed become an early free trader. However, she failed to liberalize the grain trade, even when the mother country famously repealed the Corn Laws. This paper documents that although institutions changed over the years, the ad valorem equivalents of the duties on wheat did not. The reason for this seems to be that administrators were convinced that is was not possible to fund government spending in any other way. The duties on grain in Malta were therefore not protectionist, but rather for revenue purposes, in contrast to the UK Corn Laws. Taxing an inelastic demand for foreign wheat by Maltese, who were unable to grow enough food to support themselves, was certainly an effective way of raising revenue, but probably not the fairest one, as contemporaries were well aware.
    Keywords: Malta; wheat; trade policy; British Empire
    JEL: N4 N5 N7
    Date: 2010–01
  26. By: Vlad Manole; Mariana Spatareanu
    Abstract: Many firms cite financial constraints as some of the most important impediments to their investment and growth. Using a unique data set from the Czech Republic this paper investigates the importance of financing constraints in the context of exporters. It finds that exporters are less financially constrained than non-exporters. However, after carefully correcting for possible endogeneity and selection issues, the evidence points to less constrained firms self-selecting into exporting rather than exporting alleviating firms' financial constraints. The analysis suggests that easing firms' credit constraints may play an important role in facilitating exporting and that welldeveloped financial markets that would decrease firms' cost of external finance may be needed in order to benefit from selling in foreign markets.
    Keywords: exporting, cash flow, financial constraints
    JEL: F21 F23 F36
    Date: 2009

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