nep-int New Economics Papers
on International Trade
Issue of 2012‒05‒02
ten papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. Liberalized Trade and Worker-Firm Matching By Davidson, Carl; Heyman, Fredrik; Matusz, Steven; Sjöholm, Fredrik; Chun Zhu, Susan
  2. Intra-Firm Trade and Employment in US Manufacturing By Sotiris Blanas
  3. Price equalization does not imply free trade By Piyusha Mutreja; B. Ravikumar; Raymond Riezman; Michael J. Sposi
  4. Goods Trade, Factor Mobility and Welfare By Stephen J. Redding
  5. A critical judgement of the applicability of 'New New Trade Theory' to agriculture: Structural change, productivity, and trade By Prehn, Sören; Brümmer, Bernhard
  6. Trade liberalization and credit constraints: Why opening up may fail to promote convergence By Peters, Katrin; Schnitzer, Monika
  7. Exchange Rate Bands of Inaction and Play-Hysteresis in German Exports: Sectoral Evidence for Some OECD Destinations By Ansgar Belke; Matthias Göcke; Martin Günther
  8. Regional Integration Agreements and Rent-Seeking in Africa By S. STANDAERT; G. RAYP
  9. The sophistication and diversification of the African agricultural sector: A product space approach By Ulimwengu, John; Badibanga, Thaddée
  10. Why Do Imports Fall More than Exports Especially During Crises? Evidence from Selected Asian Economies By Tang, Hsiao Chink

  1. By: Davidson, Carl (Michigan State University); Heyman, Fredrik (Research Institute of Industrial Economics (IFN)); Matusz, Steven (Michigan State University); Sjöholm, Fredrik (Research Institute of Industrial Economics (IFN)); Chun Zhu, Susan (Michigan State University)
    Abstract: Recent theoretical analysis suggests that a reduction in the cost of exporting increases the degree of assortative matching between workers and firms in export-oriented industries. Changes that reduce the cost of imports have an ambiguous impact on matching. We combine detailed Swedish matched worker-firm data from 1995 – 2005 with tariff data to test these hypotheses. The data cover 94 sectors subject to international competition and includes all firms with at least 20 employees. Our findings strongly support the theoretical predictions.
    Keywords: Matching; Globalization; Firms; Workers; Multinational Enterprises; International Trade
    JEL: F14 F16 J20
    Date: 2012–04–03
  2. By: Sotiris Blanas
    Abstract: This paper studies the impact of trade within US-headquartered multinational companies (MNCs) on labour demand for all employees, as well as, for those of high and low skill in US manufacturing for the period 1995 – 2005. We find strong evidence on the positive and negative effect of intra-firm exports and imports respectively, on aggregate employment. The former effect is stronger than the latter. Moreover, we find that demand for low-skilled labour is negatively associated with intra-firm imports, while unaffected by intra-firm exports. In contrast, high-skilled labour demand is positively linked to intra-firm exports but unaffected by intra-firm imports. The last two findings put together, suggest that low-skill intensive stages of the value-added chain are mostly transferred to the US affiliates abroad, while highskill intensive ones are mostly kept within the US parents.
    Keywords: Multinational Companies (MNCs), intra-firm imports, intra-firm exports, employment, low-skilled workers, high-skilled workers
    JEL: F16 F23 J21 J23
    Date: 2012–04
  3. By: Piyusha Mutreja; B. Ravikumar; Raymond Riezman; Michael J. Sposi
    Abstract: In this paper we show that price equalization alone is not sufficient to establish that there are no barriers to international trade. There are many barrier combinations that deliver price equalization, but each combination implies a different volume of trade. Therefore, in order to make statements about trade barriers it is necessary to know the trade flows. We demonstrate this first in a simple two-country model. We then extend the result to a multi-country model with two sectors. We show that for the case of capital goods trade, barriers have to be large in order to be consistent with the observed trade flows. Our model also implies that capital goods prices look similar across countries, an implication that is consistent with data. Zero barriers to trade in capital goods will deliver price equalization in capital goods, but cannot reproduce the observed trade flows in our model.
    Keywords: Purchasing power parity ; International trade
    Date: 2012
  4. By: Stephen J. Redding
    Abstract: This paper extends a recent class of quantitative models of international trade to incorporate factor mobility within countries. We present a model-based decomposition of the variance of economic activity into the contributions of locational fundamentals, market access and their covariance. We show how the standard framework for undertaking model-based counterfactuals in trade can be augmented to obtain predictions for endogenous changes in the distribution of economic activity across regions within countries. A region's trade share with itself is no longer a sufficient statistic for the welfare gains from trade, which also depend on endogenous changes in the distribution of mobile factors.
    JEL: F11 F12 F16
    Date: 2012–04
  5. By: Prehn, Sören; Brümmer, Bernhard
    Abstract: The emergence of 'New New Trade Theory' fundamentally changed the thinking of international trade, and it is now at the heart of science. Here, we are going to take up the discussion of Golpinath et al. [2007], looking at whether 'New New Trade Theory' is applicable to agriculture. Revisiting the recent literature, we can find new theoretical and methodological evidence for its importance: the concepts of 'New New Trade Theory' will impact the modelling of structural change in agriculture and of agricultural trade. Farm productivity and agricultural trade cannot be seen anymore as detached from one another; both concepts are interrelated. We claim that 'New New Trade Theory' and its concepts will become standard for agriculture, too. --
    Keywords: Agriculture Economics,New New Trade Theory,Farm Heterogeneity,Elasticity of Trade Flows,Estimation Methods
    Date: 2012
  6. By: Peters, Katrin; Schnitzer, Monika
    Abstract: Recent evidence suggests that despite opening up a country for trade, the productivity gap between developed and emerging economies often does not close. This paper examines credit constraints as one channel held responsible for hampering convergence. Specifically, we extend a Melitz and Ottaviano (2008) type trade model with variable mark-ups to allow for endogenous technology adoption. We consider a framework with two countries that potentially differ with respect to credit market development. Firms have the option to adopt a more efficient technology by paying some fixed cost. A fraction of the fixed technology adoption cost has to be financed externally: in a less developed credit market, the costs of external finance and thus the total costs of technology adoption are higher. A reduction in trade costs raises demand abroad (pro technology-adoption effect) but reduces demand at home because of import competition (anti technology-adoption effect). We find that trade liberalization increases economic performance, that is average productivity and technology adoption, in both countries but that the productivity gap widens. Simulations show that the welfare gap widens too. Opening up without sufficient access to external funding thus fails to promote convergence.
    Keywords: Convergence; Financial constraints; Productivity gap; Technology adoption; Trade liberalization
    JEL: F1 O16 O33
    Date: 2012–04
  7. By: Ansgar Belke; Matthias Göcke; Martin Günther
    Abstract: A non-linear model is applied where suddenly strong spurts of exports occur when changes of the exchange rate go beyond a zone of inaction. We call the latter a "play" area - analogous to mechanical play and implement an algorithm describing path-dependent playhysteresis into a regression framework. The hysteretic impact of real exchange rates on German exports is then estimated based on quarterly data from 1995Q1 to 2010Q3. For some of the main export partners of Germany outside the euro area and some of the most important tradable sectors we find significant hysteretic effects for a part of the German exports.
    Keywords: exchange rate movements, play-hysteresis, modelling techniques, switching/spline regression, export demand
    JEL: F14 C51
    Date: 2012
    Abstract: This paper explores the motives behind the formation of intra-African regional integration agreements (RIAs). We aim to see whether rent-seeking can be identified as a statistically significant driving force of African integration. The traditional reason for economic integration, the static and dynamic effects, predict no or even a negative effect on welfare. Moreover, many of the new regionalism theories are conditional on strong economic integration. Two exceptions are rent-seeking behavior and the regime boosting hypothesis. Not only can they credibly explain the proliferation of African trade agreements in the absence of a positive effect on welfare, they can also account for the lack of progress in clearing away the many obstructions to regional trade.<br> Because most African agreements involve more than two partner countries, the decision to enter a RIA cannot be analyzed by examining agreements between pairs of countries. Instead, we propose regressing whether a country is a member of a certain agreement on the characteristics of both country and agreement. We find that corruption does have an effect on the willingness to join RIAs, but that it is strongly dependent on the level of GDP. Moreover, for a given level of GDP the effect of corruption is non-linear.
    Keywords: Regional Integration, Rent-seeking, Africa
    JEL: F53 C23
    Date: 2012–02
  9. By: Ulimwengu, John; Badibanga, Thaddée
    Abstract: We use the concept of the product space to analyze the key features of the transformation process in Africa with a focus on the agricultural sector. Between 1962 and 2008, we find that both specialization and diversification occur for the overall economy and across sectors. Our findings also confirm that the transformation of the African economy is driven primarily by the increasing specialization of nonagricultural exports. However, the transformation process is still moving more slowly than that of an emerging economy such as Brazil. The index of specialization of agricultural exports grew at a modest annual rate of 2.1 percent between 1962 and 2008, compared to 5.0 percent for nonagricultural exports and 4.1 percent for the overall economy. Although substantive achievements are observed in terms of product specialization or sophistication, the diversification of agricultural exports is rather insignificant. Compared to Africa, Brazil appears to have experienced a more balanced process in terms of both specialization and diversification of its agriculture. African countries' specific transformation dynamics are heterogeneous, suggesting that a one-size-fits-all strategy to boost the agricultural sector in Africa is probably not the best option. Therefore, we advocate that the goals and principles of the Comprehensive Africa Agriculture Development Programme (CAADP) be adapted and customized to individual countries and incorporated into their strategies to enhance the transformation process of the African agricultural sector.
    Keywords: Structural transformation, sophistication, Growth, export, diversification,
    Date: 2012
  10. By: Tang, Hsiao Chink (Asian Development Bank)
    Abstract: This question is examined via a standard import specification augmented with differential and time-varying impacts of each component of aggregate demand: consumption, investment, government spending, and exports. Several important variables in explaining import demand such as credit conditions and business and consumer sentiment are also included. A panel fixed-effects model adjusted for cross-sectional dependence is estimated for 11 Asian economies from 1Q91 to 2Q11. The result shows the import intensity of exports is the highest among all variables. Alone, however, it does not contribute to a larger fall in imports. The larger decline in imports will be evident if other components of aggregate demand also fall, particularly investment and consumption. A weakened credit condition will also exacerbate the fall in imports. Business and consumer sentiment, however, does not seem to matter. In crisis periods more nuanced results are evident. For example, fiscal contractions may have worsened the fall in imports during the 1997/98 Asian financial crisis, while the fall in exports also has an additional adverse impact. Business and consumer sentiment seems to have a lagged positive impact during the global financial crisis.
    Keywords: imports; exports; Asia; ASEAN; East Asia; crisis
    JEL: F10 F14 F31
    Date: 2012–04–01

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