nep-int New Economics Papers
on International Trade
Issue of 2012‒05‒22
nineteen papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. Putting currency misalignment into gravity: The currency union effect reconsidered By Hogrefe, Jan; Jung, Benjamin; Kohler, Wilhelm K.
  2. FDI to Japan and Trade Flows: A Comparison of BRICs, Asian Tigers and Developed Countries By Serge REY; Jacques JAUSSAUD
  3. Credit Support for Export: Econometric Evidence from the Czech Republic By Karel Janda; Eva Michalíková; Jiøí Skuhrovec
  4. Implications of India-Asean Fta on India’s fisheries sector By Sarath Chandran, B.P.
  5. Administrative Barriers and the Lumpiness of Trade By Cecília Hornok; Miklós Koren
  6. How exporters respond to antidumping investigations? By Lu, Yi; Tao, Zhigang; Zhang, Yan
  7. Once an enemy, forever an enemy? the long-run impact of the Japanese invasion of China from 1937 to 1945 on trade and investment By Che, Yi; Du, Julan; Lu, Yi; Tao, Zhigang
  8. Trade and economic growth: A re-examination of the empirical evidence By Busse, Matthias; Königer, Jens
  9. Determinants of Comparative Advantage in Services By Erik van der Marel
  10. Distributional effects of preferential and multilateral trade liberalization: the case of Paraguay By Elizabeth Jane Casabianca
  11. Brokers vs. Retailers: Evidence from the French Imports Industry of Fresh Produce. By Latouche, Karine; Rouviere, Elodie
  12. The home market effect, regional inequality, and intra-industry reallocations By Felbermayr, Gabriel; Jung, Benjamin
  13. Comparative Advantage and the Welfare Impact of European Integration By Andrei A. Levchenko; Jing Zhang
  14. A further examination of the export-led growth hypothesis By Christian Dreger; Dierk Herzer
  15. Modelling FDI based on a spatially augmented gravity model: Evidence for Central and Eastern European Countries By Markus Leibrecht; Aleksandra Riedl
  16. Reverse FDI in Europe: An Analysis of Angola’s FDI in Portugal By Carlos P. Barros; Bruno Damásio; João R. Faria
  17. (When) Does Tit-for-Tat Diplomacy in Trade Policy Pay Off? By Barbara Dluhosch; Daniel Horgos
  18. Trade with Time Zone Differences:Factor Market Implications By Toru Kikuchi; Sugata Marjit; Biswajit Mandal
  19. Wages and international factors’ mobility By E. Podrecca; G. Rossini

  1. By: Hogrefe, Jan; Jung, Benjamin; Kohler, Wilhelm K.
    Abstract: Member countries of a currency union like the euro area have absorbed asymmetric shocks in ways that are inconsistent with a common nominal anchor. Based on a reformulation of the gravity model that allows for such bilateral misalignment, we disentangle the conventional microeconomic trade effect and macroeconomic trade effects deriving from bilateral misalignment within currency unions. Econometric estimation reveals that for the euro area the misalignment channel exerts a significant trade effect on bilateral exports. We retrieve country-specific estimates of the misalignment-induced effect on trade which demonstrate heterogeneous outlooks across countries for the costs and benefits from adopting the euro. --
    Keywords: Euro,gravity model,exchange rates,trade imbalances
    JEL: F12 F13 F15
    Date: 2012
  2. By: Serge REY; Jacques JAUSSAUD
    Abstract: FDI to Japan and Trade Flows: A Comparison of BRICs, Asian Tigers and Developed Countries
    Date: 2012–03
  3. By: Karel Janda (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic); Eva Michalíková (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic); Jiøí Skuhrovec (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)
    Abstract: The topic of this paper is quite a novel one - it is one of few empirical academic papers dealing with export credit. Moreover, it is the first analysis of this kind which focuses on transition economies. The paper deals with export credit promotion in the Czech Republic. The development and structure of Czech trade and export support is presented first, followed by an econometric analysis of the gravity model of Czech trade. A panel of 160 countries in 1996-2008 is analyzed and two gravity models of exports for the Czech Republic are estimated, the static model by fixed effects (LSDV estimator) and the dynamic model by System GMM. Due to ambiguous conclusions we assume that the behavior of our explanatory variables is not uniform and our data set behaves as a mixture of countries with heterogeneous behavior. This means that traditional techniques of estimation which include all observations into one model do not give significant results. Thus, we use robust techniques of estimation that solve the problem of heterogeneous patterns in data sets. Out of several possibilities we use the Least Trimmed Squares estimator (LTS) with a leverage point. We show that guarantees are a significant factor that influences positively the volume of exports in the Czech Republic. Moreover, there exist more variables that a effect the size of exports in the Czech Republic. Market forces described by GDP, distance, political risk or gross fix capital formation are significant in our econometric model. We find that higher GDP, shorter distance or lower political risk have a positive impact on Czech exports.
    Keywords: export, government promotion, gravity model, panel data
    JEL: F14 G28 C23
    Date: 2012–05
  4. By: Sarath Chandran, B.P.
    Abstract: India and ASEAN signed a Free Trade Agreement (FTA) in trade in goods which came to effect from 1st January 2010. There were apprehensions on the likely impact of this RTA on some sensitive sectors of India such as agriculture, fisheries and plantation crop as large number of people depend on these sectors for their livelihood. India is a large consumer of marine products and export also export part of the catch to international markets (1.7 percent in total world export in 2007). Some of the ASEAN partners of India namely Thailand (5.82%), Vietnam (3.86) and Indonesia (2.14%) have larger presence in international fisheries trade and there is a possibility that they can export these products in to India in the post FTA period. In this context the paper looked in to the various provisions of India ASEAN FTA on fisheries sector and calculated trade complementarity and similarity using different trade indices. The paper found that India has taken adequate precaution to protect its marine sector from large scale dumping. The apprehension that India-ASEAN FTA will lead to substantial import of marine products in to India is unfounded.
    Keywords: Regional Trade Agreements; Revealed Comparative Advantage; Fisheries; India;ASEAN
    JEL: F15 F10 F14
    Date: 2012–05–07
  5. By: Cecília Hornok; Miklós Koren
    Abstract: We document that administrative trade costs of per shipment nature (documentation, customs clearance and inspection) lead to less frequent and larger-sized shipments, i.e., more lumpiness, in international trade. We build a model where consumers have heterogeneous preferences for the arrival time of a non-storable product and firms compete by selecting the time of their shipment. Per shipment costs reduce shipment frequency, increase the shipment size and the product price and lead to welfare losses. We provide empirical evidence for these effects on detailed export data from the US and Spain. We find that US and Spanish exporters send fewer and larger shipments to countries with higher administrative barriers. However, we find no robust evidence that such destination would command higher prices.
    Date: 2011–09–01
  6. By: Lu, Yi; Tao, Zhigang; Zhang, Yan
    Abstract: Using China Customs data that cover monthly transactions of all Chinese exporters, we investigate how Chinese exporters respond to U.S. antidumping investigations during the 2000-2006 period. Our difference-in-differences analysis uncovers a number of findings: (1) the substantial trade-dampening effect at the product level operates mostly at the extensive margin (i.e., a decrease in the number of exporters) rather than the intensive margin (i.e., a decrease in the export volume per exporter); (2) direct exporters are more likely to exit the U.S. market than trade intermediaries upon both the affirmative preliminary and final ITC determinations; (3) multi-product direct exporters are more likely to exit the U.S. market than single-product direct exporters upon the affirmative preliminary ITC determination, but the opposite holds upon the affirmative final ITC determination; and (4) little price adjustment to antidumping investigations are found at either the product level or firm-product level. We then provide a coherent explanation to the aforementioned findings based on recent developments in trade theories.
    Keywords: Antidumping investigations; Difference-in-differences estimation; Extensive and intensive margins; Trade intermediaries; Single- versus multi-product exporters
    JEL: D21 L25 F13 F14
    Date: 2012–05
  7. By: Che, Yi; Du, Julan; Lu, Yi; Tao, Zhigang
    Abstract: We are living in an increasingly globalized world yet with constant and endless conflicts among countries. While studies have uncovered the impacts of various economic factors and policy regimes on trade and investment, a much less understood issue is whether conflicts among countries have any, especially long-lasting, impacts on cross-border trade and investment. In this paper, we exploit one of the most important conflicts of the 20th century between what are currently the world's second and third largest economies, the Japanese invasion of China from 1937 to 1945, to investigate its long-run impact on contemporary trade and investment between the two countries. We find that Chinese regions that suffered more severe damage in the Japanese invasion are both less likely to trade with and trade less with Japan. Consistently, we also find that Japanese multinationals are less likely to invest in Chinese regions that suffered greater numbers of casualties during the Japanese invasion. Our study shows that historical animosity still matters for international trade and investment, despite the trend toward a flat world.
    Keywords: Sino-Japanese War; Trade; Foreign Direct Investment
    JEL: D74 F10 F23 F21
    Date: 2011–12
  8. By: Busse, Matthias; Königer, Jens
    Abstract: While trade integration is often regarded as a principal determinant of economic growth, the empirical evidence for a causal linkage between trade and growth is ambiguous. This paper argues that the effect of trade in dynamic panel estimations depends crucially on the specification of trade. Both from a theoretical as well as an empirical point of view one specification is preferred: the volume of exports and imports as a share of lagged total GDP. For this trade measure, a positive and highly significant impact on economic growth can be found. --
    Keywords: Openness,Trade,Growth
    JEL: F11 F43 C23
    Date: 2012
  9. By: Erik van der Marel
    Abstract: This paper analyzes whether and to what extent determinants of comparative advantage have explanatory power for conventional services trade. It assesses the geographical, Heckscher-Ohlin and institutional determinants of services trade based on the literature for goods trade. Moreover, this paper investigates the importance of a country’s governance of regulation as a source of comparative advantage in services markets. Determinants for services trade differ from goods. Services trade is more sensitive to a country’s stock of high-skilled and mid-skilled labour, more receptive to the level of trust enjoyed by any importers, and more dependant on the quality of regulatory governance practiced when liberalizing services sectors. The counterfactual analyses presented in this paper show furthermore that these factors when affected by policy can bring substantial gains to countries. Specifically, countries with already good regulatory governance structures would enjoy relatively higher growth share in services trade by capitalizing on their highskilled stock. Other countries, however, would instead to better by improving their condition of regulatory governance.
    Keywords: Trade in services, Comparative advantage, Institutions, Regulation integration
    JEL: F13 L8 F15
    Date: 2012–05
  10. By: Elizabeth Jane Casabianca
    Abstract: In this paper I apply Porto (2006) to Paraguay using household level data. The aim is to assess the distributional impact of the preferential and multilateral trade liberalization in a small member country. I also follow Nicita (2009) assuming incomplete pass-through on prices of traded goods which in turn influence both household consumption and earnings of household members in the labour market. I estimate these effects highlighting the difference between the impact of the preferential trade agreement and the multilateral one. Finally, I am able to depict if and who trade integration has benefited.
    Keywords: Household welfare, Paraguay, Pass-through, Trade and Poverty
    JEL: D1 F1 J3 R2
    Date: 2012–05
  11. By: Latouche, Karine; Rouviere, Elodie
    Abstract: There is burgeoning discussion in the literature about trade intermediaries and more precisely about their specific role in trade. Using very original data, our article sheds light on the behavior of trade intermediaries when importing fresh fruits and vegetables in France. To do so, we distinguish the shares of direct and indirect imports of fresh produce respectively operated through French brokers and through French retailers. Accounting for the bounded nature of the share, we show that brokers are more likely than retailers to operate in small countries with high variable costs.
    Keywords: mporters, Intermediation, Fresh produce, International Trade., Industrial Organization, International Relations/Trade, F23, Q17, Q18,
    Date: 2012
  12. By: Felbermayr, Gabriel; Jung, Benjamin
    Abstract: In New Trade Theory models, the larger region hosts an overproportionate share of producers. This Home Market Effect (HME) exacerbates regional income discrepancies caused by trade frictions or technology differences. With homogeneous firms, it requires inter-industry reallocations to emerge. We present a heterogeneous firms single-sector model with fixed market access costs, in which the HME arises exclusively from empirically more relevant intra-industry reallocations. It is magnified by lower trade costs or higher heterogeneity. In contrast to multi-industry models, a more pronounced HME leads to regional income convergence as adjustment of the firm size distribution counteracts the effects of firmentry. --
    Keywords: Home Market Effect,Regional Inequality,Monopolistic Competition,Heterogeneous Firms,Economic Geography
    JEL: F12 R12
    Date: 2012
  13. By: Andrei A. Levchenko; Jing Zhang
    Abstract: This paper investigates the welfare gains from European trade integration, and the role of comparative advantage in determining the magnitude of those gains. We use a multisector Ricardian model implemented on 79 countries, and compare welfare in the 2000s to a counterfactual scenario in which East European countries are closed to trade. For West European countries, the mean welfare gain from trade integration with Eastern Europe is 0.16%, rang- ing from zero for Portugal to 0.4% for Austria. For East European countries, gains from trade are 9.23% at the mean, ranging from 2.85% for Russia to 20% for Estonia. For Eastern Europe, comparative advantage is a key determinant of the variation in the welfare gains: countries whose comparative advantage is most similar to Western Europe tend to gain less, while countries with technology most different from Western Europe gain the most.
    JEL: F11 F14 F15
    Date: 2012–05
  14. By: Christian Dreger; Dierk Herzer
    Abstract: This paper challenges the common view that exports generally contribute more to GDP growth than a pure change in export volume, as the export-led growth hypothesis predicts. Applying panel cointegration techniques to a production function with non-export GDP as the dependent variable, we find for a sample of 45 developing countries that: (i) exports have a positive short-run effect on non-export GDP and vice versa (short-run bidirectional causality), (ii) the long-run effect of exports on non-export output, however, is negative on average, but (iii) there are large differences in the long-run effect of exports on non-export GDP across countries. Cross-sectional regressions indicate that these cross-country differences in the long-run effect of exports on non-export GDP are significantly negatively related to cross-country differences in primary export dependence and business and labor market regulation. In contrast, there is no significant association between the growth effect of exports and the capacity of a country to absorb new knowledge.
    Keywords: Export-led growth, Developing countries, Panel cointegration
    JEL: F43 O11 C23
    Date: 2012–05
  15. By: Markus Leibrecht (Department for Economics, Leuphana University Lueneburg, Germany); Aleksandra Riedl (Austrian National Bank)
    Abstract: Based on a spatially augmented gravity model the current paper isolates spatial interrelationships in Foreign Direct Investment (FDI) to Central and Eastern European Countries (CEECs) not only across the destination but also across the origin country dimension of FDI. Results show that: (i) spatial interrelationships across destination countries are present and are consistent with the predom- inance of vertical-complex FDI in total FDI; (ii) spatial correlation across origin countries is given in earlier years of transition, while demonstration and competition effects cancel over the whole sample period; and (iii) agglomeration forces gain in importance for FDI to CEECs.
    Keywords: Foreign Direct Investment, Spatial Econometrics, Central and Eastern Europe, Third country effects
    JEL: C33 F21
    Date: 2012–04
  16. By: Carlos P. Barros; Bruno Damásio; João R. Faria
    Abstract: This paper analyses investment from Angola in Portugal. An open economy model with money laundering is proposed and then tested with a time series Bayesian regression. The result reveals that exports and corruption are the positive determinants of Angola FDI in Portugal. Policy implications are derived.
    Keywords: FDI, Angola, Portugal, corruption and exports
    JEL: F29 O55 F41
    Date: 2011–12
  17. By: Barbara Dluhosch; Daniel Horgos
    Abstract: In international relations, short-run incentives for non-cooperation often dominate. Yet, (external) institutions for enforcing cooperation are hampered by national sovereignty, supposedly strengthening the role of selfenforcing mechanisms. This paper examines their scope with a focus on contingent protection aka tit-for-tat in trade policy. By highlighting various strategies in a (linear) partial-equilibrium framework, we show that retaliation of non- cooperative behavior by limiting market access works as a disciplining device independently of supply and demand parameters. Our theoretical results are backed by empirical evidence that countries more frequently involved in WTO-mediated disputes entailing tit-for-tat strategies pursue on average more liberal trade regimes.
    Keywords: Int. Political Economy, Trade Policy Conflicts, Tit-for-Tat, WTO Dispute Settlement
    JEL: F13 F51 D74
    Date: 2012–05
  18. By: Toru Kikuchi (Graduate School of Economics, Kobe University, Kobe, Japan); Sugata Marjit (Centre for Studies in Social Sciences, Calcutta, India); Biswajit Mandal (Visva-Bharati University, Santiniketan, India)
    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.
    Date: 2012
  19. By: E. Podrecca; G. Rossini
    Abstract: The labor wage is the result of market variables and institutional settings of a country. In an open economy the determination of the market wage rate may be further affected by the extent of international mobility of both factors of production, labor and capital. Labor mobility is represented by migration in and out of a country, while capital mobility relates mostly to the extent of foreign direct investment (FDI) outflows and inflows. Migrants may represent an addition to the native labor force of a country and, in some cases, play a substitute role with respect to incumbent workers. FDI, in particular of the greenfield category, represents either a supplement to or a reduction of the domestic capital and, by and large, changes the opportunity set of a firm’s CEO with respect to the corresponding company operating in a closed economy. International factor mobility and domestic market variables, such as unemployment and productivity, interact in the wage setting process. In this paper, we derive a theoretical wage equation following the above premises, and perform pooled mean group estimates of its parameters on panel data for a group of 13 European countries with quarterly time observation over the period 1996-2007. We find that capital outflows have a robust negative effect on the wage rate. The effects of migration inflows, on the other hand, are not so clear-cut, as they can be nullor negative depending on the sample of countries considered.
    JEL: F2 J5 J6
    Date: 2012–05

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