Models of export instability and empirical tests for less-developed countries

Alternative models are developed in which export earnings instability is generated by domestic supply, domestic demand or foreign demand fluctuations. Their relative merits over the 1957–1972 period are examined through multiple regression analysis for a sample of 50 LDCs, with breakdown into sub-samples based on the type of commodity exported and the nature of foreign markets. The results suggest that export instability originates mainly from foreign sources - especially variations of market shares in foreign markets and commodity groups. However, domestic supply and demand fluctuations are the dominant factors for countries highly-dependent on food exports. Geographic concentration is an important factor for countries dependent on food exports and developed-country markets.     

Exchange Rate Volatility and Exports: Regional Differences between Developing and Industrialized Countries

This study uses a large panel of industrialized and developing countries to investigate the link between exchange rate volatility and exports. Although the empirical literature on this relationship is extensive, a clear consensus about its nature and importance is yet to emerge. Using fixed- and random-effects models to capture cross-country differences, pooled export equations are estimated for the entire panel and various subsets of countries. The results, which are robust across different volatility measures, indicate that negative effects exist for LDC exports, especially from Latin America and Africa, but not for exports from Asian LDCs or industrialized countries.     

Diversification and Specialization Paradox in Developing Country Trade

This paper examines and resolves a puzzling issue associated with less developed country (LDC) export compositions. Since the newly industrialized country (NIC) takeoff during the early 1970s, LDC exports have involved an increasingly broader and diversified export base. Yet trade theories, both “old” that focus on classic comparative advantage, and “new” which rely on scale economies, lead to expectations of growing specialization as a concomitant of LDC takeoff. This study examines periods of rapid growth and structural transformation of trade for a representative group of LDCs covering a wide geographic and temporal sample.     

Resource-based industrialization in the developing countries: A survey

This survey at

shed light on the potential contribution of industrialization based on resource processing to efficient growth, employment creation, greater equity and economic independence. The use of capital-intensive methods to reduce raw material costs appears to confer comparative advantage on countries with cheap capital. Lower transport costs due to substantial weight reduction in processing may counter this advantage for some stages of processing, but does not universally favor LDC exporters. Most major producers export sufficient quantities to achieve scale economies typical of resource processing, but economies of scale are a barrier in processing for the domestic market in all except the largest LDCs. External economies of industrialization are also thought to favor processing in the industrial countries, but potential linkages could stimulate some complementary investments in LDCs. Because resource-based industries are not impressive contributors to direct or indirect employment creation, they are likely to perpetuate the pattern of dualism and inequality present in typical resource-rich countries.Third-world exporters may be barred from entry into resource processing by the dominance of multinational firms in the metals and petroleum industries; by shipping conference freight rates that discriminate against processed commodities; and by importing country tariff structures that provide substantial effective protection against many LDC semi-processed exports. Processing of natural resources for export tends to continue the broad pattern of trade, financial and technical dependence of developing countries, although market dependence may decrease at some stage of processing. Home-oriented processing avoids market dependence, but cannot escape outside dependency on technology, management and finance.     

Market structures in small open economies: Evidence from Denmark

This paper provides some stylized facts about market structure in Denmark, a country exhibiting high rates of exports and imports as is common in small developed economies. Utilizing disaggregated data at the firm-product level for manufacturing industries, we highlight the widespread presence of industries that are neither purely oligopolistic or monopolistically competitive; rather, they contain a few domestic leaders with numerous firms having insignificant domestic market shares. We also document that, relative to the latter type of firms, leaders have greater labor productivity, are more capital intensive, and pay higher wages; additionally, they are more likely to export and import, although they exhibit a greater domestic intensity relative to exporters with negligible domestic market shares. Finally, through a model of leaders and followers, we investigate how leaders can benefit from acting strategically against small firms and quantify its potential impact on industry outcomes through a numerical exercise.     

Diverse twins: analysing China’s impact on Italian and German exports using a multilevel quantile regressions approach

Germany and Italy are the largest manufacturing producers in Europe and export over 70% of their products to OECD countries. While they share many characteristics, they are also diverse in term of specialization and destination markets. Italy has a productive structure largely based on labour intensive sectors, while Germany is mainly specialized in high-tech goods. We study whether these characteristics make the two countries vulnerable in different ways to the competitive pressure by emerging economies, especially China, which experienced the strongest increase in export market share during the last decades. We discuss the impact of China on the export performance of Italy and Germany on OECD markets. Using data for the period 1995–2009, we implement a novel model to account for two important data characteristics: their hierarchical hidden structure (captured by a multilevel model) and the heterogeneity of the export shares (captured by a quantile approach). Results show that Chinese competition on Italy’s and Germany’s market shares differ by sectors, but, on average, Italy is not more vulnerable than Germany. These results are relevant for policy implications and for an ex-post analysis of the ‘best response’ to the Chinese competition.     

Quota removal and firm-level offshoring: Theory and evidence

Recent literature indicates that offshoring can effectively increase firm productivity and improve product quality. Therefore, global value chains have increased in importance. In this paper, we investigate the impact of export growth on firm-level offshoring. Removal of the quota on textile and clothing products in importing countries boosts China's exports of quota-restricted products. This removal offers a quasi-natural experiment. Using a difference-in-differences approach, we find that export growth induced by the quota removal increases the extensive and intensive margins of firm-level offshoring. The impact is more pronounced on domestic firms and firms that are engaged in ordinary trade. Our findings suggest additional gains from trade liberalization: trade liberalization not only boosts exports, but also enhances firm productivity and product quality through encouraging firm-level offshoring.     

国际贸易中消费排污产品的排污标准

该文运用新近拓展的差异减污模型分析消费排污产品的排污标准对贸易中的发达国家和发展中国家的效应.结果显示,发达国家实行排污标准,短期内对发展中国家的低减污产品构成非关税壁垒,长期中却提升发展中国家产品的减污量及出口量.国际贸易中垂直差异的文献表明,最低质量标准降低本国社会福利,本研究则显示发达国家实行排污标准提高本国的社会福利.     

Who Benefits from Voluntary Export Restraints?

Using a simple Cournot-oligopoly model, the paper examines the effects of voluntary export restraints (VERs) on profits, market shares, consumers' surplus, and domestic welfare when the domestic market is open to foreign direct investment (FDI) or exports from a third country. A VER may induce FDI from the VER-restricted country or exports from the third country. Under certain circumstances, the domestic firm loses from a VER. Even if the domestic firm gains, the increase in the market share of the domestic country induced by the VER could be less than that of the third country.     

Trends in Disaggregated Import and Export Prices in Europe: Implications for the Trade and Wages Debate

We consider carefully the evidence from traded prices (as proxied by unit values) concerning the transmission of the effects of globalisation to domestic labour markets. Using standard index number techniques we decompose changes in sectoral import and export unit values into movements due to changes in pure prices of the initial bundle of goods imported or exported and changes due to upgrading of that bundle. Looking at the imports of selected European countries of textiles, clothing and footwear relative to engineering products we find evidence of strongly falling pure prices of the unskilled intensive products relative to the skilled products in the 1980s. This reinforces the view that import prices can capture the impact of globalisation in terms of falling relative prices for products produced with the intensive use of unskilled labour. However, the trends are not common across all the unskilled sectors; footwear is clearly an exception. In the absence of detailed domestic data, we look for reactions by domestic firms to increased import competition in movements in the price and composition of exports. We find evidence of stiff price competition from imports being associated with similar movements in export prices and no support for the view that import competition from low–wage countries has led to upgrading of the quality of exports.     

Heterogeneous firms,corporate taxes and export behavior: A firm-level investigation for Italy

This paper analyses the effect of home corporate taxes on a firm’s decision to expand the scale of its activity through exports using a rich dataset on Italian firms. Starting out from the observation that firms’ export activity vary greatly among them and tend to be systematically related to firm’s characteristics, we relate differences in firms’ export choices to firm level incidence of corporate taxes. Our results suggest that (i) corporate taxes matter at both the extensive and the intensive margin and (ii) higher corporate taxes may increase the probability of new firms’ entry in the foreign market while they decrease the export intensity of incumbent exporters.     

The exceptional performance of exporters and labour market outcomes: evidence from Egyptian firms

ABSTRACT

This paper examines the manufacturing export market in Egypt after the Arab Spring using a novel firm-level census dataset from 2013. Export is very rare in Egypt. The conventional export premia are very high, except for total factor productivity. Exporters have stark effects on labour market outcomes, including wages, employment, demand for skilled and female workers, wage inequality, and job security. These findings have two important implications: (1) Manufacturing exports might be monopolized by large firms, and (2) promoting exports could improve labour market outcomes, especially for skilled and female workers.     

Terms of trade and domestic distribution: Export-led growth with abundant labour

A general equilibrium macro model is constructed to explore effects of export-led growth policies on the terms of trade and the domestic distribution of a developing region with abundant labour. This region, the South, trades with another, the North; they have different technologies and supplies of factors. It is shown that under certain conditions of dualism in the production of goods and of abundant labour supply in the South, an increase in the volume of exports from the South may bring about a sustained worsening of the South's terms of trade with the North even if this increase in exports is due to a positive shift in demand from the North. This change in the terms of trade is accompanied by a sustained loss of purchasing power of wages within the South. These results take place in a Walrasian stable market. When technologies are more homogenous and labour less abundant, the results are reversed: increased exports will take place together with improvements in terms of trade and a tendency to equalise factor prices between the regions. The results argue for coordination of domestic and international policies with special attention to technologies and labour markets.     

Competition between Brazil and other exporting countries in the US import market: a new extension of constant-market-shares analysis

This article develops a new extension of the constant-market-shares model, attributing the gains or losses of market share of an exporter in a specific market to its competitors. The method is then applied to Brazil's exports of manufactured products to the US market, determining from which countries and by how much Brazil gained market share, and to which countries Brazil lost market share in the period between 1992, 1999 and 2004. The bilateral gains and losses of Brazil to OECD countries are shown to be related to changes in the relative unit labour costs of these countries through a two-period panel data analysis.     

Insulating countries against fluctuations in domestic production and exports: An analysis of Compensatory Financing schemes

For several years the IMF has operated a Compensatory Financing Facility (CFF) whose aim is to smooth out the effects of a shortfall in export receipts in a particular country. In 1981, the Facility was extended to cover imports of foodstuffs, with the objective of reducing food insecurity. The purpose of this paper is to provide a theoretical analysis of the CFF, interpreted as an international scheme whose object is to stabilise some domestic policy target, such as consumption, by providing loans based on the value or volume of a country's exports or imports. The paper shows that, under certain assumptions, the IMF's CFF for exports provides net gains to individual countries. The extension of the scheme to include food imports could provide further gains, but only if it is appropriately redesigned.     

Export surges

How can developing countries stimulate and sustain strong export growth? To answer this question, we examine 92 episodes of export surges, defined as significant increases in manufacturing export growth that are sustained for at least 7 years. We find that export surges in developing countries tend to be preceded by a large real depreciation, which leaves the exchange rate significantly undervalued. In contrast, in developed countries, the role of the exchange rate is less pronounced. We examine why the exchange rate is important in developing countries and find that the depreciation is associated with a significant reallocation of resources in the export sector. In particular, depreciation stimulates entry into new export products and new markets. These new exports are important, accounting for over 40% of export growth on average during the surge in developing countries. We argue that a large real depreciation induces firms to expand the product and market space for exports.     

Tariff escalation,export shares and economy-wide welfare: A computable general equilibrium approach

The current literature suggests that tariff escalation (TE) lowers the competitiveness of processing sectors. Coffee and cotton are agricultural products that face the problem of TE in developing countries, where we observe low global coffee product export shares but high global cotton textile export shares, posing a question on TE's impact on competitiveness. This paper employs a computable generalised equilibrium (CGE) modelling approach to examine the impact of TE on export shares of processed coffee and cotton textiles. We modify the standard GTAP (global trade analysis project) model to solve for global export shares and simulate the impact of eliminating TE on coffee and cotton to analyse economy-wide trade and welfare implications. Results show that TE has mixed effects on export shares, depending on the initial economic structure. Findings reveal that the elimination of TE on cotton and coffee may generate potential global gains of over US$ 0.7 billion, mainly from the cotton sector. Given the relative size of these sectors in global agriculture, the magnitude of gains is not small. This underlines the need for the policy-makers to examine, address and evaluate the prevalence of TE on a sectoral basis in ongoing WTO negotiations.     

The cost and composition of Indian exports

India has a history of export promotion policies extending back into the 1950's. These policies seem to have been applied without regard to comparative advantage and this study indicates the high cost of India's disregard for economic efficiency. Using the domestic resource cost concept as the criterion for measuring relative export efficiency, the present structure of Indian exports is examined on both the sectoral and product level. The results show not only an unacceptably wide divergence in the domestic resource cost of exports on the margin - indicating a misallocation of resources in the export sector - but also an export incentive system which fails to select India's most efficient exports.     

The Export Performance of the 2004 EU Enlargement Economies since the 1990s: a Constant Market Share Analysis

This study focuses on the export performance of the 2004 European Union (EU) enlargement economies to the EU15 between 1990 and 2013. The long time span analysed allows to capture different stages in the relationship of these new members with the EU before and after accession. The study is based on the constant market share methodology of decomposing an ex-post country’s export performance into different effects. Two constant market share analyses were selected in order to disentangle (i) the growth rate of exports and (ii) the growth rate of exports relatively to the world. Both approaches are applied to manufactured products grouping products in different classifications of sectors. Results provide information on export performance for the ten economies individually considered, including the importance of each EU15 destination market.     

Export Market Performance of OECD Countries: An Empirical Examination of the Role of Cost Competitiveness

We investigate the relationship between export market shares and relative unit labour costs using a long panel of 12 manufacturing industries across 14 OECD countries. We ask how sensitive are export market shares to changes in relative costs and what determines this sensitivity? Both costs and embodied technology are important, but neither can fully explain changing export positions. We explore whether residual country-specific trends might be linked to 'deep' structural features of economies. Sensitivity to labour costs is lower in high tech industries and core ERM countries. Industry elasticities have increased, especially in industries subject to increasing product market competition.