nep-int New Economics Papers
on International Trade
Issue of 2011‒07‒13
nineteen papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. Structural Estimation of Gravity Models with Path-dependent Market Entry By Egger, Peter; Pfaffermayr, Michael
  2. Holding together or falling apart:Results of gravity equation of the CIS trade By Kurmanalieva, Elvira; Vinokurov, Evgeny
  3. Export performance, competitiveness and commodity composition By Athanasoglou, Panayiotis; Backinezos , Constantina; Georgiou, Evangelia
  4. Incomplete Contracts and the Impact of Globalization on Consumer Welfare By Fabrice Defever
  5. Trade liberalization, firm heterogneity, and wages : new evidence from matched employer-employee data By Krishna, Pravin; Poole, Jennifer P.; Senses, Mine Zeynep
  6. New trade theory, non-price competitiveness and export performance By Athanasoglou, Panayiotis; Bardaka, Ioanna
  7. Supplier-Customer Relationships and the Interactions Between Inventories and Trade Credit By Simona Mateut; Paul Mizen; Ydriss Ziane
  8. Unionisation, International Integration and Selection By Catia Montagna; Antonella Nocco
  9. Innovation, Trade, and Finance By Egger, Peter; Keuschnigg, Christian
  10. The role of product variety and quality and of domestic supply in foreign trade By Athanasoglou, Panayiotis
  11. China’s Trade in Asia and the World: Long run Relation with Short run Dynamics By Dinda, Soumyananda
  12. Export Diversification and Development - Empirical Assessment By Aleksandra PARTEKA; Massimo TAMBERI
  13. Trade Collapse, Trade Relapse and Global Production Networks: Supply Chains in the Great Recession (revised) By Escaith, Hubert
  14. Robust estimates of exporter productivity premia in German business services enterprises By Alexander Vogel; Joachim Wagner
  15. Estimating the Constraints to Trade of Developing Countries By Jean-Jacques Hallaert; Ricardo Cavazos Cepeda; Gimin Kang
  16. French firm's financing choices: towards a reconciliation of the static trade-off theory and the pecking order theory? By Gharsalli Mazen
  17. All Because of Euro? On Some Structural Changes in the Italian Foreign Trade, 1960-2000 By Giorgio Rampa
  18. China: A Sleeping Giant of Temporary Trade Barriers? By Chandra, Piyush
  19. Institutions and foreign direct investment (FDI) in Malaysia: empirical evidence using ARDL model By Abdul Karim, Zulkefly; Zaidi, Mohd Azlan Shah; Ismail, Mohd Adib; Abdul Karim, Bakri

  1. By: Egger, Peter; Pfaffermayr, Michael
    Abstract: This paper develops a structural empirical general equilibrium model of aggregate bilateral trade with path dependence of country-pair level exporter status. Such path dependence is motivated through informational costs about serving a foreign market for first-time entry of (firms in) an export market versus continued export services to that market. We embed the theoretical model into a structural dynamic stochastic econometric model of bilateral selection into export markets and apply it to a data-set of aggregate bilateral exports among 120 countries over the period 1995-2004. In particular, we disentangle the role of changes in trade costs, in labor endowments, and in total factor productivity for trade, bilateral market entry, numbers of firms active, and welfare. Dynamic gains from trade differ significantly from static ones, and path-dependence in market entry cushions effects of impulses in fundamental variables that are detrimental to bilateral trade.
    Keywords: Bilateral trade flows; Dynamic random effects model; Gravity equation; Sample selection
    JEL: F10 F12 F17
    Date: 2011–06
  2. By: Kurmanalieva, Elvira; Vinokurov, Evgeny
    Abstract: The main purpose of this paper is to assess intra-regional trade within the CIS by looking at the impact of numerous trade agreements in the region. Applying a gravity model on a set of 162 countries, we attempt to assess dynamics of intra-regional trade of various trade agreements between 1995 and 2008 in order to identify trade creation and trade diversion effects. We propose and empirically test three explanations of the CIS intra-regional trade: 1) home bias effect, 2) holding together effect and 3) holdup effect. Finally, we perform a simulation of potential trade and see to what extent twelve post-Soviet states and all their groupings would, ceteris paribus, have traded with each other.
    Keywords: Soviet Union; CIS; EurAsEC; CES; Gravity equation; Trade potential; Panel data
    JEL: F15 F13 C23 O54 O52
    Date: 2011–06
  3. By: Athanasoglou, Panayiotis; Backinezos , Constantina; Georgiou, Evangelia
    Abstract: The study of export performance, especially for countries with serious external imbalances, is essential for economic decision-making. This study attempts to evaluate Greek export performance during the 1996-2001 period, using detailed panel data on bilateral trade by product. Factors explaining Greek export market shares are analysed with the method of Constant Market Shares. In addition, the dynamics of the specialization pattern of Greek exports and the effect of price competitiveness on export market shares are examined. The results show a considerable change in export structure, mainly the geographical structure, with a favourable effect on market shares. Although the pattern of comparative advantages and the technological intensity of Greek exports have improved, exports remain concentrated in low- and medium-technology sectors, while product variety and quality have declined. Finally, the results show heterogeneity among the panels. In the aggregate, export market shares are inelastic with respect to relative and absolute prices, which would call for focus on non-price factors to improve competitiveness in international markets. However, elasticities are greater than one for a considerable proportion of commodities.
    Keywords: export performance; market shares; New Trade Theory; comparative advantages; Markov matrix; price and non-price competitiveness
    JEL: F12 F14 C22 O14
    Date: 2010–05
  4. By: Fabrice Defever
    Abstract: We embed a North-South trade model into an incomplete contracts setting where the production of heterogeneous firms can be geographically separated. When a Northern headquarter contracts with a Southern supplier instead of a Northern supplier, the presence of international incomplete contracts may lead to a higher price. As a result, trade liberalization, that induces offshoring, is not necessarily welfare-enhancing for consumers, despite the lower cost of labor in the South. In addition, firms which use the supplier's component intensively, offshore their supplier in the South using outsourcing. As trade costs fall, less componentintensive firms also offshore, but by vertically integrating their supplier. We argue that this organizational change increases production-shifting in the South, implying that a larger number of varieties will be produced in the South where contracts are incomplete. We show that, this may reduce consumer welfare in both countries.
    Keywords: Consumer Welfare, Incomplete Contracts, hold-up problem
    JEL: F23 L22 R3
    Date: 2011–07
  5. By: Krishna, Pravin; Poole, Jennifer P.; Senses, Mine Zeynep
    Abstract: In this paper, the authors use a linked employer-employee database from Brazil to examine the impact of trade reform on the wages of workers employed at heterogeneous firms. The analysis of the data at the firm-level confirms earlier findings of a differential positive effect of trade liberalization on the average wages at exporting firms relative to non-exporting firms. However, this analysis of average firm-level wages is incomplete along several dimensions. First, it cannot fully account for the impact of a change in trade barriers on workforce composition especially in terms of unobservable (time-invariant) characteristics of workers (innate ability) and any additional productivity that obtains in the context of employment in the specific firm (match specific ability). Furthermore, the firm-level analysis is undertaken under the assumption that the assignment of workers to firms is random. This ignores the sorting of worker into firms and leads to a bias in estimates of the differential impact of trade on workers at exporting firms relative to non-exporting firms. Using detailed information on worker and firm characteristics to control for compositional effects and using firm-worker match specific effects to account for the endogenous mobility of workers, the authors find the differential effect of trade openness on wages in exporting firms relative to domestic firms to be insignificant. Consistent with the models of Helpman, Itskhoki, and Redding (2010) and Davidson, Matusz and Schevchenko (2008), they also find that the workforce composition improves systematically in exporting firms in terms of innate (time invariant) worker ability and in terms the quality of the worker-firm matches.
    Keywords: Labor Markets,Microfinance,Free Trade,Trade Policy,Economic Theory&Research
    Date: 2011–06–01
  6. By: Athanasoglou, Panayiotis; Bardaka, Ioanna
    Abstract: This paper develops a demand function for Greece's exports of manufactures according to New Trade Theory. Non-price competitiveness plays a vital role in explaining export performance and failure to include it in the export equation may lead to mis-specification error. Foreign income has a moderately high effect on exports in the long run and no effect in the short run. Exports are also sensitive to domestic and competitors' prices in the long run, but cost and price competitiveness elasticities are close to one, indicating that Greek exporters have some ability to compete on the basis of prices.
    Keywords: Export demand; Price and non-price competitiveness; New trade theory; Vector autoregressive error correction model
    JEL: F12 C22
    Date: 2010–01
  7. By: Simona Mateut; Paul Mizen; Ydriss Ziane
    Abstract: Our paper focuses on testing the advantages in controlling the buyer and salvaging goods supplied where we have information on the nature of the transacted good and information on the inventory of buyers and sellers. We find transactions in specialized goods tend to be conducted more often using trade credit, but willingness to extend trade credit also depends on the ability of the firm to resell goods when demand is uncertain and on inventory costs. The advantages in salvage of goods is also limited by the extent to which goods have been processed by the receiving firm. These findings are derived from 82,000 French firms in four sectors over the period 1999-2007. Our results confirm the findings of the existing literature based on US and UK data, while also giving more support to the inventory transactions cost motive for firms with specialized goods.
    Keywords: Trade credit, Inventories
  8. By: Catia Montagna; Antonella Nocco
    Abstract: We study how unionisation affects competitive selection between heterogeneous firms when wage negotiations can occur at the firm or at the profit-centre level. With productivity specific wages, an increase in union power has: (i) a selection-softening; (ii) a counter-competitive; (iii) a wage-inequality; and (iv) a variety effect. In a two-country asymmetric setting, stronger unions soften competition for domestic firms and toughen it for exporters. With profit-centre bargaining, we show how trade liberalisation can affect wage inequality among identical workers both across firms (via its effects on competitive selection) and within firms (via wage discrimination across destination markets).
    Keywords: firm selection, unionisation, wage inequality, trade liberalisation
    JEL: F12 F16 R13 J51
    Date: 2011–06
  9. By: Egger, Peter; Keuschnigg, Christian
    Abstract: This paper proposes a model where heterogeneous firms choose whether to undertake R&D or not. Innovative firms are more productive, have larger investment opportunities and lower own funds for necessary tangible continuation investments than non-innovating firms. As a result, they are financially constrained while standard firms are not. The efficiency of the financial sector and a country's institutional quality relating to corporate finance determine the share of R&D intensive firms and their comparative advantage in producing innovative goods. We illustrate how protection, R&D subsidies, and financial sector development improve access to external finance in distinct ways, support the expansion of innovative industries, and boost national welfare. International welfare spillovers depend on the interaction between terms of trade effects and financial frictions and may be positive or negative, depending on foreign countries' trade position.
    Keywords: Financial Development; Innovation; Protection; R&D Subsidy
    JEL: F11 G32 L26 O38
    Date: 2011–07
  10. By: Athanasoglou, Panayiotis
    Abstract: The study examines the behaviour of imports of goods in the Greek economy during the last five decades and their determinants, with an emphasis on consumer’s preferences for “variety and quality” of the imported goods as well as on the demand and supply conditions of these goods in the domestic market. The estimated equations provide strong evidence for the importance of these two factors for import demand, and also explain significantly the stylized facts as well as long- and short-term movements in trade.
    Keywords: effective demand for imports; New Trade Theory; product variety and quality.
    JEL: F14 F41 C22 E21
    Date: 2011–04
  11. By: Dinda, Soumyananda
    Abstract: This paper attempts to find the long run relation with short run dynamics of China’s trade in Asia and the world. Co-integration technique provides the economic integration of China’s export to the US and its import from Asian nations. This study observed that China is economically integrated with Asia and the world. China has double role in international trade – (i) China acts as an attractor of all inputs from Asia and (ii) China pushes the products in international market with a comparative advantage in price competition. This study also reveals that the speed of China’s import from Asia is faster than that of China’s export to the US.
    Keywords: Economic Integration; production network; Co-integration; Asia; China; the US; Error correction; Double Engine of Growth; Export; Import; Long run; short run dynamics.
    JEL: F15 O53 C22 C01
    Date: 2011–04–11
  12. By: Aleksandra PARTEKA (Gdansk University of Technology, Faculty of Management and Economics); Massimo TAMBERI (Universita' Politecnica delle Marche, Dipartimento di Economia)
    Abstract: This paper assesses the role played by country specific factors as determinants of exports' diversification process. Using a panel data-set for 60 countries and twenty years (1985-2004) we confirm that even after clearing out differences in income per capita, cross section variability in the degree of exports' diversification is significant. In general, apart from per capita income, variables influencing the size of accessible markets (domestic and foreign) are the most relevant and robust determinants of the export diversification process. Diversification opportunities grow if countries are large, not located far from economic core areas and when barriers to trade are restricted.
    Keywords: sectoral diversification, structural change, trade
    JEL: C23 F15 O14 O33
    Date: 2011–06
  13. By: Escaith, Hubert
    Abstract: Global supply chains reshaped international trade since the 1980s. Their role in explaining the trade collapse that followed the financial crisis of September 2008 was significant. Because manufacture production is internationally fragmented, adverse external shocks affect firms not only through final demand, but also through the disruption on the flow of inputs received from their suppliers. The future of supply chains depends of alternative exit scenarios from the Great Recession; as a result of global rebalancing, they will probably be smaller and more regional. Left unchecked, these centripetal forces may lead to a deterioration of global governance and to rampant deglobalization. On the other hand, because trade in goods for processing inflated artificially some bilateral trade imbalances, correcting them will prove easier in the short term, while the technical factors that made possible the internationalization of production will keep promoting further "flattening of the Earth" in the longer term. The reshaping of global effective demand is of particular importance for the labour abundant Least Developed Countries that were relying on global supply chains to attract productive investments.
    Keywords: international supply chain; global value chains; great trade collapse; exit scenario; trade and development
    JEL: F13 O24 F1 O19
    Date: 2009–10
  14. By: Alexander Vogel (Leuphana University Lüneburg, Institute of Economics, Germany); Joachim Wagner (Leuphana University Lüneburg, Institute of Economics, Germany)
    Abstract: A large and growing number of micro-econometric studies show that exporting firms are more productive than firms that sell their products on the home market only. This so-called exporter productivity premium qualifies as a stylized fact. Only recently researchers started to look at the role of extreme observations, or outliers, in shaping these findings. These studies use micro-econometric methods that are robust against outliers to show that very small shares of firms with extreme values drive the result. The large exporter productivity premium found for samples of firms including outliers are dramatically smaller in samples without these extreme observations. Evidence on this, however, is limited so far to firms from manufacturing industries. This note adds comparable evidence for firms from the business services industries. We find that the estimated exporter productivity premium is statistically significant and relevant from an economic point of view when a standard fixed effects estimator is used to control for unobserved firm characteristics, but that it drops to zero when a robust estimator is applied.
    Keywords: Exporter productivity premium, services firms, robust estimation, panel data
    JEL: F14 C23 C81 C87
    Date: 2011–07
  15. By: Jean-Jacques Hallaert; Ricardo Cavazos Cepeda; Gimin Kang
    Abstract: The severity of binding constraints to trade expansion in developing countries and the importance of the complementary policies that will maximize the impact of trade reforms on trade and economic growth are identified and quantified in this report. As trade-related needs of developing countries are numerous, such quantification is needed to identify the most binding constraints to guide the sequencing of reforms and aid-for-trade interventions. The constraints to trade expansion are largely country specific. However, countries which share important characteristics may face similar binding constraints. An econometric analysis is undertaken for as many partner countries as possible to produce an \unrestricted sample. that can be used as a benchmark against which special country groupings can be assessed. The econometric work relies on experimentation to identify and rank (based on their relative severity) the most binding constraints for each country grouping. Two case studies, on Azerbaijan and Uganda, illustrate the mechanisms of the econometric work and the importance of several variables not captured because of data limitations
    Keywords: aid for trade, trade expansion, Binding constraints, developing countries trade, taxonomy of constraints, landlocked countries, small and vulnerable economies, resource rich countries
    JEL: F1
    Date: 2011–06–24
  16. By: Gharsalli Mazen (ICI - Laboratoire Information, Coordination, Incitations - Institut Télécom - Télécom Bretagne - Université de Bretagne Occidentale - Brest : EA2652 - Université européenne de Bretagne)
    Abstract: The main purpose of this study is to examine the validity of the static trade-off theory and the pecking order theory using a French panel data. Our empirical tests provide that we can not formally reject either of the two theories explaining financing behavior. However, they confirm the importance of considerations provided by the static trade-off theory. On the contrary, when we combine the adjustment model and the pecking order model we find that the statistical power of the hierarchical model is improved and the choice of financing of French firms confirms the greatest explanatory power of the pecking order hypotheses.
    Keywords: capital structure, trade-off theory, pecking order theory
    Date: 2012–01–04
  17. By: Giorgio Rampa (Department of Economics and Quantitative Methods, University of Pavia)
    Abstract: Using a long-run series of I-O tables, some simple facts are explored with respect to the Italian trade balance in the period 1960-2000. The analysis confirms that the Italian economy underwent a de-specialisation process before the Euro era. This phenomenon weakened our export capacity, and in addition worsened significantly our dependence on non-oil imports.
    JEL: C67 E01 F14
    Date: 2011–06
  18. By: Chandra, Piyush (Department of Economics, Colgate University)
    Abstract: While tariff rates around the world have decreased during the last five decades, there has been an increase in other instruments of protectionism – in particular, antidumping (AD), countervailing duties (CVD) and global safeguards (SG) - collectively, temporary trade barriers (TTBs). In this paper, we examine China’s use of these TTBs both before and during the 2008-9 crisis in order to identify underlying historical trends and explore potential changes in their use over time. While the flow of new AD investigations increased during the crisis, China’s total stock of imports subject to AD measures decreased in terms of both count and value. Despite this decrease in the stock of imports subject to AD, we find a number of worrying trends. An increase in the flow of AD investigations during the crisis was a reversal of the trend from last five years. Second, prior to the crisis, almost all of China’s AD use was confined to only five Harmonized System (HS) sectors, however, during the crisis, some new AD investigations were in sectors that had never participated in AD earlier. In addition, a large number of China’s AD measures have lasted for longer than five years. At the end of 2009, only 40% of the AD cases imposed five or more years ago have been removed. However, not all news is bad. The size of the ad valorem AD duty has decreased in recent years. Also, through 2009, very few Chinese firms have participated as petitioners with most of them participating only once. We also find several differences in China’s AD use across developed and developing trading partners both before and during the crisis. For instance, not only all of China’s AD measures through 2009 disproportionately targeted developed countries but also the entire increase in AD investigations by new sectors during the crisis years was directed against developed countries.
    Keywords: Antidumping Duties; China; Countervailing Duties; Crisis; Safeguards; Temporary Trade Barriers.
    JEL: F13 F14 F53
    Date: 2011–01–15
  19. By: Abdul Karim, Zulkefly; Zaidi, Mohd Azlan Shah; Ismail, Mohd Adib; Abdul Karim, Bakri
    Abstract: Since 1990’s, institution factors have been regarded as playing important roles in stimulating foreign direct investments (FDI). However, empirical studies on their importance in affecting FDI are still lacking especially for small open economies. This paper attempts to investigate the role of institutions upon the inflow of foreign direct investment (FDI) in a small open economy of Malaysia. Using bounds testing approach (ARDL model), the empirical findings reveal that there exists a long run relationship among FDI and the institution variables. Specifically, several institution variables namely government stability, bureaucracy, and corruption are found to play prominent roles in influencing the inflow of FDI. Thus, in attracting foreign investors, implementing FDI-friendly policies by providing and maintaining the quality of domestic institutions would be beneficial to Malaysian economic growth.
    Keywords: Institutions; Foreign Direct Investment (FDI); ARDL
    JEL: E22 C22
    Date: 2011–06–29

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