Exposure to foreign markets and plant-level innovation: evidence from Chile and Mexico

Unlike most studies that calculate productivity as a residual, this study uses detailed plant-level data to examine the relationship between exposure to foreign markets and specific innovations including product design, investment in new tools (such as computers), research and development, and innovation in products and processes. The results suggest that exposure to foreign markets is positively related to most types of technology. The effects seem to be stronger in recently liberalized Mexico, which may suggest that the innovation gains from liberalization are greatest in the early stages of liberalization.     

A Eurasian (or a Soviet) Union? Consequences of further economic integration in the Commonwealth of Independent States

On January 1, 2012, the Customs Union of Belarus, Kazakhstan, and Russia took a big step in regional integration by removing all barriers to trade, capital, and labor movements between the three countries. Policymakers have signaled that even this landmark step is merely a way station en route to a comprehensive ‘Eurasian Union’ by 2015. However, is this idea of greater integration a good one, and if so, what shape should the integration take? This article examines the opportunities and challenges for both deeper (i.e., more intensive) and broader (i.e., more inclusive) integration in the Eurasian space and concludes that greater integration will work for all only if it is based on fostering the trade liberalization that has been missing from the region. Moreover, including Ukraine is not necessary for the integration to succeed, but Central Asian nations should be encouraged to follow the example of a liberalized Eurasian Union. Acting as the European Union did in the post-war era, the Eurasian Union could help member countries take the liberalizing steps they could not take on their own.     

Can compensation save free trade?

When the median voter loses from trade reform, liberalization is blocked. Allowing the electorate to vote for compensatory subsidies may reverse this outcome. However, the order of the agenda may matter. The winners who pay the compensation may be sufficiently powerful to block compensation if trade is first liberalized. Seeing the inevitable outcome of sequential votes, the median voter realizes he will not be compensated for his losses and opposes liberalization. In contrast, liberalization can be achieved if compensation is placed first on the agenda. Finally, there is a significant chance that the least efficient compensation scheme will be chosen.     

FDI in post-production services and product market competition

Post-production services, such as sales, distribution, and maintenance, comprise a crucial element of business activity. We explore an international duopoly model in which a foreign firm has the option of outsourcing post-production services to its domestic rival or providing those services by establishing its own facilities through FDI. We demonstrate that trade liberalization in goods may hurt domestic consumers and lower world welfare, and that the negative welfare impacts are turned into positive ones if service FDI is also liberalized. This finding yields important policy implications, given the reality that the progress of liberalization in service sectors is still limited.     

North–South trade liberalization and returns to skill in the south: The case of Mexico

This study examines the effect of North American Free Trade Agreement (NAFTA), an instance of North–South trade liberalization, on returns to skill in Mexico. Mexico is abundant in low-skill workers relative to the US and Canada, and so, by the Heckscher–Ohlin–Samuelson trade model, NAFTA ought to have raised the relative earnings of low-skill workers, that is, lowered returns to skill in Mexico. Analysis of Mexican labour micro-data yields the finding that while returns to skill in industries producing tradeables have risen, ceteris paribus, since Mexico embarked upon trade liberalization by joining the GATT in 1986, this rise was less pronounced by 1999 in industries liberalized relatively rapidly by NAFTA, launched in 1994, than in industries liberalized relatively slowly by this phased trade treaty. This is considered evidence of NAFTA holding back rise in returns to skill, since it is plausible such a dampening would have been more marked in industries more rapidly exposed to trade with Mexico's skill abundant northern neighbours. Hence, this study suggests trade with developed nations may lower returns to skill in developing nations.     

Education, trade and investment liberalizations

Empirical evidence suggests a two-way causality between skilled labor and inward direct investment. I construct a general equilibrium model that allows for endogenous firm and plant-location decisions and the endogenous accumulation of skilled labor. I examine the effect of an education subsidy when trade is liberalized and investment is restricted and vice versa. For an initially skilled-labor-scarce country, I show that an education subsidy under investment liberalization can jump the economy to a high-level equilibrium, and that it may be possible to remove the subsidy completely and remain at the superior equilibrium.     

Economic integration,market discipline and productivity growth in Spain

This paper explores the changes on productivity growth, economies of scale and market discipline experienced by a selected number of Spanish manufacturing industries as a result of the 1986?–?92 integration of Spain into the European Union. Since the intra-union trade liberalization process spanned a seven-year, multi-stage, adhesion period we employ a model with a smooth transition variable to account fully for its impact. An additional model that uses separate sets of dummy variables captures differences in the regression estimates during the transitional and liberalized periods. In both model specifications we find strong evidence of increases in returns to scale and reductions in producers' mark-ups, whereas productivity growth increases are found to be small and uneven.     

Antitrust and Liberalization in developing countries

A number of developing countries around the world have recently liberalized once highly protected regimes through privatization programs and by reducing impediments to market trade. Many of these countries have adopted an antitrust policy as an integral component of their market reforms. Recent assessments of trade liberalization programs show disappointing results. Such outcomes contradict long-held beliefs that free trade is sufficient to generate competitive outcomes in small economies. Antitrust advocates view these underwhelming achievements as further justification for extensive antitrust enforcement. We argue instead that the failure of liberalization suggests not the correctness but the inappropriateness of the enactment of antitrust policies. The continuance of market power after liberalization is due primarily to lobbying activities by producer interest groups to establish nontariff barriers rather than to collusive practices among producers. Interest groups find cartelization and rent seeking as substitutes in raising prices above competitive levels. Accordingly, the establishment of antitrust serves to improve the relative attractiveness of seeking nontariff barriers. Antitrust policies are ineffective in challenging the emergence of nontariff barriers and thus may have the unintended consequence of promoting anticompetitive activities.     

Education bias of trade liberalization and wage inequality in developing countries

The aim of this article is to examine the impact of increased trade on wage inequality in developing countries, and whether a higher human capital stock moderates this effect. We look at the skilled–unskilled wage differential. When better educated societies open up their economies, increased trade is likely to induce less inequality on impact because the supply of skills better matches demand. But greater international exposure also brings about technological diffusion, further raising skilled labour demand. This may raise wage inequality, in contrast to the initial egalitarian level effect of human capital. We attempt to measure these two opposing forces. We also employ a broad set of indicators to measure trade liberalization policies as well as general openness, which is an outcome, and not a policy variable. We further examine what type of education most reduces inequality. Our findings suggest that countries with a higher level of initial human capital do well on the inequality front, but human capital which accrues through the trade liberalization channel has inegalitarian effects. Our results also have implications for the speed at which trade policies are liberalized, the implication being that better educated nations should liberalize faster.     

Adjustment Problems in Developing Countries and the U.S.-Central America-Dominican Republic Free Trade Agreement

Abstract

In this study, MERCOSUR's past exports to the EU under the protectionist environment of the period between 1988 and 1996 are examined and an attempt is made to determine MERCOSUR's exports' growth potential in a liberalized EU market. A sectoral study is considered indispensable since tariff and non-tariff trade barriers vary strongly among sectors. The influence of the macroeconomic environment on MERCOSUR's exports is examined in a dynamic panel analysis. A simulation study based on a quite comprehensive evaluation of EU trade barriers is performed for the Argentinean case to evaluate the impact of EU trade liberalization.     

International spillovers of China's structural reforms

This paper sheds light on the international spillovers of China's reforms in upgrading industrial capabilities, liberalizing capital account, internationalizing the renminbi, and transition to flexible exchange rates. Drawing on two-country New Keynesian model of endogenous entry and portfolio adjustment, we find that China's industrial upgrading that peddles on yuan appreciation lifts all boats through global production network irrespective of capital account convertibility, degree of renminbi internationalization, and exchange rate reform. Feasibility of appreciation-driven upgrading is called into question, however, when renminbi reform and capital account liberalization go in parallel. We also show that international spillovers disappear once renminbi internationalization is associated with liberalized capital account and flexible renminbi exchange rates.     

工业品贸易对工业就业影响的实证分析

本文通过实证分析,证实了工业品贸易对就业的拉动作用,其中出口是拉动就业的主要因素,进口对就业影响不明显。随着贸易自由化的推进,出口对就业的拉动作用逐步增强,进口对就业的冲击效应逐步显现。因此,要实现贸易与就业的均衡增长,就要立足于本国国情,充分发挥我国人力资源大国的比较优势,提升出口的就业拉动效应和降低进口的冲击影响,最大限度地趋利避害,实现就业和经济增长的协调发展。     

Assessing Managerial Discretion across Different Industries in China

In this study, managerial discretion in 37 industries in China is measured and ranked into high, medium and low groups. The results are compared with findings from Hambrick and Abrhamson＇s （1995） study in the U.S. context, and changes are examined in two dimensions of managerial discretion from 2001 to 2009. This study contributes a reliable measure of managerial discretion for future organizational and strategic studies, which can help explain the differences in managerial phenomena across different industries in China＇s institutional environment.     

Indirect network effects and the impact of trade liberalization: A note

In this note, we examine how trade liberalization affects production structure in the presence of indirect network effects (hardware/software systems). For these purposes we construct a simple two-country model of trade with two incompatible hardware technologies. It is shown that, given that both types of hardware exist before trade liberalization, liberalization and increased intra-industry trade in software products may reduce the variety of hardware technology via intensified network effects. It is also shown that, contrary to the findings of previous studies on intra-industry trade, some consumers may become worse off as the result of trade.     

Supply Chain Management in a Private Farming Vis-à-Vis Cooperative Processing and Distribution Environment of Dairy Sector in India

Organized segment of dairy sector was hitherto dominated by the cooperative sector that established a structured and three-tiered organizational hierarchy, procured milk from small-scale farms, processed and distributed milk and milk products. With the liberalization of India's economy and market entry by the private sector, new dynamics have emerged. These include increased supplies of a greater variety of value-added products and increased inter-firm competition with companies and supporting their sales development with integrated marketing initiatives. This fostered greater attention to branding, product positioning and product differentiation with intense price discounting for some products. In response to these challenges, the State cooperatives have started to integrate their operations in areas such as procurement of supplies, logistics, manufacturing, distribution and inventory management. However, these face a major constraint regarding the sufficient availability of milk supplies over space and time while due to political interferences, excess staff adds to the administrative costs therby inefficiencies in its operations and losses results.     

自由贸易是经济发展的必要选择吗？——基于历史视角的富国发展之路

通过分析当今几个最主要发达国家在它们各自发展阶段所采用的贸易保护方式的历史,来质疑当今发达国家鼓吹贸易自由化能有效促进发展中国家经济增长的观点,得出结论：发达国家的成功并不是建立在学术理论和经济政策上所倡导的贸易自由化,而是基于幼稚产业保护的技术性竞赛;发展是个复杂的过程,贸易自由化不应该在缺乏实证检验下被高度概括为适应所有经济体成功的条件;发达国家不应该限制发展中国家自由使用它们在发展阶段曾经使用过的贸易政策,而应该尊重它们的选择。     

Exclusive dealing and common agency in international markets

This paper investigates the contractual choice between exclusive dealing and common agency in a simple international oligopoly model where products are sold through intermediaries. We find that when trade barriers are high, domestic firms tend to adopt exclusive dealing contracts whereas trade liberalization may lead firms to choose common agency. Social welfare can be raised be prohibiting exclusive dealing (common agency) when trade barriers are high (low) and products are close substitutes.     

Large format stores and the introduction of new regulatory controls in South Korea

Since 1996, when Korea's retail industry was liberalized, new store formats such as large discount stores, have grown, it was widely believed, at the expense of incumbent rivals such as traditional markets and small operators. This paper seeks to empirically test this proposition: an important underpinning to new regulatory control policies. Research involved a spatial analysis of traditional markets (1456), large discount stores (408), and super-supermarkets (SSMs or hypermarkets (729)) spread throughout the country, in order to examine the scale and scope of the influence of the new retail store formats. The research is supportive of the ‘Traditional Commercial Activity Protection Zones’, which protect small and medium-sized enterprises (SMEs). From the perspective of traditional markets, it may be necessary for the South Korean government to promote additional, more proactive, support policies for SMEs.     

Book Review

This paper discusses partial approaches to trade liberalization, such as the Asia Pacific Economic Cooperation (APEC) group's Early Voluntary Sector Liberalization (EVSL) proposal and the "zero-for-zero" approach. Distortions to resource allocation and global markets that might result from partial liberalizations are discussed, and parallels drawn to the possible trade diversion impacts and welfare losses of regional liberalization and tariff escalation. A global Computable General Equilibrium (CGE) model is used to provide some numerical illustrations of the issues with respect to international trade in grains, oilseeds, and related processed products.     

The effects of cross-regional free trade agreements under a vertical industry structure

This paper examines the effects of a cross-regional free trade agreement (FTA) on tariffs, welfare, and the incentives for multilateral free trade in a three-country model with a vertical industry structure. We show that the FTA induces member countries to reduce their tariffs on nonmember countries. On the other hand, a nonmember country lowers its tariff on final-good imports, but raises its tariff on intermediate-good imports. Also, the FTA makes member and nonmember countries better off. After the FTA is enacted, member and nonmember countries have an incentive to support multilateral free trade, so an FTA acts as a building block for multilateral trade liberalization.