nep-int New Economics Papers
on International Trade
Issue of 2012‒09‒09
twenty papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. New aspects of intra-industry trade in EU countries By Ito, Tadashi; Okubo, Toshihiro
  2. Different Types of Firms, Products, and Directions of Trade: The Case of the People’s Republic of China By Lee, Hyun-Hoon; Park, Donghyun; Wang, Jing
  3. Measuring global value chains and regional economic integration : an international input-output approach By Meng, Bo; Fang, Yong; Yamano, Norihiko
  4. Vertical specialization and industrial upgrading: a preliminary note By Xiao Jiang; William Milberg
  5. Exports, R&D and Productivity in German Business Services Firms: A test of the Bustos-model By Alexander Vogel; Joachim Wagner
  6. International Trade, Offshoring and Heterogeneous Firms By Richard Baldwin; Toshihiro Okubo
  7. Transport Infrastructure for MED11 Countries By Robin Carruthers
  8. Gravity or Dummies? The Limits of Identification in Gravity Estimations By Cecília Hornok
  9. Does the use of multiple FTAs force firms to raise local input share? : evidence of the spaghetti bowl phenomenon By Hayakawa, Kazunobu
  10. Firms' use of FTA schemes in exporting and importing : is there a two-way relationship? By Hayakawa, Kazunobu
  11. Protectionism during the crisis: Tit-for-tat or chicken games? By Boffa, Mauro; Olarreaga, Marcelo
  12. Sources of Comparative Advantage in Polluting Industries By Broner, Fernando A; Bustos, Paula; Carvalho, Vasco M
  13. Economic and Social Upgrading in Global Production Networks: Problems of Theory and Measurement By William Milberg; Deborah Winkler
  14. European Export Performance. By Cheptea, A.; Fontagné, L.; Zignago, S.
  15. Trade policies and agricultural exports of Sub-Saharan African countries: Some stylized facts and perspectives By Douillet, Mathilde
  16. Corporate taxation and exports By Federici, Daniela; Parisi, Valentino
  17. Regional Policies, Firm Characteristics, and Exporting in the Indian State of Karnataka By Pradhan, Jaya Prakash; Zohair, Mohammad; Alagawadi, Mallikarjun V.
  18. Is Direct FDI in Healthcare Desirable in a Developing Economy? By Chaudhuri, Sarbajit; Mukhopadhyay, Ujjaini
  19. FDI and Income Inequality - Evidence from Latin American Economies By Dierk Herzer; Philipp Hühne; Peter Nunnenkamp
  20. R&D and the Incentives from Merger and Acquisition Activity By Gordon M. Phillips; Alexei Zhdanov

  1. By: Ito, Tadashi; Okubo, Toshihiro
    Abstract: Using the HS eight-digit product level trade data of EU countries for the period 1988 – 2010, we analyse Intra-industry trade within EU countries as well as with Eastern European countries and with China. We find the Eastern European countries’ rise up the quality ladder, and by contrast the substantially lower prices of China’s exports to EU countries vis-à-vis China’s imports from them. The contrast between EU trade with the Eastern European countries and with China is present even in very recent years.
    Keywords: Europe, China, International trade, EU, Intra-industry trade, Horizontal and Vertical Product Differentiation, Quality, Unit price gap
    JEL: F13 F14
    Date: 2012–08
  2. By: Lee, Hyun-Hoon (Department of International Trade and Business); Park, Donghyun (Asian Development Bank); Wang, Jing (Department of International Trade and Business)
    Abstract: Using highly disaggregated, Harmonized System (HS) 8-digit, product-category level data collected by the People’s Republic of China’s (PRC) Customs Office for 2000 and 2008, we perform an in-depth anatomy of the PRC's trade in manufactured goods. First, we distinguish between foreign firms and domestic firms, with the latter further divided into private firms and public firms. Second, we distinguish products as either final goods or intermediate goods. Third, we look at not only the PRC's exports but also its imports, and test for the relative importance of the extensive margin—number of goods—versus the intensive margin—the amount traded per good. Fourth, we estimate gravity equations from the perspective of dynamics utilizing a dynamic adjustment model. Overall, our analysis yields a number of new stylized facts and generates some interesting puzzles about the PRC's exports and imports.
    Keywords: People’s Republic of China; intermediate goods; fragmentation; foreign enterprises; firm heterogeneity
    JEL: F14 F21 F23
    Date: 2012–08–01
  3. By: Meng, Bo; Fang, Yong; Yamano, Norihiko
    Abstract: Firms that are expanding their cross-border activities, such as vertical specialization trade, outsourcing, and fragmentation productions, have brought dramatic changes to the global economy during the last two decades. In an attempt to understand the evolution of the interaction among countries or country groups, many trade-statistics-based indicators have been developed. However, most of these statistics focus on showing the direct trade-specific-relationship among countries, rather than considering the roles that intercountry and interindustrial production networks play in a global economy. This paper uses the concepts of trade in value added as measured by the input–output tables of OECD and IDE-JETRO to provide alternative indicators that show the evolution of regional economic integration and global value chains for more than 50 economies. In addition, this paper provides thoughts on how to evaluate comparative advantages on the basis of value added using an international input–output model.
    Keywords: International trade, International economic integration, Industrial management, Trade in value added, Value chain, Vertical specialization, Comparative advantage
    JEL: C6 F4 F53 O18
    Date: 2012–07
  4. By: Xiao Jiang; William Milberg
    Abstract: Abstract Vertical specialization is a measure of the import content of exports. Given the widely recognized importance of trade in tasks and global production networks, vertical specialization has recently gained the attention of international trade researchers and policy makers. In this note, we use measured changes in the within-country pattern of vertical specialization to gauge the relevance of task trade for industrial upgrading and economic development. We first calculate vertical specialization (VS) for five countries between 1995 and 2005 – USA, China, India, Brazil and South Africa. We then construct our own measure – the import content of export expansion ratio (ICEER) – to isolate changes in import content from the growth in exports. Since the ICEER measure captures structural change in the import content of exports for each country at the sectoral level, we use ICEER as a proxy for the kind of industrial upgrading associated with raising the proportion of export value accruing to the domestic sector. We name this kind of upgrading ‘vertical upgrading’.
    Date: 2012
  5. By: Alexander Vogel (Leuphana University Lueneburg, Germany); Joachim Wagner (Leuphana University Lueneburg, Germany)
    Abstract: This paper uses newly available data for German business services firms to test a hypothesis derived by Bustos (AER 2011) in a model that explains the decision of heterogeneous firms to export and to engage in R&D. Using a non-parametric test for first order stochastic dominance it is shown that, in line with this hypothesis, the productivity distribution of firms with exports and R&D dominates that of exporters without R&D, which in turn dominates that of firms that neither export nor engage in R&D. These results are in line with findings for firms from manufacturing industries. The model, therefore, seems to be useful to guide empirical work on the relation between exports, R&D and productivity for services firms, too.
    Keywords: Exports, R&D, productivity, business services firms, Germany
    JEL: F14
    Date: 2012–08
  6. By: Richard Baldwin (Graduate Institute, Geneva); Toshihiro Okubo (Faculty of Economics, Keio University)
    Abstract: Recent trade models determine the equilibrium distribution of firm-level efficiency endogenously and show that freer trade shifts the distribution towards higher average productivity due to entry and exit of firms. These models ignore the possibility that freer trade also alters the firm-size distribution via international firm migration (offshoring); firms must, by assumption, produce in their 'birth nation.' We show that when firms are allowed to switch locations, new productivity effects arise. Freer trade induces the most efficient small-nation firms to move to the large nation. The big country gets an 'extra helping' of the most efficient firms while the small nation's firm-size distribution is truncated on both ends. This reinforces the big-nation productivity gain while reducing or even reversing the small-nation productivity gain. The small nation is nevertheless better off allowing firm migration.
    Date: 2012–08
  7. By: Robin Carruthers
    Abstract: Lack of adequate infrastructure is a significant inhibitor to increased trade of the countries of the Mediterranean region. Bringing their transport infrastructure to standards comparable with countries of a similar per capita GDP will be costly but worthwhile. We compare the current quantities of six types of transport infrastructure with international, and estimate the additional quantities needed to reach the benchmarks. We also estimate the cost of that infrastructure and express it as a percentage of GDP. Finally we make tentative estimates of how much trade might be generated and how this might impact on GDP. All the estimates are made for each MED11 country and for each of four scenarios. The highest need for additional infrastructure will be for airport passenger terminals (between 52% and 56%), whereas the lowest need was for more unpaved roads (between 7% and 13%). The investment (including maintenance) cost would be between 0.9% of GDP and 2.4% of GDP, although the investments in some countries would be between 1.4% and 4.5% of GDP. The impact on non-oil international trade would be substantial, but with differences between imports and exports. The overall trade balance of the MED11 region would be an improvement of between 5.4% and 17.2%, although some countries would continue to have a negative balance. A final assessment was of the benefit ratio between the increase in GDP and the cost of transport investment. This varied between about 3 and 8, an indication of the high return to be expected from increased investment in transport infrastructure.
    Keywords: Infrastructure, Region, Investment, GDP, Trade, Benefit ratio
    JEL: F15 O18 O24 R42
    Date: 2012
  8. By: Cecília Hornok
    Abstract: Trade economists often estimate gravity equations of international trade with fixed effects. Anderson and van Wincoop (2003, American Economic Review 93, 170–192) have shown the importance of controlling for multilateral trade resistances when estimating a gravity equation. This can be done by including exporter-time and importer-time fixed effects in a panel or exporter and importer fixed effects in a cross section estimation. I argue that this approach limits the identifiability of policy parameters that capture the effect of certain ”club memberships” (EU, NAFTA, euro area, WTO, etc.) on trade flows. I show that, in the baseline case, only one effect can be identified, which precludes, for example, the estimation of separate effects on the exporter and the importer side. The magnitude, and even the sign, of the estimated club effect are very sensitive to the precise identification assumptions, which are often left unspecified in empirical studies. The underlying problem is that club membership provides some, but very little bilateral variation. When heterogeneous club effects are to be identified, the membership dummies can become perfectly collinear with the fixed effects. Empirical researchers may not be aware of the lack of identification, because standard estimation techniques often permit them to run perfectly collinear regressions. I illustrate the findings with estimating the effect of EU enlargement in 2004 on the trade flows of new and old members. Finally, I discuss potential solutions.
    Date: 2012–05–20
  9. By: Hayakawa, Kazunobu
    Abstract: This paper empirically investigates the firm-level relationship between the local input share and the number of used FTAs by employing the data on FTA utilization in Japanese affiliates in ASEAN. As a result, we do not find a robust linear relationship. However, affiliates using a large number of FTAs (seven or eight) have an extremely higher share of local inputs. This result might be interpreted as the first evidence of the “spaghetti bowl phenomenonâ€.
    Keywords: Southeast Asia, International trade, FTA, International economic integration, Spaghetti bowl phenomenon
    JEL: F15 F53 O53
    Date: 2012–08
  10. By: Hayakawa, Kazunobu
    Abstract: In this paper, we examine the roles of firm size in the use of FTA schemes in exporting and importing. Also, it is investigated as to whether FTA users in importing (exporting) are more likely to use FTA schemes in exporting (importing). To do that, we employed a unique survey in which the detailed information on FTA use is available for Japanese affiliates in ASEAN. Our findings are summarized as follows. First, firm size matters in the use of FTA schemes only in exporting, not in importing. Second, the past experience of FTA use in exporting (importing) does not help firms use the FTA schemes in importing (exporting). Thus, it is necessary to assist firms to use FTA schemes in exporting even if they are already using FTA schemes in importing.
    Keywords: International trade, FTA, International economic integration, Micro data, Firm size
    JEL: F15 F53 O53
    Date: 2012–08
  11. By: Boffa, Mauro; Olarreaga, Marcelo
    Abstract: During the recent financial crisis many countries resorted to protectionist measures to try to boost demand for domestically-produced goods. In this paper we explore the extent to which the adoption of protectionist measures led to retaliation by other countries undermining the increase in demand. We found no evidence of retaliation. On the contrary, there is strong evidence of chicken-games being played. Indeed, the probability of a protectionist measure being imposed on a trading partner's export bundle is significantly smaller when the partner imposes a protectionist measure on home exports.
    Keywords: Chicken-games; Financial crisis; Trade Retaliation
    JEL: F13
    Date: 2012–09
  12. By: Broner, Fernando A; Bustos, Paula; Carvalho, Vasco M
    Abstract: We study the determinants of comparative advantage in polluting industries. We combine data on environmental policy at the country level with data on pollution intensity at the industry level to show that countries with laxer environmental regulation have a comparative advantage in polluting industries. Further, we address the potential problem of reverse causality. We propose an instrument for environmental regulation based on meteorological determinants of pollution dispersion identified by the atmospheric pollution literature. We find that the effect of environmental regulation on the pattern of trade is causal and comparable in magnitude to the effect of physical and human capital.
    Keywords: air pollution; comparative advantage; environmental regulation; international trade
    JEL: F11 F18 Q53 Q56
    Date: 2012–09
  13. By: William Milberg; Deborah Winkler
    Abstract: Abstract The massive globalization of production led by large firms in industrialized countries, combined with the policy shift in developing countries toward export-oriented growth, has meant that economic development has increasingly become synonymous with “economic upgrading” within global production networks (GPNs), that is, moving into higher productivity and higher value-added aspects of production and export. There is much research on economic upgrading in global production networks, connecting economic growth and economic upgrading to international trade performance. There has been less analysis of what such upgrading means for living standards, including wages, work conditions, economic rights, gender equality and economic security. In this paper, we refer to improvements in these aspects of economic and social life as “social upgrading”. This paper reviews the ways in which economic and social upgrading in GPNs are measured. In this paper we focus mainly on developing countries. In the process we also scrutinize the theoretical connection between these two dimensions of upgrading within GPNs.
    Date: 2012
  14. By: Cheptea, A.; Fontagné, L.; Zignago, S.
    Abstract: Competitiveness has come to the forefront of the policy debate within the European Union, focusing on price competitiveness and intra-EU imbalances. But how to measure properly competitiveness, beyond price or cost competitiveness, remains an open methodological issue; and what is the resilience of producers located in the EU to the competition of emerging economies is disregarded. We analyze the redistribution of world market shares at the level of product variety, as countries no longer specialize in sectors or even products, but in varieties of the same product, sold at different prices. We decompose changes in market shares into structural effects (geographic and sectoral) and a pure performance effect. Our method is based on an econometric shift-share decomposition and we consider the EU-27 as an integrated economy, excluding intra-EU trade. Revisiting the competitiveness issue in such perspective sheds new light on the ongoing debate. From 1995 to 2009 the EU-27 withstood the competition of emerging countries better than the US and Japan. The EU market shares in the upper price range of the market proved quite resilient, by cumulating good performance and favorable structure effects, contrary to the US and Japan. Finally, while most developed countries lose market shares in high-technology products to developing countries, the EU is slightly gaining, benefiting of a favorable structure effect.
    Keywords: International Trade, Export Performance, Competitiveness, Market Shares, Shift-Share, European Union.
    JEL: F12 F15
    Date: 2012
  15. By: Douillet, Mathilde
    Abstract: It has long been consensual that limited market demand within poor African countries have hampered economic development of Sub-Saharan Africa and that countries therefore needed to rely on exports markets to spur economic growth. But despite benefiting from preferential agreements, Sub-Saharan African countries have been marginalized from global trade. Indicators of the exports of Sub-Saharan African countries are constructed to reflect their characteristics. Existing trade negotiating options are examined in the current context of agricultural markets. It appears that prospects at the regional level arise as well as at the global level, especially when looking at the opportunities from a policy coherence for development perspective. Regional prospects are even more acute in light of the global economic crisis affecting traditional trade partners.
    Keywords: Africa; Trade policy; Agriculture
    JEL: O55 F13 Q17
    Date: 2012–07
  16. By: Federici, Daniela; Parisi, Valentino
    Abstract: The paper analyses the relationship between corporate taxes and exports at firm level. We use an integrated dataset that combines, for the period 2004-2006, survey data(Indagine sulle Imprese Manifatturiere) and company accounts for the manufacturing sector to estimate a Probit and a Tobit model. Our results suggest that export participation as well as export intensity increase with corporate taxation. Consistently with recent developments of the corporate tax incidence theory, this finding can be traced out to the greater ability of exporting firms to shift the tax burden on international markets, compared to domestic firms. Calculation of the average and marginal corporate tax rates uses the methodology recently developed by Egger et al. (2009) which allows deriving firm-specific effective corporate tax rates.
    Keywords: Corporate taxation; exports; effective tax rates
    JEL: H25 F14 H32
    Date: 2012–09–03
  17. By: Pradhan, Jaya Prakash; Zohair, Mohammad; Alagawadi, Mallikarjun V.
    Abstract: Karnataka is among pioneering Indian states to frame suitable policies aimed at encouraging local firms’ export activities. Promotion and facilitation of firms to look beyond national market was achieved by creating a strong enabling institutional framework, supporting expansion of productive capacity, and helping exporting firms gain access to required physical infrastructure. As a result of such policies, exports from the Indian state of Karnataka have been growing rapidly with contributing over half a quarter of Indian exports of commodities and software. The present study provides an overview of export trends and patterns of Karnataka in the backdrop of the state policy developments. It examines the relevance of various factors pertinent to the exports by Karnataka manufacturing firms and deduces implications for development policy of the state.
    Keywords: Export Policies; Exports; Karnataka; India
    JEL: F10 O24 O53
    Date: 2012–08–17
  18. By: Chaudhuri, Sarbajit; Mukhopadhyay, Ujjaini
    Abstract: We develop a three-sector general equilibrium model and attempt to examine the impact of FDI in healthcare sector on the welfare and human capital stock of the economy. The greater the size of the healthcare sector the higher and better would be the medical facilities available to each member of the population. Better medical facilities must produce positive effects on workers’ general health and productivity. The greater the size of the healthcare sector the higher is the efficiency of labour. There are two types of capital: capital of type K and capital of type N. While capital of type K is used in production of all the sectors of the economy, capital of type N is specific to the healthcare sector. Our analysis finds that an FDI of capital of type N although raises the human capital formation may lower social welfare. On the contrary, an inflow of foreign capital of type K is likely to be welfare-improving. Although these effects crucially hinge on different structural factors e.g. the degree of labour market imperfection, trade-related and technological factors these can at least question the desirability of allowing the entry of foreign capital in the healthcare sector directly.
    Keywords: FDI; healthcare; developing economy; social welfare; human capital; general equilibrium
    JEL: P36 I12 F19
    Date: 2012–09–03
  19. By: Dierk Herzer; Philipp Hühne; Peter Nunnenkamp
    Abstract: We analyze whether foreign direct investment (FDI) has contributed to the typically wide income gaps in five Latin American host countries. We perform country-specific and panel cointegration techniques to assess the long-run impact of inward FDI stocks on income inequality among households in Bolivia, Chile, Colombia, Mexico and Uruguay. The panel cointegration analysis reveals a significant and positive effect on income inequality. Furthermore, FDI contributed to widening income gaps in all individual sample countries, except for Uruguay. Our findings are robust to the choice of different estimation methods. There is no evidence for reverse causality
    Keywords: FDI, income inequality, cointegration techniques, Latin America
    JEL: F21 D31
    Date: 2012–08
  20. By: Gordon M. Phillips; Alexei Zhdanov
    Abstract: We provide a model and empirical tests showing how an active acquisition market affects firm incentives to innovate and conduct R&D. Our model shows that small firms optimally may decide to innovate more when they can sell out to larger firms. Large firms may find it disadvantageous to engage in an "R&D race" with small firms, as they can obtain access to innovation through acquisition. Our model and evidence show that the R&D responsiveness of firms increases with demand, competition and industry merger and acquisition activity. All of these effects are stronger for smaller firms than for larger firms.
    JEL: G20 G3 G34 L11 L22 L25 O31 O34
    Date: 2012–08

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