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on International Trade |
| By: | Hatzigeorgiou, Andreas (Department of Economics, Lund University); Lodefalk, Magnus (Department of Economics, Lund University) |
| Abstract: | Migration has been associated with higher levels of trade. Previous studies interpret this as evidence of migrants’ ability to lower trade costs. Nevertheless, no study has investigated the impact of migrants on firms’ foreign trade. Thus, they fail to both provide evidence on the role that migrants may play in lowering firms’ trade costs, and exactly through which mechanisms the impact is derived. This study, being the first to study in depth the impact of immigration on trade at the firm level, bridges this gap in research. It utilizes new and unique employer-employee data for 12,000 Swedish firms, for the period 1998-2007, in a firm-level gravity framework. It provides novel firm-level evidence, demonstrating a significant, positive, and robust impact of immigrants in raising firms’ foreign trade. Migrants are found to increase trade both on the extensive and intensive product margin. Further, the study is able to conclude that the sustained effect mainly derives from lower information frictions through superior knowledge of foreign-markets, although contacts are also important. |
| Keywords: | trade costs; information; trust; migration; heterogeneous firms; gravity; firmlevel data; product margins |
| JEL: | D22 D83 F14 F22 |
| Date: | 2011–12–13 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:lunewp:2011_039&r=int |
| By: | Marco Duenas; Giorgio Fagiolo |
| Abstract: | This paper investigates whether the gravity model (GM) can explain the statistical properties of the International Trade Network (ITN). We fit data on international-trade flows with a GM specification using alternative fitting techniques and we employ GM estimates to build a weighted predicted ITN, whose topological properties are compared to observed ones. Furthermore, we propose an estimation strategy to predict the binary ITN with a GM. We find that the GM successfully replicates the weighted-network structure of the ITN, only if one fixes its binary architecture equal to the observed one. Conversely, the GM performs very badly when asked to predict the presence of a link, or the level of the trade flow it carries, whenever the binary structure must be simultaneously estimated. |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1112.2867&r=int |
| By: | Swati Dhingra |
| Abstract: | Firms face competing needs to expand product variety and reduce production costs. Trade policy affects firm investments in product variety and production processes differently. Access to larger markets enables innovation to reduce costs. Although firm scale increases, foreign competition reduces markups. Firms react by narrowing their product varieties to recapture these lost markups. I provide a theory detailing this conflicting impact of trade policy and address welfare gains from trade. Accounting for firm heterogeneity, I show support for the theoretical predictions with firm-level innovation data from Thailand's manufacturing sector which experienced unilateral home tariff changes during 2003-2006. |
| Keywords: | brands, trade, manufacturing, heterogeneous firms, Thailand |
| JEL: | F10 F14 M37 N80 |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1103&r=int |
| By: | Curuk, M. (Tilburg University, Center for Economic Research) |
| Abstract: | This paper suggests that contingent on the productivity level of the trade partner; international trade may create resource misallocation in less productive countries. It theoretically shows how productivity spillovers induced by trade with more productive countries and heterogeneity in pro- ductivity distributions across sectors lead to asymmetric pro-competitive effects, which in turn result in misallocation. It also presents robust empirical evidence supporting the model predictions by showing that trade with more productive regions as a share of purchasing power parity (PPP) GDP (1) increases economy wide markup variation, (2) raises mean sectoral productivity, and (3) decreases productivity dispersion within 4-digit sectors, only in less productive countries. |
| Keywords: | International trade;knowledge spillovers;firm size;misallocation. |
| JEL: | F10 F15 L11 O33 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubcen:2011125&r=int |
| By: | Giovanni Federico (European University Institute, Florence and Università di Pisa); Nikolaus Wolf (Humboldt University Berlin and CEPR) |
| Abstract: | The history of Italy since her unification in 1861 reflects the two-way relationship between foreign trade and economic development. Its growth was accompanied by a dramatic increase in the country’s integration with European and global commodity markets: foreign trade in the long run grew on average faster than the overall economy. Behind the dynamics of aggregate trade, Italy’s comparative advantage changed fundamentally over the last 150 years. The composition of trade, in terms of both commodities imported and exported and in terms of trading partners, developed from a high concentration of a few trading partners and a handful of rather simple commodities into a wide diversification of trading partners and more sophisticated commodities. In this chapter we use a new long-term database on Italian foreign trade at a high level of disaggregation to document and analyze these changes. We will conclude with an assessment of Italy’s prospects from a historical perspective. |
| Keywords: | international trade, 19th-20th century, Italy |
| JEL: | F14 N73 N74 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:workqs:qse_9&r=int |
| By: | Hugo Rojas-Romagosa |
| Abstract: | <p>Recent trade-in-tasks models suggest that relative low-skill wages may increase when low-skill tasks are offshored. However, using extensive numerical simulations of these models we find that wage inequality is increasing for almost all endowment combinations when we use a broad range of parameter values and model specifications. </p><p>The most common exception is when the country is relatively small and cannot affect international prices. In the case of relatively poor lowskill abundant countries, we find that offshoring is always welfare improving, but wage inequality effects are ambiguous. Finally, we find that a trade-intasks model with three skill-types can also account for wage polarization when we allow medium-skill tasks to be offshored.</p> |
| JEL: | F11 F16 J31 |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:cpb:discus:196&r=int |
| By: | Logan T. Lewis |
| Abstract: | This paper examines how nominal uncertainty affects the choice firms face to serve a foreign market through exports or to produce abroad as a multinational. I develop a two-country, stochastic general equilibrium model in which firms make production and pricing decisions in advance, and I consider its implications on this relative choice. For foreign firms, both exports and multinational production are priced in the destination currency, and this uncertainty has no effect on the relative decision. In the data, U.S. firms set nearly all of their export prices in dollars. Therefore, home firms price exports in their own currency in the model. Home exporters gain an advantage over home multinationals: during a foreign contraction, the foreign exchange rate appreciates, causing exported goods from the home country to be relatively cheaper. This pricing advantage affects exporters non-linearly through demand, which translates to convex profits. As foreign volatility rises, the model implies that the home country should serve the foreign country relatively more through exports. I take this implication to bilateral U.S. data, using inflation volatility as a proxy for nominal volatility. Using sectoral data on sales by majority-owned foreign affiliates matched with U.S. exports, I find that higher inflation volatility is associated with a significantly lower ratio of multinational production to total foreign sales. |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgif:1038&r=int |
| By: | Laborde Debucquet, David; Martin, Will; van der Mensbrugghe, Dominique |
| Abstract: | Traditional weighted-average measures of trade distortions are widely used in analyzing global and regional reforms, despite well-known deficiencies. This paper develops and applies optimal aggregators for the real-world case of multiple countries and commodities with much more detailed information on trade than on production and consumption. The approach reflects that different aggregators are needed for expenditure on imported goods and tariff revenues, and allows for incorporation of both intensive and extensive margins of adjustment to reform. Applications confirm that the technique is straightforward enough for widespread use, and point to close to a doubling of the welfare gains at the intensive margin when using the highest possible level of international commodity disaggregation, with larger gains in developing regions than in the industrial countries. The measured income gains increase along the entire path of liberalization, with slightly larger increases in the earlier stages, where the gaps between the responses of the expenditure and tariff revenue aggregators are largest. Sensitivity analysis suggests that, for global trade reform, the ease of substitution between tariff lines is much more important than that between varieties from different countries. |
| Keywords: | aggregation, distortions, economic welfare measurement, Trade reform, trade restrictiveness, |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:fpr:ifprid:1123&r=int |
| By: | Brett Berger; Robert F. Martin |
| Abstract: | Over the past decade, Chinese exports have boomed, increasing far faster than GDP growth. What can account for this explosion? Our paper uses finely detailed Chinese export data (8-digit HS codes) combined with U.S. trade data to explore this question. Although exchange rate policy clearly boosted the trade surplus, and the structure of the economy, e.g. abundant cheap labor, encouraged investment, these alone cannot account for the changing composition and acceleration of exports. We find that the growth in exports is most likely a product of effective Chinese industrial policy and fortuitous timing. The detailed trade data reveal that key "new" technology goods, such as cell phones, LCD screens, and laptops played a critical role. Finally, we use the data to examine the relationship between Chinese exports and global manufacturing, in particular U.S. manufacturing employment. We find that increased Chinese competition in both domestic and U.S. export markets likely lowered U.S. manufacturing employment between 2000 and 2007. Chinese policy is not, however, wholly responsible. Some job losses, such as in textile production, were no doubt the result of China's natural comparative advantages, while other U.S. job losses are attributable to relatively low investment and slow GDP growth in the United States following the 2001 recession. |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgif:1033&r=int |
| By: | JaeBin Ahn |
| Abstract: | This paper provides a theory model of trade finance to explain the "great trade collapse." The model shows that, first, the riskiness of international transactions rises relative to domestic transactions during economic downturns, and second, the exclusive use of a letter of credit in international transactions exacerbates a collapse in trade during a financial crisis. The basic model considers banks' optimal screening decisions in the presence of counterparty default risks. In equilibrium, banks will maintain a higher precision screening test for domestic firms and a lower precision screening test for foreign firms, which constitutes the main mechanism of the model. |
| Keywords: | Banks , Credit , Economic models , Payment systems , Trade , |
| Date: | 2011–11–14 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:11/262&r=int |
| By: | Barbara Pistoresi; Alberto Rinaldi |
| Abstract: | The nexus between trade and economic growth in Italy has been widely debated by historiography. However, there are not long run analysis on this topic that cover the whole span from Unification to present days. This paper contributes to fill this gap by investigating the relationship between real exports, imports and GDP in Italy from 1863 to 2004 by using cointegration analysis and causality tests. The outcome suggests that these variables comove in the long run but the direction of causality varies across time. In the period prior to the First World War import growth led GDP growth that in turn led export growth. Conversely, in the post-Second World War period we have a strong bidirectionality between imports and exports consequent on the increase in intra-industry trade. We also find a weak support for export-led growth and growth-led imports. This suggests that exports were not the only or the main driver of economic growth. There was probably a multiplicity of factors at work, among which high rates of capital formation and the expansion of internal demand probably stood out |
| Keywords: | Trade; economic growth; Italy; unit root tests; cointegration analysis; Granger-causality; |
| JEL: | F43 O11 N1 N7 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:mod:depeco:0666&r=int |
| By: | Peter Klimek; Ricardo Hausmann; Stefan Thurner |
| Abstract: | We show that world trade network datasets contain empirical evidence that the dynamics of innovation in the world economy follows indeed the concept of creative destruction, as proposed by J.A. Schumpeter more than half a century ago. National economies can be viewed as complex, evolving systems, driven by a stream of appearance and disappearance of goods and services. Products appear in bursts of creative cascades. We find that products systematically tend to co-appear, and that product appearances lead to massive disappearance events of existing products in the following years. The opposite - disappearances followed by periods of appearances - is not observed. This is an empirical validation of the dominance of cascading competitive replacement events on the scale of national economies, i.e. creative destruction. We find a tendency that more complex products drive out less complex ones, i.e. progress has a direction. Finally we show that the growth trajectory of a country's product output diversity can be understood by a recently proposed evolutionary model of Schumpeterian economic dynamics. |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1112.2984&r=int |
| By: | Kyle Bagwell; Robert W. Staiger |
| Abstract: | A fundamental objective of the Doha Round of WTO negotiations is to improve the trading prospects of developing countries. The 2001 declaration from the WTO Ministerial Conference in Doha, Qatar, commits the member governments to negotiations aimed at substantial improvements in market access with a view to phasing out export subsidies, while embracing “special and differential treatment” for developing countries as an integral part of all elements of the negotiations. The main message of this paper comes in three parts. First, these stated aims are incompatible from the perspective of our economic analysis; thus, if these aims are pursued as stated, then we conclude that they are unlikely to deliver the meaningful trade gains for developing countries that the WTO membership seeks. Second, in attempting to integrate its developing country membership into the world trading system, the WTO may face a “latecomers” problem that, while occurring also in earlier rounds, is unprecedented in its scale in the Doha Round, and which could potentially account for the current impasse. And third, we argue that if the Round maintains its stated aims but moves away from the non-reciprocal special-and-differential treatment norm as the cornerstone of the approach to meeting developing country needs in the WTO, and if developing countries prepare, in markets where they are large, to come to the bargaining table and to negotiate reciprocally with each other and with developing nations, then it might be possible to break the impasse at Doha, to address the latecomers problem, and to deliver trade gains for developing countries. |
| JEL: | F02 F1 F13 |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17650&r=int |
| By: | Virginia Di Nino (Bank of Italy); Barry Eichengreen (University of California, Berkeley); Massimo Sbracia (Bank of Italy) |
| Abstract: | What is the relationship between real exchange rate misalignments and economic growth? And what effect, if any, did undervaluations or overvaluations of the lira/euro have on Italy's growth? We address these questions by presenting, first, three main facts: (i) there is a positive relationship between undervaluation and growth; (ii) this relationship is strong for developing countries and weak for advanced countries; (iii) these results tend to hold for both the pre- and the post-World War II period. Building a simple analytical model, we explore channels through which undervaluation may exert a positive effect on real GDP. We assume that productivity is higher in the tradeable-goods than in the non-tradeable-goods sector, and examine the roles of market structure, scale economies and wage flexibility in channelling resources from the latter to the former sector, increasing exports and real GDP. We then turn to Italy and verify empirically that, as the theory suggests, undervaluation has positively affected its exports. Undervaluation has been helpful, in particular, to increase the exports of high-productivity sectors, such as most manufacturing industries. Finally, we describe the misalignments of the lira/euro since 1861, analyze their determinants and draw the implications for Italy's economic growth. |
| Keywords: | Currency misalignments, Competitiveness, Italy, Export, Growth |
| JEL: | F30 F10 O10 N00 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:workqs:qse_10&r=int |
| By: | Murphy, Gavin; Siedschlag, Iulia |
| Date: | 2011–11 |
| URL: | http://d.repec.org/n?u=RePEc:esr:wpaper:rb2011/3/3&r=int |
| By: | Shiro Armstrong (Australian National University) |
| Abstract: | The Trans-Pacific Partnership (TPP) Agreement aims to be a high quality, 21st Century economic agreement that furthers economic integration in the Asia Pacific. In late 2011 it remains unclear whether the TPP will turn out to be a stepping stone or stumbling block towards regional or global economic integration. The current negotiations involve Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, the United States and Vietnam with Japan, Mexico and Canada expressing interest in joining. The potential economic and political significance of the TPP depends on the expansion of the membership to include Japan, Korea, Indonesia, other East Asian economies, and especially China, as well as the ultimate quality of any agreement. Including additional members will be difficult after a deal is concluded among the original members and partners with whom they are currently in negotiation, especially if the content of the agreement and the accession criteria are not designed carefully and specifically with additional membership in mind. Desirably TPP will contribute to the global system by making it easier for others to join. That includes multilateralising preferences within the TPP, and eventually extending that treatment to non-members. Importantly, the agenda of negotiations needs to focus on reducing regulatory and institutional, behind-the-border barriers to trade and commerce. Focus on strengthening intellectual property rights, including stringent labour and environmental and other so called "platinum" standards will make it difficult for many members and non-members to participate fully. The TPP has the potential to keep the United States engaged in the region but complications will arise with a TPP to which China is not party, or an inward looking East Asian arrangement to which the United States is not party. A regional arrangement that does not include both the United States and China is more likely to disrupt than to contribute to regional trade and prosperity. |
| Keywords: | Trade agreements, economic integration, TPP |
| JEL: | F02 F13 F15 |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:eab:tradew:23135&r=int |