nep-int New Economics Papers
on International Trade
Issue of 2010‒07‒03
twenty-one papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. Determinants of Currency Invoicing in Japanese Exports: A firm-level analysis By ITO Takatoshi; KOIBUCHI Satoshi; SATO Kiyotaka; SHIMIZU Junko
  2. Who Uses Free Trade Agreements? By Kazunobu HAYAKAWA; Daisuke HIRATSUKA; Kohei SHIINO; Seiya SUKEGAWA
  3. The Euro’s Trade Effect under Cross-Sectional Heterogeneity and Stochastic Resistance By Helmut Herwartz; Henning Weber
  4. Trade and regional inequality By Rodriguez-Pose, Andres
  5. Foreign Presence Spillovers and Firms’ Export Response:Evidence from the Indonesian Manufacturing By Dionisius Narjoko
  6. The long-run decline in the share of agricultural and food products in international trade, 1951-2000: a gravity equation approach of its causes By Vicent Pinilla; Raúl Serrano
  7. Third-Country Effects on the Formation of Free Trade Agreements By Chen, Maggie; Joshi, Sumit
  8. Foreign Direct Investment, Information Spillover, and Export Decision : The Concentric-Circle Model with Application to Hungarian Firm-Level Data By Iwasaki, Ichiro; Csizmadia, Péter; Illéssy, Miklós; Makó, Csaba; Miklós Szanyi
  9. Fragmentation in East Asia: Further Evidence By Dr. Mitsuyo ANDO; Dr. Fukunari Kimura
  10. Methods for Ex Ante Economic Evaluation of Free Trade Agreements By Cheong, David
  11. The economy-wide effects of further trade reforms in Tunisia's services sectors By Dee, Philippa; Diop, Ndiame
  12. Estimating Gravity Models of International Trade with Correlated Time-Fixed Regressors: To IV or not IV? By Mitze, Timo
  13. Complex Networks and Symmetry: a Review with Applications to the Evolution of World Trade By Franco Ruzzenenti; Diego Garlaschelli; Riccardo Basosi
  14. Corruption and Productivity Firm-level Evidence from the BEEPS Survey By Donato De Rosa; Nishaal Gooroochurn; Holger Görg
  15. Pollution Havens and the Trade in Toxic Chemicals: Evidence from U.S. Trade Flows By John P. Tang
  16. Resiliency of Production Networks in Asia: Evidence from the Asian Crisis By Dr.Ayako OBASHI
  17. The Concentric-Circle Model of FDI Spillover Effects: Estimation Using Hungarian Panel Data By Iwasaki, Ichiro; Csizmadia, Péter; Illéssy, Miklós; Makó, Csaba; Szanyi, Miklós
  18. Environmental regulation and revealed comparative advantages in Europe: is China a pollution haven? By Daniela Marconi
  19. NAMA Tariff Negotiations: What Are South Asia's Best Options? By Prabhash Ranjan
  20. The hub continent? Immigrant networks, emigrant diasporas and FDI By Sara Flisi; Marina Murat
  21. What lies beneath the euro's effect on financial integration? Currency risk, legal harmonization, or trade? By Sebnem Kalemli-Ozcan; Elias Papaioannou; José-Luis Peydró

  1. By: ITO Takatoshi; KOIBUCHI Satoshi; SATO Kiyotaka; SHIMIZU Junko
    Abstract: Currency invoicing in Japanese exports has two puzzling patterns concerning an excessively small share of yen invoicing: one is a strong tendency of Japanese firms to choose the importer's currency invoicing in exports to developed countries, and the other is the prevalence of U.S. dollar invoicing in Japanese exports to East Asia even though Japanese firms have built a regional production network over two decades. To address the puzzles, we propose new possible determinants of currency invoicing at a firm-level, based on an interview analysis with Japanese representative exporting firms, and then empirically test them by probit estimation using the unique dataset on the firms' currency invoicing choice by destination. Our novel findings suggest that a surprisingly low share of yen invoicing in Japanese exports even in the 2000s is attributed not only to the growing intra-firm trade through active overseas operations of Japanese firms but also to the unique production/trade structure in Asia mainly established by Japanese electronics companies.
    Date: 2010–06
  2. By: Kazunobu HAYAKAWA (Institute of Developing Economies, Japan External Trade Organization, Japan); Daisuke HIRATSUKA (Institute of Developing Economies, Japan External Trade Organization, Japan); Kohei SHIINO (Overseas Research Department, Japan External Trade Organization, Japan); Seiya SUKEGAWA (Overseas Research Department, Japan External Trade Organization, Japan)
    Abstract: It is noted that utilization of ASEAN Free Trade Agreements (FTAs) is low by international standards. In order to clarify the reasons for such low utilization, this paper investigates what kinds of Japanese affiliates in ASEAN are more likely to use FTAs in their exporting, by employing unique affiliate-level data. Our findings are as follows. First, the larger the affiliate is, or the more diversified the origins of its procurements, the more likely it is to utilize an FTA scheme in its exporting. Second, affiliates that export actively to countries with higher general tariffs are more likely to use FTAs. Third, there are clear differences in FTA utilization depending affiliates’ locations and sectors.
    Date: 2009–11–01
  3. By: Helmut Herwartz; Henning Weber
    Abstract: This paper investigates if the euro's effect on euro-area trade differs across trade sectors and across country pairs, and to what degree heterogeneity matters for estimating the aggregate euro effect. Time-varying latent variables, which are specific to each sector in each country pair, control for omitted trade costs and mismeasured resistance terms. Parameter heterogeneity and time-varying latent variables are both strongly supported by the data. Due to decreasing trade costs, aggregate exports within the euro area increase between 2000 and 2002 by 15 to 25 percent compared with aggregate exports between European economies which are not members of the euro area. Adjustment within individual sectors is rapid whereas aggregate adjustment is more spread out and gradual since different sectors adjust at distinct times
    Keywords: Euro's trade effect, parameter heterogeneity, smooth-transition model
    JEL: C31 C33 F13 F15 F33 F42
    Date: 2010–06
  4. By: Rodriguez-Pose, Andres
    Abstract: This paper examines the relationship between openness and within-country regional inequality across 28 countries over the period 1975-2005, paying special attention to whether increases in global trade affect the developed and developing world differently. Using a combination of static and dynamic panel data analysis, we find that while increases in trade per se do not lead to greater territorial polarization, in combination with certain country-specific conditions, trade has a positive and significant association with regional inequality. In particular, states with higher inter-regional differences in sector endowments, a lower share of government expenditure, and a combination of high internal transaction costs with a higher degree of coincidence between the regional income distribution and regional foreign market access positions have experienced the greatest rise in territorial inequality when exposed to greater trade flows. This means that changes in trade regimes have had a more polarizing effect in low and middle-income countries, whose structural features tend to potentiate the trade effect and whose levels of internal spatial inequality are, on average, significantly higher than in high-income countries.
    Keywords: Economic Theory&Research,Regional Economic Development,Free Trade,Trade Policy,Emerging Markets
    Date: 2010–06–01
  5. By: Dionisius Narjoko (Dionisius Narjoko Economic Research Institute for ASEAN and East Asia (ERIA), Indonesia)
    Abstract: This paper examines the existence of spillovers associated with the presence of multinational enterprises (MNEs) on a firm’s decision to export, and on export intensity. It utilizes data from Indonesian manufacturing for the census years 1996 and 2006. Channels through which MNEs can affect other firms’ export behavior are considered and tested. The econometric analysis suggests that the contribution of MNEs in improving technological knowledge raises the likelihood that domestic firms will enter the export market, and improves export performance. The analysis finds weak evidence to support the hypothesis that competition, created by the operation of MNEs, facilitates entry into export markets. Further analysis however shows that the impact of competition depends on the level of productivity of the domestic firms. In particular, the more productive firms are suggested to have been able to benefit more than the less productive ones. The overall analysis suggests that given the mixed evidence, policies to promote MNEs are still worth pursuing. The most obvious justification comes from the positive impact of the increased pool of technological knowledge. Other than this, strengthening trade facilitation seems to be a positive proposition, given the finding that many of the new domestic exporters seem to have been constrained in increasing their exports.
    Date: 2009–12–01
  6. By: Vicent Pinilla (Department of Applied Economics and Economic History, Faculty of Economics and Business Studies, Universidad de Zaragoza); Raúl Serrano (Department of Business Administration, Faculty of Economics and Business Studies, Universidad de Zaragoza)
    Abstract: The objective of this study is to determine the causes of the loss of share of agricultural products and food in international trade. The article compares, using a gravity model, the impact of various factors upon bilateral trade in agricultural products, in manufactures and in total trade, between 1963 and 2000 for a representative sample of 40 countries. The results clearly demonstrate how the low demand elasticity for agricultural products and food, the high degree of protectionism to which they were subjected and their meagre share in intra-industrial trade are the principal causes of their relatively slow growth.
    Keywords: Home market effect, Agri-food trade, GATT, Regional trade agreements, International Trade, Gravity model, Homogenous products
    JEL: F14 N50 N70 F10
    Date: 2010–05
  7. By: Chen, Maggie; Joshi, Sumit
    Abstract: The recent proliferation of free trade agreements (FTAs) has resulted in an increasingly complex network of preferential trading relationships. The economics literature has generally examined the formation of FTAs as a function of the participating countries' economic characteristics alone. In this paper, we show both theoretically and empirically that the decision to enter into an FTA is also crucially dependent on the participating countries' existing FTA relationships with third countries. Accounting for the interdependence of FTAs helps to explain a significant fraction of FTA formations that would not otherwise be predicted by countries' economic characteristics.
    Keywords: free trade agreements; third-country effect; loss sharing; concession erosion
    JEL: F15 F11
    Date: 2010–06
  8. By: Iwasaki, Ichiro; Csizmadia, Péter; Illéssy, Miklós; Makó, Csaba; Miklós Szanyi
    Abstract: In this paper, we empirically examine the impact of foreign direct investment (FDI) on the export decision of domestic firms using large-scale panel data from Hungary. In comparison with the conventional model that expresses the export propensity of multinational enterprises (MNEs) with a single variable, the concentric-circle model, considering the nested structure of industrial classification, more precisely specifies the source, extent, and direction of information spillovers from MNEs to indigenous firms. We also confirmed the close relationship between the information spillover effect and the heterogeneity of FDI and domestic firms.
    Keywords: FDI, information spillover, export decision, concentric-circle model, Hungary
    JEL: F14 F21 F23 L16 L60 L80 O19 P23
    Date: 2010–03
  9. By: Dr. Mitsuyo ANDO (Faculty of Business and Commerce, Keio University, Japan); Dr. Fukunari Kimura (Faculty of Economics, Keio University, Economic Research Institute for ASEAN and East Asia (ERIA))
    Abstract: This paper analyzes the spatial pattern of production/distribution networks in East Asia. Two issues are investigated. The one is how the formation of networks has changed the intra- and inter-regional trade pattern. We find that an explosive expansion of intra-regional trade in machinery parts and components, in particular among developing countries, contributes to the current dense networking. The other is how corporate firms effectively organize fragmentation in terms of geographical distance and disintegration. The micro data of Japanese firms indicate that long-distance transactions are mainly intra-firm while transactions in local markets are predominantly arm’s-length (inter-firm), suggesting the formation of agglomeration.
    Date: 2009–10–01
  10. By: Cheong, David (World Trade Institute)
    Abstract: This paper provides practical techniques to policymakers for evaluating the potential economic effects of a Free Trade Agreement (FTA). To this end, the paper discusses how to apply three methods: (i) trade indicators, (ii) SMART (Software for Market Analysis and Restrictions on Trade) in WITS (World Integrated Trade Solutions), and (iii) the GTAP (Global Trade Analysis Project) model. The paper identifies the different aspects of an FTA that each method can evaluate, describes data sources and software requirements, specifies how to interpret the output from each method, and discusses the strengths and limitations of each method. To illustrate each method, there are examples applied to countries in the Association of Southeast Asian Nations (ASEAN), particularly Cambodia, Lao People‘s Democratic Republic, and Vietnam.
    Keywords: regionalization; evaluation methods; trade indicators; SMART model; CGE analysis; preferential trade agreements; Asia
    JEL: F13 F15
    Date: 2010–06–01
  11. By: Dee, Philippa; Diop, Ndiame
    Abstract: The purpose of this paper is to benchmark Tunisia against other emerging economies in terms of the regulatory barriers affecting particular services sectors, and to assess the economy-wide effects of further liberalizing these services trade restrictions, compared with reducing the dispersion in barriers to its merchandise trade. On the basis of a rather restricted sample of services sectors, partial regulatory reform would yield gains roughly equivalent to full unilateral reform of manufacturing tariffs, but roughly one-tenth the gains from full bilateral reform of border protection in agriculture with the European Union. The adjustment costs associated with these services trade reforms would be minimal. The paper identifies the reasons why the gains from these services reforms are relatively small, and argues that a wider set of reforms could provide win-win outcomes and even fewer adjustment costs. By contrast, the gains in agriculture and manufacturing tend to come at the expense of domestic output in the reforming sectors -- the gains are greater, but so too are the adjustment costs.
    Keywords: Transport Economics Policy&Planning,Banks&Banking Reform,Emerging Markets,Economic Theory&Research,Markets and Market Access
    Date: 2010–06–01
  12. By: Mitze, Timo
    Abstract: Gravity type models are widely used in international economics. In these models the inclusion of time-fixed regressors like geographical or cultural distance, language and institutional (dummy) variables is often of vital importance e.g. to analyse the impact of trade costs on internationalization activity. This paper analyses the problem of parameter inconsistency due to a correlation of the time-fixed regressors with the combined error term in panel data settings. A common solution is to use Instrumental-Variable (IV) estimation in the spirit of Hausman-Taylor (1981) since a standard Fixed Effect Model (FEM) estimation is not applicable. However, some potential shortcomings of the latter approach recently gave rise to the use of non-IV two-step estimators. Given their growing number of empirical applications, we aim to compare the performance of IV and non-IV approaches in the presence of time-fixed variables and right hand side endogeneity using Monte Carlo simulations, where we explicitly control for the problem of IV selection in the Hausman-Taylor case. The simulation results show that the Hausman-Taylor model with perfect-knowledge about the underlying data structure (instrument orthogonality) has on average the smallest bias. However, compared to the empirically relevant specification with imperfect-knowledge and instruments chosen by statistical criteria, simple non-IV rival estimators performs equally well or even better. We illustrate these findings by estimating gravity type models for German regional export activity within the EU. The results show that the HT specification tends to overestimate the role of trade costs proxied by geographical distance.
    Keywords: Gravity model; Exports; Instrumental variables; two-step estimators; Monte Carlo simulations
    JEL: C52 C23 C15
    Date: 2010–06–26
  13. By: Franco Ruzzenenti; Diego Garlaschelli; Riccardo Basosi
    Abstract: In this review we establish various connections between complex networks, symmetry, and symmetry breaking. We first rephrase the main results of network theory in terms of symmetry concepts, then we study link reversal symmetry as a particular example, and finally consider the evolution of the international trade network as a real-world application. We show that a strong embedding in economic space breaks the invariance of the trade network down to disjoint equivalence classes, while the observed evolution of reciprocity is consistent with a symmetry breaking taking place in production space. Our results show that networks can be strongly affected by symmetry-breaking phenomena occurring in embedding spaces, and that network symmetries can therefore suggest, or rule out, possible underlying mechanisms.
    Date: 2010–06
  14. By: Donato De Rosa; Nishaal Gooroochurn; Holger Görg
    Abstract: Using enterprise data for the economies of Central and Eastern Europe and the CIS, this study examines the effects of corruption on productivity. Corruption is defined as a “bribe tax” and is compared to another form of institutional inefficiency, which is often believed to be closely linked with corruption: the “time tax” imposed on firms by red tape. When testing their effects in the full sample, only the bribe tax appears to have a negative effect on firm-level productivity, while the effect of the time tax is insignificant. At the same time, there is no evidence of a trade-off between the time and the bribe taxes, implying that bribing does not emerge as a second-best option to achieve higher productivity by helping circumvent cumbersome bureaucratic requirements. When the sample is split between EU and non-EU countries, the time tax turns out to have a negative effect only in EU countries and the bribe tax only in non-EU countries. This suggests that the institutional environment influences the way in which firm behaviour affects firm performance. In particular, the impact of bribing for individual firms appears to vary depending on overall institutional quality: in countries where corruption is more prevalent and the legal framework is weaker, bribery is more harmful for firm-level productivity
    Keywords: Keywords: corruption, firm performance, productivity, bribe tax
    JEL: O14 P37
    Date: 2010–06
  15. By: John P. Tang
    Abstract: Does increased environmental protection decrease the emission of pollutants or merely displace them? Using newly available trade data, this study examines the flows of a panel of chemicals designated as toxic by the U.S. Environmental Protection Agency’s Toxics Release Inventory (TRI). Estimates from a differences-in-differences model indicate a significant increase in net imports when a chemical is listed on TRI, which suggests production offshoring. Furthermore, I find that increased imports due to this “pollution haven effect” are sourced disproportionately from poorer countries, which are likely to have lower environmental protection standards. At the same time, I observe the bulk of American trade in toxic chemicals occurs with other wealthy countries, which may be attributed to the capital intensity of chemical production.
    Date: 2010–06
  16. By: Dr.Ayako OBASHI (Faculty of Economics, Keio University)
    Abstract: This paper presents the resiliency of international production networks stretched across the Asian region in face of the Asian financial and currency crisis back in 1997-98, as well as confirming its stability with consideration to adverse effects of the crisis. To examine the probability of survival once a trade relationship is established and the probability of revival after the transaction is broken off, survival analysis is conducted using the country-product level trade data. A series of survival analyses provide evidence supporting the view that transactions of intermediate goods within production networks are more likely to be stable and resilient to a temporary disruption compared to other transactions. First, even after considering the impact of the Asian crisis, machinery parts & components are more likely to be traded through long-lived trade relationships compared to finished products in intra-Asian trade. Second, machinery parts & components are no exception in that a non negligible portion of trade relationships was actually broken off amid the Asian crisis, but many of them were restored shortly afterward as compared to the others.
    Date: 2009–10–01
  17. By: Iwasaki, Ichiro; Csizmadia, Péter; Illéssy, Miklós; Makó, Csaba; Szanyi, Miklós
    Abstract: A new empirical model is presented in this paper with respect to the productivity spillover effects of foreign direct investment (FDI) by focusing on the concentric-circle structure of industrial organizations arising from sectoral differences among firms. In this model, the market presence of horizontal FDI in a host country is expressed using multiple variables with a nested structure corresponding to the aggregated level of industrial classification in order to identify its spillover effects on the productivity of domestic firms according to the industrial sector with different depth. We estimated the model using large-scale firm-level data from Hungary and confirmed horizontal FDI spillover effects simultaneously taking place in sectors with different depth that cannot be captured with the conventional model having a single horizontal variable.
    Keywords: foreign direct investment, spillover effects, concentric-circle model, Hungary
    JEL: D24 F21 F23 L16 L60 L80 O19 P23
    Date: 2009–11
  18. By: Daniela Marconi (Bank of Italy)
    Abstract: The relocation of more polluting industries in poorer countries due to gaps in environmental standards is known as the pollution haven effect, whereby the scale and the composition of output change across countries. Changes in the composition of the output mix might translate into changes of comparative advantages across countries, as revealed by trade flows. This paper focus on this issue and looks at the changes of bilateral revealed comparative advantages (RCAs) in the last decade between China and the major fourteen EU countries (EU14). Using industry level data on bilateral trade, air pollution, water pollution and several measures of environmental stringency, we find that, controlling for other factors that may have affected RCAs, such as labor costs, on average our EU14 countries have kept or improved their advantages with respect to China in both water polluting industries (such as paper and agro-based industries) and air polluting industries (such as basic metals and chemicals), while they have lost competitiveness in the more clean industries (such as machinery and fabricated metals).
    Keywords: revealed comparative advantages, environmental regulation, industrial pollution
    JEL: F14 F18
    Date: 2010–06
  19. By: Prabhash Ranjan
    Abstract: This paper looks at the possible impact of ongoing tariff negotiations on South Asian countries, namely Bangladesh, India, Nepal, Pakistan and Sri Lanka, at an aggregate level or at the Multilateral Trade Negotiation (MTN) categories level. It analyses the impact of some of the submissions and also endeavours to find out the obligations that South Asian countries may have to fulfil in the ongoing negotiations under NAMA. [Working Paper 3]
    Keywords: Negotiations, World Trade Organisation (WTO), Non-Agricultural Market Access (NAMA), South Asian, Multilateral Trade Negotiation (MTN), sectoral component, tariff bindings, tariff reduction, preference erosion
    Date: 2010
  20. By: Sara Flisi; Marina Murat
    Abstract: This paper studies the effects of immigrant networks on the bilateral FDI of France, Germany, Italy, Spain and the UK, and, for Italy and Spain, also of the emigrant diasporas. It analyses the effects of skilled and unskilled immigrants and of networks linked to developing and developed countries. Results show that the FDIs of the UK, Germany and France are affected by the networks of skilled immigrants, while those of Italy and Spain are prompted only by the emigrant diasporas. Networks linked to OECD and non-OECD countries have similar effects
    Keywords: migration, networks, skills, diasporas, FDI
    JEL: F21 F22 F23
    Date: 2010–05
  21. By: Sebnem Kalemli-Ozcan (University of Houston, Department of Economics, Houston, TX, 77204, USA.); Elias Papaioannou (Dartmouth College, 6106 Rockefeller Hall, 319 Silsby Hanover, NH 03755, USA.); José-Luis Peydró (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.)
    Abstract: Although recent research shows that the euro has spurred cross-border financial integration, the exact mechanisms remain unknown. We investigate the underlying channels of the euro’s effect on financial integration using data on bilateral banking linkages among twenty industrial countries in the past thirty years. We also construct a dataset that records the timing of legislative-regulatory harmonization policies in financial services across the European Union. We find that the euro’s impact on financial integration is primarily driven by eliminating the currency risk. Legislative-regulatory convergence has also contributed to the spur of cross-border financial transactions. Trade in goods, while highly correlated with bilateral financial activities, does not play a key role in explaining the euro’s positive effect on financial integration. JEL Classification: F1, F3, G2, K0.
    Keywords: Financial integration, Law and finance, Euro, European Union, FSAP, Trade, Regulation.
    Date: 2010–06

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