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on International Trade |
| By: | Peter Egger; Michael Pfaffermayr |
| 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 import 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, Gravity equation, Dynamic random effects model, Sample selection |
| JEL: | F10 F12 F17 |
| Date: | 2011–09 |
| URL: | http://d.repec.org/n?u=RePEc:wsr:ecbook:2011:i:iii-007&r=int |
| By: | Marco de Pinto (University of Kassel); Jochen Michaelis (University of Kassel) |
| Abstract: | This paper analyzes how trade liberalization influences the unemployment rate of workers with different abilities. We refine the Melitz (2003) framework to account for trade unions and heterogeneous workers, who differ with respect to their abilities. Our main ?findings are: (i) high ability workers profit from trade liberalization in terms of higher wages and higher employment; (ii) the least efficient workers loose their job and switch to long-term unemployment (worker-selection effect); (iii) if a country is endowed with a large fraction of low-skilled workers, trade liberalization leads to a rise in aggregate unemployment. In this case, trade liberalization may harm a countrys welfare. |
| Keywords: | trade liberalization, trade unions, skill-specific unemployment |
| JEL: | F1 F16 J5 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:mar:magkse:201127&r=int |
| By: | FE, Doukouré Charles |
| Abstract: | This study shows the role of institutions quality in expanding international trade within WAEMU member states. Analyzing all WAEMU member states and their main export partners from 1996 to 2007, I find two results. First, institution quality according to corruption level, government effectiveness and rule of law are becoming worst and worst in WAEMU on the period. Second, taking into account a sequential behavior of exporters, they decide to export according to their perception of institutional environment, then they choose the amount of their shipment considering economic variables, I show that this poor quality of institutions is not an obstacle to expanding exports within WAEMU member states. Particularly, corruption encourages exports flows. |
| Keywords: | Bilateral trade; Institutions; Gravity model |
| JEL: | C23 F14 |
| Date: | 2011–07–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:33333&r=int |
| By: | Joras Ferwerda; Mark Kattenberg; Han-Hsin Chang; Brigitte Unger; Loek Groot; Jacob A. Bikker |
| Abstract: | Several attempts have been made in the economics literature to measure money laundering. However, the adequacy of these models is difficult to assess, as money laundering takes place secretly and, hence, goes unobserved. An exception is trade- based money laundering (TBML), a special form of trade abuse that has been discovered only recently. TBML refers to criminal proceeds that are transferred around the world using fake invoices that under- or overvalue imports and exports. This article is a first attempt to test well-known prototype models proposed by Walker and Unger to predict illicit money laundering flows and to apply traditional gravity models borrowed from international trade theory. To do so, we use a dataset of Zdanowicz of TBML flows from the US to 199 countries. Our test rejects the specifications of the Walker and Unger prototype models, at least for TBML. The traditional gravity model that we present here can indeed explain TBML flows worldwide in a plausible manner. An important determinant is licit trade, the mass in which TBML is hidden. Furthermore, our results suggest that criminals use TBML in order to escape the stricter anti money laundering regulations of financial markets. |
| Keywords: | Money laundering, international trade, gravity model, Walker model. |
| JEL: | C21 F10 |
| Date: | 2011–09 |
| URL: | http://d.repec.org/n?u=RePEc:use:tkiwps:1116&r=int |
| By: | Moser, Christoph; Rose, Andrew K |
| Abstract: | The effects of Regional Trade Agreements (RTAs) are disputed. In this paper, we assess these effects using capital market data and an event-study approach, using a daily data set covering a thousand announcements spanning over eighty economies and a hundred RTAs over twenty recent years. We measure the effects of news concerning RTAs on the returns of national stock markets, adjusted for international stock market movements. We then link these excess returns to features of the RTA members and the agreements themselves. We find evidence of the natural trading partner hypothesis; stock markets rise more when RTAs are signed between countries that already engage in high volumes of trade. Stock markets also rise more when poorer countries sign RTAs. |
| Keywords: | assets; data; empirical; event study; income; low; natural; panel; producers |
| JEL: | F10 F13 G14 |
| Date: | 2011–09 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:8566&r=int |
| By: | Dreger, Christian; Herzer, Dierk |
| Abstract: | This paper challenges the common view that exports generally contribute more to GDP growth than a pure change in export volume, as the export-led growth hypothesis predicts. Applying panel cointegration techniques to a production function with non-export GDP as the dependent variable, we find for a sample of 45 developing countries that: (i) exports have a positive short-run effect on non-export GDP and vice versa (short-run bidirectional causality), (ii) the long-run effect of exports on non-export output, however, is negative on average, but (iii) there are large differences in the longrun effect of exports on non-export GDP across countries. Cross-sectional regressions indicate that these cross-country differences in the long-run effect of exports on nonexport GDP are significantly negatively related to cross-country differences in primary export dependence and business and labor market regulation. In contrast, there is no significant association between the growth effect of exports and the capacity of a country to absorb new knowledge. -- |
| Keywords: | Export-led growth,Developing countries,Panel cointegration |
| JEL: | F43 O11 C23 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:euvwdp:305&r=int |
| By: | Gable, Susanna Lundstrom; Mishra, Saurabh |
| Abstract: | Technology has changed the nature of service activities and made them more productive, tradable and fragmented in the global supply chain. Has Europe's growth been benefiting from the ongoing globalization of services? Services dominate growth in EU-15 countries and, to a lesser extent, in New Member States (NMS) and Accession (ACC) countries. Except in the ACC region, Europe has maintained specialization in service exports. Service productivity, tradability, and exports of modern services are high in EU-15, growing fast in NMS while at a lower pace in ACC. Service export sophistication is important for growth across the region, but especially in NMS. |
| Keywords: | Commodities,Public Sector Corruption&Anticorruption Measures,Housing&Human Habitats,Economic Theory&Research,Banks&Banking Reform |
| Date: | 2011–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:5793&r=int |
| By: | Peter Neary; Joe Tharakan |
| Abstract: | This paper endogenizes the extent of intra-sectoral competition in a multi-sectoral general-equilibrium model of oligopoly and trade. Firms choose capacity followed by prices. If the benefits of capacity investment in a given sector are below a threshold level, the sector exhibits Bertrand behaviour, otherwise it exhibits Cournot behaviour. By endogenizing the threshold parameter in general equilibrium, we show how exogenous shocks such as globalization and technological change alter the mix of sectors between “more” and “less” competitive, or Bertrand and Cournot, and affect the relative wages of skilled and unskilled workers, even in a “North-North” model with identical countries. |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:rpp:wpaper:1111&r=int |
| By: | Benjamin Elsner (Department of Economics, Trinity College Dublin); |
| Abstract: | This paper studies the impact of a large emigration wave on real wages in the source country. Following EU enlargement in 2004, a large share of the workforce of the Central and Eastern Europe emigrated to Western Europe. Using data from Lithuania for the calibration of a factor demand model I show that emigration had a significant short-run impact on real wages in the source country. In particular, emigration led to a change in the wage distribution between young and old workers. The wages of young workers increased by 6%, whereas the wages of old workers decreased by around 1%. On the contrary, I find no effect on the wage distribution between workers of different education levels. |
| Keywords: | Emigration, EU Enlargement, European Integration, Wage Distribution |
| JEL: | F22 J31 O15 R23 |
| Date: | 2011–01 |
| URL: | http://d.repec.org/n?u=RePEc:tcd:tcduee:tep1311&r=int |
| By: | Bauer, Christian; Langenmayr, Dominika |
| Abstract: | This article analyzes profit taxation according to the arm's length principle in a new model where heterogeneous firms sort into foreign outsourcing. We show that multinational firms are able to shift profits abroad even if they fully comply with the tax code. This is because, in equilibrium, intra-firm transactions occur in firms that are better than the market at input production. Transfer prices set at market values following the arm's length principle thus systematically exceed multinationals' marginal costs. This allows for a reduction of tax payments with each unit sold. The optimal organization of firms hence provides a new rationale for the empirically observed lower tax burden of multinational corporations. |
| Keywords: | outsourcing; profit taxation; transfer pricing; arm's length principle; multinational firms |
| JEL: | F23 L22 H25 |
| Date: | 2011–09 |
| URL: | http://d.repec.org/n?u=RePEc:lmu:muenec:12312&r=int |
| By: | Cecilio R. Tamarit Escalona (Universitat de València); Estrella Gómez (Dpto. Teoría e Historia Económica) |
| Abstract: | In this paper we present new evidence on the effect of the Euro on trade. We use a data set containing all bilateral combinations in a panel of 26 countries covering the period 1967-2008. We estimate the equation using two sets of variables: a standard one and a second one built according to the criticisms stated by Baldwin and Taglioni (2006). We implement a new generation of tests that allow us to solve some of the problems derived from the non-stationary nature of the data usually present in the macroeconomic variables used in gravitational equations (GDP, trade). To this aim we use some panel tests that account for the presence of cross-section dependence as well as discontinuities in the non-stationary panel data series. We test for cointegration between the variables using panel cointegration tests, especially the ones proposed by Banerjee and Carrión-i-Silvestre (2004, 2010). We also efficiently estimate the long-run relationships using the CUP-BC and CUP-FM estimators proposed in Bai et al. (2009). The results obtained are in line with those of Bun and Klaassen (2007). We argue that the creation of the European Monetary Union is best interpreted as a culmination of a series of policy changes that have been increasing economic integration in Europe during over four decades. En este trabajo presentamos nueva evidencia del efecto del Euro sobre el comercio. En este trabajo presentamos nueva evidencia del efecto del Euro sobre el comercio. Para ello utilizamos una base de datos que contiene todas las combinaciones bilaterales en un panel de 26 países para el periodo 1967-2008. Estimamos la ecuación de gravedad usando dos tipos de variables: la estándar en la literatura y la que recoge las críticas de Baldwin y Taglioni (2006), aplicando una nueva generación de contrastes que nos permiten resolver los principales problemas derivados de la naturaleza no estacionaria de las series. Con este propósito utilizamos algunos contrastes de panel que tienen en cuenta la presencia de dependencia cross-section así como de rupturas en las series. Para realizar el análisis de cointegración cabe destacar el uso del contraste de Banerjee y Carrion-i-Silvestre (2006, 2010). También estimamos de forma eficiente las relaciones de largo plazo mediante los estimadores CUPpc y CUPfm propuestos por Bai et al. (2009). Los resultados obtenidos están en línea con los de Bun y Klaassen (2007). Nuestro argumento es que la creación de la Unión Monteria Europea se debe interpretar como la culminación de un conjunto de cambios de política que han ido dando lugar a un proceso de integración económica en Europa durante las últimas cuatro décadas. |
| Keywords: | modelos de gravedad; comercio; cointegración con paneles; factores comunes; cambios estructurales; dependencia. gravity models; trade; panel cointegration; common factors; structural breaks, cross-section dependence. |
| JEL: | C12 C22 F15 F10 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:ivi:wpasec:2011-07&r=int |
| By: | Paulo Júlio (Gabinete de Estratégia e Estudos, Portuguese Ministry of Economy and Employment, and NOVA School of Business and Economics); Ricardo Pinheiro-Alves (Gabinete de Estratégia e Estudos, Portuguese Ministry of Economy and Employment and Instituto de Artes Visuais, Design e Marketing); José Tavares (NOVA School of Business and Economics and Center for Economic Policy Research) |
| Abstract: | This article analyses the effects of several geographic, economic and institutional factors on bilateral inward FDI in Europe. Moreover, it assesses the required reform effort, and the expected benefits, for Portugal to converge with the EU in the institutional variables that are relevant to attract investment. We conclude that good institutions favouring economic freedom and the ease of doing business, and geography, market size and labor costs, affect bilateral inward FDI. Political risk does not lead to significant differences in FDI across the EU. The results are robust to different methods – principal component analysis, factor-based scores and by considering several institutional indicators successively. We also find that most promising reforms arise in the financial system, corruption, property rights, and in some business regulations associated with starting a business. Increasing labor market flexibility to the EU level has also a large impact on inward FDI, but this reform comes at a comparatively higher effort. |
| Keywords: | FDI, Institutional reform, Institutions, Portugal, EU |
| JEL: | F30 H00 |
| Date: | 2011–09 |
| URL: | http://d.repec.org/n?u=RePEc:mde:wpaper:0040&r=int |