nep-int New Economics Papers
on International Trade
Issue of 2010‒06‒04
sixteen papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. Intra-National Regional Heterogeneity in International Trade By Kyoko Hirose; Yushi Yoshida
  2. The Export-Production Decision of Chilean Farmers: Implications for Chileâs Agricultural and Export Policies By Echeverria, Rodrigio; Gopinath, Munisamy
  3. The great trade collapse of 2008-2009: an inventory adjustment? By George Alessandria; Joseph P. Kaboski; Virgiliu Midrigan
  4. The Structure and Growth of International Trade By Massimo Riccaboni; Stefano Schiavo
  5. Market Imperfections, Wealth Inequality, and the Distribution of Trade Gains By Reto Foellmi; Manuel Oechslin
  6. An alternative theory of the plant size distribution with an application to trade By Thomas J. Holmes; John J. Stevens
  7. Agricultural Trade Liberalization, Productivity Gain and Poverty Alleviation: a General Equilibrium Analysis By Nadia Belhaj Hassine; Véronique Robichaud; Bernard Decaluwé
  8. Trade Flows, Exchange Rate Uncertainty and Financial Depth: Evidence from 28 Emerging Countries By Mustafa Caglayan; Omar S. Dahi; Firat Demir
  9. Endogenous Skill Acquisition and Export Manufacturing in Mexico By David Atkin
  10. Comparative Trade Policy By Wiberg, Magnus
  11. Perceived Job Insecurity, Unemployment Risk and International Trade: A Micro-Level Analysis of Employees in German Service Industries By Maren Lurweg
  12. Interaction between trade, conflict and cooperation: the case of Japan and China By Shiro Armstrong
  13. FDI in Post-Production Services and Product Market Competition By Jota Ishikawa; Hodaka Morita; Hiroshi Mukunoki
  14. The Dixit-Stiglitz-Krugman Trade Model: A Geometric Note By Toru Kikuchi
  15. How Do Chinese Industries Benefit from FDI Spillovers? By ITO Banri; YASHIRO Naomitsu; XU Zhaoyuan; CHEN Xiaohong; WAKASUGI Ryuhei
  16. Trade Competitiveness, Subsidies and Barriers to Trade:Implication for Indian Agriculture By Bandhu, Yogesh

  1. By: Kyoko Hirose (Faculty of Economics, Kyushu Sangyo University); Yushi Yoshida (Faculty of Economics, Kyushu Sangyo University)
    Abstract: We present a two-country model with explicit incorporation of two regions in the home country and one region in a foreign country. Each region consists of two types of workers: skilled workers, freely mobile across domestic regions, are required to set up a firm, whereas unskilled workers are constrained to their own regions. Trade costs accrue both intra-nationally and internationally. International trade costs are assumed to be different among regions. Our model produces a region-based gravity equation and generates heterogeneity among regional exports in terms of responses with respect to economic size. We also find a home-market effect at the regional level. Moreover, we are able to show the relative magnitude of the home-market effect among home regions, in terms of a change in the export share. The magnitude of the home-market effect is larger in a region further away from the foreign country. We empirically test our theoretical hypothesis with an application to the export dataset of Japanese regions. Our empirical results provide strong evidence in support of a region-based home-market effect but weak evidence for a relative home-market effect.
    Keywords: Home-market effect, International trade, Regional exports, Regional heterogeneity, Trade cost.
    JEL: F12 F14 R12
    Date: 2010–05
  2. By: Echeverria, Rodrigio; Gopinath, Munisamy
    Keywords: International Relations/Trade,
    Date: 2010–05–10
  3. By: George Alessandria; Joseph P. Kaboski; Virgiliu Midrigan
    Abstract: This paper examines the role of inventories in the decline of production, trade, and expenditures in the US in the economic crisis of late 2008 and 2009. Empirically, the authors show that international trade declined more drastically than trade-weighted production or absorption and there was a sizeable inventory adjustment. This is most clearly evident for autos, the industry with the largest drop in trade. However, relative to the magnitude of the US downturn, these movements in trade are quite typical. The authors develop a two-country general equilibrium model with endogenous inventory holdings in response to frictions in domestic and foreign transactions costs. With more severe frictions on international transactions, in a downturn, the calibrated model shows a larger decline in output and an even larger decline in international trade, relative to a more standard model without inventories. The magnitudes of production, trade, and inventory responses are quantitatively similar to those observed in the current and previous US recessions.
    Keywords: Inventories ; Global financial crisis ; International trade
    Date: 2010
  4. By: Massimo Riccaboni; Stefano Schiavo
    Abstract: The paper develops a model of proportionate growth to describe the dynamics of international trade flows. We show that a large number of the empirical regularities characterizing international trade -such as the fraction of zero trade flows across pairs of countries, the positive relationship between inten- sive and extensive margins, the high concentration of trade with respect to both products and destinations, the core-periphery structure of exchanges- are well explained by this simple stochastic setup. This helps us to distinguish among economically relevant regularities and those simply resulting from the mechanical interactions among agents. Furthermore, our model can be used to describe the process of `self-discovery' that lie at the foundations of suc- cessful export-led growth and is thought to play a crucial role in the process of economic development. Our model correctly predicts that large export flows are rare events, as pointed out in the empirical literature: yet, countries char- acterized by large `discovery' efforts are much more likely to draw a `big hit' due to the (very skewed) shape of the distribution of bilateral export flows.
    Keywords: international trade, development, weighted networks, proportionate growth, industrial policy
    JEL: F14 F43 O25
    Date: 2010
  5. By: Reto Foellmi; Manuel Oechslin
    Abstract: Globalization increasingly involves less-developed countries (LDCs), i.e., economies which usually suffer from severe imperfections in their financial systems. Taking these imperfections seriously, we analyze how credit frictions affect the distributive impact of trade liberalizations. We find that free trade significantly widens income differences among firm owners in LDCs: While wealthy entrepreneurs are better off, relatively poor business people lose. Intuitively, with integrated markets, profit margins shrink -- which makes access to credit particularly difficult for the least affluent agents. Richer entrepreneurs, by contrast, win because they can take advantage of new export opportunities. Our findings resonate well with a number of empirical regularities, in particular with the observation that some liberalizing LDCs have observed a surge in top-income shares.
    Keywords: Wealth inequality; trade liberalization; credit market frictions; top incomes
    JEL: O11 F13 O16
    Date: 2010–03
  6. 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
  7. By: Nadia Belhaj Hassine; Véronique Robichaud; Bernard Decaluwé
    Abstract: Computable General Equilibrium (CGE) models have gained continuously in popularity as an empirical tool for assessing the impact of trade liberalization on agricultural growth, poverty and income distribution. Conventional models ignore however the channels linking technical change in agriculture, trade openness and poverty. This study seeks to incorporate econometric evidence of these linkages into a CGE model to estimate the impact of alternative trade liberalization scenarios on poverty and equity. The analysis uses the Latent Class Stochastic Frontier Model (LCSFM) and the metafrontier function to investigate the influence of trade openness on agricultural technological change. The estimated productivity effects induced from higher levels of trade are combined with a general equilibrium analysis of trade liberalization to evaluate the income and prices changes. These effects are then used to infer the impact on poverty and inequality following the top-down approach. The model is applied to Tunisian data using the social accounting matrix of 2001 and the 2000 household expenditures surveys. Poverty is found to decline under agricultural and full trade liberalization and this decline is much more pronounced when the productivity effects are included.
    Keywords: Openness, Agriculture, Productivity, Poverty, CGE modeling
    JEL: C24 C33 D24 F43 I32 Q17
    Date: 2010
  8. By: Mustafa Caglayan (Department of Economics, The University of Sheffield Author-Person=pca30); Omar S. Dahi (Hampshire College); Firat Demir (University of Oklahoma)
    Abstract: We investigate the effects of real exchange rate uncertainty and financial depth on manufactures exports from 28 emerging economies to the North and South over 1978-2005. We estimate a dynamic panel model using system GMM approach and show that for the majority of countries in our sample exchange rate uncertainty affects both South-South and South-North trade negatively. Furthermore, for several cases we discover that this effect is unidirectional, that is South-South or South-North. In addition, we find that while financial depth plays a trade-enhancing role, exchange rate shocks can negate this effect. We also show that trade among developing economies is likely to enhance export growth.
    Keywords: Trade flows, Exchange rate uncertainty, South-South trade, Financial depth, Dynamic panel data
    JEL: F15 F31 G15 E44 O14
    Date: 2010–05
  9. By: David Atkin
    Abstract: This paper confi…rms that for Mexico over the period 1986-2000, the export sector pays higher wages than other sectors, but school drop out increases with the arrival of new export jobs. The workers induced to enter export manufacturing eventually earn less than they would have earned had the jobs never appeared and they stayed in school.
    Keywords: higher wages, literature, export, manufacturing fi…rms, jobs, new, o¤ering plenty, skill workers,
    Date: 2010
  10. By: Wiberg, Magnus (Ministry of finance)
    Abstract: Current research has found ambiguous results with respect to the effects of the type of electoral regime on trade policy. The present paper proposes a solution to this indeterminacy. It is shown that the equilibrium level of trade protection can be relatively higher, as well as lower, under a majoritarian electoral rule compared to proportional representation. The equilibrium outcome is shown to depend on the number of voters in swing districts who own a factor specific to the exporting industry in relation to those who possess claims to the specific input employed by the import-competing sector. It is further argued that political rents are lower (higher) under majoritarian elections if there are more factor owners in the swing districts with stakes in the exporting (import-competing) industry.
    Keywords: Endogenous Tariff Formation; Trade Policy; Electoral Rules
    JEL: D72 F13
    Date: 2010–05–27
  11. By: Maren Lurweg
    Abstract: The present paper investigates the impact of international trade on individual labour market outcomes in the German service sector for the period 1995-2006. Combining micro-level data from the German Socio-Economic Panel (SOEP) and industry-level trade data from input-output tables, we examine the impacts of international trade on (1) the individually reported fear of job loss and (2) job-to-unemployment transitions. We therefore apply both a “subjective” and a more “objective” measure of job insecurity. Our results indicate that international trade does indeed affect labour market outcomes in German service industries. Employees in trading service sectors face both a higher subjective and objective unemployment risk, regardless of their skill level. Moreover, growth in real net exports is positively correlated with perceived job insecurity and individual unemployment risk.
    Keywords: International trade, perceived job insecurity, employment status
    JEL: F16 C23 J63
    Date: 2010
  12. By: Shiro Armstrong (Australia–Japan Research Centre)
    Abstract: The complex interaction between trade and politics is analysed for the Japan–China relationship using Granger causality tests. The purpose is to determine the presence and direction of causation between trade and political events, both positive and negative, and to gauge an idea of the lag length of causality. Trade is growing quickly between Japan and China despite long standing political distance between the two countries. Results show that the economic relationship underpins and constrains the political relationship between Japan and China while an increase in positive political news and a decrease in negative political news promote trade to some degree.
    Keywords: Conflict and Cooperation; Japan–China; Trade; Granger Causality
    JEL: C32 F10 F59
    Date: 2010
  13. By: Jota Ishikawa; Hodaka Morita; Hiroshi Mukunoki
    Abstract: Post-production services, such as sales, distribution, and maintenance, comprise a crucial element of business activity. We explore an international duopoly model in which a foreign firm has the option of outsourcing post-production services to its domestic rival or providing those services by establishing its own facilities through FDI. We demonstrate that trade liberalization in goods may hurt domestic consumers and lower world welfare, and that the negative welfare impacts are turned into positive ones if service FDI is also liberalized. This finding yields important policy implications, given the reality that the progress of liberalization in service sectors is still limited.
    Keywords: post-production services, trade liberalization, FDI, outsourcing, international oligopoly
    Date: 2010–04
  14. By: Toru Kikuchi (Graduate School of Economics, Kobe University)
    Abstract: In this note, we briefly review the now standard Dixit-Stiglitz-Krugman trade model of monopolistic competition. Furthermore, we propose a convincing graphical exposition that emphasizes the firms' entry-exit process.
    Date: 2010–05
  15. By: ITO Banri; YASHIRO Naomitsu; XU Zhaoyuan; CHEN Xiaohong; WAKASUGI Ryuhei
    Abstract: Recently, Foreign Invested Enterprises (FIEs) in China have increased their investment in not only production activity but also R&D activity. This paper examines the impact of spillovers from their activities on two types of innovations by Chinese domestic firms: Total Factor Productivity (TFP) and invention patent application, using comprehensive industry and province-level data. We evaluate such spillovers according to FIEs' ownership structure, the origin of foreign funds, and the type of their activity: R&D, and production. We find an interesting asymmetry between spillovers to TFP and patent application; however, although we do not find significant intra-industry spillovers from FIEs, which is in line with previous studies, we find robust inter-industries spillover on TFP. We also find substantial intra-industry spillovers promoting invention patent application but no evidence of inter-industries spillovers. Furthermore, whereas spillovers from FIEs to Chinese firmsf TFP stem from their production activities, the source of spillovers to invention patent application is mostly through their R&D activity. Our findings indicate a need for multi-dimensional evaluation on the role of FDI in developing countries.
    Date: 2010–05
  16. By: Bandhu, Yogesh
    Abstract: Agriculture in India is the most important segment of the economy. Growth of Agricultural sector is crucial for Indian economy as it employs two-third of its population and contributes nearly one-third of national income. However its importance in the economic, social and political fabric of India goes well beyond what is indicated by its contribution to the economy. The large number of poor agricultural households and their income vulnerability are major concern among policy makers. These concerns have driven both agricultural policies and public expenditures in agriculture in India as well as in other part of the globe. India made significant advances towards achieving its goal of rapid agricultural growth, improving food security, and reducing rural poverty during the last four decades. Sustainable food production growth enabled India to achieve foodgrain self sufficiency, eliminating the threat of famines and acute starvation in the country. More rapid agricultural productivity growth, as past experiences shows, can have major impacts on poverty reduction trough direct effects on producers income, indirect effects on consumer welfare trough changes in food prices, employment and wage effects, and growth induced effects throughout the economy. Agriculture is also one of the major sources of export earnings of our country and is crucial for improving the balance of payments. In recent years, the export of agricultural and allied products accounted for about one-fifth of total export earnings of India. India's share of agricultural export has remained very low in many commodities despite inherent strength of Indian agriculture with the exception of few commodities. The performance of agricultural export depends not only on adequate surplus, international prices, quality of product, market competition and comparative advantage of producing the exportable commodities but also on domestic and international trade policy. Hence the subsidies and supports to agricultural commodities of country play a major role to stand in international market. Present paper is an effort to evaluate competitiveness of Indian wheat and rice in international market. Keeping in view the overall foodgrain production, marketable surplus and number of farmers, among the major foodgrain producing states, Uttar Pradesh has been taken for comparison of trade competitiveness. Since agricultural trade is highly distorted due to huge subsidies and support to agriculture in developed countries; paper also evaluate competitiveness of these commodities in alternative case if both countries withdraw their subsidies to these commodities in form of Producer Support Estimate (PSE). The Paper is divided in four parts; Part one is about the methodology to calculate competitiveness. Trade competitiveness of wheat and rice at normal prices and at PSE adjusted prices has been calculated in part two. Part three evaluate the implications of agricultural subsidy and part four is the concluding part with suggesting some corrective measures for fair agricultural trade and due space of developing countries in international agricultural trade.
    Keywords: Trade competitiveness; Subsidies; WTO; Indian Agriculture
    JEL: F00 F13 Q17 F1
    Date: 2009–10

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