nep-int New Economics Papers
on International Trade
Issue of 2013‒02‒03
fourteen papers chosen by
Alessia A. Amighini
Universita' Amedeo Avogadro

  1. Stochastic Trade Networks By Massimo Riccaboni; Stefano Schiavo
  2. Chinese trade reforms, market access and foreign competition: the patterns of French exporters By Bas, Maria; Bombarda, Pamela
  3. Internationalization choices: an ordered probit analysis at industry-level By Pietrovito, Filomena; Pozzolo, Alberto Franco; Salvatici, Luca
  4. Export market exit and firm survival: theory and first evidence By Sanne Hiller; Philipp J.H. Schroeder; Allan Sorensen
  5. Determinants of export growth at the extensive and intensive margins : evidence from product and firm-level data for Pakistan By Reis, Jose Guilherme; Taglioni, Daria
  6. Does trade reduce poverty ? a view from Africa By Le Goff, Maelan; Singh, Raju Jan
  7. Trade dimensions of logistics services : a proposal for trade agreements By Kunaka, Charles; Mustra, Monica Alina; Saez, Sebastian
  8. Who Gains the Most in Preferential Trade Agreements? By Juyoung Cheong; Shino Takayama
  9. Trends in developing country trade 1980-2010 By Michalopoulos, Constantine; Ng, Francis
  10. Offshoring domestic jobs By Egger, Hartmut; Kreickemeier, Udo; Wrona, Jens
  11. FDI and Wages: Evidence from Firm-Level and Linked Employer-Employee Data in Hungary, 1986-2008 By Earle, John S.; Telegdy, Álmos; Antal, Gábor
  12. Integrating gravity: the role of scale invariance in gravity models of spatial interactions and trade By Arvis, Jean-François
  13. How is the liberalization of food markets progressing ? market integration and transaction costs in subsistence economies By Zant, Wouter
  14. Framework for the Proposed Comprehensive Trade Policy for Bangladesh By Khondaker Golam Moazzem; Nazneen Ahmed; Syed Nasim Manzur; Mehruna Islam Chowdhury

  1. By: Massimo Riccaboni (IMT Lucca Institute for Advanced Studies); Stefano Schiavo (School of International Studies and Department of Economics and Management, University of Trento)
    Abstract: This paper develops a simple network model to describe the dynamic of the intensive and extensive margin of international trade flows. The result is achieved by means of the combination of two mechanisms of proportional growth: the first (discrete) determines the formation of trade links, the second (continuous) governs trade intensity. We show that our setup is able to simultaneously match a large number of empirical regularities, such as the fraction of zero trade flows across pairs of countries or the high concentration of trade with respect to both products and destinations. Our findings suggest that stylized facts are strongly interconnected across different levels of aggregation of trade data, so that a unifying explanation is called for. By incorporating stochastic elements into standard trade models we can improve their ability to explain relevant facts about world trade.
    Keywords: international trade, networks, preferential attachment, urn models, proportionate growth.
    JEL: F14 F43 O25
    Date: 2013–01
  2. By: Bas, Maria; Bombarda, Pamela
    Abstract: A unilateral trade reform generates two opposite effects: market access expansion and strengthening of competitive pressures in the liberalized market. Using detailed trade and firm-level data from France, the authors investigate how French firms'product scope and export sales changed after Chinese liberalization vis-a-vis Asian liberalization. The findings suggest that lower Chinese import tariffs account on average for 7 percent of the new products exported by French firms, and for 18 percent of additional French export sales. These results are robust when accounting for foreign competition faced by French firms in the liberalized market.
    Keywords: Free Trade,Markets and Market Access,Microfinance,Trade Policy,Economic Theory&Research
    Date: 2013–01–01
  3. By: Pietrovito, Filomena; Pozzolo, Alberto Franco; Salvatici, Luca
    Abstract: Trade theory traces back different patterns of internationalization to heterogeneity between firms, measured both through differences in productivity levels and size. In this paper we analyze the link between heterogeneity within sectors and internationalization choices, namely trade and foreign direct investments (FDI) for a large sample of countries and industries between 1994 and 2004. The focus of our paper is on the role played by average productivity level and the distribution of firms by size in explaining differences across sectors and countries in the extensive margin of internationalization (i.e., the number of foreign nations where firms from a given sector and country have expanded abroad). By performing an ordered probit analysis, and controlling for other factors affecting the patterns of internationalization, we confirm that industries with higher productivity levels and with a distribution of firms shifted toward large firms are more prone to internationalize in foreign markets through both trade and FDI. Moreover, the relative impact of average productivity and firm size on FDI is larger than that on trade. These results are robust to different measures of productivity and the distribution of firms.
    Keywords: exports, foreign direct investments, mergers and acquisitions, productivity, distribution of firms, ordered probit
    JEL: D24 F10 F14 F20 F23
    Date: 2013–01–25
  4. By: Sanne Hiller (Department of Economics, Leuphana University Lueneburg, Germany); Philipp J.H. Schroeder (Aarhus University, School of Business and Social Sciences, Department of Economics and Business, Denmark); Allan Sorensen (Aarhus University, School of Business and Social Sciences, Department of Economics and Business, Denmark)
    Abstract: This paper deploys a dynamic extension of the Melitz (2003) model to generate predictions on export market exit and firm survival in a setting where firms endogenously make exit decisions. The central driver of the model dynamics is the inclusion of exogenous economy wide technological progress. The model predicts – inter alia – that a higher relative productivity not only increases the likelihood of exporting, but also the chances of firm survival and continued export market engagements. We relate these predictions to the empirical stylized facts of export market exit and firm survival based on Danish firm-level data. We find strong evidence that firms experience a decline in market share prior to export market exit and prior to death and that the firms discontinuing their exporting activity or closing down tend to be small. Overall, our empirical results support the central predictions from the model.
    Keywords: Intra-industry trade, entry/exit, heterogeneous firms, technological change
    JEL: F12 F15 O33 L11 L16
    Date: 2013–01
  5. By: Reis, Jose Guilherme; Taglioni, Daria
    Abstract: As globalization progresses and investment is mobile, it is ever more important for policy makers to understand drivers of growth and exports at the micro-level: Which products are being produced and exported? Which firms populate the domestic economy? Are they successful in exporting? How are firms affected by exogenous shocks and policy intervention? Through the use of descriptive statistics and econometric analysis, this paper assesses the trade competitiveness of Pakistan using micro-data. The case of Pakistan is interesting since the country's recent trade policy has reverted to a protectionist path since the mid-2000s and trade performance is stagnating, as indicated by a decrease in its trade-to-gross domestic product ratio over the past decade and low levels of sophistication of exports. The main findings of the paper are the following. Like many other countries, Pakistan posts a high concentration of exports in the hands of a limited number of large exporters. The dominance of few exporters has increased over time and it seems associated with the changes in trade policy. Low rates of product innovation and experimentation and a low ability of the Pakistani export sector to enter into new higher growth sectors are other features emerging from the data. All in all, the mediocre performance seems to be associated with internal problems with trade-related incentives, business environment, and governance, in addition to the well-known external constraints.
    Keywords: Economic Theory&Research,Free Trade,Markets and Market Access,Debt Markets,Trade Policy
    Date: 2013–01–01
  6. By: Le Goff, Maelan; Singh, Raju Jan
    Abstract: Although trade liberalization is being actively promoted as a key component in development strategies, theoretically, the impact of trade openness on poverty reduction is ambiguous. A more liberalized trade regime is argued to change relative factor prices in favor of the more abundant factor. If poverty and relative low income stem from abundance of labor, greater trade openness should lead to higher labor prices and a decrease in poverty. However, should the re-allocation of factors be hampered, the expected benefits from freer trade may not materialize. The theoretical ambiguity on the effects of openness is reflected in the available empirical evidence. This paper examines how the effect of trade openness on poverty may depend on complementary reforms that help a country take advantage of international competition. Using a non-linear regression specification that interacts a proxy of trade openness with proxies of various country structural specificities and a panel of 30 African countries over the period 1981-2010, the analysis finds that trade openness tends to reduce poverty in countries where financial sectors are deep, education levels high and governance strong.
    Keywords: Achieving Shared Growth,Free Trade,Economic Theory&Research,Trade Policy,Emerging Markets
    Date: 2013–01–01
  7. By: Kunaka, Charles; Mustra, Monica Alina; Saez, Sebastian
    Abstract: Services have a direct impact on the competitiveness of the goods sector. This paper illustrates the importance of logistics services, their trade dimension, and how regulatory issues act as perhaps one of the most significant barriers to competitiveness. The paper discusses recent developments and the role and benefits of logistics services and argues that from a trade agreement standpoint, logistics is a network industry that ultimately provides one service to a final client. It analyzes logistics services from a services trade perspective and proposes that trade agreements should ensure access to and use of the infrastructure required to provide these services recognizing their interconnectedness. The paper offers suggestions on additional policies World Trade Organization members, and countries negotiating services agreements regionally or bilaterally, could follow in order to fully exploit the opportunities provided by logistics services. Local regulations and complementary policies in areas such as trade facilitation will always remain important.
    Keywords: Transport Economics Policy&Planning,Transport and Trade Logistics,Common Carriers Industry,Trade and Transport,Banks&Banking Reform
    Date: 2013–01–01
  8. By: Juyoung Cheong (School of Economics, The University of Queensland); Shino Takayama (School of Economics, The University of Queensland)
    Abstract: Using recent extensive data of bilateral trade in manufacturing, we study the relations between trade flows, each country’s technological levels, and geographic barriers. Then, we calibrate the equilibrium of a general equilibrium model to explore how a Trans-Pacific Partnership affects each country’s welfare and trade flows. We decompose the total change of trade flows from member countries into income effects and substitution effects, and investigate the factors that affect trade flows. We demonstrate that a positive coalition externality could exist in that some nonmember countries could gain more than member countries and further investigate under which circumstances it arises.
    Date: 2013–01–17
  9. By: Michalopoulos, Constantine; Ng, Francis
    Abstract: This paper reviews trends and patterns in developing countries'trade from 1980 to 2010. During the 30-year span, world trade expanded rapidly, especially in developing countries in the last decade. A similar picture emerges in trade in services. These overall trends, however, mask different trade patterns during some of the time periods and among different developing countries and groups. For example, except for Asia, the 1980s were pretty much a"lost"decade for many developing countries and groups. But that changed in the 1990s and 2000s, with trade by all major developing countries growing faster than developed countries. From 1980 to 2000, trade by Least Developed Countries grew much more slowly than that of developing countries as a whole. But those countries saw the fastest growth in trade in the following decade. This strong overall trade performance -- with some exceptions (for example Sub-Sahara Africa in the manufacturing trade) -- raises questions about sustainability, trade policy and the architecture of the trading system.
    Keywords: Emerging Markets,Economic Theory&Research,Trade Policy,Inequality,Income
    Date: 2013–01–01
  10. By: Egger, Hartmut; Kreickemeier, Udo; Wrona, Jens
    Abstract: We set up a two-country general equilibrium model, in which heterogeneous firms from one country (the source country) can offshore routine tasks to a low-wage host country. The most productive firms self-select into offshoring, and the impact on welfare in the source country can be positive or negative, depending on the share of firms engaged in offshoring. Each firm is run by an entrepreneur, and inequality between entrepreneurs and workers as well as intra-group inequality among entrepreneurs is higher with offshoring than in autarky. All results hold in a model extension with firm-level rent sharing, which results in aggregate unemployment. In this extended model, offshoring furthermore has non-monotonic effects on unemployment and intra-group inequality among workers. The paper also offers a calibration exercise to quantify the effects of offshoring. --
    Keywords: Heterogeneous Firms,Income Inequality
    JEL: F12 F16 F23
    Date: 2013
  11. By: Earle, John S. (George Mason University); Telegdy, Álmos (Institute of Economics, Budapest); Antal, Gábor (Central European University)
    Abstract: We estimate the wage effects of foreign direct investment (FDI) with universal firm-level and linked employer-employee panel data containing 4,926 foreign acquisitions in Hungary. Matching on pre-acquisition data and controlling for fixed effects for firms and detailed worker groups, we find 12-28 percent effects on average wages. The wage effect mostly reverses for 983 foreign acquisitions later divested to domestic owners. We find positive effects for all worker types, occupations, and wage quantiles. The evidence implies little role for either measurement problems or residual selection, but suggests a strong cross-firm association of FDI wage premia with similar differentials in productivity.
    Keywords: foreign acquisitions, FDI, earnings, wage differentials, productivity, difference-in-differences matching, employer effects, Hungary
    JEL: F23 J31
    Date: 2012–12
  12. By: Arvis, Jean-François
    Abstract: This paper revisits the ubiquitous bi-proportional gravity model and investigates the reasons why different theoretical frameworks may lead to the same empirical formula.The generic gravity equation possesses scale invariance symmetries that constrain possible theoretical explanations based on optimal allocation principles, such as neoclassical or probabilistic frameworks. These constraints imply that a representative consumer's utilities must be separable, and that an entropy model is the only consistent maximum likelihood allocation of a matrix of flows between origin and destination. The paper explores the feasibility of wider classes of non-scale invariant gravity equations, where gravity is no longer bi-proportional by including nonlinear interactions between trade costs and fundamental country factors such as economic size. It shows that such extensions are feasible but that they do not result in a significant improvement in the explanatory power of the empirical analysis.
    Keywords: Economic Theory&Research,Free Trade,Transport Economics Policy&Planning,Geographical Information Systems,Trade Law
    Date: 2013–01–01
  13. By: Zant, Wouter
    Abstract: The paper proposes a modification of Baulch's parity bounds model to measure the market integration of food markets in developing countries. Instead of extrapolating a single observation of transaction costs, it estimates transaction costs. Predicted transaction costs compare well with survey data of traders. Probabilities of market regimes, computed on the basis of predicted transaction costs, fluctuate significantly and do not support fixed regime probabilities over time. The probability of market integration with trade decreases consistently during food shortages, increasing either the probability of no trade or loss-making trade or the probability of profitable but unexploited trade opportunities. The data support a negative trend in market integration with trade.
    Keywords: Markets and Market Access,Transport Economics Policy&Planning,Debt Markets,Economic Theory&Research,Food&Beverage Industry
    Date: 2013–01–01
  14. By: Khondaker Golam Moazzem; Nazneen Ahmed; Syed Nasim Manzur; Mehruna Islam Chowdhury
    Abstract: The paper has been prepared for the Ministry of Commerce of the Government of Bangladesh to formulate the Trade Policy Framework which will serve as the benchmark document for the Comprehensive Trade Policy for Bangladesh. The study has carried out detailed analysis of the present tariff structure, incentives and support structure, trade facilitation measures, priority sectors, institutional capacity, bilateral, regional and multilateral trade negotiations in Bangladesh, and has come up with the structure of the proposed policy document.
    Keywords: Comprehensive Trade Policy, Ministry of Commerce, Trade Policy Framework
    Date: 2012–10

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