nep-int New Economics Papers
on International Trade
Issue of 2011‒05‒30
fourteen papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. Service innovation and the proximity-concentration trade-off model of trade and FDI By Fulvio, Castellacci
  2. Economic performance under NAFTA : a firm-level analysis of the trade-productivity linkages By De Hoyos, Rafael E.; Iacovone, Leonardo
  4. Technological Knowledge and Offshore Outsourcing: Evidence from Japanese firm-level data By ITO Banri; TOMIURA Eiichi; WAKASUGI Ryuhei
  5. Deep trade policy options for Armenia : the importance of services, trade facilitation and standards liberalization By Jensen, Jesper; Tarr, David G.
  6. Do exports cause growth? Some evidence for the new EU members By Oscar Bajo-Rubio; Carmen Díaz-Roldán
  7. Trade Liberalization and Self-Control Problems By Jennifer Abel-Koch
  8. Measuring the impacts of global trade reform with optimal aggregators of distortions By Laborde, David; Martin, Will; van der Mensbrugghe, Dominique
  9. Transportation, freight rates, and economic geography By Kristian Behrens; Pierre M. Picard
  10. Transnational social capital and FDI.Evidence from Italian associations worldwide By Marina Murat; Barbara Pistoresi; Alberto Rinaldi
  11. Does Domestic Offshoring Precede International Offshoring? Industry-level Evidence By Franz-Josef Bade; Eckhardt Bode; Eleonora Cutrini
  12. Daily and monthly costs of terrorism on Pakistani exports By Mamoon, Dawood; Akhtar, Sajjad; Hissam, Saadia
  13. The effects of terrorist activities on foreign direct investment: nonlinear Evidence By Omay, Tolga; Takay Araz, Bahar; Ilalan, Deniz
  14. The Gravity of R&D FDIs. By Davide Castellani; Alfredo Jimenez Palmero; Antonello Zanfei

  1. By: Fulvio, Castellacci
    Abstract: This paper introduces service innovation in the proximity-concentration trade-off model of trade and FDI (Helpman, Melitz and Yeaple, 2004). The idea is that innovation will have two main effects on service firms’ choice between exports and FDI. First, innovative firms will on average have higher productivity levels than non-innovative enterprises. Secondly, innovators will have to pay a higher relational distance cost for undertaking export activities, and they will therefore prefer to avoid (or reduce) these costs by choosing a FDI strategy instead. We test the empirical relevance of this idea on a new survey dataset for a representative sample of firms in all business service sectors in Norway. The results show that firms are more likely to choose FDI rather than export the greater their productivity level and the higher the relational distance costs they face.
    Keywords: Service sectors; innovation; export; FDI; firm heterogeneity; survey data
    JEL: F15 F10 O33
    Date: 2011
  2. By: De Hoyos, Rafael E.; Iacovone, Leonardo
    Abstract: Did the North American Free Trade Agreement make Mexican firms more productive? If so, through which channels? This paper addresses these questions by deploying an innovative microeconometric approach that disentangles the various channels through which integration with the global markets (via international trade) can affect firm-level productivity. The results show that the North American Free Trade Agreement stimulated the productivity of Mexican plants via: (1) an increase in import competition and (2) a positive effect on access to imported intermediate inputs. However, the impact of trade reforms was not identical for all integrated firms, with fully integrated firms (i.e. firms simultaneously exporting and importing) benefiting more than other integrated firms. Contrary to previous results, once self-selection problems are solved, the analysis finds a rather weak relationship between exports and productivity growth.
    Keywords: Economic Theory&Research,Free Trade,Labor Policies,Knowledge for Development,Microfinance
    Date: 2011–05–01
  3. By: Elena Meschi (CEE, Institute of Education, University of London); Erol Taymaz (Department of Economics, Middle East Technical University, Ankara); Marco Vivarelli (DISES, Università Cattolica del Sacro Cuore - Piacenza)
    Abstract: In this paper we report evidence on the relationship between trade openness, technology adoption and the relative demand for skilled labour in the Turkish manufacturing sector, using firm level data over the period 1980-2001. In a dynamic panel data setting, using a unique database comprising data from 17,462 firms, we estimate an augmented cost share equation whereby the wage bill share of skilled workers in a given firm is related to international exposure and technology adoption. Both at the sectoral and firm level, it emerged that R&D expenditures are positive and significantly related to skill upgrading. This result supports the skill biased technological change argument in the case of a middle-income country such as Turkey. Moreover, the sectoral analysis revealed that increasing export towards more industrialised countries (mainly the E.U.) tends to shift the production toward less skill-intensive activities. While this result is consistent with the HOSS theorem, on the other hand import penetration from more developed countries turns out to facilitate the adoption of new technologies embodied in capital and intermediate goods, thus shifting the production toward more skill-intensive technologies. This result is confirmed by the firm level analysis that finds a positive impact of technological transfer from abroad, foreign ownership and export on the demand for skills, highlighting the role of increasing globalisation in fostering skill upgrading within firms. Our microdata also allowed us to investigate the direct impact of import flows in shaping the relative demand for skills. The results showed that those firms belonging to the sectors that most raised their inputs from more developed countries also experienced a higher increase in their labour cost share of skilled workers. This finding is a further support to the hypothesis that imports from industrialised countries imply a transfer of new technologies, in turn leading to a higher demand for skilled labour.
    Keywords: globalization, technology transfer, skills, panel data, GMM-SYS
    JEL: F16 O15 O33
    Date: 2010–06
  4. By: ITO Banri; TOMIURA Eiichi; WAKASUGI Ryuhei
    Abstract: This paper empirically examines the effects of knowledge capital on offshore outsourcing choices based on original survey data of Japanese firms. The results of a multinomial logit model demonstrate that firms' offshoring is positively correlated with knowledge capital measured by their R&D activities or patenting, even after controlling for other firm characteristics including productivity, capital intensity, firm age, and export status. Further, knowledge-intensive firms are more inclined to choose foreign insourcing rather than outsourcing, suggesting that firms tend to internalize their technological knowledge in offshore sourcing.
    Date: 2011–05
  5. By: Jensen, Jesper; Tarr, David G.
    Abstract: This paper develops an innovative 21 sector computable general equilibrium model of Armenia to assess the impact on Armenia of a Deep and Comprehensive Free Trade Agreement with the European Union, as well as further regional or multilateral trade policy commitments. The analysis finds that such an agreement with the European Union will likely result in substantial gains to Armenia, but shows that the gains derive from the deep aspects of the agreement. In order of importance, the sources of the gains are: (i) trade facilitation and reduction in border costs; (ii) services liberalization; and (iii) standards harmonization. A shallow agreement with the European Union that focuses only on preferential tariff liberalization in goods will likely lead to small losses to Armenia primarily due to a loss of productivity from lost varieties of technologies from the rest of the world region in manufactured products. Additional gains can be expected in the long run from an improvement in the investment climate. The authors estimate only small gains from a services agreement with countries of the Commonwealth of Independent States, but significant gains from expanding services liberalization multilaterally.
    Keywords: Economic Theory&Research,Transport Economics Policy&Planning,Emerging Markets,Free Trade,Trade Policy
    Date: 2011–05–01
  6. By: Oscar Bajo-Rubio (Universidad de Castilla-La Mancha); Carmen Díaz-Roldán (Universidad de Castilla-La Mancha)
    Abstract: In this paper, we analyze the relationship between international trade and economic growth, from the point of view of one of the most traditional hypothesis within this field, namely, the export-led growth hypothesis. To this end, we apply Grangercausality tests, in a cointegration framework, to data on exports and GDP of the eight CEECs that became members of the EU in 2004.
    Keywords: Economic growth, Exports, Transition countries
    JEL: F41 F43 O40
    Date: 2011–05
  7. By: Jennifer Abel-Koch (Department of Economics, Johannes Gutenberg-Universitaet Mainz, Germany)
    Abstract: This paper analyzes the welfare effects of trade liberalization when some individuals suffer from self-control problems and hence consume too much of goods which generate immediate benefits but entail future costs. Within a classic Ricardian model of trade, the welfare efects depend crucially on the direction of trade. In the importing country, individuals who are suciently price-sensitive and have a sufficiently strong self-control problem lose from trade. In the exporting country, all individuals unambiguously gain from trade. These ndings are however not robust to changes in the assumptions on production technology and market structure. Within a new trade model with increasing returns to scale and monopolistic competition, individuals with self-control problems can lose in both countries. In contrast to the Ricardian setting, even individuals without self-control problems can lose if the average self-control problem is stronger in their country than in the country they start trading with.
    Keywords: Globalization, welfare gains from trade, self-control problems, timeinconsistency
    JEL: F11 F12 D91
    Date: 2011–05–15
  8. By: Laborde, David; Martin, Will; van der Mensbrugghe, Dominique
    Abstract: Traditional weighted-average measures of trade distortions are widely used in analyzing global and regional reforms, despite well-known deficiencies. This paper develops and applies optimal aggregators for the real-world case of multiple countries and commodities with much more detailed information on trade than on production and consumption. The approach reflects the fact that different aggregators are needed for expenditure on imported goods and for tariff revenues, and allows for incorporation of both intensive and extensive margins of adjustment to reform. Applications confirm that the technique is straightforward enough for widespread use, and point to close to a doubling of the welfare gains at the intensive margin when using the highest possible level of international commodity disaggregation, with larger gains in developing regions than in the industrial countries. The measured income gains increase along the entire path of liberalization, with slightly larger increases in the earlier stages, where the gaps between the responses of the expenditure and tariff revenue aggregators are largest. Sensitivity analysis suggests that, for global trade reform, the ease of substitution between tariff lines is much more important than that between varieties from different countries.
    Keywords: Free Trade,International Trade and Trade Rules,Trade Policy,Economic Theory&Research,Debt Markets
    Date: 2011–05–01
  9. By: Kristian Behrens (Canada Research Chair, Department of Economics, Universite du Quebec a Montreal (uqam)); Pierre M. Picard (crea, Universite du Luxembourg, Luxembourg; and core, Universite catholique de Louvain, Belgium)
    Abstract: We investigate the role of competitive transport markets in shaping the location of economic activity and the pattern of trade. In our model, carriers supply transport services for shipping man- ufactured goods, and freight rates are set to clear transport markets. Each carrier must commit to the maximum capacity for a round-trip and thus faces a logistics problem as there are opportunity costs of returning empty. These costs increase the freight rates charged to firms located in regions that are net exporters of manufactured goods. Since demand for transport services depends on the spatial distribution of economic activity, the concentration of production in one region raises freight rates to serve foreign markets from there, thus working against specialization and the agglomera- tion of firms. Consequently, a more even spatial distribution of firms and production prevails at equilibrium when freight rates are endogenously determined than when they are assumed to be exogenous as in the literature.
    JEL: F12 R12
    Date: 2011
  10. By: Marina Murat; Barbara Pistoresi; Alberto Rinaldi
    Abstract: Emigrant associations abroad are structured nodes of social networks; they are manifestations of a transnational social capital. Italian associations are numerous, spread across several countries, in some cases they exist since the end of the nineteenth century, and may count on high numbers of members. Also, they are robustly tied to the home country. This paper assesses the effects of Italian associations abroad on the bilateral FDI between Italy and the countries of settlement of Italian diaspora. The main results are that these effects are positive and strongly significant, especially for the inward FDI and relatively to the countries with the oldest associations
    Keywords: international migration, FDI, Italy
    JEL: F21 F23
    Date: 2011–05
  11. By: Franz-Josef Bade; Eckhardt Bode; Eleonora Cutrini
    Abstract: This paper presents descriptive evidence suggesting that there may be something to be learned about the future patterns of international offshoring from the recent patterns of “domestic offshoring”, the relocation of activities across regions within countries. Industries appear to offshore activities first within the same country and only later across the national border. Investigating the domestic and international offshoring patterns for West German manufacturing industries between 1992 and 2007, we find that, on the one hand, industries that offshored more extensively domestically offshored less extensively internationally, and vice versa. On the other hand, we find that those industries that offshored more extensively domestically were still in earlier stages of their life cycles while those that offshored more extensively internationally were already in later stages. International unbundling may consequently not be as unpredictable as it is currently believed to be
    Keywords: International offshoring, domestic offshoring, functional fragmentation, industry life cycle, Germany, K density
    JEL: C46 F21 R12
    Date: 2011–05
  12. By: Mamoon, Dawood; Akhtar, Sajjad; Hissam, Saadia
    Abstract: This is first of its kind empirical study on the costs of terrorism on Pakistan’s exports. The analysis finds that intensity of terrorist activity can be divided into three distinct periods. The LAL Masjid incident in mid 2007 marks the first sign of intensification of terrorism in Pakistan. The second one is the assassination of Benazir Bhutto. The third one comes in 2008 when the US announced to shift gear from Iraq to Afghanistan and incumbent government in Pakistan created a political support for armed action within Pakistani borders against the terrorists. The analysis finds that terrorism has more significant affect on Pakistani exports post Benazir assassination. The report calculates the monthly and daily costs of terrorism. On average there are 2 terrorist attacks every day whereas 5 citizens on average die in these attacks. A single terrorist attack costs 12 million dollars to the exports. Post Benazir assassination the costs rise to 18 million dollars due to increased intensity where not only the death toll on average has risen but the number of terrorist attacks have gone up. Average per month loss in exports due to terrorism is calculated to be around 500 million dollars. Pakistan in 2006-09 has lost nearly 30 billion dollars in exports as its market shares have fallen. Part of this loss is explained by terrorism, where we find that 18 billion dollars accounts for it. Please note that extending the data for later years may make our results more pronounced but suffice to say our calculated β’s are robust capable of predicting terrorism for coming years. For example, it is found out that costs of number of deaths and number of injured are different while exports are more sensitive to the former capturing severity of casualties that is the hall mark of extreme terrorist actions like suicide attacks.
    Keywords: Conflict; Trade
    JEL: F0 A14
    Date: 2011–05–15
  13. By: Omay, Tolga; Takay Araz, Bahar; Ilalan, Deniz
    Abstract: In this study, we examine the relationship between foreign direct investment and terrorist incidents that took place in Turkey for the period from 1991:12 to 2003:12. This research contributes to the literature by checking for a possible non-linear relationship between terrorism and foreign direct investment. The data used to measure the intensity of terrorism were collected from the newspapers of Turkey, and therefore are limited to the direct signals given to the market. Empirical evidence from both linear and non-linear models confirms that terrorism has a large significant negative impact on foreign direct investment. With respect to the nonlinear model, the impact of terrorism on the foreign direct investment is more severe during periods of high terrorism when the intensity of terrorism passes the threshold level 3.725.
    Keywords: Terror; FDI, Smoot Transition Model
    JEL: C22 F21 J18
    Date: 2011–04–09
  14. By: Davide Castellani (Department of Economics, Finance and Statistics, Università di Perugia); Alfredo Jimenez Palmero (Department of Economics and Business Administration, University of Burgos, Spain); Antonello Zanfei (Department of Economics, Society & Politics, Università di Urbino "Carlo Bo")
    Abstract: The negative effect of distance is justified by the existence of transport costs which hamper the international exchange of final and intermediate goods, and by higher uncertainty about local markets. We submit that distance plays a remarkably different role in the case of R&D FDIs since they mainly involve the international transfer, absorption and use of knowledge. Using data on bilateral investment projects in R&D, manufacturing and other business activities between 58 countries, we find that geographic distance does not hinder R&D FDIs as much as in the case of production and other investment activities. Furthermore, once we control for institutional and psychic distance, in particular language and religious differences, the negative effect of geographic distance vanishes.
    Keywords: Multinational Firms, International Business, Technological Change, Choices and Consequences, Diffusion Processes.
    JEL: F23 O33
    Date: 2011

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