nep-int New Economics Papers
on International Trade
Issue of 2016‒01‒18
nineteen papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. Exporting firms and retail internationalization. Evidence from France By Angela Cheptea; Charlotte Emlinger; Karine Latouche
  2. Estimating the Impacts of FTA on Foreign Trade: An analysis of extensive and intensive trade margins for the Japan-Mexico FTA By KUNO Arata; URATA Shujiro; YOKOTA Kazuhiko
  3. Heckscher-Ohlin : evidence from virtual trade in value added By Rotunno, Lorenzo; Vezina, Pierre-Louis; Ito, Tadashi
  4. Wage and Employment Gains from Exports: Evidence from Developing Countries By Irene Brambilla; Nicolas Depetris Chauvin; Guido Porto
  5. The economic impact of the Russian import ban: A CGE analysis By Kutlina-Dimitrova, Zornitsa
  6. Net Comparative Advantage Index: Overcoming the Drawbacks of the Existing Indices By Andrey A. Gnidchenko; Vladimir A. Salnikov
  7. Geographical and Sectorial Concentration in Czech, Hungarian and Slovak exports By Karoly Attila Soos
  8. Learning or Leaning: Persistent and Transitory Spillovers from FDI By Ronald B. Davies; Michael J. Lamla; Marc Schiffbauer
  9. Working Paper: Everything you always wanted to know about Latvia's service exporters (but were afraid to ask) By Konstantins Benkovskis; Olegs Tkacevs
  10. Outward Foreign Direct Investments Patterns of Italian Firms in the EU ETS By Simone Borghesi; Chiara Franco; Giovanni Marin
  11. Trade, Finance and Endogenous Firm Heterogeneity By Alessandra Bonfiglioli; Rosario Crinò; Gino Gancia
  12. The Impact of Information and Communication Technology Adoption on Multinational Firm Boundary Decisions By Wenjie Chen; Fariha Kamal
  13. Did export promotion help firms weather the crisis ? By Johannes Van Biesebroeck; Jozef Konings; Christian Volpe Martincus
  14. The Multinational Wage Premium and Wage Dynamics By Gianluca Orefice; Nicholas Sly; Farid Toubal
  15. Trade Competition, Technology and Labor Re-allocation By Bahar Baziki, Selva; Ginja, Rita; Borota Milicevic, Teodora
  16. Monitoring competitiveness in the European Economic and Monetary Union By Volker Hallwirth
  17. Technical Change, Non-Tariff Barriers, and the Development of the Italian Locomotive Industry, 1850-1913 By Carlo Ciccarelli; Alessandro Nuvolari
  18. Competition and Gains from Trade: A Quantitative Analysis of China Between 1995 and 2004 By Wen-Tai Hsu; Yi Lu; Guiying Laura Wu
  19. On the Comparative Advantage of U.S. Manufacturing: Evidence from the Shale Gas Revolution By Arezki, Rabah; Fetzer, Thiemo

  1. By: Angela Cheptea; Charlotte Emlinger; Karine Latouche
    Abstract: This paper questions the impact of the globalization of the retail sector on the export activity of origin country agri-food firms. In a previous paper (Cheptea et al., 2015), we showed that the overseas expansion of a country’s retailers fostered its exports to foreign markets. This effect can be explained by a reduction in trade costs for retailers’ supplying firms in the origin country, or to a change in consumer preferences in the host country that benefits all origin country firms. In this paper, we evaluate which of the two mechanisms dominates. For that, we use an original firm-level database of French agri-food exports, identifying the domestic suppliers of French retailers through certification with the private IFS standard. We find that IFS certified French firms are more likely to export and export larger volumes than noncertified firms to markets where French retailers established outlets. We also show that when French retailers close down their activities in a market, IFS firms face a drop in exports to this market in the subsequent years. The results are robust to the use of different sets of firm- and country-specific fixed effects, are unaffected by possible selection and endogeneity biases, and by the presence in export markets of other retailers. The difference in behavior for certified and non-certified exporting firms on markets where French retailers operate confirms the trade cost advantage of retailers’ suppliers, which is lost when French retailers exit from the destination country.
    Keywords: multinational retailers, firm-level exports, private standards
    JEL: F12 F14 F23
    Date: 2015
  2. By: KUNO Arata; URATA Shujiro; YOKOTA Kazuhiko
    Abstract: This paper examines the impacts of the Japan-Mexico free trade agreement (JMXFTA), which was enacted in 2005, on Japanese exports to Mexico. The authors construct a theoretical trade model of heterogeneous firms, which is based on the Melitz-Chaney model, and derive a theoretical relationship of the impacts of tariff changes on extensive and intensive trade margins. Applying this model, the authors estimate the impacts of JMXFTA on product-level extensive and intensive margins of Japan's exports to Mexico by using the most detailed commodity trade data. The results show that the tariff reduction caused by JMXFTA increases intensive margins while no clear evidence is found on the effect on extensive margins. This indicates that in the short-run, the JMXFTA exerts more favorable effect on existing exporters than on new export market entrants.
    Date: 2016–01
  3. By: Rotunno, Lorenzo; Vezina, Pierre-Louis; Ito, Tadashi
    Abstract: The fragmentation of production chains across borders is one of the most distinctive feature of the last 30 years of globalization. Nonetheless, our understanding of its implications for trade theory and policy is only in its infancy. We suggest that trade in value added should follow theories of comparative advantage more closely than gross trade, as value-added flows capture where factors of production, e.g. skilled and unskilled labor, are used along the global value chain. We find empirical evidence that Heckscher-Ohlin theory does predict manufacturing trade in value-added, and it does so better than for gross shipment flows. While countries exports across a broad range of sectors, they contribute more value-added in techniques using their abundant factor intensively.
    Keywords: International trade, International economic relations, Econometric model, International division of labor, Heckscher-Ohlin, Value added, Trade theory, Global value chains
    JEL: F13
    Date: 2015–12
  4. By: Irene Brambilla; Nicolas Depetris Chauvin; Guido Porto
    Abstract: We study the relationship between exports, employment, and wages in developing countries using both firm and industry level data. The firm level data shows that on average exporters pay 31 percent higher wages than non-exporters. The data also reveals that exporting firms are on average much larger. We build a model that allows us to study the main mechanisms that explain the export premium. These are skilled labor utilization, technology sophistication, imported input use, and productivity. We find that, conditional on all the mechanisms, the wage export premium disappears completely. To establish causality we use firm-level panel data from Chile and instrument variables capturing exogenous export opportunities for firms. The estimations show that conditional on size, firms that export a higher share of their total sales utilize more skilled (and also highly-skilled) workers, and less unskilled workers. This implies that exporters need to perform skill intensive activities and tasks. We finally assess the argument that exporting per se may not necessarily lead to higher skill utilization and what matters is the destination of a firms' exports. We use a panel of industries and countries to establish whether the destination of a country's exports is relevant for skill utilization and to take this as evidence of a demand for high quality products in export markets. We find robust evidence that, worldwide, industries that ship products to high-income destinations do pay higher average wages. We also find that industries that ship products to high-income destination export higher quality goods and that the provision of quality is costly and require more intensive use of higher-wage skilled labor.
    Keywords: export wage premium;exports to high-income destination;skill utilization
    JEL: F13 F14 J23
    Date: 2015–12
  5. By: Kutlina-Dimitrova, Zornitsa (DG Trade)
    Abstract: The aim of this paper is to assess the economic impact of the Russian embargo from 7 August 2014 on certain agricultural food products from the EU, the USA, Norway, Canada and Australia. The effects of this economic sanction are analysed in the framework of a computable general equilibrium (CGE) model with a particular focus on bilateral and total exports, production and welfare. The detailed, based on real trade data, calibration of the model allows for an exact identification of the sectoral shares and prohibitive tariffs aggregated to match the CGE model’s sectoral level of aggregation. In addition, the paper carries on a validation exercise to compare the model’s predictions with real trade data developments. The modelling simulation results show that the impact of the ban on total exports of the EU, the USA, Norway, Canada and Australia are limited. Total extra-EU exports decline by merely 0.12%. Nevertheless at a disaggregate level there are sectors – ‘vegetables and fruits’, ‘other meat’ and ‘dairy products’ – which experience two digit percentage change declines.
    Keywords: International trade; Agri-food embargo; CGE modelling; Russia
    JEL: F13 F17 Q17
    Date: 2016–01–07
  6. By: Andrey A. Gnidchenko (National Research University Higher School of Economics); Vladimir A. Salnikov (National Research University Higher School of Economics)
    Abstract: In this paper, we examine a number of indices used for measuring comparative advantages of a country in international trade for a good and propose the new net comparative advantage index that has several strong features. First, it reflects net trade, and that’s why it is more theoretically grounded than indices calculated only from export data. Second, it is consistent with Kunimoto (1977) theoretical framework that is highly appreciated among trade economists. Third, it is not totally focused on a single commodity (that is, it takes world trade structure into consideration), unlike net export index. Fourth, it accounts for economic openness, using GDP as a scale variable. Fifth, it is hardly exposed to structural distortions. Finally, its sign is consistent with the sign of the net trade. We compare the new index with CEPII theoretically grounded econometric indicator and show that the proposed index has better empirical characteristics and is much easier to calculate and interpret.
    Keywords: international trade, comparative advantages, goods, indices, net trade
    JEL: F14
    Date: 2015
  7. By: Karoly Attila Soos (Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences)
    Abstract: Statistical data display a high level of sectorial and geographical concentration in the exports of three Central European new member states of the European Union: the Czech Republic, Hungary and Slovakia. All the three export huge quantities of the products of certain sectors of engineering industries, and the main destination of their exports are the partner countries in the European Union. In this article, we discuss these issues in a comparative perspective, including into the analysis some other Central–Eastern European (CEE) new EU member states and also some other (non-CEE) EU member states. With more thorough examination we find that both kinds of concentration (which are also interrelated) are at lower levels than it appears in foreign trade statistics, and still rather high in international comparison. Concentration has both positive and negative (dangerous) sides.
    Keywords: External trade, international value chains, clustering, industrial structure, European Union, Central–Eastern Europe, Hungary, Czech Republic, Slovakia, mechanical engineering, automotive industry
    JEL: F13 F15 F23 F43 H25 J24
    Date: 2015–09
  8. By: Ronald B. Davies (KOF Swiss Economic Institute, ETH Zurich, Switzerland); Michael J. Lamla (University of Essex, United Kingdom); Marc Schiffbauer (World Bank)
    Abstract: Using firm-level data for Jordan, we estimate the extent to which growth spillovers from foreign direct investment (FDI) to local firms stem from persistent learning ex- ternalities (i.e., they endure even after foreign investment leaves as knowledge has been transferred to local firms) or from transitory effects (e.g., demand increases which evap- orate following disinvestment). We find that they have a significant transitory nature, with employment and capital growth declining when FDI falls, particularly in down- stream industries supplied by locals. This suggests that if FDI-attracting policies are intended to promote sustainable growth, it may be more effective to attract and retain FDI via long-term structural policies, for instance, through low corporate tax rates rather than temporary tax holidays or through policies that strengthen the domestic absorptive capacity and linkages between foreign and local firms. It also suggests that FDI-led growth can increase a country's vulnerability to adverse global shocks in that the productivity gains of domestic firms will be partly reversed with the disinvestment of multinational firms.
    Keywords: FDI, Spillovers
    JEL: F23 F16
    Date: 2016–01
  9. By: Konstantins Benkovskis (Bank of Latvia); Olegs Tkacevs (Bank of Latvia)
    Abstract: We provide a set of stylised facts about Latvia's firms engaging in service exports, using detailed firm-level datasets for 2006–2013. We show that the fraction of firms involved in service exports is small, but the numbers of service exporters are on average bigger than of non-exporters and goods exporters. Service exporters also appear more productive than non-exporters and goods exporters, although this finding may be attributed mainly to innovative, knowledge-based sectors of the economy. We have also shown tentative evidence in favour of self-selection of productive firms in service exporting which warrants further investigation. The study suggests that it might be more difficult to enter the pool of service exporters than goods exporters, since the service market has historically been highly regulated in Latvia's major trading partners, and efforts necessary to become a service exporter are larger than those needed to become a goods exporter.In a nutshell, the study enhances understanding of the relationship between trade behaviour and performance of service providers; likewise, it presents insight into how service and goods exporters compare. It complements the existing sparse set of empirical firm-level studies on service trade with evidence of a small open euro area economy.
    Keywords: service trade, productivity, firm performance, micro data
    JEL: D22 F10 F14
    Date: 2015–12–30
  10. By: Simone Borghesi (University of Siena, Italy.); Chiara Franco (Catholic University of Sacred Heart, Milano, Italy.); Giovanni Marin (IRCrES-CNR, Milano, Italy.)
    Abstract: We consider the role played by the EU Emission Trading System (EU ETS) as a possible driver of outward Foreign Direct Investments (FDI henceforth). In particular, we aim at assessing whether EU ETS has any effect on outward FDI patterns of Italian firms. Using a novel panel dataset of about 59,000 firms covering the first two phases of the EU ETS and the pre-EU ETS period, we are able to observe the patterns of FDI by destination country of firms, distinguishing between those with plants covered by the EU ETS and other firms. Results show that, on average, firms in the EU ETS do not increase their presence in other countries. However, EU ETS firms operating in sectors particularly exposed to international competition increase their outward FDI towards countries not covered by the EU ETS.
    Keywords: EU ETS, FDI, carbon leakage
    JEL: F23 L23 Q50
    Date: 2016–01
  11. By: Alessandra Bonfiglioli; Rosario Crinò; Gino Gancia
    Abstract: We study how financial frictions affect firm-level heterogeneity and trade in a model where productivity differences across monopolistically competitive firms are endogenous and depend on investment decisions at the entry stage. By increasing entry costs, financial frictions soften competition and lower the value of investing in bigger projects with more dispersed outcomes. Hence, credit frictions make firms more homogeneous and hinder the volume of exports both along the intensive and the extensive margin. Export opportunities, instead, shift expected profits to the tail and increase the value of technological heterogeneity. We test these predictions using comparable measures of sale dispersion within 365 manufacturing industries in 119 countries, built from highly disaggregated US import data. Consistent with the model, financial development increases sale dispersion, especially in more financially vulnerable industries; sale dispersion is also increasing in measures of comparative advantage. These results are quantitatively important for explaining the effect of financial development and factor endowments on export sales.
    Keywords: financial development, firm heterogeneity, international trade
    JEL: F12 F16 E24
    Date: 2015–12
  12. By: Wenjie Chen; Fariha Kamal
    Abstract: This paper evaluates the effect of adopting internet-enabled information and communication technology (ICT) adoption on the decision to reorganize production across national borders (foreign boundary decision) by multinational enterprises (MNE). Using a transaction cost framework, we argue that ICT adoption influences foreign boundary decisions by lowering coordination costs both internally and externally for the firm. We propose that the heterogeneity in the technology’s characteristics, namely complexity and the production processes’ degree of codifiability, moderate this influence. Using a difference-in-differences methodology and exploiting the richness of confidential U.S. Census Bureau microdata, we find that overall ICT adoption is positively associated with greater likelihood of in-house production, as measured by increases in intra-firm trade shares. Furthermore, we find that more complex forms of ICT are associated with larger increases in intra-firm trade shares. Finally, our results indicate that MNEs in industries in which production specifications are more easily codified in an electronic format are less likely to engage in intra-firm relative to arms-length trade following ICT adoption.
    Date: 2016–01
  13. By: Johannes Van Biesebroeck (KU Leuven and CEPR); Jozef Konings (KU Leuven and CEPR, NBB); Christian Volpe Martincus (InterAmerican Development Bank)
    Abstract: In the global recession of 2009, exports declined precipitously in many countries. We illustrate with firm-level data for Belgium and Peru that the decline was very sudden and almost entirely due to lower export sales by existing exporters. After the recession, exports rebounded almost equally quickly and we evaluate whether export promotion programs were an effective tool aiding this recovery. We show that firms taking advantage of this type of support did better during the crisis, controlling flexibly for systematic differences between supported and control firms. The primary mechanism we identify is that supported firms are generally more likely to survive on the export market and, in particular, are more likely to continue exporting to countries hit by the financial crisis.
    Keywords: trade promotion, trade policy, Great Recession, business cycles
    JEL: F13 F14 F44
    Date: 2016–01
  14. By: Gianluca Orefice; Nicholas Sly; Farid Toubal
    Abstract: Using detailed administrative data linking French firms and workers over the years 2002-2007, we document a distinct U-shaped pattern in worker-level wages surrounding the time their employer is acquired by a foreign firm, with a dip in earnings observed in years just before domestic firms switch to MNE status. The dip in earnings is evident in both wages and in-kind payments given to workers. To guide our empirical approach, we present a simple model with fair wage considerations among workers and endogenous cross-border acquisition activity that predicts this U-shaped pattern, and characterizes the selection of domestic targets for acquisition by an MNE.
    Keywords: multinational enterprises;wage premium;in-kind payments;fair wages
    JEL: F14 F23
    Date: 2015–12
  15. By: Bahar Baziki, Selva (Central Bank of the Republic of Turkey); Ginja, Rita (Uppsala Center for Labor Studies); Borota Milicevic, Teodora (Uppsala Center for Labor Studies)
    Abstract: This paper studies the changes in labor allocation across firms and industries in response to changes in technology (captured by the adoption of information and communication technologies, ICT) and import competition, due to increased exposure to trade competition from China. We use detailed matched worker-firm data from the Swedish manufacturing sector. We provide new evidence on the mobility of heterogeneous workers across firms and document increased assortative matching of workers in ICT intensive industries. However, the sorting patterns are not uniform across industries within this group. The adoption of ICT along with stronger Chinese import competition results in a significant skill upgrade within high-wage firms. Incontrast,intheabsence of strong pressures in importcompetition, sorting occurs at the low end of the worker-firm distribution, i.e. low-skill workers allocate to low-wage firms. Industries with low ICT intensity do not exhibit any of these sorting patterns. We rationalize our empirical findings through a labor market matching model which is able to explain the increased assortative matching in ICT intensive industries through an increase in the relative demand for qualified workers.
    Keywords: Wage Inequality; Employment Dynamics; Assortative Matching; Import Competition; Technological Change
    JEL: E24 F16 J31 J63 O33
    Date: 2015–12–26
  16. By: Volker Hallwirth
    Abstract: The aim of the European Union's Macroeconomic Imbalance Procedure (MIP) is to prevent and correct macroeconomic imbalances before they get out of hand. The President's of the EU and Euro area institutions recommend in their report on "Completing Europe's Economic and Monetary Union" to strengthen this procedure. A euro area system of Competitiveness Authorities is recommended, which should "assess whether wages are evolving in line with productivity and compare with developments in other euro area countries and in the main comparable trading partners". Along these lines it is analysed in this Study how well MIP has worked in the past and how it could make a more effective contribution to preventing and correcting divergences in competitiveness.
    Date: 2015
  17. By: Carlo Ciccarelli; Alessandro Nuvolari
    Abstract: This paper examines the dynamics of technical change in the Italian locomotive industry in the period 1850-1913. From an historical point of view, this industry presents a major point of interest: it was one of the few relatively sophisticated "high-tech" sectors in which Italy, a latecomer country, was able to set foot firmly before 1913. Using technical data on the performance of different vintages of locomotives, we construct a new industry-level index of technical change. Our reassessment reveals the critical role played by non-tariff barriers for the emergence and consolidation of national manufacturers in this field.
    Date: 2014–02–12
  18. By: Wen-Tai Hsu (Singapore Management University); Yi Lu (National University of Singapore); Guiying Laura Wu (Nanyang Technological University)
    Abstract: This paper provides a quantitative analysis of gains from trade for China over the period of 1995-2004, which was when Chinas openness drastically improved. We decompose gains from trade in two ways. First, we disentangle pro-competitive effects from a traditional Ricardian effect. Second, we separate the effect due to tariff reductions from that due to reductions in non-tariff trade costs. Our quantitative analysis shows that the pro-competitive effects account for 25:4% of the total welfare gains from trade, whereas the allocative efficiency alone accounts for 22:3%. We also fi…nd that tariff reductions account for about 31:6% of reductions of overall trade costs, whereas the associated relative contribution to overall gains is slightly larger at 39:6%. In our multi-sector analysis, we …find that when a sectoral markup is higher in 1995, there tends to be a larger reduction in the respective sectoral trade cost between 1995 and 2004, a tendency that is generally welfare improving. One methodological advantage of this papers quantitative framework is that its application is not constrained by industrial or product classi…cations, and so it can be applied to countries of any size.
    Date: 2015–12
  19. By: Arezki, Rabah (International Monetary Fund); Fetzer, Thiemo (Department of Economics, University of Warwick)
    Abstract: This paper provides the first empirical evidence of the newly found comparative advantage of the United States manufacturing sector following the so-called shale gas revolution. The revolution has led to (very) large and persistent differences in the price of natural gas between the United States and the rest of the world owing to the physics of natural gas. Results show that U.S. manufacturing exports have grown by about 6 percent on account of their energy intensity since the onset of the shale revolution. We also document that the U.S. shale revolution is operating both at the intensive and extensive margins.
    JEL: Q33 O13 N52 R11
    Date: 2016

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