Entrepreneurship and intra-industry trade

Entrepreneurship and Intra-Industry Trade. — The paper introduces entrepreneurs into the theories of intra-industry trade and investigates the role of a country ’s “entrepreneurship” in international trade. It is shown that therelative entrepreneurship between countries determines the terms of trade but the welfare effects are not obvious. Among other things, it is found that (1) an increase in exports improves the terms of trade and (2) an increase in country size is not always beneficial.     

Does the measurement of intra-industry trade matter?

Does the Measurement of Intra-Industry Trade Matter? — This paper discusses different methods of capturing the main aspects of the Chamberlin-Heckscher-Ohlin-Samuelson model. Of particular interest are the distinction between horizontal and vertical intra-industry trade, the adjustment of aggregation biases, and the definition of inter- and intra-industry specialization at product level. The main findings are that it is important to disentangle horizontal and vertical intra-industry trade, and to consider specialization patterns within refined product groups. Moreover, there is a nonlinear relationship between intra-industry trade and economies of scale that may explain contradictory results in the literature.     

Country-specific factors and the pattern of horizontal and vertical intra-industry trade in the UK

Country-Specific Factors and the Pattern of Horizontal and Vertical Intra-Industry Trade in the UK. - A large number of empirical studies have investigated the relationship between country-specific factors and total intra-industry trade (IIT). One important shortcoming of this literature is that it ignores the distinction between horizontal and vertical IIT and ignores the fact that they may have different determinants. This paper disaggregates UK IIT into its horizontal and vertical components and, using bilateral trade data, estimates a series of models incorporating countryspecific variables. The results suggest that vertical IIT is more important in the UK than horizontal IIT and that the inter-country pattern of vertical IIT is systematically related to a range of explanatory variables.     

The role of comparative advantage in trade within industries: A panel data approach for the European Union

The Role of Comparative Advantage in Trade within Industries: A Panel Data Approach for the European Union. — A large share of EU member states trade is intra-industry trade (IIT) in the period 1985-1996; in particular, IIT is based on products differentiated in quality (vertical IIT). Moreover, exports from southern countries are located mainly at the lower end of the price-quality spectrum, whereas those countries with higher per capita incomes are located at the higher end. According to the vertical IIT models, we hypothesize that commercial specialization of members states over the quality spectrum within industries is explained by differences in technological, physical and human capital. The results show that comparative advantage is an important driver of the pattern of European trade within industries.     

What’s trade got to do with it? Relative demand for skills within Swedish manufacturing

What’s Trade Got to Do with It? Relative Demand for Skills within Swedish Manufacturing. — This paper seeks to identify the contribution of trade and technological change to the increase in inequality between skilled and unskilled workers in Sweden since the 1970s. An empirical approach is adopted which allows for the outsourcing of the low-skill parts of the production chain to low-wage locations and is applied to detailed industry and bilateral trade data, the latter distinguishing between low-wage sources of imports and OECD countries. The paper finds that, in contrast to previous studies, trade with low-wage countries may have contributed to the rise in inequality in Swedish manufacturing. The empirical results also suggest that the increased use of technology also played a role in creating greater inequality between skilled and unskilled workers in Sweden, with the magnitude of this impact increasing in the 1990s.     

Back to the future: Taking stock on intra-industry trade

Back to the Future: Taking Stock on Intra-Industry Trade. — This paper begins by examining the unresolved issues identified in an earlier analysis of the literature. It then sets out developments in theory, measurement, empirical analysis and policy. The progress made on each of these fronts is assessed and remaining unresolved issues identified. The paper argues that the last decade has seen very considerable progress in the measurement of intra-industry trade and in the way the empirical investigations are conducted. It also argues that on the modelling front considerable progress has been made in incorporating spatial and growth dimensions into the paradigm.     

Fighting the forces of gravity - Seapower and maritime trade between the 18th and 20th centuries

How have large naval powers affected international commerce in history? Using a panel gravity model, we investigate the interactions of wars, alliances, naval power and trade from the 18th to mid-20th centuries. Striking an alliance with a naval power helps a country’s interstate commerce. Fighting a naval power on the other hand limits a country’s interstate commerce. Further, we split this effect on trade between an extensive effect (effect on a country’s trade when fighting a naval power) and an intensive effect (effect of that power gaining more naval strength). We conclude that the intensive effect is a powerful one - large navies have historically been destroyers of trade when mobilized to combat.     

Measuring marginal intra-industry trade

Measuring Marginal Intra-Industry Trade. — Trade liberalisation and adjustment: how important is intra-industry trade? This paper focuses on the appropriate measurement of intra-industry trade as indicator of structural adjustment costs. It is argued that existing dynamic versions of the Grubel-Lloyd index reflect horizontal trade only and classify vertical intra-industry trade with inter-industry trade. The paper proposes a method to distinguish between horizontal and vertical trade and applies these techniques to emerging trade between the EU and the economies of central and eastern Europe.     

The pattern of trade in individual products: A test of simple theories

Zusammenfassung Der Handel mit einzelnen Produkten: ein Test einfacher Theorien. — Der Zweck dieses Aufsatzes ist es, die Leistungsf?higkeit von drei einfachen Theorien zur Prognose des Handels mit einzelnen Produkten zu testen. Wenn wir diese Theorien nacheinander prüfen, so stellen wir fest, da\ die Skalenertrags-Hypothese nichts erbringt, aber sowohl die Faktorproportionen-Hypothese als auch die Neotechnologie-Hypothese signifikante und konsistente Erkl?rungen für die Wahrscheinlichkeit des Exports einzelner Produkte liefern. Die Arbeit zeigt auch, da\ die beiden erfolgreichen Hypothesen sinnvoll zu einer kombinierten Hypothese verbunden werden k?nnen, in der die Exportwahrscheinlichkeit sowohl von neo-technologischen Aspekten als auch von Faktorproportionen abh?ngt. In diesem kombinierten Erkl?rungsansatz beeinflu\t die Kapitalintensit?t — sei sie aggregiert oder in physisches und Humankapital disaggregiert — den Handel nur, wenn es sich um standardisierte Produkte mit einfacher Technologie handelt.

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Résumé La structure de commerce extérieur avec des biens individuels: un test des théories simples. — Le but de cet article est de tester la performance de trois simples théories qui prédisent le commerce extérieur avec des biens individuels. En testant ces théories, pour la même période, nous trouvons que les approches des proportions de facteur aussi bien que les approches néo-technologiques donnent une explication significative et consistante de la probabilité d’exporter les biens individuels pendant que l’approche des économies d’échelle ne la donne pas. Cet étude aussi trouve que les deux explications couronnées de succès peuvent être productivement combinées dans une approche composite, dans laquelle la probabilité d’exportation dépend des considérations néo-technologique et des proportions de facteur. Dans cette approche explicative l’intensité de capitaux, ou bien agrégée ou bien desagrégée dans l’intensité de capitaux humaine et physique, influence le commerce extérieur seulement avec des produits standardisés et de technologie basse.

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Resumen El perrón de commercio en productos individuales: un test de teorías simples. — El propósito de este estudio es investigar el desempe?o de tres teorías simples para predecir el comercio de productos individuales. Probando estas teorias, una tras otra, encontramos que mientras la explicación de las economías de escala no es satisfactoria, las explicaciones de proporciones de factores y neotecnológica, respectivamente, proveen una explicación significativa y consistente de la probabilidad de exportar productos individuales. En este estudio también se encontró que las dos explicaciones satisfactorias pueden combinarse exitosamente en una explicación compuesta, en la que la probabilidad de exportación depende de consideraciones neo-tecnológicas como también de consideraciones de proporciones de factores. En esta explicación compuesta, la intensidad de capital, agregada o desagregada en intensidad de capital física o humana, influencia el comercio solo de productos estandarizados de baja tecnología.

     

The costs of non-tariff barriers to trade: Evidence from New Zealand

The Costs of Non-Tariff Barriers to Trade: Evidence from New Zealand. — Recent work on trade policy with imperfect competition indicates that the adverse effects of non-tariff barriers to trade exceed those suggested by traditional theory. With market power in foreign supply, setting a restrictive non-tariff barrier will induce foreign exporters to raise their supply prices. The authors use the experiment provided by the comprehensive New Zealand economic reforms of the mid-1980s. Using panel data on export unit values from Germany and the United States to several destinations including New Zealand, they find some evidence for decreased export prices to New Zealand as a result of the dismantling of non-tariff barriers to trade.     

Potential demand and external trade

Summary Both in theoretical and empirical studies of international trade relative prices play a dominant role. Standard international trade theory asserts that under certain conditions the price mechanism may lead to an equilibrium between demand for and supply of goods from and to different countries. For short periods, some relevant conditions may not be fulfilled; in that case other adjustments such as changes in non price conditions may equate demand and supply or, alternatively, disequilibria may exist. Direct statistical evidence on non price conditions, excess demand and excess supply is scarce.This paper describes a partly indirect approach of the not price conditioned trade fluctuations. The basic model assumes that these fluctuations are largely dependent on pressure of demand, which is defined as the tension between potential demand and potential supply. In this way both exports and imports are divided in a potential component, dependent on relative prices, and a pressure induced component. The other main assumption is that actual domestic demand changes according to the demand function. Combining these relations, potential demand for domestic products is the sum of domestic demand and potential export demand minus potential import demand. Potential supply is assumed to be a constant fraction of the exogeneously given production capacity.The model is used for an iterative approximation of the changes in potential demand and pressure of demand for the Netherlands. For this purpose estimations for actual exports and actual imports of commodities are derived from the model. In the initial estimations, potential demand is approximated by means of actual demand, during consecutive rounds the results of the preceding stages are used. After three rounds the coefficients are stable. The values calculated for the yearly changes in potential demand are for most years in concordance with a priori expectations. For the reference period, the explanatory power of the computed pressure of demand is either of about the same quality as that of conventional pressure variables or better.     

The impact of EMU on trade flows

The Impact of EMU on Trade Flows. — In this paper we quantify the impact of exchange rate volatility on trade flows within the EU with the help of a gravity trade model. We consider bilateral instead of total exports, and we use panel data. Moreover, we introduce dynamics into the model, taking lagged exports as explanatory variable. The estimation of this model for the period 1962–1995 leads to significant negative coefficients for the proxy of exchange rate variability. We use these estimates to calculate the potential trade-creating effect of a monetary union, setting the exchange rate volatility equal to zero.     

Free trade or protection? belgian textile and clothing firms’ trade preferences

Free Trade or Protection? Belgian Textile and Clothing Firms' Trade Preferences. -This paper examines the positions of Belgian textile and clothing firms on trade policies. Observations on positions are generated by a survey. Along the lines of the political economy of protection and anti-protection we test whether firm-specific characteristics influence textile and clothing firms' trade policy preferences. The results show that international competition and having foreign establishments significantly determine firms' positions, but that product differentiation does not. A Chow test indicates no significant difference between firms' sensitivities in the textile and clothing industries. This suggests that the two professional organizations should co-operate on trade issues.     

Intra-industry trade in the European computers industry

Intra-Industry Trade in the European Computers Industry. —This paper analyzes the pattern of intra-industry trade in the European computers industry. Hypotheses regarding both country-specific and industry-specific factors are tested. Those include proxies for level of economic development, market size, market proximity, scale economies and market concentration. The problem of categorical aggregation is explicitly addressed and a method to overcome is suggested. The results of the econometric analysis corroborate the predictions of the theoretical models and their ability to identify at least some of the crucial factors driving to international specialization.     

Fragmentation and trade: US inward processing trade in the EU

Fragmentation and Trade: US Inward Processing Trade in the EU. — Fragmentation, which refers to the splitting up of a previously integrated production process into separate components, is seen as one of the reasons for the increasing globalization of the world economy. This paper undertakes an empirical study of the extent of US inward processing trade (IPT) in the EU, which we use as a proxy for fragmentation in trade. We also provide empirical evidence on the determinants of the distribution of US IPT across manufacturing sectors in the twelve EU member states. Our results give support to the importance of comparative advantage for the sectoral distribution of US IPT. Also, we find that the labour costs and the level of US FDI stocks affect US IPT in EU peripheral countries, while they do not seem to have any impact on EU core countries.     

Technological adaptation, trade, and growth

Technological Adaptation, Trade, and Growth. — Based on Grossman and Helpman’s 1991 seminal work, the authors provide a simple model extension where innovations created in the high-tech sector may be assimilated or adapted by the lowtech sector, thus generating nondecreasing returns in the production function of the latter. When applying a Heckscher-Ohlin framework the authors find that the effects of technological diffusion allow a country relatively scarce in human capital to benefit from nondecreasing rates of growth through its low-tech sector. They test this idea by using a dynamic panel data approach in order to deal with simultaneity and country heterogeneity. Their results are consistent with the predictions of the model and robust to a broad range of definitions of technological intensity.     

Intra-industry trade of India: Trends and country-specific factors

Intra-industry Trade of India: Trends and Country-Specific Factors. — The analysis in this paper confirms that trade liberalization biases trade expansion towards intra-industry trade (IIT) in India. The increased level of IIT is largely exportled, that is, caused by a faster growth of exports than of imports. India’s IIT is more intense with high-income countries and is characterized by a greater extent of complementarity. Further, certain country-specific factors which are found to be crucial in the models of vertical IIT are pertinent in influencing the pattern of India’s bilateral IIT.     

Vertical specialization and intra-industry trade: The role of factor endowments

Vertical Specialization and Intra-Industry Trade: The Role of Factor Endowments. — In this paper, we use vertical differentiation models of the Falvey-Kierzkowski type to study the effects of differences in factor endowments on vertical intraindustry specialization. We focus on Spanish intra-industry trade, as Spain typically exports low-quality varieties to the northern countries of the OECD and high-quality varieties to the southern ones. In order to achieve more general results, we consider different types of productive factors: physical, human and technological capital. Our results confirm that factor endowments play a significant role in explaining vertical intra-industry specialization.