nep-int New Economics Papers
on International Trade
Issue of 2010‒07‒24
twelve papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. The asymmetric effects of tariffs on intra-firm trade and offshoring decisions By Federico J. Díez
  2. Ethnic networks and trade: intensive vs. extensive margins By Cletus C. Coughlin; Howard J. Wall
  3. Exports, borders, distance, and plant size By Thomas J. Holmes; John J. Stevens
  4. Rules of Origin in the Africa-EU Strategic Partnership Agreement and Nigeria’s international trade By Balogun, Emmanuel Dele
  5. Royale with Cheese: The Effect of Globalization on the Variety of Goods By Matthew T Cole; Ronald B Davies
  6. Did Trade Liberalization Help Women? The Case of Mexico in the 1990s By Ernesto Aguayo-Tellez; Jim Airola; Chinhui Juhn
  7. The Economic and Environmental Effects of an EU Ban on Illegal Logging Imports. Insights from a CGE Assessment By Francesco Bosello; Ramiro Parrado; Renato Rosa
  8. Investigating the Relationship between Health and Economic Growth: Empirical Evidence from a Panel of 5 Asian Countries By Seema Narayan; Paresh Kumar Narayan; Sagarika Mishra
  9. Modeling Economic, Social and Environmental Implications of a Free Trade Agreement Between the European Union and The Russian Federation By Maryla Maliszewska; Elena Jarocinska; Milan Scasny
  10. Trade and Geography in the Economic Origins of Islam: Theory and Evidence By Stelios Michalopoulos; Alireza Naghavi; Giovanni Prarolo
  11. Do welfare and labour market institutions influence unemployment duration of immigrants? Evidence from 11 European countries By MEYER CHRISTENSEN Anna; PAVLOPOULOS Dimitris
  12. The opening up of eastern Europe at 20-jobs, skills, and reverse maquiladoras? in Austria and Germany By Dalia Marin

  1. By: Federico J. Díez
    Abstract: This paper studies the effects of tariffs on intra-firm trade. Building on the Antràs and Helpman (2004) North-South theoretical framework, I show that higher Northern tariffs reduce the incentives for outsourcing and offshoring, while higher Southern tariffs have the opposite effects. I also show that increased offshoring and outsourcing imply an increase in the ratio of Northern intra-firm imports to total imports, which is an empirically testable prediction. Using a highly disaggregated dataset of U.S. (the North) imports and relevant tariffs, I find robust evidence to support the model's predictions.
    Keywords: Tariff ; Contracting out ; Trade
    Date: 2010
  2. By: Cletus C. Coughlin; Howard J. Wall
    Abstract: Ethnic networks?as proxies for information networks?have been associated with higher levels of international trade. Previous research has not differentiated between the roles of these networks on the extensive and intensive margins. The present paper does so using a model with fixed effects, finding that ethnic networks increase trade on the intensive margin but not on the extensive margin.
    Keywords: International trade ; Exports
    Date: 2010
  3. By: Thomas J. Holmes; John J. Stevens
    Abstract: The fact that large manufacturing plants export relatively more than small plants has been at the foundation of much work in the international trade literature. We examine this fact using Census micro data on plant shipments from the Commodity Flow Survey. We show the fact is not entirely an international trade phenomenon; part of it can be accounted for by the effect of distance, distinct from any border effect. Export destinations tend to be further than domestic destinations, and large plants tend to ship further distances even to domestic locations, as compared with small plants. We develop an extension of the Melitz (2003) model and use it to set up an analysis with model interpretations of ratios between large plant and small plant shipments that can be calculated with the data. We obtain a decomposition of the overall ratio into a term that varies with distance, holding fixed the border, and a term that varies with the border, holding fixed the distance. The distance term accounts for more than half of the overall difference.
    Date: 2010
  4. By: Balogun, Emmanuel Dele
    Abstract: This paper examines the key issues and assesses the impact of the rules of origin (RoO) and cumulation on Nigeria’s international trade within the context of Africa-EU partnerships agreements. The review of literatures shows that RoO are an important element in determining the final benefit associated with the bilateral trade relationship under preferential trade agreements. It notes that Africa-EU bilateral trade relations dates back to the Lome Conventions that gave preferential entry into EU of some products, and now to the new Africa-EU partnership which lays less emphasis on RoO. An analysis of available data show that RoO have had limited impact on Nigeria’s exports trade with the EU since her major exports (crude oil) does not benefit from RoO. Instead, there has been an increase in intermediate imports from EU which suggests trade creation in favour of EU while the rising trend in trade within Africa could be the result of bilateral cumulation and intra-Africa FTAs/economic integration. The paper further argues that the increase in trade with USA and others may be the result of trade reorientation as a result of switching from EU to other cheaper partner countries, especially USA in the face of AGOA. Among the challenges which militate against the RoO are: global reduction in tariff by WTO and the changing focus of the objectives of Africa-EU partnership principles from PTA to regional support. In concluding, the paper notes that the new partnership agreements needs to reconsider its position on RoO as it is a potent tool that is mutually beneficial in partnership. As such, the EU must go beyond the WTO GSP and AGOA to give preferential treatment to goods originating from Africa.
    Keywords: Rules of origin; international trade; Africa-EU partnership; Lome Conventions; preferential trade agreements.
    JEL: F13 F1 F53
    Date: 2010–07–14
  5. By: Matthew T Cole (University College Dublin); Ronald B Davies (University College Dublin)
    Abstract: The key result of the so-called “New Trade Theory” is that countries gain from falling trade costs by an increase in the number of varieties available to consumers. Though the number of varieties in a given country rises, it is also true that global variety decreases from increased competition wherein imported varieties drive out some local varieties. This second result is a major issue for anti-trade activists who criticize the move towards free trade as promoting “homogenization” or “Americanization” of varieties across countries. We present a model of endogenous entry with heterogeneous firms which models this concern in two ways: a portion of a consumer’s income is spent overseas (i.e. tourism) and an existence value (a common tool in environmental economics where simply knowing that a species exists provides utility). Since lowering trade costs induces additional varieties to export and drives out some non-exported varieties, these modifications result in welfare losses not accounted for in the existing literature. Nevertheless, it is only through the existence value that welfare can fall as a result of declining trade barriers. Thus, for these criticisms of globalization to dominate, it must be that this loss in the existence value outweighs the direct benefits from consumption.
    Keywords: Trade Theory, Globalization, Variety, Tourism
    Date: 2010–07–19
  6. By: Ernesto Aguayo-Tellez; Jim Airola; Chinhui Juhn
    Abstract: Using household and establishment level data which span the 1990s, we examine the impact of trade liberalization policies on women’s labor market outcomes in Mexico. We find that that women’s relative wage remained stable while employment increased, leading to an increase in women’s wage bill share. Between-industry shifts, consistent with trade-based explanations, account for up to 40 percent of the growth in women’s wage bill share between 1990 and 2000. Comparing across industries, we find tariff cuts and exports are positively related to industry growth and women benefited since some of the fastest growing industries were female-intensive industries. We use establishment level data for the manufacturing sector to examine within-industry shifts in women’s wage bill share. Even controlling for detailed industry and maquiladora status, women’s wage bill share is positively related to exports by foreign firms, suggesting that trade liberalization further encouraged outsourcing and assembly-type activity. Finally, we find suggestive evidence that household bargaining power shifted in favor of women. Expenditures shifted from goods associated with male preference, such as men’s clothing and tobacco and alcohol, to those associated with female preference such as women’s clothing and education.
    JEL: J16 J21 J31 O19 O24 O54
    Date: 2010–07
  7. By: Francesco Bosello (Fondazione Eni Enrico Mattei, University of Milan and Euromediterranean Center for Climate Change (CMCC)); Ramiro Parrado (Fondazione Eni Enrico Mattei and Euromediterranean Center for Climate Change (CMCC)); Renato Rosa (Fondazione Eni Enrico Mattei and Euromediterranean Center for Climate Change (CMCC))
    Abstract: Illegal logging is widely recognized as a major economic problem and one of the causes of environmental degradation. Increasing awareness of its negative effects has fostered a wide range of proposals to combat it by major international conservation groups and political organizations. Following the 2008 US legislation which prohibits the import of illegally harvested wood and wood products, the European Union (EU) is now discussing a legislation proposal which would ban illegal timber from the EU market. In this study we use the ICES computable general equilibrium model to estimate the reallocation of global demand and timber imports following the pending EU legislation. With this exercise our final objective is to assess the economic impacts and measure the potential emission reduction resulting from the introduction of this type of policy. Results show that while the EU ban does not seem particularly effective in reducing illegal logging activities, its main effect will be the removal of illegal logs from the international markets. In addition, the unilateral EU ban on illegal logs increases secondary wood production in illegal logging countries as their exports become relatively more competitive. Through this mechanism, part of the banned, illegal timber will re-enter the international trade flows, but it will be “hidden” as processed wood. This effect is, however, limited. Finally, given the limited effect on overall economic activity, effects on GHG emissions are also limited. Direct carbon emissions from logging activities can decrease from 2.5 to 0.6 million tons per year.
    Keywords: Forestry, Illegal Logging, International Trade, Economy and Environment, Computable General Equilibrium Models
    JEL: D58 Q23 Q56 R13
    Date: 2010–06
  8. By: Seema Narayan; Paresh Kumar Narayan; Sagarika Mishra
    Abstract: In this paper, we investigate the relationship between health and economic growth through including investment, exports, imports, and research and development (R&D), for 5 Asian countries using panel unit root, panel cointegration with structural breaks and panel long-run estimator for the period 1974-2007. We model this relationship within the production function framework, and unravel two important results. First, we find that in three variants of the growth model, variables share a long-run relationship; that is, they are cointegrated. Second, we find that in the long-run, while health, investment, exports, and R&D have contributed positively to economic growth, imports have had a statistically significant negative effect while education has had an insignificant effect. We draw important policy implications from these findings.
    Keywords: Health; Economic Growth; Panel Unit Root; Panel Cointegration.
    JEL: C23 C33 I10 I20
    Date: 2010–07–16
  9. By: Maryla Maliszewska; Elena Jarocinska; Milan Scasny
    Abstract: The EU-Russia Partnership and Cooperation Agreement, which entered into force in 1997 foresees the possible establishment of a free trade area (FTA) between the parties. The aim of our study is to evaluate the possible economic, social and environmental impact of such a free trade agreement between the European Union and Russia. The results of the analysis indicate that an EU-Russia FTA will be beneficial to the Russian Federation and the EU27. Some sectors are expected to contract in the medium term, but their importance in total output is small. Over the long run, the majority of sectors in Russia are expected to expand, while only a few sectors in the EU27 are expected to register negligible decreases in output. We estimate that welfare losses from the environmental damages would be very small for Russia (possibly even smaller due to the implementation of greener technologies), and negligible for the EU. Despite some significant negative medium-term social implications in selected sectors in Russia, the overall increase in economic activity and wages, coupled with likely domestic policies aiming at easing the impact of transitional unemployment, are expected to allow for the overall reduction in poverty rates. Overall, the results show that significant welfare gains (2.24% of GDP for Russia) would accrue from the deep FTA scenario involving a significant reduction of NTBs along with additional flanking measures, particularly on competition, IPR protection and corruption, which would help re-branding of Russia as a safe and attractive investment location. Also a number of countries such as Finland, Ireland, Netherlands, Denmark, Estonia, Slovakia, Slovenia and Sweden are expected to see their welfare increase by around 0.5% of GDP.
    Keywords: free trade agreement, WTO accession, European Union, Russian Federation, labor market, environment, NTBs, CGE
    JEL: F12 F15 F16 F17 F18
    Date: 2010
  10. By: Stelios Michalopoulos (Tufts University); Alireza Naghavi (University of Bologna and FEEM); Giovanni Prarolo (University of Bologna and FEEM)
    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, Islam, Geography, Physical Capital, Human Capital, Land Inequality, Wealth Inequality, Trade
    JEL: O10 O13 O16 O17 O18 F10 Z12
    Date: 2010–06
    Abstract: This paper investigates the effect of institutions on the unemployment gap between immigrants and natives in 11 EU-countries. We study whether benefits provide disincentive effects as the job-search theory suggests or rather efficiency gains as alternative theories propose. Further than the existing literature, we study unemployment duration instead of unemployment incidence, we distinguish between exits to inactivity, primary and secondary employment and we use individual-level measures for unemployment benefits. We apply a competing-risk event-history model using the ECHP. Our results favour the efficiency-gains argument for granting immigrants benefits as we find that benefits reduce unemployment duration and prevent transitions into inactivity. Employment perspectives of immigrants are better when demand for low-skilled labour is high, employment protection is low and immigration policy is labour-market oriented.
    Keywords: Benefits; Employment protection; Event-history model; Immigrants; Low-skilled labour; Unemployment duration
    Date: 2010–04
  12. By: Dalia Marin
    Abstract: Many people in the European Union fear that eastern enlargement has led to major job losses in 'old' member states, particularly in Austria and Germany, as the two most important neighbours of the countries that joined the EU in 2004 and 2007. Are these fears justified'To address these questions, this paper makes use of new survey data of 660 German and Austrian firms with 2,200 investment projects in eastern Europe during the period 1990-2001. The new survey data represent 100 percent of Austrian and 80 percent of German direct investment in eastern Europe.
    Date: 2010–07

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