What makes a successful export? Evidence from firm‐product‐ level data

Abstract We analyse a very rich and unique panel database that provides information on exports at the firm‐product level. Motivated by the recent theory of multi‐product firms, we investigate what determines the survival of products in the export mix to find that, in export dynamics, characteristics of the product as well as that of the firm matter. In particular, firm productivity as well as product scale and tenure are associated with a higher export survival rate. This suggests, in line with theory, that there are firm‐ as well as firm‐product‐specific competencies that are important for shaping firms’ export mix.     

Does complexity explain the structure of trade?

This paper analyzes whether complexity, measured by the number of skilled tasks that are performed in production, explains countries’ commodity trade structure. We modify the Romalis ( 2004 ) model to incorporate advantage differences in complexity across commodities together with differences in the number of mistakes made by workers in the production process in developed and developing countries as a source of comparative advantage. Our model predicts that the share of developed countries in world trade increases with products’ complexity. Empirical tests confirm this prediction. Moreover, we find that complexity complements the explanation provided by skill‐intensity on countries’ commodity trade structure.     

Price dispersion across US districts of entry

Price dispersion of US imports are investigated across US districts of entry. Markups explain about 31% of price dispersion, while marginal costs of production explain about 69%; effects of trade costs, for which we have actual data, are almost none.     

Network Effects on Trade in Intermediate Goods: Evidence from the Automobile Industry

Growing production fragmentation makes the analysis of network effects on trade in intermediate goods more important than ever. The present study measures network effects on auto parts exports from 6 major auto producing countries using a panel data set covering 49 destinations and 31 products from 2002 to 2008. In contrast to prior research, the present study finds that in the case of Japanese automakers, overseas production by subsidiary plants is less important in determining auto parts exports from Japan than it is for the other major auto producing countries. Such uniqueness could be led by the higher reliance on domestic procurements of overseas subsidiaries of Japanese automakers as a result of the transfer of the vertical networks between automakers and parts suppliers formed in Japan.     

Why don't firms export more? Product quality and Colombian plants

Exporting firms around the world ship only a small fraction of their output overseas. For firms in a large country, such as the United States, this behavior can be explained by the existence of a large domestic market. For firms in a small lower income country, such as Colombia, the lower share of exports remains a puzzle. This paper begins by illustrating the failure of current models to explain plant export patterns in Colombia. Even models that do well in describing the US export distribution fail when confronted with the Colombian data. In response to this puzzle, this paper suggests that Colombia's export distribution can be explained with a two-dimensional productivity space where output productivity is considered separately from quality productivity. Predictions of this theory are tested on Colombian plant level data from 1981–1991. Overall, product quality is shown to be a significant factor in explaining the tendency for Colombian plants to under-export manufactured goods to the United States.     

Labour migration in the enlarged EU: a new economic geography approach

This paper studies the impact of migration policy liberalisation on international labour migration in the enlarged European Union (EU) in a structural economic geography approach. The liberalisation of migration policy would induce an additional 1.80–2.98% of the total EU workforce to change their country of location, with most of migrant workers relocating from the East to the West. The average net migration rate is decreasing in the level of integration, suggesting that from an economic point of view no regulatory policy responses are necessary to labour migration in the enlarged EU.     

Determinants of vertical integration in export processing: Theory and evidence from China

This paper examines the determinants of vertical integration versus outsourcing in export processing, by exploiting the coexistence of two export processing regimes in China, which designate by law who owns and controls the imported components. Based on a variant of the Antràs-Helpman (2004) model, we show theoretically that control over imported components for assembly can affect firm integration decisions. Our empirical results show that when Chinese plants control the use of components, the export share of foreign-owned plants is positively correlated with the intensity of inputs provided by the headquarter (capital, skill, and R&D). These results are consistent with the property-rights theory of intra-firm trade. However, when foreign firms own and control the components, there is no evidence of a positive relationship between the intensity of headquarters' inputs and the prevalence of vertical integration. The results are consistent with our model that considers control over imported components as an alternative to asset ownership to alleviate hold-up by export-processing plants.     

Tariff pass-through and the distributional effects of trade liberalization

This paper estimates the distribution of welfare gains due to the trade reforms in India by simultaneously considering the effect on prices of tradable goods and wages. The cost of consumption for each household is affected by the domestic price changes, while wage incomes adjust to these price changes in equilibrium. Three rounds of the Indian Employment and Consumption Surveys are used for the analysis. The price transmission mechanisms are estimated for both rural and urban areas to understand the extent to which the trade reforms are able to affect the domestic prices. In order to assess the distributional effects, a series of nonparametric local linear regressions are estimated. The findings show that households at all per capita expenditure levels had experienced gains as a result of the trade liberalization, while the average effect was generally pro-poor and varied significantly across the per capita expenditure spectrum.     

Tear down this wall: on the persistence of borders in trade

Abstract Why do borders still matter for economic activity? The reunification of Germany in 1990 provides a unique natural experiment for examining the effect of political borders on trade. With the fall of the Berlin Wall and the rapid formation of a political and economic union, strong and strictly enforced administrative barriers to trade between East Germany and West Germany were eliminated completely within a very short period of time. Remarkable persistence in intra‐German trade patterns along the former East‐West border suggests that border effects are neither statistical artefacts nor driven by administrative barriers to trade, but arise from economic fundamentals.     

Do tariff reductions affect the wages of workers in protected industries? Evidence from the Canada‐U.S. Free Trade Agreement

Abstract.  In this paper, I use Canadian micro-data on individual workers to investigate the effect on wages of the tariff reductions mandated by the Canada-U.S. Free Trade Agreement (CUSFTA). The literature on industry wage premia has revealed that the industry of employment is an important determinant of a worker's wage. My findings indicate that relative wages fell in those industries that faced the deepest tariff cuts. This effect was experienced regardless of whether or not workers belonged to a union, suggesting that CUSFTA reduced the returns to industry-specific human capital for those workers in the mostly heavily affected industries.     

Innovation and international trade in technology

The international market for technology is growing rapidly relative to world GDP. To study the international technology market, I present a model of innovation and international trade in which inventors auction their technology in both domestic and foreign markets. There is monopolistic competition in differentiated products. International trade in technology has number of significant economic effects. Technology trade improves the quality of innovation by increasing the pool of R&D experiments from which the best technology is chosen. Technology trade increases the efficiency of invention while at the same time lowering the total number of inventors relative to the equilibrium without technology trade. Technology trade increases the volume of trade in goods. Technology trade increases product variety at the market equilibrium. Technology trade increases national income in each country and increases total gains from trade.     

Domestic trade protection in vertically-related markets

We consider trade policy in a setting where home country firms are fully dependent on vertically-integrated foreign firms for supplies of a key input. We find that vertically-integrated firms' strategic considerations play an important role and that, in particular, a tariff on final goods may either increase or decrease the domestic price of final goods. The import of final goods is always taxed to extract and shift rents from foreign firms, while the import of intermediate goods can be either taxed or subsidized. The market structure is shown to be an important consideration when making trade policy.     

The Impact of a Disorderly Resolution of Global Imbalances on Global Wealth

Partly reflecting structural advantages such as liquidity and strong investor protection, foreigners have built up extremely large positions in US (as well as other dollar‐denominated) financial assets. This paper describes the impact on global wealth of an unanticipated shock to US financial markets. For every 10 per cent decline in the dollar, US equity markets, and US bond markets, total wealth losses to foreigners could amount to about 5 percentage points of foreign GDP. Four stylized facts emerge: (i) foreign countries, particularly emerging markets, are more exposed to US bonds than to US equities; (ii) over time US exposure has increased for most countries; (iii) on average, US asset holdings of developed countries and emerging markets (scaled by GDP) are very similar; and (iv) based on their reserves position alone, wealth losses of emerging market governments could on average amount to about 2¾ percentage points of their GDP.     

Innovation and duration of exports

This paper uses survival analysis to investigate the effect of innovation on export duration of 105 countries at the product level. The estimation shows that the duration of exports increases with innovation. The effect is stronger for differentiated products than for homogeneous products. The estimates are consistent with the quality ladder model.