nep-int New Economics Papers
on International Trade
Issue of 2011‒10‒09
nineteen papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. Openness to Trade, Migration and Foreign Direct Investments of the EU By Stanislav Cernosa
  2. The Role of the People’s Republic of China in International Fragmentation and Production Networks: An Empirical Investigation By Lee, Hyun-Hoon; Park, Donghyun; Wang, Jing
  3. Trade adjustment and productivity in large crises By Gita Gopinath; Brent Neiman
  4. Exports, Foreign Direct Investments and Productivity: Are Services Firms different? By Joachim Wagner
  5. International trade, CO2 emissions and heterogeneous firms By Forslid, Rikard; Okubo, Toshihiro; Ulltveit-Moe, Karen-Helene
  6. Ownership Structure of Firms and Their Export Performance: Evidence from Korea By Sangho KIM; Donghyun PARK
  7. Trade policy versus trade facilitation: An application using Good Old OLS By Márquez-Ramos, Laura; Martínez-Zarzoso, Inmaculada; Suárez-Burguet, Celestino
  8. Does Trade Integration Contribute to Peace? By Lee, Jong-Wha; Pyun, Ju Hyun
  9. International Business Cycle Comovement: Trade and Foreign Direct Investment By Jos Jansen; Ad Stokman
  10. Task trade between similar countries By Grossman, Gene M.; Rossi-Hansberg, Esteban
  11. Explaining the Diversification Path of Exporters in Brazil: How Similar and Sophisticated are New Products? By Xavier Cirera; Anabel Marin; Ricardo Markwald
  12. Importing Skill-Biased Technology By Ariel Burstein; Javier Cravino; Jonathan Vogel
  13. Do Foreign Experts Increase the Productivity of Domestic Firms? By Nikolaj Malchow-Møller; Jakob R. Munch; Jan Rose Skaksen
  14. Export diversification in a transitioning economy : the case of Syria By Lim, Jamus Jerome; Saborowski, Christian
  15. Trade liberalisation, technical change and skill-specific unemployment By Engelmann, Sabine
  16. Tax Rate and Tax Base Competition for Foreign Direct Investment By Peter Egger; Horst Raff
  17. Grossman-Hart (1986) Goes Global: Incomplete Contracts, Property Rights, and the International Organization of Production By Pol Antràs
  18. Migration and Foreign Direct Investment: Education Matters By Masood Gheasi; Peter Nijkamp; Piet Rietveld
  19. Effects of Immigration on Intra-Industry Trade: A logit analysis By Horácio Faustino; Isabel Proença

  1. By: Stanislav Cernosa
    Abstract: This paper analyses openness to trade, migration and foreign direct investment (FDI) using panel data. The focus is on the relationship between 15 EU countries (EU 15) as destination countries, and 71 trading partner countries which send migrants and receive FDI outflows, where only those predictions are introduced in the extended gravity model which are based on demographic trends of the partner countries and their geographical locations. The results confirm that a unified model successfully explains differences in openness to trade, migration and FDI between the EU 15 and the 12 new EU member countries, candidate countries, and developing countries.
    Keywords: International trade, migration, foreign direct investment, gravity model
    Date: 2011–09–30
  2. By: Lee, Hyun-Hoon (Department of International Trade); Park, Donghyun (Asian Development Bank); Wang, Jing (Department of International Trade)
    Abstract: Despite the central role of the People’s Republic of China (PRC) in global parts and components trade, most previous studies on the PRC’s parts and components trade have been limited to a particular trade partner or some specific industries. The central objective of this paper is to provide a more complete description of the PRC’s parts and components trade. To do so, we systematically separate total trade flows into parts and components and final goods, and give a description of the pattern of parts and components trade for the period 1992–2009. We then estimate a gravity model to examine the determinants of the PRC’s trade in parts and components. We find that the share of parts and components trade in the PRC’s total trade has grown rapidly.
    Keywords: People’s Republic of China; PRC; parts and components trade; fragmentation; production network
    JEL: F14 F21 F23
    Date: 2011–09–01
  3. By: Gita Gopinath; Brent Neiman
    Abstract: The authors empirically characterize the mechanics of trade adjustment during the Argentine crisis using detailed firm-level customs data covering the universe of import transactions made during 1996-2008. Their main findings are as follows: First, the extensive margin defined as the entry and exit of firms or of products (at the country level) plays a small role during the crisis. Second, the sub-extensive margin defined as the churning of inputs within firms plays a sizeable role in aggregate adjustment. This implies that the true increase in input costs exceeds that imputed from conventional price indices. Third, the relative importance of these margins and of overall trade adjustment varies with firm size. Motivated by these facts, we build a model of trade in intermediate inputs with heterogeneous firms, fixed import costs, and round-about production to evaluate the channels through which a collapse in imports affects TFP (total factor productivity) in manufacturing. Measured aggregate productivity in the sector depends on within-firm adjustments to the varieties imported as well as the joint distribution of each firm's technology and the share of imports in its total spending on inputs. We simulate an imported input cost shock and show that these mechanisms can deliver quantitatively significant declines in manufacturing TFP.
    Keywords: International trade - Argentina
    Date: 2011
  4. By: Joachim Wagner (Institute of Economics, Leuphana University of Lüneburg, Germany)
    Abstract: This paper contributes to the literature on international firm activities and firm performance by providing the first evidence on the link of productivity and both exports and foreign direct investment (fdi) in services firms from a highly developed country. It uses unique new data from Germany - one of the leading actors on the world market for services - that merge information from regular surveys and from a one-time special purpose survey performed by the Statistical Offices. Descriptive statistics, parametric and non-parametric statistical tests and regression analyses (with and without explicitly taking differences along the conditional productivity distribution and firms with extreme values, or outliers, into account) indicate that the productivity pecking order found in numerous studies using data for firms from manufacturing industries – where the firms with the highest productivity engage in fdi while the least productive firms serve the home market only and the productivity of exporting firms is in between – does not exist among firms from services industries. In line with the theoretical model and the empirical results for software firms from India provided by Bhattacharya, Patnaik and Shah (2010) there is evidence that firms with fdi are less productive than firms that export.
    Keywords: Exports, foreign direct investments, productivity, services firms
    JEL: F14 F21
    Date: 2011–09
  5. By: Forslid, Rikard; Okubo, Toshihiro; Ulltveit-Moe, Karen-Helene
    Abstract: This paper develops a model of trade with heterogenous firms, where firms invest in abatement technology and thereby have an impact on their level of emissions. The model shows how firm productivity and firm exports are both positively related to investments in abatement technology. Emission intensity is, however, negatively related to firms' productivity and exports. The basic reason for these results is that a larger production scale supports more fixed investments in abatement technology and, in turn, lower emissions per output. In contrast to the standard models of heterogeneous firms, firms' productivity, and thus export performance, is not exogenous, but endogeneously determined by firms' investment in abatement technology. We derive closed form solutions for firm-level abatement investments and emissions per output, and test the empirical implications of the model using detailed Swedish firm-level data. The empirical results strongly support the model.
    Keywords: CO2-emissions; heterogeneous firms; international trade
    JEL: D21 F12 F15
    Date: 2011–09
  6. By: Sangho KIM (Department of International Trade, Honam University, Gwangju 506-714, KOREA); Donghyun PARK (Economics and Research Department, Asian Development Bank, 6 ADB Avenue, Mandaluyong City, Metro Manila, PHILIPPINES 1550)
    Abstract: The central objective of our paper is to empirically examine the relationship between the ownership structure of firms and their export performance using data from Korea. Due to growing globalization, export performance has become a highly influential determinant of firm performance. While a large and growing empirical literature investigates the relationship between the ownership structure and overall performance of firms, there are almost no studies which delve into the issue of whether the concentration of ownership has a positive or negative effect on export performance. The primary contribution of our study is to help remedy this serious gap in the empirical literature on ownership and performance. Our empirical results indicate that firms with more concentrated ownership are more likely to be exporters and export more.
    Keywords: Exports, ownership structure, logit analysis, Tobit regression, Korea
    JEL: F10 G30 D80
    Date: 2011–01
  7. By: Márquez-Ramos, Laura; Martínez-Zarzoso, Inmaculada; Suárez-Burguet, Celestino
    Abstract: Trade policy barriers are only one element of overall trade costs. Among these, and due to the decrease in the influence of tariff barriers on trade over time, institutional barriers might increase in relative importance and become a key obstacle to the movements of goods across countries. This paper quantifies and compares the impact that a number of trade facilitation and trade policy barriers have on bilateral trade flows. A theoretically justified gravity model of trade is estimated by using the methodology proposed in Baier and Bergstrand (2009) for a cross-section of countries in the year 2000. Results indicate that institutional trade barriers have a greater impact on trade flows than tariff barriers. According to these findings, trade policy negotiation efforts should focus on facilitating trade processes and should be at the forefront of multilateral negotiations. --
    Keywords: Tariff barriers,trade facilitation,sectoral trade
    JEL: F14
    Date: 2011
  8. By: Lee, Jong-Wha (Korea University); Pyun, Ju Hyun (University of CA, Davis)
    Abstract: We investigate the effect of trade integration on interstate military conflict. Our empirical analysis, based on a large panel data set of 243,225 country-pair observations from 1950 to 2000, confirms that an increase in bilateral trade interdependence significantly promotes peace. It also suggests that the peace-promotion effect of bilateral trade integration is significantly higher for contiguous countries that are likely to experience more conflict. More importantly, we find that not only bilateral trade but global trade openness also significantly promotes peace. It shows, however, that an increase in global trade openness reduces the probability of interstate conflict more for countries far apart from each other than it does for countries sharing borders. The results also show that military conflict between countries significantly reduces not only bilateral trade interdependence but also global trade integration. The main finding of the peace-promotion effect of bilateral and global trade integration holds robust when controlling for the natural and geopolitical characteristics of dyads of states that may influence the probability of military conflict and for the simultaneous determination of trade and peace.
    JEL: D74 F15 F51
    Date: 2011–09
  9. By: Jos Jansen; Ad Stokman
    Abstract: This paper investigates the relationship between foreign direct investment (FDI) and business cycle synchronization in the period 1982–2010 for eight industrialized countries. We find that more synchronized business cycles are associated with stronger FDI relations during 1995–2010, but that they are mainly associated with stronger trade linkages before 1995. More intensive FDI links are also associated with a greater vulnerability to lagged output spillovers from abroad, whereas trade links are not. Our findings suggest that FDI has become a separate channel through which economies may affect each other and that FDI stocks are now an essential aspect of economic interdependence.
    Keywords: business cycle synchronization; international linkages; trade; FDI; vertical integration
    JEL: F21
    Date: 2011–09
  10. By: Grossman, Gene M.; Rossi-Hansberg, Esteban
    Abstract: The authors propose a theory of task trade between countries that have similar relative factor endowments and technological capabilities but may differ in size. Firms produce differentiated goods by performing a continuum of tasks, each of which generates local spillovers. Tasks can be performed at home or abroad, but offshoring entails costs that vary by task. In equilibrium, the tasks with the highest offshoring costs may not be traded. Among the remainder, those with the relatively higher offshoring costs are performed in the country that has the higher wage and higher aggregate output. The paper discusses the relationship between equilibrium wages, equilibrium outputs, and relative country size and examines how the pattern of specialization reflects the key parameters of the model.
    Keywords: Economic Theory&Research,Trade Policy,Political Economy,Health Systems Development&Reform,Labor Policies
    Date: 2011–09–01
  11. By: Xavier Cirera (IDS and CARIS, University of Sussex); Anabel Marin (SPRU, University of Sussex and Conicet, Argentina); Ricardo Markwald (FUNCEX, Brazil)
    Abstract: A stylised fact of the economic literature suggests that export diversification is good for economic growth and is associated with economic development. In addition, there is evidence suggesting that the level of sophistication of countries’ exports “matters” for growth and development. This paper contributes to this literature by analysing two unexplored dimensions of export diversification: the degree of relatedness (similarity) and sophistication of new products in relation to existing ones. The objective of this paper is to understand the mechanisms through which firms are able to diversify to less related and more sophisticated activities. We do so using a unique dataset that links data on exports, innovation and firms’ characteristics at the firm level in Brazil. The main findings suggest that i) diversification occurs in very closely related activities, where firms have some core competences, ii) most diversification occurs in new products with lower level of sophistication than existing exports, iii) the degree of diversification and innovativeness of the production basket, and the position that the firm has developed in the domestic market appear to matter for diversification towards more or less distant products.
    Keywords: Diversification; Relatedness; Sophistication; Trade; Innovation; Brazil
    JEL: F14 L25
    Date: 2011–10
  12. By: Ariel Burstein; Javier Cravino; Jonathan Vogel
    Abstract: Capital equipment – such as computers and industrial machinery – embodies skill-biased technology, in the sense that it is complementary to skilled labor. Most countries import a large share of their capital equipment, and by doing so import skill-biased technology. In this paper we develop a tractable quantitative model of international trade in capital goods to quantify the extent to which trade, through capital-skill complementarity, raises the relative demand for skill and hence increases the skill premium. In one counterfactual, we find that moving from the trade levels observed in the year 2000 to autarky would decrease the skill premium by 16% in the median country in our sample, by 5% in the US, and by a much larger magnitude in countries that heavily rely on imported capital equipment.
    JEL: F1
    Date: 2011–09
  13. By: Nikolaj Malchow-Møller (University of Southern Denmark and CEBR); Jakob R. Munch (University of Copenhagen and CEBR); Jan Rose Skaksen (Copenhagen Business School and CEBR)
    Abstract: While most countries welcome (and some even subsidise) high-skilled immigrants, there is very limited evidence of their importance for domestic firms. To guide our empirical analysis, we first set up a simple theoretical model to show how foreign experts may impact on the productivity and wages of domestic firms. Using matched worker-firm data from Denmark and a difference-in-differences matching approach, we then find that firms that hire foreign experts - defined as employees eligible for reduced taxation under the Danish "Tax scheme for foreign researchers and key employees" both become more productive (pay higher wages) and increase their exports of goods and services.
    Keywords: Foreign experts, export, immigrants, productivity, difference-in-differences matching
    JEL: F22 J24 J31 J61 L2
    Date: 2011–09
  14. By: Lim, Jamus Jerome; Saborowski, Christian
    Abstract: How does the process of export diversification play out in a transitioning economy, especially in light of government policy aimed at trade liberalization? This paper examines this question by considering a directed policy effort by Syria -- an economy transitioning from both economic centralization and resource dependence -- to liberalize its trade in 2001. In addition to documenting the patterns of diversification at the aggregate level since the implementation of the policy, we also examine factors that are related to diversification at the sectoral level. Our findings suggest that, while Syria has achieved reasonably rapid export diversification, this may to a large extent be the result of structural transformations in the economy, and that further consolidation of diversification gains may require continued policy reform along the lines of strengthening Syria's weak institutional and business environment.
    Keywords: Free Trade,Economic Theory&Research,Trade Policy,Agribusiness&Markets,Achieving Shared Growth
    Date: 2011–09–01
  15. By: Engelmann, Sabine (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany])
    Abstract: "The aim of this paper is to formalise a two-country model of trade liberalisation and technical change with heterogenous firms and search-and-matching frictions in the labour market. By considering different sectors and factors of production we allow for comparative advantages and study the trade and technology effects within and between sectors on wages and employment of skilled and low-skilled workers. Technical change together with inter-sectoral trade has distributional consequences across the labour force, favouring the skilled against the low-skilled workers. Intra-sectoral trade counteracts as it increases the demand for low-skilled workers, too. The overall effects on wages and employment of skilled and low-skilled workers depend on the extent of technical change, inter-sectoral trade and intra-sectoral trade." (Author's abstract, IAB-Doku) ((en))
    Keywords: Handel, technischer Fortschritt, ökonomische Theorie, Hochqualifizierte, Niedrigqualifizierte, Lohnelastizität, Beschäftigungseffekte
    JEL: F12 F16 J64 O33
    Date: 2011–09–29
  16. By: Peter Egger; Horst Raff
    Abstract: This paper argues that the large reduction in corporate tax rates and only gradual widening of tax bases in many countries over the last decades are consistent with tougher international competition for foreign direct investment (FDI). To make this point we develop a model in which governments compete for FDI using corporate tax rates and tax bases. The model’s predictions regarding the slope of policy reaction functions and the response of equilibrium tax parameters to trade costs and market size are shown to be consistent with panel data for 43 developed countries and emerging markets. Using estimated policy reaction functions we simulate the effect of regional trade integration and find that this integration has contributed significantly to the observed fall in corporate tax rates
    Keywords: corporate taxes; tax competition; foreign direct investment; multinational firms; free-trade areas; regional integration
    JEL: F15 F23 H20 H25
    Date: 2011–09
  17. By: Pol Antràs
    Abstract: I survey the influence of Grossman and Hart's (1986) seminal paper in the field of International Trade. I discuss the implementation of the theory in open-economy environments and its implications for the international organization of production and the structure of international trade flows. I also review empirical work suggestive of the empirical relevance of the property-rights theory. Along the way, I develop novel theoretical results and also outline some of the key limitations of existing contributions.
    JEL: D23 F10 F12 F14 F21 F23 L22 L23
    Date: 2011–09
  18. By: Masood Gheasi (VU University Amsterdam); Peter Nijkamp (VU University Amsterdam); Piet Rietveld (VU University Amsterdam)
    Abstract: The rapid growth in the foreign-born population in many high and middle-income countries in recent decades has prompted much research on the socio-economic determinants and impacts of immigration. This paper investigates the relationship between the stock of foreign population by nationality living in the UK and the bilateral volume of foreign direct investment (FDI), both inward FDI into the UK and outward FDI from the UK. This study contributes to the literature on the above-mentioned association between migration and FDI, by using the UK annual data from 2001 to 2007 for 22 countries on the inward volume of FDI and for 27 countries on the outward volume of FDI. Our study finds a significant and positive relationship between migration and outward FDI. This result also holds, if we correct for endogeneity by using an instrumental variable approach. If we then include the education level of migrants living in the UK, our results indicate that the more educ ated migrants from a certain country are, the stronger positive effect they have on FDI in both directions (inward and outward).
    Keywords: foreign direct investment; immigration; gravity model; instrumental variable
    JEL: F22 P45
    Date: 2011–09–27
  19. By: Horácio Faustino; Isabel Proença
    Abstract: This study estimates the effects of the immigration stock, as well as those of immigrants’ characteristics, such as having the same language as that of the host country and the level of qualification or entrepreneurship, on Portuguese intra-industry trade (IIT) by types, controlling for the effects of other socio-economic factors, like economic dimensions, price indexes and distance. In addition to the member-countries of the EU-27, the group of countries studied includes five African countries with Portuguese as their official language, known as the PALOPs, and the BRIC countries. Since indexes are fractional variables, the pseudo-likelihood Logit estimator was used on the panel data to obtain the empirical results. The study found that an increase of the immigrant stock will produce an increment in the trade indexes considered and this effect is enhanced if immigrants originate from a country where Portuguese is the official language, or if they are highly qualified, whereas immigrant entrepreneurs have no significant effect.
    Keywords: Immigration; trade; skills; entrepreneurship; panel data; Portugal. Classification-C33, F11, F12, F22.
    Date: 2011–09

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