nep-int New Economics Papers
on International Trade
Issue of 2015‒08‒30
seventeen papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. Trade Facilitation and Country Size By Mohammad Amin; Jamal Ibrahim Haidar
  2. Export promotion and firm entry into and survival in export markets By Lederman,Daniel; Olarreaga,Marcelo; Zavala,Lucas
  3. Diversification through Trade By Caselli, Francesco; Koren, Miklós; Lisicky, Milan; Tenreyro, Silvana
  4. Ouverture commerciale et croissance économique en RD Congo : une analyse en équilibre général calculable By UMBA, Gilles
  5. Do Environmental Regulations Increase Bilateral Trade Flows? By Tsurumi, Tetsuya; Managi, Shunsuke; Hibiki, Akira
  6. Multilateral Trade Bargaining: A First Look at the GATT Bargaining Records By Kyle Bagwell; Robert W. Staiger; Ali Yurukoglu
  7. Imported Inputs in Indonesia’s Product Development By Lili Yan ING; Chandra Tri PUTRA
  8. Intra-regional trade and income inequality: Where do we stand? By Thi Hong Hanh Pham
  9. Singapore’s Participation in Global Value Chains: Perspectives of Trade in Value-Added By Mun-Heng TOH
  10. Understanding Agricultural Price Range Systems as Trade Restraints: Peru – Agricultural Products (DS457) By Kamal Saggi; Mark Wu
  11. The Similarity of Global Value Chains: A Network-Based Measure By Zhen Zhu; Greg Morrison; Michelangelo Puliga; Alessandro Chessa; Massimo Riccaboni
  12. Visa Policies, Networks and the Cliff at the Border By Simone BERTOLI; Jesús FERNÁNDEZ-HUERTAS MORAGA
  13. Together at Last: The Endogenous Formation of Free Trade Agreements and International R&D Networks By Tran, Tat Thanh; Zikos, Vasileios
  14. Estimating the Extensive Margin of Trade By Santos Silva, J.M.C; Tenreyro, Silvana; Wei, Kehai
  15. Who’s Getting Globalized? The Size and Implications of Intra-national Trade Costs By Atkin, David; Donaldson, Dave
  16. The impact of foreign firms on industrial productivity : evidence from Japan By Tanaka, Kiyoyasu
  17. Intrafirm Trade and Vertical Fragmentation in U.S. Multinational Corporations By Natalia Ramondo; Veronica Rappoport; Kim J. Ruhl

  1. By: Mohammad Amin; Jamal Ibrahim Haidar
    Abstract: It is argued that compared with large countries, small countries rely more on trade and therefore are more likely to adopt liberal trading policies. The present paper extends this idea beyond the conventional trade openness measures by analyzing the relationship between country size and the number of documents required to export and import, a measure of trade facilitation. Three important results follow. First, trade facilitation does improve as country size becomes smaller; that is, small countries perform better than large countries in terms of trade facilitation. Second, the relationship between country size and trade facilitation is nonlinear, much stronger for the relatively small than the large countries. Third, contrary to what existing studies might suggest, the relationship between country size and trade facilitation does not appear to be driven by the fact that small countries trade more as a proportion of their gross domestic product than the large countries.
  2. By: Lederman,Daniel; Olarreaga,Marcelo; Zavala,Lucas
    Abstract: Surveys of export promotion agencies suggest that that they tend to focus on helping firms become exporters as a means to stimulate aggregate export growth. But the existing empirical evidence has paid little attention to the role of export promotion agencies in helping entry into exporting. This paper fills this gap with a panel of exporting and non-exporting firms from seven Latin American countries during the period 2006-2010. The results suggest that export promotion encourages exports mainly by helping firms enter into and survive in export markets. The impact on the intensive margin of exporting firms is not robust. This finding is consistent with export promotion helping reduce fixed rather than variable costs of exporting, which is to be expected if export promotion agencies help correct for market failures associated with information externalities.
    Keywords: E-Business,Tax Law,Export Competitiveness,Microfinance,Airports and Air Services
    Date: 2015–08–19
  3. By: Caselli, Francesco; Koren, Miklós; Lisicky, Milan; Tenreyro, Silvana
    Abstract: A widely held view is that openness to international trade leads to higher GDP volatility, as trade increases specialization and hence exposure to sector-specific shocks. We revisit the common wisdom and argue that when country-wide shocks are important, openness to international trade can lower GDP volatility by reducing exposure to domestic shocks and allowing countries to diversify the sources of demand and supply across countries. Using a quantitative model of trade, we assess the importance of the two mechanisms (sectoral specialization and cross-country diversification) and provide a new answer to the question of whether and how international trade affects economic volatility.
    Keywords: diversification; trade; volatility
    Date: 2015–08
  4. By: UMBA, Gilles
    Abstract: This paper analyzes the effects of the trade openness on the economic growth in the Democratic Republic of Congo. The empirical analysis conducted diverged on the actual effects of such measures on the behavior of macroeconomic variables of a country. Most see similar policies a catalyst for growth while others see them as detrimental to production and competitiveness. In order to grasp the different effects of trade opening, this work considers an analysis in a framework of a standard dynamic general equilibrium from Decaluwé and Al. (2010) by simulating a gradual lowering of tariffs between 2015 and 2029. The simulations conducted however reveals a net negative effect on economic growth effects of trade opening. However, this negative impact could be absorbed by continued structural reforms to improve competitiveness and diversify the economy.
    Keywords: Openness; economic growth; general equilibrium models
    JEL: D58 F15 F43
    Date: 2013–06–29
  5. By: Tsurumi, Tetsuya; Managi, Shunsuke; Hibiki, Akira
    Abstract: The argument that stringent environmental regulations are generally thought to harm export flows is crucial when determining policy recommendations related to environmental preservation and international competitiveness. By using bilateral trade data, we examine the relationships between trade flows and various environmental stringency indices. Previous studies have used energy intensity, abatement cost intensity, and survey indices for regulations as proxies for the strictness of environmental policy. However, they have overlooked the indirect effect of environmental regulations on trade flows. If the strong version of the Porter hypothesis is confirmed, we need to consider the effect of environmental regulation on GDP, because GDP induced by environmental regulation affects trade flows. The present study clarifies the effects of regulation on trade flows by distinguishing between the indirect and direct effects. Our results indicate an observed non-negligible indirect effect of regulation, implying that the overall effect of appropriate regulation benefits trade flows.
    Keywords: Environmental regulations, Porter hypothesis, Trade and environment, Gravity model
    JEL: F18 Q56 Q59
    Date: 2015–08–28
  6. By: Kyle Bagwell; Robert W. Staiger; Ali Yurukoglu
    Abstract: This paper empirically examines recently declassified data from the GATT/WTO on tariff bargaining. We document eight stylized facts about these interconnected high-stakes international negotiations. We use detailed product-level offer and counteroffer data to examine several questions about trade policy, including whether preferential tariffs were a stumbling block towards liberalization, and whether the relaxation of bilateral reciprocity to multilateral reciprocity aided liberalization. We organize the empirical analysis around a theoretical model of multi-party trade negotiations motivated by the terms-of-trade theory and respecting the institutional features of most-favored-nation status and reciprocity.
    JEL: C78 D02 F13
    Date: 2015–08
  7. By: Lili Yan ING (Economic Research Institute for ASEAN and East Asia and University of Indonesia); Chandra Tri PUTRA (The Australian National University)
    Abstract: The paper argues that reductions in input tariffs will increase value added via product variety and quality. Using Indonesia’s firm and product level data from 2000 to 2010, the findings show that a reduction of one percent in input tariffs will increase value added by 0.2 percent, not only via its interaction with importing firms, but also with exporting firms that use imported products as their inputs. A onepercent reduction in input tariffs will increase product variety and quality by 3.5 percent and 1.5 percent, respectively. Exporting firms tend to have a higher value added than the average of all firms, and they also tend to have increased variety and higher quality of products. Foreign firms also tend to have a relatively higher value added than the general average, but they do not necessarily have increased product variety and higher quality.
    Keywords: : Indonesia, tariff, imported input, product variety, product quality
    JEL: F12 F13 L16 O14 O19 O24
    Date: 2015–08
  8. By: Thi Hong Hanh Pham (LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - UN - Université de Nantes)
    Abstract: This paper assesses the link between intra-regional trade and within income inequality. To do so, we use a data sample of nineteen countries in the Asia-Pacific region - one of the most dynamic economic regions. Differing from the existing empirical literature, we employ the gravity model to explain income inequality in function of bilateral trade variables. We find that intra-regional exports can narrow within-country income inequalities, while the opposite tends to be true for intra-regional imports. Moreover, the creation effect of exports on income inequality seems to be dominated by the diversion effect of imports. Our finding also supports the hump-shaped relationship between per capita GDP and within-country income inequality described by the Kuznets curve.
    Date: 2014–11–25
  9. By: Mun-Heng TOH (National University of Singapore)
    Abstract: This paper reviews the cluster-based development strategy adopted in Singapore. That strategy has enabled Singapore to be plugged into global value chains (GVAs) to benefit from inflows of foreign investment and participation in international trade. The OECD-WTO Trade in Value-Added (TiVA) database was made public recently and has been mostly used in studies relating to trade policies and GVCs. This paper makes use of information and indicators of GVC participation from the TiVA database with specific reference to Singapore. New concepts and the implications of trade in value-added are appraised to provide new perspectives of, and prospects for, continued sustainable growth of Singapore’s economy.
    Keywords: global value chain, trade in value-added, cluster development, agglomeration, foreign direct investment
    JEL: F14 F24 O19 O24
    Date: 2015–07
  10. By: Kamal Saggi (Vanderbilt University); Mark Wu (Harvard University)
    Abstract: An agricultural price range system (PRS) aims to stabilize local prices in an open economy via the use of import duties that vary with international prices. The policy is inherently distortionary and welfare-reducing for a small open economy, at least according to the canonical economic model. We offer an explanation for why a government concerned with national welfare may nevertheless implement such a policy when faced with risk aversion and imperfect insurance markets. We also highlight open questions arising out of the Peru – Agricultural Products dispute for the WTO's Appellate Body to address in order to clarify how a PRS consistent with WTO rules could be designed. Finally, we discuss the possibility that a WTO member might resort to a free trade agreement (FTA) to preserve its flexibility to implement a PRS and how an FTA provision of this sort ought to be treated in WTO litigation.
    Keywords: Price range systems, variable duties, WTO, dispute, welfare
    JEL: F1 K0
    Date: 2015–08–18
  11. By: Zhen Zhu; Greg Morrison; Michelangelo Puliga; Alessandro Chessa; Massimo Riccaboni
    Abstract: International trade has been increasingly organized in the form of global value chains (GVCs) where different stages of production are located in different countries. This recent phenomenon has substantial consequences for both trade policy design at the national or regional level and business decision making at the firm level. In this paper, we provide a new method for comparing GVCs across countries and over time. First, we use the World Input-Output Database (WIOD) to construct both the upstream and downstream global value networks, where the nodes are individual sectors in different countries and the links are the value-added contribution relationships. Second, we introduce a network-based measure of node similarity to compare the GVCs between any pair of countries for each sector and each year available in the WIOD. Our network-based similarity is a better measure for node comparison than the existing ones because it takes into account all the direct and indirect relationships between country-sector pairs, is applicable to both directed and weighted networks with self-loops, and takes into account externally defined node attributes. As a result, our measure of similarity reveals the most intensive interactions among the GVCs across countries and over time. From 1995 to 2011, the average similarity between sectors and countries have clear increasing trends, which are temporarily interrupted by the recent economic crisis. This measure of the similarity of GVCs provides quantitative answers to important questions about dependency, sustainability, risk, and competition in the global production system.
    Date: 2015–08
  12. By: Simone BERTOLI (CERDI - Centre d'études et de recherches sur le developpement international - CNRS - Université d'Auvergne - Clermont-Ferrand I); Jesús FERNÁNDEZ-HUERTAS MORAGA (Universidad Autonoma de Madrid [Madrid]] Universidad Autonoma de Madrid [Madrid - Universidad Autónoma de Madrid - Universidad Autónoma de Madrid)
    Abstract: The scale of international migration flows depends on moving costs that are, in turn, influenced by host-country policies and by the size of migrant networks at destination. This paper estimates the influence of visa policies and networks upon bilateral migration flows to multiple destinations. We rely on a Poisson pseudo-maximum likelihood estimator to derive estimates that are consistent under more general distributional assumptions on the underlying RUM model than the ones commonly adopted in the literature. We derive bounds for the estimated direct and indirect effects of visa policies and networks that reflect the uncertainty connected to the use of aggregate data, and we show that bilateral migration flows can be highly sensitive to the immigration policies set by other destination countries, an externality that we are able to quantify.
    Date: 2015–01–05
  13. By: Tran, Tat Thanh; Zikos, Vasileios
    Abstract: We study how free trade agreements between countries and international R&D networks between firms emerge endogenously. The government of each country can initiate bilateral free trade agreements to abolish the import tariffs of other countries. Firms can decide whether and with whom to form R&D collaborations. We build a new model of double-layer networks where the network of free trade agreements is formed in the first layer, and the R&D network is formed in the second layer. Consistently with the stylized facts, we find that free trade agreements can promote international R&D collaboration between firms. Private incentives to form free trade agreements are aligned with societal ones. For R&D networks, by contrast, we identify a conflict between private and social incentives.
    Keywords: Free trade agreements, R&D collaboration, tariffs, innovation.
    JEL: D85 F10 L13 L20 O31
    Date: 2014–11–20
  14. By: Santos Silva, J.M.C; Tenreyro, Silvana; Wei, Kehai
    Abstract: Understanding and quantifying the determinants of the number of sectors or firms exporting in a given country is of relevance for the assessment of trade policies. Estimation of models for the number of sectors, however, poses a challenge because the dependent variable has both a lower and an upper bound, implying that the partial effects of the explanatory variables on the conditional mean of the dependent variable cannot be constant and must approach zero as the conditional mean approaches its bounds. We argue that ignoring these bounds can lead to erroneous conclusions due to the model's mispecification, and propose a flexible specification that accounts for the doubly-bounded nature of the dependent variable. We empirically investigate the problem and the proposed solution, finding significant differences between estimates obtained with the proposed estimator and those obtained with standard approaches.
    Keywords: bounded data; extensive margin of trade; number of sectors
    JEL: C13 C25 F11 F14
    Date: 2015–08
  15. By: Atkin, David; Donaldson, Dave
    Abstract: How large are the intra-national trade costs that separate consumers in remote locations of developing countries from global markets? What do those barriers imply for the intra-national incidence of the gains from falling international trade barriers? We develop a new methodology for answering these questions and apply it to newly collected CPI micro-data from Ethiopia and Nigeria (as well as to the US). In order to overcome three well-known challenges that arise when using price gaps to estimate trade costs, we: (i) work exclusively with a sample of goods that are identified at the barcode-level (to mitigate bias due to unobserved quality differences over space); (ii) collect novel data on the origin location of each product in our sample (to focus only on the pairs of locations that actually identify trade costs); and (iii) use estimates of cost pass-through to correct for mark-ups that potentially vary over space (to extract trade costs from price variation in an environment with potentially oligopolistic intermediaries). Without these corrections, we find that our estimates of the cost of distance would be biased downwards by a factor of approximately four. Our preferred estimates imply that the effect of log distance on trade costs within Ethiopia or Nigeria is four to five times larger than in the US. We also use our pass-through estimates to calculate the incidence of surplus increases due to falling world prices. We find that intermediaries capture the majority of the surplus, and that their share is even higher in distant locations, suggesting that remote consumers see only a small part of the gains from falling international trade barriers.
    JEL: F1 O1 R4
    Date: 2015–08
  16. By: Tanaka, Kiyoyasu
    Abstract: With a newly constructed dataset on foreign firms in Japan for the period 1995-2008 from firm-level surveys, this paper estimates the impact of foreign firms on industrial productivity at the regional level. A Bayesian-model averaging approach is taken to account for model uncertainty resulting from various linkages between foreign firms and domestic industries. The results show that the foreign firms may contribute to industrial efficiency directly through their above-average productivity and indirectly through positive spillovers in intra-industry and local backward linkages. Forward linkages with foreign firms may have a negative impact on industrial productivity. However, these impacts depend on the nationality and entry mode of foreign investors. Aggregating foreign firms may mask their distinctive impacts on productivity.
    Keywords: Japan, Foreign Affiliated Firm, Productivity, Econometric Model, Foreign Firm, Industrial Productivity, Bayesian Model Averaging
    JEL: C11 F21 F23
    Date: 2015–08
  17. By: Natalia Ramondo; Veronica Rappoport; Kim J. Ruhl
    Abstract: Using firm-level data, we document two new facts regarding intrafirm trade and the activities of the foreign affiliates of U.S. multinational corporations. First, intrafirm trade is concentrated among a small number of large affiliates within large multinational corporations; the median affiliate ships nothing to the rest of the corporation. Second, we find that the input-output coefficient linking the parent’s and affiliate’s industries of operation—a characteristic commonly associated with production fragmentation— is not related to a corresponding intrafirm flow of goods.
    JEL: F0
    Date: 2015–08

This nep-int issue is ©2015 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.