nep-int New Economics Papers
on International Trade
Issue of 2010‒12‒04
eleven papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. The Anatomy of Trade Deflection By Veysel Avsar
  2. International Migration and Foreign Trade: What connexion? (In French) By Stéphane BECUWE (GREThA UMR CNRS 5113); Fatma MABROUK (GREThA UMR CNRS 5113)
  3. Per-capita incomes and the extensive margin of bilateral trade By Christian Hepenstrick
  4. Extending Transit Facility to India: Implications for Pakistan’s Bilateral Trade with Afghanistan By Mamoon, Dawood; Mukhtar, Zahid Junaid; Ayesha, Anam; Hanif, Noorulain; Aslam, Rizwan; Quddus, Maliha
  5. Migrant networks and foreign direct investment.. By Javorcik, Beata S.; Özden, Çağlar; Spatareanu, Mariana; Neagu, Cristina
  6. On the Distributive Effects of Terms of Trade Shocks: The Role of Non-tradable Goods By Sebastian Galiani; Daniel Heymann; Nicolas E Magud
  7. Minimum Quality Standards and International Trade By Kenneth Baltzer
  8. Linkages between Financial Development and Openness: panel evidence from developing countries. By Simplice Anutechia , Asongu
  9. Can we identify Balassa-Samuelson effects with measures of product variety? By Richard Frensch; Achim Schmillen
  10. International outsourcing over the business cycle: some intuition for Germany, the Czech Republic and Slovakia By Sandrine Levasseur; Sandrine Levasseur
  11. Vertical Integration and Efficiency: an application to the Italian Machine Tool Industry. By Fabio Pieri; Enrico Zaninotto

  1. By: Veysel Avsar (Department of Economics, Florida International University)
    Abstract: This study employs a rich three dimensional export data of Brazilian firms to empirically examine the effect of previous exporting relationships of the firms, whose products are targeted by antidumping duties, on their export flows to alternative markets. Our estimations show that facing an antidumping duty on a product leads to a 25-33% increase in the exports of the firm for that product to the alternative countries where the firms previously exported the same product and a 9% increase to the countries where the firms exported another product. On the contrary, there is no significant effect of antidumping duties on the exports of the particular product to third countries to which the firm did not export before. Further, exploring the extensive margin, we demonstrate that being hit with an antidumping duty increases the probability that firms will introduce the particular product in a new market they previously served. A firm's probability to start exporting the duty imposed product in a different destination increases by 8-10% if the firm already exported another product to that destination. However, we find no such evidence for the countries to which the firm did not export before. Our findings clearly points out the role of market and product-market specific start-up costs of exporting to explain the heterogeneity in trade deflection.
    Keywords: Antidumping, trade deflection, WTO, new exports, previous exporting status,intensive margin, extensive margin, firm-level export data, IV first difference estimation
    JEL: F10 F13 O54 C23
    Date: 2010–09
  2. By: Stéphane BECUWE (GREThA UMR CNRS 5113); Fatma MABROUK (GREThA UMR CNRS 5113)
    Abstract: This paper establishes an inventory of international migration and trade relationship. In the new global context, this link is complex and multidimensional. It includes political, economic, social, and legal, it involves many actors like international organizations, migrants, countries of origin and host. Our methodology is based on Principal Component Analysis and a Hierarchical Ascendant Classification to show a clear link between migration and trade, where distance is the main discriminating variable. We used a gravity model in cross section to show the positive effect of trade on international migration. The signs obtained for the two variables (exports and imports) indicate clearly a complementary relationship between migration and trade. We note also that the degrees of significance of these two variables are close. This seems to confirm that it is important that the bilateral trade relations are that migration is important.
    Keywords: International Migration, Foreign Trade, Principal components analysis, gravity model
    JEL: F22 F1 C21
    Date: 2010
  3. By: Christian Hepenstrick
    Abstract: This paper argues that the per-capita income of importers is an important determinant of the extensive margin of trade. I formalize this by incorporating preferences that allow for binding nonnegativity constraints into an otherwise standard Ricardian model. This implies that agents adjust the set of goods from which they consume with income, which in turn affects the extensive margin of bilateral trade. I quantify the model using data on US consumer behavior and aggregate values of bilateral trade flows. I find that the behavior of the model’s extensive margin of bilateral trade is consistent with elasticities measured in the data. Two counterfactual experiments demonstrate the quantitative importance of the mechanism outlined in this paper.
    Date: 2010–11
  4. By: Mamoon, Dawood; Mukhtar, Zahid Junaid; Ayesha, Anam; Hanif, Noorulain; Aslam, Rizwan; Quddus, Maliha
    Abstract: The paper examines patterns of bilateral trade between Pakistan, India, Afghanistan and CARs. It also investigates whether providing India transit route to Afghanistan has opportunity costs for Pakistan’s trade potential with Afghanistan and CARs. In 2009, Pakistan’s exports to Afghanistan amount to US$ 1.3 billion which make up for 7.8 % of Pakistan’s total exports. For the same year, India’s exports to Afghanistan stand at 471 million dollars which make 0.3 % of India’s total exports. Looking at the product wise composition of Pakistan’s exports to Afghanistan, mineral fuels, oils, distillation products are on the top with share of around 29%. Salt, sulpher, earth, plaster, lime and cement and cereals have a share of around 11 %. While animal, vegetable fats and oils, cleavage products and articles of iron and steel have the share of around 7%. On the other hand, the top five exports of India to Afghanistan are man-made filaments with 42 % share, pharmaceutical products with 11 % share, electric and electronic equipment with 7% share and rubber and articles with 6% share. Clearly there is no overlap between exports of Pakistan and India to Afghanistan. Nonetheless Pakistan has already lost its market share to India in pharmaceuticals. The tariff applied to Pakistan by Afghanistan on pharmaceuticals is 2.50 % while India which enjoys Preferential Trade Agreement with Afghanistan only faces an average tariff of 0.60% on pharmaceuticals. Pharmaceuticals are Pakistan’s top performing exports to CARs with 42.5 % share of total exports to CARs. India also exports pharmaceuticals to CARs but its share in total exports to CARs is only 25.5 %. In Afghanistan, Pakistan has clearly lost its market share to India due to presence of preferential tariffs for India in Afghanistan. If Pakistan provides transit route to India for its exports to Afghanistan, cheaper pharmaceuticals of Indian origin can then be re-exported to CARs capturing Pakistan’s market share in CARs. Much like pharmaceuticals there are other Pakistani products which are likely to lose out to India in Afghanistan and CARs if India is provided transit route to Afghanistan. The Wagah-Peshawar-Torkham route which roughly extends up to 800 km is probably the shortest possible one between India and Afghanistan; which would greatly reduce the logistics cost of shipping goods from India to Afghanistan and beyond. In addition to that, the preferential treatment currently enjoyed by Indian products in Afghanistan under the PTA would further cost Pakistani goods by eroding their competitiveness in the Afghan market. In the absence of a robust mechanism to contain the informal trade, allowing Indian goods a passage through Pakistan’s territory would, in all likelihood, worsen the smuggling situation, something Pakistan can ill afford to accept. Therefore, under the circumstances, there are clear economic disadvantages to Pakistan in extending the transit facility to India without adequate safeguards and preferably a quid pro quo, be it political or economic.
    Keywords: International Trade; Transit Trade Agreements; Pakistan; India; Afghanistan; Sectoral Analysis
    JEL: F4
    Date: 2010–09–01
  5. By: Javorcik, Beata S.; Özden, Çağlar; Spatareanu, Mariana; Neagu, Cristina
    Abstract: Although there exists a sizeable literature documenting the importance of ethnic networks for international trade, little attention has been devoted to studying the effects of migrants on foreign direct investment (FDI). The presence of migrants can stimulate FDI by promoting information flows across international borders and by serving as a contract enforcement mechanism. This paper investigates the link between the presence of migrants in the US and US FDI in the migrants' countries of origin, taking into account the potential endogeneity concerns. The results suggest that US FDI abroad is positively correlated with the presence of migrants from the host country. The data further indicate that the relationship between FDI and migration is stronger for migrants with tertiary education.
    JEL: F22 F23 F21
    Date: 2011–03
  6. By: Sebastian Galiani; Daniel Heymann; Nicolas E Magud
    Abstract: We introduce non-tradable goods to the Heckscher-Ohlin-Samuelson (HOS) model to study the distributive effects of terms of trade shocks. We show that the employment of resources in activities producing exclusively for the local market induces a crucial association between domestic spending and factor demand and prices, which is absent in the usual HOS framework. Specifically, in a two-sector economy (producing only exportable and non-tradable goods) there are no redistributive effects of external terms of trade shifts-i.e. no Stolper-Samuelson-type of effect. By extending the model to the domestic production of a third, importable good, we show that distributional tensions arise. Distributional conflicts occur within urban labor groups (skilled vs. unskilled) and not only between the "traditional" rural vs. urban factors. Finally, export taxes are imposed to re-distribute the effects of external shocks. We show that the ability of the government to cushion the impact of the terms of trade shift on the economy’s income distribution depends crucially on the use of the tax revenues.
    Keywords: Export taxes , Exports , External shocks , Labor productivity , Terms of trade , Trade models ,
    Date: 2010–10–25
  7. By: Kenneth Baltzer (Institute of Food and Resource Economics, University of Copenhagen)
    Keywords: Minimum Quality Standards, International Trade, Oligopoly, Consumer Heterogeneity
    JEL: F12 L12
    Date: 2010–11
  8. By: Simplice Anutechia , Asongu
    Abstract: In this paper, we contribute to existing literature on financial development and openness by, sampling twenty-nine African countries with data spanning from 1987 to 2008. Using panel empirical techniques, we provide evidence of bi-directional causality between trade openness and financial openness; albeit, the former, bearing much more impact on the later. Neither capital openness nor trade openness, significantly account for financial development. Our results are robust to variable interaction via Principal Component Analysis. For sampled countries, policy towards trade openness should be effective in view of inviting private capital flows.
    Keywords: Trade Openness; Financial Openness; Financial Development; Panel; Africa.
    JEL: G1 D6 G0
    Date: 2010–10–20
  9. By: Richard Frensch; Achim Schmillen (Osteuropa-Institut, Regensburg (Institut for East European Studies))
    Abstract: The Balassa-Samuelson hypothesis – i.e. that real exchange rates between each pair of countries increase with the tradables sector productivities ratio between these countries, and decrease with their non-tradables sector productivities ratio – has been one of the most prominent frameworks in open economy macroeconomics for more than forty years. However, empirical studies have often been unable to confirm it. We argue that this might at least in part be due to measurement errors leading to downward-biased estimates. We test the Balassa-Samuelson hypothesis with innovative trade-based vari-ety measures to differentiate between tradables and non-tradables sector productivities that do not suffer from such errors-in-variables. Using a pairwise regression approach, we find stable and very robust Balassa-Samuelson effects over all our specifications.
    Keywords: Balassa-Samuelson, product variety, measurement errors, pairwise regressions
    JEL: F40 F43
    Date: 2010–11
  10. By: Sandrine Levasseur (OFCE, Research Department); Sandrine Levasseur (Observatoire Français des Conjonctures Économiques)
    Abstract: In this paper, we assess the extent to which multinational firms - in the first instance, the German ones - may adjust their international outsourcing over the business cycle in the Czech Republic and Slovakia. For that purpose, we have used monthly data of production for the manufacturing sector as a whole and some of its sub-sectors, since 2000 onwards. Our econometrical estimates suggest that there would be an asymmetry in the international outsourcing across the states of the economy, meaning that multinationals firms would be engaged differently in outsourcing activities, depending on whether bad or good economic times occur. Yet, such an asymmetry is found increasing over the time for German and French multinationals operating in the transport equipment sector of Slovakia. Another conclusion is that international outsourcing made by multinational firms in Slovakia may account for a portion of its large business cycles volatility.
    Keywords: International outsourcing, foreign direct investment, business cycles, Central and Eastern European countries, European integration.
    JEL: F21 F23 F4 L60
    Date: 2010–11
  11. By: Fabio Pieri; Enrico Zaninotto (DISA, Faculty of Economics, Trento University)
    Abstract: This paper analyzes the relationship between firm efficiency and vertical integration in the Italian machine tool (MT) industry. A theoretical model of entry and competition within an industry has been set up. In this model firms can choose either to be vertically integrated or not: the most efficientfirms self-select in being vertically integrated, while less efficientfirms prefer a disintegrated structure and they both coexist in equilibrium. In the second part of the paper the relationship between efficiency and vertical integration has been tested using a stochastic frontier framework in an novel panel dataset including around 500 MT builders. The theoretical prediction is confirmed: outsourcing seems a rational choice for less efficient firms to make positive operating profits and stay in the market; on the other hand, more efficient firms exploit their efficiency advantage to control a greater part of the production chain, possibly benefiting from greater coordination among different phases and tailored intermediate inputs.
    Keywords: vertical integration; technical efficiency; firm heterogeneity; heteroskedastic frontier model
    JEL: D24 L23 L25 L64
    Date: 2010–11

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