nep-int New Economics Papers
on International Trade
Issue of 2012‒01‒03
twenty-six papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. Firm Exit, Technological Progress and Trade By Philipp J.H. Schröder; Allan Sørensen
  2. Outward FDI, merchandise and services trade: evidence from Singapore By Wong, Koi Nyen; Goh, Soo Khoon
  3. Modeling the International-Trade Network: A Gravity Approach By Marco Duenas; Giorgio Fagiolo
  4. Trade, Wages, and Profits By Egger, Hartmut; Egger, Peter; Kreickemeier, Udo
  5. Service Trade and Occupational Tasks: An Empirical Investigation By Andrea Ariu; Giordano Mion
  6. Market Size, Competition, and the Product Mix of Exporters By Thierry Mayer; Marc J. Melitz; Gianmarco I.P. Ottaviano
  7. Market access in global and regional trade By De Sousa, Jose; Mayer, Thierry; Zignago, Soledad
  8. Does corruption facilitate trade for the new EU members? By Horsewood, Nicholas; Voicu, Anca Monika
  9. The “China effect” on EU Exports to OECD markets – A focus on Italy By Giorgia Giovannetti; Marco Sanfilippo; Margherita Velucchi
  10. Verti-zontal Differentiation in Monopolistic Competition By Francesco Di Comite; Jacques-François Thisse; Hylke Vandenbussche
  11. International Trade and Institutional Change By Andrei A. Levchenko
  12. The currency union effect on trade is decreasing over time By De Sousa, Jose
  13. Moving up the Quality ladder? EU-China Trade Dynamics in Clothing By Di Comite, Francesco; Rovegno, Laura; Vandenbussche, Hylke; Viegelahn, Christian
  14. Investing across borders with heterogeneous firms : do FDI-specific regulations matter? By Wagle, Swarnim
  15. Do determinants of FDI to developing countries differ among OECD investors? Insights from Bayesian Model Averaging By Nikolaos Antonakakis; Gabriele Tondl
  16. Export Prices of U.S. Firms By James Harrigan; Xiangjun Ma; Victor Shlychkov
  17. Export activities under financial constraints: margins, quantities and prices By Angelo Secchi; Federico Tamagni; Chiara Tomasi
  18. Assignment Reversals: Trade, Skill Allocation and Wage Inequality By Thomas Sampson
  19. Estimating the impact of currency unions on trade using a dynamic gravity framework By Campbell, Douglas L.
  20. Explaining the Performance of Italian Exports during the Crisis: (Medium) Quality Matters By Piero Esposito; Claudio Vicarelli
  21. Internal Geography and External Trade: regional disparities in Italy, 1861-2011 By Brian A’Hearn; Anthony J. Venables
  22. The Contribution of China, India and Brazil to Narrowing North-South Differences in GDP/capita, World Trade Shares, and Market Capitalization By Jing Wang; Dana Medianu; John Whalley
  23. Economic Impact of Potential Outcome of the DDA By Yvan Decreux; Lionel Fontagné
  24. Tariff Pass-Through and the Distributional Effects of Trade Liberalization By Ural Marchand, Beyza
  25. Heterogeneous Information and Trade Policy By Ponzetto, Giacomo AM
  26. Imported Inputs and Skill Upgrading By Rosario Crinò

  1. By: Philipp J.H. Schröder (Department of Economics and Business, Aarhus University, Denmark); Allan Sørensen (Department of Economics and Business, Aarhus University, Denmark)
    Abstract: The dynamics of export market exit and firm closure have found limited attention in the new heterogeneous-firms trade literature. In fact, several of the predictions on firm survival and exit stemming from this new class of models are at odds with the stylized facts. Empirically, higher productivity firms survive longer, most firm closures are young firms, higher productivity exporters are more likely to continue to export compared to less productive exporters and market exits as well as firm closures are typically preceded by periods of contracting market shares. The present paper shows that the simple inclusion of exogenous economy wide technological progress into the standard Melitz (2003) model generates a tractable dynamic framework that generates endogenous exit decisions of firms in line with the stylized facts. Furthermore, we derive the effects of faster technological progress and trade liberalization on export market exit and firm closure.
    Keywords: Intra-industry trade, entry/exit, monopolistic competition,heterogeneous firms, technological change
    JEL: F12 F15 O33 L11 L16
    Date: 2011–12–20
  2. By: Wong, Koi Nyen; Goh, Soo Khoon
    Abstract: This paper aims to explore the causality pattern between OFDI and major external trade components (i.e. exports and imports of merchandise as well as services) using Singapore as a case, since it is one of the largest outward investors in the Asian region, and is overtly trade-dependent. The findings reveal that there is evidence of OFDI-led trade hypothesis, particularly, merchandise exports and imports, an indication for OFDI to open up important channels for intra-firm trade activities, home country sourcing and backward integration. However, there is no evidence of causality relationships between Singapore’s OFDI and services trade because the nature of services is mainly to provide market presence in the consuming country. As such, Singaporean multinationals are likely to outsource their services either from the host country services sector or their own services-supporting subsidiaries that have been relocated abroad. The present study provides implications for policy formulation on strengthening the OFDI-services trade linkages.
    Keywords: Outward FDI; multinationals; Singapore; Granger causality; merchandise and services trade
    JEL: F21
    Date: 2011–07
  3. 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.
    Keywords: International Trade Network; Gravity Equation; Weighted Network Analysis; Topological Properties; Econophysics
    JEL: F10 D85
    Date: 2011–12–15
  4. By: Egger, Hartmut; Egger, Peter; Kreickemeier, Udo
    Abstract: This paper formulates a structural empirical model of heterogeneous firms whose workers exhibit fair-wage preferences. In the underlying theoretical framework, such preferences lead to a link between a firm's operating profits on the one hand and wages of workers employed by this firm on the other hand. The latter establishes an exporter wage premium, since exporters have higher profits, given their productivity, than non-exporting firms. We estimate the parameters of the model in a data-set of five European economies and find that, when evaluated at these parameter values, the model has a high level of explanatory power. The estimates also enable us to quantify the exporter wage premium and the consequences of trade for the main variables of interest. According to our results, openness to international trade contributes to greater inequality across firms in terms of both operating profits and average wages. We also find evidence for gains from trade for all five countries, which go along with negative, but quantitatively moderate, aggregate employment effects.
    Keywords: Exporter wage premium; Fair wages; Heterogeneous firms; Labour market imperfections; Structural models
    JEL: C31 F12 F16 J31
    Date: 2011–12
  5. By: Andrea Ariu; Giordano Mion
    Abstract: Using micro data for Belgium we investigate the relationship between occupational tasks changes and the rise of service trade. We focus the analysis on the extensive margin and look at the heterogeneous proliferation of firms involved in exports and imports of services across sectors characterized by different tasks changes patterns. Occupational tasks changes display an extremely consistent relationship with participation to service trade across firm groups pointing to strong churning effects. The change in analytical (interactive and routine cognitive) tasks intensity has a positive (negative) impact across the board meaning that, in industries characterized by larger changes, firms have experienced both higher (lower) likelihood of entry and exit. The negative relationship between the change in interactive tasks and service exports participation underlines the special role that proximity between demand and supply plays for services. Interestingly, we find exactly the opposite result (a positive relationship) between the extensive margin of goods exports and interactive tasks. Moreover, our analysis suggests that the change in IT use per se does not strike as being a key underlying force behind the increase in the extensive margin of service exports.
    Keywords: Trade in services, extensive margin, occupational tasks, technological change
    JEL: F14 F16 O33 L80
    Date: 2011–12
  6. By: Thierry Mayer (Sciences-Po, CEPII and CEPR); Marc J. Melitz (Harvard University, NBER and CEPR); Gianmarco I.P. Ottaviano (Bocconi University, FEEM, Bruegel, CEPR and Centro Studi Luca d\'Agliano)
    Abstract: We build a theoretical model of multi-product firms that highlights how market size and geography (the market sizes of and bilateral economic distances to trading partners) affect both a firm\'s ex-ported product range and its exported product mix across market destinations (the distribution of sales across products for a given product range). We show how tougher competition in an export market induces a firm to skew its export sales towards its best performing products. We find very strong confirmation of this competitive effect for French exporters across export market destina-tions. Trade models based on exogenous markups cannot explain this strong significant link between destination market characteristics and the within-firm skewness of export sales (after controlling for bilateral trade costs. Theoretically, this within firm change in product mix driven by the trading environment has important repercussions on firm productivity and how it responds to changes in that trading environment.
    Date: 2011–10–17
  7. By: De Sousa, Jose; Mayer, Thierry; Zignago, Soledad
    Abstract: This paper develops a method to measure difficulties in market access over a large set of countries (both developing and developed) and industries, during the period 1980-2006. We use a micro-founded heterogeneous-consumers model to estimate the impact of national borders on global and regional trade flows. Results show that difficulties faced by developing countries' exporters in accessing developed markets are 50% higher than those faced by Northern exporters. These international fragmentations have however experienced a noticeable fall since 1980 in both Southern and Northern markets, and in all industries. It is twenty three times easier to enter those markets for a Southern country exporter in 2006 than in 1980. While tariffs still have an influence on trade patterns, they do not seem to explain an important part of the border effect. Last, our theory-based measure offers a renewal of the assessment of the impact of regional trading arrangements. The EU, NAFTA, ASEAN and MERCOSUR agreements all tend to reduce the estimated degree of market fragmentation within those zones, with the expected ranking between their respective trade impact.
    Keywords: Market Access; North-South Trade; Regional integration; Border Effects; Gravity; Tariffs; Trade Costs; Distances
    JEL: F15 F13 F12 F14
    Date: 2011–12
  8. By: Horsewood, Nicholas; Voicu, Anca Monika
    Abstract: The paper uses a gravity model to examine the role of corruption in the direction of trade in a data set comprising OECD economies, new EU members and developing nations. Contrary to a number of studies, the findings suggest that membership of the RTAs does not always increase bilateral trade whereas reducing a country's corruption does tend to increase trade flows. The results suggest that EU membership, with the associated improvement in the perceived level of corruption, should have a positive impact on Romania and Bulgaria. --
    Keywords: trade,corruption,EU membership
    JEL: F14 F15
    Date: 2011
  9. By: Giorgia Giovannetti (Università degli Studi di Firenze, Dipartimento di Scienze Economiche); Marco Sanfilippo; Margherita Velucchi
    Abstract: This paper analyzes the indirect impact of China on the export performance of major European countries (Italy, France, Germany and Spain) in their main destination markets (OECD countries). Given a strong specialization in manufacturing sector, these EU countries are likely to be at risk from China’s competition, especially in consumer goods. The heterogeneity in the production (and export) structures of EU countries makes Italy, whose productive structure is based on so-called “traditional” sectors, most vulnerable to China’s competitive pressure. Using data for the period 1995-2009, this paper estimates the possible displacement effect at sector level. Results show that there is a considerable variation in different EU countries’ exposure to China’s competition and that, in some sectors the Chinese exports effect is, indeed, strong. This is particularly true for the more recent period, after China has entered WTO and for Italy, both in traditional and more capital intensive sectors.
    Keywords: china, trade, italy, gravity model
    JEL: F10 F14
    Date: 2011
  10. By: Francesco Di Comite (Université Catholique de Louvain and European Commission); Jacques-François Thisse (Université Catholique de Louvain); Hylke Vandenbussche (National Bank of Belgium)
    Abstract: The recent availability of trade data at a firm-product-country level calls for a new generation of models able to exploit the large variability detected across observations. By developing a model of monopolistic competition in which varieties enter preferences non-symmetrically, we show how consumer taste heterogeneity interacts with quality and cost heterogeneity to generate a new set of predictions. Applying our model to a unique micro-level dataset on Belgian exporters with product and destination market information, we find that heterogeneity in consumer tastes is the missing ingredient of existing monopolistic competition models necessary to account for observed data patterns.
    Keywords: Heterogeneous firms, Product Differentiation, Monopolistic Competition, Nonsymmetric varieties
    JEL: D43 F12 F14 L16
    Date: 2011–10–17
  11. By: Andrei A. Levchenko
    Abstract: This paper analyzes the impact of international trade on the quality of institutions, such as contract enforcement, property rights, or investor protection. It presents a model in which imperfect institutions create rents for some parties within the economy, and are a source of comparative advantage in trade. Institutional quality is determined as an equilibrium of a political economy game. When countries share the same technology, there is a "race to the top'' in institutional quality: irrespective of country characteristics, both trade partners are forced to improve institutions after opening. On the other hand, domestic institutions will not improve in either country when one of the countries has a strong enough technological comparative advantage in the institutionally intensive good. We provide empirical evidence for a related cross-sectional prediction of the model. Countries whose exogenous geographical characteristics predispose them to exporting in institutionally intensive sectors exhibit significantly higher institutional quality.
    JEL: F15 P45 P48
    Date: 2011–12
  12. By: De Sousa, Jose
    Abstract: Estimating a theoretical gravity model over a sixty-year period, from 1948 to 2009, I found an unexpected trend: the currency union impact on trade is decreasing over time. This result suggests that with trade and financial globalization currency unions become less and less important to promote trade.
    Keywords: Currency; Unions; Dollarization; Trade; Gravity; Poisson
    JEL: F15 F33
    Date: 2011–11
  13. By: Di Comite, Francesco; Rovegno, Laura; Vandenbussche, Hylke; Viegelahn, Christian
    Abstract: We apply a simple method to study the relative quality of Chinese versus European products exported in the clothing sector after the end of the Multi-Fiber Arrangement. Based on the model of Foster et al (2008), we interpret the relative change of export prices and quantities sold in narrowly defined product categories as an indicator of quality shifts. Using UN Comtrade data we find that European varieties exported to the US typically sell for a higher price than identical Chinese varieties exported to the US, but this price gap is narrowing. Despite rising prices, Chinese varieties are gaining market share. This opposite movement of relative prices and quantities sold in the same destination market are a strong indication of China moving up the quality ladder in its clothing exports relative to the EU. While European ‘core’ products in clothing are stable over time, Chinese exports show strong product dynamics with exit and entry of new ‘core’ products every year and ‘core’ products changing rapidly. Both China and the EU export in every product category, resulting in an almost perfect product overlap with almost no products being exported by only one of the two.
    Keywords: Comtrade; product-level exports; quality
    JEL: F13 F14
    Date: 2011–12
  14. By: Wagle, Swarnim
    Abstract: This paper revisits the institutional determinants of foreign direct investment (FDI) using a comprehensive new data set on the regulations that govern FDI in more than 80 countries. It exploits the presence of confirmed zero investment flows between countries to estimate productivity cut-offs of firms that invest abroad profitably. This approach corrects likely biases arising from firm heterogeneity and country selection in a theoretically derived gravity-type model. The analysis finds inward FDI to be highly responsive to cross-country variation in specific institutional provisions, such as arbitration of disputes and legal procedures to establish foreign subsidiaries. The importance of FDI-specific provisions stands out even after controlling for the general quality of institutions. Statutory openness to FDI, however, has no association with actual inflow of investment. These results are found to be robust to different specifications.
    Keywords: Debt Markets,Foreign Direct Investment,Economic Theory&Research,Emerging Markets,E-Business
    Date: 2011–12–01
  15. By: Nikolaos Antonakakis; Gabriele Tondl
    Abstract: The main objective of this paper is to examine the determining factors of outward FDI from four major OECD investors US, Germany, France and the Netherlands to developing countries located in different world regions. Our goal is to elucidate whether the motivation for FDI differs among these investors. Rather than relying on specific theories of FDI determinants we examine them all simultaneously employing Bayesian Model Averaging (BMA) in a panel data set with 129 FDI destinations in 5 geographical regions over the period 1995-2008. This approach permits us to select the most appropriate model that governs FDI allocation and to distinguish robust FDI determinants. We find that all our investors search for destinations with whom they have established intensive trade relations and that offer a qualified labor force. However, low wages and attractive tax rates are robust investment criteria too, and a considerable share of FDI is still resource-driven. Our investors show fairly similar strategies in the main FDI destinations.
    Keywords: FDI determinants, Bayesian Model Averaging, OECD, Developing countries, US, Germany, France, Netherlands
    JEL: C11 F0 F21
    Date: 2011–12
  16. By: James Harrigan; Xiangjun Ma; Victor Shlychkov
    Abstract: Using confidential firm-level data from the United States in 2002, we show that exporting firms charge prices for narrowly defined goods that differ substantially with the characteristics of firms and export markets. We control for selection into export markets using a three-stage estimator. We have three main results. First, we find that that highly productive and skill intensive firms charge higher prices, while capital-intensive firms charge lower prices. Second, the very large correlation between distance and export prices found by Baldwin and Harrigan (2011) is largely due to a composition effect. Third, U.S. firms charge slightly higher prices to larger and richer markets, and substantially higher prices to markets other than Canada and Mexico.
    Keywords: exporters, firm level data, pricing, heterogeneous firms
    JEL: F1 F10 F23
    Date: 2011–12
  17. By: Angelo Secchi; Federico Tamagni; Chiara Tomasi
    Abstract: This paper provides a comprehensive analysis of the role that financial constraints play in shaping firms' export activities. We use custom information on cross borders transactions for Italian firms, together with an informative measure of financing constraints based on an official credit rating issued by an independent institution. Controlling for potential selection bias our results confirm that limited access to external capital narrows the scale of foreign sales, the exporters' product scope and the number of trade partners. We enrich previous analyses showing that financial problems influence firms' strategies of switching among products or destinations, and also affect firms' pricing decisions. Constrained firms have a reduced probability of adding new products or destinations and a higher probability of dropping products or destinations. Moreover, they attempt to offset, via higher prices, the negative impact on foreign revenues induced by the decreased physical quantity associated with financial constraints.
    Keywords: financial constraints, margins of export, export prices
    JEL: F10 F14 F30 G20
    Date: 2011–12–12
  18. By: Thomas Sampson
    Abstract: Understanding the allocation of skilled labor across industries is necessary to explain inter-industry wage differences and the effect of trade on wages. This paper develops a multi-sector assignment model with both heterogeneous labor and a non-labor input in which high skill agents match with high input productivity sectors where they can best leverage their talent. When the ranking of sectors by input productivity differs across countries, their ranking by workforce skill also differs - this is an assignment reversal. In a two sector, two country model the existence of an assignment reversal implies that each country has a comparative advantage in its high skill sector. Consequently, trade integration causes both the relative wage of high skill workers, and wage inequality within the high skill sector, to increase in both countries. Using exogenous differences in capital productivity induced by a country's proximity to major capital exporters the paper shows that international variation in the industry wage structure supports the existence of assignment reversals and is consistent with the model's sorting predictions.
    Keywords: skilled labor, productivity, workforce, wage inequality, skill intensity reversal
    JEL: J30 L60 O30
    Date: 2011–12
  19. By: Campbell, Douglas L.
    Abstract: This paper revisits the early time series estimates of currency unions on trade from an historical perspective using a dynamic gravity equation and by conducting in-depth case studies of currency union breakups. The early large estimates were driven by omitted variables, as many currency union exits were coterminous with warfare, communist takeovers, coup d'etats, genocide, bloody wars of independence, various other geopolitical travesties, or were predated by trade collapses. Static gravity estimates are found to be sensitive to controlling for these omitted variables, while a dynamic gravity specification implies that currency unions do not increase trade.
    Keywords: Currency Unions; Trade; Dynamic Gravity; Decolonization
    JEL: F15 F33 F54
    Date: 2011–12–21
  20. By: Piero Esposito (Sant’Anna School of Advanced Studies); Claudio Vicarelli (Italian National Institute of Statistics)
    Abstract: A recent study argues that the contraction in total trade that occurred during the crisis was mainly driven by the fall in high quality goods, which should have higher income elasticity owing to a non-linear Engel curve. Our aims are, on the one hand, to test the quality Engel curve assumption for EU15 imports from Italy and, on the other hand, to ascertain whether a break in income elasticities – either temporary or permanent – occurred during the global financial crisis as a result of the changing preference for quality of consumers in the old EU member states. We test these hypotheses by estimating income and price elasticities of EU imports of consumption goods from Italy for both volumes and market shares. The contribution of this paper is twofold. First, we introduce a medium quality category, allowing us to make a more detailed reading of the stylised facts about the performance of Italian trade during the crisis. Second, we perform three different versions of the mean group estimator. Our results are consistent with the assumption of a change in the preference for quality. This change may be due either to a shift in consumption from high to medium quality Italian products or to the higher quality, actual or perceived, of Italian medium quality goods compared with the varieties imported from the rest of the world.
    Keywords: Product Quality, Export Elasticity, Panel Data
    JEL: F01 F10 F14 C23
    Date: 2011
  21. By: Brian A’Hearn (Pembroke College, Oxford); Anthony J. Venables (University of Oxford & CEPR)
    Abstract: This paper explores the interactions between external trade and regional disparities in the Italian economy since unification. It argues that the advantage of the North was initially based on natural advantage (in particular the endowment of water, intensive in silk production). From 1880 onwards the share of exports in GDP stagnated and then declined; domestic market access therefore became a key determinant of industrial location, inducing fast growing new sectors (especially engineering) to locate in regions with a large domestic market, i.e. in the North. From 1945 onwards trade growth and European integration meant that foreign market access was the decisive factor; the North had the advantage of proximity to these markets.
    Keywords: industrialisation, market integration, new economic geography, geographic concentration, Italian regions
    JEL: F14 F15 N63 N64 N93 N94 R11 R12
    Date: 2011–10
  22. By: Jing Wang; Dana Medianu; John Whalley
    Abstract: This paper focuses on the contribution to recent narrowing of the gap between Northern and Southern economies in GDP/capita, shares in world trade and market capitalization attributable both jointly and single to China, India, and Brazil (the three currently largest rapidly growing Southern economies). We report North‐South differences in GDP/capita which (depending slightly on definition of North and South, as well as price deflators used) fall from 22 to 15.9 in constant USD between 1990 and 2009, changing Northern and Southern shares in world trade which fall for the North from 82.3% to 64.4% and rise for the South from 17.7% to 35.6%, and a changing North‐South gap in stock market capitalizations from 27.6 to 3.3 over the same time. In contrast the North‐China gap falls from 57.2 to 13.1 between 1990 and 2009, and India from 70.4 to 38.1 using market exchange rates and from 23.4 to 5.5 for China and from 20.7 to 11.4 for India using PPP rates. We calculate the portions of North‐South gap change after 1990 which is accounted for by growth individually and jointly of China, India, and Brazil. Our calculations show that the majority of the change occurs from growth in these three economies, and the most from China. We suggest that the conventional view of a North‐South bipolar world may need recasting into a tripolar world of the North, the Large South, and the rest of the South. In this, world manufacturing activity, trade, and even more rapidly, market capitalization are gravitating towards the Large Three, with a narrowing South‐Large Three gap as well as a shrinking North‐Large Three gap.
    JEL: F0 F1 F2 F4
    Date: 2011–12
  23. By: Yvan Decreux; Lionel Fontagné
    Keywords: DOHA, CGEM, International Trade
    JEL: F13 F17 A A A A A A A A
    Date: 2011–11
  24. By: Ural Marchand, Beyza (University of Alberta, Department of Economics)
    Abstract: This paper estimates the distribution of welfare gains due to the trade reforms in India by simultaneously considering the effect on prices of tradeable goods and wages. The cost of consumption for each household is affected by the domestic price changes, while wage incomes adjust to these price changes in equilibrium. Three rounds of the Indian Employment and Consumption Surveys are used for the analysis. The price transmission mechanisms are estimated for both rural and urban areas to understand the extent to which the trade reforms are able to affect the domestic prices. In order to assess the distributional effects, a series of nonparametric local linear regressions are estimated. The findings show that households at all per capita expenditure levels had experienced gains as a result of the trade liberalization, while the average effect was generally pro-poor and varied significantly across the per capita expenditure spectrum.
    Keywords: trade liberalization; pass-through; wages; India; welfare distribution
    JEL: D31 F14 O12 O15
    Date: 2011–12–01
  25. By: Ponzetto, Giacomo AM
    Abstract: Protectionism enjoys surprising popular support, in spite of deadweight losses. At the same time, trade barriers appear to decline with public information about protection. This paper develops an electoral model with heterogeneously informed voters which explains both facts and predicts the pattern of trade policy across industries. In the model, each agent endogenously acquires more information about his sector of employment. As a result, voters support protectionism, because they learn more about the trade barriers that help them as producers than those that hurt them as consumers. In equilibrium, asymmetric information induces a universal protectionist bias. The structure of protection is Pareto inefficient, in contrast to existing models. The model predicts a Dracula effect: trade policy for a sector is less protectionist when there is more public information about it. Using a measure of newspaper coverage across industries, I find that cross-sector evidence from the United States bears out my theoretical predictions.
    Keywords: Dracula effect; Imperfect information; Media coverage; Pareto inefficiency; Protectionism; Voters
    JEL: D72 D83 F13
    Date: 2011–12
  26. By: Rosario Crinò (University of Brescia, Centro Studi Luca d\'Agliano and IAE-CSIC)
    Abstract: This paper studies the effect of imported inputs on relative skilled labor demand. To this purpose, it uses firm-level data for 27 transition countries and propensity score matching techniques. The results show that importing inputs induces skill upgrading: according to a conservative estimate, it explains roughly one-quarter of the higher share of skilled employment observed at importers. The paper discusses possible mechanisms behind this result. In particular, it reports suggestive evidence that importing may lead firms to engage in skill-intensive activities, such as production of new goods, improvements in product quality and, to a lesser extent, R&D and technology adoption.
    Keywords: Imported Inputs; Relative Skilled Labor Demand; Firm-Level Data; Transition Countries; Propensity Score Matching
    JEL: F1
    Date: 2011–12–27

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