nep-int New Economics Papers
on International Trade
Issue of 2012‒04‒17
eighteen papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. Do migrants really foster trade ? the trade-migration nexus, a panel approach 1960-2000 By Parsons, Christopher R.
  2. How frequently firms export? Evidence from France By Gábor Békés; Lionel Fontagné; Balázs Muraközy; Vincent Vicard
  3. How does Religion Bias the Allocation of Foreign Direct Investment? The Role of Institutions By Jérôme Hergueux
  4. Economic Corridors in South Asia: Exploring the Benefits of Market Access and Trade Facilitation By Raihan, Selim
  5. SAFTA and the South Asian Countries: Quantitative Assessments of Potential Implications By Raihan, Selim
  6. Employment Effects of FTA Agreements: The Perspectives from Bangladesh By Raihan, Selim
  7. Food Prices and the Multiplier Effect of Export Policy By Paolo E. Giordani; Nadia Rocha; Michele Ruta
  8. Workers'age and the impact of trade shocks By Artuc, Erhan
  9. Exports and Wages: Rent Sharing, Workforce Composition or Returns to Skills? By Macis, Mario; Schivardi, Fabiano
  10. Global Supply Chains and Wage Inequality By Arnaud Costinot; Jonathan Vogel; Su Wang
  11. Transportation and Communication Infrastructure in Latin America: Lessons from Asia By Barbara Kotschwar
  12. Do south-south trade agreements enhance member countries' trade? evaluating implications for development potential in the context of SAARC By Das, Gouranga; Bhattacharya, Swapan K.
  13. Greenfield FDI and Skill Upgrading By Ronald B. Davies; Rodolphe Desbordes
  14. Welfare Changes and Sectoral Adjustments of Asia-Pacific Countries under Alternative Sequencings of Free Trade Agreements By Ken Itakura; Hiro Lee
  15. Does the Acquisition of Mines Benefit Resource-Importing Countries? By Keisaku Higashida; Yasuhiro Takarada
  16. Trade with Time Zone Differences: Factor Market Implications By Kikuchi, Toru; Marjit, Sugata; Mandal, Biswajit
  17. A comparative study of trends in globalization using different synthetic indicators By Mishra, SK
  18. Ricardo's Theory of Comparative Advantage: Old Idea, New Evidence By Costinot, Arnaud; Donaldson, Dave

  1. By: Parsons, Christopher R.
    Abstract: Despite the burgeoning empirical literature providing evidence of a strong and robust positive correlation between trade and migration, doubts persist as to unobserved factors which may be driving this relationship. This paper re-examines the trade-migration nexus using a panel spanning several decades, which comprises the majority of world trade and migration in every decade. First the findings common to the literature are reproduced. Country-pair fixed effects are then used to account for unobserved bilateral factors, the implementation of which removes all of the positive impact of migration on trade. In other words the unobserved factors, a leading candidate for which it is argued is international bilateral ties, are on average strongly and positively correlated with migrant networks. Dividing the world into the relatively affluent North and poorer South, the results show that migrants from either region only affect Northern exports to the South. This is intuitive since in general countries of the North export more differentiated products and information barriers between these regions are greatest. A country-level analysis further shows that migrants may both create and divert trade. Taken as a whole, the results demonstrate the large biases inherent in cross-sectional studies investigating the trade-migration nexus and highlight the extent to which previous results have been overstated.
    Keywords: Free Trade,Economic Theory&Research,Trade Law,Trade Policy,Emerging Markets
    Date: 2012–04–01
  2. By: Gábor Békés; Lionel Fontagné; Balázs Muraközy; Vincent Vicard
    Keywords: GRAVITY MODEL, transport costs, frequency of trade, Baumol-Tobin model, France, customs data
    JEL: F12 F15 D40 F12 R40 A A A A A
    Date: 2012–04
  3. By: Jérôme Hergueux (LaRGE Research Center, Université de Strasbourg)
    Abstract: We construct a gravity model of worldwide foreign direct investment stock (FDI) in order to study the effect of religion on FDI allocation. We establish empirically that both bilateral religious similarity and bilateral religious diversity foster FDI at the country pair level. These apparently contradicting results confirm an empirical puzzle that has already emerged in the literature, particularly in the case of trade in goods. We investigate whether the answer to this puzzle could lie on the fact that the effect of these two variables play for different types of countries, depending on the level of efficiency of their institutions.
    Keywords: culture, religion, institutions, trust, foreign direct investment.
    JEL: F21 F23 Z12
    Date: 2012
  4. By: Raihan, Selim
    Abstract: This paper shows that there are significant prospects of rise in intra-regional trade among the four Eastern South Asian countries. The partial equilibrium modelling exercise helps identify the products with high export potentiality. Simulation exercise based on a global general equilibrium model suggests that though there are prospects of welfare gains for India, Pakistan and Sri Lanka, there are risks of welfare loss for Bangladesh and other LDCs in South Asia out of FTA in goods under the SAFTA agreement because of the fact that the trade diversion effects could be larger than trade creation effects for these countries. However, such welfare loss could be well compensated by the rise in welfare due to improvement in trade facilitation among the South Asian countries. It also appears that the gains from trade facilitation are much bigger than the gains from trade liberalisation. Interactions with the stakeholders in Bangladesh helped identify a number of factors which are constraining trade in Eastern South Asia sub-region. These include inadequate facilities at the land and sea ports, weak physical infrastructure, inefficient bureaucracy, corruption and several forms of NTBs. Removal of such trade barriers though improvement in trade facilitation measures will generate significant rise in trade among these countries.
    Keywords: Economic Corridor; Market Access; Trade Facilitation; SAFTA
    JEL: F15 C68 F17
    Date: 2011–09
  5. By: Raihan, Selim
    Abstract: This paper has examined the implications of SAFTA for the South Asian countries. In doing so it has reviewed the pattern of intra-regional trade in South Asia. The paper has reviewed a number of studies which conducted qualitative and quantitative assessments of SAFTA. Using the global general equilibrium model the paper has also explored the welfare implications of tariff liberalisation under SAFTA and increased trade facilitation in South Asia. The simulation results suggest that the gains from trade facilitation in South Asia are much higher than the gains from mere reduction in tariff in goods. Therefore, in order to make SAFTA effective, trade liberalization is a necessary condition, but not a sufficient one. Utmost priority should be given to developing trade infrastructure facilities (hardware) and trade facilitation (software).
    Keywords: SAFTA; Regional Integration; Market Access; Trade Facilitation
    JEL: F15 C68 F17
    Date: 2012–02
  6. By: Raihan, Selim
    Abstract: Bangladesh has entered into several regional FTA agreements and is in the process of signing bilateral FTA agreements with a number of countries. The study uses several models such as WITS/SMART global partial equilibrium model, SAM multiplier model, CGE model and an employment satellite matrix to explore the employment effects in Bangladesh out of three different FTA scenarios. In the WITS/SMART model, three FTA scenarios are run which assume full elimination of bilateral tariff between Bangladesh and India (under Bangladesh-India bilateral FTA), full elimination of bilateral tariff between Bangladesh and Malaysia (under Bangladesh-Malaysia bilateral FTA) and full elimination of tariff on trade among the BIMSTEC member countries (under BIMSTEC). The analysis of the macro impacts of the FTA scenarios suggest that such bilateral and regional FTAs would be beneficial for Bangladesh in terms of impact on consumer prices, exports, real wages and employment. At the sectoral level, a number of export oriented sectors would gain from such FTAs. However, the sectoral level impacts also suggest that a large number of sectors would experience fall in production because of large inflow of imports, which will result in loss in employment in these sectors. Therefore, these FTAs have important sectoral implications in terms of production, exports, import and employment. It however appears that at the aggregate level employment would rise which would mean that the loss in employment in some sectors will be more than compensated by rise in employment in other sectors. Therefore, the net effect on employment is likely to be positive.
    Keywords: FTA; CGE Model; Partial Equilibrium Model; Employment; Bangladesh
    JEL: F15 C68 F17 F14
    Date: 2011–12
  7. By: Paolo E. Giordani (Luiss "Guido Carli"); Nadia Rocha (World Trade Organization); Michele Ruta (World Trade Organization)
    Abstract: This paper studies the relationship between export policy and food prices. We show that, when individuals are loss averse, food exporters may use trade policy to shield the domestic economy from large price shocks. This creates a complementarity between the price of food in international markets and export policy. Speci?cally, unilateral actions by exporting countries give rise to a "multiplier e¤ect": when a shock in the international food market drives up (down) its price, governments respond by imposing export restrictions (subsidies), thus exacerbating the initial shock and soliciting further export activism. We test this theory with a new dataset that comprises monthly information on trade measures across 125 countries and 29 food products for the period 2008-10, ?nding evidence of a multiplier e¤ect. Global restrictions in a product (i.e. the share of international trade covered by export restrictions) are positively correlated with the probability of imposing a new export restriction on that product, especially for staple foods. Large exporters are found to be more reactive to restrictive measures, suggesting that the multiplier e¤ect is mostly driven by this group. Finally, we estimate that a 1 per cent surge in global restrictions increased international food prices by 1.1 per cent on average during 2008-10. These ?ndings contribute to inform the broader debate on the proper regulation of export policy within the multilateral trading system.
    Keywords: Loss aversion; Export policy; Multiplier e¤ect; Food crisis; WTO
    JEL: F13 F59 Q02 Q17
    Date: 2012
  8. By: Artuc, Erhan
    Abstract: Do trade shocks affect workers differently because of their age? This paper examines the issue by estimating the lifetime mobility of workers based on the sectors in which they work. Using U.S. data, the paper shows that mobility costs rise with a worker's age and years of experience, but stay the same regardless of his or her education level. In addition, using a general-equilibrium simulation of counterfactual trade-liberalization policies in the metal manufacturing sector, the paper shows that trade shocks affect workers with higher mobility costs more, for both winners and losers of the policy shocks. But the effects taper off over a worker's lifetime, especially when they are close to retirement.
    Keywords: Economic Theory&Research,Labor Markets,Tertiary Education,Labor Policies,Trade Policy
    Date: 2012–04–01
  9. By: Macis, Mario; Schivardi, Fabiano
    Abstract: We use linked employer-employee data from Italy to explore the relationship between exports and wages. Our empirical strategy exploits the 1992 devaluation of the Italian Lira, which represented a large and unforeseen shock to Italian firms' incentives to export. The results indicate that the export wage premium is due to exporting firms both (1) paying a wage premium above what their workers would earn in the outside labor market -- the 'rent-sharing' effect, and (2) employing workers whose skills command a higher price after the devaluation -- the ‘skill composition’ effect. The latter effect only emerges once we allow for the value of individual skills to differ in the pre- and post-devaluation periods. In fact, using a fixed measure of skills, as typically done in the literature, we would attribute the wage increase only to rent sharing. We also document that the export wage premium is larger for workers with more export-related experience. This indicates that the devaluation increased the demand for skills more useful for exporting, driving their relative price up.
    Keywords: Export wage premium; Linked employer employee data
    JEL: F16 J31
    Date: 2012–04
  10. By: Arnaud Costinot; Jonathan Vogel; Su Wang
    Abstract: A salient feature of globalization in recent decades is the emergence of "global supply chains" in which different countries specialize in different stages of a sequential production process. In Arnaud Costinot, Jonathan Vogel and Su Wang (2011), CVW hereafter, we have developed a simple theory of trade with sequential production to shed light on how global supply chains affect the interdependence of nations. In this paper we develop a multi-factor extension of CVW to explore how the emergence of global supply chains may affect wage inequality within countries. Our main theoretical prediction is that the emergence of global supply chains has opposite effects on wage inequality among workers employed at the bottom and the top of these chains. This suggests that the consequences of globalization on wage inequality may be very different in primary sectors like agriculture or mining than in manufacturing sectors.
    JEL: F1
    Date: 2012–04
  11. By: Barbara Kotschwar (Peterson Institute for International Economics)
    Abstract: In Latin America, inadequate transportation infrastructure has been identified as an increasingly important impediment to the region's further integration in global trade and a significant factor preventing countries from properly taking advantage of the multitude of regional, plurilateral, and bilateral trade agreements signed in the past decade and a half. This paper examines transport and communications infrastructure initiatives in Latin American and Asian regional trade arrangements and finds several lessons Asia can teach Latin America.
    Keywords: trade, infrastructure, regional trade agreements (RTAs), transport costs, transport infrastructure, cooperation, East Asia, Latin America
    JEL: F10 F15 R11 R42 R58
    Date: 2012–04
  12. By: Das, Gouranga; Bhattacharya, Swapan K.
    Abstract: The South Asian Association for Regional Cooperation (SAARC) is the least integrated economy in the Asia-Pacific region, whose intraregional trade was only 5.6 per cent in 2006. In order to estimate potential trade of the SAARC Member Countries (SMCs), we have estimated “behind the border” and “beyond the border” constraints, which both appear to be quite significant in all SMCs. Given the level of “beyond the border” constraints, in the absence of full information on all “behind the border” constraints, the combined effect of the latter on actual exports of individual SAARC country is modeled in the gravity equation, which is estimated using the methods suggested in the literature for estimating stochastic frontier production function. Results of the stochastic frontier gravity model show that when FTA among SAARC countries becomes fully operational, smaller members will gain maximum benefits compared to larger members. The paper also analyses the synergy between trade and development goals of the SAARC countries. Since tariffs are not an important barrier in this region, emphasis should be given to liberalization of investment flows, higher technology cooperation, and cooperation in areas of education, literacy, basic health care, gender bias, favorable institutions ensuring good governance, social capital, transparency, transportation costs, infrastructure, to achieve the SAARC development goals (SDGs).
    Keywords: SAARC; Development; RTA; PTA: FTA: Stochastic Frontier Analysis; Technology; Cooperation
    JEL: F13 O24 R11
    Date: 2009–11–05
  13. By: Ronald B. Davies (University College Dublin; Institute for International Integration Studies, Trinity College Dublin; CES-Ifo); Rodolphe Desbordes (University of Strathclyde)
    Keywords: Greenfield FDI, Labour Demand, Skill Upgrading
    JEL: F16 F23
    Date: 2012–03
  14. By: Ken Itakura (Graduate School of Economics, Nagoya City University); Hiro Lee (Osaka School of International Public Policy, Osaka University)
    Abstract: In this paper we compare welfare effects and the extent of sectoral adjustments of the member countries under alternative free trade agreement (FTA) sequencings in the Asia-Pacific region using a dynamic computable general equilibrium (CGE) model. If a Trans-Pacific Partnership (TPP) agreement under one sequencing and an East Asian FTA (EAFTA) under another sequencing will enter into force at the same time, followed by more enlarged FTAs, then a larger number of countries are expected to realize greater welfare gains under the Asia-track sequencing. However, given the uncertainty about the establishment of an Asia-wide FTA in the near future, the TPP-track sequencing appears to be an attractive option for most countries in the Asia-Pacific region. With respect to sectoral adjustments, there seem to be no significant differences among the alternative sequencings.
    Keywords: Sequencing, FTA, Asia-Pacific, CGE model
    JEL: F15 F17
    Date: 2012–03
  15. By: Keisaku Higashida (School of Economics, Kwansei Gakuin University); Yasuhiro Takarada (Faculty of Policy Studies, Nanzan University)
    Abstract: Using a simple two-period model, this paper examines the effects of the acquisition of mines/resources by a final goods producer located in a resource-importing country on resource prices in both the first (the present) and second (the future) periods, profits of firms, and welfare. We find that an increase in the mines owned by a final goods producer can increase the resource price in the first period and/or, interestingly, the second period. The strategic behavior of a resource-extracting firm located in a resource-exporting country produces this result. Whether the resource price increases in either period depends on the demand structure for the final goods and the resource supply condition of the final goods producer which owns the mines in the second period. We also consider three extended situations: joint exploration, entry of speculators, and the case of a non-committed investment.
    Keywords: Acquisition of mines, resource exploitation, governments' support
    JEL: F12 F18 Q31 Q34
    Date: 2012–03
  16. By: Kikuchi, Toru; Marjit, Sugata; Mandal, Biswajit
    Abstract: The main purpose of this study is to illustrate, with a simple two-factor (skilled and unskilled labor) model, how a time-saving improvement in business-services trade benefitting from differences in time zones can have an impact on national factor markets. In doing so, we intend to capture the situation where the night-shift work in one country is replaced by the day-shift work in another country. In other words, we will show that, trade with time zone differences will result in shifts of the relative supplies and demands for skilled labor around the globe.
    Keywords: Time Zone Differences; Trade in Business Services; Skilled and Unskilled Labor; Day-shift and Night-shift Work
    JEL: F12
    Date: 2011
  17. By: Mishra, SK
    Abstract: Using the KOF data at the annual level, we construct ten different composite indices for comparing the extent of globalization of 131 countries for eleven years, 1999-2009. We compare the different indices of globalization among themselves and also with the Dreher-KOF index of globalization and find that among the different indices the Dreher-Chebyshev index is the most representative one. Among the countries, we concentrate on the trends in globalization of India and her neighboring countries, Bangladesh, China, and Pakistan.
    Keywords: Synthetic; Composite indices; Pena indicators; Particle Swarm; Combinatorial optimization; Globalization; Tsallis entropy; Sharma-Mittal entropy; Maximin problem
    JEL: F15 C43 C44 F01 C61 F43
    Date: 2012–04–10
  18. By: Costinot, Arnaud; Donaldson, Dave
    Abstract: When asked to name one proposition in the social sciences that is both true and non-trivial, Paul Samuelson famously replied: `Ricardo's theory of comparative advantage'. Truth, however, in Samuelson's reply refers to the fact that Ricardo's theory of comparative advantage is mathematically correct, not that it is empirically valid. The goal of this paper is to assess the empirical performance of Ricardo's ideas. We use novel agricultural data that describe the productivity in 17 crops of 1.6 million parcels of land in 55 countries around the world. Crucially, this dataset contains information about the productivity of each parcel of land in all crops, not just those that are currently being grown. This direct information about relative productivity differences across economic activities allows us to compute, for the first time, the output predicted by Ricardo's theory of comparative advantage. Despite all of the real-world considerations from which this theory abstracts, we find that Ricardo's theory of comparative advantage has significant explanatory power in the data, at least within the scope of our analysis.
    Keywords: comparative advantage; Ricardian theory
    JEL: F10 F11
    Date: 2012–04

This nep-int issue is ©2012 by Alessia A. Amighini. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.