nep-int New Economics Papers
on International Trade
Issue of 2010‒06‒11
seventeen papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. Readdressing the trade effect of the Euro: Allowing for currency misalignment By Hogrefe, Jan; Jung, Benjamin; Kohler, Wilhelm
  2. Transport Costs and International Trade By Alberto Behar; Anthony J. venables
  3. Output Quality, Skill Intensity, and Factor Contents of Trade: An empirical analysis based on microdata of the Census of Manufactures By FUKAO Kyoji; ITO Keiko
  4. An Empirical Evaluation of Trade Potential in Southern African Development Community By Simwaka, Kisu
  5. International Trade, Factor Mobility and the Persistence of Cultural-Institutional Diversity By Marianna Belloc; Samuel Bowless
  6. Intra-Industry Trade in Agricultural Products: The Case of China By Wang Jing; Nuno Carlos Leitão; Horácio C. Faustino
  7. Irish firms' productivity and imported inputs By FORLANI, Emanuele
  8. Analyzing trade competitiveness : a diagnostics approach By Farole, Thomas; Reis, Jose Guilherme; Wagle, Swarnim
  9. A global CGE model at the NUTS 1 level for trade policy evaluation By Gabriele Standardi
  10. Measuring Economic Localization: Evidence from Japanese firm-level data By NAKAJIMA Kentaro; SAITO Yukiko; UESUGI Iichiro
  11. Migration and Trade Union Rights By Thierry Baudassé; Rémi Bazillier
  12. The Portuguese intra-industry tradeand the labor market adjustment costs: The SAH Again By Horácio C. Faustino; Nuno Carlos Leitão
  13. Exposure to FDI and New Plant Survival: Evidence in Canada By Yanling Wang
  14. Aflatoxin Redux: Does European Aflatoxin Regulation Hurt Groundnut Exporters from Africa? By Xiong, Bo; Beghin, John C.
  15. Trade liberalization and poverty dynamics in Vietnam 2002-2006 By Barbara Coello; Madior Fall; Akiko Suwa-Eisenmann
  16. The Impact of FDI on Firm’s Performance Across Sectors: Evidence from Ukraine By Maryia Akulava; Ganna Vakhitova
  17. Trade and Geography in the Economic Origins of Islam: Theory and Evidence By Stelios Michalopoulos; Alireza Naghavi; Giovanni Prarolo

  1. By: Hogrefe, Jan; Jung, Benjamin; Kohler, Wilhelm
    Abstract: We know that euro-area member countries have absorbed asymmetric shocks in ways that are inconsistent with a common nominal anchor. Based on a reformulation of the gravity model that allows for such bilateral misalignment, we disentangle the conventional trade cost channel and trade effects deriving from 'implicit currency misalignment'. Econometric estimation reveals that the currency misalignment channel exerts a significant trade effect on bilateral exports. We retrieve country specific estimates of the euro effect on trade based on misalignment. This reveals asymmetric trade effects and heterogeneous outlooks across countries for the costs and benefits from adopting the euro. --
    Keywords: Euro,gravity model,exchange rates,purchasing power parity,trade imbalances
    JEL: F12 F13 F15
    Date: 2010
  2. By: Alberto Behar; Anthony J. venables
    Abstract: The first issue we study is the impact of transport costs on the volume and nature of international trade. To what extent has the rise in international trade been driven by changes in transport costs? Why is cross-country and cross-regional experience so different? Transport costs also influence modal choice, the commodity composition of trade and the organisation of production, particularly as ‘just-in-time’ methods get extended to the global level. In turn, these new production methods are placing increasing demands on the transport system. The second issue is the determinants of international transport costs. There is enormous cross-country variation in transport costs and in trade costs more generally. To what extent are these determined by geography, infrastructure deficiencies or institutional barriers? Through time, the evidence is that transport costs have not fallen as much as many people might expect. We explore this paradox.
    Keywords: Trade costs, Gravity equation, Trade infrastructure, Trade facilitation
    JEL: F1 N70 O24
    Date: 2010
  3. By: FUKAO Kyoji; ITO Keiko
    Abstract: Using factory-level data for Japanfs manufacturing sector, we estimate the relationship between the unit values of gross output and factor intensities. We find a significant and positive relationship between the unit value of a product and its white-collar labor intensity, which supports the assumption widely used in theoretical models that commodities with higher prices are of higher quality and more human capital-intensive. However, the relationship between the unit value of a product and its capital intensity is not always positive, and is significantly negative in some sectors. Using the results of the relationship between unit values and factor intensities, we also estimate the factor contents of Japanfs trade, taking account of differences in the unit values of exports and imports. We find that the number of non-production workers and the capital stock embodied in Japanfs net exports are under-estimated when differences in unit values are not taken into account.
    Date: 2010–06
  4. By: Simwaka, Kisu
    Abstract: This paper attempts to estimate the trade potential expected from the SADC FTA. Specifically, the study investigates what the Southern African countries stand to gain by way of increases in intra-regional trade if all trade barriers are removed. In order to assess the trade potential compared to its current level, a gravity model has been estimated. Results show that the observed intra-regional trade is lower than its potential. The results suggest that there is trade potential in the sub-region. There is no question that an FTA will enhance the prospects for increasing intra-regional trade. The results are in agreement with findings by Evans (1997) who found that that the FTA is likely to lead to trade creation, and also African Development Bank (1993), whose results found that there is considerable potential for the non-Southern African Customs Union (SACU) countries to switch supply from third countries to South Africa. The results, however, differ with findings by Chauvin (2002) and Cassim (2001) whose results indicated that SADC trade potentials are rather small, especially for South African exports. They also differ with Elbadawi (1997) whose results indicate that SADC did not have a significant effect on trade among its members.
    Keywords: Trade Potential; Gravity model; SADC
    JEL: F15 F13 F14
    Date: 2010–06–20
  5. By: Marianna Belloc; Samuel Bowless
    Abstract: Cultural and institutional differences among nations may result in differences in the ratios of marginal costs of goods in autarchy and thus be the basis of specialization and comparative advantage, as long as these differences are not eliminated by trade. We provide an evolutionary model of endogenous preferences and institutions under autarchy, trade and factor mobility in which multiple asymptotically stable cultural-institutional conventions may exist, among which transitions may occur as a result of decentralized and un-coordinated actions of employers or employees. We show that: i) specialization and trade may arise and enhance welfare even when the countries are identical other than their cultural-institutional equilibria; ii) trade liberalization does not lead to convergence, it reinforces the cultural-institutional differences upon which comparative advantage is based and may thus impede even Pareto-improving cultural-institutional transitions; and iii) by contrast, greater mobility of factors of production favors decentralized transitions to a superior cultural-institutional convention by reducing the minimum number of innovators necessary to induce a transition.
    Keywords: institutions, incomplete contracts, culture, trade integration, factor mobility,
    JEL: D02 F15 F16
    Date: 2009–09
  6. By: Wang Jing; Nuno Carlos Leitão; Horácio C. Faustino
    Abstract: This paper studies the extent and determinants of intra-industry trade (IIT) in agricultural products of China for the period 1997-2006. The IIT index shows that the level of IIT in agricultural products between China and its thirteen main trading partners is not high. Using a panel data analysis, the empirical results of determinants of IIT indicate that differences in per-capita income and geographical distance have a negative effect on Chinese IIT in agricultural products. Free trade agreements between China and some trading partners weaken the negative effect of per-capita income differences on IIT. The results also suggest that cultural similarity between China and some countries has a positive influence on this type of trade.
    Keywords: agricultural products; intra-industry trade; China.
    JEL: F14
    Date: 2010–04
  7. By: FORLANI, Emanuele (Center for Operations Research and Econometrics (CORE), UniversitŽ catholique de Louvain (UCL), Louvain la Neuve, Belgium)
    Abstract: In this paper, we empirically analyze the evolution of firmsÕ productivity and how the efficiency changes with variations in the inputsÕ origin. Using firm-level information on a sample of Irish firms, we assess the importance of the imported inputsÕ quota for a firmÕs efficiency, as well as starting import activity. The main findings are that an increase in the intensive margin of imports raises firmsÕ efficiency of domestic firms; in addition heterogeneous effects across firms are detected. Unlike the findings of most of the literature, there is weak evidence of self-selection in import activity; differently from previous research when we introduce fixed effects, the self-selection disappears. Instead, the few observed firms that start importing raise their productivity compared to non-importing firms; learning by importing is suspected. The results suggest an important policy implication: policies that favor the imports of intermediates enhance the productivity of domestic firms, making them more competitive in the international markets.
    Keywords: firms' productivity, inputs, import, Ireland
    JEL: F10 F14 D24 L25
    Date: 2010–04–01
  8. By: Farole, Thomas; Reis, Jose Guilherme; Wagle, Swarnim
    Abstract: Trade has proven to be a powerful engine of growth worldwide. But not all countries have benefited equally. Despite much effort to use trade policy to catalyze exports, many developing countries have failed to achieve successful, sustainable export and economic growth. Even with the benefit of preferential market access, many developing country exporters face a broad and diverse set of constraints that limit their potential to compete in export markets. This paper discusses the concept of"competitiveness"with respect to trade and the various dimensions on which trade competitiveness might be assessed. It argues there is a need for a framework by which trade competitiveness can be assessed in a systematic way. Inspired by the"growth diagnostics"approach, it outlines a possible framework for assessing factors that facilitate or constrain trade competitiveness.
    Keywords: Economic Theory&Research,Environmental Economics&Policies,Markets and Market Access,E-Business,Currencies and Exchange Rates
    Date: 2010–06–01
  9. By: Gabriele Standardi (Department of Economics (University of Verona))
    Abstract: This paper aims at building a global CGE trade model at NUTS 1 level (subnational level) for the EU15 regions. The focus is on the production side. The model is used to assess production reallocation across sectors in each NUTS 1 regions after an agricultural tariff liberalization. Nevertheless, it can also be used to simulate other trade policy reform according to the special objective of the researcher. The model is parsimonious in terms of data at the NUTS 1 level. The unskilled and skilled labour are the source of the heterogeneity across the NUT 1 regions. A stylised model is built in order to interpret the results. A sensitivity analysis on trade policy results according to two different degrees of skilled/unskilled labour mobility (perfect immobility and high mobility within the EU15) is conducted. Moreover, an integrated unskilled/skilled labour market within EU27 is tested.
    Keywords: computable general equilibrium models, international trade
    JEL: F12 F13 D58 Q17
    Date: 2010–06
  10. By: NAKAJIMA Kentaro; SAITO Yukiko; UESUGI Iichiro
    Abstract: This paper examines the extent of localization in Japan's manufacturing sector using a unique firm-level dataset on the geographic location of firms. Following the point-pattern approach proposed by Duranton and Overman (2005), we find the following. First, approximately half of Japan's manufacturing industries can be classified as localized and the number of localized industries is largest for a distance of 40 km or less. Second, several industries in the textile mill products sector are among the most localized, which is similar to findings for the UK. This suggests that there exist common factors across countries that determine the concentration of industrial activities. Third, the distribution of distances between entrant (exiting) firms and remaining firms is, in most industries, not significantly different from a random distribution. The results by Durantan and Overman (2008) for the UK and our results for Japan suggest that most industries neither become more localized nor more dispersed over time.
    Date: 2010–06
  11. By: Thierry Baudassé (LEO - Laboratoire d'économie d'Orleans - CNRS : UMR6221 - Université d'Orléans); Rémi Bazillier (LEO - Laboratoire d'économie d'Orleans - CNRS : UMR6221 - Université d'Orléans)
    Abstract: We study in this paper both theoretically and empirically the influence of trade union rights in origin countries on bilateral migration flows. Theoretically, we propose two complementary models. In the first model, trade union rights are supposed to increase the bargaining power of workers. We model these rights as a transfer from high-skilled workers to low-skilled workers, assuming that this latter category of workers will benefit more from freedom of association and collective bargaining. However, we do have to take into account the large extent of informal economy in lots of developing countries. If trade union rights are only enforced in the formal sector, workers from this sector will benefit from a wage premium. The most qualified will then be the first winners of an improvement of such rights if they are more employed in the formal sector. We then propose different alternative indexes measuring trade union rights. We find that, all things being equal, more trade union rights tend to be associated with less migration of low-skill and high-skilled workers. Effects are not significant for intermediate skill level. Lastly, we show that social tensions may have the opposite effect. If trade union rights are associated with more social instability, it may increase the level of migration. It emphasizes the importance of social dialogue.
    Keywords: Migration ; Core Labor Standards ; Freedom of Association and collective bargaining
    Date: 2010–04–23
  12. By: Horácio C. Faustino; Nuno Carlos Leitão
    Abstract: This paper provides an empirical test of the SAH (Smooth Adjustment Hypothesis) using data from Portugal. According to SAH, intra-industry trade leads to relatively lower adjustment costs in comparison to inter-industry trade. The paper tests the SAH by using a dynamic panel data analysis that takes into account lagged effects of changes in the MIIT (Marginal Intra-Industry Trade) index. The regressions use the absolute change in the total employment in a given industry as a proxy for trade adjustment costs. The main results imply that a higher MIIT leads to lower adjustment costs in the same year. More specifically, the coefficients of the MIIT index are negative and statistically significant in all regressions. These results provide support for the SAH. In addition, the coefficients of the lagged MIIT indicators (one or two period) are mostly positive but not significant throughout. These findings highlight the importance of lagged trade indicators in affecting labor reallocation outcomes and thus adjustment costs.
    Keywords: Adjustment costs; dynamic panel data, labor market; marginal intraindustry trade, smooth adjustment hypothesis, Portugal.
    Date: 2010–05
  13. By: Yanling Wang (Norman Paterson School of International Affairs, Carleton University)
    Abstract: This paper examines how exposure to FDI affects Canadian indigenous plants‘ survival, through their economic linkages with FDI affiliates as competitors, input suppliers and customers. One unique feature of the paper is that it studies a country with extensive exposure to FDI, and relies on a dataset including hundreds of thousands of manufacturing plants born to Canadian domestic firms, covering a long time period from 1973 to 1997. The study finds that indigenous plants tend to have shorter lives (more deaths) due to competition with FDI affiliates operating in the same industry, but benefit from FDI affiliates operating in upstream and downstream industries as input suppliers and customers. The positive benefits of FDI outweigh the negative competition effects, resulting in net positive impact on the survival of indigenous Canadian-owned plants. For those plants in cohorts which have survived long enough to become exporters, access to foreign markets generates additional significant benefits for their survival.
    Keywords: FDI, Survival, economic linkages
    JEL: F2 L1
    Date: 2010–05–28
  14. By: Xiong, Bo; Beghin, John C.
    Abstract: We provide an ex-post econometric examination of the harmonization and tightening of the EU Maximum Residues Limit (MRL) on aflatoxins in 2002 and its impact on African exports of groundnut products. We show that the MRL set by the EU has no significant trade impact on groundnut exports from Africa across various methods of estimation. African domestic supply plays an important role in the determination of the volumes of trade and the propensity to trade. Our findings suggest that the trade potential of African groundnut exporters is more constrained by domestic supply issues rather than by limited market access.
    Keywords: food safety; market access; standards; aflatoxin; MRL; groundnut; Africa; EU
    JEL: F13 Q17
    Date: 2010–06–02
  15. By: Barbara Coello; Madior Fall; Akiko Suwa-Eisenmann
    Abstract: This paper shows the evolution of poverty in Vietnam during the deepening of trade liberalization and examines the impact of trade-related variables at the household level. The study is based on a panel dataset of households followed in 2002, 2004 and 2006. Trade-related variables at the household level are defined as the household specialization in terms of production and employment with respect to the type of jobs (wage earners or self-employed) and sectors (import-competing or exported manufactured goods, services, and in agriculture, rice, exported, subsistence and import-competing crops). For the poor, besides the expected positive impact of working in an export-related sector (in industry and in agriculture), diversification in self-employed non-farm activities appears to have been efficient at alleviating poverty. Moreover, the import-competing sectors (in industry and in agriculture) play also a positive role in poverty alleviation. The latter channel could be hindered in the near future, as Vietnam is now in the process of decreasing its import protection.
    Date: 2010
  16. By: Maryia Akulava (Belarusian Economic Research and Outreach Center); Ganna Vakhitova (Kyiv School of Economics, Kyiv Economic Institute)
    Abstract: There are evidences in the literature that FDI impact on enterprises’ performance across three large sectors, i.e. primary, secondary and services, differs substantially. We suggest that these disparities may be due to two factors. First, the weak inter- and intra-sectoral links may prevent the FDI spillovers. Second, sector entry restraints can limit the foreign technology diffusion. Using firm-level data that covers 80% of population in all three sectors we provide some evidence supporting these hypotheses. In particular, horizontal and vertical spillovers a found to have very different impact on firms by sectors. There is an overall positive horizontal spillover effect which is mostly driven by impact in the manufacturing due to the level of competitiveness of that sector. Vertical spillovers are working in the opposite direction and their influence is pronounced for domestic companies in the service sector and for foreign enterprises in the primary sector. Most importantly, the direct FDI effect is the largest in the most restricted primary sector and falls with time in services where substantial liberalization has been undertaken.
    Keywords: Foreign Direct Investment, horizontal spillovers, vertical spillovers, cross-sectoral difference, Ukraine
    JEL: F21 F23 C33
    Date: 2010–06
  17. By: Stelios Michalopoulos; Alireza Naghavi; Giovanni Prarolo
    Abstract: This research examines the economic origins of Islam and uncovers two empirical regularities. First, Muslim countries, virtual countries and ethnic groups, exhibit highly unequal regional agricultural endowments. Second, Muslim adherence is systematically larger along the pre-Islamic trade routes in the Old World. The theory argues that this particular type of geography (i) determined the economic aspects of the religious doctrine upon which Islam was formed, and (ii) shaped its subsequent economic performance. It suggests that the unequal distribution of land endowments conferred differential gains from trade across regions, fostering predatory behavior from the poorly endowed ones. In such an environment it was mutually beneficial to institute a system of income redistribution. However, a higher propensity to save by the rich would exacerbate wealth inequality rendering redistribution unsustainable, leading to the demise of the Islamic unity. Consequently, income inequality had to remain within limits for Islam to persist. This was instituted via restrictions on physical capital accumulation. Such rules rendered the investments on public goods, through religious endowments, increasingly attractive. As a result, capital accumulation remained low and wealth inequality bounded. Geography and trade shaped the set of economically relevant religious principles of Islam affecting its economic trajectory in the preindustrial world.
    Keywords: Religion; Physical Capital; Human Capital; Land Inequality; Wealth Inequality
    JEL: O10 O13 O16 O17 O18 F10 Z12
    Date: 2010

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