nep-int New Economics Papers
on International Trade
Issue of 2012‒09‒22
fifteen papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. International Trade without CES: Estimating Translog Gravity By Novy, Dennis
  2. The performance of trading firms in the services sectors – Comparable evidence from four EU countries By Jože Damijan; Stefanie A. Haller; Ville Kaitila; Mika Maliranta; Emmanuel Milet; Matija Rojec; Daniel Mirza
  3. How frequently firms export? Evidence from France By Gábor Békés; Lionel Fontagné; Balázs Muraközy; Vincent Vicard
  4. Global Production Sharing and the FDI-Trade Nexus: New Evidence from the Japanese Automobile Industry By Shuhei Nishitateno
  5. The Empirics of Firm Heterogeneity and International Trade By Andrew B. Bernard; J. Bradford Jensen; Stephen J. Redding; Peter K. Schott
  6. On the Measurement of Trade Costs: Direct vs. Indirect Approaches to Quantifying Standards and Technical Regulations By Natalie Chen; Dennis Novy
  7. Decomposing Aggregate Trade Flows: New Evidence from U.S. Traders By Fariha Kamal; C.J. Krizan
  8. Playing by the Rules? The Development of an Amended Index to Measure the Impact of Rules of Origin on Intra-PTA Trade Flows By Sinéad Kelleher
  9. Epidemic Trade By Lars Boerner; Battista Severgnini
  10. The Pattern of Foreign Market Entry of Canadian Exporters By Sui, Sui; Yu, Zhihao
  11. Self-enforcing environmental agreements and international trade By Thomas Eichner; Rüdiger Pethig
  12. Trade policy and wage inequality : a structural analysis with occupational and sectoral mobility By Artuc, Erhan; McLaren, John
  13. Regulation and electricity market integration: When trade introduces inefficiencies By Billette de Villemeur, Etienne; Pineau, Pierre-Olivier
  14. Antidumping and market competition: implications for emerging economies By Bown, Chad P.; McCulloch, Rachel
  15. Frontier Issues of the Political Economy of Migration By Gil S. Epstein

  1. By: Novy, Dennis
    Abstract: This paper derives a micro-founded gravity equation based on a translog demand system that allows for flexible substitution patterns across goods. In contrast to the standard CES-based gravity equation, translog gravity generates an endogenous trade cost elasticity. Trade is more sensitive to trade costs if the exporting country only provides a small share of the destination country's imports. As a result, trade costs have a heterogeneous impact across country pairs, with some trade flows predicted to be zero. I test the translog gravity equation and find empirical evidence that is in many ways consistent with its predictions.
    Keywords: Distance; Gravity; Import Share; Trade Cost Elasticity; Trade Costs; Translog
    JEL: F11 F12 F15
    Date: 2012–09
  2. By: Jože Damijan; Stefanie A. Haller; Ville Kaitila; Mika Maliranta; Emmanuel Milet; Matija Rojec; Daniel Mirza
    Abstract: We analyse common stylized facts of services firms engaged in trade in a comparative study across four EU member countries. We find that, though relatively less engaged in trade than manufacturing firms, services firms have similar traits. Services firms are more likely to import than to export. Their prevalent type of trade is trade in goods. The complexity of trade activities is increasing in firm size and productivity. Two-way traders outperform one-way traders. Services are more likely to be traded by firms already engaged in trade of goods. Changes in trading status by either adding another dimension of trade (imports, exports) or another type of product (goods, services) are infrequent and are associated with significant pre-switching premia. In contrast, learning effects from switching trading status are uncommon. This evidence points to significant fixed cost of being engaged in trade. Thus, the literature on heterogeneous firms is able to explain the sorting of firms into trading and non-trading firms in the services sectors as well.
    Keywords: services sectors, exports, imports, trade in goods and services, trade premia
    JEL: F14 F19 F23
    Date: 2012–09–06
  3. By: Gábor Békés; Lionel Fontagné; Balázs Muraközy; Vincent Vicard
    Abstract: This paper proposes studying export frequency as an additional margin of international trade. While extensive margins of products and destination define the scope of firm’s export, export shipment frequency is determined by sale method choice and cost structure of the trade technology. We define export shipment frequency as the per annum number of shipments of a given product, by a firm to a given destination. In order to more deeply understand the trade cost structure and sale methods, we estimate gravity models on export frequency and other margins of trade using monthly firm-product-destination level export data from France. We show that in key predictions of the model are validated. During the recent trade collapse, we also find a great deal of stability in shipment frequency with a modest adjustment to declining GDP.
    Date: 2012–03–01
  4. By: Shuhei Nishitateno
    Abstract: The growing importance of global production sharing makes the nexus between outward foreign direct investment (FDI) and trade in parts and components ever more important. This paper examines the impact of overseas operation of upstream firms (parts and components suppliers) on parts and components exports from the home country through a case study of the Japanese automobile industry. The empirical analysis is based on a newly-constructed product-level dataset covering 32 products and 49 host countries over the period 1993 to 2008. It is found that overseas operation of upstream firm lead to additional exports of intermediate goods from the home country. This finding runs counter to the the popular view that the growing overseas activity of multinational enterprises could replace intermediate exports from a home country, thereby depriving the home country of job opportunities.
    Keywords: Global production sharing, foreign direct investment, exports, automobile, Japan
    JEL: F14 F23
    Date: 2012
  5. By: Andrew B. Bernard; J. Bradford Jensen; Stephen J. Redding; Peter K. Schott
    Abstract: This paper reviews the empirical evidence on firm heterogeneity in international trade. A first wave of empirical findings from micro data on plants and firms proposed challenges for existing models of international trade and inspired the development of new theories emphasizing firm heterogeneity. Subsequent empirical research has examined additional predictions of these theories and explored other dimensions of the data not originally captured by them. These other dimensions include multi-product firms, offshoring, intra-firm trade and firm export market dynamics.
    Date: 2012–09
  6. By: Natalie Chen; Dennis Novy
    Abstract: In this article, we review the literature on the measurement of trade costs in international trade with a special emphasis on nontariff measures and in particular on standards and technical regulations. We distinguish 'direct' from 'indirect' approaches. The direct approach collects observable data or proxy variables on trade cost components which are then typically used as regressors in a gravity equation of trade. Instead, the indirect approach infers the extent of trade impediments from trade flows. It compares actual trade flows to the trade flows predicted by a hypothetical frictionless benchmark scenario based on a micro-founded trade model, attributing the deviation of actual from predicted trade flows to trade frictions. We argue that economists and policymakers can gain useful insights from both approaches.
    Keywords: Trade costs, nontariff measures, product standards, technical regulations,technical barriers to trade, measurement, gravity
    JEL: F10 F15
    Date: 2012–09
  7. By: Fariha Kamal; C.J. Krizan
    Abstract: Using firm-level data on export transactions, we uncover a rich set of results about the extensive margins of exporting and exporter responses during periods of global downturns. We perform our analysis with respect to firm size, age, ownership status, and sector to emphasize the role of firm heterogeneity. We uncover a larger role for firm entry and exit in changes in annual export flows of single-unit, smaller, and younger firms. Young, small firms perform best during both periods of crises as well as non-crises periods. We also decompose the margins of U.S. imports at the U.S. importer, foreign supplier, and U.S. importer-foreign supplier pair levels. While export flows are closely correlated with global business cycles, import flows more closely approximate U.S. economic cycles. Additionally, both pair and foreign supplier flows are far more volatile than U.S. import flows, that is, U.S. importer-foreign supplier matches experience more churning on average than do either U.S. importers or foreign suppliers.
    Keywords: U.S. exports, imports, extensive and intensive margins, firm heterogeneity, shocks
    JEL: F1 F23 F43
    Date: 2012–09
  8. By: Sinéad Kelleher (University College Dublin)
    Abstract: Rules of Origin (RoO) are essential components of any preferential trade agreement (PTA) short of a full customs union. The recent proliferation of PTAs has led to increased interest in the effects of RoO with empirical estimates consistently showing that they act as barriers to intra-PTA trade. However, this paper argues that the indices of RoO restrictiveness currently used in empirical analysis are flawed as they focus solely on product specific RoO and do not incorporate information on regime wide provisions, that is, those rules that apply across all goods in a particular agreement. As such, they do not capture fully the effective restrictiveness of a given RoO. In order to address this issue, this paper weights the Harris Index of RoO restrictiveness by three regime wide provisions; the size of the Cumulation Zone, the de minimis allowance, and certification type. The resulting new measure, the Regime Weighted Harris Index (RWHI), is then each used in both OLS and IV regressions to measure the impact of RoO on intra-PTA trade flows. Across an eleven year panel of 90 country-pairs, a negative effect of RoO on intra-PTA trade is found using OLS. However, the results of an IV regression suggest that the situation is somewhat more complicated, with RoO actually promoting trade flows in certain product groups. This is the first attempt in the literature to develop an instrument for RoO restrictiveness which constitutes a second source of value added for this paper.
    Keywords: Rules of Origin, International Trade Agreements, Nontariff Barriers
    JEL: F13 F15
    Date: 2012–09–13
  9. By: Lars Boerner (Freie Universität Berlin); Battista Severgnini (Copenhagen Business School)
    Abstract: This paper studies the spread of the Black Death as a proxy for the intensity of medieval trade ows between 1346 and 1351. The Black Death struck most areas of Europe and the wider Mediterranean. Based on a modied version of the gravity model, we estimate the speed (in kilometers per day) of transmission of the disease between the transmitting and the receiving cities. We find that the speed depends on distance, political borders, and on the political impor- tance of a city. Furthermore, variables related to the means of transportation like rivers and the sea, religious seasons such as Advent, and geographical position are of substantial significance. These results are the rst to enable us to identify and quantify key variables of medieval trade ows based on an empirical trade model. These results shed new light on many qualitative debates on the importance and causes of medieval trade.Length: 40 pages
    Keywords: Trade, Middle Ages, Black Death, Gravity model, Poisson regression
    JEL: F10 F15 N13
    Date: 2012–08
  10. By: Sui, Sui; Yu, Zhihao
    Abstract: This paper employs a unique large-scale longitudinal (1997–2005) dataset to investigate the pattern of foreign market entry by 6,079 Canadian exporters. We have found that fewer firms are choosing the United States as their initial export destination. This trend suggests that a growing number of firms are not following the traditional stage model of internationalization. Furthermore, our results suggest that government support should be targeted towards young and small Canadian-controlled firms, since they are more likely to encounter barriers and gain benefits from exporting to a wider range of foreign markets.
    Keywords: Canadian exporters; United States; emerging market; foreign market entry; internationalization process; stage model
    JEL: F13 O51
    Date: 2012–09–01
  11. By: Thomas Eichner; Rüdiger Pethig
    Abstract: In the basic model of the literature on international environmental agreements (IEAs) (Barrett 1994; Rubio and Ulph 2006) the number of signatories of selfenforcing IEAs does not exceed three, if non-positive emissions are ruled out. We extend that model by introducing a composite consumer good and fossil fuel that are produced and consumed in each country and traded on world markets. When signatory countries act as Stackelberg leader and emissions are positive, the size of stable IEAs may be significantly larger in our model with international trade. This would be good news if larger self-enforcing IEAs would lead to stronger reductions of total emissions. Unfortunately, the allocation of total emissions in self-enforcing IEAs turns out to be approximately the same as in the business as usual scenario independent of the number of its signatories. We also investigate the role of international trade by comparing our free-trade results with the outcome in the regime of autarky. Our autarky model turns out to coincide with the basic model of the literature alluded to above. We contribute to that literature by showing that in autarky regime the outcome of self-enforcing IEAs is also approximately the same as in business as usual.
    Keywords: international trade, self-enforcing environmental agreements, Stackelberg equilibrium
    JEL: C72 F02 Q50 Q58
    Date: 2012
  12. By: Artuc, Erhan; McLaren, John
    Abstract: A number of authors have argued that a worker's occupation of employment is at least as important as the worker's industry of employment in determining whether the worker will be hurt or helped by international trade. This paper investigates the role of occupational mobility on the effects of trade shocks on wage inequality in a dynamic, structural econometric model of worker adjustment. Each worker in the model can switch either industry, occupation, or both, paying a time-varying cost to do so in a rational-expectations optimizing environment. The authors find that the costs of switching industry and occupation are both high, and of similar magnitude, but in simulations they find that a worker's industry of employment is much more important than either the worker's occupation or skill class in determining whether he or she is harmed by a trade shock.
    Keywords: Labor Markets,Labor Policies,Economic Theory&Research,Housing&Human Habitats,Work&Working Conditions
    Date: 2012–09–01
  13. By: Billette de Villemeur, Etienne; Pineau, Pierre-Olivier
    Abstract: Electricity markets vary greatly across jurisdictions, in terms of regulatory institutions, cost levels and environmental impacts. Integrating such different markets can lead to significant changes. This paper considers two jurisdictions - one with a regulated monopoly selling at average cost and one with a competitive market - and compares three different institutional regimes: autarky, a mixed-market structure with trade and a fully integrated market, where electricity is sold at marginal cost. We show that, in the second regime, the regulated monopoly always exports toward the jurisdiction pricing at marginal cost, up to inducing productive inefficiencies. By contrast, a shift from the second to the third regime, i.e. "integrated deregulation" yields a decrease in overall consumption. We identify the exact conditions under which the shift from one regime to the other results in environmental gains.
    Keywords: Market Integration; Regulation; Electricity Trade; Environmental Impacts
    JEL: F15 Q52 Q56 F14 L94 L50
    Date: 2012
  14. By: Bown, Chad P.; McCulloch, Rachel
    Abstract: While the original justification of the antidumping laws in the industrial economies was to protect domestic consumers against predation by foreign suppliers, by the early 1990s the laws and their use had evolved so much that the opposite concern arose. Rather than attacking anti-competitive behavior, dumping complaints by domestic firms were being used to facilitate collusion among suppliers and enforce cartel arrangements. This paper examines the predation and anti-competitiveness issues from the perspective of the"new users"of antidumping -- the major emerging economies for which antidumping is now a major tool in the trade policy arsenal. The paper examines these concerns in light of important ways in which the world economy and international trading system have been changing since the early 1990s, including more firms and more countries participating in international trade, but also more extensive links among suppliers and consumers through multinational firm activity and vertical specialization.
    Keywords: Free Trade,Markets and Market Access,Economic Theory&Research,Trade Law,Access to Markets
    Date: 2012–09–01
  15. By: Gil S. Epstein (Department of Economics, Bar-Ilan University, Israel IZA, Bonn and CReAM, London)
    Abstract: Migration has a strong economic impact on the sending and host countries. Since individuals and groups do not benefit equally from migration, interest groups emerge to protect and take care of their narrow self-interests and compete for rents generated by migration. Narrow self-interests may be present not only for interest groups but also for ruling politicians and civil servants. In this paper we consider how political culture is important for determining policy and how interest groups affect, via a lobbying process, the choice of public policy. We also consider how interest groups and lobbying activities affect assimilation and attitudes towards migrants and international trade. The narrow interests of the different groups may cause a decrease in social welfare, in some cases, and may enhance welfare in other situations.
    Keywords: Migration, Political Economy, Culture, Minorities, Politicians.
    JEL: F22 P48 O15
    Date: 2012–09

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