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on International Trade |
| By: | Andrei A. Levchenko; Julian di Giovanni; Romain Ranciere |
| Abstract: | Existing estimates of power laws in firm size typically ignore the impact of international trade. Using a simple theoretical framework, we show that international trade systematically affects the distribution of firm size: the power law exponent among exporting firms should be strictly lower in absolute value than the power law exponent among non-exporting rms. We use a dataset of French firms to demonstrate that this prediction is strongly supported by the data. While estimates of power law exponents have been used to pin down parameters in theoretical and quantitative models, our analysis implies that the existing estimates are systematically lower than the true values. We propose two simple ways of estimating power law parameters that take explicit account of exporting behavior. |
| Keywords: | Corporate sector , Exports , International trade , Trade models , |
| Date: | 2010–04–28 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:10/109&r=int |
| By: | Freund, Caroline; Ornelas, Emanuel |
| Abstract: | This paper reviews the theoretical and empirical literature on regionalism. The formation of regional trade agreements has been, by far, the most popular form of reciprocal trade liberalization in the past 15 years. The discriminatory character of these agreements has raised three main concerns: that trade diversion would be rampant, because special interest groups would induce governments to form the most distortionary agreements; that broader external trade liberalization would stall or reverse; and that multilateralism could be undermined. Theoretically, all of these concerns are legitimate, although there are also several theoretical arguments that oppose them. Empirically, neither widespread trade diversion nor stalled external liberalization has materialized, while the undermining of multilateralism has not been properly tested. There are also several aspects of regionalism that have received too little attention from researchers, but which are central to understanding its causes and consequences. |
| Keywords: | Free Trade,Trade Law,Trade Policy,Trade and Regional Integration,Economic Theory&Research |
| Date: | 2010–05–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:5314&r=int |
| By: | Norbäck, Pehr-Johan (Research Institute of Industrial Economics (IFN)) |
| Abstract: | In this paper, I investigate whether instead of strengthening home-based production, government R&D-subsidies can induce R&D-intensive firms to locate production abroad. Investigating firm-level data on Swedish MNEs, however, I find no evidence of such relocation. R&D subsidies rather tend to en courage export production at the expense of foreign production. The theory presented suggests that this is consistent with technology transfer costs, which outweigh trade costs for physical goods. |
| Keywords: | Multinational Firms; R&D; Subsidies; Location; Empirical Analyses |
| JEL: | F23 L13 O33 |
| Date: | 2010–05–19 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iuiwop:0832&r=int |
| By: | Barua, Alokesh; Chakraborty, Debashis; Hariprasad , C. G. |
| Abstract: | The industry and trade policy regimes in India have witnessed drastic changes since 1991. The dismantling of the industrial licensing system and thereby allowing free entry to and exit from the industry of firms in 1991 followed by the WTO induced trade liberalization leading to substantial reduction in tariffs and gradual softening of foreign investment regulations, particularly in the context of foreign direct investment since 1995, may have had significant impact on the state of competitiveness in India industries. In this paper an attempt has been made to evaluate the effects of trade and industrial policy changes on domestic competitiveness for select Indian industries during post-liberalization period. Though there exists a pool of empirical literature focusing on the state of competitiveness in India, the link between theoretical models underlying the empirical analysis is not often strong. Moreover, a section of the literature focuses on a combination of firm and industry data for drawing conclusions on firm behavior, which may not reflect the actual scenario. Given this background, the present paper attempts to provide a unified approach to examine the inter-relationships between entry and competitiveness within a consistent oligopolistic market framework. The empirical analysis of the present study, carried out on the basis of firm data for 14 sectors over 1990-2008, indicates that Indian industry have shown considerable changes over the last decade in terms of entry and competitiveness. An overall decline in concentration is witnessed between the two end points, which signify the importance of newer entry in the markets. The Price-Cost Margin however behaves differently for different sectors, which could be explained by the differing level of spillover of technical changes as a result of increased pressure of competition due to liberalization. Demand curve is generally found to be inelastic and declines over the period. The relationship between the size of the firms and their export volume turns out to be significantly positive. |
| Keywords: | Competitiveness; entry; industrial liberalization; trade liberalization |
| JEL: | F12 L50 |
| Date: | 2010–05–15 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:22738&r=int |
| By: | Abraham, Vinoj; Sasikumar, S.K. |
| Abstract: | The implementation of the Agreement on Textile and Clothing (ATC) of the World Trade Organization (WTO) renders both threats and opportunities to India’s Textile and Clothing (T&C) industry in the wake of liberal international trade in the sector. Firms acquire greater international competitiveness through various cost cutting and efficiency enhancing strategies. The question we try to ponder on is, what route does Indian firms take to join the international export market in T&C. Empirical analysis, using Tobit estimation techniques, supported the view that increasing the share of low cost labour was an important route through which export performance of the Indian firms in T&C was enhanced. Further, the use of this means to perform better in the international market aggravated in the period after the implementation of the ATC. On the other hand, capital and technology based factors did not have any perceptive effect on the export performance of Indian firms in the international market. This endorses the view that the Indian T&C firms by and large utilized the low road to competitiveness, rather than the other. Also the importance of the import intensity in export performance suggests that Indian T&C is increasingly getting integrated within the global value chain. |
| Keywords: | Export performance; Textile and clothing industry; Labour cost; Tobit Model; Agreement on Textile and Clothing |
| JEL: | F16 J3 F14 |
| Date: | 2010–03–16 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:22784&r=int |
| By: | María Santana-Gallego (Universidad de La Laguna); Francisco J. Ledesma-Rodríguez (Universidad de La Laguna); Jorge V. Pérez-Rodríguez (Universidad de Las Palmas) |
| Abstract: | The main objective of this research is to revisit the estimation of the effect of a common currency on international trade by applying the new methodology proposed by Helpman, Melitz and Rubistein (2008) and incorporating tourism to the theoretical framework. Rose (2000) estimates an empirical model of bilateral trade, finding a significant coefficient for a currency union variable of 1.2, suggesting an effect of currency unions on trade of over a 200%. Rose (2000)’s finding did not receive full acceptance and further research was consequently devoted to find reasons of such high effect. This still remains as a major puzzle in the International Economics. Rose and Van Wincoop (2001) hold that there may still be some omitted factors that drives countries to both participate in currency unions and trade more. In this research a gravity equation for trade is estimated controlling by international tourism. |
| Keywords: | Common currency, tourism, gravity equation |
| JEL: | F3 |
| Date: | 2010–05 |
| URL: | http://d.repec.org/n?u=RePEc:aee:wpaper:1002&r=int |
| By: | Kareem Ismail |
| Abstract: | This study derives structural implications of the Dutch disease in oil-exporting countries due to permanent oil price shocks from a typical model. We then test these implications in manufacturing sector data across a wide group of countries including oil-exporters covering 1977 to 2004. The results on oil-exporting countries are four folds. First, we find that permanent increases in oil price negatively impact output in manufacturing as consistent with the Dutch disease. Second, Evidence in the data shows that oil windfall shocks have a stronger impact on manufacturing sectors in countries with more open capital markets to foreign investment. Third, we find that the relative factor price of labor to capital, and capital intensity in manufacturing sectors appreciate as windfall increases. Fourth, we find that manufacturing sectors with higher capital intensity are less affected by windfall shocks than their peers, possibly due to a larger share of the effect being absorbed by more laborintensive tradable sectors. An implication of the fourth result is that having diverse manufacturing sectors in capital intensity helps cushion the volatility of oil shocks. |
| Keywords: | Capital , Cross country analysis , Economic models , External shocks , Industrial sector , International trade , Labor costs , Manufacturing sector , Oil exporting countries , Oil prices , Price increases , Production , Resource allocation , |
| Date: | 2010–04–20 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:10/103&r=int |
| By: | Markus Lampe |
| Abstract: | This study investigates the empirical determinants of the treaty network of the 1860s and 1870s. It makes use of three central theories about the determinants of PTA formation, considering economic fundamentals from neoclassical and ‘new’ trade theory, political-economy variables, and international interaction due to trade diversion fears (dependence of later PTAs on former). These possible determinants are operationalized using a newly constructed dataset for bilateral cooperation and non-cooperation among 13 European Countries and the US. The results of logistic regression analysis show that the treaty network can be explained by a combination of ‘pure’ welfare-oriented economic theory with political economy and international interaction models. |
| Keywords: | Cobden-Chevalier Network, Bilateralism |
| JEL: | A |
| Date: | 2010–05 |
| URL: | http://d.repec.org/n?u=RePEc:cqe:wpaper:1410&r=int |
| By: | Davies, Ronald B. (University of Oregon); Norbäck, Pehr-Johan (Research Institute of Industrial Economics (IFN)); Tekin-Koru, Ayça (Oregon State University) |
| Abstract: | This paper uses affiliate level data from Swedish multinationals to examine the impact of tax treaties on both overall affiliate sales and the composition of those sales. In line with previous results, we find little evidence for an effect of treaties on the level of total sales. We do, however, find that a tax treaty increases the probability of investment by a firm in a given country. In addition, we find that a treaty reduces exports to the parent but increases imports of intermediate inputs from the parent. This is consistent with treaties increasing the effective host tax. This suggests that tax treaties impact the behavior of multinationals along some dimensions but not along others. |
| Keywords: | Tax Treaties; Multinational Firms; Foreign Direct Investment |
| JEL: | F21 F23 H25 |
| Date: | 2010–05–19 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iuiwop:0833&r=int |
| By: | Thomas J. Holmes; John J. Stevens |
| Abstract: | There is wide variation in the sizes of manufacturing plants, even within the most narrowly defined industry classifications used by statistical agencies. Standard theories attribute all such size differences to productivity differences. This paper develops an alternative theory in which industries are made up of large plants producing standardized goods and small plants making custom or specialty goods. It uses confidential Census data to estimate the parameters of the model, including estimates of plant counts in the standardized and specialty segments by industry. The estimated model fits the data relatively well compared with estimates based on standard approaches. In particular, the predictions of the model for the impacts of a surge in imports from China are consistent with what happened to U.S. manufacturing industries that experienced such a surge over the period 1997—2007. Large-scale standardized plants were decimated, while small-scale specialty plants were relatively less impacted. |
| Date: | 2010–05 |
| URL: | http://d.repec.org/n?u=RePEc:cen:wpaper:10-10&r=int |
| By: | Xing, Yuqing (Asian Development Bank Institute) |
| Abstract: | This paper estimated the pass-though effects of yuan's exchange rates on prices of the US and Japanese imports from the People's Republic of China (PRC). Empirical results show that, a 1% nominal appreciation of the yuan would result in a 0.23% increase in prices of the US imports in the short run and 0.47% in the long run. Japanese import prices were relatively more responsive to changes of the bilateral exchange rates between the yuan and the yen. For a 1% nominal appreciation of the yuan against the yen, Japanese import prices would be expected to rise 0.55% in the short run and 0.99%, a complete pass-through, in the long run. The high degree of pass-through effects were also found at the disaggregated sectoral level: food, raw materials, apparel, manufacturing, and machinery. However, further analysis indicated that the high pass-through effects in the case of Japan were mainly attributed to the PRC's policy to peg the yuan to the United States (US) dollar, and that the dollar is used as a dominant invoicing currency for the PRC's exports to Japan. After controlling the currency invoicing factor, I found no evidence that the yuan's cumulative appreciation since July 2005 was passed on to prices of Japanese imports at either the aggregate or disaggregated levels. The estimated low pass-through effects of the yuan's appreciation suggest that a moderate appreciation of the yuan would have very little impact on the PRC's trade surplus. |
| Keywords: | exchange rate pass-through; prc; japan; usa |
| JEL: | F31 F32 |
| Date: | 2010–05–18 |
| URL: | http://d.repec.org/n?u=RePEc:ris:adbiwp:0216&r=int |
| By: | Helen Simpson (CMPO University of Bristol, IFS and Oxford University Centre for Business Taxation) |
| Abstract: | This paper investigates the structure of firms’ outward FDI and their behaviour at home in both manufacturing and business services sectors. UK multinationals with overseas affiliates in low-wage economies invest simultaneously in a large number of high-wage countries. I find that more productive multinationals operate in a greater number of countries, consistent with their being able to bear the fixed costs of investing in numerous locations abroad. UK manufacturing plants owned by large-scale, low-wage economy outward investors display lower domestic employment growth, in particular in low-skill activities, consistent with low-wage economy labour substituting for low-skill labour in the UK. |
| Keywords: | multinational enterprises; skills; globalisation |
| JEL: | F2 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:btx:wpaper:1009&r=int |
| By: | Anusha Chari (University of North Carolina & NBER); Wenjie Chen (George Washington University); Kathryn M.E. Dominguez (University of Michigan & NBER) |
| Abstract: | This paper examines the recent upsurge in foreign direct investment by emerging-market firms into the United States. Traditionally, direct investment flowed from developed to developing countries, bringing with it superior technology, organizational capital, and access to international capital markets, yet increasingly there is a trend towards Òcapital flowing uphillÓ with emerging market investors acquiring a broad range of assets in developed countries. Using transaction-specific information and firm-level accounting data we evaluate the operating performance of publicly traded U.S. firms that have been acquired by firms from emerging markets over the period 1980-2007. Our empirical methodology uses a difference-in-differences approach combined with propensity score matching to create an appropriate control group of non-acquired firms. The results suggest that emerging country acquirers tend to choose U.S. targets that are larger in size (measured as sales, total assets and employment), relative to matched non-acquired U.S. firms before the acquisition year. In the years following the acquisition, sales and employment decline while profitability rises, suggesting significant restructuring of the target firms. |
| Keywords: | foreign direct investment, capital flows, emerging markets, acquisitions, firm performance |
| JEL: | F21 F37 G34 |
| Date: | 2009–11 |
| URL: | http://d.repec.org/n?u=RePEc:mie:wpaper:601&r=int |