nep-int New Economics Papers
on International Trade
Issue of 2011‒12‒13
38 papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. The Incidence of Geography on Canada's Services Trade By James E. Anderson; Catherine A. Milot; Yoto V. Yotov
  2. Did International Trade Become Dirtier in Developing Countries? On the Composition Effect of International Trade on the Environment By Yushi Yoshida; Satoshi Honma
  3. The Effectiveness of Preferential Trade Liberalization in Central and Eastern Europe By Jan Hagemejer; Andrzej Cieślik
  4. The Impact of Immigration on International Trade: A Meta-Analysis By Genc, Murat; Gheasi, Masood; Nijkamp, Peter; Poot, Jacques
  5. The Empirics of Firm Heterogeneity and International Trade By Andrew B. Bernard; J. Bradford Jensen; Stephen J. Redding; Peter K. Schott
  6. Trading Tasks and Quality By F. Banu Demir
  7. European Accounting Harmonisation: Consequences of IFRS Adoption on Trade in Goods and Foreign Direct Investments By Laura Márquez-Ramos
  8. Gravity chains: estimating bilateral trade flows when parts and components trade is important By Richard Baldwin; Daria Taglioni
  9. GATT/WTO membership does promote international trade after all – Some new mmpirical evidence By Konya, Laszlo; Matyas, Laszlo; Harris, Mark
  10. Towards a Theory of Trade Finance By Tim Schmidt-Eisenlohr
  11. Spatial Exporters By Fabrice Defever; Benedikt Heid; Mario Larch
  12. Minimum wage and export: evidence from Chinese firm-level data By Ma, Shuang; Sun, Churen; Tian, Guoqiang
  13. On the relationship between tariff levels and the nature of mergers By Yildiz, Halis Murat; Ulus, Aysegul
  14. Agri-food exports and the enlarged european union By Alessandro Antimiani; Anna Carbone; Valeria Costantini; Roberto Henke
  15. Hub and spoke trade agreements under oligopoly with asymmetric costs By Yildiz, Halis Murat
  16. Multinational Corporations, FDI and the East Asian Economic Integration By Tzu-Han YANG; Deng-Shing HUANG
  17. International Openness and Social Development as Endogenous Determinants of Growth By Łukasz Goczek
  18. Quality Upgrading, Skill Demand and International Trade: The Case of German Manufacturing By Elisabeth Kutschka
  19. Trade relationship between E.U. and U.S. By Albu, Gina
  20. Trade Liberalization, Inequality and Poverty in Brazilian States. By Sztulman, Aude; Menéndez, Marta; Castilho, Marta
  21. Export dynamics and sales at home By Berman, Nicolas; Berthou, Antoine; Héricourt, Jérôme
  22. Does trade creation by social and business networks hold in services? An analysis for Accommodation and Restaurants in Spain By de la Mata, Tamara
  23. Entry Costs and Increasing Trade By William Lincoln; Andrew McCallum
  24. Trade patterns and trade clusters: China, India, Brazil and South Africa in the global trading By Silvia Nenci; Pierluigi Montalbano
  25. The time cost of documents to trade By Amin, Mohammad
  26. China and the world trading system By Mattoo, Aaditya; Subramanian, Arvind
  27. The Organization of European Multinationals By Marin, Dalia; Rousová, Linda
  28. Why foreign ownership may be good for you By Egger, Hartmut; Kreickemeier, Udo
  29. Markups and export pricing By Gullstrand, Joakim; Olofsdotter, Karin; Thede, Susanna
  30. Migration, trade and unemployment By Heid, Benedikt; Larch, Mario
  31. Does Trade Globalization Induce or Inhibit Corporate Transparency? Unbundling the Growth Potential and Product Market Competition Channels By Hui Tong; Shang-Jin Wei
  32. Inward FDI and firm-specific advantages of Indian manufacturing industries By Mishra, Bikash Ranjan
  33. Role of trade policies in growth of Indian manufacturing sector By Banga, Rashmi; Das, Abhijit
  34. A China Round of Multilateral Trade Negotiations By Aaditya Mattoo; Arvind Subramanian
  35. Is Technical Assistance under Free Trade Agreements WTO-Plus? A Review of Japan–ASEAN Economic Partnership Agreements By Hamanaka, Shintaro
  36. International trade and polarization in the labor market By Das, Satya P.
  37. Can Asia Sustain an Export-Led Growth Strategy in the Aftermath of the Global Crisis? An Empirical Exploration By Razmi, Arslan; Hernandez, Gonzalo
  38. Regional Determinants of MNE's Location Choice in Transition Economies By Andrea Gauselmann; Philipp Marek

  1. By: James E. Anderson; Catherine A. Milot; Yoto V. Yotov
    Abstract: We estimate geographic barriers to export trade in nine service categories for Canada's provinces from 1997 to 2007 using the structural gravity model. Constructed Home, Domestic and Foreign Bias indexes (the last two new) capture the direct plus indirect effect of services trade costs on intra-provincial, inter-provincial and international trade relative to their frictionless benchmarks. Barriers to services international trade are huge relative to inter-provincial trade and large relative to goods international trade. A novel test confirms the fit of structural gravity with services trade data.
    JEL: F1
    Date: 2011–12
  2. By: Yushi Yoshida (Faculty of Economics, Kyushu Sangyo University); Satoshi Honma (Faculty of Economics, Kyushu Sangyo University)
    Abstract: Utilizing the world panel dataset for the pollution emission embedded in international trade for the period between 1988 and 2009, we investigated whether the composition of international trade of a country moved away from pollution-intensive industries as its income level rises. The empirical evidence suggests that the income levels of countries are negatively related to export pollution intensity, but we also find that income is negatively related to import pollution intensity. Thus, the composition effect of international trade on the environment is only consistent with the pollution haven hypothesis on the export side, which predicts that developing countries export more of dirtier industries and import more of cleaner industries after trade liberalization. Further investigation reveals that the lower-middle income countries experienced an increase in the pollution emission of exports and a decrease in the pollution emission of imports, whereas the countries in the lowest income group experienced increases in the pollution emission embodied in both exports and imports.
    Keywords: Composition effect; Environment; International trade; Pollution emission; Pollution haven hypothesis.
    JEL: F18 O13 Q56
    Date: 2011–12
  3. By: Jan Hagemejer (Faculty of Economic Sciences, University of Warsaw; Economic Institute, National Bank of Poland); Andrzej Cieślik (Faculty of Economic Sciences, University of Warsaw)
    Abstract: After the collapse of communism in Central and Eastern Europe (CEE) many countries in the region radically liberalized their foreign trade regimes in the 1990s. In particular preferential trade liberalization in the CEE countries has been promoted by the European Union in the form of the association agreements that involved “vertical” trade liberalization between the EU and countries in Central and Eastern Europe. In addition to this the CEE countries liberalized trade “horizontally” among themselves in the form of sub-regional and bilateral free trade agreements. In this paper, we use the generalized gravity equation estimated on bilateral trade data for ten CEE countries during the period of 1993-2004 to evaluate the effectiveness of preferential trade liberalization in Central and Eastern Europe. We find that all forms of preferential trade liberalization positively contributed to the expansion of trade of the CEE countries but their impact was country specific.
    Keywords: bilateral trade, gravity equation, preferential trade liberalization
    JEL: F13 F15 P33
    Date: 2011
  4. By: Genc, Murat (University of Otago); Gheasi, Masood (VU University Amsterdam); Nijkamp, Peter (VU University Amsterdam); Poot, Jacques (University of Waikato)
    Abstract: Since the early 1990s many empirical studies have been conducted on the impact of international migration on international trade, predominantly from the host country perspective. Because most studies have adopted broadly the same specification, namely a log-linear gravity model of export and import flows augmented with the logarithm of the stock of immigrants from specific source countries as an additional explanatory variable, the resulting elasticities are broadly comparable and yield a set of estimates that is well suited to meta-analysis. We therefore compile and analyze in this paper the distribution of immigration elasticities of imports and exports across 48 studies that yielded 300 observations. The results show that immigration complements rather than substitutes for trade flows between host and origin countries. Correcting for heterogeneity and publication bias, an increase in the number of immigrants by 10 percent may be expected to increase the volume of trade on average by about 1.5 percent. However, the impact is lower for trade in homogeneous goods. Over time, the growing stock of immigrants decreases the elasticities. The estimates are affected by the choice of some covariates, the nature of the data (cross-section or panel) and the estimation technique. Elasticities vary between countries in ways that cannot be fully explained by study characteristics; trade restrictions and immigration policies matter for the impact of immigration on trade. The migrant elasticity of imports is larger than that of exports in about half the countries considered, but the publication bias and heterogeneity-corrected elasticity is slightly larger for exports than for imports.
    Keywords: international trade, imports, exports, immigration, gravity model, meta-analysis
    JEL: F16 F22
    Date: 2011–11
  5. By: Andrew B. Bernard; J. Bradford Jensen; Stephen J. Redding; Peter K. Schott
    Abstract: This paper reviews the empirical evidence on firm heterogeneity in international trade. A first wave of empirical findings from micro data on plants and firms proposed challenges for existing models of international trade and inspired the development of new theories emphasizing firm heterogeneity. Subsequent empirical research has examined additional predictions of these theories and explored other dimensions of the data not originally captured by them. These other dimensions include multi-product firms, offshoring, intra-firm trade and firm export market dynamics.
    JEL: F10 F12 F14
    Date: 2011–11
  6. By: F. Banu Demir
    Abstract: I present a trade model featuring North-South differences in demand for quality and in quality of task supply. The model explains a number of stylised facts: Southern firms charge higher factory-gate prices for their products in rich than in poor, and in distant than in near markets. The model predicts that firms vary the quality of their products across markets by changing, between varieties, the fractions of low and high-quality tasks. This mechanism for quality differentiation introduces a new margin to trade: the extensive margin of intermediate imports. Extension of the model to general equilibrium with heterogeneous firms shows that even under low fixed and zero variable trade costs, only the more productive Southern firms export to the rich Northern market. Compared to their domestic market, they charge higher prices in the North, with the most productive ones earning higher revenues.
    Keywords: Quality, Task trade, Heterogeneous firms
    JEL: F12 L11
    Date: 2011
  7. By: Laura Márquez-Ramos (Department of Economics and Institute of International Economics, UniversitatJaume I)
    Abstract: This paper focuses on the importance of accounting harmonisation in foreign activities at country level. The adoption of International Financial Reporting Standards (IFRS) is considered to reduce information costs among countries and, therefore, encourage international trade in goods and investment. The results provide evidence that benefits exist in terms of trade in goods and foreign direct investments (FDI) when IFRS are adopted.
    Keywords: IFRS, trade in goods, FDI, gravity
    JEL: F40
    Date: 2011
  8. By: Richard Baldwin (The Graduate Institute of International and Development Studies, Rue de Lausanne 132, P.O. Box 136, CH – 1211 Geneva 21, Switzerland.); Daria Taglioni (The World Bank, 1818 H Street, NW, Washington, DC 20433, USA and European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.)
    Abstract: Trade is measured on a gross sales basis while GDP is measured on a net sales basis, i.e. value added. The rapid internationalisation of production in the last two decades has meant that gross trade flows are increasingly unrepresentative of value added flows. This fact has important implications for the estimation of the gravity equation. We present empirical evidence that the standard gravity equation performs poorly by some measures when it is applied to bilateral flows where parts and components trade is important. We also provide a simple theoretical foundation for a modified gravity equation that is suited to explaining trade where international supply chains are important. JEL Classification: F01, F10.
    Keywords: Value chains, parts and components trade, gravity, bilateral flows.
    Date: 2011–11
  9. By: Konya, Laszlo; Matyas, Laszlo; Harris, Mark
    Abstract: The declared objective of the General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO) is to promote free trade between member states. Nonetheless, an exhaustive study of bilateral merchandise trade based on a large panel data set led Rose (2004) to conclude that there is no compelling empirical evidence to show that GATT/WTO membership does actually encourage international trade. This unanticipated finding generated a great deal of attention in the literature and several scholars put forward various explanations for it. In this paper we set up a new international trade data set which, unlike Rose’s, allows us to model exports and imports separately and to study the extensive margin of trade, i.e., the number of bilateral trade relationships. Using this data set and a gravity framework, first we demonstrate how to obtain puzzling negative results and so explain the previous unintuitive findings. Then we show that GATT/WTO membership does indeed encourage international trade, so the most obvious reason for Rose’s negative outcome is the lack of zero bilateral trade observations in his data set.
    Keywords: GATT/WTO; international trade; gravity model; multidimensional panel data
    JEL: F13 C23 C24 F49
    Date: 2011–06
  10. By: Tim Schmidt-Eisenlohr
    Abstract: Shipping goods internationally is risky and takes time. To allocate risk and to finance the time gap between production and sale, a range of payment contracts is utilized. I study the optimal choice between these payment contracts and their implications for trade. The equilibrium contract is determined by financial market characteristics and contracting environments in both the source and the destination country. Trade increases in enforcement probabilities and decreases in financing costs proportional to the time needed for trade. Empirical results from gravity regressions are in line with the model, highly significant and economically relevant. They suggest that importer finance is as important for trade as exporter finance.
    Keywords: Trade finance, Payment contracts, Trade patterns, Distance interaction
    JEL: F12 F3 G21 G32
    Date: 2011
  11. By: Fabrice Defever; Benedikt Heid; Mario Larch
    Abstract: In this paper, we provide evidence that expanding firms tend to serve new markets which are geographically close and culturally related to their prior export destinations. We quantify the impact of this spatial pattern using a Chinese firm-level data set. To ensure an exogenous set of potential new destinations (25 EU countries, US and Canada) and an exogenous timing of entry, we focus on firms that benefited from the abrupt end of the textile quota restrictions in 2005. Controlling for firmproduct and destination specific effects and ac- counting for possible multiple new export destinations we show that the probability to export to a country increases by 15 to 38 percent for each prior export destination with a geographical or cultural link with this country.
    Keywords: export destination choice, spatial correlation, firm-level customs data, MFA/ATC quotaremoval
    JEL: F12 F13 C25
    Date: 2011–12
  12. By: Ma, Shuang; Sun, Churen; Tian, Guoqiang
    Abstract: This paper proposes a two-country trade equilibrium model with heterogeneous firms to investigate the influences of minimum wages and productivity on firms' exports. It shows that the influence of minimum wages on firms' exporting probability and foreign sales is negative while that of firms' productivity on their exports is positive. Econometric analysis based on the Annual Survey of Chinese Industrial Firms as well as the data of minimum wages collected ourselves from 1998 to 2007 verifies these predictions. Holding the other variables constant, if minimum wages and their productivity increase by 100%$, then the elasticity of minimum wage on firms' exporting sales is -8.6% while that of firms' productivity is 75.6%, and firms' exporting possibility decreases by 1.1%$ and increases by 1.6%$, respectively.
    Keywords: Minimum wage; heterogeneous firm; productivity; export
    JEL: F16 L25 F12
    Date: 2011–07–22
  13. By: Yildiz, Halis Murat; Ulus, Aysegul
    Abstract: This paper employs an endogenous merger formation approach in a two-country oligopoly model of trade to examine the international linkages between the nature of mergers and tariff levels. Firms sell differentiated products and compete in a Bertrand fashion in product markets. We find two effects playing key roles in determining equilibrium market structure: the tariff saving effect and the protection gain effect. The balance between these two effects implies that, when foreign country practices free trade, unilateral tariff reduction by a domestic country yields international mergers irrespective of the substitutability levels. By contrast, when foreign tariffs are sufficiently high and products are close substitutes, national mergers obtain in the equilibrium. Therefore, the implications of unilateral trade liberalization on the equilibrium market structure depends on the trade regime in foreign country especially when products are close substitutes. Unlike this asymmetric result of unilateral trade liberalization, we find that when bilateral tariffs are sufficiently low, international mergers arise. These results fit well with the fact that global trade liberalization has been accompanied by an increase in international merger activities. Finally, from a welfare perspective, we show that international mergers are preferable to national mergers and thus social and private merger incentives become aligned together as trade gets bilaterally liberalized.
    Keywords: international mergers; national mergers; tariff saving; protection gain
    JEL: F13 F12
    Date: 2011–07–03
  14. By: Alessandro Antimiani; Anna Carbone; Valeria Costantini; Roberto Henke
    Abstract: This paper explores agri-food export dynamics in New Member States (NMS) and Old Member States (OMS) of the European Union during the enlargement process. A quality-oriented survey is conducted by developing an original analytical framework which combines information from trade similarity analysis with elements from the sophistication literature. Country and sector specific features seem to emerge, revealing a more complex picture than that produced by aggregated trade analysis. While for some NMS agri-food exports, patterns converge towards OMS with regard to size, competitiveness and quality improvement process, for other NMS, a low-quality trap seems to prevail
    Keywords: Agri-food sector, export dynamics, EU enlargement, quality upgrading
    JEL: F14 F15 Q17
    Date: 2011–07
  15. By: Yildiz, Halis Murat
    Abstract: Using an oligopoly model of trade, we study the individual and world welfare implications of hub and spoke trade agreements. Under a hub and spoke regime, the hub country can benefit at the expense of the spokes relative to free trade. Furthermore, if the hub is sufficiently efficient compared to the spokes, such a regime can yield higher global welfare than free trade. Preferential treatment of the hub country in its export markets improves world welfare because it helps allocate a larger share of the world's output to a low cost location.
    Keywords: oligopoly; hub and spoke trade agreements; global free trade
    JEL: F13 F12
    Date: 2011–10–02
  16. By: Tzu-Han YANG; Deng-Shing HUANG
    Abstract: The phenomenon of fast-growing business activities of multinational corporations around the world has generated much interest in understanding its implications for the development of the world economy as well as the relationships among national economies. By analyzing the world's top 2000 firms published by Forbes Magazine (the Forbes Global 2000), this article first investigates the contents and structural evolution of these giant multinational firms and their relationship with national foreign direct investment (FDI). We then adopt the method of clustering analysis to investigate FDI and trade networks within and among regions through which the development of regional economic integration are revealed.
    Date: 2011–10
  17. By: Łukasz Goczek (Faculty of Economic Sciences, University of Warsaw)
    Abstract: We study empirically the impact of social indicators on growth in the context of FDI and trade. In this article, we argue that the positive growth effects of FDI and trade arise from factors such as knowledge spillovers or technological upgrading. Therefore, the effect of FDI and trade depends on the structural and sectoral investment composition, which depends in turn on social indicators such as income inequality, human development, education, and health.
    Keywords: growth, FDI, social development
    JEL: F20 E66 F43
    Date: 2011
  18. By: Elisabeth Kutschka (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)
    Abstract: The present paper contributes to the ongoing debate about how international trade can affect the demand for skills in industrial countries by estimating the impact of quality competition on the relative demand for low skilled workers in German manufacturing between 1995 and 2004. Results reveal a statistically significant negative effect albeit relatively small in size with quality competition accounting for approximately 5% of the overall decline in low skilled workers' wage bill share. This effect entirely stems from quality competition with other advanced countries. The influence of trade in different qualities with newly industrializing economies is negligible.
    Keywords: international trade, quality differentiated products, labour demand
    JEL: C23 F16 J23
    Date: 2011–10
  19. By: Albu, Gina
    Abstract: The paper tries to underline the evolution of trade between the E.U. and U.S. financial crisis period. In the analysis we present trend of trade in goods, services and foreign direct investment. Financial economic crisis had repercussions throughout the economy, its effects are visible throughout the international trade and the consequences are major.
    Keywords: trade; goods; commercial services; investment flow
    JEL: F4 F1
    Date: 2011–11–29
  20. By: Sztulman, Aude; Menéndez, Marta; Castilho, Marta
    Abstract: This paper studies the impact of trade liberalization and international trade on household income inequality and poverty using detailed micro-data across Brazilian states, from 1987 to 2005. Results suggest that Brazilian states that were more exposed to tariff cuts experienced smaller reductions in household poverty and inequality. If significance of results on Brazilian states depends on the choice of poverty and inequality indicators, robust and contrasting results emerge when we disaggregate into rural and urban areas within states. Trade liberalization contributes to poverty and inequality increases in urban areas and may be linked to inequality declines in rural areas (no significant effect on rural poverty appears from our study). In terms of observed integration to world markets, import penetration plays a similar role as trade liberalization for Brazilian states as a whole. On the contrary, rising export exposure appears to have significantly reduced both measures of household welfare.
    Keywords: Trade liberalization; Brazil states; Inequality; Poverty;
    JEL: D31 F16 F14
    Date: 2011
  21. By: Berman, Nicolas; Berthou, Antoine; Héricourt, Jérôme
    Abstract: How do firms' sales interact across markets? Are foreign and domestic sales complements or substitutes? Using a large French firm-level database that combines 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 the firms' demand on foreign markets to instrument yearly variations in exports. We use alternatively as instruments product-destination specific imports or tariffs changes, and large foreign shocks such as financial crises or civil wars. 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: domestic sales; export dynamics; liquidity; markets
    JEL: F10 F20
    Date: 2011–12
  22. By: de la Mata, Tamara (Departamento de Análisis Económico (Teoría e Historia Económica). Universidad Autónoma de Madrid.)
    Abstract: Recent literature on the border effect fostered research on informal barriers to trade and the role of networks promoting it. In relation to social networks, it has been shown that the intensity of trade of goods is positively correlated with the migration flows between any pair of countries/regions. In this article it is investigated if such a relation also holds for the Spanish domestic trade flows of services. With this aim, a gravity model rooted in the Dixit–Stiglitz–Krugman theoretical frameworks is used taking advantage of a unique dataset on interregional trade flows of some of the main sectors linked to Tourism, namely, Accommodation and Restaurants. A different analysis of each sector separately is carried out, finding a big positive effect for Restaurants, but no effect for the Hostel industry. These novel results can be explained by forces driving the demand in each sector. Migration linkages are measured by means of Register data, regarding the stock of people born in each region living in the others. Business networks are approached by a matrix of companies in different regions operating in these key sectors that are connected.
    Keywords: Gravity model; bilateral exports; border effect; Social and business networks; internal migration; interregional trade.
    JEL: F14 F17 F21 L14
    Date: 2011–10
  23. By: William Lincoln; Andrew McCallum
    Abstract: Using confidential microdata from the US Census, we find that the fraction of manufacturing plants that export rose from 21% in 1987 to 39% in 2006. It has been suggested that similar trends in other countries may have been caused by declining costs of entering foreign markets. Our study tests this hypothesis for the first time. Both reduced form and structural estimation approaches find little evidence that the entry costs declined significantly in the US over this period. We instead argue that changes in other factors that determine export status are sufficient to explain these trends.
    Date: 2011–12
  24. By: Silvia Nenci; Pierluigi Montalbano
    Abstract: The present paper analyzes the evolution of the specialization and trade patterns of China, India, Brazil and South Africa (CIBS) and other WTO countries. It aims to provide an answer to the following questions: is there a tendency to a multi-polarization of trade patterns? If so, is CIBS’ rise leading to new clusters with or among CIBS or other emerging countries? Also, ultimately, does this multi-polarization have a regional element to it? The paper deals with the above questions by presenting: i) a world map of trade clusters involving WTO countries and CIBS; ii) a comparison of the above clusters and their key characteristics in the last decade; and iii) the key drivers of clusters’ trends. The novelty of this study is twofold: first, it adopts a more comprehensive dataset for a wide range of countries and trade dimensions; second, it provides an evolutionary look at the clusters’ trends. The empirical results do not show neither a remarkable phenomenon of multi-polarization, nor evidence of CIBS as a significant separate group and/or regional agglomeration
    Keywords: CIBS, trade patterns, trade specialization, cluster
    JEL: F10 F14 F15 C38
    Date: 2011–02
  25. By: Amin, Mohammad
    Abstract: This paper analyzes the relationship between the number of documents required to export and import and the time it takes to complete all procedures to trade. It shows that an increase in the number of documents required for export and import tends to increase the time cost of shipments. However, this relationship is far from simplistic, varying sharply in magnitude across rich versus poor countries and small versus large countries. Specifically, the increase in the time cost of increased documentation is much larger for relatively poor and larger countries. One interpretation of this finding is that richer countries that have more resources and smaller countries that rely more on trade invest more in building efficient documentation systems. Hence, in such countries relative to others, increased documentation adds less to the time cost at the margin. At a broader level, the findings suggest caution in interpreting how input-based measures such as the number of required documents to trade affect the quality of the business environment as far as the associated cost is concerned.
    Keywords: Economic Theory&Research,Information Security&Privacy,Science Education,Scientific Research&Science Parks,Inequality
    Date: 2011–12–01
  26. By: Mattoo, Aaditya; Subramanian, Arvind
    Abstract: The World Trade Organization has been until recently an effective framework for cooperation because it has continually adapted to changing economic realities. The current Doha Agenda is an aberration because it does not reflect one of the largest shifts in the international economic and trading system: the rise of China. Although China will have a stake in maintaining trade openness, an initiative that builds on but redefines the Doha Agenda would anchor China more fully in the multilateral trading system. Such an initiative would have two pillars. The first is a new negotiating agenda that would include the major issues of interest to China and its trading partners, and thus unleash the powerful reciprocal liberalization mechanism that has driven the World Trade Organization process to previous successes. The second is new restraints on bilateralism and regionalism that would help preserve incentives for maintaining the current broadly non-discriminatory trading order.
    Keywords: Emerging Markets,Economic Theory&Research,Free Trade,Debt Markets,Trade Law
    Date: 2011–12–01
  27. By: Marin, Dalia; Rousová, Linda
    Abstract: Recent literature on international trade has established that the most productive firms become multinationals. But our data reveal a startling variation in productivity levels of foreign affiliates across the countries in Eastern Europe of the same European multinational parent firms suggesting that not all multinationals transplant their home productivity advantage to the new EU Member States and Emerging Europe. One candidate for this startling difference in productivity levels among foreign affiliates is the ability of European multinationals to transport their business model abroad. This paper examines the conditions under which European multinationals give autonomy to their subsidiaries and delegate authority to them. We also analyse the conditions under which European multinationals transplant their business model to Eastern Europe. We collect original and unique matched parent and affiliate data on the internal organization of 660 German and Austrian parent firms and 2200 of their subsidiaries in Eastern Europe including the former Soviet Union. We test the hypothesis that the ability of European multinationals to transplant their business model to foreign affiliates is determined by the organization of European multinationals on the one hand and the market environment their affiliate firms face in Eastern Europe on the other hand. We show that the business culture of parent firms accounts for about 50 percent of the variation of the organization of subsidiaries, while the market environment of subsidiaries contributes the rest.
    Keywords: International Trade and Organizations; Multinational firm with internal hierarchies; Empirical test of the theory of the firm; Technology transfer to Eastern Europe; Organizational transfer across countries
    JEL: F F23 D21 L22 O1
    Date: 2011–12
  28. By: Egger, Hartmut; Kreickemeier, Udo
    Abstract: We develop a general equilibrium two-country model with heterogeneous producers and rent sharing at the firm level due to fairness preferences of workers. We identify two sources of a multinational wage premium. On the one hand, there is a pure composition effect because multinational firms are more productive, make higher profits, and therefore pay higher wages. On the other hand, there is a firm-level wage effect: A multinational firm pays higher wages in its home market than an otherwise identical national firm since it has higher global profits. We analyse how these two sources interact in determining the multinational wage premium in a setting with two identical countries, and show that in this case the wage premium is fully explained by firm characteristics. We then allow for technology differences between countries and find that a residual wage premium exists in the technologically backward country, but not in the advanced country. --
    Keywords: multinational firms,wage premium,heterogeneous firms
    JEL: D31 F12 F15 F16 H25
    Date: 2011
  29. By: Gullstrand, Joakim (Department of Economics, Lund University); Olofsdotter, Karin (Department of Economics, Lund University); Thede, Susanna (Department of Economics, Lund University)
    Abstract: We analyze empirically product-price variation across export destinations using detailed firm-product data. Most recent studies using highly disaggregated data emphasize variations in product quality as an explanation as to why firms charge different prices for the same product on different export markets. In this paper, we take an alternative approach and assume that variations in firms' export prices reflect market segmentation and investigate the relationship between price variation and average firm markup. We study an entire supply chain in order to see how price discrimination varies across sectors with different distribution networks. Specifically, we make use of firm-level data for exporting firms in the Swedish food supply chain. The results offer new information about the behavior of exporting firms. Hence, for the food-processing industry, firms with greater ability to discriminate between markets are associated with a higher markup. However, the results also reveal that markups are a complex function of firm characteristics and that the price-setting behavior of firms in the manufacturing sector is not necessarily observed in other sectors of the supply chain.
    Keywords: Markups; Export prices; Price discrimination; Firm-level data
    JEL: D40 F12 F14
    Date: 2011–11–24
  30. By: Heid, Benedikt; Larch, Mario
    Abstract: A source of anxiety of policy makers and the public in general is the detrimental impact of globalization and immigration on unemployment. The transitory restrictions for worker migration after the EU enlargements of 2004 and 2007 exemplify the supposed negative effect of immigration on labor markets. This paper aims to identify the effects of immigration alongside trade on unemployment taking into account the substitutability of worker and goods flows. We use data from 24 OECD countries over the period from 1997 to 2007 and employ instrumental variables fixed effects and dynamic panel estimators in order to account for unobserved heterogeneity as well as the potential endogeneity of migration flows and the high persistence of unemployment. We find a significant negative effect of immigration on unemployment on average. --
    Keywords: migration,unemployment,international trade,fixed effects instrumental variable panel estimators,dynamic panel estimators
    JEL: C23 C26 F15 F16 F22
    Date: 2011
  31. By: Hui Tong; Shang-Jin Wei
    Abstract: How does increasing globalization affect corporate transparency? Freer trade represents different facets and in theory has ambiguous effects on corporate transparency. On the one hand, by exposing firms to more product market competition, it could discourage discretionary disclosure. On the other hand, by opening up foreign markets and enhancing firms’ growth opportunities, it may promote more transparency. Rather than simply estimating a net effect, this paper pursues an approach that allows separate estimation of the two potentially opposing channels. We employ three different measures of corporate transparency and track their evolutions for 4061 firms in 49 countries during 1992-2005. By using detailed product-level tariff schedules for these countries, we construct a measure of growth opportunities enabled by foreign tariff liberalizations at the sector-country-year level, and a second measure of globalization-induced product market competition based on a country’s own tariff liberalization (again at the sector–country-year level). We find strong evidence that higher growth opportunities engendered by globalization promotes corporate transparency, especially in industries that depend heavily on external financing. At the same time, we find somewhat weaker evidence that greater product market competition engendered by globalization discourages corporate transparency. The results demonstrate the importance of disentangling the multiple and potentially conflicting effects of globalization.
    JEL: F10 G30
    Date: 2011–12
  32. By: Mishra, Bikash Ranjan
    Abstract: The unprecedented growth of international productions and Foreign Direct Investment (FDI) flows over the last two decades has led to the upsurge in scientific investigation into the distinctive facets of FDI. Despite the considerable amount of research undertaken, it seems that there is very little comprehensive economic analysis of FDI flows with respect to Indian firms. The present study attempts to bridge this gap by answering the following research question: what are the micro-level causes of FDI inflow, i.e. what are the determinants or pull factors of FDI inflow into Indian domestic firms? In order to analyze this question the study uses a panel data structure constructed over the recent 5 years, ranging from 2006 to 2010 and covering 22 sectors in Indian Manufacturing Industries. Adoption of Fixed and Random effects estimation procedure help to identify that among a set of firm-specific factors, only technological intensity, both in-house and import along with product differentiation have negatively contributed for foreign investors’ shareholding of local firms. The export performance, age, asset size and sales volume are among other remaining firm-specific characteristics which lack effective pulling effects in attracting FDI.
    Keywords: Key words: FDI; firm-specific factors; panel data
    JEL: C23 F21 B41
    Date: 2011–12–01
  33. By: Banga, Rashmi; Das, Abhijit
    Abstract: Abstract: Indian manufacturing sector witnessed an unprecedented growth in the decade of 2000. Not only did the average annual growth touch 8%, there was a stupendous rise in growth of real exports and real imports of manufactures in this decade. This is also the decade when the average annual growth of real per capita income was the highest (5.6%). In this scenario, the paper examines three issues: firstly, the role played by trade polices and reforms in the growth of the manufacturing sector. Secondly, whether this growth was an export-led growth? And thirdly, what are the successful stories at the industry level. Structural breaks are identified in growth rate of manufacturing sector and growth rates of real exports and real imports using Additive Outliers (AO) and Innovative Outliers (IO) tests. The results show that the reforms of 1991 played a more crucial role than the reforms of 1980s in causing structural break in overall manufacturing growth. Changes in export and import policies which were brought about in 2001 and 2002 led to structural breaks in real exports and real imports of the sector. Time series analysis is undertaken and Vector Error Correction model is estimated using two different specifications to test whether manufacturing growth is an export-led growth or not. Granger causality tests are undertaken to check the causality. The results show that growth of Indian manufacturing sector is not an export-led growth but has been induced by domestic demand and import growth. Motor vehicles and food and food products industries are identified as successful stories with respect to growth in value added and growth in trade while electrical machinery and, chemicals and chemical products with some others are identified as industries which need to be closely monitored as they may have the danger of possible hollowing out.
    Keywords: Indian manufacturing sector; Indian manufacturing growth; reforms of 1991; structural break; IO and AO; VECM for Indian manufacturing; Export Led Growth; Hollowing out
    JEL: F13 O25 O24 L6 F14
    Date: 2011–11
  34. By: Aaditya Mattoo (; Arvind Subramanian (Peterson Institute for International Economics)
    Abstract: Until recently, the World Trade Organization (WTO) has been an eff ective framework for cooperation because it has continually adapted to changing economic realities. Th e current Doha Agenda is an aberration because it does not refl ect one of the biggest shifts in the international economic and trading system: the rise of China. Even though China will have a stake in maintaining trade openness, an initiative that builds on but redefi nes the Doha Agenda would anchor China more fully in the multilateral trading system. Such an initiative would have two pillars. First, a new negotiating agenda that would include the major issues of interest to China and its trading partners, and thus unleash the powerful reciprocal liberalization mechanism that has driven the WTO process to previous successes. Second, new restraints on bilateralism and regionalism that would help preserve incentives for maintaining the current broad non-discriminatory trading order.
    Keywords: China, trade, multilateralism, WTO, Doha Agenda
    JEL: F1 F2 F5
    Date: 2011–12
  35. By: Hamanaka, Shintaro (Asian Development Bank)
    Abstract: What kind of technical assistance and capacity building benefits do developing countries enjoy if they sign a free trade agreement (FTA) with developed countries? This is a frequently asked question among developing country officials involved in FTA policymaking. While we tend to normatively insist that an FTA should lead to a win-win situation for all contracting parties and that developed members should provide technical assistance to developing partners so that the latter can maximize the benefits and minimize the costs of an FTA, empirical assessments of technical assistance mechanisms under FTAs have not been thoroughly conducted. This paper presents a detailed textual analysis of World Trade Organization (WTO) Agreements and several FTAs in Asia, and identifies how much additional technical assistance developing member countries can enjoy if they enter into FTAs with developed countries.
    Keywords: Technical Assistance; FTAs; North-South Cooperation; WTO Agreements
    JEL: F51 F53 K33
    Date: 2011–11–01
  36. By: Das, Satya P.
    Abstract: The paper builds an argument that international trade can be one explanation behind polarization of employment in the labor market observed in developed countries such as U.K. and U.S. It considers a small open economy, having production sectors which use three types of labor: high-skill, middle-skill and low-skill. The economy faces an increase in the relative price of the high-skill intensive sector. Using decision rules for choosing middle-skill and low-skill education, it is shown that such a terms of trade shock can lead to higher shares of high-skill as well as low-skill workers in the total workforce. The effects off-shoring on wages and job composition are also studied. That of low-skill and high-skill tasks, not middle-skill tasks, is shown to contribute towards polarization in job composition. --
    Keywords: polarization in labor markets,hollowing out,skill biased technical change,terms of trade,off-shoring
    JEL: F16 J21
    Date: 2011
  37. By: Razmi, Arslan (Asian Development Bank Institute); Hernandez, Gonzalo (Asian Development Bank Institute)
    Abstract: Many developing countries have attempted to pursue the East Asian growth model in recent decades. This model is widely perceived to have been based on export-led growth. Given that developed countries are likely to grow at a slower rate and be less willing to run trade deficits in the post-financial-crisis world can this growth model be sustained? Using panel data for Asian countries, this paper contributes to addressing this question by distinguishing between different kinds of export- and tradable-led growth in order to more precisely identify the nature of growth in the pre-crisis decades.
    Keywords: export-led growth; tradable-led growth; global imbalances; industrialization; capital accumulation
    JEL: F43 O11 O53
    Date: 2011–12–05
  38. By: Andrea Gauselmann; Philipp Marek
    Abstract: This paper analyses the impact of agglomeration effects, labour market conditions and other determinants on the location choice of MNEs in transition economies. We compare data from 33 regions in East Germany, the Czech Republic and Poland using a conditional logit model on a sample of 4,343 subsidiaries for the time period 2000-2010. The results show that agglomeration advantages, such as sectoral specialisation, a certain economic diversity as well as a region's economic and technological performance prove to be some of the most important pull factors for FDI in transition regions. In addition, the labour market factors prove to play an important role in the location of FDI.
    Date: 2011–12–01

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