nep-int New Economics Papers
on International Trade
Issue of 2013‒09‒24
sixteen papers chosen by
Alessia A. Amighini
Universita' Amedeo Avogadro

  1. On the Trade and Price Effects of Preferential Trade Agreements By Falvey, Rod; Foster-McGregor, Neil
  2. The Buyer Margins of Firms' Exports By Carballo, Jerónimo; Ottaviano, Gianmarco; Volpe Martincus, Christian
  3. Quantitative Evidence on Transparency in Regional Trade Agreements By Iza Lejárraga; Ben Shepherd
  4. The Effect of Globalization in an Endogenous Growth Model with Heterogeneous Firms and Endogenous International Spillovers: Note By Katsufumi Fukuda
  5. Protection for Sale, Monopolistic Competition and Variable Markups By Enrico Marvasi
  6. Firms' Leverage and Export Quality: Evidence from France By Michele Bernini; Sarah Guillou; Flora Bellone
  7. "Trade, Reform, And Structural Transformation in South Korea" By Betts, Caroline; Giri, Rahul; Verma, Rubina
  8. Globalization and Multiproduct Firms By Volker Nocke; Stephen Yeaple
  9. Conquering the EU Market with New Trade Agreements – Issues of Free Trade Agreements Between the EU and Partner Countries By Rau, Marie-Luise
  10. Supply-chain trade: A portrait of global patterns and several testable hypotheses By Baldwin, Richard; Lopez-Gonzalez, Javier
  11. One Ring to Rule Them All? Globalization of Knowledge and Knowledge Creation By Richard B. Freeman
  12. How distance and different areas of cultivation determine European food and agricultural trade flows By Dreyer, Heiko
  13. What separates us? Sources of resistance to globalization By Head, Keith; Mayer, Thierry
  14. Do Multinationals Transplant their Business Model? By Marin, Dalia; Rousová, Linda; Verdier, Thierry
  15. Economic geography, endogenous fertility, and agglomeration By Tadashi Morita; Kazuhiro Yamamoto
  16. A bargaining theory of trade invoicing and pricing By Goldberg, Linda S.; Tille, Cédric

  1. By: Falvey, Rod; Foster-McGregor, Neil
    Abstract: In this paper we extend recent work using the Gravity Model to estimate the trade and price effects of Preferential Trading Arrangements (PTAs), by explicitly taking into account the extent of the preferential access being provided by the importer. This involves specifying a trade model, deriving appropriate PTA variables, appending them to a gravity-type equation and estimating it. We find that relying on the estimated coefficient on a PTA dummy variable overestimates the trade creating effects of PTAs. We also use average tariff and estimated trade cost data to calculate the effects of the PTAs in force in 2006 on trade flows. We show that ignoring the general equilibrium effects of PTA membership greatly distorts the distribution of outcomes.
    Keywords: Preferential Trading Arrangements, Gravity Model, Trade Diversion
    JEL: F13 F14
    Date: 2013–09
  2. By: Carballo, Jerónimo; Ottaviano, Gianmarco; Volpe Martincus, Christian
    Abstract: We use highly disaggregated firm-level export data from Costa Rica, Ecuador, and Uruguay over the period 2005-2008 to provide a precise characterization of firms' export margins, across products, destination countries, and crucially customers. We show that a firm's number of buyers and the distribution of sales across them systematically vary with the characteristics of its destination markets. While most firms serve only very few buyers abroad, the number of buyers and the skewness of sales across them increases with the size and the accessibility of destinations. We develop a simple model of selection with heterogeneous buyers and sellers consistent with these findings in which tougher competition induces a better alignment between consumers' ideal variants and firms' core competencies. This generates an additional channel through which tougher competition leads to higher productivity and higher welfare and hints at an additional source of gains from trade as long as freer trade fosters competition.
    Keywords: Buyer Margins; Competition; Market Segmentation; Markups
    JEL: F12
    Date: 2013–08
  3. By: Iza Lejárraga; Ben Shepherd
    Abstract: What influences the adoption of transparency obligations in trade agreements, and what are its effects? This paper uses a new dataset on transparency provisions in over a hundred regional trade agreements (RTAs) to provide empirical evidence of the political economy determinants of international transparency commitments, as well as the trade impact of negotiating such transparency provisions in RTAs. The study finds that RTAs with deeper mechanisms for enhancing transparency appear to be more strongly trade-promoting than those with shallower commitments on transparency. Concretely, each additional transparency commitment negotiated in an RTA is associated with an increase in bilateral trade flows of more than one percent. Considering that comprehensive RTAs typically contain a dozen of such commitments, countries that opt for a comprehensive transparency agenda can expect to gain substantial increases in intra-regional trade. Moreover, the findings suggest that the readiness of trading partners to adhere to transparency norms is influenced by the quality of home institutions, which is consistent with a view that strengthening governance and regulatory capacities can contribute to a broader diffusion of transparency practices in international trade. Overall, the results of the analysis suggest that transparency should remain an important element of the trade agenda, both at the regional and multilateral levels.
    Keywords: governance, institutions, trade, WTO, regional trade agreements, free trade agreements, regulatory cooperation, preferential trade agreements, RTAs, anti-corruption, PTAs, regulatory quality, FTAs, World Trade Organisation, gravity model of trade, transparency
    JEL: F1 F10 F13 F15
    Date: 2013–06–14
  4. By: Katsufumi Fukuda (Graduate School of Economics, Kobe University, JAPAN)
    Abstract: This paper shows that globalization increases (decreases) the growth rate if and only if the beachhead cost for the domestic market is strictly higher (lower) than that for the foreign market in a endogenous growth model with firm heterogeneity, international trade, and endogenous international spillover under specified necessary and sufficient conditions for exporting firms being more productive than non-exporting firms.
    Keywords: heterogeneous firms, endogenous international spillovers, endogenous growth theory
    JEL: F12 F15 O30 O33
    Date: 2013–08
  5. By: Enrico Marvasi (Università degli Studi di Firenze)
    Abstract: We extend the basic model of trade protection with special interest groups developed in Grossman and Helpman (1994) to include monopolistic competition with variable markups. We find the following results: (i) for sectors organized into lobbies the endogenous import tariff is always positive and inversely related to the degree of import penetration; (ii) for unorganized sectors the endogenous import policy may be a tariff or a subsidy, depending on the policy implemented by the partner country; (iii) the endogenous export policy consists in an export tax for unorganized sectors and in a subsidy for organized sector provided that goods are suciently differentiated.
    Keywords: Endogenous Trade Policy; Protection for Sale; Monopolistic Competition; Variable Markups.
    JEL: F12 F13
    Date: 2013
  6. By: Michele Bernini; Sarah Guillou; Flora Bellone
    Abstract: Is corporate financial structure a determinant of non-price competitiveness in export markets? In this paper we provide a positive answer to this question by finding that among illiquid exporters leverage is negatively correlated with the quality of their exported goods. This result is obtained on a sample including over 120,000 export flows of 6,229 French firms exporting within six HS6 products categories. The main methodological contribution of our study is the use of a flow-level measure of export quality obtained from the estimation of a structural model of demand (Berry, 1994); this estimator enhances the validity of our approach by avoiding the drawbacks of proxying for quality using export prices, as it is common practice in the trade literature. We argue that the negative impact of leverage on quality is consistent with theoretical contributions in the financial literature predicting that debt financing hampers the incentive to undertake quality upgrading investments.
    Keywords: Export, output quality, leverage
    JEL: C11 D22 F14 G32
    Date: 2013–09
  7. By: Betts, Caroline; Giri, Rahul; Verma, Rubina
    Abstract: A two country, three sector hybrid model of structural change with distortionary government policies is used to quantify the impact of international trade and trade reform for industrialization. The model features Arming- ton motivated trade in agriculture and industry, and a novel representation of trade reform as a time sequence of import tariffs, export subsidies and lump sum government transfers of net tariff revenue. We calibrate our economy to data on South Korea and the OECD, inputting time series of country and sector specific labor productivity, tariffs and export subsidies which determine evolution of the effective pattern of comparative advantage. The model’s predicted reallocations of Korean labor from agriculture into industry and services from 1963 through 2000 are quantitatively similar to those in the data. Incorporating trade and measured Korean trade reform are both important for the accuracy of this predicted structural change, although interna- tional real income differences under non-homothetic preferences primarily determine trade and specialization patterns rather than comparative advantage. Counterfactually eliminating a) international trade b) interna- tional labor productivity differentials c) post 1967 Korean tariff reform and d) post 1967 industrial export subsidy reform increase the model’s SSE by 91 percent, 56 percent, 27 percent, and 62 percent respectively.
    Keywords: Liberalization, comparative advantage, import price, industrialization, structural change
    JEL: F1 F13 F14 F4 F43 O14 O41
    Date: 2013–07–31
  8. By: Volker Nocke; Stephen Yeaple
    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.
    JEL: F12 F15 L25
    Date: 2013–09
  9. By: Rau, Marie-Luise
    Abstract: With the lock-up of multinational negotiations under the Doha Round, bilateral agreements have multiplied. The number of regioanl free trade agreements (FTAs) between and across countries has been growing considerably. The objective of the research projectis is to give an overview on the contents of the FTAs between the EU and partner countries in a systematic way. The result will be a systematic comparative analysis, pointing out differences and similarity of EU FTAs as well as indicating main issues. Implications for trade relations and negotiations new trade agreements will be elaborated as well as provide useful insights for quantifying effects.
    Keywords: International trade, regional trade agreements, trade liberalisation, tariff, Agricultural and Food Policy, International Relations/Trade,
    Date: 2013
  10. By: Baldwin, Richard; Lopez-Gonzalez, Javier
    Abstract: The trade linked to international production networks – supply-chain trade for short – is associated with momentous global economic changes. This paper presents a portrait of the global pattern of supply-chain trade and how it has evolved since 1995. The paper draws on a variety of data sources but most heavily on the recent World Input-Output Database. China‘s supply-chain trade receives special attention.
    Keywords: China trade; fragmentation; intermediate goods trade; offshoring; second unbundling; supply-chain trade
    JEL: C67 F15 F23
    Date: 2013–04
  11. By: Richard B. Freeman
    Abstract: This paper directs attention at the globalization of knowledge and knowledge creation as the fundamental global driver of economic outcomes in today's information economy. It documents the globalization of knowledge and spread of scientific research from advanced to developing countries and argues that these developments undermine trade models in which advanced countries invariably have comparative advantage in high tech goods and services; determine the immigration of skilled workers; boosts labor standards; and influences incomes and inequality within and across countries. To the extent that knowledge is the key component in productivity and growth, its spread and creation is the one ring of globalization that rules the more widely studied patterns of trade, capital flows and immigration, per my title.
    JEL: F11 F16 F22 J24 J44 J81
    Date: 2013–08
  12. By: Dreyer, Heiko
    Abstract: In this contribution it is argued and empirical proven, complementary to the existing literature, that distance to a trading partner especially in agricultural trade does not only reflect transport costs but also different areas of cultivation. The study accounts for the described patterns by modeling different areas of cultivation. Without doing so the effect of distance would be underestimated.
    Keywords: Food and agricultural trade, distance, growing areas, panel analysis, Germany, gravity approach, International Relations/Trade,
    Date: 2013
  13. By: Head, Keith; Mayer, Thierry
    Abstract: With increasing sophistication, economists have been estimating gravity equations for five decades. Robust evidence shows that borders and distance impede trade by much more than tariffs or transports costs can explain. We therefore advocate investigation of other sources of resistance, despite the greater difficulty involved in measuring and modeling them. From our selective review of recent findings, a unifying explanation emerges. A legacy of historical isolation and confl ict forged a world economy in which neither tastes nor information are homogeneously distributed. Cultural difference and inadequate information manifest themselves most strongly at national borders and over distance.
    Keywords: borders; distance; globalization; gravity; history; trade
    JEL: F1
    Date: 2013–08
  14. By: Marin, Dalia; Rousová, 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; organisational transfer between countries; the theory of the firm; trade and organisations
    JEL: D23 F12 F23
    Date: 2013–06
  15. By: Tadashi Morita (Faculty of Economics, Osaka Gakuin University); Kazuhiro Yamamoto (Graduate School of Economics, Osaka University)
    Abstract: In this paper, we construct an interregional trade model that has en- dogenous fertility rates in the manner of Helpman and Krugman (1985). The presented model shows that fertility rates in a large region become lower than those in a small region because of the agglomeration of man- ufacturing firms in the former. The agglomeration of firms in a region lowers the relative price of manufactured goods to child rearing costs, which raises the fertility rates. We also find that a decline in transportation costs results in the ag- glomeration of manufacturing firms, which lowers fertility rates in both large and small regions. Finally, we extend our two-region model to a multi-region model and find that the number of manufacturing firms in larger regions is always greater than that in smaller regions, meaning that fertility rates in the former are always lower than those in the latter.
    Keywords: agglomeration, fertility rates, transportation costs, consumerism
    JEL: J13 R10
    Date: 2013–09
  16. By: Goldberg, Linda S.; Tille, Cédric
    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

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