Services Linkages and the Value Added Content of Trade

Working with a set of global social accounting matrices spanning intermittent years from 1992 to 2011, this paper examines the services embodied in trade on a value added basis. Data include not only the direct and indirect contribution of services to value added contained in a given country's exports, but also the extent to which third‐country value added in services, through intermediate linkages of imported goods and services, is also embodied in production and trade. Our data indicate, in line with previous findings, that the ratio of value added to gross trade has been decreasing both for goods and for services, which is consistent with growing vertical production fragmentation. On the other hand, while value added in goods sectors including indirect exports is less than the gross value of exports, in services, it is greater, highlighting the service intensity of trade.     

Food retailers' perceptions of older consumers in Northern Ireland

Demographic changes' occurring in developed countries has meant that older consumers are becoming an increasingly important consumer segment that retailers need to pay particular attention to. It is essential that their specific needs within the food and other service sectors are met, as food plays an important role in their social well‐being. Very little research has focused upon the extent to which retailers meet their demands and particular needs. The aim of this study, as part of a wider study on older consumers, is to address this lack of information by examining the level of awareness held by food retail management as to the needs of older consumers (60+ years old) and the problems that they encounter while shopping. Qualitative data were collected using face‐to‐face interviews with retail managers (n = 5) from food retailers in Northern Ireland. These were analysed according to Gillham's content analysis guide. Food retailers stated they were aware of the issues older consumers face and recognize their importance as a growing consumer segment; however, there would appear to be relatively little actual consideration/evidence of them meeting their needs. All interviewees expressed an interest in improving the food shopping experiences of older consumers, and were keen to make an increased effort towards this segment of the population, but these were often not put into practice. In order to overcome the problems faced by older consumers and strengthen the food shopping experience for this age group, it is suggested that retail management make practical changes to improve in‐store facilities, increase affordability of food products and home delivery services, and enhance customer communication.     

On the Differential Behaviour of National and Multinational Firms: A Within‐ and Across‐sectors Approach

This paper looks for different patterns of behaviour of national firms and multinational enterprises (MNEs). Its main contribution is the use of a computable general equilibrium perspective to analyse firms’ performance. The model is calibrated for the case of the Czech Republic, which has been a very attractive foreign direct investment location in the last three decades. We replicate the arrival of MNEs to different sectors of this country in turn and analyse the responses of both types of firms across the 20 different sectors in which the Czech economy has been split. Our results grasp the short‐run impact. The higher labour intensity of national firms leads them to different patterns of production and labour demand, compared with MNEs operating within the same sector. The demand side of the model (particularly, exports and private consumption) drives the evolution of production and labour demand across sectors. Regarding prices, we also find a differential pattern between both types of firms within and across sectors. Our analysis offers detailed evidence on how the impact of MNEs will differ depending on the sector to which they arrive. Finally, the aggregate results suggest that a completely different microeconomic panorama may underlie rather similar macroeconomic outcomes.     

Global production sharing: Exploring Australia's competitive edge

Cross‐border dispersion of production processes within vertically integrated global industries (“global production sharing”) has been an increasingly important structural feature of economic globalisation in the recent decades. This paper examines patterns and determinants of global production sharing with an emphasis on how Australian manufacturing fits into global production networks (GPNs). Though Australia is a minor player in GPNs, there is evidence that Australian manufacturing has a distinct competitive edge in specialised, skill‐intensive tasks in several industries such as aircraft, medical devices, machine tools, measuring and scientific equipment and photographic equipment. Specialisation in high‐value‐to‐weight components and final goods within GPNs, which are suitable for air transport, helps Australian manufacturing to overcome the “tyranny of distance” in world trade. Being predominantly “relationship specific,” Australian GPN exports are not significantly susceptible to real exchange rate appreciation.     

The link between innovation and productivity in Estonia's services sector

This paper investigates how the innovation–productivity relationship differs across various sub-branches of the services sector. The Crépon, Duguet and Mairesse structural model is used, consisting of equations for innovation expenditures, innovation output, productivity and exports. The data are taken from the Community Innovation Surveys for Estonia. It is shown that innovation is associated with increased productivity. The results indicate, surprisingly, that the association between technological innovation and productivity is stronger in the less knowledge-intensive service (KIS) sectors. Non-technological innovation plays a positive role especially in KISs. An indirect channel of the effects of innovation on productivity appears to function through increased exports.     

The Pathological Export Boom and the Bazaar Effect: How to Solve the German Puzzle

Germany is the laggard of Europe, yet the country is world champion in merchandise exports. The paper tries to solve this theoretical and empirical puzzle by diagnosing a ‘pathological export boom’ and a ‘bazaar effect’. Excessively high wages defended by unions and the welfare state against the forces of international low‐wage competition destroy too big a fraction of the labour‐intensive sectors and drive too much capital and labour into the capital‐intensive export sectors, causing both unemployment and excessive value added in exports. Moreover, excessive wages induce too much outsourcing of upstream production activities, which implies that export quantities grow too much in relation to value added contained in exports. Finally, excessive wages cause capital flight resulting in a too large current account surplus.     

The African Growth and Opportunity Act and growth in sub‐Saharan Africa: A local projection approach

The African Growth and Opportunity Act (AGOA) is intended to increase exports and economic growth in sub‐Saharan Africa by providing trade preferences to eligible countries. While previous research has generally found a positive relationship between AGOA and exports, no previous research has investigated the relationship between AGOA and economic growth. We explore the dynamic relationship between AGOA and economic growth in sub‐Saharan Africa by applying the local projection method (American Economic Review, 95, 2005 and 161) to estimate impulse responses. We find that a country's becoming eligible for AGOA preferences is associated with higher growth rates in the future, but that this effect may not be immediate, highlighting the importance of exploring the dynamic relationship between AGOA and growth.     

Enlargement and the EU Periphery: Introduction

The CEEC share of Irish exports has grown fivefold since transition began, with export sales expanding in all sectors. Even at current income levels there remains scope for a further doubling of exports, and trade will grow even more substantially if accession facilitates the CEEC in converging more rapidly on EU living standards. Most analyses predict that the EU15 sectors that face the greatest threats of enlargement‐induced disruption are Food and Textiles, Clothing and Footwear. In the case of Irish Food Processing, however, the prognosis of the present paper is positive since Irish agricultural output differs quite strongly from that of the CEE economies. The adjustment costs associated with industrial dispution, furthermore, are highest in economies with rigid labour markets, whereas the flexibility of the Irish labour market seems to have improved substantially over the last decade or so. Outward FDI from Ireland has grown strongly over the Celtic Tiger era, and Irish multinational firms have been reasonably active in acquiring companies in their sectors in Cental and Eastern Europe. The main worry for Ireland is that the more successful accession states may divert FDI inflows away from Ireland. Micro‐level analysis of the conditions pertaining in some of Ireland's most important foreign‐dominated sectors – information technology, pharma‐chem and instrument engineering – suggests that these threats may be overstated. The leading CEE economies, rather than drawing FDI away from Ireland, may instead contribute to the further development of EU‐wide production networks, making the networks themselves more competitive as global players. The net cost to Ireland of agreements already reached on the financing of enlargement is quite manageable. The cost to Ireland would escalate dramatically, however, if costs and benefits were to be redistributed within the EU in line with current income levels, entailing a substantial transformation of the CAP transfer mechanism.     

EXCHANGE RATE BANDS OF INACTION AND PLAY‐HYSTERESIS IN GERMAN EXPORTS—SECTORAL EVIDENCE FOR SOME OECD DESTINATIONS

A non‐linear model is applied, where suddenly strong spurts of exports occur when changes of the exchange rate go beyond a zone of inaction, which we call ‘play’ area—analogous to mechanical play. We implement an algorithm describing path‐dependent play‐hysteresis into a regression framework. The hysteretic impact of real exchange rates on German exports is estimated based on the period from 1995Q1 to 2010Q3. Looking at some of the main export partners of Germany outside the euro area and some of the most important tradeable sectors we find significant hysteretic effects for a part of the German exports.     

Foreign multinationals in service sectors: A general equilibrium analysis of Brexit

We examine the role of foreign multinationals in service sectors in the context of Brexit, which is assumed to induce an increase in different types of barriers: (a) FDI barriers to multinationals in services; (b) non-tariff barriers to trade; and (c) import tariffs between the UK and the rest of the EU. We use a state-of-the-art Melitz approach in manufactures with multinationals operating in imperfectly competitive service sectors in a multiregional general equilibrium framework. We find that the increased FDI barriers in services explain about one third of the total welfare loss of Brexit. Furthermore, our decomposition analysis (by introducing each type of barriers separately) shows that the barriers against the EU service multinationals in the UK are harmful to British manufacturing sectors because they face a reduced (and more expensive) supply of intermediate services.     

Cuba,the centrally planned cigar,and its rivals

Cuba has a long‐standing reputation for producing premium cigars. Despite the inefficiencies of central planning, Cuba continues to command a dominant global market share in this product outside the United States, whose trade embargo forbids Cuban imports. Cuba's main rivals in premium cigars include the Dominican Republic, Nicaragua and Honduras, which dominate the US market but have a smaller presence elsewhere. All premium cigar exporters face important global demographic and policy changes that will alter the competitive landscape. Public anti‐smoking measures have diminished cigar demand in Europe and other industrialised areas, reinforcing a market growth shift towards emerging markets, especially China. Cuba's strengths in branding, reputation and third‐world ties give it an advantage in developing the high end of these new markets. However, the rigidities of Cuba's economic system make it difficult to increase or adjust premium cigar output and exports in response to new market opportunities. Cost‐efficient competition from its Caribbean rivals allows them to respond to consumer preferences for new cigar blends and lower‐priced brands. The paper concludes by assessing the need for economic reforms and foreign investment in Cuban cigar production that will be necessary for it to maintain or improve its export performance.     

Does vertical specialisation increase productivity?

This paper investigates the impact of global value chain (GVC) participation on productivity. It uses data on trade in value‐added from the World Input‐Output Database. The results based on a panel estimation covering 13 sectors in 40 countries over 15 years suggest that participation in GVCs is a significant driver of labour productivity. Backward participation in GVCs, that is, the use of imported inputs to produce for exports, emerges as particularly important. An increase by 10% in the level of GVC participation increased average productivity by close to 1.6%.     

Impacts of Trade Liberalisation Commitments on the Vietnamese Economy: A CGE Approach

This article quantifies the economic effects of tariff reduction following Vietnam's WTO accession. It differs from previous studies in several aspects. First, the model incorporates non‐standard features of the Vietnamese economy (e.g. changes in the domestic tax system). Second, the model divides Vietnamese households into 10 groups, allowing for the assessment of household welfare and income distribution. Third, the model has been run employing the most up‐to‐date database available. The major findings are summarised as follows. First, Vietnam as a whole would benefit from trade liberalisation. Second, the overall gain would be accompanied by a redistribution of income and a moderate increase in inequality between the rich and the poor. Third, concerning sectoral output, export‐oriented sectors, sectors with large shares of input in total imports, and those with increased domestic demands are likely to expand, whereas, in contrast, domestic‐oriented sectors are likely to contract. Measures to increase labour mobility, target disadvantaged groups and areas, and further liberalise service sectors are recommended as the recipe for effective utilisation of integration, as well as a more equitable pattern of growth.     

Time Zone Effect and the Margins of Exports

The negative effect of time zone on trade flows has recently been established in the literature. However, thus far, no paper has explored the differing time zone effect on the intensive and extensive margin. Utilising product‐level trade data, this paper examines the impact of time zone differences on the intensive and extensive margin of exports. Furthermore, this paper examines the non‐linear impact of different levels of time zone differences on exports. Using the Poisson pseudo‐maximum likelihood estimation, the results indicate that the time zone differences negatively affect exports primarily via the extensive margin, with no effect on the intensive margin, which suggests that time zone differences act as a fixed cost of exporting. Furthermore, quartile analysis shows non‐linearities in the time zone measure, more specifically that time zones matter more at larger time zone differences. These results can have important policy implications for nations looking to increase their trade presence.     

A dynamic analysis of the impacts of export taxes: The case of Argentinean soy and beef markets

Argentina plays an important role in the global soy market as one of the world's leading exporters of soy products. In an effort to shift its agricultural sector's focus to value‐added exports and to raise revenue, Argentina's government has maintained a regime of differential export taxes on soy products. In addition to soy products, Argentina is a major producer, consumer and exporter of beef. However, over the last decade it has relinquished much of its world market share as its beef exports have fallen because the government has periodically imposed a ban on exports of beef along with maintaining an export tax. As the soy and livestock sectors are inextricably linked, owing to both industries’ intensive land use and the utilisation of soymeal as a feed supplement for cattle, trade policies in one sector have pronounced cross‐sectoral impacts. This study develops a theoretical model of these different sectors and trade policies, incorporating the dynamic decisions of cattle stock management. The model is calibrated to real‐world data on the Argentinean economy, and the impacts of trade liberalisation are quantified. Key results show modelling the various intersectoral linkages and the dynamic implications of cattle stock is essential for obtaining accurate estimates.     

Who Gains From Nominal Devaluation? An Empirical Assessment of Euro‐area Exports and Imports

In early 2013, rumours about the euro‐appreciation gained momentum, which may lead to decreases in exports and increases in imports of the member states. Therefore, we investigate the impact of changes in the nominal euro exchange rate vis‐à‐vis major currencies on export and import performance of nine different euro‐area countries. To disentangle the ‘true’ equilibrium elasticities Stein's unbiased risk estimate (SURE) system error correction models (SSECM) are estimated for nominal exchange rate changes versus the rest of the world or other major currencies. To differentiate between price level changes and changes of the nominal exchange rate, a country's export and import equation is estimated using separately the nominal rate and the relative price/unit labour cost as regressors. Results of Wald tests indicate that assuming both variables to have the same influence on exports and imports is misleading. Whether the relative price/unit labour costs elasticities are high or low depends crucially on which indicator is chosen, while the effect of nominal exchange rate changes can be estimated robustly for all countries in the sample. In particular, France and Spain are hit by a euro‐appreciation since their exports are highly exchange rate elastic. However, for France, this effect is at least partly offset by an also negative exchange rate elasticity of imports.     

中国融入东亚生产网络的贸易利益——基于20个工业部门净附加值的分析

本文结合中国融入东亚生产网络的现状,采用反映进口中间产品在国内的产业循环效应或产业波及效果的净附加值指标来衡量中国融入东亚生产网络后归属于中国的直接的贸易利益。基于1992-2007年期间中国20个工业部门从东亚进口的中间产品在国内产业循环后所创造的净附加值分析表明:从净附加值的绝对量来看,中国工业部门从东亚进口中间产品所创造的净附加值增长迅猛,且在从世界进口的中间产品所创造的总的净附加值中平均占了42%左右的份额,但该净附加值占中国工业部门总出口的比重总体上不高且年均增长幅度有限。细分行业的考察发现,来自东亚的中间产品创造的净附加值比重较高的部门主要是技术、资本密集型工业部门,但在大多数工业部门中这一比重增长不显著。因此,应在进一步深化中国与东亚的垂直专业化分工的基础上,通过增强本土企业的技术吸收能力和自主创新能力来提升本土企业在东亚生产网络中的分工地位,以获取更多的贸易利益。     

Intermediary Products: FDI Strategies,Imports, Exports,and Trade Balances in Developed Economies

Has the relationship between the dominant investment motives of multinational enterprises (MNEs) and national trade balances, imports, and exports changed over time? A 1996 study hypothesized and found that the MNE market versus resource seeking investment motives in developed countries (DCs) resulted in different aggregate impacts on national trade balances, imports, and exports. In this study, we ask whether the increased use of intermediary products, a major change in the way MNEs conduct business, affect the previously found patterns. Because firm‐level data on intermediary products is not widely available across countries, we indirectly test their impact, hypothesizing that the rise in use of intermediary products has changed MNE investment motives in DCs, resulting in stronger relationships between foreign direct investment (FDI) and imports/exports in high‐FDI DCs but weaker links between FDI and national trade balances. Implications and future research directions are discussed. © 2015 Wiley Periodicals, Inc.     

Asymmetric effects of exchange rate movements on traditional and modern services exports: Evidence from a large emerging economy

The service sector in India has emerged as the ‘new engine of growth’ with an increasing share in output and exports. In this paper we analyse the effect of real exchange rate movements on service exports of India, incorporating goods exports, financial development, FDI inflows, world demand and the role of globalization as drivers. We find that while traditional service exports are negatively and significantly affected by the real exchange rate movements, the modern service exports are negatively but not significantly affected. By applying the asymmetric cointegration approach, the results also confirm the non-existence of any asymmetric relationship between the real exchange rate and service exports in India. Further, the results also show that the supply augmenting and demand-side factors are more dominant than the exchange rate to affect service exports from India.     

How Do Exporters React to Changes in Cost Competitiveness?

Various international institutions such as the European Commission, the ECB and the OECD often use unit labour costs as a measure of international competitiveness. The goal of this paper was to examine how well this measure is related to international export performance at the firm level. To this end, we use Belgian firm‐level data for the period 1999 to 2010 to analyse the impact of unit labour costs on exports. We find an estimated elasticity of the intensive margin of exports with respect to unit labour costs between −0.2 and −0.4. This elasticity varies between sectors and between firms, with more labour‐intensive firms having a higher elasticity. The microdata also enable us to analyse the impact of unit labour costs on the extensive margin. Our results show that higher unit labour costs reduce the probability of starting to export for non‐exporters and increase the probability of exporters stopping. While our results show that unit labour costs have an impact on the intensive margin and extensive margin of firm‐level exports, the effect is rather low, suggesting that pass‐through of costs into prices is limited. The latter is consistent with recent trade models emphasising that not only relative costs, but also demand factors such as quality and taste matter for explaining firm‐level exports.