nep-int New Economics Papers
on International Trade
Issue of 2011‒08‒22
eleven papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. Foreign Trade and the National Export Initiative By Nuzum, Janet
  2. Exports, Imports and Firm Survival: First evidence for manufacturing enterprises in Germany By Joachim Wagner
  3. Measuring the Impact of Trade Finance on South African Export Flows By Marcel Kohler; Adrian Saville
  4. The Impact of Trade Liberalization on Micro Enterprises: Do Banks Matter? Evidence from Indian Manufacturing By Asha Sundaram
  5. The Impact of Trade on Organization and Productivity By Caliendo, Lorenzo; Rossi-Hansberg, Esteban
  6. International Trade and Firm Performance: A Survey of Empirical Studies since 2006 By Joachim Wagner
  7. International Sourcing, Product Complexity and Intellectual Property Rights By Alireza Naghavi; Julia Spies; Farid Toubal
  8. Micro and Macro Determinants of trade temporary barriers: the Brazilian case over the last two decades By Marcel Vaillant; Marcelo Olarreaga
  9. On the Genesis of Multinational Foreign Affiliate Networks By Egger, Peter; Fahn, Matthias; Merlo, Valeria; Wamser, Georg
  10. India’s Outward Foreign Direct Investment: Closed Doors to Open Souk By Chowdhury, Mamta B
  11. FDI from BRICs to LICs: Emerging Growth Driver? By Misa Takebe; Montfort Mlachila

  1. By: Nuzum, Janet
    Keywords: International Relations/Trade,
    Date: 2011
  2. By: Joachim Wagner (Institute of Economics, Leuphana University of Lüneburg, Germany)
    Abstract: This paper documents the relationship between firm survival and three types of international trade activities – exports, imports and two-way trade. It uses unique new representative data for manufacturing enterprises from Germany, one of the leading actors on the world market for goods, that merge information from surveys performed by the Statistical Offices and administrative data collected by the Tax Authorities. It contributes to the literature by providing the first evidence on the role of imports and two-way trading for firm survival in a highly developed country. Descriptive statistics and regression analysis (with and without explicitly taking the rare events nature of firm exit into account) point to a strong positive link between firm survival on the one hand and imports and two-way trading on the other hand, while exporting alone does not play a role for exiting the market or not.
    Keywords: Exports, imports, firm survival
    JEL: F14
    Date: 2011–08
  3. By: Marcel Kohler; Adrian Saville
    Abstract: Trade finance (or short-term credit) plays a crucial role in facilitating international trade yet is particularly vulnerable to financial crises as banks increase the pricing on all trade finance transactions to cover increased funding costs and higher credit risks. Whereas South Africa’s financial institutions largely managed to strengthen their capital positions during the global financial crisis, the country’s trade flows and access to capital (in particular trade finance and its costs) were hit hard by the crisis. Little is known about the extent of shortages or ‘gaps’ in trade finance and the impact of this on South Africa’s recent trade performance. Whilst our research recognises that access to trade finance is not the main cause of South Africa’s trade contraction, our research suggests that a one percentage point increase in the interbank lending rate of our trade partner could reduce exports by approximately ten percent, all else equal.
    Keywords: exports trade finance crisis
    JEL: F10 F30
    Date: 2011
  4. By: Asha Sundaram
    Abstract: This paper looks at the impact of trade liberalization on output, factor intensity and labor productivity of micro enterprises with differential access to banks. It uses Indian data on micro enterprises employing fewer than ten workers in the manufacturing sector and finds that trade liberalization, measured by a fall in the tariff, is associated with higher enterprise output, capital-labor ratios and labor productivity in districts with a larger number of bank branches per capita. Evidence is consistent with strong complementarities between trade liberalization effects and better access to credit and greater economic dynamism due to greater bank presence in the enterprise’s location. In addition, the research points to greater likelihood of outsourcing of production activity to micro enterprises in more open industries. The study highlights the role of credit market institutions, labor regulation and linkages between micro enterprises and large firms in determining the effects of trade liberalization on developing country manufacturing.
    Keywords: Trade Reform, Banks, Manufacturing, Informal Firms, Productivity, Outsourcing
    JEL: F16 J32 L24 O14 O17
    Date: 2011
  5. By: Caliendo, Lorenzo; Rossi-Hansberg, Esteban
    Abstract: A firm's productivity depends on how production is organized given the level of demand for its product. To capture this mechanism, we develop a theory of an economy where firms with heterogeneous demands use labor and knowledge to produce. Entrepreneurs decide the number of layers of management and the knowledge and span of control of each agent. As a result, in the theory, heterogeneity in demand leads to heterogeneity in productivity and other firms' outcomes. We use the theory to analyze the impact of international trade on organization and calibrate the model to the U.S. economy. Our results indicate that, as a result of a bilateral trade liberalization, firms that export will increase the number of layers of management and will decentralize decisions. The new organization of the average exporter results in higher productivity, although the responses of productivity are heterogeneous across these firms. In contrast, non-exporters reduce their number of layers, decentralization, and, on average, their productivity. The marginal exporter increases its productivity by about 1% and its revenue productivity by about 1.8%.
    Keywords: Communication Costs; Cost function; Hierarchies; Knowledge; Management; Trade Liberalization; Wage Distribution
    JEL: D21 D24 F12 F13
    Date: 2011–08
  6. By: Joachim Wagner (Institute of Economics, Leuphana University of Lüneburg, Germany)
    Abstract: The literature on international trade and firm performance grows exponentially. This paper attempts to summarize what we learn from this literature to guide both future empirical and theoretical work in this area, and public debates and policy makers, in an evidence-based way. The focus is on the empirical part of the literature that consists of recently published papers using data for firms from manufacturing or services industries to study the links between international trade (exports and imports) and dimensions of firm performance (productivity, wages, profitability and survival). It discusses recent add-ons to the box of tools for empirical investigation in this field and suggests topics for future research.
    Keywords: International trade, firm performance, empirical studies, survey
    JEL: F14
    Date: 2011–08
  7. By: Alireza Naghavi; Julia Spies; Farid Toubal
    Abstract: In this paper, we propose the technological complexity of a product and the level of Intellectual Property Rights (IPRs) protection to be the co-determinants of the mode through which multinational firms purchase their goods. We study the choice between intra-firm trade and outsourcing given heterogeneity at the product- (complexity), firm- (productivity) and country- (IPRs) level. Our findings suggest that the above three dimensions of heterogeneity are crucial for complex goods, where firms face a trade-off between higher marginal costs in the case of trade with an affiliate and higher imitation risks in the case of sourcing from an independent supplier. We test these predictions by combining data from a French firm-level survey on the mode choice for each transaction with a newly developed complexity measure at the product-level. Our fractional logit estimations confirm the proposition that although firms are generally reluctant to source highly complex goods from outside the firm’s boundaries, they do so when a strong IPR regime in the host country guarantees the protection of their technology.
    Keywords: sourcing decision; product complexity; intellectual property rights; fractional logit estimation
    JEL: F12 F23 O34
    Date: 2011–07
  8. By: Marcel Vaillant (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República); Marcelo Olarreaga (University of Geneva and CEPR)
    Abstract: When the process of trade liberalisation started in Brazil in the late 1980s, a regime of temporary trade protection was put in place. This paper describes the use of TTB by Brazilian’s authority over the last two decades. We found them to be highly concentrated in a few sectors and to heavily rely on antidumping measures, rather than countervailing or safeguards measures. We also develop a simple empirical model to explain the micro and macroeconomic determinants of TTBs in Brazil. After controlling for the political strength of each HS six-digit sector in Brazil, as well as the time invariant characteristic of each trading partner and the level of domestic economic activity using fixed effects, we found that low import prices are not an important determinant of TTB in Brazil even though more than ninety percent of TTB that were put in place over the last two decades were antidumping cases. TTBs are more likely to be observed when imports are large. But, perhaps more interestingly, in sectors with low MFN tariffs and where MFN tariffs are falling, which suggest that MFN tariffs and TTBs are substitutes. Finally, changes in the bilateral exchange rate are important determinants of TTBs, with appreciations of the domestic currency making the imposition of restrictive TTBs more likely.
    Keywords: Temporary Trade Barriers, Brazil, Exchange rate
    JEL: F10 F11
    Date: 2011–05
  9. By: Egger, Peter; Fahn, Matthias; Merlo, Valeria; Wamser, Georg
    Abstract: Multinational enterprises (MNEs) develop their networks of foreign affiliates gradually over time. Instead of exploring all profitable opportunities immediately, they first establish themselves in their home countries and then enter new markets stepwise. We argue that this behavior is driven by uncertainty concerning a firm’s success in new markets. After entry, the firm collects information which is used to update its beliefs about its performance at a market. As conditions in different markets are correlated, the information gathered in one of them can also be used to update beliefs elsewhere – with the degree of correlation depending on issues such as the geographical or cultural distance between markets. This correlated learning may render it optimal to enter markets sequentially – an investment in market A is only followed by entry in market B if the firm was sufficiently successful in A. The prediction that firms start their expansion in markets that are closer to their home base and then proceed step by step is supported by our empirical analysis, which features the universe of foreign affiliates held by German multinationals. Based on a rich set of benchmark estimates and sensitivity checks, we identify correlated learning across markets beyond alternative explanations as a key driver of gradualism in the genesis of multinational foreign affiliate networks.
    Keywords: Firm-level data; Foreign affiliates; Learning; Location decisions; Multinational firms
    JEL: D83 D92 F23 L23
    Date: 2011–08
  10. By: Chowdhury, Mamta B
    Abstract: Abstract: Spectacular liberalisation of trade and investment policies opened the floodgate of capital flows in and out of India from the mid 1990s. This colossal capital flows facilitated the rapid economic growth and raised the country’s profile as one of the super powers in the region. The recent surge of outward foreign direct investment (OFDI) from India has a significant balance of payments as well as enormous socio economic effect in securing the country’s position as a new economic power in the global context. Since the study on the OFDI is sparse, this paper attempts to contribute to the literature by examining the major determinants of OFDI from India using the cointegration and Vector Error Correction Model over 1970 and 2009. The results of our study indicate that the dramatic financial and trade liberalisation has instigated the gigantic outflow of investment and acquisition by India’s firms. Furthermore, the domestic economic environment including the growing human capital stocks, increasing international competitiveness, large influx of inflow of foreign capital and increased domestic savings are positively and significantly influencing India’s huge outward capital flows in recent decade. However, improvement in domestic technological capabilities, rising standard of living and increased interest rates are deterrents to the OFDI of the country in the long run. Granger causality test also indicates that while all the above mentioned independent variables are Granger causing OFDI, nevertheless, outward FDI does not Granger cause any of the factors determining the OFDI from India.
    Keywords: Keywords: Inward FDI; Outward FDI; Economic Growth; India; Cointegration; VECM; Endogeniety test; Granger Causality Test
    JEL: F21
    Date: 2011–06–15
  11. By: Misa Takebe; Montfort Mlachila
    Abstract: Despite the rapid increase in FDI flows to LICs, there have been relatively few studies that have specifically examined these flows. This paper attempts to partially fill the void by throwing light on one particularly dynamic aspect of global FDI-flows from Brazil, Russia, India and China (BRICs). The paper finds that official data sources undoubtedly underestimate the volume and scope of FDI flows as many small and medium-sized enterprises (SMEs) do not always register their investment. As a result, while it is difficult to estimate accurately the growth impact of BRIC FDI, there is case study evidence that it is increasingly significant. Second, while initial investment, mostly by state-owned companies, has often been destined for natural resource industries, over time, investment has been spreading to agriculture, manufacturing, and service industries (e.g., telecommunications). Third, FDI from BRICs flows into many non resource-rich countries in LICs and plays a significant role in growth in those countries.
    Keywords: Foreign investment , Capital inflows , Low-income developing countries ,
    Date: 2011–07–28

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