nep-int New Economics Papers
on International Trade
Issue of 2013‒09‒06
nine papers chosen by
Alessia A. Amighini
Universita' Amedeo Avogadro

  1. Trade Liberalisation and Vertical Integration By Peter Arendorf Bache; Anders Laugesen
  2. The Trade and Health Effects of Tobacco Regulations By Gregmar Galinato; Aaron Olanie; Jon Yoder
  3. Trade Protectionism and Intra-industry Trade: A USA - EU Comparison By Ferreira-Lopes, Alexandra; Sousa, Cândida; Carvalho, Helena; Crespo, Nuno
  4. Globalization and Multiproduct Firms By Nocke, Volker; Yeaple, Stephen
  5. The Ease of Trade Imbalances Within the Euro Area After the 2008 Recession By Marcus Scheiblecker
  6. Revisiting the Effectiveness of African Economic Integration. A Meta-Analytic Review and Comparative Estimation Methods By Sylvanus Kwaku Afesorgbor
  7. The Impact of Trade Policy on Industry Concentration in Switzerland By Burghardt, Dirk
  8. International Trade and Labour Demand Elasticities: Is there Any Empirical Evidence from South Africa? By Abdulkader Cassim Mahomedy
  9. Resource Depletion and Trade: Adding a Nonrenewable Resource to the Heckscher-Ohlin Model By Henry Thompson

  1. By: Peter Arendorf Bache (Department of Economics and Business, Aarhus University); Anders Laugesen (Department of Economics and Business, Aarhus University)
    Abstract: We build a three-country model of international trade in final and intermediate goods and study the relation between different types of trade liberalisation and vertical integration. Firms are heterogeneous with respect to both productivity and factor intensity as observed in data. Final-good producers face decisions on exporting, vertical integration of intermediate-input production, and whether the intermediate-input production should be offshored to a low-wage country. We find that due to firm-level complementarities, the shares of final-good producers that pursue either vertical integration, offshoring, or exporting are all increasing when intermediate- or final-goods trade is liberalised and when the cost of vertical integration is reduced. At the same time, one will observe individual firms that shift away from either vertical integration, offshoring, or exporting. All these results hold for a class of productivity distributions to which the Pareto distribution belongs.
    Keywords: International Trade, Firm Heterogeneity, Incomplete Contracts, Vertical Integration, Offshoring, Exporting, Trade Liberalisation
    JEL: D23 F12 L23
    Date: 2013–09–02
  2. By: Gregmar Galinato; Aaron Olanie; Jon Yoder (School of Economic Sciences, Washington State University)
    Abstract: This paper examines how domestic and foreign tobacco regulations affect tobacco trade flows and consumer health in importing countries. We develop a gravity equation incorporating domestic and foreign tobacco regulations into a country’s tobacco import demand. We estimate the bilateral trade effects of marketing, counter-advertising, age and smoking tobacco location regulations. There are two striking results: smoking location regulations reduce tobacco exports and imports, and marketing regulations may actually increase tobacco trade. The magnitude of these effects is larger when the trading partners are rich exporters and poor importers. Using existing health effect elasticities in conjunction with our results, we show how these changes affect tobacco-related mortality and morbidity in importing countries. Our results highlight the importance of implementing policies that account for potential spillover effects in an increasingly multilateral economy.
    Keywords: bilateral trade effect; gravity model; tobacco regulation; mortality
    JEL: F14 I18
    Date: 2013–08
  3. By: Ferreira-Lopes, Alexandra; Sousa, Cândida; Carvalho, Helena; Crespo, Nuno
    Abstract: The aim of this work is to find patterns for products included in the customs tariffs of the USA and the EU (composed of over 5000 products disaggregated at the 6 digit-level) which share similarities, defined by a set of international trade variables, namely the index of revealed comparative advantages (RCA), the Grubel-Lloyd index, and other indicators of international trade. There is a recent strand in the literature advancing a theory that links the degree of intra-industry trade with the level of protectionism. In order to test this theory we use cluster analysis as a method of data analysis and the Grubel-Lloyd index as a classification variable between groups. For each of the analyzed regions we obtain four different groups. Thereafter each of these four clusters are further characterized with the help of the other international trade indicators and the tariffs. Finally, we establish a comparison between the two regions by examining possible differences and similarities. The results show a significant difference in the tariffs applied between the USA and the EU, with the USA presenting a lower level of protectionism. Additionally, the results for the USA show a positive relationship between the degree of intra-industry trade and a lower level of protectionism, while for the EU the results are not conclusive.
    Keywords: Trade Policy, Customs Tariff, USA, EU, Intra-industry Trade, Cluster Analysis
    JEL: C38 F12 F13 F14
    Date: 2013–07–31
  4. By: Nocke, Volker; Yeaple, Stephen
    Abstract: We present an international trade model with multiproduct firms. Firms are heterogeneously endowed with two types of capabilities that jointly determine the trade-off within firms between managing a large portfolio of products and producing at low marginal cost. The model can explain many of the documented cross- sectional correlations in firm performance measures, including why larger firms are more productive and more diversified, and yet more diversified firms trade at a discount. Globalization is shown to induce heterogeneous responses across firms in terms of scope and productivity, some of which are consistent with existing empirical work, while others are potentially testable.
    Keywords: multiproduct firms , trade liberalization , diversification discount , firm heterogeneity , productivity
    JEL: F12 F15
    Date: 2013
  5. By: Marcus Scheiblecker (WIFO)
    Abstract: Right from the start of the European currency union, trade imbalances could be observed in the current accounts and trade balances of the euro countries. The business cycle upswing reaching into 2008 and the strong inflow of cheap money led to a strong economic expansion especially in the periphery of the euro area. Traditionally abundant wage increases in these countries persisted. In the more export oriented economies in the core of the euro area, however, hardly any wage increases could be observed due to the lacklustre internal demand. As a consequence, those countries gained further in competitiveness in comparison to the periphery. This led to an increase in foreign trade imbalances. With the sharp drop of economic activity in 2008 and the swift dry-up of cheap financial means this process was interrupted. Since, labour unit costs of Spain, Portugal and Greece evolved much more muted than the average of the euro area. As a result, imports of those countries stagnated while exports increased at the same time which led to a nearly balanced external trade in 2012.
    Keywords: External imbalances Euro area Current account
    Date: 2013–08–29
  6. By: Sylvanus Kwaku Afesorgbor (Department of Economics and Business, Aarhus University)
    Abstract: The gravity model has extensively been used in estimating the effectiveness of a number of RTAs in the world. However, many previous studies that assess the effectiveness of African RTAs using gravity model produce contrasting results and are characterize by two main shortcomings. Firstly, these studies failed to account for multilateral resistance term (MRT). The omission of the MRT contributes to biased estimates for standard variables in the gravity model. This bias is reflected in parameters of these previous studies. Secondly, there is significant proportion of zero flows in developing countries’ trade measurement; however, these studies fail in dealing with them properly. The zero flows are more endemic when one considers only African bilateral trade, which has over 50% zero flows. In an attempt to correct this anomaly, previous studies rely on the Tobit model or replacing zero flows with small values. However this strategy has been labeled as infeasible and producing inconsistent parameters. In this study, we conduct a meta-analysis of previous empirical studies to explain the potential heterogeneity in the studies and compare the different estimation methods of the gravity model to Poisson Pseudo Maximum Likelihood (PPML). Using panel data on trade flows from 1980 to 2006 for 47 African countries, we estimate the gravity model for the five major RTAs on the Africa continent. We find that although there is general positive impact of African RTAs, impacts are highly sensitive to different estimation methods and they tend to be significantly overestimated when zero flows are not properly dealt with. Comparative assessment of the five major RTAs indicates highly uneven performance.
    Keywords: Regional Integration in African, Gravity model, Meta-Analysis, Zero flows, PPML
    JEL: C33 F15 O55
    Date: 2013–09–02
  7. By: Burghardt, Dirk
    Abstract: This paper studies the impact of trade policy on industry concentration. Based on the Swiss Business Census, concentration levels for all four-digit manufacturing industries in Switzerland are calculated. Then the effect of a bilateral reduction in technical barriers to trade with the European Union is estimated. Adopting a difference-in-differences approach, it turns out that concentration in affected industries with low R&D intensity increased significantly following the policy change. This supports the notion that fewer firms are able to survive as the toughness of price competition increases. The effect on industries with high R&D intensity is found to be insignificant.
    Keywords: Industry Concentration, Sunk Costs, R&D Expenses, Price Competition, Globalization, Trade Barriers, Natural Experiment, Plant-level Data
    JEL: F13 L10 L60
    Date: 2013–08
  8. By: Abdulkader Cassim Mahomedy
    Abstract: There are various pathways through which the impact of trade openness may be transmitted to the labour market. This study explores a relatively new linkage identified by the literature: the impact on labour demand elasticities via a substitution effect through increased factor substitutability and/or via a scale effect brought about by an increase in product market elasticities. More elastic factor demands have adverse implications for labourers vis-à-vis employers. Using an industry-level panel dataset covering the South African manufacturing sector spanning a period of over three decades, I empirically test for this relationship focusing primarily on the substitution effect. I am able to find, at best, only limited empirical support for my hypothesis of a positive and significant impact of trade liberalisation on labour demand elasticities. Whilst demand for labour appears to have become more elastic for manufacturing overall and in one of ten sectors within manufacturing, this result fails to hold for any of the other industries examined.
    Keywords: International trade, labour demand, elasticities, empirical evidence, South Africa
    Date: 2013
  9. By: Henry Thompson
    Abstract: This paper develops the intertemporal equilibrium of a small open economy with a nonrenewable resource intensive export and a labor intensive import. Optimal depletion implies the resource price rises at the rate of the capital return. Capital grows with investment and labor at a steady rate, raising the issue of whether depletion necessarily diminishes. Effects of a depletion tax, import tariff, and export subsidy are examined. Simulations with Cobb-Douglas production functions illustrate model properties. The paper also considers a constant depletion rate, tragedy of the commons, and myopic resource owner.
    Keywords: Resource Depletion; Trade; General Equilibrium
    JEL: F11
    Date: 2013–08

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.
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