nep-int New Economics Papers
on International Trade
Issue of 2012‒05‒15
25 papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. Can FDI promote export diversification and sophistication of host countries? : dynamic panel system GMM analysis By Iwamoto, Manabu; Nabeshima, Kaoru
  2. Measuring preretnial market access By Fugazza, Marco; Nicita, Alessandro
  3. Russia's Trade Flows and WTO By Sergey Kolesnikov; Olga Podkorytova
  4. Intensive and Extensive Decisions of Firms with Spatial Dependency By ITO Yukiko
  5. Competition, Markups, and the Gains from International Trade By Chris Edmond; Virgiliu Midrigan; Daniel Yi Xu
  6. Comparative Advantages in Italy: A Long-Run Perspective By Giovanni Federico; Nikolaus Wolf
  7. Comparative Advantage and Within-Industry Firms Performance By Matthieu Crozet; Federico Trionfetti
  8. Comovement in GDP Trends and Cycles Among Trading Partners By Bruce A. Blonigen; Jeremy Piger; Nicholas Sly
  9. Trade Specialisation and Economic Convergence: Evidence from two Eastern European Countries By Guglielmo Maria Caporale; Christophe Rault; Robert Sova; Anamaria Sova
  10. The People’s Republic of China’s High-tech Exports: Myth and Reality By Xing, Yuqing
  11. The effect of instıtutıonal varıables on fdi inflows: Evidence from upper-middle income countries By dogru, bulent
  12. On Trade Impact of Exchange Rate Volatility and Institutional Quality: The Case of Central European Countries By Ferto, Imre; Fogarasi, Jozsef
  13. The Economic Effects of a Spanish Trade Boycott against Catalan Products By Xavier Cuadras Moraté; Modest Guinjoan
  14. Technology Differences in Empirical Studies of International Trade By Erich Gundlach; Albert de Vaal
  15. International Trade and Agglomeration in Asymmetric World: Core-Periphery Approach By Alexander V. Sidorov
  16. The effect of EU environmental regulation on international trade : restriction of hazardous substance as a trade barrier By Honda, Keiichiro
  17. The location substitution effect: does it apply for China? By Banik, Nilanjan; Das, Khanindra Ch.
  18. Trade, economic growth and environment By Managi, Shunsuke
  19. The Harrod-Balassa-Samuelson effect and endogenous extensive margins By Masashige Hamano
  20. A concordance between ten-digit U.S. Harmonized System codes and SIC/NAICS product classes and industries By Justin R. Pierce; Peter K. Schott
  21. Heterogeneous Information and Trade Policy By Giacomo Ponzetto
  22. Trade in Intermediate Goods, Endogenous Growth and Intellectual Property Rights By Bidisha Chakraborty
  23. Are all trade policies created equal? empirical evidence for nonequivalent market power effects of tariffs and quotas By Bruce A. Blonigen; Benjamin H. Liebman; Justin R. Pierce; Wesley W. Wilson
  24. The Formulation and Estimation of Random Effects Panel Data Models of Trade By László Mátyás; Cecilia Hornok; Daria Pus
  25. Export Pioneers in Latin America By Charles Sabel; Eduardo Fernandez-Arias; Ricardo Hausmann; Andres Rodriguez-Clare; Ernesto H. Stein

  1. By: Iwamoto, Manabu; Nabeshima, Kaoru
    Abstract: Recent trade literature highlights the importance of export diversification and upgrading in fostering faster and sustainable economic growth. This study investigates the impact of FDI inflow and stock on the level of export diversification and sophistication in host country's export baskets. By utilizing the dynamic panel data model, we find that the five-year lagged FDI inflow correlates positively with both export diversification and sophistication, and FDI stock makes the positive contribution to export sophistication. These findings provide support for the possibility of successful capabilities transfer to and building by local firms. We also find that these positive impacts of FDI exist only in developing countries.
    Keywords: Developing countries, Foreign investments, International trade, FDI, Export diversification, Export sophistication, Capabilities transfer
    JEL: F10 F21 O14
    Date: 2012–03
  2. By: Fugazza, Marco; Nicita, Alessandro
    Abstract: One consequence of the proliferation of preferential trade agreements is that an increasing share of international trade is not subject to most favored nation tariffs, but rather enters markets through preferential access. The objective of this paper is to better investigate to what extent preferential market access affects bilateral trade. In doing so, the paper first provides two indices of market access conditions that take into account the complex structure of tariff preferences. One index summarizes direct market access conditions (the overall tariff faced by exports), while the other measures relative market access conditions (the overall tariff faced by exports relative to that faced by foreign competitors). Then, the paper explores the effects of preferential access on international trade by estimating a gravity model augmented by the two indices. The results indicate that both direct and relative market access conditions affect bilateral trade. Although a large majority of countries benefits from the system of preference because of improved direct market access, some countries see part of their benefits eroded, sometimes substantially, by the deterioration in their relative market access conditions.
    Keywords: Gravity Model; Trade policy; International Trade Flows; Tariffs
    JEL: F15 F10
    Date: 2011–09–08
  3. By: Sergey Kolesnikov; Olga Podkorytova
    Keywords: WTO, Russia, gravity model, trade flows, non-oil trade
    Date: 2011–09
  4. By: ITO Yukiko
    Abstract: We examine how firms operating in three or more countries show different international spatial dependencies, compared to those operating in just two countries (home and one foreign country). In a multi-country model, we focus on the significance of rival locations abroad, which has not been considered in bilateral two-country models. We present a model in which a multinational enterprise (MNE) determines the spatial extension of operations (measured by the number of foreign countries per parent firm) and the intensity of production (measured by the volume of local sales or exports per foreign location). We call these "extensive decisions" and "intensive decisions," respectively. We then estimate how their affiliates' locations are substitutable or complementary with each other. We use panel data on Japanese-owned foreign affiliates from 2000-2007 and measure key determinants to trade and foreign direct investment (FDI) multilaterally, relative to other foreign locations. We find that 1) the setup of a new location for local sales is replaceable with the imports from surrounding economies, 2) the setup of a new location for exports is encouraged by the market size of surrounding economies, and 3) the export volume to the third foreign economies are also enhanced.
    Date: 2012–04
  5. By: Chris Edmond; Virgiliu Midrigan; Daniel Yi Xu
    Abstract: We study the gains from trade in a model with endogenously variable markups. We show that the pro-competitive gains from trade are large if the economy is characterized by (i) extensive misallocation, i.e., large inefficiencies associated with markups, and (ii) a weak pattern of cross-country comparative advantage in individual sectors. We find strong evidence for both of these ingredients using producer-level data for Taiwanese manufacturing establishments. Parameterizations of the model consistent with this data thus predict large pro-competitive gains from trade, much larger than those in standard Ricardian models. In stark contrast to standard Ricardian models, data on changes in trade volume are not sufficient for determining the gains from trade.
    JEL: E23 F1 O4
    Date: 2012–05
  6. By: Giovanni Federico (European University Institute, Florence and Università di Pisa); Nikolaus Wolf (Humboldt University Berlin and CEPR)
    Abstract: The history of Italy since her unification in 1861 reflects the two-way relationship between foreign trade and economic development. Its growth was accompanied by a dramatic increase in the country's integration with European and global commodity markets: foreign trade in the long run grew on average faster than the overall economy. Behind the dynamics of aggregate trade, Italy's comparative advantage changed fundamentally over the last 150 years. The composition of trade, in terms of both commodities imported and exported and in terms of trading partners, developed from a high concentration of a few trading partners and a handful of rather simple commodities into a wide diversification of trading partners and more sophisticated commodities. In this chapter we use a new long-term database on Italian foreign trade at a high level of disaggregation to document and analyze these changes. We will conclude with an assessment of Italy's prospects from a historical perspective.
    Keywords: international trade, 19th-20th century, Italy
    JEL: F14 N73 N74
    Date: 2011–10
  7. By: Matthieu Crozet; Federico Trionfetti
    Abstract: Guided by empirical evidence we consider firms heterogeneity in terms of factor intensity. We show that Heckscher-Ohlin comparative advantage and firm-level relative factor-intensity interact to jointly explain the observed differences in relative sales. Firms whose relative factor-intensity matches up with the comparative advantage of the country have lower relative marginal costs and larger relative sales than firms who do not. Our empirical analysis, conducted using data for a large panel of European firms, supports these predictions. Our findings also provide an original firm-level verification of the Heckscher-Ohlin model based on the effect of comparative advantage on firms relative sales.
    Keywords: Factor intensity, Firms heterogeneity, Test of trade theories.
    JEL: F1
    Date: 2011–09
  8. By: Bruce A. Blonigen; Jeremy Piger; Nicholas Sly
    Abstract: It has long been recognized that business cycle comovement is greater between countries that trade intensively with one another. Surprisingly, no one has previously examined the relationship between trade intensity and comovement of shocks to the trend level of output. Contrary to the result for cyclical fluctuations, we find that comovement of shocks to trend levels of real GDP is significantly weaker among countries that trade intensively with one another. We also find that the influence of trade on comovement between shocks to trends has remained stable, or become stronger in recent decades, while the role of trade in generating cyclical comovement has diminished steadily over time. In short, we find that international trade relationships have a substantial impact on comovement of shocks to output trends across countries, and these effects stand in stark contrast to the conventional wisdom regarding cyclical comovement.
    JEL: C22 E32 F42
    Date: 2012–05
  9. By: Guglielmo Maria Caporale; Christophe Rault; Robert Sova; Anamaria Sova
    Abstract: This paper analyses trade specialisation dynamics in two Eastern European countries (Romania and Bulgaria – EEC-2) vis-à-vis the core EU member states (EU-15) over the period 1990-2006. Specifically, we focus on whether there is a shift towards intra-industry trade leading to economic convergence and technological catch-up. We use recently developed static (FEM, REM and FEVD) and dynamic (GMM) panel data methods which take into account possible heterogeneity. Our empirical results indicate that intra-industry trade has indeed increased, but it is of the vertical rather than the horizontal type, resulting in complementary rather than competitive production patterns.
    Keywords: Gravity Models, Panel Data models, Trade Specialisation, Comparative Advantage
    Date: 2011–09
  10. By: Xing, Yuqing (Asian Development Bank Institute)
    Abstract: Trade statistics portray the People's Republic of China (PRC) as the largest exporter of high-tech products. In this paper the author argues that the PRC’s leading position in high-tech exports is a myth created by outdated trade statistics, which are inconsistent with trade based on global supply chains. Current trade statistics mistakenly credit entire values of assembled high-tech products to the PRC, thus greatly inflating its exports. He suggests that a value-added-based approach should be adopted to accurately measure high-tech exports. Furthermore, if assembly is the only source of the value-added generated by PRC workers, in terms of technological contribution these assembled high-tech exports are no different from labor-intensive products, so they should be excluded from the high-tech classification.
    Keywords: prc; high-tech; value added; iphone
    JEL: F10 F20
    Date: 2012–05–07
  11. By: dogru, bulent
    Abstract: For two decades, the relationship between institutions and foreign direct investment (FDI) has been receiving a growing attention as a result of increasing economic globalization and international trade promoting democracy all over the world. In this paper, we investigate the impact of institutional variables, social, economic and political, on foreign direct investment inflows into 54 upper-middle income developing countries applying panel data regressions for the period 1995-2011. The findings suggest that the institutional variables have significant effect on FDI inflows but their impact is weaker than macoreconomic variables. Especially, the market size indicators, population growth rate, global competitiveness and international country risk play a major role in attracting FDI.
    Keywords: Institutional Variables; Foreign Direct Investment; Upper-Middle Income Countries; Panel Data Regression
    JEL: C23 F21
    Date: 2012–05–06
  12. By: Ferto, Imre; Fogarasi, Jozsef
    Abstract: This paper explores the effect of exchange rate volatility and of the institutional quality on international trade flows of transition economies in Central European Countries by applying a gravity model of balance panel between 1999 and 2008. The results show that nominal exchange rate volatility has had a significant negative effect on trade by applying Psuedo-Maximum-Likelihood (PML) estimator method over this period. The institutional quality need to be improved in case of size of government and the quality of regulation. The negative effect of exchange rate volatility on agricultural exports suggests that joining Central European Countries to the euro zone can reduce the negative effects of exchange rate volatility on trade.
    Keywords: international trade, gravity model, exchange rate volatility, institutions., International Relations/Trade, Risk and Uncertainty, G10, F11, O17, Q17, P29,
    Date: 2012–02–23
  13. By: Xavier Cuadras Moraté; Modest Guinjoan
    Abstract: We study the potential consequences of a hypothetical trade boycott against Catalan products organized by some sectors of the Spanish society mainly for political reasons. A symmetric trade boycott would have two effects: a reduction of Catalan exports to Spain and a partial process of import substitution in Catalonia. In order to quantify the economic impact of the boycott, we compare the "actual" Catalan economy, as described in the input-output table for 2005, with a "simulated" Catalan economy that takes into account the effects of a boycott on the trade exchanges between Catalonia and Spain.
    Keywords: trade boycott, input output analysis
    JEL: C67 F17 F51
    Date: 2011–05
  14. By: Erich Gundlach; Albert de Vaal
    Abstract: We show that the specification of technology differences in recent empirical studies of trade is not supported by basic growth theory and may lead to biased estimates of the pattern of specialization and trade.
    Keywords: Technology differences, factor endowments, specialization bias
    JEL: F11 O41
    Date: 2011–09
  15. By: Alexander V. Sidorov
    Abstract: The paper studies the Krugman’s CP model in the weakly explored case of asymmetric regions in two settings: international trade and agglomeration processes. First setting implies that the industrial labor is immobile, while second one consider mobile industrial labor and long-run equilibria. Analytical study of both settings requires application of advanced mathematical analysis, e.g. implicit function theory. For international trade we find how equilibrium prices, production, consumption, wages and welfare for all population groups respond to shifts in all exogenous parameters: characteristics of utility function, transportation costs and degree of asymmetry in initial labor endowment. As for agglomeration process, it was found that the asymmetry in the population distribution simplifies pattern of agglomeration, making the direction of migration more definite, so the well-known ambiguity of final destination may disappear under sufficiently large extent of asymmetry. From political point of view, it means that under some conditions, openness of international trade may be harmful to immobile population of the smaller country.
    Keywords: Agglomeration; international trade; migration dynamics
    JEL: C62 D51 F12 R12 R23
    Date: 2011–09
  16. By: Honda, Keiichiro
    Abstract: In 2003 the Restriction of Hazardous Substances (RoHS) was established in the EU, which limited the trade of machinery, electrical and electronic equipment that have at least one of the substances considered hazardous under RoHS directive. Since countries trading with the EU must comply with this new regulation, it is expected a decrease in value of imports to the EU. In this paper, it is followed the procedures used in Heckman (1979), as well as the extended procedure suggested by Helpman, Melitz, and Rubinstein (2008) to ascertain the effects on the persistence of trade and values of trade.
    Keywords: Europe, Trade problem, International trade, Environmental protection, The RoHS directive, Harmonized standards, Gravity model, Intensive and extensive margin, Sample selection and firm heterogeneity
    JEL: F13 F18 Q56
    Date: 2012–03
  17. By: Banik, Nilanjan; Das, Khanindra Ch.
    Abstract: The notion about China being factory of the world is changing. Factories in China are shifting their production base to neighboring Asia, primarily because of higher input costs in China, a volatile Chinese exchange rate, Chinese exports being increasingly targeted by its major trading partners, and a fall in price-competitiveness in producing in mainland China. We examine the location substitution effect for China: Chinese firms are exporting primary, intermediate and machinery items, meant for producing final output elsewhere. Results suggest Chinese firms are increasingly substituting their production base outside China.
    Keywords: Trade; Foreign Direct Investment; China; GMS
    JEL: F14
    Date: 2012–04–17
  18. By: Managi, Shunsuke
    Abstract: The literature on trade openness, economic development, and the environment is largely inconclusive about the environmental consequences of trade. This study review previous studies focusing on treating trade and income as endogenous and estimating the overall impact of trade openness on environmental quality using the instrumental variables technique. The results show that whether or not trade has a beneficial effect on the environment varies depending on the pollutant and the country. Trade is found to benefit the environment in OECD countries. It has detrimental effects, however, on sulfur dioxide (SO2) and carbon dioxide (CO2) emissions in non-OECD countries, although it does lower biochemical oxygen demand (BOD) emissions in these countries. The results also find the impact is large in the long term, after the dynamic adjustment process, although it is small in the short term.
    Keywords: Developed countries, Developing countries, International trade, Environmental problems, Economic development, Trade, Environment
    JEL: F13 F18 L50 L60 O13
    Date: 2012–03
  19. By: Masashige Hamano (CREA-University of Luxembourg)
    Abstract: In the last few decades, the world economy has witnessed the expansion of trade especially in the number of exchanged varieties, the so-called "extensive margins". In a theoretical model where extensive margins in both traded and non-traded sectors are endogenously determined, it is shown that the HBS effect is amplified. Following an HBS productivity shock, when countries expand their extensive margins rather than scale of production, wages appreciate further. Therefore, the expansion in extensive margins leads to a stronger appreciation in the price of non-traded goods. A panel regression across OECD countries indicates consistency with the theoretical model.
    Keywords: The Harrod-Balassa-Samuelson effect, firm entry, real exchange rate, extensive margin
    JEL: F12 F41 F43
    Date: 2011
  20. By: Justin R. Pierce; Peter K. Schott
    Abstract: While the relationship between international trade and domestic economic activity is an important topic in economics, research in this area has been slowed due to data limitations. In this paper we provide tools that improve the existing data in two ways. First, we develop an algorithm that yields concordances between the ten-digit Harmonized System (HS) codes used to classify products in U.S. international trade and the SIC and NAICS industry codes used to classify domestic economic activity. These concordances then yield novel time series of industry-level international trade data for the years 1989 to 2009. Second, we provide concordances between HS codes and the SIC and NAICS product classes used to classify U.S. manufacturing production, allowing for matching at a more disaggregated level than was previously available.
    Date: 2012
  21. By: Giacomo Ponzetto
    Abstract: Protectionism enjoys surprising popular support, in spite of deadweight losses. At the same time, trade barriers appear to decline with public information about protection. This paper develops an electoral model with heterogeneously informed voters which explains both facts and predicts the pattern of trade policy across industries. In the model, each agent endogenously acquires more information about his sector of employment. As a result, voters support protectionism, because they learn more about the trade barriers that help them as producers than those that hurt them as consumers. In equilibrium, asymmetric information induces a universal protectionist bias. The structure of protection is Pareto inefficient, in contrast to existing models. The model predicts a Dracula effect: trade policy for a sector is less protectionist when there is more public information about it. Using a measure of newspaper coverage across industries, I …find that cross-sector evidence from the United States bears out my theoretical predictions.
    Keywords: Protectionism, Voters, Imperfect information, Media coverage, Dracula effect, Pareto inefficiency
    JEL: F13 D72 D83
    Date: 2011–12
  22. By: Bidisha Chakraborty
    Abstract: The present paper develops a product cycle model of North South trade and integrates Romer (1990) model and Helpman (1993) model. In this paper, North innovates the variety of intermediate good and South immitates it. Final goods are not traded while variety of capital intensive intermediate goods are traded. The effect of intellectual property rights on economic growth is studied. It is shown that there may exist a unique steady state balanced growth equilibrium or there may exist multiple steady state equilibria and tighter intellectual property rights may lead to both higher and lower steady state balanced growth rate depending on the human capital endowment of both the countries. This contradicts the result obtained by Helpman (1993).
    Keywords: North-South trade, Product development, Intellectual property rights, Human Capital, Endogenous growth, Steady state equilibrium
    Date: 2011–09
  23. By: Bruce A. Blonigen; Benjamin H. Liebman; Justin R. Pierce; Wesley W. Wilson
    Abstract: Over the past 50 years, the steel industry has been protected by a wide variety of trade policies, both tariff- and quota-based. We exploit this extensive heterogeneity in trade protection to examine the well-established theoretical literature predicting nonequivalent effects of tariffs and quotas on domestic firms' market power. Using plant-level Census Bureau data for steel plants from 1967-2002, we find evidence for significant market power effects for binding quota-based protection, but not tariff-based protection, particularly with respect to integrated and minimill steel producers. Our results are robust to calculation with two standard measures of market power and controlling for potential endogeneity of trade policies.
    Date: 2012
  24. By: László Mátyás; Cecilia Hornok; Daria Pus
    Abstract: The paper introduces for the most frequently used three- dimensional panel data sets several random effects model specifications. It derives appropriate estimation methods for the balanced and unbalanced cases and deals with some extensions as well. An application is also presented where the bilateral trade of 20 EU countries is analysed for the period 2001-2006. The differences between the fixed and random effects specifications are highlighted through this empirical exercise.
    Date: 2012–05–05
  25. By: Charles Sabel; Eduardo Fernandez-Arias; Ricardo Hausmann; Andres Rodriguez-Clare; Ernesto H. Stein
    Abstract: Export Pioneers in Latin America analyzes a series of case studies of successful new export activities throughout the region to learn how pioneers jump-start a virtuous process leading to economic transformation. The cases of blueberries in Argentina, avocados in Mexico, and aircraft in Brazil illustrate how an initially successful export activity did not stop with the discovery of a single viable product, but rather continued to evolve. The book explores the conjecture that costly burdens to entrepreneurial self-discovery (due to the deterrent effects of imitation by competitors) have held back potential exporters in post-reform Latin America. It also considers the conjecture that new export activities are a complex enterprise that can only come to fruition when innovative contributions of many actors are somehow provided jointly.
    JEL: F14 F19 O14 Q17
    Date: 2012–04

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