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on International Trade |
| By: | Chen, Natalie; Juvenal, Luciana |
| Abstract: | This paper investigates the heterogeneous response of exporters to real exchange rate fluctuations due to product quality. We model theoretically the effects of real exchange rate changes on the optimal price and quantity responses of firms that export multiple products with heterogeneous levels of quality. The model shows that the elasticity of demand perceived by exporters decreases with a real depreciation and with quality, leading to more pricing-to-market and to a smaller response of export volumes to a real depreciation for higher quality goods. We test empirically the predictions of the model by combining a unique data set of highly disaggregated Argentinean firm-level wine export values and volumes between 2002 and 2009 with experts wine ratings as a measure of quality. In response to a real depreciation, we find that firms significantly increase more their markups and less their export volumes for higher quality products, but only when exporting to high income destination countries. These findings remain robust to different measures of quality, samples, specifications, and to the potential endogeneity of quality. |
| Keywords: | Exchange rate pass-through; exports; firms; pricing-to-market; quality; unit values; wine |
| JEL: | F12 F14 F31 |
| Date: | 2013–11 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9744&r=int |
| By: | Costinot, Arnaud; Donaldson, Dave; Vogel, Jonathan; Werning, Iván |
| Abstract: | The theory of comparative advantage is at the core of neoclassical trade theory. Yet we know little about its implications for how nations should conduct their trade policy. For example, should import sectors with weaker comparative advantage be protected more? Conversely, should export sectors with stronger comparative advantage be subsidized less? In this paper we explore these issues in the context of a canonical Ricardian model. Our main results imply that optimal import tariffs should be uniform, whereas optimal export subsidies should be weakly decreasing with respect to comparative advantage, reflecting the fact that countries have more room to manipulate prices in their comparative-advantage sectors. Quantitative exercises suggest substantial gains from such policies relative to simpler tax schedules. |
| Keywords: | Comparative Advantage; Ricardian Model; Trade Policy |
| JEL: | F10 F11 F13 |
| Date: | 2013–12 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9765&r=int |
| By: | Melitz, Marc J; Redding, Stephen J. |
| Abstract: | The theoretical result that there are welfare gains from trade is a central tenet of international economics. In a class of trade models that satisfy a "gravity equation", the welfare gains from trade can be computed using only the open economy domestic trade share and the elasticity of trade with respect to variable trade costs. The measured welfare gains from trade from this quantitative approach are typically relatively modest. In this paper, we suggest a channel for welfare gains that this quantitative approach typically abstracts from: trade-induced changes in domestic productivity. Using a model of sequential production, in which trade induces a reorganization of production that raises domestic productivity, we show that the welfare gains from trade can become arbitrarily large. |
| Keywords: | Productivity; Sequential Production; Welfare Gains from Trade |
| JEL: | F10 F11 F15 |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9821&r=int |
| By: | Busse, Matthias; Erdogan, Ceren; Muehlen, Henning |
| Abstract: | We investigate the impact of Chinese activities in sub-Saharan African countries with respect to the growth performance of economies in that region. Using a Solow-type growth model and panel data for the period 1991 to 2011, we find that African economies that export natural resources have benefited from positive terms-of-trade effects. In addition, there is evidence for displacement effects of African firms due to competition from China. Chinese foreign investment and aid in Africa does not have an impact on growth. |
| Keywords: | China; Sub-Saharan Africa; Trade; FDI; Foreign aid; Economic growth; South-south cooperation |
| JEL: | F14 F23 F35 O47 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:bom:ieewps:206&r=int |
| By: | Mrázová, Monika; Neary, J Peter |
| Abstract: | We show that relaxing the assumption of CES preferences in monopolistic competition has surprising implications when trade is restricted. Integrated and segmented markets behave very differently, the latter typically implying a form of reciprocal dumping. Globalization and lower trade costs have very different effects: the former reduces spending on all existing varieties, the latter switches spending from home to imported varieties; in the plausible case where demands are less convex than CES, globalization raises firm output whereas lower trade costs reduce it. Finally, calibrating gains from trade is harder. Many more parameters need to be calibrated than in the CES case, while import demand elasticities are likely to overestimate the true elasticities, and so underestimate the gains from trade. |
| Keywords: | Additively Separable Preferences; CES Preferences; Iceberg Trade Costs; Quantifying Gains from Trade; Super- and Subconcavity of Utility; Super- and Subconvexity of Demand |
| JEL: | F12 F15 F17 |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9839&r=int |
| By: | Uysal , Pinar (Ecole Polytechnique Federale de Lausanne); Yotov, Yoto (School of Economics Drexel University); Zylkin , Thomas (School of Economics Drexel University) |
| Abstract: | We study the interaction between firm-level total factor productivity and trade liberalization as key determinants of firm-level job destruction caused by trade. Employing an original US firm-level data set, we test and find support for theoretical predictions from Melitz (2003), whose model we use to derive an explicit equation relating firm productivity and trade-induced layoffs when a country liberalizes its trade policy. In addition, we incorporate intuitive labor market interactions that are not explicitly incorporated in Melitz's model. These allow us to both highlight some discrepancies between theory and data and also clarify how to interpret the incidence of layoffs in light of the model. |
| Keywords: | Heterogeneous Firms; Trade Liberalization; Trade-induced Unemployment |
| JEL: | F10 F12 F14 F16 |
| Date: | 2014–05–07 |
| URL: | http://d.repec.org/n?u=RePEc:ris:drxlwp:2014_006&r=int |
| By: | Crinò, Rosario; Epifani, Paolo |
| Abstract: | We study, both theoretically and empirically, how trade imbalances affect the structure of countries' exports and wage inequality. We show that, in a Heckscher-Ohlin model with a continuum of goods, a Southern (Northern) trade surplus leads to an increase (reduction) in the average skill intensity of exports, in the relative demand for skills and in the skill premium in both countries. We provide robust support for the mechanism underlying these predictions using a large panel of countries observed over the past 30 years. Our results suggest that the large and growing North-South trade imbalances arisen over the last three decades may have exacerbated wage inequality worldwide. |
| Keywords: | Average Skill Intensity of Exports; North-South Trade Imbalances; skill premia |
| JEL: | F1 |
| Date: | 2014–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9900&r=int |
| By: | Bernard, Andrew B.; Moxnes, Andreas; Ulltveit-Moe, Karen-Helene |
| Abstract: | Empirical studies of firms within industries consistently report substantial heterogeneity in measures of performance such as size and productivity. This paper explores the consequences of joint heterogeneity on the supply side (sellers) and the demand side (buyers) in international trade using a novel transaction-level dataset from Norway. Domestic exporters as well as foreign importers are explicitly identified in each transaction to every destination. The buyer-seller linked data reveal a number of new stylized facts on the distributions of buyers per exporter and exporters per buyer, the matching among sellers and buyers and the variation of buyer dispersion across destinations. The paper develops a model of trade with heterogeneous importers as well as heterogeneous exporters where matches are subject to a relation-specific fixed cost. The model matches the stylized facts and generates new testable predictions emphasizing the importance of importer heterogeneity in explaining trade patterns. |
| Keywords: | exporters; Heterogeneous firms; importers; trade elasticity |
| JEL: | F10 F12 F14 |
| Date: | 2013–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9681&r=int |
| By: | di Giovanni, Julian; Levchenko, Andrei A.; Ortega, Francesc |
| Abstract: | This paper evaluates the global welfare impact of observed levels of migration using a quantitative multi-sector model of the world economy calibrated to aggregate and firm-level data. Our framework features cross-country labor productivity difference, international trade, remittances, and a heterogeneous workforce. We compare welfare under the observed levels of migration to a no-migration counterfactual. In the long run, natives in countries that received a lot of migration -- such as Canada or Australia -- are better off due to greater product variety available in consumption and as intermediate inputs. In the short run the impact of migration on average welfare in these countries is close to zero, while the skilled and unskilled natives tend to experience welfare changes of opposite signs. The remaining natives in countries with large emigration flows -- such as Jamaica or El Salvador -- are also better off due to migration, but for a different reason: remittances. The welfare impact of observed levels of migration is substantial, at about 5 to 10% for the main receiving countries and about 10% in countries with large incoming remittances. Our results are robust to accounting for imperfect transferability of skills, selection into migration, and imperfect substitution between natives and immigrants. |
| Keywords: | International Trade; Migration; Remittances; Welfare |
| JEL: | F12 F15 F22 F24 |
| Date: | 2014–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9919&r=int |
| By: | Feenstra, Robert; Luck, Philip; Obstfeld, Maurice; Russ, Katheryn N. |
| Abstract: | The elasticity of substitution between goods from different countries—the Armington elasticity—is important for many questions in international economics, but its magnitude is subject to debate: the "macro" elasticity between home and import goods is often found to be smaller than the "micro" elasticity between foreign sources of imports. We investigate these two elasticities in a model using a nested CES preference structure. We explore estimation techniques for the macro and micro elasticities using both simulated data from a Melitz-style model, and highly disaggregate U.S. production data matched to Harmonized System trade data. We find that in up to one-half of goods there is no significant difference between the macro and micro elasticities, but in the other half of goods the macro elasticity is significantly lower than the micro elasticity, even when they are estimated at the same level of disaggregation. |
| Keywords: | Armington elasticity; CGE trade models; disaggregate trade equations; effects of devaluation; elasticity of trade |
| JEL: | F12 F14 F42 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9951&r=int |
| By: | Head, Keith; Mayer, Thierry; Thoenig, Mathias |
| Abstract: | Quantifications of gains from trade in heterogeneous firm models assume that productivity is Pareto distributed. Replacing this assumption with log-normal heterogeneity retains some useful Pareto features, while providing a substantially better fit to sales distributions—especially in the left tail. The cost of log-normal is that gains from trade depend on the method of calibrating the fixed cost and productivity distribution parameters. When set to match the size distribution of firm sales in a given market, the log-normal assumption delivers gains from trade in a symmetric two country model that can be twice as large as under the Pareto assumption. |
| Keywords: | Pareto; trade; welfare |
| JEL: | F1 |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9826&r=int |
| By: | Ferguson, Shon; Forslid, Rikard |
| Abstract: | The purpose of this study is to test for the effects of trade promotion via the foreign service. We develop a Melitz-based model where firms are heterogeneous with respect to productivity and must pay a beachhead cost to enter a foreign market, which can be reduced by government spending on trade promotion. The model predicts that unilateral trade promotion allows medium-sized firms to export. We test this prediction using Swedish firm-level data and information on the opening and closing of Swedish embassies abroad using Norwegian firms as control group. Our results lend support to the predictions of the model, with large and medium-sized firms responding most strongly to the opening of embassies. |
| Keywords: | heterogeneous firms; trade promotion |
| JEL: | D21 F12 |
| Date: | 2014–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9879&r=int |
| By: | Molina, Danielken; Roa, Monica |
| Abstract: | In this paper we use Colombian manufacturing data on exports and external financing for the period 1998 − 2006 to estimate the credit elasticity of exports. We use bank-firm linked data to construct a supply side instrument for a manufacturer’s demand of credit, which we use to address the reverse causality between a manufacturer’s export revenue and its demand for credit. We find that access to credit produces a significant increase on a manufacturer’s export revenue explained by the positive effect of credit on an exporter’s market reach - number of destinations -. Across manufacturers the effect of credit on a manufacturer’s export revenue varies by size. While medium sized manufacturers use credit to increase their market reach, market penetration and product mix, large manufacturers only use credit to increase their market reach. Small manufacturers do not seem to benefit from bank credit. |
| Keywords: | Trade, Export Margins and Bank Financing. |
| JEL: | F14 G21 |
| Date: | 2014–05–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:56137&r=int |
| By: | Bernard, Andrew B.; Massari, Renzo; Reyes, Jose-Daniel; Taglioni, Daria |
| Abstract: | Two otherwise identical firms that enter the same market in different months, one in January and one in December, will report dramatically different annual sales for the first calendar year of operations. This partial year effect in annual data leads to downward biased observations of the level of activity upon entry and upward biased growth rates between the year of entry and the following year. This paper examines the implications of partial year effects using Peruvian export data. The partial year bias is very large: the average level of first-year exports of new exporters is understated by 65 percent and the average growth rate between the first and second year of exporting is overstated by 112 percentage points. This paper re-examines a number of stylized facts about firm size and growth that have motivated rapidly expanding theoretical and empirical literatures on firm export dynamics. Correcting the partial year effect eliminates unusually high growth rates in the first year of exporting, raises initial export levels, and shifts 10 percent of market entrants from below to above the median size. Revisiting an older set of facts on firm size and growth, the paper finds that correcting for partial year biases reduces the number of small firms in the firm size distribution and weakens the negative relationship between firm growth and firm size. |
| Keywords: | export entry; export growth; firm growth; firm size distribution; Heterogeneous firms; variance of firm growth |
| JEL: | C81 D22 F14 L11 |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9844&r=int |
| By: | Segerstrom, Paul; Sugita, Yoichi |
| Abstract: | This paper calls into question the currently most influential model of international trade. An empirical finding by Trefler (2004, AER) and others that industrial productivity increases more strongly in liberalized industries than in non-liberalized industries has been widely accepted as evidence for the Melitz (2003, Econometrica) model. We show that a multi-industry version of the Melitz model does not predict this relationship. Instead, it predicts the opposite relationship that industrial productivity increases more strongly in non-liberalized industries than in liberalized industries. |
| Keywords: | firm heterogeneity; industrial productivity; trade liberalization |
| JEL: | F12 F13 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9952&r=int |
| By: | di Giovanni, Julian; Levchenko, Andrei A.; Zhang, Jing |
| Abstract: | This paper evaluates the global welfare impact of China's trade integration and technological change in a multi-country quantitative Ricardian-Heckscher-Ohlin model. We simulate two alternative growth scenarios: a "balanced" one in which China's productivity grows at the same rate in each sector, and an "unbalanced" one in which China's comparative disadvantage sectors catch up disproportionately faster to the world productivity frontier. Contrary to a well-known conjecture (Samuelson 2004), the large majority of countries experience significantly larger welfare gains when China's productivity growth is biased towards its comparative disadvantage sectors. This finding is driven by the inherently multilateral nature of world trade. |
| Keywords: | China; International Trade; Productivity growth |
| JEL: | F11 F43 O33 O47 |
| Date: | 2013–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9683&r=int |
| By: | Carrère, Céline; Fugazza, Marco; Olarreaga, Marcelo; Robert-Nicoud, Frédéric |
| Abstract: | We embed a model of the labor market with sector-specific search-and-matching frictions into a Ricardian model with a continuum of goods to show that trade liberalization causes higher unemployment in countries with comparative advantage in sectors with strong labor market frictions and leads to lower unemployment in countries with comparative advantage in sectors with weak labor market frictions. We test this prediction in a panel dataset of 97 countries during the period 1995-2009 and find that the data supports the theoretical prediction. Our results also help reconciliate the apparently contradicting evidence in the empirical literature on the impact of trade on unemployment. |
| Keywords: | search unemployment; trade |
| JEL: | F10 F13 F16 |
| Date: | 2014–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9916&r=int |
| By: | Auer, Raphael; Mehrotra, Aaron |
| Abstract: | Some observers argue that increased real integration has led to greater co-movement of prices internationally. We examine the evidence for cross-border price spillovers among economies participating in the pan-Asian cross-border production networks. Starting with country-level data, we find that both producer price and consumer price inflation rates move more closely together between those Asian economies that trade more with one another, ie that share a higher degree of trade intensity. Next, using a novel data set based on the World Input-Output Database (WIOD), we examine the importance of the supply chain for cross-border price spillovers at the sectoral level. We document the increasing importance of imported intermediate inputs for economies in the Asia-Pacific region and examine the impact on domestic producer prices of changes in costs of imported intermediate inputs. Our results suggest that real integration through the supply chain matters for domestic price dynamics in the Asia-Pacific region. |
| Keywords: | Asian manufacturing supply chain; globalisation; inflation; price spillovers; supply chain |
| JEL: | E31 F14 F15 F4 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9949&r=int |
| By: | Novy, Dennis; Taylor, Alan M. |
| Abstract: | We offer a new explanation as to why international trade is so volatile in response to economic shocks. Our approach combines the uncertainty shock idea of Bloom (2009) with a model of international trade, extending the idea to the open economy. Firms import intermediate inputs from home or foreign suppliers, but with higher costs in the latter case. Due to fixed costs of ordering firms hold an inventory of intermediates. We show that in response to an uncertainty shock firms optimally adjust their inventory policy by cutting their orders of foreign intermediates disproportionately strongly. In the aggregate, this response leads to a bigger contraction in international trade flows than in domestic economic activity. We confront the model with newly-compiled monthly aggregate U.S. import data and industrial production data going back to 1962, and also with disaggregated data back to 1989. Our results suggest a tight link between uncertainty and the cyclical behavior of international trade. |
| Keywords: | Imports; Intermediates; Inventory; Real options; Trade collapse; Uncertainty shock |
| JEL: | E3 F1 |
| Date: | 2014–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9888&r=int |
| By: | Joachim Wagner (Leuphana University Lueneburg, Germany) |
| Abstract: | This paper uses a tailor-made newly available data set for enterprises from manufacturing industries in Germany to investigate for the first time the links between the extensive margins of imports (the number of imported goods and the number of countries imported from) and firm profitability. While both extensive margins are highly positively linked with firm productivity, profits are not higher in firms that import more goods and from more countries. This demonstrates that productivity advantages of importers are eaten up by extra costs related to buying more goods in more countries. |
| Keywords: | Imports, intensive margins, profitability, Germany |
| JEL: | F14 |
| Date: | 2014–05 |
| URL: | http://d.repec.org/n?u=RePEc:lue:wpaper:298&r=int |
| By: | Crinò, Rosario; Epifani, Paolo |
| Abstract: | We propose a theoretical foundation for a link between North-South trade imbalances and skill upgrading. We provide robust support for our theory using a panel of US manufacturing industries observed between 1977 and 2005. Our results suggest that the impact of the US trade deficit on the relative demand for skills within US industries may dominate that of alternative forces of change, such as trade liberalization, offshoring and technical change. |
| Keywords: | North-South Trade Imbalances; Skill Premia; Skill Upgrading |
| JEL: | F1 |
| Date: | 2014–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9899&r=int |
| By: | Anderson, James E; Neary, J Peter |
| Abstract: | What kind of tariff reform is likely to raise welfare in situations where tariff revenue is important? Uncertainty about specification and risk from imprecise parameter estimates of any particular specification reduce the credibility of simulation estimates. A promising alternative is to develop rules which are robust with respect to such uncertainty. We present sufficient conditions for a class of linear rules that guarantee welfare-improving tariff reform. The rules span cones of welfare-improving tariff reforms consisting of convex combinations of (i) trade-weighted-average-tariff-preserving dispersion cuts; and (ii) uniform tariff cuts that preserve domestic relative prices among tariff-ridden goods. |
| Keywords: | Generalized mean and variance of tariffs; Piecemeal policy reform; Tariff revenue; Trade policy reform |
| JEL: | F1 F13 H21 |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9838&r=int |
| By: | Clark, Gregory; O'Rourke, Kevin Hjortshøj; Taylor, Alan M. |
| Abstract: | Many previous studies of the role of trade during the British Industrial Revolution have found little or no role for trade in explaining British living standards or growth rates. We construct a three-region model of the world in which Britain trades with North America and the rest of the world, and calibrate the model to data from the 1760s and 1850s. We find that while trade had only a small impact on British welfare in the 1760s, it had a very large impact in the 1850s. This contrast is robust to a large range of parameter perturbations. Biased technological change and population growth were key in explaining Britain’s growing dependence on trade during the Industrial Revolution. |
| Keywords: | British Industrial Revolution; colonies; Great Divergence; growth; specialization; trade |
| JEL: | F11 F14 F43 N10 N70 O40 |
| Date: | 2014–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9878&r=int |
| By: | Martuscelli, Antonio; Winters, L. Alan |
| Abstract: | This paper reviews key recent literature on the effects of trade liberalisation on poverty in developing countries and asks whether our knowledge has changed significantly over a decade. The conclusion that liberalisation generally boosts income and thus reduces poverty has not changed; some suggest that this is not true for very poor countries, but this is not an established finding. On microeconomics, recent literature again confirms that liberalisation has very heterogeneous effects on poor households, depending, inter alia, on what trade policies are liberalised and how the household earns its living. Working in the export predicts gains and in the import-competing sector losses, a finding that is re-inforced by studies of the effects of liberalisation on wages. New research has suggested several ways in which intra-sectoral wage inequality is increased by trade, but this does not generally indicate that the poor actually lose. A fairly common finding is that female workers gain from trade liberalisation. |
| Keywords: | developing countries; growth; poverty; tariffs; trade liberalisation |
| JEL: | F13 F14 O19 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9947&r=int |
| By: | Gorodnichenko, Yuriy; Svejnar, Jan; Terrell, Katherine |
| Abstract: | We use rich firm-level data and national input-output tables from 17 countries over the 2002-2005 period to test new and existing hypotheses about the impact of foreign direct investment (FDI) on the efficiency of domestic firms in the host country (i.e., spillovers). We document that backward linkages have a consistently positive effect on productivity of domestic firms while horizontal and forward linkages show no consistent effect. We also examine how the strength of spillovers varies by sector, FDI source, business environment (corruption, red tape, level of development), firm’s distance to the technological frontier, education of workers, and other firm- and country-specific characteristics. |
| Keywords: | efficiency; FDI; spillovers; transition economies |
| JEL: | F23 M16 O16 P23 |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9807&r=int |
| By: | de Melo, Jaime; Vijil, Mariana |
| Abstract: | Barriers to trade in Environmental Goods (EGs) and Environmental Services (ESs) are documented for a large sample of countries and compared with barriers to trade in other goods and other services. Some progress at reduction in barriers has occurred at the national, regional and sectoral levels but not at the multilateral level where countries have been unable to agree on an approach to reduce barriers to trade. For EGs, tariffs and NTBs are highest for low-income countries and low for high-income countries. First-order estimates of the import response to a 50% reduction in tariffs for low-income countries suggest an increase in imports of around 4%. For ESs, estimates draw on the comparison of an Environment Services Liberalization index calculated across modes and services sub-sectors. The limitations of this ordinal index coupled with the inadequacy of the UN CPC list where services are defined in an exclusionary manner so that they cannot appear on two lists, casts greater uncertainty as to the informational content of the commitment measures presented here which, at best, indicate bindings on market access and national treatment rather than actual policies. It would appear nonetheless that at least as great, and probably greater commitments took place in the environmental sectors (as defined by the CPC) both multilaterally and regionally than for ‘other’ services with the same pattern across income groups: greater commitments observed for HIC than for MICs and LICs although it is widely recognized that GATS commitments by HICs largely amounted to consolidated members’ unilateral services policies. North-South Regional Trade Agreements resulted mostly in commitments by the Southern partners indicating greater prospects for reducing barriers to trade in a regional than in a multilateral context. |
| Keywords: | Doha round; environmental goods; environmental services; tariff reductions |
| JEL: | F18 Q56 |
| Date: | 2014–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9869&r=int |
| By: | Bosker, Maarten; Westbrock, Bastian |
| Abstract: | This paper develops a novel theory of trade in a global supply chain. We expand on a monopolistic competition trade model. Countries produce both intermediate and final goods that are sold domestically or, incurring country-pair specific trade costs, internationally. This links countries in a multi-stage production network. In the unique general equilibrium of the model, goods prices and wages in each country depend on the entire structure of trade connections. Drawing on methods from the social network literature, we then determine each country's importance in the global production network and analyse the welfare consequences of a further integration of the network. Our findings highlight the role of a few key countries that bring other nations closer together by intermediating their value added. Proximity to these key countries is crucial for other nations' income growth. An accompanying empirical analysis shows strong support in favor of the predicted network effects. |
| Keywords: | global supply chains; international trade; network effects |
| JEL: | C67 F12 |
| Date: | 2014–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9870&r=int |
| By: | Felbermayr, Gabriel; Impullitti, Giammario; Prat, Julien |
| Abstract: | Increasing wage inequality between similar workers plays an important role for overall inequality trends in industrialized societies. To analyze this pattern, we incorporate directed labor market search into a dynamic model of international trade with heterogeneous firms and homogeneous workers. Wage inequality across and within firms results from their different hiring needs along their life cycles and the convexity of their adjustment costs. The interaction between wage posting and firm growth explains some recent empirical regularities on firm and labor market dynamics. Fitting the model to capture key features obtained from German linked employer-employee data, we investigate how falling trade costs and institutional reforms interact in shaping labor market outcomes. Focusing on the period 1996-2007, we find that neither trade nor key features of the Hartz labor market reforms account for the sharp increase in residual inequality observed in the data. By contrast, inequality is highly responsive to the increase in product market competition triggered by domestic regulatory reform. |
| Keywords: | Directed Search; Firm Dynamics; International Trade; Product and Labor Market Regulation; Wage Inequality |
| JEL: | E24 F12 F16 |
| Date: | 2014–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9855&r=int |
| By: | de Melo, Jaime |
| Abstract: | This paper discusses the state of knowledge about the trade-related environmental consequences of a country’s development strategy along three channels: (i) direct trade-environment linkages (overexploitation of natural resources and trade-related transport costs);(ii) ‘virtual trade’ in emissions resulting from production activities; (iii) the product mix attributes of a ‘green-growth’ strategy (environmentally preferable products and goods for environmental management). Main conclusions are the following. Trade exacerbates over-exploitation of natural resources in weak institutional environments, but there is little evidence that differences in environmental policies across countries has led to significant ‘pollution havens’. Trade policies to ‘level the playing field’ would be ineffective and result in destructive conflicts in the WTO. Lack of progress at the Doha round suggests the need to modify the current system of global policy making. |
| Keywords: | Environmental goods; green growth; natural resources; trade and climate |
| JEL: | F18 Q56 |
| Date: | 2013–09 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9660&r=int |
| By: | Comerford, David; Rodríguez Mora, José Vicente |
| Abstract: | We use a version of the Melitz (2003) model to calibrate the magnitude and impact of the border effect, the well-known empirical regularity that trade is much lower across a national border than would otherwise be expected. We calibrate total bilateral trade frictions as a parameter and show that frictions between nation states are systematically higher than those between sub-national states or regions. Using plausible counterfactual analysis, we assess the costs of independence for Scotland, Catalonia, & the Basque Country: the intellectual experiment that is performed is to suppose that the region on independence takes on the calibrated frictions of a counterfactual independent country. If the main change that comes with the independence of regions of larger countries is that their border with their former union partner comes to resemble a normal country border, then the trade costs of the break-up of countries into smaller states (even within the EU) are significant. The border effects associated with membership of the European Union or otherwise, are much lower than the border effect differences between countries and regions. As an illustration of this we produce a potential quantification of the trade costs of a British exit from the EU. Conversely, the potential gains from the European Union achieving the sort of integration seen within a nation state, a United States of Europe, are very large. |
| Keywords: | Border effect; independence; trade |
| JEL: | F15 R13 |
| Date: | 2014–05 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9967&r=int |
| By: | Danakol, Seçil Hülya; Estrin, Saul; Reynolds, Paul; Weitzel, Utz |
| Abstract: | This paper explores the effects of foreign direct investment, measured by mergers and acquisitions, on domestic entrepreneurial entry. We use a micro-panel of more than two thousand individuals disaggregated by industry in seventy countries including both developed and developing economies, 2000-2009. The theory yields ambiguous predictions about the relationship between FDI and entrepreneurship; positive spillovers via dissemination of technology or negative because of crowding out. Our empirical analysis is conducted at three levels of aggregation. We find the relationship between FDI and domestic entrepreneurship in aggregate and intra-industry to be negative. Policies need to consider how to counteract this effect. |
| Keywords: | entrepreneurship; foreign direct investment; new firm entry; spillovers |
| JEL: | F23 L26 M13 |
| Date: | 2014–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9793&r=int |
| By: | Francisco Costa; Jason Garred; Joao Paulo Pessoa |
| Abstract: | A recent boom in commodities-for-manufactures trade between China and other developing countries has led to much concern about the losers from rising import competition in manufacturing, but little attention on the winners from growing Chinese demand for commodities. Using census data for Brazil, we find that local labour markets more affected by Chinese import competition experienced slower growth in manufacturing wages and in-migration rates between 2000 and 2010, and greater rises in local wage inequality. However, in locations benefiting from rising Chinese demand, we observe higher wage growth, lower takeup of cash transfers and positive effects on job quality. |
| Keywords: | China, trade, commodities-for manufactures, wages, employment, informality |
| JEL: | F14 F16 O17 Q17 |
| Date: | 2014–05 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1269&r=int |
| By: | Evenett, Simon J |
| Abstract: | Several factors potentially responsible for the failure to conclude the Doha Round of multilateral trade negotiations are analysed. A two-stage negotiation and ratification game between the “North” (industrialised countries) and the “South” (developing countries) is employed and collapses into a single diagram. The choice of negotiating agenda, principles, and currency of the Doha Round interact with domestic political factors in leading WTO members, the fast growth of exports prior to 2007, and pervasive unilateral trade reform to eliminate the “landing zone” for this particular multilateral negotiation. Recent emphasis on differences between developing countries and on Chinese WTO accession as independent causes of the impasse seems misplaced. |
| Keywords: | deadlock; Doha Round; impasse; two-level games; WTO |
| JEL: | F02 F13 F53 |
| Date: | 2013–12 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9780&r=int |
| By: | Patrick Low (Asian Development Bank Institute (ADBI)) |
| Abstract: | This paper argues that preferential trade agreements (PTAs) and the World Trade Organization (WTO) are not substitutes, and while PTAs are without doubt here to stay, dispensing with a multilateral venue for doing business in trade matters is not a serious option. It is therefore necessary to seek out better accommodation between PTAs and the WTO than has been apparent to date. The law of the General Agreement on Tariffs and Trade (GATT)/WTO has systematically fallen short in imposing discipline on discriminatory reciprocal trade agreements, while procedural requirements, such as notifications, have been partially observed at best, and dispute settlement findings have tended to reinforce existing weaknesses in the disciplines. One approach to remedying this situation is to explore a different kind of cooperation—that of soft law. A soft law approach to improving coherence and compatibility between the WTO and PTAs may hold some promise, but the option also has its pitfalls. |
| Keywords: | Preferentialism in trade relations, preferential trade agreements (PTAs), WTO, soft law |
| JEL: | F1 F5 K3 |
| Date: | 2014–05 |
| URL: | http://d.repec.org/n?u=RePEc:eab:govern:24161&r=int |
| By: | Bernard Hoekman |
| Abstract: | At the 9th Ministerial Conference of the WTO in Bali it was agreed to develop a work program to conclude the long-running Doha round. This report argues that any work program should recognize that goods and services are increasingly produced in international supply chains. Many of the policies impacting on supply chain trade are on the negotiating table; others are not. The WTO takes a “silo approach”, addressing policy areas in isolation. This may reduce the relevance of WTO agreements as the marginal effect of agreement on one policy instrument may be minimal if the cost-raising effects of others are not addressed in parallel. Complementing market-access and rule-making negotiations with a supply chain framework may help to construct an overall package spanning the different policy areas that are on the table, and to identify policy areas that are not, but should be discussed. Greater use of the WTO for deliberation on trade policy matters and learning from the experience of regional trade agreements, complemented by an effort to create greater space for new plurilateral agreements among groups of WTO Members, could help bolster the relevance of the WTO as a forum for multilateral cooperation on trade. |
| Keywords: | WTO, Doha round, trade negotiations, trade governance, international cooperation, regional trade agreements, supply chains, economic development |
| Date: | 2014–03 |
| URL: | http://d.repec.org/n?u=RePEc:rsc:rsceui:2014/27&r=int |
| By: | de Melo, Jaime; Regolo, Julie |
| Abstract: | Globalization has failed to relax barriers to the movement of labor, especially unskilled workers. So have North-South Regional Trade Agreements (RTAs), while South-South RTAs have failed to implement good intentions. A literature review of the labor effects of RTAs underscores context specificity precluding generalizations across categories of RTAs. Most ex-ante studies have focused on global welfare effects rather than anticipated labor market effects while ex-post studies have had difficulty isolating any direct effects attributable to implementation of the RTA because of confounding effects as illustrated by a discussion of the wage puzzle in Mexico under NAFTA. The survey reviews labor market and wage results from ex-ante CGE estimates and ex-post household-based econometric estimates. A review of the response of manufacturing firms and plants to the large reductions in tariffs under CUSFTA, MERCOSUR, and NAFTA reveal significant adjustments. Under CUSTTA, in Canadian manufacturing short-run employment losses were large while productivity gains were equally large and the market access to the US led Canadian firms in the bottom of the distribution of labor productivity to engage in investment in technology upgrading. In MERCOSUR and NAFTA, an upgrading in technology was also observed among the firms that were led to enter (or to increase) their exports to RTA partners (Brazil for Argentine firms and the US for Mexican firms). These firms also increased their demand for skilled labor suggesting that the FTA contributed to an increase in the skill premium. |
| Keywords: | Labor markets; Regional Trade Agreements |
| JEL: | F15 F16 |
| Date: | 2013–09 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9661&r=int |
| By: | Cadot, Olivier; Fernandes, Ana; Gourdon, Julien; Mattoo, Aaditya |
| Abstract: | This paper evaluates the effects of the FAMEX export promotion program in Tunisia on the performance of beneficiary firms. While most studies assess only the short-term impact of such programs, we consider also the longer-term impact. Estimates suggest that beneficiaries initially saw both faster export growth and greater diversification across destinations and products. However, three years after the intervention, beneficiaries’ growth rates and export levels were not significantly different from those of a control group even though they remained more diversified. We confirm that this divergence between export growth and diversification is not due to small export transactions to new markets creating an illusion of diversification; to greater exposure of beneficiary firms to crisis-affected economies leading to stunted export growth; or to spillover benefits for non-beneficiary firms resulting in their catching-up in export sales. We find some evidence that the divergence may be related to constraints within the firm, such as limited experience and in-house export capacity; to external constraints, such as access to finance; and to the design and implementation of the FAMEX program which placed greater emphasis on diversification than on export growth. |
| Keywords: | export margins; Export promotion; firms; impact evaluation; matching grant; propensity-score matching; Tunisia |
| JEL: | C23 F13 F14 L15 L25 O17 O24 |
| Date: | 2013–11 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9758&r=int |
| By: | Lionel Fontagné (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique); Sophie Hatte (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, Université de Rouen - Université de Rouen) |
| Abstract: | We study international competition in high-end products for 416 detailed HS6 product categories marketed by leading French luxury brands. We construct a world database of trade flows for these products in the period 1994-2009, computing unit values of related bilateral trade flows and analyzing competition among the main exporters. We use the observed distribution of unit values to define a high-end market segment. In 2009, Europe's market share (EU27 plus Switzerland) despite suffering some erosion since 1994, represented three-quarters of the world market. Exports of high-end products are shown to be less sensitive to distance than other products, and found more sensitive to destination country wealth than other products, but only in relation to countries already producing a large range of luxury brands. |
| Keywords: | Product differentiation ; Market shares ; Unit values |
| Date: | 2013–11 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:hal-00959394&r=int |
| By: | Sarah Ben Yahmed (IEP Aix-en-Provence - Sciences Po Aix - Institut d'études politiques d'Aix-en-Provence - Institut d'Études Politiques [IEP] - Aix-en-Provence - Aix Marseille Université - Fondation Nationale des Sciences Politiques [FNSP], GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - École des Hautes Études en Sciences Sociales (EHESS) - CNRS : UMR7316); Sean Dougherty (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, OCDE - Organisation de coopération et de développement économiques - OCDE) |
| Abstract: | This paper examines how import penetration affects firms' productivity growth taking into account the heterogeneity in firms' distance to the efficiency frontier and country differences in product market regulation. |
| Keywords: | Firm productivity growth ; Behind-the-border regulatory barriers ; Product market regulation ; Import competition, international trade |
| Date: | 2014–03–14 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:hal-00959389&r=int |
| By: | Dammert, Ana C. (Carleton University); Mohan, Sarah (Carleton University) |
| Abstract: | Fair Trade has spread in developing countries as an initiative aimed at lifting poor smallholder farmers out of poverty by providing them with premium prices, availability of credit, and improved community development and social goods. Fair Trade is also viewed as a niche market for high value products in a context of globalization and trade liberalization policies that affect smallholder farmers in developing countries. The question of whether Fair Trade affects the welfare of rural farmers, however, is particularly contentious. This paper provides a review of the Fair Trade literature, both theoretical and empirical, with a specific focus on the analysis of small-scale producer's welfare in developing countries. Our review shows that while most empirical papers have focused on the impacts of Fair Trade on prices and income, our review highlights the importance of limited market access and changes in productivity. Likewise, little is known about the impacts of Fair Trade on labor markets and human capital investments. Persistent methodological challenges make it challenging, however, to assess the causal impact of this certification and labelling initiative. |
| Keywords: | Fair Trade, developing countries, market efficiency |
| JEL: | O19 P46 |
| Date: | 2014–05 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp8167&r=int |
| By: | Ashournia, Damoun (University of Oxford); Munch, Jakob R. (University of Copenhagen); Nguyen, Daniel (University of Copenhagen) |
| Abstract: | The impact of imports from low-wage countries on domestic labor market outcomes has been a hotly debated issue for decades. The recent surge in imports from China has reignited this debate. Since the 1980s several developed economies have experienced contemporaneous increases in the volume of imports and in the wage gap between high- and low-skilled workers. However, the literature has not been able to document a strong causal relationship between imports and the wage gap. Instead, past studies have attributed the widening wage gap to skill biased technological change. This paper finds evidence for the direct impact of low wage imports on the wage gap. Using detailed Danish panel data for firms and workers, it measures the effects of Chinese import penetration at the firm level on wages within job-spells and over the longer term taking transitions in the labor market into account. We find that greater exposure to Chinese imports corresponds to a negative firm-level demand shock, which is biased towards low-skill intensive products. Consistent with this, an increase in Chinese import penetration results in lower wages for low-skilled employees. |
| Keywords: | Chinese import penetration, wage inequality, firm heterogeneity |
| JEL: | F16 |
| Date: | 2014–05 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp8166&r=int |
| By: | Martin, Philippe; Mayer, Thierry; Mayneris, Florian |
| Abstract: | Clusters have already been extensively shown to favor firm-level economic performance (productivity, exports, innovation etc.). However, little is known about the capacity of firms in clusters to resist economic shocks. In this paper, we analyze whether firms that agglomerate in clusters and firms that have been selected to benefit from the "competitiveness cluster'' industrial policy, implemented in France in 2005, have performed better on export markets during the recent economic turmoil. We show that, on average, both agglomeration and the cluster policy are associated with a higher survival probability of firms on export markets, and conditioning on survival, a higher growth rate of their exports. However, these effects are not stronger during the 2008-2009 crisis; if anything, the opposite is true. We then show that this weaker resilience of competitiveness cluster firms is probably due to the fact that firms in clusters are more dependent on the fate of the ``leader'', i.e. the largest exporter in the cluster. |
| Keywords: | clusters; competitiveness clusters; crisis; exports; resilience |
| JEL: | F1 R10 R11 R12 R15 |
| Date: | 2013–09 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9667&r=int |
| By: | Pomfret, Richard |
| Abstract: | Central Asian governments frequently express the goal of economic diversification, and specifically of diversifying their agricultural sector, but with little actual impact. Diversification has not happened because high trade costs discourage farmers, potential foreign investors and others from identifying new products that could be produced competitively. This paper reviews recent international literature on trade costs, and the limited Central Asian evidence. Because of high trade costs, the phenomenon of global value chains has scarcely touched Central Asia, apart from a few cases in the Kyrgyz Republic. The examples of clothing and beans illustrate how a Central Asian country has joined international value chains. The paper draws conclusions about how Central Asian countries wishing to diversify their agricultural sectors could draw upon this experience. -- Viele zentralasiatische Regierungen verfolgen das Ziel der wirtschaftlichen Diversifizierung, insbesondere im Agrarsektor, allerdings oftmals mit geringer Wirkung. Hohe Handelskosten halten Landwirte, potenzielle ausländische Investoren und andere Akteure davon ab, neue Produkte zu entwickeln, die sie anschließend wettbewerbsfähig vermarkten können. Auf diese Weise wird eine wirtschaftliche Diversifizierung verhindert. Dieser Beitrag behandelt einige neuere internationale Arbeiten über Handelskosten und stellt empirisches Material mit Zentralasienbezug vor. Aufgrund der hohen Handelskosten hat Zentralasien, abgesehen von einigen Fällen in Kirgisistan, bisher kaum teil an globalen Wertschöpfungsketten. Beispiele aus den Bereichen Kleidung und Bohnenproduktion zeigen, wie ein zentralasiatisches Land in internationale Wertschöpfungsketten eingegliedert werden kann. Abschließend wird aufgezeigt, wie zentralasiatische Länder von diesen Erfahrungen lernen können, wenn sie eine weitere Diversifizierung ihrer Wirtschaft anstreben. |
| Keywords: | trade costs,agricultural trade,Central Asia,Handelskosten,Agrarhandel,Zentralasien |
| JEL: | F13 F14 Q17 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:iamodp:146&r=int |
| By: | In 'T Veld, Jan; Kollmann, Robert; Ratto, Marco; Roeger, Werner; Vogel, Lukas |
| Abstract: | We estimate a three-country model using 1995-2013 data for Germany, the Rest of the Euro Area (REA) and the Rest of the World (ROW) to analyze the determinants of Germany’s current account surplus after the launch of the Euro. The most important factors driving the German surplus were positive shocks to the German saving rate and to ROW demand for German exports, as well as German labour market reforms and other positive German aggregate supply shocks. The convergence of REA interest rates to German rates due to the creation of the Euro only had a modest effect on the German current account and on German real activity. The key shocks that drove the rise in the German current account tended to worsen the REA trade balance, but had a weak effect on REA real activity. Our analysis suggests these driving factors are likely to be slowly eroded, leading to a very gradual reduction of the German current account surplus. An expansion in German government consumption and investment would raise German GDP and reduce the current account surplus, but the effects on the surplus are likely to be weak. |
| Keywords: | Current Account; estimated DSGE model; Eurozone crisis; intra-European imbalances; monetary union |
| JEL: | E3 F21 F3 F4 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9933&r=int |
| By: | Cadot, Olivier; de Melo, Jaime; Fernandes, Ana; Gourdon, Julien; Mattoo, Aaditya |
| Abstract: | The demand for accountability in “Aid-for-Trade” (AFT) is increasing but monitoring has focused on case-studies and impressionistic narratives. The paper reviews recent evidence from a wide range of studies, recognizing that a multiplicity of approaches is needed to learn what works and what does not. The review concludes that there is some support for the emphasis on reducing trade costs through investments in hard infrastructure (like ports and roads) and soft infrastructure (like customs). But failure to implement complementary reform – especially the introduction of competition in transport services – may erode the benefits of these investments. Direct support to exporters does seem to lead to diversification across products and destinations, but it is not yet clear that these benefits are durable. In general, it is difficult to rely on cross-country studies to direct AFT. More rigorous impact evaluation (IE) is an under-utilized alternative, but situations of “clinical interventions” in trade are rare and adverse incentives (due to agency problems) and costs (due to the small size of project) are a hurdle in implementation. |
| Keywords: | Aid for Trade (AFT); gravity; impact evaluation; trade performance |
| JEL: | F15 F35 |
| Date: | 2013–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9690&r=int |
| By: | Barbara Fliess |
| Abstract: | The incidence of export taxes, prohibitions and other measures that raise export prices, limit export quantities or place conditions on exporting is on the rise. Transparency can help mitigate the negative effects of export restrictions by enabling affected stakeholders to better understand and anticipate policy change and adjust their activities. This paper develops a checklist of good practice in transparency which can serve as a tool for self-evaluation by governments and for promoting better and more consistent transparency practices in this area. The items of the checklist are drawn from norms and practices found in WTO and regional trade agreements and good governance guidelines. Additionally, feedback was sought through a small business survey. The list provides guidance with respect to such questions as what, when and how information about export restrictions governments ought to make public. It assembles relevant principles for keeping stakeholders and the general public informed at different stages of developing and implementing export restrictions and identifies information content for an effective information policy. Transparency moreover depends on the ease with which information can be obtained and on the extent to which stakeholders have an opportunity to make their views known when a measure is still on the drawing board. |
| Keywords: | trade policy, transparency, information, business surveys, good practices, WTO, exports, raw materials, minerals, rule-making, GATT, export restrictions |
| JEL: | F13 F53 F55 K33 |
| Date: | 2014–05–20 |
| URL: | http://d.repec.org/n?u=RePEc:oec:traaab:164-en&r=int |
| By: | Grossman, Gene; Helpman, Elhanan; Kircher, Philipp |
| Abstract: | We develop a neoclassical trade model with heterogeneous factors of production. We consider a world with two factors, labor and "managers", each with a distribution of ability levels. Production combines a manager of some type with a group of workers. The output of a unit depends on the types of the two factors, with complementarity between them, while exhibiting diminishing returns to the number of workers. We examine the sorting of factors to sectors and the matching of factors within sectors, and we use the model to study the determinants of the trade pattern and the effects of trade on the wage and salary distributions. Finally, we extend the model to include search frictions and consider the distribution of employment rates. |
| Keywords: | heterogeneous labor; international trade; matching; productivity; sorting; wage distribution |
| JEL: | F11 F16 |
| Date: | 2013–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9680&r=int |
| By: | Guren, Adam; Hemous, David; Olsen, Morten |
| Abstract: | This paper develops a dynamic Heckscher Ohlin Samuelson model with sector-specific human capital and overlapping generations to characterize the dynamics and welfare implications of gradual labor market adjustment to trade. Our model is tractable enough to yield sharp analytic results, that complement and clarify an emerging empirical literature on labor market adjustment to trade. Existing generations that have accumulated specific human capital in one sector can switch sectors when the economy is hit by a trade shock. Nonetheless, the shock induces few workers to switch, generating a protracted adjustment that operates largely through the entry of new generations. This results in wages being tied to the sector of employment in the short-run but to the skill type in the long-run. Relative to a world with general human capital, welfare is improved for the skill group whose type-intensive sector shrinks. We extend the model to include physical capital and show that the transition is longer when capital is mobile. We also introduce nonpecuniary sector preferences and show that larger gross flows are associated with a longer transition. |
| Keywords: | sector-specific human capital; trade shock; transitional dynamics; worker mobility |
| JEL: | E24 F11 F16 J24 |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9835&r=int |
| By: | Anna Ray (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Antoine Vatan (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, LMA - Laboratoire de macroéconomie - Centre de Recherche en Économie et STatistique (CREST)) |
| Abstract: | This paper approaches international trade in luxury goods from demand side. It associates demand for luxury goods with within-country income disparities, via a social interactions component, the so-called Veblen effect (Veblen 1899). In the theoretical part, we propose a simple model of vertical differentiation with preferences displaying a Veblen effect. The model predicts that demand for luxury goods increases with the income gap between the two socio-economic groups (wealthy and non-wealthy agents). Furthermore, wealthy individuals in societies with higher income disparities have higher incentives to purchase luxury goods and hence they are willing to pay more for these. Next, we provide an empirical validation of these predictions on a sample of French high-end exporters (as defined by Martin and Mayneris, 2013) from French 8-digit CN custom data for 2006 at firm-product-destination level. Both demand for and average firm-product unit values of luxury goods are increasing with the income gap in importer country. The relationship is robust to inclusion of control variables as well as to use of alternative measures of income dispersion. |
| Keywords: | International Trade ; Luxury Goods ; Veblen Effects |
| Date: | 2013–10 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:hal-00959398&r=int |
| By: | Bouoiyour, Jamal; Selmi, Refk |
| Abstract: | Several factors have been highlighted to explain the controversial effect of exchange rate uncertainty on international trade. However, the empirical evidence is rather mixed. The main focus of this paper is to reconcile the apparently conflicting results from 59 studies published between 1984 and 2014. We found that the interaction between the two variables is likely to be ambiguous when measured in real rather than in nominal terms, when using “naïve models” rather than GARCH extensions as volatility measurement and when less developed countries are considered. Intuitively, the lack of clearer evidence may be also attributed to the scarcity of studies addressing the robustness of this relationship along several econometric methods and to the fact that neither the exchange rate policy nor the trade policy can be designed without considering regulatory and instrumental factors, which are unfortunately excluded in the majority of researches. To find better paths, further researches should focus on the new methods based on additional variables such as institutional quality proxies and financial development indicators. |
| Keywords: | Exchange rate uncertainty; international trade; meta-analysis. |
| JEL: | F14 |
| Date: | 2014–05–22 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:56201&r=int |
| By: | Cosar, Kerem; Guner, Nezih; Tybout, James R |
| Abstract: | This paper explores the combined effects of reductions in trade frictions, tariffs, and firing costs on firm dynamics, job turnover, and wage distributions. It uses establishment-level data from Colombia to estimate an open economy dynamic model that links trade to job flows in a new way. The fitted model captures key features of Colombian firm dynamics and labor market outcomes, as well changes in these features during the past 25 years. Counterfactual experiments imply that integration with global product markets has increased both average income and job turnover in Colombia. In contrast, the experiments find little role for this country's labor market reforms in driving these variables. The results speak more generally to the effects of globalization on labor markets in Latin America and elsewhere. |
| Keywords: | firm dynamics; inequality; International trade; labor market frictions; size distribution |
| JEL: | E24 F12 F16 J64 L11 |
| Date: | 2013–11 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9732&r=int |
| By: | Aggarwal, Vinod K; Evenett, Simon J |
| Abstract: | Although the global economy has begun to recover from the 2008-2011 financial crisis, challenges to the world trading system have increased. Several trends are taking public policies further away from the core WTO disciplines of non-discrimination, namely MFN and national treatment. This has manifested itself in 1) growing resort to protectionism in the wake of the crisis; 2) continued interest in FTAs, in particular strong interest in interregional RTAs, such as the TTIP and TPP; 3) A stalled Doha Round negotiation where differentiation among WTO members has become a key source of discord. We identify and discuss four determinants of these trends. First, developing countries believe that they got a bad deal in the Uruguay Round and seek alternative terms. Second, the rapid economic growth of the large emerging markets has led them to be forceful advocates of the developing country position at the WTO. Third, in view of the deadlock at the WTO, the US and EU, and other trade-oriented states, have come to believe that interregional accords may provide a viable alternative to the WTO, and will simultaneously address the creation of a spaghetti or noodle bowl created by the proliferation of FTAs. Fourth, the rise of China, often with significant government intervention and state owned enterprises, has fostered interest in “new industrial policy” by many countries, both industrialized and developing. The prospects for a seemingly open yet fragmented global trading system are discussed. |
| Keywords: | Doha Round; fragmentation; industrial policy; protectionism; regional trade agreements; WTO |
| JEL: | F02 F13 F52 F53 |
| Date: | 2013–12 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9781&r=int |
| By: | Cai, Ruohong (Princeton University); Feng, Shuaizhang (Shanghai University of Finance and Economics); Pytlikova, Mariola (KORA - Danish Institute for Local and Regional Government Research); Oppenheimer, Michael (Princeton University) |
| Abstract: | While there is considerable interest in understanding the climate-migration relationship, particularly in the context of concerns about global climatic change, little is known about underlying mechanisms. We analyze a unique and extensive set of panel data characterizing annual bilateral international migration flows from 163 origin countries to 42 OECD destination countries covering the last three decades. We find a positive and statistically significant relationship between temperature and international outmigration only in the most agriculture-dependent countries, consistent with the widely-documented adverse impact of temperature on agricultural productivity. In addition, migration flows to current major destinations are especially temperature-sensitive. Policies to address issues related to climate-induced international migration would be more effective if focused on the agriculture-dependent countries and especially people in those countries whose livelihoods depend on agriculture. |
| Keywords: | international migration, climate variability, agricultural productivity |
| JEL: | Q54 J10 |
| Date: | 2014–05 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp8183&r=int |
| By: | Anderson, Kym; Strutt, Anna |
| Abstract: | Rapid economic growth in some emerging economies in recent decades has significantly increased their global economic importance. If this rapid growth continues and is strongest in resource-poor Asian economies, the growth in global demand for imports of primary products also will continue, to the on-going benefit of natural resource-rich countries. This paper explores how global production, consumption and trade patterns might change over the next two decades in the course of economic development and structural changes under various scenarios. We employ the GTAP model and Version 8.1 of the GTAP database with a base year of 2007, along with supplementary data from a range of sources, to support projections of the global economy to 2030. We first project a baseline assuming trade-related policies do not change in each region but that factor endowments and real GDP grow at exogenously estimated rates. That baseline is compared with two alternative scenarios: one in which the growth rates of China and India are lower by one-quarter, and the other in which this slowdown in emerging economies leads to slower productivity growth in the primary sectors of all countries. Throughout the results, implications are drawn out for natural resource-abundant economies, including Australia and New Zealand. |
| Keywords: | Asian economic growth and structural change; booming sector economics; food security; global economy-wide model projections |
| JEL: | D58 F13 F15 F17 Q17 |
| Date: | 2013–12 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9779&r=int |
| By: | Clougherty, Joseph A.; Gugler, Klaus Peter; Sørgard, Lars; Szücs, Florian |
| Abstract: | Two literatures exist concerning cross-border merger activity’s impact on domestic wages: one focusing on spillover-effects; the other focusing on bargaining-effects. Motivated by scarce theoretical scholarship spanning these literatures, we nest both mechanisms in a single conceptual framework. Considering the separate phenomena of inward and outward cross-border merger activity, we predict that ‘bargaining’ (‘spillover’) effects are relatively more dominant under high (low) unionization rates and under high (low) degrees of relatedness. Employing US firm-level panel data on wages combined with industry-level data on unionization and merger activity (covering 1989-2001), we find support for our propositions as inward and outward cross-border merger activity generate positive spillovers to wages, but are more likely to generate firm-level wage decreases when unionization rates are high and when cross-border merger activity is best characterized as related. |
| Keywords: | bargaining; Cross-Border Mergers; FDI; spillovers; wages |
| JEL: | F23 J30 L21 |
| Date: | 2014–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9863&r=int |
| By: | Morris, Sebastian; Jain, Palakh |
| Abstract: | This study analyzes the relationship between outward foreign direct investment (OFDI) stocks pertaining to thirty four OECD source and one hundred sixty destination countries (i.e. bilateral stocks) and other various variables such as size, distance, common language etc using augmented gravity model. Our principal findings are as follows: (i). the variables of the gravity model (population size, per capita income and distance) explain nearly 50 per cent of the variation in the outward FDI stock. The coefficients are not only significant but are significantly close to the expected values. (ii). Common language and colonial linkages explain further variations in OFDI stock, over the gravity model (iii). Index of revealed comparative advantage of natural resources for source country bears positive relation with OFDI (iv).Common currency (Euro, in this study) between source and destination country lowers transaction costs and reduces risk in transactions between the source and destination countries to increase OFDI level. Overall, the gravity related variables have very large significance, and even if other variables are included their coefficients are unlikely to change. |
| Keywords: | Outward FDI, Gravity Model, Determinants, Common language |
| JEL: | F21 |
| Date: | 2013–03–13 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:56194&r=int |
| By: | Varma, Sumati; Nayyar, Rishika |
| Abstract: | India and the Latin America and Caribbean (LAC) region have emerged as major growth drivers of the world economy in the last couple of decades. Trade and investment relations between these regions have traditionally been rather insignificant but have picked up in recent years. Since 2000, Indian companies have invested about $12 billion in the LAC region across various industries. This paper examines the important issue of the motives driving OFDI between the two regions. It uses content analysis to identify the motives of the FDI transactions and the Chi Square test to find out the dominant motives driving investment from India to the LAC region across industries between 2000 - 2012. The study finds that Indian OFDI into the LAC is market seeking in nature and thus makes a significant contribution to the literature on FDI in the emerging markets context. |
| Keywords: | India, LAC, OFDI, Motives |
| JEL: | F21 F23 |
| Date: | 2014–04–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:56219&r=int |
| By: | Hemous, David |
| Abstract: | This paper builds a two-country (North, South), two-sector (polluting, nonpolluting) trade model with directed technical change, examining whether unilateral environmental policies can ensure sustainable growth. The polluting good is produced with a clean and a dirty input. I show that a temporary Northern policy combining clean research subsidies and a trade tax can ensure sustainable growth but Northern carbon taxes alone cannot. Trade and directed technical change accelerate environmental degradation either under laissez-faire or if the North implements carbon taxes, yet both help reduce environmental degradation under the appropriate unilateral policy. I characterize the optimal unilateral policy analytically and numerically using calibrated simulations. |
| Keywords: | climate change; directed technical change; environment; innovation; trade; unilateral policy |
| JEL: | F18 F42 F43 O32 O33 O41 Q54 Q55 |
| Date: | 2013–11 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9733&r=int |
| By: | Fariha Kamal; Mary E. Lovely; Devashish Mitra |
| Abstract: | We estimate the extent to which firms responded to tariff reductions associated with China’s WTO entry by altering labor’s share of value. Firm-level regressions indicate that firms in industries subject to tariff cuts raised labor’s share relative to economy-wide trends, both through input choices and rent sharing. Labor’s share of value is an estimated 12 percent higher in 2007 than it would be if tariffs had remained at their 1998 levels. There is significant variation across firms: the impact is larger where market access is better and it is influenced by union presence and state ownership. |
| Date: | 2014–05 |
| URL: | http://d.repec.org/n?u=RePEc:cen:wpaper:14-24&r=int |
| By: | Aron, Janine; Creamer, Kenneth; Muellbauer, John; Rankin, Neil |
| Abstract: | A sizeable literature examines exchange rate pass-through to disaggregated import prices but very few micro-studies focus on consumer prices. This paper explores exchange rate pass-through to consumer prices in South Africa during 2002-2007, using a unique data set of highly disaggregated data at the product and outlet level. The paper adopts an empirical approach that allows pass-through to be calculated over various horizons, including controls for domestic and foreign costs. It studies how pass-through differs across types of consumption goods and services and draws some aggregate implications about pass-through, using actual weights from the CPI basket. The heterogeneity of pass-through for different food sub-components and the role of switches between import and export parity pricing of maize is investigated and found significant for five out of ten food sub-components. Overall pass-through to the almost 63 percent of the CPI covered is estimated at about 30 percent after two years, but is higher for food. |
| Keywords: | consumer prices; CPI; exchange rate pass-through; exchange rate volatility; food prices; goods prices; monetary policy; services prices |
| JEL: | C23 C51 C52 E3 E31 E52 E58 F31 F39 |
| Date: | 2013–11 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9735&r=int |
| By: | João Amador; Sónia Cabral |
| Abstract: | The production of most goods and services is nowadays vertically fragmented across different countries. This paper surveys the growing empirical literature on global value chains (GVCs), acknowledged as the current paradigm for the international organisation of production. The paper starts by discussing the driving forces behind the significant expansion of GVCs in recent decades. Next, it surveys the indicators used to measure this phenomenon, accounting for their different scope and required datasets. Finally, the impacts of GVCs on trade flows, productivity and labour market developments, as well as some policy implications, are reviewed. |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:ptu:wpaper:w201403&r=int |
| By: | Prehn, Sören; Brümmer, Bernhard; Glauben, Thomas |
| Abstract: | Since the work of FEENSTRA (2002), the standard ANDERSON & VAN WINCOOP (2003) Gravity Model has been estimated using a fixed effects approach. However, a fixed effects approach has a major drawback: it does not allow for the estimation of exporter- and importer-invariant variables. Thus, economically relevant variables such as exporter and importer gross domestic product are disregarded. Here, we propose a random intercept model to address this gap. This approach not only provides identical estimates to a fixed effects approach, but also allows for the estimation of exporter- and importer-invariant variables. -- Seit FEENSTRA (2002) wird das Standard ANDERSON & VAN WINCOOP (2003) Gravity Modell mittels Fixed-Effects-Ansatzes geschätzt. Der Fixed-Effects-Ansatz hat allerdings den entscheidenden Nachteil, dass er nicht die Schätzung von Exporteur- und Importeur-invarianten Variablen erlaubt. Folglich lassen sich ökonomisch relevante Variablen wie Exporteur- und Importeur-Bruttosozialprodukt nicht berücksichtigen. Wir empfehlen ein Random-Intercept-Modell anstatt. Dieser Ansatz liefert nicht nur die identischen Schätzer wie ein Fixed-Effects-Modell, sondern erlaubt auch die Schätzung von Exporteur- und Importeur-invarianten Variablen. |
| Keywords: | Gravity Model Estimation,Poisson Pseudo Maximum Likelihood,Fixed Effects Model,Random Intercept Model |
| JEL: | F1 C3 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:iamodp:148&r=int |