Entrepreneurship and intra-industry trade

Entrepreneurship and Intra-Industry Trade. — The paper introduces entrepreneurs into the theories of intra-industry trade and investigates the role of a country ’s “entrepreneurship” in international trade. It is shown that therelative entrepreneurship between countries determines the terms of trade but the welfare effects are not obvious. Among other things, it is found that (1) an increase in exports improves the terms of trade and (2) an increase in country size is not always beneficial.     

Economic integration, market size and the welfare effects of trade liberalisation

Economic Integration, Market Size and the Welfare Effects of Trade Liberalisation. — This paper examines the welfare effects of regional and global integration in a model where market size matters. Regional integration leads to higher welfare in the countries of a preferential trading arrangement (PTA), but to lower welfare outside. In case the countries also decide to form a customs union (CU), both countries will experience further gains if the creation of the CU means that the average external trade barriers are raised. In turn, the outside country will in this case experience further welfare losses. If it retaliates and creates a trade war, this will lower welfare in all countries. In contrast, global integration mostly benefits both PTA countries and outside countries.     

Integration and the export behaviour of firms: Trade costs,trade volumes and welfare

Integration and the Export Behaviour of Firms: Trade Costs, Trade Volumes and Welfare. - This paper analyses a model in which, because of fixed costs associated with exporting, only a proportion of firms in an industry engage in international trade. Economic integration (a reduction in trade costs) increases the proportion of firms trading and reduces the total number of active firms as relatively small non-trading firms are replaced by larger trading firms. There are welfare gains from integration, but because of the adverse effects of integration on the total population of firms these gains are smaller than in the standard model where all firms export.     

Exploring the limits of comparative advantage

Exploring the Limits of Comparative Advantage. - The paper examines extensions of the Law of Comparative Advantage to several situations that have not been adequately covered before. The basic result is the positive one that a country’s pattern of trade will be negatively correlated with its relative autarky prices. The first extension is to situations of unbalanced trade. The second extension is to an economy with domestic distortions. Finally, the third extension is to a lumpy country model, in which regions of a country may differ in various ways, including differences in factor prices.     

Sunk costs, firm size and internationalization

Sunk Costs, Firm Size, and Internationalization. — One strand of the industrial organization literature argues that outlays on sunk costs are endogenous in market expansion, implying an adaptive adjustment by firms to preserve their market share. A different view is taken in the literature on firms’ internationalization. Here it is argued that sunk costs in firm-specific assets, such as R&;D and marketing, are necessary in order to grow and gain market shares. The empirical analysis supports the internationalization hypothesis. In addition, we also provide evidence that even though larger firms incur higher sunk costs, they do so at a diminishing rate.     

Export entry and exit by German firms

Export Entry and Exit by German Firms. — While exports have played an important role in German business cycles, little is known about the export supply response of German firms. This paper presents a dynamic model of the export decision by a profit-maximizing firm. Using a panel of German manufacturing plants, we test for the role of plant characteristics and sunk costs in the entry decision. We find evidence for substantial sunk costs: exporting today by a plant increases the probability by 50 percent that the plant will export tomorrow. This advantage depreciates quickly, falling by two-thirds in a year. The authors also find evidence that plant success, as measured by size and productivity, increases the likelihood of exporting.     

Endowments vs. market potential: What explains the relocation of industry after the Polish reunification in 1918?

How did the location of industry across interwar Poland react to the Polish reunification? After more than 120 years of political and economic separation, Poland was reunified at the end of 1918. In consequence, the removal of internal tariff barriers and improved infrastructure strengthened the domestic market, while foreign market relations were cut off. Similarly, the geographical distribution of factor endowments was changed, for example, through internal migration. How did these forces interact to determine the location of industry? We survey the dynamics of industrial location between 1902 and 1925-1937 and estimate a specification that nests market potential and comparative advantage to quantify their respective impact during the interwar years. The results point to a role for both, comparative advantage and access to markets. We show that both statistically and economically the most important factors were the endowment with skilled labour and inter-industry-linkages.     

Mean‐reverting and Asymmetric Volatility Switching Properties of Stock Price Index,Exchange Rate and Foreign Capital in Taiwan*

The main purpose of the present study is to explore the relationships among stock price index, exchange rate and foreign capital in Taiwan and to detect whether the mean‐reverting and asymmetric volatility switching properties exist in these markets. The multivariate asymmetric nonlinear smooth transition generalized autoregressive conditional heteroskedastic in mean model is used in this study. The empirical results indicate that overbuy and oversell rates of foreign capital influence the movements of the stock price index and the exchange rate. All three conditional means exhibit asymmetric mean‐reverting behavior, with negative returns reverting quicker than positive returns in terms of both speed and magnitude. The empirical results also demonstrate that the conditional heteroskedasticities of these markets are asymmetric, generating different volatility persistence under a prior positive and negative return shock.     

Exchange controls, international capital flows and saving-investment correlations in the UK: An empirical investigation

Exchange Controls, International Capital Flows and Saving-Investment Correlations in the UK: An Empirical Investigation. - This paper reexamines the Feldstein-Horioka approach to measure the degree of international capital mobility, focusing on the difference between the short-run and the long-run saving-investment correlation coefficient. The authors also investigate the effectiveness of the abolition of exchange control which, in October 1979, ended a long period of restrictions on capital flows between the UK and the international economy. Their results suggest that the short-run saving-investment correlation is significantly higher than the long-run one. Unlike most of the relevant literature, the empirical evidence suggests that the UK is financially highly integrated with the world economy after 1979.     

Institutional mechanism for ASEAN-India cooperation: Trends and prospects

ASEAN's dynamic structural change and India's imminent economic liberalisation and deregulation are expected to further strengthen the ASEAN-India relations. A key component in this relationshiup is the institutional mechanism that can facilitate investment and trade flows, social and cultural exchanges and technical cooperation. To intensify these links, ASEAN has established a sectoral dialogue partnership with India in 1993, covering trade, investment and tourism areas. The framework for cooperation also provides for private sector representation. In view of this increasingly important relationship, ASEAN has agreed to upgrade India as a Full Dialogue Partner in 1995. Future changes and streamlining of the ASEAN institutional mechanism is expected to further facilitate and strengthen the ASEAN-India relatiionship.     

Non-Europe: The magnitude and causes of market fragmentation in the EU

Non-Europe: The Magnitude and Causes of Market Fragmentation in the EU. — In 1985 the European Commission diagnosed its member states as suffering from excessive market fragmentation, later referred to as “Non-Europe.” The authors examine the empirical basis for the Commission’s diagnosis using a trade model derived from monopolistic competition. They then investigate the links between the initial size and subsequent evolution of border effects within the EU. The findings support the view that European consumers act as if imports from other members were subject to high nontariff barriers. However, there appears to be almost no relationship between market fragmentation and the barriers that were identified and removed by Europe’s Single Market Programme.     

Two-way trade between unequal partners: The EU and the developing countries

Two-Way Trade between Unequal Partners: The EU and the Developing Countries. — This paper analyses the intra-industry trade specialization between the EU and the developing countries between 1980 and 1992. It shows that EU intra-industry trade with the developing countries has greatly increased and that the traditional measure of intra-industry trade, the Grubel-Lloyd index, is inappropriate when applied to trade between developed and developing countries. By and large, the empirical analysis confirms that intra-industry trade between the developed and the developing countries increases with average and per capita income, and with reduced differences in economic size and capital-labour ratios.     

Country-specific factors and the pattern of horizontal and vertical intra-industry trade in the UK

Country-Specific Factors and the Pattern of Horizontal and Vertical Intra-Industry Trade in the UK. - A large number of empirical studies have investigated the relationship between country-specific factors and total intra-industry trade (IIT). One important shortcoming of this literature is that it ignores the distinction between horizontal and vertical IIT and ignores the fact that they may have different determinants. This paper disaggregates UK IIT into its horizontal and vertical components and, using bilateral trade data, estimates a series of models incorporating countryspecific variables. The results suggest that vertical IIT is more important in the UK than horizontal IIT and that the inter-country pattern of vertical IIT is systematically related to a range of explanatory variables.     

Vertical specialization and intra-industry trade: The role of factor endowments

Vertical Specialization and Intra-Industry Trade: The Role of Factor Endowments. — In this paper, we use vertical differentiation models of the Falvey-Kierzkowski type to study the effects of differences in factor endowments on vertical intraindustry specialization. We focus on Spanish intra-industry trade, as Spain typically exports low-quality varieties to the northern countries of the OECD and high-quality varieties to the southern ones. In order to achieve more general results, we consider different types of productive factors: physical, human and technological capital. Our results confirm that factor endowments play a significant role in explaining vertical intra-industry specialization.     

The economic and strategic motives for antidumping filings

The Economic and Strategic Motives for Antidumping Filings. — This paper looks at worldwide antidumping activity during the last two decades. We examine the motives for AD filings by countries in an attempt to identify whether economic or strategic concerns are driving the recent upsurge in AD use. We begin by providing a comprehensive overview of the data on cases initiated in the 1980–1998 period. We then use nonparametric methods to identify motivations for the use of antidumping and find considerable support for strategic motivations. This suggests that the rise in AD activity cannot be solely explained by an increase in unfair trading practices.     

Demand, comparative advantage and economic geography in international trade: Evidence from the OECD

Demand, Comparative Advantage and Economic Geography in International Trade: Evidence from the OECD. — This paper examines the influence of demand on the pattern of net trade for 17 OECD countries. It is found that demand differences are important as a cause of international trade. In fact, for the majority of countries, demand factors explain more of the net trade pattern than do factor proportions. The evidence offers some support for the modern geography and trade theories: high domestic demand in an industry leads to a net export for the majority of cases. The evidence is, however, not clear-cut. Moreover, a demand bias in favour of domestic varieties leads to a net export. Here, the evidence is clear-cut.     

Foreign capital, unemployment and national welfare

We consider a situation where foreign capital is allowed to flow only into the export-processing zone of an economy characterized by unemployment and pursuing protectionary policy. We derive conditions under which growth induced by an increase in the flow of foreign capital will be immiserizing. The results are derived when foreign capital does not directly flow into the protected sector but alters the composition of outputs in the other traded sectors through inter-sectoral reallocation of other resources.