nep-int New Economics Papers
on International Trade
Issue of 2015‒02‒11
thirty-two papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. Export Diversification Effects of the WTO Trade Facilitation Agreement By Cosimo Beverelli; Simon Neumüller; Robert Teh
  2. The economic impact of the Australia-United States free trade agreement By Shiro Armstrong
  3. Tariffs and non-tariff frictions in the world wine trade By Dal Bianco, Andrea; Boatto, Vasco; Caracciolo, Francesco; Santeramo, Fabio Gaetano
  4. Optimal trade policy with monopolistic competition and heterogeneous firms. By Haaland, Jan I.; Venables, Anthony J.
  5. Trade crisis?: what trade crisis? By Kristian Behrens; Gregory Corcos; Giordano Mion
  6. From selling goods to selling services: firm responses to trade liberalization By Holger Breinlich; Anson Soderbery; Greg C. Wright
  7. Mega-deals: What Consequences for sub-Saharan Africa? By Houssein Guimbard; Maëlan Le Goff
  8. Trade in Services and Japan's Bilateral FTAs: Empirics on their impacts By ISHIDO Hikari
  9. Trade policy uncertainty and the WTO By Groppo, Valeria; Piermartini, Roberta
  11. The Tide That Does Not Raise All Boats: An Assesment of EU Preferential Trade Policies By Maria Cipollina; David Laborde; Luca Salvatici
  12. European High-End Varieties in International Competition By Lionel Fontagné; Sophie Hatte
  14. The Margins of Global Sourcing: Theory and Evidence from U.S. Firms By Antràs, Pol; Fort, Teresa C; Tintelnot, Felix
  15. Foreign direct investment and domestic entrepreneurship: blessing or curse? By Saul Estrin; Seçil Hülya Danakol; Paul Reynolds; Utz Weitzel
  16. Improving “National Brands”: Reputation for Quality and Export Promotion Strategies By Julia Cage; Dorothée Rouzet
  17. The Regional Impact of Bilateral Investment Treaties on Foreign Direct Investment By Arjan Lejour; Maria Salfi
  18. Renewable Energy, Subsidies, and the WTO: Where Has the ‘Green’ Gone? By Patrice Bougette; Christophe Charlier
  19. Services Trade Restrictiveness Index (STRI): Scoring and Weighting Methodology By Massimo Geloso Grosso; Frédéric Gonzales; Hildegunn Kyvik Nordås
  20. Trade Liberalization and the Skill Premium: A Local Labor Markets Approach By Rafael Dix-Carneiro; Brian K. Kovak
  21. Brexit or Fixit? the trade and welfare effects of leaving the European union By G.I.P. Ottaviano; João Paulo Pessoa; Thomas Sampson; John Van Reenen
  22. Canada – Renewable Energy: Implications for WTO Law on Green and Not-so-Green Subsidies By Steve Charnovitz; Carolyn Fischer
  23. A Brief History of International Trade Thought: From Pre-doctrinal Contributions to Contemporary Neoclassical Economics By Carmen Elena Dorobat
  24. Internationalization and innovation of firms: evidence and policy By Carlo Altomonte; Tommaso Aquilante; Gábor Békés; Gianmarco I. P. Ottaviano
  25. Trade Reform and Regional Dynamics: Evidence From 25 Years of Brazilian Matched Employer-Employee Data By Rafael Dix-Carneiro; Brian K. Kovak
  26. Can Innovation Help U.S. Manufacturing Firms Escape Import Competition from China? By Hombert , Johan; Matray , Adrien
  27. Productivity and export market participation: evidence from Colombia By Diez, Federico J.; Casas, Camila; Gonzalez, Alejandra; Moreno, Stefany
  28. Asian firms and the restructuring of global value chains By Shamel Azmeh; Khalid Nadvi
  29. Globalization and synchronization of innovation cycles By Kiminori Matsuyama; Iryna Sushko; Laura Gardini
  30. Exchange volatility and trade performance in Morocco and Tunisia: what have we learned so far? By Bouoiyour, jamal; Selmi, Refk
  31. Manufacturing and Trade Liberalisation of India: Continuing the Debate By Ghosh Dastidar, Sayantan
  32. Impact of domestic support and border measures for developing countries’ food security By M. Huchet Bourdon; C. Laroche Dupraz

  1. By: Cosimo Beverelli; Simon Neumüller; Robert Teh
    Abstract: We estimate the effects of trade facilitation on export diversification, as measured by two extensive margins: the number of products exported by destination and the number of export destinations served by product. To address the issue of causality, we employ an identification strategy whereby only exports of new products, or exports to new destinations, are taken inton account when computing the respective margins of trade. We find a positive impact of trade facilitation on the extensive margins of trade. The results are robust to alternative definitions of extensive margins, different sets of controls and various estimation methods. Simulation results suggest substantial extensive margin gains from trade facilitation reform in Sub-Saharan Africa and Latin America and the Caribbean.
    Keywords: Trade facilitation, Export diversification, International trade agreements, WTO
    JEL: F13 F14 F17
    Date: 2015–01
  2. By: Shiro Armstrong (East Asia Bureau of Economic Research)
    Abstract: The Australia–United States free trade agreement (AUSFTA) came into effect in 2005. It was the second preferential trade agreement that Australia signed, after its agreement with Singapore, and marked a departure from the primacy of Australia’s previous trade policy of unilateral and multilateral trade liberalisation towards preferential liberalisation. This paper assesses the economic effects of AUSFTA by applying the Productivity Commission’s gravity model of trade from its Bilateral and Regional Trade Agreements review. The evidence reveals AUSFTA resulted in a fall in Australian and US trade with the rest of the world — that the agreement led to trade diversion. Estimates also show that AUSFTA is associated with a reduction in trade between Australia and the United States.
    Keywords: Trade Liberalisation, AUSFTA, preferential trade agreements
    JEL: F13 F14
    Date: 2015–02
  3. By: Dal Bianco, Andrea; Boatto, Vasco; Caracciolo, Francesco; Santeramo, Fabio Gaetano
    Abstract: This article empirically investigates the impact of trade barriers on the world wine trade, focusing on trade costs impeding exports, including transport, tariffs, technical barriers and sanitary and phytosanitarystandards. A gravity model is estimated using data from the main importing and exporting countries for the years 1997 to 2010. The Poison Pseudo-Maximum Likelihood (PPML) estimator accounts for heteroskedasticity and the presence of zero trade flows. Our results identify which regulations can adversely affect trade, providing useful information to policy-makers involved in negotiations on trade frictions. While sanitary and phytosanitary measures do not seem to obstruct exports, technical barriers have a varying impact on trade. A decreasing trend for tariffs has largely been compensated by more stringent technical barriers. The overall result is that frictions in the world wine trade have not changed during the past fifteen years.
    Keywords: tariffs, technical barriers to trade, sanitary and phytosanitary regulations, gravity model, PPML
    JEL: F13 Q17 Q18
    Date: 2014–09–01
  4. By: Haaland, Jan I. (Dept. of Economics, Norwegian School of Economics and Business Administration); Venables, Anthony J. (University of Oxford)
    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. Analysis encompasses cases in which the domestic MC sector is able to expand or contract flexibly, or is constrained to be of fixed size. In the former case domestic protection can bring gains by increasing the number of product varieties on offer; these gains (and the corresponding rates of domestic subsidy or of import tariffs) are reduced by heterogeneity of foreign exporters some of whom may withdraw from the market. In the latter case gains from protection arise from terms-of-trade effects; since various margins of substitution are switched off, only the relative values of domestic taxes, import tariffs and export taxes matter. In general, policies work through both a terms-oftrade and a variety effect, and the paper shows how the relative importance of each depends on the structure of the economy.
    Keywords: Trade policy; monopolistic competition; heterogeneous firms; terms of trade; variety; productivity.
    JEL: F12 F13
    Date: 2014–11–12
  5. By: Kristian Behrens; Gregory Corcos; Giordano Mion
    Abstract: We investigate the dramatic 2008–2009 trade collapse using microdata from a small open economy, Belgium. Belgian trade essentially fell because of reduced quantities and unit prices, rather than fewer firms involved in international transactions, fewer trading partners per firm, or fewer products traded. Our difference-in-difference results point to a fall in the demand for tradables – especially durables and capital goods – as the main driver of the recent collapse. Finance and involvement in global value chains played only minor roles. Firm-level exports-to-turnover and imports-to-intermediates – as well as exports-to-production and imports-to-production – ratios reveal a comparable collapse of domestic and cross-border operations. Access to credit affected both types of activities to the same extent. Overall, our results point to a general fall in demand and not a crisis of Belgian cross-border trade per se.
    Keywords: 2008–2009 trade collapse; trade crisis; margins of trade; firm-level analysis; Belgium
    JEL: F01 F10 F14
    Date: 2013–05
  6. By: Holger Breinlich; Anson Soderbery; Greg C. Wright
    Abstract: In the face of trade liberalization domestic firms are often forced out of the market, whereas others adapt and survive. In this paper we focus on a new channel of adaptation, namely the shift toward increased provision of services in lieu of goods production. We exploit variation in EU trade policy to show that lower manufacturing tariffs cause firms to shift into services provision and out of goods production. Additionally, we find that a successful transition is strongly associated with higher firm-level R&D stocks whereas higher physical capital stocks slow the shift into services provision.
    Keywords: Services trade; trade liberalization
    JEL: F12 F15 F23
    Date: 2014–09
  7. By: Houssein Guimbard; Maëlan Le Goff
    Abstract: The sub-Saharan African (SSA) countries are excluded from the mega-deals (EU-USA, EU-Japan, China-Japan-Korea…) under negotiations: they might however undergo important economic impacts, as their exports remain dependant from those large markets. Using a dynamic Computable General Equilibrium Model (CGEM), this paper find that mega-deals would have a negative impact on the welfare of SSA countries. Regional integration (the “Tripartite” FTA, a potential trade agreement gathering 26 African countries) in Africa might limit these losses but cannot overcome them. A continental RTA involving all SSA countries would slightly counterbalance the negative impact of the Mega deals. We also show that openness of African countries towards Asia could be a potential solution to avoid trade diversion.
    Keywords: International Trade;Mega Deals;Africa
    JEL: F13 F15 O55
    Date: 2014–12
  8. By: ISHIDO Hikari
    Abstract: This paper addresses the economic impacts of free trade agreements (FTAs) on the location choice of Japanese services suppliers. It makes a first-step analysis on the impact of Japan's bilateral FTAs on the Mode 3 (commercial presence)-based trade in services, as there seems to be no detailed quantitative analysis focusing exclusively on those FTAs with a General Agreement on Trade in Services (GATS)-style commitment table. An analysis of aggregate survey results is made. Then, utilizing a newly constructed firm-level database matched with the newly calculated Hoekman Index (for measuring the degree of service sector liberalization) through Mode 3, count data analyses were conducted. Overall, the results reveal some positive correlations between the degree of service trade liberalization in the host country and service firms' commercial presence in that country, hence a policy suggestion for Japan to further promote service trade liberalization under bilateral/plurilateral FTAs.
    Date: 2015–01
  9. By: Groppo, Valeria; Piermartini, Roberta
    Abstract: Do WTO commitments reduce the risk of trade policy reversals? To address this question, we rely on the theoretical model of varying cooperative tariffs by Bagwell and Staiger (1990) to specify our empirical model for the probability of a tariff increase. We then study how WTO tariff commitments affect this probability. We estimate our model using a database of WTO bound tariffs that we built for all WTO Members from 1996 to 2011 at the HS 6-digit level of disaggregation. Our results show that WTO commitments significantly reduce the probability of a tariff increase, even when the bound tariff is above the MFN applied rate. In addition, the WTO reduces trade policy uncertainty through its monitoring function. These results are robust to including political economy explanations of tariff changes and to addressing endogeneity concerns.
    Keywords: gains from trade agreements,commitments,tariffs formation,binding overhang
    JEL: F1 F5
    Date: 2014
  10. By: Marco Fugazza; Claudia Trentini
    Abstract: Motivations for foreign direct investment (FDI) could be multiple. This paper conducts a general examination of the influence of market access conditions on FDI decisions using a unique data set on bilateral FDI outward stocks and novel measures of market access. We find that over the period 1990–2010, export platform and complex-vertical investment strategies have been driving FDI decisions around the world.
    Date: 2014
  11. By: Maria Cipollina; David Laborde; Luca Salvatici
    Abstract: The aim of this article is to assess 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 eight-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 a 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.
    JEL: F1 O24 Q18
  12. By: Lionel Fontagné; Sophie Hatte
    Abstract: We study international competition in high-end varieties for 416 detailed HS6 product categories marketed by the leading French luxury brands. We construct a world database of trade flows for these products, computing unit values of related bilateral trade flows and analyzing competition among the main exporters. We use the observed distribution of unit values to define a high-end market segment. Exports of high-end varieties are shown to be less sensitive to distance, and found more sensitive to destination country wealth than other varieties, but only in relation to countries already producing a large range of luxury brands, pointing to a first-mover advantage.
    Keywords: Product Differentiation;Market Shares;Unit Values
    JEL: F12 F15
    Date: 2014–12
  13. By: Denise Penello
    Abstract: Newly collected data in UNCTAD’s Trade Analysis and Information System (TRAINS) database on non-tariff measures (NTMs) offers the possibility to assess its impact on trade. The approach chosen is using a frequency count, which is the number of NTM on a single product. This novel method can be relevant if one can assume that NTM do have a cost for exporters, even if that cost is unknown. The key concept is the average cost of any NTM. This analysis checks whether more measures imposed on a single product, will increase difficulty for exporters to comply with all requisites and still being able to export competitively. European imports of agrifood products (at 4 digit level) is analysed, and data suggests that higher frequency of SPS measures may be significant to influence European imports from all countries, and it impacts LDC in special, particularly those in Africa. Exports could be reduced by around 3 per cent for all countries, and almost 5 per cent for LDC countries for each additional SPS requirement in the importing country. Countries in Asia do not seem to be affected, but this is probably because of trade patterns, since European Union is not a major market for agri-food exports coming from those countries. Other middle income countries are affected in a lesser way. This fact gives strength to the idea that the higher income in a country, the more resources are available to the companies operating in their territory to overcome obstacles posed by NTM in partner markets and continue exporting. Even in the evidence that NTM may negatively affect trade, negotiation for reduction, harmonization or elimination is not automatic or even desirable. Some policy implications are discussed based on the conclusions.
    Date: 2014
  14. By: Antràs, Pol; Fort, Teresa C; Tintelnot, Felix
    Abstract: This paper studies the extensive and intensive margins of firms' global sourcing decisions. We develop a quantifiable multi-country sourcing model in which heterogeneous firms self-select into importing based on their productivity and country-specific variables. The model delivers a simple closed-form solution for firm profits as a function of the countries from which a firm imports, as well as those countries' characteristics. In contrast to canonical models of exporting in which firm profits are additively separable across exporting markets, we show that global sourcing decisions naturally interact through the firm's cost function. In particular, the marginal change in profits from adding a country to the firm's set of potential sourcing locations depends on the number and characteristics of other countries in the set. Still, under plausible parametric restrictions, selection into importing features complementarity across markets and firms' sourcing strategies follow a hierarchical structure analogous to the one predicted by exporting models. Our quantitative analysis exploits these complementarities to distinguish between a country's potential as a marginal cost-reducing source of inputs and the fixed cost associated with sourcing from this country. Counterfactual exercises suggest that a shock to the potential benefits of sourcing from a country leads to significant and heterogeneous changes in sourcing across both countries and firms.
    Keywords: complementarities; extensive margin; global sourcing; heterogeneous firms; importing; productivity
    JEL: C63 D21 D22 F12 F23 L11 L16 L23
    Date: 2014–12
  15. By: Saul Estrin; Seçil Hülya Danakol; Paul Reynolds; Utz Weitzel
    Abstract: This paper explores the effects of foreign direct investment, measured by mergers and acquisitions, on domestic entrepreneurial entry. We use a micro‐panel of more than two thousand individuals disaggregated by industry in seventy countries including both developed and developing economies, 2000-2009. The theory yields ambiguous predictions about the relationship between FDI and entrepreneurship; positive spillovers via dissemination of technology or negative because of crowding out. Our empirical analysis is conducted at three levels of aggregation. We find the relationship between FDI and domestic entrepreneurship in aggregate and intra-industry to be negative. Policies need to consider how to counteract this effect.
    Keywords: Foreign direct investment; entrepreneurship; new firm entry; spillovers
    JEL: F23 L29 M13
    Date: 2014–05
  16. By: Julia Cage (Département d'économie); Dorothée Rouzet (OECD - Economics Department)
    Abstract: This paper studies the effect of firm and country reputation on exports when buyers cannot observe quality prior to purchase. Firm-level demand is determined by expected quality, which is driven by the dynamics of consumer learning through experience and the country of origin’s reputation for quality. We show that asymmetric information can result in multiple steady-state equilibria with endogenous reputation. We identify two types of steady states: a high-quality equilibrium (HQE) and a low-quality equilibrium (LQE). In a LQE, only the lowest-quality and the highest-quality firms are active; a range of relatively high-quality firms are permanently kept out of the market by the informational friction. Countries with bad quality reputation can therefore be locked into exporting low-quality, low-cost goods. Our model delivers novel insights about the dynamic impact of trade policies. First, an export subsidy increases the steady-state average quality of exports and welfare in a LQE, but decreases both quality and welfare in a HQE. Second, there is a tax/subsidy scheme based on the duration of export experience that replicates the perfect information outcome. Third, a minimum quality standard can help an economy initially in a LQE moving to a HQE.
    Keywords: product quality; product differenciation; export promotion; industrial policy; trade; asymetric information
    JEL: F12 F13 L15 L52 O14 O24
    Date: 2015
  17. By: Arjan Lejour; Maria Salfi
    Abstract: We examine the impact of bilateral investment treaties (BITs) on bilateral FDI stocks using extensive data from 1985 until 2011. We correct for endogeneity using indicators for governance and membership of international organisations. We find that ratified BITs increase on average bilateral FDI stocks by 35% compared to those of country pairs without a treaty. Upper middle income countries seem to benefit the most from ratified treaties whereas high income countries with high governance levels do not profit at all. In addition, lower middle and low income countries experience significantly larger inward FDI stocks from partner’s countries. Distinguishing by region, we find that ratified BITs increase FDI stocks mainly in East Asia and Middle & Eastern Europe.
    JEL: F21 F23 H25 H26
    Date: 2015–01
  18. By: Patrice Bougette (Université Nice Sophia Antipolis and GREDEG/CNRS); Christophe Charlier (Université Nice Sophia Antipolis and GREDEG/CNRS)
    Abstract: Faced with the energy transition imperative, governments have to decide about public policy to promote renewable electrical energy production and to protect domestic power generation equipment industries. For example, the Canada – Renewable energy dispute is over Feed-in tariff (FIT) programs in Ontario that have a local content requirement (LCR). The EU and Japan claimed that FIT programs constitutesubsidies that go against the SCM Agreement, and that the LCR is incompatible with the non-discrimination principle of the World Trade Organization (WTO). This paper investigates this issue using an international quality differentiated duopoly model in which power generation equipment producers compete on price. FIT programs including those with a LCR are compared for their impacts on trade, profits, amount of renewable electricity produced, and welfare. When ‘quantities’ are taken into account, the results confirm discrimination. However, introducing a difference in the quality of the power generation equipment produced on both sides of the border provides more mitigated results. Finally, the results enable discussion of the question of whether environmental protection can be put forward as a reason for subsidizing renewable energy producers in light of the SCM Agreement.
    Keywords: Feed-in Tariffs, Subsidies, Local Content Requirement, Industrial Policy, Canada – Renewable Energy Dispute, Trade Policy
    JEL: F18 L52 Q42 Q48 Q56
    Date: 2014–10
  19. By: Massimo Geloso Grosso; Frédéric Gonzales; Hildegunn Kyvik Nordås
    Abstract: This paper presents the scoring and weighting methodology for calculation of the services trade restrictiveness indices (STRIs) for 18 sectors. The STRIs are composite indices taking values between zero and one, zero representing an open market and one a market completely closed to foreign services providers. The scoring system is based on binary scoring. To reconcile the complexity of services trade restrictions with binary scoring, non-binary measures are broken down to multiple thresholds; complementary measures are grouped and scored as zero only if all measures in the bundle are not restrictive. Finally in cases where one restriction renders others irrelevant, those measures that are rendered irrelevant are automatically scored one. The paper presents the general methodology that applies to the core measures found in all sectors as well as sector-specific scoring where relevant.
    Keywords: composite indicators, services trade restrictions
    JEL: C10 C80 F13 F14 F53
    Date: 2015–01–23
  20. By: Rafael Dix-Carneiro; Brian K. Kovak
    Abstract: We develop a specific-factors model of regional economies that includes two types of workers, skilled and unskilled. The model delivers a simple equation relating trade-induced local shocks to changes in local skill premia. We apply the methodology to Brazil's early 1990s trade liberalization and find statistically significant but modest effects of liberalization on the evolution of the skill premium between 1991 and 2010. The methodology uses widely available household survey data and can easily be applied to other countries and liberalization episodes.
    JEL: F14 F16 J31
    Date: 2015–01
  21. By: G.I.P. Ottaviano; João Paulo Pessoa; Thomas Sampson; John Van Reenen
    Abstract: Since a speech by the Prime Minister in January 2013 , the Conservative party has been committed to holding a referendum on the UK’s membership of the European Union (EU) in 2017. So this is a good moment to consider what would be the likely economic effects on the UK from such a move (commonly called ‘Brexit’).Eurosceptics emphasise greater national sovereignty from Brexit while Europhiles tend to focus on the importance of ever greater unity to reduce the risks of the political conflicts that ravaged Europe in the first half of the twentieth century. These are important matters, but this analysis focuses on the more mundane (but quantifiable) economic issues, especially trade. The costs and benefits of the UK leaving the EU are complex. Losses due to trade alone could be very substantial. Even under very optimistic assumptions, the sum of the static and dynamic trade losses would be almost 2.2% of GDP. More pessimistic calculations would lead to a long-term loss of almost a tenth of national income. The dream of splendid isolation may turn out to be a very costly one indeed.
    Keywords: trade; European union; welfare
    JEL: N0
    Date: 2014–05
  22. By: Steve Charnovitz (George Washington University Law School); Carolyn Fischer (Resources for the Future (RFF) and Fondazione Eni Enrico Mattei (FEEM))
    Abstract: In the first dispute on renewable energy to come to WTO dispute settlement, the domestic content requirement of Ontario’s feed-in tariff was challenged as a discriminatory investment-related measure and as a prohibited import substitution subsidy. The panel and Appellate Body agreed that Canada was violating the GATT and the TRIMS Agreement. But the SCM Article 3 claim by Japan and the European Union remains unadjudicated, because neither tribunal made a finding that the price guaranteed for electricity from renewable sources constitutes a ‘benefit’ pursuant to the SCM Agreement. Although the Appellate Body provides useful guidance to future panels on how the existence of a benefit could be calculated, the most noteworthy aspect of the new jurisprudence is the Appellate Body’s reasoning that delineating the proper market for ‘benefit’ analysis entails respect for the policy choices made by a government. Thus, in this dispute, the proper market is electricity produced only from wind and solar energy.
    Keywords: Feed-in-Tariff, Renewable Energy, Subsidies, International Trade, WTO, Green Growth, Local Content Requirement
    JEL: K33 Q48 Q56 Q58
    Date: 2014–11
  23. By: Carmen Elena Dorobat (University of Angers)
    Abstract: The present paper outlines the development of international trade thought, from the pre-doctrinal contributions of Greek philosophers and scholastic theologians, through the theories of the first schools of economic thought, and up to modern trade theories. I follow filiations of ideas in a chronological order, and show how theoretical investigation into the causes and effects of international trade - and the necessity of government intervention - has evolved over centuries of economic thought.
    Keywords: international trade, history of economic thought
    JEL: F10 B10 B20
    Date: 2014–10
  24. By: Carlo Altomonte; Tommaso Aquilante; Gábor Békés; Gianmarco I. P. Ottaviano
    Abstract: We use a representative and cross-country comparable sample of manufacturing firms (EFIGE) to document patterns of interaction among firm-level internationalization, innovation and productivity across seven European countries (Austria, France, Germany, Hungary, Italy, Spain, United Kingdom). We find strong evidence of positive association among the three firm-level characteristics across countries and sectors. We also find that the positive correlation between internationalization and innovation survives after controlling for productivity, with some evidence of causality running from the latter to the former. Our analysis suggests that export promotion per se is unlikely to lead to sustainable internationalization because internationalization goes beyond export and because, in the medium to long term, internationalization is likely driven by innovation. We recommend coordination and integration of internationalization and innovation policies 'under one roof' at both the national and EU levels, and propose a bigger coordinating role for EU institutions.
    Keywords: economic integration; European Union; export; globalization; industrial enterprise; industrial policy; innovation; manufacturing; sustainable development
    JEL: R14 J01
    Date: 2013–10
  25. By: Rafael Dix-Carneiro; Brian K. Kovak
    Abstract: We empirically study the dynamics of labor market adjustment following the Brazilian trade reform of the 1990s. We use variation in industry-specific tariff cuts interacted with initial regional industry mix to measure trade-induced local labor demand shocks, and then examine regional and individual labor market responses to those one-time shocks over two decades. Contrary to conventional wisdom, we do not find that the impact of local shocks is dissipated over time through wage-equalizing migration. Instead, we find steadily growing effects of local shocks on regional formal sector wages and employment for 20 years. This finding can be rationalized in a simple equilibrium model with two complementary factors of production, labor and industry-specific factors such as capital, that adjust slowly and imperfectly to shocks. Next, we document rich margins of adjustment induced by the trade reform at the regional and individual level. Workers initially employed in harder hit regions face continuously deteriorating formal labor market outcomes relative to workers employed in less affected regions, and this gap persists even 20 years after the beginning of trade liberalization. Negative local trade shocks induce workers to shift out of the formal tradable sector and into the formal nontradable sector. Non-employment strongly increases in harder-hit regions in the medium run, but in the longer run, non-employed workers eventually find re-employment in the informal sector. Working age population does not react to these local shocks, but formal sector net migration does, consistent with the relative decline of the formal sector and growth of the informal sector in adversely affected regions.
    JEL: F14 F16 J23
    Date: 2015–01
  26. By: Hombert , Johan; Matray , Adrien
    Abstract: The authors study whether R&D-intensive firms are more resilient to trade shocks. They correct for the endogeneity of R&D using tax-induced changes to the cost of R&D. On average across US manufacturing firms, rising imports from China lead to slower sales growth and lower profitability. These effects are, however, significantly smaller for firms with a larger stock of R&D -- by about half when moving from the 25th percentile to the 75th percentile of the R&D stock distribution. As a result, while the average firm in import-competing industries cuts capital expenditures and employment, R&D-intensive firms downsize considerably less.
    Keywords: R&D; Innovation; Product Market Competition; Trade Shocks
    JEL: F14 G31 O33
    Date: 2014–12–24
  27. By: Diez, Federico J. (Federal Reserve Bank of Boston); Casas, Camila (Banco de la Republica); Gonzalez, Alejandra (Banco de la Republica); Moreno, Stefany (Banco de la Republica)
    Abstract: Using evidence from Colombia, the authors study the relationship between firms' productivity and their export market participation decisions. Understanding the link between these two variables is critical for the study and design of policies aimed at achieving high and sustainable economic growth in the long run.
    Keywords: productivity; exporters; productivity premium; openness
    JEL: F14 L22 L60
    Date: 2015–02–03
  28. By: Shamel Azmeh; Khalid Nadvi
    Abstract: Asian trans-national garment manufacturers are transforming the structure of global value chains in the apparel industry. Recent studies show such first tier suppliers undertaking a greater range of functional activities. In many cases, these firms originate from the so-called ‘Rising Power’ economies, particularly ‘Greater China’ and South Asia. We argue that such, transnational, Asian firms can play a pivotal and strategic role in shaping the geography and organisational restructuring of the global value chain. Drawing on secondary sources and primary research we illustrate how such firms manage complex international production linkages, and ensure the incorporation of Jordan into the global garment industry. The paper contributes to the understanding of the role of these firms and how their behaviour is driven by complex dynamics linked to their own business strategies, their linkages with buyers, and their ability to exploit production and trade opportunities while maintaining high levels of global locational flexibility.
    Keywords: apparel industry; Asian transnational suppliers; global value chains; Jordan
    JEL: R14 J01
    Date: 2014–08
  29. By: Kiminori Matsuyama (Northwestern University, USA); Iryna Sushko (Institute of Mathematics, National Academy of Science of Ukraine); Laura Gardini
    Abstract: We propose and analyze a two-country model of endogenous innovation cycles. In autarky, innovation fluctuations in the two countries are decoupled. As the trade costs fall and intra-industry trade rises, they become synchronized. This is because globalization leads to the alignment of innovation incentives across firms based in different countries, as they operate in the increasingly global (hence common) market environment. Furthermore, synchronization occurs faster (i.e., with a smaller reduction in trade costs) when the country sizes are more unequal, and it is the larger country that dictates the tempo of global innovation cycles with the smaller country adjusting its rhythm to the rhythm of the larger country. These results suggest that adding endogenous sources of productivity fluctuations might help improve our understanding of why countries that trade more with each other have more synchronized business cycles.
    Keywords: Endogenous innovation cycles and productivity co-movements; Globalization, Home market effect; Synchronized vs. Asynchronized cycles; Synchronization of coupled oscillators; Basins of attraction; Two-dimensional, piecewise smooth, noninvertible maps
    JEL: C61 E32 F12 F44 O31
    Date: 2015–02
  30. By: Bouoiyour, jamal; Selmi, Refk
    Abstract: This paper attempts to assess two interesting issues for two small open economies (Morocco and Tunisia). First, it analyses the historical behaviour of nominal exchange rate, differential price and real exchange rate uncertainties. Second, it investigates the stability of the interaction between exchange volatility and exports in nominal and real terms. Our main results reveal that the effect of differential price volatility on exports exceeds that of nominal exchange rate by a large margin in terms of duration of persistence, ARCH and GARCH effects and intensity of shock. The relationship appears complex. In Morocco, it is negative and significant in 75.82% (as average) of cases in nominal terms and in 77.22% in real terms. This link is stronger in Tunisia with averages, respectively, equal to 85.88% and 89.99%. We associate the apparently mixed results to the differential price uncertainty itself sensitive to ups and down oil price movements, switching regime and leverage effects.
    Keywords: exchange volatility; total exports; sectoral exports; GARCH.
    JEL: F13 F14 F4
    Date: 2014
  31. By: Ghosh Dastidar, Sayantan
    Abstract: The paper attempts to identify the reasons behind the differential performance of the registered and unregistered manufacturing sectors of India during the post-reform period. The motivation for this study comes from the econometric results of Ghosh Dastidar and Veeramani (2014) who find that trade liberalisation has positively affected the unregistered sector growth performance but not that of the registered segment. Besides discussing the probable reasons behind the absence of a trade-growth nexus in the case of the registered sector, the paper reviews the theoretical literature on the unregistered sector - trade liberalisation association with an aim to identify the channels through which trade liberalisation might have affected the performance of the unregistered segment. It seems that trade liberalisation benefitted the unregistered sector indirectly through the increase in sub-contracting activities from the registered sector. Absence of rigid labour regulations also helped the unregistered sector undergo restructuring during the post-reform period and achieve faster growth through elimination of inefficient firms, something which the registered segment failed to do.
    Keywords: Registered Manufacturing, Unregistered Manufacturing, Trade Liberalisation, Growth, Employment, India
    JEL: F10 L60 O14 O25
    Date: 2015–02–05
  32. By: M. Huchet Bourdon; C. Laroche Dupraz
    Abstract: Food security is a major concern, especially for developing countries where a large percentage of population lives in rural areas and where agricultural sector represents an important weight in their economy. Agricultural and food imports play a particular key role in terms of food security in low income countries. Indeed, dependency on imports for food may raise a problem for food security in particular in the case of sudden price increase which put up national food bill. The national state of food availability combining food imports and domestic food production thus constitutes some crucial information. Following Diaz-Bonilla et al. (2000), this contribution aims to shed light on the determinants of food security at national level. We first build a theoretical framework linking explicitly food security measured by the Bonilla index and national intervention policy intervention in agriculture. Second, the empirical methodology aims at assessing the impact of national policy responses to 2008 price surge in terms of food security using the national rate assistance index on importable food products for 42 countries over the period 1995-2010. Our results suggest that most developing countries have largely used their possibility to play with the NRA level in order to moderate BI during the 2008 food price surge.
    JEL: Q18 O24

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