nep-int New Economics Papers
on International Trade
Issue of 2010‒09‒11
eighteen papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. Productivity Gains From Exporting: Do Export Destinations Matter? By Pavel Vacek
  2. Bilateral trade flows and income-distribution similarity By Inmaculada Martínez-Zarzoso; Sebastian Vollmer
  3. Trade, Resource Reallocation and Industry Heterogeneity By Blyde, Juan
  4. Trade and Investment Policies and Regional Economic Integration in East Asia By Siow Yue Chia
  5. A Meta-Analysis of Estimates of the Impact of Technical Barriers to Trade By Li, Yuan; Beghin, John C.
  6. "Does foreign intellectual property rights protection affect U.S. exports and FDI?" By Titus O. Awokuse; Weishi Grace Gu
  7. Export entrepreneurs : evidence from Peru By Freund, Caroline; Pierola, Martha Denisse
  8. FDI and Export Participation of Local Firms in Africa: The Case of the Kenyan Garment Industry By Fukunishi, Takahiro
  9. Globalization and Knowledge Spillover: International Direct Investment, Exports and Patents By Chia-Lin Chang; Sung-Po Chen; Michael McAleer
  10. Paving the road to export: the trade impacts of domestic transport costs and road quality By Blyde, Juan
  11. International Trade and its Effects on Economic Growth in China By Sun, Peng; Heshmati, Almas
  12. Markups, bargaining power and offshoring: An empirical assessment By Lourdes Moreno; Diego Rodríguez
  13. "Knowledge-Capital, International Trade and Foreign Direct Investment: A Sectoral Analysis" By Titus O. Awokuse; Keith E. Maskus; Yiting An
  14. Foreign Direct Investment and Economic Growth: A real relationship or wishful thinking? By Hristos Doucouliagos; Sasi Iamsiraroj; Mehmet Ali Ulubasoglu
  15. Outsourcing and Pass-Through By Hellerstein, Rebecca; Villas-Boas, Sofia B.
  16. Is foreign trade important for regional growth? Empirical evidence from Portugal By Elias Soukiazis; Micaela Antunes
  17. The Consumption Terms of Trade and Commodity Prices By Martin Berka; Mario J. Crucini
  18. What Can be Blamed for the Increased Wage Gap? A Survey of Trade and Inequality By Yoshinori Kurokawa

  1. By: Pavel Vacek (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)
    Abstract: In this paper, I have examined whether exporters benefit by exporting more, and also whether the productivity benefits from exporting more are heterogeneous across export destinations. I have conducted my own data collection field work and built a unique firm-level panel database of Czech manufacturing firms that includes data on the destinations of exports. I have found that firms do benefit from exporting more. However, my results also show that it is necessary to take into account export markets' heterogeneity. I have found that it is only exporting more to developed countries that brings productivity gains.
    Keywords: exporting, productivity, spillovers
    JEL: F14
    Date: 2010–08
  2. By: Inmaculada Martínez-Zarzoso (Georg-August University of Gottingen and Universidad Jaume I); Sebastian Vollmer (Harvard University and University of Hannover)
    Abstract: This paper accounts for non-homothetic preferences by specifically investigating the role of income per capita and income-distribution differences in the context of the gravity model of trade. A theoretically justified gravity model is estimated for disaggregated trade data using a sample of 104 exporters and 108 importers for 1980-2003 to achieve two main goals. First we are able to empirically test some of the theoretical predictions of Markusen (2010), namely that there is a positive dependence of trade on per capita income and that higher inequality increase trade of more sophisticated goods. Second, and in line with the Linder hypothesis, we hypothesized that a higher demands’ overlap implies a more similar demand structure and therefore more trade. We test this hypothesis with new measures of income-distribution similarity. National income distributions are used to calculate income similarity indices that measure how much each country pair overlaps in terms of income distribution and population. We find that per capita income is positively related to bilateral trade and that on average, a 10 percent increase in incomedistribution similarities increases exports by almost 4 percent being this effect stronger for more sophisticated goods in comparison with more homogenous ones.
    Keywords: Exports, Income distribution, Gravity equation, Density estimation, Non-homothetic prefereces.
    JEL: F10 F14 D31
    Date: 2010–09
  3. By: Blyde, Juan
    Abstract: Recent trade models with heterogeneous firms (Bernard et al., 2003 and Melitz, 2003) show how lower trade costs can spur aggregate productivity by forcing lower productivity firms out of the market, cutting off the lower tail of the productivity distribution. In this paper we find significant heterogeneity regarding this impact across different industries. In particular, we find that the exit of inefficient plants due to stronger import competition is very prominent in light industries, that is, in industries in which only a limited amount of capital is needed and where most plants are of small-scale. In contrast, we find no significant effects of import competition on the exit of plants in heavy industries. The result has important policy implications regarding the role of trade reform in boosting aggregate productivity, particularly in industries with high levels of distortions.
    Keywords: Trade costs; productivity; resource reallocation
    JEL: F13 F14 L1
    Date: 2010–09–02
  4. By: Siow Yue Chia (Asian Development Bank Institute)
    Abstract: The global economic crisis has affected the East Asian economies via trade and investment. The export-led model which had been responsible for the “East Asian Miracle” now must redirect the basis of growth from exports sent to the US and Europe to regional and domestic demand. Regional trade integration has been market-led through production networks and foreign direct investment (FDI). Since the proliferation of bilateral and plurilateral free trade agreements (FTA) and economic partnership agreements (EPA) has not resulted in an integrated regional market, it is important that East Asia seek an arrangement for a region-wide FTA/EPA. Currently, there are proposals for an ASEAN+3, an ASEAN+6, Pan-Asia, and Asia Pacific initiatives. While proponents of a region-wide FTA/EPA highlight its benefits, skeptics and critics point to the difficulties of reaching consensus in a region with widely varying political, economic, and social systems. Ultimately it will depend on a political-economic decision based on a cost-benefit analysis of liberalization, facilitation, and cooperation in a region-wide FTA.
    Keywords: foreign direct investment, free trade agreements, economic partnership agreements, ASEAN+3, an ASEAN+6, Pan-Asia
    JEL: F13 F14 O24
    Date: 2010
  5. By: Li, Yuan; Beghin, John C.
    Abstract: We conduct a meta-analysis to statistically explain the variations found in estimated trade effects of technical measures broadly defined (TBT, SPS measures and other standard-like policies), using available estimates from the empirical international trade literature, and accounting for both data sampling and methodology differences. Agriculture and food industries tend to be more impeded by these barriers than other sectors. Controlling for “multilateral resistance†significantly lowers the propensity to find that these policies impede trade. Models that correct endogeneity by using panel data and time fixed effect tend to find more negative (or less positive) trade effects of technical measures. In addition, studies based on a count variable proxy are less likely to find a negative trade effect and more likely to find a positive effect than studies relying on other proxies. SPS regulations on agricultural trade flows from developing exporters to high-income importers tend to impede trade, a systematic finding.
    Keywords: meta-analysis; SPS; TBT; trade; technical standards; trade barriers
    JEL: F F13 Q17
    Date: 2010–09–03
  6. By: Titus O. Awokuse (Department of Food and Resource Economics, University of Delaware); Weishi Grace Gu (Graduate Student, Cornell University)
    Abstract: Using GMM models on a panel data of fifty-three countries, we examine whether stronger foreign IPR protection stimulates international transactions of U.S. multinational firms. The empirical results suggest that foreign countries that strengthen their IPR protection, especially those with strong imitative ability, can attract more international transactions from U.S. multinational firms.
    Keywords: export, FDI, intellectual property rights, GMM
    JEL: F23 O34
    Date: 2010
  7. By: Freund, Caroline; Pierola, Martha Denisse
    Abstract: This paper examines firm entry and survival in exporting, and in products and markets not previously served by any domestic exporters. The authors use data on the nontraditional agriculture sector in Peru, which grew seven-fold from 1994 to 2007. They find tremendous firm entry and exit in the export sector, with exits more likely after one year and among firms that start small. There is also significant entry and exit in new markets. In contrast, such trial and error in new products is rare. New products are typically discovered by large experienced exporters and there is increased entry after products are discovered. The results imply that high sunk costs of entry are of concern for product discovery, especially for products that are not consumed domestically. In contrast, the tremendous entry and exit in exporting and in new markets suggests that initial sunk costs are relatively low. The authors develop a model that explains how entrepreneurs decide to export and to develop new export products and markets when there are sunk costs of discovery and uncertainty about idiosyncratic costs. The model explains many features of the data.
    Keywords: Markets and Market Access,Microfinance,Access to Markets,Economic Theory&Research,Debt Markets
    Date: 2010–08–01
  8. By: Fukunishi, Takahiro
    Abstract: FDI in the garment sector has been the single case of large-scale manufacturing investment in African low-income countries since the 1990s. While FDI has triggered the development of local industries in many developing countries, it has not yet been realized in Africa. This paper describes the spillover process in the Kenyan garment industry and investigates the background of local firms' behavior through firm interviews and simulation of expected profits in export market. It shows that credit constraint, rather than absorptive capacity, is a primary source of inactive participation in export opportunity. Only firms which afford additional production facilities without sacrificing stable domestic supply may be motivated to start exporting. However, in comparison with successful Asian exporters, those firms were not as motivated as Asian firms due to the large gap in expected profits.
    Keywords: Textile industry, Foreign investments, Exports, Manufacturing exports, FDI spillover, sub-Saharan Africa
    JEL: F21 L67 O14 O33
    Date: 2010–04
  9. By: Chia-Lin Chang; Sung-Po Chen; Michael McAleer (University of Canterbury)
    Abstract: This paper examines the impact of the three main channels of international trade on domestic innovation, namely outward direct investment, inward direct investment (IDI) and exports. The number of Triadic patents serves as a proxy for innovation. The data set contains 37 countries that are considered to be highly competitive in the world market, covering the period 1994 to 2005. The empirical results show that increased exports and outward direct investment are able to stimulate an increase in patent output. In contrast, IDI exhibits a negative relationship with domestic patents. The paper shows that the impact of IDI on domestic innovation is characterized by two forces, and the positive effect of cross-border mergers and acquisitions by foreigners is less than the negative effect of the remaining IDI.
    Keywords: International direct investment; Export; Triadic Patent; Outward Direct Investment; Inward Direct Investment; R&D; negative binomial model
    JEL: C53 C22 E27 E37
    Date: 2010–08–01
  10. By: Blyde, Juan
    Abstract: The literature examining the effects of domestic transport costs on trade flows is scarce. The few studies available rely mostly on distance-based measures as proxies of transport costs which impede analyzing the trade impacts of transport-infrastructure improvements, a critical aspect in regional and public policy. Applying a novel methodology that combines real freight costs and Geographic Information System (GIS) analysis to the case of Colombia, this paper measures the extent to which domestic transport costs -from the place of production to the port of shipment- act as a friction to international trade. Domestic transport costs are found to significantly affect the prospects of exporting. For instance, regions within the country with transport costs in the 25th percentile export around 2.3 times more than regions with transport costs in the 75th percentile, once other factors are controlled for. Export increases from road improvements are found to be larger in regions with initially higher transport costs. This is because regions with initially higher transport costs are normally associated with longer routes and those tend to have larger shares of roads in poor conditions
    Keywords: Transport costs; road quality; regional exports
    JEL: R10 F10 O2
    Date: 2010–08–25
  11. By: Sun, Peng (affiliation not available); Heshmati, Almas (Korea University)
    Abstract: International trade, as a major factor of openness, has made an increasingly significant contribution to economic growth. Chinese international trade has experienced rapid expansion together with its dramatic economic growth which has made the country to target the world as its market. This research discusses the role of international trade in China's economic growth. It starts with a review of conceptions as well as the evolution of China's international trade regime and the policy that China has taken in favor of trade sectors. In addition, China's international trade performance is analyzed extensively. This research then evaluates the effects of international trade on China's economic growth through examining improvement in productivity. Both econometric and non-parametric approaches are applied based on a 6-year balanced panel data of 31 provinces of China from 2002 to 2007. For the econometric approach, a stochastic frontier production function is estimated and province specific determinants of inefficiency in trade identified. For the non-parametric approach, the Divisia index of each province/region is calculated to be used as the benchmark. The study demonstrates that increasing participation in the global trade helps China reap the static and dynamic benefits, stimulating rapid national economic growth. Both international trade volume and trade structure towards high-tech exports result in positive effects on China's regional productivity. The eastern region of China has been developing most rapidly while the central and western provinces have been lagging behind in terms of both economic growth and participation in international trade. Policy implications are drawn from the empirical results accordingly.
    Keywords: international trade, economic growth, China, panel data, stochastic frontier
    JEL: C23 D24 F10 O24 R58
    Date: 2010–08
  12. By: Lourdes Moreno (Universidad Complutense de Madrid and GRIPICO); Diego Rodríguez (Universidad Complutense de Madrid and GRIPICO)
    Abstract: This paper tests the pro-competitive effect of imports on product and labour markets for Spanish manufacturing firms in the period 1990-2005. In doing so, it takes into account the type of imported products: final vs intermediate. Markups are estimated following the procedure suggested by Roeger (1995) and including an efficient bargaining model. The observed heterogeneity among firms is parameterized to consider additional product standardization and market concentration. The results support the Imports as Market Discipline hypothesis for importers of final goods, while firms that offshore intermediate inputs show similar markups to non-importers. Additionally, the union bargaining power is smaller the more final-goods oriented imports are and the more homogeneous is the type of goods elaborated by firms.
    Keywords: Markups, Offshoring, Bargaining power.
    JEL: F12 L60 L13
    Date: 2010–09
  13. By: Titus O. Awokuse (Department of Food and Resource Economics, University of Delaware); Keith E. Maskus (Department of Economics,University of Colorado); Yiting An (Senior Economist, Ernst and Young Consulting)
    Abstract: The knowledge-capital (KC) model of MNEs is now a widely adopted empirical approach to explaining the location and production decisions of global firms based on both horizontal and vertical motivations. While most of the existing studies have focused on highly aggregated national data, we extend this model to sectoral data consisting of broad manufacturing industries and explicitly account for the dynamic nature of international investment data. The empirical results from a dynamic panel data analysis indicate that that the predictions of the KC model regarding MNE behavior vary by the type of industry. Production processes in electronics and transportation-equipment are more characterized by efficient vertical specialization of R&D activities and assembly, while other sectors display more complex motivations.
    Keywords: FDI, knowledge-capital model, exports, GMM
    JEL: F14 F23 L23
    Date: 2010
  14. By: Hristos Doucouliagos; Sasi Iamsiraroj; Mehmet Ali Ulubasoglu
    Abstract: The macroeconomic impact of FDI has been a longstanding source of debate. This paper provides a comprehensive assessment of the empirical evidence accumulated over the past three decades on the effects of FDI on economic growth. Meta-regression analysis is applied to 880 estimates of this effect from 108 empirical studies. This analysis reveals that FDI has overall a positive effect on growth. Compared to North America, the growth effect of FDI is larger in Western Europe and is weaker in the Middle East and South East Asia. The positive effect of FDI on growth is amplified when FDI interacts with financial development, trade, and human capital. Finally, higher levels of FDI are associated with larger governments, more developed financial markets, lower inflation, higher levels of schooling, and higher levels of foreign aid.
    Keywords: FDI, economic growth, meta-regression analysis
    JEL: F21 F4
    Date: 2010–08–25
  15. By: Hellerstein, Rebecca; Villas-Boas, Sofia B.
    Abstract: A large share of international trade occurs through intra-firm transactions. We show that this common cross-border organization of the firm has implications for the well-documented incomplete transmission of shocks across such borders. We present new evidence of an inverse relationship between a firm’s outsourcing of inputs and its rate of exchange-rate pass-through. We then develop a structural econometric model with final assemblers and upstream parts suppliers to quantify how firms’ organization of their activities across national borders affects their pass-through behavior.
    Keywords: exchange-rate pass-through, intra-firm trade, vertical contracts, outsourcing
    Date: 2010–02–01
  16. By: Elias Soukiazis (GEMF/Faculdade de Economia, Universidade de Coimbra, Portugal); Micaela Antunes (Faculdade de Economia, Universidade de Coimbra, Portugal)
    Abstract: Both the neoclassical approach associated to the Solow’s exogenous growth model and the endogenous growth theories have been criticised for being more consistent with a closed economy. In these approaches, the effects of international trade on growth and the trade deficits are not explicitly considered as impediments to economic expansion. The aim of this study is to contribute to the debate, investigating whether openness, exports share or trade balances affect regional growth in Portugal. In combination with external trade indicators, human capital is also considered as a conditional factor to growth, expressed by the rate of success in high school education. Thus, we analyse whether the combination of international trade measures and human capital is relevant to explaining regional growth in Portugal and how it affects the convergence process between regions. Additionally, interaction terms are considered to explore the existence of different performances between regions of the Littoral and the Interior zones. As an alternative to the traditional approach that considers the population growth rate, we include the share of the industrial employment as an indicator of regional specialisation. The empirical analysis estimates the conditional convergence model of the Barro’s type, applied to the Portuguese NUTS3 regions for the period 1996-2005. The estimation approach based on regional panel data and using the GMM estimation technique reveals that factors associated to external trade, human capital and reallocation of resources to more productive sectors (industry) are relevant to explain regional growth and convergence in Portugal.
    Keywords: conditional convergence, human capital, external trade, employment share in industry, GMM regressions, panel data.
    JEL: E12 F43 O11
    Date: 2010–07
  17. By: Martin Berka; Mario J. Crucini
    Abstract: Movements in a nation's terms of trade are widely viewed as important for the understanding the sources of business cycle °uctuations, the dynamics of the trade balance and economic welfare. Backus, Kehoe and Kydland (1994) emphasize the role of productivity movements in a two-country, two-good setting. In their model an increase in domestic productivity expands out- put at home relative to output abroad and the terms of trade deteriorates. Put di®erently: a large country expanding the supply of the traded good it produces must (in equilibrium) drive down the relative price of its prod- ucts on world markets. The importing country's terms of trade improves, a positive spillover. Backus and Crucini (2000) add a third region to this model; a region that specializes in oil production. When the oil region cuts back production, the relative price of oil rises, a terms of trade improvement for oil producers. Output falls in the oil importing regions because oil is an intermediate input into production of the two manufactured goods produced in those regions. The business cycle implications of this model are consis- tent with empirical work by Hamilton (1983) showing oil price increases in advance of U.S. recessions. Mendoza (1995) studies the terms of trade and business cycles in an extensive cross-country panel using a partial equilibrium business cycle model where terms of trade movements are exogenous. In his theoretical setting, terms of trade shocks are analogous to lotteries with the sign and magnitude of the payout dependent upon a country's pattern of specialization across an array of internationally traded goods.
    Date: 2010–09
  18. By: Yoshinori Kurokawa
    Abstract: This paper surveys recent studies on trade and wage inequality. We first introduce some remarkable studies in support of the effects of trade on wage inequality, most notably Wood (1994). There are, however, a number of criticisms on this line of thought. We thus explain three major criticisms based on the ―trade-wage inequality anomaly,‖ price movements (Lawrence and Slaughter, 1993), and the small volume of trade (Krugman, 1995). Mainly due to these criticisms, trade-based explanations for rising wage inequality have been minor in economic academia. Rather, major explanations for wage inequality have been based on technological change. Some of the technology-based explanations, most notably Krusell et al. (2000), are explained. We next examine a few trade models weakening the above criticisms, in particular, a model by Feenstra and Hanson (1996). Finally, our alternative trade models are also introduced.
    Date: 2010–09

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