Give Heckscher and Ohlin a chance!

Give Heckscher and Ohlin a Chance! — This paper argues that criticism of the empirical inaccuracy of Heckscher-Ohlin theory has been much exaggerated. Most tests have mis-specified the theory, particularly in their treatment of capital, a factor of production which is internationally mobile and therefore generally does not influence the pattern of trade. The argument is illustrated by a review of empirical studies of North-South trade in manufactures, which is well explained by a skill-only Heckscher-Ohlin model.     

The extent of anti-export bias in the South African economy during the 1990s

An analysis of trade incentives in the South African economy during the 1990s reveals two major findings. Firstly, the extent of the anti-export bias in South Africa's trade policy during the 1990s is less than is claimed in the empirical literature. The sectors subjected to an anti-export bias accounted for around 7 per cent of total output in 1990 and 21 per cent in 1999. Secondly, sectoral output growth did not strongly correlate with the prevailing trade incentives of the 1990s. Export production continued despite the prevalence of import substituting incentives in many sectors. Although further research is needed, this suggests that attention should also be given to other factors related to domestic competitiveness (e.g. skills development, productivity enhancement, competition policy, etc.) and market access if South African export production is to be significantly increased.     

经济一体化下中国贸易自由化调整成本实证研究——以中国和澳大利亚自贸区建立为例

在国际经济一体化背景下,本文从边际产业内贸易的分析角度对中国和澳大利亚贸易自由化调整成本进行实证分析。首先采用A指数对1992～2008年两国23个主要工业部门的边际产业内贸易水平进行测度,然后分别采用B指数比率和S指数比率对两国主要工业部门的贸易绩效和贸易自由化调整成本进行测度,最终得到一致结论:中国主要工业部门的贸易绩效整体较好,贸易自由化调整成本相对较小,但仍需进一步改善;"中高技术密集型制造品"行业调整成本低于"初级产品"和"劳动力和资源密集型制造品"行业;大部分"中高技术密集型制造品"行业的贸易自由化调整成本呈现明显下降趋势等。     

The refsnes seminar: Economic theory and north–south negotiations

This paper attempts to assess existing economic theory and its use by policy-makers in North-South negotiations. Particular attention is directed at international trade in manufactures, primary commodity issues, and international monetary questions. Problems considered include: weak theory, the employment of overly crude models by policy-makers, paradigm clash, implicit bias, and inadequate knowledge of facts. An agenda for further research and possible action concludes the discussion. The paper is a personal summary of the discussions in a conference on the relevance of economic theory to NIEO negotiations.     

The changing geography of world trade: Projections to 2030

Rapid economic growth in Asia (and some other emerging economies) has been shifting the global economic and industrial centres of gravity away from the north Atlantic, raising the importance of Asia in world trade, and boosting South–South trade. This paper examines how trade patterns are likely to change in the course of continuing economic growth and structural changes in Asia and the rest of the world over the next two decades. It does so by projecting a core baseline for the world economy from 2004 to 2030 and comparing it with alternative scenarios, including slower economic growth rates in the ‘North’, slower productivity growth in primary sectors, and prospective trade policy reforms in Developing Asia, without and with policy reforms also in the ‘North’ and in South–South trade. Projected impacts on international trade patterns, sectoral shares of GDP, ‘openness’ to trade, and potential welfare gains from reforms are highlighted, in addition to effects on bilateral trade patterns as summarized by intra- and extra-regional trade intensity and propensity indexes. The paper concludes with implications for regional and multilateral trade policy.     

The Terms of Trade,Debt and Development: with Particular Reference to Africa*

Abstract: This paper is concerned with how primary product price movements, and movements in the terms of trade of primary commodities, impinge on the balance of payments and growth of countries, and also on debt. The first part of the paper gives an up-to-date survey of the literature on the terms of trade of primary commodities which suggests overall an average deterioration of 0.5 to 1.0 percent per annum over the last 90 years. The second section models the terms of trade, and movements in the terms of trade are shown to depend on wage rate changes in industry, labour saving technical progress in industry, diminishing returns to agriculture, and land saving technical progress in agriculture. In the next section of the paper a model of balance of payments constrained growth is developed which enables the direct and indirect effects of movements in the terms of trade on growth to be quantified. Some recent evidence of the effect of terms of trade movements and volatility on growth is examined, and the effect of export instability on growth in Africa. The fourth section looks at the debt situation in Africa, and a simple model is presented enabling changes in the debt service ratio to be decomposed to see, particularly, the effect of export earnings instability on the debt service ratio. The last section draws some policy conclusions. Résumé: Le document examine comment les fluctuations des cours des produits primaires et l'évolution des termes de l'échange des produits de base influent sur la balance des paiements, la croissance et la dette des pays. La première section passe en revue la documentation la plus récente sur les termes de l'échange des produits primaires, qui fait apparaître en moyenne une deterioration de 0,5 à 1 pour cent par an sur les 90 dernières années. La deuxième section présente une modélisation des termes de l'échange et montre que leur variation est liée à l'évolution des taux salariaux dans l'industrie, au progrès technique occasionnant des économies de main-d'oeuvre dans l'industrie, aux rendements décroissants dans l'agriculture et aux économies de terres induites par le progrès technique dans l'agriculture. La section suivante du document développe un modèle d'une croissance entravée par la balance des paiements, permettant de quantifier les effets directs et indirects des fluctuations de la balance des paiements sur la croissance. Sont examinés quelques exemples récents des effets qu'exercent sur la croissance les mouvements et la volatilité de la balance des paiements ainsi que l'instablilité des exportations en Afrique. La quatrième section se penche sur la situation de la dette en Afrique et présente un modèle simple qui permet de décomposer les changements intervenant dans le ratio du service de la dette pour voir notamment comment l'instabilité des recettes d'exportation influe sur le ratio du service de la dette. La dernière section tire quelques conclusions d'ordre pratique. This paper is a mixture of survey material and analytical frameworks for thinking about movements in the net barter terms of trade of primary commodities relative to manufactured goods and how these movements affect the growth performance of countries both directly and indirectly (for example, by affecting the balance of payments, or by worsening the debt burden of heavily indebted countries). Following a brief introduction, the paper is divided into five parts. Firstly, there is an up-to-date survey of movements in the terms of trade of primary commodities and of less developed countries (LDCs), including Africa. Secondly, I address the issue of the determinants of terms of trade movements, drawing on my formalisation of Kaldor's two-sector agriculture-industry model which captures both neoclassical and structuralist explanations of terms of trade movements (Thirlwall, 1986). Thirdly, a model of balance of payments constrained growth is presented which enables the effect of terms of trade movements on economic growth to be quantified. I look at some of the recent evidence of the effect of terms of trade movements and volatility on output growth, and the effect of export instability on growth in Africa. Fourthly, the interrelationship between primary product price changes and international debt problems is examined, with specific reference to Africa. Finally some policy implications are drawn.     

Deindustrialization and changes in manufacturing trade: Factor content calculations for 1978–1995

Input-output analysis is used to estimate the labor content embodied in changes in manufacturing output resulting from changing patterns of manufacturing trade. For ten OECD countries from the late 1970s to the mid-1990s, changes in world trade of manufactures are estimated to have had a negative net effect on manufacturing employment of 3.5 million jobs, 2.0 million in the US alone, compared to a 6.2 million decline in actual manufacturing employment. The employment losses resulted mainly from North-South trade. At the industry level, there were large losses in labor-intensive industries and in industries that were strategically targeted by developing country industrial policies. There were employment losses in nearly all manufacturing industries, not a mixture of winners and losers. Such a pattern may result not from surging imports from the South but rather declining exports to the South in the aftermath of the 1980s debt crisis. JEL no. F14, F16, O24     

Terms of trade, catch-up, and home-market effect: The example of Japan

This paper explores theoretically and empirically the medium- and long-run relation of the terms of trade (ratio of traded goods prices) and economic growth of a pair of countries—one of which experiences a major catch-up process towards the other. Two theoretical interdependencies between the terms of trade and economic growth are offered: the home-market effect and the productivity-shock effect. These two effects are tested against each other in a cointegration analysis on data for Japan and the US from 1971 until 1997. Income is cointegrated with the terms of trade. The relevant empirical channel is the home-market effect. However, financial-market effects appear also to be relevant. J. Japanese Int. Economies 21 (4) (2007) 470–488.     

An empirical examination of the role of vertical product differentiation in north-south trade

Conclusions Our results indicate that the general line of reasoning embodied in the recently developed models of North-South IIT would seem to be valid. The various measures of income and size similarity do seem to affect North-South IIT in the theoretically predicted way. Further, this type of trade is positively impacted by the direction of quality differences and, to a lesser degree, the extent of quality differences. Finally, it would appear that modeling this type of trade on a bilateral basis using data detailed by both industry and country has not only theoretial appeal, but is empirically useful. The results, however, do not address the mechanism which generates these quality differences between the exports of the North and South. The theoretical models use different assumptions concerning the process which generates the quality differences. Such differences may be related to capital abundance as in Falvey [1981]; a Ricardian form of comparative advantage as in Flam and Helpman [1987]; or a complex combination of the two.¹⁵ Some preliminary evidence on the role of quality differences has been given in this paper. The difficult task of explaining what generates these differences is an important issue left unaddressed at this point.     

Trends,cycles and asymmetries in the terms of trade of primary commodities from developed and less developed countries

The paper examines the Prebisch hypothesis that primary product prices relative to the price of manufacturers fall during cyclical downturns by more than they rise during cyclical upturns and that this is an independent explanation of the secular tendency of the net barter terms of trade to move against primary commodities. An important distinction is made between primary products exported by less developed countries and those exported by developed countries. The greater cyclicality of primary product prices, and the long-run deterioration in their terms of trade since 1954 are confirmed, but there is little support for the Prebisch thesis that primary product prices relative to manufacturers are move sensitive on the downswing than the upswing.     

DETERMINANTS OF SOUTH AFRICA‐US INTRA‐INDUSTRY TRADE IN SERVICES: A WILD BOOTSTRAP DYNAMIC PANEL DATA ANALYSIS1

The study attempts to empirically identify factors that determine South Africa–US intra‐industry trade (IIT) in selected services during the period 1994‐2002. The study utilises Liu‐Davidson‐Flachaire wild bootstrap, which is robust to heteroscedasticity and provides estimates of the degree of parameter bias. The empirical results, in principle, show that South Africa–US IIT in the selected services is determined by factors similar to goods‐based “North‐South” IIT studies. Specifically, differences in per capita income and differences in market size negatively affect IIT. The study also indicates that US foreign direct investment in South Africa positively contributes to the unaffiliated IIT in services.     

Comparing quotas with VERs: A three-region,North-South-NICs macroeconomic analysis

The paper presents a three-region macro-economic model of the North, South and NICs. Discriminatory commercial policy is undertaken by the North against the South and the NICs: a quota is used against the former and a VER against the latter. Contrary to most of the existing literature on macro-commercial policy, the initiator of the policy (the North) could gain from such a mixed commercial policy in terms of output and employment. This would normally be at the expense of the South (lower terms of trade), whereas the terms of trade for the NICs could improve, although not necessarily.     

知识产权保护与国际贸易摩擦的理论与实证分析

本文扩展了Samuelson(2004)的国际贸易摩擦的静态理论模型,提出了解释国际贸易摩擦的动态模型,并依据这一模型分析了由知识产权引发的国际贸易摩擦问题。同时还运用相关统计资料,对模型的基本结论进行了实证分析。     

Changing nature of North–South linkages: Stylized facts and explanations

This paper examines the changing nature of growth spillovers between developed economies, the North, and developing countries, the South, driven by the process of globalization—the phenomenon of rising international trade and financial flows. We use a comprehensive database of macroeconomic and sectoral variables for 106 countries over the period 1960–2005. We consider the South to be composed of two groups of countries, the Emerging South and the Developing South, based on the extent of their integration into the global economy. Using a panel regression framework, we find that the impact of the Northern economic activity on the Emerging South has declined during the globalization period (1986–2005). In contrast, the growth linkages between the North and Developing South have been rather stable over time. Our findings also suggest that the North and Emerging South economies have started to exhibit more intensive intra-group growth spillovers.     

Upgrading labor quality,structural change,and economic development

Economic development involves fundamental structural changes that move resources from agriculture to industry, from low value-added to high value-added activities. In this paper, this basic theme in development economics is formalized in a simple model, comparable to the neoclassical model of trade and growth. In the proposed model, free trade realizes static efficiency of comparative advantage but tends to preserve the status quo in which the South trades primarily commodities for manufacturers with the North. Through facilitating accumulation of human capital, the trade policy that protects domestic high value-added activities may raise welfare in the long run.     

Real Exchange Rates and Fundamentals: Evidence from 15 OECD Countries

In an extended Balassa–Samuelson model, long-run real exchange rates are determined by relative productivity and terms of trade. We present evidence of systematic long-run relationships between these fundamental variables and real exchange rates in a data set covering 15 OECD countries from 1960 to 1996. High relative productivity is associated with real exchange rate appreciations in most cases. There is less support for the hypothesis that the terms of trade affect equilibrium real exchange rates.     

HAS SOUTH AFRICA LIBERALISED ITS TRADE?

This paper uses new tariff data to re‐evaluate the extent to which South Africa has liberalised its trade from the late 1980s. The paper finds that significant progress has been made in simplifying South Africa's tariff structure and reducing tariff protection, but further progress can be made in removing tariff peaks, reducing tariff dispersion, and lowering the anti‐export bias arising from protection. Further, although protection has fallen, the decline has been no faster than in other lower‐middle‐income economies. The paper also finds that estimates of the level of nominal and effective protection, and their rate of change, are sensitive to the choice of tariff measure (collection duties or scheduled tariff rates) and Input‐Output or Supply‐Use table, but that the sectoral structure of protection is largely unaffected.     

Technology diffusion and host–country productivity in South-South FDI flows

This paper investigates the effects of foreign direct investment (FDI) on the host country's economic performance, namely, its total factor productivity (TFP). Such effects are often referred to as FDI externalities or spillover effects. In addition, the paper examines whether such spillover effects depend on the home country's income level. Our empirical findings indicate that FDI flows have positive effects on less developed countries (South countries), and that the effect of FDI flows from the developed countries (North countries) is stronger than that from less developed countries. That is, these results confirm the so-called North-South effects but provide no evidence of South-South effects. Furthermore, another channel of spillover effects is imports, which have significant effects on TFP.     

南北贸易与内生增长——南方既模仿又创新

本文模型是对GH模型(Grossman and Helpman,1991)的一个拓广,不仅包括GH的情形(北方创新、南方模仿),还包括北方创新、南方既模仿又创新的情形。在后一种情形下我们发现:(1)参与国际贸易的南北双方能享受更高的增长率;(2)北方规模扩大会提高增长率、降低模仿率以及模仿企业数与北方企业数的比率;南方规模扩大会提高增长率、模仿率、南方相对工资水平,以及模仿企业数与北方企业数的比率;(3)南、北方政府资助创新会提高增长率、模仿率,但南方政府资助创新会提高南方相对工资、降低模仿企业数与北方企业数的比率,而北方自主创新的影响不确定;南方政府资助模仿的政策除提高南方相对工资外,对稳态的增长率、模仿率以及模仿企业数与北方企业数的比率都不产生任何影响。     

Changes in the Terms of Trade and Sectoral Reallocation of Labor: The Case of Guyana, Jamaica, and Trinidad and Tobago

This paper quantifies the consequences of long-term changes in the terms of trade on the growth rate of real income in Guyana, Jamaica, and Trinidad and Tobago. We find that magnitudes of both the long-term changes in the terms of trade and the responses of income growth rates vary considerably across these three countries. We then develop a model that links a change in the terms of trade to a change in income through the degree of sectoral reallocation of labor. Using this model, we analyze whether specific fiscal and trade policy responses cushion or amplify the impact of terms of trade on income. In a calibrated version of the model, we demonstrate that the degree with which an economy reallocates its labor across sectors is not necessarily a good indicator of its vulnerability to changes in its terms of trade.