A tale of two gravities*

The flows of traded goods across countries are known to follow a gravity pattern: Their volumes are greater between countries that are larger in size and closer to each other. We find a similar pattern in the flows of territories across countries between 1870 and 2008. During this period, countries experienced inflows and outflows of territories, mirroring the international flows of goods. We find three other pieces of critical evidence supporting that the two flows interact through similar economic motives. Our findings illustrate the usefulness of international trade models for understanding international politics.     

Trade,income and the Baltic Dry Index

Does trade improve the income levels of the poor and less developed nations? Focusing on the Least Developed Countries (LDCs) designated by the United Nations, we construct a new measure of trade cost, based on the Baltic Dry Index (BDI), as an instrument for trade. The BDI reflects the cost of utilizing dry bulk carriers, which are specially designed vessels for transporting primary goods internationally, where these goods dominate the output and export sectors of the LDCs. We find that a 1% expansion in trade raises GDP per capita by approximately 0.5% on average. This estimate is much larger than previously found in the literature and its quantitative significance emphasizes the importance of trade towards the economic development of low income countries.     

Linder Revisited: Trade and Development in the Spanish Economy

The literature has tended to treat Linder’s hypothesis with excessive simplicity given the absence of any formalization for this intuitive theory on trade potential in manufacturers, closely related to the intra‐industry trade paradigm. Against this background, in this paper we first propose a complete empirical model of bilateral trade containing all the determinants suggested by Linder, with special emphasis being placed on non‐homothetic preferences, national income distribution, international economic convergence and geographic distance. We then test the model in an appropriate case, namely that of Spain during the period of its economic transition running from approximately 1959 to 1986. This period was characterized by increasing openness and structural change, as well as by convergence until that country’s integration into the then European Economic Community. The results confirm the importance of the characteristics of internal demand, essentially of income distribution and non‐homothetic preferences. We find that trade horizons delimited by bilateral proximity in development and geographical distance, together with multilateral convergence in economic development are the main indicators for selecting trade partners as markets and suppliers, thereby reinforcing the idea that foreign markets can be considered as an extension of the national market.     

Gender Inequality and Trade*

The paper empirically explores the international linkages between gender inequality and trade flows of a sample of 92 developed and developing countries. The focus is on comparative advantage in labor‐intensive manufactured goods. The results indicate that gender wage inequality is positively associated with comparative advantage in labor‐intensive goods, i.e. countries with a larger gender wage gap have higher exports of these goods. Also, gender inequality in labor force activity rates and educational attainment rates are negatively linked with comparative advantage in labor‐intensive commodities.     

Foreign Trade Patterns Between Estonia and the EU

In this paper, we focus on the development of the foreign trade flows between Estonia and the EU. We observe rapid reorientation of the trade flows from the former Soviet Union towards Western markets because of economic reforms and foreign trade liberalization. Moreover, we determine the commodity groups with a comparative advantage in the EU market and analyze its dynamics. Further analysis of the intra-industry trade (ITT) shows that vertical IIT plays a dominant role in Estonian-EU IIT flows. Shares of total, vertical, and horizontal IIT have grown rapidly since 2004, the year of accession to the EU.     

Political Proximity and International Trade

The impact of politics on international trade has often been excluded by economists both from theoretical and empirical analysis. In this study, we examine empirically the impact of politics on trade flows. Results indicate that political differences have an impact on bilateral trade that is robust to a wide range of econometric specifications. However, the impact of political differences on trade flows vanishes when the costs of reducing the latter become fairly important.     

Openness, Government Size and the Terms of Trade

This paper investigates the relationship between trade openness and the size of governments, both theoretically and empirically. We argue that openness can increase the size of governments through two channels: (1) a terms-of-trade externality, whereby trade lowers the domestic cost of taxation, and (2) the demand for insurance, whereby trade raises risk and public transfers. We provide a unified framework for studying and testing these two mechanisms. Our main theoretical prediction is that the relative strength of the two explanations depends on a key parameter, namely, the elasticity of substitution between domestic and foreign goods. Moreover, while the first mechanism is inefficient from the standpoint of world welfare, the second, instead, is optimal. In the empirical part of the paper, we provide new evidence on the positive association between openness and government size and we explore its determinants. Consistent with the terms-of-trade externality channel, we show that the correlation is contingent on a low elasticity of substitution between domestic and foreign goods. Our findings raise warnings that globalization may have led to inefficiently large governments.     

Trade and Technology from a Schumpeterian Perspective

This paper attempts to implement empirically a Schumpeterian model of international trade. After briefly discussing the literature on trade and technology, we formulate a model in which ‘real’ factors such as R&D expenditures, investment and wage costs have an impact on bilateral trade flows between advanced economies. We also take into account the effect of exchange rate differences. The model is empirically estimated on sectoral data for nine OECD countries. We find that what determines competitiveness differs by sector. In many sectors, either R&D expenditures or wage costs are important. The results for investment indicate a weaker role. Consistent with the Marshall-Lerner logic, we find that the sign of exchange rate changes varies by sector. We conclude the paper by a discussion of the relevance of the results for ‘technology-based’ theories of international trade.     

Institutional Quality and International Trade

Institutions—quality of contract enforcement, property rights, shareholder protection, and the like—have received a great deal of attention in recent years. Yet trade theory has not considered the implications of institutional differences, beyond treating them simply as different technologies or taxes. The purpose of this paper is twofold. First, we propose a simple model of international trade in which institutional differences are modelled within the framework of incomplete contracts. We show that doing so reverses many of the conclusions obtained by equating institutions with productivity. Institutional differences as a source of comparative advantage imply, among other things, that the less developed country may not gain from trade and factor prices may actually diverge as a result of trade. Second, we test empirically whether institutions act as a source of trade, using data on U.S. imports disaggregated by country and industry. The empirical results provide evidence of "institutional content of trade": institutional differences are an important determinant of trade flows.     

Testing Mundell's Intuition of Endogenous OCA Theory*

This paper presents an empirical assessment of the endogenous optimum currency area theory. Frankel and Rose (1998 ) study the endogeneity of a currency union through the lens of international trade flows. Our study extends Frankel and Rose's model by using FDI flows to test the original theory developed by Mundell in 1973. A gravity model is used to empirically assess the effectiveness of the convergence criteria by examining location‐specific advantages that guide multinational investment within the European Union. A fixed effects model based on a panel data of foreign direct investment (FDI) flows within the EU‐15 shows that horizontal investment promotes the diffusion of the production process across the national border. Specifically, our results suggest that economic convergence ensured by belonging to the common currency area helps double FDI flows.     

Trade implications of the Euro in EMU countries: a panel gravity analysis

In this paper, we study the intra-EMU and intra-Eurozone trade effects of the euro adoption on 29 European Economic and Monetary Union countries (including 17 Eurozone economies and Iceland) from the period 1994 through 2011. We employ a generalized gravity model that controls for an extended set of trade theory and policy variables. The gravity model is estimated using the robust panel data techniques that includes times effects, besides country-specific effects. The various econometric specifications of the gravity equation, on the whole dataset of 29 economies, yield positive and significant impact (to be around 14 %) of the euro currency adoption on bilateral trade flows. Next, euro effect on bilateral trade and exports on a smaller dataset is estimated. The estimated results suggest that bilateral trade and exports increase by 20.81 and 18.57 %, respectively, when both the countries belong to the Eurozone. This effect is larger than the one obtained when only one of the two trading partners uses the euro as its currency. In addition, the validity of the assumptions of Heckscher–Ohlin (H–O) theory are checked for the countries under study. The estimated results reject the H–O theory in favor of Modern Trade theories. However, the low value of the coefficient on respective variable suggests that, over the period, the type of trade among these countries has transited from inter-industry trade to horizontal intra-industry trade. This suggests that these developed European economies are on the path of economic convergence via intra-industry trade.     

The Impact of Liberalizing Trade in Services on Trade in Goods: An Empirical Investigation

In this paper we use a large dataset to explore whether the liberalization of trade in services is beneficial for the international trade in goods. We find empirical evidence supporting this notion. We investigate which types of trade in services are more important for the international trade in goods and find that trade in transportation and communication services generate the largest impacts on trade in goods. We also investigate which types of trade in goods are likely to benefit from the liberalization of trade in services and find that, under the 2‐digit ISTC classification, all the categories are likely to exhibit a positive impact.     

“十二五”时期我国对外贸易的转变

"十二五"规划实施时期,国际国内的新形势对我国对外贸易提出了新的要求。为了实现协调和持续发展,对外贸易必须实现一系列的转变:由注重出口规模增长转向进出口并重;由以发达国家为主要贸易对象转向贸易对象的多元化;由以货物贸易为主转向货物贸易和服务贸易并重;由单一地打破贸易保护转变为通过多种方式减少贸易摩擦。     

Trade and Financial Liberalisation and Endogenous Growth in Bangladesh

This paper empirically explores the joint impact of financial and trade liberalisation on economic growth in Bangladesh using various time series techniques, endogenous growth theory and annual data from 1975–95. Our empirical results are in accordance with the predictions of endogenous growth theory that both financial and trade liberalisation, along with investment in human capital enhance economic growth, suggesting the case for liberalisation of both the financial and trade sectors and suggesting that government initiatives in education policy may expedite economic growth. Results are robust across methodologies. [E52, F43, O11, O53]     

Factor Endowments,Democracy, and Trade Policy Divergence

We develop a stochastic model of electoral competition in order to study the economic and political determinants of trade policy. We model a small open economy with two tradable goods, each of which is produced using a sector‐specific factor (e.g., land and capital) and another factor that is mobile between these tradable sectors (labor); one nontradable good, which is also produced using a specific factor (skilled labor), and an elected government with the mandate to tax trade flows. The tax revenue is used to provide local public goods that increase the economic agents’ utility. We use this general equilibrium model to explicitly derive the ideal policies of the different socioeconomic groups in society (landlords, industrialists, labor, and skilled workers). We then use those ideal policies to model the individual probabilistic voting behavior of the members of each of these socioeconomic groups. We use this model to shed light on how differences in the comparative advantages of countries explain trade policy divergence between countries as well as trade policy instability within countries. We regard trade policy instability to mean that, in equilibrium, political parties diverge in terms of the political platforms they adopt. We show that in natural resource (land)–abundant economies with very little capital, or in economies that specializes in the production of manufactures, parties tend to converge to the same policy platform, and trade policy is likely to be stable and relatively close to free trade. In contrast, in a natural resource–abundant economy with an important domestic industry that competes with the imports, parties tend to diverge, and trade policy is likely to be more protectionist and unstable.     

The Convergence Analysis of Chinese Regional Inequality

Based on the convergence theory, this paper discusses Chinese regional economic inequality among 30 provinces, which are divided into three groups, that is, Traditional Advanced Regions group, New Advanced Regions group and Less Developed Regions group. It is verified that regional income growth does not present absolute beta convergence or sigma convergence, but presents conditional beta convergence from 1978 to 2003. Those economic policies of reform and opening-up to the outside world are provided with regionally heterogeneous characteristics and are powerful enough to influence regional performance in growth.     

Determinants of International Trade Flows in Travel and Passenger Services*

In the past decade there has been a great increase in interest in trade in services. This paper estimates the determinants of trade flows for two service industries, travel and passenger transportation services, for 16 OECD countries Traditional and more recent models of import demand and demand for export functions are utilized The empirical results indicate similarity between trade in goods and trade in services. Price competitiveness is an important factor in determining the trade flows in travel services and like trade in manufactured goods, exchange rate variations have some influence on the volume of travel and passenger transportation services     

基于产业结构区际贸易壁垒的实证分析

文章分别利用直接贸易流量和间接产业趋同两种分析方法考察我国三次产业的地方保护程度。一方面,利用中国投入产出表中的贸易及相关数据,运用边界效应模型分别考察了八大区域中的总贸易和三次产业地方保护程度,分析了生产规模、产品价格、区域位置及区间距离等因素对区际产业贸易的影响,测算边界效应值并运用区域贸易依存度进行了验证和区域分析。另一方面,通过计算产业地区集中度,考察1997-2005年期间地区产业结构的分布趋势,以此考察各产业贸易壁垒的趋势变化。研究发现,产业属性差异对区际贸易有一定阻碍作用,因此,根据产业结构特点制定和谐的贸易体制,尊重比较优势的差异化发展,降低区际贸易壁垒,对促进我国区域经济协调发展尤为重要。     

China's Regional Trade and Domestic Market Integrations

The global economic crisis in 2007 forced China to move from export‐led growth to promoting domestic demand. The move is significant, but the success of this new growth strategy depends critically on the level of domestic market integrations. In this paper, we use the methodology proposed by Anderson and Wincoop to examine China's domestic market integrations. We find evidence of border effects at both national and regional levels with significant regional differences, but they are smaller than some earlier studies suggest. Income growth, lower transportation costs, and higher intra‐industry trade all have positive effects on China's regional trade. Among the factors affecting regional trade, a better business environment has the largest positive impact on lifting China's domestic trade between regions, especially in intermediate goods, suggesting that improving business environment should be the priority of government at all levels in China.     

以科学发展观指导中国对外贸易的可持续发展

科学发展观是中国现代化建设的指导思想。对外贸易在中国经济社会发展中具有不容忽视的地位和作用。而中国对外贸易发展中存在着国内地区结构不平衡,出口贸易方式单一和出口市场相对集中,进出口管理体制有疏漏,出口商品结构有待进一步优化等问题。我们应以科学发展观为指导,着力解决对外贸易发展中的问题,以推进其可持续发展。