nep-int New Economics Papers
on International Trade
Issue of 2015‒03‒13
25 papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. The roles of import competition and export opportunities for technical change By Claudia Steinwender
  2. Service Trade and Productivity: Firm-level evidence from Japan By MORIKAWA Masayuki
  3. Trade, Wages, and Collective Bargaining: Evidence from France By Carluccio, Juan; Fougère, Denis; Gautier, Erwan
  4. Asymmetric Industrial Energy Prices and International Trade By Antoine Dechezleprêtre; Misato Sato
  5. Financial Development and International Trade By Fernando Leibovici
  6. Firm Heterogeneity and Location Choice of European Multinationals By Marti, Josep; Alguacil, Maite; Orts, Vicente
  7. The gravity model, global value chain and the brazilian states By Joachim Guilhoto; Jean-Marc Siroën; Ayçil Yücer
  8. Intra-Industry Trade with Bertrand and Cournot Oligopoly: The Role of Endogenous Horizontal Product Differentiation By James A. Brander; Barbara J. Spencer
  9. Did China Tire Safeguard Save U.S. Workers? By Chung, Sunghoon; Lee, Joonhyung; Osang, Thomas
  10. Threshold and interaction effects in the trade, growth, and inequality relationship By Leyaro, Vincent
  11. Credit constraints and the extensive margins of exports: First evidence for German manufacturing By Joachim Wagner
  12. Productivity, Firm Size, Financial Factors, and Exporting Decisions: The case of Japanese SMEs By OGAWA Kazuo; TOKUTSU Ichiro
  13. International Knowledge Spillovers: The Benefits from Employing Immigrants By Jürgen Bitzer; Erkan Gören; Sanne Hiller
  14. West European Economic Integration since 1950: Implications for Trade and Income By Nicholas Crafts
  15. The Causal Impact of Common Native Language on International Trade: Evidence from a Spatial Regression Discontinuity Design By Andrea Lassmann; Peter Egger
  16. Crown Rule, Home Charges, and U.K.-India Terms of Trade By Dennis Appleyard; Shyam Gouri Suresh
  17. The Political Economy of European Integration By Spolaore, Enrico
  18. The Extrajurisdictional Effects of Environmental Measures in the WTO Law Balancing Process By Ulrike Will
  19. Liberalized trade policy and inequality: Evidence from post-Multi-Fibre Arrangement India and some theoretical issues By Kar, Mausumi; Kar, Saibal
  20. Globalization: A Woman’s Best Friend? Exporters and the Gender Wage Gap By Bøler, Esther Ann; Javorcik, Beata; Ulltveit-Moe, Karen-Helene
  21. Investigation on the relationship between Romanian foreign trade and industrial production By Stefanescu, Razvan; Dumitriu, Ramona
  22. Labor Market Flexibility and FDI Flows: Evidence from Oil-Rich GCC and Middle Income Countries By Mina, Wasseem; Jaeck, Louis
  23. Long Run Relationship between IFDI and Domestic Investment in GCC Countries By Ghassan, Hassan B.; Alhajhoj, Hassan R.
  24. Does exchange of information between tax authorities influence multinationals' use of tax havens? By Braun, Julia; Weichenrieder, Alfons
  25. Impact of Exchange Rate Shocks on Japanese Exports: Quantitative assessment using a structural VAR model By IWAISAKO Tokuo; NAKATA Hayato

  1. By: Claudia Steinwender
    Abstract: A variety of empirical and theoretical trade papers have suggested and documented a positive impact of trade on the productivity of firms. However, there is less consensus about the underlying mechanism at work. While trade papers focus on access to export markets, other papers stress the importance of import competition. Since imports and exports (and even tariffs affecting either) are usually highly correlated, it is unclear which mechanism the existing empirical papers uncover. This paper conducts a “horse race” between export opportunities and import competition. Using Spanish firm level data, instrumenting for exports and imports with tariff changes and controlling for selection, I find robust evidence that access to export markets leads to productivity increases, but only for firms that were already highly productive before. The evidence on import competition is weaker. If anything, initially low-tech firms manage to increase their productivity in response to increased competition from abroad. The latter finding is at odds with most trade models, so I propose a model incorporating non-profit maximizing managers to reconcile theory with the evidence. Empirically, I find that all productivity upgrades are driven by increased R&D, patenting, and product innovation. Access to export markets also leads to the adaptation of foreign technologies. There is no evidence that either mechanism leads to increased full time employment, instead full time workers seem to be replaced by part-time or temporary workers.
    Keywords: import competition; technical change; productivity; exporting
    JEL: F12 F13 F14 L25
    Date: 2015–02
  2. By: MORIKAWA Masayuki
    Abstract: Studies on the globalization of firm activities have been progressing rapidly, but empirical studies on service trade using firm-level data have been scarce. This paper, using panel data from Japanese firms, analyzes the relationship between service trade and firm characteristics such as productivity and finds the following. 1) The number of firms engaged in service trade is far less than that engaged in goods trade, and the ratio of service trade value to total sales is also small. 2) The share of trade with overseas affiliate firms is larger in service trade than in goods trade. 3) The productivity and wage level of service trading firms are higher than those of domestic firms and goods trading firms. 4) The productivity of firms that export services beyond the boundary of their firm groups is higher than those firms that export services only to their affiliate firms. Collectively, the results suggest that the fixed costs to initiate service trade exceed that to initiate goods trade, thus indicating the potentially important role of policies to liberalize and facilitate service trade.
    Date: 2015–03
  3. By: Carluccio, Juan; Fougère, Denis; Gautier, Erwan
    Abstract: We estimate the impact of international trade on wages using data for French manufacturing firms. We instrument firm-level trade flows with firm-specific instrumental variables based on world demand and supply shocks. Both export and offshoring shocks have a positive effect on wages. Exports increase wages for all occupational categories while offshoring has heterogeneous effects. The impact of trade on wages varies across bargaining regimes. In firms with collective bargaining, the elasticity of wages with respect to exports and offshoring is higher than in firms with no collective bargaining. Wage gains associated with collective bargaining are similar across worker categories.
    Keywords: collective bargaining; exports; firm-level wages; offshoring
    JEL: E24 F16 J51
    Date: 2015–03
  4. By: Antoine Dechezleprêtre; Misato Sato
    Abstract: This paper measures the response of bilateral trade flows to differences in industrial energy prices across countries. Using a panel for the period 1996-2011 including 42 countries, 62 sectors and covering 60% of global merchandise trade, we estimate the short-run effects of sector-level energy price asymmetry on trade. We find that changes in relative energy prices have a statistically significant but very small impact on imports. On average, a 10% increase in the energy price difference between two country-sectors increases imports by 0.2%. The impact is larger for energy-intensive sectors. Even in these sectors however, the magnitude of the effect is such that changes in energy price differences across time explain less than 0.01% of the variation in trade flows. Simulations based on our model predict that a †40-65/tCO2 price of carbon in the EU ETS would increase Europe's imports from the rest of the world by less than 0.05% and decrease exports by 0.2%.
    Keywords: Energy prices, international trade, carbon taxes
    JEL: F18 F14 Q56
    Date: 2015–03
  5. By: Fernando Leibovici (Department of Economics, York University, Toronto, Canada)
    Abstract: This paper studies the industry-level and aggregate implications of financial development on international trade. I set up a multi-industry general equilibrium model of international trade with heterogeneous firms subject to export entry costs and financial frictions, in which industries differ in their dependence on external finance. The model is parametrized to match key features of plant-level data. I find that financial frictions have a large effect on the extent of international trade across industries, but a negligible impact at the aggregate-level. I show that these findings are consistent with estimates from cross-country industry- and aggregate-level data.
    Date: 2015–03–05
  6. By: Marti, Josep; Alguacil, Maite; Orts, Vicente
    Abstract: In this paper we investigate how the different characteristics of European multinational firms affect their decision tolocate in different foreign markets. Considering the existence of n geographically separated markets with different attributes, in terms of entry or fixed costs, variable production costs and the market potential, our theoretical model shows that both firm and country characteristics determine the location of multinational firms. The model reveals that given the characteristics of the countries, the decision to enter a specific country in order to serve all markets globally will depend on all the sources of a firm’s heterogeneity. In the empirical analysis, we drawn on a dataset comprised of harmonized and detailed firm-level data across European countries for 2008 (EFIGE dataset). The results obtained confirm that firms’ international location decision reflects the underlying dissimilarities of European multinational firms, including the specific industry in which they operate. More specifically, our estimations show that only the most productive European firms invest in Latin America and those that decide to enter North America are more productive than firms that locate in China and India. However, we find that this ranking may vary across industries, depending not only on TFP, but also on the years of establishment and the firms’ human and R&D intensity.
    Keywords: multinational firms, firm heterogeneity, location choices, European FDI
    JEL: D24 F14 F21 F23
    Date: 2015–03–05
  7. By: Joachim Guilhoto (Department of Economics, FEA, University of São Paulo); Jean-Marc Siroën (PSL, Université Paris-Dauphine,LEDa, IRD UMR DIAL, 75016 Paris, France); Ayçil Yücer (University of Dokuz Eylül,Department of Economics, Izmir 35160 Turkey, PSL, Université Paris-Dauphine, LEDa, IRD UMR DIAL, 75016 Paris, France)
    Abstract: The WTO and the OECD along with many other organizations, suggest trade in value-added is a “better” measuring system than gross value in order to better understand the impact of trade on employment, growth and production . When it comes to the "domestic" value chain and internal specializations, internal trade statistics are rarely available. In this work we use a gravity model based on the estimation of exports of the Brazilian states, considered as trade entities, both in traditional terms of gross value and in terms of value-added. Our method is based on an Input-Output table for 2008. The results of the bilateral gravity model for the Brazilian states' exports show that the main determinants (GDP, distance etc.) are fairly similar when exports are estimated in gross or value-added terms. _________________________________ L'OMC et l'OCDE ainsi que de nombreuses organisations internationales, suggèrent que l’évaluation du commerce en valeur ajoutée est «meilleure» que celle en valeur brute car elle permet de mieux saisir l'impact du commerce sur l'emploi, la croissance et la production. Quand il s’agit de la chaîne de valeur "domestique" les statistiques commerciales internes sont rarement disponibles. Dans ce travail, nous utilisons un modèle de gravité qui estime les exportations des États brésiliens, considérés comme des entités commerciales, à la fois en termes traditionnels de valeur brute et en termes de valeur ajoutée. Notre méthode est basée sur une table d'entrées-sorties pour 2008. Les résultats du modèle de gravité pour les exportations des États brésiliens montrent que les principaux déterminants du commerce (PIB, distance, etc.) ont des élasticités similaires lorsque les exportations sont estimées en valeur brute ou en valeur ajoutée.
    Keywords: Vertical Specialization, Global supply-chain, Input-Output Analysis, Brazil, Intranational trade, Spécialisation verticale, chaîne globale de valeur, analyse Input-Output, Brésil, Commerce international.
    JEL: F12 F14 F15 R12 R15
    Date: 2015–01
  8. By: James A. Brander; Barbara J. Spencer
    Abstract: This paper investigates the effect of endogenous horizontal product differentiation on trade patterns and the gains from trade under Bertrand and Cournot oligopoly. Firms differentiate their products to mitigate competition, but only if the investment required is not too high. Investment in product differentiation takes place in a much wider range of cases and results in a greater difference between products under Bertrand than Cournot competition. In our model, trade in homogeneous products never takes place under Bertrand competition: Bertrand firms export only if they differentiate their products. Cournot firms may trade in either homogeneous or differentiated products. If there is trade, consumers tend to be better off with Bertrand than Cournot competition due to greater product differentiation and more aggressive pricing, but higher levels of investment can raise Bertrand profit above Cournot profit and also above the monopoly profit at autarky when investment costs are sufficiently low.
    JEL: F12 L1 L13
    Date: 2015–03
  9. By: Chung, Sunghoon; Lee, Joonhyung; Osang, Thomas
    Abstract: It has been well documented that trade adjustment costs to workers due to globalization are significant and that temporary trade barriers have been progressively used in many countries, especially during periods with high unemployment rates. Consequently, temporary trade barriers are perceived as a feasible policy instrument for securing domestic jobs in the presence of increased globalization and economic downturns. However, no study has assessed whether such temporary barriers have actually saved domestic jobs. To overcome this deficiency, we evaluate the China-specific safeguard case on consumer tires petitioned by the United States. Contrary to claims made by the Obama administration, we find that total employment and average wages in the tire industry were unaffected by the safeguard using the ‘synthetic control’ approach proposed by Abadie et al. (2010). Further analysis reveals that this result is not surprising as we find that imports from China are completely diverted to other exporting countries partly due to the strong presence of multinational corporations in the world tire market.
    Keywords: China Tire Safeguard, Temporary Trade Barriers, Trade Diversion, Synthetic Control Method
    JEL: F13 F14 F16
    Date: 2014–06
  10. By: Leyaro, Vincent
    Abstract: This paper examines the relationship between trade (exports), growth, and inequality, using a panel of 100 countries over 30 years (1980 to 2010). As there is no clear theoretical relationship between trade (exports) and inequality, and as inequality can
    Keywords: trade, growth, inequality, threshold effects
    Date: 2015
  11. By: Joachim Wagner (Leuphana University Lueneburg, Germany)
    Abstract: This paper uses a unique newly constructed data set to investigate for the first time the link between credit constraints and the extensive margins of exports in Germany, one of the leading actors on the international market for goods. In line with theoretical considerations and comparable results reported for a small number of other countries we report a negative impact of credit constraints on both the number of goods exported and the number of export destination countries that is both statistically highly significant and large from an economic point of view.
    Keywords: Credit constraints, exports, extensive margins
    JEL: F14
    Date: 2015–03
  12. By: OGAWA Kazuo; TOKUTSU Ichiro
    Abstract: This study is an empirical attempt to compare the exporting behavior of small and medium-sized enterprises (SMEs) with large firms from the viewpoints of export market participation decision (extensive margin) and export volume decision (intensive margin), using firm-level panel data. We find that firm size is an important determinant of both extensive margin and intensive margin decision for SMEs as well as large firms. In contrast, productivity affects only the intensive margin of export for both SMEs and large firms. Quantitatively, the contribution of productivity to export volume is much larger for large firms. Financial factors are also important determinants of export. Liquidity reserve has positive effects on the extensive margin of export for SMEs and large firms. Moreover, financial institutions play an important role in supporting the export activities of SMEs.
    Date: 2015–03
  13. By: Jürgen Bitzer (University of Oldenburg - Department of Economics & ZenTra); Erkan Gören (University of Oldenburg - Department of Economics); Sanne Hiller (Aarhus University - Department of Economics and Business)
    Abstract: This paper explores the role of immigrant employees for a firm’s capability to absorb international knowledge. Using matched employer-employee data from Denmark for the years 1996 to 2009, we are able to show that non-Danish employees from technological advanced countries contribute significantly to a firm’s economic output through their ability to access international knowledge. The empirical results suggest that the immigrants’ impact increases if they come from technological advanced countries, have a high educational level, and are employed in high-skilled positions.
    Keywords: R&D Spillovers, Absorptive Capacity, Firm-Level Analysis, Foreign Workers, Immigrants
    JEL: D20 J82 L20 O30
    Date: 2015–03
  14. By: Nicholas Crafts (University of Warwick)
    Abstract: This paper provides a survey of the implications of post-war European economic integration for trade and income. A particular focus is the impact on the United Kingdom. The literature clearly points to large effects of the EU on trade but is more ambivalent about EFT A. Conventional econometric models suggest that this extra trade meant that the level of income in 2000 in EU countries was about 9 percent larger. Comparisons of the ex-post in come gains of EU membership for the United Kingdom with ex-ante predictions show that the outcome was far better than optimistsexpectedinthe1970s.
    Keywords: economicintegration;gravitymodel;grow theffects;tradecreation
    Date: 2015
  15. By: Andrea Lassmann (KOF Swiss Economic Institute, ETH Zurich, Switzerland); Peter Egger (KOF Swiss Economic Institute, ETH Zurich, Switzerland)
    Abstract: This paper studies the effect of sharing a common native language on international trade. Switzerland hosts three major native language groups which adjoin countries sharing the same native majority languages. In regions close to the internal language border the alternate major language is taught early on in school and not only understood but spoken by the residents. This setting allows for an assessment of the impact of common native rather than spoken language on transaction-level imports from neighbouring countries. Our findings point to an effect of common native language on extensive rather than on intensive margins of trade.
    Keywords: Common native language, Culture, International trade, Regression discontinuity design, Quasi-randomised experiments
    JEL: C14 C21 F14 R12 Z10
    Date: 2015–03
  16. By: Dennis Appleyard; Shyam Gouri Suresh
    Abstract: This paper examines possible determinants of the long-run bilateral commodity terms of trade between the United Kingdom and British India during the Crown Rule period of 1858-1947. The potential influences of aggregate real incomes, price levels/money supplies, international transportation costs, and the exchange rate are included in the analysis, but we especially focus on the Home Charges that India was obliged to pay to Britain. The econometric results provide some support for the hypothesis that a rise in Home Charges was associated with an improvement in Britain’s terms of trade with India. In addition, a clear role was played by changes in transport costs and in the exchange rate.
    JEL: F14 F54 N73 N74 N75
  17. By: Spolaore, Enrico (Tufts University)
    Abstract: This paper 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: 2015
  18. By: Ulrike Will (Faculty of Business Administration and Economics, European University Viadrina, Frankfurt (Oder))
    Abstract: Environmental protection policies become relevant in WTO law if they lead to extrajurisdictional effects. These effects might have different benchmarks, and may restrict free trade rules or competing policy goals. Although both forms of extrajurisdictional effects occur in WTO case law, this differentiation extends further than has been previously discussed. This paper refers to Article XX GATT and the Articles 2.1 and 2.2 TBT. Despite some vague legal terms leading to large discretions, the necessity test respectively the ‘relating to’ requirements and the exclusion of disguised discrimination are capable of resolving conflicts between environmental measures and free trade rules conclusively. However, if the benchmark is a competing environmental policy measure, both measures can refer to the same rule. If both environmental measures then fulfil the balancing requirements, but the realization of both regulatory goals is not possible, the balancing process results in stalemate. This paper considers two approaches to resolving such a collision: the comparison of the intensity of extrajurisdictional effects, and the re-evaluation of the regulatory goal. It is asserted that both approaches contain shortcomings.
    Keywords: Extrajurisdictional Effects, Extraterritorial Jurisdiction, Environment, Trade, Balancing, Regulatory Autonomy
    Date: 2015–03
  19. By: Kar, Mausumi; Kar, Saibal
    Abstract: The phased elimination of the Multi-Fibre Arrangement has been one of the most compelling trade policy reforms of the early twenty-first century, and has brought in significant changes in the industrial structures of the countries of the global south. The
    Keywords: trade policy, MFA quota, employment, wage, inequality
    Date: 2015
  20. By: Bøler, Esther Ann; Javorcik, Beata; Ulltveit-Moe, Karen-Helene
    Abstract: While the impact of globalization on income inequality has received a lot of attention,little is known about its effect on the gender wage gap (GWG). This study argues that there is a systematic difference in the GWG between exporting firms and non-exporters. By the virtue of being exposed to higher competition, exporters require greater commitment and flexibility from their employees. If commitment is not easily observable and women are perceived as less committed workers than men, exporters will statistically discriminate against female employees and will exhibit a higher GWG than non-exporters. We test this hypothesis using matched employer-employee data from the Norwegian manufacturing sector from 1996 to 2010. Our identification strategy relies on an exogenous shock, namely, the legislative changes that increased the length of the parental leave that is available only to fathers. We argue that these changes have narrowed the perceived commitment gap between the genders and show that the initially higher GWG observed in exporting firms relative to non-exporters has gone down after the changes took place.
    Keywords: exporters; gender wage gap; globalization
    JEL: F10 F14 F16 J16
    Date: 2015–03
  21. By: Stefanescu, Razvan; Dumitriu, Ramona
    Abstract: This paper investigates the interactions among the Romanian industrial production, exports and imports after the adhesion to European Union. We employ monthly values testing for the Granger Causality between the variables in a Vector Autoregression framework. Our results indicate significant causalities among the variables, especially the one from the returns of exports to the returns of the industrial production index. We could consider these findings as an argument in favor of the Exports-Led Growth Hypothesis.
    Keywords: Industrial Production, Exports, Imports, Granger Causality
    JEL: F40 F43 F49 O40
    Date: 2014–12–22
  22. By: Mina, Wasseem; Jaeck, Louis
    Abstract: In this paper we empirically examine the impact of labor market flexibility on FDI flows to oil-rich GCC and compare it to middle income countries in 2006-2011. We account for potential endogeneity and nonstationarity and adopt system GMM and IV estimation methodologies. Our findings show that in middle income countries overall flexibility increases FDI flows under both system GMM and IV methodologies. In GCC countries overall LMF decreases FDI flows under system GMM methodology. Results also show a positive “GCC region” influence outweighing the negative flexibility influence. Growth potential and infrastructure development matter for both GCC and middle income countries.
    Keywords: Labor markets; FDI; GCC; Middle income countries; UAE
    JEL: F2 F21 J3 J32 J38 J5 J53 J58 J6 J65 J68
    Date: 2015–03–04
  23. By: Ghassan, Hassan B.; Alhajhoj, Hassan R.
    Abstract: The research aims to examine the relationship, whether complementary or substitutive, between inward FDI and gross domestic investment in the six GCC countries using cointegration techniques and fully modified GMM estimation. Based on the panel data during the period 1979-2010, the empirical evidence implies that in Qatar, Oman, the UAE and Saudi Arabia, the inward FDI has positive short-run and long-run effects on the domestic investment. For Bahrain, such a complementary relationship exists only in the short-run. For the majority of GCC countries, the long-run elasticities have large magnitude compared to the short-run counterparts, justifying more attraction policy of the IFDI in the future. The gap in the privatization process of public enterprises in the GCC explains in a large extent their heterogeneity in terms of elasticities and spillovers effects.
    Keywords: FDI, Domestic investment, GMM, Long-run, Elasticities, GCC.
    JEL: C5 C54 F2 F21
    Date: 2012–05
  24. By: Braun, Julia; Weichenrieder, Alfons
    Abstract: Since the mid-1990s, countries offering tax systems that facilitate international tax avoidance and evasion have been facing growing political pressure to comply with the internationally agreed standards of exchange of tax information. Using data of German investments in tax havens, we find evidence that the conclusion of a bilateral tax information exchange agreement (TIEA) is associated with fewer operations in tax havens and the number of German affiliates has on average decreased by 46% compared to a control group. This suggests that firms invest in tax havens not only for their low tax rates but also for the secrecy they offer.
    Keywords: tax havens,tax information exchange agreements,location decisions,international taxation
    JEL: F21 F23 H87
    Date: 2015
  25. By: IWAISAKO Tokuo; NAKATA Hayato
    Abstract: In the policy debate over the Japanese macroeconomic performance, the impact of exchange rate fluctuations on Japan's exports has received considerable attention. However, if we take the period from the end of 2008 following the collapse of Lehman Brothers as an example, the "price shock" of the yen's rapid appreciation and the "quantity shock" because of the rapid decline in global aggregate demand were equally responsible for the significant reduction in exports. We analyze this problem using a structural vector autoregression (VAR) model, assuming that there are two exogenous shocks, namely, a foreign demand shock and an exchange rate-specific shock. We evaluate the relative importance of each shock to Japanese aggregate exports. We further expand our VAR system to incorporate and analyze the impact of fluctuations in oil prices as additional exogenous shocks. In the second half of the paper, the relative importance of foreign demand shocks and exchange rate shocks during historic episodes of large exchange rate fluctuations are compared, including the mid-1980s with the high-yen recession after the Plaza Accord, the sharp yen appreciation in the mid-1990s, and the period of the "trade collapse" after the Lehman Brothers bankruptcy in the late 2000s.
    Date: 2015–03

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