nep-int New Economics Papers
on International Trade
Issue of 2012‒07‒01
ten papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. Selection into Trade and Wage Inequality By Thomas Sampson
  2. Fragmentation and Trade in Value Added over Four Decades By Robert C. Johnson; Guillermo Noguera
  3. Export Activity and Productivity: New Evidence from the Egyptian Manufacturing Industry By Youssouf KIENDREBEOGO
  4. The Effect of Trade and Migration on Income By Francesc Ortega; Giovanni Peri
  5. Globalization and Knowledge Spillover: International Direct Investment, Exports and Patents By Chia-Lin Chang; Sung-Po Chen; Michael McAleer
  6. Trade, Technology Diffusion and Misallocation: Trade Partner Matters (Replaces CentER DP 2011-125) By Curuk, M.
  7. Financial Factors and Manufacturing Exports:Theory and Firm-level Evidence From Egypt By Youssouf KIENDREBEOGO; Alexandru MINEA
  8. The impact of "early" nineteenth-century globalization on foreign trade in the Southern Cone: A study of British trade statistics By Manuel Llorca-Jaña
  9. The Selection of Migrants and Returnees in Romania: Evidence and long-run implications By William Ambrosini; Karin Mayr; Giovanni Peri; Dragos Radu
  10. The Role of Income and Immigration Policies in Attracting International Migrants By Francesc Ortega; Giovanni Peri

  1. By: Thomas Sampson
    Abstract: This paper analyzes the impact of trade integration on wage inequality when there is heterogeneity across both workers and firms. By incorporating labor assignment into the heterogeneous firms literature I develop a model in which positive assortative matching between worker skill and firm technology explains the employer size-wage premium and the exporter wage premium. Under trade, fixed export costs cause the selection of high productivity, high skill firms into exporting and an upwards shift in the firm technology distribution. Consequently, the demand for skill and wage inequality increase in all countries, both on aggregate and within the export sector. This result holds both when firms' technologies are determined by a random draw and when technology is endogenous to firm level R&D. With endogenous technology, the increased demand for skill caused by trade liberalization results from technology upgrading by new exporters.
    Keywords: Wage inequality, matching, technology, skills, trade
    JEL: F16 J31
    Date: 2012–06
  2. By: Robert C. Johnson; Guillermo Noguera
    Abstract: We combine data on trade, production, and input use to compute the value added content of trade for forty-two countries from 1970 to 2009. For the world, the ratio of value added to gross trade falls by ten to fifteen percentage points, with two-thirds of this decline in the last two decades. Across countries, declines range from zero to twenty-five percentage points, with large declines concentrated among countries undergoing structural transformation. Across bilateral trade partners, declines are larger for nearby partners and partners that adopt regional trade agreements. That is, both policy and non-policy trade costs shape production fragmentation.
    JEL: F1
    Date: 2012–06
  3. By: Youssouf KIENDREBEOGO
    Abstract: This study addresses on the relationship between export participation and firm-level productivity. Using comprehensive data for Egypt, we find that total factor productivity and labor productivity are significantly higher in exporters than in non-exporters. When we differentiate between pre-entry and post-entry differences in productivity performance and after controlling for potential endogeneity problem, we find that this exporter premia is driven by the learning-by-exporting hypothesis. We find no evidence that more productive firms self-select into export markets. Exporting makes firms more productive but more productive firms do not necessarily self-select into exporting.
    Keywords: Productivity Performance, Exports
    JEL: L60 F10 D21
    Date: 2012
  4. By: Francesc Ortega; Giovanni Peri (Department of Economics, University of California Davis)
    Abstract: This paper explores the relationship between economic openness and income per person using cross-country data. To address endogeneity concerns we extend the instrumental-variables strategy first used by Frankel and Romer (1999). First, we show that bilateral geographic characteristics of countries such as distance, contiguity and commonality of language are successful in predicting openness to immigration and to trade. Equipped with these instruments we then establish a robust, positive effect of openness to immigration on long-run income per capita across countries using econometric specifications that include a comprehensive set of variables controlling for geography, climate, disease environment, and colonial past. In contrast the positive effect of trade openness on income vanishes once the control variables are included in the specification. Our main finding is robust to explicitly including institutional quality as an (endogenous) regressor, controlling for measures of early economic development, and measuring the share of immigrants in terms of efficiency units of labor. We also show that the main effect of migration operates through total factor productivity but not through institutional quality. This is consistent with the idea that immigration increases the variety of skills and ideas available for production. We also provide some more direct evidence of this channel by building an index of the degree of diversity in immigration flows by country of origin. Immigration also increases linguistic fractionalization which, in turn, has a negative effect on income per capita, however the direct gains from greater skill diversity are much larger than the costs arising from increased fractionalization due to immigrants. We do not find evidence of increased income inequality due to openness to immigration or trade. Finally we find evidence that immigration benefits the amount of innovation produced in a country as measured by patents.
    Keywords: International Migration, Trade, Income per person, Productivity, Geography, Institutions, Diversity.
    JEL: F22 E25 J61
    Date: 2012–06–19
  5. By: Chia-Lin Chang (Department of Applied Economics, Department of Finance, National Chung Hsing University Taichung, Taiwan); Sung-Po Chen (Department of Applied Economics, National Chung Hsing University Taichung, Taiwan); Michael McAleer (Econometric Institute, Erasmus School of Economics, Erasmus University Rotterdam and Tinbergen Institute, The Netherlands, Department of Quantitative Economics, Complutense University of Madrid, and Institute of Economic Research, Kyoto University.)
    Abstract: This paper examines the impact of the three main channels of international trade on domestic innovation, namely outward direct investment (ODI), inward direct investment (IDI), and exports. The number of Triadic patents serves as a proxy for innovation. The data set contains 37 countries that are considered to be highly competitive in the world market, covering the period 1994 to 2005. The empirical results show that increased exports and outward direct investment are able to stimulate an increase in patent output. In contrast, IDI exhibits a negative relationship with domestic patents. The paper shows that the impact of IDI on domestic innovation is characterized by two forces, and the positive effects of cross-border mergers and acquisitions by foreigners is less than the negative effect of the remaining IDI.
    Keywords: International direct investment, Exports, Imports, Triadic Patent, Outward direct investment, Inward direct investment, R&D, negative binomial model.
    JEL: F14 F21 O30 O57
    Date: 2012–06
  6. By: Curuk, M. (Tilburg University, Center for Economic Research)
    Abstract: Abstract: This paper suggests that contingent on the productivity level of the trade partner; international trade may create resource misallocation in less productive countries. It theoretically shows how the interaction between technology diffusion induced by trade and cross sectoral heterogeneity in productivity distributions, and technology adoption rates leads to asymmetric pro-competitive effects, which in turn result in misallocation. In this framework trade increases welfare in the long-run due to technology diffusion, even though there is steadystate resource misallocation across industries. Using firm level data from 32 European countries for the period of 1992-2007, it also presents robust empirical evidence supporting the model predictions by showing that trade with more productive regions as a share of purchasing power parity (PPP) GDP (1) increases economy wide markup variation, (2) raises mean sectoral productivity, and (3) decreases productivity dispersion within 4-digit sectors, only in less productive countries.
    Keywords: International trade;Technology diffusion;Firm size distribution;Misallocation.
    JEL: F10 F15 L11 O33
    Date: 2012
  7. By: Youssouf KIENDREBEOGO; Alexandru MINEA (Centre d'Etudes et de Recherches sur le Développement International)
    Abstract: This paper focuses on the effects of financial factors on manufacturing firms' export participation. Using a simple dynamic discrete choice model, we firstpresent the intuition according to which financial constraints reduce the probability of exporting. Then, based on a panel of Egyptian manufacturing firms over the 2003-2008 period, we estimate the impact of financial constraints on export market participation. Our main results show that, unlike financial liquidity, financial constraints reduce the export participation of Egyptian firms. In addition,financial constraints equally have a negative impact on alternative measures of the export activity, namely the export intensity and the hazard rate of entry into exporting.
    Keywords: Financial Constraints, Exports, Firm-Level Evidence, Sunk Costs
    JEL: D92 F10 D24
    Date: 2012
  8. By: Manuel Llorca-Jaña
    Abstract: This paper deals with the impact of "early" nineteenth-century globalization (c.1815-1860) on foreign trade in the Southern Cone (SC). Most of the evidence is drawn from bilateral trades between Britain and the SC, at a time when Britain was the main commercial partner of the new republics. The main conclusion drawn is that early globalization had a positive impact on foreign trade in the SC, and this was due to: improvements in the SC's terms of trade during this period; the SC's per capita consumption of textiles (the main manufacture traded on world markets at that time) increased substantially during this period, at a time when clothing was one of the main items of SC household budgets; British merchants brought with them capital, shipping, insurance, and also facilitated the formation of vast global networks, which further promoted the SC's exports to a wider range of outlets.
    Keywords: Lost decades; Anglo-Latin American trade; Early globalization.
    JEL: N70 N76 O19 R11
    Date: 2012–05
  9. By: William Ambrosini; Karin Mayr; Giovanni Peri; Dragos Radu (Department of Economics, University of California Davis)
    Abstract: This paper uses census and survey data to identify the wage earning ability and the selection of recent Romanian migrants and returnees. We construct measures of selection across skill groups and estimate the average and the skill-specific premium for migration and return for three typical destinations of Romanian migrants after 1990. Once we account for migration costs, we find evidence that the selection and sorting of migrants by skills is driven by different returns in countries of destination. We also find that the return premium increases with migrants' skills and this drives the positive selection of returnees relative to non-migrants. As these findings are consistent with a model of rational choice in the migration decisions, we simulate a rational-agent model of education, migration and return. Our results suggest that for a source country like Romania relatively high rates of temporary migration might have positive long-run effects on average skills and wages.
    Keywords: Selection of Migrants, Migration Premium, Returnees
    JEL: F22 J61 O15
    Date: 2012–06–19
  10. By: Francesc Ortega; Giovanni Peri (Department of Economics, University of California Davis)
    Abstract: This paper makes two contributions to the literature on the determinants of international migration flows. First, we compile a new dataset on annual bilateral migration flows covering 15 OECD destination countries and 120 sending countries for the period 1980-2006. We also collect data on time-varying immigration policies that regulate the entry of immigrants for our destination countries over this period. Second, we extend the empirical model of migration choice across multiple destinations developed by Grogger and Hanson (2011) by allowing for unobserved individual heterogeneity between migrants and non-migrants. Our estimates show that international migration flows are highly responsive to income per capita at destination. This elasticity is twice as high for within-EU migration, reflecting the higher degree of labor mobility within the European Union. We also find that tightening of laws regulating immigrant entry reduce rapidly and significantly their flow.
    Keywords: International Migration, Labor Movements, Immigration Policies.
    JEL: F22 E25 J61
    Date: 2012–06–07

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