Factor Heterogeneity,Factor Market Imperfection and Trade

This paper develops a tractable model of examining how factor heterogeneity and imperfect factor market interact for determining a pattern of trade. Institution plays a crucial role for the interaction. In my work, firm productivity is defined as a composition of factor productivity and technology. Thus, input selection should affect the pattern of Melitz’s intra-industry allocation due to the incurring transaction cost. For a simple model, I assume two factors (labor and capital) and two sectors, which are relatively less institution-dependent and relatively more institution-dependent. When the economy is open, effect of the transaction cost on income distribution is more drastic for an institutionally underdeveloped country. Depending on institutional quality, the economic openness reallocates resource across countries through job creation or job destruction. The job turnovers redistribute income between heterogeneous labors within countries. The income redistribution is catalyzed by international mobility of capital. As a result, income disparity is widened between the institutionally developed country and the institutionally underdeveloped country. This paper can contribute to the literature of institution and international trade.     

Can country trade flows benefit from improved corporate social responsibility ratings?

We set out in this study to examine the effects of country ‘corporate social responsibility’ (CSR) ratings on the international trade flows of 28 countries. Drawing on categorization theory, we examine whether country CSR engagement is a categorizing factor capable of influencing the overall process of categorization. Based upon a two-stage approach, comprising of gravity and panel Tobit models, we find that a country's CSR rating has significantly positive effects on the country's international trade flows. When the CSR rating of a country is higher than that of another rival trading country, this will have significantly positive effects on the bilateral trade flows between the two countries.     

Arms production,national defense spending and arms trade: Examining supply and demand

Scholars have estimated demand functions for national defense spending and investigated international arms trade for a long time. The relationship between supply and demand for military goods has, however, only been examined on aggregate level or in formal models yet. I investigate how the supply of military goods by arms-producing companies and the demand for military goods by both the national government and foreign governments are related by using a panel of up to 195 arms-producing companies in 21 countries for the period 2002–2016. The results show that if the demand for national defense spending increases by 1%, the arms sales by a country’s largest arms-producing companies increase by up to 1.2%. If exports of major conventional weapons increase by 1%, sales increase by up to 0.2%. Arms imports do not affect domestic arms sales because imported and domestically produced arms are complements, and countries mainly import those arms they do not produce themselves. Country-specific estimation results suggest that differences among countries in geopolitical conditions and international relations determine whether a country’s arms industry serves economic rather than security purposes.     

Productive Capacity, Product Varieties, and the Elasticities Approach to the Trade Balance

Most macroeconomic models imply that faster income growth tends either to lower a country’s trade balance by raising its imports with little change to its exports or to reduce its terms of trade in order to maintain balanced trade. Krugman (1989 ) proposed a model in which countries grow by producing new varieties of goods. In his model, faster‐growing countries are able to export these new goods and maintain balanced trade without suffering any deterioration in their terms of trade. This paper analyzes the growth of US imports from different source countries and finds strong support for Krugman’s model.     

Trade partner diversification and growth: How trade links matter

We analyze the effects of a country’s export connections on its income growth using trade partner diversification (TPD) measures that capture the country’s relative importance in the international trade network. On top of the standard trade openness measures, TPD measures are shown to enter growth regressions positively and significantly, where one standard deviation increase in TPD is associated with a 1–1.5 percentage point increase in the annual growth rate. Threshold analyses show that TPD measures are positively and significantly correlated with growth in countries that have low financial depth, high inflation, low levels of human capital, or high trade openness.     

Trade in intermediate inputs,customs unions,and global free trade

In a three‐country customs union (CU) formation game, I introduce international trade in intermediate inputs and rules of origin (RoO) restrictions. In the case of symmetric countries, I show that as countries become more involved in global supply chains, global free trade is less likely to be a stable equilibrium outcome. RoO can help solve this problem. In the case of asymmetry, depending on the degree of the globalization, free riding (for high degree) or exclusion motive (for low degree) prevents global free trade. Correspondingly, I show that RoO can have helpful or detrimental effects on attaining global free trade.     

PROFIT TAX AND FIRM MOBILITY IN A THREE‐COUNTRY MODEL

We construct a three‐country model that incorporates international relocation by imperfectly competitive firms and examine both the effects of each country's profit tax reduction on the consumption and welfare of all countries, and the incentive for the countries to decrease the profit tax. In such a model, both the terms of trade and international relocation of firms offer the key to understanding the impacts of one country's profit tax policy. In particular, we note that the relocation of firms from the other two countries is positively related to the wage incomes of the third country through a shift in labour demand, and the terms‐of‐trade improvement is not only positively related to the wage incomes, but also negatively related to profit incomes through a shift in world consumption demand. We show that (i) in a three‐country world economy, regardless of the reduction's source, the profit tax reduction of each country leads to relocation of firms away from foreign countries toward its own economy and deteriorates the terms of trade of its economy and (ii) this becomes a ‘beggar‐thy‐neighbour’ policy in the sense that it lowers the welfare of the other foreign countries.     

Is Trade Good for Your Health?*

We use a panel of 219 countries to examine the relationship between a country’s openness to international trade and several health outcomes and find that, in general, increased openness is associated with lower rates of infant mortality and higher life expectancies, especially in developing countries. We find evidence suggesting that some of the positive correlation between trade and health can be attributed to knowledge spillovers. In addition, openness is associated with sound economic policies which themselves are related to better health outcomes.     

Trade agreements, bargaining and economic growth

Rebelo’s two-sector endogenous growth model is embedded within a two-country international trade framework. The two countries bargain over a trade agreement that specifies: (i) the size of the foreign aid that the richer country gives to the poorer one; (ii) the terms of the international trade that takes place after the aid is given. Foreign aid is given not because of generosity, but because it improves the capital allocation across the world and thus raises total world production. This world production surplus enables the rich country to raise its equilibrium consumption and welfare beyond their no-aid levels. To ensure it, the rich country uses a trade agreement to condition the aid on favorable terms of trade.     

Estimating the impact of country‐level policy restrictions on services trade

Standard techniques used to estimate gravity equations, rely on bilateral variation to identify the effect of trade barriers on bilateral trade flows. In this paper, I develop a method that estimates the effects of country‐level variables on trade between countries in the presence of firm heterogeneity and country selection into trade, a natural extension of existing empirical models of international trade. I implement the method in services data, where available measures of trade policy provide information on the average level of regulations restricting entry into a country. The results suggest that policy barriers are important determinants of services trade flows.     

The importance of the Logistics Performance Index in international trade

Logistics and transport increasingly play a pivotal role in international trade relations. The Logistics Performance Index (LPI) analyses differences between countries in terms of customs procedures, logistics costs and the quality of the infrastructure for overland and maritime transport. The aim of this article is to analyse the impact that each of these components has on trade in emerging economies using a gravity model. Furthermore, the study also attempts to detect possible advances in logistics in developing countries, which are grouped into five regions (Africa, South America, Far East, Middle East and Eastern Europe) by comparing the first LPI data published in 2007 with the most recent data, released in 2012. The results obtained reveal that improvements in any of the components of the LPI can lead to significant growth in a country’s trade flows. Specifically, LPI components are becoming increasingly important for international trade in many countries in Africa, South America and Eastern Europe.     

Competing-destinations gravity model applied to trade in intermediate goods

The competing-destinations formulation of the gravity model ensues from the fact that unlike the classic version, this approach explicitly acknowledges the interdependence of the flows between a set of alternative countries. This article applies the competing-destinations gravity model to the analysis of trade in intermediate goods. The results of the model were then tested empirically with an international input–output data set and using the Poisson pseudo-maximum-likelihood estimator. The empirical results suggest that the analytical model can explain trade in intermediate goods. Indeed, as predicted, import of intermediate goods is increasing in the importing country’s demand for inputs, in the competitiveness of the exporting country, and decreasing in distance and competition posed by alternative countries.     

Preferences,Country Bias,and International Trade

The paper analyzes international trade in a Ricardian world where consumer preferences exhibit country bias. In particular, consumers differentiate between identical physical goods by country of manufacture. In contrast to the classical Ricardian model, the pattern of international specialization in production depends on the preference structure. Possible equilibrium configurations include ones where both countries specialize incompletely and trade in both commodities, as well as situations where the pattern of specialization and trade is the reverse of that in the classical Ricardian world. Both interindustry and intraindustry trade can occur simultaneously, though there are no market imperfections or scale economies.     

International supply chains and trade agreements

There is a growing literature that examines the role of trade agreements on the formation of international supply chains. The evidence indicates that in general countries that share trade agreements are more likely to develope cross-border supply chains. In this analysis, we argue that in order to examine the effects of trade agreements on the formation of supply chains between two countries, it is not enough to analyse the impact of the trade agreements that the two countries share but it is also important to assess the impact of the trade agreements that they share with third countries. Using data on trade in value added for 129 countries, we show empirically that about 40% of the potential increase in trade in value added induced by a trade agreement between an importing country and a sourcing partner is wiped out by each additional trade agreement signed by the importing country with third nations in which the sourcing partner is not a member. The result has important implications for regions seeking to develop international supply chains but in which the process of integration is highly fragmented.     

Global Production Networks and the Private Organization of World Trade

As John R. Commons understood, the role of the firm in providing employment and income distribution is a form of public power (Munkirs and Knoedler 1987). This public power of firms is supported by the laws of the state, which protect private property and enforce market transactions. The Global Production Network (GPN) is a new form of the firm, influenced by information technology to lower “transaction costs” (Coase 1937), as well as international trade regimes, such as the Washington Consensus to improve the ease of world trade and investment. The GPN is globe-scanning, yet private and able to shape the economies and policies of countries. Under the banner of branded products, the lead firm in a supply chain exercises considerable power over subsidiaries, contractors, workers, communities, and countries. By influencing trade relations, GPNs also influence international finance, foreign currency reserves and exchange rates, as well as trade deficits and “race to the bottom” of taxes and environmental protection. Drawing on interdisciplinary research, this topic benefits from an alliance of sociology, business, history, law, and international as well as institutional economics in the AFEE tradition. I draw on the work of leading scholars in the field (Antras 2016; Baldwin 2016; Gereffi 2013; Milberg and Winkler 2013) and analyze the implications for the world trade system, as well as the ongoing political resistance to globalization. These GPNs are no longer “of” their country of origin (Tyson vs. Reich).     

Fragmentation, Engel's Law, and Learning

This paper outlines the conditions under which trade is beneficial for a developing country's growth. A developing country suffers from two disadvantages: low income and a comparative disadvantage in the production of modern manufactured goods—goods which allow a high rate of human capital accumulation through learning by doing. Low income together with Engel's law imply that developing countries consume and produce very few modern goods in autarky and hence grow slowly. With international fragmentation of production, a developing country may find comparative advantage in the production of some stages of modern goods despite an absence of comparative advantage in the production of modern goods under “100% local content.” More resources can then be allocated to the modern goods sector leading to greater learning externalities and hence growth under free trade than in autarky.     

国际生产分割的生产率效应

国际生产分割对参与国的生产率产生了重要影响。本文使用符合中国特点的生产分割指标考察了中国参与国际生产分割对于工业行业生产率的影响。研究结果表明:中国参与生产分割有利于生产率的提高;非加工贸易形式的生产分割对生产率的提升作用要高于加工贸易形式的生产分割;生产分割提高生产率的效果对不同行业是不同的,中低技术行业最为明显,其次是高技术行业,最低为初级产品、劳动和资源密集部门;从发达国家承接的生产分割对生产率的提升作用要大于从非发达国家承接的生产分割。     

China’s rise,asymmetric trade shocks and exchange rate regimes

China’s rapid growth provides a natural experiment to study the effects of asymmetric trade shocks on the competitiveness of OECD countries. The different levels of exposure to Chinese trade competition, as measured using an index of export similarity, triggered asymmetric shocks as China’s trade surged. Motivated by a Ricardian framework, this paper finds that countries with exports similar to those of China experience a loss in competitiveness compared with countries with a different trade structure. Once an additional layer of distinction is introduced between fixed and flexible exchange rate regimes, I find that countries with a fixed exchange rate and with relatively high similarity to China experience a real appreciation.     

Cournot competition,intra-industry trade,and nonconstancy of marginal costs: A three-country case

In this paper we shall develop and investigate a three-country and two-commodity model of international trade with an imperfectly competitive good which is produced under increasing marginal costs by explicitly incorporating intra-industry trade between industrialized countries. The main results we obtain are: (1) the full optimal discriminatory tariffs levied by a third importing country are necessarily positive; (2) the imposition of tariff can cause an increase in intra-industry trade, and therefore (3) under certain conditions the importing country's intervention into the international market can be a Pareto superior policy for the world as a whole as well as for the country.     

Incentives to lead,follow, or compete: comparative national choices of international copyright

I study the desirability and incentives for countries to lead or follow in international copyright policy making by analyzing a lead-follow model of international copyright and comparing it with a competitive model. The analyses suggest that the lead-follow model is globally preferable except when the information products have short economic life in the leading country. In this exceptional case, the incentives of individual countries are compatible with global welfare as they also prefer the globally preferable competitive model. However, in the cases where the lead-follow model is globally preferable, individual countries do not always have the incentive to lead or follow. For example, a small country may prefer competition over leading or following, as competition may allow it to free-ride on the copyright protection provided by the larger country. This suggests that ‘extraordinary’ incentive is sometimes needed to induce individual countries to adopt the lead-follow model of international copyright when it is globally desirable.