nep-int New Economics Papers
on International Trade
Issue of 2014‒09‒29
nineteen papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. Gains from Intra-Firm Trade and Multinational Production By Pamela Bombarda; Stefania Marcassa;
  2. The Composition of Trade Flows and the Aggregate Effects of Trade Barriers By Scott French
  3. The gains from trade in intermediate goods By Kwok Tong Soo
  4. The Discriminatory Effect of Domestic Regulations on International Trade in Services: Evidence from Firm-Level Data By Matthieu Crozet; Emmanuel Milet; Daniel Mirza
  5. Foreign Market Experience, Learning by Hiring and Firm Export By Jaan Masso; Kärt Rõigas; Priit Vahter
  6. Productivity Growth and International Competitiveness By Gu, Wulong; Yan, Beiling
  8. Smoothing the adjustment to trade liberalization By Wolfgang Lechthaler; Mariya Mileva
  9. The World Trade Web: A Multiple-Network Perspective By Paolo Sgrignoli
  10. The New Trade Environment and Trade Performance in the Caribbean By World Bank
  11. Agricultural Trade Policy Distortions and Food Security: Is there a Causal Relationship? By Magrini, Emiliano; Montalbano, Pierluigi; Nenci, Silvia; Salvatici, Luca
  12. Export Taxes and Consumption: A ‘Natural Experiment’ from Côte d'Ivoire By Souleymane Soumahoro
  13. Does the WTO Help Member States Clean Up? By Susan Ariel Aaronson; M. Rodwan Abouharb
  14. The Political Economy of European Integration By Enrico Spolaore
  15. The Impact of Str4uctural Change on Potential Instability in the World Wheat Market By Schwartz, Nancy E.; Blandford, David
  16. Trade Imbalance: Juggling the Needs of Investors and the Public Interest in TTIP By Susan Ariel Aaronson; Rob Maxim
  17. Fragmenting global business processes: A protection for proprietary information By Julien Gooris; Carine Peeters
  18. Trade Liberalization and Food Retail Structure: The Italian Case By Bonanno, Alessandro; Castellari, Elena; Sckokai, Paolo
  19. Technology Spillovers and International Borders: A Spatial Econometric Analysis By Amjad Naveed; Nisar Ahmad

  1. By: Pamela Bombarda; Stefania Marcassa; (Université de Cergy-Pontoise, THEMA and CNRS; Université de Cergy-Pontoise, THEMA; )
    Abstract: This paper quantifes the welfare gains from intra-form trade. We propose a model where rms have access to competing market strategies: export and multinational production. Due to technolog- ical appropriability issues, foreign affiliates import an intermediate input from the home headquarters. The presence of export and multinational production alters the standard results obtained for welfare in heterogeneous form models, through a double truncation of the productivity distribution. The model is then calibrated to analyze counterfactual scenarios. We and that welfare gains from intra-form trade range from 0.3 to 7 percent depending on country characteristics.
    Keywords: MNFs, multinational production, intra-form trade, wel-fare
    JEL: F12 F23
    Date: 2014
  2. By: Scott French (School of Economics, Australian School of Business, the University of New South Wales)
    Abstract: A widely used class of quantitative trade models implicitly assumes that patterns of com- parative advantage take a specific form such that they have no influence over the effect of trade barriers on aggregate trade flows and welfare. In this paper, I show that this assumption is inconsistent with patterns present in the product-level trade data and develop a framework in which to analyze the role of interactions among countries’ patterns of comparative advantage in determining the aggregate effects of trade barriers. The model preserves much of the tractability of standard aggregate quantitative trade models while allowing for the effects of any pattern of comparative advantage, across many products and countries, to be taken into account. After fitting the model to product-level trade data, I find that the composition of trade flows is quantitatively important in determining the welfare gains from trade and the aggregate effects of changes in trade barriers. A key finding is that the welfare gains from trade tend to be larger and more skewed toward low-income countries than an aggregate model would suggest.
    Keywords: International Trade, Composition, Comparative Advantage, Trade Barriers, Welfare, Gravity, Income Differences, Elasticity of Substitution
    JEL: F11 F14 F17 O19
  3. By: Kwok Tong Soo
    Abstract: This paper develops a model of intermediate and final goods trade based on comparative advantage. Firms endogenously decide whether to produce a final good directly using labour, or indirectly using both labour and intermediate inputs. It is shown that the gains from trade in intermediate and final goods exceeds that from trade in final goods alone. Allowing for decreasing trade and coordination costs results in an endogenous change in the structure of production towards a more fragmented structure, with corresponding implications for trade patterns.
    Date: 2014
  4. By: Matthieu Crozet (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, IUF - Institut Universitaire de France - Ministère de l'Enseignement Supérieur et de la Recherche Scientifique, CEPII - Centre d'Etudes Prospectives et d'Informations Internationales); Emmanuel Milet (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); Daniel Mirza (CEPII - Centre d'Etudes Prospectives et d'Informations Internationales, GERCIE - Université François Rabelais - Tours)
    Abstract: In order to promote international trade in services, the WTO-GATS aims at progressively eliminating discriminatory regulations, which apply to foreign suppliers, byguaranteeing equal national treatment. This paper looks instead at the trade effect of domestic regulations, which apply to all firms indifferently and do not intend to exclude foreign suppliers. We propose a theory-based empirical test to determine whether or not these domestic regulations affect foreign suppliers more than local ones. We take this test to the data by using French firm-level exports of professional services to OECD countries. Our econometric results show that domestic regulations in the importing markets matter significantly for trade in services. They reduce both the decision to export and the individual exports. These results tend to prove that domestic regulations are de facto discriminatory even if they are not de jure.
    Keywords: Trade in services; domestic regulations; firm heterogeneity
    Date: 2013–02
  5. By: Jaan Masso; Kärt Rõigas; Priit Vahter
    Abstract: Export experience of managers and other top specialists is among the key drivers of export decisions in firms. We show evidence of this regularity based on employer-employee level data from the manufacturing industry in Estonia. We find that hiring managers and other high-wage employees with prior experience in exporting to a specific geographical region is associated with a higher probability of export entry to that region. However, there is little evidence of significant effects on export intensity. Notably, the relationship between export experience and a firm’s export decisions is usually stronger if the prior export experience is from an exporter that is located nearby in the product space. Our findings suggest that the contribution of prior trade experience of employees and the firm’s productivity as drivers of export market entry are of comparable magnitude.
    Keywords: export experience, export entry, labour mobility, learning-to-export
    JEL: F10 F14 J31
    Date: 2014–09–16
  6. By: Gu, Wulong; Yan, Beiling
    Abstract: This paper presents estimates of effective multifactor productivity (MFP) growth for Canada, the United States, Australia, Japan and selected European Union (EU) countries, based on the EU KLEMS productivity database and the World Input-Output Tables. Effective MFP growth captures the impact of the productivity gains in upstream industries on the productivity growth and international competitiveness of domestic industries, thereby providing an appropriate measure of productivity growth and international competitiveness in the production of final demand products such as consumption, investment and export products. A substantial portion of MFP growth, especially for small, open economies such as Canada?s, is attributable to gains in the production of intermediate inputs in foreign countries. Productivity growth tends to be higher in investment and export products than for the production of consumption products. Technical progress and productivity growth in foreign countries have made a larger contribution to production growth in investment and export products than in consumption products. The analysis provides empirical evidence consistent with the hypothesis that effective MFP growth is a more informative relevant indicator of international competitiveness than is standard MFP growth.
    Keywords: Economic accounts, International trade, Productivity accounts
    Date: 2014–09–09
  7. By: Dudu, Hasan; Cakmak, Erol H
    Abstract: This paper analyses the effects of climate change and trade liberalization on Turkish Economy between 2008 and 2099 by using a recursive dynamic CGE model. Results of a crop-irrigation requirement model are used to generate climate change shocks. The results suggest that the effects of climate change will be effective especially after 2030s with acceleration after 2060s. GDP loss gets as high as 3.5 percent. Main drivers of the loss in GDP are the significant decline in private consumption and up to two percent increase in imports. A trade liberalization scenario where tariffs on imports from EU are eliminated unilaterally by Turkey is also simulated to investigate the interaction between climate change and trade liberalization. Trade policy alleviates the negative effects of climate change only marginally for Turkey, as suggested by the literature for many other regions in the world. Trade liberalization with EU causes a trade diversion effect and decreases imports from other trading regions. The main adjustment mechanism of the economy under trade liberalization works through the substitution of factors for intermediate goods, imported consumption goods and intermediate inputs for domestic goods. Maize, oilseeds, fruits and processed food benefit from trade liberalization while production of other crops generally decline.
    Keywords: Climate Change, Trade Liberalization, Agriculture, Computable General Equilibrium, Turkey, Environmental Economics and Policy, Land Economics/Use, Research Methods/ Statistical Methods, C68, Q54, Q17,
    Date: 2014
  8. By: Wolfgang Lechthaler; Mariya Mileva
    Abstract: We use a dynamic general equilibrium trade model with comparative advantage, heterogeneous firms, heterogeneous workers and endogenous firm entry to analyze economic policy meant to compensate the losers of trade liberalization and reduce the ensuing wage inequality. We consider several instruments of economic policy: a wage tax to redistribute income between skilled and unskilled workers; sector-specific consumption taxes and profit taxes to affect inter-sectoral wage inequality; sector-specific firm entry subsidies, worker sector-migration subsidies and training subsidies to speed up the adjustment process. We find that the re-distributional and efficiency effects of these instruments differ very much. Probably the most potent instrument to reduce the wage inequality after trade liberalization are training subsidies. They increase the supply of skilled workers and thereby reduce the skill premium. The policy also generates inefficiencies because too many workers are trained, but the costs of these inefficiencies are relatively low
    Keywords: trade liberalization; wage inequality; adjustment dynamics; redistribution
    JEL: E24 F11 F16 J62
    Date: 2014–08
  9. By: Paolo Sgrignoli
    Abstract: International Trade (IT) plays a fundamental role in today's economy: by connecting world countries production and consumption processes, it radically contributes in shaping their economy and development path. Although its evolving structure and determinants have been widely analyzed in the literature, much less has been done to understand its interplay with other complex phenomena. The aim of this work is, precisely in this direction, to study the relations of IT with International Migration (IM) and Foreign Direct Investments (FDI). In both cases the procedure used is to first approach the problem in a multiple-networks perspective and than deepen the analysis by using ad hoc econometrics techniques. With respect to IM, a general positive correlation with IT is highlighted and product categories for which this effect is stronger are identified and cross-checked with previous classifications. Next, employing spatial econometric techniques and proposing a new way to define country neighbors based on the most intense IM flows, direct/indirect network effects are studied and a stronger competitive effect of third country migrants is identified for a specific product class. In the case of FDI, first correlations between the two networks are identified, highlighting how they can be mostly explained by countries economic/demographic size and geographical distance. Then, using the Heckman selection model with a gravity equation, (non-linear) components arising from distance, position in the Global Supply Chain and presence of Regional Trade Agreements are studied. Finally, it is shown how IT and FDI correlation changes with sectors: they are complements in manufacturing, but substitutes in services.
    Date: 2014–09
  10. By: World Bank
    Keywords: Environmental Economics and Policies International Economics and Trade - Free Trade Economic Theory and Research Private Sector Development - Emerging Markets International Economics and Trade - Trade Policy Macroeconomics and Economic Growth Environment
    Date: 2014–06
  11. By: Magrini, Emiliano; Montalbano, Pierluigi; Nenci, Silvia; Salvatici, Luca
    Abstract: The aim of this paper is to assess the causal impact of trade policy distortions on food security. This is an hot issue since restrictions to agricultural trade have been generally applied by national governments, especially in developing countries, as a tool to insulate domestic markets from international prices turmoil. The added value of this work is twofold: i) the use of a non parametric matching technique with continuous treatment, namely the Generalised Propensity Score (GPS) to address the self selection bias; ii) the analysis of treatment (by commodities) as well as outcome heterogeneity (i.e., different dimensions of food security). The outcomes of our estimates show clearly that trade policy distortions are, overall, signficantly correlated with the various dimensions of food security under analysis but on the opposite direction than hoped for by policy-makers: countries less prone to adopt trade distortion policies tend to be better off in all the dimensions of food security (food availability, access, utilisation) with the relevant exception of food stability.
    Keywords: Food security, International trade, Trade measures, Impact evaluation, GPS, Agricultural and Food Policy, International Relations/Trade, Research Methods/ Statistical Methods, C21, F14, Q17, Q18,
    Date: 2014
  12. By: Souleymane Soumahoro (University of Oklahoma)
    Abstract: TI exploit the emergence of two de facto states in Côte d'Ivoire during the 2002-2007 political crisis to examine the effects of an export tax reduction for cocoa beans on the living standards of farming households. Combining both spatial and temporal variations in exposure to a set of dichotomous tariff policies, I find that farmers in low tariff districts significantly increased their consumption expenditure relative to farmers in high tariff districts. I also provide evidence that the transmission of border prices to local farmers is a relevant mechanism through which the reduction of trade barriers enhances cocoa farmers' living standards.
    Keywords: Trade Liberalization; Agricultural Commodity; Household Consumption
    JEL: D60 F10 O10 Q10
    Date: 2014–09
  13. By: Susan Ariel Aaronson (Department of Economics/Institute for International Economic Policy, George Washington University); M. Rodwan Abouharb (University London College)
    Abstract: The WTO says nothing about corruption. This paper uses qualitative and quantitative analysis to examine whether the GATT/WTO, without deliberate intent, helps nations improve governance and fight corruption. Under GATT/WTO rules, policymakers are obligated to act in an evenhanded manner, to facilitate transparent trade-related policymaking and to provide due process to such policymaking by allowing individuals to comment on and challenge trade related regulations before they are adopted. Evenhandedness, access to information, and due process are anticorruption counterweights. We hypothesized that we would see both qualitative and quantitative evidence of improvement in these government metrics among developing country WTO members, especially during the accession process. However, that is not what we found; instead our data shows members gradually improve governance.
    Date: 2014–07
  14. By: Enrico Spolaore
    Abstract: This chapter discusses the process of European institutional integration from a political-economy perspective, linking the long-standing political debate on the nature of the European project to the recent economic literature on political integration and disintegration. First, we introduce the fundamental trade-off between economies of scale associated with larger political unions and the costs from sharing public goods and policies among more heterogeneous populations, and examine the implications of the trade-off for European integration. Second, we describe the two main political theories of European integration-intergovernmentalism and functionalism- and argue that both theories capture important aspects of European integration, but that neither view provides a complete and realistic interpretation of the process. Finally, we critically discuss the successes and limitations of the actual process of European institutional integration, from its beginnings after World War II to the current crisis.
    Date: 2014
  15. By: Schwartz, Nancy E.; Blandford, David
    Abstract: The relative decline in wheat consumption in the developed countries is reducing the potential stabilizing effect on the world market of freer trade in these countries. Furthermore, the growing role of centrally planned countries as importers is increasing the potential instability in world wheat import demand.
    Keywords: Crop Production/Industries, International Development,
  16. By: Susan Ariel Aaronson (Department of Economics/Institute for International Economic Policy, George Washington University); Rob Maxim (Department of Economics/Institute for International Economic Policy, George Washington University)
    Date: 2014–08
  17. By: Julien Gooris; Carine Peeters
    Abstract: With the progress of information and communication technologies, the cost and efforts to remotely exchange information have drastically fallen. It has created new opportunities to leverage comparative advantages by reorganizing value chains along the geographic dimension and by reconsidering the organizational boundaries of the firm (i.e. the governance model of operations). However the global disaggregation of the firm’s processes tends to increase the dispersion of firm’s proprietary information and knowledge across locations and intermediate producers. Firms are potentially exposed to higher levels of misappropriation hazard and forced to elaborate protection strategies to mitigate that risk. This study shows that firms adjust the fragmentation of activities entrusted to foreign services production units to adapt their information and knowledge protection strategy to the availability of strong legal protection (from the local institutions) or internal control mechanisms. We hypothesize and empirically support that, when the above mechanisms are not available, firms use the substitute protection mechanism of fragmenting global business processes across multiple services production units. Through their capabilities to integrate the multiple fragments that compose production processes, firms can exploit the complementarities between these fragments while reducing the misappropriation hazard of individual fragments. We find also that the propensity to turn to this alternative protection mechanism increases with firm’s host country specific experience and with the alternative value of the proprietary information.
    Keywords: Fragmentation;Misappropriation;Services;Information;Institutional environment;Outsourcing
    JEL: F23 O34 L8
    Date: 2014–09
  18. By: Bonanno, Alessandro; Castellari, Elena; Sckokai, Paolo
    Abstract: In this paper we assess the impact of the LD 114/1998 on the structure of the Italian food retailing industry. We use difference–in–difference technique, comparing the level of concentration, number of stores, average store size and level of service offered to consumers in regions enacting mandated consistent with the LD 114/1998, versus those that did not. Results show that, once the endogenous nature of policy changes is controlled for, the policy appears more effective than expected, in terms of its impact on concentration, consumers’ access, store size and level of service to consumers. While the decree overall seems to have help the consumer to have more access and more in-store services, our analysis suggests food retailing became more concentrated in response to the implementation of the LD 114/1998. Further, the effect of the liberalization seems to have stronger effects in regions where the level of liberalization implemented is “low”.
    Keywords: Food Retailer Structure, Trade Liberalization, Industrial Organization, Marketing, L81 L22 L52,
    Date: 2014
  19. By: Amjad Naveed (Department of Border Region Studies, University of Southern Denmark); Nisar Ahmad (Department of Border Region Studies, University of Southern Denmark)
    Abstract: The borders of the EU are open for the movement of resources but still there can be some strong negative effects of international borders on productivity and knowledge spillovers compared to the internal regional borders. These negative effects could be due to language barriers, cultural differences, local rules and regulation, legal issues, property rights, etc. These effects of international borders have economic significance that needs to be controlled when analyzing the regional knowledge spillovers. This aspect related to international borders has not been fully taken into account in the existing literature related to knowledge spillovers. Ignoring this effect might under or overestimate the effect of knowledge and technology spillovers. The results show that technology and knowledge spillovers are mainly coming from internal neighbor regions only, whereas spillovers across the international borders are statistically insignificant. Moreover, the results show that not properly incorporating border effects will lead to inaccurate estimates of the spillovers.
    Keywords: total factor productivity, knowledge spillovers, European regions, spatial econometrics, Extended Spatial Durbin Model
    JEL: C31 D24 O49 O52 R10
    Date: 2014–09

This nep-int issue is ©2014 by Luca Salvatici. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.