nep-int New Economics Papers
on International Trade
Issue of 2010‒08‒21
twelve papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. What Goods Do Countries Trade? A Quantitative Exploration of Ricardo's Ideas By Arnaud Costinot; Dave Donaldson; Ivana Komunjer
  2. Exports and productivity selection effects for Dutch firms By Kox, Henk L.M.; Rojas Romasgosa, Hugo
  3. Exports, Borders, Distance, and Plant Size By Thomas J. Holmes; John J. Stevens
  4. The Dynamic Effects of Currency Union on Trade By Paul Bergin; Ching-Yi Lin
  5. Informal Trade in the SAARC region By Nisha Taneja
  6. Interaction Between Trade, Conflict And Cooperation: The Case Of Japan And China By Shiro Armstrong
  7. Time Zones and Periodic Intra-Industry Trade By Toru Kikuchi; Sugata Marjit
  8. The effects of the TRIPS Agreement on international protection of intellectual property rights By Cardwell, Ryan; Ghazalian, Pascal L.
  9. Has the Euro Affected the Choice of Invoicing Currency? By Ligthart, J.E.; Werner, S.E.V.
  10. FDI Spillovers and the Timing of Foreign Entry By Bruno Merlevede; Koen Schoors; Mariana Spatareanu
  11. Measuring the Environmental Impacts of Changing Trade Patterns on the Poor By Kalirajan, Kaliappa; Anbumozhi, Venkatachalam; Singh, Kanhaiya
  12. How Do Different Motives for R&D Investment in Foreign Locations Affect Domestic Firm Performance? An Analysis Based on Swiss Panel Micro Data By Spyros Arvanitis; Heinz Hollenstein

  1. By: Arnaud Costinot; Dave Donaldson; Ivana Komunjer
    Abstract: The Ricardian model predicts that countries should produce and export relatively more in industries in which they are relatively more productive. Though one of the most celebrated insights in the theory of international trade, this prediction has received virtually no attention in the empirical literature since the mid-sixties. The main reason behind this lack of popularity is the absence of clear theoretical foundations to guide the empirical analysis. Building on the seminal work of Eaton and Kortum (2002), the present paper offers such foundations and uses them to quantify the importance of Ricardian comparative advantage. Using trade and productivity data from 1997, we estimate that, ceteris paribus, the elasticity of bilateral exports with respect to observed productivity is 6.53. From a welfare standpoint, however, the removal of Ricardian comparative advantage at the industry level would only lead, on average, to a 5.5% decrease in the total gains from trade.
    JEL: F10 F11
    Date: 2010–08
  2. By: Kox, Henk L.M.; Rojas Romasgosa, Hugo
    Abstract: The paper investigates whether the self-selection hypothesis and other predictions from the heterogeneous-firms trade models can explain the export participation patterns for Dutch firms in manufacturing and services. The results provide strong support for the self-selection hypothesis, according to which firms need higher productivity performance to compensate for sunk entry costs in export markets. After controlling for many firm and market characteristics we robustly find higher productivity levels for exporters. The paper also tests for the reverse causality (learning-by-exporting), but finds no empirical support for it, not even after controlling for the firm's distance to a constructed international productivity frontier. This latter result may be important for the motivation of future export promotion policies. The empirical estimates are achieved by probit regressions at the plant level and at the firm level. As a robustness test we also applied the more standard OLS panel regression estimates, which provided similar results. The paper also tested whether the productivity-export link is conditional on the sectoral market structure and multinational affiliation. Services sectors with high competition and a lower degree of product differentiation have significantly higher export productivity premia than services firms in less competitive sectors. Such differences are not found in the manufacturing sector.
    Keywords: Export participation; productivity; self selection; market structure
    JEL: F23 F12 L1
    Date: 2010–07–01
  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: 2010–06
  4. By: Paul Bergin; Ching-Yi Lin
    Abstract: A currency union's ability to increase international trade is one of the most debated questions in international macroeconomics. This paper studies the dynamics of these trade effects. First, an empirical study of the European Monetary Union finds that the extensive margin of trade (entry of new firms or goods) responds several years ahead of overall trade volume. This implies that the intensive margin (previously traded goods) falls in the run-up to EMU. The paper's theoretical contribution is to study the announcement of a future monetary union as a news shock to trade costs in the context of a dynamic stochastic general equilibrium trade model. Early entry of new firms in anticipation is explainable as a rational forward-looking response under certain conditions, where essential elements include sunk costs of exporting and heterogeneity among firms of a type known before entry. The findings help identify which types of trading frictions are reduced by a currency union. The important role of expectations also indicates that continued gains from EMU depend upon long-term credibility of the union.
    JEL: F41
    Date: 2010–08
  5. By: Nisha Taneja
    Abstract: This paper explores issues relating to informal trade in the SAARC region. It spells out the reasons underpinning illegal trade in the South Asian region. Further it focuses on the estimated size and composition of informal trade in the region and highlights its relationship to formal trade. The study examines the modalities under which such trade prospers. It analyses the impact of tariff and non-tariff barriers on informal trade and also considers the implications of transportation costs and other costs that influence informal trade. The possible impact of domestic policy distortions on illegal trade have also been looked into. The study probes into the extent to which Regional Co-operation in South Asia will influence the shift of illegal trade flows to legal channels. [Working Paper No. 47]
    Keywords: informal, trade, underpinning, South Asian, regional, domestic policy, tariff, non-tariff, modalities
    Date: 2010
  6. By: Shiro Armstrong
    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.
    JEL: C32 F10 F59
    Date: 2010
  7. By: Toru Kikuchi; Sugata Marjit
    Abstract: An important source of trade with time zone differences is related to the “coincidence in time” aspect of service transactions. Trade across different time zones is gainful when fulfilling nighttime demand in one time zone by utilizing daytime supply in another time zone. This note emphasizes that, due to communications revolutions, new versions of periodic intra-industry trade based on the differences in time zones emerge.
    Keywords: Communications Nteworks; Time Zone Differences; Periodic Intra-Industry Trade.
    JEL: F12
    Date: 2010–08–08
  8. By: Cardwell, Ryan; Ghazalian, Pascal L.
    Abstract: Draft version â final version forthcoming in International Trade Journal
    Keywords: International Relations/Trade,
    Date: 2010
  9. By: Ligthart, J.E.; Werner, S.E.V. (Tilburg University, Center for Economic Research)
    Abstract: We present a new approach to study empirically the effect of the introduction of the euro on currency invoicing. Our approach uses a compositional multinomial logit model, in which currency choice depends on the characteristics of both the currency and the country. We use unique quarterly panel data of Norwegian imports from OECD countries for the 1996{2006 period. One of the key findings is that the eurozone countries in trade with Norway have substantially increased their share of home currency invoicing after the introduction of the euro. In addition, the euro as a vehicle currency has overtaken the role of the US dollar in Norwegian imports. The econometric analysis shows a significant effect of euro introduction above and beyond the determinants of currency invoicing (i.e., ination rate, ination volatility, foreign exchange market size, and product composition). However, the rise in producer currency invoicing by eurozone countries is primarily caused by a drop in ination volatility.
    Keywords: euro;invoicing currency;exchange rate risk;ination;ination risk;vehicle currencies;compositional multinomial logit
    JEL: F14 F15 F31 F33 F36 E31 C25
    Date: 2010
  10. By: Bruno Merlevede; Koen Schoors; Mariana Spatareanu
    Abstract: This study analyzes the dynamic effect of FDI on local firms’ productivity by relaxing the standard implicit assumption that technological spillovers are immediate and permanent. We find that the entry of majority foreign owned firms has a short run negative effect on the productivity of local competitors, which is more than offset by a longer run positive effect. The entry of minority foreign owned firms has an immediate, though short-lived, positive effect on local suppliers through backward linkages. The entry of majority foreign owned firms also improves the productivity of local suppliers, but the effect materializes later and lasts longer.
    Keywords: FDI, spillovers, dynamics, timing
    JEL: F2
    Date: 2010
  11. By: Kalirajan, Kaliappa (Asian Development Bank Institute); Anbumozhi, Venkatachalam (Asian Development Bank Institute); Singh, Kanhaiya (Asian Development Bank Institute)
    Abstract: <p>It is an empirical fact that it is very difficult to balance economic growth, poverty reduction, and environment protection, particularly for developing and transitional economies. While the economic environment of a country is influenced by conditions within the country, it is also influenced by external shocks such as the recent global financial crisis depending on how integrated the country is with the rest of the world. Thus, it poses a continuing challenge for policy makers in developing and transitional countries to readjust the economic environment in a way that leads to better and more effective targeting of the chronic issue of poverty reduction without causing damage to the natural environment. It is in this context that this paper attempts to measure the environmental impact of changing trade patterns on the poor. <p>The recent financial crisis has discouraged United States (US) private consumption, which in turn has significantly reduced exports from Asia. However, Asia’s private consumption is at a very low level even when compared with the current reduced US private consumption. Therefore, it is possible for Asian countries to focus more on improving regional trade and domestic consumption to compensate for the revenue losses that resulted from the reduction in global demand. This paper argues that energy-efficient production methods and service-led growth, particularly trade in environmental goods and services, provide good opportunities for Asian countries to enjoy “inclusive growth” without damaging the natural environment.
    Keywords: asia economic growth; asia trade and environment; asia poverty reduction
    JEL: E20 Q43 Q56
    Date: 2010–08–11
  12. By: Spyros Arvanitis; Heinz Hollenstein (WIFO)
    Abstract: The aim of this paper is to investigate the differences between specific motives of R&D investment in foreign locations with respect to the factors influencing the likelihood of foreign R&D and to the impact of foreign presence on the parent firms' innovativeness and productivity. An econometric analysis of Swiss firm panel data shows, firstly, that factors related to firm-specific knowledge-oriented advantages are more important for explaining the likelihood of foreign R&D activities than factors reflecting disadvantages related to home location. Secondly, knowledge-oriented motives of foreign R&D are positively correlated to innovation performance of domestic firms, whereas market-oriented and resource-oriented strategies correlate positively with productivity.
    Date: 2010–07–13

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