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on International Trade |
| By: | Alessandro Barattieri |
| Abstract: | I present a new stylized fact from a large sample of countries for the period 2000-2006: bilateral foreign direct investment (FDI) flows are almost never observed in the absence of bilateral trade flows. I document a similar pattern using bilateral foreign affiliate sales (FAS), aggregating them up from a large firm level dataset (ORBIS), which includes over 45,000 firms. I propose a model where heterogeneous firms can decide whether to serve foreign markets through export or FDI. I derive theory-based gravity-type equations for the aggregate bilateral trade and foreign affiliate sales (FAS) flows. I then suggest a two-stage estimation procedure structurally derived from the model. In the first stage, an ordered Probit model is used to retrieve consistent estimates of the terms needed to correct the flows equations for firms’ heterogeneity and selection into exports and FDI. In the second stage, a maximum likelihood estimator is applied to the corrected trade and FAS equations. The main results of the analysis are as follows: 1) The impact of distance, border and regional trade agreements on the amount bilateral foreign affiliate sales becomes substantially smaller after controlling for selection and firms’ heterogeneity (hence separating the impact on the extensive versus the intensive margin). 2) The same “attenuation” result is found also for the trade equations, consistently with previous literature. 3) When FAS are observed, failing to take this into account when correcting for heterogeneity and selection in the trade equations does not leads to significant differences in the estimated coefficients. |
| Keywords: | Trade Flows, Investment Flows, Gravity, Two-stage Estimation Procedure |
| JEL: | F10 F14 F21 F23 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:lvl:lacicr:1133&r=int |
| By: | Tanja Grublješič; Jože Damijan; |
| Abstract: | We provide new comprehensive evidence on similarities and differences in export Behavior of Slovenian manufacturing and services firms by using detailed firm-level panel data for Slovenia. Main findings show that export Behavior in these two types of firms is similar and in line with the big picture that is by now familiar from the literature. Slovenian exporting services firms are more productive than non-exporting firms when observed and unobserved heterogeneity are controlled for. Export premia of services firms is even larger than for exporting manufacturing firms. Similarly, pre-entry premia over non-exporters is even larger than for manufacturing firms. We find some evidence of significant learning-by-exporting effects for services firms, but only when using the Levinsohn and Petrin measure of total factor productivity. |
| Keywords: | Trade in Services, Firm heterogeneity, Self-selection, Learning by exporting |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:lic:licosd:29511&r=int |
| By: | Wagner, Joachim (Leuphana University Lüneburg) |
| 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: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp6009&r=int |
| By: | Massimo Riccaboni; Alessandro Rossi; Stefano Schiavo |
| Abstract: | Considerable efforts have been made in the recent years to produce detailed topolo- gies of the Internet. While Internet topology data have brought to the attention of a wide and somehow diverse audience of scholars they have been so far over- looked by economic analyses. In this paper we suggest that such data could be effectively treated as a proxy to characterize the size of the “digital economy” ac- tivities at national country level: we therefore analyze the topological structure of the network of trade in digital services (trade in bits) and compare it with that of the more traditional flow of manufactured goods across countries. To perform a meaningful comparison across networks with different characteristics we define a common null model for the number of connections among each country-pair, based on the hypergeometric distribution. Original data are thus filtered using different thresholds so that we focus our attention on the strongest links only, i.e., on links the represent a significant departure from the stochastic benchmark. We find that trade in bits displays a more sparse and less hierarchical network structure, which is more similar to trade in high-skill manufactured goods than total trade. Last, distance plays a more prominent role in shaping the network of international trade in physical goods than trade in digital services. |
| Keywords: | Internet, hypergeometric, international trade, network analysis, distance |
| JEL: | F14 L86 O33 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:trn:utwpde:1108&r=int |
| By: | Martins, Pedro S. (Queen Mary, University of London); Opromolla, Luca David (Banco de Portugal) |
| Abstract: | We investigate the relationship between exporting, importing, and wage premia using a rich matched employer-employee data set. We improve on the previous literature (i) by using a new methodology to quantify the contribution of an extensive set of worker- and firm-level observable and unobservable characteristics to the wage gap, and (ii) by controlling for the import as well as the export activity of the firm. These two innovations allow us to avoid large biases that characterized the previous literature. A robust result is that the hiring policy of exporters is quite different than the one of importers. While firm size and sales are, to different extents, important components of the wage gap both for exporters and importers, importers hire workers that are overwhelmingly more able than the average. Workers at exporting firms, on the contrary, are no different in terms of unobserved time-invariant characteristics. Our analysis provides a useful guidance for recent theories that aim at explaining participation both in export and import markets and at including non-neoclassical labor market features into trade models. |
| Keywords: | globalization, export, import, wage differentials |
| JEL: | F16 J31 F15 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp6013&r=int |
| By: | Luca Antonio Ricci (Research Department, Development Macroeconomics Division - International Monetary Fund); Federico Trionfetti (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - CNRS : UMR6579) |
| Abstract: | This paper uses a newly assembled multi-country multi-industry fi rm-level dataset to test the effect of productivity and networking on the export probability of firms. Results are in line with the new-new trade theory and with the literature on the information value of networks. Firms are more likely to export if they are more productive, larger, and if they bene fit from foreign networks (ownership and financial linkages), domestic networks (chamber of commerce, links to regulation), and communication networks (E-mail, internet). Firms bear a lower probability of exporting if they have state or labor networks. Overall, firms with better network connections by one standard deviation enjoy a 15% higher probability of exporting. |
| Keywords: | new-new trade theory; export probability |
| Date: | 2011–10–17 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-00633033&r=int |
| By: | Dimitra Petropoulou (Department of Economics, University of Sussex); Kwok Tong Soo (Department of Economics, Lancaster University) |
| Abstract: | One of the main causes behind the trade collapse of 2008-09 was a significant fall in the demand for durable goods. This paper develops a small country, overlapping generations model of international trade in which goods durability gives rise to a more than proportional fall in trade volumes, as observed in 2008-09. The model has three goods - two durable, traded goods and one non-durable, non-traded good and two factors of production. The durability of goods affects consumers’ lifetime wealth and their optimal consumption bundle across goods and time periods. A uniform productivity shock reduces consumers’ lifetime wealth inducing a re-optimisation away from durables. This gives rise to a more than proportional effect on international trade, provided the non-traded sector is sufficiently capital intensive. The elasticity of trade flows to GDP is found to be increasing in both the degree of durability and the size of the shock. Thus the model provides micro-foundations for the asymmetric shock to the demand for durable goods observed in recessions and clarifies the link between this endogenous shift in preferences and international trade flows. It also explains the observation that deeper downturns are associated with a higher elasticity of trade to GDP. Furthermore, the greater the degree of durability of traded goods, the larger is the share of domestically produced goods in consumption, for plausible factor intensities. This provides an alternative explanation for the home bias in consumption, and hence another explanation for Trefler's "missing trade ". |
| Keywords: | Trade in durable goods; 2008 trade collapse economic growth |
| JEL: | F11 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:sus:susewp:2811&r=int |
| By: | Hylke Vandenbussche; Christian Viegelahn; |
| Abstract: | This paper evaluates the Eurpean Union's antidumping (AD) policy from 1995-2009 with a special focus on the 2008-9 crisis. Combining product-level data on AD cases with detailed import data, we fail to find clear signs of a major trade policy change since the outbreak of the crisis. Our findings suggest that the EU largely remained on its pre-crisis path of AD policy with an increasing share of products and more industries covered by AD measures. Moreover, EU AD policy has increasingly focused on China and other lower middle income countries as targets. Further findings suggest that the EU is more likely to impose protection against countries and country-industries that are similar in their product mix. Country-product combinations subject to a preferential tariff are also more likely to be targeted. In terms of product characteristics, we observe that especially the shares of consumer goods and differentiated goods covered by EU AD measures have increased rapidly, remaining at a relatively high level also during the crisis.The patterns we reveal do not appear to be driven by a few outlying countries but are also similar when considering imports of individual EU member states. |
| Keywords: | Antidumping, crisis, European Union, great recession, product-level data, temporary trade barriers, trade policy, WTO |
| JEL: | F13 F14 F52 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:lic:licosd:28511&r=int |
| By: | Nelly Exbrayat (Université de Lyon, Lyon, F-69003, France ; Université Jean Monnet, Saint-Etienne, F-42000, France ; CNRS, GATE Lyon St Etienne, Saint-Etienne, F-42000, France); Benny Geys (Norwegian School of Management BI, Nydalsveien 37, N-0442 Oslo, Norway and Social Science Research Center Berlin (WZB), Reichpietschufer 50, D-10785 Berlin, Germany) |
| Abstract: | Building on recent contributions to the New Economic Geography literature, this paper analyses the relation between asymmetric market size, trade integration and business income tax differentials across countries. First, relying on a foot-loose capital model of tax competition, we illustrate that trade integration (or decreasing trade costs) reduces the importance of relative market size for differences in the extent of corporate taxation between countries. Then, using a dataset of 26 OECD countries over the period 1982-2004, we provide supportive evidence of these theoretical predictions : i.e., market size differences are strongly positively correlated with corporate income tax differences across countries but, crucially, trade integration weakens this link. These findings are obtained controlling for the potential endogeneity of trade integration and are robust to various alternative specifications and robustness checks. |
| Keywords: | Tax competition, Trade integration, New Economic Geography, Tax differentials |
| JEL: | H2 H3 C23 F12 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:gat:wpaper:1123&r=int |
| By: | Bruce Blonigen (University of Oregon); Matthew T Cole (University College Dublin) |
| Abstract: | Recent theoretical work suggests that the presence of foreign direct investment (FDI) lowers a country’s noncooperative Nash tariff. To test this hypothesis, we first adapt the theoretical model formulated by Blanchard (2010) to derive an intuitive, empirically testable equation. This equation is an augmentation of the standard formula equal to the inverse of export supply elasticity. Using constructed estimates of export supply elasticities and measures of FDI, we test this hypothesis with respect to tariffs set by China prior to 2001. We focus on China before its accession into the World Trade Organization (WTO) for two primary reasons: first, China is a recipient of FDI during this time; and second, prior to becoming a WTO member China can be seen as a player in a noncooperative game. We find evidence to suggest that before entering the WTO, China chooses lower tariffs, ceteris paribus, for industries that receive more FDI. This is an important result since having a better understanding of how countries act unilaterally will provide insight into the multilateral cooperative outcome; that is trade negotiations. |
| Keywords: | Foreign direct investment; Optimal tariffs |
| Date: | 2011–09–30 |
| URL: | http://d.repec.org/n?u=RePEc:ucn:wpaper:201121&r=int |
| By: | Askenazy, Philippe; Caldera, Aida; Gaulier, Guillaume; Irac, Delphine |
| Abstract: | This paper studies the effect of credit constraints on the expansion and survival of firms in foreign markets. It develops a model of the multi-country firm, in which, lower access to external finance, or reduced internal liquidity, hampers the firm ability to finance the recurrent costs to serve foreign markets and decreases firm survival in foreign markets. Additionally, financial constraints act as a barrier to firm export expansion by decreasing the firm ability to finance the entry costs into new export markets; thus, they push firm to avoid losing destinations and by the same token may increase firm survival in a given foreign market. We use a unique longitudinal dataset on French firms that contains information on export destinations of individual firms and allows us to construct various firm-level measures of financial constraints to test these predictions. We obtain two main results. First, credit constraints have a negative effect on the number of newly served destinations. Second, higher probability of exit from the export market is also associated with credit constraints. This seems to suggest that, no less than an issue of financing entry costs, credit constraints bear upon the recurrent costs of survival in an existing destination and strongly affect the firms’portfolio of destinations by this token. |
| Keywords: | firm heterogeneity; financial constraints; trade |
| JEL: | D24 F14 D92 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpm:docweb:1112&r=int |
| By: | Francesco Di Comite (Department of Economics (IRES), Université Catholique de Louvain; European Commission, Directorate-General Economic and Financial Affairs); Jacques-François Thisse (CORE, Université Catholique de Louvain); Hylke Vandenbussche (National Bank of Belgium, Research Department; CORE, Université Catholique de Louvain; Department of Economics (IRES), Université Catholique de Louvain) |
| Abstract: | The recent availability of trade data at a firm-product-country level calls for a new generation of models able to exploit the large variability detected across observations. By developing a model of monopolistic competition in which varieties enter preferences non-symmetrically, we show how consumer taste heterogeneity interacts with quality and cost heterogeneity to generate a new set of predictions. Applying our model to a unique micro-level dataset on Belgian exporters with product and destination market information, we find that heterogeneity in consumer tastes is the missing ingredient of existing monopolistic competition models necessary to account for observed data patterns. |
| Keywords: | Heterogeneous firms, Product Differentiation, Monopolistic Competition, Nonsymmetric varieties |
| JEL: | D43 F12 F14 L16 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbb:reswpp:201110-216&r=int |
| By: | Arvis, Jean-Francois; Shepherd, Ben |
| Abstract: | This paper shows that the Poisson quasi-maximum likelihood estimator applied to the gravity model produces estimates in which, summing across all partners, actual and estimated total trade flows are identical. Other methods such as OLS do not have this desirable property. Indeed, Poisson is the only quasi-maximum likelihood estimator that preserves total trade flows. This result is an additional reason for preferring Poisson as a workhorse gravity model estimator. |
| Keywords: | International Trade; Gravity Model; Poisson; Quasi-Maximum Likelihood Estimator |
| JEL: | C10 F10 |
| Date: | 2011–10–25 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:34334&r=int |
| By: | Esther Kalkbrenner (University of Vienna / Department of Ecnomics) |
| Abstract: | Despite the economic importance of international foreign direct investment (FDI) flows, investment decisions of multinational firms are not well understood. A multinational firm can establish a subsidiary in a foreign country through greenfield investment or through acquiring an existing firm in the target country. The goal of this paper is to shed some light on the determinants of foreign market entry modes. In particular to analyze the systematic variation in the mode choice of FDI, namely acquisition versus non-acquisition (greenfield) investments. We propose a transparent and general applicable method to construct a data base. This database includes information about parent firms and their majority owned affiliates in foreign countries. A particular feature is the construction of a variable which allows to differentiate the establishment mode of parent firms into foreign markets. For this purpose two databases from the Bureau van Dijk are interlinked: Osiris and Zephyr. We provide evidence that firm heterogeneity is important for U.S. multinational firms in determining their entry mode choice. However, this is not a distinguishing feature for European multinational firms. For both sets of parent firms the host country characteristics play an important role in deciding on the entry mode. Higher institutional quality increases the likelihood of acquisitions versus greenfield investments. |
| Keywords: | Acquisition, Greenfield, Subsidiaries, Mode Choice, FDI, Institutions; |
| JEL: | L23 F23 P5 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:jku:nrnwps:2010_22&r=int |
| By: | Ronald B Davies (University College Dublin); Amélie Guillin (University College Dublin) |
| Abstract: | Foreign direct investment (FDI) in services has grown significantly in recent years. Evidence of spatial relationships in FDI decisions have been provided for goods man- ufacturing by utilizing physical distance-based measures of trade costs. This paper investigates spatial interactions for services FDI using several distance measures, in- cluding physical distance, genetic distance, and transport time. Across different mea- sures of distance, the traditional determinants of outbound FDI activity remain valid for services. We also find spatial interdependence for services FDI that is generally supportive of complex vertical motivations. |
| Keywords: | Foreign direct investment, Services, Spatial econometric techniques |
| Date: | 2011–09–30 |
| URL: | http://d.repec.org/n?u=RePEc:ucn:wpaper:201120&r=int |
| By: | Jane Haltmaier |
| Abstract: | This paper uses an adaptation of Vahid and Engle's common trend/common cycle analysis to estimate trend and cyclical export elasticities for trading partner income and real exchange rates for 36 countries. For the countries for which both types of income elasticities can be identified, the cyclical elasticity is on average more than twice as large as the trend elasticity. The methodology is applied to forecasting exports during the recent cycle and it appears to improve on simpler models for about half of the countries. For an aggregate of all of the countries for which separate elasticities can be identified, the RMSE is about half as large for the trend/cycle model as for the simple model. |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgif:1030&r=int |
| By: | A. Yasemin Yalta |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:tob:wpaper:1107&r=int |