nep-int New Economics Papers
on International Trade
Issue of 2010‒04‒04
fifteen papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. German firms in service trade By Kelle, Markus; Kleinert, Jörn
  2. The International Strategy of Firms: the Role of Endogenous Product Differentiation By Pierre Blanchard; Carl Gaigné; Claude Mathieu
  3. Freight Rates and the Margins of Intra-Latin American Maritime Trade By Inmaculada Martínez-Zarzoso; Gordon Wilmsmeier
  4. Trade costs, resource reallocation and productivity in developing countries By Blyde, Juan; Iberti, Gonzalo
  5. Asymmetric effects of trade costs on entry modes: Firm level evidence By Tekin-Koru, Ayca
  6. The Economic Benefits of Giving Aid in Terms of Donors` Exports By Inmaculada Martínez-Zarzoso; Felicitas Nowak-Lehmann D.; Stephan Klasen
  7. Innovation and the Elasticity of Trade Volumes to Tariff Reductions By Rubini, Loris
  8. Microeconomic flexibility, creative destruction and trade By Blyde, Juan; Pineda, Jose
  9. North American Integration and Canadian Foreign Direct Investment By Waldkirch, Andreas; Tekin-Koru, Ayca
  10. A further examination of the export-led growth hypothesis By Dierk Herzer
  11. The Long-Run Relationship between Outward FDI and Total Factor Productivity: Evidence for Developing Countries By Dierk Herzer
  12. Exports versus FDI revisited: does finance matter? By Buch, Claudia M.; Kesternich, Iris; Lipponer, Alexander; Schnitzer, Monika
  13. The Dynamics of the Trade Balance and the Terms of Trade in Central and Eastern European Countries By Alexandra Ferreira-Lopes; Tiago Neves Sequeira
  14. Offshoring, Tasks, and the Skill-Wage Pattern By Baumgarten, Daniel; Geishecker, Ingo; Görg, Holger
  15. Structural Change, Specialization and Growth in EU 25 By Paul J.J. Welfens; Jens K. Perret

  1. By: Kelle, Markus; Kleinert, Jörn
    Abstract: We provide firm-level evidence concerning four key facts of services trade in Germany. First, not only firms classified as service firms, but also firms from all industries export and import services. Second, service trade patterns are fairly similar to those in goods trade. Most notably, service trade is dominated by a few large firms that serve many countries, sell several service products, and often export and import services. Differences in firms' trade values are result from differences in all three margins of trade. Third, there is a strong concentration of firms on one core market and service. Fourth, the patterns are surprisingly similar for services exports and imports. --
    Keywords: service trade,firm heterogeneity,intensive and extensive margins of trade
    JEL: D21 F14 L80
    Date: 2010
  2. By: Pierre Blanchard; Carl Gaigné; Claude Mathieu
    Abstract: We study the impact of trade liberalization on the international strategy of firms (to export and/or invest abroad as well as the number of products to be produced and exported) when product differentiation is endogenous. By considering product differentiation as a strategic variable, our analysis sheds new light on the impact of trade barriers on the decision to produce abroad and on the choice of product range, in accordance with recent empirical evidence. Indeed, we show that, even though technology exhibits the same productivity for each variety, firms drop some varieties with trade integration. In addition, our results reveal that, contrary to the standard theoretical literature, the relationship between the decision to export and trade costs is non-linear. When trade costs are relatively high, each firm export and is multi-product. Then, when trade costs take intermediate values, firms may invest abroad and the choice of producing abroad results from a prisoner's dilemma game. Finally, when trade costs are low, firms export but become single-product.
    Keywords: Foreign direct investment, exports, multi-product competition, endogenous differentiation product, trade integration
    JEL: F12 F23 L11 L25
    Date: 2010
  3. By: Inmaculada Martínez-Zarzoso (Universidad Jaume I, Spain and University of Goettingen / Germmany); Gordon Wilmsmeier
    Abstract: This paper focuses on the analysis of the relationship between maritime trade and transport cost in Latin America. The data available are disaggregated (SITC 5 digit level) maritime trade flows on trade routes within Latin America over the period 1999-2004. The contribution to the literature is to disentangle the effects that transport costs have on the extensive margin (number of products imported) and the intensive margin (quantity imported of each product) of international trade in order to test some of the predictions of the trade theories that introduce firm heterogeneity in productivity, as well as fixed costs of exporting. Recent investigations show that spatial frictions (distance) reduce trade mainly by reducing the number of shipments and that most firms ship only to geographically proximate customers, instead of shipping to many destinations in quantities that decrease in distance. Our findings confirm this result for intra-LA trade and show that the opposite pattern is observed for ad-valorem freight rates that reduce aggregate trade values mainly by reducing the quantity imported (intensive margin).
    Keywords: Transport costs; Maritime trade; Latin America; Sectoral data, Competitiveness
    JEL: F10
    Date: 2010–02–16
  4. By: Blyde, Juan; Iberti, Gonzalo
    Abstract: An increasing body of evidence indicates that an important share of aggregate productivity growth, in both developed and developing countries, arises from the reallocation of resources across plants of different productivity levels. New trade models with heterogeneous firms (Bernard et al., 2003; Melitz, 2003) suggest that international trade plays an important role in this reallocative process. Focusing on a developing country, Chile, we use explicit measures of trade costs to explore the existence of the channels suggested by these new trade models. We provide new key findings for developing countries: first, trade costs affect the reallocative process by protecting inefficient producers, lowering their likelihood to exit, and also by limiting the expansion of efficient plants, lowering their likelihood to export. Second, the reallocative impacts of trade arise not only from tariff barriers but also from transport costs.
    Keywords: Trade costs; productivity; resource reallocation
    JEL: F13 F14 L1
    Date: 2010–02
  5. By: Tekin-Koru, Ayca
    Abstract: Standard foreign direct investment (FDI) theory suggests that falling trade costs should discourage horizontal FDI. Most FDI is horizontal. Yet, the world witnessed an FDI boom in 1990s, a period of striking falls in trade barriers. This paper carries out an empirical analysis with rich, firm-level data on the activities of Swedish multinationals around the globe in manufacturing sectors from 1987 to 1998 to shed light on this apparent conflict. The analysis is based on the predictions of a recent literature with an industrial organization (IO) angle: Trade costs have asymmetric effects on foreign expansion modes. This view posits that falling trade costs encourage entry realized as mergers and acquisitions (M&As), one of the potential explanations for the conflict between received theory and recent trends in FDI. Empirical results confirm the findings of this recent literature and add to it by testing its extensions.
    Keywords: foreign direct investment; entry modes; and trade liberalization
    JEL: F23 G34 F21 L22
    Date: 2009–11
  6. By: Inmaculada Martínez-Zarzoso (University of Goettingen / Germany); Felicitas Nowak-Lehmann D. (University of Goetingen / Germany); Stephan Klasen (University of Goettingen)
    Abstract: This paper uses the gravity model of trade to investigate the link between bilateral and multilateral foreign aid and exports. There are three primary findings from this approach. First, in the long term, the average return, in terms of an increase in the donor’s level of goods exports, is approximately $ 2.15 US for every aid dollar spent on bilateral aid. Second, multilateral aid has a positive effect on export levels only in the short term, whereas in the long term, the effect is negative. Third, aid from other donors does not give rise to a displacement effect for a given donor-recipient trade relationship. This paper also makes comparisons among donors and finds that aid has a positive and significant effect on most donors’ export levels.
    Keywords: exports, foreign aid, donors, panel data, sample selection, GLM
    JEL: F10 F35
    Date: 2010–03–26
  7. By: Rubini, Loris
    Abstract: I study the implications of endogenous productivity choices ("innovation") on the effects of trade liberalization. I find that a model with innovation generates an elasticity of trade volumes to tariff reductions that is fifty percent larger than models without innovation, and consistent in magnitude to empirical estimates. To show this, I develop a new model of international trade with innovation, and calibrate it to data on Canada and the United States before the Free Trade Agreement. Feeding into the calibrated model the tariff drop that resulted from the agreement, the increase in the trade volumes is similar to that observed in the data. Without innovation, the change in trade volumes is considerably lower, and similar in magnitude to what existing models without innovation have found.
    Keywords: innovation; trade liberalization; trade elasticity; international trade
    JEL: F12 F41 O31
    Date: 2009–12–17
  8. By: Blyde, Juan; Pineda, Jose
    Abstract: We investigate whether greater microeconomic flexibility facilitates the process of creative destruction in the context of new trade models with heterogeneous firms (Bernard et al., 2003 and Melitz, 2003). In these models, freer trade increases aggregate productivity because high-efficiency plants expand through exporting and low-efficiency plants exit the market. However, factor reallocation could be negatively affected by the presence of microeconomic frictions. We use these insights of the theory to analyze whether a reduction in trade costs increases the probability of becoming an exporter relatively more in industries with greater microeconomic flexibility and whether plant exit driven by trade costs declines is more likely in industries with lower frictions. Using plant level data from Venezuela, we report results supporting these predictions.
    Keywords: Trade costs; microeconomic frictions; resource reallocation
    JEL: F13 F14 L1 O12
    Date: 2010–01
  9. By: Waldkirch, Andreas; Tekin-Koru, Ayca
    Abstract: We investigate how economic integration in North America has altered the pattern of foreign direct investment (FDI) to and from Canada. The theoretical analysis suggests that while the Canadian-U.S. free trade agreement should generate less FDI, the addition of Mexico in the North American Free Trade Agreement (NAFTA) produces the opposite effect. The fall in trade costs results in investment diversion from the U.S. and Canada, yet lower fixed costs may increase FDI even in those countries via an increased incentive to locate production facilities abroad rather than only domestically. Using a difference-in-differences estimator, we find that U.S. FDI in Canada as well as Canadian FDI in the U.S. have expanded disproportionately since NAFTA, suggesting that the latter effect dominates.
    Keywords: Foreign Direct Investment; Multinationals; NAFTA; Canada
    JEL: F15 F23 F21
    Date: 2010–02
  10. By: Dierk Herzer (Johann Wolfgang Goethe-University, Frankfurt am Main / Germany)
    Abstract: This paper challenges the common view that exports generally contribute more to GDP growth than a mere change in export volume, as the export-led growth hypothesis predicts. Applying heterogeneous panel cointegration techniques to a production function model with non-export GDP as the dependent variable, we find for a sample of 45 developing countries that: (i) exports have a positive short-run effect on non-export GDP in developing countries, (ii) the long-run effect of exports on non-export output, however, is negative on average, and (iii) there are large differences in the long-run effect of exports on non-export GDP across countries. Evidence from a simple regression analysis suggests that these cross-country differences in the long-run effect of exports on non-export GDP are significantly negatively related to cross-country differences in primary export dependence, business regulation, and labour regulation, whereas there is no statistically significant association between the growth effect of exports and the capacity of a country to absorb knowledge.
    Keywords: Export-led growth; Developing countries; Panel cointegration
    JEL: F43 O11 C23
    Date: 2010–02–16
  11. By: Dierk Herzer (Johann Wolfgang Goethe-University, Frankfurt am Main / Germany)
    Abstract: This paper examines the long-run relationship between outward foreign direct investment (FDI) and total factor productivity for a sample of 33 developing countries over the period 1980-2005. Using panel cointegration techniques, we find that: (i) outward FDI has, on average, a positive long-run effect on total factor productivity in developing countries, (ii) increased factor productivity is both consequence and a cause of increased outward FDI, and (iii) there are large differences in the long-run effects of outward FDI on total factor productivity across countries. Cross-sectional regressions indicate that these cross-country differences in the productivity effects of outward FDI are significantly negatively related to cross-country differences in labor market regulation, whereas there is no statistically significant association between the productivity effects of outward FDI and the level of human capital, the level of financial development, or the degree of trade openness in the home country.
    Keywords: Outward FDI; total factor productivity; developing countries; panel cointegration
    JEL: F21 O11 F23 C23
    Date: 2010–02–16
  12. By: Buch, Claudia M.; Kesternich, Iris; Lipponer, Alexander; Schnitzer, Monika
    Abstract: The crisis on international financial markets that started in 2007 has shown the potential links between the financial sector and the real economy. Exports and foreign direct investment (FDI) have declined, presumably not only because of a lack of demand, but also because of restricted access of firms to external finance. In this paper, we explore the impact of access to external finance on firms' choices to export or to engage in FDI. We simultaneously model a firm's decision to engage in FDI and in exports, and we assess the importance of financial factors for this choice (the extensive margin) as well as for the volume of activities (the intensive margin). We find that financial frictions matter, in particular for the decision to engage internationally. --
    Keywords: Multinational firms,exports versus FDI,financial constraints,heterogeneity,productivity
    JEL: F2 G2
    Date: 2010
  13. By: Alexandra Ferreira-Lopes (ISCTE - Lisbon University Institute - Department of Economics, UNIDE-ERC and DINÂMIA); Tiago Neves Sequeira (UBI and INOVA-UNL)
    Abstract: In this work we assess the existence of a S-Curve pattern in ten Central and Eastern European Countries (CEEC-10) for the relation between the trade balance and the terms of trade. Empirical results support the existence of this curve for Slovenia, Czech Republic, Hungary, and also for an aggregate of the ten transition countries. In the case of Lithuania, Poland, Romania, and Slovakia the pattern is weaker than in the mentioned countries but it stills prevails. We then document this property of business cycles in the dynamic general equilibrium trade model of Backus, Kehoe, and Kydland (1994) calibrated specifically to match the CEEC-10 aggregate economy. Results support the existence of a S-Curve, except when technology shocks are absent and domestic and imported goods are perfect substitutes.
    Keywords: Central and Eastern European Countries, Current Account Dynamics, Terms of Trade, S-Curve.
    JEL: C68 F32 F41
    Date: 2010
  14. By: Baumgarten, Daniel (Ruhr Graduate School in Economics); Geishecker, Ingo (University of Göttingen); Görg, Holger (Kiel Institute for the World Economy)
    Abstract: The paper investigates the relationship between offshoring, wages, and the ease with which individuals' tasks can be offshored. Our analysis relates to recent theoretical contributions arguing that there is only a loose relationship between the suitability of a task for offshoring and the associated skill level. Accordingly, wage effects of offshoring can be very heterogeneous within skill groups. We test this hypothesis by combining micro-level information on wages and demographic and workplace characteristics as well as occupational information relating to the degree of offshorability with industry-level data on offshoring. Our main results suggest that in partial equilibrium, wage effects of offshoring are fairly modest but far from homogeneous and depend significantly on the extent to which the respective task requires personal interaction or can be described as non-routine. When allowing for cross-industry movement of workers, i.e., looking at a situation closer to general equilibrium, the magnitude of the wage effects of offshoring becomes substantial. Low- and medium-skilled workers experience significant wage cuts due to offshoring which, however, again strongly depend on the degree of personal interaction and non-routine content.
    Keywords: outsourcing, offshoring, tasks, skills, wages
    JEL: F1 F2 J3
    Date: 2010–03
  15. By: Paul J.J. Welfens (Europäisches Institut für Internationale Wirtschaftsbeziehungen (Eiiw)); Jens K. Perret (Europäisches Institut für Internationale Wirtschaftsbeziehungen (Eiiw))
    Abstract: Based on the OECD's classification of goods, we take a closer look at EU 15 countries and EU accession countries in terms of the dynamics of sectoral output growth - with due emphasis on the distinction between labor-intensive and science-intensive products. Sectoral output dynamics are explained by the (modified) revealed comparative advantage (RCA), specialization in terms of input intensity, the growth rate of RCA, past sectoral output dynamics and per capita output. In addition, we consider the development of nominal sectoral output development. Considerable differences between EU 15 and EU 10 countries were found, which point to different production regimes in leading EU countries and the Eastern European accession countries, respectively. This panel-based bottom-up approach to output growth suggests that structural change will affect the responsiveness of the supply side considerably.
    Keywords: RCA, Output Growth, Sektoral Output Analysis
    JEL: C23 O47 O52 R10
    Date: 2010–01

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