nep-int New Economics Papers
on International Trade
Issue of 2010‒03‒20
eighteen papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. The effect of the Uruguay Round on the intensive and extensive margins of trade By Ines Buono; Guy Lalanne
  2. How Important Are Non-Tariff Barriers to Agricultural Trade within ECOWAS? By Seck, Abdoulaye; Cissokho, Lassana; Makpayo, Kossi; Haughton, Jonathan
  3. Exports and productivity selection effects for Dutch firms By Henk Kox; Hugo Rojas-Romagosa
  4. Heterogeneous firms and import quality: evidence from transaction-level prices By Benjamin R. Mandel
  5. A Decomposition of Ricardian Trade Gains By Toru Kikuchi; Ngo Van Long
  6. Ukrainian Firm-Level Export Dynamics: Structural Analysis By Yevgeniya Shevtsova
  7. International Trade and Productivity: Firm-Level Evidence from Ukraine By Yevgeniya Shevtsova
  8. Outsourcing versus Integration at Home or Abroad By Stefano Federico
  9. Trade Liberalization, Competition and Growth By Omar Licandro; Antonio Navas Ruiz
  10. Civil War in a Globalized World: Diplomacy and Trade By Mathieu Couttenier; Raphael Soubeyran
  11. Structural Estimation of Variety Gains from Trade Integration in a Heterogeneous Firms Framework By Victor Rivas
  12. How costly is rent-seeking to diversification : an empirical approach By Felipe Starosta De Waldemar
  13. Varieties and the terms of trade By Free Huizinga; Sjak Smulders
  14. Shake Hands or Shake Apart? International Relationship of Japan with Global Blocs By Toshihiro OKUBO
  15. Globalization, product differentiation and wage inequality By Paulo Bastos; Odd Rune Straume
  16. Were Canadian Exports to the U.S. Curtailed by the Post-9/11 Thickening of the U.S. Border? By Grady, Patrick
  17. COMPETITIVENESS OF WINE EXPORT FROM THE REPUBLIC OF SERBIA By Vlahovic, Branislav; Puskaric, Anton; Maksimovic, Branka
  18. The Collapse of Global Trade: What a Tangled Web We Weave By Spehar, Ann / AOS

  1. By: Ines Buono (Bank of Italy); Guy Lalanne (INSEE and Crest-LMa)
    Abstract: Do tariffs inhibit trade flows by limiting the entry of exporting firms (`extensive margin') or by restricting the average volume exported by each firm (`intensive margin')? Using a gravity equation approach, we analyze how the decrease in tariffs promoted during the 1990s by the Uruguay Round multilateral trade agreement affected the trade margins of French firms across 57 sectors and in 147 countries, from 1993 to 2002. Our main contribution is to estimate the elasticity of trade for both margins, controlling for the unobserved heterogeneity of trade flows thanks to a three-dimensional panel and to time-varying tariffs as a measure of variable trade costs. Our results show that the number of firms exporting in a given sector to a given destination is related to the level of tariffs. But they also show that the decrease in tariffs determined by the implementation of the Uruguay Round did not lead more firms to export and instead, only encouraged incumbent exporters to increase their shipments. We control for two problems that may affect our basic specification: tariff changes may be endogenous and zero flows are not included. Our results are confirmed - even when the extensive margin is significant, its contribution is very small.
    Keywords: tariffs, trade margins, Uruguay Round
    JEL: F10 F13 F14
    Date: 2010–02
  2. By: Seck, Abdoulaye (Suffolk University & Universite Cheikh Anta Diop, Economics); Cissokho, Lassana (Suffolk University, Economics); Makpayo, Kossi (Suffolk University, Economics); Haughton, Jonathan (Suffolk University & Beacon Hill Institute, Economics)
    Abstract: It is widely believed that the countries of Africa trade relatively little with the outside world, and among themselves, despite an extensive network of regional trade agreements. We examine this proposition by focusing on agricultural trade. Specifically, we ask whether non-tariff barriers (NTBs) are stunting agricultural trade within ECOWAS, a grouping of 15 countries in West Africa that has removed tariffs on agricultural trade among its members. Our survey of truckers in Tambacounda (Senegal) in August 2009 found evidence of extensive bribery by police and border officials, effectively representing a barrier to trading.
    Keywords: Non-tariff barriers; ECOWAS; gravity model; regional trade agreements; Africa
    JEL: F15 Q17 O55 O24
    Date: 2010–03–06
  3. By: Henk Kox; Hugo Rojas-Romagosa
    Abstract: This study presents recently available data on the microstructure of Dutch exports and the relation between export participation and productivity at the .rm and establishment-level. We test whether recent theories of international trade with heterogeneous .rms can explain the patterns in the Dutch data. We .nd signi.cant evidence that .rms self-select into export participation, even after controlling for sector and .rm-speci.c characteristics. In general, only the most productive Dutch .rms participate in exports and foreign direct investment. In addition, we .nd evidence for the learning-by-exporting hypothesis once we control for the .rm.s distance to the international productivity frontier.
    Keywords: Exports; foreign direct investment; productivity; self selection by firms
    JEL: D21 D24 F12 F23 L1
    Date: 2010–03
  4. By: Benjamin R. Mandel
    Abstract: A key emerging insight in international economics is that the scope for quality differentiation can help to explain patterns in export prices at the level of products or firms. In this paper, a unified theoretical framework of firm heterogeneity in cost and quality is brought to bear on an expansive data set of U.S. import transaction prices collected by the Bureau of Labor Statistics (BLS). The higher moments of the price distribution are used to identify the scope for quality differentiation at the detailed product level; highly differentiated products account for about half of U.S. import value. The product classification is then used to evaluate two claims in the nascent firm-level trade quality literature. First, the positive link between exporter capability and price is found to depend on the nature of the product: productive exporters simultaneously specialize in high-priced varieties in quality differentiated goods and low-priced varieties in more homogeneous goods. Second, a novel time series test documents firm sorting into export markets according to output quality.
    Date: 2010
  5. By: Toru Kikuchi (Graduate School of Economics, Kobe University); Ngo Van Long (Department of Economics, McGill University)
    Abstract: Teaching trade patterns and trade gains under the Ricardian trade model is one of the most difficult tasks for teachers of international economics. We propose that the utilization of both the PPF and a labor market graph makes the understanding of Ricardian trade gains much easier.
    Keywords: Trade Gains; Ricardian Trade Model; Graph of the Labor Market
    JEL: F10
    Date: 2010–03
  6. By: Yevgeniya Shevtsova
    Abstract: In the following chapter the focus will remain on exploring the linkages between plants' exporting activity and productivity performance. However, now I will try to widen the scope of the study to explore export dynamics at the intensive and extensive margin. Indeed the existence of plant-level productivity gains from international market exposure is the corner-stone of the trade policy. Productivity gains from engagement in international trade usually serve as a main justification of the trade liberalization policies. Pre-entry productivity gains are mainly associated with a higher level of competition in international markets, which requires potential entrants to improve their efficiency before the entry. Post-entry gains usually come in the form of increased returns to innovation, economies of scale, better managerial practices, reduced X-inefficiency, etc.
    Date: 2010
  7. By: Yevgeniya Shevtsova
    Abstract: In the last quarter-century there has been a considerable increase in the openness of the Ukrainian economy. The percentage of Ukrainian exporting firms has risen sharply after the collapse of the Soviet Union in 1991 and has been exhibiting strong positive dynamics since then. At the same time the structure of Ukrainian export has undergone through some significant changes. Row materials and semi-processed products that constituted the largest part of the Ukrainian export during 1990s have been partially replaced by the manufactured products of higher levels of processing. In the current paper the research focus is made on exploring export-productivity linkages at the level of individual firms on the basis of the database covering main output sectors of the Ukrainian economy for the period 2000-2005. During the past decade increasing number of studies has emerged on the link between exporting activity and productivity at the micro-level. The literature suggested a number of ways by which engaging into international trade could be beneficial to the firm's as well as aggregate productivity growth.
    Date: 2010
  8. By: Stefano Federico (Bank of Italy, Economics and International Relations)
    Abstract: Using data on a sample of Italian manufacturing companies, this paper analyzes the location (at home or abroad) and the mode of organization (outsourcing versus integration) of intermediate inputs production. We find evidence of a productivity ordering (largely consistent with the assumptions in Antràs and Helpman 2004) where foreign integration is chosen by the most productive and domestic outsourcing by the least productive firms; those with medium-high productivity choose domestic integration, those with medium-low productivity foreign outsourcing. We also find that the preference for integration over outsourcing is positively related to some indicators of headquarter intensity, notably capital intensity, as predicted by Antràs (2003) and Antràs and Helpman (2004).
    Keywords: international outsourcing, foreign direct investment, intra-firm trade, productivity
    JEL: F12 F23 L22
    Date: 2010–02
  9. By: Omar Licandro; Antonio Navas Ruiz
    Abstract: Increasing evidence support the claim that international trade enhances innovation and productivity growth through an increase in competition. This paper develops a two-country endogenous growth model, with firm specific R&D and a continuum of oligopolistic sectors under Cournot competition to provide a theoretical support to this claim. Since countries are assumed to produce the same set of varieties, trade openness makes markets more competitive, reducing prices and increasing quantities. Under Cournot competition, trade is pro-competitive. Since firms undertake cost reducing innovations, the increase in production induced by a more competitive market push firms to innovate more. Consequently, a reduction on trade barriers enhances growth by reducing domestic firm's market power.
    Keywords: Trade Openness, Growth, Competition
    JEL: F13 F43 O3
    Date: 2010–03–04
  10. By: Mathieu Couttenier; Raphael Soubeyran
    Abstract: We consider the impact of diplomatic intervention in civil wars on international trade. Using a large data set over the period 1948-2005, we obtain two striking results: (i) diplomatic intervention has a positive effect on trade for the country in which the civil war occurs (target country); and (ii) bilateral trade between the target and intervening country does not increase more than trade between the target country and the other countries. We argue that intervention induces an enhancement of trade-promoting capital in the target country and show that diplomatic intervention has a positive effect on institutional quality in the target country.
    Date: 2010–02
  11. By: Victor Rivas
    Abstract: The present paper structurally estimates the impact of increased variety in the EU and Asia over the period from 1989 to 2009. Using the most disaggregated import data available, we document that the number of varieties imported by the EU, defined as the number of import categories multiplied by the average number of source countries for each category, quadrupled, whereas it sextupled in Asia. About half of this increase was due to increases in the number of categories and half due to a doubling of the number of countries from which the EU and Asia imported each good. Using the Feenstra's (1994) methodology we estimate 35,000 elasticities and then construct an aggregate price index that is robust to common changes in quality variation, the arbitrary splitting of categories, the introduction of new goods, and other data problems. After reconstructing the EU and Asia import price indices, we found that the price of the EU imports has been falling at a rate 1.24 percent per year faster than one would have thought without taking new varieties into account. The variety gains for Asia are even higher - 2.69 percent per year.
    Keywords: Variety gains, structural estimation, trade integration, heterogenous firms.
    JEL: C68 F12 F14 F15 F17 R12 R13 R23
    Date: 2010–01–02
  12. By: Felipe Starosta De Waldemar (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I)
    Abstract: The empirical U-shaped pattern between product diversification and economic development has been widely examined, but here we analyze the determinants of diversification. We find that a high level of rent-seeking activities has a large impact on the diversification of nations : in countries where rent-seeking is a widespread practice, the number of products being exported will be smaller and its value more concentrated in certain goods. Our analysis embraces a large sample of more than 130 countries between 1995 and 2007, using a highly disaggregated export database comprising more than 5000 products. To establish this relationship, we use a Generalized Method of Moments estimation, controlling for endogeneity originated from reverse causality. These empirical predictions contribute to the idea that resources allocated to harm diversification are an important binding constraint for developing countries.
    Keywords: Product diversification, international trade, economic development.
    Date: 2010–01
  13. By: Free Huizinga; Sjak Smulders
    Abstract: This paper analyzes the dynamic adjustment of the terms of trade in an intertemporal, two country model with endogenous product variety. In the base model all workers are identical. In an extended version the development of new varieties requires skilled labor while manufacturing uses skilled and unskilled labor. In the model without skill, a population increase in one of the countries has no effect on its terms of trade, not even in the short run. In the model with skill, the terms of trade initially worsen, but eventually return to their original level. The terms of trade immediately and permanently worsen in response to a productivity increase in manufacturing. However, they gradually improve if the productivity in variety research rises. If productivity in both activities rises equiproportionally, the terms of trade respond in the same manner as after a population shock.
    Keywords: terms of trade; product variety; scale effect; productivity
    JEL: F12 F41 O31 O41
    Date: 2009–07
  14. By: Toshihiro OKUBO (Research Institute for Economics and Business Administration, Kobe University)
    Abstract: Despite the world-wide spread of economic blocs following the Great Depression, Japan sought to find trade partners outside of its own bloc and to maintain a relationship with some foreign blocs, in particular maintaining a connection with the British Commonwealth and the Sterling bloc. The 1930s bloc economies did not isolate Japan. Also, in the early period of the cold war after World War II, capitalist blocs did not significantly isolate Japan. Econometric analysis of Japan’s trade and world trade over the period from 1890 to 1955 based on a development of a gravity equation illustrates these statements.
    Keywords: Trade/ Currency Blocs; Bloc Economy; Trade Diversion; Gravity equation; GATT
    JEL: F10 F15 N70
    Date: 2010–02
  15. By: Paulo Bastos (Research Department, Inter-American Development Bank); Odd Rune Straume (Universidade do Minho - NIPE)
    Abstract: This paper develops a two-country, general equilibrium model of oligopoly in which the degree of horizontal product differentiation is endogenously determined by firms' strategic investments in product innovation. Consumers seek variety and product innovation is more skill intensive than production. Greater import competition increases innovation incentives, and thereby the relative demand for skill. An intraindustry trade expansion following trade liberalization can therefore increase wage inequality between skilled and unskilled workers. In addition, since product differentiation is resource consuming, freer trade entails a potential trade-off between production and variety. The import competition effect highlighted by the model, which plays a key role in determining the general equilibrium, is supported by panel data on Chilean manufacturing plants.
    Keywords: Trade liberalization; Product differentiation; Innovation; Wage Inequality; General Oligopolistic Equilibrium.
    JEL: F15 F16 L13 O31
    Date: 2010
  16. By: Grady, Patrick
    Abstract: The paper examines the data for Canadian exports to the United States that have been cited as prima facie evidence of a "thickening of the border." It estimates that Canadian exports of goods, excluding energy and forestry products, to the United States have been 12.5 per cent lower than would have been expected based on estimated relationships and exports of services 8 per cent lower. These estimates suggest that the boost to Canadian exports resulting from the FTA/NAFTA has been substantially eroded.
    Keywords: Canadian Exports; Canada-U.S. Border; Post 9/11 Security; Free Trade Agreement; North American Free Trade Agreement
    JEL: F15 F14 F53
    Date: 2009–10–09
  17. By: Vlahovic, Branislav; Puskaric, Anton; Maksimovic, Branka
    Abstract: The authors of this paper analyze export and competitiveness of wine export from the Republic of Serbia. Main goal of the research reflects in perceiving basic features of export and competitiveness of wine export from the Republic of Serbia on international market. The analysis encloses time period 2004-2007. The amount of wine export is very modest and, in observed period, was realized average export of 8,6 million litres, which value amounts 9,6 million USD. Only 5% of total domestic production is exported. In export structure dominate CEFTA agreement signatory countries. Export price of wine from Serbia is doubly less in regard to average world price, and thrice in regard to the biggest world exporter â Italy. Average export price of wine produced in Serbia is on the level of 1,11 USD per litre. The export structure is very unfavourable, i.e. dominates wine in bulk (90%), while only 10% of total export makes wine in bottles, which, for sure, reflects to attained export price. The authors quote that main limitation factors of Serbian wine export are small surfaces under grapevine, inappropriate structure of production, i.e. lack of qualitative and top-class (famous) wines. The wines which produce in Serbia, on international market, are competitive by price. However, low quality represents limitation factor of competitiveness increase. Unfavourable production structure and wine export represents one more limitation factor of competitiveness increase. In total wine production in Serbia, top-class wines participate with less than 15%, participation of qualitative wines is 20%, while the higher participation, more than 65%, have table wines, and more produces white (64%) than rose wines (36%). Previously mentioned is in opposition with demand trends on international market. Along with quality increase and change of production and export structure, there can be expected also increase of Serbian wine prices on international market. Analyzing the world turnover of wine, the authors resolve that leading exporters of wine have developed production and long tradition in wine export. Besides, there are series of governmental stimulations, aiming at export increase, which is significant from aspect of competitiveness increase. The European Union has increased wine export quota from 55 to 63 thousand hectolitres to the Republic of Serbia for duty free export, and mentioned decision on export quotas increase represents an incentive for faster development of viticulture and wine production in Serbia. As an imperative, the authors quote increase of high-quality wines participation in export, which have higher price in regard to table wines. They find that own chance for export must not be looked-for in quantity, because Serbia is relatively small wine producer, concerning high quality according to selected market segments, but also that Serbia must leave the path of industrial wines and produces only high-quality wines. In this paper has been pointed out to necessary measures, aiming at more dynamic export and competitiveness increase of wine export from Serbia. The Authors find that main focus should be on intellectual capital, which means permanent education of producers, in order to get wines of the highest quality which will find their consumers in a competitive world market.
    Keywords: wine, export, competitveness, Agribusiness, Crop Production/Industries, International Relations/Trade,
    Date: 2009–12
  18. By: Spehar, Ann / AOS
    Abstract: A unique feature of the 2007 financial crisis is the unprecedented collapse in global world trade. The objective of this paper is to explain some of that collapse as a move toward protectionism triggered not by nationalistic interests but by competing objectives among trading partners from the Mundell-Fleming Trilemma. Even with the best of intentions, efforts toward internal rebalancing necessarily implies harming your trading partner unintentionally if they should be using conflicting policy objectives of the Trilemma. National interests are at odds between two such countries and their policy prescriptions counteract, and paralyze rebalancing and coordination efforts between nations. Policymakers may be forced into protectionists’ stances in an effort to counteract the internal rebalancing efforts of their neighbors.
    Keywords: International Trade; Financial Crisis; Global Trade Collapse
    JEL: F0 F59 F02 F01 F51
    Date: 2010–03–01

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