nep-int New Economics Papers
on International Trade
Issue of 2012‒11‒24
twelve papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. Learning, incomplete contracts and export dynamics: theory and evidence from French firms By Romain Aeberhardt; Ines Buono; Harald Fadinger
  2. Monitoring export vulnerability to changes in growth rates of major global markets By Hollweg, Claire H.; Lederman, Daniel; Reyes, Jose-Daniel
  3. Employment Protection and Multinational Enterprises: Theory and Evidence from Micro Data By Norbäck, Pehr-Johan; Duanmu , Jing-Lin; Skedinger, Per
  4. Is bioenergy trade good for the environment? By Jean-Marc Bourgeon; Helene Ollivier
  5. Producers' Service Improvements and Manufacturing Agglomeration When Taking Trade Costs as a Mediator Variable: Mechanism and evidence from China By ZHAO Wei; ZHENG Wenwen
  6. Price, Quality, and International Agricultural Trade By Woods, Darian
  7. Buyer-Supplier Relationships, Internationalization and Product Innovation By Massimiliano Bratti; Giulia Felice
  8. Financial intermediaries and emissions trading market development and pricing strategies By Heindl, Peter
  9. Agricultural trade : what matters in the Doha round ? By Laborde, David; Martin, Will
  11. Terms-of-trade and the funding of adaptation to climate change and variability: An empirical analysis By Schenker, Oliver; Stephan, Gunter
  12. Foreign firm characteristics, absorptive capacity and the institutional framework : the role of mediating factors for FDI spillovers in low- and middle-income countries By Farole, Thomas; Winkler, Deborah

  1. By: Romain Aeberhardt (CREST); Ines Buono (Bank of Italy); Harald Fadinger (University of Vienna)
    Abstract: Using French firm-level trade data, we provide empirical support for a heterogeneous firm model in which exporting requires finding a local partner in each market: contracts are incomplete, exporters must learn the reliability of their partners through experience, and export behaviour is state-dependent due to matching frictions. As predicted by our theoretical model, we find that better legal institutions ease contracting frictions especially in sectors with serious contracting problems. This increases state dependence by more in those sectors. Finally, hazard rates depend on the quality of local legal institutions and decline with the age of the relationship, as unreliable partners are weeded out.
    Keywords: trade dynamics, learning, institutions, state dependence, firm-level trade data.
    JEL: F12 F14 L14
    Date: 2012–10
  2. By: Hollweg, Claire H.; Lederman, Daniel; Reyes, Jose-Daniel
    Abstract: Interest in assessing the impacts on developing countries of changes in major markets'economic performance has risen in tandem with global economic uncertainty over short- and medium-term growth prospects. This paper proposes a methodology to measure the vulnerability of a country's exports to fluctuations in the economic activity of foreign markets. Export vulnerability depends first on the overall level of export exposure, measured as the share of exports in gross domestic product, and second on the sensitivity of exports to fluctuations in foreign gross domestic product. The authors capture this sensitivity by estimating origin-destination specific elasticities of exports with respect to changes in foreign gross domestic product using a gravity model of trade. Furthermore, export vulnerability is computed separately for commodities and differentiated products. This methodology is applied to six developing countries, one from each World Bank region, selected to be otherwise similar yet differ in terms of the level of exposure to major global markets as well as the product composition of their export basket. Although the results suggest differences in elasticity estimates across regions as well as product categories, the principal source of international heterogeneity in export vulnerability results from differences in export exposure to global markets. This result calls for developing countries to diversify their export markets rather than shielding themselves from international markets, which would actually raise economic risk and vulnerability.
    Keywords: Economic Theory&Research,Emerging Markets,Free Trade,Trade Policy,Markets and Market Access
    Date: 2012–11–01
  3. By: Norbäck, Pehr-Johan (Research Institute of Industrial Economics (IFN)); Duanmu , Jing-Lin (School of Management); Skedinger, Per (Research Institute of Industrial Economics (IFN))
    Abstract: In this paper we show, theoretically and empirically, that stronger employment protection legislation (EPL) in a host country has important and differing effects on the various activities of multinational enterprises (MNEs). Using micro data on affiliates to Swedish multinational firms in 20 countries for the period of 1965–1998, we find that increased stringency in EPL is associated with fewer investments in new affiliates and lower employment in existing affiliates. We also find that it is mainly affiliate exports that are affected negatively by stronger EPL, while the impact on local sales is small. This is in accordance with our theoretical model, which predicts that the impact of EPL on the costs of competing firms is likely to put affiliates at a smaller disadvantage when selling for the local market than in the production for exports.
    Keywords: Labor market institutions; Firm heterogeneity; Oligopoly; Platform-FDI; Horizontal-FDI; Micro data
    JEL: C20 F23 J80
    Date: 2012–10–25
  4. By: Jean-Marc Bourgeon (Institut National de la Recherche Agronomique - INRA, Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X); Helene Ollivier (ARE - Department of Agricultural and Resource Economics - University of California, Berkeley)
    Abstract: We analyze the impacts of bioenergy trade on greenhouse gas emissions using a two-good, three-factor model. Bioenergy is an agricultural good used as a substitute for fossil fuels in industry. Governments tax domestic pollution without international coordination. We assume that northern countries have higher labor productivity than southern ones and that agriculture is less pollution intensive than industry (after taxation). We show that whereas southern countries impose a lower tax rate than northern ones, they do not necessary have a competitive advantage in industry, and that compared to autarky, trade liberalization either increases or decreases worldwide emissions depending on regional comparative advantages.
    Keywords: Bioenergy; Intermediate product; North-South trade; Global pollution
    Date: 2012–04
  5. By: ZHAO Wei; ZHENG Wenwen
    Abstract: Most studies about the effects of producers' services on manufacturing agglomeration focus on the effects themselves while neglecting the mechanism that such effects spread. By stressing the key role of trade costs in the process of manufacturing agglomeration, this paper identifies a chain of effects from producers' service improvements to manufacturing agglomeration via changing trade costs and builds a simple model to enable empirical analysis. Both in the mechanism used to assess this chain of effects and in the empirical model, trade costs are dealt with as a mediator variable. Empirical tests using firm-level data from China support the hypothesis that producers' services affect manufacturing agglomeration via changing trade costs. Further tests at the two-digit sector level show that these types of mediator effects vary in accordance with differences in sector factor intensiveness. Specifically, the mediator effects are more significant in the technology-intensive manufacturing industries than they are in the labor- or capital-intensive manufacturing industries. The policy implication of this finding is that encouraging the development and regional concentration of producers' services would not only promote manufacturing agglomeration but also stimulate technology progress in related sectors.
    Date: 2012–11
  6. By: Woods, Darian
    Abstract: The average value of a particular class of agricultural exports varies widely across different destinations. In the event of a supply shock, such as the implementation of the Emissions Trading Scheme, can farmers offset higher costs by raising their average prices by contracting exports to lower value destinations? If the difference in value reflects different prices because producers have market power, the answer will be ―yes‖. If the difference in value reflects differences in the quality of goods exported to different destinations, the answer is ―no.‖ While not definitive, there is little support for the hypothesis that exports are curtailed.
    Keywords: agriculture, trade, prices, quality, market power, Agribusiness, Demand and Price Analysis, International Relations/Trade, Production Economics,
    Date: 2012–08
  7. By: Massimiliano Bratti (University of Milan); Giulia Felice (Centro Studi Luca d\'Agliano)
    Abstract: Recent empirical studies have reported strong firm-level evidence of `learning by exporting\' in product innovation. In this paper we consider a specific channel which might contribute to explain the innovation premium of exporters, by focussing on the information exchange between firms establishing buyer-supplier relationships related to production to order (PTO). Using new European firm-level data, we first provide some descriptive evidence that suppliers doing PTO for foreign firms are more innovative than suppliers producing only for domestic rms. We rationalize this evidence in a theoretical framework where firms are heterogeneous in the characteristics of their products and where buyers, searching for a specialized input, have to match either with a domestic or with a foreign supplier in order to produce a final good. A successful match requires the intermediate good\'s adaptation/modification (`innovation\') which can be carried out either by the buyer or by the supplier. In a framework where information is imperfect and contracts are incomplete, we single out the conditions for which different internationalization and innovation strategies are implemented, and in particular suppliers are likely to adapt their products for foreign buyers (i.e., `learning by exporting\'). Our results are driven by the interplay between the innovation costs\' structure, the internationalization costs and the density of suppliers in the different countries.
    Keywords: Exporting, firm behavior, product innovation, production to order
    JEL: D21 D22 F10 L23 L25 O31
    Date: 2012–11–13
  8. By: Heindl, Peter
    Abstract: This paper examines the role of intermediaries in quantity regulation theoretically and presents a data application to the EU Emissions Trading Scheme (EU ETS). The choice of regulated firms to trade permits through intermediaries or directly at the exchange is discussed. Permit pricing strategies of intermediaries and possible issues of market power of intermediaries are modeled. Based on empirical data, the model application aims to assess the actual costs (fees, fixed costs) from permit trading, which represent costs of transacting. In a competitive setup, costs are relatively modest with about 1% to 2% of the permit price. In the EU ETS, firms that trade more than 283,000t CO2/year are likely to directly access the exchange while others trade with intermediaries. In the unlikely event of an intermediary having market power, overall costs would be six times higher in the model application. Options for regulated firms to access a permit exchange directly at low costs decrease the costs of transacting considerably in a competitive and non-competitive intermediary market. --
    Keywords: permit trading,financial intermediaries,market power
    JEL: Q52 D42 D21
    Date: 2012
  9. By: Laborde, David; Martin, Will
    Abstract: This survey concludes that including agriculture in the Doha Agenda negotiations was important both economically and politically, although the political resistance to reform is particularly strong in this sector. While agriculture accounts for less than 10 percent of merchandise trade, high and variable agricultural distortions appear to cause the majority of the cost of distortions to global merchandise trade. Within agriculture, most of the costs appear to arise from trade barriers levied on imports since these barriers tend to be high, variable across time and over products, and are levied by a wide range of countries. The negotiations faced a need for balance between discipline in reducing tariffs and hence creating the market access gains that are central to the negotiations, and flexibility in managing political pressures. While the approach of providing flexibility on a certain percentage of tariff lines is seriously flawed, the proposed Modalities still appear to provide worthwhile market access. Better ways appear to be needed to deal with developing countries'concerns about food price volatility while reducing the collective-action problems resulting from price insulation.
    Keywords: Agribusiness,Free Trade,Emerging Markets,Trade Policy,Economic Theory&Research
    Date: 2012–11–01
  10. By: Siddig, Khalid H.A.; Grethe, Harald
    Abstract: The field of price transmission is dominated by econometric time-series analysis (PTA) and rather disconnected from analyses based on CGE models. This paper addresses how a certain degree of empirically determined price transmission can be met in a single country CGE model. We examine and validate seven determinants including structural characteristics of the model, the parameterization of behavioral functions and properties of the sectors concerned.
    Keywords: price transmission, CGE models, international trade, Preistransmission, internationaler Handel, International Relations/Trade, Research Methods/ Statistical Methods,
    Date: 2012
  11. By: Schenker, Oliver; Stephan, Gunter
    Abstract: This paper analyses the interplay between international trade, regional adaptation and North-to-South transfers for funding adaptation within the framework of a dynamic computable gen-eral equilibrium model, where impacts of climate change depend on changes in precipitation and temperature. If all regions, even the least developed ones, own the necessary resources for adapting optimally to climate change and variability, by mid-century less than 10% of the regions' GDP would be invested for avoiding almost 40% of climate change damages. This has measurable effects on the regions' competitiveness as well as on the terms-of-trade. If, however, the developing world does not own sufficient resources for adapting optimally to climate change, as is to expected, funding of adaptation can make sense from an economic perspective. In particular the Hicks-Kaldor criterion is fulfilled as aggregated welfare gains at least compensate the costs of providing financial assistance for adaptation. --
    Keywords: funding of adaptation,climate change,international trade,multi-regional dynamic CGE model
    JEL: C68 D58 F18 Q56 Q54
    Date: 2012
  12. By: Farole, Thomas; Winkler, Deborah
    Abstract: Using a cross-section of more than 25,000 domestic manufacturing firms in 78 low and middle-income countries from the World Bank's Enterprise Surveys, this paper assesses how mediating factors influence intra-industry productivity spillovers to domestic firms from foreign direct investment. It identifies three types of mediating factors: (i) foreign direct investment spillover potential, (ii) domestic firm absorptive capacity, and (iii) the host country's institutional framework. It finds that all three affect the extent and direction of foreign direct investment spillovers on domestic firm productivity. However, the impact of mediating factors depends significantly on the level of domestic firms'productivity and the structure of foreign ownership.
    Keywords: Foreign Direct Investment,Microfinance,Emerging Markets,Economic Theory&Research,E-Business
    Date: 2012–11–01

This nep-int issue is ©2012 by Alessia A. Amighini. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.