nep-int New Economics Papers
on International Trade
Issue of 2014‒12‒24
33 papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. Foreign Direct Investment and Trade: A Bi-directional Gravity Approach By Monika Harach; Ernesto Rodriguez-Crespo
  2. Going abroad on regional shoulders: The role of spillovers on the composition of regional exports By Mariasole Bannò; Diego Giuliani; Enrico Zaninotto
  3. Optimal trade policy with monopolistic competition and heterogeneous firms By Haaland, Jan I.; Venables, Anthony J
  4. The Division of Labor within Firms, Optimal Entry, and Firm Productivity By Koji Shintaku
  5. The Tide That Does Not Raise All Boats: An Assessment of EU Preferential Trade Policies By Maria Cipollina; David Laborde; Luca Salvatici
  6. Towards "trade policy analysis 2.0": From national comparative advantage to firm-level trade data. By Cernat, Lucian
  7. RTAs’ Proliferation and Trade-diversion effects: Evidence of the “Spaghetti Bowl” Phenomenon By Sorgho, Zakaria
  8. Contributions of the GATT/WTO to global economic welfare: Empirical evidence By Kym Anderson
  9. FDI, structural change and productivity growth: global supply chains at work in Central and Eastern European countries By Jože Damijan; Črt Kostevc; Matija Rojec
  10. Firms' Leverage and Export Market Participation: Evidence from South Korea By Haeng-Sun Kim
  11. Grin and Bear It: Producer-financed Exports from an Emerging Market By Demir, Banu; Javorcik, Beata
  12. The impact of an EU-US Transatlantic Trade and Investment Partnership Agreement on Biofuel and Feedstock Markets By Beghin, John C.; Bureau, Jean-Christophe; Gohin, Alexandre
  13. The impact of an EU-US Transatlantic Trade and Investment Partnership Agreement on Biofuel and Feedstock Markets By John C. Beghin; Jean-Christophe Bureau; Alexandre Gohin
  14. Revealed Comparative Advantage: What Is it Good For? By Scott French
  15. Trade Liberalization and Optimal R&D policies with Process Innovation. By Thanh Le; Cuong Le Van
  16. Modern Services Export Performances among Emerging and Developed Asian Economies By Nasir, Shahbaz; Kalirajan, Kaliappa
  17. Determinants of virtual water flows in the Mediterranean By Fracasso, Andrea; Sartori, Martina; Schiavo, Stefano
  18. Trade Integration, Production Fragmentation and Performance in Europe - Blessing or Curse? A Comparative Analysis of the New Member States and the EU-15 By Sandra M. Leitner; Robert Stehrer
  19. Liquidity-Driven FDI By Rahul Mukherjee; Linda L. Tesar; Ron Alquist
  20. Embracing Diversity: Plurilateral Agreements and the Trading System By Hoekman, Bernard; Mavroidis, Petros C
  21. STRUCTURE AND PERFORMANCE OF ETHIOPIA’S COFFEE EXPORT SECTOR By Minten, Bart; Tamru, Seneshaw; Kuma, Tadesse; Nyarko, Yaw
  22. Hurricanes Revisited : Comparative Advantage as a Source of Heterogeneity. By Martino Pelli; Jeanne Tschopp
  23. Product Quality and Intra-Industry Trade By Tadashi Ito; Toshihiro Okubo
  24. Importing high food prices by exporting : rice prices in Lao PDR By Durevall, Dick; van der Weide, Roy
  25. Is Offshoring Linked to Offshoring Potential? - Evidence from German Linked Employer-Employee Data By Tobias Brändle
  26. Why Do Canadian Firms Invest and Operate Abroad? Implications for Canadian Exports By Martin Coiteux; Patrick Rizzetto; Lena Suchanek; Jane Voll
  27. Measuring the Effectiveness of Cost and Price Competitiveness in External Rebalancing of Euro Area Countries: What Do Alternative HCIs Tell Us? By Styliani Christodoulopoulou; Olegs Tkacevs
  28. Global Value Chains and Indian Food Sector: A Preliminary Analysis of Issues and Options By Sunitha Raju
  29. Trade and Tasks: An Exploration over Three Decades in Germany By Sascha O. Becker; Marc-Andreas Muendler
  30. Can selective immigration policies reduce migrants' quality? By Bertoli, Simone; Dequiedt, Vianney; Zenou, Yves
  31. The Motives for the FDI Location Choice in the `Old' and `New' Europe By Ilona Elzbieta Serwicka; Jonathan Jones; Colin Wren
  32. Economic Partnership Agreements of the EU: Impact on Regional Integration in Africa By Marinov, Eduard
  33. Sailing away from Malthus: intercontinental trade and European economic growth, 1500-1800 By Nuno Palma

  1. By: Monika Harach; Ernesto Rodriguez-Crespo
    Abstract: This paper compares the traditional gravity model with a bidirectional approach when multilateral resistance is implemented to analyze the effect of inward foreign direct investment (FDI) on exports. We use cross-sectional HS trade data disaggregated at a 6-digit level in 2010 with controls for HS 2-digit level. Our results show that FDI increases exports only in the in the direction of exporter-importer, and the effect is higher when multilateral resistance is implemented and the effect is different across sections. Our robustness checks show that when FDI is removed, the coefficients and the effect on sectors are similar
    Keywords: FDI, bilateral trade, gravity model, cross-section data, Harmonized System 2-digit code
    JEL: C21 F14 F15 F21
    Date: 2014–09
  2. By: Mariasole Bannò; Diego Giuliani; Enrico Zaninotto
    Abstract: In this paper we examine the existence of destination, industry, and generic export spillovers at the regional level. The empirical analysis is conducted by examining data on export activity of 103 Italian NUTS 3 regions, the 10 industries with the highest export values in the period 2004–2008, and the 15 main countries of destination of Italy’s exports. In particular we analyse the decision of export and subsequent flow of trade and we aim to identify the source and quantify the effect of spillovers generated at the regional level by means of a selection-bias corrected panel data model. In order to control for the different territorial effects, three models are estimated. The first one uses all the observations in the period, the second one is estimated using only the regions located in the north-centre of Italy, and the last one is estimated considering the data from the south of Italy. With the inclusion of controls, results show a distinct effect of export industry, destination, and generic spillovers both on the intensive and extensive margins of trade. Spillovers at the start of export activity are stronger when specific by product while are stronger generically when analysing the export flow.
    Keywords: International trade, Export spillovers, NUTS 3 region, Selection-bias corrected panel data model
    JEL: C33 F14 R10
    Date: 2014
  3. By: Haaland, Jan I.; Venables, Anthony J
    Abstract: This paper derives optimal trade and domestic taxes for a small open economy containing a monopolistically competitive (MC) sector in which firms may have heterogeneous productivity levels. Domestic protection brings gains from expanding the number of product varieties on offer, but these gains (and the corresponding rates of domestic subsidy or of import tariffs) are reduced by heterogeneity of foreign exporters who may withdraw from the market. Our analysis encompasses special cases in which the domestic MC sector can expand or contract flexibly, or is of fixed size. In the latter case gains from protection arise from terms of trade effects and, since various margins of substitution are switched off, only the relative values of domestic taxes, import tariffs and export taxes matter.
    Keywords: heterogeneous firms; monopolistic competition; productivity; terms of trade; trade policy; variety
    JEL: F12 F13
    Date: 2014–10
  4. By: Koji Shintaku
    Abstract: Constructing an intra-industry trade model with division of labor within firms, this paper shows that opening up to trade improves firm productivity. Firms choose the number of markets they export. Optimal entry conditions for export markets rule out loss from opening up to trade. Under fixed export costs, opening up to trade makes some firms exit and concentrates labor to surviving firms through recruiting process and induces the division of labor. An increase in the number of markets induces firms to enter more export markets and improves firm productivity in the long run and has the reverse effect on firm productivity in the short run.
    Keywords: the division of labor within firms; firm productivity; the optimal number of markets firms enter; fixed export costs
    JEL: F12
    Date: 2014–12
  5. By: Maria Cipollina; David Laborde; Luca Salvatici
    Abstract: The aim of this article is to assess of the impact of the European Union’s trade preferences on global trade, focusing on several methodological issues that are relevant to these preferences’ trade creating impact. Using highly disaggregated digit data in a theoretically grounded gravity model framework, we define an explicit measure of preferential tariff margins computed on alternative definitions based on a comparison between bilateral applied tariffs and two different reference levels: the Most Favoured Nation duty and a Constant Elasticity of Substitution price aggregator. From the methodological point of view, we show that the assessment of these policies’ impacts can be very sensitive to the definition of the preferential tariff margin. From a policy perspective, such preferential schemes have an actual impact on trade volumes, although with significant differences across sectors
    Keywords: Theoretical gravity model, Preferential trade agreements, T
    JEL: F13 F14
    Date: 2014–09
  6. By: Cernat, Lucian (DG Trade)
    Abstract: This paper makes the case for the need to "upgrade" current analytical tools used for trade policy analysis and complement them with more detailed firmlevel data. Such an upgrade should be based on the latest intellectual advancements in trade theories and the latest firm-level trade statistics that are now becoming widely available. An upgraded "Trade Policy Analysis 2.0" could contribute to several trade policy priorities and to a better understanding of the benefits from international trade for firm competitiveness, job creation and consumer welfare.
    Keywords: future of trade policy; firm competitiveness; job creation
    JEL: F13 F16 F17
    Date: 2014–11–27
  7. By: Sorgho, Zakaria
    Abstract: This paper investigates the trade-diversion effects of regional trade agreements (RTAs), so-called “Spaghetti bowl” Phenomenon (SBP), in multilateral trade. The SBP is due to the proliferation of RTAs. Thus, we investigate the relationship between the number of RTAs concluded by a country and the additional trade value attributed to an RTA. The main finding reveals a negative trade-effect between them, confirming the existence of SBP multilateral trade. However, results could not conclude evidence of a negative effect of overlapping RTAs, involving the existence of SBP, within North-North, North-South or South-South trade. But, the additional trade value attributed to an RTA concluded with EU countries or US seems to confirm significantly a trade-diversion effect because of the number of RTAs signed by these countries.
    Keywords: Regional Trade Agreements; Spaghetti Bowl Phenomenon; Gravity equation; Trade diversion
    JEL: F11 F12 F15
    Date: 2014–09
  8. By: Kym Anderson
    Abstract: This paper surveys estimates of the value of the GATT/WTO's contributions to global welfare through providing a forum for negotiating reductions in policy-induced distortions to trade flows, including through the process of accession by new members. After reviewing measures of the price-distorting effects of trade-related policies, it assesses estimates from global simulation models of the welfare effects of trade liberalizations prior to the WTO's Doha round, including the net benefits and transfers associated with implementing the Uruguay Round agreement on trade-related intellectual property rights, and then reviews estimates of the potential welfare effects of a Doha round agreement to cut tariffs and subsidies. Econometric estimates of past trade and related effects of the GATT/WTO are then examined, before turning to estimates of the benefits of WTO accession and of potential benefits from WTO-sponsored trade facilitation. The paper concludes that while it remains difficult to attribute reforms directly to the GATT/WTO, the overall body of evidence presented supports the economic profession's consensus that this institution has contributed substantially to global economic welfare.
    Keywords: rules-based multilateral trading system, trade liberalization, global economywide modeling, Uruguay Round agreements
    Date: 2014
  9. By: Jože Damijan (University of Ljubljana, Faculty of Economica, Institute for Economic Research); Črt Kostevc (University of Ljubljana, Faculty of Economica, Institute for Economic Research); Matija Rojec (University of Ljubljana, Faculty of Social Sciences, Institute for Macroeconomic Analysis and Development)
    Abstract: This paper empirically accounts for the importance of the 'global supply chains' concept for export restructuring and productivity growth in Central and Eastern European Countries (CEECs) in the period 1995-2007. Using industry-level data and accounting for technology intensity, we show that FDI has significantly contributed to export restructuring in the CEECs. The effects of FDI are, however, heterogeneous across countries. While more advanced core CEECs succeeded in boosting exports in higher-end technology industries, non-core CEECs stuck with export specialization in lower-end technology industries. This suggests that question towards which industries FDI flows have been directed, is of key importance. Our results show that export restructuring and economic specialization brought about by FDI during the last two decades in the CEECs might matter a lot for their potential for long-run productivity growth. Industries of higher-end technology intensity have experienced substantially higher productivity growth and so countries have been more successful in attracting FDI to these industries.
    Keywords: trading agreements, developing countries, economic reforms
    JEL: F21 F23 L60 O14
  10. By: Haeng-Sun Kim (Ecole des Hautes Etudes en Sciences Sociales (EHESS))
    Abstract: To understand why some firms export while others do not, it is necessary to understand major determinants which lead some firms to engage in exporting. A large base of empirical literature provides evidence that firms which trade are systematically different from those which do not trade in size, productivity, and the involvement of multinational corporations. In this paper, we introduce a financial dimension as an additional source of firm heterogeneity to understand export market participation, and examine how the impact of leverage on firms' exporting decisions varies depending on financial constraints, using a panel of 3,353 Korean manufacturing firms over the period of 1994-2011. First, we find that leverage for financially-constrained firms is negatively associated with the probability of exporting while leverage for financially-unconstrained is not. Also, we find that in the sample of financially-constrained firms, future exporters have higher leverage before they begin to export, while in the sample of financially-unconstrained firms, firms with ex-ante lower leverage self-select to export. Finally, it is found that export market participation decreases leverage for both financially-constrained and financially-unconstrained firms, but the magnitudes of decreases in leverage are larger for financially-constrained firms.
    Keywords: Exports, Firm heterogeneity, Financial constraints, Leverage
    JEL: F14 G32 D92
    Date: 2014–12
  11. By: Demir, Banu; Javorcik, Beata
    Abstract: This study uses a unique dataset to provide the first comprehensive test of the theory of export financing. We extend the existing literature by drawing attention to the theoretical and empirical relationship between the extent of competition in the export market and the choice of financing terms. Our dataset covers the universe of Turkey's exports disaggregated by product, destination, and financing terms for the period 2004-2011. Our identification strategy takes advantage of an exogenous shock, namely, the end of the Multi-Fibre Arrangement (MFA), a system of bilateral quotas governing the global trade in textiles and clothing until January 1, 2005. The analysis, based on a difference-in-differences approach, suggests that exporter-financed exports to the European Union disproportionately increased, relative to importer or bank-financed exports, in the post-MFA period in products where Turkish competitors initially faced binding quotas. As Turkey was not bound by EU quotas before the end of the MFA, these results are consistent with an increase in competition pushing Turkish exporters to offer trade financing. Our results also support the other theoretical predictions. They indicate that the prevalence of exporter-financed exports (relative to exports on other financing terms) increases with the institutional quality in the importing country, with this effect being stronger for differentiated products. Exporter-financed exports are also more likely to be destined for countries with a less efficient banking sector.
    Keywords: competition; Great Recession; Multi-Fibre Arrangement; trade financing
    JEL: F14 F36
    Date: 2014–09
  12. By: Beghin, John C.; Bureau, Jean-Christophe; Gohin, Alexandre
    Abstract: We assess the impact of a potential TTIP bilateral free trade agreement on the EU and US bio-economies (feedstock, biofuels, by-products, and related competing crops) and major trade partners in these markets. The analysis develops a multi-market model that incorporates bilateral trade flows (US to EU, EU to US, and similarly with third countries) and is calibrated to OECD-FAO baseline for 2013–2022 to account for recent policy decisions. The major policy reforms from a TTIP involve tariff and TRQ liberalization and their direct contractionary impact on US sugar supply, EU biofuel production, and indirect negative effect on US HFCS production. EU sugar and isoglucose productions expand along with US ethanol and biodiesel and oilseed crushing. EU sugar would flow to the US, US biofuels and vegetable oil to the EU. We further quantify nontariff measures (NTM) affecting these trade flows between the EU and the US. EU oilseed production contracts, and EU crushing expands with improving crushing margins following reduced NTM frictions. Our analysis reveals limited net welfare gains with most net benefits reaped by Brazil and not the two trading partners of the TTIP.
    Keywords: biofuel; ethanol; biodiesel; sugar; TTIP; bilateral trade agreement; nontariff measure
    JEL: F13 Q17 Q42 Q48
    Date: 2014–11–19
  13. By: John C. Beghin (Center for Agricultural and Rural Development (CARD)); Jean-Christophe Bureau; Alexandre Gohin
    Abstract: We assess the impact of a potential TTIP bilateral free trade agreement on the EU and US bio-economies (feedstock, biofuels, by-products, and related competing crops) and major trade partners in these markets. The analysis develops a multi-market model that incorporates bilateral trade flows (US to EU, EU to US, and similarly with third countries) and is calibrated to OECD-FAO baseline for 2013–2022 to account for recent policy decisions. The major policy reforms from a TTIP involve tariff and TRQ liberalization and their direct contractionary impact on US sugar supply, EU biofuel production, and indirect negative effect on US HFCS production. EU sugar and isoglucose productions expand along with US ethanol and biodiesel and oilseed crushing. EU sugar would flow to the US, US biofuels and vegetable oil to the EU. We further quantify nontariff measures (NTM) affecting these trade flows between the EU and the US. EU oilseed production contracts, and EU crushing expands with improving crushing margins following reduced NTM frictions. Our analysis reveals limited net welfare gains with most net benefits reaped by Brazil and not the two trading partners of the TTIP.
    Keywords: TTIP, bilateral trade agreement, biofuel, ethanol, biodiesel, sugar, nontariff measure JEL Codes: F13, Q17, Q42, Q48
    Date: 2014–11
  14. By: Scott French (School of Economics, Australian School of Business, the University of New South Wales)
    Abstract: This paper utilizes a many-country, many-product Ricardian trade model to evaluate the usefulness of measures of revealed comparative advantage (RCA) in academic and policy analyses. I find that, while commonly used indexes are generally not consistent with theoretical notions of comparative advantage, certain indexes can be usefully employed for certain tasks. I explore several common uses of RCA indexes and show that different indexes are appropriate when attempting to (a) evaluate the differential effect of changes in trade barriers across producers of different products, (b) identify countries who are relatively close competitors in a given market, or (c) recover patterns of relative productivity.
    Keywords: Revealed comparative advantage, relative productivity, trade responsiveness, trade policy, Ricardian
    JEL: F10 F13 F14 F15
    Date: 2014–11
  15. By: Thanh Le (University of Queensland); Cuong Le Van (Centre d'Economie de la Sorbonne - Paris School of Economics, IPAG and VCREME)
    Abstract: We set up a theoretical framework to discuss the impact of trade liberalization and R&D policies on domestic exporting firms' incentive to innovate and social welfare. In this framework, exporting firms invest in R&D to reduce their production costs and, in return, receive R&D subsidies from the government. While firms target at maximizing their profits, the government aims to maximize the social welfare. We consider different settings of firm competition to explore their strategic behaviors as well as the government's strategic behavior at the policy stage. We find that trade liberalization in the foreign market always increases firms' output sales and social welfare and, in most cases, leads to higher R&D investments and productivity at firms as well as industry level. When firms are independent monopolies in the overseas market, it is optimal for the government not to provide any R&D subsidy. When goods are close substitutes, the social optimum can be achieved as a Nash equilibrium by applying an optimal R&D tax. Trade liberalization induces a higher R&D tax rate to be levied on firms. When firms also conduct business in the home market, it is always optimal for the government to provide firms with a financial support to their R&D activity. While this R&D subsidy is decreasing in the trade cost when firms are independent monopolies, its monotonicity in the trade costs is determined by the convexity of the R&D cost function when firms produce close substitutes.
    Keywords: Trade, R&D, subsidies, welfare, process innovation.
    JEL: F12 F13 F15 O31
    Date: 2014–10
  16. By: Nasir, Shahbaz (Asian Development Bank); Kalirajan, Kaliappa (Crawford School of Public Policy)
    Abstract: Advancements in information and communications technologies (ICTs) have expanded the possibilities for trade in modern services and many Asian emerging and developed economies are increasingly participating in these new trade activities. This study examines the export performances of emerging and developed Asian economies in selected modern services—computer and information, business and professional, and telecommunications—using a stochastic frontier gravity model. Estimation results show that the performances of emerging economies in South Asia and the Association of Southeast Asian Nations (ASEAN), in terms of realization of export potential, are considerably weaker than those of developed economies in North America and Europe. The results also show that the number of graduates and the quality of ICT infrastructure in emerging countries are among the key factors in realizing services export potential. These findings suggest that emerging economies need to remove "behind-the-border" constraints and adopt advanced technologies in order to catch up with high-performing developed countries.
    Keywords: Service exports; stochastic frontier gravity model; Asia; North America; Europe
    JEL: C24 F14
    Date: 2014–11–01
  17. By: Fracasso, Andrea; Sartori, Martina; Schiavo, Stefano
    Abstract: The aim of the paper is to investigate the main determinants of the bilateral virtual water ‘flows’ associated with international trade in agricultural goods across the Mediterranean basin. Virtual water refers to the volume of water used in the production of a commodity or a service. The exchange of water as embedded in traded goods brings about the so-called virtual water ‘trade’. We consider the bilateral gross ‘flows’ of virtual water in the area and study what export-specific and import-specific factors are significantly associated with virtual water ‘flows’. We follow a sequential approach. Through a gravity model of trade, we obtain a “refined” version of the variable we aim to explain, one that is free of the amount of flows due to pair-specific factors affecting bilateral trade flows and that fully reflects the impact of country-specific determinants of virtual water ‘trade’. A number of country-specific potential explanatory variables is presented and tested. To identify the variables that help to explain the bilateral ‘flows’ of virtual water, we adopt a model selection procedure based on model averaging. Our findings confirm one of the main controversial results in the literature: larger water endowments do not necessarily lead to a larger ‘export’ of virtual water, as one could expect. We also find some evidence that higher water irrigation prices reduce (increase) virtual water ‘exports’ (‘imports’).
    Keywords: virtual water, Mediterranean, model averaging
    JEL: F18 Q25
    Date: 2014–12
  18. By: Sandra M. Leitner (The Vienna Institute for International Economic Studies, wiiw); Robert Stehrer (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: Summary Fundamental changes in the global trade landscape in terms of considerably expanding trade volumes and rapidly advancing global fragmentation of production processes have opened up new opportunities for many economies. The ensuing analysis determines whether these new opportunities have actually translated into real gains and have helped foster economic performance in terms of economic growth, employment generation and labour productivity improvements. It uses the WIOD database for all EU-27 countries and shows that between 1995 and 2007, vertical specialisation intensified in all EU member countries (but the UK) but intensified the most in the new Member States. Moreover, it demonstrates that export growth is beneficial to performance, particularly in the new Member States. Likewise, stronger participation in global production processes is performance-enhancing as results indicate that export growth and the degree of vertical specialisation tend to reinforce each other. In particular, the effects of export growth on macroeconomic performance tend to be even higher if vertical specialisation is high.
    Keywords: trade integration, vertical specialisation, economic performance
    JEL: F14 F15 F16
    Date: 2014–11
  19. By: Rahul Mukherjee (IHEID, The Graduate Institute of International and Development Studies, Geneva); Linda L. Tesar; Ron Alquist
    Abstract: We develop a model of foreign direct investment (FDI) in which financially liquid foreign firms acquire liquidity-constrained target firms. Using a large dataset of emerging-market acquisitions, we find evidence supporting three central predictions of the model: (i) firms in external finance dependent and intangible sectors are more likely to be targets of foreign acquisitions; (ii) these targets have ownership structures with larger foreign stakes; (iii) these effects are most prominent in countries with low levels of financial development. The regression evidence indicates that liquidity is at least as economically important as technology- or trade-related motives for FDI in emerging-market economies.
    Keywords: Foreign direct investment; cross-border mergers and acquisitions; financial development; external finance dependence; asset tangibility; emerging markets
    JEL: F21 F23 G34 L24 L60
    Date: 2014–12–11
  20. By: Hoekman, Bernard; Mavroidis, Petros C
    Abstract: Plurilateral agreements in the WTO context allow sub-sets of countries to agree to commitments in specific policy areas that only apply to signatories, and thus allow for ‘variable geometry’ in the WTO. Current WTO rules make it much more difficult to pursue the plurilateral route than to negotiate a preferential trade agreement outside the WTO. We argue that this is inefficient from a global welfare and trading system perspective and that WTO Members should facilitate the negotiation of new plurilateral agreements on regulatory matters.
    Keywords: multilateralism; plurilateral agreement; regulatory cooperation; trade agreements; WTO
    JEL: F13 K32
    Date: 2014–10
  21. By: Minten, Bart; Tamru, Seneshaw; Kuma, Tadesse; Nyarko, Yaw
    Abstract: We study the structure and performance of the coffee export sector in Ethiopia, Africa’s most important coffee producer, over the period 2003 to 2013. We find an evolving policy environment leading to structural changes in the export sector, including an elimination of vertical integration for most exporters. Ethiopia’s coffee export earnings improved dramatically over this period, i.e. a four-fold real increase. This has mostly been due to increases in international market prices. Quality improved only slightly over time, but the quantity exported increased by 50 percent, seemingly explained by increased domestic supplies as well as reduced local consumption. To further improve export performance, investments to increase the quantities produced and to improve quality are needed, including an increase in washing, certification, and traceability, as these characteristics are shown to be associated with significant quality premiums in international markets.
    Keywords: coffee, Ethiopia, exports, Agribusiness, Agricultural and Food Policy, Crop Production/Industries, International Relations/Trade, Productivity Analysis,
    Date: 2014–10
  22. By: Martino Pelli (Département d'économique, Université de Sherbrooke); Jeanne Tschopp (Vancouver School of Economics, University of British Columbia)
    Abstract: There is little consensus in the economic literature on the effects of hurricanes on economic growth. This paper argues that this mixed evidence may result from ignoring the potential for hurricanes to generate heterogeneous impacts within countries. To test this hypothesis, we take advantage of highly disaggregated manufacturing export data over the period 1995- 2005 to examine whether the effect of hurricanes on the pattern of trade depends on productcountry- specific comparative advantage. Using a triple-difference identification strategy, we show evidence of heterogeneous effects: product lines with lower comparative advantage suffer disproportionately more.
    Keywords: hurricanes, comparative advantage, trade
    JEL: F14 F18 Q54
    Date: 2014–11
  23. By: Tadashi Ito; Toshihiro Okubo
    Abstract: In this study, we argue that the conventional intra-industry trade (IIT) index does not directly address the quality issue and propose a methodology to make full use of unit-price gap information to deduce quality differences between simultaneously exported and imported products. By applying this measure to German trade data at the eight-digit level, we study the quality change of Chinese export goods in its IIT with Germany. We compare the case of China with those of Eastern European countries, which are also major trading partners of Germany. Our results show that the unit-value difference in IIT between Germany and Eastern European countries is clearly narrowing. However, China’s export prices to Germany are much lower than Germany’s export prices to China, and this gap has not narrowed over the last 23 years. This is at odds with the common perception that China’s product quality has improved, as documented by Rodrik (2006) and Schott (2008). Our results support Xu (2010), which argued that incorporating the quality aspect of the exported goods weakens or even eliminates the evidence of the sophistication of Chinese export goods in Rodrik (2006).
    Date: 2014–12
  24. By: Durevall, Dick; van der Weide, Roy
    Abstract: This paper shows how a developing country, Lao PDR, imports high glutinous rice prices by exporting its staple food to neighboring countries, Vietnam and Thailand. Lao PDR has extensive export controls on rice, generating a sizable difference between domestic and international prices. Controls are relaxed after good harvests, leading to a surge in exports early in the season and rapidly rising prices later in the year. There is thus a strong case for removal of trade restrictions since they give rise to price spikes, keep the long-term price of glutinous rice low, and thereby hinder increases in income from agriculture. Although this is a case study of Lao PDR, the findings may equally apply to other developing countries that export their staple food.
    Keywords: Markets and Market Access,Food&Beverage Industry,Emerging Markets,Access to Markets,E-Business
    Date: 2014–11–01
  25. By: Tobias Brändle
    Abstract: This paper analyses the link between offshoring in German plants and the offshoring potential of their employees. We use information on the offshoring potential of jobs from representative task data and merge it with linked employer-employee data, for which information on different modes of offshoring behaviour is available. We empirically identify individual and plant-level determinants of offshoring activity and additionally analyse how offshoring potential influences the realisation of offshoring by German plants. Depending on the measure for actual offshoring, we mostly find a negative link: firms are less likely to outsource or offshore parts of their production processes if their outsourcing and offshoring potential is high. This indicates that existing measures of offshoring potential can indeed be interpreted as not-yet realised offshoring, or offshoring that cannot be realised, e.g. due to trade barriers.
    Keywords: Outsourcing, Offshoring, Trade in Tasks
    JEL: F14 F16
    Date: 2014–10
  26. By: Martin Coiteux; Patrick Rizzetto; Lena Suchanek; Jane Voll
    Abstract: Canadian foreign direct investment and sales of Canadian multinational firms’ operations abroad, particularly in the manufacturing industry and in the United States, have accelerated sharply over the past decade. At the same time, although foreign demand has accelerated following the Great Recession, Canadian exports have failed to rebound as strongly as historical correlation would suggest. If part of Canadian firms’ investment abroad over the past decade was intended to replace their Canadian production and exports, it could help to explain recent export weakness. This paper investigates these issues in the Canadian forest products industry and the motor vehicle parts manufacturing industry, using a case study approach. Specifically, we examine 15 large, Canadian, publicly traded firms, dominant in each of these industries, over the period 2000-13. We triangulate (i) financial statement data and (ii) public statements about decisions to invest abroad with (iii) macroeconomic data on the activity of Canadian foreign affiliates, focusing on investments in the United States and Mexico. We find that over this period, the companies in the study increasingly chose to invest abroad, leading to a shift in relative operational capacity from Canada to locations abroad. Motives behind this trend include market-seeking objectives, as well as relative cost factors and strategic asset seeking abroad. This shift in the location of production capacity may, at least for the industries and the time period studied, help to explain the weakness in Canadian merchandise exports over the past years, since these firms increasingly choose to serve foreign demand through their operations abroad, rather than exclusively through exports.
    Keywords: International topics; Recent economic and financial developments
    JEL: F10 F41 F21 F23
    Date: 2014
  27. By: Styliani Christodoulopoulou (European Central Bank); Olegs Tkacevs (Bank of Latvia)
    Abstract: This study is devoted to examing marginal effects of traditional determinants of exports and imports with a focus on the role of price competitiveness in restoring external balances. It is a first attempt to compare marginal effects of various harmonised competitiveness indicators (HCIs) on both exports and imports of both goods and services across individual euro area countries. We find evidence that the HCIs based on broader cost and price measures have a larger marginal effect (with some exceptions) on exports of goods. Exports of services are sensitive to the HCIs in large euro area countries and Slovakia, where exports of services are also found to be more sensitive to competitiveness indicators based on broader price measures. Imports of goods and imports of services are quite insensitive to the changes in relative prices. Finally, in some cases the measures of the goodness of fit indicate that a large unexplained residual part is present, implying that other non-price related factors might play an important role in driving foreign trade.
    Keywords: real exchange rate, exports, imports, price competitiveness, euro area
    JEL: F14 F31 F41
    Date: 2014–12–01
  28. By: Sunitha Raju (Indian Institute of Foreign Trade, Kolkata, India)
    Abstract: The increased trade in agricultural value added products has internationalized production and marketing systems. As such, a variety of forms of value chain relationships have emerged (outgrower schemes, contract farming, marketing contracts etc.) that have replaced the arms length market relationships between buyers and suppliers. The application of the Global Value Chain framework as also Production Networks to agriculture has gained significance particularly considering the importance of promoting agricultural exports from developing countries. As agriculture in most of the developing countries, as also in India, is dominated by small and medium farms, poverty reduction through exports would require production shifts and access to the global agribusiness. In recent years, the market requirements of agribusiness products have become challenging for three reasons. First, the importance of standards is increasing in global agricultural trade. Meeting the requirements of stringent food safety conditions has become complex as monitoring is required the way products are grown, harvested, processed and transported. Second, the demands of global buyers in terms of large-volume supply, speed and reliability of delivery, customization through processing and packaging and product safety guarantees have emerged as challenges for small producers. And, third, strategies for product differentiation particularly for traditional exports involved certification and/or closer links between producers, traders, processors and retailers. In meeting these challenges, organizing agribusiness value chains or integrated supply chains is necessary for global competitiveness. The Indian agri business is largely unorganized at the production, trading and consumer levels and with trade and retailing gaining importance, structural shifts in agribusiness are taking place. With exports increasing, many food chains and companies are sourcing agricultural products from India to feed their outlets in different parts of the world. Similarly, under organized retailing, several channels of procurement have developed to ensure efficiency in the value chain. Under these evolving conditions, the paper addresses the following contextual issues: Value chain linkages and coordination costs of buyer-seller relationships Information codification and transmission along value chain and supplier competence Channels of procurement of different products by food retailers Public private partnership in developing market, transportation and logistic infrastructure Building supplier competencies of the producer particularly small farmers The application of the GVC has underlined three important issues. First, with globalization and expansion of agricultural trade, India is still an insignificant part of the global production network. Though India has a comparative advantage in the production of many agricultural products, this is being undermined by the high transaction costs arising out of inefficiencies in distribution and logistics. But, considering that the market, transportation and logistics infrastructure is less developed in India and the public investments in the same being low, the policy approach should be to encourage investments by the transnationals in setting up the value chain and strengthening the support institutions like inspecting and testing facilities, certification companies, local consultancy etc. Overall, the effort should be to ensure a conducive economic environment for integrating India into global agricultural production networks. The second important issue emerging out of the GVC analysis is the development of domestic retailing in building the capacities of the local firms for forging international operations. The development of organized retailing, particularly in the urban areas, provides the ‘threshold expertise’ to organize and coordinate supply activities for greater efficiencies. Leveraging the domestic operations for entering into global markets requires development of infrastructure and support institutions. And, lastly, the third important issue arising out of the GVC analysis is the effect of trade in building the supply competencies of the producer, particularly the small farmers. The costs of compliance being high, the role of state in providing the Standards infrastructure becomes crucial. Adopting new technologies and production processes by the farmers is not scale neutral and therefore, can have the tendency of excluding the small farmers. In providing this technical assistance, NGOs, international development organizations and public organizations can cooperate and extend necessary support.
    Keywords: Global Value Chains, Indian Food Sector, International Trade.
    JEL: Q17
    Date: 2014–07
  29. By: Sascha O. Becker; Marc-Andreas Muendler
    Abstract: This paper combines representative worker-level data that cover time-varying job-level task characteristics of an economy over a long time span with sector-level bilateral trade data for merchandize and services. We carefully create longitudinally consistent workplace characteristics from the German Qualification and Career Survey 1979-2006 and prepare trade flow statistics from varying sources. Four main facts emerge: (i) intermediate inputs constitute a major share of imports, and their relevance grows especially in the early decade; (ii) the German workforce increasingly specializes in workplace activities and job requirements that are typically considered non-offshorable, mainly within and not between sectors and occupations; (iii) the imputed activity and job requirement content of German imports grows relatively more intensive in work characteristics typically considered offshorable; and (iv) labour-market institutions at German trade partners are largely unrelated to the changing task content of German imports but German sector-level outcomes exhibit some covariation consistent with faster task offshoring in sectors exposed to lower labour-market tightness. We discuss policy implications of these findings.
    JEL: F14 F16 J23 J24
    Date: 2014–12
  30. By: Bertoli, Simone; Dequiedt, Vianney; Zenou, Yves
    Abstract: Destination countries have been resorting to selective immigration policies to improve migrants' quality. We propose a model that analyzes the effects of selective immigration policies on migrants' quality, measured by their wages at destination. Screening potential migrants on the basis of observable characteristics also influences their self-selection on unobservables that influences their wages. We show that the prevailing pattern of selection on unobservables influences the effect of an increase in selectivity, which can reduce migrants' quality when migrants are positively self-selected.
    Keywords: migrants' quality; selective policies; self-selection
    JEL: F22 J61
    Date: 2014–09
  31. By: Ilona Elzbieta Serwicka; Jonathan Jones; Colin Wren
    Abstract: This paper adds to the scarce cross-country evidence on FDI location decisions between the EU-15 Member States and the ten new Members that joined the European Union (EU) in 2004 and 2007 from the Central and East European Countries (CEECs). To capture the discrete nature of the location choice, a conditional logit methodology is used to analyze the determinants of FDI location decisions across these EU-25 countries. The study uses the European Investment Monitor database, which contains information on the location of over 35,000 individual cross-border investment projects that were implemented in the EU between 1997 and 2010. The purpose is to understand the factors an investing firm considers when choosing a location within the EU-25, and to understand the effect of the European Union accession process on the amount and nature of this investment. A distinction is made between market-based and resource-based factors, while macroeconomic, industry and institutional variables are included to control for other country-level factors that affect FDI location. Overall, allowing for heterogeneity in preferences of investors locating in the ‘old' versus the ‘new' EU Member States, the results show that FDI tends to avoid congested locations in the EU-15 by locating in the periphery away from main markets, but this tendency is not evident for the CEECs. Investment in the EU-15 is predominantly knowledge-seeking, as better educated workforce attracts FDI, whereas in the CEECs the efficiency-seeking motive dominates, as greater education attainment and higher labour costs both deter FDI. An analysis by industrial sector indicates that these factors apply to manufacturing FDI, but that a better educated workforce is actually more attractive for service FDI in the CEECs, indicating that the knowledge-seeking motive may be more important for FDI in the CEECs in future. The estimates on the controls are plausible and they indicate that EU membership increased the flow of FDI to the CEECs. The results show that membership changed the importance of the market-based and resource-based motives for FDI location in the CEECs.
    Keywords: foreign direct investment; location choice; European Union; conditional logit;
    JEL: F23 R30 O52
    Date: 2014–11
  32. By: Marinov, Eduard
    Abstract: The development and dynamics of regional integration in Africa are severely influenced by the transformation of the trade relations between African, Caribbean and Pacific (ACP) countries and the EU, imposed by the Cotonou agreement. Economic relations now based on unilateral trade preferences provided by the EU are envisaged to be based on Economic partnership agreements (EPAs) that should regulate trade and cooperation establishing new trade regimes between the EU and ACP regions selected by clear criteria. They also promote regional integration efforts and impose measures to support developing partner regions. However a decade after the start of the negotiations for the EPAs in Africa, the impact on regional integration is still unclear. The EPA negotiations do not cover the existing regional economic communities (RECs) which complicates the already delicate situation of dispersed capacity. Although EPAs aim at the promotion of regional integration their immediate impact is even greater fragmentation of existing RECs. The report examines the principles, history, and current state of negotiations as well as the twofold effects of EPAs on regional integration efforts in Africa.
    Keywords: Economic Partnership Agreements, African economy
    JEL: F15 F50 N77
    Date: 2013
  33. By: Nuno Palma
    Abstract: What was the contribution of intercontinental trade to the development of the European early modern economies? Previous attempts to answer this question have focused on static measures of the weight of trade in the aggregate economy at a given point in time, or on the comparison of the income of specific imperial nations just before and after the loss of their overseas empire. These static accounting approaches are inappropriate if dynamic and spillover effects are at work, as seems likely. In this paper I use a panel dataset of ten countries in a dynamic model which allows for spillover effects, multiple channels of causality, persistence and country-specific fixed effects. Using this dynamic model, simulations suggest that in the counterfactual absence of intercontinental trade, rates of early modern economic growth and urbanization would have been moderately to substantially lower. For the four main long-distance traders, by 1800 the real wage was, depending on the country, 6.1 to 22.7% higher, and urbanization was 4.0 to 11.7 percentage points higher, than they would have otherwise been. For some countries, the effect was quite pronounced: in the Netherlands between 1600 and 1750, for instance, intercontinental trade was responsible for most of the observed increase in real wages and for a large share of the observed increase in urbanization. At the same time, countries which did not engage in long-distance trade would have had real wage increases in the order of 5.4 to 17.8% and urbanization increases of 2.2 to 3.2 percentage points, should they have done so at the same level as the four main traders. Intercontinental trade appears to have played an important role for all nations which engaged in it, with the exception of France. These conclusions stand in contrast with the earlier literature which uses a partial equilibrium and static accounting approach.
    Keywords: early modern economic growth; economics of empires
    JEL: O52
    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.