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on International Trade |
| By: | Luis Araujo; Giordano Mion; Emanuel Ornelas |
| Abstract: | We study the role of contract enforcement in shaping the dynamics of international trade at the firm level. We develop a theoretical model to describe how agents build reputations to overcome the problems created by weak enforcement of international contracts. We find that, all else equal, exporters start their activities with higher volumes and remain as exporters for a longer period in countries with better contracting institutions. However, conditional on survival, the growth rate of a firm's exports to a country decreases with the quality of the country's institutions. We test these predictions using a rich panel of Belgium exporting firms from 1995 to 2008 to every country in the world. We adopt two alternative empirical strategies. In one specification we use firm-year fixed effects to control for time-varying firm-specific characteristics. Alternatively, we model selection more explicitly with a two-step Heckman procedure using "extended gravity" variables as our exclusion restrictions. Results from both specifications support our predictions. Overall, our findings suggest that weak contracting institutions cannot be thought simply as an extra sunk or fixed cost to exporting firms; they also significantly affect firms' trade volumes and have manifold implications for firms' dynamic patterns in foreign markets. |
| Keywords: | Firm exports, contract enforcement, contracting institutions, firm dynamics |
| JEL: | F10 F12 L14 |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1118&r=int |
| By: | Gregory Corcos; Delphine M. Irac; Giordano Mion; Thierry Verdier |
| Abstract: | How well does the theory of the firm explain the choice between intrafirm and arms' length trade? This paper uses firm-level import data from France to look into this question. We find support for three key predictions of property-rights theories of the multinational firm. Intrafirm imports are more likely: (i) in capital- and skill-intensive firms; (ii) in highly productive firms; (iii) from countries with well-functioning judicial institutions. We further bridge previous aggregate findings with our investigation by decomposing intrafirm imports into an extensive and intensive margin. Doing so we uncover interesting patterns in the data that require further theoretical investigation. |
| Keywords: | intrafirm trade, outsourcing, firm heterogeneity, incomplete contracts, internationalization strategies, quality of institutions, extensive margin, intensive margin |
| JEL: | F23 F12 F19 |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1119&r=int |
| By: | Peter Arendorf Bache (Department of Economics and Business, Aarhus University, Denmark); Anders Laugesen (Department of Economics and Business, Aarhus University, Denmark) |
| Abstract: | This paper presents a Melitz-type model of international trade in final goods and Grossman-Hart-Antràs input sourcing by heterogeneous firms. We show how firms self-select into different organizational forms in a continuum of industries with different characteristics. Next, we show how a liberalization of trade leads to short run increases in the number of firm mergers and acquisitions and potentially new gains from trade. Finally, we show how the relative prevalence of integrating firms is increasing in some industries while constant in all others. |
| Keywords: | international trade, firm heterogeneity, make-or-buy decision, export behavior, productivity gains, M&As |
| JEL: | D23 F12 F14 F15 L2 |
| Date: | 2012–01–26 |
| URL: | http://d.repec.org/n?u=RePEc:aah:aarhec:2012-05&r=int |
| By: | Kafle, Kashi R.; Kennedy, P. Lynn |
| Abstract: | This study documents the effect of exchange rate volatility and the real exchange rate on bilateral agricultural exports, imports and total trade (exports + imports) flows between the United States and OECD countries. The effect of exchange rate volatility is estimated both separately from and in combination with the real exchange rate. In addition, implementation of Free Trade Agreements (FTAs) and use of the Euro as a national currency (Euro) are included as dummy variables and their effects on trade flows are also determined. A panel data set, which contains 28 cross-sections and 1148 observations, is used for bilateral trade flows between the United States and OECD countries from 1970 to 2010. With an empirical model based on a gravity equation, the results show that exchange rate volatility and the real exchange rate have a statistically significant and negative effect on agricultural, non-agricultural and total exports, imports, and trade (exports +imports) flows. Exchange rate volatility is found to have a greater impact on the agricultural sector, while the real exchange rate has a greater impact on the non-agricultural sector. Effects of FTAs and the Euro are always positive, with FTAs having a greater impact on the agricultural sector and the Euro on the non-agricultural sector. |
| Keywords: | bilateral agricultural trade, exchange rate volatility, OECD¬ countries, gravity equation, International Relations/Trade, |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:ags:saea12:119736&r=int |
| By: | Emanuel Ornelas |
| Abstract: | Labor market consequences are at the forefront of most debates on the merits of trade liberalization. Preferential trade agreements (PTAs) have become the primary form of trade liberalization in most countries, and several studies have shown that discriminatory and nondiscriminatory trade liberalization can lead to very different outcomes. Yet to date there has not been any attempt to study the specific labor market implications of preferential liberalization. In this article I argue that the labor market consequences of unilateral or multilateral non-discriminatory trade liberalization and those stemming from integration in the context of PTAs can indeed be quite distinct, and therefore the latter must be given closer scrutiny. I provide a short summary of both the theoretical literature on trade and the labor market and the literature on preferential liberalization. Relying on the insights from those two—largely independent—lines of research, I then discuss why liberalization through PTAs can have consequences for the labor market that are considerably different from the effects of lowering trade barriers in a non-discriminatory fashion. Examples of areas where those differences are likely to be meaningful include the nature of labor market adjustment costs, the incentives for firms to start exporting, and the effects on "job rents." |
| Keywords: | Trade liberalization, unemployment, trade diversion, labor frictions |
| JEL: | F16 F15 F13 |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1117&r=int |
| By: | Susanto, Dwi; Rosson, C. Parr; Costa, Rafael |
| Abstract: | This study empirically investigates the effects of structural reforms on bilateral trade flows of agricultural products. Specifically, the study jointly analyzes the impacts of three different reforms including financial reform, trade reform, and agricultural reform on agricultural trade. The results suggest that less restrictive credit constraints, reduced tariff rates, and less government interventions are likely to generate increase in total agricultural exports. The evidence further indicates that the impacts of the reforms vary considerably across less aggregated products as well as across reform forms. The results provide a solid policy foundation for pursuing structural reforms in order to stimulate trade and economic growth, given the fact that the index level of reforms has not reached the level of full liberalization yet |
| Keywords: | International Relations/Trade, |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:ags:saea12:119657&r=int |
| By: | Esiyok, Bulent; Ugur, Mehmet |
| Abstract: | Foreign direct investment (FDI) flows into Vietnam have increased significantly in recent years, with unequal distribution between provinces and regions. We aim to contribute to the literature on locational determinants of FDI by accounting for spatial interdependence between 62 Vietnamese provinces from 2006-2009. For this purpose, we estimate a spatial lag model using maximum likelihood estimation method. We report existence of spatial dependence between provinces as well as spatial spill-over effects. The results are robust to different specifications for weight matrices and inclusion of different explanatory variables and/or proxies. We also report that conventional determinants of FDI such as market size, domestic investment, openness to trade, labour cost, education and governance, etc. are significant and remain robust to inclusion of spatial interdependence. The sign of the spatial dependence suggests that the distribution of FDI between provinces is subject to conglomeration effects. |
| Keywords: | Foreign direct investment; spatial dependence; conglomeration; Vietnam |
| JEL: | R12 F21 C31 |
| Date: | 2011–12–20 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:36145&r=int |
| By: | Yeboah, Osei; Naanwaab, Cephas; Saleem, Shaik; Akuffo, Akua |
| Abstract: | The relationship between trade and productivity has not been established theoretically. Some researchers have indeed found some, if not complete, support for the view that increasing openness has a positive impact on productivity. This study used a Cobb-Douglas production function as in Miller and Upadhyay (2000) to estimate the impact of FDI, exchange rate, capital-labor ratio and trade openness on GDP for 38 African countries from 1980 to 2008. Data were transformed to natural logs and estimated using alternative panel models; which included one- or-two-way fixed or random effects models. The results found trade openness having a positive relationship with GDP; which is comparable to findings of Ahmed et al.; (2008). |
| Keywords: | Trade Openness, Productivity, Africa, Cobb Douglas Production Function., International Development, International Relations/Trade, Productivity Analysis, |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:ags:saea12:119795&r=int |