nep-int New Economics Papers
on International Trade
Issue of 2012‒09‒30
twelve papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. Communication costs and trade in Sub-Saharan Africa By Mupela, Evans; Szirmai, Adam
  2. An Eaton-Kortum Model of Trade and Growth By NAITO Takumi
  3. Reassessing the Evolution of World Trade, 1870-1949 By Klasing, Mariko J.; Milionis, Petros
  4. Trade Liberalization and Female Labor Force Participation: Evidence from Brazil By Gaddis, Isis; Pieters, Janneke
  5. Institution-Driven Comparative Advantage and Organizational Choice By Ferguson, Shon; Formai, Sara
  6. Cherries for Sale: Export Networks and the Incidence of Cross-Border M&A By Bruce A. Blonigen; Lionel Fontagné; Nicholas Sly; Farid Toubal
  7. Does the internet generate economic growth, international trade, or both? By Meijers, Huub
  8. Negotiating free trade agreements with Latin America and Asia is an increasingly important priority for the EU. By Garcia, Maria
  9. Anatomy of South–South FTAs in Asia: Comparisons with Africa, Latin America, and the Pacific Islands By Hamanaka, Shintaro
  10. Foreign ownership structure, technology upgrading and exports: Evidence from Chinese firms By Surafel Girma; Yundan Gong; Holger Görg; Sandra Lancheros
  11. Non-Price Competitiveness of Exports from Emerging Countries By Konstantins Benkovskis; Julia Wörz
  12. Sources of Comparative Advantage in Polluting Industries By Fernando Broner; Paula Bustos; Vasco Carvalho

  1. By: Mupela, Evans (WSU, UNU-MERIT/MGSoG); Szirmai, Adam (UNU-MERIT/MGSoG)
    Abstract: This paper investigates the effects of connectivity charges (communication costs) on bilateral exports in Sub Saharan Africa (SSA). Data from 19 exporter countries was used together with communication costs data in a gravity model of trade setup. The export data derive from the IMF Direction of Trade and the COMTRADE databases, while the communication cost data was collated from a variety of sources including direct contact with service providers. We find that communication cost is an important factor in bilateral trade in the region. Communications have a significant negative effect on export intensity. The study also reveals that countries with high communication costs generally have lower export intensity than countries with low communication costs. The results suggest that investment in ICT infrastructure that brings down international communication costs will have a positive effect on regional trade in the long run.
    Keywords: Trade, gravity model, communication cost, connectivity, export
    JEL: O25 O41 O43 O47 F15 F43
    Date: 2012
  2. By: NAITO Takumi
    Abstract: We combine a multi-country, continuum-good Ricardian model of Eaton and Kortum (2002) with a multi-country AK model of Acemoglu and Ventura (2002) to examine how trade liberalization affects countries' growth rates and extensive margins of trade over time. Focusing mainly on the three-country case, we obtain two main results. First, a permanent fall in any trade cost raises the balanced growth rate. Second, trade liberalization increases the liberalizing countries' long-run fractions of exported varieties to all destinations. Our analysis includes a bilateral preferential trade agreement with the long-run bilateral terms of trade unchanged.
    Date: 2012–09
  3. By: Klasing, Mariko J.; Milionis, Petros (Groningen University)
    Abstract: The typical narrative regarding the evolution of world trade prior to World War II refers to a secular rise that started around 1870 and a subsequent collapse that began in 1914. This narrative, though, is based on measures of trade openness that do not fully take into account purchasing power di¤erences across countries, as in the literature non-PPP-adjusted trade data are typically denominated by PPP-adjusted GDP data. The present paper seeks to resolve this inconsistency by constructing new trade share estimates for 51 countries spanning the period from 1870 to 1949 by combining historical import and export data with non-PPP-adjusted GDP values that we estimate via the "short-cut" method. Our estimates indicate a much more pronounced rise and fall of world trade over this period with trade shares being on average 32% higher than previously documented and the world's level of openness to trade in 1913 being comparable to that in 1974. In addition, performing a similar correction for purchasing power differences in the context of standard gravity regressions for the 1870-1939 period we find that the existing literature has overestimated the importance of income movements during this period relative to tariffs changes and the evolution of the gold standard.
    Date: 2012
  4. By: Gaddis, Isis (University of Göttingen); Pieters, Janneke (IZA)
    Abstract: While there is a large literature analyzing the distributional impacts of trade reforms across the income or skill distribution, very little is known about the gender effects of trade reforms. This paper seeks to fill this gap and investigates the impact of Brazil's 1987-1994 trade liberalization on labor force participation of women. To identify the causal effect of trade reforms we exploit exogenous variation in exposure to tariff reductions across states linked to spatial differences in states' initial industry composition. We find that tariff reductions were associated with an increase in female labor force participation and employment after a period of around two years. Our results are robust to a variety of different approaches in dealing with the potential endogeneity of regional exposure to trade liberalization, alternative measures of trade protection and different time periods. Moreover, we find evidence that employment flows across sectors, especially an accelerated shift from agriculture and manufacturing to trade and other services, but also greater labor market insecurity and male unemployment are behind the observed increase in female economic activity. This suggests that both push and pull factors induced women to join the labor force.
    Keywords: female labor force participation, trade liberalization, Brazil
    JEL: F13 F16 J16 J21 O15
    Date: 2012–08
  5. By: Ferguson, Shon (Research Institute of Industrial Economics (IFN)); Formai, Sara (Bank of Italy)
    Abstract: The theory of the firm suggests that firms can respond to poor contract enforcement by vertically integrating their production process. The purpose of this paper is to examine whether firms’ integration opportunities affect the way contract enforcement institutions determine international trade patterns. We find that the benefits of judicial quality for the exports of contract-intense goods are more muted in industries that have a greater propensity towards vertical integration arrangements with input suppliers. We show that our results are not driven by primitive industry characteristics. Our results confirm the role of judicial quality as source of comparative advantage and suggest that this depends not only on the technological characteristics of the goods produced but also on the way firms are able to organize the production process.
    Keywords: International Trade; Comparative Advantage; Contract Enforcement; Vertical Integration
    JEL: D23 F10 F14 L22 L23
    Date: 2012–09–11
  6. By: Bruce A. Blonigen; Lionel Fontagné; Nicholas Sly; Farid Toubal
    Abstract: This paper develops a dynamic model of cross-border M&A activity. We show that foreign firms will be relatively more attracted to targets in the domestic country that had high productivity levels several years prior to acquisition, but then suffered a negative productivity shock (i.e., cherries for sale). With high ex ante productivity levels, target firms are able to invest in large export networks that are valuable to foreign multinationals because of locational differences and trade costs. Subsequently, domestic firms that experience reductions in productivity no longer find their established network as valuable to serve independently, increasing the surplus generated by a foreign acquisition. From the theory we derive a dynamic panel binary choice empirical model that uses predetermined export activity and the evolution of target firm productivity over time to predict cross-border M&A activity. Administrative data from French firms across 1999-2006 provide strong evidence that both the established export networks and productivity losses among target firms promote takeover by foreign multinationals.
    JEL: F12 F23 G34
    Date: 2012–09
  7. By: Meijers, Huub (UNU‐MERIT/MGSoG, and Department of Economics, Maastricht University)
    Abstract: Recent cross country panel data studies find a positive impact of internet use on economic growth and a positive impact of internet use on trade. The present study challenges the first finding by showing that internet use does not explain economic growth directly in a fully specified growth model. In particular openness to international trade variables seems to be highly correlated with internet use and the findings in the literature that internet use causes trade is confirmed here, suggesting that internet use impacts trade and that trade impacts economic growth. A simultaneous equations model confirms the positive and significant role of internet use to openness and the importance of openness to economic growth. Internet use has been shown to impact trade more in non-high income countries than in high income countries, whereas the impact of trade on economic growth is the same for both income groups.
    Keywords: economic growth, internet, ICT, trade, panel data
    JEL: C23 L86 L96 F10 O40
    Date: 2012
  8. By: Garcia, Maria
    Abstract: The EU has recently completed trade agreements with a number of different countries in Latin America, and is seeking further agreements in Asia. Maria Garcia looks at the EU’s recent history of trade negotiations, arguing that free trade agreements offer an important opportunity to ‘level the playing field’ for EU businesses facing competition from the United States, China, and beyond.
    Date: 2012–07–24
  9. By: Hamanaka, Shintaro (Asian Development Bank)
    Abstract: In understanding the proliferation of free trade agreements (FTAs) in Asia since 2000, it is important to distinguish between two types of FTAs in terms of a legal basis on either General Agreement on Tariffs and Trade (GATT) Article XXIV or the Enabling Clause. The latter provision can be used when an FTA involves only developing countries. While there are a total of 34 Enabling Clause-based FTAs in effect around the globe, more than half of them are located in Asia. Moreover, the way the Enabling Clause is used by developing countries in Asia is very different from other regions. Outside of Asia, the Enabling Clause is usually used to form a plurilateral FTA that has an accession clause, which envisages gradual evolution into a subregion-wide cooperative agreement. In contrast, in Asia, developing counties started to use the Enabling Clause to sign bilateral FTAs in 2000. Such an innovative way of using the Enabling Clause is one of the main contributors to the recent proliferation of FTAs in Asia. This paper also considers the implications of this proliferation in Asia on the openness of Asian regionalism.
    Keywords: Free Trade Agreements (FTAs); Enabling Clause; GATT Article XXIV; open regionalism; bilateralism
    JEL: F13 F15
    Date: 2012–09–01
  10. By: Surafel Girma; Yundan Gong; Holger Görg; Sandra Lancheros
    Abstract: We examine the role of foreign ownership structure in stimulating technology and skill upgrading, and exporting in Chinese manufacturing firms that were taken over by foreign owners. The analysis considers the period 2001 to 2007. We use a propensity score reweighted least squares estimation to control for the possible endogeneity of the acquisition decision. Our results indicate that there are strong effects on export activity post-acquisition for all types of ownership share. We also find that targets that are taken over with a less than 100 per cent foreign ownership share experience increases in new product development and R&D upgrading due to the acquisition. Overall, our results suggest that joint ventures between foreign owners and Chinese firms can contribute positively to China’s “science and technology take-off”
    Keywords: Chinese manufacturing
    JEL: O14
    Date: 2012–08
  11. By: Konstantins Benkovskis; Julia Wörz
    Abstract: We analyse EMEs global competitiveness whereby we explicitly take account of non-price aspects of competitiveness building on the methodology developed in Feenstra (1994) and Broda and Weinstein (2006) and the extension provided in Benkovskis and Wörz (2012). We construct an export price index which adjusts for changes in the set of competitors (variety) and changes in non-price factors (quality in a broad sense) for a set of nine large emerging economies (Argentina, Brazil, Chile, China, India, Indonesia, Mexico, Russia and Turkey). We use a highly disaggregated data set at the detailed 6-digit HS level over the period 1999-2010. In contrast to the conclusions based on the CPI-based real effective exchange rate we find that there are rather pronounced differences between individual markets. As a first and important result, China shows a huge gain in international competitiveness due to non-price factors thus suggesting that the role of Renminbi undervaluation for China’s competitive position may be overstressed. The strong improvements in Russia's non-price competitiveness are exclusively due to developments in the oil sector as are the competitive losses observed for Argentina and Indonesia. Further, Brazil, Chile, India, and Turkey show discernible improvements in their competitive position when accounting for non-price factors while Mexico's competitiveness has deteriorated regardless of the index chosen.
    Keywords: non-price competitiveness, quality, relative export price, emerging countries
    JEL: C43 F12 F14 L15
    Date: 2012–08
  12. By: Fernando Broner; Paula Bustos; Vasco Carvalho
    Abstract: We study the determinants of comparative advantage in polluting industries. To do this, we combine data on environmental policy at the country level with data on pollution intensity at the industry level and show that countries with laxer environmental regulation have a comparative advantage in polluting industries. This is consistent with the existence of a pollution haven effect. Further, we address the potential problem of reverse causality. To do so we propose an instrument for environmental regulation based on meteorological determinants of pollution dispersion as identified by the atmospheric pollution literature. We find that the pollution haven effect is causal and economically significant.
    Keywords: international trade, environmental regulation, comparative advantage, air pollution
    JEL: F11 F18 Q53 Q56
    Date: 2012–03

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