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on International Trade |
| By: | Chen, Shenjie; Van Biesebroeck, Johannes; Yu, Emily |
| Abstract: | We evaluate the impact of the export promotion program delivered by the Canadian Trade Commissioner Service on various dimensions of export performance. Over the 1999-2006 time period we study, Canadian firms successfully diversified their exports to destinations beyond the United States and smaller firms increased their share of total exports. Both of these achievements are explicit aims of the program, but in order to make causal inferences we rely on various identifying assumptions from the treatment effects literature. The results indicate very robustly that the program had an effect at the intensive margin, boosting the average level of exports to given product-destination markets. Effects at the extensive margins of trade, increasing the number of export destinations or number of products exported, are smaller and more sensitive to the identification assumption. This finding differs from previous studies for several Latin American countries where extensive margin effects were most robust. One reason is that the Canadian program was most effective for larger firms and for firms already active on several export markets. |
| Keywords: | Export Promotion; heterogeneous firms; treatment effect |
| JEL: | F13 F14 L15 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:8597&r=int |
| By: | Amit K. Khandelwal; Peter K. Schott; Shang-Jin Wei |
| Abstract: | If trade barriers are managed by inefficient institutions, trade liberalization can lead to greater-than-expected gains. We examine Chinese textile and clothing exports before and after the elimination of externally imposed export quotas. We find that the surge in export value and decline in export prices following quota removal is driven by net entry, and show that this dominance is inconsistent with use of a productivity-based allocation of quota licenses by the Chinese government. Our counterfactual implies that elimination of misallocated quotas raised the overall productivity gain of quota removal by 28 percent. |
| JEL: | F1 O1 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17524&r=int |
| By: | Tibor Besedeš; Byung–Cheol Kim; Volodymyr Lugovskyy |
| Abstract: | We investigate the effect of credit constraints on the growth of exports at the micro level. We develop a model showing credit constraints play a key role in early stages of exporting, but not in later stages. Our empirical results using product level data on exports to twelve European Union members and the U.S. support the model’s predictions: exports from more credit constrained exporters grow faster. Export growth rates decrease with duration and converge across countries. Larger initial export volume reduces subsequent growth. While an important force in early stages, the effect of credit constraints is not persistent. |
| Date: | 2011–10–14 |
| URL: | http://d.repec.org/n?u=RePEc:cfg:cfigwp:16&r=int |
| By: | Antràs, Pol |
| 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. |
| Keywords: | intrafirm trade; multinational firms; outsourcing; property rights |
| JEL: | D23 F10 F12 F14 F21 F23 L22 L23 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:8598&r=int |
| By: | David Hummels; Rasmus Jørgensen; Jakob R. Munch; Chong Xiang |
| Abstract: | We estimate how offshoring and exporting affect wages by skill type. Our data match the population of Danish workers to the universe of private-sector Danish firms, whose trade flows are broken down by product and origin and destination countries. Our data reveal new stylized facts about offshoring activities at the firm level, and allow us to both condition our identification on within-job-spell changes and construct instruments for offshoring and exporting that are time varying and uncorrelated with the wage setting of the firm. We find that within job spells, (1) offshoring tends to increase the high-skilled wage and decrease the low-skilled wage; (2) exporting tends to increase the wages of all skill types; (3) the net wage effect of trade varies substantially across workers of the same skill type; and (4) conditional on skill, the wage effect of offshoring exhibits additional variation depending on task characteristics. We then track the outcomes for workers after a job spell and find that those displaced from offshoring firms suffer greater earnings losses than other displaced workers, and that low-skilled workers suffer greater and more persistent earnings losses than high-skilled workers. |
| JEL: | F16 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17496&r=int |
| By: | Arcand, Jean-Louis; Olarreaga, Marcelo; Zoratto, Laura |
| Abstract: | The recent theoretical literature on the determinants of trade agreements has stressed the importance of political gains, such as credibility, as a rationale for trade agreements. The empirical literature, however, has lagged behind in the estimation of the economic gains or losses associated with these politically motivated trade agreements. This paper fills that gap by providing estimates of the economic impact of politically and economically motivated trade agreements. We find that credibility gains play a role in increasing the probability of two countries signing an agreement. Moreover, agreements with a stronger political motivation are more trade creating than agreements that are signed for pure market access / economic reasons, and the value for the government of solving its time inconsistency problems through trade agreements is estimated at an average of 1.8% of GDP, which compares quite well with the traditional estimates of the economic gains from trade. |
| Keywords: | Credibility; Political economy; Trade agreements |
| JEL: | D72 F13 F15 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:8595&r=int |
| By: | Van Biesebroeck, Johannes; Zhang, Lijun |
| Abstract: | We analyze a firm that produces a final good from multiple intermediates that can each be sourced domestically or from a low-wage country. The model explicitly incorporates that sourcing decisions of intermediates are interdependent. Equilibrium predictions depend crucially on a key modeling assumption--the nature of the trade friction that foreign production has to overcome. If production abroad involves a fixed cost, offshoring one intermediate unambiguously facilitates offshoring of other intermediates. However, if production abroad involves incomplete contracts, offshoring one intermediate almost always makes it more difficult to offshore others. We illustrate that the pattern in prices at which successive automotive parts are imported into the U.S. accords better with the predictions of the incomplete contracting model, except for a few countries with the best governance indicators. |
| Keywords: | FDI; Outsourcing; property rights |
| JEL: | D23 F12 L23 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:8614&r=int |
| By: | Felix Groba |
| Abstract: | Studies analyzing renewable energy market development usually investigate additional capacity or investment. Characteristics, roles and determinants of cross border trade with renewable energy system components remain blurred. Environmental regulation and renewable energy policies are important in promoting renewable energy use. Yet, the effect of respective policies on determining exports remains ambiguous. The Porter hypothesis and the lead market literature argue that environmental regulation leads to a comparative export advantage. Empirical studies testing both hypotheses reach diverging conclusions and rarely focus on the renewable energy sector. Using solar energy technology components, this study adds to the literature by explaining exports of environmental technologies. The analysis uses a gravity trade model and a unique panel dataset to test the role of renewable energy policies on environmental technology exports from OECD countries and to describe structure and development of international solar energy technology component trade. The results find a rapidly growing market with trade dominated by European countries. The study supports the Porter and the lead market hypotheses as early adopters of strong renewable energy policies have gained a comparative advantage. Analyzing the importer side, the study suggests that regulatory policies and import tariffs determine export flows of solar energy technology components. |
| Keywords: | Solar Energy Technologies, Energy Policy, Environmental Regulation and Trade, Trade Barriers |
| JEL: | F14 F18 Q42 Q55 Q56 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1163&r=int |
| By: | Nicita, Alessandro; Olarreaga, Marcelo; Porto, Guido |
| Abstract: | The objective of this paper is to estimate the potential pro-poor bias in the existing structure of protection in six countries in Sub-Saharan Africa (SSA) (i.e., whether it redistributes income from rich to poor households). We also explore the extent to which the barriers faced by SSA exporters to the rest of the world are biased in favor of poor or rich households. To this end, we start with a simple agricultural household production model and propose an extension to include adjustments in labor income associated with changes in unskilled and skilled wages. We then build indicators that capture the differences in welfare changes across income levels associated with the elimination of SSA's own trade protection, as well as trade protection on SSA's export bundle by the rest of the world. Results suggest that SSA's own trade policy is biased in favor of poor households. In contrast, the trade policies of SSA's trading partners tend to be biased in favor of SSA's rich households, especially when ad-valorem equivalents of non tariff measures (NTMs) are taken into account. |
| Keywords: | Poverty; Sub-Saharan Africa; Trade policy; Wage elasticities |
| JEL: | F13 F16 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:8594&r=int |
| By: | Gabriela López Noria |
| Abstract: | Taking advantage of the liberalization process under NAFTA, this paper assesses the relative importance of the degree of trade openness and Foreign Direct Investment (FDI) in explaining inter-industry wage differentials for the case of Mexico. Using INEGI's National Survey of Urban Employment for the period 1994-2004, the empirical analysis is conducted on two stages. In the first stage, individual wages are regressed on worker characteristics, job and firm attributes, informality and a set of industry indicators. In the second stage, inter-industry wage differentials (derived from the coefficient estimates of the industry indicators) are regressed on trade and FDI variables. The main findings show that trade openness does not have a robust and statistically significant effect on inter-industry wage differentials, whereas for the case of FDI, a positive nonlinear relationship is found to exist. |
| Keywords: | Wage Inequality, Trade Liberalization, Foreign Direct Investment, NAFTA. |
| JEL: | F16 G31 J23 M52 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:bdm:wpaper:2011-10&r=int |
| By: | Jean-Marc Siroën (UMR DIAL LEDa Université Paris-Dauphine IRD); Aycil Yucer (LEDa, UMR DIAL-Université Paris-Dauphine) |
| Abstract: | We consider the impact of MERCOSUR on trade among Brazilian states and on trade by Brazilian states with MERCOSUR and the rest of the world. We use a theoretically founded gravity model to shed light on MERCOSUR’s possible creation and diversion effects as well as its “preference erosion” effect on trade among Brazilian states. Using data on interstate trade over a four-year period, including one year prior to the MERCOSUR period (1991), we deliver empirical evidence at state level with a focus on the impact of MERCOSUR which can vary across Brazilian regions. We show that MERCOSUR increased Brazilian states’ trade with member countries, but had no effect on either interstate trade or Brazilian states’ trade with third countries. The paper finds that MERCOSUR’s impact varies across Brazilian regions and that the Northern region is relatively less well integrated into international trade. We use an estimation method dealing better with the traditional issue of zero trade values and heteroskedasticity than OLS does. _________________________________ Le document décompose l'impact du MERCOSUR sur le commerce brésilien en distinguant les effets de l’accord sur les échanges entre les États brésiliens et de chaque État brésilien avec le MERCOSUR et le reste du monde. Nous utilisons un modèle de gravité théoriquement fondé pour mettre en évidence non seulement les éventuels effets de création et de détournement de commerce mais également un effet d’"érosion des préférences" quand on considère le Brésil comme un bloc commercial qui regrouperait les États. En utilisant les données sur le commerce interétatique sur une période de quatre ans, dont un an avant la période du MERCOSUR (1991), nous aboutissons à des résultats empiriques au niveau des 27 États brésiliens sur les impacts du MERCOSUR sur le commerce qui peuvent varier selon les régions du Brésil. Nous montrons que le MERCOSUR a permis d’augmenter le commerce des États avec les pays membres, sans effets importants sur le commerce interétatique ou avec les pays tiers. Nous confirmons que l'impact du MERCOSUR varie selon les régions du Brésil et que la région du Nord est relativement moins bien intégrée dans le commerce international. Nous utilisons une méthode d'estimation qui résout certains des problèmes des modèles de gravité comme les valeurs de commerce nulles et l’hétéroscédasticité trouvée en MCO. |
| Keywords: | Regional Trade Agreements; MERCOSUR; Gravity Model; Trade Diversion; Trade Creation; Preference Erosion. |
| JEL: | F14 F15 R10 R50 |
| Date: | 2011–09 |
| URL: | http://d.repec.org/n?u=RePEc:dia:wpaper:dt201107&r=int |
| By: | Breinlich, Holger |
| Abstract: | This paper presents novel empirical evidence on key predictions of heterogeneous firm models by examining stock market reactions to the Canada-United States Free Trade Agreement of 1989 (CUSFTA). Using the uncertainty surrounding the agreement's ratification, I show that the pattern of abnormal returns of Canadian manufacturing firms was broadly consistent with the predictions of a class of models based on Melitz (2003). Increases in the likelihood of ratification led to stock market gains of exporting firms relative to non-exporters. Moreover, gains were higher in sectors with larger cuts in U.S. import tariffs. Decreases in the likelihood of ratification led to opposite stock market reactions. Results for the impact of Canadian tariff reductions are less conclusive but most specifications suggest that exporters also gained relative to non-exporters in response to such reductions. Translating stock market gains into implied profit changes, I find that CUSFTA increased expected per-period profits of exporters by around 6-7% relative to non-exporters. |
| Keywords: | Canada-U.S. Free Trade Agreement; Heterogeneous Firm Models; Stock Market Event Studies |
| JEL: | F12 F14 G14 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:8600&r=int |
| By: | Yuet-Yee Wong; Randall Wright |
| Abstract: | We study bilateral exchange, both direct trade and indirect trade that happens through chains of intermediaries or middlemen. We develop a model of this activity and present applications. This illustrates how, and how many, intermediaries get involved, and how the terms of trade are determined. We show how bargaining with one intermediary depends on upcoming negotiations with downstream intermediaries, leading to holdup problems. We discuss the roles of buyers and sellers in bilateral exchanges, and how to interpret prices. We develop a particular bargaining solution and relate it to other solutions. In addition to contrasting our framework with other models of middlemen, we discuss the connection to different branches of search theory. We also illustrate how bubbles can emerge in intermediation. |
| JEL: | D2 D4 D83 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17511&r=int |
| By: | Mustafa Yavuz Çakir; Alain Kabundi |
| Abstract: | This paper studies the trade linkages between South Africa and the BRIC (Brazil, Russia, India, and China) countries. We apply a global vector autoregressive model (global VAR) to investigate the degree of trade linkages and shock transmission between South Africa and the BRIC countries over the period 1995Q1-2009Q4. The model contains 32 countries and has two different estimations: the first one consists of 24 countries and one region, with the 8 countries in the euroarea treated as a single economy; and the second estimation contains 20 countries and two regions, with the BRIC and the euro area countries respectively treated as a single economy. The results suggest that trade linkages exist between our focus economies; however the magnitude differs between countries. Shocks from each BRIC country are shown to have considerable impact on South African real imports and output. |
| Keywords: | BRICS, Trade Linkages, Global VAR |
| JEL: | C32 C51 F14 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:rza:wpaper:250&r=int |
| By: | Georg H. Strasser (Department of Economics, Boston College) |
| Abstract: | The macroeconomic evidence on the short-term impact of exchange rates on exports and prices is notoriously weak. In this paper I examine the micro-foundations of this disconnect by looking at firm export and price setting decisions in response to exchange rate fluctuations and changing credit conditions. A unique German firm survey dataset allows me to study the impact of the EUR/USD exchange rate during the years 2003-2010. Its information on pricing and export expectations at the firm-level enables me to measure the instantaneous response of a firm to changing financial constraints and exchange rates, which avoids endogeneity issues. I find that primarily large firms cause the exchange rate "puzzles" in aggregate data. The exchange rate disconnect disappears for financially constrained firms. For these firms, the pass-through rate of exchange rate changes to the prices is more than twice the rate of unconstrained firms. Similarly, their exports are about twice as sensitive to exchange rate fluctuations. Credit therefore affects not only exports via trade finance, but also international relative prices by constraining the scope of feasible pricing policies. The effect of borrowing constraints is particularly strong during the recent financial crisis. |
| Keywords: | exchange rate pass-through, exchange rate disconnect, financing constraints, pricing to market, exports, credit crunch, trade collapse, law of one price, trade finance |
| JEL: | F31 E44 F40 E32 G21 |
| Date: | 2010–10–21 |
| URL: | http://d.repec.org/n?u=RePEc:boc:bocoec:788&r=int |
| By: | Svetlana Demidova; Andres Rodriguez-Clare |
| Abstract: | In this paper we present a version of the Melitz (2003) model for the case of a small economy and summarize its key relationships with the aid of a simple figure. We then use this figure to provide an intuitive analysis of the implications of asymmetric changes in trade barriers and show that a decline in import costs always benefits the liberalizing country. This stands in contrast to variants of the Melitz model with a freely traded (outside) sector, such as Demidova (2008) and Melitz and Ottaviano (2008), where the country that reduces importing trade costs experiences a decline in welfare. |
| JEL: | F1 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17521&r=int |
| By: | Corsetti, Giancarlo; Dedola, Luca; Viani, Francesca |
| Abstract: | Accounting for the pervasive evidence of limited international risk sharing is an important hurdle for open-economy models, especially when these are adopted in the analysis of policy trade-offs likely to be affected by imperfections in financial markets. Key to the literature is the evidence, at odds with efficiency, that consumption is relatively high in countries where its international relative price (the real exchange rate) is also high. We reconsider the relation between cross-country consumption differentials and real exchange rates, by decomposing it into two components, reflecting the prices of tradable and nontradable goods, respectively. We document that, as a common pattern among OECD countries, both components tend to contribute to the overall lack of risk sharing, with the tradable price component playing the dominant role in accounting for efficiency deviations. We relate these findings to two mechanisms proposed by the literature to reconcile open economy models with the data. One features strong Balassa-Samuelson effects on nontradable prices due to productivity gains in the tradable sector, with a muted offsetting response of tradable prices. The other, endogenous income effects causing nontradable but especially tradable prices to appreciate with a rise in domestic consumption demand. |
| Keywords: | consumption-real exchange rate anomaly; Harrod-Balassa-Samuelson effect; incomplete markets; international transmission mechanism; terms of trade |
| JEL: | F41 F42 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:8613&r=int |
| By: | Aoife Hanley; Joaquín Monreal-Pérez |
| Abstract: | The prevalence of Internet-based sales by exporters vs. non-exporters is highlighted in a recent World Bank Report (Ferro, 2011) suggesting the use of sophisticated processes when selling overseas. We investigate the count of new process/ product innovations for a group of newly exporting Spanish firms vs. a non-exporter control group. We use propensity score kernel matching and difference-in-differences to help deal with endogenous exporting, sunk exporting costs and common macroeconomic shocks. Our results confirm that selection into exporting is largely driven by productivity and industry technological differences, consistent with exporting sunk costs. We find some evidence of ‘technology upgrading’ through higher contemporaneous process innovation rates |
| Keywords: | exporting, innovation, Propensity Score Kernel Matching, Learning-by-exporting |
| JEL: | F14 F23 O3 |
| Date: | 2011–09 |
| URL: | http://d.repec.org/n?u=RePEc:kie:kieliw:1735&r=int |
| By: | Susana Assunção (Faculdade de Economia, Universidade do Porto); Rosa Forte (CEF.UP, Faculdade de Economia, Universidade do Porto); Aurora A. C. Teixeira (CEF.UP, Faculdade de Economia, Universidade do Porto; INESC Porto; OBEGEF) |
| Abstract: | The development of economic activity and the rise in foreign direct investment (FDI) in recent decades has prompted a great deal of research into the phenomenon of multinational companies. A vast amount of empirical literature on FDI catalogues a long list of determinants that try to explain direct investment by multinational companies in a particular location, but it is noticeable that the results are not always consensual. This article provides a review of the theoretical approaches to and empirical studies on FDI in an attempt to single out the most robust factors for explaining the geographic distribution of FDI flows worldwide. It also suggests paths for future research in this area. |
| Keywords: | FDI, determinants of FDI, literature review |
| JEL: | F21 F23 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:por:fepwps:433&r=int |