nep-int New Economics Papers
on International Trade
Issue of 2013‒01‒07
29 papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. What Drives Africa`s Export Diversification? By Dick Nuwamanya Kamuganga
  2. Distance Sensitivity of Export: A Firm-Product Level Approach By Jienwatcharamongkhol, Viroj
  3. Euro introduction and export behaviour of Italian firms By Claudio, Vicarelli; Carmine, Pappalardo
  4. Does Intra-Africa Regional Trade Cooperation Enhance Africa’s Export Survival? By Dick Nuwamanya Kamuganga
  5. Endogenous Market Structures and International Trade. I: Theory By Federico Etro
  6. China's Pure Exporter Subsidies By Fabrice Defever; Alejandro Riaño
  7. Multi-Product Firms and Product Quality By Kalina Manova; Zhiwei Zhang
  8. Trade, Wages, and Profits By Udo Kreickemeier; Peter Egger; Hartmut Egger
  9. How to Combine High Sunk Costs of Exporting and Low Export Survival By Gullstrand, Joakim; Persson, Maria
  10. Trading firms in the Spanish services sector By Minondo, Asier
  11. The Great Trade Collapse By Rudolfs Bems; Robert C. Johnson; Kei-Mu Yi
  12. Variety Gains and the Extensive Margin of Trade By Lukas Mohler
  13. What determines the export performance? A comparative analysis of China and India in the European Union By Ana Luísa Coutinho; Maria Paula Fontoura
  14. Trade openness reduces growth volatility when countries are well diversified By Mona Haddad; Jamus Jerome Lim; Cosimo Pancaro; Christian Saborowski
  15. The Effect of Exchange Rate Changes on Germany's Exports By THORBECKE, Willem; KATO Atsuyuki
  16. The relationship between export status and productivity in services: A firm-level analysis for Spain By Minondo, Asier
  17. Exchange rate pass-through, markups, and inventories By Adam Copeland; James A. Kahn
  18. Gender Wage Discrimination and Trade Openness By Sarra Ben Yahmed
  19. The Real Exchange Rate and Export Growth: Are Services Different? By Eichengreen, Barry; Gupta, Poonam
  20. The political economy of trade and migration: Evidence from the U.S. Congress By Conconi, Paola; Facchini, Giovanni; Steinhardt, Max; Zanardi, Maurizio
  21. The Impact of R&D Activities on Exports of German Business Services Enterprises: First evidence from a continuous treatment approach. By Vogel , Alexander; Wagner, Joachim
  22. Is the impact of AGOA heterogeneous? By Cooke, Edgar F. A.
  23. Gender Wage Gaps across Skills and Trade Openness By Sarra Ben Yahmed
  24. The Redistribution of Trade Gains and the Equity-Efficiency Trade-Off By Marco de Pinto
  25. Importers, Exporters, and Exchange Rate Disconnect By Amiti, Mary; Itskhoki, Oleg; Konings, Jozef
  26. Are the benefits of export support durable ? evidence from Tunisia By Cadot, Olivier; Fernandes, Ana M.; Gourdon, Julien; Mattoo, Aaditya
  27. Immigration and Trade Creation for the U.S.: The Role of Immigrant Occupation By Mundra, Kusum
  28. Endogenous Market Structures and International Trade. II: Optimal Trade Policy By Federico Etro
  29. Emerging economies, trade policy, and macroeconomic shock By Chad Bown; Meredith Crowley

  1. By: Dick Nuwamanya Kamuganga (Graduate Institute of International Studies)
    Abstract: The primary purpose of this paper is to seek empirical answers to the above question. Using a highly disaggregated bilateral trade flows at HS 6 digit level for African countries for a period 1995-2009 and a conditional logit technique, I find 3 main empirical results. First, intra-Africa regional trade cooperation enhances the likelihood of an African nation exporting across the new-product, new-market margin. Second, I also find evidence that both product and market experience help to increase the chances of African exporters exporting on new-product and new market margins thus providing support for the learning effects hypothesis. The third result shows that infrastructure related trade frictions such as export costs; time to export; procedures to export as well as weak export supporting institutions have a negative effect on African export diversification. Similarly macroeconomic developments particularly exchange rate volatility, financial underdevelopments and inappropriate foreign direct investments hurt African nation’s chances to diversify its exports. In policy terms this study suggests that for African exporters learning to export from regional markets before exploring major distant markets, a reduction in intra-African trade barriers, deepening and strengthening regional trade cooperation could be a significant channel for encouraging export diversification in Africa.
    Keywords: Extensive Margin of trade, Firm Heterogeneity, unilateral trade preferences & regional trade agreements
    JEL: F1 F13 F14 F15
    Date: 2012–12–13
  2. By: Jienwatcharamongkhol, Viroj (Department of Economics, Lund University)
    Abstract: Recent literature suggests that product characteristics assert different distance sensitivity on trade flows. But the empirical evidences still find conflicting results. Previous studies have examined the effect of distance on the export decisions across different product groups at the aggregate level. In this paper the analyses are executed at a disaggregated firm-product level to examine the issue based on individual firm's decisions. Empirically, I employ a gravity model on Swedish micro-level export data in the manufacturing sector. The results suggest that homogeneous products are more sensitive to distance than differentiated products for the export selection and are insignificant for the export intensity.
    Keywords: distance sensitivity; export decisions; gravity model; micro-data
    JEL: F12 F14 F41
    Date: 2012–12–06
  3. By: Claudio, Vicarelli; Carmine, Pappalardo
    Abstract: Recent literature has focused on the importance of extensive and intensive margins of trade in the case of the Euro adoption. Using a unique dataset taken from ISTAT firm level data, we study the effects of euro introduction on Italian manufacturing firms. We focus our analysis on the period 1996-2004, covering three years before and six years after the euro introduction. We estimate a gravity equation using difference-in difference estimation techniques. Firm-level evidence shows that the euro had indeed a positive influence on Italian exports, mainly channelled through the intensive margin, whereas the extensive margin was not significantlyimportant. This result suggests that the positive effect of euro introduction on trade flows is essentially owed to a reduction of variable trade costs. The reduction of fixed-entry costs would have a role, allowing the entry of new exporting firms in foreign markets. However, these latter are smaller and less productive and exporting a small number of products; as a result, their contribution to total export value is quite low. This result seems in line with the well known stylised fact on small average size of Italian firms. The lower is the average firm size, the lower is the probability to benefit of a downward shift of fixed entry costs in foreign markets induced by the common currency.
    Keywords: Trade; Euro; Export Margins; Instrumental variables;
    JEL: F15 C23 F14 C21
    Date: 2012–12–23
  4. By: Dick Nuwamanya Kamuganga (Graduate Institute of International Studies)
    Abstract: In this paper, I use a stratified Cox Proportional Hazard Model to econometrically evaluate the effects of intra-Africa regional trade cooperation and other underlying factors on Africa`s export survival. Using a highly disaggregated dataset of bilateral trade flows at HS 6 digit level for 49 African countries for the period 1995 to 2009, I obtain 3 key main empirical results. First, intra-Africa regional trade cooperation do increase the likelihood of Africa`s export survival. The results show that the depth of regional integration matters on lowering Africa`s export hazard rates relative to countries that are not in any regional cooperation. Second, I find evidence that supports the “learning by export hypothesis”. That is export experience within regional as well as rest of the world markets increases the likelihood of Africa`s export survival. Finally, results suggests that infrastructure related trade frictions such as costs to export, time to export, and customs procedures to export as well as weak export supporting institutions have a negative effect on Africa`s export survival. Similarly macroeconomic developments particularly exchange rate volatility, financial underdevelopment, “inappropriate” foreign direct investment hurt chances of an African export survival. The results also show that interaction effects between regional integration initiatives and a variety of these trade frictions namely: costs to export, time to export and customs procedures effects on hazard rates diminish in significance with the depth of regional integration over time.
    Keywords: regional integration, export survival, trade relationships
    JEL: F14 F15 C14 C41
    Date: 2012–12–13
  5. By: Federico Etro (Department of Economics, University Of Venice Cà Foscari)
    Abstract: With strategic interactions and endogenous entry in a market, opening up to trade creates gains under very general conditions. Under Dixit-Stiglitz preferences and Cournot (or Bertrand) competition, an expansion of the market size induces exit of domestic firms, lower prices and larger production of the surviving firms due to competition from more foreign firms, without resorting to selection effects à la Melitz. This holds also in a 2x2x2 Heckscher-Ohlin model with Cournot (or Bertrand) competition in a sector. I study heterogenous preferences between countries as a source of trade: the country with a relative preference for the differentiated goods becomes a net importer of them facing radical business destruction. Finally, I extend the model to cost heterogeneity à la Melitz. In all cases, the elasticity of the number of firms to market size decreases with the substitutability between goods and reaches 1/2 under Cournot competition with homogenous goods.
    Keywords: Gains from trade, Krugman model, Endogenous entry, Comparative advantage, Comparative preference
    JEL: F11 F12
    Date: 2012
  6. By: Fabrice Defever; Alejandro Riaño
    Abstract: One third of Chinese exporters sell more than ninety percent of their production abroad. We argue that this distinctive pattern is attributable to a wide range of subsidies that provide incentives to these "pure exporters". We propose a heterogeneous firm model in which firms exporting all their output receive an ad-valorem sales subsidy. Using microdata on manufacturing firms matched with custom transactions for the years 2000-2006, we measure sizable differences in productivity and paid taxes between pure exporters and domestic firms and between pure and regular exporters, in line with the predictions of our model. Embedding a pure-exporter subsidy in a two-country general equilibrium environment, we show that this instrument is worse from a welfare standpoint than a standard export subsidy, partly because it increases protection of the domestic market. A counterfactual analysis suggests that eliminating these subsidies would result in a welfare gain for China comparable to halving its trade costs.
    Keywords: Trade policy, export subsidies, heterogeneous firms, China
    JEL: F12 F13 O47
    Date: 2012–12
  7. By: Kalina Manova; Zhiwei Zhang
    Abstract: This paper proposes that quality differentiation is an important feature of the operations of multi-product firms. We develop a model in which manufacturers vary product quality across their product range by using inputs of different quality levels. Firms core competency is in varieties of superior quality that bring higher sales despite being more expensive. Using detailed customs data for China, we establish four new stylized facts consistent with this model. First, firms earn more bilateral and global revenues from their more expensive products. Second, exporters focus on their top expensive goods, drop cheaper articles and earn lower revenues in markets where they sell fewer varieties. Third, companies' sales are more skewed towards their core expensive goods in destinations where they offer less items. Finally, export prices are positively correlated with input prices across products within a firm. Our results have important implications for the aggregate and distributional effects of trade reforms and exchange rate movements.
    JEL: D22 F10 F12 F14 L10 L11 L15
    Date: 2012–12
  8. By: Udo Kreickemeier (University of Tuebingen); Peter Egger (ETH Zurich); Hartmut Egger (University of Bayreuth)
    Abstract: This paper formulates a structural empirical model of heterogeneous firms whose workers exhibit fair-wage preferences. In the underlying theoretical framework, such preferences lead to a link between a firmâÂÂs operating profits on the one hand and wages of workers employed by this firm on the other hand. The latter establishes an exporter wage premium, since exporters have higher profits, given their productivity, than non-exporting firms. We estimate the parameters of the model in a data-set of five European economies and find that, when evaluated at these parameter values, the model has a high level of explanatory power. The estimates also enable us to quantify the exporter wage premium and the consequences of trade for the main variables of interest. According to our results, openness to international trade contributes to greater inequality across firms in terms of both operating profits and average wages. We also find evidence for gains from trade for all five countries, which go along with negative, but quantitatively moderate, aggregate employment effects.
    Date: 2012
  9. By: Gullstrand, Joakim (Department of Economics, Lund University); Persson, Maria (Department of Economics, Lund University)
    Abstract: In endeavouring to explain the empirical puzzle that the sunk costs of exporting are important, but that, at the same time, trade flows do not, on average, survive for very long, this paper explores the concepts of core and peripheral markets. First, it illustrates that if the importance of sunk costs as well as the expected future returns from exporting are different, depending on whether the export decision refers to a core or a peripheral market, it is plausible that while firms will tend to stay on the core market for a long time, they will enter and exit the peripheral market much more frequently. Second, using firm-product-destination-specific export data for all firms in the Swedish food chain for the period 1997-2007, an empirical test is carried out to ascertain whether there is support for the hypothesis that trade duration will be longer for core markets. Employing two variables that capture different aspects of the core/periphery dimension, it is found that firms will indeed tend to stay longer in their core markets, while export decisions regarding peripheral markets are much less long-term. The conclusion, therefore, is that the empirical puzzle can be explained by taking into account the fact that the trade hysteresis literature builds on data on the core market decision to export or not, and that the trade survival literature also includes data on decisions to stay in or exit peripheral markets.
    Keywords: Sunk Costs; Trade Duration; Survival; Core v. Peripheral Markets; Sweden; Firm-Level Data; Discrete-Time Hazard Models
    JEL: F10 F14
    Date: 2012–11–27
  10. By: Minondo, Asier
    Abstract: In this study, I analyze the characteristics of trading firms in the Spanish service sector. I reveal that half of the service firms in Spain operate only in their local markets, whereas one-third of the examined service firms trade with non-local areas of Spain, and fewer than 20% of Spanish service firms trade with other nations. Similar to those in the manufacturing sector, trading firms in the service sector exhibit premia relative to non-traders with respect to size, labor productivity and average wages. Larger premia are observed for firms that trade with more distant markets and for firms that participate in bidirectional trade. Service firms that trade with non-local areas of Spain also exhibit similar premia relative to firms that trade only in their regional markets. I demonstrate that compared with non-trading firms, firms that engage in trade with foreign countries are more productive even before they have commenced their trading activities. However, I do not find that the initiation of trade with foreign nations by trading firms is followed by improvements in the productivity of these firms relative to non-trading firms.
    Keywords: exports; services; firm-level evidence; Spain; productivity; heterogeneity
    JEL: F23 F14 F19
    Date: 2012–12–11
  11. By: Rudolfs Bems; Robert C. Johnson; Kei-Mu Yi
    Abstract: We survey recent literature on the causes of the collapse in international trade during the 2008-2009 global recession. We argue that the evidence points to the collapse in aggregate expenditure, concentrated on trade-intensive durable goods, as the main driver of the trade collapse. Inventory adjustment likely amplified the impact of these expenditure changes on trade. In addition, shocks to credit supply constrained export supply further exacerbating the decline in trade. Most evidence suggests that changes in trade policy did not play a large role. We conclude that one benefit of the trade collapse is that it has stimulated research in neglected areas at the intersection of trade and macroeconomics.
    JEL: F1 F14 F17 F4
    Date: 2012–12
  12. By: Lukas Mohler (University of Basel)
    Abstract: <p style="text-autospace:none"><span style="font-size:12.0pt; font-family:CMR12" lang="EN-US">This paper contributes to the debate on the empirical quantification of the variety gains from trade. Findings from the literature suggest that previous estimates of these variety gains may be too small because of the imprecise measurement of the imported variety set. I modify the lambda ratios presented in Feenstra (1994) and use empirical results from the literature on multi-product firms to obtain realistic estimates of the variety gains from trade. Specifically, I account for entry and exit of firms as well as for product turnover within firms. I find welfare gains that amount to 2.79% of GDP in the United States between 1990 and 2006 - compared to variety gains of 0.54% of GDP if the standard Armington product-country variety differentiation is used.</span>
    Keywords: Margins of trade, welfare gains from trade, multi-product firm
    JEL: F10 F12 F14
    Date: 2012
  13. By: Ana Luísa Coutinho; Maria Paula Fontoura
    Abstract: This paper aims to assess the competitiveness of exports of manufactured goods from China and India to the European Union in the 2000s. The empirical analysis is based on two methodologies: (i) a Constant Market Share analysis which allows to decompose the export growth to the European market into several components including an effect usually related to competitiveness, and (ii) an analysis based on the combination of revealed comparative advantage indexes with a geographic orientation of trade which allows to identify the products of China and India that appear to have export potential.
    Keywords: China, India, Competitiveness, European Union, Constant Market Shares Technique, Trade Potential.
    Date: 2012–10
  14. By: Mona Haddad (The World Bank); Jamus Jerome Lim (The World Bank); Cosimo Pancaro (European Central Bank); Christian Saborowski (International Monetary Fund)
    Abstract: This paper addresses the mechanisms by which trade openness affects growth volatility. Using a diverse set of export concentration measures, we present strong evidence pointing to an important role for export diversification in conditioning the effect of trade openness on growth volatility. Indeed, the effect of openness on volatility is shown to be negative for a significant proportion of countries with relatively diversified export baskets. JEL Classification: F15, F43, O24
    Keywords: Export diversification, growth volatility, trade openness
    Date: 2012–11
  15. By: THORBECKE, Willem; KATO Atsuyuki
    Abstract: Germany's nominal exchange rate has remained weaker because it is linked to weaker eurozone economies. Germany's real exchange rate also depreciated vis-à-vis eurozone countries after 2000 because German firms and workers controlled unit labor costs. This paper investigates how exchange rate changes affect German exports. Results from Johansen maximum likelihood and dynamic ordinary least squares (DOLS) estimation indicate that the export elasticity for the unit labor cost-deflated exchange rate equals 0.6. Results from panel DOLS estimation indicate that price elasticities are much higher for consumption goods exports than for capital goods exports and for exports to the eurozone than for exports outside of it. These results imply that Germany's internal devaluation after 2000 contributed to a surge in exports to Europe.
    Date: 2012–12
  16. By: Minondo, Asier
    Abstract: This paper analyzes the relationship between export status and productivity in a major service exporter, Spain, during 2001-2007. I find that exporters in the services sector are 37% more productive than non-exporters. This productivity premium is larger for firms that supply non-Internet-related services than for firms that supply Internet-related services. The results show that exporters were more productive than non-exporters before beginning to export. The results also show that exporting increases productivity growth; however, this positive shock vanishes quickly.
    Keywords: exports; services; firm-level evidence; Spain; productivity
    JEL: F23 F14 F19
    Date: 2012–12
  17. By: Adam Copeland; James A. Kahn
    Abstract: A large body of research has established that exporters do not fully adjust their prices across countries in response to exchange rate movements, but instead allow their markups to vary. But while markups are difficult to observe directly, we show in this paper that inventory-sales ratios provide an observable counterpart. We then find evidence that inventory-sales ratios of imported vehicles respond to exchange rate movements to a degree consistent with pass-through on the order of 50 to 75 percent, on the high end of the range found in the literature.
    Keywords: Exports ; Inventories ; Automobile industry and trade - Finance ; Automobiles - Prices ; Foreign exchange rates ; International trade
    Date: 2012
  18. By: Sarra Ben Yahmed (Aix-Marseille University (Aix-Marseille School of Economics), CNRS & EHESS.)
    Abstract: International trade has been expected to reduce the gender wage gap by increasing competition and thus reducing the rents that allow employers to discriminate. However, some empirical assessments find an opposite effect. We provide an explanation for the puzzling result that trade openness widens the gender wage gap under certain circumstances. This paper introduces employer taste discrimination in an open economy model with imperfect competition to shed light on the heterogeneous impacts of openness on the gender wage gap. Firms operate in an oligopoly where and prejudiced employers can use their rents to pay men a premium, in line with Becker’s theory. Penetration of foreign products in the domestic market triggers a surge in competition thus heightening incentives to reduce costs differences which reduces the wage gap. However, an easier access to foreign markets is an opportunity for domestic firms to enhance profits. The model determines under which conditions new export opportunities enable discriminatory firms to maintain their discretionary expenditures. The theoretical predictions are confronted with data for Uruguayan manufacturing sectors that experienced a sharp liberalization of trade in the 1990s. Market access of Uruguayan firms as well as competitors’ access to the Uruguayan market, computed at the industry level, are used for the first time to assess the impact of trade openness on the gender wage gap in a specification inspired by the theory.
    Keywords: Gender wage gap, Employer taste Discrimination, Trade Openness, Imperfect.Competition.
    JEL: F16 J31 J7 L13
    Date: 2012–11
  19. By: Eichengreen, Barry; Gupta, Poonam
    Abstract: We consider the determinants of exports of services, distinguishing between modern and traditional services. We consider both the growth of export volumes and so-called export surges – periods of rapid sustained export growth. We ask whether the determinants of export growth rates and surges differ between merchandise, traditional services and modern services and whether developing countries are different. Our findings confirm the importance of the real exchange rate for export growth. We find that the effect of the real exchange rate is even stronger for exports of services than exports of goods; it is especially strong for exports of modern services. While the evidence of differential effects between advanced and developing countries is weaker, our results nonetheless suggest that as developing countries shift from exporting primarily commodities and merchandise to exporting traditional and modern services in the course of their development, appropriate policies toward the real exchange rate become even more important.
    Keywords: Real Exchange Rate; Exports; Services; Traditional Services
    JEL: F15 F43
    Date: 2012–11
  20. By: Conconi, Paola; Facchini, Giovanni; Steinhardt, Max; Zanardi, Maurizio
    Abstract: Over the last decades, the United States has become increasingly integrated in the world economy. Very low trade barriers and comparatively liberal migration policies have made these developments possible. What drove US congressmen to support the recent wave of globalization? While much of the literature has emphasized the differences that exist between the political economy of trade and migration, in this paper we find that important similarities should not be overlooked. In particular, our analysis of congressional voting between 1970 and 2006 suggests that economic drivers that work through the labor market play an important role in shaping representatives’ behavior on both types of policies. Representatives from more skilled-labor abundant districts are more likely to support both trade liberalization and a more open stance vis-à-vis unskilled immigration. Still, important systematic differences exist: welfare state considerations and network effects have an impact on the support for immigration liberalization, but not for trade; Democratic lawmakers are systematically more likely to support a more open migration stance than their Republican counterparts, and the opposite is true for trade liberalization.
    Keywords: immigration reforms; trade reforms
    JEL: F22 J61
    Date: 2012–12
  21. By: Vogel , Alexander (Leuphana University Lueneburg); Wagner, Joachim (Leuphana University Lueneburg and CESIS, Stockholm)
    Abstract: This study uses newly available representative data from German business services firms and a continuous treatment approach based on the generalized propensity score to test for a causal effect of R&D activities (measured by the share of engineers and natural scientists in all employees) on the share of exports in total sales. We find evidence for a positive and statistically significant but small causal effect. This result is in line with the (non-causal) results reported in Vogel and Wagner (2012) based on regression models with and without control for unobserved time-invariant firm characteristics. The bottom line, then, is that R&D activity does matter for success of German business services firms on export markets – but not much.
    Keywords: Innovation; export; business services; Germany
    JEL: F14
    Date: 2012–12–19
  22. By: Cooke, Edgar F. A.
    Abstract: The literature reports the mean impact of trade preferences. The literature on the agoa impact is no exception. The mean impact can be sensitive to heterogeneity in the adoption of preferences by recipients. Nonetheless, the choice of countries included in the sample can play a role in determining the level of the impact. A small increase at the bottom of the distribution is more likely to present a large impact (in percentage terms) compared to the top 20\% -- 5\%. In this paper, we investigate the gains to developing countries focusing on where they lie on the export distribution. This way, heterogeneity can be controlled for and the impact at various percentiles of the distribution can be estimated. We carry out a quantile regression on a sample of countries selected by matching countries on an estimated propensity score as well as the full sample for comparison. Secondly, we decompose the impact using methodology in the spirit of the Oaxaca-Blinder decomposition found in Machado and Mata (2005) for quantile regressions. We find that gains to agoa recipients is confined to the top 5\% of the export distribution. On the contrary the gains to the recipients from exporting to the EU is mainly at the bottom 25\% and the median. There is an unambiguous decline in their exports to the rest of the world relative to the counter-factual countries they are compared with. The decomposition exercise supports the quantile results and shows that both coefficient and the covariate differences between the two groups explain the difference in the total change at the various quantiles.
    Keywords: quantile regression; decomposition; agoa; trade preference
    JEL: F00 F19
    Date: 2012–12–14
  23. By: Sarra Ben Yahmed (Aix-Marseille University (Aix-Marseille School of Economics), CNRS & EHESS.)
    Abstract: Several empirical studies have shown that the effect of openness on the gender wage gap depends on the skill requirement of the workplace. This paper offers a theoretical explanation to understand that finding. We integrate a statistical discrimination framework with the labour assignment approach to give general conditions under which the matching between firms and workers gives rise to a wider gender wage gap at the upper tail of the distribution, in accordance with empirical evidence. We further look at the effect of trade openness on the gender wage gap along the entire distribution. Workers’ characteristics vary in two dimensions, skills and job commitment. The inability to observe individual’s job commitment induces employers to base partly their decision on group average. Following the literature on labour and international trade, we assume that skills act as complements to technological upgrading. Exporting firms are more skill-intensive and pay higher wages ; assuming further that worker’s job commitment is a complement to technological upgrading, we find that a reduction in trade costs increases wage inequality within-groups and has non-monotonic effects on between-group inequality. Trade openness reduces the gender wage gap among unskilled workers but increases the gender wage gap among high-skill workers.
    JEL: J24 J7 F16
    Date: 2012–11
  24. By: Marco de Pinto (Institute for Labour Law and Industrial Relations in the EU, University of Trier)
    Abstract: The contribution of this paper is to derive an optimal redistribution scheme for trade gains in the case of a government's objective function that explicitly accounts for the equity-efficiency trade-off. The government pays unemployment benefits (UB) either financed by a wage tax, a payroll tax or a profit tax paid by exporters only. Using a Melitz-type framework with unionized labor markets and heterogeneous workers we show that there is a clear-cut ranking of the redistribution schemes in terms of welfare level: 1. UB financed by a profit tax paid by exporters, 2. UB financed by a wage tax, 3. UB financed by a payroll tax.
    Keywords: trade liberalization, heterogeneous firms, trade unions, income unequality, unemployment benefits, taxes
    JEL: F1 F16 H2
    Date: 2012–10
  25. By: Amiti, Mary; Itskhoki, Oleg; Konings, Jozef
    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.
    Keywords: exchange rate pass-through; import intensity; pricing-to-market
    JEL: F14 F31 F41
    Date: 2012–12
  26. By: Cadot, Olivier; Fernandes, Ana M.; Gourdon, Julien; Mattoo, Aaditya
    Abstract: This paper evaluates the effects of the FAMEX export promotion program in Tunisia on the performance of beneficiary firms. While much of the literature assesses only the short-term impact of such programs, the paper considers also the longer-term impact. Propensity-score matching, difference-in-difference, and weighted least squares estimates suggest that beneficiaries initially see faster export growth and greater diversification across destination markets and products. However, three years after the intervention, the growth rates and the export levels of beneficiaries are not significantly different from those of non-beneficiary firms. Exports of beneficiaries do remain more diversified, but the diversification does not translate into lower volatility of exports. The authors also did not find evidence that the program produced spillover benefits for non-beneficiary firms. However, the results on the longer-term impact of export promotion must be interpreted cautiously because the later years of the sample period saw a collapse in world trade, which may not have affected all firms equally.
    Keywords: Microfinance,Small Scale Enterprise,Economic Theory&Research,E-Business,Labor Policies
    Date: 2012–12–01
  27. By: Mundra, Kusum (Rutgers University)
    Abstract: This paper highlights that the immigrants' effect on trade is not identical across all types of immigrants but it varies with the immigrants' occupation. Using a sample of 63 U.S. trading partners which are also big immigrant sending countries over the years 1991-2000, this paper finds that the immigrant trade elasticity for the no occupation group is similar in magnitude to the immigrant effect on trade estimated in the literature. However, this does not capture the full extent of the effect of immigrant network on trade. The share of professional immigrants in comparison to immigrants with no occupation significantly increases the trade elasticity for Rauch's referenced price and differentiated commodities and this effect is strongest for the differentiated goods. This paper establishes that immigrants' occupation is an important indicator of the quality and effectiveness of immigrants' network in trade creation with the home country.
    Keywords: immigrant occupation, immigrant networks, bilateral trade, U.S.
    JEL: F22 F11 J10 J61
    Date: 2012–12
  28. By: Federico Etro (Department of Economics, University Of Venice Cà Foscari)
    Abstract: I characterize the optimal unilateral trade policy for domestic firms competing in domestic or integrated markets with endogenous entry of foreign firms. Under conditions satisfied in most trade models (as with quasi-linear or Dixit-Stiglitz preferences), the analysis is simplified by a Neutrality Theorem: any policy affecting the profitability of the domestic firm is not going to affect consumers surplus and the strategies of the foreign firms, but changes their number and the profits of the domestic firm. In a domestic market with quantity competition the optimal tariff is positive with linear demand but negative with highly convex demand or Dixit-Stiglitz preferences. In an integrated market the optimal subsidy to domestic production is always positive, independent from the relative size of the domestic market and inversely related to the elasticity of demand.
    Keywords: Import tariffs, Production Subsidies, Endogenous entry, Optimal Trade Policy
    JEL: F12 F13
    Date: 2012
  29. By: Chad Bown; Meredith Crowley
    Abstract: This paper estimates the impact of macroeconomic shocks on the trade policies of thirteen major emerging economies over 1989-2010; by 2010, these WTO member countries collectively accounted for 21 percent of world merchandise imports and 22 percent of world GDP. We examine determinants of carefully constructed, bilateral measures of new import protection imposed at the extensive margin. New import restrictions on products arise through the temporary trade barriers (TTBs) – antidumping, safeguards, and countervailing duties – that have become some of the most important time-varying trade policies in use. Our approach explicitly addresses changes to the institutional environment facing these emerging economies as they joined the WTO and promised to restrain other trade policies by keeping applied import tariffs below specified maximum levels. After controlling for this phenomenon, bilateral real exchange rate fluctuations, and potential differences across exchange rate regimes, we find general evidence of a counter-cyclical relationship between macroeconomic shocks and new import protection through TTBs. Furthermore, for the subset of major G20 emerging economies, the trade policy responsiveness coinciding with the onset of the WTO in 1995 through 2008 suggests a significant change relative to the pre-WTO period; i.e., import protection through these policy instruments became more counter-cyclical over time. Finally, we document evidence on potential changes to the channels through which macroeconomic shocks affect emerging economy new import protection coinciding with the timing of the Great Recession.
    Date: 2012

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