nep-int New Economics Papers
on International Trade
Issue of 2013‒03‒16
thirty papers chosen by
Alessia A. Amighini
Universita' Amedeo Avogadro

  1. Are low-productive exporters marginal exporters? Evidence from Germany By Wagner, Joachim
  2. Improving "National Brands": Reputation for Quality and Export Promotion Strategies By Julia Cagé; Dorothée Rouzet
  3. Financial Development and the Choice of Trade Partners By Man Lung Chan; Kalina Manova
  4. Prospects for Trade in Intermediates and Trade in Services: What Does the Gravity Model of Bilateral Trade Tell Us? By Haruka Yane
  5. Heterogeneous Firms, Globalization and the Distance Puzzle By Larch, Mario; Norbäck, Pehr-Johan; Sirries, Steffen
  6. International Outsourcing versus FDI under Contractual Incompleteness By Valeria Gattai
  7. Roads and Trade: Evidence from the U.S. By Gilles Duranton; Peter Morrow; Matthew Turner
  8. Country-specific determinants of horizontal and vertical intra-industry agri-food trade of the Visegrad Countries By Attila Jambor
  9. Assessing the impact of European Integration on sectoral trade in services By Nadine Behncke
  10. The structure and the determinants of the trade of SME products By Sawako Maruyama
  11. The Discriminatory Effect of Domestic Regulations on International Trade in Services: Evidence from Firm-Level Data. By Matthieu Crozet; Emmanuel Milet; Daniel Mirza
  12. Cross-Regional Comparison of Trade Integration: The Case of Services By Hamanaka, Shintaro
  13. Consolidated Data on International Trade in Services By Joseph Francois; Olga Pindyuk
  14. International Productivity Gaps and the Export Status of Firms: Evidence from France and Japan By Flora BELLONE; KIYOTA Kozo; MATSUURA Toshiyuki; Patrick MUSSO; Lionel NESTA
  15. Gains from Offshoring? Evidence from U.S. Microdata By Monarch, Ryan; Park, Jooyoun; Sivadasan, Jagadeesh
  16. Aggregation Bias in Trade Elasticities: The Case of Macedonia By Branimir Jovanovic
  17. Outward FDI from developing countries : a case of Chinese firms in South Africa By Kimura, Koichiro
  18. The role of trade in intra-industry productivity growth - the case of old and new European Union countries (1995-2007) By Aleksandra Parteka; ; ;
  19. Spillovers from Foreign Exporters By Anna Bohnstedt
  20. Domestic Institutions as a Source of Comparative Advantage By Nathan Nunn; Daniel Trefler
  21. Foreign Direct Investment in East Asia By THORBECKE, Willem; Nimesh SALIKE
  22. The dynamic linkages among exports, R&D and productivity By Juan A. Máñez; María E. Rochina-Barrachina; Juan A. Sanchis-Llopis
  23. Globalization and Vertical Structure: An Empirical Investigation By Buehler, Stefan; Burghardt, Dirk
  24. Export performance and product market regulation. By Bruno Amable; Ivan Ledezma
  25. Impact of the ASEAN Economic Community on ASEAN Production Networks By Kornkarun Cheewatrakoolpong; Chayodom Sabhasri; Nath Bunditwattanawong
  26. The Evolution of Agricultural Trade Flows By M.Ataman Aksoy; Francis Ng
  27. The death of German firms: What role for foreign direct investment? By John P. Weche Geluebcke; Chiara Franco
  28. Exports from the European regions during the crisis and in the long run By Chiara Bentivogli; Paolo Chiades; Cristina Fabrizi; Elena Mattevi; Andrea Petrella
  29. Eu enlargement and the gains from trade By Demian Calin-Vlad
  30. Fire-sale FDI or Business as Usual? By Ron Alquist; Rahul Mukherjee; Linda Tesar

  1. By: Wagner, Joachim (Leuphana University, Lueneburg and CESIS, Stockholm)
    Abstract: A stylized fact from the emerging literature on the micro-econometrics of international trade and a central implication of the heterogeneous firm models from the new new trade theory is that exporters are more productive than non-exporters. It is argued that this exporter-productivity premium is due to extra cost of exporting that can be covered profitably by more productive firms only. Germany is a case in point - exporting firms from manufacturing industries are more productive than non-exporting firms from the same 4-digit industry both on average and over the whole productivity distribution. However, many firms from the lower end of this distribution are exporters. This paper report that these low-productivity exporters are not marginal exporters defined according to the share of exports in total sales, or export participation over time, or the number of goods exported, or the number of countries exported to.
    Keywords: Exports; productivity; low-productive exporters
    JEL: F14
    Date: 2013–03–05
  2. By: Julia Cagé (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole des Ponts ParisTech - Ecole normale supérieure de Paris - ENS Paris - Institut national de la recherche agronomique (INRA), Harvard University - Harvard university (Cambridge, USA)); Dorothée Rouzet (Harvard University - Harvard university (Cambridge, USA), OECD - OECD)
    Abstract: Why do "made in"labels matter? We study the effect of firm and country reputation on exports when buyers cannot observe quality prior to purchase. Firm-level demand is determined by expected quality, which depends on both past experience with the good and the country of origin's reputation for quality. Asymmetric information acts as a barrier to entry for high-quality firms but facilitates sales by "fly-by-night"low-quality firms. We derive two types of steady-state equilibria with endogenous reputation. In a high-quality equilibrium, imperfect information does not hinder entry into export markets, but there is a distortion in profits and in the quality composition of exports. In a lowquality equilibrium, we obtain a sorting of firms into exporting that is non-linear in quality. A range of relatively high-quality firms are permanently kept out of the market by the informational friction, so that countries with bad quality reputation can be locked into exporting low-quality, low-cost goods. Export subsidies then have a positive welfare effect on the exporting country, by improving the average quality of its exports and its terms of trade. However, a subsidy has the opposite long-run effects in a country that initially exports relatively high-quality products. The model is consistent with empirical patterns of export prices. Measuring national reputations by analyzing the content of US newspaper articles about foreign countries over 1988-2006, we find that more positive news coverage of foreign countries and companies is associated with higher unit values of their exports to the US, particularly in sectors with a larger scope for vertical differentiation.
    Keywords: Product quality ; Product differentiation ; Export promoting ; Industrial policy
    Date: 2013–03
  3. By: Man Lung Chan; Kalina Manova
    Abstract: What determines the choice of countries' trade partners? Is there an order that firms follow when entering foreign markets? We show theoretically and empirically that financial market imperfections affect the number and identity of exporters' destinations. Bigger economies with lower trade costs are relatively more attractive markets because they offer cross-border sellers higher profits. This generates a pecking order of destinations such that exporters serve all countries above a cut-off level of market potential. Credit constraints raise this cut-off and prevent firms from entering some markets that they could profitably service in the first-best. Financially advanced exporters thus have more trade partners and go further down the pecking order of importers, especially in sectors that rely more heavily on the financial system. Our results provide the first systematic evidence that countries follow a hierarchy of export destinations, that market size and trade costs determine this hierarchy, and that financial frictions interact importantly with it. Methodologically, we show how to construct a model-consistent ranking of countries by market potential, and derive model-consistent estimating equations to test the pecking order hypothesis. Our findings have implications for various economic effects of international trade linkages that depend crucially on the number and identity of countries' trade partners.
    JEL: F10 F14 F36 G20
    Date: 2013–03
  4. By: Haruka Yane (Graduate student, Osaka School of International Public Policy, Osaka University)
    Abstract: This study uses product-level international bilateral trade panel data for the period 1995 to 2009, covering 40 countries from the recently released World Input-Output Database (WIOD). Constructing this dataset into a standard gravity model, this paper aims to compare the magnitude of coefficients across two pairs of equations with different dependent variables: trade in intermediates in comparison with trade in final products, and total trade in goods as opposed to total trade in services. So as to investigate these differences further, this study also analyzes the models by sector. This paper applies the sample selection model in order to account for the zero trade flows. Estimation results confirm that trading partners in East Asia engage much more in both trade in intermediate inputs and assembled final products, especially the former, compared to EU and NAFTA blocs. Trade in services presents remarkable resilience to the current financial crisis. Intermediate services trade, in particular, is affected less by trade costs and market size. By liberalizing trade and increasing economic freedom, there will be a highly significant, positive effect on nearly all kinds of trade flows.
    Keywords: trade in intermediates, services trade, gravity model
    JEL: F14
    Date: 2013–02
  5. By: Larch, Mario (University of Bayreuth); Norbäck, Pehr-Johan (Research Institute of Industrial Economics (IFN)); Sirries, Steffen (University of Bayreuth)
    Abstract: Despite the strong pace of globalization, the distance effect on trade is persistent or even growing over time (Disdier and Head, 2008). To solve this distance puzzle, we use the recently developed gravity equation estimator from Helpman, Melitz and Rubinstein (2008), HMR henceforth. Using three different data sets, we find that the distance coefficient increases over time when OLS is used, while the non-linear estimation of HMR leads to a decline in the distance coefficient over time. The distance puzzle thus arises from a growing bias of OLS estimates. The latter is explained by globalization more significantly reducing the downward bias from omitting zero trade flows than it reduces the upward bias from omitting the number of heterogeneous exporting firms. Furthermore, we show that including zero-trade flows cannot solve the distance puzzle when using HMR. The HMR estimates are strongly correlated with the time pattern in freight costs reported by Hummels (2007).
    Keywords: Distance puzzle; Gravity estimation; Zero trade flows; Firm heterogeneity
    JEL: F13 F14 F23
    Date: 2013–03–05
  6. By: Valeria Gattai
    Abstract: This paper empirically analyzes the boundaries of a large sample of Italian multinational enterprises, with firm-level data from Capitalia, AIDA and Centrale dei Bilanci. Within the broad array of feasible contracts in a foreign country, we focus on the trade-off between international outsourcing and Foreign Direct Investment (FDI), in a context of contractual incompleteness. Probit estimates reveal that Italian enterprises operating in highly relation-specific environments are more prone to international outsourcing than FDI, consistently with recent theoretical contributions on the topic. Results are robust to different specifications and alternative measures of contractual incompleteness and international outsourcing.
    Keywords: FDI, international outsourcing, contractual incompleteness, Italy
    JEL: F23 C25
    Date: 2013–03
  7. By: Gilles Duranton; Peter Morrow; Matthew Turner
    Abstract: We estimate the effect of interstate highways on the level and composition of trade for us cities. Highways within cities have a large effect on the weight of city exports with an elasticity of approximately 0.5. We find little effect of highways on the total value of exports. Consistent with this, we find that cities with more highways specialize in sectors producing heavy goods.
    Keywords: interstate highways, transportation costs, trade and specializartion
    JEL: F14 R41 R49
    Date: 2013–03–08
  8. By: Attila Jambor
    Abstract: The article analyses patterns and country-specific determinants of Visegrad Countries’ (VC) agri-food trade with the European Union. Literature focusing on the country-specific determinants of vertical and horizontal intra-industry trade is rather limited and those analysing agricultural (or agri-food) trade are extremely rare. Therefore, the paper seeks to contribute to the literature by covering latest theory and data available on the topic to provide up to date results and suggestions. Moreover, it seeks to identify the determinants of horizontal and vertical intra-industry trade of the Visegrad Countries after EU accession. Results suggest that agri-food trade of the Visegrad Countries is mainly inter-industry in nature but intra-industry trade is dominated by vertical elements. Results verify that determinants of horizontal and vertical IIT differ and suggest that economic size is positively, while distance is negatively related to both sides of IIT. However, the relationship between vertical IIT and differences in factor endowments as well as FDI is ambiguous.
    Keywords: Visegrad Countries, intra-industry trade, determinants
    JEL: F14
    Date: 2013–03
  9. By: Nadine Behncke
    Abstract: The present paper contributes to the existing literature analyzing the relationship between intra EU trade in services and European Integration by taking into consideration a potential endogeneity bias of the EU dummy and a correct specification of multilateral resistance terms in a panel data set covering the years 2000-2010. Our results offer evidence for a high positive impact of European integration on aggregate services trade between member states while we find a negative effect of monetary integration. However, there exist notable differences at the sector level. According to our results, European integration has positive effects especially for business services, travel and EDV services. Analyzing the evolvement of the sectoral EU-effects over time shows that exports of EDV and OBS have steadily increased due to European integration.
    Keywords: Trade in Service, European integration, gravity equation
    JEL: F13 F15
    Date: 2013–03
  10. By: Sawako Maruyama (Graduate School of Economics, Kobe University)
    Abstract: This paper aims to investigate the structure and the determinants of the trade of products manufactured by small- and medium-sized enterprises. For this purpose, trade database for selected SME-based industries is prepared. Analyzing this database, the following three findings are obtained. First, firms in SME-based industries are facing a large inflow of imported goods, while the volume of their export is relatively small. Secondly, the share of Asian countries in the trade of SME products is larger than overall trade. Thirdly, the gravity model can be applied for the trade of SME products. In some cases, distance and difference of income level tend to be more sensitive for SME products than overall trade. These results are consistent with the labor-intensive characteristics of SME products.
    Keywords: Trade; Gravity model; Small and Medium-sized Enterprises(SMEs); Manufacturing
    Date: 2013–03
  11. By: Matthieu Crozet (Centre d'Economie de la Sorbonne - Paris School of Economics,Institut Universitaire de France et CEPII); Emmanuel Milet (Centre d'Economie de la Sorbonne - Paris School of Economics et CESIfo); Daniel Mirza (Université François Rabelais - GERCIE, CEPII/CIREM et Banque de France)
    Abstract: In order to promote international trade in services, the WTO-GATS aims at progressively eliminating discriminatory regulations, which apply to foreign suppliers, byguaranteeing equal national treatment. This paper looks instead at the trade effect of domestic regulations, which apply to all firms indifferently and do not intend to exclude foreign suppliers. We propose a theory-based empirical test to determine whether or not these domestic regulations affect foreign suppliers more than local ones. We take this test to the data by using French firm-level exports of professional services to OECD countries. Our econometric results show that domestic regulations in the importing markets matter significantly for trade in services. They reduce both the decision to export and the individual exports. These results tend to prove that domestic regulations are de facto discriminatory even if they are not de jure.
    Keywords: Trade in services, Domestic regulations, firm heterogeneity.
    JEL: F1 L8
    Date: 2013–02
  12. By: Hamanaka, Shintaro (Asian Development Bank)
    Abstract: In this paper, we will examine the level of services trade integration in Asia in comparison with Europe and North America. The main empirical findings of this paper are that (i) the regional bias of services trade in Asia is as high or higher than in Europe and North America; (ii) in Asia, the regional bias of services trade is higher than that of goods trade, which is in sharp contrast to Europe and North America, where the regional bias of goods trade is higher than that of services trade; and (iii) while Asia’s regional bias of goods trade shows a declining trend, that of services trade remains high, although in the future its decline is expected. Asia’s relatively high-level of regional bias of services trade can be explained by the following factors: (i) a relatively high prevalence of a shared language (Chinese), which is essential to services trade, but not to goods trade; and (ii) the archipelagic nature of the region, which inhibits goods trade more than services trade. In contrast, for example, major European countries share land borders with their neighbors and they speak different languages. In order to deepen Asia’s services trade integration, two policies are necessary. First, effective regional services agreements are critical to enhancing the level of integration. Second, policies to increase the trade of crisis-resilient services, such as professional services and insurance, as opposed to crisis-vulnerable services, such as transport and travel, are necessary.
    Keywords: Services trade; regional integration; trade integration; determinants of trade; regional bias; regional trade agreement (RTA)
    JEL: F15
    Date: 2013–03–01
  13. By: Joseph Francois (CEPR and Johannes Kepler University Linz); Olga Pindyuk (wiiw (Vienna))
    Abstract: This is an update to the 2009 release of the trade in services database (TSD). The database provides a consolidated and reconciled version of multiple sources of bilateral trade data. Its advantages over the original source data are that it provides broader coverage based on mirror flows, reconciliation of aggregate with underlying flows, and consolidation (allowing for broader coverage than offered by source data). One weakness, inherent in all available data of this type, is that even with mirror flows, a substantial share of South-­â€South trade is unreported. As such, while we can recover North-­â€South exports from mirror flows, we cannot recover all unreported bilateral flows. Comparing trade with the world can gauge the scale of the problem with bilateral flows in the database. This version includes extended EBOPS data in *.csv and *.dta (stata) format for the full database, as well as a smaller version aggregated to GTAP sectors. The panel spans 1981 to 2010, though early years and 2010 are relatively incomplete. Recent year data covers almost all OECD trade (based on reported totals and bilateral flows) though only 40 to 60 percent of middle and low-income bilateral flows can be identified.
    Keywords: trade in services, bilateral services trade, TSD, services database
    JEL: F14
    Date: 2013–02–01
  14. By: Flora BELLONE; KIYOTA Kozo; MATSUURA Toshiyuki; Patrick MUSSO; Lionel NESTA
    Abstract: This paper provides new evidence on the international productivity gaps; this evidence is built from large scale firm-level data from the French and Japanese manufacturing industries. Our primary finding is that international productivity gaps are sensitive to the export status of firms. We establish that the productivity gap between French and Japanese exporters differs systematically from the average industry gap—this gap is wider in the industries in which Japan has a productivity lead and narrower in the industries in which France has a productivity lead. We relate this basic finding to the new models of international trade with heterogeneous firms. Under this framework, our data predict that Japanese firms, on average, face higher trade costs than French firms.
    Date: 2013–03
  15. By: Monarch, Ryan (University of Michigan); Park, Jooyoun (Kent State University); Sivadasan, Jagadeesh (University of Michigan)
    Abstract: We construct a new linked data set with over one thousand offshoring events by matching Trade Adjustment Assistance program petition data to micro-data from the U.S. Census Bureau. We exploit this data to assess how offshoring impacts domestic firm-level aggregate employment, output, wages and productivity. A class of models predicts that more productive firms engage in offshoring, and that this leads to gains in output and (measured) productivity, and potential gains in employment and wages, in the remaining domestic activities of the offshoring firm. Consistent with these models, we find that offshoring firms are on average larger and more productive compared to non-offshorers. However, we find that offshorers suffer from a large decline in employment (32 per cent) and output (28 per cent) relative to their peers even in the long run. Further, we find no signicant change in average wages or in total factor productivity measures at affected firms. We find these results robust to a variety of checks. Thus we find no evidence for positive spillovers to the remaining domestic activity of firms in this large sample of offshoring events.
    Keywords: Outsourcing, employment, trade, productivity, firm performance
    JEL: F16 F14 F23
    Date: 2013–01–21
  16. By: Branimir Jovanovic
    Abstract: This paper evaluates the bias which may occur when trade elasticities are estimated using data on aggregate trade, instead of using data on bilateral trade. The exercise is done on the case of Macedonia. Elasticities obtained from aggregate-trade data, using the Autoregressive Distributed Lag approach, are compared with the elasticities obtained from bilateral-trade data, using dynamic heterogenous panels techniques. Results point out that the aggregation bias is sizeable and that relying on aggregate data can lead to wrong conclusions about the trade elasticities.
    Keywords: trade elasticities, aggregation bias, dynamic panel, heterogenous panel, ARDL, Macedonia
    JEL: F10 F14 F4
    Date: 2013–03
  17. By: Kimura, Koichiro
    Abstract: Outward foreign direct investment (FDI) from developing countries is increasing. In the research on FDI, it has been considered that only competitive and productive firms can invest in foreign countries. However, since the differences in competitiveness and productivity between multinational enterprises (MNEs) from developed and developing countries have not been explicitly investigated, we cannot say whether MNEs from developing countries can or cannot survive in competition with MNEs from developed countries as well as against competitive and productive indigenous firms in host countries. To examine the activities of MNEs from developing countries, this study investigates Chinese firms in South Africa. It reveals that in order to compensate for the weak brand recognition of Chinese products and to expand sales, Chinese firms have mainly been making products that are sold under the brand names of indigenous South African firms. Chinese firms have expanded their business in South Africa relying on the business resources of indigenous firms in the host country. This indicates that business with indigenous firms is significant for MNEs from developing countries in boosting competitiveness.
    Keywords: China, South Africa, Foreign investments, International business enterprises, Foreign direct investment (FDI), Multinational enterprise (MNE)
    JEL: F23 M16
    Date: 2013–02
  18. By: Aleksandra Parteka; (Gdansk university of Technology, Gdansk, Poland); ;
    Abstract: The purpose of this paper is to evaluate the role of trade in productivity growth in a sample of 30 sectors in 25 EU countries in the period of rapid East-West integration. Shift-share analysis is used to show that changes in value added per hour worked in these countries appear to be mainly due to positive developments (rising productivity) within single industries and only to a lower extent result from a shift towards higher productivity activities. Trade is found to be an important positive determinant of intra-industry productivity growth in European countries. Exports and imports alike can be associated with efficiency gains, but intermediate good exchange and trade with New Member States exert a particularly strong influence on intra-industry productivity growth in the EU.
    Keywords: productivity, trade, shift share analysis, European Union
    JEL: F14 F16 O47
    Date: 2013–02
  19. By: Anna Bohnstedt
    Abstract: We develop a general equilibrium model of international trade with heterogeneous firms that accounts for productivity spillovers transmitted by foreign exporters. Everything else equal, stronger spillovers increase welfare. We embed the model framework into a trade policy scenario where countries strategically set inter-country variable trade costs for the trading partner. In the strategic Nash-equilibrium policy, governments trade-off welfare gains from protectionism and those which are due to spillovers from foreign exporters. The equilibrium degree of protectionism is decreasing in the strength of the spillover. Policy coordination induces welfare gains, but these gains can be hump-shaped in the spillover strength.
    Keywords: Spillovers; heterogeneous firms
    JEL: F1 L25
    Date: 2013–01
  20. By: Nathan Nunn; Daniel Trefler
    Abstract: Domestic institutions can have profound effects on international trade. This chapter reviews the theoretical and empirical underpinnings of this insight. Particular attention is paid to contracting institutions and to comparative advantage, where the bulk of the research has been concentrated. We also consider the reverse causation running from comparative advantage to domestic institutions
    JEL: D23 F10 F19
    Date: 2013–02
  21. By: THORBECKE, Willem; Nimesh SALIKE
    Abstract: This paper surveys research on foreign direct investment (FDI) in East Asia. The pattern of FDI in the region has changed over time. Outward FDI from Asia began in earnest when Japanese multinational corporations (MNCs) shifted production to other Asian economies following the 60% appreciation of the yen that started in 1985. The major destinations for Japanese FDI initially were South Korea and Taiwan. However, as labor cost in these economies rose, Japanese FDI shifted to Association of Southeast Asian Nations (ASEAN) economies. MNCs from South Korea and Taiwan responded to the increase in labor costs by also investing in other Asian economies. Following the 1997-98 Asian financial crisis, China became a favored destination for FDI. As Kojima (1973) noted, one of the striking features of East Asian FDI is its complementary relationship with trade. The complementary nature of trade and FDI in Asia is partly due to the rise of regional production networks. Parts and components rather than final products are traded between fragmented production blocks. To understand the slicing up of the value chain, it is helpful to compare the production cost saving arising from fragmentation with the service cost of linking geographically separated production modules (Kimura and Ando, 2005). This has been called "networked FDI" by Baldwin and Okubo (2012). It is a complex form of FDI in which horizontal, vertical, and export platform FDI take place to differing degrees at the same time. The fragmentation strategy adopted especially by Japanese MNCs is to allocate production blocks across countries based on differences in factor endowments and other locational advantages. The paradigm example of this type of production fragmentation is the electronics sector, where parts and components are small and light and can easily be shipped from country to country for processing and assembly. In this sector, the quality of a country's infrastructure plays an important role in its ability to attract FDI.
    Date: 2013–03
  22. By: Juan A. Máñez (University of Valencia and ERICES); María E. Rochina-Barrachina (University of Valencia and ERICES); Juan A. Sanchis-Llopis (University of Valencia and ERICES)
    Abstract: This paper estimates a dynamic model of a firm’s decision to export and invest in R&D, in which we allow past export and R&D experience to endogenously affect productivity. In our empirical strategy we proceed in two steps: in the first step, using as starting point the traditional control approach method to estimate total factor productivity, we consider a more general process driving the law of motion of productivity in which we recognise the potential role that export and R&D experience might have in shaping future firms’ productivity, and test whether this assumption holds; in the second step, we estimate a bivariate dynamic model of the firm’s decision to invest in R&D and export, in which we analyse the linkages among investing in R&D, exporting and productivity. Using a representative sample of Spanish manufacturing firms for the period 1990- 2009 we find that both export and R&D positively affect future productivity, which will drive more firms to self-select in those activities.
    Keywords: export experience, R&D experience, endogenous Markov, Total Factor Productivity, learning-by-exporting, returns to innovation, GMM, dynamic bivariate probit
    Date: 2013–03
  23. By: Buehler, Stefan; Burghardt, Dirk
    Abstract: This paper studies the effect of trade facilitation on vertical firm structure using plant-level data from Switzerland. Based on the Business Census and the Input-Output table, we first calculate a binary measure of vertical integration for all plants registered in Switzerland. We then estimate the effect of a Mutual Recognition Agreement with the European Union on the plants' probability of being vertically integrated. Adopting a difference-in-differences approach, we find that this policy change reduced the treated plants' probability of being vertically integrated by about 10 percent. Our results are consistent with recent work in international trade theory.
    Keywords: Vertical Integration, Hold-up Risk, Theory of the Firm, Globalization, Trade Barriers, Natural Experiment, Plant-Level Data
    JEL: D23 L22
    Date: 2013–03
  24. By: Bruno Amable (Centre d'Economie de la Sorbonne, CEPREMAP, Institut Universitaire de France); Ivan Ledezma (Université Paris Dauphine et IRD/DIAL - UMR 225)
    Abstract: This paper analyses the impact of product market regulation on the propensity to export at the industry level for 13 OECD countries and 13 industries over the 1977-2007 period. Recent economic policy and academic literature insists on the negative effects of product market regulation on productivity or innovation, and hence on “competitiveness”, a term that we interpret as the ability to export. Similar to the conclusions of some contributions to a recent literature on competition and growth, the “common sense” is that product market regulation should be detrimantal to competitiveness. Testing through a two-step estimation the impact of upstream pressures of product market regulation on productivity and the effect of the latter on the propensity to export, this paper shows that upstream regulatory pressures have a significantly positive impact on productivity and thereby on the capability of an industry to attract resources and to sell its production in international markets.
    Keywords: Exports, product market regulation, competitiveness.
    JEL: F14
    Date: 2013–02
  25. By: Kornkarun Cheewatrakoolpong (Asian Development Bank Institute (ADBI)); Chayodom Sabhasri; Nath Bunditwattanawong
    Abstract: Empirical evidence suggests that the emergence of international production networks in East Asia results from market-driven forces such as vertical specialization and higher production costs in the home countries and institutional-led reasons such as free trade agreements. The growth in trade in parts and components since the 1990s, especially with the People’s Republic of China (PRC), one of the important major assembly bases, confirms the existence of international production sharing in the region. Also, a decline in the share of parts and components trade in several members of the Association of Southeast Asian Nations (ASEAN) such as Indonesia and Thailand indicates the increasing importance of the ASEAN countries as assembly bases for Japanese multinational enterprises (MNEs). This paper examines two industries—autos and auto parts, and hard disk drives (HDDs)—to understand international production networks. The study examines the structure of vertical intra-industry trade among East Asian countries, especially members of the Association of Southeast Asian Nations, depicts international production sharing in the selected industries, namely HDD, and automobiles and automotive parts, in the region. The study also points out the importance of the People’s Republic of China and Thailand as assembly bases. It concludes that investment promotion policies contributed more to the emergence of international production networks than free trade agreements.
    Keywords: Production Networks, East Asia, vertical specialization, trade in parts and components, ASEAN, China, MNEs, autos and auto parts, Hard Disk Drive industry, intra-dindustry
    JEL: F14
    Date: 2013–02
  26. By: M.Ataman Aksoy (World Bank); Francis Ng (World Bank)
    Date: 2013
  27. By: John P. Weche Geluebcke (Leuphana University Lueneburg, Germany); Chiara Franco (Catholic University of the Sacred Heart, Milan, Italy)
    Abstract: This paper aims at examining the role played by inward Foreign Direct Investments (FDI) in affecting the exit probabilities of German manufacturing firms in the pre-crisis year 2007. We introduce two main novelties: in the first place, we include the FDI variable, dividing it between types of foreign investor (industrial vs. financial) besides the usual analysis with the division by country of origin. Secondly, we analyze whether FDI may have effects not only on the probability that a firm exits the domestic market, but also on whether it stops being internationally involved, that is, whether it stops importing or exporting. We find that German firms in most cases suffer from higher competition introduced by foreign firms except when they are part of a high-R&D region or a high-tech sector when they have the needed absorptive capacity to take advantage of possible spillover effects. We also find that U.S. FDI has a crowding out effect for firms located in low-tech sectors but not in high-tech sectors. The results are reversed when considering financial investments instead of industrial investments. Finally, we find that FDI is negatively correlated with exits from export markets but positively with those from import markets.
    Keywords: MNE, FDI, foreign ownership, survival, Germany
    JEL: F23 L60 O30
    Date: 2013–02
  28. By: Chiara Bentivogli (Banca d'Italia); Paolo Chiades (Banca d'Italia); Cristina Fabrizi (Banca d'Italia); Elena Mattevi (Banca d'Italia); Andrea Petrella (Banca d'Italia)
    Abstract: This paper compares the return to pre-crisis levels and the long-term performance of exports in the main Italian regions compared with some European regions with a similar production structure. The results show that the intensity and timing of recovery in the cyclical component of exports were similar across the regions of the cluster. In the short run, Italian exporters adapted satisfactorily to changes in demand but the long-run trend has grown at a slower rate compared with European competitors, especially Germany. Italian regions began to lag behind in the first half of the decade 2000-2010. The slower long-term growth is due to the insufficient strengthening of trade relations in dynamic markets outside Europe, largely due to the small size of exporting firms, as well as the pattern of specialization that in some regions is still biased towards traditional products with a lower technological content.
    Keywords: international trade, regional economies, business cycle
    JEL: F10 R11 E32
    Date: 2013–02
  29. By: Demian Calin-Vlad
    Abstract: In this paper I quantify the welfare gains of the 2004 EU enlargement as a result of the abolition of border controls, both for incumbents and for new members. I build a multi-sector Ricardian model, allowing for linkages across sectors, similar to the one in Caliendro and Parro (2011). As with a large number of quantitative trade models, the gains crucially depend on one key parameter, the dispersion of productivity. I extend the estimation methodology of Costinot et al. (2012) to a richer modeling setting and compute the dispersion in a way consistent with the underlying theoretical model. Within the model, I compare the welfare changes for 23 countries between 2003 and 2006. I find that new entrants gained significantly more than old members from enlargement. However, the overall changes in real income are rather small, measured in single digits for new entrants and fractions of a percent for old members. I also break down total gains by source and find that allowing for interconnectedness across sectors amplifies the changes in welfare.
    Keywords: EU enlargement, Ricardian Model, structural estimates, welfare gains, multisector, calibration
    JEL: F11 F14 F15
    Date: 2013–03
  30. By: Ron Alquist; Rahul Mukherjee; Linda Tesar
    Abstract: Using a new data set, we examine the characteristics and dynamics of cross-border mergers and acquisitions during emerging-market financial crises, that is, so-called “fire-sale FDI”. Our findings shed fresh light on whether the transactions undertaken during crisis periods differ in fundamental ways from those undertaken during more tranquil periods. The increase in foreign acquisitions during crises is mainly driven by non-financial acquirers targeting firms in the same industry rather than foreign financial firms. This increase in acquisition activity in a given industry is unrelated to the industry’s dependence on external finance. There is also no evidence of an increase in the size of stakes bought during crises. In terms of the effect of crises on emerging-market mergers and acquisitions, we find little evidence that foreign acquisitions are resold, or “flipped”, more frequently than domestic acquisitions. Moreover, flipping rates are uncorrelated with the industry’s dependence on external finance. Finally, the probability of being flipped to a domestic buyer does not differ across crisis and non-crisis periods. All of these results are robust to alternative empirical specifications, different definitions of crises, and the inclusion of macroeconomic controls. Contrary to conventional wisdom, fire-sale FDI and asset flipping by foreign firms appear to have been “business as usual”.
    JEL: F2 F41
    Date: 2013–02

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