nep-int New Economics Papers
on International Trade
Issue of 2012‒01‒18
23 papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. Contractual Versus Non-Contractual Trade: The Role of Institutions in China By Robert C. Feenstra; Chang Hong; Hong Ma; Barbara J. Spencer
  2. Isolating the Network Effect of Immigrants on Trade By Mariya Aleksynska; Giovanni Peri
  3. A Structural Model of Demand, Cost, and Export Market Selection for Chinese Footwear Producers By Mark J. Roberts; Daniel Yi Xu; Xiaoyan Fan; Shengxing Zhang
  4. Hub-and-spoke free trade areas: Theory and evidence from Israel By George Deltas; Klaus Desmet; Giovanni Facchini
  5. Market Access in Global and Regional Trade By De Sousa, José; Mayer, Thierry; Zignago, Soledad
  6. The impact of trade on employment in Colombian By Yezid HERNÁNDEZ LUNA
  7. Compilation of Bilateral Trade Database by Industry and End-Use Category By Shiguang Zhu; Norihiko Yamano; Agnès Cimper
  8. Estimating Trade Elasticities: Demand Composition and the Trade Collapse of 2008-09 By Matthieu Bussière; Giovanni Callegari; Fabio Ghironi; Giulia Sestieri; Norihiko Yamano
  9. Trade costs in the India-Mekong Subregion: Identifying Policy Priorities for Trade Facilitation By Yann Duval; Chorthip Utoktham
  10. Analysis of Export and Import Processes of Seclected Products in Thailand By Somnuk Keretho; Saisamorn Naklada
  11. Null Models of Economic Networks: The Case of the World Trade Web By Giorgio Fagiolo; Tiziano Squartini; Diego Garlaschelli
  12. Environmental policy and trade performance: Evidence from China By Laura Hering; Sandra Poncet
  13. Rules of origin and development of regional production network in Asia: case studies of selected industries By Biswajit Nag; Debdeep De
  14. The Effect of Trade Openness on Deforestation: Empirical Analysis for 142 Countries By Tetsuya , Tsurumi; Shunsuke , Managi
  15. Intra-Asia Exchange Rate Volatility and Intra-Asia Trade: Evidence by Type of Goods By Tang, Hsiao Chink
  16. Vert-zonal Differentiation in Monopolistic Competition By Francesco Di Comite; Jean-François Thisse; Hylke Vandenbussche
  17. Is Trade in Asia Really Integrating? By Hamanaka, Shintaro
  18. Moving up the Quality ladder? EU-China Trade Dynamics in Clothing By Hylke Vandenbussche; Francesco Di Comite; Laura Rovegno; Christian Viegelahn
  19. A Dynamic Model of Trade with Heterogeneous Firms By Peter Arendorf Bache
  20. Impact of India-ASEAN Free Trade Agreement: A cross-country analysis using applies general equilibrium modelling By Chandrima Sikdar; Biswajit Nag
  21. Trade credit and company performance during the 2008 financial crisis By K. KESTENS; P. VAN CAUWENBERGE; H. VANDER BAUWHEDE
  22. International Migration with Heterogeneous Agents: Theory and Evidence for Germany, 1967-2009 By Herbert Brücker; Philipp J.H. Schroeder
  23. New Exports from Emerging Markets:Do Followers Beneit from Pioneers ? By Rodrigo Wagner; Andrés Zahler

  1. By: Robert C. Feenstra; Chang Hong; Hong Ma; Barbara J. Spencer
    Abstract: Recent research has demonstrated the importance of institutional quality at the country level for both the volume of trade and the ability to trade in differentiated goods that rely on contract enforcement. This paper takes advantage of cross-provincial variation in institutional quality in China, and export data that distinguishes between foreign and domestic exporters and processing versus ordinary trade, to show that institutional quality is a significant factor in determining Chinese provincial export patterns. Institutions matter more for processing trade, and more for foreign firms, just as we would expect from a greater reliance on contracts in these cases.
    JEL: F13
    Date: 2012–01
  2. By: Mariya Aleksynska; Giovanni Peri
    Keywords: Migration, International Trade, Business Networks, Differentiated Goods
    JEL: F14 F16 F22 A A A
    Date: 2011–12
  3. By: Mark J. Roberts; Daniel Yi Xu; Xiaoyan Fan; Shengxing Zhang
    Abstract: In this paper we use micro data on both trade and production for a sample of large Chinese manufacturing firms in the footwear industry from 2002-2006 to estimate an empirical model of export demand, pricing, and market participation by destination market. We use the model to construct indexes of firm-level demand, cost, and export market profitability. The empirical results indicate substantial firm heterogeneity in both the demand and cost dimensions with demand being more dispersed. The firm-specific demand and cost components are very useful in explaining differences in the extensive margin of trade, the length of time a firm exports to a destination, and the number and mix of destinations, as well as the export prices, while cost is more important in explaining the quantity of firm exports on the intensive margin. We use the estimates to analyze the reallocation resulting from removal of the quota on Chinese footwear exports to the EU and find that it led to a rapid restructuring of export supply sources in favor of firms with high demand and low cost indexes.
    JEL: F1 L0
    Date: 2012–01
  4. By: George Deltas (University of Illinois at Urbana-Champaign); Klaus Desmet (Universidad Carlos III); Giovanni Facchini (Erasmus University Rotterdam)
    Abstract: We study how the sequential formation of free trade areas affects trade flows between member countries. In a three-country, three-good model of comparative advantage if two countries have an FTA, and both sign a similar agreement with the third, trade between the two decreases. However, if only one of them signs an additional FTA, a hub- and-spoke pattern arises, and trade between the initial members increases. Israel's experience lends strong support to our model: trade between Israel and the EU, subject to an FTA since 1975, increased by an additional 29% after the introduction of the US-Israel FTA in 1985.
    Keywords: free trade areas; hub-and-spoke; Israel; trade flows
    JEL: F11 F13
    Date: 2012–01–05
  5. By: De Sousa, José; 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: F12 F13 F14 F15
    Date: 2012–01
    Abstract: This article analyses the impact of imports and exports, from and towards the most important Colombian trade partners (United States, European Union, China, Andean Community of Nations, Venezuela, Brazil and Mexico), on employment in the manufacturing sector during 2000 ‐ 2007. We use the System GMM methodology to estimate an equation of labor demand as a function of capital, wage, and a measure of imports and exports. Additionally, we estimate the effects of the share of trade with each trade partner over the labor demand, and compute interaction variables to analyze changes in the effects of international trade across the categories of workers (high and low skilled). Econometric estimations produced, for this period, evidence on inertia in the Colombian labor market. In addition, a substitution relationship between capital and labor was also found. Imports showed no or a negative effect over employment depending on the index of imports used. Analyses by destiny and origin of trade showed that exports to Venezuela and Andean Community of Nations had a negative correlation to employment. Likewise, we found that only commerce with China had some impact on each manufacturing subsector employment, depending on the characteristics of the workers (high or low skilled).
    Date: 2011–10–31
  7. By: Shiguang Zhu; Norihiko Yamano; Agnès Cimper
    Abstract: During the last decade, the volume of international trade has increased significantly as international economic integration has deepened, especially in emerging countries, and national industrial structures have become increasingly aligned with international trade in intermediate goods. The OECD STAN Bilateral Trade Database by Industry and End-use Category (BTDIxE) presents international trade in goods flows broken down both by industry sectors and by end-use categories, allowing insights into the patterns of trade in intermediate goods between countries to track global production networks and supply chains as well as helping to address other trade-related policy issues such as trade in value added and tasks.
    Keywords: global value chains, trade in intermediates, trade statistics
    Date: 2011–12–20
  8. By: Matthieu Bussière; Giovanni Callegari; Fabio Ghironi; Giulia Sestieri; Norihiko Yamano
    Abstract: This paper introduces a new methodology for the estimation of demand trade elasticities based on an import intensity-adjusted measure of aggregate demand, with the foundation of a stylized theoretical model. We compute the import intensity of demand components by using the OECD Input-Output tables. We argue that the composition of demand plays a key role in trade dynamics because of the large movements in the most import-intensive categories of expenditure (especially investment, but also exports). We provide evidence in favor of these mechanisms for a panel of 18 OECD countries, paying particular attention to the 2008-09 Great Trade Collapse.
    JEL: F10 F15 F17 F4
    Date: 2012–01
  9. By: Yann Duval; Chorthip Utoktham (United Nations Economic and Social Commission for Asia and the Pacific (ESCAP))
    Abstract: This paper explores the trade facilitation performance of India and Mekong countries using a new measure of bilateral comprehensive trade costs, complemented by a review of specific trade policy and trade facilitation-related indicators. A model of comprehensive trade costs is then developed and estimated using these specific indicators in an effort to identify policies and measures that have a significant effect on trade costs, and to prioritize them. The trade costs between India and Mekong countries are found to be high: from 20% to 100% higher than those prevailing among Mekong countries. However, the fact that India, China, Thailand, and most of the other India-Mekong countries made more progress in reducing trade costs with each other than with developed countries - such as Japan and the USA - is encouraging, showing signs of slow but steady improvements in regional connectivity. Econometric results suggest that countries should prioritize policies aimed at further developing maritime and ICT services to reduce trade costs.
    Keywords: trade costs, trade facilitation, measures, policy, India, Mekong, tariff, non-tariff, regional connectivity, maritime, ICT, Information and Communication Technology
    JEL: F1
    Date: 2011–09
  10. By: Somnuk Keretho; Saisamorn Naklada (Institute for Information Technology Innovation (INOVA), Kasetsart University.)
    Abstract: Administrative and procedural barriers to import and export processes may unnecessarily impede further participation in international trade. Business Process Analysis (BPA) is a powerful tool which can help to identify these barriers and suggest ways to streamline trade processes. As part of the ARTNeT Regional Study on Improving Regional Trade Procedures and Processes, a BPA was conducted on Thai exports of sugar to Bangladesh and auto-parts to India as well as imports of raw materials used to produce electronic goods.
    Keywords: Business process Analysis, Trade Facilitation, Thailand, single window, paperless, international supply chain
    JEL: F1
    Date: 2011–06
  11. By: Giorgio Fagiolo; Tiziano Squartini; Diego Garlaschelli
    Abstract: In all empirical-network studies, the observed properties of economic networks are informative only if compared with a well-defined null model that can quantitatively predict the behavior of such properties in constrained graphs. However, predictions of the available null-model methods can be derived analytically only under assumptions (e.g., sparseness of the network) that are unrealistic for most economic networks like the World Trade Web (WTW). In this paper we study the evolution of the WTW using a recently-proposed family of null network models. The method allows to analytically obtain the expected value of any network statistic across the ensemble of networks that preserve on average some local properties, and are otherwise fully random. We compare expected and observed properties of the WTW in the period 1950-2000, when either the expected number of trade partners or total country trade is kept fixed and equal to observed quantities. We show that, in the binary WTW, node-degree sequences are sufficient to explain higher-order network properties such as disassortativity and clustering-degree correlation, especially in the last part of the sample. Conversely, in the weighted WTW, the observed sequence of total country imports and exports are not sufficient to predict higher-order patterns of the WTW. We discuss some important implications of these findings for international-trade models.
    Date: 2011–12
  12. By: Laura Hering; Sandra Poncet
    Keywords: Export performance, spillovers
    JEL: F1 A A A
    Date: 2011–12
  13. By: Biswajit Nag; Debdeep De (Indian Institute of Foreign Trade)
    Abstract: Rules of Origin (RoO) are essential part of trade rules that become very important in the context of increasing globalisation of production process. Most industrial goods today incorporate inputs from a wide variety of countries (e.g. automobiles, electronic goods etc) and when traded it becomes important to determine their country of origin as tariffs depend on country of origin. The current study performs a critical investigation of RoO in selected regional trade agreements (RTAs) in the Asia Pacific region, and has made attempts to study linkages with intra-regional trade in some sectors such as textiles, electronics in the form of integrated circuits, and automobile components.
    Keywords: Rules of origin, international production network, free trade agreement, preferential trade agreement
    JEL: F1
    Date: 2011–05
  14. By: Tetsuya , Tsurumi; Shunsuke , Managi
    Abstract: This study explores the effect of trade openness on deforestation. Previous studies do not find a clear effect of trade openness on deforestation. We use updated data on the annual rate of deforestation for 142 countries from 1990 to 2003, treat trade and income as endogenous, and take into consideration an adjustment process by applying a dynamic model. We find that an increase in trade openness increases deforestation for non-OECD countries while slowing down deforestation for OECD countries. There is a possibility that both capital-labor and environmental-regulation effects have a negative impact on deforestation in developing countries, whereas the opposite holds in developed countries.
    Keywords: Trade Openness; Environment; Comparative Advantage; Deforestation
    JEL: Q23 F10
    Date: 2011–12–30
  15. By: Tang, Hsiao Chink (Asian Development Bank)
    Abstract: This paper examines the impact of intra-Asia exchange rate volatility on intra-Asia trade in primary goods, intermediate goods, equipment goods, and consumption goods from 1980 to 2009. For Asia, the evidence shows that as intraregional exchange rate volatility increases, intraregional exports in these goods fall. This adverse impact is even more pronounced in the sub-region of Association of Southeast Asian Nations (ASEAN)+5 comprising ASEAN member countries plus the People's Republic of China; Hong Kong, China; Japan; the Republic of Korea; and Taipei,China; and especially among intermediate and equipment exports. Again, the impact magnifies in an even smaller sub-group excluding the smaller ASEAN economies. These results underline the significant impact of exchange rate volatility on the region's production networks. For South Asia, however, exchange rate volatility appears to have a positive impact on exports. Still, caution is warranted given that South Asian economies trade relatively little with each other.
    Keywords: exchange rate volatility; trade; ASEAN; East Asia
    JEL: F10 F14 F31
    Date: 2011–12–01
  16. By: Francesco Di Comite; Jean-François Thisse; Hylke Vandenbussche
    Abstract: The pattern of trade observed from firm-product-country data calls for a new generation of models. To address the unexplained variation in the data, we propose a new model of monopolistic competition where varieties enter preferences non-symmetrically, capturing both horizontal and vertical differentiation in an unprecedented way. Together with a variable elasticity of substitution, competition effects, varying markups and prices across countries, this results in a tractable model whose predictions differ from existing ones. Using the population of Belgian exporters, our model succeeds in explaining the hitherto unexplained variation. The implications call for a re-thinking of earlier results and measurement practices.
    Keywords: Heterogeneous firms - Horizontal differentiation - Vertical differentiation - Monopolistic competition - non symmetric varieties
    JEL: D43 F12 F14 L16
    Date: 2011
  17. By: Hamanaka, Shintaro (Asian Development Bank)
    Abstract: Is intraregional trade in Asia really integrating? It is not easy to answer this ostensibly simple question. There are two ways to assess the level of trade integration: de facto integration and de jure integration. With respect to de facto integration (actual level of interdependence in terms of trade flows), the answer depends on which Asian countries are being considered and which indicator is being using to measure trade interdependence. This paper compares the trade interdependence of different sets of Asian countries using various indices. With respect to de jure integration (the signing of free trade agreements [FTAs]), the number of signed FTAs in Asia is growing but the relation between trade interdependence and the signing of FTAs has not been sufficiently studied. The second half of this paper addresses whether de jure trade integration is ultimately brought about by high-level or low-level de facto trade integration.
    Keywords: FTAs; trade interdependence; scope of agreements
    JEL: F15 F53 F55 F59
    Date: 2012–01–01
  18. By: Hylke Vandenbussche; Francesco Di Comite; Laura Rovegno; Christian Viegelahn
    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.
    Date: 2011
  19. By: Peter Arendorf Bache (Department of Economics and Business, Aarhus University, Denmark)
    Abstract: This paper builds a dynamic general equilibrium trade model, in which heterogeneous intermediate goods are produced and traded in a Melitz (2003) type sector. These intermediate goods are used in the production of a final good, which can be used for consumption, capital accumulation, or investment in market entry. Therefore capital accumulation is the direct alternative to investing in firm entry. This has a number of implications. First, in the short run following trade liberalizations a higher interest rate will prevail, which will tend to shelter incumbent firms from increased competition by discouraging investment in entry of new firms. Second, different forms of trade liberalizations with the same impact on the share of expenditure on domestic variety will have different effects on consumption, and thus welfare, both during transitions and in steady-state, due to different effects on aggregate investment. Third, the accumulation of capital will add a time dimension to the anti-variety effects of trade liberalizations. In effect, capital accumulation generates rich adjustment dynamics both in the aggregate and at the firm level. Further, the study of transitions in this framework provides important insights regarding the effects of different forms of trade liberalizations in general and on welfare and individual firms in particular.
    JEL: F12 F14 F41
    Date: 2012–01–04
  20. By: Chandrima Sikdar; Biswajit Nag (Narsee Monjee Institute of Management Studies)
    Abstract: The study attempted to analyse the long-term effects of the FTA on India. It is argued that after full trade liberalization, India’s allocative efficiency will increase, but the terms of trade effect will worsen continuously and remain negative. India will be able to arrest the worsening in terms of trade once the gain in allocative efficiency is used to improve productivity in the export-oriented sectors as well as achieve economies of scale.
    Keywords: India-ASEAN Free Trade Agreement, cross-country analysis, general equilibrium model
    JEL: F1
    Date: 2011–11
    Abstract: We investigate whether the 2008 financial crisis had an impact on companies’ trade credit, and whether changes in trade credit mitigated the crisis’ impact on firm profitability. We document that the availability of trade credit decreased, and that this decline is more pronounced, the higher companies’ pre-crisis reliance on short-term debt. We further report evidence that the redistribution hypothesis holds during crisis periods. Finally, we show that the crisis had a negative impact on company performance, but that this impact was lower (greater) for firms which report an increase in trade receivables (payables) in crisis compared to precrisis periods.
    Date: 2011–09
  22. By: Herbert Brücker (University of Bamberg, IAB, Nuernberg, and IZA, Bonn.); Philipp J.H. Schroeder (Aarhus School of Business and DIW Berlin.)
    Abstract: Temporary migration, though empirically relevant, is often ignored in formal models. This paper proposes a migration model with heterogeneous agents and persistent cross country income differentials that features temporary migration. In equilibrium there exists a positive relation between the stock of migrants and the income differential, while the net migration flow becomes zero. Consequently, existing empirical migration models, estimating net migration flows, instead of stocks, may be misspecified. This suspicion appears to be confirmed by our investigation of the cointegration relationships of German migration stocks and flows since 1967. We find that (i) panel-unit root tests reject the hypothesis that migration flows and the explanatory variables are integrated of the same order, while migration stocks and the explanatory variables are all I(1) variables, and (ii) the hypothesis of cointegration cannot be rejected for the stock model.
    Keywords: International migration, temporary migration, panel cointegration
    JEL: C23 C53 F22
    Date: 2011–12
  23. By: Rodrigo Wagner (Department of Economics, Harvard University); Andrés Zahler (Facultad de Economía y Empresa, Universidad Diego Portales)
    Date: 2011–05

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