Trade and employment in Vietnam: how firms' trade matters

This paper aims to analyse how employment and wages change when a firm's trade status is altered. Using a detailed firm-level dataset of Vietnamese manufacturing enterprises, the study finds that how firms trade matters for firm employment and wages in Vietnam. The average effect of one-way trading (exporting or importing) is positive for both firms' total employment and female employment. Direct trading activities are associated with a higher level of employment than indirect trading activities by firms. The female employment effect of direct exports is nearly three times higher than direct imports. Indirect imports hurt firms' total employment and female employment. Both direct and indirect two-way traders experience higher growth in firm employment than direct-only traders. However, it is interesting to note that indirect two-way trading activities have a positive impact on female employment. Furthermore, the commencement of direct import is also associated with greater labour cost advantage.     

Higher productivity in importing German manufacturing firms: self-selection, learning from importing, or both?

This paper uses a newly available comprehensive panel data set for manufacturing enterprises from 2001 to 2005 to document the first empirical results on the relationship between imports and productivity for Germany, a leading actor on the world market for goods. Furthermore, for the first time the direction of causality in this relationship is investigated systematically by testing for self-selection of more productive firms into importing, and for productivity-enhancing effects of imports (‘learning-by-importing’). We find a positive link between importing and productivity. From an empirical model with fixed enterprise effects that controls for firm size, industry, and unobservable firm heterogeneity we see that the premia for trading internationally are about the same in West and East Germany. Compared to firms that do not trade at all two-way traders do have the highest premia, followed by firms that only export, while firms that only import have the smallest estimated premia. We find evidence for a positive impact of productivity on importing, pointing to self-selection of more productive enterprises into imports, but no clear evidence for the effect of importing on productivity due to learning-by-importing.     

Indirect exporters and importers

This paper analyses the relation between firms’ productivity and the different modes of participation in international trade. In particular, it accounts for the possibility that firms can not only export their products, but also internationally source their inputs, either directly or indirectly. Using a cross section of firm level data for several advanced and developing economies, the study confirms the productivity-sorting prediction according to which domestic firms are less efficient than those that resort to an export intermediary, while the latter are less productive than producers which export directly. We show that the same sorting exists on the import side. By considering firms involved in both exporting and importing activities, we also find that direct two-way traders are on average more productive than firms trading indirectly on one of the two trade sides. The latter are in turn more efficient than indirect two-way traders. Finally, we investigate the effects of source-country characteristics on the sorting of firms into different modes of international trade.     

关于日本对华直接投资贸易效应的实证分析

有关外商直接投资的贸易效应已经成为理论界讨论的热点问题,大量文献讨论了投资对贸易流量的影响.本文在前人研究的基础上,采用协整检验及误差修正模型检验,分析日本对华直接投资对于中日双边贸易所产生的效应.结果表明,日本对华直接投资与中国对日进、出口均表现为一种显著的协整关系;无论从长期还是短期看,日本对华直接投资与中国对日本的出口具有显著的双向格兰杰因果关系,但与中国对日本进口仅有单向的因果关系.     

US Safeguards on Steel and the Markups of European Producers

This paper is among the first to explore the microeconomic impacts of a trade policy on foreign firms. We empirically investigate the effects of the US safeguard protection of steel imports in 2002 on the markups of EU steel firms. Using a large panel of affected EU steel firms between 1995 and 2005, we find that the protection they faced abroad significantly reduced their markups. Our results indicate smaller adverse effects on multi-product EU firms. Our study has wider implications as it quantifies the cost that trade protection imposes on trading partners, an externality currently not considered in any trade regulation. The US safeguard protection also resulted in some diversion of EU steel especially towards China, aggravating the situation on the Chinese steel market and ultimately resulting in the Chinese trade protection of steel imports. JEL no.  F13, L13, L61     

International trade and firm performance: a survey of empirical studies since 2006

The literature on international trade and firm performance grows exponentially. This paper attempts to summarize what we learn from this literature to guide future empirical and theoretical work in this area. The focus is on the empirical part of the literature that consists of recently published papers using data for firms from manufacturing or services industries to study the links between international trade (exports and imports) and dimensions of firm performance (productivity, wages, profitability and survival).     

Economic performance and international trade engagement: the case of Portuguese manufacturing firms

By combining economic and financial data for Portuguese manufacturing firms with data on their exports and imports, we uncover some aspects of the relationship between international trade engagement and firms’ performances. In line with recent theoretical and empirical developments in the international trade literature: (i) we testify that Portuguese international trade is highly concentrated, especially on the import side, and both in inter- and intra-sector terms; (ii) we corroborate previous studies and theses according to which two-way traders outperform only importers, only exporters and above all domestic firms; (iii) we find that the greater the diversification of markets and goods (especially with regard to imports), the better the performance achieved by internationalised firms; (iv) we notice that the higher the intensity of firms’ international trade (especially imports), the better their performance; (v) we also present evidence that destination markets for exports and origin markets for imports are also important in explaining firm’s performance.     

Trade creation,trade diversion,and the general equilibrium effects of regional trade agreements: a study of the European Community–Turkey customs union

This paper presents an industry-level analysis of trade flows in order to estimate the trade effects of Turkey’s customs union with the European Community (EC). The paper is able to distinguish between trade creation and trade diversion by employing tariff data on each good to measure the impact of not only the tariff level but also the difference between tariffs applied to imports from Europe and the most-favored nation tariffs applied to imports from other non-preferential trading partners. The paper estimates the general equilibrium effects of the customs union in addition to the effects of eliminating tariffs on the EC’s exports to Turkey. It concludes that the customs union has generated more than twice as much trade creation as trade diversion but that the overall impact of the customs union has been relatively small.     

Firms’ exporting and importing activities: is there a two-way relationship?

The literature on firm heterogeneity and trade has highlighted that most trading firms tend to engage in both importing and exporting activities. This paper provides some evidence that helps understanding to what extent this is the result of a two-way relationship. Using firm-level data for a group of 27 Eastern European and Central Asian countries from the World Bank Business Environment and Enterprise Performance Survey (BEEPS) over the period 2002–2008, we estimate a bivariate probit model of exporting and importing. After controlling for size (and other firm-level characteristics) we find that firms’ exporting activity does not increase the probability of importing, while the latter has a positive effect on foreign sales. This effect is mainly channeled through an increase in firm productivity and product innovation.     

Trade Policy Versus Competition Policy: Substitutes or Complements?

This paper deals with the difference between trade policy and competition policy for domestic prices, wages, and employment when product and labour markets are imperfectly competitive. We show that in the presence of country-specific institutions like trade unions, trade policy and competition policy are no longer substitutes in disciplining product and labour market distortions. While both domestic entry and foreign imports affect domestic price-cost margins, they differ in their effectiveness and their impact on the domestic labour market. The results in this paper suggest that enforcement of competition policy without a sufficient degree of openness to imports is typically not a first-best outcome. While domestic entry increases union welfare, foreign imports reduce it. Competition policy in the presence of labour unions is insufficient to reduce labour market distortions, while international competition reduces both labour and product distortions.     

How do firms respond to political tensions? The heterogeneity of the Dalai Lama Effect on trade

Little is known about the firm-level dynamics behind trade responses to political tensions. This article reinvestigates variation in the travel pattern of the 14th Dalai Lama to study how political tensions affect trading decisions of Chinese importers. Using monthly trade data from China Customs covering imports of machinery and transport equipment from 173 countries over the 2000–2006 period, our empirical results show a significant reduction of imports in response to foreign government members' meetings with the Dalai Lama. In line with the idea that Chinese importers face a trade-off between bearing costs from suboptimal trade transactions and costs from not accommodating the government, this ‘Dalai Lama Effect’ operates at the intensive margin, i.e., via a decrease in the import volume per importer. Examining differential effects across types of firm ownership, we find that the observed effect is driven by state-owned enterprises (and foreign-invested firms) and not by private companies. Moreover, while direct importers temporarily reduce their trade with Dalai Lama-receiving countries, there is some evidence that trade intermediaries fill the void. Overall, we find the effects to be much more short-lived than previously thought.     

The Dutch Grey Market

When-issued trading concerns transactions in securities that have not yet been issued. This paper investigates the Dutch “grey market” for when-issued shares prior to stock splits, using a unique hand-collected data set. Market makers are more likely to set up a when-issued market when the underlying firm is larger, the relative trading volume of the stock is higher, and the stock return is less volatile. The when-issued securities trade at a small premium over the regular shares during the weeks prior to the stock split, but this when-issued premium disappears in the last days of trading.     

China's impact on South African trade and inflation

There has been much controversy about the impact of Chinese growth on the rest of the world. It is generally accepted that China has a dampening effect on global inflation through the supply of cheap products. On the other hand, imports from China could displace domestic production and hence have adverse effects on economic growth and employment. Thus, the question of whether a country benefits from trading with China is a country-specific issue. The results in this paper indicate that limited short-term costs have resulted from the strengthening of trade relations between South Africa and China. As far as inflation is concerned, the paper does not find convincing empirical evidence at the aggregate level for inflation in China leading to domestic price changes. At the disaggregate level, however, there appear to be stronger sector-specific linkages between prices in China and South Africa.     

Expectation-driven fluctuations and welfare loss under free trade in two-country models

This paper investigates the interlinkage in the business cycles based on expectation-driven fluctuations of large-country economies in a free-trade equilibrium. We consider a two-country, two-good, two-factor general equilibrium model with sector-specific externalities. We show that some country's expectation-driven fluctuations can spread throughout the world once trade opens even if the other country has determinacy under autarky. We thus prove that under free trade, globalization and market integration can have destabilizing effects on a country's competitive equilibrium. Finally, we characterize a configuration in which opening to international trade improves the stationary welfare at the world level but deteriorates the stationary welfare of the country that imports investment goods and exports consumption goods. We conclude that in opposition to the standard belief, international trade might not be beneficial to all trading partners in the long run.     

Market information: Selling intensity and the dynamics of international economic integration

Summary We may assume the more a firm has traded previously with a particular party, or a particular country, the lower the costs of market information will be. When a firm starts to trade with a new country, we may further assume that the greater the cultural distance is between this country and its own country, the larger the information costs will be.A statistical study of the Swedish imports of selected consumers goods after the establishment of EFTA indicates that these assumptions hold true for non-selling intensive commodities, but not for selling intensive commodities.The research on which this paper is based is a part of a more general study of how various knowledge factors influence international business decisions, which will be published in a forthcoming bookHow Foreign is Foreign Trade? A first draft of the paper was written during a stay at the International Institute of Management in Berlin, and I am grateful for the aid which I recieved from the Institute's staff during its preparation. I am also most grateful Michal Groniewitz at the Institute of Business Studies in Uppsala whose time-consuming and tedious task it has been to prepare the tables on Swedish imports, on which the statistical part of the study has been based.     

The impact of China's trade liberalisation on the greenhouse gas emissions of WTO countries

We examine the effects of China's trade liberalisation, post entry into the WTO, on the greenhouse-gas (GHG) emissions of its trading partners. Using complementary estimators we establish that China's liberalised trade had significant effects on the GHG emissions of its trading partners. Increased exposure to Chinese exports increased the growth of consumption-based emissions while reducing production-based emission. The increase in consumption-based emissions was larger than the decrease in production emissions. Consumption emissions increased both through a scale effect (consumption increased) and a composition effect (consumption became more emissions intensive). Decomposition analysis suggests that the link between exposure to Chinese exports and the increase consumption-based emissions is the emissions embodied in imports: The emissions embodied in imports increased and imports became more emissions intensive. The increase in imported emissions was not offset by a reduction in domestic production of emissions either in final consumption goods or exports. (JEL: Q53, Q54, Q55).     

The effect of the New Silk Road railways on aggregate trade volumes between China and Europe

‘One Belt One Road’ is an extensive and complex initiative whose potential effect and influence are still currently pending for answers. This paper addresses the following research question: What is the effect of the New Silk Road intercontinental railways on the trade between China and its trading partners in Central Asia and Europe? We focus on nine railway lines connecting Europe and China, which started operations between 2011 and 2015. The countries’ trade patterns with railway connections to China are then compared to the countries without railway connections to China. We find the intercontinental railways have a positive effect on China’s exports to its trading partners in Central Asia and Europe, especially concerning exports of manufactured goods, machinery and transport equipment and miscellaneous manufactured articles. Moreover, the intercontinental railways have a positive effect on China’s imports of food and live animals from its trading partners.     

Factor adjustment implications of a free trade agreement between the United States and Thailand

Changes in intra-industry specialization indicators are used to assess factor adjustment pressures that may be experienced by U.S. and Thai industries from a proposed U.S.–Thailand Free Trade Agreement (FTA). Many industries experienced large increases in intra-industry trade over the 2000–2008 period. Ten U.S. industries are found to be candidates for factor adjustment pressures based on past experiences. These industries account for 38% of all U.S. imports from Thailand and 4% of imports from all trading partners. Results also show that nine Thai industries face possible adjustment pressures. These industries account for 9% of Thai imports from the United States. An FTA should result in a larger increase in U.S. exports to Thailand than U.S. imports from Thailand because Thai exporters face much lower tariffs in the U.S. market than do U.S. exporters in the Thai market.     

A dynamic analysis of the impact of uncertainty on import- and/or export-led growth: The experience of Japan and the Asian Tigers

Increasing integration of the Asian Tigers with the world economy through trade has exposed their income and trade to greater uncertainty and volatility. This paper models uncertainty in trade and income and re-examines the stability of the trade-growth nexus for Japan and the Asian Tigers in a dynamic framework. We find that in a volatile environment Japan's GDP growth is only import-led while Hong Kong's GDP growth is both export and import growth-led. On the other hand, incorporating uncertainty breaks the causal link between Korea's GDP growth and trade but it does not affect Taiwan's mutually causative relationship between GDP growth, with exports and imports. Lastly, the varied qualitative and quantitative impact of volatility in imports and exports on income growth among the Asian Tigers provides further thought for policy making.