nep-int New Economics Papers
on International Trade
Issue of 2012‒10‒13
seventeen papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. Export mode, Trade Costs, and Productivity Sorting By Ronald B Davies; Tine Jeppesen
  2. Trade times, importing, and exporting: Firm-level evidence By Shepherd, Ben
  3. The Rise of the East and the Far East: German Labor Markets and Trade Integration By Jens Suedekum; Sebastian Findeisen; Wolfgang Dauth
  4. Trade Prices and the Global Trade Collapse of 2008-2009 By Gopinath, Gita; Itskhoki, Oleg; Neiman, Brent
  5. Services firms in the developing world: An empirical snapshot By Shepherd, Ben
  6. Import tariffs and export subsidies in the World Trade Organization: A small-country approach By Tanapong Potipiti
  7. Do Preferential Trade Agreements Increase Members’ Agri-food Trade? By Ul Haq, Zahoor; Meilke, Karl D.; Orden, David
  8. Is China climbing up the quality ladder? By Pula, Gabor; Daniel Santabarbara, Daniel
  9. Product Heterogeneity, Intangible Barriers & Distance Decay: The effect of multiple dimensions of distance on trade across different product categories By Maureen Lankhuizen; Thomas De Graaff; Henri De Groot
  10. Export, Migration, and Costs of Market Entry: Evidence from Central European Firms By Dieter Pennerstorfer
  11. Agglomeration, Productivity, and Firms¡® Exports: Evidence from Chinese Firm-level Data By Churen Sun; Zhihao Yu; Tao Zhang
  12. Trade and Geography in the Origins and Spread of Islam By Stelios Michalopoulos; Alireza Naghavi; Giovanni Prarolo
  13. Determinants of R&D activities of multinational firms abroad By Sandra Leitner; Bernhard Dachs; Robert Stehrer
  14. Testing for Factor Price Equality with Unobserved Differences in Factor Quality or Productivity By Andrew B. Bernard; Stephen J. Redding; Peter K. Schott
  16. In Search of Growth Effects by inward FDI in Central East Europe By Johannes Stephan; Olivier Zieschank
  17. The EU-Canada Free Trade Agreement: What is on the Table for Agriculture? By Kerr, William A.

  1. By: Ronald B Davies (University College Dublin); Tine Jeppesen (University College Dublin)
    Abstract: In this paper we directly test the proposed productivity hierarchy of direct, indirect and non-exporters using firm-level data from 105 developing and transition countries. Using both regression analysis and propensity score matching, we find strong evidence to suggest that direct exporters are on average more productive than both indirect and non-exporters. However, only the results obtained using regression analysis support a similar ranking between indirect and non-exporters. Furthermore, we test the underlying relationship between source-specific fixed trade costs and the average productivity differences between the three firm-types. We find a significant and positive relation between such costs and the average productivity premium of direct exporters only. While other studies have shown that exports by trade intermediaries increase with destination-specific fixed costs, our results suggest that this is also true for source-specific costs, as an increase in the average productivity of direct exporters indicate that a larger share of less productive direct exporters choose to make use of a trade intermediary as export costs rise.
    Keywords: Heterogeneous firms, Export mode, Exporting Costs
    JEL: F1
    Date: 2012–10–04
  2. By: Shepherd, Ben
    Abstract: This paper uses data on 11 industries in 85 developing countries to show that trade times matter for import and export performance at the firm-level. Firms import more intermediate inputs if import licensing times are shorter. They export more of their production if border clearance times are shorter, but tend to use third party distributors more if clearance times are longer. This is the first time that imports and indirect exports have been considered in the firm-level literature on trade facilitation.
    Keywords: Import Time; Export Time; Trade Facilitation; Developing Countries
    JEL: F13 O24
    Date: 2012–09–18
  3. By: Jens Suedekum; Sebastian Findeisen; Wolfgang Dauth
    Abstract: The unprecedented economic rise of Eastern Europe and China in the last two decades has triggered concerns in developed Western market economies about adverse effects for domestic labor markets trough increased import competition. Simultaneously, exports from developed countries to these new destination markets have also surged. We analyze the effect of this enormous rise in trade integration on German labor markets between 1988 and 2008, using detailed administrative data. We exploit the variation in initial industry variation across German regions, before the onset of these trade shocks, and instrument for regional import and export exposure using trade flows from other highly-developed countries with East Europe and China. We find large effects of export and import exposure to East Europe; on average exports are estimated to have increased manufacturing employment by 3.99 percentage points, whereas imports increased manufacturing employment by 2.33 percentage points. We find no effects of trade integration with China on the employment margin. We complement our findings with results on regional wage growth, inequality, industry churning and population shifts. Using data at the worker level, we show that workers specialized in export (import) industries before the onset of trade shocks, have a higher (lower) probability of subsequently being employed and have more (less) stable employment outcomes, defined as working in the same firm or industry. These effects of trade on worker outcomes are larger and more robustly estimated for Eastern Europe.
    Date: 2012–10
  4. By: Gopinath, Gita; Itskhoki, Oleg; Neiman, Brent
    Abstract: We document the behavior of trade prices during the Great Trade Collapse of 2008-2009 using transaction-level data from the U.S. Bureau of Labor Statistics. First, we find that differentiated manufactures exhibited marked stability in their trade prices during the large decline in their trade volumes. Prices of non-differentiated manufactures, by contrast, declined sharply. Second, while the trade collapse was much steeper among differentiated durable manufacturers than among non-durables, prices in both categories barely changed. Third, the frequency and magnitude of price adjustments at the product level changed with the onset of the crisis, consistent with a state-dependent view of price adjustment. The quantitative magnitudes of the changes, however, were not pronounced enough to affect aggregate prices. Our findings present a challenge for theories of the trade collapse based on cost shocks specific to traded goods that work through prices.
    Keywords: Durable Goods; Global Trade Collapse; Great Recession; Import and Export Prices
    JEL: F10 F14 F44
    Date: 2012–09
  5. By: Shepherd, Ben
    Abstract: This paper paints the first empirical portrait of services firms in the developing world. Compared with manufacturers, service providers are smaller, but growing faster. They are more productive, pay higher wages, and invest more heavily than manufacturers, but are less likely to export or to receive inward foreign direct investment. Among service providers, internationalized firms display similar characteristics to internationalized manufacturers: they are larger, employ more workers, pay higher wages, invest more heavily, and grow faster. Although these premia are generally more pronounced for goods exporters than for services exporters, the reverse is often true for foreign-owned firms.
    Keywords: Services; Developing countries; Trade in services; FDI in services; Firm-level data
    JEL: O24 F14 L80
    Date: 2012–10–04
  6. By: Tanapong Potipiti (Chulalongkorn University)
    Abstract: This paper develops a simple small-country model to explain why the World Trade Organization (WTO) prohibits export subsidies but allows import tariffs
    Keywords: Export subsidy agreement, import tariff, WTO
    JEL: F13 F53
    Date: 2012–08
  7. By: Ul Haq, Zahoor; Meilke, Karl D.; Orden, David
    Abstract: This study estimates the effect of a diverse group of 30 PTAs on members’ trade of 26 agri-food products categorized into eight commodity sectors for 1990, 1995, 2000 and 2000 using disaggregated trade data for 40 countries and the Heckman selection model. Results show that whether reported zero trade-flows are considered actual or potential affects the size of the estimated PTA impacts. However, irrespective of the true nature of the zero trade-flows, the effects of PTAs are found positive and statistically significant. OLS estimates fall between the Heckman-model-derived conditional and unconditional effects of PTAs.
    Keywords: Preferential Trade Agreements, agri-food trade, selection bias, Heckman, Food Consumption/Nutrition/Food Safety, F130, C180,
    Date: 2012–09–28
  8. By: Pula, Gabor (BOFIT); Daniel Santabarbara, Daniel (BOFIT)
    Abstract: There is an ongoing debate in the literature about the quality content of Chinese exports and to what extent China imposes a threat to the market positions of advanced economies. While China’s export structure is very similar to that of the advanced world, its export unit values are well below the level of developed economies. Building on the assumption that unit values reflect quality the prevailing view of the literature is that China exports low quality varieties of the same products than its advanced competitors. This paper challenges this view by relaxing the assumption that unit values reflect quality. We derive the quality of Chinese exports to the European Union by estimating disaggregated demand functions from a discrete choice model. The paper has three major findings. First, China’s share on the European Union market is larger than would be justified only by its low average prices, implying that the quality of Chinese exports is high compared to many competitors. Second, China has gained quality relative to other competitors since 1995, indicating that China is climbing up the quality ladder. Finally, our analysis on the supply side determinants reveals that the relatively high quality of Chinese exports is related to processing trade and the increasing role of global production networks in China.
    Keywords: Chinese exports; vertical product differentiation; quality ladder; global production networks; discrete choice model; COMEXT database
    JEL: F10 F12 F14 F15 F23
    Date: 2012–10–02
  9. By: Maureen Lankhuizen; Thomas De Graaff; Henri De Groot
    Abstract: This paper empirically examines the heterogeneity in the effects of multiple dimensions of distance on trade across detailed product groups. Using finite mixture modelling on bilateral trade data at the 3-digit SITC level, we endogenously group product categories into an, a priori unknown, number of segments based on estimated coefficients of multiple dimensions of distance in the gravity equation. The paper contributes to the literature by offering a new classification of products into homogeneous groups. We find that distance decay functions in a gravity model of international trade at a disaggregate level reveal a complex process that involve location characteristics (comparative and natural advantages, demand patterns or preferences) as well as intrinsic sensitivity of trade to multiple dimensions of distance. Keywords: bilateral trade, gravity models, cultural distance, institutions, product heterogeneity, finite mixture modelling JEL code: F14, F21, F23
    Date: 2012–10
  10. By: Dieter Pennerstorfer
    Abstract: In this article I analyze the export behavior of firms located in different Central European countries (Austria, Hungary, Czech Republic and Slovakia) with respect to migration. Ever since the seminal article by Gould (1994) on immigrant links to their home country and due to empirical research following his contribution, it is a well established result that immigrants from a particular country spur exports to and imports from that destination. Chaney (2008) shows that a decrease in fixed costs of exporting increases the number of exporters (extensive margin), whereas a reduction in variable costs also increases the volume exported by each exporting firm (intensive margin). Empirical contributions using firm-level data focus on various aspects influencing costs of exporting (like spillover effects of nearby firms (Sinani and Hobdari, 2010; Silvente and Geménez, 2007) or financial factors (Berman and Héricourt, 2010)), but leave out the issue of migration. I combine detailed information coming from a questionnaire conducted among 8,300 firms on the export behavior to different countries with regional data on migration from the European Labor Force Survey (LFS). I find evidence that both the propensity to export and – to a much smaller extent – the volume of sales of exporting firms to a particular destination is higher for firms located in regions with a larger number of immigrants from that country. I conclude that migrants mainly reduce fixed costs of exporting.
    Date: 2012–10
  11. By: Churen Sun; Zhihao Yu; Tao Zhang
    Abstract: The paper proposes a model to investigate the influences of agglomeration on heterogeneous firms' exporting behaviors. In the model, firms are heterogeneous in productivity. Selection effect and agglomeration economies caused by agglomeration increase firms' productivity and decreases industrial entry costs, and factor prices are increased because of agglomeration. The former factors increase while the latter reduces firms' exporting possibilities and sales. The theoretical result shows that the compositive effect is that the influences of productivity on the latter increase with agglomeration level. Empirical results based on data from Chinese Industrial Enterprises between 1998 and 2007 verify the theoretical results. Moreover, the is a critical agglomeration level for each firm (which varies across firms' productivity), so that the influence of agglomeration on a firm' export increases with agglomeration if it's less than this level while decreases if it's larger than it. The paper also estimates the influences of local market effect, urban economies and competition effect on firms' exports and find that they affect firms' exporting behaviors in very complicated modes.
    Date: 2012–10
  12. By: Stelios Michalopoulos; Alireza Naghavi; Giovanni Prarolo
    Abstract: This research examines the economic origins and spread of Islam in the Old World and uncovers two empirical regularities. First, Muslim countries and ethnic groups exhibit highly unequal regional agricultural endowments. Second, Muslim adherence is systematically higher along the pre-Islamic trade routes. We discuss the possible mechanisms that may give rise to the observed pattern and provide a simple theoretical argument that highlights the interplay between an unequal geography and proximity to lucrative trade routes. We argue that these elements exacerbated inequalities across diverse tribal societies producing a conflictual environment that had the potential to disrupt trade flows. Any credible movement attempting to centralize these heterogeneous populations had to offer moral and economic rules addressing the underlying economic inequalities. Islam was such a movement. In line with this conjecture, we utilize anthropological information on pre-colonial traits of African ethnicities and show that Muslim groups have distinct economic, political, and societal arrangements featuring a subsistence pattern skewed towards animal husbandry, more equitable inheritance rules, and more politically centralized societies with a strong belief in a moralizing God.
    JEL: N0 N27 N3 O0 O1 O43 Z0 Z1 Z12
    Date: 2012–10
  13. By: Sandra Leitner; Bernhard Dachs; Robert Stehrer
    Abstract: In recent years, firms have considerably decentralized their research and development (R&D) activities. Subsidiaries of foreign multinational enterprises (MNEs) are now among the top performers of R&D in many EU and non-EU countries. Specifically, MNE affiliates account for around 20% of total business R&D in France, Germany and Italy; between 30% and 50% in Canada, Portugal, the Slovak Republic, Sweden and the United Kingdom; and more than 50% in Austria, Belgium, the Czech Republic, Hungary and Ireland. Against that backdrop, the paper uses a novel and unique data base on R&D expenditure of foreign-owned firms for a set of OECD countries and identifies and analyzes factors that drive the scale of R&D expenditure across countries and sectors. The empirical analysis employs a gravity approach which demonstrates that geography plays a pivotal role as distance between host and home country of a foreign-owned firm, a common language spoken in both home and host countries, or common borders are key drivers of cross-border R&D investments. Moreover, results reveal that additional determinants such as larger host and home country markets or superior host country human capital bases are conducive to R&D expenditure of foreign-owned firms while stronger human capital bases in home countries deter R&D efforts of foreign-owned firms abroad. Keywords: internationalisation of research and development, multinational firms, gravity model JEL-codes: F23, O32, O33
    Date: 2012–10
  14. By: Andrew B. Bernard; Stephen J. Redding; Peter K. Schott
    Abstract: We develop a method for identifying departures from relative factor price equality that is robust to unobserved variation in factor productivity. We implement this method using data on the relative wage bills of non-production and production workers across 170 local labor markets comprising the continental United States for 1972, 1992 and 2007. We find evidence of statistically significant differences in relative wages in all three years. These differences increase in magnitude over time and are related to industry structure in a manner that is consistent with neoclassical models of production.
    Keywords: Factor Price Equality, Regional Wages, Neoclassical Trade, Labor Market Areas
    JEL: F16 J30 R23 C14
    Date: 2012–09
  15. By: Steinbach, Sandro; Rybak, Mariusz
    Keywords: Agricultural and Food Policy, International Relations/Trade,
    Date: 2012
  16. By: Johannes Stephan; Olivier Zieschank
    Abstract: With systemic change in Central East European countries (CEECs), foreign direct investment (FDI) became an important factor for the transition economies. FDI not only played a leading role in privatisation in most transition countries. FDI is also widely assumed to spur restructuring in terms of capital and technology transfer, spillovers, breaking up of national monopolies, and alignment of sectoral specialisation to comparative advantages. This way, FDI is often entrusted with a leading role in the growth and development processes in CEECs. Alas, empirical proof of FDI’s positive contributions to macroeconomic growth remains not robust in an already large body of literature: significant positive growth effects are typically only found by use of very complex methods based on neoclassical growth theory and often only in very specific model specifications. For CEECs, the literature is generally overly optimistic, which is not least used by policy makers (and lobbyists) to argue for active FDI-attracting policies. This contribution revisits the FDI-growth-contribution hypothesis for the case of CEECs during the last 15 years with a particular focus on the individual roles of financial sector FDI and manufacturing industry FDI. The analysis uses the clearest and simplest econometric set-up in the form of a Cobb-Douglas production function that distinguishes between FDI flows and stocks and controls for policy-interventions, human capital endowments, technological activity of firms, and for heterogeneity between countries, sectors, and years. Applying a very large number of alternative models and specifications and post-estimation tests, the analysis concludes for CEECs (i) that there is no robust and convincing independent and effect of neither financial nor manufacturing nor total inward FDI on economic growth if assumed to work via accelerating technical advance (the A in AK-models) in a neoclassical world; and (ii) that robust positive growth contributions become much more convincing as soon as neoclassical assumptions are relaxed, and FDI can affect growth via capital, human capital, and capital formation. For future empirical analysis, this suggests that the search for growth effects by inward FDI in CEECs as economies in transition has to consider indirect effects beyond the strict conceptualisation of neoclassical or new growth theory. For economic policy, the results suggest that FDI may have positive growth effects, but only indirect ones, necessitating a policy-mix beyond the pure attracting of more inward FDI.
    Date: 2012–10
  17. By: Kerr, William A.
    Abstract: In October 2008 French President Nicholas Sarkozy and Canadian Prime Minister Stephen Harper announced that the EU and Canada would seek a free trade agreement and in May 2009 negotiations on a Comprehensive Economic and Trade Agreement (CETA) commenced. There have been a number of negotiating sessions since then and good progress has been reported. One of the more difficult sectors was expected to be agriculture. This paper outlines the major opportunities for expanded agricultural trade between the EU and Canada as well as those areas where the negotiations are expected to be particularly difficult. Topics include, subsidies, sanitary and phytosanitary barriers to trade, tariffs, tariff line adjustments, regulatory harmonization, protection for geographical indications, barriers to trade in genetically modified products and TRQs in the Canadian dairy sector. A section on opportunities and concerns of particular interest to the agri-food sector of the UK is included. The paper concludes with a discussion of the expected outcome and degree of trade expansion that will follow a successful conclusion to the negotiations.
    Keywords: agriculture, Canada, international trade, negotiations, European Union, Agricultural and Food Policy, Q17,
    Date: 2012

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