nep-int New Economics Papers
on International Trade
Issue of 2010‒04‒17
thirty-one papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. Intra-firm Trade and Product Contractibility (Long Version) By Andrew B. Bernard; J. Bradford Jensen; Stephen J. Redding; Peter K. Schott
  2. Trade-in-goods and trade-in-tasks: An Integrating Framework By Richard Baldwin; Frédéric Robert-Nicoud
  3. Economic performance and international trade engagement: the case of Portuguese manufacturing firms By Armando Silva; Óscar Afonso; Ana Paula Africano
  4. Exports and Productivity: An Empirical Analysis of German and Austrian Firm-Level Performance By Hansen, Thorsten
  5. Variety Gains of Trade I ntegration in a Heterogeneous Firm Model By d’Artis Kancs
  6. Argentina : trade patterns and challenges ahead By Anos-Casero, Paloma; Rollo, Valentina
  7. The contribution of trade policy to the openness of the Dutch economy By Harold Creusen; Arjan Lejour
  8. Distance and regionalization of trade for low-income countries By Carrere, Celine; de Melo, Jaime; Wilson, John
  9. A preliminary analysis of the impact of a Ukraine-EU free trade agreement on agriculture By von Cramon-Taubadel, Stephan; Hess, Sebastian; Brummer, Bernhard
  10. Tariff Rates, Offshoring and Productivity: Evidence from German and Austrian Firm-Level Data By Hansen, Thorsten
  11. Export performance and trade facilitation reform : hard and soft infrastructure By Portugal-Perez, Alberto; Wilson, John S.
  12. Global Production Networks in Electronics and Intra-Asian Trade By Byron Gangnes; Ari Van Assche
  13. Structural Change in an Open Economy By Kei-Mu Yi; Jing Zhang
  14. Graduating to globalisation: A study of southern multinationals. By Demirbas, Dilek; Patnaik, Ila; Shah, Ajay
  15. Trade openness reduces growth volatility when countries are well diversified By Haddad, Mona E.; Lim, Jamus Jerome; Saborowski, Christian
  16. Investigating the Effect of Exchange Rate Changes on the People's Republic of China's Processed Exports By Thorbecke, Willem
  17. Skill splits of labour input values in GTAP: An approach based on ILO and UBS data By Nico van Leeuwen; Stefan Boeters
  18. European trade in parts and components : searching (for a trade model for searching) for offshoring evidence By Richard Frensch
  19. Education, Institutions, Migration, Trade, and The Development of Talent By Dhimitri Qirjo
  20. Trade-weighted Exchange Rate Indices and Foreign Markets Shares by Manufacturing Industries. Some Stylised Facts By Christa Magerl; Franz R. Hahn
  21. Skills, exports, and the wages of five million Latin American workers By Brambilla, Irene; Carneiro, Rafael Dix; Lederman, Daniel; Porto, Guido
  22. Fragmentation and immiserising specialisation : the case of the textile and clothing sector By Céline Gimet; Bernard Guilhon; Nathalie Roux
  23. Financial Constraints and the Margins of FDI By Claudia M. Buch; Iris Kesternich; Alexander Lipponer
  24. Does Trade Liberalization Affect the Composition of Government Spending in Developing Nations? By Michael O. Moore; Maurizio Zanardi
  25. The Export Base Model with a Supply-Side Stimulus to the Export Sector By Kim Swales; Soo Jung Ha
  26. The Effects of Product Dropping on Firm's Productivity and Employment Composition By Sergio De Nardis; Marco Ventura
  27. Working Hours of Part-timers and the Measurement of Firm-level Productivity By MORIKAWA Masayuki
  28. Linking Partial and General Equilibrium Models: A GTAP Application Using TASTE By Narayanan, Badri; Thomas Hertel; Mark Horridge
  29. The Impact of Horizontal and Vertical FDI on Labor Demand for Different Skill Groups By Anselm Mattes
  31. Comparative Advantage in the Asian Automotive Industry By Somsupa Nopprach

  1. By: Andrew B. Bernard; J. Bradford Jensen; Stephen J. Redding; Peter K. Schott
    Abstract: This paper examines the determinants of intra-firm trade in U.S. imports using detailed country-product data. We create a new measure of product contractibility based on the degree of intermediation in international trade for the product. We find important roles for the interaction of country and product characteristics in determining intra-firm trade shares. Intra-firm trade is high for products with low levels of contractability sourced from countries with weak governance, for skill-intensive products from skill-scarce countries, and for capital-intensive products from capital-abundant countries.
    JEL: F10 F23 L14 L23
    Date: 2010–04
  2. By: Richard Baldwin; Frédéric Robert-Nicoud
    Abstract: Our paper integrates results from trade-in-task theory into mainstream trade theory by developing trade-in-task analogues to the four famous theorems (Heckscher-Ohlin, factor price equalisation, Stolper-Samuelson, and Rybczynski) and showing the standard gains-from-trade theorem does not hold for trade-in-tasks. We show trade-in-tasks creates intraindustry trade in a Walrasian economy, and derive necessary and sufficient conditions for analyzing the impact of trade-in-tasks on wages and production. Extensions of the integrating framework easily accommodate monopolistic competition and two-way offshoring/trade-in-tasks.
    JEL: F11 F12 F16
    Date: 2010–04
  3. By: Armando Silva (Faculdade de Economia, Universidade do Porto); Óscar Afonso (CEF.UP and Faculdade de Economia, Universidade do Porto); Ana Paula Africano (CEF.UP and Faculdade de Economia, Universidade do Porto)
    Abstract: By combining economic and financial data for Portuguese manufacturing firms with data of their exports and imports, we uncover some aspects of the relationship between international trade engagement and firms’ performance. In line with recent theoretical and empirical developments in the international trade literature: (i) we testify that Portuguese international trade is highly concentrated, especially on the import side, and both in inter- and intra-sector terms; (ii) we corroborate previous studies and theses according to which two-way traders outperform only importers, only exporters and above all domestic firms; (iii) we find that the greater the diversification of markets and goods (especially with regard to imports) the better the performance achieved by internationalized firms; (iv) we also present evidence that destination markets, for exports, and, origin markets, for imports, are also important in explaining the performance of firms.
    Keywords: International trade, Firm performance, Diversification
    JEL: C20 F14 F23
    Date: 2010–04
  4. By: Hansen, Thorsten
    Abstract: This paper studies the relationship between export activities and firm-level productivity. Unique matching of German and Austrian micro data from 1994 to 2003 suggests that exporters are more productive by around 40 percent compared with non-exporters. Moreover, beside other analysis techniques, instrumental variable estimations suggest that exporting causes a rise in firm-level productivity. That is, the annual average growth rate of an exporting firm's productivity is between about 1 and 1.5 percent higher than that of non-exporters. It allows the conclusion that, against other findings of existing studies, both directions hold: more productive firms self-select themselves into export markets and being active in foreign markets boosts firm-level productivity.
    Keywords: exports; firm-level productivity
    JEL: D24 F13 F23 L22 L23 O47
    Date: 2010–04
  5. By: d’Artis Kancs
    Abstract: The present paper studies the variety gains of regional integration in Asia. Applying a heterogenous firm model we are able to assess the gains arising from the increased product and consumer choice, which is not possible in trade models with representative firms. We analyse the impacts of the ongoing trade liberalisation in South East Asia in three scenarios: CIFTA, ASEAN+3, and ASEAN+6. We find that the gains from trade integration are substantial, particularly in the multilateral liberalisation scenario ASEAN+6. A multilateral reduction of fixed and variable trade barriers by 15 percent results in a trade growth of 34 percent, which due to the additional extensive margin of trade, is larger than in trade models with representative firms. Similarly, due to the additional gains from variety growth, the welfare gains of trade integration in Asia are up to 9 percent higher than trade models with representative firms would predict.
    Keywords: Variety gains, trade integration, Asia, heterogenous firms
    JEL: C68 F12 F14 F17 R12 R23
    Date: 2010
  6. By: Anos-Casero, Paloma; Rollo, Valentina
    Abstract: Argentinean export growth was impressive during the recent economic boom (2003-2007). However, decomposing export growth reveals that the extensive margin (increases in exports of existing products to existing markets) dominates, while the intensive margin (increases in exports of new products or new markets) contributes little to export growth. Argentina's trade product concentration has increased in the past 10 years, and the main export products remain overwhelmingly natural-resource intensive. The little diversification of non-primary exports limits the country’s ability to weather a decline in export commodity prices. The country has had some success finding new export markets, especially in Latin America, but should seek to develop deeper trade relationships with high GDP export destinations such as the European Union and the United States. Another challenge going forward is the relatively low sophistication of exports and limited integration into the global production chains, falling behind regional competitors such as Brazil. This calls for policy measures to improve the ability of existing firms to innovate and compete successfully in global markets.
    Keywords: Economic Theory&Research,Trade Policy,Free Trade,Transport Economics Policy&Planning,Emerging Markets
    Date: 2010–02–01
  7. By: Harold Creusen; Arjan Lejour
    Abstract: The last four decades, Dutch exports and imports grew annually about 7.5%, while re-exports rocketed in the last two decades. Using a gravity approach this paper finds that the increase in trade is largely caused by income developments. Trade policy, consisting of reductions in import tariffs and other trade barriers and the creation of the EU internal market, also has a significant impact on trade growth, although much smaller. Without any liberalisation of trade policy since 1970 the ratio of trade (excluding re-exports) to GDP would have been about 8%- points lower. By estimating the trade enhancing-effect of trade policy on GDP we conclude that trade policy has contributed 6% to 8% to the growth of national income in Netherlands since the 1970s. Foreign Direct Investments (FDI) experienced a massive but erratic growth, mostly in the last two decades. Income developments could explain half of that growth; deregulations of national capital markets explain only a small part of FDI growth.
    Keywords: trade policy; openness and income; gravity equation; FDI
    JEL: F15 F4
    Date: 2009–11
  8. By: Carrere, Celine; de Melo, Jaime; Wilson, John
    Abstract: The"distance effect"measuring the elasticity of trade flows to distance has been rising since the early 1970s in a host of studies based on the gravity model, leading observers to call it the"distance puzzle". This paper reviews the evidence and explanations. Using an extensive data set of 124 countries over the period 1970-2005, the authors confirm the existence of this puzzle and identify that it only applies to poor countries (the bottom third in per capita income terms in the sample -- i.e., the low-income countries according to the World Bank classification, 2006). The analysis shows that this group has intensified trade with closer partners and has chosen new partners that are closer than existing partners, leading to a regionalization of their trade at both extensive and intensive margins (regionalization of trade is absent for the other countries). Combining several methods on cross-section and panel estimates of the gravity equation, the authors estimate that low-income countries exhibit a significant rising distance effect on their trade, around 18 percent between 1970 and 2006. There is no more distance"puzzle"for trade within richer countries (the top third in per capita income terms in the sample). The paper disposes of several previous explanations of the puzzle, and notes that this regionalization could well be a reflection of increased integration of this group of countries in the world economy or greater marginalization.
    Keywords: Transport Economics Policy&Planning,Economic Theory&Research,Free Trade,Common Carriers Industry,Emerging Markets
    Date: 2010–02–01
  9. By: von Cramon-Taubadel, Stephan; Hess, Sebastian; Brummer, Bernhard
    Abstract: Agriculture including food products is of particular interest for Ukraine. However, in free trade agreements involving the European Union, agriculture is always given special treatment and subject to less and slower liberalization than other sectors. This paper employs the standard Global Trade Analysis Project model in order to assess how World Trade Organization accession affects agriculture in Ukraine, and how potential bilateral tariff cuts may interact with potential productivity gains within Ukrainian agriculture. The results indicate that, due to trade liberalization, Ukraine can expect gains from a more efficient allocation of its resources in line with comparative advantage, leading to an increase of production and exports of wheat, other grains, and oilseeds, but also of several processed food products that benefit from less expensive intermediate inputs. However, Ukraine's exports are concentrated on a small number of destinations, especially Russia and some other Former Soviet Union countries because they fail to meet quality standards elsewhere. When Ukrainian production of these products increases due to increased allocative efficiency, exports to Russia increase further and prices there fall, generating negative terms of trade effects that largely offset the allocative gains. Ukrainian imports of agricultural products increase as well, partly because Ukrainian consumers switch to higher quality imported goods even though domestic production increases. Regarding free trade agreement negotiations with the European Union, these results highlight for Ukraine the fact that improved agricultural productivity will help to get most out of improved market access. However, the results also highlight for Ukraine the great importance of adopting internationally accepted quality standards in order to diversify its export structure.
    Keywords: Free Trade,Economic Theory&Research,Trade Policy,Trade Law,Emerging Markets
    Date: 2010–04–01
  10. By: Hansen, Thorsten
    Abstract: This paper studies the impact of trade liberalization in terms of tarif cuts within the Eastern European enlargement on German and Austrian firm productivity. Unique matching of data from 1994 to 2003 suggests that tarif reductions raise parent firm productivity significantly. A ten percentage point decrease in tarif rates can lead to total factor productivity gains of up to 2 percent. The data allow distinction between three types of tarifs: output, intra-firm and input tarif rates. The size of the results strongly depends on the type of tarif and country analyzed.
    Keywords: tariff rates; intra-firm trade; productivity; trade liberalization
    JEL: F12 F13 F23 L22 L23 O14
    Date: 2010–04
  11. By: Portugal-Perez, Alberto; Wilson, John S.
    Abstract: The authors estimate the impact of aggregate indicators of"soft"and"hard"infrastructure on the export performance of developing countries. They build four new indicators for 101 countries over the period 2004-07. Estimates show that trade facilitation reforms do improve the export performance of developing countries. This is particularly true with investment in physical infrastructure and regulatory reform to improve the business environment. Moreover, the findings provide evidence that the marginal effect of infrastructure improvement on exports appears to be decreasing in per capita income. In contrast, the impact of information and communications technology on exports appears increasingly important for richer countries. Drawing on estimates, the authors compute illustrative exports growth for developing countries and ad-valorem equivalents of improving each indicator halfway to the level of the top performer in the region. As an example, improving the quality of physical infrastructure so that Egypt's indicator increases half-way to the level of Tunisia would increase exports by 10.8 percent. This is equivalent to a 7.4 percent cut in tariffs faced by Egyptian exporters across importing markets.
    Keywords: Environmental Economics&Policies,Transport Economics Policy&Planning,Free Trade,Economic Theory&Research,Trade Policy
    Date: 2010–04–01
  12. By: Byron Gangnes; Ari Van Assche
    Abstract: The growth of East Asia’s intra-regional trade is driven largely by increased component trade within global electronics production networks. Data on both electronics trade and production elucidate a pattern of specialization in which upper- and middle-income countries produce sophisticated components and lower-income countries assemble lowervalue- added final goods. There is evidence of increasing sophistication within the electronics sector by the Newly Industrialized Economies and to a lesser extent by ASEAN countries. Despite the marked increase in intra-regional trade, developing East Asian countries remain heavily dependent on developed-country markets. When Western export demand rapidly contracted during the 2008-2009 economic crisis, these specialization patterns led the rapid diffusion of the business cycle shock throughout the East Asian region.
    Keywords: Global production networks, electronics, Asian trade, business cycle transmission, global economic crisis
    JEL: F14 F23 F40 L63
    Date: 2010
  13. By: Kei-Mu Yi (Federal Reserve Bank of Philadelphia); Jing Zhang (University of Michigan)
    Abstract: We develop a tractable, three-sector model to study structural change in an open economy. The model features an endogenous pattern of trade dictated by comparative advantage. We derive an intuitive expression linking sectoral employment shares to sectoral expenditure shares and to sectoral net export shares of total GDP. Changes in productivity and in trade barriers affect expenditure and net export shares, and thus, employment shares, across sectors. We show how these driving forces can generate the "hump" pattern that characterizes the manufacturing employment share as a country develops, even when manufacturing is the sector with the highest productivity growth.
    Keywords: structural transformation, international trade, sectoral labor reallocation
    JEL: F20 F40 O13 O41
    Date: 2010–04
  14. By: Demirbas, Dilek (Newcastle Business School); Patnaik, Ila (National Institute of Public Finance and Policy); Shah, Ajay (National Institute of Public Finance and Policy)
    Abstract: FDI by firms in developing countries is a recent phenomenon and demands a study of relationship between firm productivity and different modes of globalisation activities. This paper attempts to understand this relationship through ordered probit models, examining two key hypotheses using firm level panel data from India. First, we test whether there are characteristic differences between domestic firms, exporting firms and firms engaging with FDI. Second, we test if FDI is an integral part of the evolution of firms in developing countries. Our results suggest that there are strong differences between domestic firms, exporting firms, and firms that invest abroad, especially in their knowledge investment, indicating the presence of a ladder of quality in graduating to globalisation.
    Date: 2010–02
  15. By: Haddad, Mona E.; Lim, Jamus Jerome; Saborowski, Christian
    Abstract: This paper addresses the mechanisms by which trade openness affects growth volatility. Using a diverse set of export diversification indicators, it presents strong evidence pointing to an important role for export diversification in reducing the effect of trade openness on growth volatility. The authors also identify positive thresholds for product diversification at which the effect of openness on volatility changes sign. The effect is shown to be positive only for a minority of countries with highly concentrated export baskets. This result is shown to be robust to both explicit accounting for endogeneity as well as the inclusion of a host of additional controls.
    Keywords: Economic Conditions and Volatility,Achieving Shared Growth,Markets and Market Access,Free Trade,Emerging Markets
    Date: 2010–02–01
  16. By: Thorbecke, Willem (Asian Development Bank Institute)
    Abstract: Many argue that the yuan needs to appreciate to rebalance the People's Republic of China's trade. However, empirical evidence on the effects of a CNY appreciation on the People's Republic of China's exports has been mixed for the largest category of exports, processed exports. Since much of the value-added of these goods comes from parts and components produced in Japan, the Republic of Korea, and other East Asian supply chain countries, it is important to control for exchange rate changes in these countries. Employing dynamic ordinary least squares, or DOLS, techniques and quarterly data, this paper finds that exchange rate appreciations across supply chain countries would cause a much larger drop in processed exports than a unilateral appreciation of the yuan.
    Keywords: exchange rate changes prc; prc processed exports; global imbalances; exchange rate elasticities; china
    JEL: F32 F41
    Date: 2010–03–03
  17. By: Nico van Leeuwen; Stefan Boeters
    Abstract: Researchers working empirically at the intersection of labour market economics and international trade with macroeconomic interest need datasets with regional, sectoral and skill-specific detail. Important strands of the literature where these interlinkages are centre stage are the testing of theories that explain the patterns of trade with factor endowments (Heckscher-Ohlin type), the analysis of the consequences of trade liberalisation for the distribution of income and the relocation of labour as a result of migration. In this paper, we propose an approach to skill split data that can be used in a computable general equilibrium context, in particular when working with the GTAP dataset.
    Date: 2009–09
  18. By: Richard Frensch (Osteuropa-Institut, Regensburg (Institut for East European Studies))
    Abstract: Recent empirical studies have been searching for evidence on and driving forces for offshoring. Typically, this search has been conducted by analysing gross trade flows related to offshored activities using gravity equations augmented by ad hoc measures of supply-side country differences. This paper suggests that gravity formulations of this sort are potentially mis-specified, due to theoretically unmotivated attempts of allowing for both complete and incomplete specialisation influences on gross trade flows within the same gravity framework. The paper suggests an alternative specification rooted in incomplete specialisation with complete specialisation as a natural limiting case. Re-sults support evidence for offshoring activities across Europe, driven by supply-side country differences compatible with models of incomplete specialisation and trade. Fur-ther interpretation of the results in the spirit of Grossman and Rossi-Hansberg (2008) suggests the conjecture that the latest waves of offshoring activities from “old” to “new” EU members may have been more likely to hurt (low-skill) workers in the old EU than offshoring to east Asia.
    Keywords: offshoring, gravity
    JEL: F14 F16 L24
    Date: 2010–02
  19. By: Dhimitri Qirjo (Department of Economics, Florida International University)
    Abstract: This paper proposes a theory of free movement of goods and labor between two large economies with imperfect labor contracts. Each country is incompletely specialized in producing two final goods that differ in their complexity of production. The most complex good is produced by workers and managers who pair up with each other according to an efficient matching process, where the most talented manager matches with the most talented worker. The least complex good is produced by firms that consist of one individual. The most talented individual is defined as the one with the highest level of optimal job training. The heart of our analysis lies in the determinants of talent development. We show that in a world economy with two otherwise similar countries that have different institutional quality, or/and a different system of early education, a country that has the best quality of institution, combined with the best early educational system, will be the host country of immigrants. Under free trade and labor, the best institutions and the best early educational system can serve as complementary sources of comparative advantage in the most complex industries. Consequently, the host country of immigrants will export the most complex goods produced by the most talented individuals. The economic progress of a source country will be shown to be related to its ability to improve its quality of institutions and its early educational system. It also is shown that individuals’ decisions to emigrate are related to the fixed costs of migration, such as language barriers. Finally, emigration affects the income of both countries via an indirect effect on individuals’ incentives to invest in their job training and a direct effect on prices of goods.
    Keywords: Comparative advantage, Occupational Choice, Education, Institutions, Immigration, Moral hazard, Organization of production
    JEL: B52 I21 F10 F16 F22 J24
    Date: 2010–03
  20. By: Christa Magerl (WIFO); Franz R. Hahn (WIFO)
    Abstract: In this paper we make an attempt to extend the WIFO trade-weighted exchange rate index (TWI_ER) by computing export-weighted exchange rate indices for eight Austrian manufacturing industries covering the period from 1995 to 2005. The TWI_ER by manufacturing industries improves upon the previous WIFO-TWI by calculating both current single (bilateral) and current double (multilateral) export weights for each year under investigation. We also present stylised facts based on this unique dataset concerning foreign market share dynamics and the relationship between international competitiveness and improvement in international performance at an industry level.
    Date: 2010–02–19
  21. By: Brambilla, Irene; Carneiro, Rafael Dix; Lederman, Daniel; Porto, Guido
    Abstract: The returns to schooling or the skill premium is a key parameter in various literatures, including globalization and inequality and international migration. This paper explores the skill premium and its link to exports in Latin America, thus linking the skill premium to the emerging literature on the structure of trade and development. Using data on employment and wages for over five million workers in sixteen Latin American economies, the authors estimate national and industry-specific skill premiums and study some of their determinants. The evidence suggests that both country and industry characteristics are important in explaining skill premiums. The analysis also suggests that the incidence of exports within industries, the average income per capita within countries, and the relative abundance of skilled workers are related to the underlying industry and country characteristics that explain skill premiums. In particular, higher sectoral exports are positively linked with the skill premium at the industry level, a result that supports recent trade models linking exports with wages and the demand for skills.
    Keywords: Labor Markets,Water and Industry,Tertiary Education,Labor Policies,Inequality
    Date: 2010–03–01
  22. By: Céline Gimet (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines); Bernard Guilhon (DEFI - Centre de recherche en développement Economique et Finance Internationale - CNRS : EA4265); Nathalie Roux (DEFI - Centre de recherche en développement Economique et Finance Internationale - CNRS : EA4265)
    Abstract: With production activity tending rapidly towards international fragmentation, this study examines the consequences for labour countries of the forms of specialisation brought about by fragmentation processes. It further addresses the risk that fragmented sectors may become excluded from greater developments within the manufacturing industry as a whole. An empirical analysis using panel data reveals that, contrary to expectation, the textile and clothing sector in labour countries does not always reap the positive benefits of this form of international trade integration. Rather, we observe a phenomenon of immiserising specialisation, due to a drop in relative wages within this sector.
    Keywords: offshoring ; outsourcing ; fragmentation ; immiserising specialisation ; relative wages ; textile and clothing sector
    Date: 2010
  23. By: Claudia M. Buch; Iris Kesternich; Alexander Lipponer
    Abstract: Recent literature on multinational firms has stressed the importance of low productivity as a barrier to the cross-border expansion of firms. But firms may also need external fi-nance to shoulder the costs of entering foreign markets. We develop a model of multina-tional firms facing real and financial barriers to foreign direct investment (FDI), and we analyze their impact on the FDI decision (the extensive margin) and foreign affiliate sales (the intensive margin). We provide empirical evidence based on a detailed dataset of German multinationals which contains information on parent-level and affiliate-level financial constraints as well as about the location the foreign affiliates. We find that fi-nancial factors constrain firms’ foreign investment decisions, an effect felt in particular by large firms. Financial constraints at the parent level matter for the extensive, but less so for the intensive margin. For the intensive margin, financial constraints at the affiliate level are relatively more important.
    Keywords: multinational firms, heterogeneity, productivity, financial con-straints
    JEL: F2 G2
    Date: 2009–11
  24. By: Michael O. Moore; Maurizio Zanardi
    Abstract: Many skeptics of trade liberalization in the developing world argue that lowering trade taxes can cause significant fiscal pressures in countries particularly reliant on these taxes and result in a reallocation of resources away from important development goals. This research evaluates whether there is evidence that central governments systematically change the composition of spending priorities in the wake of lowered trade tax revenues as a share of total government revenues. We find very little evidence for this concern in a sample of 51 developing countries for the 1990 through 2005 period.
    Keywords: Government expenditure, tariff revenue, trade liberalization.
    JEL: H7 F13
    Date: 2010
  25. By: Kim Swales (Department of Economics, University of Strathclyde); Soo Jung Ha (Department of Economics, University of Strathclyde)
    Abstract: In the export-base model, the level of a region’s economic activity is underpinned by the performance of its export sector (Daly, 1940; Dixon and Thirlwall, 1975; Kaldor, 1970; North, 1955). This theory is now almost universally represented as a primitive version of the familiar Input-Output (IO) or Keynesian demand-driven approach, where regional output is linked to regional exports through a rather mechanistic multiplier process (Romanoff, 1974). Further, in a standard IO inter-regional framework, the expansion of output in one region always generates positive impacts on other regions. That is to say, there is always a positive spread, and no negative backwash, effect. However, these models typically embody no supply-side constraints. What is more, the stimulus to the export sector is often thought to come through supply-side improvements (North, 1955; McCombie, 1992). Whilst accepting that the development of a healthy export base is generally central to promoting the growth of the regional economy, the relationship is likely to be much more complex than is usually thought. Also whilst an increase in regional exports typically increases economic activity in the target region, the effect on other regions is less straightforward (Myrdal, 1957). In this paper we begin by using a single-region IO analysis of the operation of a stylised export base model. The impact of a conventional increase in export demand is compared to a situation in which increased competitiveness underpins the improved export performance. This analysis is then extended through the use of an inter-regional (Scotland–Rest of the UK) Computable General Equilibrium (CGE) model. In simulation, different exogenous demand and supply side disturbances are calibrated so as to generate the same long-run expansion in Scottish manufacturing exports. The subsequent specific evolutions of regional GDP and employment in both Scotland and the rest of the UK (RUK) are then tracked.
    Keywords: Export base, efficiency improvement, regional growth
    JEL: R11 R13 R58
    Date: 2010–03
  26. By: Sergio De Nardis (ISAE - Institute for Studies and Economic Analyses); Marco Ventura (ISAE - Institute for Studies and Economic Analyses)
    Abstract: Recent literature on heterogeneous multi-product firms predicts that elimination of marginal (less productive) products, due to fiercer competition, leads to an increase of firm efficiency. We test this prediction in the case of a sample of Italian firms during a period (2000-05) of rising competitive pressures. Adopting a propensity score matching estimator, we find evidence of a causal relationship between product dropping and higher firm productivity. We also find evidence that product dropping activity causes a fall of the share of blue collars versus white collars. We draw some policy implications regarding labour market adjustment and support to internal product switching when competition shocks take place.
    Keywords: product dropping, matching estimator, white collar
    JEL: D20 L23 L60
    Date: 2010–03
  27. By: MORIKAWA Masayuki
    Abstract: This paper empirically quantifies what effect the data availability on part-timers' firm-level working hours may have on the accuracy of productivity measurement by using a data set on a large number of Japanese firms. Despite the practical importance of part-time workers in productivity measurement, this issue has not been considered seriously in past empirical studies. According to the analysis of this paper: (1) firm-level working hours of part-timers are quite heterogeneous even within the same industry; (2) when using industry average working hours, the bias of measured productivity is around 4% at the sample mean and from 1% to 2% at the sample median. The biases are especially large for service industries such as restaurant, hotel, and retail trade, where the part-time ratio is high; (3) however, the correlation between measured productivities using industry average working hours and those using firm-level hours is very high. This suggests there is only a small mismeasurement when using industry aggregate data in analyzing effects of firm characteristics or policy measures on productivity; (4) it is desirable to calculate full-time and part-time hours separately in productivity analyses covering service industries. In considering the importance of planning a valid economic growth strategy, enriching firm-level statistics is a cost-effective investment.
    Date: 2010–04
  28. By: Narayanan, Badri; Thomas Hertel; Mark Horridge
    Abstract: CGE models are utilized for the evaluation of trade policy reforms, yet they are typically highly aggregated, limiting their usefulness to trade negotiators interested in impacts at the tariff line. Partial Equilibrium (PE) models used for disaggregate analysis lack the benefits of an economy-wide analysis required to examine the overall impact of trade policy reforms. This suggests the need for a PE-GE, nested modeling framework to support trade policy analysis. In this paper, we develop a PE model that captures international trade, domestic consumption and output, using CET and CES structures, market clearing conditions and price linkages, nested within the standard GTAP Model. In addition, we extend the welfare decomposition of Huff and Hertel (2001) to this PE-GE model to contrast the sources of welfare gain among models. To illustrate the value-added of this model, we examine the impact of multi-lateral tariff liberalization on the Indian economy, with special focus on the auto sector, using PE, GE and PE-GE models. The PE model does not predict the change in overall size and price level for the industry well, while the GE model underestimates the aggregate welfare gain due to tariff averaging. It also fails to account for the change in industry composition resulting from trade reform. These findings are robust to wide variation in model parameters. We conclude that the linked model is superior to both the GE and PE counterparts.
    Date: 2010
  29. By: Anselm Mattes
    Abstract: This paper analyzes the determinants and effects of firm-level FDI flows on the basis of German micro-level data. Concering the determinants of FDI, I differentiate between different target regions and motivations for FDI (market seeking/horizontal FDI versus cost reducing/vertical FDI). The main result is that most firms engage in FDI because of market access motives. Further, I focus on the employment effects of direct investment projects abroad. From a theoretical point of view, the effects of FDI flows on labor demand at the rm level are uncertain. Therefore, this paper analyzes this question empirically using theory-based labor demand re- gressions and and an econometric framework based on the generalized method of moments (GMM). As a main result I find that there is no negative effect of firm-level FDI flows on employment. Positive effects seem plausible in many specication. Further, theory and anecdotal evidence suggest that unskilled workers are aected worse than highly or medium-skilled employees. Hence, the analysis distinguishes between different skill groups. Again, I cannot find negative effects of firm-level FDI flows on any skill group.
    Keywords: FDI, horizontal FDI,vertical FDI, labor demand, skill gorups, GMM
    JEL: F16 F23 J23
    Date: 2010–02
  30. By: Dermot Leahy; Catia Montagna
    Abstract: We critically consider the conventional belief that the attractiveness of international outsourcing lies in cheaper labour costs overseas and that it offers a means to ‘escape’ the power of unions. We develop an oligopoly model in which firms facing unionised domestic labour market choose between producing an intermediate in-house or outsourcing it to a non-unionised foreign supplier that makes a relationship specific investment in developing the intermediate. We show that outsourcing typically results in higher wages and does not always reduce marginal costs. Trade liberalisation favours outsourcing particularly for the relatively less efficient firms.
    Keywords: Outsourcing, Unionisation, Strategic Investment, Trade Liberalisation, Oligopoly
    JEL: F12 J51 L13 L14
    Date: 2010–03
  31. By: Somsupa Nopprach
    Abstract: This paper seeks to analyze determinants of Asian countries' comparative advantage in the automotive industry. The effects of supporting industries, factor availability, factor intensity, transportation costs, and of the scale of foreign investment in the industry on the level of countries' comparative advantage are on focus. The results highlight the importance of strong supporting industries in raising a country's comparative advantage in the automotive industry. Furthermore, it is found that the role of factor endowments and intensities, and the role of the presence of Japanese firms, also became more important in determining a country's comparative advantage in the automotive industry following the decline in government intervention in the automotive industry. In addition, transportation costs play an important role in promoting costly-to-transport products to be likely to be produced in countries where there exists large local demand.
    Date: 2010–03

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