nep-int New Economics Papers
on International Trade
Issue of 2011‒11‒14
twenty papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. Export, Migration, and Costs of Market Entry: Evidence from Central European Firms By Dieter Pennerstorfer
  2. Transport Costs in International Trade By Julia Spies; Joern Kleinert
  3. Give Credit where Credit is Due: Tracing Value Added in Global Production Chains By Robert Koopman; William Powers; Zhi Wang; Shang-Jin Wei
  4. Within and Between Panel Cointegration in the German Regional Output-Trade-FDI Nexus By Timo Mitze
  5. Offshoring and export performance in the european automotive industry By Raphaël Chiappini
  6. Does Globalization affect Regional Growth? Evidence for NUTS-2 Regions in EU-27 By Richard Sellner; Wolfgang Polasek
  7. Economic Integration and Welfare: Manufacturing vs. Agricultural Markets By Hajime Takatsuka; Dao-Zhi Zeng
  8. Impact Evaluation of Trade Interventions: Paving the Way By Cadot, Olivier; Fernandes, Ana; Gourdon, Julien; Mattoo, Aaditya
  9. Determinants of trade policy responses to the 2008 financial crisis By Gawande, Kishore; Hoekman, Bernard; Cui, Yue
  10. Development of trade blocs in an era of globalization: Proximity still matters By Aleid Brouwer; Tristan Kohl
  11. Export dynamics and sales at home By Nicolas Berman, Antoine Berthou,Jérôme Héricourt
  12. A Sorted Tale of Globalization: White Collar Jobs and the Rise of Service Offshoring By Runjuan Liu; Daniel Trefler
  13. Trade and regional inequality By Rodríguez-Pose, Andrés
  14. Institutional Quality and FDI to the South: An Analytical Approach By Rodolphe Desbordes; Julia Darby; Ian Wooton
  15. Trade and Regional Development in A Developing Country: The Case of Turkey By Ertan Oktay; Giray Gozgor
  16. Product Quality in Different Markets and Cost Structure By Kiyoshi Matsubara
  17. Do nonreciprocal preference regimes increase exports? By Salvador Gil-Pareja
  18. Factor Proportions and International Business Cycles By Keyu Jin; Nan Li
  19. Export growth and diversification : the case of Peru By Illescas, Javier; Jaramillo, C. Felipe
  20. Domestic and International Offshoring of Tasks By Eckhardt Bode; Franz-Josef Bade Bade; Eleonora Cutrini Cutrini

  1. By: Dieter Pennerstorfer (WIFO)
    Abstract: In this paper I analyse the export behaviour of firms located in different Central European countries (Austria, Hungary, Czech Republic and Slovakia) with respect to migration. Ever since the seminal article by Gould (1994) on immigrant links to their home country and due to empirical research following his contribution, it is a well established result that immigrants from a particular country spur exports to and imports from that destination. Chaney (2008) shows that a decrease in fixed costs of exporting increases the number of exporters (extensive margin), whereas a reduction in variable costs also increases the volume exported by each exporting firm (intensive margin). Empirical contributions using firm-level data focus on various aspects influencing costs of exporting (like spillover effects of nearby firms or financial factors), but leave out the issue of migration. I combine detailed information coming from a questionnaire conducted among 8,300 firms on the export behaviour to different countries with regional data on migration from the European Labour Force Survey (LFS). I find evidence that both the propensity to export and – to a much smaller extent – the volume of sales of exporting firms to a particular destination is higher for firms located in regions with a larger number of immigrants from that country. I conclude that migrants mainly reduce fixed costs of exporting.
    Keywords: Firm-level data, Export destinations, Immigrants, Margins of trade
    Date: 2011–11–04
  2. By: Julia Spies; Joern Kleinert
    Abstract: This paper claims that distance alone is a poor proxy for international transport costs in gravity equations. We develop a theoretical framework with a manufacturing and a transport sector, where the level of manufacturing exports determines the demand for transport. Above a certain threshold, transport service suppliers find it profit-maximizing to invest into advanced transport technology, which lowers their marginal costs and as a consequence, transport prices. Transport costs therefore vary with the distance between the two locations, and with the endogenous decision to invest in a more efficient technology. We tackle the biases in traditional gravity estimates by using newly collected data on transport prices from UPS and by applying instrument variable estimation techniques. Our results reveal that distance affects trade beyond the transport cost channel. Transport prices, in turn, are influenced by the distance and by the exports between two countries. We find that trading partners with 10% more exports enjoy 0.7% lower transport prices.
    Date: 2011–09
  3. By: Robert Koopman (United States International Trade Commission); William Powers (United States International Trade Commission); Zhi Wang (United States International Trade Commission); Shang-Jin Wei (Columbia University and Centre for Economic Policy Research and National Bureau of Economic Research and Hong Kong Institute for Monetary Research)
    Abstract: This paper presents a new conceptual framework to measure sources of value-added trade by country in global production networks. With a parsimonious decomposition of gross exports that eliminates "double counting", it integrates all previous measures of vertical specialization and value-added trade in the literature. We apply the framework to the most recent appropriate data (2004). Among emerging markets, East Asian countries are the most globally integrated. Among major developed economies, the US is the most integrated in some aspects, and Japan in others. These regional differences also affect exporters¡¦ trade costs.
    JEL: F1 F2
    Date: 2011–10
  4. By: Timo Mitze
    Abstract: For spatial data with a sufficiently long time dimension, the concept of global cointegration has been recently included in the econometrics research agenda. Global cointegration arises when non-stationary time series are cointegrated both within and between spatial units. In this paper, we analyze the role of globally cointegrated variable relationships using German regional data (NUTS 1 level) for GDP, trade, and FDI activity during the period 1976-2005. Applying various homogeneous and heterogeneous panel data estimators to a Spatial Panel Error Correction Model (SpECM) for regional output growth allows us to analyze the short- and long-run impacts of internationalization activities. For the long-run cointegration equation, the empirical results support the hypothesis of export- and FDI-led growth. We also show that for export and outward FDI activity positive cross-regional effects are at work. Likewise, in the short-run SpECM specification, direct and indirect spatial externalities are found to be present. As a sensitivity analysis, we use a spatial weighting matrix based on interregional goods transport flows rather than geographical distances. This scheme thus allows us to address more soundly the role of positive and negative effects of trade/FDI on output activity for a system of interconnected regions.
    Date: 2011–09
  5. By: Raphaël Chiappini (Larefi - Laboratoire d'analyse et de recherche en économie et finance internationales - Université Montesquieu - Bordeaux IV : EA2954)
    Abstract: This paper investigates the impact of offshoring on export performances of French, German and Italian automotive firms. We argue that the different offshoring strategies run by the main European automakers are responsible for the discrepancies in export performances of France, Germany and Italy on the world automotive market. We use an export equation and a panel data analysis and show that offshoring strongly affect exports of automotive firms. Focussing on the French and German export performances, we show that the relatively low export performance of France in the automotive industry since the end of the 1990s is mainly the result of an increase in offshoring lead by Renault and PSA.
    Keywords: Offshoring, export performance, automotive industry
    Date: 2011–06–24
  6. By: Richard Sellner; Wolfgang Polasek
    Abstract: We analyze the influence of newly constructed globalization measures on regional growth for the EU-27 countries between 2001 and 2006. The spatial Chow-Lin procedure, a method constructed by the authors, was used to construct on a NUTS-2 level a complete regional data for exports, imports and FDI inward stocks, which serve as indicators for the influence of globalization, integration and technology transfers on European regions. The results suggest that most regions have significantly benefited from globalization measured by increasing trade openness and FDI. In a non-linear growth convergence model the growth elasticities for globalization and technology transfers decrease with increasing GDP per capita. Furthermore, the estimated elasticity for FDI decreases when the model includes a higher human capital premium for CEE countries and a small significant growth enhancing effect accrues from the structural funds expenditures in the EU.
    Date: 2011–09
  7. By: Hajime Takatsuka; Dao-Zhi Zeng
    Abstract: In the literature of new trade theory, most papers study the industrial location by imposing the assumption of free transportation in the agricultural sector. This paper explicitly incorporates arbitrary transport costs in both the manufacturing and the agricultural sectors into the Helpman-Krugman-Davis model of two countries and one production factor. The following results are obtained. First, we find a necessary and sufficient condition for the home market effect (HME) to be observed. Secondly, we find that integrating manufacturing markets has contrastive impacts on two countries to integrating agricultural markets. Our results are suggestive for the understanding of various international trade agreements.
    Date: 2011–09
  8. By: Cadot, Olivier; Fernandes, Ana; Gourdon, Julien; Mattoo, Aaditya
    Abstract: The focus of trade policy has shifted in recent years from economy-wide reductions in tariffs and trade restrictions towards targeted interventions to facilitate trade and promote exports. Most of these latter interventions are based on the new mantra of "aid-for-trade" rather than on hard evidence on what works and what doesn’t. On the one hand, rigorous impact-evaluation is needed to justify these interventions and to improve their design. On the other hand, rigorous evaluation is feasible because unlike traditional trade policy, these interventions tend to be targeted and so it is possible to construct treatment and control groups. When interventions are not targeted, such as in the case of customs reforms, some techniques, such as randomized control trials, may not be feasible but meaningful evaluation may still be possible. We discuss examples of impact evaluations using a range of methods (experimental and non-experimental) highlighting the particular issues and caveats arising in a trade context, and the valuable lessons that are already being learnt. We argue that systematically building impact evaluation into trade projects could lead to better policy design and a more credible case for "aid-for-trade."
    Keywords: aid for trade; export promotion; impact evaluation; propensity-score matching; randomized control trials; trade competitiveness; trade facilitation
    JEL: C23 F13 F14 L15 L25 O24
    Date: 2011–11
  9. By: Gawande, Kishore; Hoekman, Bernard; Cui, Yue
    Abstract: The collapse in trade and contraction of output that occurred during 2008-09 was comparable to, and in many countries more severe than, the Great Depression of 1930, but did not give rise to the rampant protectionism that followed the Great Crash. Theory suggests several hypotheses for why it was not in the interest of many firms to lobby for protection, including much greater macroeconomic"policy space"today, the rise of intra-industry trade (specialization in specific varieties), and the fragmentation of production across global value chains ("vertical"specialization and the associated growth of trade in intermediates). Institutions may also have played a role in limiting the extent of protectionist responses. World Trade Organization disciplines raise the cost of using trade policies for member countries and have proved to be a stable foundation for the open multilateral trading system that has been built over the last fifty years. This paper empirically examines the power of these and other theories to explain the observed pattern of trade policy responses to the 2008 crisis, using trade and protection data for seven large emerging market countries that have a history of active use of trade policy. Vertical specialization (global fragmentation) is found to be the most powerful economic factor determining trade policy responses.
    Keywords: Free Trade,Trade Policy,Economic Theory&Research,International Trade and Trade Rules,Debt Markets
    Date: 2011–10–01
  10. By: Aleid Brouwer; Tristan Kohl
    Abstract: This article describes the development of international trade blocs world wide from the 1950s till 2010. We updated the data on international trade flows and introduced a new trade bloc variable based on the intramax hierarchical clustering technique, which defines trade blocs on actual trade intensities and not - as was preciously done - by traditional geographic and political factors: such as the division into a triad of economic regions based on North America, the European Union and Japan. Nevertheless, the results of intramax hierarchical clustering indicate that actual trade flows are very much influenced by geographical and political factors; after all, proximity matters. To explain how mechanism of globalization changed trade patterns over the last half century and how - in the end - proximity is one of the most explanatory variables - we furthermore apply multivariate analysis with gravity-model based variables aims to explain which geographical, political and cultural factors do contribute to the (importance of) proximity in trade partners. In addition we also apply GIS to analyze patterns and proximity issues.
    Date: 2011–09
  11. By: Nicolas Berman, Antoine Berthou,Jérôme Héricourt (IHEID, The Graduate Institute of International and Development Studies, Geneva)
    Abstract: How do firms' sales interact across markets? Are foreign and domestic sales complements or substitutes? Using a large French firm-level database that combine balance-sheet and product-destination-specific export information over the period 1995-2001, we study the interconnections between exports and domestic sales. We identify exogenous shocks that affect firm demand on foreign markets to instrument yearly variations in exports. Our results show that exogenous variations in foreign sales are positively associated with domestic sales, even after controlling for changes in domestic demand. A 10% exogenous increase in exports generates a 1.5 to 3% increase in domestic sales in the short-term. This result is robust to various estimation techniques, instruments, controls, and sub-samples. It is also supported by the natural experiment of the Asian crisis in the late 1990's. We discuss various channels that may explain this complementarity.
    Keywords: Export dynamics, domestic sales, liquidity
    JEL: F1 F14 L2
    Date: 2011–10
  12. By: Runjuan Liu; Daniel Trefler
    Abstract: We study how the rise of trade in services with China and India has impacted U.S. labour markets. The topic has two understudied aspects: it deals with service trade (most studies deal with manufacturing trade) and it examines the historical first of U.S. workers competing with educated but low-wage foreign workers. Our empirical agenda is made complicated by the endogeneity of service imports and the endogenous sorting of workers across occupations. To develop an estimation framework that deals with these, we imbed a partial equilibrium model of ‘trade in tasks’ within a general equilibrium model of occupational choice. The model highlights the need to estimate labour market outcomes using changes in the outcomes of individual workers and, in particular, to distinguish workers who switch ‘up’ from those who switch ‘down’. (Switching ‘down’ means switching to an occupation that pays less on average than the current occupation). We apply these insights to matched CPS data for 1996-2007. The cumulative 10-year impact of rising service imports from China and India has been as follows. (1) Downward and upward occupational switching increased by 17% and 4%, respectively. (2) Transitions to unemployment increased by a large 0.9 percentage points. (3) The earnings of occupational ‘stayers’ fell by a tiny 2.3%. (4) The earnings impact for occupational switchers is not identified without an assumption about worker sorting. Under the assumption of no worker sorting, downward (upward) switching was associated with an earning change of -13.9% (+12.1%). Under the assumption of worker sorting, there is no statistically significant impact on earnings.
    JEL: F16
    Date: 2011–11
  13. By: Rodríguez-Pose, Andrés
    Abstract: This paper examines the relationship between openness and within-country regional inequality across 28 countries over the period 1975-2005. In particular, it tests a) whether increases in trade lead to rising inequalities, b) whether these inequalities recede in time, and c) whether increases in global trade affect the developed and developing worlds differently. Using static and dynamic panel data analysis, it is found that while increases in trade per se do not lead to greater territorial polarisation, in combination with certain country-specific conditions, trade has a positive and significant association with regional inequality. States with higher inter-regional differences in sectoral endowments, a lower share of government expenditure, and a combination of high internal transaction costs with a higher degree of coincidence between the regional income distribution and regional foreign market access positions have experienced the greatest rise in territorial inequality when exposed to greater trade flows. Hence, changes in trade regimes have a more polarising and enduring effect in low- and middle-income countries, whose structural features tend to enhance the trade-inequality effect and whose levels of internal spatial inequality are, on average, significantly higher than in high-income countries.
    Keywords: developed countries; developing countries; regional inequality; trade
    JEL: F11 O18 R12 R58
    Date: 2011–11
  14. By: Rodolphe Desbordes (Department of Economics, University of Strathclyde); Julia Darby (Department of Economics, University of Strathclyde); Ian Wooton (Department of Economics, University of Strathclyde)
    Abstract: We ask whether MNEs’ experience of institutional quality and political risk within their “home†business environments influences their decisions to enter a given country. We set out an explicit theoretical model that allows for the possibility that firms from South source countries may, by virtue of their experience with poor institutional quality, derive a competitive advantage over firms from North countries with respect to investing in destinations in the South. We show that the experience gained by such MNEs of poorer institutional environments may result in their being more prepared to invest in other countries with correspondingly weak institutions.
    Keywords: foreign direct investment, multinational enterprises, institutional quality
    JEL: F23 O1
    Date: 2011–10
  15. By: Ertan Oktay; Giray Gozgor
    Abstract: There is a widespread literature to investigate the relations among increasing trade, economic growth and development; however the relationship between trade and regional development is remained inconsiderable. The aim of this study is, to investigate the interrelationship between trade and regional development in Turkey. Therefore firstly, regional development index is defined for 81 provinces of Turkey for the period from 2002 to 2008. This definition is based on the concept and calculation method of Human Development Index (HDI) of United Nations Development Programme. HDI is taken as a basis because it is a composite measure of education, health, and income. Health and education data used in this paper are Regional Statistics of Turkish Statistical Institute. However, GDP/GDP per capita data are not available for provinces for the period under concern. Several studies obviously show that there is a causality relationship between GDP and energy consumption. Thus, energy consumption statistics are used instead of income data. The seminal approaches of uniform and heterogeneous intra-national space of urban systems (and new economic geography models are considered to be worthwhile. To show the relationship between regional development index and share of volume of trade and between regional development index and trade openness, these approaches are utilized within generalized method of moments procedure in a panel data framework. Accordingly we use three dummy variables as endogenous or exogenous, namely large city, port and border provinces. The empirical findings show that the increases in trade openness are positively associated with future increases in regional development. As a result, large cities have a positive effect in this relationship, while the dummy variables of port and border provinces have not found statistically significant. The link between share of volume of trade and regional development is found out negative, merely when the approach of uniform intra-national space of new economic geography model is considered in our estimation. Furthermore, the results of panel causality tests, the share of volume of trade significantly causes regional development. On the other hand, there is a bilateral causality relationship between regional development and trade openness.
    Date: 2011–09
  16. By: Kiyoshi Matsubara
    Abstract: This paper analyzes the behavior of monopoly firm serving its products to two countries. The main focus of this paper is on how the product-quality choice in different markets are related with the cost structure of the firm. First, This paper examines the effects of production and R&D costs on the product quality separately, and then discusses the general case where the both costs exists. This paper shows that if only production costs exist, providing different levels of product quality is optimal and that if only R&D costs exist, providing the same level of quality is optimal. About the general case, this paper shows the conditions with which the same-quality strategy is optimal in terms of utility and other parameters. As an application, this paper discusses the firm’s decision on entry in a foreign market either by exports or FDI. The result is consistent with observations in emerging economies.
    Date: 2011–09
  17. By: Salvador Gil-Pareja
    Abstract: This paper investigates whether and to what extent nonreciprocal preference regimes have increased developing countries’ exports to richer countries. Moreover, it analyzes how they have affected donors’ exports to beneficiary countries. Using recent developments in the econometric analysis of the gravity equation over the period 1990-2008, we find robust evidence that, on the whole, nonreciprocal preference regimes and GSP schemes have had an economically significant effect on exports from developing countries. However, the estimation of catch-all dummies masks heterogeneous results for the individual schemes. Finally, we find that nonreciprocal regimes have also increased exports from donors to beneficiary countries.
    Date: 2011–09
  18. By: Keyu Jin; Nan Li
    Abstract: Positive investment comovements across OECD economies as observed in the data are difficult to replicate in open-economy real business cycle models, but also vary substantially in degree for individual country-pairs. This paper shows that a two-country stochastic growth model that distinguishes sectors by factor intensity (capital-intensive vs. labor-intensive) gives rise to an endogenous channel of the international transmission of shocks that first, can substantially ameliorate the "quantity anomalies" that mark large open-economy models, and second, generate a cross-sectional prediction that is strongly supported by the data: investment correlations tend to be stronger for country-pairs that exhibit greater disparity in the factor-intensity of trade. In addition, three new pieces of evidence support the central mechanism: (1) the production composition of capital versus labor-intensive sectors changes over the business cycle; (2) the prices of capital-intensive goods and labor-intensive goods are respectively, procyclical and countercyclical; (3) a positive productivity shock in the U.S. tilts the composition of production towards capital-intensive sectors in other countries.
    Keywords: International business cycles, international comovement, composition effects
    JEL: F41
    Date: 2011–11
  19. By: Illescas, Javier; Jaramillo, C. Felipe
    Abstract: The rapid growth of exports since the early 1990s is a central feature in the extraordinary rise of Peru's economy in recent years. This study puts a lens on this export growth episode, with special attention to two issues. The first one is the role of international price levels as well as export volumes in explaining this growth. The second one is whether Peru has seen a diversification of its exports during this growth episode. The empirical analysis finds that although the increase in international mineral prices has exerted a significant impact in recent years, much of the growth of Peru's export revenues has also been related to an increase in volumes. This finding applies to traditional and non- traditional exports, although the importance of volumes is more predominant for the latter. The analysis does not reveal a trend toward greater diversification of Peru's exports since 1993. On the contrary, some of the evidence suggests that the rises in price and volumes in the mining components could be leading to greater concentration. Nonetheless, there is a clear trend toward diversification among non-traditional exports due to the significant emergence of new export products in recent years.
    Keywords: Economic Theory&Research,Achieving Shared Growth,Agribusiness&Markets,Markets and Market Access,Tax Law
    Date: 2011–11–01
  20. By: Eckhardt Bode; Franz-Josef Bade Bade; Eleonora Cutrini Cutrini
    Abstract: In this paper, we explore empirically the aggregate patterns of offshoring (or outsourcing) of tasks, which we call “functionsâ€, within a country, and link these patterns to those of offshoring across countries, thereby bridging the existing gap in the literature between intra- and international offshoring. By estimating K densities from georeferenced establishment-level data, we assess, separately for 27 West German manufacturing industries, to what extent three selected functions, production, headquarters (HQ), and research and development (R&D), were spatially clustered—both individually and with each other—in these industries. We also assess how these patterns of spatial clustering of functions changed during the past two decades (1992 – 2007). Please note This is begginning of the extended abstract which is uploaded.
    Date: 2011–09

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