nep-int New Economics Papers
on International Trade
Issue of 2013‒05‒11
nineteen papers chosen by
Alessia A. Amighini
Universita' Amedeo Avogadro

  1. Trade policy barriers: an obstacle to export diversification in Eurasia By Cusolito, Ana Paula; Hollweg, Claire H.
  2. Check-in, departure and arrival times: Air cargo in Southern Africa? By Bianka Dettmer; Andreas Freytag; Peter Draper
  3. Can FTAs Support the Growth or Spread of International Production Networks in Asia? By Jayant Menon
  4. International trade, technology, and the skill premium By Jonathan Vogel; Ariel Burstein
  5. Imported Inputs and the Gains from Trade By Ananth Ramanarayanan
  6. Services linkages and the value added content of trade By Francois, Joseph; Manchin, Miriam; Tomberger, Patrick
  7. The Changing World of International Beef Trade By Margelis, Steve
  8. The Clothing Export Performance and Prospects for Advanced and Emerging Economies: Evidence from a Panel Data Analysis (new version) By Donatella Baiardi; Carluccio Bianchi; Eleonora Lorenzini
  9. Different Trade Models, Different Trade Elasticities? By Michael Waugh; Ina Simonovska
  10. Is There Anything in New Trade Theory for Small Countries? By Carter, Colin A.; MacLaren, Donald
  11. An Economic Analysis of Commodity Export Revenue Variability in the South Pacific Island Nations By Onchoke, Sospeter; Fleming, Euan M.; In, Francis
  12. Does Specialization Matter for Trade Imbalance at Industry Level? By E. Yong Song; Chen Zhao
  13. The 2030 Architecture of Association of Southeast Asian Nations Free Trade Agreements By Chirathivat, Suthiphand; Srisangnam, Piti
  14. Trade and Labor Reallocation with Heterogeneous Enforcement of Labor Regulations By Almeida, Rita K.; Poole, Jennifer
  15. Dominance, dependence and interdependence in linear structures. A theoretical model and an application to the international trade flows. By Roland Lantner; Didier Lebert
  16. Intellectual Property Rights Protection, Complexity and Multinational Firms By Yang, Zhenzeng
  17. Do Multinationals Transplant their Business Model? By Marin, Dalia; Rousova, Linda; Verdier, Thierry
  18. Complexity, Specialization and Growth By Benno Ferrarini; Pasquale Scaramozzino
  19. A Bargaining Theory of Trade Invoicing and Pricing By Linda Goldberg; Cédric Tille

  1. By: Cusolito, Ana Paula; Hollweg, Claire H.
    Abstract: Despite trade liberalization efforts made by Eurasian countries, the export structure of the region shows significant levels of concentration across export destinations. To shed light on this observation, this research analyzes trade policy barriers in Eurasia, East Asia and the Pacific, and the European Union. Using the most recent data from sources including the World Trade Organization, the United Nations, and the World Bank — including the Overall Trade Restrictiveness Indices, the Services Trade Restrictions Database, and the Temporary Trade Barriers Database — the role of tariffs, non-tariff measures, temporary trade barriers, trade agreements, and trade barriers in services are explored to explain the lack of diversification by destination. Several conclusions can be drawn from the analysis. First, China, Korea, and Japan, as well as the European Union, impose high levels of protection on products of animal origin, which may explain the lack of Eurasian export diversification toward the East Asia and the Pacific and the European Union regions. It also highlights the potential benefits of diversifying the structure of production in Eurasia toward more sophisticated and technologically intensive goods. Second, the East Asia and the Pacific region (especially China) appears to be more protectionist than the European Union, suggesting a greater challenge for Eurasian countries in diversifying exports to the destination. And third, few or no regional trade agreements exist between Eurasian countries and countries in the European Union or East Asia and the Pacific.
    Keywords: Free Trade,Trade Policy,Trade Law,International Trade and Trade Rules,Economic Theory&Research
    Date: 2013–05–01
  2. By: Bianka Dettmer (Friedrich-Schiller-University Jena); Andreas Freytag (School of Economics and Business Administration, Friedrich-Schiller-University Jena); Peter Draper (South African Institute of International Affairs)
    Abstract: In this paper we develop a methodology which is based on two important criteria - sensitivity in delivery time and value-to-weight ratio - to classify products relevant for air transport. Detailed trade data by mode of transport are used to check the loading of an average airplane between South Africa and the European Union. The product classification is applied to evaluate the potential for air cargo transport in Southern Africa. We find that especially export of products with high and medium air cargo relevance grew much faster than exports of bulky goods and non air cargo products. South Africa's most prominent export products to industrialized countries consist of diamonds, gold and platinum (HS71) which, however, are so precious that they tend to be transported in the hand baggage of a business or security person, because they leave the loading weight of an average airplane almost unaffected. When correcting South Africa's trade for these 'invisible outliers' in the loading freight we find that South Africa exports a much larger share of products with high air cargo relevance to its SADC partners than to industrialized countries. The results indicate that air cargo seems to be valuable option to overcome trade barriers associated with poor land transport infrastructure and corruption.
    Keywords: Trade cost, time sensitivity, air transport, intra-African trade
    JEL: F10 F14 F15 L93
    Date: 2013–04–24
  3. By: Jayant Menon
    Abstract: Free trade agreements (FTAs) have been proliferating in Asia for more than a decade. International fragmentation of production and the resultant cross-border production networks have been growing for a much longer period. Although FTAs are not necessary for the formation of production networks, can they support their further growth or spread? Empirical studies have produced mixed results, presumably because the causality can run either way. Therefore, this paper employs a qualitative approach that carefully examines the characteristics of both product fragmentation trade and FTAs in Asia to ascertain possible linkages. We find the relationship to be tenuous for a number of reasons. First, most product fragmentation trade already takes place at zero or low tariffs because of the International Technology Agreement, various duty-drawback schemes, and the location of most multinationals in duty-exempt export processing zones. Second, much of fragmentation trade is unlikely to benefit from FTA tariff concessions given the inability to satisfy rules of origin because of limited value-addition. Third, almost all FTAs involving Asian countries are relatively shallow, and there are still some non-tariff barriers that affect this trade. For these reasons, national liberalization actions that deal with incumbency issues would be the best way forward.
    Keywords: production networks, product fragmentation, free trade areas, trade facilitation, Asia
    JEL: F14 F15 F23
    Date: 2013
  4. By: Jonathan Vogel (Columbia); Ariel Burstein (UCLA)
    Abstract: What are the consequences of international trade on income inequality---measured as the relative wage of skilled to unskilled workers, the skill premium? To address this question we formulate a multi-country model of international trade that introduces skill intensity differences across firms and sectors and factor endowment differences across countries into an otherwise standard quantitative model of international trade. Parameterized for 65 countries using firm-, sector-, and aggregate-level data, our model can account for a number of features of the data including the relationship between firm size, exporter status, and skill intensity and the relationship between sector-level trade shares and skill intensities. Our model generates large increases in the skill premium in response to reductions in trade costs, especially in open countries and small countries, but not necessarily in those that are skill abundant. Using data generated by our model, we show that standard approaches in the literature underestimate the rise in the skill premium generated by trade cost reductions in almost all countries, especially in skill-scarce countries.
    Date: 2012
  5. By: Ananth Ramanarayanan (University of Western Ontario)
    Abstract: The bulk of international trade takes place in intermediate inputs as opposed to goods for final consumption. Studies of firm-level data show that there is substantial heterogeneity in the share of inputs that are imported by different firms, and that a firm's productivity increases with the quantity and variety of inputs that it imports. This paper develops a model to quantify the contributions of firm-level productivity gains to aggregate productivity and welfare gains from trade. In the model, heterogeneous firms choose the fraction of their inputs to import. Importing a higher fraction of inputs raises firm-level productivity, but requires higher up-front fixed costs. Therefore, firms with different inherent profitability will vary in how much they import and the productivity they gain from doing so. This heterogeneity provides aggregate productivity and welfare gains from trade that would not exist in a world in which firms used identical input bundles. These gains are consistent with data on specific trade liberalization episodes that show large firm-level productivity gains attributed to higher imports of intermediate inputs.
    Date: 2012
  6. By: Francois, Joseph; Manchin, Miriam; Tomberger, Patrick
    Abstract: Services trade constitute roughly one-third of trade on a value added basis, and much of this is concentrated in margin services (transport, logistics) linked to trade in goods. However, producer services are also part of the value added contained in traded goods. This is especially true in high income countries, where services account for roughly 70 percent of value added. Working with data (a set of global social accounting matrices spanning intermittent years from 1992 to 2007) this paper examines the services embodied in trade on a value added basis. This includes not only the direct and indirect contribution of services to value added contained in a given country’s exports, but also the extent to which third-country value added in services, through intermediate linkages of imported goods and services, are also embodied in production and trade. This exercise serves to highlight not only the importance of non-tradables in trade, but also by extension the importance that productivity, foreign affiliates sales, and trade and investment in services may hold for interdependence and cross-border linkages.
    Keywords: Economic Theory&Research,Transport Economics Policy&Planning,Free Trade,Trade Policy,Markets and Market Access
    Date: 2013–05–01
  7. By: Margelis, Steve
    Keywords: International Relations/Trade,
  8. By: Donatella Baiardi (Department of Economics and Management, University of Pavia); Carluccio Bianchi (Department of Economics and Management, University of Pavia); Eleonora Lorenzini (Department of Economics and Management, University of Pavia)
    Abstract: This paper studies the clothing export performance of twelve top exporting countries (China, Honk Kong, France, Germany, India, Indonesia, Italy, Netherlands, Spain, Turkey, UK and USA) in the period between 1992 and 2011. Price and income elasticities are estimated for each country, after controlling for nonstationarity, cointegration and Granger causality. Price elasticities estimates are used, together with market shares and unit values dynamics, to assess the export performance and prospects of the various countries. A multifarious picture emerges from the analysis, whereby China plays the role of uncontested leader, but not all the advanced European countries, which are supposed to be more severely hit by the competition of the low-labour costs countries, definitely lose competitiveness, since different outcomes are possible according to the specific price and quality strategies adopted.
    Keywords: Clothing, Price elasticity, Income elasticity, Export Performance, Product Quality, Panel Granger causality
    JEL: F10 F14 O10
    Date: 2013–04
  9. By: Michael Waugh (New York University); Ina Simonovska (University of California, Davis)
    Abstract: How has the development of new trade models changed our understanding of the welfare gains from trade? Answering this question depends solely on estimates of the trade elasticity obtained using techniques applicable across different models. In this paper we build on the methods of Simonovska and Waugh (2011) and we develop a common estimator for the trade elasticity that is applicable across different models that feature micro-level heterogeneity. The benefit of our approach is that, while the estimation uses the same moment conditions, it allows for different micro structures to matter. We apply the estimator to the models of Eaton and Kortum (2002), Bernard, Eaton, Jensen, and Kortum (2003), and a variant of the framework of Melitz (2003) and Chaney (2008). We find that the trade elasticity estimates differ considerably across models. The results suggest that the Bernard, Eaton, Jensen, and Kortum (2003) model yields the highest, while the Melitz (2003) model yields the lowest welfare gains from trade.
    Date: 2012
  10. By: Carter, Colin A.; MacLaren, Donald
    Keywords: International Relations/Trade,
    Date: 2013–04–23
  11. By: Onchoke, Sospeter; Fleming, Euan M.; In, Francis
    Keywords: International Relations/Trade,
    Date: 2013–04–16
  12. By: E. Yong Song (Department of Economics, Sogang University); Chen Zhao (Department of Economics, Hong Kong University of Science and Technology, Clear Water Bay, Hong Kong)
    Abstract: This paper investigates the source of bilateral trade imbalance at industry level. We build a simple model based on gravity theory and derive the prediction that the bilateral trade balance in an industry is increasing in the difference between trading partners in the output share of the industry. We test this prediction and find that the difference in industry share is highly significant in predicting both the sign and the magnitude of trade balance at industry level. We also find that FTAs tend to enlarge trade imbalance at industry level. However, the overall predictive power of the model is rather limited, suggesting that factors other than production specialization are important in determining trade balance at industry level. Another finding of the paper is that the influence of the difference in industry share on trade balance increases as we move to industries that produce more homogeneous products. This finding calls into question monopolistic competition as the main driver of gravity in international trade.
    Keywords: trade imbalance, gravity theory, specialization, output share, homogeneous products
    Date: 2012–08
  13. By: Chirathivat, Suthiphand (Asian Development Bank Institute); Srisangnam, Piti (Asian Development Bank Institute)
    Abstract: This paper investigates and analyzes the present status, potential, and prospects of Association of Southeast Asian Nations (ASEAN) free trade agreements (FTAs). The move towards the ASEAN Economic Community by 2015 and the attempts to broaden FTAs in East Asia present major challenges to ASEAN. Ultimately, it is desirable for ASEAN to draw a clear picture of how the architecture of ASEAN FTAs in 2030 can be given shape.
    Keywords: nafta; trade; free trade agreements; fta; regional integration; asean; asean economic community; aec
    JEL: F13 F14 F15
    Date: 2013–04–26
  14. By: Almeida, Rita K. (World Bank); Poole, Jennifer (University of California, Santa Cruz)
    Abstract: This paper revisits the question of how trade openness affects labor market outcomes in a developing country setting. We explore the fact that plants face varying degrees of exposure to global markets and to the enforcement of labor market regulations, and rely on Brazil's currency crisis in 1999 as an exogenous source of variation in access to foreign markets. Using administrative data on employers matched to their employees and on the enforcement of labor regulations at the city level over Brazil's main crisis period, we document that the way trade openness affects labor market outcomes for plants and workers depends on the stringency of de facto labor market regulations. In particular, we show for Brazil, a country with strict labor market regulations, that after a trade shock, plants facing stricter enforcement of the labor law decrease job creation and increase job destruction by more than plants facing looser enforcement. Consistent with our predictions, this effect is strongest among small, labor-intensive, non-exporting plants, for which labor regulations are most binding. These findings are consistent with the hypothesis that, in the context of strict de jure labor market regulations, increased enforcement limits the plant-level productivity gains associated with increased trade openness. Therefore, increasing the flexibility of de jure regulations may allow for broader access to the gains from trade.
    Keywords: employer-employee data, globalization, enforcement, labor market regulations
    JEL: F16 J6 J8
    Date: 2013–04
  15. By: Roland Lantner (Centre d'Economie de la Sorbonne); Didier Lebert (ENSTA ParisTech - Unité d'Economie Appliquée et Centre d'Economie de la Sorbonne)
    Abstract: This paper aims to study the structure of international trade. It establishes, through a simple formalization of exchange coefficients, that many theorems can be proved on a function of the macroscopic structure (the determinant of the matrix). This determinant is the cornerstone of indicators to analyze the evolution of trade between countries and regions. The objective is to introduce new tools to rigorously measure the characteristics and effects of globalization. The structural analysis proposed in this way can be applied to many other areas.
    Keywords: Influence graph theory, interdependence, international trade.
    JEL: C65 C67 F14
    Date: 2013–04
  16. By: Yang, Zhenzeng
    Abstract: This paper examines theoretically the impact of host intellectual property rights (IPR) protection and complexity on MNEs' investment decision to the South in order to explain why large amount of foreign direct investment (FDI) flows to low IPR protecting China and other emerging economies. There are two key assumptions, imitation cost are positively related to complexity and imitation cost is higher when imitating a product designed only for foreign market than those for host market. In the model, a strengthening of IPR protection in the South raises an MNE's profit and stimulates inward FDI and licensing simultaneously, and stronger IPR protection will also induce more higher complexity production transfered to the South. Furthermore, as cost-oriented FDI is less sensitive to host IPR protection, developing host countries with low IPR protection can attract relatively more cost-oriented FDI. The model implies that strengthening of IPR protection can help emerging economies attract more complex and market-oriented FDI.
    Keywords: Intellectual Property Rights, Licensing, Imitation, Multinational Enterprise, Foreign Direct Investment
    JEL: F21 F23 O33 O34
    Date: 2013–05–07
  17. By: Marin, Dalia; Rousova, Linda; Verdier, Thierry
    Abstract: What determines whether or not multinational firms transplant their mode of organisation to other countries? We embed the theory of knowledge hierarchies in an industry equilibrium model of monopolistic competition to examine how the economic environment may affect the decision of a multinational firm about transplanting its business organisation to other countries. We test the theory with original and matched parent and affiliate data on the internal organisation of 660 Austrian and German multinational firms and 2200 of their affiliate firms in Eastern Europe. We find that three factors stand out in promoting the multinational firm’s decision to transplant the business model to the affiliate firm in the host country: a competitive host market, the corporate culture of the multinational firm, and when an innovative technology is transferred to the host country. These factors increase the respective probabilities of organisational transfer by 18.5 percentage points, 37, and 31 percentage points.
    Keywords: organisational economics of multinational firms; trade and organisations; the theory of the firm; organisational transfer between countries
    JEL: D23 F12 F23
    Date: 2013–04
  18. By: Benno Ferrarini (Asian Development Bank); Pasquale Scaramozzino (University of Rome "Tor Vergata" and SOAS)
    Abstract: This paper analyzes the role of complexity in production on the level of output and on its rate of growth. We develop an endogenous growth model with human capital accumulation, where increased complexity could exert either a positive or a negative effect on the level of output but always a positive effect on its rate of growth. Our empirical measure of complexity is derived from net trade flows, and is based on the product space description of production sectors in the global economy. The evidence from a broad cross-section of countries is consistent with the main theoretical predictions of the model, and supports the view that production complexity is important in order to account for differences in economic performance. An indicator of the intensity of vertical trade among countries is also shown to be relevant to explain output performance
    Keywords: International Trade Flows, Vertical Trade, Economic Growth, Complexity
    JEL: F43 O11 O14 O15 O33
    Date: 2013–04–30
  19. By: Linda Goldberg; Cédric Tille
    Abstract: We develop a theoretical model of international trade pricing in which individual exporters and importers bargain over the transaction price and exposure to exchange rate fluctuations. We find that the choice of price and invoicing currency reflects the full market structure, including the extent of fragmentation and the degree of heterogeneity across importers and across exporters. Our study shows that a party has a higher effective bargaining weight when it is large or more risk tolerant. A higher effective bargaining weight of importers relative to exporters in turn translates into lower import prices and greater exchange rate pass-through into import prices. We show the range of price and invoicing outcomes that arise under alternative market structures. Such structures matter not only for the outcome of specific exporter-importer transactions, but also for aggregate variables such as the average price, the average choice of invoicing currency, and the correlation between invoicing currency and the size of trade transactions
    Keywords: currency, invoicing, Exchange rate
    JEL: F30 F40
    Date: 2013–04

This nep-int issue is ©2013 by Alessia A. Amighini. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.