nep-int New Economics Papers
on International Trade
Issue of 2011‒06‒04
twelve papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. Diversification, Networks and the Survival of Exporting Firms By Jorge Tovar; Luis Roberto Martínez
  2. Trade network and international R&D spillovers By Andrea Fracasso; Giuseppe Vittucci Marzetti
  3. Paying a Visit: The Dalai Lama Effect on International Trade By Fuchs, A.; Klann, N.
  4. International Trade in Variety and Domestic Production By Ulf Lewrick; Lukas Mohler; Rolf Weder
  5. Non-homothetic preferences, parallel imports and the extensive margin of international trade By Föllmi, Reto; Hepenstrick, Christian; Zweimüller, Josef
  6. Buyer-Seller Relationships in International Trade: Evidence from U.S. States' Exports and Business-Class Travel By Cristea, Anca D.
  7. Trade Liberalization and the Wage Skill Premium: Evidence from Indonesia By Amiti, Mary; Cameron, Lisa
  8. Taking Keller seriously: trade and distance in international R&D spillovers By Andrea Fracasso; Giuseppe Vittucci Marzetti
  9. Poultry in Motion: A Study of International Trade Finance Practices By Pol Antràs; C. Fritz Foley
  11. War Signals: A Theory of Trade, Trust and Conflict By Rohner, D.; Thoenig, M.; Zilibotti, F.
  12. International Business Travel: An Engine of Innovation? By Nune Hovhannisyan; Wolfgang Keller

  1. By: Jorge Tovar; Luis Roberto Martínez
    Abstract: There is abundant empirical evidence testing models where comparative advantage arises from firm heterogeneity. As of today it is relatively clear who exports and why a firm decides to export. But, what determines the survival of a firm in the export market? This paper exploits a detailed developing economy monthly firm-level dataset for the period 2001 – 2008 in order to explore the importance of trade networks and product and market diversification on the survival of exporting firms. We find that market diversification prevails over product diversification while trade network effects, measured in various ways, are highly correlated to the survival of new exporting firms. From a policy perspective our findings suggest that government aid in the exporting process should focus on expanding into new markets, not on promoting new export products.
    Date: 2011–03–06
  2. By: Andrea Fracasso; Giuseppe Vittucci Marzetti
    Abstract: Following Coe and Helpman (International R&D Spillovers, EER, 39, 859-887, 1995), the literature on the trade-related channels of international knowledge flows has flourished. Departing from Coe and Helpman's tenets on the proportionality of trade and productivity spillovers and thus relaxing the implicit assumption that the knowledge transferred internationally is physically embodied in the exchanged products, we test whether relatively strong bilateral trade relationships are significantly associated with important international R&D spillovers. Notably, we focus on refined measures of bilateral trade that account for country size, time-invariant pair-specific factors and time-varying country-specific factors. By distinguishing closer and more distant trade partners without weighting their R&D stocks for the bilateral trade flows, we show that trade is indeed an international transmission channel of knowledge even when distance and other pair specific time-invariant factors are taken into account.
    Keywords: International R&D spillovers, Total Factor Productivity, International trade network
    JEL: C23 F01 O30 O47
    Date: 2011
  3. By: Fuchs, A.; Klann, N.
    Abstract: The Chinese government frequently threatens that meetings between its trading partners’ officials and the Dalai Lama will be met with animosity and ultimately harm trade ties with China. We run a gravity model of exports to China from 159 partner countries between 1991 and 2008 to test to which extent bilateral tensions affect trade with autocratic China. In order to account for the potential endogeneity of meetings with the Dalai Lama, the number of Tibet Support Groups and the travel pattern of the Tibetan leader are used as instruments. Our empirical results support the idea that countries officially receiving the Dalai Lama at the highest political level are punished through a reduction of their exports to China. However, this ‘Dalai Lama Effect’ is only observed for the Hu Jintao era and not for earlier periods. Furthermore, we find that this effect is mainly driven by reduced exports of machinery and transport equipment and that it disappears two years after a meeting took place.
    Keywords: International Trade, International Political Economy, Diplomatic Relations, Exports to China, Tibet, Dalai Lama
    JEL: F13 F51 F59
    Date: 2011–01–26
  4. By: Ulf Lewrick; Lukas Mohler; Rolf Weder (University of Basel)
    Keywords: Variety gains, margins of trade, lambda ratio, U.S. manufacturing
    JEL: F10 F12 F14
    Date: 2011
  5. By: Föllmi, Reto; Hepenstrick, Christian; Zweimüller, Josef
    Abstract: We study international trade in a model where consumers have non-homothetic preferences and where household income restricts the extensive margin of consumption. In equilibrium, monopolistic producers set high (low) prices in rich (poor) countries but a threat of parallel trade restricts the scope of price discrimination between countries. The threat of parallel trade allows differences in per capita incomes to have a strong impact on the extensive margin of trade, whereas differences in population sizes have a weaker effect. We also show that the welfare gains from trade liberalization are biased towards rich countries. We extend our model to more than two countries; to unequal incomes within countries; and to more general specifications of non-homothetic preferences. Our basic results are robust to these extensions.
    Keywords: Heterogenous markups, non-homothetic preferences, parallel imports, extensive margin of trade.
    JEL: F10 F12 F19
    Date: 2011–05
  6. By: Cristea, Anca D.
    Abstract: International trade has become increasingly dependent on the transmission of complex information, often realized via face-to-face communication. This paper provides novel evidence for the importance of in-person business meetings in international trade. Interactions among trade partners entail a fixed cost of trade, but at the same time they generate relationship capital, which adds bilateral specific value to the traded products. Differences in the face-to-face communication intensity of traded goods, bilateral travel costs and foreign market size determine the optimal amount of interaction between trade partners. Using U.S. state level data on international business-class air travel as a measure of in-person business meetings, I find robust evidence that the demand for business-class air travel is directly related to volume and composition of exports in differentiated products. I also find that trade flows in R&D intensive manufactures and goods facing contractual frictions are most dependent on face-to-face meetings. The econometric identification exploits the cross-state variation in bilateral exports and business-class air travelers by foreign country and time period, circumventing any spurious correlation induced by cross-country differences driving aggregate travel and trade patterns.
    Keywords: state exports; air travel; fixed export cost; face-to-face communication; relationship intensity; tacit knowledge
    JEL: R4 F1 O3
    Date: 2011–02
  7. By: Amiti, Mary; Cameron, Lisa
    Abstract: In this paper, we analyze the effect of reducing import tariffs on intermediate inputs and final goods on the wage skill premium within firms in Indonesia – a country with a high share of unskilled workers. We present a new finding that reducing input tariffs reduces the wage skill premium within firms that import their intermediate inputs. However, we do not find significant effects from reducing tariffs on final goods on the wage skill premium within firms.
    Keywords: import tariffs; intermediate inputs; wage inequality
    JEL: F10 F12 F13 F14 F16
    Date: 2011–05
  8. By: Andrea Fracasso; Giuseppe Vittucci Marzetti
    Abstract: In a much cited paper, Wolfgang Keller (Are international R&D spillovers trade-related? Analyzing spillovers among randomly matched trade partners, European Economic Review, 48, 1469-1481, 1998) claims that international R&D spillovers are global and trade-unrelated. In following works, Keller revisits his position and maintains that spillovers are localized because the tacit nature of knowledge favors the direct interaction among agents. Whether the international R&D spillovers are global and trade-related still remains a debated issue in the empirical literature. By adopting two empirical specifications that nest Keller’s models, we i) reject the hypothesis that international R&D spillovers are global and ii) show that these latter depend on both geographical distance and international trade.
    Keywords: International R&D spillovers, International technology diusion, Localized knowledge spillovers, Total Factor Productivity
    JEL: C23 F01 O30 O47
    Date: 2011
  9. By: Pol Antràs; C. Fritz Foley
    Abstract: This paper analyzes the financing terms that support international trade and sheds light on how and why these arrangements affect trade. Using detailed transaction level data from a U.S. based exporter of frozen and refrigerated food products, primarily poultry, it begins by describing broad patterns about the use of alternative financing terms. These patterns help discipline a model in which the trade finance mode is shaped by the risk that an importer defaults on an exporter and by the possibility that an exporter does not deliver goods as specified in the contract. The empirical results indicate that transactions are more likely to occur on cash in advance or letter of credit terms when the importer is located in a country with weak contractual enforcement and in a country that is further from the exporter. Letters of credit, however, are rarely used by the exporter. As an importer develops a relationship with the exporter, transactions are less likely to occur on terms that require prepayment. During the recent crisis, the exporter was more likely to demand cash in advance terms when transacting with new customers, and customers that traded on cash in advance terms prior to the crisis disproportionately reduced their purchases. These results can be rationalized by the model whenever (i) misbehavior on the part of the exporter is of little concern to importers, and (ii) local banks in importing countries are typically more effective than the exporter in pursuing financial claims against importers.
    JEL: F1 G0 K12
    Date: 2011–05
  10. By: Kenji Fujiwara (Kwansei Gakuin University)
    Abstract: This paper constructs a reciprocal market model of intra-industry trade in network goods to consider the implications of network externalities for an optimal tari policy and the welfare eects of bilateral tari reductions. We show that the degree of network externalities nontrivially aects the sign of the Nash equilibrium tari. Then, we prove that network externalities amplify the gains from tari reductions. These results help better understand the implications of traderelated issues in network industries.
    Date: 2010–05
  11. By: Rohner, D.; Thoenig, M.; Zilibotti, F.
    Abstract: We construct a dynamic theory of civil conflict hinging on inter-ethnic trust and trade. The model economy is inhabitated by two ethnic groups. Inter-ethnic trade requires imperfectly observed bilateral investments and one group has to form beliefs on the average propensity to trade of the other group. Since conflict disrupts trade, the onset of a conflict signals that the aggressor has a low propensity to trade. Agents observe the history of conflicts and update their beliefs over time, transmitting them to the next generation. The theory bears a set of testable predictions. First, war is a stochastic process whose frequency depends on the state of endogenous beliefs. Second, the probability of future conflicts increases after each conflict episode. Third, "accidental" conflicts that do not reflect economic fundamentals can lead to a permanent breakdown of trust, plunging a society into a vicious cycle of recurrent conflicts (a war trap). The incidence of conflict can be reduced by policies abating cultural barriers, fostering inter-ethnic trade and human capital, and shifting beliefs. Coercive peace policies such as peacekeeping forces or externally imposed regime changes have instead no persistent effects.
    JEL: D74 D83 O15 Q34
    Date: 2011–04–11
  12. By: Nune Hovhannisyan; Wolfgang Keller
    Abstract: While it is well known that managers prefer in-person meetings for negotiating deals and selling their products, face-to-face communication may be particularly important for the transfer of technology because technology is best explained and demonstrated in person. This paper studies the role of short-term cross-border labor movements for innovation by estimating the recent impact of U.S. business travel to foreign countries on their patenting rates. Business travel is shown to have a significant effect up and beyond technology transfer through the channels of international trade and foreign direct investment. On average, a 10% increase in business travel leads to an increase in patenting by about 0.3%. We show that the technological knowledge of each business traveler matters by estimating a higher impact for travelers that originate in U.S. states with substantial innovation, such as California. Moreover, the business traveler effect on innovation also varies across industries. This study provides initial evidence that international air travel may be an important channel through which cross-country income differences can be reduced. We also discuss a number of policy issues in the context of short-term cross-border labor movements.
    JEL: F20 J61 O33
    Date: 2011–05

This nep-int issue is ©2011 by Alessia A. Amighini. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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