Sovereign debt crises and credit to the private sector

We use micro-level data to analyze emerging markets' private sector access to international debt markets during sovereign debt crises. We find that these crises are systematically accompanied by a decline in foreign credit to domestic private firms, both during debt renegotiations and for over two years after restructuring agreements are reached. This decline is large, statistically significant, and robust. We find that this effect is concentrated in the non-financial sector and is different for firms in the exporting and in the non-exporting sectors. We also find that the magnitude of the effect depends on the type of debt restructuring agreement.     

Firm and sectoral heterogeneity in markup variability

Many theoretical models assume that the markup of price over marginal costs is the same for all firms in a sector, irrespective of firm size, type, or efficiency. We analyze the distribution of markups for 70 Finnish sectors using a complete dataset, including both manufacturing and services sectors and firms of all sizes. In contrast to the constant markup hypothesis, we find (i) large differences in markups within sectors, (ii) higher markups for small firms and domestic firms, and (iii) greater markup heterogeneity in sectors with low capital-labour ratios and a large number of firms.     

Power laws in firm size and openness to trade: Measurement and implications

Existing estimates of power laws in firm size typically ignore the impact of international trade. Using a simple theoretical framework, we show that international trade systematically affects the distribution of firm size: the power law exponent among exporting firms should be strictly lower in absolute value than the power law exponent among non-exporting firms. We use a dataset of French firms to demonstrate that this prediction is strongly supported by the data, both for the economy as a whole and at the industry level. Furthermore, the differences between power law coefficients for exporters and non-exporters are larger in sectors that are more open to trade. While estimates of power law exponents have been used to pin down parameters in theoretical and quantitative models, our analysis implies that the existing estimates are systematically lower than the true values. We propose two simple ways of estimating power law parameters that take explicit account of exporting behavior.     

Sovereign Ratings and Oil‐Exporting Countries: The Effect of High Oil Prices on Ratings

We investigate how high and rising oil prices in the 2003–2008 period affected the sovereign ratings of oil‐exporting countries, after controlling for fundamentals. Based on a large dataset of countries from Standard and Poor's and Moody's, we find strong statistical evidence of a large ratings premium – nearly two notches – for those oil‐exporting countries with a large share of net oil revenue to gross domestic product, relative to countries with similar economic fundamentals. We have some limited forecast information from the rating agencies and the effect increases when we include this information, providing further evidence that this ratings premium is not driven by expected improvements in fundamentals. This finding has implications for asset prices in oil‐exporting countries and highlights the risk that in the event of a sharp unanticipated drop in oil prices, sovereign rating downgrades of oil‐exporting countries could be sharper than the deterioration in their economic fundamentals.     

Wage Effects of Trade Reform with Endogenous Worker Mobility

In this paper, we use a linked employer–employee database from Brazil to evaluate the wage effects of trade reform. With an aggregate (firm-level) analysis of this question, we find that a decline in trade protection is associated with an increase in average wages in exporting firms relative to domestic firms, consistent with earlier studies. However, using disaggregated, employer–employee level data, and allowing for the endogenous assignment of workers to firms due to match-specific productivity, we find that the premium paid to workers at exporting firms is economically and statistically insignificant, as is the differential impact of trade openness on the wages of workers at exporting firms relative to otherwise identical workers at domestic firms. We also find that workforce composition improves systematically in exporting firms, in terms of the combination of worker ability and the quality of worker–firm matches, post-liberalization. These results stand in stark contrast to the findings reported in many earlier studies and underscore the importance of endogenous matching and, more generally, non-random labor market allocation mechanisms, in determining the effects of trade policy changes on wages.     

The effects of loss aversion on trade policy: Theory and evidence

We study the implications of loss aversion for trade policy determination and show how it allows us to explain a number of important and puzzling features of trade policy. Some important questions concerning trade policy are why a disproportionate share of protection goes to declining industries and why trade policy has an anti-trade bias. We show that if individual preferences exhibit sufficient loss aversion, higher protection will be given to sectors in which profitability is declining. We also show that if the coefficient of loss aversion is large enough, there will be an anti-trade bias in trade policy. Using a nonlinear regression procedure, we find support for the model and the estimates of the loss aversion parameters are very close to those obtained by Kahneman and Tversky (Kahneman, D., Tversky, A., 1992. Advances in Prospect Theory: Cumulative Representation of Uncertainty. Journal of Risk and Uncertainty 5, 297-323.) with experimental data. Protection is found to be more responsive to losses than to gains, and the estimates of the coefficient of loss aversion are about 2. We also find evidence of loss aversion in lobby formation.     

Non-linear panel estimation of import quotas: The evolution of quota premiums under the ATC

We develop a panel-based inequality constrained least-squares (ICLS) framework for estimating the export tax equivalent (ETE) of quotas where the ETEs vary over time. Working with a panel of bilateral data on textile and clothing trade,underlying bilateral tariffs, and the country-pair coverage of quotas under the WTO's Agreement on Textiles and Clothing (ATC), we use this framework to examine the evolution of market access conditions in the textile and clothing sectors. Our estimating framework takes advantage of the panel nature of trade data when calculating export tax equivalents while allowing for inequality constraints on the quota premium estimates. We also implement quadrature methods for calculating confidence intervals for our regression-based NTB measures.     

Firm export dynamics and the geography of trade

Two recent trends in international economics have been an increased focus on the geography of trade (e.g. what factors determine where a country exports) and the emergence of new theoretical and empirical work examining exporting activity at the firm-level. However, data limitations have prevented much progress in combining these two areas, because very few countries provide firm-level data breaking down firm exports by their destination. This paper uses a unique survey of Irish exporting firms with information on over fifty destinations for a five-year period to fill some of the gaps in this empirical literature. In particular we investigate how well the predications of a model of exporting with firm heterogeneity fits with the patterns of this detailed data source. Amongst our findings are that firm productivity differences are a factor in explaining the number of export markets a firm has but the prediction of a hierarchy of markets could only be weakly upheld by the data. Firm involvement in individual export markets is found to be much more dynamic than export status. Entry and exit to markets is shown to be a quantifiably important component of overall export flows, with this factor becoming more important for less popular markets. The paper also shows how the patterns of entry and exit into export markets combine to determine the overall firm-level distribution of number of markets entered.     

Trade and Productivity in a Transition Economy: the Role of Industry and Export Destination

This paper focuses on the joint role of industry technology intensity and export market characteristics in the analysis of export-related productivity gains. Using a unique database of Ukrainian manufacturing firms in 2000-06, we classify all manufacturing sectors according to their technology intensity and estimate destination-specific learning by exporting effects separately for firms operating in high and low technology sectors. New exporters in high technology sectors enjoy robust long-term productivity growth premia when targeting advanced export markets, consistent with learning through exports. Export entrants in low technology sectors, instead, enjoy mostly short-term productivity improvements regardless of the export destination. Our findings suggest that the systematic distinction between the technology intensity of various industries is a relevant dimension for empirical studies on destination-specific learning by exporting.     

Trade effects of the Europe agreements: A theory-based gravity approach

We analyze normalized productivity differences for 15 developing Latin American countries and four firm types: National Domestic, National Exporter, Foreign Domestic, and Foreign Exporter. There are no productivity thresholds for viability, export activity, or multinational activity, but we do find a clear size productivity premium and development productivity premium in the manufacturing sectors. We also find a clear foreign-ownership productivity premium, both for domestic firms and for exporting firms and both for manufacturing sectors and services sectors. In contrast, we only find an export productivity premium for national firms in the manufacturing sectors.     

Factor Intensity,product switching,and productivity: Evidence from Chinese exporters

This paper analyzes how a firm's specialization in its core products after exporting affects its factor intensity and productivity. Using Chinese manufacturing firm data for the 1998–2007 period, we find that firms become less capital-intensive but more productive after exporting, compared to non-exporters that share similar ex ante characteristics. To rationalize these findings that contrast with existing studies, we develop a variant of the model by Bernard, Redding, and Schott (2010, 2011) to consider firms producing multiple products with varying capital intensity. The model predicts that when a firm in a labor-abundant country starts exporting, it specializes in its core competencies by allocating more resources to produce more labor-intensive products. Firm ex ante productivity is associated with a smaller decline in capital intensity after exporting. A sharper post-export decline in capital intensity is associated with a larger increase in measured total factor productivity. We find firm-level evidence supporting these predictions. Using transaction-level data for the 2000–2006 period, we show that Chinese new exporters add products that are less capital-intensive than their existing products and drop those that are more capital-intensive in subsequent years.     

Unions, competition and international trade in general equilibrium

We develop a two-country, multi-sector model of oligopoly in which unionised and non-unionised sectors interact in general equilibrium. The model is used to study the impact of trade liberalisation, deunionisation and firm entry on wages in unionised and non-unionised sectors, and on welfare. We find that a shift from autarky to free trade increases non-union wages and welfare, whereas the effect on union wages is ambiguous. We also show that partial deunionisation leads to higher wages in both unionised and non-unionised sectors, but only increases welfare when the proportion of unionised sectors is sufficiently low. Finally, wages in non-unionised sectors necessarily increase with firm entry, while the response of union wages and welfare depends on the trade regime.     

Service Trade and Occupational Tasks: An Empirical Investigation

Using microdata for Belgium, we investigate the relationship between changes in the task content of production and the rise in the number of service exporters. We show that occupational tasks changes display an extremely consistent relationship with participation to service exports: in sectors in which the importance of face‐to‐face communication with customers has increased, the firm‐level likelihood of entering export markets has decreased; instead, the likelihood of exporting increased in sectors in which the sophistication of production and delivery has expanded (following an increase in cognitive tasks). Moreover, our analysis suggests that the change in IT use per se does not strike as being a key underlying force behind the increase in the extensive margin of service exports. These results are robust controlling for comparative advantage, offshoring, trade liberalisation and demand shifts.     

Democracy, foreign direct investment and natural resources

Empirical studies that examine the impact of democracy on foreign direct investment (FDI) assume that the relationship between democracy and FDI is the same for resource exporting and non-resource exporting countries. This paper examines whether natural resources in host countries alter this relationship. We estimate a linear dynamic panel-data model using data from 112 developing countries over the period 1982-2007. We find that democracy promotes FDI if and only if the value of the share of minerals and oil in total exports is less than some critical value. We identify 90 countries where an expansion of democracy may enhance FDI and 22 countries where an increase in democratization may reduce FDI. We also find that the effect of democracy on FDI depends on the size and not the type of natural resources.     

The Skill Structure of Export Wage Premium: Evidence from Chinese Matched Employer–Employee Data

We study how the wage gap between exporting and non‐exporting firms (export wage premium) differs across skill groups, using unique matched employer–employee data from China. We find robust evidence that exporters pay relatively higher wages than non‐exporters to more educated workers. The differences in export wage premium across education groups are sizable. Further investigations show that the positive correlation between export wage premium and education is more pronounced in sectors with higher scope for quality differentiation. This is consistent with the theory that exporters produce relatively higher quality goods which require relatively higher quality skilled workers.     

Does foreign investment benefit the exporting activities of Vietnamese firms?

Using firm-level data, this paper examines the effects of foreign investment on the exporting behaviour of domestic firms in the Vietnamese manufacturing and service sectors. Applying the Heckman selection model on panel data and following the Wooldridge approach, we find that investment by foreign firms has a significant positive effect on the decision of domestic firms in the same and upstream sectors to export. The proportion of exports of domestic firms declines through horizontal and forward linkages, but increases through backward linkages in the manufacturing sector. However, there is only weak evidence in support of export spillovers on domestic firms in the service sector. We also find that the presence of foreign firms has differing effects on the exporting activities of low- versus high-tech firms in the manufacturing sector.     

Do safeguard tariffs and antidumping duties open or close technology gaps?

This paper examines how the country-breadth of tariff protection can affect the technology adoption decisions of both domestic import-competing and foreign exporting firms. The contribution of the analysis is to show how firm-level technology adoption changes under tariffs of different country-breadth. I show that a country-specific tariff like an antidumping duty induces both domestic import-competing firms and foreign exporting firms to adopt a new technology earlier than they would under free trade. In contrast, a broadly-applied tariff like a safeguard can accelerate technology adoption by a domestic import-competing firm, but will slow-down technology adoption by foreign exporting firms. Because safeguard tariffs can delay the foreign firm's adoption of new technology, the worldwide welfare costs associated with using them may be larger than is generally believed.     

Entry into Export Markets and Product Quality

Using a rich data set of Chilean exporters, we analyse several issues regarding the relationship between entry into export markets and product quality. We find that every year, a large number of new exporting relationships are initiated, but the survival rate of these entries is very low and declines over time. Using unit values as a proxy for product quality, our estimations show that entry is generally associated with higher product quality. This higher quality, however, tends to reduce over time and eventually disappears three years after entry. In addition, our evidence suggests that the positive relationship between entry and quality is more prevalent in new exporters. To better identify this effect, we explore whether there are systematic differences across sectors. As expected, for sectors in which quality differentiation may be important, our findings reveal that reference‐price and differentiated products show a higher price in the year of entry and a longer convergence to incumbent prices. These results hold after controlling for potential sample selection bias.     

Trade, turnover, and tithing

This paper examines the hypothesis that turnover affects trade preferences. High turnover industries are similar to the Stolper-Samuelson assumption of perfect factor mobility, so factor of production drives trade preferences. Among low turnover industries, as in the specific factors model, net export position determines trade preferences. We show that PAC contribution patterns are consistent with this hypothesis. In high turnover industries, capital groups give significantly larger shares of their campaign contributions to free trade supporters than labor groups do. Among low turnover industries, on the other hand, exporting and import-competing groups differ significantly in their financial support for free traders.     

Do interest groups affect US immigration policy?

While anecdotal evidence suggests that interest groups play a key role in shaping immigration policy, there is no systematic empirical analysis of this issue. In this paper, we construct an industry-level dataset for the United States, by combining information on the number of temporary work visas with data on lobbying activity associated with immigration. We find robust evidence that both pro- and anti-immigration interest groups play a statistically significant and economically relevant role in shaping migration policy across sectors. Barriers to migration are lower in sectors in which business interest groups incur larger lobbying expenditures and higher in sectors where labor unions are more important.