nep-int New Economics Papers
on International Trade
Issue of 2012‒09‒16
seventeen papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. Pass-on Trade: Why do Firms Simultaneously Engage in Two-Way Trade in the Same Varieties? By Joze Damijan; Joep Konings; Saso Polanec
  2. Uncertain productivity growth and the choice between FDI and export By Yalcin, Erdal; Sala, Davide
  3. Complexity as a source of comparative advantage By Asier Minondo; Francisco Requena
  4. Is the International Border Effect Larger than the Domestic Border Effect? Evidence from U.S. Trade By Cletus C. Coughlin; Dennis Novy
  5. The paradox of “preferences”: regional trade agreements and trade costs in services By Miroudot, Sebastien; Shepherd, Ben
  6. The Impact of MERCOSUR on Trade of Brazilian States. By Siroën, Jean-Marc; Yücer, Aycil
  7. Export experience of managers and the internationalization of firms By Sala, Davide; Yalcin, Erdal
  8. Is there a producer quality wage premium similar to the exporter wage premium? By Hernández, Pedro
  9. Global trade and climate policy scenarios ? Impact on Finland By Janne Niemi; Juha Honkatukia; Ville Kaitila; Markku Kotilainen
  10. The rise and fall of (Chinese) African apparel exports By Lorenzo Rotunno; Pierre-Louis Vezina; Zheng Wang
  11. Institutional Determinants of Bilateral Trade: Taking Another Look By Aljaz Kuncic
  12. Energy endowments, barriers to trade and industry location in Chinese provinces By Irina Hotz
  13. Extensive vs. Intensive Margin in Japan By Makoto Kakinaka; Hiroaki Miyamoto
  14. International Tax Competition and Coordination By Michael Keen; Kai A. Konrad
  15. A gravity equation for commuting By Damiaan Persyn; Wouter Torfs
  16. Start-up export intensity: An empirical investigation of the impact of absorptive capacity and business owner human and social capital By Jonas Debrulle
  17. Perpetual leapfrogging in international competition By Furukawa, Yuichi

  1. By: Joze Damijan; Joep Konings; Saso Polanec
    Abstract: This paper documents that a large fraction of trade flows at the firm level consists of simultaneous imports and exports in identical products, narrowly defined at the 8-digit product classification, which we call Pass-On Trade, POT. We use data on imports and exports at the firm–product level for Slovenian manufacturing firms in the period 1994-2008, to show that, on average, 70 percent of all exporting firms engage in POT. This corresponds to more than 50 percent of all exported products. Thus, imported products that are exported again by the same firm is a statistical regularity of trade of Slovenian manufacturing firms. We document that the use of POT is increasing in firm size, product diversification, multinational status as well as firm productivity and profitability. We offer and explore empirically a number of explanations for POT. Among possible explanations, we find evidence on the importance of firms’ multinational networks and demand complementarities between firms’ own and POT products. The latter confirms the theoretical explanations for ‘Carry-Along Trade’ (CAT) as developed by the recent work of Bernard et al (2010, 2012).
    Date: 2012
  2. By: Yalcin, Erdal (ifo Institute for Economic Research); Sala, Davide (Department of Business and Economics)
    Abstract: With aggregate sales by foreign affiliates exceeding world exports, determinants of FDI patterns have received great attention, while the timing of their surge has been understudied. Recent evidence indicates that transportation costs of goods have fallen too little to explain these figures based on the proximity-concentration trade-off argument alone. Contextually, other changes have occurred: in particular, the uncertainty that firms bear has increased. Enriching the classical choice problem of a multinational firm with insights from the investment literature, we show that increased uncertainty along with the sizable fixed costs characterizing engagements on international markets can explain specific FDI patterns.
    Keywords: Proximity-concentration hypothethis; stochastic processes; real option
    JEL: F17 F21 F23
    Date: 2012–09–07
  3. By: Asier Minondo (Deusto Business School - University of Deusto); Francisco Requena (University of Valencia)
    Abstract: This paper analyzes whether complexity, measured by the number of skilled tasks that are performed simultaneously in production, explains countries' commodity trade structure. We modify Romalis (2004) model to incorporate differences in complexity across commodities together with differences in average skills across countries and monopolistic competition. Our model predicts that the share of developed countries in world trade increases with products' complexity. The empirical tests confirm this prediction. Moreover, complexity seems to provide a better explanation of countries' commodity trade structure than the one offered only by skill intensity.
    Keywords: complexity, skill-intensity, factor proportions, trade structure, specialization.
    JEL: F11 F12 F14
    Date: 2012–09
  4. By: Cletus C. Coughlin; Dennis Novy
    Abstract: Many studies have found that international borders represent large barriers to trade. But how do international borders compare to domestic border barriers? We investigate international and domestic border barriers in a unified framework. We consider a data set of exports from individual U.S. states to foreign countries and combine it with trade flows between and within U.S. states. After controlling for distance and country size, we estimate that relative to state-to-state trade, crossing an individual U.S. state's domestic border appears to entail a larger trade barrier than crossing the international U.S. border. Due to the absence of governmental impediments to trade within the United States, this result is surprising. We interpret it as highlighting the concentration of economic activity and trade flows at the local level.
    Keywords: International border, intranational home bias, domestic border, gravity, trade costs, distance
    JEL: F10 F15
    Date: 2012–09
  5. By: Miroudot, Sebastien; Shepherd, Ben
    Abstract: Abstract This paper analyzes the relationship between regional trade integration and trade costs in services industries. The empirical analysis relies, on the one hand, on a dataset of theory-consistent bilateral trade costs calculated for 55 countries over the period 1999-2009 and, on the other hand, on an analysis of services commitments in 66 regional trade agreements to which these countries are parties. Despite the proliferation of services RTAs in the past decade, we find that trade costs are only slightly lower due to the impact of these agreements. In addition, we find that the trade cost reductions that do take place tend to happen before the agreement is signed. This mechanism is consistent with countries using services RTAs as a way of “locking in” reforms. Finally, we find that the preferential margin of services RTAs is quite thin: members and non-members both see slightly lower trade costs when an RTA is signed. We discuss the possible explanations for these findings in terms of the nature of services RTAs and their relationship with regulatory reform in signatory countries. Based on these results, we argue that regionalism in the case of services seems relatively non-discriminatory and does not lead to substantial trade preferences.
    Keywords: Trade policy; Trade in services; Regional trade agreements; services trade liberalization
    JEL: F15 F13
    Date: 2012–09–06
  6. By: Siroën, Jean-Marc; Yücer, Aycil
    Abstract: We consider the impact of MERCOSUR on trade among Brazilian states and on trade by Brazilian states with MERCOSUR and the rest of the world. We use a theoretically founded gravity model to shed light on MERCOSUR’s possible creation and diversion effects as well as its “preference erosion” effect on trade among Brazilian states. Using data on interstate trade over a 4-year period, including 1 year prior to the MERCOSUR period (1991), we deliver empirical evidence at state level with a focus on the impact of MERCOSUR which can vary across Brazilian regions. We show that MERCOSUR increased Brazilian states’ trade with member countries, but had no effect on either interstate trade or Brazilian states’ trade with third countries. The paper finds that MERCOSUR’s impact varies across Brazilian regions and that Center West region did not benefit from the integration to MERCOSUR. We use an estimation method dealing better with the traditional issue of zero trade values and heteroskedasticity than ordinary least squares does.
    Keywords: Accords commerciaux régionaux; Modèles de gravité; Détournement de commerce; Création de commerce; Erosion des préférences; Preference Erosion; Trade Creation; Trade Diversion; Gravity Model; MERCOSUR; Regional Trade Agreements;
    JEL: F14 F15 R1 R5
    Date: 2012
  7. By: Sala, Davide (Department of Business and Economics); Yalcin, Erdal (IFO Institute - Leibniz Institute for Economic Research)
    Abstract: As the firm gravitates to the core analysis of international trade models, the possibilities to learn from the theory of the multinational enterprise developed in international business studies increase. The managerial resources and capabilities that are so emphasized in this theory for export initiation have largely been neglected in the empirical studies of international trade. Probably not because they are unimportant, but rather because of the challenge to identify and measure them. We exploit Danish employer-employee matched data to overcome this barrier and analyze the impact of managers’ international experience together with other managerial characteristics on the likelihood that the firm starts exporting. We find that productivity and fixed costs associated to exporting are not the sole determinants of the selection of firms into international markets, but “managerial inputs” are as important. Our data allows us to identify managers’ export experience based on the CEOs’ historical career as documented in official registry statistics. This puts our study apart from earlier survey based studies which rely on self-assessments.
    Keywords: Export status; managerial promotions; international experience; self-selection
    JEL: D22 F23 M51
    Date: 2012–09–06
  8. By: Hernández, Pedro
    Abstract: Exporter wage premium has been widely studied in the literature on international trade. The aim of this paper is analyze whether there is also a producer quality wage premium at firm level, and if so, analyze whether its origin is similar to the exporter wage premium. In other words, I test whether firms that increase their product quality become more productive and pay higher wages (as with the learning by exporting hypothesis, we can speak of learning by producing quality), or, in contrast, more-productive firms with higher wages opt to increase product quality because their higher productivity means these kinds of decisions and investments can be taken with more guarantees (self-selection hypothesis).
    Keywords: Wage differentials; International trade; Exports; Product quality
    JEL: F16 J31 J24
    Date: 2012–09–06
  9. By: Janne Niemi; Juha Honkatukia; Ville Kaitila; Markku Kotilainen
    Abstract: In this study we use the dynamic version of the GTAP model to analyse the effects of global trade policy changes and their interaction with different global climate policy regimes from Finland?s point of view, and in particular, implications for Finnish export sectors. Scenarios explore further trade liberalisation as well as effects of higher-than-current tariffs on world markets. As a complementary dimension we analyse the impact of a global climate agreement that will lead to an additional improvement in energy efficiency and impose limitations to GHG emissions.<br><br>We find a general trend towards a greater weight of services sector in Finland?s total exports volume, whilst the share of traditionally important heavy industry and electronics industries declines. These trends are amplified by further trade liberalisation and slowed down by new barriers for trade. The global coverage of climate policy is particularly significant for energy-intensive industries.
    Keywords: trade policy, climate policy, general equilibrium model
    JEL: Q58 C68 F13
    Date: 2012–09–03
  10. By: Lorenzo Rotunno; Pierre-Louis Vezina; Zheng Wang
    Abstract: During the final years of the Multifiber Agreement the US imposed strict import quotas on Chinese apparel while it gave African apparel duty- and quota-free access. The combination of these policies led to a rapid but ephemeral rise of African exports. In this paper we argue that the African success can be explained by a temporary transhipment of Chinese apparel driven by quota-hopping Chinese assembly firms. We first provide a large body of anecdotal evidence on the Chinese apparel wave in African countries. Second, we show that Chinese apparel exports to African countries predict US imports from the same countries and in the same apparel categories but only where transhipment incentives are present, i.e. for products with binding quotas in the US and for countries with preferential access to the US unconstrained by rules of origin. Using input-output linkages, we then show that African countries imported quasi-finished products with little assembly work left to do, rather than primary textile inputs. We estimate that direct transhipment may account for around half of AGOA countries apparel exports.
    Keywords: Transhipment, AGOA, Multifiber agreement
    JEL: F13 O17 O19
    Date: 2012
  11. By: Aljaz Kuncic
    Abstract: This paper examines institutional determinants of bilateral trade in a thorough fashion, paying special attention to the issues of selecting institutional measures (using a new dataset), institutional endogeneity (cleansing the endogenous part) and state of the art gravity trade estimations (controlling for multilateral resistance). In terms of the institutional focus, we emphasize, as de Groot et al. (2004), that institutional distance can be an even more relevant determinant of trade than institutional quality on its own, but correct for the technical and substance shortcomings of the afore mentioned paper. We find that not all institutions matter for trade. The consistent effect is that of the quality of origin and destination country’s legal institutions, which both increase trade. In terms of political and economic institutions, only the quality of origin’s political institutions and destination’s economic institutions increase trade, the latter being most salient. More importantly, we highlight the importance of the effect of institutional distance on trade, showing that economic distance affects trade significantly and negatively, an effect practically impossible to dissipate in any specification. Our conclusion in this research is that countries which are more similar in terms of economic institutions, trade more with each other, and that the quality of legal institutions is always conducive to general trade, but surprisingly does not determine your trade partners. Finally, we show that the use of only one of the proxies generally used by the literature to control for institutional environmentcan be biased and misleading in terms of what is actually being controlled for.
    Date: 2012–08
  12. By: Irina Hotz (Institute of economic research IRENE, Faculty of Economics, University of Neuchâtel, Switzerland)
    Abstract: This study analyzes the determinants of manufacturing activity across Chinese provinces with emphasis on the important role of energy endowments on the location of industries. The data set consists of a panel of 28 Chinese provinces and 13 manufacturing industries for the years 1994, 1997 and 1999-2009. A model of production location is estimated, including comparative advantage and economic geography dynamics. The effects of trade impediments and changes in economic policies on the distribution of economic activity are also considered. Results validate energy as a driving force of industry location. They further show that provincial protectionism poses a problem to market mechanisms, but indicate an increase of concentration of economic activity through time.
    Keywords: China, factor endowments, industry location, energy, externalities, protectionism
    JEL: F18 P2 R14
    Date: 2012–09
  13. By: Makoto Kakinaka (International University of Japan); Hiroaki Miyamoto (International University of Japan)
    Abstract: This paper studies the role of extensive and intensive margins of labor adjustment overbusiness cycle in Japan. We find that the intensive margin accounts for much of total hours worked variation, and its contribution to the fluctuation of total hours worked is about 77%. This result is in sharp contrast with those in the U.S. and European countries where the extensive margin mainly accounts for the overall variability in total hours worked. The implication of a recent rise in non-regular employment for firms' labor adjustment behavior is also discussed.
    Keywords: intensive and extensive margins, labor adjustment, Japanese labor market
    JEL: C10 E32 J23
    Date: 2012–09
  14. By: Michael Keen; Kai A. Konrad
    Abstract: This paper aims to provide a comprehensive survey of the theory of international tax competition. Starting with the standard framework, it visits the non-cooperative equilibrium of tax competition, analyses aspects of partial and regional coordination, repeated interaction, stock-flow-effects, agglomeration effects and time consistency issues in dynamic models. We discuss profit shifting in the Keen-Kanbur model and then survey frameworks to analyze countries’ bidding for firms, tax rate differentiation and preferential tax regimes, the role of information exchange and recent work on tax havens. The paper also discusses approaches that replace the benevolent government assumption by selfish (Leviathan) governments or by political processes that determine countries' decisions on their tax policy in an international context.
    Keywords: International taxation, tax competition
    Date: 2012–06
  15. By: Damiaan Persyn; Wouter Torfs
    Abstract: This paper derives a gravity equation for commuter flows from a simple spatial labor market model, and uses it to identify the effect of regional borders on commuting. This structural approach allows us to identify the relevant control variables and sources of potential omitted variable bias. The model is estimated by means of a negative binomial regression using Belgian data on intermunicipality commuting. We find that regional borders exert a sizable residual deterrent effect on commuting. This border-effect differs significantly between regions and depends on the direction in which the border is crossed.
    Date: 2012
  16. By: Jonas Debrulle
    Abstract: This study investigates the influence of business owner human and social capital on start-up export intensity. In addition, building on the knowledge-based view of the firm, we assume the relationships between owner characteristics and firm export activities to be moderated by the start-up’s absorptive capacity, which designates its ability to acquire, assimilate and exploit new information. Flemish start-ups form this study’s empirical setting. Our results indicate that start-up export intensity is (1) driven by the business owner’s formal education and start-up experience, while (2) weakened by his/her accumulated management experience. Furthermore, we find evidence that start-up absorptive capacity significantly moderates the export impact of the owner’s human capital. Finally, implications and opportunities for future research are suggested.
    Date: 2012
  17. By: Furukawa, Yuichi
    Abstract: Technological leadership has shifted at various times from one country to another. This analysis proposes a mechanism that endogenously explains this perpetual cycle of technological leapfrogging by incorporating international knowledge spillovers into a two-country dynamic model of innovation with the dynamic optimization of an infinitely-lived consumer. In the model, innovation productivity in each country endogenously increases over time because of domestic learning-by-doing and learning from foreign capital. The analysis shows that if international spillovers through learning from foreign capital are sufficiently large, technological leadership may first shift from one country to another, and then perpetually alternate between the two countries.
    Keywords: Perpetual leapfrogging; innovation; spillovers
    JEL: E32 O41 F12 F43
    Date: 2012–06

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