nep-int New Economics Papers
on International Trade
Issue of 2010‒10‒09
ten papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. Deeper Integration: What Effects On Trade By Martin Clever; Inmaculada Martínez-Zarzoso
  2. Are estimation techniques neutral to estimate gravity equations? By Estrella Gómez Herrera
  3. Globalization and Knowledge Spillover: International Direct Investment, Exports and Patents By Chang, C-L.; Chen, S-P.; McAleer, M.J.
  4. Spatial discrimination, nations' size and transportation costs By Kai Andree
  5. Exporting and performance: Market entry, expansion and destination characteristics By Richard Fabling and Lynda Sanderson
  6. Where to Find Positive Productivity Spillovers from FDI in China: Disaggregated Analysis By Galina Hale; Cheryl Long; Hirotaka Miura
  7. The Evolution of Comparative Advantage: Measurement and Welfare Implications By Andrei A. Levchenko; Jing Zhang
  8. China-Malaysia’s Trading and Exchange Rate: Complementary or Conflicting Features? By Chan, Tze-Haw; Hooy, Chee-Wooi
  9. Firm Strategy, Location and MNE-networks By Lööf, Hans; Johansson, Borje
  10. Estimating the Baumol-Bowen and Balassa-Samuelson effects in the Polish economy -- a disaggregated approach By Karolina Konopczak; Andrzej Torój

  1. By: Martin Clever (Georg-August-Universität Göttingen); Inmaculada Martínez-Zarzoso (Universitat Jaume I, Georg-August-Universität Göttingen)
    Abstract: The focus of this paper is to estimate the effect of the different types of regional trade agreements on the volume of trade between country pairs. The analysis will employ the “empirical workhorse” of international trade; the gravity model. We hypothesize that the deeper agreements have a stronger effect on trade, especially when considering the extensive margin of trade. When controlling for the extensive margin of trade, the multilateral trade resistance terms, and the endogeneity bias we are able to obtain satisfyingly accurate treatment effects of the different types of regional trade agreements. Using a panel of 50 countries over the period 1980-1999, we find that customs unions, “deep” free trade agreements, and common markets have stronger effects on bilateral trade than simple free trade agreements.
    Keywords: Regional trade agreements, Deep integration, International trade flows, Gravity equation, Panel data
    JEL: F1
    Date: 2010–09–17
  2. By: Estrella Gómez Herrera (Department of Economic Theory and Economic History, University of Granada.)
    Abstract: The gravity equation has been traditionally used to predict trade flows across countries. However, several problems related with its empirical application still remain unsolved. In this paper, I provide a survey of the recent literature concerning the specification and estimation methods of this equation. In addition, I compare the performance of two widely extended estimators, panel OLS and Poisson Pseudo Maximum Likelihood (PPML), for a dataset covering 80% of world trade.
    Keywords: International trade, Gravity model, Estimation methods
    Date: 2010–09–01
  3. By: Chang, C-L.; Chen, S-P.; McAleer, M.J.
    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
    Date: 2010–09–28
  4. By: Kai Andree
    Abstract: In this paper we develop a spatial Cournot trade model with two unequally sized countries, using the geographical interpretation of the Hotelling line. We analyze the trade and welfare effects of international trade between these two countries. The welfare analysis indicates that in this framework the large country benefits from free trade and the small country may be hurt by opening to trade. This finding is contrary to the results of Shachmurove and Spiegel (1995) as well as Tharakan and Thisse (2002), who use related models to analyze size effects in international trade, where the small country usually gains from trade and the large country may lose.
    Date: 2010–09
  5. By: Richard Fabling and Lynda Sanderson (Reserve Bank of New Zealand)
    Abstract: We examine the effect of export market entry on New Zealand firm performance. Our novel contribution to the literature is the treatment of export status as an incremental process, in which firms may export to one or more markets with each of these markets providing additional potential for learning to occur. Focussing on new markets provides several benefits. Since we use matching techniques to account for self-selection, controlling for firm export histories reduces the problem of selection on unobservables (such as managerial preferences) which would confound a causal interpretation. Also, most new market entry is undertaken by incumbent exporters, providing a large number of events on which to test the learning-by-exporting (LBE) hypothesis.
    JEL: C23 D10 R20
    Date: 2010–01
  6. By: Galina Hale (Federal Reserve Bank of San Francisco and Hong Kong Institute for Monetary Research); Cheryl Long (Colgate University); Hirotaka Miura (Federal Reserve Bank of San Francisco)
    Abstract: Using panel data from Chinese Industrial Surveys of Medium-sized and Large Firms for 2000-06, we show that while there is evidence of positive technological spillovers from FDI, such spillovers are very unevenly distributed. For some industries, there are positive spillovers from FDI presence in the same industry and province, but for others spillovers are negative. There are positive spillovers from FDI presence in upstream and downstream industries, but such spillovers mostly occur in private firms. There are more spillovers from foreign capital that comes from outside the greater China area.
    Keywords: FDI, Spillovers, Forward-Backward Linkages, China
    JEL: L33 F23 O17
    Date: 2010–06
  7. By: Andrei A. Levchenko (University of Michigan); Jing Zhang (University of Michigan)
    Abstract: Using an industry-level dataset of production and trade spanning 75 countries and 5 decades, and a fully speciÞed multi-sector Ricardian model, we estimate productivities at sector level and examine how they evolve over time in both developed and developing countries. We find that in both country groups, comparative advantage has become weaker: productivity grew systematically faster in sectors that were initially at the greater comparative disadvantage. The global welfare implications of this phenomenon are significant. Relative to the counterfactual scenario in which an individual countryÕs comparative advantage remained the same as in the 1960s, and technology in all sectors grew at the same country-specific average rate, welfare today is 1.9% lower at the median. The welfare impact varies greatly across countries, ranging from -0.5% to 6% among OECD countries, and from -9% to 27% among non-OECD countries. Remarkably, for the OECD countries, nearly all of the welfare impact is driven by changes in technology in OECD countries, and for the non-OECD countries, nearly all of the welfare impact is driven by changes in technology in non-OECD countries.
    Keywords: evolution of comparative advantage, welfare, Ricardian models of trade
    JEL: F15 F43
    Date: 2010–09
  8. By: Chan, Tze-Haw; Hooy, Chee-Wooi
    Abstract: Over the last decade, China and Malaysia have committed to export-led growth policy based on maintenance of their undervalued currencies. While both nations have recorded current account surplus and devoted for regional trade integration, it was lately claimed that the Chinese foreign exchange regime poses her as a formidable export competitor and offers further threat to the crowding out of other developing Asian, including Malaysia. Such scenario motivated us to examine the dynamic nexus of exchange rate impact on bilateral export and import flows between China and Malaysia. Our analysis contributed in using high frequency monthly data for the recent period from January 1990 to January 2008, based on the Autoregressive Distributed Lag (ARDL) bound testing procedure and generalised impulse response analysis. Our empirical findings reveal that the Marshall-Lerner condition holds in the long run but only the short run import demands adhere to the potential J-curve pattern. In brief, the study supports for the complementary role of China instead of conflicting (competing) features in the China-Malaysia bilateral trading.
    Keywords: Exchange rates; J-curve; Marshall-Lerner Condition; ARDL Bound Test
    JEL: F10 F31
    Date: 2010–04–06
  9. By: Lööf, Hans (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Johansson, Borje (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: This paper asks three explicit questions, where the first one concerns the impact of a firm’s choice of innovation strategy and knowledge resources. The study aims at confirming that firms with a strategy with R&D persistency have a markedly higher productivity, profitability and wage level than other firms. The second question is focused on the location of firms, with a distinction between firms dwelling in a metropolitan region and other firms. The hypothesis is that a metropolitan knowledge milieu may augment the performance of firms. The third question concerns knowledge exchange in regional and global networks that pertain to multinational affiliates. Applying Swedish data on individual firms and their location, the paper shows that firm performance is significantly higher when the three factors R&D persistency, metropolitan location and affiliation to a multinational group are combined.
    Keywords: R&D; knowledge; productivity; profitability; regional milieu
    JEL: F23 L25 O31 O33 R11
    Date: 2010–09–28
  10. By: Karolina Konopczak (Warsaw School of Economics and Ministry of Finance, Financial Policy, Analysis and Statistics Department); Andrzej Torój (Warsaw School of Economics and Ministry of Finance, Financial Policy, Analysis and Statistics Department)
    Abstract: This paper estimates the magnitude of the Baumol-Bowen and Balassa-Samuleson effects in the Polish economy. The purpose of the analysis is to establish to what extent the differential price dynamics in Poland and in the euro area and the real appreciation of PLN against EUR are explained by the differential in respective productivity dynamics. The historical contribution of the Baumol-Bowen effect to Polish inflation rate is estimated at 0.7-1.0 percentage points in the short run. According to estimation results, the Balassa-Samuelson effect contributed around 0.9 to 1.3 percentage point per annum to the rate of relative price growth between Poland and the euro area and 0.9 to 1.6 p.p. to real exchange rate appreciation. Sub-sample calculations and productivity trends over the last decade suggest that this impact should be declining. However, its size is still non-negligible for policymakers in the context of euro adoption in Poland.
    Keywords: Balassa-Samuelson hypothesis, monetary integration, real appreciation, panel cointegration
    JEL: C33 E31 F31 F41
    Date: 2010–09–27

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