nep-int New Economics Papers
on International Trade
Issue of 2011‒02‒26
sixteen papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. Export performance of Chinese domestic firms: the role of foreign export spillovers By Florian MAYNERIS; Sandra PONCET
  2. Export Growth and Factor Market Competition: Theory and Evidence By Julian Emami Namini; Giovanni Facchini; Ricardo Lopez
  3. Refugees and “Missing” Arms Trade By Gaia Narciso;
  4. Herfindahl-Hirschman Meets International Trade and Development Theories By Mitchell H. Kellman; Yochanan Shachmurove
  5. How an Export Boom affects Unemployment By Noel Gaston; Gulasekaran Rajaguru
  6. Occupational Choice, Aggregate Productivity, and Trade By Meckl, Jürgen; Weigert, Benjamin
  7. Vertical Specialisation and Regional Trade Integration. A Study on Italy and Northern African Countries By Giancarlo Corò; Marco Giansoldati; Mario Volpe
  8. The role of subsidies for exports: Evidence from Portuguese manufacturing firms By Armando Silva
  9. Trade and the Skill Premium Puzzle with Capital Market Imperfections By Roberto Bonfatti; Maitreesh Ghatak
  10. FDI versus Exports: Multiple Host Countries and Empirical Evidence By Oberhofer, Harald; Pfaffermayr, Michael
  11. Information Technology, Globalization, and Growth: Role for Scale Economies, Terms of Trade, and Variety By Catherine Mann
  12. How Does Trade Evolve in the Aftermath of Financial Crises? By Abdul Abiad; Petia Topalova; Prachi Mishra
  13. Free Trade Agreements and Governance of the Global Trading System By Andrew G. Brown; Robert M. Stern
  14. The Evolution of Comparative Advantage: Measurement and Welfare Implications By Andrei A. Levchenko; Jing Zhang
  15. Trade and Trade Finance in the 2008-09 Financial Crisis By Mika Saito; Armine Khachatryan; Irena Asmundson; Ioana Niculcea; Thomas William Dorsey
  16. The Wage Effects of Immigration and Emigration By Frederic DOCQUIER; Çaglar OZDEN; Giovanni PERI

  1. By: Florian MAYNERIS (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) and Center for Operations Research and Econometrics (CORE)); Sandra PONCET (Paris School of Economics - Université de Paris 1 Panthéon-Sorbonne and CEPII)
    Abstract: We investigate how the proximity to multinational exporters influences the creation of new export linkages (extensive margin of trade) by domestic firms in China. Using panel data from Chinese customs for 1997-2007, we show that domestic firms’ capacity to start exporting new varieties to new markets positively responds to the export activity of neighboring foreign firms for that same product-country pair. We find that foreign export spillovers are limited to ordinary trade activities. No foreign export spillovers are found for processing trade. More, export spillovers are stronger for sophisticated products indicating that proximity to foreign exporters may help domestic exporters to upgrade their exports. However we observe that foreign export spillovers are weaker when the technology gap between foreign and domestic firms is large, suggesting that upgrading may not occur when foreign firms have already a strong edge.
    Keywords: Export performance; spillovers; FDI; Sophistication
    JEL: F1 R12 L25
    Date: 2011–02–04
  2. By: Julian Emami Namini (Erasmus University Rotterdam); Giovanni Facchini (Erasmus University Rotterdam); Ricardo Lopez (International Business School, Brandeis University)
    Abstract: Empirical evidence suggests that sectoral export growth decreases exporters' survival probability, whereas non-exporters are unaffected. Models with firm heterogeneity in total factor productivity predict the opposite. To solve this puzzle, we develop a two-factor framework where firms differ in factor shares. In this model, export growth increases competition for the factor used intensively by exporters, eliminating some of them, while non-exporters benefit. Our empirical analysis shows that the forces highlighted in the model drive the firm selection experienced by the Chilean manufacturing sector, suggesting that heterogeneity in factor shares is crucial to understand how firms react to trade liberalization.
    Keywords: Firm Dynamics, Two-factor Trade Model, Firm Heterogeneity in Factor Input Shares, Chile, Manufacturing Industry
    JEL: F12 F14 F16 L11
    Date: 2011–02
  3. By: Gaia Narciso (Institute for International Integration Studies, Trinity College Dublin);
    Abstract: Millions of people are killed or wounded by small arms each year. The aim of this study is to enhance our understanding of “missing” arms trade across countries. We proceed in two steps. First, we measure the extent of missing arms trade on the basis of official trade statistics. We construct a measure of the gap in arms trade based on the discrepancy between the value of arms exports reported by the exporting country and the value of arms imports recorded by the importing country. Second, we uncover the link between refugee movements and missing arms trade. Refugee flows, by reducing the ability of the receiving country to patrol its borders and its customs, are found to be correlated with arms smuggling across the border into the importing country. A series of robustness checks confirm the above findings.
    Keywords: international trade, refugees, arms, customs.
    JEL: F14 K42 O15
    Date: 2011–01
  4. By: Mitchell H. Kellman (Department of Economics, The City College of New York, and the Graduate Center of the City University of New York); Yochanan Shachmurove (Department of Economics, The City College of New York, and the Graduate Center of the City University of New York)
    Abstract: To date there does not exist one a generally acceptable measure or index of Specialization in International Trade. Development Economic Theory embraces the expectation of a direct relationship between economic growth and export diversification. However, International Trade Theory supports the association of export expansion with increased specialization. The paper proposes a Specialization Index and applies it to six small developing countries: Singapore, South Korea, Malaysia, Mexico, Tunisia and Morocco, during the years of their take offs. Additionally, the index is applied to the two large fast growing economies of Chine and India.
    Keywords: Trade Specialization Indices; Development Theory; Developing Country Export Compositions; International Trade Theory; Trade in Manufactures; Trade and Transformation; Singapore; South Korea; Malaysia; Mexico; Tunisia; Morocco; China; India.
    JEL: O1 O14 F1 F14
    Date: 2011–01–23
  5. By: Noel Gaston; Gulasekaran Rajaguru
    Abstract: Does trade affect the equilibrium rate of unemployment? To theoretically examine this question, we incorporate firm-union bargaining considerations into a model with a booming external sector and a stagnating manufacturing sector. In the model, a sustained improvement in the terms of trade lowers unemployment. To empirically investigate the predicted determinants of the unemployment rate, we use data for Australia, a country whose prosperity has always depended on the value of its exports. We find strong evidence that higher export prices, capital accumulation in tradeable goods industries and a lower unemployment benefit replacement rate each reduce the equilibrium unemployment rate.
    Date: 2011–01
  6. By: Meckl, Jürgen (Justus Liebig University, Giessen); Weigert, Benjamin (German Council of Economic Experts)
    Abstract: We propose occupational decisions of heterogeneous individuals as an alternative mechanism of explaining the distribution of firm productivities emphasized by empirical studies. Thus, we integrate the frameworks of Melitz (2003), and of Manasse and Turrini (2001) that establish the theoretical base of trade models with heterogeneous firms. Our model is technically much simpler than the Melitz approach while preserving the main results on firm-selection effects due to international market integration. Our approach paves the way for detailed analysis of institutions in a heterogeneous firm model to better understand the link between institutions and an economy’s productivity distribution.
    Keywords: intra-industry trade, heterogeneous productivities, firm selection, occupational choice
    JEL: F12 F16 J24
    Date: 2011–02
  7. By: Giancarlo Corò (Department of Economics, University Of Venice Cà Foscari); Marco Giansoldati (Department of Economics, University Of Venice Cà Foscari); Mario Volpe (Department of Economics, University Of Venice Cà Foscari)
    Abstract: This paper uses a multistage approach to investigate the role of Italy in the Northern African countries, both in terms of trade and investment. In particular, we show that Italian import flows for two typically Made in Italy industries, namely textile and clothing on one hand, and leather and footwear on the other hand, are strongly related not only to export flows of the same sector, but also to a set of variables capturing features of the Italian and the foreign country. In this way, we supply a first result supporting the hypothesis of an international fragmentation of production. To offer this outcome additional strength, we endow the present contribution with information on the attractiveness of the Northern African countries, looking at the volume of inward FDI flows and stocks, but with no industry disaggregation, due to data unavailability. Although we start from a global perspective, we rapidly shift to consider only the Italian investments in the area, with a breakdown by outward region. Thanks to the availability of a detailed dataset made available by the Bank of Italy, we are able to provide further evidence on the Italian internationalisation in the North of Africa. Indeed, our second result highlights the remarkable heterogeneity across countries and the emergence of the major role played by Tunisia.
    Keywords: Northern Africa, Italian regions, Made in Italy, FDI, fragmentation, Global Value Chains
    JEL: F14 F21 F23 L67
    Date: 2011
  8. By: Armando Silva (nstituto Politécnico do Porto- ESEIG. Rua D. Sancho I, 981, 4480-876 Vila do Conde, Portugal.)
    Abstract: Production subsidies have not been used by International Business literature to explain firms internationalization processes. We argue subsides may have a role to play in that process. Using a longitudinal database (1996-2003) at the plant level, this paper aims to shed light on the causal nexus between production-related subsidies and exports, in Portugal. We implement a propensity score matching approach in order to evaluate the effects of subsidies on both the probability of domestic firms to begin exporting and on the probability of increasing the export share of already exporters. We find no impact of subsidies on the ability of domestic firms to become exporters; additionally, no effects of subsidies are detected on export shares. Such disappointing results may be explained by the inefficiency in the granting criteria.
    Keywords: Subsidies, Exports, Portugal, Matching
    JEL: F13 F14 H29
    Date: 2011–02
  9. By: Roberto Bonfatti; Maitreesh Ghatak
    Abstract: An interesting puzzle is that trade liberalization in the 1980s and 1990s has been associated with a sharp increase in the skill premium in both developed and developing countries. This is in contrast with neoclassical theory, according to which trade should increase the relative return of the relatively abundant factor. We develop a simple model of trade with capital market imperfections, and show that trade can increase the skill premium in both the North and the South, and both in the short run as well as in the long run. We show that trade with a skill-intensive economy has two effects: it reduces the skilled wage, and thus discourages non talented agents out of the skilled labor force; and it reduces the cost of subsistence, thus allowing the talented offspring of unskilled workers to go to school. This compositional effect has a positive effect on the observed skill premium, possibly strong enough to counterweight the decrease in the skilled wage.
    Keywords: Trade Liberalization, Skill Premium, Credit Market Frictions, Latin America
    JEL: F16 O15 O16
    Date: 2010–11
  10. By: Oberhofer, Harald (University of Salzburg); Pfaffermayr, Michael (Department of Economics and Statistics, University of Innsbruck)
    Abstract: There are two main options for companies to serve foreign markets: exports and foreign direct investment (FDI). Based on the Helpman, Melitz and Yeaple (2004) model for multiple host countries this paper derives a clear theoretical prediction for the decision between both strategies. A bivariate probit model is estimated using a large data set of European companies to analyze the probability of using one or the other strategy. The empirical evidence indicates that more productive firms less (more) probably use the export (FDI) strategy to serve foreign markets. Moreover, a considerable number of companies use a combination of both strategies to serve foreign markets, which is in line with a multiple country model.
    Keywords: Heterogeneous Firms; Exports; Foreign Direct Investment; Multiple Host Countries; Bivariate Probit Estimation
    JEL: C35 D21 F12
    Date: 2011–02–17
  11. By: Catherine Mann (International Business School, Brandeis University)
    Abstract: This paper considers three channels through which globalization of information technology products may affect economic growth: Terms of trade in IT products in international trade, economies of scale in IT production and trade, and variety in IT consumption and trade. The empirical question relevant for policy makers is, what is the relative magnitudes of these channels. To catalyze economic growth and enhance performance, should policymakers promote IT exports to exploit economies of scale in production? Or, should they promote imports and domestic consumption of a variety of IT products to gain from falling IT prices, get more variety, and through these channels support faster TFP? Using a sample of 36 countries for 2000-2007, the findings are: (1) Importers of IT gain relatively more than exporters, on average, from the declining prices of IT coming through international trade. (2) Despite falling IT prices, most exporters enjoy positive economy-wide benefits of trading in IT because of economies of scale in production. (3) The extent of variety of traded IT products is related to the deviation of a country’s experience from that of the average country in its peer group. Controlling for trade patterns, the countries that are below average (in terms of economy-wide benefits from trade in IT) are also those that import and export the least variety of IT products. This suggests that gains to variety in consumption outweigh gains from economies of scale in production.
    Date: 2011–02
  12. By: Abdul Abiad; Petia Topalova; Prachi Mishra
    Abstract: We analyze trade dynamics following past episodes of financial crises. Using an augmented gravity model and 179 crisis episodes from 1970-2009, we find that there is a sharp decline in a country’s imports in the year following a crisis-19 percent, on average-and this decline is persistent, with imports recovering to their gravity-predicted levels only after 10 years. In contrast, exports of the crisis country are not adversely affected, and they remain close to the predicted level in both the short and medium-term.
    Keywords: Bilateral trade , Cross country analysis , Economic models , Financial crisis , Imports , Time series ,
    Date: 2011–01–05
  13. By: Andrew G. Brown (Amherst, MA); Robert M. Stern (University of Michigan)
    Abstract: This paper explores how far free trade agreements (FTAs) have strengthened or weakened global governance of the trading system. We open with an analysis of the altered political and economic context within which countries have come, in recent years, to assign a new importance to regional and bilateral trade agreements in their trade policies. We then consider each of the main provisions included in FTAs and comment on how these may separately affect the management of trade relations. We conclude with some observations of the broader trends affecting global governance that are associated with the spread of trade agreements as a whole.
    Keywords: Global trading system; free trade agreements; WTO; management of trade relations
    JEL: F1 F10 F13
    Date: 2011–01
  14. By: Andrei A. Levchenko; Jing Zhang
    Abstract: es.Using an industry-level dataset of production and trade spanning 75 countries and 5 decades, and a fully specified multi-sector Ricardian model, we estimate productivities at the 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 country's 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 for the median country. 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. Contrary to frequently expressed concerns, changes in developing countries' comparative advantage had virtually no impact on welfare in the developed countries.
    JEL: F11 F43 O33 O47
    Date: 2011–02
  15. By: Mika Saito; Armine Khachatryan; Irena Asmundson; Ioana Niculcea; Thomas William Dorsey
    Abstract: Global merchandise trade sharply declined in late 2008 and early 2009, and some press and financial market reports assigned a large role for the decline to trade finance. However, the available evidence suggests that shocks to trade finance were not the major factor in the decline in trade. Surveys of commercial banks by the IMF and others found that while bank-intermediated trade finance fell in value during the crisis, it fell by less than merchandise trade. As a result, the share of world trade supported by bank-intermediated trade finance increased despite higher pricing margins. Other explanations appear to account for the bulk of the reduction in international trade.
    Keywords: Bank credit , Banking , Banks , Capital markets , Financial crisis , Global Financial Crisis 2008-2009 , International trade ,
    Date: 2011–01–25
  16. By: Frederic DOCQUIER (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) and FNRS); Çaglar OZDEN (The World Bank, Development Research Group); Giovanni PERI (University of California, Davis)
    Abstract: In this paper, we simulate the long-run effects of migrant flows on wages of high-skilled and low-skilled non-migrants in a set of countries using an aggregate representation of national economies. We focus on Europe and compare the outcomes for large Western European countries with those of other key destination countries both in the OECD and outside the OECD. Our analysis builds on an improved database of bilateral stocks and net migration flows of immigrants and emigrants by education level for the years 1990 through 2000. We find that all European countries experienced a decrease in their average wages and a worsening of their wage inequality because of emigration. Whereas, immigration had nearly equal but opposite effects. These patterns hold true using a range of parameters for our simulations, accounting for the estimates of undocumented immigrants, and correcting for the quality of schooling and/or labor-market downgrading of skills. In terms of economic outcomes, it follows that prevalent public fears in European countries are misplaced; immigration has had a positive average wage effect on native workers. These concerns would be more properly focused on the wage effect of emigration.
    Keywords: Immigration, Emigration, Complementarity, Schooling Externalities, Average Wage, Wage inequality
    JEL: F22 J61 J31
    Date: 2010–12–14

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