nep-int New Economics Papers
on International Trade
Issue of 2011‒08‒29
seventeen papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. Do multinationals beat down developing countries' export prices? The impact of FDI on net barter terms of trade By Konstantin M. Wacker
  2. Reflections on the Preferential Liberalization of Services Trade By Shingal, Anirudh; Sauvé, Pierre
  3. Institution-Driven Comparative Advantage, Complex Goods and Organizational Choice By Ferguson, Shon; Formai, Sara
  4. International Sourcing, Product Complexity and Intellectual Property Rights By Alireza Naghavi; Julia Spies; Farid Toubal
  5. International Trade and Firm Performance: A Survey of Empirical Studies since 2006 By Wagner, Joachim
  6. Country Size, International Trade, and Aggregate Fluctuations in Granular Economies By Julian di Giovanni; Andrei A. Levchenko
  7. The Impact of Trade on Organization and Productivity By Lorenzo Caliendo; Esteban Rossi-Hansberg
  8. How Do People in Asia and the Pacific Migrate Legally for Work? An Overview of Legal Frameworks: GATS Mode 4, PTAs and Bilateral Labour Agreements By Melanie Ramjoue
  9. International Trade, Union Wage Premia,and Welfare in General Equilibrium By Kreickemeier, Udo; Meland, Frode
  10. Engendering trade By Do, Quy-Toan; Levchenko, Andrei A.; Raddatz, Claudio
  11. Endogenous Product Differentiation, Market Size and Prices By Ferguson, Shon
  12. Entry of Foreign Multinational Firms and Productivity Growth of Domestic Firms: The case of Japanese firms By ITO Keiko
  13. Firm Heterogeneity and Development: Evidence from Latin American countries By Han-Hsin Chang; Charles van Marrewijk
  14. Estimating the Gains from Trade in the Market for Innovation: Evidence from the Transfer of Patents By Carlos J. Serrano
  15. Endogenous enforcement of intellectual property, North-South trade, and growth By Schäfer, Andreas; Schneider, Maik T.
  16. Why Do Some Oil Exporters Experience Civil War But Others Do Not? – A Qualitative Comparative Analysis of Net Oil-Exporting Countries By Matthias Basedau; Thomas Richter
  17. A Dynamic Factor Model for World Trade Growth By Stéphanie Guichard; Elena Rusticelli

  1. By: Konstantin M. Wacker (Georg-August-Universität Göttingen)
    Abstract: This paper explores the economic relationship between foreign direct investment to developing countries and the export prices of the latter, measured by terms of trade. It is rst shown that economic theory suggests such a relationship for various reasons but is inconclusive about the direction of the eect. To address this open issue empirically, I analyze data on more than 50 developing countries throughout the period 1980 - 2008 using dynamic panel data methods. The results show that multinational corporations, measured by data on foreign direct investment, had an economically relevant and statistically signicant positive impact on developing countries' net barter terms of trade. A higher level of education in the developing country fosters this eect.
    Keywords: Multinationals, FDI, Terms of Trade, Prebisch-Singer hypothesis
    JEL: C23 F23 O11
    Date: 2011–08–19
  2. By: Shingal, Anirudh; Sauvé, Pierre
    Abstract: This paper takes stock of the forces that lie behind the recent rise of preferential agreements in services trade. Its initial focus is with a number of distinguishing features of services trade that sets it apart from trade in goods and shapes trade liberalization and rule-making approaches in the services field. The paper then documents the nature, modal and sectoral incidence of the trade and investment preferences spawned by PTAs in services. It does so with a view to addressing the question of how “preferential” is the preferential treatment of services trade? Finally, the paper addresses a number of considerations arising from attempts to multilateralize preferential access and rule-making in services trade.
    Keywords: Services; trade in services; preferential trade agreements; General Agreement on Trade in Services; multilateral trading system
    JEL: F15 F13 L8
    Date: 2011–03
  3. By: Ferguson, Shon (Research Institute of Industrial Economics (IFN)); Formai, Sara (Stockholm School of Economics)
    Abstract: The theory of the firm suggests that firms can respond to poor contract enforcement by vertically integrating their production process. The purpose of this paper is to examine whether firms' integration opportunities affect the way institutions determine international trade patterns. We find that vertical integration lessens the impact of a country's ability to enforce contracts on the comparative advantage of complex goods. We also find that countries with good financial institutions export disproportionately more in sectors that produce complex goods and that have a high propensity for vertical integration. In doing so we use a new outcome-based measure of vertical integration propensity and we employ several empirical strategies: cross section, panel and event study analysis. Our results confirm the role of institutions as source of comparative advantage and suggest that this depends not only on the technological characteristics of the goods produced but also on the way firms are able to organize the production process.
    Keywords: International Trade; Comparative Advantage; Contract Enforcement; Financial Institutions; Vertical Integration
    JEL: D23 F10 F14 G20 G34 L22 L23
    Date: 2011–08–16
  4. 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: 2011–08
  5. By: Wagner, Joachim (Leuphana University Lüneburg)
    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
  6. By: Julian di Giovanni; Andrei A. Levchenko
    Abstract: This paper proposes a new mechanism by which country size and international trade affect macroeconomic volatility. We study a multi-country, multi-sector model with heterogeneous firms that are subject to idiosyncratic firm-specific shocks. When the distribution of firm sizes follows a power law with an exponent close to -1, the idiosyncratic shocks to large firms have an impact on aggregate output volatility. We explore the quantitative properties of the model calibrated to data for the 50 largest economies in the world. Smaller countries have fewer firms, and thus higher volatility. The model performs well in matching this pattern both qualitatively and quantitatively: the rate at which macroeconomic volatility decreases in country size in the model is very close to what is found in the data. Opening to trade increases the importance of large firms to the economy, thus raising macroeconomic volatility. Our simulation exercise shows that the contribution of trade to aggregate fluctuations depends strongly on country size: in the largest economies in the world, such as the U.S. or Japan, international trade increases volatility by only 1.5-3.5%. By contrast, trade increases aggregate volatility by some 15-20% in a small open economy, such as Denmark or Romania.
    JEL: F12 F15 F41
    Date: 2011–08
  7. By: Lorenzo Caliendo; Esteban Rossi-Hansberg
    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%.
    JEL: D21 D24 F12 F13
    Date: 2011–08
  8. By: Melanie Ramjoue (United Nations Economic and Social Commission for Asia and the Pacific (ESCAP))
    Abstract: This paper examines the patchwork of multilateral, regional and bilateral legal instruments through which migrants from Asia and the Pacific currently legally cross borders in search of employment. It concludes that the existing frameworks are very inadequate: in almost all the multilateral and preferential agreements focusing predominantly on trade (GATS Mode 4 and Preferential Trade Agreement), countries have made binding commitments only with respect to the temporary entry of high-skilled service providers.
    Keywords: International Migration, Trade in Services, GATS Mode 4, Preferential Trade Agreements, Bilateral Labour Agreements
    JEL: F1
    Date: 2011–06
  9. By: Kreickemeier, Udo (Department of Economics , University of Tübingen); Meland, Frode (University of Bergen, Norway)
    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, 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: 2011–03–25
  10. By: Do, Quy-Toan; Levchenko, Andrei A.; Raddatz, Claudio
    Abstract: The authors analyze the interaction between a country's world market integration and its attitude towards gender roles. They discuss both theoretically and empirically how female empowerment is a source of comparative advantage that shapes a country's response to trade opening. Reciprocally, the authors show that as countries integrate into the world economy, the costs and benefits of gender discrimination shift. Their theory goes beyond a potential aggregate wealth effect associated with trade opening, and emphasizes the heterogeneity of impacts. On the one hand, countries in which women are empowered -- measured by fertility rates, female labor force participation or female schooling -- experience an expansion of industries that use female labor relatively more intensively. On the other hand, the gender gap is smaller in countries that export more in relatively female-labor intensive sectors. In an increasingly globalized economy, the road to gender equality is paradoxically very specific to each country’s productive structure and exposure to world markets.
    Keywords: Labor Markets,Labor Policies,Gender and Development,Economic Theory&Research,Political Economy
    Date: 2011–08–01
  11. By: Ferguson, Shon (Research Institute of Industrial Economics (IFN))
    Abstract: Recent empirical evidence suggests that prices for some goods and services are higher in larger markets. This paper provides a demand-side explanation for this phenomenon when firms can choose how much to differentiate their products in a model of monopolistic competition with horizontal product differentiation. The model proposes that consumers’ love of variety makes them more sensitive to product differentiation efforts by firms, which leads to higher prices in larger markets. At the same time, endogenous product differentiation modeled in this way can lead to a positive and concave relationship between market size and entry.
    Keywords: Endogenous Technology; Entry; Market Size Effect; International Trade; Monopolistic Competition
    JEL: D43 F12 L13
    Date: 2011–08–12
  12. By: ITO Keiko
    Abstract: This paper examines whether and how the entry of foreign multinational firms affects productivity growth of domestically owned firms, using Japanese firm-level data for the period 2000-2007. Although there are a considerable number of studies conducting productivity analyses on foreign multinationals and domestic firms for the manufacturing sector, there are few such studies for the service sector. Against this background, the present paper focuses on the role of foreign entry in the service sector, where cross-border trade is often difficult and firms are therefore less likely to be exposed to international competition.<br />The results of the analysis suggest that foreign multinationals perform better than domestically owned firms in many sectors. However, although the productivity levels of the former tend to be higher than those of the latter, no significant difference in productivity growth rates is found. Moreover, once firm-fixed effects are controlled for, foreign presence in a particular industry tends to negatively affect the productivity growth rate of domestically owned firms in the industry. However, firms that are catching up with the productivity frontier enjoy positive FDI spillovers, implying that foreign entry accelerates productivity catch-up.
    Date: 2011–08
  13. By: Han-Hsin Chang; Charles van Marrewijk
    Abstract: Motivated by the work of Melitz (2003), Helpman, et al. (2004) and Yeaple (2005), micro-firm data provided by the World Bank Enterprise Survey is used to study the empirical productivity distribution across 15 Latin American countries. This paper differs from previous work in identifying four types of firms by their ownership characteristics and their exporting status. We compare the productivity distribution of these four types of firms to reflect on theoretical modeling deficiencies. First, the productivity distributions for each type show no sign of a productivity cut-off at the lower end, contrary to current theoretical modeling. Second, we see that exporting activities are nonexclusive to firms with high productivity. In other words, by distinguishing groups of firms with different degrees of international involvement (domestic producers, exporters, nationally-owned and foreign-owned firms), we find that the productivity distributions of different groups of firms overlap with one another. This contradicts with the modeling in Melitz (2003), which suggests sorting into different international engagement according to productivity level. Third, we find a superior productivity distribution among foreign-owned firms as compared to domestic firms. The foreign ownership premium is significant and more prevailing in the services sectors than the manufacturing sectors. Exporters also show superior productivity, but this productivity premium is only enjoyed by the nationally-owned manufacturers. The premium is not constant over the quantiles. Lastly, with the cross-country data, we find a positive relationship between the overall productivity level and a country's development level, as often found in other research. However, we find that firms with low productivity in a given sector are more constrained by the macroeconomic development level of the country than firms with higher productivity, which seem to be able to advance productivity with individual micro- firm characteristics.
    Keywords: Firm heterogeneity; Productivity distribution; Exporting; Development; Latin America
    JEL: O12 D20 F14 O54
    Date: 2011–08
  14. By: Carlos J. Serrano
    Abstract: The "market for innovation" — the sale and licensing of patents — is an often discussed source of incentives to invest in R&D. This article presents and estimates a model of the transfer and renewal of patents that, under some assumptions, allows us to quantify the gains resulting from the transfer of patents in the market for innovation. The gains from trade measure the benefits of reallocating the ownership of a patent from the original inventor to a new owner for whom the patent has a higher value. In addition, we study the effect that lowering the costs of technology transfer has on the proportion of patents traded and the gains from trade.
    JEL: L24 O32 O34
    Date: 2011–08
  15. By: Schäfer, Andreas; Schneider, Maik T.
    Abstract: While most countries have harmonized intellectual property rights (IPR) legislation, the dispute about the optimal level of IPR-enforcement remains. This paper develops an endogenous growth framework with two open economies satisfying the classical North-South assumptions to study (a) IPR-enforcement in a decentralized game and (b) the desired globally-harmonized IPR-enforcement of the two regions. The results are compared to the constrained-efficient enforcement level. Our main insights are: The regions' desired harmonized enforcement levels are higher than their equilibrium choices, however, the gap between the two shrinks with relative market size. While growth rates substiantially increase when IPR-enforcement is harmonized at the North's desired level, our numerical simulation suggests that the South may also benefit in terms of long-run welfare. --
    Keywords: Endogenous Growth,Intellectual Property Rights,Trade,Dynamic Game
    JEL: F10 F13 O10 O30
    Date: 2011
  16. By: Matthias Basedau; Thomas Richter
    Abstract: According to quantitative studies, oil is the only resource that is robustly linked to civil war onset. However, recent debates on the nexus of oil and civil war have neglected that there are a number of peaceful oil-rentier states, and few efforts have been spent to explain why some oilexporting countries have experienced civil war and others have not. Methodologically, the debate has been dominated by research using either quantitative methods or case studies, with little genuine medium-N comparison. This paper aims to fill this gap by studying the conditions of civil war onset among net oil exporters using (crisp-set) Qualitative Comparative Analysis (csQCA). Considering a sample of 44 net oil exporters between 1970 and 2008, we test conditions such as oil abundance (per capita) and dependence, the interaction of ethnic exclusion and oil reserve locations (overlap) as well as the type of political regime (polity). Our results point to a combination of necessary and sufficient conditions that has been largely ignored until now: low abundance is a necessary condition of civil war onset. Two pathways lead to civil war: first, a combination of low abundance and high dependence and, second, a combination of low abundance and the geographical overlap of ethnic exclusion with oil reserve areas within autocracies.
    Keywords: civil war, oil exports, resource curse, rentier state, QCA
    Date: 2011–01
  17. By: Stéphanie Guichard; Elena Rusticelli
    Abstract: This paper reviews the main monthly indicators that could help forecasting world trade and compares different type of forecasting models using these indicators. In particular it develops dynamic factor models (DFM) which have the advantage of handling larger datasets of information than bridge models and allowing for the inclusion of numerous monthly indicators on a national and world-wide level such as financial indicators, transportation and shipping indices, supply and orders variables and information technology indices. The comparison of the forecasting performance of the DFMs with more traditional bridge equation models as well as autoregressive benchmarking models shows that, the dynamic factor approach seems to perform better, especially when a large set of indicators is used, but also that the marginal gains in adding indicators seems to diminish after a certain stage.<P>Un modèle à facteurs dynamiques pour prévoir la croissance du commerce mondial<BR>Ce document passe en revue les principaux indicateurs mensuels pouvant aider á prévoir le commerce mondial et compare différents types de modèles de prévision utilisant ces indicateurs. En particulier, il développe des modèles á facteurs dynamiques (DFM) qui ont l'avantage de permettre l’utilisation de plus de séries que les modèles d’étalonnage et donc d’inclure des indicateurs mensuels au niveau national et mondial tels que les indicateurs financiers, de transport et d’expédition, d’approvisionnement et de carnets de commandes ou encore et de technologie de l’information. La comparaison de la performance de prévision des DFM avec des modèles d’étalonnage plus traditionnels ou des modèles autoregressifs montre que l'approche en facteurs dynamiques semble plus performante, surtout quand un vaste ensemble d'indicateurs est utilisé ; les gains marginaux en ajoutant des indicateurs semblent toutefois diminuer après un certain stade.
    Keywords: forecasting, world trade, dynamic factor models, bridge models, prévisions, Commerce mondial, modèles á facteurs dynamiques, modèle d’étalonnage
    JEL: C53 E37 F17 F47
    Date: 2011–05–31

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