nep-int New Economics Papers
on International Trade
Issue of 2012‒05‒08
fifteen papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. Entry Costs & Increasing Trade By William F. Lincoln; Andrew H. McCallum
  2. Ethical distance and difference in Bilateral trade By Bala Ramasamy; Matthew C.H. Yeung
  3. How Trade Credits Foster International Trade By Eck, Katharina; Engemann, Martina; Schnitzer, Monika
  4. Networked FDI: Sales and sourcing patterns of Japanese foreign affiliates By Richard BALDWIN; OKUBO Toshihiro
  5. Trade and Inequality: From Theory to Estimation By Elhanan Helpman; Oleg Itskhoki; Marc-Andreas Muendler; Stephen Redding
  6. Goods Trade, Factor Mobility and Welfare By Stephen J. Redding
  7. Income terms of trade and trade balance: the long run evidence from Bangladesh By Faridul, Islam; Mohammad, Iqbal Tahir; Muhammad, Shahbaz
  8. An Empirical Investigation into the Determinants of Trade Policy Bias By Hink, Matthew; Cardwell, Ryan T.; Lawley, Chad
  9. Regional cooperation for improvement of trade procedures: The case of Japan By Naoko Shinkai; Zenebe Bashaw
  10. International Trade And Business Practices: A Comparative Attempt In The Apparel Market By Kavvadia, Helen
  11. Can India become an export platform for global operations of Japanese and American multinational corporations affiliates? By Nobuaki Yamashita
  12. Framework for the International Services Agreement By Gary Clyde Hufbauer; J. Bradford Jensen; Sherry Stephenson; Julia Muir; Martin Vieiro
  13. The Next-11 and the BRICs: Are They the Future Markets for Agrifood Trade? By Cairns, Alexander; Meilke, Karl D.
  14. Market familiarity and the location of South and North MNEs By Celine Azemar, Julia Darby, Rodolphe Desbordes and Ian Wooton; Julia Darby; Rodolphe Desbordes; Ian Wooton
  15. How to Stir Up FDI Spillovers: Evidence from a Large Meta-Analysis By Tomas Havranek; Zuzana Irsova

  1. By: William F. Lincoln; Andrew H. McCallum
    Abstract: Using con…dential microdata from the US Census, we …nd that the fraction of manufacturing plants that export rose from 21% in 1987 to 39% in 2006. It has been suggested that similar trends in other countries may have been caused by declining costs of entering foreign markets. Our study tests this hypothesis for the …rst time. Both reduced form and structural estimation approaches …nd little evidence that the entry costs declined signi…cantly in the US over this period. We instead argue that changes in other factors that determine export status are su¢ cient to explain these trends.
    Keywords: globalization, international trade, export, entry, exit, heterogeneous firms, trade cost, technical barriers to trade (TBT), bayesian monte carlo markov chain (MCMC)
    JEL: F10 D21 D22 F14 C11 C25
    Date: 2011–11–01
  2. By: Bala Ramasamy (?China Europe International Business); Matthew C.H. Yeung (Lee Shau Kee School of Business and Administration)
    Abstract: In this paper authors examine if ethical distance and difference between an exporting country and an importing country matter in international trade. Ethics in international trade is important because purchasing, exports, marketing and sales activities are more likely to involve unethical behaviors like bribery and corruption.
    Keywords: Japan, Ethic, Bilateral trade, international trade, bribery, corruption
    JEL: F1
    Date: 2012–01
  3. By: Eck, Katharina; Engemann, Martina; Schnitzer, Monika
    Abstract: Internationally active firms rely intensively on trade credits even though they are considered particularly expensive. This phenomenon has been little explored so far. Our theoretical analysis shows that trade credits can alleviate financial constraints arising from asymmetric information because they serve as a quality signal and reduce the uncertainty related to international transactions. We use unique survey data on German enterprises to test the effect of the use of trade credits on firms' exporting and importing behavior, both at the extensive and intensive margins. Our results support the assertion that trade credits have a positive impact on firms' exporting and importing activities.
    Keywords: BEEPS; export; financial constraints; import; international trade; trade credits
    JEL: F10 G30
    Date: 2012–04
  4. By: Richard BALDWIN; OKUBO Toshihiro
    Abstract: Using firm-level data on the sales and sourcing patterns of Japanese affiliates, this paper suggests that very little foreign direct investment (FDI) falls neatly into the standard bins of horizontal, vertical and export-platform FDI. Most affiliates import some intermediates and export some output, suggesting a pattern that might be called "networked FDI." This suggests that the nature of FDI is influenced by "regional comparative advantage," i.e., the proximity of markets and suppliers.
    Date: 2012–04
  5. By: Elhanan Helpman; Oleg Itskhoki; Marc-Andreas Muendler; Stephen Redding
    Abstract: While neoclassical theory emphasizes the impact of trade on wage inequality between occupations and sectors, more recent theories of firm heterogeneity point to the impact of trade on wage dispersion within occupations and sectors. Using linked employer-employee data for Brazil, we show that much of overall wage inequality arises within sector-occupations and for workers with similar observable characteristics; this within component is driven by wage dispersion between firms; and wage dispersion between firms is related to firm employment size and trade participation. We then extend the heterogenous-firm model of trade and inequality from Helpman, Itskhoki, and Redding (2010) and structurally estimate it with Brazilian data. We show that the estimated model fits the data well, both in terms of key moments as well as in terms of the overall distributions of wages and employment, and find that international trade is important for this fit. In the estimated model, reductions in trade costs have a sizeable effect on wage inequality.
    Keywords: Wage inequality, international trade
    JEL: F12 F16 E24
    Date: 2012–04
  6. 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.
    Keywords: International trade, factor mobility, welfare gains from trade
    JEL: F11 F12 F16
    Date: 2012–04
  7. By: Faridul, Islam; Mohammad, Iqbal Tahir; Muhammad, Shahbaz
    Abstract: The paper implements the Autoregressive Distributed Lag (ARDL) approach to cointegration to test the Harberger-Laursen-Metzler (HLM) effect in the context of Bangladesh. The HLM effect predicts that a rise in terms of trade from an exogenous shock to a small open economy will lead to an improvement in that country’s trade balance. Our findings confirm a long run relationship. The Granger causality test reports unidirectional causality from income terms of trade to trade balance. Results are consistent with the theoretical predictions.
    Keywords: Income terms of trade; cointegration; ARDL
    JEL: F1
    Date: 2012–04–07
  8. By: Hink, Matthew; Cardwell, Ryan T.; Lawley, Chad
    Abstract: There exists an extensive literature that attempts to identify important factors that determine trade policies. An understanding of these important factors could be useful when negotiating trade agreements, especially in agriculture, which is a relatively heavily supported industry. Limao and Panagariya (L&P, 2007) modify Grossman and Helpman’s (G&H, 1994) lobbying model in an attempt to understand why anti-trade bias (as opposed to pro-trade bias, which is predicted by the G&H (1994) model) is the predominant pattern in observed trade policy. L&P (2007) propose that governments seek to reduce inequality between sectors by modifying trade policies in a way that reallocates gross revenue from the larger to the smaller sector. We use measures of trade bias calculated in the World Bank Distortions to Agricultural Incentives database (Anderson and Valenzuela, 2008) in an effort to explain trade bias in agriculture. We find little empirical evidence that governments pursue agricultural trade policies to reduce inequality between net-importing and net-exporting sectors in agriculture. Lagged trade policies are significant determinants of current trade-distorting policy, suggesting the presence of policy persistence. We conclude that it is difficult to generalise determinants of trade-distorting policy across a wide and long panel of countries, and that specific knowledge of governments’ priorities are required to explain trade bias.
    Keywords: trade, policy, bias, Agricultural and Food Policy, International Relations/Trade,
    Date: 2012–01
  9. By: Naoko Shinkai (Nagoya University); Zenebe Bashaw (Swiss Foundation for Development and International Cooperation)
    Abstract: The main focus of this study is to examine the level of simplification and harmonization of trade facilitation during import and export of products identified to and from Japan. Specifically, the study looks into administrative requirements and procedures, the length of time it takes to deliver a product, and the costs involved in transporting and clearing a product at the port of entry or exit.
    Keywords: Japan, business process analyasis, trae procedures, import, export
    JEL: F1
    Date: 2011–12
  10. By: Kavvadia, Helen
    Abstract: The apparel industry is an important branch of Greek manufacturing, with a significant contribution to GDP, employment and exports. Greek companies have established production facilities in the Balkan countries, as a way to improve competitiveness by reducing production costs. Competition, however, is not based on production costs alone. A comparative analysis of three successful international companies is reviewed in this paper, as an attempt to shed light in non-production cost aspects. The methodology used could be also by Greek companies.
    Keywords: Balkans; Greek manufacturing; Apparel industry; Exports; Brands
    JEL: M0
    Date: 2012
  11. By: Nobuaki Yamashita (
    Abstract: This paper examines various indicators of the economic activities of Japanese and American multinational corporation (MNC) affiliates in India compared to the case of China, using the unique affiliate-level data.
    Keywords: production networks, multinational corporations, FDI, India, China
    JEL: F14 F23 O53
    Date: 2012–02
  12. By: Gary Clyde Hufbauer (Peterson Institute for International Economics); J. Bradford Jensen (Peterson Institute for International Economics); Sherry Stephenson (Organization of American States); Julia Muir (Peterson Institute for International Economics); Martin Vieiro (Peterson Institute for International Economics)
    Abstract: Services trade continues to be the most dynamic part of world trade, and service sectors have long been the largest destination of foreign direct investment flows. Countries can reap huge potential gains through greater liberalization of services trade and investment, including increased job creation, greater economic efficiency, more variety, and lower costs of doing business. Despite these positive attributes, liberalization of services at the multilateral level has been stuck in the ill-fated Doha Development Round for over ten years now. Failure in the World Trade Organization (WTO) can cause long-term damage to the multilateral trading system because action on services liberalization will then inevitably become the exclusive province of regional trade agreements. The way forward within the WTO framework is through an International Services Agreement (ISA) in which self-selected WTO members voluntarily agree to new rules and market access commitments, but the agreement itself is open to all WTO members who are willing to accept its disciplines and commitments. The authors consider the important questions of who will participate in an ISA and what the agreement itself might contain. It would be important to attract the largest and most successful emerging countries (Brazil, Russia, India, China, and South Africa), which account for a sizeable share of world services trade, but this will probably not happen at the outset, because the BRICS have so far opposed services liberalization. The authors attempt to quantify the gains participating countries would reap from varying degrees of liberalization. They suggest a large range of possible export gains to the United States. At the lower end, using a standard partial equilibrium model, an ISA might facilitate a jump in US service exports by $14 billion annually. At the upper end, extrapolating from the scale of business services trade within US territory, the United States might realize export gains of $300 billion annually.
    Date: 2012–04
  13. By: Cairns, Alexander; Meilke, Karl D.
    Abstract: In the mid-2000’s, Goldman Sachs identified two groups of emerging economies known as the BRICs and the Next-11. Primarily selected on the basis of having large populations, these countries were heralded as the growth centres of the future with the potential to stimulate increased demand for a wide range of commodities, including food. This study uses an import demand model to estimate how income influences per capita expenditure on agrifood imports in 63 countries. The findings suggest that as groups the BRICs and N-11 do not di↵er from other low, middle, or high income countries with respect to their import behaviour. However, disaggregation of the two groups reveals significantly larger expenditure elasticities for China, India, South Korea and Vietnam. A forecasting exercise reveals the capacity of income and population growth in China, India, Indonesia, Russia, South Korea and Vietnam to substantially increase their expenditure on imported agrifood products.
    Keywords: Next-11, BRICs, trade, agrifood, imports, Agricultural and Food Policy, Demand and Price Analysis, International Relations/Trade,
    Date: 2012–04
  14. By: Celine Azemar, Julia Darby, Rodolphe Desbordes and Ian Wooton; Julia Darby; Rodolphe Desbordes; Ian Wooton
    Abstract: We use a systematic empirical analysis of the determinants of South-South (SS) and North-South (NS) foreign direct investment (FDI) as a canvas to explore how multinational enterprises’ (MNEs) location decisions are shaped by better acquaintance with a foreign market resulting from bilateral ties, experience of international expansion, and knowledge of how to deal with poor governance. We find that these various aspects of market familiarity, which can interact together, are important to explain and differentiate the location behaviours of South MNEs (S-MNEs) and North MNEs (N-MNEs) in developing countries.
    Keywords: BSouth-South FDI; governance; institutions; familiarity; distance
    JEL: F22
    Date: 2012–04
  15. By: Tomas Havranek; Zuzana Irsova
    Abstract: The voluminous empirical research on horizontal productivity spillovers from foreign investors to domestic rms in transition and developing countries has yielded mixed results. In this paper, we collect 1,205 estimates of horizontal spillovers from the literature and examine which factors in uence spillover magnitude. To identify the most important determinants of spillovers among 43 collected variables, we employ Bayesian model averaging. Our results suggest that horizontal spillovers are on average zero, but that their sign and magnitude depend systematically on the characteristics of the domestic economy and foreign investors. The most important determinants are the technology gap between domestic and foreign rms and the ownership structure in investment projects. Foreign investors who form joint ventures with domestic rms and who come from countries with a modest technology edge create the largest benets for the domestic economy.
    Keywords: Bayesian model averaging; Foreign direct investment; Productivity spillovers; Determinants; Meta-analysis
    JEL: C83 F23 O12
    Date: 2011–11–26

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