nep-int New Economics Papers
on International Trade
Issue of 2013‒05‒19
nine papers chosen by
Alessia A. Amighini
Universita' Amedeo Avogadro

  1. Same Same But Different: Dialects and Trade By Lameli, Alfred; Nitsch, Volker; Suedekum, Jens; Wolf, Nikolaus
  2. Trade between China and the Netherlands: a Case Study of Globalization By Frank A.G. den Butter; Raphie Hayat
  3. From Mine to Coast: Transport Infrastructure and the Direction of Trade in Developing Countries By Roberto Bonfatti; Steven Poelhekke
  4. Product Heterogeneity, Intangible Barriers and Distance Decay: The Effect of Multiple Dimensions of Distance on Trade across Different Product Categories By Maureen B.M. Lankhuizen; Thomas de Graaff; Henri L.F. de Groot
  5. Does Bilateral Trust Affect International Movement of Goods and Labor? By Spring, Eva; Grossmann, Volker
  6. Reducing Transatlantic Barriers to Trade and Investment: An Economic Assessment By Joseph Francois; Miriam Manchin; Hanna Norberg; Olga Pindyuk; Patrick Tomberger
  7. Exporting and Plant-Level Efficiency Gains: It’s in the Measure By Alvaro Garcia Marin; Nico Voigtländer
  8. Internal and International Vertical Specialization– Estimations For Brazil and new Approach to Gravity Models By Guilhoto, Joaquim José Martins; Siroën, Jean-Marc; Yucer, Ayçil
  9. Association of Southeast Asian Nations, People's Republic of China, and India Growth and the Rest of the World : The Role of Trade By Robert Z. Lawrence

  1. By: Lameli, Alfred (University of Marburg); Nitsch, Volker (Darmstadt University of Technology); Suedekum, Jens (University of Duisburg-Essen); Wolf, Nikolaus (Humboldt University Berlin)
    Abstract: Language is a strong and robust determinant of international trade patterns: Countries sharing a common language trade significantly more with each other than countries using different languages, holding other factors constant. In this paper, we show that this trade-promoting effect of language is likely to reflect cultural ties, rather than lower costs of communication or similar institutions. Analyzing unique data for a single-language country, Germany, we find that similarities in the local dialect between regions have a sizable and significant positive impact on intra-national trade. We interpret this finding as evidence for the effect of culture on trade.
    Keywords: language, culture, trade costs, gravity, dialects
    JEL: F14 F15 Z10
    Date: 2013–05
  2. By: Frank A.G. den Butter (VU University Amsterdam); Raphie Hayat (KPMG Corporate Finance, Amsterdam)
    Abstract: During the last decades, the growth of trade between China and the Netherlands has been larger than the increase in bilateral trade flows between China and most other countries. Using a time series based gravity model, this paper investigates the main determinants of this increase. The empirical analysis indicates that, apart from GDP growth, Dutch in-house offshoring to China is a major determinant of Dutch import growth from China. Dutch firms tend to offshore production in-house when the asset specificity of the traded inputs is high and offshore via the market when this asset specificity is low. Controlling for these product types also reveals that transport costs are more important for trade in homogeneous and reference priced goods than for trade in differentiated goods
    Keywords: international trade; transaction costs; offshoring; foreign direct investments; asset specificity; gravity model
    JEL: F14 L16 L23
  3. By: Roberto Bonfatti (University of Nottingham); Steven Poelhekke (VU University Amsterdam, and De Nederlandsche Bank)
    Abstract: Mine-related transport infrastructure specializes in connecting mines to the coast, and not so much to neighboring countries. This is most clearly seen in developing countries, whose transport infrastructure was originally designed to facilitate the export of natural resources in colonial times. We provide first econometric evidence that mine-to-coast transport infrastructure matters for the pattern of trade of developing countries, and can help explaining their low level of regional integration. The main idea is that, to the extent that it can be used not just to export natural resources but also to trade other commodities, this infrastructure may bias a country's structure of transport costs in favor of overseas trade, and to the detriment of regional trade. We investigate this potential bias in the context of a gravity model of trade. Our main findings are that coastal countries with more mines import less than average from their neighbors, and this effect is s tronger when the mines are located in such a way that the related infrastructure has a stronger potential to affect trade costs. Consistently with the idea that this effect is due to mine-to-coast infrastructure, landlocked countries with more mines import less than average from their non-transit neighbors, but more then average from their transit neighbors. Furthermore, this effect is specific to mines and not to oil and gas fields, arguably because pipelines cannot possibly be used to trade other commodities. We discuss the potential welfare implications of our results, and relate these to the debate on the economic legacy of colonialism for developing countries.
    Keywords: Mineral Resources, Transport Infrastructure, Regional Trade Integration, Gravity Model, Economic Legacy of Colonialism
    JEL: F14 F54 Q32 R4
    Date: 2013–03–07
  4. By: Maureen B.M. Lankhuizen (VU University Amsterdam); Thomas de Graaff (VU University Amsterdam); Henri L.F. de Groot (VU University Amsterdam, and Ecorys NEI)
    Abstract: We empirically examine the heterogeneity in the effects of multiple dimensions of distance on trade across detailed product groups. Using finite mixture modeling on bilateral trade data at the 3-digit SITC level, we endogenously group product categories into an, a priori unknown, number of segments based on estimated coefficients of multiple dimensions of distance in the gravity equation. We find that institutional distance, whether countries belong to the same trade block and especially geographical distance are crucial and distinct factors to classify commodities in homogeneous groups.
    Keywords: bilateral trade, gravity models, distance, institutions, product heterogeneity, finite mixture modeling
    JEL: F14 F21 F23
    Date: 2012–07–09
  5. By: Spring, Eva (University of Fribourg); Grossmann, Volker (University of Fribourg)
    Abstract: Trust in the citizens of a potential partner country may affect the decision to trade with or to migrate to a foreign country. This paper employs panel data to examine the causal impact of such bilateral trust on international trade and migration patterns. We apply instrumental variables (IV) approaches that capture the exogenous variance of bilateral trust separately with eight indicators of genetic ("somatic") distance between country-pairs. These indicators work equally well at the first stage. However, second-stage results very much depend on the exact measure employed as instrument. Overall, we find little evidence that bilateral trust affects international movements of goods and labor. More generally, we highlight the potential fragility of IV estimations even when the instruments seem plausible on theoretical grounds and when standard statistical tests confirm their validity.
    Keywords: instrumental variables, international trade, international migration, bilateral trust, somatic distance
    JEL: F10 F22 Z10
    Date: 2013–05
  6. By: Joseph Francois (CEPR, Johannes Kepler University Linz, and wiiw (Vienna)); Miriam Manchin (University College London); Hanna Norberg (Lund (School of Economics and Business) and Stichting IIDE); Olga Pindyuk (wiiw (Vienna)); Patrick Tomberger (Johannes Kepler University Linz)
    Abstract: This study reviews the importance of the bilateral economic relationship between the EU and US. It integrates NTB estimates, based on gravity modeling and firm surveys, with computable general equilibrium (CGE)-based estimates for the economy-wide impact of reducing both tariff and non-tariff barriers (NTBs). Estimates are provided with regards to expected changes in GDP, sector output, aggregate and bilateral trade flows, wages, and labour displacement, among other issues. The study investigates different policy options for the deepening of the bilateral trade and investment relationship between the EU and US. These range from partial agreements that are limited in the scope of barriers they would address (tariffs only, or services only, or procurement only) to a full-fledged free trade agreement (FTA) with a comprehensive liberalisation agenda covering simultaneously tariffs, procurement, NTBs for goods, and NTBs for services. The study also quantifies potential benefits from NTB reduction affecting FDI. The overall message is that negotiating an agreement that would be of a comprehensive nature would bring significantly greater benefits to both economies. A core message that follows from the results is that focusing efforts on reducing NTBs is critical to the logic of transatlantic trade liberalization. Different approaches to the same regulatory challenges have the unintended consequence of increasing costs for firms, which have to comply with two regulatory environments, dragging down labour productivity. Negotiation on NTBs provides the opportunity to pursue a mix of cross-recognition and regulatory convergence to reduce these barriers. Compared to a focus on NTBS, just limiting the exercise to tariffs would lead to much more limited, though positive effects. CEPR report for the European Commission.
    Keywords: regional trade agreements, TTIP, NTBs, deep regionalism, trade in services, bilateral services trade, trade costs
    JEL: F14
    Date: 2013–04–01
  7. By: Alvaro Garcia Marin; Nico Voigtländer
    Abstract: Gains from trade due to exporting can result from the reallocation of resources to more productive producers, or from efficiency increases within exporting firms over time. While there is strong evidence for the former, the latter has received little support in the data. Previous research has documented minuscule or no efficiency gains within exporting plants. This result is derived from revenue productivity measures and thus also reflects variation in prices. Using a census panel of Chilean manufacturing plants, we first show that, in line with the previous results, there is no evidence for within-plant increases in revenue productivity after export entry. We then derive product-plant level marginal cost and use it as an efficiency measure that is not affected by prices. We find that marginal costs drop substantially when plants begin to export – on average by 15-25%. Prices drop by the same order of magnitude (while volume grows). Since new exports initially charge lower prices, revenue productivity measures fail to identify these within-plant efficiency gains from exporting.
    JEL: D24 F14 L25 L60
    Date: 2013–05
  8. By: Guilhoto, Joaquim José Martins; Siroën, Jean-Marc; Yucer, Ayçil
    Abstract: WTO, OECD with many others, suggest the trade in value-added would be a “better” measure to understand the impact of trade on employment, growth, production etc. when import content in exports is important. We use in this work an Input-Output table for 2008, to calculate the value-added exported by Brazilian states. We distinguish the value-added exported directly by the state itself or indirectly via other states. First, by using value-added we define the extent of vertical specialization among Brazilian states. Exported value-added are then used in a gravity model to determine the structure of trade in value-added terms. We also define a trilateral gravity structure which permits to control for the vertical specialization between states and to estimate the trade determinants at three steps: origin state, re-exporter state and importer country.
    Keywords: Vertical Specialization, Input-Output Analysis, Gravity Model, Brazil, intra-national trade
    JEL: F02 F15 R12 R15
    Date: 2013
  9. By: Robert Z. Lawrence (Asian Development Bank Institute (ADBI))
    Abstract: This paper explores the impact of past and future growth in the Association of Southeast Asian Nations (ASEAN)1 Since the mid-1990s, ACI growth has improved the non-oil terms of trade of the developed countries. There have also been strong complementarities between ACI suppliers of intermediate inputs and PRC exports. More developed Asian countries have benefited from PRC capital goods demand. ACI growth has, however, put competitive pressures on other less-developed manufacturing exporters, worsening their terms of trade and constraining their pricing ability. ACI growth has been especially beneficial for oil and minerals commodity producers. On the other hand, net food importers and oil importing countries have been adversely affected by high import costs. , the People's Republic of China (PRC), and India—here referred to as the ACI countries—on aggregate welfare, relative wages, and global emissions in the rest of the world. It outlines several analytical frameworks, considers effects over the past decade and, based on consensus forecasts, the implications of that growth for the rest of the world in the decades to come. Future ACI growth provides opportunities and challenges for the rest of the world. For developed countries the opportunities are for selling high-end services and capital and consumer goods in the ACI markets and enjoying the benefits from intra-industry trade; the challenges will come from increased head-to-head competition in manufactured goods and services that should become more intense in future decades. For medium-income producers currently at between 30% and 60% of US levels, there will be a tougher tradeoff between more intensive competition with the PRC and serving the growing middle classes in ACI countries. For poorer countries, there will greater opportunities for becoming part of global supply chains in manufactured exports. Standard frameworks that assume internal factor mobility suggest continuing pressures for wage inequality in developed countries. But these hinge on the assumption that the ACI and developed countries will continue to produce similar products and that the ACI will specialize in unskilled labor-intensive products. In fact, as their exports become more technology—intensive and developed countries more specialized these pressures could be alleviated. On the one hand, as the “flying geese†process continues, exports from countries with lower incomes than the PRC are likely to displace PRC labor-intensive exports rather than domestic production in developed countries. On the other hand, while it may cause job loss and erode the returns to specific factors, PRC export growth is less likely to be a source of wage inequality in advanced economies.
    Keywords: Association of Southeast Asian Nations (ASEAN), China, PRC, India, trade, flying geese, Intra-industry trade, global supply chains, manufactured exports
    JEL: F01 F10
    Date: 2013–04

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