nep-int New Economics Papers
on International Trade
Issue of 2011‒05‒14
24 papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. Export performance of Chinese domestic firms: the role of foreign export spillovers By MAYNERIS, Florian; PONCET, Sandra
  2. Evidence on Productivity, Comparative Advantage, and Networks in the Export Performance of Firms By Federico Trionfetti; Luca Antonio Ricci
  3. Did Export Diversification Soften the Impact of the Global Financial Crisis? By Rafael Romeu; Nelson Camanho da Costa Neto
  4. Multimarket entry in exporting By Sheard, Nicholas
  5. Feeling The Elephant’s Weight: The Impact of Côte d’Ivoire’s Crisis on WAEMU Trade By Ankouvi Nayo; Philippe Egoumé-Bossogo
  6. ‘Export Led Growth’ x ‘Growth Led Exports’: What Matters for the Brazilian Growth Experience after Trade Liberalization? By Araujo, Ricardo Azevedo; Soares, Cristiane
  7. The Elasticity of Trade: Estimates and Evidence By Simonovska, Ina; Waugh, Michael
  8. Europe Agreements and Trade Balance: Evidence form Four New EU Members By Caporale, Guglielmo Maria; Rault, Christophe; Sova, Robert; Sova, Anamaria
  9. International trade, union wage premia, and welfare in general equilibrium By Kreickemeier, Udo; Meland, Frode
  10. Ethnic networks and trade: Intensive vs. extensive margins By Coughlin, Cletus C; Wall, Howard J.
  11. The Effects of Trade on Unemployment: Evidence from 20 OECD countries By Kim, Jaewon
  12. Does Globalization affect Regional Growth? Evidence for NUTS-2 Regions in EU-27 By Wolfgang Polasek; Richard Sellner
  13. Financial Constraints and Foreign Market Entries or Exits: Firm-Level Evidence from France By Askenazy, Ph.; Caldera, A.; Gaulier, G.; Irac, D.
  14. Energy content in manufacturing exports: a cross-country analysis By João Amador
  15. Financial development and survival of African agri-food exports By Jaud, Melise; Kukenova, Madina
  16. Factor-Biased Technical Change and Specialization Patterns By Jana Brandt; Jürgen Meckl; Ivan Savin
  17. Link between Exporting and Productivity: Firm Level analysis for Indian Chemical Industry By Vinish Kathuria
  18. A Dynamic Approach to the Environmental Effects of Trade Liberalization By M. Fadaee
  19. Historical Evidence on the Finance-Trade-Growth Nexus By Michael D. Bordo; Peter L. Rousseau
  20. FDI in the Service Sector – Propagator of Growth for India? By Sen, Chitrakalpa
  21. Foreign Direct Investment and Economic Growth in Pakistan: A Sectoral Analysis By Muhammad Arshad Khan; Shujaat Ali Khan
  22. The impact of foreign R&D activities on the MNC’s performance at home: Evidence from the Case of Swiss Manufacturing firms By Lamia Ben Hamida
  23. Contingent trade policy and economic efficiency By Phillip McCALMAN; Frank STÄHLER; Gerald WILLMANN
  24. Biofuel Subsidies and International Trade By Bandyopadhyay, Subhayu; Bhaumik, Sumon; Wall, Howard

  1. By: MAYNERIS, Florian (Université catholique de Louvain, CORE and IRES, B-1348 Louvain-la-Neuve, Belgium); PONCET, Sandra (Paris School of Economics, Université Paris 1 Panthéon-Sorbonne and CEPII, France)
    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 L12
    Date: 2011–02–01
  2. By: Federico Trionfetti; Luca Antonio Ricci
    Abstract: This paper tests the effect of comparative advantage, size, and networking on the firm probability of exporting. The closest theoretical framework is the one of Bernard, Redding, and Schott (2007), with firm heterogeneity across countries and industries. We use a recently assembled multi-country multi-industry firm level dataset, and construct original measures of comparative advantage. The results show that firms are more likely to export if they belong to the comparative advantage industry, if they enjoy a higher productivity, or if they benefit from foreign, domestic, or communication networks.
    Keywords: Economic models , Export performance , Exports , Industrial sector , International trade , Productivity ,
    Date: 2011–04–05
  3. By: Rafael Romeu; Nelson Camanho da Costa Neto
    Abstract: This study considers the role of export diversification in determining trade outcomes during the global financial crisis. The impact of export diversification (or concentration) is measured by assessing three different dimensions of specialization. First, concentration by geographic destination is considered; that is, whether the bulk of exports from a country go to many or few trading partners. Second, industry/sectoral concentration is considered; that is, whether a country’s exports are scattered across many industries and sectors, or concentrated in just a few. Third, product concentration is considered; that is, whether countries produce many products within their export sectors or just a few. The workhorse gravity trade model is adapted with trade diversification as an additional trade cost, and the model solution is empirically tested on a dataset containing over 500 thousand observations for Latin America. Industry and product concentration are found to significantly affect the resilience of Latin American countries’ trade during the global financial crisis - increasing the diversity of both export sectors and export products within sectors by one standard deviation reduces the quarterly decline in exports by approximately 4.7 percent. Diversifying exports across many different trading partners is not found to significantly affect outcomes.
    Keywords: Commodities , Commodity prices , Cross country analysis , Exports , Financial crisis , Global Financial Crisis 2008-2009 , Industrial production , International trade , Latin America , Manufacturing , Trade models ,
    Date: 2011–05–02
  4. By: Sheard, Nicholas (Dept. of Economics, Stockholm University)
    Abstract: The expansion of exporters to new markets is an important aspect of international trade. This paper develops a model to explain a firm’s optimal export entry strategy when faced with multiple potential export destinations. The model allows for experience-related reductions in the costs of entry to export markets, which explains productivity-driven heterogeneity in the extent, timing, and order of market entry. The model presents several predictions that are tested and confirmed using Swedish firm-level data. More productive firms employ strategies that involve entering a larger number of markets in the long-term, entering larger markets, and entering markets more quickly. More productive firms tend to enter larger then smaller markets whereas less productive firms enter smaller then larger markets, so the model explains part of the heterogeneity in market entry orders. All firms enter nearer markets earlier. In addition, the model is consistent with empirically observed hierarchies of export markets.
    Keywords: export market entry; learning by exporting; fixed costs; heterogeneous firms
    JEL: D83 F12 F17
    Date: 2011–05–05
  5. By: Ankouvi Nayo; Philippe Egoumé-Bossogo
    Abstract: This paper analyzes the impact of political instability in Côte d’Ivoire on WAEMU trade over 1990-2007, applying panel econometric techniques to a gravity model of trade within WAEMU and between WAEMU and the rest of the world. The paper finds that intra-regional trade represents a small share of total WAEMU trade and that Côte d’Ivoire accounts for around half of that total, highlighting the importance of this country for the region. The political instability in Côte d’Ivoire has led to an increase in transaction costs, making it relatively more costly for member countries to trade with each other than with the rest of world. Instability has also resulted in a diversion of trade away from Côte d’Ivoire in favor of other countries equipped with ports and in a reduction of WAEMU overall potential trade. For Côte d’Ivoire alone, lost trade is estimated at around 40 percent of its potential trade with the WAEMU in the absence of instability. With a normalization in Côte d’Ivoire, enhanced security and further integration would be essential to achieve higher levels of trade and growth in the WAEMU region.
    Keywords: Bilateral trade , Côte d'Ivoire , Cross country analysis , Exports , Imports , International trade , Political economy , Trade integration , Trade liberalization , Trade models , West Africa , West African Economic and Monetary Union ,
    Date: 2011–04–07
  6. By: Araujo, Ricardo Azevedo; Soares, Cristiane
    Abstract: In this paper we study the Brazilian growth experience after trade liberalization by testing both the Export Led Growth (ELG) and the Growth Led Exports (GLE) hypotheses through a causality test between exports and gross domestic output (GDP). The paper provides further evidence that after openness both ELG and GLE hypotheses are useful to explain the Brazilian growth experience.
    Keywords: Export led growth; Growth Led Exports; Thirlwall’s law; Granger causality test.
    JEL: O41 O24
    Date: 2011
  7. By: Simonovska, Ina (University of CA, Davis); Waugh, Michael (NY University)
    Abstract: Quantitative results from a large class of international trade models depend critically on the elasticity of trade with respect to trade frictions. We develop a simulated method of moments estimator to estimate this elasticity from disaggregate price and trade-flow data using the Ricardian model. We motivate our estimator by proving that the estimator developed in Eaton and Kortum (2002) is biased in any finite sample. We quantitatively show that the bias is severe and that the data requirements necessary to eliminate it in practice are extreme. Applying our estimator to new disaggregate price and trade-flow data for 123 countries in the year 2004 yields a trade elasticity of roughly four, nearly fifty percent lower than Eaton and Kortum's (2002) approach. This difference doubles the welfare gains from international trade.
    JEL: F10 F11 F14 F17
    Date: 2011–02
  8. By: Caporale, Guglielmo Maria (Brunel University); Rault, Christophe (University of Orléans); Sova, Robert (CREST & University of Paris 1 Panthéon-Sorbonne); Sova, Anamaria (E.B.R.C. Bucharest)
    Abstract: This paper analyses the trade balance effects of Europe agreements (EA) between the EU-15 and four new EU members from Central and Eastern Europe (CEEC-4) using both static and dynamic panel data approaches. Specifically, the system Generalized Method of Moments (GMM, Blundell and Bond, 1998) and recently developed econometric methods such as the Correlated Common Estimation Pooled - Hausman-Taylor (CCEPHT, Serlenga and Shin, 2007) are applied to analyse the effects of the agreement variable. Our estimation results indicate a positive and significant impact of EA on trade flows. However, there is an asymmetric impact of the agreement variable on the trade balance, exports and imports being affected in different ways, which results in a trade balance deficit in the CEEC-4.
    Keywords: regionalisation, trade flows, trade balance, panel data methods
    JEL: E61 F13 F15 C25
    Date: 2011–04
  9. By: Kreickemeier, Udo; Meland, Frode
    Abstract: We study how two distinct forms of globalisation, trade cost reductions and opening up of trade in previously shielded sectors, affect sector-specific wages, employment levels and aggregate welfare in a two-country model of general oligopolistic equilibrium (GOLE) with partly unionised labour markets. We find that both forms of globalisation increase union coverage, and they also lead to a lower union wage premium in shielded sectors. In contrast, the union wage premium in open sectors and aggregate welfare are affected differently by the two types of globalisation. Trade cost reductions in open sectors always lead to higher union wage premia and to lower aggregate welfare, while an increased number of open sectors lowers the union wage premium, and it may also increase welfare. --
    Keywords: Globalisation,Unions,Non-traded Goods,General Oligopolistic Equilibrium
    JEL: F12 F15 F16
    Date: 2011
  10. By: Coughlin, Cletus C; Wall, Howard J.
    Abstract: Ethnic networks—as proxies for information networks—have been associated with higher levels of international trade. Previous research has not differentiated between the roles of these networks on the extensive and intensive margins. The present paper does so using a model with fixed effects, finding that ethnic networks increase trade on the intensive margin but not on the extensive margin.
    Keywords: Ethnic Networks; State Exports; Intensive Margin; Extensive Margin
    JEL: R10 F10
    Date: 2011–01–13
  11. By: Kim, Jaewon (Dept. of Economics, Stockholm University)
    Abstract: This study empirically investigates if international trade has an impact on aggregate unemployment in the presence of labour market institutions. Using data for twenty OECD countries for the years 1961-2008, this study finds that an increase in trade leads to higher aggregate unemployment as it interacts with rigid labour market institutions, whereas it may reduce aggregate unemployment if the labour market is characterised by flexibility. In a country with the average degree of the labour market rigidities, an increase in trade has no significant effect on unemployment rates.
    Keywords: Unemployment; Trade; Labour market institutions; Panel-data analysis; Instrument
    JEL: C33 F16 F41 J50
    Date: 2011–05–05
  12. By: Wolfgang Polasek (Institute for Advanced Studies, Austria; The Rimini Centre for Economic Analysis (RCEA), Italy); Richard Sellner (Institute for Advanced Studies, Austria)
    Abstract: We analyze the influence of newly constructed globalization measures on regional growth for the EU-27 countries between 2001 and 2006. The spatial Chow-Lin procedure, a method constructed by the authors, was used to construct on a NUTS-2 level a complete regional data for exports, imports and FDI inward stocks, which serve as indicators for the in uence of globalization, integration and technology transfers on European regions. The results suggest that most regions have significantly benefited from globalization measured by increasing trade openness and FDI. In a non-linear growth convergence model the growth elasticities for globalization and technology transfers decrease with increasing GDP per capita. Furthermore, the estimated elasticity for FDI decreases when the model includes a higher human capital premium for CEE countries and a small significant growth enhancing effect accrues from the structural funds expenditures in the EU.
    Keywords: Regional Globalization Measures, EU Integration (Structural Funds), Regional Growth Convergence Models, Foreign Direct Investment (FDI)
    JEL: C11 C15 C51 R12
    Date: 2011–05
  13. By: Askenazy, Ph.; Caldera, A.; Gaulier, G.; Irac, D.
    Abstract: This paper studies the effect of credit constraints on the expansion and survival of firms in foreign markets. It develops a model in which, lower access to external finance, or reduced internal liquidity, hampers the firm ability to finance the recurrent costs to serve foreign markets and decreases firm survival in foreign markets. Additionally, financial constraints act as a barrier to firm export expansion by decreasing the firm ability to finance the entry costs into new export markets; thus, they push firm to avoid losing destinations. We use a unique longitudinal dataset on French firms that contains information on export destinations of individual firms and allows us to construct various firm-level measures of financial constraints to test these predictions. We obtain two main results. First, credit constraints have a negative effect on the number of newly served destinations. Second, higher probability of exit from the export market is also associated with credit constraints; that is consistent with constraints limiting the financing of recurrent export costs.
    Keywords: Firm heterogeneity, financial constraints, trade.
    JEL: D24 F14 D92
    Date: 2011
  14. By: João Amador
    Abstract: This paper compares the energy content in manufacturing exports in a set of 30 advanced and emerging economies and examines its evolution from 1995 to 2005. The paper combines information from the OECD input-output matrices and international trade data in 18 manufacturing sectors. Energy inputs are defined as those from sectors “coke, refined petroleum products and nuclear fuel” and “electricity, gas and water supply”. In addition, the value of energy inputs that is required for the production of one unit of output in a given manufacturing sector is defined as the corresponding sector's coefficient in the inverse Leontief matrix. Finally, these coefficients are weighted according to sectors' shares in countries' total manufacturing exports. The resulting indicator for the energy content of manufacturing exports is compared across countries in periods where comparable input-output matrices exist. The paper also suggests a methodology to disentangle the effects attributable to the structure of manufacturing exports and sectoral energy efficiency, presenting results according to technological categories. The paper concludes that Brazil, India and, mostly, China, present a high energy content in manufacturing exports, which has increased from 1995 to 2005. Conversely, many advanced economies, notably in Europe and North America, which showed energy contents below the world average in 1995, reinforced their position as relatively low energy intensive economies. The contribution of trade specialization and energy efficiency effects to explain differences in the energy content of exports draws attention to the situation of China. This country increased its relative energy usage in the exports of all technological categories of goods. Nevertheless, this effect was reinforced by the stronger export specialization in high-tech products and a comparatively lower specialization in medium-high-tech products.
    JEL: F10 F14 Q40
    Date: 2011
  15. By: Jaud, Melise; Kukenova, Madina
    Abstract: This paper investigates the link between export survival of agri-food products and financial development. It tests the hypothesis that financial development differentially affects the survival of exports across products based on their need of external finance. The authors test whether exports of products that are relatively more reliant on external capital survive longer when initiated in more financially developed countries. The results suggest that agri-food products that require more external finance indeed sustain longer in foreign markets if the exporting country is more financially developed.
    Keywords: Food&Beverage Industry,Economic Theory&Research,Markets and Market Access,Labor Policies,Debt Markets
    Date: 2011–05–01
  16. By: Jana Brandt (University of Giessen); Jürgen Meckl (University of Giessen); Ivan Savin (University of Giessen)
    Abstract: We analyze the medium- and long-run effects of international integration of capital markets on specialization patterns of countries. For that purpose, we incorporate induced technical change into a Heckscher-Ohlin model with a continuum of final goods. This provides a comprehensive theory that explains the dynamics of comparative advantages based on differences in effective factor endowments. Our model constitutes an appropriate framework for understanding the changes in industrial structure of foreign trade observed, e.g., in the CEE countries over the last two decades. In addition, our approach provides a theoretical foundation for the empirical prospective comparative advantage index (Savin and Winker 2009) with new insights into the future dynamics of comparative advantages. Eventually, the model may serve as a basis to set development priorities in countries being in the period of transition.
    Keywords: Factor-biased technical change, continuum of goods, comparative advantage, factor mobility, innovation, knowledge spillovers
    JEL: F17 F21 F43 O33
    Date: 2011
  17. By: Vinish Kathuria
    Abstract: The first objective of the study tests the empirical regularity that exporters are more productive than non-exporters in India. TFP is calculated from the Cobb-Douglas Production function using a fixed effects model. The productivity differential comparison between exporters and non-exporters show that Non-exporters have a higher Total Factor Productivity than Exporters. URL: [ /129.pdf].
    Keywords: chemical industry, productivity, exporters, India, cobb-douglas, firm level, self-selection hypothesis, international contracts, commodities, domestic economy, foreign technology
    Date: 2011
  18. By: M. Fadaee
    Abstract: In this paper, we develop a two-country world di¤erential game model with a polluting firm in each country where there is transportation cost to investigate the equilibrium of the game between firms when they decide to trade or not and to see under which conditions social welfare coincides with the market equilibrium. We find out that in the static game bilateral trade is always the equilibrium for any acceptable transportation cost while in the dynamic game social planner can prevent the inefficient outcome by imposing and determining the proper amount of Pigouvian taxation.
    JEL: C73 F18 H23 Q56
    Date: 2011–05
  19. By: Michael D. Bordo; Peter L. Rousseau
    Abstract: We study linkages between financial development, international trade, and long-run growth using data since 1880 for seventeen now-developed “Atlantic” economies and a set of cross-country and dynamic panel data models. We find that finance and trade reinforced each other before 1930, but that these effects did not persist after the Second World War. Financial development has positive effects on growth throughout the sample period, while trade affects growth strongly and independently after 1945. We attribute the rising importance of trade in explaining growth to major post-World War II changes in tariffs and quantity restrictions associated with the GATT, the establishment of the European Common Market, and the gradual elimination of capital controls after 1973. The findings are robust to the use of ‘deep’ fundamentals such as legal origin and indicators of the political environment as instruments for financial development and trade. Financial development, however, is more closely linked to these fundamentals than trade.
    JEL: E44 F14 F15 N1 N2
    Date: 2011–05
  20. By: Sen, Chitrakalpa
    Abstract: The last two decades have witnessed an unprecedented growth of the Indian service sector. This paper aims to analyze the growth dynamics. This study intends to see whether the growth in FDI has any significant impact on the service sector growth and also investigates whether a growth in this sector causes the GDP to grow. The results suggest that there has been a significant positive impact of the FDI on services sector and this service sector growth has in turn a significant effect on the GDP. The study also looks into the sub-sectoral dynamics and indicates towards the fact that the trade, hotels and restaurants, transport, storage and communications sub-sector contributes the most in the growth of Indian service sector. Therefore FDI can be truly be used as a propagator of economic growth, via its favourable effect on the growth in the services sector. Finally, the study addresses the long running sustainability debate regarding the Indian service sector.
    Keywords: Service sector; FDI; Economic growth
    JEL: F21 F43 C1
    Date: 2011–04–18
  21. By: Muhammad Arshad Khan (Pakistan Institute of Development Economics, Islamabad.); Shujaat Ali Khan (Middlebury College, USA.)
    Abstract: This paper establishes an empirical relationship between industry -specific foreign direct investment (FDI) and output under the framework of Granger causality and panel cointegration for Pakistan over the period 1981-2008. The result supports th e evidence of panel cointegration between FDI and output. FDI has a positive effect on output in the long run. The result also supports the evidence of long-run causality running from GDP to FDI, while in the short run, the evidence of two-way causality between FDI and GDP is identified. At the sectoral level, the effects of FDI on growth vary significantly across sectors. The most striking result obtained is that FDI causes growth in the primary and services sectors, while growth causes FDI in the manufacturing sector.
    Keywords: FDI, Growth, Cointegration, Causality
    JEL: F23 O40 C33
    Date: 2011
  22. By: Lamia Ben Hamida (Institute of Management and Information Systems, University of Applied Sciences, Haute Ecole de Gestion ARC)
    Abstract: This paper examines the impact of the MNCs’ internationalisation of R&D activities on their performances/productivity at home. Specifically, using detailed firm-level data for Swiss manufacturing firms, we find that foreign R&D activity of Swiss MNCs is a valuable source of knowledge which improves their productivity performance at home, but only when firms invest in knowledge-seeking activities. Conversely, R&D activities conducted abroad with knowledge exploiting purposes seem to weaken the MNC’s productivity at home.
    Keywords: internationalization, R&D, knowledge, seeking, exploiting, productivity
    JEL: F23
    Date: 2010–07
  23. By: Phillip McCALMAN; Frank STÄHLER; Gerald WILLMANN
    Abstract: This paper develops an efficiency theory of contingent trade policies. We model the competition for a domestic market between one domestic and one foreign firm as a pricing game under incomplete information about production costs. The cost distributions are asymmetric because the foreign firm has to pay a trade cost. We show that the foreign firm prices more aggressively to overcome its cost disadvantage. The resulting possibility of an inefficient allocation justifies the use of contingent trade policy on efficiency grounds. Contingent trade policy that seeks to maximize global welfare can avoid the potential inefficiency. National governments, on the other hand, make excessive use of contingent trade policy due to rent shifting motives. The expected inefficiency of national policy is larger (smaller) for low (high) trade costs compared to the laissez-faire case. In general, there is no clear ranking between the laissez-faire outcome and a contingent national trade policy.
    Date: 2011–04
  24. By: Bandyopadhyay, Subhayu; Bhaumik, Sumon; Wall, Howard
    Abstract: This paper explores optimal biofuel subsidization in the context of a general equilibrium trade model. The focus is on biofuels such as corn-based ethanol, which diverts corn from use as food to use as an intermediate input in energy production. In the small-country case, when a Pigouvian tax on conventional fuels such as crude is in place, the optimal biofuel subsidy is zero. When the tax on crude is not available as a policy option, however, a second-best biofuel subsidy (or tax) is optimal. In the large-country case, a biofuel subsidy spurs global demand for food and confers a terms-of-trade benefit to the food-exporting nation. In the absence of beggar-thy-neighbor trade policy tools due to WTO rules, the twin objectives of pollution reduction and term-of-trade improvement justify a combination of crude tax and biofuel subsidy for the food exporter. If the food importer also uses a biofuel subsidy (or tax), we have a Johnson (1953) type Nash equilibrium augmented by pollution considerations. If biofuel subsidies reduce global crude use, then in a Nash equilibrium, the food-exporting nation must use a subsidy, while a food-importing nation will impose a subsidy if and only if the pollution-reduction effect dominates the terms-of-trade effect.
    Keywords: Optimal Biofuel Subsidy; Pigouvian Tax; Terms-of-Trade; Pollution Externality
    JEL: O1 H2 F1
    Date: 2010–10

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