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on International Trade |
| By: | Ana Fernandes; Heiwai Tang |
| Abstract: | Using detailed product-level export data for China and a variant of the Antras and Helpman (2004) model that includes investments in component search, we examine the sectoral determinants of foreign direct investment (FDI) versus foreign outsourcing in export processing trade. We exploit the coexistence of two regulatory export processing regimes in China, Which specify who owns and controls the imported components for export processing. We find that in the regime that Chinese plants own the imported components, the share of exports from vertically integrated plants is increasing in the intensity of headquarter inputs across sectors, and is decreasing in the contractibility of inputs. These results are consistent with the property-rights theory of intra-firm trade. However, in the regime that foreign firms own the imported components, no significant relationship is found between the prevalence of vertical integration, headquarter intensity, and input contractibility across sectors. The positive relationship between productivity dispersion and the export share fo the integrated plants across sectors, as suggested by the existing literature, is found only in the regime that foreign firms own the imported components. These results are consistent with our model, which considers ownership of imported components as an alternative to asset ownership to alleviate the hold-up problem by the export-processing plant. |
| Keywords: | Intra-firm trade, Vertical integration, Export processing, Outsourcing |
| JEL: | F14 F23 L14 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:tuf:tuftec:0749&r=int |
| By: | Armando Silva (Faculdade de Economia, Universidade do Porto, Portugal); Óscar Afonso (CEF.UP, OBEGEF and Faculdade de Economia, Universidade do Porto, Portugal); Ana Paula Africano (CEF.UP, Faculdade de Economia, Universidade do Porto) |
| Abstract: | Using a longitudinal database (1996-2003) at the plant level, this paper aims to shed light, on the thesis that most productive domestic firms self select to export markets. Self selection and learning by exporting are two non-mutually exclusive theses that try to explain the high correlation between international trade involvement of firms and their superior performance, relative to domestic firms. In general, we find evidence of a self-selection to exports. However, there is a significant heterogeneity according to the destination of sales, to firms’ import status before exporting and to the specificities of sectors firms’ belong to. |
| Keywords: | Exports, Imports, Self selection |
| JEL: | F14 D24 |
| Date: | 2010–04 |
| URL: | http://d.repec.org/n?u=RePEc:por:fepwps:371&r=int |
| By: | Hess, Wolfgang (Department of Economics, Lund University); Persson, Maria (Department of Economics, Lund University) |
| Abstract: | The objective of this paper is twofold. First, against the background of an existing empirical literature on the duration of trade which has found that international trade is often of strikingly short duration, we aim to establish whether or not EU imports from the rest of the world also are short-lived. Second, since there is at this point no clear commonly accepted theoretical explanation for these short trade durations, we seek to provide a thorough empirical description and analysis of the phenomenon, with the intention of thereby facilitating theoretical developments on the subject. We employ a rich data set of detailed imports to the EU15 countries from 140 exporters, covering the time period 1962-2006. Using these data, we begin by conducting a thorough descriptive analysis of the duration of EU imports. Thereafter, we perform a regression analysis using discrete-time duration models with proper controls for unobserved heterogeneity. We draw the conclusion that EU imports are indeed very short-lived – in fact, possibly more so than, for example, US imports. The median duration of EU imports is for example merely one year, and almost 60 percent of all spells cease during the first year of service. Among our empirical findings are (i) that the duration of trade remains stable across the long time period that we study; (ii) that short trade durations are the result of at least two processes: countries shifting between different suppliers but continuing to import a given product, and countries ceasing to import the product altogether; and (iii) that countries with a diversified export structure also will tend to have more long-lived export flows. In our formal regression, we are also able to find a set of explanatory variables that have statistically significant effects on the probability that trade flows die. |
| Keywords: | Duration of Trade; Survival; European Union; Discrete-Time Hazard Models |
| JEL: | C41 F10 F14 |
| Date: | 2010–04–29 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:lunewp:2010_004&r=int |
| By: | Alba, Joseph (Nanyang Technological University); Hur, Jung (Sogang University); Park, Donghyun (Asian Development Bank) |
| Abstract: | We use panel data consisting of 96 countries and covering the period 1960–2000 to investigate the effects of free trade agreements (FTAs) and hub-and-spoke systems of FTAs on exports. Our empirical results imply an annual growth rate of 5.57% in exports, leading to a doubling of exports after 12.4 years, between FTA partners. Non-overlapping FTAs account for 4.12%, while hub-and-spoke FTAs account for 1.45% of the estimated export growth rate. This indicates that in addition to the direct trade liberalizing effect of FTAs, the hub-and-spoke nature of FTAs has an additional positive effect on trade. |
| Keywords: | free trade agreement; hub and spoke; world bilateral trade data; panel data analysis; fixed effect; average treatment effect |
| JEL: | F15 |
| Date: | 2010–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:ris:adbrei:0046&r=int |
| By: | Yildiz, Halis Murat |
| Abstract: | We examine the implications of a customs union (CU) on the pattern of tariffs, welfare and the prospects for free trade when the nonmember firm has an incentive to engage in foreign direct investment (FDI). First we show that upon the formation of a bilateral CU, the non-member firm has greater incentives to engage in FDI. However, when FDI becomes a feasible entry option for the nonmember firm under a CU, member countries have incentives to strategically induce export over FDI by lowering their joint external tariff. When fixed set-up cost of FDI is sufficiently low, this tariff falls below Kemp-Wan tariff and CU leads to a Pareto improvement relative to no agreement. Moreover, using an infinite repetition of the one-shot tariff game under a CU, we show that FDI incentive of the nonmember firm makes the member countries (nonmember country) more (less) willing to cooperate multilaterally over free trade. |
| Keywords: | Customs Union; Foreign Direct Investment; Multilateral Tariff Cooperation. |
| JEL: | F13 F12 |
| Date: | 2010–04–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:22346&r=int |
| By: | Gabriela Schmidt; Natalia Trofimenko |
| Abstract: | This paper aids our understanding of the link between innovation and exporting behavior by detailing how firms may purposefully decide on the source country for the imported innovation and the market that they ultimately serve. We argue that firms who invest in the state-of-the-art technologies pursue a more aggressive exporting strategy and test this hypothesis with firm-level data from Argentina. The empirical results, based on the data from 1402 Argentinean firms over the period 1998-2001, suggest the existence of positive and highly significant effect of spending on new technology on the export performance. The magnitude of the effect is large: a one percent increase in spending on technology increases exports by 30 percent. The effect is even larger if the technology is sourced from one of the world’s leaders: a one percent increase in spending on technology imported from leaders increases exports by 176 percent, whereas a one percent increase in spending on technology imported from non-leaders increases exports by about 28 percent |
| Keywords: | Technology Choice, Exporting, Productivity, Imports of Technology |
| JEL: | O F L |
| Date: | 2010–04 |
| URL: | http://d.repec.org/n?u=RePEc:kie:kieliw:1620&r=int |
| By: | Kenji Fujiwara (Kwansei Gakuin University) |
| Abstract: | This paper formulates a reciprocal market model of international duopoly with network externalities to reconsider welfare effects of reductions in transport costs and tariffs. Depending on the magnitude of network externalities, we show two possibilities. One of them, which emerges under strong network externalities, illustrates that freer trade unambiguously improves welfare for any initial level of trade barriers. This finding provides an affirmative evaluation of freer trade. |
| Keywords: | network externality, duopoly, transport costs, tariffs |
| Date: | 2010–04 |
| URL: | http://d.repec.org/n?u=RePEc:kgu:wpaper:53&r=int |
| By: | Dudley Cooke (Trinity College Dublin ,Hong Kong Institute for Monetary Research) |
| Abstract: | I develop a two country general equilibrium model with heterogeneous price-setting firms to understand how shocks to monetary policy and aggregate labor productivity impact trade integration, which I capture through the (inverse) average productivity of exporting firms. A contractionary domestic monetary policy shock raises the average productivity of domestic exporting firms but lowers the average productivity of foreign exporting firms. The magnitude of these changes is greater when governments target domestic price inflation as opposed to consumer price inflation. A positive shock to domestic labor productivity generates positive - although quantitatively small - changes in the average productivity of all exporting firms when consumer price inflation is targeted. When domestic price inflation is targeted, the same shock causes a fall in the average productivity of domestic exporting firms, and a far larger rise in the productivity of foreign exporting firms. |
| Keywords: | Monetary Policy, Heterogeneous Firms, Trade Globalization |
| JEL: | E31 E52 F41 |
| Date: | 2010–02 |
| URL: | http://d.repec.org/n?u=RePEc:hkm:wpaper:042010&r=int |
| By: | Nicolas Berman and Philippe Martin |
| Abstract: | In the early stage of the 2008-2009 financial crisis, the conventional wisdom was that financial under-development of sub Saharan African economies may have been a bless-ing in disguise because it insulated them from the direct effects of the crisis. This paper argues that this may also make African exporters, dangerously more dependent on the health of financial institutions in countries where they export. In the 2008-2009 financial crisis, we find that African exports to the US have been hit more than other countries. On past financial crises (1976-2002), we find that African exporters are more vulnerable to recessions in partner countries. Hence, African countries seem more affected by the income effect of financial crises. In addition to this income effect, we find that, for the average exporter, the disruption effect due to a financial crisis in the partner country is moderate (a deviation from the gravity predicted trade of around 2 to 8%) and long lasting (around 7 years). We find however that the disruption effect is much larger for African exporters as the fall in trade (relative to gravity) is at least 20% more than for other countries in the aftermath of the crisis. Only a part of the vulnerability of African exports comes from a composition effect as primary exports are hit more than manufac-turing exports. We also provide evidence that African countries more dependent on trade finance are hit more badly |
| Keywords: | International trade, financial crises, trade collapse, Africa |
| Date: | 2010–01–29 |
| URL: | http://d.repec.org/n?u=RePEc:rsc:rsceui:2010/15&r=int |
| By: | Gustavsson Tingvall, Patrik (China Economic Research Center); Ljungwall, Christer (China Economic Research Center) |
| Abstract: | Whether China has benefited more from exports than other countries has produced intensive debate. We analyze this question by performing a meta-analysis on a sample of 68 country-specific studies analyzing the link between exports and economic growth. The results show that exports have been more significant for growth in China than in other countries, even when China is compared to other transition/emerging economies. |
| Keywords: | Meta-analysis; Exports; Economic growth; China |
| JEL: | F21 F43 O11 O53 |
| Date: | 2010–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:hacerc:2010-015&r=int |
| By: | Andrei Zlate |
| Abstract: | Cross-country variation in production costs encourages the relocation of production facilities to other countries, a process known as offshoring through vertical foreign direct investment. I examine the effect of offshoring on the international transmission of business cycles. Unlike the existing macroeconomic literature, I distinguish between fluctuations in the number of offshoring firms (the extensive margin) and in the value added per offshoring firm (the intensive margin) as separate transmission mechanisms. The firms' decision to produce offshore depends on the firm-specific level of labor productivity, on fluctuations in the relative cost of effective labor, and on the fixed and trade costs of offshoring. The model replicates the procyclical pattern of offshoring and the dynamics along its two margins, which I document using data from U.S. manufacturing and Mexico's maquiladora sectors. Offshoring enhances the synchronization of business cycles, and dampens the real exchange rate appreciation generated by aggregate productivity differentials across countries. |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgif:995&r=int |
| By: | Mohler, Lukas; Seitz, Michael |
| Abstract: | Over the last decade, European Union members have experienced a dramatic increase in imports. This increase was accompanied by a strong growth in the number of imported goods and trading partners, indicating positive welfare gains for consumers via an extended set of consumption possibilities, as pointed out in the "New Trade Theory". In this paper, we apply the methodology developed by Feenstra (1994) and Broda and Weinstein (2006) to estimate structurally the gains from imported variety for the 27 countries of the European Union using highly disaggregated trade data at the HTS-8 level from Eurostat for the period of 1999 to 2008. Our results show that, within the European Union, especially “newer” and smaller member states exhibit high gains from newly imported varieties. Furthermore, we find that the vast majority of the gains from variety for consumers stem from intra-European Union trade. |
| Keywords: | European Union; Welfare Gains from Trade; Trade in Variety |
| JEL: | F12 F14 |
| Date: | 2010–04 |
| URL: | http://d.repec.org/n?u=RePEc:lmu:muenec:11477&r=int |
| By: | Sandra Hanslin (Socioeconomic Institute, University of Zurich) |
| Abstract: | This paper investigates empirically the effect of import diversity on government size and provides evidence for the love of variety effect on government spending described in Hanslin (2008). I argue that crowding out of firms is an important cost of public good provision. However, due to the access to foreign varieties, national costs of public good provision are lower and therefore, public good provision is higher. Especially for OECD countries this channel seems to exist. The diversity of imported products has a positive effect on government consumption, particularly when these goods are classified as differentiated. In addition, this positive effect is decreasing in home market size. Further, the direct effect of the share of differentiated in total imported products on the government share is negative. |
| Keywords: | education, schooling, Switzerland |
| JEL: | I21 J62 |
| Date: | 2010–04 |
| URL: | http://d.repec.org/n?u=RePEc:soz:wpaper:1004&r=int |