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on International Trade |
| By: | Shuhei Nishitateno |
| Abstract: | The growing importance of global production sharing makes the analysis of the nexus between outward foreign direct investment (FDI) and trade in intermediate goods ever more important. This study examines the substitution hypothesis that FDI by upstream firms replaces intermediate exports from home, using the case of the Japanese automobile industry. In analysing newly-constructed product-level data covering 37 products and 49 host countries over the period 1999 to 2008, this study finds a complementary relationship between these two variables. The findings cast doubt on the popular view that the growing overseas activity of multinational enterprises could replace intermediate exports from a home country thereby depriving the locals of job opportunities and deindustrialising the domestic economy under ongoing global production sharing. |
| JEL: | F14 F23 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:csg:ajrcau:397&r=int |
| By: | Khandelwal, Amit; Schott, Peter K.; Wei, Shang-Jin |
| Abstract: | If trade barriers are managed by inefficient institutions, trade liberalization can lead to greater-than-expected gains. We examine Chinese textile and clothing exports before and after the removal of externally imposed quotas. Both the surge in export volumes and the decline in prices after the quota removal are driven by net entry, implying that the pre-liberalization quota allocation is not based on firm productivity. Removing this misallocation accounts for a substantial share of the overall productivity gains associated with the quota removal. |
| Keywords: | China; misallocation; Multifibre Agreement; productivity |
| JEL: | F1 O1 |
| Date: | 2012–12 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9246&r=int |
| By: | Andrea Ariu (FNRS; IRES, Universite catholique de Louvain, Belgium) |
| Abstract: | In this paper, we present for the first time a qualitative and quantitative comparison between trade in services and trade in goods at firm level for the same country. We focus first on static features of trade such as participation rates, firms’ characteristics, heterogeneity, concentration and trade variation. Secondly, we explore dynamic aspects focusing on entry, exit, firm survival and growth strategy. On the one hand, our results reveal qualitative similarities between services and goods trade at firm level, suggesting that heterogeneous models of trade can be a good starting point for the analysis of trade in services. On the other hand, we highlight dramatic differences in quantitative terms and in some key characteristics that pose new challenges to current trade models. |
| Keywords: | Trade in Services; Trade in Goods, Trade Dynamics |
| JEL: | F10 F14 L80 |
| Date: | 2012–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbb:reswpp:201212-237&r=int |
| By: | Krautheim, Sebastian; Verdier, Thierry |
| Abstract: | The process of globalization is characterized by an impressive growth in global value chains, as well as the proliferation of non-governmental organizations (NGOs) interacting with production and sourcing decisions of multinational firms. In this paper, we present a simple North-South model of international trade allowing for the joint emergence of firm offshoring to South and NGO activism financed by donations from the civil society. In our model northern consumers care about unobservable “credence” characteristics of goods such as the environmental and social impact of production. The analysis highlights a complementarity between the growth of global value chains and the emergence of NGOs: for a range of trade costs potential NGO emergence allows firms to capture gains from globalization, which would otherwise be unattainable. We show that, somewhat paradoxically, when offshoring triggers NGO emergence, this can be at the expense of the consumers, who for a range of trade costs, would be better-off in a world without NGOs. In an extension we show that NGOs may also crowd out investment in regulatory capacities in low cost countries, as consumers in North have a willingness to fund NGOs providing a substitute for regulation in South. |
| Keywords: | Globalization; Multinationals; NGOs; Regulation |
| JEL: | F23 L31 |
| Date: | 2012–11 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9232&r=int |
| By: | Koopman, Robert; Wang, Zhi; Wei, Shang-Jin |
| Abstract: | This paper proposes a framework for gross exports accounting that breaks up a country’s gross exports into various value-added components by source and additional double counted terms. By identifying which parts of the official trade data are double counted and the sources of the double counting, it bridges official trade (in gross value terms) and national accounts statistics (in value added terms). Our parsimonious framework integrates all previous measures of vertical specialization and value-added trade in the literature into a unified framework. To illustrate the potential of such a method, we present a number of applications including re-computing revealed comparative advantages and the magnifying impact of multi-stage production on trade costs. |
| Keywords: | global production chains; value added exports; vertical specialization |
| JEL: | F10 |
| Date: | 2012–12 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9245&r=int |
| By: | Biewen, Elena; Harsch, Daniela; Spies, Julia |
| Abstract: | This study provides evidence on how German multinational firms have restructured their service activities around the recent crisis. Making use of new micro-level data on service imports of German multinationals from 2002-2008, we assess the determinants of service offshoring along the extensive and intensive margins. In particular, we evaluate how internal frictions in terms of a sharp drop in the sales level (per employee) and external frictions in terms of a reduced availability of credit co-determine the likelihood and the extent of sourcing services from abroad. First, we find that firms are less likely to start to import services from abroad if they are under cost pressure. By contrast, firms intensify existing service imports linkages in times of a sales drop. Second, financial constraints, which played a major role for the goods trade during the crisis, did not have any significant effect on service imports. These results are in line with the argument that the generally observed crisis-resilience of service trade stems from increased pressures to save on variable costs through offshoring and from its lower dependence on external finance. Furthermore, and in line with our argument, we find that a decline in sales and labor productivity induces firms to sort into intra-firm rather than arm's-length trading. -- |
| Keywords: | Service Imports,Intra-Firm Trade,Arm's-Length Trade |
| JEL: | F12 F15 L13 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bubdps:312012&r=int |
| By: | Eleonora Cavallaro; Piero Esposito; Alessia Matano; Marcella Mulino |
| Abstract: | In the paper we focus on emerging market economies’ pattern of trade, with a view to explaining the different features of competitiveness for high skill- and low skill-intensive firms. We consider a theoretical dynamical setup where high-skill firms engage in innovation activity and gain market shares in high-income â€quality dominated†markets thanks to technological catching up, whereas low-skill firms face price competition for their exports. On the basis of the theoretical model, we run econometric estimations for trade between CEECs and EU economies over the period 2000-2007. In the econometric analysis we first test the assumption that UVR is an adequate indicator of quality in trade, showing that in high skill-intensive firms it is systematically correlated to domestic and foreign technological variables; we then use the fitted UVR in the estimation of the role of preference for quality in the evolution of CEECs’ market shares. The estimations support the results of the theoretical model as to the role of non-price competitiveness stemming from quality-supply as well as quality-demand factors. |
| Keywords: | Vertical innovation, Knowledge spillovers, Product quality, International competitiveness. |
| JEL: | F12 F14 F15 O32 |
| Date: | 2012–11 |
| URL: | http://d.repec.org/n?u=RePEc:sap:wpaper:wp158&r=int |
| By: | Andreas Kropf; Philip Ulrich Sauré |
| Abstract: | Exporting firms do not only decide how much of their products they ship abroad but also at which frequency. Doing so, they face a trade-off between saving on fixed costs per shipments (by shipping large amounts infrequently) and saving on storage costs (by delivering just in time with small and frequent shipments). The firm's optimal choice defines a mapping from size and frequency of shipments to fixed costs per shipment. We use a unique dataset of Swiss cross-border trade on the transaction level to analyze the size and shape of the underlying fixed costs. The data suggest that for the average Swiss exporter the fixed costs per shipment are economically important: about one percent of the value of export or at a net present value of 7790 CHF. We document that the imputed fixed costs per shipment correlate negatively with language commonalities, trade agreements and geographic proximity. |
| Keywords: | Trade costs, shipment, firm trade |
| JEL: | F10 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:snb:snbwpa:2012-13&r=int |
| By: | Bernard, Andrew B.; van Beveren, Ilke; Vandenbussche, Hylke |
| Abstract: | This paper provides concordance procedures for product-level trade and production data in the EU and examines the implications of changing product classifications on measured product adding and dropping at Belgian firms. Using the algorithms developed by Pierce and Schott (2012a,b), the paper develops concordance procedures that allow researchers to trace changes in coding systems over time and to translate product-level production and trade data into a common classification that is consistent both within a single year and over time. Separate procedures are created for the eight-digit Combined Nomenclature system used to classify international trade activities at the product level within the European Union as well as for the eight-digit Prodcom categories used to classify products in European domestic production data. The paper further highlights important differences in coverage between the Prodcom and Combined Nomenclature classifications which need to be taken into account when generating combined domestic production and international trade data at the product level. The use of consistent product codes over time results in less product adding and dropping at continuing firms in the Belgian export and production data. |
| Keywords: | Combined Nomenclature; concordance; exports; Harmonized System; imports; Prodcom |
| JEL: | C81 F1 |
| Date: | 2012–12 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9254&r=int |
| By: | James Fenske |
| Abstract: | State capacity matters for growth. I test Bates’ explanation of pre-colonial African states. He argues that trade across ecological boundaries promoted states. I find that African societies in ecologically diverse environments had more centralized states. This is robust to reverse causation, omitted heterogeneity, and alternative interpretations of the link between diversity and states. Ecological diversity also predicts states outside of Africa. I test mechanisms connecting trade to states, and find that trade supported class stratification between rulers and ruled. I underscore the importance of ethnic institutions and inform our knowledge of the effects of geography and trade on institutions. |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:csa:wpaper:2012-18&r=int |
| By: | Mary Amiti; Oleg Itskhoki; Jozef Konings |
| Abstract: | Large exporters are simultaneously large importers. In this paper, we show that this pattern is key to understanding low aggregate exchange rate pass-through as well as the variation in pass-through across exporters. First, we develop a theoretical framework that combines variable markups due to strategic complementarities and endogenous choice to import intermediate inputs. The model predicts that firms with high import shares and high market shares have low exchange rate pass-through. Second, we test and quantify the theoretical mechanisms using Belgian firm-product-level data with information on exports by destination and imports by source country. We confirm that import intensity and market share are the prime determinants of pass-through in the cross-section of firms. A small exporter with no imported inputs has a nearly complete pass-through of over 90%, while a firm at the 95th percentile of both import intensity and market share distributions has a pass-through of 56%, with the marginal cost and markup channels playing roughly equal roles. The largest exporters are simultaneously high-market-share and high-import-intensity firms, which helps explain the low aggregate pass-through and exchange rate disconnect observed in the data. |
| JEL: | F14 F31 F41 |
| Date: | 2012–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:18615&r=int |
| By: | OECD |
| Abstract: | Export restrictions can be problematic if trading partners question either their conformity with international obligations or their possibly unintended negative impacts on others. Regulatory transparency can help. This paper examines how three multilateral environmental agreements (MEAs) incorporate transparency into their regulatory regimes: CITES (endangered species, especially tropical timber), the Basel Convention (hazardous e-waste), and the Kimberley Process (conflict diamonds). All three require producing countries to control exports of sensitive commodities, while allowing (Basel) or requiring consuming countries to control imports. Export and import restrictions are usually intended to affect relative prices, but in these three MEAs the ultimate objective is to limit the negative consequences, whether economic, environmental or societal, associated with improper exploitation of the covered commodities. In each case all trade in the target commodities ought to be covered, no export permits should be issued that do not meet the standards established by the MEA, and no imports should take place without the appropriate documentation. In order to have a consistent comparative basis for assessing the contribution of regulatory transparency to the success of these regimes, we use an analytic framework based on three major transparency principles: publication of the rules (the “right to know”); peer review by governments (monitoring and surveillance); and public engagement (reporting on results, and a role for non-governmental organisations, NGOs). The paper concludes with some observations about characteristics that appear to make transparency more or less effective. |
| JEL: | D7 F1 F5 L6 L7 Q2 Q3 Q5 Q53 |
| Date: | 2012–12–10 |
| URL: | http://d.repec.org/n?u=RePEc:oec:traaab:141-en&r=int |
| By: | Luisa Alamá-Sabater (Economics Department, Universitat Jaume I, Castellón, Spain); Laura Márquez-Ramos (Economics Department, Universitat Jaume I, Castellón, Spain); Celestino Suárez-Burguet (Economics Department, Universitat Jaume I, Castellón, Spain); J. Miguel Navarro-Azorín (Economics Department, Universidad de Cartagena, Spain) |
| Abstract: | This paper aims to analyze whether transport connectivity affects interregional trade flows from a spatial dependence approach. In order to do so, we consider two neighboring criteria into a spatial autoregressive model. First, we use the geographical criteria of first-order contiguity and, second, we incorporate transport connectivity. The results provide evidence about the role of the location of logistics platforms for satisfying existing demand for transport structure in Spain. Disaggregated interregional trade data and measures of regional logistics performance are not frequently available and then, this paper justifies the need to advance in these two aspects also in other countries. |
| Keywords: | Interregional trade, transport connectivity, spatial dependence, Spanish regions |
| JEL: | R12 R23 R48 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:jau:wpaper:2012/20&r=int |
| By: | Martin Borowiecki; Bernhard Dachs; Doris Hanzl-Weiss (The Vienna Institute for International Economic Studies, wiiw); Steffen Kinkel; Johannes Pöschl (The Vienna Institute for International Economic Studies, wiiw); Magdolna Sass; Thomas Christian Schmall; Robert Stehrer (The Vienna Institute for International Economic Studies, wiiw); Andrea Szalavetz |
| Abstract: | (Report based on Background Study for European Competitiveness Report 2012, see http //ec.europa.eu/enterprise/policies/industrial-competitiveness/competitiveness-analysis/european-competitiveness-report/index_en.htm)SummaryThe ongoing internationalization of production has altered the economic landscape. Many products used to be produced locally using inputs drawn largely from the domestic economy, which implied that most of the value chains or production processes used to be located in the country where a firm had its headquarters. Technological development has facilitated the geographical fragmentation of production processes, resulting in the emergence of global value chains. Different parts of a firm’s production processes can now be located in different parts of the world, according to the comparative advantages of the locations. This ‘slicing up of the value chains’, and the dispersal of the various elements to different parts of the world has given rise to increased trade with the use of imported intermediate goods in manufacturing industries having been increased globally, thereby involving more industries and countries in the value chains. Focusing on four important manufacturing industries (chemicals, chemical products and man-made fibres; machinery and equipment; electrical and optical equipment; and transport equipment) the ongoing trends of the internationalization of production is studied. To account for the multi-faceted phenomenon of the internationalization of production processes and its consequences, a comprehensive review of the literature is provided first. This is followed by an overview of the patterns and trends in vertical specialization across countries for the four selected industries. This section is based on the World Input-Output Database (WIOD), which allows the integration of production patterns and processes to be studied at a global level. As this is accompanied by similar trends in trade before and over the crisis the next section focuses on the changes in trade patterns of these industries which is based on detailed Harmonized System (HS) 6-digit trade data allowing for a differentiation between use categories of products trade in parts and components is important for the machinery and equipment, electrical and optical equipment and transport equipment industries, while trade in semi-finished products is important for the chemicals industry. As the offshoring decisions are made at company level it is important to understand the motives leading firms to offshore, the drivers of the decisions with respect to characteristics of the host and the destination country and the characteristics of the offshoring firms. Section 5 therefore focuses on the offshoring decisions at the company level it analyses the motives and determinants of company strategies with respect to the relocation of production. Section 6 provides a summary. |
| Keywords: | vertical integration, trade in intermediates, offshoring |
| JEL: | F1 F15 F19 |
| Date: | 2012–10 |
| URL: | http://d.repec.org/n?u=RePEc:wii:rpaper:rr:383&r=int |
| By: | Rafael Domenech; Monica Correa-Lopez |
| Abstract: | This paper shows that the variation in the world export share and the internationalisation process that the Spanish economy has experienced since the establishment of EMU have been determined by a broad set of factors that go beyond the evolution of international relative prices. Firms’ decisions on factor inputs (company size, investment in physical capital, quality of human capital, or R&D expenditure and technology adoption) and on market and financial strategies (product diversification, reliance on non-banking finance or expansion via outward foreign direct investment) have shaped the internationalisation process. Given the variety of determinants, economic policy must be multidimensional and have a dual objective: to improve the functioning of the markets for factor inputs (capital and labour markets, access to finance and to new production technologies and innovations) and to foster competition in the markets for goods and services. |
| Keywords: | price competitiveness, export quotas, export companies |
| JEL: | D22 F14 |
| Date: | 2012–12 |
| URL: | http://d.repec.org/n?u=RePEc:bbv:wpaper:1230&r=int |
| By: | Davide CASTELLANI; Valentina MELICIANI; Loredana Mirra |
| Abstract: | The paper accounts for the determinants of inward foreign direct investment in business services across the EU-27 regions. Together with the traditional variables considered in the literature (market size, market quality, agglomeration economies, labour cost, technology, human capital), we focus on the role of forward linkages with manufacturing sectors and other service sectors as attractors of business services FDI at the regional level. This hypothesis is based on the evidence that the growth of business services is mostly due to increasing intermediate demand by other services industries and by manufacturing industries and on the importance of geographical proximity for forward linkages in services. To our knowledge, there are no studies investigating the role of forward linkages for the location of FDI. This paper aims therefore to fill this gap and add to the FDI literature by providing a picture of the specificities of the determinants of FDI in business services at the regional level. The empirical analysis draws upon the database fDi Markets, from which we selected projects having as a destination NUTS 2 European regions in the sectors of Business services over the period 2003-2008. Data on FDI have been matched with data drawn from the Eurostat Regio database. Forward linkages have been constructed using the OECD Input/Output database. By estimating a negative binomial model, we find that regions specialised in those (manufacturing) sectors that are high potential users of business services attract more FDI than other regions. This confirms the role of forward linkages for the localisation of business service FDI, particularly in the case of manufacturing. |
| Keywords: | FDI, Business Services, Regional Specialisation, Forward linkages |
| JEL: | R12 L80 F23 |
| Date: | 2012–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:pia:wpaper:104/2012&r=int |
| By: | Horst Raff (University of Kiel, Germany); Joachim Wagner (Leuphana University Lueneburg, Germany) |
| Abstract: | Feenstra and Ma (2008) develop a monopolistic competition model where firms choose their optimal product scope by balancing the profits from a new variety against the costs of “cannibalizing” sales of existing varieties. While more productive firms always have a higher market share, there is no monotonic relationship between firms’ productivity level and their choices of product scope. In the model having a higher market share means that firms are hurt more by the “cannibalization effect”. Therefore, the incentive to add more products weakens as productivity rises. This leads to Lemma 3 in Feenstra and Ma (2008): There is an inverted U-shaped relationship between firms’ productivities and the range of varieties they choose to produce. This empirical note takes this Lemma to the data for firms from German manufacturing industries. Empirical evidence is in line with the results from the theoretical model. |
| Keywords: | Multi-product firms, productivity, optimal product scope, Germany |
| JEL: | L1 L6 |
| Date: | 2012–12 |
| URL: | http://d.repec.org/n?u=RePEc:lue:wpaper:257&r=int |
| By: | Godart, Olivier (Kiel Institute for the World Economy); Görg, Holger (Kiel Institute for the World Economy); Greenaway, David (University of Nottingham) |
| Abstract: | Using information on a panel of multinational firms operating in the United Kingdom from 1996 to 2005, we find that labour demand in domestic multinationals is less sensitive to labour cost changes than in foreign multinationals. This difference in the wage elasticity of labour demand persists even when we control for the skill intensity of firms or their level of intangible assets. This is in line with an interpretation that the provision of headquarter services in domestic multinational firms protects against strong fluctuations in labour demand. Overall, our results suggest that the wage elasticity of labour demand is about 40 percent lower in domestic than in foreign multinationals. |
| Keywords: | labour demand elasticity, multinational firms, headquarter services, skill intensity |
| JEL: | F23 J23 J24 |
| Date: | 2012–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp7061&r=int |
| By: | Elise S. Brezis (Bar-Ilan University); Ariel Soueri |
| Abstract: | Globalization has led to a vast flow of migration of workers but also of students. The purpose of this paper is to analyze the migration of individuals encompassing decisions already at the level of education. We develop a “unified brain drain” model that incorporates the decisions of an individual vis‐à‐vis both education and migration. In the empirical part, this paper addresses international flows of migration within the EU and presents strong evidence of concentration of students in countries with high-quality education. This phenomenon, as the usual brain drain, has two opposite effects on social mobility. |
| Keywords: | Brain drain; Globalization, Higher education; Human capital; Migration, Mobility, Bologna process. |
| JEL: | F22 I23 J24 |
| Date: | 2012–11 |
| URL: | http://d.repec.org/n?u=RePEc:biu:wpaper:2012-15&r=int |
| By: | Raphael Anton Auer; Raphael S. Schoenle |
| Abstract: | In this paper, we examine the extent to which market structure and the way in which it affects pricing decisions of profit-maximizing firms can explain incomplete exchange rate passthrough. To this purpose, we evaluate how pass-through rates vary across trade partners and sectors depending on the mass and size distribution of firms affected by a particular exchange rate shock. In the first step of our analysis, we decompose bilateral exchange rate movements into broad US Dollar (USD) movements and trade-partner currency (TPC) movements. Using micro data on US import prices, we show that the pass-through rate following USD movements is up to four times as large as the pass-through rate following TPC movements and that the rate of pass-through following TPC movements is increasing in the trade partner's sector-specific market share. In the second step, we draw on the parsimonious model of oligopoly pricing featuring variable markups of Dornbusch (1987) and Atkeson and Burstein (2008) to show how the distribution of firms' market shares and origins within a sector affects the trade-partner specific pass-through rate. Third, we calibrate this model using our exchange rate decomposition and information on the origin of firms and their market shares. We find that the calibrated model can explain a substantial part of the variation in import price changes and pass-through rates across sectors, trade partners, and sector-trade partner pairs. |
| Keywords: | Exchange Rate Pass-Through, U.S. Import Prices, Market Structure, Price Complementarities |
| JEL: | E3 E31 F41 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:snb:snbwpa:2012-14&r=int |