nep-int New Economics Papers
on International Trade
Issue of 2013‒08‒23
twenty papers chosen by
Alessia A. Amighini
Universita' Amedeo Avogadro

  1. Export Diversification: How Much Does the Choice of the Trading Partner Matter? By Julie Regolo
  2. Agglomeration Matters for Trade By Enrique Moral-Benito
  3. Factors of trade in Europe By Jan Hanousek; Evžen Kočenda
  4. Incomplete Specialization and Trade in Parts and Components By Richard Frensch; Jan Hanousek; Evžen Kočenda
  5. Innocent bystanders: how foreign uncertainty shocks harm exporters By Taglioni, Daria; Zavacka, Veronika
  6. Outward Foreign Direct Investment, Exporting and Firm-Level Performance in Sub-Saharan Africa By Neil Foster-McGregor; Anders Isaksson; Florian Kaulich
  7. Importing, Exporting and Performance in Sub-Saharan African Manufacturing Firms By Neil Foster-McGregor; Anders Isaksson; Florian Kaulich
  8. Fishing in the same pool? export strengths and competitiveness of China and CESEE in the EU-15 Market By Silgoner, Maria; Steiner, Katharina; Wörz, Julia; Schitter, Christian
  9. Trade adjustment in the European Union - a structural estimation approach By Corbo, Vesna; Osbat, Chiara
  10. Migration and Cross-Border Financial Flows By Maurice Kugler; Oren Levintal; Hillel Rapoport
  11. Exchange Volatility and Export Performance in Egypt: New Insights from Wavelet Decomposition and Optimal GARCH Model By Bouoiyour, Jamal; Selmi, Refk
  12. Theory and Measurement of Competitiveness By Rantala, Olavi
  13. International Fragmentation of Production, Trade and Growth: Impacts and Prospects for EU Member States By Neil Foster-McGregor; Robert Stehrer; Marcel Timmer
  14. Multilateralizing Asian Regionalism By Baldwin, Richard; Kawai, Masahiro
  15. The Role of International Trade in Employment Growth in Micro- and Small Enterprises: Evidence from Developing Asia By Krüger, Jens
  16. Impact of Croatian EU Accession on Regional Trade Patterns By Mario Holzner
  17. Modifying Export Taxes and Quotas To Make Them Less Market-Distorting By Liefert, William M.; Wescott, Paul; Wainio, John
  18. Export market exit, financial pressure and the crisis By Holger Görg; Marina-Eliza Spaliara
  19. Institutions and the Location Decisions of Highly Skilled Migrants to Europe By Nowotny, Klaus
  20. How Do Smaller Firms Select Foreign Markets? By Musso, Fabio; Francioni, Barbara

  1. By: Julie Regolo
    Abstract: This paper studies how a country’s export diversification varies across destination markets. It develops an extension of the Romalis (2004) model which yields two testable predictions. According to the first, exports between similarly endowed countries (“South-South” and “North- North”) are more diversified than exports between differently endowed countries (“South-North” and “North-South”). The second implication is that, for given countries’ production patterns, low bilateral trade costs lead to greater export diversification. These predictions find empirical support in a panel of 102 trade partners and 4998 HS-6 industries over the period 1995-2007. Results show that similarities between trading partners in physical capital, land and human capital endowments per worker are associated with more diversified bilateral exports. Exports are also more diversified when bilateral trade costs are relatively low.
    Keywords: Export diversification, comparative advantage, trade costs, intra-industry trade, North- South trade
    Date: 2013–07
  2. By: Enrique Moral-Benito (Bank of Spain)
    Abstract: We use a unique administrative dataset of Spanish exporters to document the existence of exporters' geographical agglomeration by export-destination. We reveal that firms selling to countries with worse business regulations, dissimilar language and different currency tend to cluster signicantly more. We then assess the implications of exporters' geographical agglomeration for firms' behaviour and for the estimated welfare gains from trade. On the one hand, we find that exporters engage in more stable trade relationships with those countries that are the export-destinations of nearby firms. On the other, we introduce agglomeration in a model of international trade a la Melitz (2003). Using our Spanish firm-level data, we find that relative to a model without agglomeration, accounting for this phenomenon increases by 44% the elasticity of welfare with respect to fixed trade-costs.
    Date: 2013
  3. By: Jan Hanousek (CERGE-EI); Evžen Kočenda
    Abstract: We analyze how a set of traditional as well as new determinants affect trade among European countries over the period 1992–2008. The factors encompass variables from the areas of geography, culture, institutions, infrastructure, and trade direction. Trade is analyzed for three types of goods: primary goods, parts and components, and capital goods. For each type of good we also distinguish its definiti on in terms of flows, intensive margin, and extensive margin. Methodologically we first derive country-pair fixed effects over all possible pairs of export-import partners, and in the second stage we relate fixed effects with a set of influential factors. We show (i) the intuitive and varying effects of geographical, cultural, and institutional factors, (ii) the beneficial effects of soft and hard infrastructure, and (iii) the key importance of the trade between old and new EU members.
    Keywords: bilateral trade, factors of trade, panel data, European Union
    JEL: F14 F16 L24
    Date: 2013–08
  4. By: Richard Frensch; Jan Hanousek; Evžen Kočenda
    Abstract: Within a higher-dimensional incomplete specialization Heckscher-Ohlin framework, we first develop a gravity model that views bilateral gravity equations as statistical relationships constrained on countries’ multilateral specialization patterns. Second, we test our model empirically by using a uniquely detailed and large European data set. We show that trade in the parts and components of capital goods is driven by supply-side country differences relative to the rest of the world, compatible with models of incomplete specialization and trade. We take our results as evidence of the existence of international production networks in Europe, driven by trade-offs between wages and coordination costs.
    Keywords: International trade, gravity model, offshoring, panel data, European Union
    JEL: C23 F14 F23
    Date: 2013–03–15
  5. By: Taglioni, Daria; Zavacka, Veronika
    Abstract: The failure of trade economists to anticipate the extreme drop in trade post Lehman Brothers bankruptcy suggests that the behavior of trade in exceptional circumstances may still be poorly understood. This paper explores whether uncertainty shocks have explanatory power for movements in trade. VAR estimations on United States data suggest that domestic uncertainty is a strong predictor of movements in imports, but has little effect on exports. Guided by these results, the paper estimates a bilateral model with focus on the impact of importer uncertainty on foreign suppliers. It finds that there is a strong negative relationship between uncertainty and trade and that this relationship is non-linear. Uncertainty matters most when its levels are exceptionally high. The paper does not find evidence of learning from past turmoils, suggesting that prior experience with major uncertainty shocks does not reduce the effect on trade. In line with the expectations, the negative effect of uncertainty shocks on trade is higher for trade relationships more intensive in durable goods. Surprisingly, however, the effect of durability is non-linear. Supply chain considerations or the possibility that the relationships with the highest durability lead to important compositional effects may have a bearing on the results. The results are robust to excluding the post Lehman shock, suggesting that the trade response during the 2008-2009 crisis has been similar to past uncertainty events. JEL Classification: F02, F10, G01
    Keywords: exporters, international trade, uncertainty shocks
    Date: 2013–04
  6. By: Neil Foster-McGregor (The Vienna Institute for International Economic Studies, wiiw); Anders Isaksson; Florian Kaulich
    Abstract: This paper adds to the small but growing literature that considers a relationship between the way a firm serves foreign markets and its subsequent performance. The current paper is the first to consider this issue for a sample of sub-Saharan African countries and includes data on both manufacturing and services firms. Results from a number of parametric and non-parametric tests for manufacturing industries indicate that there is a clear productivity ordering with firms undertaking outward FDI performing best, followed by exporters with domestically oriented firms performing least well. The results for services firms are more nuanced and indicate that while exporters and firms undertaking outward FDI are more productive than domestically oriented firms, there is no significant difference in productivity between these two types of firms. Despite this, average productivity and point estimates from the regression analysis on services firms suggest that the productivity of exporting firms is larger than that for firms undertaking outward FDI.
    Keywords: exports, foreign direct investment, productivity, services firms
    JEL: F14 F21
    Date: 2013–03
  7. By: Neil Foster-McGregor (The Vienna Institute for International Economic Studies, wiiw); Anders Isaksson; Florian Kaulich
    Abstract: This paper examines productivity differences between internationally trading and non-trading firms using data on a sample of firms from 19 sub-Saharan African countries. The paper provides the first evidence of whether exporters, importers and two-way traders perform better than non-traders, and whether there are differences in performance between different types of trading firms in sub-Saharan Africa. Our results indicate that exporters, importers and two-way traders perform better than non-exporters, non-importers and non two-way traders. We further find that two-way traders perform better than importers only or exporters only, results largely consistent with recent results for other countries and regions. Considering information on export starters, continuers and exiters we also present some evidence consistent with both self-selection and learning-by-exporting.
    Keywords: firm-level performance, importers, exporters
    JEL: D24 F10 M20 L10
    Date: 2013–03
  8. By: Silgoner, Maria; Steiner, Katharina; Wörz, Julia; Schitter, Christian
    Abstract: We investigate the impact of China as a global competitor on the trade performance of the ten Central, Eastern and Southeastern European EU Member States (CESEE-10) in the EU-15 market. The paper takes a comprehensive approach as we analyze export growth, export market shares, extensive and intensive margins and the dynamics in the number of joint trade links (Dynamic Trade Link Analysis) from 1995 to 2010. According to our findings, the most contested markets are those for capital goods and transport equipment. Overall, competition between CESEE-10 and China intensified as a result of their outstanding competitiveness and the continuous deepening of already existing trade relationships, while cutthroat competition has not materialized. While this suggests that the CESEE countries pursue a suitable export strategy, diversification of production toward promising new industries and markets remains essential, not least because the EU-15 market is projected to grow at a slower pace in the longer run. JEL Classification: F14, F15, O57
    Keywords: central, China, competitiveness, Eastern and Southeastern Europe, trade shift-share analysis
    Date: 2013–06
  9. By: Corbo, Vesna; Osbat, Chiara
    Abstract: We estimate the elasticity of substitution of a country’s imports, and that of its exports on the world market, for EU countries using sector level trade data. We present a new empirical strategy based on the identification scheme by Feenstra (1994), which enables the estimation of elasticities from data on exports. Moreover, our use of bootstrap methods allows us to obtain better elasticity measures, and to better characterize their accuracy. Our results show much heterogeneity in the estimates of the elasticity of substitution across industrial sectors. This, in turn, points to heterogeneity across countries, due to different production and trade structures. We obtain aggregate elasticities for the EU27 countries, with a mean of 3.5 for imports and 4.0 for exports, bringing us closer to traditional estimates and bridging the gap between the newer micro data estimates and the more traditional estimates found in the macroeconomic literature. JEL Classification: C23, F14, F47
    Keywords: Aggregation, calibration of macroeconomic models, Elasticity of Substitution, heterogeneity
    Date: 2013–04
  10. By: Maurice Kugler; Oren Levintal (Bar-Ilan University); Hillel Rapoport (Bar-Ilan University)
    Abstract: The gravity model has provided a tractable empirical framework to account for bilateral flows not only of manufactured goods, as in the case of merchandise trade, but also of financial flows. In particular, recent literature has emphasized the role of information costs in preventing larger diversification of financial investments. This paper investigates the role of migration in alleviating information imperfections between home and host countries. We show that the impact of migration on financial flows is strongest where information problems are more acute (that is, for more informational sensitive investments and between more culturally distant countries) and for the type of migrants that are most able to enhance the flow of information, namely, skilled migrants. We interpret these differential effects as additional evidence pointing to the role of information in generating home-bias and as new evidence of the role of migration in reducing information frictions between countries.
    Keywords: Migration, international financial flows, international loans, gravity models, information asymmetries
    JEL: F21 F22 O1
    Date: 2013–07
  11. By: Bouoiyour, Jamal; Selmi, Refk
    Abstract: This paper assesses the link between exchange volatility and exports in Egypt by combining wavelet analysis with an optimal GARCH model chosen among various extensions. The observed outcomes reveal that this relationship is complex and depends then widely to frequency-to-frequency variation and slightly to leverage effect and to switching regime. Indeed, it is well shown that at the low frequency, the coefficient associated to exchange rate volatility’s effect on trade performance is more intense than that at the high frequency and conversely when subtracting energy share from the total of exports. We attribute the apparently conflicting results to the financial speculation, the composition of trade partners and the choice of reference basket’s currencies.
    Keywords: Exchange volatility; exports; wavelet decomposition; optimal GARCH model.
    JEL: C1 F1 F14
    Date: 2013–01
  12. By: Rantala, Olavi
    Abstract: The study deals with the theory and measurement of competitiveness. The basic theory of firm implies that under constant returns to scale the unit cost of production can be used to measure the marginal cost of production and to model the impact of competitiveness on the market share of a firm. The competitiveness and the market share of a firm is the lower the higher its unit costs are compared to the average unit costs of all firms in the market. Empirical measurement of the unit costs of the Finnish industry is made with respect to Germany. It turns out that the unit costs of the Finnish industry have risen higher than the unit costs of the German industry since 2005, calculated without the effect of electronics industry. In addition to production costs the study deals with the theoretical and empirical impact of transportation costs on competitiveness in export markets. This is an important issue for Finland locating geographically far away from the main markets of the world. A major disadvantage for the future competitiveness of Finnish export industry will be the EU sulphur directive and the possible inclusion of shipping into the EU emissions trading scheme. The longer marine transportation distance from Finland means that Finland will lose competitiveness for example compared to Germany.
    Keywords: competitiveness, imperfect competition, production costs, transportation costs
    JEL: C67 D43 F12
    Date: 2013–08–14
  13. By: Neil Foster-McGregor (The Vienna Institute for International Economic Studies, wiiw); Robert Stehrer (The Vienna Institute for International Economic Studies, wiiw); Marcel Timmer
    Abstract: There has been an ongoing trend towards increasing internationalisation of production over the past two decades or so. This implies that countries become more dependent on demand from foreign countries but also that countries and industries are able to source intermediates from different countries, an activity referred to as ‘offshoring’. Whereas the former aspect means an increasing dependency on foreign markets, the second aspect implies that countries and industries source at lower costs making them more productive and competitive. Using the World Input-Output Database (WIOD) we first provide an overview of these trends over the period 1995-2011 for 40 advanced and emerging countries with a specific focus on the EU as a whole and the individual EU member states. In the second part of the paper we show results from an econometric analysis to explain growth performance, focusing on the impacts of the increasing internationalisation of production.
    Keywords: international fragmentation of production, growth, employment, trade
    JEL: E20 F15 F43
    Date: 2013–05
  14. By: Baldwin, Richard (Asian Development Bank Institute); Kawai, Masahiro (Asian Development Bank Institute)
    Abstract: Motivated by the proliferation of free trade agreements (FTAs) in Asia over the last decade, this paper studies the challenges faced by the Asian “noodle bowl”—overlapping, multiple trade rules, regulations, and standards in Asia—in the process of regional and global trade integration. The paper first highlights the importance of trade and investment linkages among Asian economies that have formed Asian supply chains, called Factory Asia. It then considers ways and means of multilateralizing Asian trade regionalism by discussing the pros and cons of various approaches—such as the Association of Southeast Asian Nations (ASEAN)-centered regional trade agreements, including the Regional Comprehensive Economic Partnership agreement, and cross-regional FTAs, including the Trans-Pacific Partnership agreement and a future Asia–European Union FTA. The paper emphasizes the promising role of inclusive Asian regionalism and the need to move to global integration.
    Keywords: free trade agreements; asia; asian noodle bowl; global trade integration; asean; trans-pacific partnership; inclusive asian regionalism
    JEL: F13 L23 O19
    Date: 2013–08–15
  15. By: Krüger, Jens (Asian Development Bank)
    Abstract: This paper examines the role of international trade in employment growth in micro- and small enterprises using a representative sample of manufacturing firms in six Southeast Asian countries. After controlling for firm and individual characteristics as well as country and sector dummies, participation in international trade plays a significant role in explaining this growth, boosting firm-level growth by 3% per year on average. The fact that firms start exporting quickly after their foundation suggests that reverse causality is not an issue for our estimates. However, biases arising from unobserved heterogeneity cannot be ruled out. Therefore, we exploit the fact that firms were exposed to unexpected variation in real exchange rates between 2005 and 2008 to investigate the causal relationship between trade and employment growth. The results are not conclusive, but they do not suggest that the relationship is driven by unobserved heterogeneity.
    Keywords: MSE graduation; trade; employment growth
    JEL: D22 O12
    Date: 2013–08–01
  16. By: Mario Holzner (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: Summary This report aims to analyse the regional trade effects of Croatia’s accession to the EU and simultaneous exit from the CEFTA agreement on 1st July 2013. The Global Simulation Model (GSIM) as proposed by Francois and Hall (2003) is being applied. As the change in Croatian tariff protection is rather small, price and output changes for most CEFTA countries are expected to be mostly negligible. Only for Croatia the simulation suggests that overall consumer prices might fall by as much as 0.39% and real output by 0.41%, in the short run. However, it can be expected that EU support funds will offset that loss many times over. The share of Croatian exports to the EU is expected to increase by 2.2 percentage points, while the share of exports to the CEFTA countries and to the rest of the world is expected to drop by 0.7 and 1.5 percentage points, respectively.
    Keywords: trade policy simulation, Croatia, EU accession, CEFTA
    JEL: F15 F17 P33
    Date: 2013–06
  17. By: Liefert, William M.; Wescott, Paul; Wainio, John
    Abstract: This paper examines how conventional export taxes and quotas can be modified to make them less market-distorting, and thereby less welfare-diminishing. The modified policies achieve the same economic objectives of the tax or quota, such as reducing the domestic price of the exported good, increasing domestic purchases, and raising revenue, but also generate additional exports beyond the volume that the tax/quota alone would allow. Also, the policies do not involve any government subsidies to either producers or consumers. We examine two scenarios. The first is when a tax or quota is already in place, as in the case of longstanding export taxes that many countries maintain for exports of agricultural, fishery, and forestry products, minerals, and metals. The second scenario is when a measure is not yet in place but a country wishes to impose one, as in the case of short run agricultural export restrictions that countries have enacted in recent years to restrain increases in domestic food commodity prices. We also examine the outcome when the country does and does not have world market power in the exported good.
    Keywords: trade policy, trade restrictions, export taxes, export quotas, export licenses, market power, Agricultural and Food Policy, International Relations/Trade, F13, O24, Q17,
    Date: 2013–07
  18. By: Holger Görg; Marina-Eliza Spaliara
    Abstract: Using firm-level data for the UK, we investigate the link between firms’ financial health, borrowing ratio and export exit, paying special attention to the recent financial crisis. Our results show that deterioration in the financial position of firms has increased the hazard of export exit during the crisis. We also find that the sensitivity of export exit to changes in firms’ financial condition is higher during the crisis for those firms which face increases in loan spreads associated with the firm-specific interest rate
    Keywords: financial pressure, firm exit, financial health, exports
    JEL: F1 L2 G3
    Date: 2013–08
  19. By: Nowotny, Klaus (University of Salzburg)
    Abstract: The economic literature provides ample evidence that immigration of highly skilled workers is beneficial for the host economy. Yet, when compared to countries such as the USA or Canada, Europe receives a lower share of migrants with tertiary education, raising concerns that the EU does not attract enough highly skilled migrants. There is, however, considerable heterogeneity in the share of highly-skilled migrants across EU-15 countries which is even more pronounced at the regional level. This paper uses this heterogeneity to investigate the economic, labor market and institutional factors that make regions and countries attractive for highly skilled migrants vis-a-vis low-skill migrants. Controlling for a variety of regional characteristics, the regressions show both similarities and differences in the determinants of location choice between high- and low-skilled migrants and possible directions for migration policy.
    Keywords: highly-skilled migration; regional location decisions; institutions; migration policy
    JEL: C35 F22 R23
    Date: 2013–08–09
  20. By: Musso, Fabio; Francioni, Barbara
    Abstract: The purpose of this paper was to analyze the internationalization of small and medium-sized enterprises (SMEs) in relation to international market selection (IMS). To accomplish this, an investigation of the primary factors influencing SMEs’ choice when selecting international market in a systematic way was conducted. In addition we sought to understand whether there was a relationship between the systematic approach in IMS and the characteristics of SMEs. Results revealed that the majority of SMEs adopt a non-systematic IMS. However, in the case of SMEs following a systematic approach to IMS, the study pointed out that SMEs are influenced by firm-specific and host country factors, but not by entry barriers like geographic and cultural distance. In addition, results illustrated the existence of a relationship between systematic IMS and firm size.
    Keywords: International market selection, Small and medium-sized enterprises, International strategy, Systematic and non-systematic approaches
    JEL: D92 M16 M21 M31
    Date: 2012–09–25

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