nep-int New Economics Papers
on International Trade
Issue of 2013‒07‒15
twenty-one papers chosen by
Alessia A. Amighini
Universita' Amedeo Avogadro

  1. Do Overseas Investments Create or Replace Trade? New insights from a Macro-Sectoral Study on Japan By Raphaël Chiappini
  2. How big is the impact of infrastructure on trade? Evidence from meta-analysis By Celbis, Mehmet Güney; Nijkamp, Peter; Poot, Jacques
  3. Two-Country Dynamic Model of Trade with Heterogeneous Firms and Comparative Advantage By Wolfgang Lechthaler; Mariya Mileva
  4. The end of the multifibre arrangement (MFA) and the heterogeneous performance of quota-constrained countries By Gebreeyesus, Mulu
  5. Food Standards, Heterogeneous Firms and Developing Countries’ Export Performance By Schuster, Monica; Maertens, Miet
  6. How Export Restrictive Measures Affect Trade of Agricultural Commodities By Peter Liapis
  7. Macedonia’s exports and the gravity model By Josheski, Dushko; Apostolov, Mico
  8. New Revealed Comparative Advantage Index: Dataset and Empirical Distribution By Elsa Leromain; Gianluca Orefice
  9. First globalization: Why did France miss the boat? By Stéphane BECUWE; Bertrand BLANCHETON; Léo CHARLES
  10. Country size, trade liberalization and transfers By Kilolo, Jean-Marc Malambwe
  11. How Do Banking Crises Affect Bilateral Exports? By Youssouf KIENDREBEOGO
  13. Supply Chains and International Cooperation: Thinking Outside the Box By Bernard Hoekman
  14. The Effect of Globalization in a Semi Endogenous Growth Model with Firm Heterogeneity, Endogenous International Spillover, and Trade By Katsufumi Fukuda
  15. Geographical and Industrial Spillovers in entry decisions across export markets By Muñoz Sepulveda, Jesus Angel; Rodriguez, Diego
  16. On the Determinants of Global Bilateral Migration Flows By Jesus Crespo Cuaresma; Mathias Moser; Anna Raggl
  17. Breaking Up Is Hard To Do: Why Firms Fragment Production Across Locations By Teresa C. Fort
  19. How Important are Exports and Foreign Direct Investment for Economic Growth in the People’s Republic of China? By Xing, Yuqing; Pradhananga, Manisha
  20. The Effect of Export Tax on Indonesia’s Cocoa Export Competitiveness By Rifin, Amzul; Nauly, Dahlia
  21. The Structure of Agricultural Trade Industry in Developing Countries By Briones, Roehlano M.

  1. By: Raphaël Chiappini
    Abstract: This paper investigates the relationship between outward foreign direct investment (FDI) and both exports and imports from Japan. Using the Poisson pseudomaximum likelihood (PPML) estimator developed by Santos Silva and Tenreyro (2006) to deal with the problem of zero trade ows when estimating a gravity equation, we show that the complementary relationship between FDI and trade is overestimated when using the Ordinary Least Square (OLS) estimator. The PPML method also allows sectoral estimation of the relationship. We nd that whether outward FDI creates or replaces trade depends on the industry under scrutiny. Our results indicate that the complementary relationship between FDI and trade is dominant in the Japanese manufacturing sector, especially in electric machinery, transportation equipment, and precision machinery. We nd also that Japanese overseas investments substitute for exports in chemicals products, and for both exports and imports in general machinery.
    Keywords: Exports, imports, outward foreign direct investment (FDI), Poisson pseudo-maximum likelihood (PPML)
    JEL: C23 F14 F21
    Date: 2013–06
  2. By: Celbis, Mehmet Güney (UNU-MERIT / MGSoG, Maastricht University); Nijkamp, Peter (Vrije Universiteit Amsterdam); Poot, Jacques (University of Waikato)
    Abstract: Low levels of infrastructure quality and quantity can create trade impediments through increased transport costs. Since the late 1990s an increasing number of trade studies have taken infrastructure into account. The purpose of the present paper is to quantify the importance of infrastructure for trade by means of meta-analysis and meta-regression techniques that synthesize various studies. The type of infrastructure that we focus on is mainly public infrastructure in transportation and communication. We examine the impact of infrastructure on trade by means of estimates obtained from 36 primary studies that yielded 542 infrastructure elasticities of trade. We explicitly take into account that infrastructure can be measured in various ways and that its impact depends on the location of the infrastructure. We estimate several meta-regression models that control for observed heterogeneity in terms of variation across different methodologies, infrastructure types, geographical areas and their economic features, model specifications, and publication characteristics. Additionally, random effects account for between-study unspecified heterogeneity, while publication bias is explicitly addressed by means of the Hedges model. After controlling for all these issues we find that a 1 per cent increase in own infrastructure increases exports by about 0.6 per cent and imports by about 0.3 per cent. Such elasticities are generally larger for developing countries, land infrastructure, IV or panel data estimation, and macro-level analyses. They also depend on the inclusion or exclusion of various common covariates in trade regressions
    Keywords: Infrastructure, Trade, Transportation, Communication, Public Capital, Public Goods, Meta-Analysis
    JEL: O18 F10 H54 R53 C10 F19 R49
    Date: 2013
  3. By: Wolfgang Lechthaler; Mariya Mileva
    Abstract: We develop a dynamic trade model with comparative advantage, heterogeneous firms and workers and endogenous firm entry to study wage inequality during the adjustment to trade liberalization. We find that trade liberalization increases wage inequality both in the short run and in the long run. In the short run, wage inequality is mainly driven by inter-sectoral wage inequality, while in the long run, wage inequality is driven by an increase in the skill premium. It is not a good idea to exclude certain sectors from trade liberalization, because that greatly reduces the benefits of trade liberalization, while failing to protect vulnerable workers.
    Keywords: Trade liberalization, wage inequality, adjustment dynamics
    JEL: E24 F11 F16 J62
    Date: 2013–07
  4. By: Gebreeyesus, Mulu (UNU-MERIT / MGSoG)
    Abstract: On 1 January 2005, the international trade in textile and clothing was freed from the quota restrictions that had persisted for more than four decades. This study tests one of the predictions that countries effectively constrained by quotas in the major world markets will increase their exports at the expense of non-quota-constrained suppliers. The focus is on clothing imports of the two major markets, the US and EU-15. These markets are separately analysed as they constitute different lists of quota-constrained countries, QCCs. Unlike others, this study uses a relatively longer data set of post-quota years, which allows us to understand the medium-term adjustment process of exporters following quota removal. We find a large amount of heterogeneity among the QCCs in their post-quota export performance. Only a few QCCs have benefited at the expense of not only the non-quota countries but also fellow QCCs. The estimates show that almost half of the QCCs were better off under the quota regime at least in terms of exports. The factors most likely to have influenced their heterogeneous performance are also examined.
    Keywords: Global apparel trade, Quotas, MFA, Heterogeneous country performance, Trade Quota, Textile Industry, Clothing Industry, Multifibre Arrangement, QCC, export performance, trade policy
    JEL: F13 F14 L67 O24
    Date: 2013
  5. By: Schuster, Monica; Maertens, Miet
    Abstract: While recent studies emphasize the importance of firm heterogeneous effects in understanding international trade and its gains, these insights have largely been ignored in the literature on standards. In this paper we analyze how the adoption of private food standards by individual firms affects their export performance at the intensive and extensive margins of trade. We use unique 18-year panel data from 95 asparagus export firms in Peru and apply fixed effects and system GMM models. Results indicate that, when export persistence, unobserved heterogeneity and reversed causality are controlled for, certification to private standard schemes does not improve firms’ propensity to export, nor their export volumes and values. This insight puts doubt on the effectiveness of development programs to support developing country exporters to comply with private food standards in order to maintain or improve international market access.
    Keywords: Food standards, Private standards, Firm heterogeneity, New new trade theory, Export performance, Developing countries, Agribusiness, Agricultural and Food Policy, C23, F14, Q17,
    Date: 2013
  6. By: Peter Liapis
    Abstract: Information on export restrictive measures was collected from 16 countries for the period 2007 to 2011 or 2012 depending on the country. The data indicate that export measures were applied across the whole spectrum of agricultural and food products, but grains, oilseeds and vegetable oils were particularly targeted. A variety of measures were employed at least one time on at least on product. Export bans were used by most (13) of the countries in the inventory while nine countries used export duties and export quotas were used by eight. The various measures were often used sequentially or concurrently. The data indicate that in most years, world trade of the commodities of interest rose suggesting that when restrictive measures lowered exports from intervening countries, competitors were able to compensate. For the world rice market, however, export restrictions significantly lowered exports of interfering countries, but other rice suppliers filled the gap as total imports were not affected.
    Keywords: agricultural trade, agricultural policy, export restrictions, grains (wheat, rice, maize), food trade, vegetable oils
    JEL: Q02 Q17 Q18
    Date: 2013–07–04
  7. By: Josheski, Dushko; Apostolov, Mico
    Abstract: This paper examines the export performance of the Republic of Macedonia to its main trading partners; hence we focus on the major importing countries which are most present in the Macedonian trade balance. The data used in this article are analyzed with gravity model, which has good characteristics and very stable performance. Further, the data sample is formed on the Balkan countries i.e. Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Greece, Romania, Slovenia, Turkey and Serbia and Montenegro. The results show that the domestic country GDP is positively correlated with the exports from the source country to target countries and that Balkan countries have positive propensities to import from Macedonia, however it was found that populations of source country and target country are negatively correlated with exports from the source country to target countries. Additionally, the business cycles had no positive effect on Macedonian export to the target countries.
    Keywords: exports, gravity model, Macedonia
    JEL: E30 F10 O10 P20
    Date: 2013
  8. By: Elsa Leromain; Gianluca Orefice
    Abstract: Balassa Index (Balassa 1965) is widely used in the literature to measure country-sector Revealed Comparative Advantage (RCA). However, being computed on observed trade flows, it mixes up all the factors influencing trade flows. In particular, Balassa Index cannot isolate exporter-sector (ex ante) specific factors which are the source of comparative advantage in the spirit of the traditional trade model. Furthermore, Balassa Index suffers some empirical distribution weaknesses, mainly time instability and poor ordinal ranking property (Yeats 1985; Hinloopen and Van Marrewijk 2001). A recent paper by Costinot et al. (2012) provides a micro-founded version of the Ricardian model and suggests a new measure for comparative advantage. We build up on this paper, and present a dataset providing a new econometric based measure for Ricardian RCA.
    Keywords: Revealed Comparative Advantag;Ricardian model;Exports
    JEL: F11 F14
    Date: 2013–06
  9. By: Stéphane BECUWE; Bertrand BLANCHETON; Léo CHARLES
    Abstract: Starting from Bairoch’s observation of declining French foreign trade, especially in emerging markets during the first globalization (1880-1914), this article endeavours to identify the sources for the failure to exploit the opportunities afforded by global economic growth after 1870. For this purpose a comprehensive dataset of French imports and exports of unparalleled size was assembled to investigate the changes these underwent both in geographical and product distribution over a period of 64 years. Applying standard tests of trade flow concentration, we find that France’s trade structure reflected its early intra-industry specialization which implied increasing reliance on ‘proximity’ markets.
    Keywords: International trade, Intra-Industry trade, 1st globalization, Specialization, France
    JEL: N7
    Date: 2013
  10. By: Kilolo, Jean-Marc Malambwe
    Abstract: In this paper, I develop a North-South pure exchange model to explain transfers between asymmetric countries. Two theories are investigated: firstly, I consider the theory of trade agreements; contrary to conventional wisdom, an efficient trade agreement (ETA) does not necessarily lead to free trade in the absence of internal political economy distortions. In fact, the ETA between asymmetric countries is such that the South sets a tariff higher than its Nash tariff and the North subsidizes its imports. When the difference in the endowment size is very large, the South's welfare gain is insufficient to compensate for the North's welfare loss. Interestingly enough, free trade always dominates the trade war equilibrium, regardless of countries' endowments. Secondly, I consider the theory of optimal tariffs and foreign aid. To encourage the South to liberalize trade, the North makes a transfer to the South - which increases with the countries' size asymmetry. To test this prediction, I use ACP-EU aid data and find that an increase in the recipient countries' relative size reduces foreign aid transfers. The present analysis provides a theoretical framework to understand the transition from the privileged market access to ACP-EU economic partnership agreements (EPAs) involving reciprocal trade concessions and the role of the adjustment transfers in this process.
    Keywords: asymmetry, foreign aid, transfers, tariffs, trade war.
    JEL: F13 F35
    Date: 2013
  11. By: Youssouf KIENDREBEOGO
    Abstract: This paper investigates whether banking crises are associated with declines in bilateral exports. We first develop a simple open economy model in which banking crises translate into negative liquidity shocks, leading to collapses in exports through supply-side and demand-side shocks. We then estimate a gravity model using a sample of developed and developing countries over the period 1988-2010. The results suggest that crisis-hit countries experience lower levels of bilateral exports, particularly in developing countries where supply-side shocks are found to be relatively more important than demand shocks. In developing countries, exports of manufactured goods are disproportionately hurt by banking crises and this negative effect is stronger in industries relying more on external finance. These findings are robust to correcting for potential endogeneity, to changes in the sample, and to alternative estimation methods.
    Keywords: Banking Crises, Exports, Trade Finance F14, G01
    JEL: G1 F14
    Date: 2013
  12. By: Christopher Kurz; Mine Z. Senses
    Abstract: In this paper, we use detailed trade and transactions data for the U.S. manufacturing sector to empirically analyze the direction and magnitude of the association between firm-level exposure to trade and the volatility of employment growth. We find that, relative to purely domestic firms, firms that only export and firms that both export and import are less volatile, whereas firms that only import are more volatile. The positive relationship between importing and volatility is driven mainly by firms that switch in and out of importing. We also document a significant degree of heterogeneity across trading firms in terms of the duration of time and intensity with which firms trade, the number and type of products they trade and the number and characteristics of their trading partners. We find these factors to play an important role in explaining the differential impact of trading on employment volatility experienced by these firms.
    Keywords: Trade, Firm Heterogeneity, Employment Volatility
    JEL: F1 F16 L25 L60
    Date: 2013–06
  13. By: Bernard Hoekman
    Abstract: The value of world trade has increased 27-fold since 1950, three time more that the growth of global GDP. An increasing share of that trade involves international supply chains and the global fragmentation of production. But many countries do not participate intensively in this process. One reason is that variety of policies increase supply chain costs and inhibit firms from locating part of their supply chain to a country or region. This paper argues for a new approach by governments and the business community to identify and reduce supply chain barriers, including in the context of international trade agreements. Using trade agreements to lower trade costs that negatively affect the operation of supply networks would help increase their welfare impact and their relevance to business.
    Keywords: international supply chains, trade agreements, WTO, logistics, trade negotiations
    Date: 2013–06
  14. By: Katsufumi Fukuda (Visiting Researcher and Research Assistant, Graduate School of Economics, Faculty of Economics, Kobe University, JAPAN)
    Abstract: We construct a semi endogenous growth model with firm heterogeneity, endogenous international spillover, and international trade and investigate the effects of further exposure to trade on R&D difficulty and welfare. Further exposure has ambiguous effects on R&D difficulty, increases when the sunk cost for foreign market is strictly greater than for domestic market and intertemporal spillover is sufficiently large, and decreases when the sunk costs for both markets are the same or the intertemporal spillover is small. We find unambiguously positive effect on welfare because the positive effects of the rises in the weighted average of productivity and the reduction in R&D costs through international spillovers strictly dominates the negative effects of increases in R&D costs through greater competition.
    Date: 2013–06
  15. By: Muñoz Sepulveda, Jesus Angel; Rodriguez, Diego
    Abstract: This paper addresses sequential entry decisions in export markets. It focuses on externalities derived from previous export activity in countries close to those for which a potential entry decision is taken (geographical spillovers) and externalities derived from previous presence of other firms in the same industry (industrial spillovers). The empirical analysis uses Spanish microdata for the period 2000-2010 in a gravity function framework that also integrates country and firm characteristics. The results suggest the positive effect of both geographical and industrial spillovers to explain entry decisions in export markets, though both are smaller in magnitude than the effects coming from previous presence.
    Keywords: Sequential entry, spillovers, export activity
    JEL: F10 F14
    Date: 2013–07–05
  16. By: Jesus Crespo Cuaresma; Mathias Moser; Anna Raggl
    Abstract: We present a method aimed at estimating global bilateral migration flows and assessing their determinants. We employ that fact that available net migration figures for a country are (nonlinear) aggregates of migration flows from and to all other countries of the world in order to construct a statistical model that links the determinants of (unobserved) migration flows to total net migration. Using simple specifications based on the gravity model for international migration, we find that migration flows can be explained by standard gravity model variables such as GDP differences, distance or bilateral population. The usefulness of such models is exemplified by combining estimated specications with population and GDP projections in order to assess quantitatively the expected changes in migration flows to Europe in the coming decades.
    Keywords: bilateral migration flows, gravity model, nonlinearly aggregated models
    JEL: F22 O15 J11
    Date: 2013–06
  17. By: Teresa C. Fort
    Abstract: This paper documents the relative importance of labor cost differences, distance to suppliers, and communication technology in a rm's domestic and foreign sourcing decisions. Using an original dataset of U.S. manufacturers' decisions to contract for manufacturing services, I show that domestic fragmentation: i) is far more prevalent than offshoring; ii) changes rms' opportunity cost to offshore; and iii) is facilitated by communication technology. In contrast, communication technology does not necessarily lead rms to offshore. Firms fragment production to access cheaper labor, and countries that offer signifcant labor cost savings tend not to have the technology infrastructure to support high-tech production.
    Keywords: fragmentation, offshoring, technology, contract manufacturing services
    JEL: F14 F23 L23
    Date: 2013–07
  18. By: Diego Puga (CEMFI, Centro de Estudios Monetarios y Financieros); Daniel Trefler (University of Toronto)
    Abstract: International trade can have profound effects on domestic institutions. We examine this proposition in the context of medieval Venice circa 800–1600. Early on, the growth of long-distance trade enriched a broad group of merchants who used their newfound economic muscle to push for constraints on the executive i.e., for the end of a de facto hereditary Doge in 1032 and for the establishment of a parliament in 1172. The merchants also pushed for remarkably modern innovations in contracting institutions that facilitated long-distance trade e.g., the colleganza. However, starting in 1297, a small group of particularly wealthy merchants blocked political and economic competition: they made parliamentary participation hereditary and erected barriers to participation in the most lucrative aspects of long-distance trade. Over the next two centuries this led to a fundamental societal shift away from political openness, economic competition and social mobility and towards political closure, extreme inequality and social stratification. We document this ‘oligarchization’ using a unique database on the names of 8,178 parliamentarians and their families’ use of the colleganza in the periods immediately before and after 1297. We then link these families to 6,971 marriages during 1400–1599 in order to document the use of marriage alliances to monopolize the galley trade and the consequent rise of extreme inequality, with those who were powerful before 1297 emerging as the undisputed winners.
    Keywords: International trade, Institutions, Medieval Venice.
    JEL: D02 F10 N43
    Date: 2013–06
  19. By: Xing, Yuqing (Asian Development Bank Institute); Pradhananga, Manisha (Asian Development Bank Institute)
    Abstract: The global financial crisis and the recent growth slowdown in the People’s Republic of China (PRC) have led to questions about the sustainability of the PRC’s growth. The commonly used argument is that the PRC is too dependent on external demand and that it needs to rebalance its economy toward domestic consumption. However, conventional measures of external demand—share of net exports and exports as a share of gross domestic product (GDP)—are biased and do not accurately measure the contribution of external demand to GDP growth. In this paper, the authors propose two measures that provide a more accurate estimate of the vulnerability of the PRC economy to external shocks, in the form of sudden drops in exports and foreign direct investment (FDI). Based on their findings, the authors conclude that the PRC economy remains highly dependent on external demand in the form of exports and FDI, and rebalancing the economy toward domestic demand has not yet been achieved.
    Keywords: prc economy; growth; external demand; gdp accounting
    JEL: E01 F43
    Date: 2013–07–01
  20. By: Rifin, Amzul; Nauly, Dahlia
    Abstract: The government of Indonesia implemented an export tax policy on cocoa beans since April 2010 in order to develop cocoa processing industry. The objective of this article is to analyze the effect of export tax on Indonesia’s cocoa export competitiveness. The results indicate that with the implementation of export tax, cocoa export product composition shift from cocoa beans to processed cocoa products. On the other hand, Indonesia’s cocoa export growth is lower than the growth of cocoa world demand which is mainly caused by the decrease of competitiveness. Comparing the three cocoa beans producer, Ghana has gain competitiveness in 2011 compare to 2009.
    Keywords: cocoa, export tax, competitiveness, Crop Production/Industries, Demand and Price Analysis, International Relations/Trade, Production Economics,
    Date: 2013–02
  21. By: Briones, Roehlano M.
    Abstract: Expansion of global trade has been heralded as a great boon for agriculture. However, benefits of such expansion has been seen by some quarters as inequitable due to the role of large agribusiness firms and conglomerates. This study synthesizes existing research on the market structure of agro-industry trade. Its key findings are as follows: - The dominance of large-scale operations is more pronounced in the downstream stages. Moreover, distribution for foreign markets is the most concentrated part of the global chain. - Increasing horizontal concentration, and vertical coordination, arises from a set of supply drivers (e.g., technological change), demand drivers (e.g., rising purchasing power), policies, and institutional factors. - There is some evidence for significant market power being exercised among the more concentrated value chains. Furthermore, indications that market concentration can also be leveraged to widen the exercise of market power via coordination along a supply chain. However, the association is not absolute. - At the farm level, the evidence is more solid: size of land asset or scale of production, by itself, does not seem to disqualify smallholders from supplying to consolidated value chains, as there are enabling schemes such as supervised contract growing, cooperatives, farmer associations, and the like. More critical however are human capital, farm management practices, and other assets such as equipment and irrigation facilities. Despite the great volume of relevant literature, the tentative nature of the findings stated above indicate wide scope for further research in this area. Better information and analysis could perhaps pave the way toward design of policies for more equitable and yet productive and efficient global value chains.
    Keywords: distribution, agricultural trade, market structure, global value chain
    Date: 2013

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