nep-int New Economics Papers
on International Trade
Issue of 2016‒02‒29
38 papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. Does trade liberalization help to reduce gender inequality? A cross-country panel data analysis of wage gap By Nozomi Kimura
  2. Integrated Macroeconomic Production Function for Open Economies: A New Schumpeterian Solow Model for Globalization By Welfens, Paul J. J.
  3. Dynamics and performances in the international trade of Romania’s agri-food products, by the processing level By Rusali, Mirela-Adriana
  4. Structural Gravity with Dummies Only By Egger, Peter; Nigai, Sergey
  5. The effect of macroeconomic instability on FDI flows: A gravity estimation of the impact of regional integration in the case of Euro-Mediterranean agreements By CHENAF-NICET Dalila; ROUGIER Eric
  6. Impact of Asia-Pacific Economic Cooperation (APEC) to the contemporary economy By Agnieszka Drews
  7. India's trade linkage with South Africa: Prospects and future potential By Wani, Nassir Ul Haq; Rehman, Dr. Afzal Ur; Kukreja, Mukta
  8. Inventory control and intermediation in global supply chains By Qu, Zhan; Raff, Horst; Schmitt, Nicolas
  9. What Next for Multilateral Trade Talks? Quantifying the Role of Negotiation Modalities By Yvan Decreux; Lionel Fontagné
  10. The Effects of the ASEAN Economic Community 2015 on Industries in Kitakyushu and Shimonoseki By Ramstetter, Eric D.; Archanun, Kohpaiboon
  11. Trade, Migration, and the Place Premium: Mexico and the United States - Working Paper 396 By Davide Gandolfi, Timothy Halliday, and Raymond Robertson
  12. International Trade Risk and the Role of Banks By Niepmann, Friederike; Schmidt-Eisenlohr, Tim
  13. A selective review of foreign direct investment theories By Dinkar Nayak; Rahul N. Choudhury
  14. Determinants of trade: the role of innovation in presence of quality standards By Maria Cipollina; Federica Demaria; Filomena Pietrovito
  15. The great collapse in value added trade By Nagengast, Arne J.; Stehrer, Robert
  16. Heterogeneous immigrants and foreign direct investment: The role of language skills By Lücke, Matthias; Stöhr, Tobias
  17. Modern Trade Theory for CGE Modelling: the Armington, Krugman and Melitz Models By Dixon, Peter; Michael Jerie; Maureen Rimmer
  18. Proliferation of preferential trade agreements: an empirical analysis By Koumtingué, Nelnan
  19. Exporting, Education, and Wage Differentials between Foreign Multinationals and Local Plants in Indonesian and Malaysian Manufacturing By Ramstetter, Eric D.
  20. Identifying Foreign Suppliers in U.S. Merchandise Import Transactions By Kamal, Fariha; Krizan, C.J.; Monarch, Ryan
  21. Quality and the Great Trade Collapse By Chen, Natalie; Juvenal, Luciana
  22. An Empirical Analysis of Trade-Related Redistribution and the Political Viability of Free Trade By James Lake; Daniel L. Millimet
  23. The world trade data distortion and its contagious impact. A brief comment on the WTO “Made in the World” initiative By Georgescu, George
  24. Trade Competition, Technology and Labor Re-allocation By Bahar Baziki, Selva; Ginja, Rita; Borota Milicevic, Teodora
  25. Diversification through trade By Francesco Caselli; Miklos Koren; Milan Lisicky; Silvana Tenreyro
  26. Did export promotion help firms weather the crisis? By Konings, Jozef; Van Biesebroeck, Johannes; Volpe Martincus, Christian
  27. Global products price differential between countries in the context of European Union trade regulations. The case of e-commerce markets By Andrzej Pestkowski
  28. Infrastructure and trade: A gravity analysis for major trade categories using a new index of infrastructure By Donaubauer, Julian; Glas, Alexander; Nunnenkamp, Peter
  29. How global is FDI? Evidence from the analysis of Theil indices By Bickenbach, Frank; Liu, Wan-Hsin; Nunnenkamp, Peter
  30. Current Account and Real Exchange Rate Changes: The Impact of Trade Openness By Davide Romelli; Cristina Terra; Enrico Vasconcelos
  31. Offshoring and Sequential Production Chains: A General Equilibrium Analysis By Philipp Harms; Jaewon Jung; Oliver Lorz
  32. The heterogeneity of world trade collapses By van Bergeijk, P.A.G.
  33. The New Economic Case for Migration Restrictions: An Assessment By Clemens, Michael A.; Pritchett, Lant
  34. Lifting the US Crude Oil Export Ban: A Numerical Partial-Equilibrium Analysis By Lissy Langer; Daniel Huppmann; Franziska Holz
  35. A discrete time analysis of export duration in Kenya: 1995 -2014 By MAJUNE, Socrates
  36. China’s ‘New Normal’: Challenges Ahead for Asia-Pacific Trade By Aman Saggu; Witada Anukoonwattaka
  37. Population Diversity, Division of Labor and the Emergence of Trade and State By Emilio Depetris-Chauvin; Ömer Özak
  38. Have Global Value Chains Contributed to Global Imbalances? By Haltmaier, Jane

  1. By: Nozomi Kimura (Osaka School of International Public Policy, Osaka University)
    Abstract: This paper examines the relationship between trade openness and the gender wage gap using the wage data divided into six sectors and three different skill levels (high-, medium- and low-skill) in 19 developed countries from 1995 to 2005. We apply static and dynamic panel data models to investigate whether greater trade openness has affected the gender wage gap. The results from the fixed effects model indicate that trade openness decreases the wage gap between men and women in medium- and low-skill jobs, while the relationship between trade openness and the wage gap is insignificant in high-skill jobs. When the two-step difference generalized method of moments (GMM) is employed, trade openness is found to reduce the wage gap in medium-skill jobs, but its effect on the wage gap is insignificant in high- and low-skill jobs.
    Keywords: Trade and gender, wage gap, trade openness
    JEL: F16 J16
    Date: 2016–02
  2. By: Welfens, Paul J. J. (University of Wuppertal)
    Abstract: The macroeconomic production function is a traditional key element of modern macroeconomics, as is the more recent knowledge production function which explains knowledge/patents by certain input factors such as research, foreign direct investment or international technology spillovers. This study is a major contribution to innovation, trade, FDI and growth analysis, namely in the form of a combination of an empirically relevant knowledge production function for open economies – with both trade and inward FDI as well as outward foreign direct investment plus research input – with a macro production function. Plugging the open economy knowledge production function into a standard macroeconomic production function yields important new insights for many fields: The estimation of the production potential in an open economy, growth decomposition analysis in the context of economic globalization and the demand for labor as well as long run international output interdependency of big countries; and this includes a view at the asymmetric case of a simple two country world in which one country is at full employment while the other is facing underutilized capacities. Finally, there are crucial implications for the analysis of broad regional integration schemes such as TTIP or TPP and a more realistic and comprehensive empirical analysis.
    Keywords: potential output, innovation, knowledge production function, macroeconomics, globalization
    JEL: E23 F02
    Date: 2016–02
  3. By: Rusali, Mirela-Adriana
    Abstract: The research aims at analyzing the factors of export growth of Romania's agri-food products on the world market during the period 2001-2013. The analysis used statistics for Romania's foreign trade and world trade in nominal terms, by main groups of products aggregated by codes 01-24 of the Harmonised System. The results show changes in the structure of agri-food trade flows of import and export by processing degree, evolution of trade balance and structure of export growth, highlighting the comparative performance of pre-accession Romanian and post-accession.
    Keywords: Agri-food trade, processing sector, post-accession.
    JEL: F13 F17 Q17 Q18
    Date: 2015–11–20
  4. By: Egger, Peter; Nigai, Sergey
    Abstract: The measurement of trade costs and their effects on outcome is at the heart of a large quantitative literature in international economics. The majority of the recent significant contributions on the matter assumes that trade consists of a product of exporter-time-specific factors, importer-time-specific factors, and country-pair-time-specific trade costs, and that log trade costs are additively composed of a parameterized part and a residual part. We demonstrate that residual trade costs are relatively important and that the parameters on observable trade-cost measures as well as the structural country-time-specific variables or parameters are inevitably biased no matter of whether models are estimated by ordinary least-squares or by exponential-family models. The reason is that the country-specific variables are endogenous to the residual trade costs, regardless of whether they are captured by iteratively-solved structural terms or by country-time fixed effects. As a result, quantifications of effects of trade costs and comparative static results are also biased. Apart from diagnosing this problem, the paper provides remedies for it. All of the proposed remedies involve binary indicator variables (fixed effects) only, and they are nonlinear in both variables and parameters. We therefore dub these approaches as ones of a constrained analysis of variance (CANOVA) of bilateral exports or imports. We propose saturated as well as unsaturated versions of the CANOVA approach for both cross-section and panel data. The saturated approach uses up all degrees of freedom and estimates as many parameters as there are observations on bilateral exports or imports, providing an exact decomposition of bilateral trade into trade costs and country-specific parameters. The unsaturated approaches do not use up all degrees of freedom and estimate fewer parameters than there are observations on bilateral exports or imports, providing an approximate decomposition of bilateral trade into trade costs and country-specific parameters. We demonstrate that with panel data an unsaturated model with exporter-time, importer-time and country-pair effects works quite well relative to both the saturated model as well as models with parameterized trade-cost functions. The conclusions of the CANOVA models regarding the importance of trade costs for trade turn out to be substantially different from the ones implied by the conventional parameterized trade-cost-function models
    Keywords: fixed effects estimation; gravity models; panel econometrics; structural general equilibrium models
    JEL: C23 F14
    Date: 2015–02
  5. By: CHENAF-NICET Dalila; ROUGIER Eric
    Abstract: In order to diversify their risks, firms facing uncertainty in their domestic market may choose to increase their investment abroad by transferring production to more stable host economies. By estimating a gravity model of foreign direct investment (FDI) flows from Europe and the Mediterranean region to the four main recipients of FDI in the Middle East and North Africa (MENA) region from 1985 to 2009, this article tests (1) the extent to which FDI inflows are affected by macroeconomic volatility in the source country and (2) whether regional trade and investment agreements could have increased this FDI sensitivity to source country’s macroeconomic volatility. We find that the incidence of FDI between two countries increases with source GDP instability and with host GDP stability. Moreover, FDI to MENA countries tends to be countercyclical with respect to the source country’s business cycle. We also find that although FDI reactivity to host country’s uncertainty is not conditioned by North-South trade and investment agreements, it becomes negative for South-South regional integration. Last, we show that although the source country’s instability certainly matters when explaining bilateral FDI flows in our sample, its impact may be less important when investments are driven by cost differentials, that is, for vertical investment.
    Keywords: Output volatility, FDI, gravity model, source country instability, European Union, Middle East and North Africa, regional trade integration, bilateral investment treaties, horizontal FDI, vertical FDI
    JEL: F21 F43 F4
    Date: 2016
  6. By: Agnieszka Drews (Nicolaus Copernicus University, Poland)
    Abstract: Trade is one of the important aspects of economic policy in the contexts of the third wave of regionalism. It is proven by growing number of trading agreement between regions and what goes after, expansion of positive aspects of economic cooperation. The aim of this article is to describe liberalization of trade and its changes through the ages and also deep analysis of influence of APEC at world economy. In this document the secondary data analysis and review of available literature was used. Analysis let claim that regional integration groups, with APEC in between, have crucial influence at trade and foreign direct investment creation.
    Keywords: interregional trade agreements, trade liberalization, regionalism, APEC
    JEL: J51 F13 F42 N75 O11 O24
    Date: 2015–06
  7. By: Wani, Nassir Ul Haq; Rehman, Dr. Afzal Ur; Kukreja, Mukta
    Abstract: India and South Africa are the two important emerging economies of the world with strong history of understanding. To shed light on the possibilities and limits of important coalitions among budding countries, this article focuses on Indo-South Africa trade relations. The article evaluates the structure of comparative advantage for India and South Africa and the modification in the economic scenario over a 14-year period from 2001 to 2014. The article attempted to evaluate India– South Africa trade using revealed comparative advantage (RCA) and revealed import dependence (RID) analysis in exports and imports in different type of goods categorized on the basis of their fabrication. The analysis shows broad similarities in the structure of comparative advantage for India and South Africa. Both India and South Africa enjoy comparative advantage for labour and resource intensive sectors in the global market. India enjoys comparative advantage in the exports of labour-intensive items such as textiles and scale-intensive items while South Africa enjoys advantage in manufacturing goods. The trade growth trajectory expansion between the economies has lead to sustained growth in their merchandise trade flow.
    Keywords: India: South Africa: RCA: RID
    JEL: F14
    Date: 2016–01–26
  8. By: Qu, Zhan; Raff, Horst; Schmitt, Nicolas
    Abstract: The paper develops a simple theoretical model of inventory control in global supply chains. It identifies a role for intermediaries in managing inventory, and shows that inserting an intermediary as an additional link in a supply chain is profitable when demand volatility is high. It also provides conditions under which the intermediary handling inventory is located in the exporting versus the importing country. Trade liberalization in the form of less lumpy trade is shown to expand the role of export and import intermediaries but to have potentially negative effects on the volume of international trade and social welfare in the importing country.
    Keywords: international trade,supply chain,inventory,intermediation,lumpy trade
    JEL: F12 F23 L22
    Date: 2015
  9. By: Yvan Decreux (ITC (UNCTAD-WTO) - International Trade Center - WTO - UNCTAD); Lionel Fontagné (CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique, CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)
    Abstract: What are the lessons from the DDA from a forward looking point of view? A decade of negotiations is likely to go nowhere. This paper argues that absence of a landing-zone was in the data. Quantitative tools modelling the detail of the modalities predicted failure but were not taken seriously: the design of the negotiation implied that any achievements of the Round could only be limited. Such feebleness was induced by the way multilateral negotiations were organized – in separate groups, without much consideration for, or understanding of, how the different elements added up to more than the sum of the parts. We put sensible figures on that argument by using a dynamic computable general equilibrium model of the world economy, addressing exceptions, flexibilities as well as the non-linear design of the liberalization formulas, a reduction in domestic support, the phasing out of export subsidies in agriculture, as well as trade facilitation. Our conclusion is that negotiators have to go back to simplicity and re-bundle the topics if they wish to revamp multilateral negotiations.
    Keywords: Doha Development Round,Computable General Equilibrium Models,Trade facilitation
    Date: 2015
  10. By: Ramstetter, Eric D.; Archanun, Kohpaiboon
    Abstract: This paper asks how the formation of the Association of Southeast Asian Nations'(ASEAN's) Economic Community (AEC) in 2015 (AEC2015) will affect industries in Kitakyushu and Shimonoseki. First, ASEAN's rapid economic during the past five decades has made ASEAN a large market for Japanese goods, services, and firms. ASEAN has supported this growth by facilitating important economic and political dialogue in Southeast Asia and AEC2015 will likely reinforce this important role. Second, although ASEAN has made efforts to promote economic integration among member economies and AEC2015 is another step in this direction, substantial barriers to intra-ASEAN transactions remain and will persist after AEC2015. The ASEAN Free Trade Area (AFTA) was initiated in 1992 and facilitated elimination of tariffs on most intra-ASEAN trade by 2010, but the share of intra-ASEAN trade remains relatively low at about one-quarter of all ASEAN trade and has not changed much since 2005. Most importantly, like AFTA, AEC2015 is not likely to increase preferential margins for intra-ASEAN trade, largely because ASEAN retains strong comparative advantages with respect to major external trading partners and firms in ASEAN are deeply involved in region- or world-wide production networks. Third, despite proclamations that AEC2015 marks the advent of a "single" ASEAN market, progress toward achieving most of AEC2015's specific goals is likely to be slow, especially with respect to key non-tariff barriers and restrictions on trade in services. Fourth, Japan's multinational enterprises (MNEs) in ASEAN are likely to be the largest conduit through which AEC2015 affects Japan, Kitakyushu, and Shimonoseki. To the extent that AEC2015 affects Japan, Kitakyushu, and Shimonoseki, AEC2015 is likely to affect Japan's services' industries such as trading, logistics (trade, transportation, and communication), and business services, more than commonly appreciated. The proliferation of production networks in machinery industries, which are the source of most of Japan's gross exports, is a major reason for this.
    Keywords: Economic integration, ASEAN, Japan, Kitakyushu, Shimonoseki
    JEL: F15 F55 L60 L80 L90 O53
    Date: 2015–03
  11. By: Davide Gandolfi, Timothy Halliday, and Raymond Robertson
    Abstract: TLarge wage differences between countries (“place premiums”) are well documented. Theory suggests that factor price convergence should follow increased migration, capital flows, and commercial integration. All three have characterized the relationship between the United States and Mexico over the last 25 years. This paper evaluates the degree of wage convergence between these countries during the period 1988 and 2011. We match survey and census data from Mexico and the United States to estimate the change in wage differentials for observationally identical workers over time. We find very little evidence of convergence. What evidence we do find is most likely due to factors unrelated to US-Mexico integration. While migration and trade liberalization may reduce the US-Mexico wage differential, these effects are small when compared to the overall wage gap.
    Keywords: Migration, Labor-market Integration, Factor Price Equalization
    JEL: F15 F16 J31 F22
    Date: 2015–03
  12. By: Niepmann, Friederike (Board of Governors of the Federal Reserve System (U.S.)); Schmidt-Eisenlohr, Tim (Board of Governors of the Federal Reserve System (U.S.))
    Abstract: International trade exposes exporters and importers to substantial risks. To mitigate these risks, firms can buy special trade finance products from banks. This paper explores under which conditions and to what extent firms use these products. We find that letters of credit and documentary collections cover about 10 percent of U.S. exports and are preferred for larger transactions, indicating substantial fixed costs. Letters of credit are employed the most for exports to countries with intermediate contract enforcement. Compared to documentary collections, they are used for riskier destinations. We provide a model that rationalizes these empirical findings and discuss implications.
    Keywords: Trade finance; multinational banks; risk; letter of credit
    JEL: F21 F23 F34 G21
    Date: 2015–11–16
  13. By: Dinkar Nayak (MS University of Baroda); Rahul N. Choudhury (MS University of Baroda)
    Abstract: Several theories have been put forward by the researchers to explain foreign direct investment. However, no single theory fits the different types of direct investment or the investment made by a particular multinational corporation or country in any region. This paper traces the evolution of the theories of foreign direct investment (FDI) during the past few decades. An attempt is also made to explain the growth phenomenon of Third World multinational companies. The applicability of the theory differs with the type and origin of investment. Nevertheless, all these theories are unanimous in their view that a firm moves abroad to reap the benefits of the advantages in the form of location, firm-specific or internationalization of markets.
    Keywords: Foreign direct investment, internalization, MNCs, motivation, trade
    JEL: F21 F23 F36
    Date: 2014–04
  14. By: Maria Cipollina (UNIMOL - University of Molise [Campobasso] - University of Molise); Federica Demaria (MOISA - Marchés, Organisations, Institutions et Stratégies d'Acteurs - Institut national de la recherche agronomique (INRA) - Institut de recherche pour le développement [IRD] - CIRAD - Centre de coopération internationale en recherche agronomique pour le développement - IAMM); Filomena Pietrovito (UNIMOL - University of Molise [Campobasso] - University of Molise)
    Abstract: This paper analyses the role that quality standards and innovation play on trade volume, by using a gravity model. The role of innovative activity and quality standards in enhancing trade performance is widely accepted in the literature. However, in this paper, we argue that the net effect of quality standards on trade depends on the producers’ ability to innovate and comply with these requirements. In particular, by using a sample of 60 exporting countries and 57 importing countries, for a wide range of 26 manufacturing industries over the period 1995-2000, we show that the most innovative sectors are more likely to enhance the overall quality of exports, and then gain a competitive advantage. We also find that this effect depends on the level of technology intensity at sector-level and on the level of economic development of exporting country.
    Keywords: trade policies,non-tariff measures,innovation,trade flows,gravity model
    Date: 2015
  15. By: Nagengast, Arne J.; Stehrer, Robert
    Abstract: This paper studies the great collapse in value added trade using a structural decomposition analysis. We show that changes in vertical specialisation accounted for almost half of the great trade collapse, while the previous literature on gross trade has mainly focused on final expenditure, inventory adjustment and adverse credit supply conditions. The decline in international production sharing during the crisis may partially account for the observed decrease in global trade elasticities in recent years. Second, we find that the drop in the overall level of demand accounted for roughly a quarter of the decline in value added exports while just under one third was due to compositional changes in final demand. Finally, we demonstrate that the dichotomy between services and manufacturing sectors observed in gross exports during the great trade collapse is not apparent in value added trade data.
    Keywords: Great trade collapse,Vertical specialisation,Trade in value added,Input-output tables,Structural decomposition analysis
    JEL: F1 F2 C67 R15
    Date: 2015
  16. By: Lücke, Matthias; Stöhr, Tobias
    Abstract: We investigate the interplay of language skills and immigrant stocks in determining bilateral FDI out-stocks of OECD reporting countries. Applying a Poisson panel estimator to 2004-2011 data, we find a robust positive effect of bilateral immigrants on bilateral FDI - provided that residents of the two countries have few language skills in common. We find a similar effect for immigrants from third countries that speak the language(s) of the FDI host country, making them potential substitutes for bilateral migrants. Our findings suggest that immigrants facilitate outgoing FDI through their language skills, rather than through other characteristics like cultural familiarity.
    Keywords: migration,FDI,foreign languages,globalization
    JEL: F21 F22 O14
    Date: 2015
  17. By: Dixon, Peter; Michael Jerie; Maureen Rimmer
    Abstract: This paper is for CGE modelers and others interested in modern trade theory. The Armington specification of trade, assuming country-level product differentiation, has been central to CGE modelling for 40 years. Starting in the 1980s with Krugman and more recently Melitz, trade theorists have preferred specifications with firm-level product differentiation. We draw out the connections between the Armington, Krugman and Melitz models, deriving them as successively less restrictive special cases of an encompassing model. We then investigate optimality properties of the Melitz model, demonstrating that a Melitz general equilibrium is the solution to a global, cost-minimizing problem. This suggests that envelope theorems can be used in interpreting results from a Melitz model. Next we explain the Balistreri-Rutherford decomposition in which a Melitz general equilibrium model is broken into Melitz sectoral models combined with an Armington general equilibrium model. Balistreri and Rutherford see their decomposition as a basis of an iterative approach for solving Melitz general equilibrium models. We see it as a means for interpreting Melitz results as the outcome of an Armington simulation with additional shocks to productivity and preferences variables. With CGE modelers in mind, we report computational experience in solving a Melitz general equilibrium model using GEMPACK.
    Date: 2015
  18. By: Koumtingué, Nelnan
    Abstract: The creation of a preferential trade area (PTA) or the deepening of an existing one can affect adversely excluded countries and induce them to join or create a new PTA (Baldwin, 1993). One such adverse effect is trade diversion, the shift of imports from countries outside the preferential trade area toward member countries. This paper investigates empirically whether countries whose exports are more likely to suffer from trade diversion exhibit a higher likelihood of forming a PTA. I derive a measure of the potential of trade diversion from the trade complementarity index (Michaely (1962)) and estimate a dynamic Probit model of new PTAs formed between 1961 and 2005. The results show that countries facing a larger potential of trade diversion are more likely to form a PTA in the future. The results also support the natural trading partner hypothesis according to which preferential trade agreements are more likely to be formed among countries that are predisposed to trade a lot.
    Keywords: Preferential Trade Agreements, domino theory, trade diversion, trade complementarity index, Probit.
    JEL: C11 C25 F14 F15
    Date: 2010–10–01
  19. By: Ramstetter, Eric D.
    Abstract: There is now substantial evidence that foreign multinational enterprises (MNEs) often pay higher wages than corresponding local plants. This paper extends this research by asking whether MNE-local wage differentials depend on whether a plant exports or not. Mean, unconditional, MNE-local wage differentials tended to be somewhat smaller for exporters than for non-exporters in large samples of 11 manufacturing industries of Malaysia in 2000-2004 (31 vs. 44 percent) and Indonesia in 2006 (58 vs. 74 percent), and the gap was particularly conspicuous for Indonesia in 1996 (89 vs. 220 percent). Conditional MNE-local wage differentials that account for the influences of worker education and sex, as well as plant size and capital or energy intensity, on plant-level wages, were smaller but positive and highly significant statistically. Conditional differentials were also smaller for exporters Indonesia in 1996 (24 vs. 32 percent), but larger for exporters in Indonesia in 2006 (12 vs. 5.7 percent) and Malaysia in 2000-2004 (8.8-9.2 vs . 6.2-7.5 percent in pooled OLS estimates and 7.2-7.8 vs. 4.7-6.7 percent in random effects estimates). However, when estimated at the industry level, conditional differentials and were often insignificant, especially for Indonesia in 2006, and industry-level differentials were not clearly related to export status.
    Keywords: Multinationalcorporations, SoutheastAsia, manufacturing, wagedetermination
    JEL: F23 J31 L60 O53
    Date: 2014–03
  20. By: Kamal, Fariha (Center for Economic Studies, U.S. Census Bureau); Krizan, C.J. (Center for Economic Studies, U.S. Census Bureau); Monarch, Ryan (Board of Governors of the Federal Reserve System (U.S.))
    Abstract: International trade data capturing relationships between importing and exporting firm provides new insight into the activity of trading firms, but the quality of such disaggregated data is unknown. In this paper, we assess the reliability of two-sided data from the United States by comparing the number of foreign suppliers from U.S. import data to origin-country data. Such exporter counts tend to be lower than the same counts from raw U.S. data. We propose and implement a set of methods that align the totals more closely. Overall, our analysis presents broad support for usage of U.S. data to study buyer-supplier relationships.
    Keywords: International Trade; Transactional Relationships
    JEL: F10 L14
    Date: 2015–08–12
  21. By: Chen, Natalie; Juvenal, Luciana
    Abstract: We explore whether the global …nancial crisis has had heterogeneous e¤ects on traded goods di¤erentiated by quality. Combining a dataset of Argentinean …rm-level destination-speci…c wine exports with quality ratings, we show that higher quality exports grew faster before the crisis, but this trend reversed during the recession. Quantitatively, the e¤ect is large: up to nine percentage points di¤erence in trade performance can be explained by the quality composition of exports. This ‡ight from quality was triggered by a fall in aggregate demand, was more acute when households could substitute imports by domestic alternatives, and was stronger for smaller …rms’ exports.
    Keywords: Exports, heterogeneity, multi-product firms, quality, trade collapse, unit values, wine, Demand and Price Analysis, Industrial Organization, International Relations/Trade, F10, F14, F41,
    Date: 2015–11
  22. By: James Lake (Southern Methodist University); Daniel L. Millimet (Southern Methodist University)
    Abstract: Even if free trade creates net welfare gains for a country as a whole, the associated distributional implications can undermine the political viability of free trade. We show that trade-related redistribution -- as presently constituted -- modestly increases the political viability of free trade in the US. We do so by assessing the causal effect of expected redistribution associated with the US Trade Adjustment Assistance program on US Congressional voting behavior on eleven Free Trade Agreements (FTAs) between 2003 and 2011. We find that a one standard deviation increase in expected redistribution leads to an average increase in the probability of voting in favor of an FTA of 1.8 percentage points. Although this is a modest impact on average, we find significant heterogeneities; in particular, the effect is larger when a representative's constituents are more at risk or the representative faces greater re-election risk.
    Keywords: Free Trade Agreements, Trade Adjustment Assistance, Political Economy, Redistribution
    JEL: F13 H50 J65
    Date: 2014–05
  23. By: Georgescu, George
    Abstract: The accuracy of indicators used both in economic research and for designing most appropriate policy tools by the decision makers is of crucial importance. As speeding up the globalization process, the relevance of various indicators has been affected because of the lowering connection to the changes in the world economy, reflecting increasingly less the new global realities, even unto loosing any rational meaningful. This was the case of statistical distortions in international trade data arising from the double and sometimes multi-counted record of the value of cross-border goods and services (engaged on the so called „global value-added chains”) due to the worldwide magnitude of the international fragmentation of production. This comment cautions on the remained unsolved problems, that still distorts data, even more serious, hindering the policy makers to achieve an accurate perception of realities, despite the review of the BoP international methodology and the debates on the WTO „Made in the World” initiative.
    Keywords: Inward/Outward processing trade; Global value-added chain; BoP current account balance; statistical distortions; WTO
    JEL: C18 E01 F13 F33
    Date: 2016–02–10
  24. By: Bahar Baziki, Selva (Central Bank of the Republic of Turkey); Ginja, Rita (Department of Economics); Borota Milicevic, Teodora (Department of Economics)
    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, in the absence of strong pressures in import competition, 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 qualifiedd workers.
    Keywords: Wage Inequality; Employment Dynamic; Assortative Matching; Import Competition; Technological Change
    JEL: E24 F16 J31 J63 O33
    Date: 2015–12–26
  25. By: Francesco Caselli; Miklos Koren; Milan Lisicky; Silvana Tenreyro
    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: international trade; diversification; GDP
    JEL: E32 F0
    Date: 2015–08
  26. By: Konings, Jozef; Van Biesebroeck, Johannes; Volpe Martincus, Christian
    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: crisis; export performance; export promotion
    JEL: F1 L5
    Date: 2016–02
  27. By: Andrzej Pestkowski (Wroclaw University of Economics, Poland)
    Abstract: In the age of globalization, development of economic integration, trade liberalization, Internet and technological progress particularly in ways of distribution, we may expect that global homogeneous products will have equal price in the common currency on every market around the world. Despite the fact that in the modern world economy there is a high opportunity to make the law of one price work, in reality we can observe price differences between countries. This paper concerns the problem of that price differential with the aim of analysing its causes. The hypothesis assumes that the law of one price does not work as an absolute model. Therefore, the possible causes of global homogeneous products price differential between national markets are broadly understood transaction costs. Their major component are the costs of trade regulations towards third countries made by economic integrations such as EU. Research methodologies used in the paper focus on simplified cause and effect relationship analysis based on quantitative and qualitative variables. Selected mobile devices offered on national e-commerce markets were used as an example of modern homogenous global products distributed on close to the perfect competition market. The research is supported by information from wide range of academic and scientific publications in Polish and English about world trade economy, macroeconomics, international business and economic integration. The sources are complemented by detailed papers which concern the law of one price as well as empirical data. The conclusions prove that the law of one price does not apply to the examples used in the paper. The theory and my own research shows, according to the hypothesis, that trade regulations have significant impact on increasing the prices of the same global product on those regulated markets. Value Added Taxes and certifications of compliance of mobile devices with EU standards are the most substantial among trade regulations. It was also pointed out that pricing to market, fluctuation of exchange rates and direct costs such as transport, can also have influence on price differentials of homogenous global products between countries.
    Keywords: global product, e-commerce, price differentiation, the law of one price, EU regulations
    JEL: F10 F23 L63 L81 O24
    Date: 2015–06
  28. By: Donaubauer, Julian; Glas, Alexander; Nunnenkamp, Peter
    Abstract: Making use of considerably improved measures of infrastructure, we assess the impact of infrastructure on bilateral trade for a panel of 37 developed and emerging economies during the period 1995-2011. We find significant and non-linear effects of overall infrastructure and infrastructure in transportation, communication, energy, and finance on trade in consumption goods, capital goods, and intermediates. Our major findings prove to be robust to various modifications and extensions of the gravity model. Importantly, we still observe significant and non-linear effects of infrastructure on bilateral trade after accounting for potential reverse causality.
    Keywords: trade,infrastructure,transport,ICT,energy,finance
    JEL: F14 O18
    Date: 2015
  29. By: Bickenbach, Frank; Liu, Wan-Hsin; Nunnenkamp, Peter
    Abstract: It is open to question whether the intensified worldwide competition for FDI has reduced its traditionally strong concentration in a few large and relatively advanced host countries. We calculate and decompose Theil indices to track changes in absolute and relative concentration of FDI during the period 1970-2013. We find that both absolute and relative concentration decreased when excluding offshore financial centers from the overall sample. In addition to the narrowing gap between OECD and non-OECD countries, the concentration across non-OECD countries declined - for major subgroups and for both the absolute and relative measures. Finally, recent developments indicate that low-income countries are no longer at the losing end of the competition for FDI.
    Keywords: foreign direct investment,concentration,Theil decomposition
    JEL: F21
    Date: 2015
  30. By: Davide Romelli (Essec Business School, THEMA - Théorie économique, modélisation et applications - CNRS - Centre National de la Recherche Scientifique - Université de Cergy Pontoise); Cristina Terra (THEMA - Théorie économique, modélisation et applications - CNRS - Centre National de la Recherche Scientifique - Université de Cergy Pontoise, Essec Business School); Enrico Vasconcelos (Banco Central do Brasil)
    Abstract: This article investigates the impact of trade openness on the relationship between current account and real exchange rates, during episodes of sudden stops and of abrupt exchange rate depreciations. Using data for developed and emerging economies for the period 1970-2011, we nd that more open economies are associated with lower exchange rate depreciations during sudden stops. We also provide evidence that, during abrupt exchange rate depreciation episodes, economies that are more open to trade experience a larger change in current account and trade balance. In other words, our results indicate that improvements in current account and trade balance are accompanied by a smaller exchange rate depreciation in more open economies. These fi ndings are robust to di fferent measures of openness to trade and methodologies of identifying sudden stops and abrupt exchange rate depreciations.
    Keywords: trade openness, sudden stops, exchange rate depreciation
    Date: 2015–09–29
  31. By: Philipp Harms (Johannes Gutenberg University Mainz); Jaewon Jung (RWTH Aachen Universtiy); Oliver Lorz (RWTH Aachen Universtiy)
    Abstract: We present a two-region general equilibrium model in which ?rms exploit international wage differences by offshoring parts of the production process. Firms have to take into account that production steps follow a strict sequence and that transporting intermediate goods across borders is costly. We analyze how a change in transport costs and various properties of the production process affect the volume of offshoring, accounting for the general equilibrium effects of ?rms’ decisions. Interestingly, the in?uence of declining transport costs on the range of tasks offshored per ?rm may differ from the effect on the number of ?rms engaged in offshoring.
    Keywords: Offshoring, sequential production, global production chain, task trade.
    JEL: D24 F10 F23 L23
    Date: 2016–02
  32. By: van Bergeijk, P.A.G.
    Abstract: This paper analyses drivers of imports during the major world trade collapses of the Great Depression (1930s; 34 countries) and the Great Recession (1930s; 173 countries). The analysis deals with the first year of these episodes and develops a small empirical model that shows a significant impact of the development of GDP, the share of manufacturing goods in total imports and the political system. The analysis reveals substantial heterogeneity with respect to regional importance of these drivers.
    Keywords: trade collapse, heterogeneity, resilience, political system, Great Depression, Great Recession
    Date: 2015–03–24
  33. By: Clemens, Michael A. (Center for Global Development); Pritchett, Lant (Harvard Kennedy School)
    Abstract: For decades, migration economics has stressed the effects of migration restrictions on income distribution in the host country. Recently the literature has taken a new direction by estimating the costs of migration restrictions to global economic efficiency. In contrast, a new strand of research posits that migration restrictions could be not only desirably redistributive, but in fact globally efficient. This is the new economic case for migration restrictions. The case rests on the possibility that without tight restrictions on migration, migrants from poor countries could transmit low productivity ("A" or Total Factor Productivity) to rich countries – offsetting efficiency gains from the spatial reallocation of labor from low to high-productivity places. We provide a novel assessment, proposing a simple model of dynamically efficient migration under productivity transmission and calibrating it with new macro and micro data. In this model, the case for efficiency-enhancing migration barriers rests on three parameters: transmission, the degree to which origin-country total factor productivity is embodied in migrants; assimilation, the degree to which migrants' productivity determinants become like natives' over time in the host country; and congestion, the degree to which transmission and assimilation change at higher migrant stocks. On current evidence about the magnitudes of these parameters, dynamically efficient policy would not imply open borders but would imply relaxations on current restrictions. That is, the new efficiency case for some migration restrictions is empirically a case against the stringency of current restrictions.
    Keywords: immigration, migration, migrant, wages, impact, globalization, labor, GDP, productivity
    JEL: F22 J61 O11
    Date: 2016–02
  34. By: Lissy Langer; Daniel Huppmann; Franziska Holz
    Abstract: The upheaval in global crude oil markets and the boom in oil production from shale plays in North America have brought scrutiny on the export ban for crude oil in the United States. This paper examines the global flows and strategic refinery adjustments in a spatial, game-theoretic partial-equilibrium model. We consider de- tailed supply chain infrastructure with multiple crude oil qualities (supply), distinct oil products (demand), as well as specific refinery configurations and modes of transport (mid-stream). Investments in production capacity and infrastructure are endogenous. We compare two development pathways for the global oil market: one projection retaining the US export ban, and a counterfactual scenario lifting the export restrictions. Lifting the US crude ban, we find significant expansion of US sweet crude exports. In the US refinery sector, more heavy sour crude is imported and transformed. While US producers gain, the profits of US refiners decrease, due to reduced market distortions and a more efficient resource allocation. Countries importing US sweet crude benefit from higher product output, while avoiding costly refinery investments. Producers of heavy sour crude (e.g. the Middle East) are incentivised to climb up the value chain to defend their market share and maintain their dominant position.
    Keywords: energy system model, crude oil market, US crude export ban, refining capacity, infrastructure investment
    JEL: Q41 Q47 Q48 C61
    Date: 2016
  35. By: MAJUNE, Socrates
    Abstract: The scarcity of studies on export duration in Kenya provide the drive of this study. It looks at the determinants of export duration in Kenya in a discrete-time model. Using HS-6 digit export product-level data between Kenya and 203 partners two major results emerge. First, the median export period in Kenya is one year with only 36% of exports surviving past that period. Secondly, the main determinants of export survival in Kenya are: cost of infrastructure (liner shipping connectivity, air transportation network, cost of export and cost of starting a business), macroeconomic stability (GDP, exchange rates and financial inclusivity), improved governance, labour force, regional membership into East African Community, and membership to AGOA.
    Keywords: Export duration, Discrete time model, AGOA
    JEL: C35 C41 F14 F16
    Date: 2015–12–31
  36. By: Aman Saggu (United Nations Economic and Social Commission for Asia and the Pacific (ESCAP)); Witada Anukoonwattaka (United Nations Economic and Social Commission for Asia and the Pacific (ESCAP))
    Abstract: China has grown to become an economic powerhouse and engine of global demand. However, China’s projected GDP growth rates are now anticipated to remain below 7% per annum over the next five years. This issue of Trade Insights examines how the ‘new normal’ of lower economic growth in China will impact on the prospects for trade in the Asia-Pacific region. Compared to the hypothetical scenario that China’s economic growth returns to pre-crisis levels within the next five years (by 2019), forecasts show that China’s ‘new normal’ (7% p.a.) would lead to a slowdown in real total Asia-Pacific trade growth from 7.0% to 5.9% by 2019.
    Keywords: Economic growth, value-added, trade, economy
    JEL: F1
    Date: 2015–07
  37. By: Emilio Depetris-Chauvin (Universidad de los Andes); Ömer Özak (Southern Methodist University)
    Abstract: This research explores the emergence and prevalence of economic specialization and trade in pre-modern societies. It advances the hypothesis, and establishes empirically that population diversity had a positive causal effect on economic specialization and trade. Based on a novel ethnic level dataset combining geocoded ethnographic and genetic data, this research exploits the exogenous variation in population diversity generated by the ``Out-of-Africa'' migration of anatomically modern humans to causally establish the positive effect of population diversity on economic specialization and the emergence of trade-related institutions, which, in turn, facilitated the historical formation of states. Additionally, it provides suggestive evidence that regions historically inhabited by pre-modern societies with high levels of economic specialization have a larger occupational heterogeneity and are more developed today.
    Keywords: Economic Specialization, Division of Labor, Trade, State Formation, Population Diversity, Population Heterogeneity, Genetic Diversity, Diversity, Emergence of State, Persistence, Out of Africa.
    JEL: D74 F10 N47 O10 O17 Z10
    Date: 2015–10
  38. By: Haltmaier, Jane (Board of Governors of the Federal Reserve System (U.S.))
    Abstract: Global value chains (GVCs) have grown rapidly over the past several decades. Over the same period, the aggregate value of current account imbalances has risen substantially. This paper looks at whether these developments are related. While there is a sizable literature that has documented the rise of global production networks, there have been few attempts to assess the potential effect on global imbalances. The paper uses measures of GVCs developed in the literature in panel regressions to assess the effect on global imbalances over the period 1995-2011. It is argued that these variables should be entered as a product rather than individually and that they should be lagged, not contemporaneous with the change in current account balances. The results suggest that GVC position weighted by participation and trade share is negatively related to a country's current account balance, i.e., moving upstream in the production process is negative for a country's current account. However, the effects on global imbalances over the period studied appear to be small.
    Keywords: Global value chains; current account balances
    JEL: F1 F4
    Date: 2015–12–18

This nep-int issue is ©2016 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.