nep-int New Economics Papers
on International Trade
Issue of 2014‒08‒25
thirty-one papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. Agricultural Trade Liberalization between the EU and Mediterranean Partner Countries: An Impact Analysis By Eruygur, Ozan
  2. Vertical Specialization, Tariff Shirking, and Trade By Ma, Alyson C.; Van Assche, Ari
  3. Global Engagement and the Occupational Structure of Firms By Davidson, Carl; Heyman, Fredrik; Matusz, Steven; Sjöholm, Fredrik; Zhu, Susan Chun
  4. A methodological contribution for measuring trade competition By Lopes, Vania; Simoes, Nadia; Crespo, Nuno
  5. Measuring the Competitiveness of China's Processed Exports By THORBECKE, Willem
  6. Gone for Good? Subsidies with Export Share Requirements in China: 2002-2013 By Fabrice Defever; Alejandro Riano
  7. Modeling Firm Heterogeneity in International Trade: Do Structural Effects Matter? By Roberto Roson; Kazuhiko Oyamada
  8. Did trade crisis affect different exporters differently? Case of Mexico By Rahul Giri; Enrique Seira; Kensuke Teshima
  9. Collateral imbalances in intra-European trade? Accounting for the differences between gross and value added trade balances By Nagengast, Arne J.; Stehrer, Robert
  10. Assessing the Extent of EU-Russia Trade Integration in the Presence of Global Value Chains By Konstantins Benkovskis; Julija Pastusenko; Julia Woerz
  11. Financial Frictions and New Exporter Dynamics By Fernando Leibovici; David Kohn; Michal Szkup
  12. Trade Policy and Growth in Asia By Kawai, Masahiro; Wignaraja, Ganeshan
  13. Export performance and geography in Croatia By Artuc, Erhan; Iootty, Mariana; Pirlea, Ana Florina
  14. Good and bad FDI: The growth effects of greenfield investment and mergers and acquisitions in developing countries By Philipp Harms; Pierre-Guillaume Méon
  15. What Promises Does the Eurasian Customs Union Hold for the Future? By Francisco G. Carneiro
  16. Foreign direct investment and local spillovers in the apparel sector in Sub-Saharan Africa By Staritz, Cornelia
  17. A Time Series Analysis of Turkish Trade Patterns at the Sector Level By Erlat, Haluk
  18. Local embeddedness and economic and social upgrading in Madagascar's export apparel industry By Staritz, Cornelia; Morris, Mike
  19. Regionalism and Falling External Protection in High and Low Tariff Members By Pramila Crivelli
  20. Firms’ Heterogeneity and Incomplete Pass-Through By STEFANIA GARETTO
  21. Complex Networks Analysis of European International Trade: An Agent-Based Model By Kırer, Hale; Çırpıcı, Yasemin; Eren, Ercan
  22. Former foreign affiliates: Cast out and outperformed? By Beata Javorcik; Steven Poelhekke
  23. From access to acceptance: The costs of crossing borders in the global economy By Sarianna M. Lundan
  24. A Dissection of Trading Capital: Cultural persistence of trade in the aftermath of the fall of the Iron Curtain By Ferdinand Rauch; Matthias Beestermoller
  25. From Global Factory to Global Mall: East Asia’s Changing Trade Composition By Helble, Matthias; Ngiang, Boon-Loong
  26. Disemployment Caused by Foreign Direct Investment? Multinationals and Japanese employment By KIYOTA Kozo; KAMBAYASHI Ryo
  27. Knowledge Absorption in the Development of Export Products By Warda, Peter; Johansson, Börje
  28. Integrating border regions : connectivity and competitiveness in South Asia By Cali, Massimiliano; Farole, Thomas; Kunaka, Charles; Wagle, Swarnim
  29. "Precarious upgrading" in electronics global production networks in Central and Eastern Europe: The cases of Hungary and Romania By Plank, Leonhard; Staritz, Cornelia
  30. Can Open Service Sector FDI Policy Enhance Manufacturing Productivity? Evidence from Indonesia By Victor Duggan; Sjamsu Rahardja; Gonzalo Varela
  31. Trade Facilitation, Value Creation, and Competiveness : Policy Implications for Vietnam's Economic Growth, Volume 2 By Duc Minh Pham; Deepak Mishra; Kee-Cheok Cheong; John Arnold; Anh Minh Trinh; Huyen Thi Ngoc Ngo; Hien Thi Phuong Nguyen

  1. By: Eruygur, Ozan (Gazi University, Department of Economics)
    Abstract: In this paper, the impacts of an agricultural trade liberalization between the EU and mediterranean partner countries (MPCs) including Turkey are analyzed by employing an Armington trade model structure for both the imports and exports of the EU. The study uses EU’s agricultural trade data at 8 digit level (Combined Nomenclature, CN) and disaggregates EU’s agricultural trade into 207 agricultural goods. In addition, the agricultural commodities, intermediate and final products are differentiated according to the WTO definitions. The global trade of EU has been disaggregated into 27 regions to distinguish the regional impacts. All Mediterranean partner countries including Turkey are explicitly included. In the import model, a nested constant elasticity of substitution (CES) function consisting of 27 import sources (regions) is employed. Similarly, the exports of EU are modeled by a nested constant elasticity of transformation (CET) function aggregator. The structure of the model assumes perfectly elastic export supplies for EU imports hence the model simulates the maximum possible change in the EU’s imports for each goods given the set of import demand and substitution elasticities. By the same token, the model simulates the maximum possible change in the EU’s exports as the export model assumes perfectly elastic import demands for EU exports.
    Keywords: Armington model, mediterranean partner countries, fixed effect panel, agricultural trade, EU, Turkey.
    JEL: C50 Q17 F17
    Date: 2013
  2. By: Ma, Alyson C. (University of San Diego); Van Assche, Ari (HEC Montréal; CIRANO; Institute for Research on Public Policy)
    Abstract: The core idea behind the paper is that trade policy matters for the organization of global value chains, a notion largely neglected by economists but which has important implications for our understanding of trade and the international transmission of trade policy shocks. We develop a theoretical model in which a firm’s ability to spatially separate manufacturing from headquarter services gives them the flexibility to circumvent economy-specific tariff changes by switching their assembly location abroad. We show that tariff shirking increases the elasticity of bilateral trade to economy-specific tariff hikes due to an extra extensive margin effect. Furthermore, we show that tariff shirking affects the vulnerability of headquarter services and manufacturing to trade policy shocks in opposite ways. While tariff shirking dampens the vulnerability of headquarter services to trade policy shocks, it amplifies the vulnerability of manufacturing to trade policy shocks. Using firm-level and province-level export data from the People’s Republic of China, we provide evidence in line with the theoretical model.
    Keywords: vertical specialization; extensive margin; antidumping; tariff shirking; People’s Republic of China
    JEL: F12 F13 F14
    Date: 2014–02–01
  3. By: Davidson, Carl (Michigan State University); Heyman, Fredrik (Research Institute of Industrial Economics); Matusz, Steven (Michigan State University); Sjöholm, Fredrik (Department of Economics, Lund University); Zhu, Susan Chun (Michigan State University)
    Abstract: Engagement in foreign markets can have an impact on firm organization and on the type of occupations that a firm needs. We examine the effect of globalization on the occupational mix using detailed Swedish data that cover all firms and a representative sample of the labor force for 1997-2005. We find a robust relationship between a firm’s degree of international integration and its occupational mix. Multinationals, which are the most globally engaged firms, have a distribution of occupations skewed toward the more skilled. Non-multinational exporters have a distribution of occupations less skewed toward skilled compared to multinationals, but more skewed toward skilled occupations compared to Swedish non-exporters (which are the least globally engaged). Moreover, firms tend to have an even more skill intensive distribution of occupations when they mainly export to far away markets, or when they export differentiated goods. Our results are little changed (1) when we control for firm size, productivity, capital intensity, and firm age, (2) when we control for offshoring and R&D expenditures; (3) when we use alternative methods to rank occupations, or (4) when we conduct alternative robustness tests. In addition, the results are very similar for manufacturing and non-manufacturing, and for foreign and Swedish multinationals. We interpret our results using a decomposition motivated by recent theoretical models of selection into exporting and FDI.
    Keywords: Occupational mix; Globalization; Multinational Enterprises; Export; Firms
    JEL: F14 F16 J20
    Date: 2014–06–02
  4. By: Lopes, Vania; Simoes, Nadia; Crespo, Nuno
    Abstract: The traditional approach to evaluate trade competition considers the competition between two countries in a given destination market and quantifies it through a measure of structural similarity such as the Krugman index. We explore this topic further through the discussion of six distinct perspectives. For each of them, adequate measures are proposed.
    Keywords: trade competition, globalization, structural similarity, index
    JEL: F10 F14
    Date: 2014
  5. By: THORBECKE, Willem
    Abstract: China's surplus in processing trade remains large. Processed exports are final goods produced using parts and components that are imported duty free. Since much of the value added of these exports comes from East Asia, exchange rates throughout the region should affect their foreign currency prices. This paper presents data on value-added exchange rates for processed exports over the 1993-2013 period and reports that they significantly affect exports. While the renminbi (RMB) appreciated by 36% between the beginning of 2005 and the end of 2013, exchange rates in supply chain countries have depreciated. This has mitigated the effect of the RMB appreciation on the price competitiveness of processed exports.
    Date: 2014–08
  6. By: Fabrice Defever; Alejandro Riano
    Abstract: This paper presents a simple model of subsidies with export share requirements (ESR) in a heterogeneous firm environment. A two-country general equilibrium version of the model with a single 100% ESR is calibrated using firm-level data from the 2002 wave of the Business Environment and Enterprise Performance Survey collected by the World Bank for China. The calibrated model is used to gauge the change in subsidies with ESR that is consistent with the fall in the share of ‘pure exporters’, firms exporting all their output, observed in China, from 25.7% in 2002 to 11.1% in 2013. Our results indicate that a 6.9% reduction in the ad-valorem subsidy rate available to firms that export all their output is consistent with the observed fall in their share of exporting firms. Expenditure in subsidies (as a share of value-added) falls by 66% and welfare in China increases by 1.76% while real income in the rest of the world falls by 0.59%.
    Keywords: Trade Policy; Export Subsidies; Export Share Requirements; China JEL classification: F12; F13; O47
    Date: 2014
  7. By: Roberto Roson (Department of Economics, University Of Venice Cà Foscari); Kazuhiko Oyamada (Institute of Developing Economies, Japan External Trade Organization)
    Abstract: This paper analyzes the qualitative properties of a multisectoral, multiregional computable general equilibrium model where some industries include heterogeneous firms as in Melitz (2003). The model, formulated according to Roson, R. and Oyamada (2014), adds endogenous productivity effects to a standard Walras-Ricardian framework. We argue that the inclusion of such effects changes the magnitude and distribution of welfare benefits obtainable by reductions in trade barriers, due to of comparative advantages. Abstract We illustrate the point through a numerical example, in which alternative model formulations are assessed. A standard neoclassic GE model, a basic Melitz model and a hybrid model are then compared. The three model versions are all calibrated with the same data set and an identical simulation experiment (a 50% reduction of transport costs between two regions) is carried out in the three cases. The results show that the hybrid model displays the largest welfare gains, as it combines Ricardian comparative advantages with Melitz average productivity improvements. However, they also show that new effects, not present in the original Ricardo and Melitz frameworks, are at a work.
    Keywords: Computable General Equilibrium Models, Melitz, Firm Heterogeneity, International Trade.
    JEL: C63 C68 D51 D58 F12 L11
    Date: 2014
  8. By: Rahul Giri (Centro de Investigación Económica (CIE), Instituto Tecnológico Autónomo de México (ITAM)); Enrique Seira (Centro de Investigación Económica (CIE), Instituto Tecnológico Autónomo de México (ITAM)); Kensuke Teshima (Centro de Investigación Económica (CIE), Instituto Tecnológico Autónomo de México (ITAM))
    Abstract: How did small exporters fare relative to large exporters during the 2008-09 crisis? Examining the performance of Mexican exporters reveals that crisis did not make smaller exporters more likely to exit, growless, or expand their product line less. Workhorse models of trade, in response to an aggregate demand or credit shock, would predict the opposite. The same models, however, are consistent with the data before and after the crisis: within industry, (i) firm exit rate is decreasing in size; (ii) conditional on survival, export growth is largely decreasing in size, (iii) net product addition is increasing in size.
    Keywords: firm level trade, firm size, crisis, margins of trade adjustment
    JEL: F11 F15
    Date: 2013
  9. By: Nagengast, Arne J.; Stehrer, Robert
    Abstract: One of the main stylised facts that has emerged from the recent literature on global value chains is that bilateral trade imbalances in gross terms can differ substantially from those measured in value added terms. However, the factors underlying the extent and sign of the differences between the two measures have so far not been investigated. Here, we propose a novel decomposition of bilateral gross trade balances that accounts for the differences between gross and value added concepts. The bilateral analysis contributes conceptually to the literature on double counting in trade by identifying the trade flow in which value added is actually recorded for the first time in international trade statistics. We apply our decomposition framework to the development of intra-EU27 trade balances from 1995 to 2011 and show that a growing share of intra-EU bilateral trade balances is due to demand in countries other than the two direct trading partners. The latter accounted for 25% of the total variance of intra-EU gross bilateral trade balances in 2011, which marks a considerable rise from 3% in 1995. A structural decomposition analysis indicates that this evolution was especially due to the rising importance of international production sharing. --
    Keywords: Trade balances,Global value chains,Vertical specialisation,Value added,Input-output tables
    JEL: F1 F2 C67 R15
    Date: 2014
  10. By: Konstantins Benkovskis; Julija Pastusenko; Julia Woerz
    Abstract: The present paper analyses trade linkages between EU Member States and Russia taking into account the indirect trade links through global value chains based on data for 2011 from the World Input-Output Database combined with gross flows between Russia and individual EU countries. We base our conclusions on three indicators: gross exports in final use, value added in final use and value added in output. The latter two novel indicators are able to capture direct and indirect links jointly by allocating the full amount of Russia's value added in the EU's final domestic use and output (and vice versa: the EU's value added in Russia's final domestic use and output). In terms of direct export shares, Russia represents the EU's fourth largest trade partner, while the EU is Russia's largest trade partner. The Russian economy is also considerably more dependent on European value added in terms of both final use and producing output than vice versa. However, the degree of integration varies greatly across the EU Member States. For example, the Baltic States are notably more dependent on Russia's value added than vice versa. Moreover, certain economic sectors in the EU are strongly dependent on Russian inputs, such as the energy sector, utilities and air transport.
    Keywords: trade integration, global value chains, Russia, European Union
    JEL: F12 F15 F51
    Date: 2014–08–13
  11. By: Fernando Leibovici (Department of Economics, York University, Toronto, Canada); David Kohn (New York University); Michal Szkup (New York University)
    Abstract: This paper studies the role of financial frictions as a barrier to international trade. We investigate new exporter dynamics in order to identify the extent to which these frictions affect export decisions. We study an economy with heterogeneous firms subject to financing constraints and working capital requirements, and calibrate it to match key moments from Chilean plant-level data. In contrast to standard models of international trade with sunk export entry costs, our model can account for new exporter dynamics. We find that financial frictions reduce the impact of a trade liberalization, suggesting that they constitute an important trade barrier.
    Date: 2014–08–11
  12. By: Kawai, Masahiro (Asian Development Bank Institute); Wignaraja, Ganeshan (Asian Development Bank Institute)
    Abstract: This paper examines the changing relationship between trade policy, production networks, and economic growth in Asia. It traces East Asia’s rise to the coveted “Factory Asia” league with rapid growth over several decades through trade policy anchored on outward-oriented industrialization strategies, including a voluntary liberalization approach under the Asia-Pacific Economic Cooperation (APEC) and a multilateral approach under the General Agreement on Tariffs and Trade (GATT)/World Trade Organization (WTO) system. It explores the implications of various stresses to the performance of Factory Asia such as the consequences of the global financial crisis, the risk of protectionism, the persistence of residual behind-the-border regulatory barriers, the failure to conclude ambitious WTO multilateral trade negotiations, and the relative exclusion of small and medium-sized enterprises (SMEs). Next, it examines the evolving trade policy response in major East Asian economies centered on free trade agreements (FTAs) to support the functioning of Factory Asia and key policy challenges posed by FTAs, including the insufficient depth of FTAs, the risk of an Asian noodle bowl of multiple rules of origin, the potential for raising use of FTA preferences, and the emergence of mega-regional FTA negotiations. Finally, it considers policy implications at the national, regional, and global levels for supporting Factory Asia and growth in Asia.
    Keywords: Trade policy; FTAs; WTO; regional integration; production networks; Factory Asia
    JEL: F13 L23 O19
    Date: 2014–08–17
  13. By: Artuc, Erhan; Iootty, Mariana; Pirlea, Ana Florina
    Abstract: This paper uses the gravity model to analyze whether the varying export performance of Croatian counties can be explained by their proximity to border gates, ports, and other county-specific characteristics. The analysis finds that longer distances to border gates increase trade frictions significantly for many product categories, although these frictions have been decreasing between 2007 and 2012. The paper analyzes the county specific factors that are associated with variation in export performance, net of distance. Results show that exports are strongly and positively correlated with motorway and road density, the size of the labor force, low-skill ratio, and the number of patents. These variables are also associated with a greater diversity of exports in terms of products and destinations. Several general policy implications are highlighted. The significant association between motorway and road density and export volume, number of destinations, as well as the diversity of exported products may indicate that improvements in connectivity and facilitation of transport could still play a significant role in enhancing regional trade outcomes. Similarly, good performance in research and development may significantly help to spur competitiveness and allow local producers to enter new markets in products and destinations, which in turn can increase the level of diversification and boost resilience to global economic shocks.
    Keywords: Economic Theory&Research,Free Trade,Transport Economics Policy&Planning,Trade Policy,Tax Law
    Date: 2014–08–01
  14. By: Philipp Harms; Pierre-Guillaume Méon
    Abstract: We explore the effect of foreign direct investment on economic growth in developing countries, distinguishing between mergers and acquisitions (“M&As”) and “greenfield” investment. A simple model underlines that, unlike greenfield investment, M&As partly represent a rent accruing to previous owners, and do not necessarily contribute to expanding the host country’s capital stock. Greenfield FDI should therefore have a stronger impact on growth than M&A sales. This hypothesis is supported by our empirical results, which show that greenfield FDI enhances growth, while M&As have no effect, at best, in a panel of up to 78 developing and emerging countries over 1987-2005.
    Keywords: Growth; foreign direct investmen; mergers and acquisitions; greenfield investment
    JEL: F21 F23 F43 O16
    Date: 2014–08–20
  15. By: Francisco G. Carneiro
    Keywords: International Economics and Trade - Trade and Regional Integration International Economics and Trade - Trade Policy International Economics and Trade - Free Trade Economic Theory and Research Private Sector Development - Emerging Markets Macroeconomics and Economic Growth
    Date: 2013–02
  16. By: Staritz, Cornelia
    Abstract: Foreign direct investment (FDI) in the apparel sector in several Sub-Saharan African (SSA) countries has experienced significant growth in the context of preferential market access. But expectations of FDI leading to spillovers to the local economy and the development of locally-embedded apparel export industries have not materialized. A shift from FDI attraction through fiscal incentives to more strategic industrial policies that target FDI spillovers, local value added and linkages is urgently needed for broader local development effects. --
    Date: 2013
  17. By: Erlat, Haluk (METU, Department of Economics, Ankara, Turkey)
    Abstract: In our previous research on the pattern of Turkish trade (Erlat and Erlat, 2012) we tried to establish if this pattern had a persistent nature or whether it was dynamic. In doing so we used tools originally developed by Gagnon and Rose (1995) and later used by Carolan, Singh and Talati (1998) and Carter and Li (2002, 2004). These involved (i) classifying the sectors as surplus, balance and deficit sectors and constructing 3x3 contingency tables indicating whether sectors, say, that showed a deficit at the beginning of a period, remained deficit sectors at the end of the period or became balance and surplus sectors; (ii) testing whether the pattern at the end of the period was independent of the pattern at the beginning period, and (iii) constructing histograms regarding the distribution of how long the sectors have been showing surpluses over the period. We consider three aspects of this approach that may require improvement: (i) The results are highly aggregated even though the data used, at least in Erlat and Erlat (2012), are at the SITC 5 digit level. (ii) The results refer to the comparison between the beginning and ending of two periods that are years apart. Thus, how the patterns at the end of the period are reached is not investigated. (iii) The only tools that take the individual sectors and how they behave during the period into account are the histograms. To remedy these shortcomings, we followed Carolan, Mora and Singh (2012)’s lead and applied time series methods to individual sectors to obtain information about the path their trade balances took over the period under consideration. This also allowed us to pinpoint those sectors that have been successful in trade. We first constructed two series using export and import data for the sectors to be considered. First, we have the normalized trade balance for sector i at time t, NBit, to be used as the subject of the time series analysis. Second, we have the normalized trade volume for sector i at time t, NVit, to be used in presenting the results of the time series analysis. The sum of the NVit across i for any t is always 100. It, thus, shows the significance of the ith good (or sector) in overall trade. Since the focus of our time series analysis was the NBit, we established if the trade balance of a given sector increased, decreased or remained the same. This means that we needed to be interested in the long run movement of the NBit; in other words, the trend component in the series. This component may be stochastic, implying the presence of a unit root, or deterministic, implying a trend stationary series. In the second case, the sign of a statistically significant coefficient for the linear trend term will indicate to us the direction of the change while a statistically insignificant coefficient would imply that there has been no significant change in the trade balance of that sector. We used two tests for this purpose. The first one had the existence of a unit root as its null hypothesis and our test for this was the Augmented Dickey-Fuller (ADF) test. The second had stationarity as its null and the test we used was Kwiatowski, Phillips, Schmidt and Shin (KPSS) test. The joint use of the ADF and KPSS tests leads to the classification of the sectors into eight groups. Groups IV-VII contain results where there are no conflicts. Of these IV indicates that the series are nonstationary while VI-VII indicate that they are stationary. Groups I-III and VIII indicate conflicts. However, we used the results in I-III by regarding the stationarity obtained by the KPSS test as an indication that ADF lacks power in the sense that the null of a unit root would have been rejected. The conflict in VIII implies that the NBit has neither a unit root, nor is it stationary. Thus, these sectors were ignored. The data are the same ones used in Erlat and Erlat (2012) and will enable us to compare our results with those obtained in that paper. They are from 5-sectors but we eliminated those sectors that either had no exports or imports or both at any year during the period in question. This reduced the number of sectors to be analyzed to 1118. We also used the technological classification of the data and the presentation of the results as in Erlat and Erlat (2012). When we look at the aggregate results of this paper, we find that there is not much that is new compared to those in Erlat and Erlat (2012). But, when we consider the disaggregated results, we find information about the nature of the dynamism in the sectors classified as such. We find that the number and share in 2001 trade of positive change sectors is larger in all categories except Raw-Material Intensive Goods, a category including more traditional export sectors. sectors but we eliminated those sectors that either had no exports or imports or both at any year during the period in question. This reduced the number of sectors to be analyzed to 1118. We also used the technological classification of the data and the presentation of the results as in Erlat and Erlat (2012). When we look at the aggregate results of this paper, we find that there is not much that is new compared to those in Erlat and Erlat (2012). But, when we consider the disaggregated results, we find information about the nature of the dynamism in the sectors classified as such. We find that the number and share in 2001 trade of positive change sectors is larger in all categories except Raw-Material Intensive Goods, a category including more traditional export sectors. By the same token, Difficult-to-Imitate Research Intensive Goods appears to be the most dynamic sector with 21 top dynamic 5-digit sectors. Hence, we are able to say that Turkey not only has a dynamic tra
    Keywords: Not available
    Date: 2013
  18. By: Staritz, Cornelia; Morris, Mike
    Abstract: Over the past decade, several Sub-Saharan African (SSA) countries have developed or expanded export-oriented apparel industries in the context of the Multi-Fibre Arrangement (MFA) quotas and preferential market access, most importantly under the African Growth and Opportunity Act (AGOA). Madagascar is different to the other main SSA low-income country (LIC) apparel exporters - Kenya, Lesotho and Swaziland - given its more diverse end markets and ownership structures and the political instability that led to the loss of AGOA status at the end of 2009. This paper assesses the development of Madagascar's export-oriented apparel industry and economic and social upgrading dynamics in particular in the context of the AGOA loss. It identifies four types of firms and value chains that differ with regard to ownership patterns, end markets and, most importantly, 'local embeddedness', with important implications for both economic upgrading dynamics and possibilities and the sustainability of the industry. The paper concludes that, despite the contraction in the exportoriented apparel industry post-AGOA, Madagascar is still a more successful apparel producer in terms of economic upgrading than the other main apparel-exporting LICs in SSA. The key to this trajectory lies in the differentiation of global value chain (GVC) relationships, local embeddedness and export diversification. --
    Keywords: Global value chains,upgrading,apparel/clothing industry,foreign direct investment,ownership,embeddedness,end market diversification,African Growth and Opportunity Act,Madagascar,Sub-Saharan Africa
    Date: 2013
  19. By: Pramila Crivelli
    Abstract: This paper provides evidence that the reduction in applied most-favored nation (MFN) tariffs resulting from a decrease in preferential tariffs is restricted to (or significantly larger in) high-tariff members of preferential trade agreements (PTAs). This heterogeneous impact is observed only when the share of preferential imports increases, leading to a decline in tariff revenue. This makes countries which tend to heavily depend on tariff revenue as a source of government funding more likely to reduce their MFN tariffs, which is also observed in the data. These results lend support to the “building bloc†view of regionalism, in particular for countries applying high external tariffs before the agreement. They are also consistent with a mechanism operating through trade deflection and the associated loss of tariff revenue.
    Keywords: Regionalism, Preferential Trade Agreements, TradeDiversion, External Tariff, Trade Liberalization, Tariff Revenue
    Date: 2014–08
  20. By: STEFANIA GARETTO (Department of Economics, Boston University)
    Abstract: A large body of empirical work documents that prices of traded goods change by a smaller proportion than real exchange rates between the trading countries (incomplete pass-through). The wedge between exchange rates and relative prices also varies a cross countries (pricing-to-market). I present a model of trade and international price-setting with heterogeneous firms, where firms’ strategic behavior implies that: 1) firm-level pass-through is incomplete and a U-shaped function of firm market share; 2) exchange rate fluctuations affect both the prices of traded goods and the prices of goods sold domestically; and 3) firm-level pass-through varies across destination countries. Estimates from a panel data set of cars prices support the predictions of the model.
    Keywords: Heterogeneous firms, incomplete pass-through, pricing to market
    JEL: F12 F31 L13
    Date: 2014–03
  21. By: Kırer, Hale (Balıkesir University, Bandırma Faculty of Economics and Administrative Sciences, Department of Econometrics); Çırpıcı, Yasemin (Yıldız Technical University, Faculty of Economics and Administrative Sciences, Department of Economics); Eren, Ercan (Yıldız Technical University, Faculty of Economics and Administrative Sciences, Department of Economics)
    Abstract: Economic systems involve many heterogeneous agents and their complex interactions. These lead many studies, in recent years, to focus on the complex networks. Agent based modelling and simulation (ABMS) is a powerful tool for analyzing such systems. This model enables interacting agents to assess individually their positions and makes decisions on the basis of a set of rules that configure the system. International trade can be thought of as a complex network since it consists of interacting heterogeneous agents (countries) with special characteristics. Network representation also makes it possible to analyze indirect trade interaction among countries. In this study the network of international trade of European countries is modelled by using an agent-based model. The aim is to display briefly the network structure of the European international trade.
    Keywords: Complex Networks, Agent-Based Modelling, Complexity Economics, International Trade.
    JEL: C63 C69 F14
    Date: 2013
  22. By: Beata Javorcik; Steven Poelhekke
    Abstract: The literature has documented a positive effect of foreign ownership on firm performance. But is this effect due to a one-time knowledge transfer or does it rely on continuous injections of knowledge? To shed light on this question we focus on divestments, that is, foreign affiliates that are sold to local owners. To establish a causal effect of the ownership change we combine a difference-in-differences approach with propensity score matching. We use plant-level panel data from the Indonesian Census of Manufacturing covering the period 1990-2009. We consider 157 cases of divestment, where a large set of plant characteristics is available two years before and three years after the ownership change and for which observationally similar control plants exist. The results indicate that divestment is associated with a drop in total factor productivity accompanied by a decline in output, markups as well as export and import intensity. The findings are consistent with the benefits of foreign ownership being driven by continuous supply of headquarter services from the foreign parent.
    Keywords: divestment; foreign direct investment; Indonesia; productivity
    JEL: F23
    Date: 2014–08
  23. By: Sarianna M. Lundan (University of Bremen - International Management and Governance & ZenTra)
    Abstract: This paper provides an overview of the different kinds of distance-related barriers related to crossborder investment. Expanding the economic footprint of the firm comes at the cost of a corresponding increase in the complexity of coordination. Different forms of governance, whether inside the firm or as part of its network of external relationships, have the aim of reducing uncertainty and creating a more predictable environment. The impact of conventional distancerelated barriers, as well as the more difficult institutional barriers reflecting differences in norms and beliefs, on the costs and methods of coordination adopted by multinational firms are explored.
    Keywords: transnational firms, foreign investment, governance, entry barriers, institutional distance
    JEL: F21 F23 M16
    Date: 2014–06
  24. By: Ferdinand Rauch; Matthias Beestermoller
    Abstract: We show that the countries of the former Austro-Hungarian monarchy trade significantly more with one another in the aftermath of the collapse of the Iron Curtain than predicted by a standard gravity model.� This trade surplus declines linearly and monotonically over time.� We argue that these findings suggest that decaying cultural forces explain a significant part of trading capital.� We document the rate of decay of these cultural forces.
    Keywords: Trade, Gravity, Culture, Borders, Habsburg Empire, Persistence
    JEL: F14 F15 N33 N34 N94
    Date: 2014–08–13
  25. By: Helble, Matthias (Asian Development Bank Institute); Ngiang, Boon-Loong (Asian Development Bank Institute)
    Abstract: This paper studies how East Asia’s trade composition and orientation have changed over the past decade and analyzes the implications for the region and beyond. Over the last 2 decades we have witnessed the emergence of regional and global supply chains, in which production is divided into production stages or tasks across the most competitive locations. East Asia has been the most successful region in the world in building up or joining regional and global supply chains and has been described as “Factory Asia” (Baldwin 2008). Introducing a new and simple analytical tool, we show that over the past decade East Asia has successfully consolidated its role as the “Global Factory.” Furthermore, studying East Asia’s recent trade patterns in primary, intermediate, capital, and consumption goods, our results indicate that East Asia is on track to becoming one of the biggest “malls” in the world. Whereas in 1999–2000 around half of all consumption goods exported by East Asia went to the United States and the European Union-27, in 2011–2012 half stayed in the region or were traded with the rest of the world.
    Keywords: Global supply chains; trade composition; East Asia; Factory Asia; Global Factory; Global Mall
    JEL: F14 F15 N15
    Date: 2014–08–20
    Abstract: Using parent-foreign affiliate matched data on Japan from 1995 to 2009, this paper examines the effects of foreign direct investment (FDI) on domestic employment, especially in manufacturing. One of the contributions of this paper is that we utilize the matched data for each country in which Japanese multinational firms operate, which enables us to identify the differences in the impact of FDI between destinations. Results indicate that the increases in the investment goods price in China—but the decreases in it in the United States—negatively affected the domestic labor demand of multinationals in Japan. This contrast may reflect a difference in specialization patterns across countries. We also found that disemployment in Japan was driven mainly by substitution between capital and labor, rather than by the reallocation of labor from Japan to overseas.
    Date: 2014–08
  27. By: Warda, Peter (Jönköping International Business School (JIBS), and Centre of Excellence for Science and Innovation Studies (CESIS) KTH, Sweden); Johansson, Börje (Jönköping International Business School (JIBS), Centre of Excellence for Science and Innovation Studies (CESIS) KTH, and Centre for Innovation, Research and Competence in the Learning Economy (CIRCLE), Sweden)
    Abstract: In this paper we analyze how firms’ knowledge absorption capacity – given the knowledge environment – affects the development, adoption and introduction of new export products among Swedish manufacturing firms. Our model formulation builds on theoretical arguments which imply that firms can influence the usefulness of their knowledge environment by establishing formal and informal networks with input suppliers (especially suppliers of knowledge-intensive business services) and by exploiting their absorptive capacity. The model suggests that the higher the knowledge absorption in firms, the higher the introduction frequency of new export products. In particular, it is the conjunction of a high absorptive capacity and a high external knowledge potential that makes certain firms successful introducers of new export products.
    Keywords: Absorptive capacity; innovation; exports; manufacturing; knowledge; Sweden
    JEL: D21 D24 F23 L60 R30
    Date: 2014–08–11
  28. By: Cali, Massimiliano; Farole, Thomas; Kunaka, Charles; Wagle, Swarnim
    Abstract: Deeper regional integration can be beneficial especially for regions along international borders. It can open up new markets on opposite sides of borders and give consumers wider access to cheaper goods. This paper uses data from five contiguous districts of India, Nepal, and Bangladesh in the northeast of the subcontinent to measure the degrees of trade complementarity between districts. The paper illustrates that the regions are underexploiting the potential of intraregional commerce. Price wedges of up to 90 percent in some important consumption products along with measures of complementarity between households'production and consumption suggest the potential for relatively large gains from deeper trade integration. Furthermore, an examination of a specific supply chain of tea highlights factors that help industries scale up, aided by institutions such as an organized auction and decent physical and legal infrastructure. However, districts alike in geography but located across international boundaries face different development prospects, suggesting that gains from reduced"thickness of borders"would not accrue automatically. Much rests on developing intrinsic industry competitiveness at home, including the reform of regulatory and business practices and infrastructural bottlenecks that prevent agglomeration of local economies.
    Keywords: Transport Economics Policy&Planning,Markets and Market Access,Economic Theory&Research,Regional Economic Development,Emerging Markets
    Date: 2014–07–01
  29. By: Plank, Leonhard; Staritz, Cornelia
    Abstract: The electronics manufacturing sector has played a prominent role in export-oriented development strategies, as participation in this high-tech industry promises access to new technology, high skilled jobs and a fast-growing market. Against this background, many governments in Central and Eastern Europe (CEE) have sought to attract investment in this sector, where foreign firms became the key actors in reshaping after 1989 and where integrating into global production networks (GPNs) was widely embraced as a means to modernize and upgrade local industries. We assess to what extent the potential benefits arising from integrating into electronics GPNs have materialized in Hungary, an established player and the most important electronics exporting country in the region, and Romania, a newcomer country in electronics manufacturing. To analyse these questions, we look at the organizational and geographical configuration of the electronics sector and examine the impact integration into these networks has had on local firms and workers and to what extent this integration has led to economic and social upgrading. With regard to economic upgrading processes, we suggest that the upgrading concept needs to pay more attention to the 'reach' of economic upgrading. This is particularly important when integration into GPNs takes place via foreign direct investment (FDI), where economic upgrading processes may be focused on transnational corporations (TNCs) with limited spillovers to local firms. The social upgrading trajectory is influenced importantly by global industry dynamics, for example high flexibility pressures and the tiered nature of the workforce in electronics GPNs, and countries' specific institutional and regulatory contexts. --
    Keywords: global production networks,electronics sector,foreign direct investment,economic upgrading,social upgrading,Central and Eastern Europe,Hungary,Romania
    Date: 2013
  30. By: Victor Duggan; Sjamsu Rahardja; Gonzalo Varela
    Keywords: Private Sector Development - E-Business Private Sector Development - Emerging Markets Transport Economics Policy and Planning International Economics and Trade - Trade and Services Public Sector Corruption and Anticorruption Measures Public Sector Development Transport
    Date: 2013–02
  31. By: Duc Minh Pham; Deepak Mishra; Kee-Cheok Cheong; John Arnold; Anh Minh Trinh; Huyen Thi Ngoc Ngo; Hien Thi Phuong Nguyen
    Keywords: Macroeconomics and Economic Growth - Markets and Market Access Transport Economics Policy and Planning Transport - Airports and Air Services Economic Theory and Research Private Sector Development - E-Business
    Date: 2013–07

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