Trade Openness and Vertical Integration: Evidence from the U.S. Manufacturing Sector

The present article aims to empirically examine a relationship between trade openness and the pattern of vertical integration using the six‐digit North American Industry Classification System (NAICS) of U.S. manufacturing data from 2002 to 2006. We use the index of vertical integration made out of inter‐plant transfers data by the U.S. Census Bureau, and we consider three proxies of trade openness—import penetration, export shares, and trade penetration. The empirical results substantiate 2000 theoretical proposition that trade openness undermines motives for vertical integration.     

Exports and success in German manufacturing

Exports and Success in German Manufacturing. - While Germany has a very open, export-oriented manufacturing sector, there has been little research on the role of exporting in German firms’ performance. This paper documents the significant differences between exporters and non-exporters and attempts to identify the sources of these disparities. Exporters are much larger, more capital-intensive, and more productive than non-exporters. However, the bulk of the evidence suggests that these performance characteristics predate the entry into export markets. The authors find no positive effects on employment, wage or productivity growth after entry. The authors’ results provide evidence that success leads to exporting rather than the reverse.     

A cross-section analysis of intra-industry trade in U.S. manufacturing industries

Zusammenfassung Eine Querschnittsanalyse des intraindustriellen Handels für die Verarbeitende Industrie der Vereinigten Staaten. — In dieser Studie werden fünf Hypothesen formuliert und getestet, die das Muster des intraindustriellen Handels erkl?ren sollen. Dabei wird ein Verfahren angewandt, das auf dem Gebiet der industriellen Organisation entwickelt wurde und das das von der Marktstruktur bestimmte Verhalten berücksichtigt. Im statistischen Test werden m?glichst stark disaggregierte Daten für 112 Industriezweige der Vereinigten Staaten benutzt. Die Auswahl erfolgt so, da\ das Ausma\ der statistischen Aggregation minimiert und ein repr?sentativer Querschnitt der amerikanischen Verarbeitenden Industrie gewonnen werden kann. Die fünf Hypothesen werden durch die Daten gestützt. Die empirischen Ergebnisse best?tigen die Hauptthese, da\ der intraindustrielle Handel besser erkl?rt werden kann als eine Folge des Marktverhaltens der internationalen Firmen auf dem Weltmarkt. Deren Marktverhalten wiederum ist durch die Marktstruktur, in der sie agieren, bestimmt. Die Studie zeigt, da\ die folgenden Variablen die haupts?chlichen Determinanten des intraindustriellen Handels der amerikanischen Industrie sind: (1) der Grad der Preisdiversifizierung auf Grund von Produktdifferenzierung und unvollkommener Preis- und Qualit?tsinformation der Konsumenten, (2) die ?hnlichkeit des wirtschaftlichen Entwicklungsstandes, (3) die Skalenertr?ge infolge gro\er Produktionsserien, (4) das Ausma\ des oligopolistischen Wettbewerbsverhaltens und (5) die Rate der Einführung von Produktvarianten im Reifestadium des Produktzyklus.

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Résumé Une analyse transversale du commerce intra-industriel pour les industries manufacturières des Etats-Unis. — En appliquant une approche de la conduite de marché déterminée par la structure du marché qui était dévelopée par l’école de l’organisation industrielle, cette étude suggère et teste cinq hypothèses qui doivent expliquer la structure du commerce intra-industriel. Des données les plus désagregées sont utilisées pour le test statistique; il inclut 112 industries manufacturières dans les E.-U. L’échantillon est scrupuleusement choisi pour minimiser la mesure de l’agrégation statistique et pour être représentatif du secteur manufacturier des E.-U. Les cinq hypothèses sont confirmées par les données. Les résultats empiriques supportent la thèse centrale que le commerce intra-industriel peut être mieux expliqué comme conséquence de la conduite de marché des entreprises internationales sur le marché global. Leur conduite de marché est déterminée par la structure du marché sur lequel elles opèrent. L’étude démontre que les variables suivantes sont les déterminants principaux du commerce intra-industriel pour les industries manufacturières des E.-U. : le degré de la diversité des prix due à la différenciation des produits et à l’information imparfaite du consommateur sur le prix et la qualité, la similarité en niveau du développement économique, les économies des séries longues de production, l’étendue de la conduite oligopolistique de rivalité et le taux de l’introduction de la variété des produits dans la phase m?r du cycle de produit.

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Resumen Un análisis seccional del comercio intraindustrial entre empresas manufactureras de los Estados Unidos. — Este estudio propone y comprueba empfricamente cinco hip?tesis destinadas a explicar el comercio intraindustrial. Con este fin, se utiliza un enfoque de conducta estructural de mercado. Para los tests empíricos, se utiliza informaci?n estadística desagregada sobre 112 compa?ías manufactureras de los Estados Unidos. La muestra ha sido elegida cuidadosamente con el objeto de minimizar el alcance de la agregación estadística y de que sea representativa del sector manufacturero en este país. Los datos estadistícos corraboran los cinco hipótesis. Los resultados empíricos confirman la tesis central de que el comercio intraindustrial se puede explicar mejor como el resultado de la conducta de mercado de las compa?ías internacionales en el mercado global. Esta conducta está a su vez determinada por la estructura del mercado en la que las empresas operan. El estudio demuestra que las siguientes variables son factores claves en el comercio intraindustrial de las empresas manufactureras estadounidenses : El grado de diversificatión de precios atribuido a la diferenciación de productos y a la informatión imperfecta del consumidor sobre precios y calidad, la similitud en el nivel de desarrollo económico, las economías de production continua, el alcance de la rivalidad oligopolística, y la tasa de introducción de variedad en el producto en el último estadio del ciclo productivo.

     

U.S. Export performance in manufacturing industries: An empirical investigation

Zusammenfassung Die Exportentwicklung in der amerikanischen gewerblichen Wirtschaft: Eine empirische Untersuchung. — Die Untersuchung wurde im Sinne des ?Neo-Technologie?- Erkl?rungsansatzes der Handelsstruktur durchgeführt. Sie überprüft empirisch die Determinanten der Exportentwicklung in der amerikanischen gewerblichen Wirtschaft an einem allgemeinen Modell, das die wichtigsten erkl?renden Variablen umfaβt. Dieses Modell wird mit Hilfe der Hauptkomponenten-Methode getestet, wobei sowohl Querschnitts- als auch Zeitreihendaten (1956–1968) für zweistellige und dreistellige SIC-Nummern der Vereinigten Staaten verwendet werden. Zwei allgemeine Folgerungen k?nnen mit relativer Sicherheit gezogen werden. Die ausschlieβliche oder auch haupts?chliche Konzentration der Auβenhandelstheorie auf Kosten-Preis-Faktoren, die in früheren Zeiten vielleicht gerechtfertigt werden konnte; wird in unserer Zeit, nach der Revolutionierung des Verkehrs- und Nachrichtenwesens, des Managements, des Marketing und der industriellen Produktion, eigentlich unhaltbar. Obwohl die Ergebnisse dieser Studie noch keineswegs endgültig sind, zeigen sie doch, daβ viel erreicht werden k?nnte, wenn ein groβer Teil der Aufmerksamkeit Nicht-Preis-Faktoren gewidmet würde. Auβerdem wird es schwierig, einen Ansatz mit einem einzigen Bestimmungsfaktor zu rechtfertigen, weil dieser im günstigsten Fall unvollst?ndig ist, im schlimmsten Fall aber ernsthaft in die Irre führen kann.

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Résumé La performance d’exportation des E. U. dans les industries manufacturières: Une investigation empirique. — L’étude s’approche aux explications ?neotéchnologiques? de la structure du commerce extérieur. Il s’agit d’une exploration empirique des déterminants de la performance d’exportation dans les industries manufacturières par un modèle assez général incorporant les variables explicatives les plus importantes et testé en utilisant l’analyse des composantes principales appliquées aux sections transversales aussi bien qu’aux seriés chronologiques (en couvrant la période de 1956–1968) des données de CUI en deux et trois chiffres. Il y a deux conclusions générales qu’on peut constater avec une certitude relative. Premièrement la concentration exclusive ou même primaire de la théorie du commerce extérieur sur les facteurs de prix et de co?t qu’on pourrait peut-être justifier auparavant, devient tout à fait intenable suivant notre temps avec les révolutions des communications, des techniques de management, des institutions de commercialisation et de l’organisation industrielle. Bien que les résultats de cette étude ne soient pas conclusifs, ils indiquent qu’on peut bien gagner en faisant beaucoup de l’attention aux facteurs non-prix. Deuxièmement il devient difficile à rationaliser une approche de facteur unique qui est incomplète dans le cas le plus favorable et qui peut être égarante au pis aller.

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Resumen El desempe?o de las exportaciones de industrias manufactureras estadounidenses: Una investigatión empírica. — El estudio se realizó en el espíritu de las explicaciones ?neo-tecnológicas? de la estructura del comercio. Es una exploración empírica de las determinantes del desempe?o de las exportaciones estadounidenses en industrias manufactureras por medio de un modelo bastante general, que incorpora las variables explicativas más importantes y que es sometido a test por medio del uso del análisis de componentes principales con datos de comercio exterior de EEUU (para el periodo 1956–1968) a nivel de dos dígitos de la clasificación industrial uniforme (SIC) en forma de corte transversal y series de tiempo. Se pueden sacar dos conclusiones generales con relativa seguridad. Primero, la exclusiva o aún principal concentración de la teoría del comercio sobre factores de costos/precios, que tal vez podría justificarse en un período de tiempo anterior, se torna virtualmente insostenible en nuestros tiempos con revoluciones en comunicaciones, técnicas gerenciales, instituciones de mercadeo y organizatión industrial. A pesar de que los resultados de este estudio no son completamente concluyentes, ellos indican que se puede ganar mucho si se transfiere una buena parte de atención a factores distintos del precio. Segundo, se torna difícil racionalizar un enfoque en términos de un solo factor, que en el mejor de los casos es incompleto y en el peor de los casos puede ser seriamente enga?oso.

     

A new look at the impact of U.S. import barriers on corporate profit expectations

A New Look at the Impact of U.S. Import Barriers on Corporate Profit Expectations. — The notion that industries benefit from protection is firmly grounded in trade theory. However, previous “event studies” measuring the impact of trade restrictions on stock prices reveal that shareholders expect no improvement in industry profits from protection. The implication is that barriers designed to promote industry adjustment are considered ineffective by equity holders. This investigation of U.S. “Escape Clause” cases shows that shareholders do expect protection to enhance profits, but not universally. Outcomes are linked to the type of trade measure selected, with industries protected by tariffs or global quotas faring better than those shielded by nonglobal “Orderly Marketing Agreements.”     

Foreign outward direct investment and exports in Austrian manufacturing: Substitutes or complements?

Foreign Outward Direct Investment and Exports in Austrian Manufacturing: Substitutes or Complements? — The relationship between foreign outward direct investment and exports is crucial for assessing the impact of increased internationalization by foreign outward direct investment on a country’s welfare. Three models of trade and FDI are reviewed to generate hypotheses on their direct relationship over time as well as on common determinants. The propositions are empirically examined with time-series cross-section data for Austrian manufacturing. The results indicate a significant complementary relationship between FDI and exports in the eighties and early nineties. Moreover, long-run multipliers of exogenously increased FDI and exports are calculated. They are found to be positive but small in magnitude.     

Vertical foreign direct investment: Evidence from Japanese and U.S. multinational enterprises

Foreign direct investment (FDI) in developing countries has increased since the 1990s, but there is mixed evidence of vertical FDI associated with factor-seeking motives. This paper estimates the vertical motive of offshore production by multinational enterprises (MNEs) by exploiting past schooling characteristics as instruments for skilled-labor abundance in a host country. Using panel data on Japanese and U.S. MNEs in the 1990s, I find that skilled-labor abundance has a significantly negative impact on sales of manufacturing foreign affiliate only for Japanese MNEs. The results suggest that vertical FDI activity was more prevalent in Japanese MNEs than U.S. MNEs. A plausible explanation is that Japanese MNEs might be more vertically integrated with their offshore production than U.S. MNEs. A difference in foreign outsourcing activities could generate the observed deviation between Japanese and U.S. MNEs.     

Multinationals, production efficiency, and spillover effects: The case of the U.S. auto parts industry

Multinationals, Production Efficiency, and Spillover Effects: The Case of the U.S. Auto Parts Industry. — Since the mid-1980s many of the developing countries have attempted to attract foreign direct investment. The primary reason is access to modern technology although the true impact is still controversial. The U.S. case suggests that even in a developed country FDI can also make a favorable impact on the local industry, but possibly through different channels. FDI can increase efficiency substantially through the enhancement of competitive pressure instead of, or in addition to, technology transfer. The manner in which FDI influences the local economy seems to be very different depending on the development stage of recipient countries.     

Trade,Geography, and Industry Growth in U.S. Manufacturing

Much of the recent empirical literature examining the New Economic Geography has focused on how access to markets impacts wages. In this article, we consider an alternative aspect of the theory by examining how access to markets affects industry growth. We develop a model relating the growth of two key measures of market size—market access and supplier access—to growth in industry employment and the real value of industry shipments. We estimate the model using data on U.S. manufacturing industries between 1984 and 1996. We find strong evidence to suggest that access to markets positively affects industry growth.     

Specialization patterns in Europe

Specialization Patterns in Europe. — This paper analyzes whether specialization has increased in European Union countries, and discusses whether specialization patterns are consistent with predictions of trade theory. There is evidence of increasing specialization in some EU countries between 1968 and 1990, and some industries have become more concentrated geographically. The observed pattern of specialization broadly follows trade theory. In particular, those industries that have become more concentrated geographically are characterized by high scale economies and high intermediate-goods intensity, providing some support for new trade theories.     

The role of natural resources in trade patterns among the U.S., Japan,and other countries in the Asian Pacific Rim

The Role of Natural Resources in Trade Patterns among the US, Japan, and Other Countries in the Asian Pacific Rim. —The paper investigates the role natural resources play in shaping the trade patterns of both the US and Japan in trading with each other and with country groups in the Asian Pacific Rim. It has been argued that it is the US’s effective exploitation of natural resource endowment which was instrumental in that country’s rise to economic preeminence at the turn of this century. Given that the US relative resource abundance has diminished after the Second World War, one would expect to see the declining role of resources in American exports. Using data for 1973, 1982, and 1991, the empirical results indicate clearly that natural resources continue to play a critical role in explaining the more recent bilateral trade patterns.     

The determinants of export performance: A firm-level study of Italian manufacturing

The Determinants of Export Performance: A Firm-Level Study of Italian Manufacturing. — This paper analyzes some determinants of a firm’s probability of exporting and export intensity and presents the findings of an empirical study carried out on a large sample of Italian firms. On the basis of Probit and Tobit estimates, it emerges that these determinants change according to the size of firms. In particular, only for small firms is the relationship between size and export performance positive. The export activity of small and medium-sized firms decreases with the share of sales due to subcontracting. Larger firms, instead, benefit more from being affiliated with business groups and performing innovative activities of a different nature.     

Flexible manufacturing and U.S. trade performance

Zusammenfassung Flexible Produktionsweise und die amerikanische Exportleistung. — Der Autor benutzt ein Modell, das die Produktionstechnologie in 37 Zweigen des Maschinenbaus der USA im Jahre 1983 beschreibt, und kommt zu dem Schlu\, da\ flexible Technologien durchweg einen positiven Beitrag leisten, wenn es darum geht, die Nettoexporte zu erkl?ren, w?hrend die Technologie der Massenproduktion weder einen positiven noch einen negativen Beitrag leistet. Industrien, die durch gro\e Betriebe mit flexibler Produktion, einen hohen Automatisierungsgrad, eine gro\e Zahl neuer Produkte und schnelles Wachstum gekennzeichnet sind, erzielen die beste Exportleistung. Es zeigt sich au\erdem, da\ ein Modell des intra-industriellen Handels bei Verwendung derselben Daten die beobachteten Ver?nderungen der Exportentwicklung weit schlechter erkl?rt als das Faktorproportionen-Modell.

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Résumé Flexibilité dans la production et la performance des exportateurs américains. — En utilisant un modèle qui décrit la technologie de production dans 37 industries mécaniques aux Etats Unis en 1983, l’auteur découvre que la technologie flexible contribue beaucoup à expliquer les exportations nettes tandis que la technologie de la production en masse donne l’impression de n’avoir pas une influence ni positive ni négative. Les industries qui sont caractérisées par de grands établissements avec une production flexible, d’un haut niveau d’automatisation, d’un grand nombre de nouveaux produits et d’un accroissement rapide ont le plus grand succès sur les marchés mondiaux. L’auteur trouve aussi qu’un modèle de commerce intra-industriel qui est appliqué aux mêmes dates explique beaucoup moins de la variation observée des exportations que le modèle de la dotation en facteurs.

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Resurnen Producción manufacturera flexible y el comercio de los EE UU. — Utilizando un modelo que describe la tecnología de producción en 37 industrias de ingenieria de los EE UU en 1983 se encuentra que la tecnologia flexible contribuye consistente y positivamente a explicar las exportaciones netas, mientras que la tecnologia de producción masiva parece no haber contribuido ni positiva ni negativamente a dicha explicación. Las industrias caracterizadas por plantas grandes con production flexible, un alto grado de automatization, un gran número de productos nuevos y un crecimiento rápido han sido las de mayor éxito en cuanto a las exportaciones. También se encuentra que un modelo de comercio intraindustrial aplicado a los mismos datos explica aún mucho menos de la variación del comercio observada que el modelo de la proportion de factores.

     

Assessing the Efficacy of Consumer Boycotts of U.S. Target Firms: A Shareholder Wealth Analysis

This article analyzes the effectiveness of 125 U.S. boycotts from 1978 to 2017. On average, the results suggest that actual consumer boycott calls against U.S. target firms (treatment firms) had a negative and statistically significant effect on the shareholder wealth of U.S. target firms. The synthetic control method and the placebo tests confirmed that the negative cumulative abnormal returns (CAR) observed here are robust and not due to idiosyncratic shocks unrelated to the announced boycotts. Negative and statistically significant boycott effects were also found for boycott threats and categorical issues related to union issues, animal rights, living wages in less‐developed countries, racial/sexual discrimination, ideological issues, and political/religious boycotts. The results also show that firms with a higher level of competition and advertising activity experienced larger negative boycott effects; and firms with higher net income observed mitigated boycott effects.     

Production sharing and trade flows: A comparative analysis of Japan and the US

This paper examines the determinants of trade flows in parts and components related to global production sharing in machinery industries, using a newly compiled panel dataset for Japan and the US over the period 1988–2005. The findings show the importance of labour costs, and the quality of the legal system and physical infrastructure in attracting production sharing, as suggested by theory. It is also found that US production networks in the electronics industry have a regional focus on Asia, while those in the automobile industry are concentrated in North America. On the other hand, Japanese production networks in both industries are concentrated in Asia.     

Foreign direct investment and factor prices in U.S. manufacturing

Foreign Direct Investment and Factor Prices in U.S. Manufacturing. —We investigate whether inward foreign direct investment (FDI) can explain part of the increase in relative wages of skilled workers in U.S. manufacturing over the period 1977–1994 by studying the sector bias of the effects of FDI on sector prices and technology. We follow the two-stage mandated-wage approach based on the StolperSamuelson theorem. We find that inward FDI affects the sum of sector prices and productivity depending on the absorptive capacity available in the sector. We also find some evidence that inward FDI has induced a sector bias towards using skilled workers over the period 1977–1994.     

Export entry and exit by German firms

Export Entry and Exit by German Firms. — While exports have played an important role in German business cycles, little is known about the export supply response of German firms. This paper presents a dynamic model of the export decision by a profit-maximizing firm. Using a panel of German manufacturing plants, we test for the role of plant characteristics and sunk costs in the entry decision. We find evidence for substantial sunk costs: exporting today by a plant increases the probability by 50 percent that the plant will export tomorrow. This advantage depreciates quickly, falling by two-thirds in a year. The authors also find evidence that plant success, as measured by size and productivity, increases the likelihood of exporting.     

Tariff protection and workforce gender: Evidence from U.S. manufacturing industries

A data set of 266 four-digit SIC U.S. manufacturing industries is used to examine the relationship between tariff protection and workforce gender. The paper shows that industries with a relatively large proportion of women are more likely to be protected by U.S. tariff policy, even when factors such as wages and human capital are controlled. Furthermore, this result is robust in that it is not driven by any particular industry or industries.     

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.