nep-int New Economics Papers
on International Trade
Issue of 2012‒01‒25
sixteen papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. Investigating China's Disaggregated Processed Exports: Evidence that the RMB matters By Willem THORBECKE
  2. Firms' exporting and importing activities: is there a two-way relationship? By David Aristei; Davide Castellani; Chiara Franco
  3. Goods Follow Bytes: The Impact of ICT on EU Trade By Anselm Mattes; Philipp Meinen; Ferdinand Pavel
  4. Causal links between trade, foreign direct investment and economic growth for Bangladesh By Syed Imran Ali Meerza
  5. On the development strategy of countries of intermediate size - An analysis of heterogeneous firms in a multi-region framework By Rikard Forslid; Toshihiro Okubo
  6. The PRC’s Free Trade Agreements with ASEAN, Japan, and the Republic of Korea: A Comparative Analysis By Estrada, Gemma; Park, Donghyun; Park, Innwon; Park, Soonchan
  7. Shanghai’s Trade, China’s Growth: Continuity, Recovery, and Change since the Opium War By Wolfgang Keller; Ben Li; Carol H. Shiue
  8. Ecological analysis of world trade By Leonardo Ermann; Dima L. Shepelyansky
  9. FDI, skill-specific unemployment, and institutional spillover effects By Schmerer, Hans-Jörg
  10. The Theory of the Firm goes Global By Marin, Dalia
  11. Exporters, Spin-outs and Firm Performance By Lööf, Hans; Nabavi, Pardis
  12. The Labor Market Effects of Immigration and Emigration in OECD Countries By Docquier, Frédéric; Ozden, Caglar; Peri, Giovanni
  13. Agglomeration, related-variety and internationalisation. Does a relationship exist? By Giulio Cainelli; Eleonora Di Maria; Roberto Ganau
  14. A Tale of Two Oceans: Market Integration Over the High Seas, 1800-1940. By Giovanni Federico
  15. Offshoring and Specialisation: Are Industries Moving Abroad? By Ioannis Bournakis; Michela Vecchi; Francesco Venturini
  16. Bilateral M&A activity from the global south By Dailami, Mansoor; Kurlat, Sergio; Lim, Jamus Jerome

  1. By: Willem THORBECKE
    Abstract: China's trade surplus is entirely in processing trade. Processed exports are final goods produced using parts and components coming from East Asian supply chain countries. Many claim that because much of the value added of China's processed exports comes from East Asian countries, exchange rates in supply chain countries should affect China's processed exports and the renminbi should not. To investigate these issues, this paper disaggregates processed exports into their two main categories—processing with imported materials (PWIM) exports and processing and assembly (PAA) exports. For PWIM exports, much of the value added comes from China, while for PAA exports, most of the value-added comes from supply chain countries. Dynamic ordinary least squares (DOLS) results indicate that East Asian exchange rates affect both types of exports and that the renminbi significantly affects PWIM exports but not PAA exports. Since PWIM exports are now six times the value of PAA exports, these results indicate that the renminbi matters for aggregate processed exports.
    Date: 2012–01
  2. By: David Aristei; Davide Castellani; Chiara Franco
    Abstract: The literature on firm heterogeneity and trade has highlighted that most trading firms tend to engage in both importing and exporting activities. This may be due to some common sunk costs or to a true state dependence. This paper provides some evidence that helps sort this issue out. Using firm level data for a group of 27 Eastern European and Central Asian countries from the World Bank Business Environment and Enterprise Performance Survey (BEEPS) over the period 2002-2008, we estimate a bivariate probit model of exporting and importing. The main finding is that there is a positive correlation between import and export at the level of the firm, but after controlling for size (and other firm level characteristics) importing have a positive effect on exporting, but exporting to not increase the probability of importing. The evidence is thus consistent with the presence of common sunk costs and with a one-way link between importing and exporting. The positive effect of import on export is mainly due to an increase in firm productivity and product innovation.
    Keywords: Exports, Imports, Firm heterogeneity, Eastern European and Central Asian countries
    JEL: F14 F21 F23
    Date: 2011–12–15
  3. By: Anselm Mattes; Philipp Meinen; Ferdinand Pavel
    Abstract: This paper empirically assesses whether the deployment and use of Information and Communication Technology (ICT) infrastructure at the national level affects trade flows within the European Union (EU) and between the EU and its main trading partners. The analysis tests the hypothesis that availability and use of ICT enhances trade by reducing transaction costs and through network effects that materialize when both trading partners are advanced users of ICT. The empirical analysis is based on the application of gravity equations in various robust specifications. The results suggest that ICT does have a significant impact on EU trade. In particular, we find trade to be enhanced if both trading partners reveal advanced ICT endowments, which supports the expected network effects. Additionally, we observe trade diversion effects from less to highly ICT developed countries.
    Keywords: Exports, ICT, gravity model, international trade, network effects
    JEL: F1 D2
    Date: 2012
  4. By: Syed Imran Ali Meerza (Graduate Research Assistant, Department of Economics, South Dakota State University)
    Abstract: This study investigates empirically the causal relationship between trade, foreign direct investment (FDI) and economic growth of Bangladesh for the period of 1973 to 2008. To analyze this Johansen cointegration test and Granger causality test are used. The cointegration analysis suggests that there is a long run equilibrium relationship among the variables. The results of Granger causality test identifies that there is a causal relationship among the mentioned variables. According to the study, economic growth of Bangladesh leads both FDI and export growth and there is a unidirectional causal relationship between FDI and export with direction from export to FDI.
    Keywords: gross domestic product, foreign direct investment, export, Johansen cointegration test and Granger causality
    Date: 2012–01
  5. By: Rikard Forslid (Stockholm University and CEPR); Toshihiro Okubo (Keio University)
    Abstract: This paper compares two policies: trade cost reduction and firm relocation cost reduction using a three-country version of a heterogeneous-firms geography and trade model, where the three countries have different market (population) sizes. We show how the effects of the two policies differ, in particular for the country of intermediate size. Unless the intermediate country is very small, in a relative sense, it will gain industry when relocation costs are reduced, but lose industry when trade costs are reduced. The smallest country loses industry in both cases, but only experiences lower welfare in the case of lower relocation costs. Thus, the ranking of the policies from the point of view of the two small and intermediate countries tends to be the opposite.
    Date: 2011–10
  6. By: Estrada, Gemma (Asian Development Bank); Park, Donghyun (Asian Development Bank); Park, Innwon (Division of International Studies, Republic of Korea University); Park, Soonchan (Department of Economics and International Trade, Kongju National University)
    Abstract: The role of the People’s Republic of China (PRC) in East Asia’s recovery from the recent global financial and economic crisis highlighted the PRC’s growing role as an engine of growth for the region. From the viewpoint of the PRC, there are many potential gains from entering into free trade agreements (FTAs) with its neighbors, who collectively form a large and fast-growing market. In this paper we qualitatively and quantitatively assess the four main permutations of the PRC’s FTAs with the region’s major economies: PRC–ASEAN, PRC–Japan, PRC–Republic of Korea, and ASEAN+3. We compare the effects of the FTAs on the PRC’s output and welfare. Our comparative analysis shows that the PRC would gain from all three bilateral FTAs, while gaining the most from a larger region-wide FTA such as ASEAN+3.
    Keywords: ASEAN; PRC; Japan; Republic of Korea; trade; free trade agreement; free trade area; CGE model
    JEL: F10 F14 F15
    Date: 2012–01–01
  7. By: Wolfgang Keller; Ben Li; Carol H. Shiue
    Abstract: In this paper, we provide aggregate trends in China’s trade performance from the 1840s to the present. Based on historical benchmarks, we argue that China’s recent gains are not exclusively due to the reforms since 1978. Rather, foreign economic activity can be understood by developments that were set in motion in the 19th century. We turn our focus to Shanghai, currently the world’s largest port. Shanghai began direct trade relations with western nations starting in 1843. By 1853, Shanghai already accounted for more than half of China’s foreign trade. In tracking the levels and growth rates of the city’s net and gross imports and exports, foreign direct investment, and foreign residents over more than a century, we find that Shanghai’s level of bilateral trade today with the United States, the United Kingdom, or Japan, for example, are by no means high given Shanghai’s 19th century experience. This paper argues that a regional approach that embeds national trading destinations within an international trading system provides a meaningful approach to understanding the history of China’s trade.
    JEL: F10 F22 F23 N81 N83 N85 N95 O43
    Date: 2012–01
  8. By: Leonardo Ermann; Dima L. Shepelyansky
    Abstract: Ecological systems have a high level of complexity combined with stability and rich biodiversity. Recently, the analysis of their properties and evolution has been pushed forward on a basis of concept of mutualistic networks that provides a detailed understanding of their features being linked to a high nestedness of these networks. It was shown that the nestedness architecture of mutualistic networks of plants and their pollinators minimizes competition and increases biodiversity. Here, using the United Nations COMTRADE database for years 1962 - 2009, we show that a similar ecological analysis gives a valuable description of the world trade. In fact the countries and trade products are analogous to plants and pollinators, and the whole trade network is characterized by a low nestedness temperature which is typical for the ecological networks. This approach provides new mutualistic features of the world trade highlighting new significance of countries and trade products for the world trade.
    Date: 2012–01
  9. By: Schmerer, Hans-Jörg
    Abstract: This paper proposes a multi-industry trade model with integrated capital markets and Mortensen and Pissarides search frictions in the labor market. Institutional changes in the model trigger adjustments at the intensive and extensive margin of labor demand. At the extensive margin a shift of the specialization pattern amongst the integrated countries magnifies the effects at the intensive industry margin via trade and FDI. Moreover, the distinction between high- and low-skill workers facilitates the analysis of skill-specific institutional changes. A government can influence wages and unemployment of the low-skilled by manipulating labor market institutions concerning high-skill workers only. One-sided interventions affect all workers at home and abroad irrespective of their level of skill. --
    Keywords: FDI,globalization,search unemployment,labor market institutions
    JEL: F16 E24 J6
    Date: 2012
  10. By: Marin, Dalia
    Abstract: What insights can be gained from bringing the theory of the firm to the global economy? I discuss several new features of the world economy that can be explained by incorporating the theory of the firm into the theory of international trade. Among the new features I discuss are the move to flatter corporate hierarchies and the decentralization of authority in firms, the “war for talent”, the rise of CEO pay in rich countries, organizational convergence across countries, and firm heterogeneity.
    Keywords: International Trade and Organizations; Firm heterogeneity; Organizational convergence; Decentralization in the firm; The rise of CEO pay
    JEL: F23 D21 L22
    Date: 2012–01
  11. By: Lööf, Hans (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Nabavi, Pardis (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: This paper analyzes the relationship between exporters, spin-outs and firm performance. A large body of research has shown that exporters perform better than non-exporters. But are also firms spawn out from exporters better than other new firms in terms of survival, productivity and growth? Using a panel of about 2,000 ex-employee starts ups, their parent companies and 10 000 other new firms in Sweden observed over a sequence of 5 years, we provide new evidence on spinouts as a channel of transferring knowledge from exporting firms to new ventures.
    Keywords: Exports; new firms; spin-out; spillovers; productivity
    JEL: J24 L26 M13 O31 O32
    Date: 2012–01–13
  12. By: Docquier, Frédéric (Université catholique de Louvain); Ozden, Caglar (World Bank); Peri, Giovanni (University of California, Davis)
    Abstract: In this paper, we simulate the labor market effects of net immigration and emigration during the 1990's in all OECD countries. To accomplish this, we are the first to employ a comprehensive database of migrant stocks, grouped by education level and country of origin/destination, for the years 1990 and 2000. Due to the much higher international mobility of college graduates, relative to all other individuals, we find that net migration flows are college-intensive, relative to the population of non-migrants. Using the consensus aggregate model of labor demand and supply we simulate the long-run employment and wage effects of immigration and emigration. We use a range of parameter values spanning most of the estimates in the literature. In all cases we find that immigration had a positive effect on the wage of less educated natives. It also increased or left the average native wages unchanged and had a positive or no effect on native employment. To the contrary, emigration had a negative effect on the wage of less educated native workers and it contributed to increase within country inequality in all OECD countries. These results still hold true when we correct for the estimates of undocumented immigrants, for the skill-downgrading of immigrants, when we focus on immigration from non-OECD countries, and when we consider preliminary measures of more recent immigration flows for the period 2000-2007.
    Keywords: immigration and emigration, complementarity, schooling externalities, average wage, wage inequality
    JEL: F22 J61 J31
    Date: 2011–12
  13. By: Giulio Cainelli; Eleonora Di Maria; Roberto Ganau
    Abstract: This paper uses a large sample of Italian manufacturing firms over the period 2004-2006, to investigate whether different types of agglomeration externalities affect firms’ internationalisation modes. In addition to specialisation economies, Jacobs externalities are analysed following the recent contribution by FRENKEN et al. (2007) which distinguishes between related and unrelated variety. Econometric results show that agglomeration externalities – in particular, specialisation and related-variety – positively affect export, while they do not affect the multinational strategy. Moreover, results show that the impact of agglomeration externalities on firms’ internationalisation decisions is higher for small sized firms.
    Keywords: Agglomeration, externalities, internationalisation
    JEL: F23 R12
    Date: 2011
  14. By: Giovanni Federico (European University Institute and University of Pisa)
    Abstract: Long-range market integration is an essential component of globalization but it is still comparatively under-researched. The conventional wisdom relies heavily on the case of Atlantic trade in the period after 1870. This paper covers also the Indian Ocean and extends the period under consideration, from Waterloo to World War Two. Integration started in first half of the 19th century, and timing and extent of convergence differed substantially among products. The second part of the paper analyses the causes of the process with a panel regression and puts forwards a tentative estimate of its welfare effects. The key message of the paper is that simple generalizations about the first globalization are not good substitutes for empirical research.
    Date: 2011–10
  15. By: Ioannis Bournakis; Michela Vecchi; Francesco Venturini
    Abstract: This paper investigates the impact of off-shoring on specialisation via its effect on national endowments and productivity. We use different definition of off-shoring to properly capture international fragmentation of production, while controlling for countries? stocks of R&D and ICT capital. Using industry data for the US, Japan and Europe we show that while offshoring of materials can benefit a wide range of industries, service and intra-industry offshoring can decrease specialisation in high-tech industry, both within manufacturing and services. This effect can be compensated with increasing R&D investments.
    Date: 2011–12–01
  16. By: Dailami, Mansoor; Kurlat, Sergio; Lim, Jamus Jerome
    Abstract: This paper studies the factors associated with outbound bilateral mergers and acquisitions (M&A) activity by firms located in emerging economies. The authors document recent trends in emerging market M&A flows, which have risen dramatically over the past decade, and explore the factors that may have contributed to this rise. They find distinct patterns for M&A deals according to whether the acquisition targets are in other emerging economies or advanced countries, and that these differences can be attributed to differing theoretical motivations behind foreign direct investment. The authors also consider the implications of their model for future M&A originating in the global South, in light of the global financial crisis of 2008.
    Keywords: Debt Markets,Emerging Markets,Economic Theory&Research,Markets and Market Access,Currencies and Exchange Rates
    Date: 2012–01–01

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