nep-int New Economics Papers
on International Trade
Issue of 2014‒04‒05
fourteen papers chosen by
Luca Salvatici
Universita' di Roma 3

  1. Trade, Economic and Welfare impacts of the CARICOM-Canada Free Trade Agreement By Khadan, Jeetendra; Hosein, Roger
  2. The rise of China and India: blessing or curse for the advanced countries? By Stracca, Livio
  3. Shipment frequency of exporters and demand uncertainty. By Békès, G.; Fontagné, L.; Murakozy, B.; Vicard, V.
  4. Growth, real exchange rates and trade protectionism since the financial crisis By Georgiadis, Georgios; Gräb, Johannes
  5. Trade, productivity improvements and welfare: an endogenous market structure framework By Montinari, Letizia
  6. Immigrants and Firms' Productivity: Evidence from France By Cristina Mitaritonna; Gianluca Orefice; Giovanni Peri
  7. American tariff policy and the British alkali industry, 1880-1905 By Brian Varian
  8. Institutional Determinants of Japanese Outward FDI in the Manufacturing Industry By Raphaël Chiappini
  9. Origin of FDI and domestic productivity spillovers: does European FDI have a ‘productivity advantage’ in the ENP countries? By Vassilis Monastiriotis
  10. Exploring the Causality and Co-integration Relationship between FDI, GDP and Employment: A Case of Czech Republic By Yousafzai, Arshad Hayat
  11. Determinants of Inflow of Foreign Direct Investment (FDI) into Pakistan By Ahmed, Tehseen; Malik, Saif Ullah
  12. Asian Fragmentation in the Global Financial Crisis By Toshihiro Okubo; Fukunari Kimura; Nozomu Teshima
  13. Micro-based evidence of EU competitiveness: the CompNet database By Lopez-Garcia, Paloma; di Mauro, Filippo; Benatti, Nicola; Angeloni, Chiara; Altomonte, Carlo; Bugamelli, Matteo; D’Aurizio, Leandro; Navaretti, Giorgio Barba; Forlani, Emanuele; Rossetti, Stefania; Zurlo, Davide; Berthou, Antoine; Sandoz-Dit-Bragard, Charlotte; Dhyne, Emmanuel; Amador, João; Opromolla, Luca David; Soares, Ana Cristina; Chiriacescu, Bogdan; Cazacu, Ana-Maria; Lalinsky, Tibor; Biewen, Elena; Blank, Sven; Meinen, Philipp; Hagemejer, Jan; Tello, Patry; Rodriguez-Caloca, Antonio; Cede, Urska; Galuscak, Kamil; Merikyll, Jaanika; Harasztosi, Peter
  14. Cross-border production chains and business cycle co-movement between Central and Eastern European countries and euro area member states By Iossifov, Plamen

  1. By: Khadan, Jeetendra; Hosein, Roger
    Abstract: This paper estimates the trade, revenue and welfare effects of the proposed Caribbean Community (CARICOM)-Canada FTA on CARICOM countries using a partial equilibrium model. The welfare analysis also takes into account the Economic Partnership Agreement (EPA) which was signed in 2008 between the CARIFORUM (CARICOM and the Dominican Republic) countries and the EU. The Revealed Comparative Advantage (RCA) index, trade complementarity index and transition probability matrices are employed to examine the dynamics of comparative advantage for CARICOM countries exports to Canada. The results obtained from the partial equilibrium model indicate adverse revenue and welfare effects for CARICOM member states. The results from various trade indices employed do not provide evidence to suggest that a FTA between CARICOM countries and Canada can improve trade outcomes.
    Keywords: CARICOM-Canada FTA, partial equilibrium model, welfare effects, comparative advantage
    JEL: F13 F14 F17
    Date: 2014–03–28
  2. By: Stracca, Livio
    Abstract: This paper evaluates the impact of the rise of large emerging manufacturing exporters such as China and India on economic growth in advanced countries. After illustrating the possible theoretical channels, I estimate a growth regression based on 3-year average data augmented with country-specific measures of import and export competition from China and India using instrumental variables. Stronger import competition from China and India leads to stronger income growth in advanced countries, but to a loss of manufacturing jobs. A more flexible labour market, lower concentration of employment in manufacturing and pre-existing trade links with China and India help advanced countries to maximise the growth dividend resulting from their rise in world export markets. JEL Classification: F02, F15
    Keywords: China, comparative advantage, economic growth, globalisation, India, offshoring, trade
    Date: 2013–12
  3. By: Békès, G.; Fontagné, L.; Murakozy, B.; Vicard, V.
    Abstract: This paper analyzes how firms adjust to differences in market size and demand uncertainty by changing the frequency and size of their export shipments. In our inventory model, transportation costs and optimal shipment frequency are determined on the basis of demand as well as inventory and per shipments costs. Using a cross section of detailed monthly firm-product-destination level French export data we show that, in line with the predictions of the model, firms adjust on both margins for market size. In a stochastic setting, increased demand uncertainty is associated with larger logistics costs as well as a more convex marginal cost function. Firms adjust to increased uncertainty by reducing their sales and, for a given export volume, by reducing their number of shipments and increasing their shipment size. We show that these predictions of the model are in line with patterns in the data.
    Keywords: Gravity; Transport costs; Frequency of trade; Inventory model; Firms.
    JEL: D40 F12 R40
    Date: 2014
  4. By: Georgiadis, Georgios; Gräb, Johannes
    Abstract: Existing evidence suggests that protectionist activity since the financial crisis has been muted, raising the question whether the historically well-documented relationship between growth, real exchange rates and trade protectionism has broken down. This paper re-visits this relationship for the time period since 2009. To this end, we use a novel and comprehensive dataset which considers a wide range of trade policies stretching beyond the traditionally considered tariff and trade defence measures. We find that the specter of protectionism has not been banished: Countries continue to pursue more trade-restrictive policies when they experience recessions and/or when their competitiveness deteriorates through an appreciation of the real exchange rate; and this finding holds for a wide array of contemporary trade policies, including “murky” measures. We also find differences in the recourse to trade protectionism across countries: trade policies of G20 advanced economies respond more strongly to changes in domestic growth and real exchange rates than those of G20 emerging market economies. Moreover, G20 economies’ trade policies vis-à-vis other G20 economies are less responsive to changes in real exchange rates than those pursued vis-à-vis non-G20 economies. Our results suggest that—especially in light of the sluggish recovery—the global economy continues to be exposed to the risk of a creeping return of trade protectionism. JEL Classification: F13, F14
    Keywords: exchanges rates, growth, trade protectionism
    Date: 2013–11
  5. By: Montinari, Letizia
    Abstract: In this paper, I investigate the welfare effects that developed countries experience after productivity improvements occur in their emerging trading partners, using a two-country model featuring pro-competitive effects of trade and asymmetries in technology. I model the technology advantage of the developed country, assuming that the productivity distribution its firms draw from stochastically dominates that of the emerging country. Calibrated to match aggregate and firm level statistics of the US economy, the model predicts that the country with better technology has a higher productivity cut-off level, higher average productivity and higher welfare. Productivity improvements in the emerging country generate selection and raise welfare everywhere, with both the selection effect and the positive welfare effect being stronger in the emerging country. Finally, trade liberalization is associated with more selection and higher welfare in both the developed and the emerging country. JEL Classification: F12, F62, O33, I31
    Keywords: asymmetric countries, endogenous market structure, productivity improvements, welfare
    Date: 2013–12
  6. By: Cristina Mitaritonna; Gianluca Orefice; Giovanni Peri
    Abstract: Immigrants may complement native workers, allow reallocation by skill in the firm and lower costs. These effects could be beneficial for the firm and increase its productivity and profits. However not all firmes use immigrants. Allowing firms to have differential fixed cost in hiring immigrants, because of different information and access to their network, we analyze the impact of an increase in local supply of immigrants on firms' immigrant employment and productivity. Using micro-level data on French firms during the period 1995-2005, we show that a supply-driven increase in foreign born workers in a department (location) increases the productivity of firms in that department. We also find that this effect is significantly stronger for firms with initially low (or zero) level of foreign employment. Those are also the firms whose share of immigrants increases the most. We also find that the positive productivity effect of immigrants is associated with faster growth of capital and improved export performances (for extensive and intensive margin) of the firms. While these outcomes depend on the firm share of immigrants in employment we find a positive effect of immigration on wages of natives and on specialization of natives in complex occupations that is common to all firms in the district. Supply-driven increase in foreign born workers in a department (location) implies a re-allocation of native workers towards communication and cognitive intensive tasks.
    Keywords: immigrants;firms;productivity;heterogeneity;fixed cost of hiring
    JEL: F22 E25 J61
    Date: 2014–03
  7. By: Brian Varian
    Abstract: Until the late nineteenth century, the British alkali industry enjoyed a colossal export market in the United States. Yet, as several scholars have already noted, the highly protectionist Dingley Tariff of 1897 caused a precipitous and irreversible decline in the volume of British alkali exports to the United States. Drawing upon an abundance of textual evidence, this study argues that, in addition to the climactic Dingley Tariff, previous American tariff acts in 1883, 1890, and 1894 also exerted a pronounced influence on the volume of British alkali exports to the United States. Further corroborating this claim is a regression analysis that employs, as an explanatory variable, newly constructed annual estimates of the ad valorem equivalent tariff that the United States imposed upon alkali imports from Britain. Approaching the British alkali industry from a microeconomic standpoint, this study also argues that one particular British alkali firm, Brunner, Mond & Co., mitigated its financial exposure to American tariff policy by acquiring, in 1887, a minority shareholding in a nascent American alkali firm, the Solvay Process Company. Profits from Brunner’s shareholding in the Solvay Process Company substantially offset the profits that Brunner, Mond & Co. lost as the result of its diminished alkali exports to the United States. The other dominant British alkali firm, the United Alkali Company, did not fare so well.
    Keywords: alkali; chemicals; tariffs; trade; Britain; United States; nineteenth century
    JEL: N0
    Date: 2014–03
  8. By: Raphaël Chiappini
    Abstract: This paper explores the relationship between six indicators of governance and outward foreign direct investment (FDI) in the Japanese manufacturing industry. We estimate a gravity model of FDI for 30 host countries covering the period 2005-2011, employing Heckman's two-step sample selection correction in order to tackle the issue of zero-value observations. The results indicate that Japanese overseas investments are driven by host market size, yen real exchange rate, macroeconomic stability, resource endowments and policy variables. In particular, we find that confidence societal rules, control of corruption, government effectiveness, political stability and private sector policies are important factors driving FDI.
    Keywords: Outward foreign direct investment (FDI), institutions, gravity model, Heckman sample selection model
    JEL: C34 F21 F23
    Date: 2014–03
  9. By: Vassilis Monastiriotis
    Abstract: The process of approximation between the EU and its ‘eastern neighbourhood’ has created conditions for deepening economic interactions and market integration, giving to the EU –and to EU businesses– an elevated role in the process of economic modernisation and transition in the neighbourhood countries. This raises the question as to whether European business activity in these countries produces indeed measureable economic advantages both in absolute and in relative terms (e.g., compared to business activity from other parts of the world). Similarly, a question arises as to whether European business activity reduces or amplifies spatial imbalances within the partner countries. This paper examines these issues for the case of capital flows (foreign ownership) and the related productivity spillovers, using firm-level data from the Business Environment and Enterprise Performance Survey (BEEPS) covering 28 transition countries over the period 2002-2009. We estimate the direct and intra-industry productivity effects of foreign ownership and examine how these differ across regional blocks (CEE, SEE and ENP), according to the origin of the foreign investor (EU versus non-EU), across geographical scales (pure industry versus regional spillovers) and for different types of locations (capital-city regions versus the rest). Our results suggest that FDI of EU origin plays a distinctive role in the countries concerned helping raise domestic productivity significantly more than investments from outside the EU. However, this process appears to operate in a spatially selective manner, thus enhancing regional disparities and spatial imbalances. This, then, assigns a particular responsibility for EU policy, as it continues to promote economic integration (and FDI flows) to its eastern neighbourhood, to devise interventions that will help redress these problems.
    Keywords: foreign direct investment
    Date: 2014–01–08
  10. By: Yousafzai, Arshad Hayat
    Abstract: The paper investigate long term relationship between FDI, GDP and host country employment by using sector-wise panel data from 1993-2011 for the Czech Republic. IPS test is applied for panel data unit root testing and Johansen Fisher Panel Co-integration test is used to test for the presence of co-integration relationship between the variables. A vector error correction model (VECM) is estimated to find out the short run and long run causality between the variables. In the end, Impulse response functions are estimated. The paper found both a short term and long term causality going from FDI inflow to employment. Impulse responses show that both GDP and employment respond positively to an exogenous shock in FDI inflow. However, the employment response to FDI inflow shock is smaller than that of GDP response.
    Keywords: Foreign Direct Investment (FDI), Employment, Czech Republic, Unit Root, Co-integration, Causality
    JEL: F21 F23 J23
    Date: 2014
  11. By: Ahmed, Tehseen; Malik, Saif Ullah
    Abstract: The objective of this research paper is to examine the effects of various factors like violence, stock exchange performance and exchange rate on Foreign Direct Investment (FDI) inflow into Pakistan. For econometric analysis monthly secondary data ranging from 2003 to 2011 has been used. Regression and correlation are used as analytical tools for the empirical estimation. In addition, for time series data analysis Augmented Dickey Fuller test and Phillips-Perron test have been used. This study finds that the violence in the country and Karachi Stock Exchange- 100 Index are statistically significant factors with a positive sign. Moreover, the exchange rate has also been found to be statistically significant factor with negative sign. This study uses monthly time series data from 2003-2001, which enables a deeper understanding of FDI inflow in Pakistan. Results suggest that in order to enhance FDI inflow to a desirable level, the government should ensure the existence of a peaceful environment, efficient capital markets and a stable exchange rate in the country.
    Keywords: Foreign Direct Investment (FDI) inflow, Exchange Rate, Violence, Karachi Stock Exchange (KSE)
    JEL: G10
    Date: 2012–10–01
  12. By: Toshihiro Okubo; Fukunari Kimura; Nozomu Teshima
    Abstract: This paper studies the impact of the Global Financial Crisis of 2008 on Japanese exports, focusing on international production networks in machinery sectors. For our survival analysis, we estimate a Cox proportional hazards model. Consequently, we find that Japanese exports to Asian countries, parts and components trade in particular, were less likely to stop during the crisis. Even if they stopped, such trade is more likely to be revived. Therefore, regardless of the worldwide economic crisis, Japan maintained trade relationships in parts and components in the machinery sectors.
    Keywords: Financial crisis, Asian trade, parts and components, exit-entry diagram, survival analysis
    JEL: F14
    Date: 2014–03
  13. By: Lopez-Garcia, Paloma; di Mauro, Filippo; Benatti, Nicola; Angeloni, Chiara; Altomonte, Carlo; Bugamelli, Matteo; D’Aurizio, Leandro; Navaretti, Giorgio Barba; Forlani, Emanuele; Rossetti, Stefania; Zurlo, Davide; Berthou, Antoine; Sandoz-Dit-Bragard, Charlotte; Dhyne, Emmanuel; Amador, João; Opromolla, Luca David; Soares, Ana Cristina; Chiriacescu, Bogdan; Cazacu, Ana-Maria; Lalinsky, Tibor; Biewen, Elena; Blank, Sven; Meinen, Philipp; Hagemejer, Jan; Tello, Patry; Rodriguez-Caloca, Antonio; Cede, Urska; Galuscak, Kamil; Merikyll, Jaanika; Harasztosi, Peter
    Abstract: Drawing from confidential firm-level balance sheets in 11 European countries, the paper presents a novel sectoral database of comparable productivity indicators built by members of the Competitiveness Research Network (CompNet) using a newly developed research infrastructure. Beyond aggregate information available from industry statistics of Eurostat or EU KLEMS, the paper provides information on the distribution of firms across several dimensions related to competitiveness, e.g. productivity and size. The database comprises so far 11 countries, with information for 58 sectors over the period 1995-2011. The paper documents the development of the new research infrastructure, describes the database, and shows some preliminary results. Among them, it shows that there is large heterogeneity in terms of firm productivity or size within narrowly defined industries in all countries. Productivity, and above all, size distribution are very skewed across countries, with a thick left-tail of low productive firms. Moreover, firms at both ends of the distribution show very different dynamics in terms of productivity and unit labour costs. Within-sector heterogeneity and productivity dispersion are positively correlated to aggregate productivity given the possibility of reallocating resources from less to more productive firms. To this extent, we show how allocative efficiency varies across countries, and more interestingly, over different periods of time. Finally, we apply the new database to illustrate the importance of productivity dispersion to explain aggregate trade results. JEL Classification: L11, L25, D24, O4, O57
    Keywords: allocative efficiency, competitiveness, cross country analysis, firm-level data, productivity and size distribution, total factor productivity
    Date: 2014–02
  14. By: Iossifov, Plamen
    Abstract: In this paper, we highlight the role of global value chains in the synchronization of economic activity between countries in Central and Eastern Europe (CEE) and the euro area. We start off by demonstrating that the degree of synchronization of the business cycles of CEE countries and their main trade partners from the euro area has increased in recent years. We next show that the cyclical fluctuations of GDP in CEE countries are strongly influenced by pro-cyclical movements of changes in inventories. We then present evidence of the importance of cross border production chains for the economies of CEE countries. We build on these findings to show that the propagation of changes in demand for imports along global supply chains—linked to technological requirements and inventory stock adjustments—contributes to the synchronization of economic activity across Europe. We also show evidence that CEE exporters have started to set up their own value chains in the CEE region. JEL Classification: E32, F44, F62, O52
    Keywords: business cycle, CEE, Central and Eastern European countries, cross-border production chains, global value chains, inventories
    Date: 2014–01

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