Intertemporal gains from trade

The gains-from-trade theorems of atemporal trade theory have direct analogues in intertemporal models. The apparent paradoxes which arise in the comparison of steady states disappear when the complete time paths of perfectly competitive trade and autarky equilibria in a general intertemporal linear production model are considered. The analysis can be extended to cover international investment.     

Trade and the gains from trade with imperfect competition

A simple two-country model is constructed in order to show how imperfect competition can form a basis for trade. Under the assumption of Cournot-Nash behaviour, it is demonstrated that trade will lead to a bilateral welfare improvement when countries are identical in all respects. When countries differ in size, trade will always increase total world real income, but the large country may experience a welfare loss. Increasing returns to scale in the production of the monopolized good complicates the situation further, but it generally remains true that trade increases world real income.     

Non-competitive imports and gains from trade

The paper argues for the explicit inclusion in international trade models of goods which cannot be produced in the importing country. Non-competitive goods require a product-requisite factor which is not universally available. International trade in these goods generates much greater per-unit gains from trade than trade in ordinary goods which can be produced in both (all) countries. Omission of these goods from models of international trade leads to the possibility of a gross underestimation of the difference between autarkic and with-trade income levels. The omission of these goods also neglects some dimensions of policy which are important in the real world, such as sanctions.     

Growth gains from trade and education

A multi-sector general equilibrium model is presented where education enhances general human capital, which is essential for increasing or maintaining the mobility of workers across industries. The paper shows that international trade, combined with education, can have a positive growth effect by allowing workers to move easily to, and specialize in, the industry with the greatest productivity in each period, which enables an economy to grow in the long run at the growth rate of the industry with the most rapid technical progress. Depending on the initial ratio of general-to-specific human capital stock, multiple equilibrium growth paths can exist including a poverty trap, and trade liberalization can allow an economy in a poverty trap to transform into one with continuous education and higher output growth.     

Income distribution and unequal gains from trade

This paper studies welfare gains from trade in a tractable model with a nonhomothetic preference over product quality. We show that the welfare changes due to trade shocks are unequal across consumers and derive a parsimonious formula to measure these welfare changes as in Arkolakis et al. (2012, American Economic Review, 102, 94–130). We find that the welfare changes are larger for consumers with lower income. Moreover, this paper shows that the welfare implications are different between a change in (iceberg-type) variable trade cost and a change in tariff when tariff revenue matters. More importantly, we show that the difference varies across consumers with different income levels.     

Domestic productivity and variety gains from trade

We show theoretically and confirm empirically that domestic productivity has a significant impact on the demand for foreign varieties under the assumption that domestic and foreign varieties are imperfect substitutes. In particular, the demand for imported varieties is more elastic for countries with comparative advantage. For an average good facing a median trade barrier, doubling the importer–exporter relative export performance decreases the number of imported varieties by 17%. Our findings suggest that the variety gains estimates could be significantly biased if we ignore the substitutability between imported and domestic varieties.     

Distortions and static negative marginal gains from trade

In this paper, the method of input-output analysis is used for the case of Korea to demonstrate that the promotion of certain exports can result in static inefficiency to the economy. It appears that Korea lost a significant amount of both capital and labor via trade in competitive goods during 1970/1972. Although the simple existence of static losses at any specific point in time does not necessarily imply welfare losses to the economy over the long term, the fact that we can observe such losses implies that we should at least try to justify their existence in terms of dynamic gains.     

On the gains from an expansion in factor mobility in bilateral trade

A single composite-good two-factor input production model is employed to investigate the gains from an expansion in factor mobility between two countries with different neoclassical technologies. Necessary and sufficient conditions for both countries to gain from an expansion in factor mobility are established. The analysis then develops a criterion based on market information for predicting whether a country would gain from an expansion in factor mobility. Finally, the income distributional effects within and between countries of an expansion in factor mobility are discussed.     

The gains from international trade in the context of a growing economy

This paper discusses the effects of trade on long-run equilibrium values of some important economic variables of a small growing economy under alternative assumptions about the saving behavior. Using a two-commodity and two-factor model it is shown that long-run gains from trade depend not only on the saving behavior but also on the comparative advantage of the country at its autarkic steady state.     

Allocative efficiency,mark-ups,and the welfare gains from trade

This paper develops an index of allocative efficiency that depends upon the distribution of mark-ups across goods and is separable from an index of standard Ricardian gains from trade. It determines how changes in trade frictions affect allocative efficiency in an oligopoly model of international trade, decomposing the effect into the cost-change channel and the price-change channel. Formulas are derived shedding light on the signs and magnitudes of the two channels. In symmetric country models, trade tends to increase allocative efficiency through the cost-change channel, yielding a welfare benefit beyond productive efficiency gains. In contrast, the price-change channel has ambiguous effects on allocative efficiency.     

Allocative efficiency,mark-ups,and the welfare gains from trade

This paper develops an index of allocative efficiency that depends upon the distribution of mark-ups across goods and is separable from an index of standard Ricardian gains from trade. It determines how changes in trade frictions affect allocative efficiency in an oligopoly model of international trade, decomposing the effect into the cost-change channel and the price-change channel. Formulas are derived shedding light on the signs and magnitudes of the two channels. In symmetric country models, trade tends to increase allocative efficiency through the cost-change channel, yielding a welfare benefit beyond productive efficiency gains. In contrast, the price-change channel has ambiguous effects on allocative efficiency.     

Trade in tourism services: Explaining tourism trade and the impact of the general agreement on trade in services on the gains from trade

The article addresses two questions related with tourism as a service trade. Can tourism be explained as other export activities? Does service liberalisation have a positive or negative impact on tourism receipts in destination countries? Previous research has either focused on the demand side factors (i.e. factors of demand in the origin countries) or on tourism as a long-run factor of economic growth. The research shows that a complementary perspective such as that offered by trade in a supply side perspective can render additional insights towards understanding tourism. This approach can explain why countries have absolute and comparative advantage. Another finding is that tourism as an export can be explained by some of the same destination factors that explain other service exports. Using different panel estimators the importance of supply side factors that are to some extent exclusive to tourism are demonstrated: the general price competitiveness of the destination, tourism infrastructure and the provision of safety. The econometric models also confirm the relevance of other conventional explanatory factors of trade in services such as GDP per capita and internet usage. The last part of the article analyses the welfare gains from trade under the general agreement on trade in services (GATS). The revenue (tourism receipt) effect is decomposed into a volume (arrival) and price effect. Results suggest that liberalisers under the GATS gained especially from a volume effect with average higher growth rates in the number of arrivals. There is also found to be a positive effect on the average income earned per tourist from being a liberaliser.     

Estimating the pro-competitive gains from trade liberalization: an application to Mexican manufacturing

An original two-stage method is proposed to estimate the pro-competitive gains from trade liberalization. In a first step, I estimate the sensitivity of the price-cost margins of domestic firms to changes in the effective rate of protection, on the basis of a structure-performance relationship. This parameter is later exploited in a second step, where the cost of protection is calculated on the basis of a simple partial equilibrium model where domestic and foreign goods are imperfect substitutes. Applied to the Mexican case, this estimation reveals that protection removal depresses margins significantly and suggests that important additional gains can be expected from pro-competitive forces.     

Realizing the gains from trade: Export crops, marketing costs, and poverty

This paper explores the role of export costs in the process of poverty reduction in rural Africa. We claim that the marketing costs that emerge when the commercialization of export crops requires intermediaries can lead to lower participation into export cropping and, thus, to higher poverty. We test the model using data from the Uganda National Household Survey. We show that: i) farmers living in villages with fewer outlets for sales of agricultural exports are likely to be poorer than farmers residing in market-endowed villages; ii) market availability leads to increased household participation in export cropping (coffee, tea, cotton, fruits); iii) households engaged in export cropping are less likely to be poor than subsistence-based households. We conclude that the availability of markets for agricultural export crops help realize the gains from trade. This result uncovers the role of complementary factors that provide market access and reduce marketing costs as key building blocks in the link between the gains from export opportunities and the poor.     

On the sharing of trade gains by resource-poor and resource-rich countries

A model of an asymmetric world composed of resource-poor and resource-rich countries. The scopes of ‘economic imperialism’ and ‘resource nationalism’ are then examined. It is shown that self-seeking resource-poor countries will completely exploit their resource-rich trading partners but that the latter will exploit the former only partially.     

Rue the ROOs: Rules of origin and the gains (or losses) from trade agreements

ABSTRACT

This article provides three-good, three-country examples of trade in both intermediate inputs and final goods. These show the adverse effects that rules of origin (ROOs) can have, even in a world where every country has a free trade agreement (FTA) with every other country. ROOs may cause ubiquitous FTAs to yield a level of welfare, for everyone, that is worse than if there were no FTAs at all, and all trade were subject to common nondiscriminatory tariffs. Thus, the move to an ever increasing number of FTAs may be reducing world welfare.     

Fair trade and global cognitive orientation: a focus on Spanish fair trade consumers

In the past few years, there has been an increase in the ‘ethical consumer’, characterized by more reflexive values like solidarity, social responsibility, multiculturalism and ecology. This idea has found support in the appearance and development of proposals like fair trade, along with others, such as responsible consumption, the recycling business or sustainable development. In a parallel way, also during the past few years, various analysts have pointed out that the phenomenon of globalization is changing not only the aspect of the world but also our way of perceiving it, which is progressively becoming a ‘global orientation’. In the framework of these two tendencies, this paper examines the extent to which ‘global orientation’ is also a characteristic of consumers of fair trade products. The paper presents a two‐phase exploratory study. The first phase, of a quantitative nature, showed the greater global orientation of Spanish consumers of fair trade products, and it obtained a typology of them. This typology showed, however, that not all the clusters of consumers of fair trade products have a high global orientation, which reveals that the relationship between this dimension and the consumption of fair trade products is not a direct, straightforward one. The subsequent qualitative study examined the components of this global orientation in each of the three clusters where the consumption of fair trade products was the highest. The results showed that the purchase of fair trade products is influenced by the ‘global orientation’ of the consumer, although other factors, such as a sense of social responsibility and trust in international non‐governmental organizations, can condition this influence.     

Market imperfections, wealth inequality, and the distribution of trade gains

Globalization increasingly involves less-developed countries (LDCs), i.e., economies which usually suffer from severe imperfections in their financial systems. Taking these imperfections seriously, we analyze how credit frictions affect the distributive impact of trade liberalizations. We find that free trade significantly widens income differences among firm owners in LDCs: While wealthy entrepreneurs are better off, relatively poor business people lose. Intuitively, with integrated markets, profit margins shrink — which makes access to credit particularly difficult for the least-affluent agents. Richer entrepreneurs, by contrast, win because they can take advantage of new export opportunities. Our findings resonate well with a number of empirical regularities, in particular with the observation that some liberalizing LDCs have observed a surge in top-income shares.     

Identifying factors affecting consumers purchase incidence at retail trade shows

The purpose of this article is to examine variables influencing purchase incidences at retail trade shows. To this end, retailer and consumer related antecedent variables are proposed. The retailer related variables are represented by store environmental cues of sales staff services, store atmosphere and product assortment. The consumer related variables are represented by impulse buying tendency and perceived time pressure. Drawing on relevant literature, hypotheses are developed to link each of these variables to purchase incidence. Data were collected using questionnaire from shoppers (N=95) at a large retail trade show. The hypotheses were tested using partial least square path modeling. The findings indicate that consumers’ favorable evaluation of retailers’ sales staff services, store atmosphere and product assortment led to more purchase incidences. The findings about the consumer related variables indicate that impulse buying tendency led to more purchase incidences whereas perceived time pressure led to fewer purchase incidences. Drawing on these results, several implications for practice and research are suggested.     

The impact of trade restrictions on U.S. apparel consumers

The loss incurred by U.S. apparel consumers in 1980 due to higher prices from tariffs and quotas was estimated. The price impact of tariffs was based on the ad valorem tariff rate while the price impact of quotas was based on estimated price differences between domestic and imported apparel at the same U.S. distribution level.Consumer losses in 1980 ranged from $10 billion to $12 billion depending on the price elasticity of demand for apparel and whether consumers or distributors received the scarcity rent generated by quotas. The increase in consumer expenditures due to higher prices accounted for the greatest proportion of consumer losses and ranged from 23% to 25% of total consumer expenditures for apparel depending on the allocation of the scarcity rent.While a reduction in trade restrictions would benefit consumers, such a reduction would also impose losses on firms and workers in the domestic apparel industry. However, there are other strategies for meeting competition from imports that would benefit producers as well as consumers.

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Einfuhrbeschränkungen aus Konsumentensicht — das Beispiel des US-amerikanischen Kleidungsmarktes

Zusammenfassung Die hohen amerikanischen Bekleidungseinfuhren der letzten 25 Jahre sind eine Folge der hohen Arbeitsintensität der Bekleidungsproduktion, die Ländern mit niedrigem Lohnniveau einen komparativen Vorteil bietet. Schon seit längerem sollen Zölle und Einfuhrmengen-Beschränkungen die amerikanische Bekleidungsindustrie schützen.Der vorliegende Beitrag versucht, die Verluste zu schätzen, die bei amerikanischen Käufern von Bekleidung im Jahre 1980 durch diejenigen Preiserhöhungen entstanden sind, die auf Zölle und Mengenbeschränkungen zurückzuführen sind. Die Schätzung der Preiswirkungen der Zölle knüpft unmittelbar an deren Beträge an, während die Schätzung der Preiswirkung der Mengenbeschränkungen an Preisunterschiede zwischen vergleichbaren heimischen Bekleidungsgütern und importierten Bekleidungsgütern anknüpft.Die auf diese Weise geschätzten Verbraucherverluste für das Jahr 1980 liegen zwischen 10 und 12 Milliarden Dollar (je nach der Höhe der Preiselastizität der Bekleidungsgüter-Nachfrage). Preisbedingte Ausgabenerhöhungen machen den größten Teil der Verbraucherverluste aus (ca. 23 bis 25% der gesamten Verbrauchsausgaben für Bekleidung).Die Analyse ist auf preisbedingte Verbraucherverluste beschränkt. Mögliche Einschränkungen der Wahlmöglichkeit durch Einfuhrbeschränkungen werden nicht erfaßt. Beispielsweise können Einfuhrmengen-Beschränkungen das Qualitätsspektrum der importierten Güter beeinflussen und zu einer Substitution besserer und teurerer Güter durch schlechtere Güter führen. Die Vernachlässigung solcher Wirkungen bedeutet, daß die im vorliegenden Beitrag quantifizierten Verbraucherverluste durch Einfuhrbeschränkungen unterschätzt sein dürften.Einerseits würde die Aufhebung von Einfuhrbeschränkungen den Verbrauchern nützen, andererseits würde sie jedoch der amerikanischen Bekleidungsindustrie Schaden bringen und zu Unternehmensschließungen und zu Arbeitslosigkeit führen. Strategien, um dem ausländischen Wettbewerb wirkungsvoll zu begegnen, liegen im Bereich neuer Produktionstechnologien, verbessertem Einsatz des Marketinginstrumentariums und vor allem im Bereich der Produktqualität. Solche Strategien würden sowohl der Industrie als auch den Konsumenten nützen, sie werden jedoch so lange unterdrückt, wie Handelsbeschränkungen auf anderem Wege einen Schutz gegen die Importkonkurrenz bieten.Das Beispiel zeigt die Divergenz von Produzenten- und Konsumenteninteressen bei Fragen des internationalen Handels. Diese Divergenz sollte für die Verbraucheraufklärung Anstoß sein, Konsumenten und ihre Organisationen auf die Vorteile des freien Handels aufmerksam zu machen, so daß sie ihren politischen Willen ebenso wirkungsvoll vorbringen wie Produzenten oder Arbeitnehmer.This paper is Scientific Article Number A-3731, Contribution Number 6707 of the Maryland Agricultural Experiment Station.

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Rachel Dardis is a Professor, and Katherine Cooke a Graduate Student, at the Department of Textiles and Consumer Economics, University of Maryland, College Park, MD 20742, U.S.A.