nep-int New Economics Papers
on International Trade
Issue of 2011‒02‒12
thirteen papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. Export versus FDI in services By Bhattacharya, Rudrani; Patnaik, Ila; Shah, Ajay
  2. Services liberalization in preferential trade arrangements : the case of Kenya By Balistreri , Edward J.; Tarr, David G.
  3. Energy Abundance, Trade and Industry Location By Reyer Gerlagh; Nicole A. Mathys
  4. Entry on Export Markets and Firm-Level Performance Growth: Intra-Industrial Convergence or Divergence? By Florian Mayneris
  5. Financial constraints and exports: evidence from Portuguese manufacturing firms By Armando Silva
  6. Trade and Colonial Status By José De Sousa; Julie Lochard
  7. Innovation, antidumping and retaliation By MIYAGIWA, Kaz; SONG, Huasheng; VANDENBUSSCHE, Hylke
  8. Determinants of Trade Misinvoicing. By Patnaik, Ila; Gupta, Abhijit Sen; Shah, Ajay
  9. Immigration, Offshoring and American Jobs By Gianmarco I.P. Ottaviano; Giovanni Peri; Greg C. Wright
  10. Productivity and International Firm Activities: What do we know? By Joachim Wagner
  11. Domestic and Trade Tax Reforms in the Presence of a Public Good and Different Neutrality Conditions By Michael S. Michael; Sajal Lahiri; Panos Hatzipanayotou
  12. The wage effects of immigration and emigration By Docquier, Frederic; Ozden, Caglar; Peri, Giovanni
  13. The Impact of the Global Business Cycle on Small Open Economies: A FAVAR Approach for Canada By Garima Vasishtha; Philipp Maier

  1. By: Bhattacharya, Rudrani (National Institute of Public Finance and Policy); Patnaik, Ila (National Institute of Public Finance and Policy); Shah, Ajay (National Institute of Public Finance and Policy)
    Abstract: In the literature on exports and investment, most productive firms are seen to invest abroad. In the Helpman et al. (2004) model, costs of transportation play a critical role in the decision about whether to serve foreign customers by exporting, or by producing abroad. We consider the case of tradable services, where the marginal cost of transport is near zero. We argue that in the purchase of services, buyers face uncertainty about product quality, especially when production is located far away. Firm optimisation then leads less productive firms to self-select themselves for FDI. We test this prediction with data from the Indian software industry, and find support for it.
    Date: 2011–01
  2. By: Balistreri , Edward J.; Tarr, David G.
    Abstract: Given the growing importance of commitments to foreign investors in services in regional trade agreements, it is important to develop applied general equilibrium models to assess the impacts of liberalization of barriers to multinational service providers. This paper develops a 55 sector applied general equilibrium model of Kenya with foreign direct investment and Dixit-Stiglitz productivity effects from additional varieties of imperfectly competitive goods or services, and uses the model to assess its regional and multilateral trade options, focusing on commitments to foreign investors in services. To assess the sensitivity of the results to parameter values, the model is executed 30,000 times, and results are reported as confidence intervals of the sample distributions. The analysis reveals that a 50 percent preferential reduction in the ad valorem equivalents of barriers in all business services by Kenya with its African partners would be somewhat beneficial for Kenya. If a preferential agreement with African partners is combined with an agreement with the European Union, the gains would more than triple the gains of an Africa only agreement. Multilateral reduction of services barriers, however, would yield gains about 12 times the gains of an agreement with the Africa region alone. These results suggest that preferential liberalization in the region is a valuable first step, but wider liberalization, with larger partners and liberal rules of origin or multilaterally, will yield much larger gains due to providing access to a much wider set of services providers. The largest gains would come from domestic regulatory reform in services, as this would almost triple the gains of multilateral liberalization.
    Keywords: Economic Theory&Research,Emerging Markets,Public Sector Corruption&Anticorruption Measures,Transport Economics Policy&Planning,Free Trade
    Date: 2011–01–01
  3. By: Reyer Gerlagh (Tilburg University, Netherlands); Nicole A. Mathys (Swiss Federal Office of Energy and University of Neuchâtel,)
    Abstract: We study the effect of countries’ energy abundance on trade and sector activity, conditional on sector’s energy intensity, using an unbalanced panel with 14 high-income countries from Europe, America and Asia, 10 broad sectors, and years 1970-1997. We find that (i) countries with large energy endowments have low energy prices, and are thus energy abundant both on micro and macro level. (ii) Energy abundant countries have a high level of energy embodied in exports relative to imports. (iii) Energy intensive sectors export from and (iv) have higher economic activity in energy abundant countries. (v) The trade and location effects increase with a sector’s exposure to international trade. In short, energy is a major driver for sector location through specialisation. We show that capital and energy are complements in the production function and use various controls in our analysis. The results give insights into delocalisation effects that may take place among rich countries with heterogeneous energy policy.
    Keywords: Trade and the Environment, Pollution Haven, Factor Endowments, Industry Location
    JEL: Q56
    Date: 2011–01
  4. By: Florian Mayneris (CORE)
    Abstract: This paper investigates theoretically and empirically the endogenous investment decision of firms conditioning on export decision. It shows that theoretically, whatever the form of preferences, firms that start exporting invest more and grow more than the others. However, it is shown that when preferences are CES, within each category of firms (domestic and switchers), initial productivity and investment are strategic complements, inducing intra-industrial divergence. On the contrary, when preferences are quadratic, initial productivity and investment are strategic substitutes: less productive firms invest more and grow more than the others, inducing intra-industrial convergence. Empirical results on French data support the predictions of the quadratic preferences model.
    Keywords: Export Decision, Investment, Firm Heterogeneity
    JEL: D21 D24 F12
    Date: 2010–12
  5. By: Armando Silva (Instituto Politécnico do Porto, Escola Superior de Estudos Industriais e de Gestão)
    Abstract: This paper analyzes the links between financial constraints and firm export behavior, at the firm level, by using data on Portuguese manufacturing enterprises. Theoretical models of Chaney (2005) and Manova (2010) suggest that credit constraints are detrimental for exports but no model explains consistently why exports could improve firms´ financial health. Previous empirical literature has not yet reached a consensus on these subjects and there is a great heterogeneity in measuring financial constraints and how to assess the causality relationships; results are also quite heterogeneous. Developing a very recent trend, we approximate credit constraints by using a financial score built on eight variables; to assess the effects of exports on the financial status of firms we apply, for the first time to these types of studies, a propensity score matching with difference in differences. This procedure is used to deal with the endogeneity problems, stemming from the fact that new exporters have most likely initial better financial health. We find that firms enjoying better financial health are more likely to become exporters and that new exporters show improvements in their financial situation. These findings have important policy implications as they suggest that public intervention to support exports is clearly justified.
    Keywords: exports, matching, financial constraints, corporate finances
    Date: 2011–02
  6. By: José De Sousa; Julie Lochard
    Abstract: Does colonisation explain differences in trade performance across developing countries? In this paper, we analyse the differential impact of British versus French colonial legacies on the current trade of African ex-colonies. We initially find that former British colonies trade more, on average, than do their French counterparts. This difference might be the result of the relative superiority of British institutions. However, a core concern is the non-random selection of colonies by the British. Historians argue that with Britain, trade preceded colonisation. Using an instrument based on colonisation history to control for this endogeneity, we find no evidence of a systematic difference between the British and French colonial legacies with respect to trade. This finding suggests that the apparent better performance of British ex-colonies might be instead explained by pre-colonial conditions.
    Keywords: Trade, colonisation, Africa
    JEL: F10 F54 O55
    Date: 2010
  7. By: MIYAGIWA, Kaz (Emory University, USA); SONG, Huasheng (CRPE and College of Economics, Zhejiang University, China; Université catholique de Louvain, CORE, B-1348 Louvain-la-Neuve, Belgium); VANDENBUSSCHE, Hylke (Université catholique de Louvain, CORE and IRES, B-1348 Louvain-la-Neuve, Belgium; KULeuven-LICOS & CEPR)
    Abstract: We study the effect of contingency trade policy in a multi-country oligopoly model with and without R&D opportunities. We show that firms benefit from unilateral protection but initiate antidumping (AD) only against the targets domiciled in substantially smaller countries. Also, AD filings are more likely when firms face R&D opportunities. These results are consistent with recent empirical findings, namely, (1) actions are mostly between industrial and developing countries, (2) developing countries use AD to retaliate against industrial countries, and (3) AD is concentrated in R&D-intensive industries. Interestingly, intellectual property rights violations in developing countries have no connection to AD filings.
    Keywords: F12, F13, L13
    Date: 2010–10–01
  8. By: Patnaik, Ila (National Institute of Public Finance and Policy); Gupta, Abhijit Sen (Jawaharlal Nehru University); Shah, Ajay (National Institute of Public Finance and Policy)
    Abstract: Traditional explanations for trade misinvoicing -- high custom duties and weak domestic economies - are less persuasive in a world of high growth emerging markets who have low trade barriers. We construct a 35- country data set over a 26 year span, covering both industrialised and developing countries, to study the phenomena of export and import misinvoicing. Capital account openness, differentials in interest rates, political stability, corruption, indebtedness and the exchange rate regime are identified as factors related to misinvoicing. Trade misinvoicing should be seen as one element of de facto capital account openness.
    Keywords: Trade misinvoicing, Capital account openness, Political stability, Custom duties
    Date: 2010–10
  9. By: Gianmarco I.P. Ottaviano (Università Bocconi, CEPR, FEEM and LdA); Giovanni Peri (University of California, Davis, NBER and LdA); Greg C. Wright (University of California, Davis)
    Abstract: How many "American jobs" have U.S.-born workers lost due to immigration and offshoring? Or, alternatively, is it possible that immigration and offshoring, by promoting cost-savings and enhanced efficiency in firms, have spurred the creation of jobs for U.S. natives? We consider a multi-sector version of the Grossman and Rossi-Hansberg (2008) model with a continuum of tasks in each sector and we augment it to include immigrants with heterogeneous productivity in tasks. We use this model to jointly analyze the impact of a reduction in the costs of offshoring and of the costs of immigrating to the U.S. The model predicts that while cheaper offshoring reduces the share of natives among less skilled workers, cheaper immigration does not, but rather reduces the share of offshored jobs instead. Moreover, since both phenomena have a positive "cost-savings" effect they may leave unaffected, or even increase, total native employment of less skilled workers. Our model also predicts that offshoring will push natives toward jobs that are more intensive in communication-interactive skills and away from those that are manual and routine intensive. We test the predictions of the model on data for 58 U.S. manufacturing industries over the period 2000-2007 and find evidence in favor of a positive productivity effect such that immigration has a positive net effect on native employment while offshoring has no effect on it. We also find some evidence that offshoring has pushed natives toward more communication-intensive tasks while it has pushed immigrants away from them.
    Keywords: Employment, Production tasks, Immigrants, Offshoring
    JEL: F22 F23 J24 J61
    Date: 2010–11
  10. By: Joachim Wagner (Institute of Economics, Leuphana University of Lüneburg, Germany)
    Abstract: This paper summarizes in a non-technical way what we know from empirical studies based on firm-level data about the mutual links between international activities of firms and productivity. It is written with a view to inform policy makers in an evidencebased way. A special focus is on the empirical evidence we have from studies using firm-level data from the Nordic countries. It is argued that this empirical evidence does not provide a sound basis to search for similarities and differences (and their causes) between the Nordic countries, and the empirical results reported cannot qualify as stylized facts that can inform policy makers in an evidence-based way.
    Keywords: International firm activities, productivity, firm level data, Nordic countries
    JEL: F14 F23 L25
    Date: 2011–01
  11. By: Michael S. Michael; Sajal Lahiri; Panos Hatzipanayotou
    Abstract: This paper develops a perfectly-competitive general-equilibrium model of a small open economy with production of private traded goods and of a public good which is financed by revenues from trade and domestic taxes. Within this framework we consider the effects on public good provision and on welfare of the following tax reforms: (i) a producer-price-neutral reduction in export taxes and a corresponding increase in production taxes, (ii) a consumer-price-neutral reduction in tariffs and a corresponding increase in consumption taxes, and (iii) a partial tax-revenue-neutral reform in trade and domestic taxes.
    Keywords: Indirect tax reforms, Government tax revenue, Public good, Welfare
    Date: 2011–01
  12. By: Docquier, Frederic; Ozden, Caglar; Peri, Giovanni
    Abstract: Immigrants in Rome or Paris are more visible to the public eye than the Italian or French engineers in Silicon Valley, especially when it comes to the debate on the effects of immigration on the employment and wages of natives in high-income countries. This paper argues that such public fears, especially in European countries are misplaced; instead, more concern should be directed towards emigration. Using a new dataset on migration flows by education levels for the period 1990-2000, the results show the following: First, immigration had zero to small positive long-run effect on the average wages of natives, ranging from zero in Italy to +1.7 percent in Australia. Second, emigration had a mild to significant negative long-run effect ranging from zero for the US to -0.8 percent in the UK. Third, over the period 1990-2000, immigration generally improved the income distribution of European countries while emigration worsened it by increasing the wage gap between the high and low skilled natives. These patterns hold true using a range of parameters for the simulations, accounting for the estimates of undocumented immigrants, and correcting for the quality of schooling and/or labor-market downgrading of skills. All results go counter to the popular beliefs about migration, but they are due to the higher skill intensity of both emigration and immigration relative to non-migrants.
    Keywords: Population Policies,Human Migrations&Resettlements,Voluntary and Involuntary Resettlement,International Migration,Labor Markets
    Date: 2011–02–01
  13. By: Garima Vasishtha; Philipp Maier
    Abstract: Building on the growing evidence on the importance of large data sets for empirical macroeconomic modeling, we use a factor-augmented VAR (FAVAR) model with more than 260 series for 20 OECD countries to analyze how global developments affect the Canadian economy. We focus on several sources of shocks, including commodity prices, foreign economic activity, and foreign interest rates. We evaluate the impact of each shock on key Canadian macroeconomic variables to provide a comprehensive picture of the effect of international shocks on the Canadian economy. Our findings indicate that Canada is primarily exposed to shocks to foreign activity and to commodity prices. In contrast, the impact of shocks to global interest rates or global inflation is substantially lower. Our findings also expose the different channels through which higher commodity prices impact the Canadian economy: Canada benefits from higher commodity prices through a positive terms of trade shock, but at the same time, higher commodity prices tend to lower global economic activity, hurting demand for Canadian exports.
    Keywords: International topics; Econometric and statistical methods; Business fluctuations and cycles
    JEL: C32 F41
    Date: 2011

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