Trade liberalization and technical efficiency in the Indonesian chemicals industry

This article examines the impact of trade reform on technical efficiency on the Indonesian chemicals industry using firm-level panel data. The effects of trade reform on technical efficiency are analysed using a stochastic frontier approach. Two variables represent trade reform in this model: effective rate of protection (ERP) and import ratio (IMP). The findings of the present study suggest that both trade reform variables have significant effects on technical efficiency. The coefficient of ERP has a positive sign and is statistically significant, which means that an increase in ERP increases the inefficiency (or decreases the technical efficiency) of firms in the chemicals industry. The coefficient of IMP is negative and statistically significant, which represents the negative impact of IMP on technical inefficiency (or positive on technical efficiency). Thus, trade reform, a reduction in ERP or an increase in IMP, has an unambiguously positive effect on technical efficiency in the Indonesian chemicals industry.     

Trade liberalization and capacity utilization: New evidence from the Turkish rubber industry

This study empirically tests the hypothesis that trade liberalization increases capacity utilization. It calculates capacity utilization for the Turkish rubber industry by using a production theory framework. More specifically, plant-level capacity utilization levels are calculated using a Generalized Leontief cost function system. Capacity utilization levels were low but improved when the trade regime shifted from a restrictive to a more liberalized one. The size and location of plants were two significant factors which created capacity utilization differences within the industry. However, capacity utilization levels appeared to improve primarily because of trade liberalization.Also, a scholar-in-residence, Department of Economics, Duke University. My particular thanks go to Patrick Conway, Marjorie McElroy, Edward Tower, participants of the International Economics Workshops at Duke University, and the anonymous referee for helpful suggestions. Any errors are mine.     

Trade liberalization and the Labor Market Revisited

This paper provides new insights in understanding the adjustments of the labor market to trade liberalization policies in an economy producing tradeables and nontradeables. The results of the paper indicate that the short-run effects of trade liberalization on wages, labor allocation and worker welfare is contingent on certain explicit production and demand conditions that exist in an economy. The production condition is related to the slope of the labor demand curve in a given economy and the demand condition is related to the difference in the cross-price elasticity of demand of nontradeables to the price of importables and exportables. The necessary combination of these conditions needed for trade liberalization to be welfare improving in the short run is explored.     

贸易自由化与中国贸易结构升级

贸易自由化是加深经济全球化程度的主要因素,我国在逐步融入经济全球化的进程中,贸易自由化将会对我国外贸结构产生重大影响.本文根据贸易自由化对贸易结构变动效应的分析,用以各自科学的衡量指标,着重从理论和实证两个方面研究分析两者间的影响作用,进而提出相应的政策建议.     

Trade liberalization, heterogeneous firms and the soft budget constraint

We analyze the interaction between the soft budget constraint (SBC) and international trade by placing Segal’s (1998) SBC model within Melitz’s (2003) framework of international trade with heterogeneous monopolistically competitive firms. As in Segal’s model, SBC may result in moral hazard. The opening to international trade adds another sort of inefficiency. Some firms that would have become exporters in the absence of SBC choose to apply low effort and not export in order to extract a subsidy from the government. This effect takes place when the trade costs are sufficiently low. Overall, however, trade liberalization reduces inefficiencies generated by SBC. The number of firms subject to moral hazard SBC decreases, aggregate effort level increases and aggregate profits lost due to SBC-induced sub-optimal effort decline as trade costs decrease.     

Trade liberalization in a differentiated duopoly reconsidered

Constructing a model of differentiated Cournot duopoly, we consider welfare effects of trade liberalization (i.e. reductions in transport costs). We examine both multilateral trade (i.e. the firms in both countries export bilaterally) and unilateral trade, under which foreign entry is possible but the home firm cannot export. Some new results on trade gains under differentiated oligopoly are proved and their implications are discussed.     

Trade Structure and Trade liberalization: The emerging pattern between the EU and Transition Economies

The purpose of this study is to find empirical evidence for the assumption that trade liberalization unlocks the potential of the Transition Economies (TEs) to achieve technological upgrading, productivity progress and catching-up (in terms of income). The study examines the trade structure now emerging between the European Union (EU) and the TEs in the light of two sets of differently liberalized trade items identified by the European Agreements. The aim is to determine whether trade liberalization has helped to supersede the structures – reflected mainly in the low quality of products – inherited by the TEs from the command economy. The empirical results are interpreted in the light of the Flam-Helpman quality-cycle model. We find evidence of an ongoing division of labor between high quality products (EU) and low quality products (TEs) according to a cycle. The first stage comprises the already well established dominance of quality advantage products by EU countries producing and exporting high-quality products, which crowd out the TEs' production of similar products. The second stage is the exploitation of cost-advantages by TEs in less liberalized trade, and there they appear to achieve better results. All these results may be taken as support for an active government in TEs.     

APEC下的贸易投资自由化

由亚太地区21个国家和地区组成的亚太经合组织（简称APEC）今年将在中国举行一系列活动。6月6日至7日,来自APEC21个成员体的贸易部长们在上海举行贸易部长会议,这是APEC中国年的首次部长级会议。APEC能否在促进本地区贸易与投资的自由化和便利化上有所作为,颇为引人关注。APEC成立于1989年,其创立不久便把“坚持开放的多边贸易体制和减少区域贸易壁垒”正式确立为自己的宗旨和目标（1991年《汉城宣言》）。人们通常把贸易投资自由化、便利化（TILF）和经济技术合作（ECOTECH）称为APEC运行的两个车轮,两大支柱。推进贸…     

Trade liberalization and markups: Micro evidence from China

This paper presents evidence from highly disaggregated Chinese firm-product data that, given productivity, input tariff reductions induce an incumbent importer/exporter to increase product markups. We further investigate empirically the mechanisms underlying this trade liberalization effect, and find that input tariff reductions decrease marginal costs, and their effects on markup adjustments are more profound among firms with higher import dependence. Moreover, we exploit unique features of Chinese data by comparing results for two trade regimes: ordinary trade (wherein firms pay import tariffs to import) and processing trade (wherein firms are not subject to import tariffs). While the aforementioned trade liberalization effects and mechanisms only apply to ordinary trade, processing trade samples are used in a placebo test. The paper also shows that more productive firms charge higher markups for products. All these findings are robust to alternative markup measures including one estimate using physical-quantity output data, different production function specifications, a subsample consisting only of pure exporters, and estimations based on our theoretical derivations.     

Trade liberalization,the exchange rate and job flows in Brazil

Brazil underwent a large trade liberalization process in the 1990s. Over the period, manufacturing employment decreased significantly, generating public debate on the need to revert liberalization. This paper aims to identify the actual effect of trade liberalization on employment, separating it from exchange rate movements using a gross job flow approach. Our novel dataset covers all sectors and formally registered enterprises, and we use new sector specific exchange rate data. Our estimates suggest that greater openness reduce jobs through increased job destruction, with no effect on job creation, but the exchange rate matters also. Depreciations expand the number of jobs in manufacturing by increasing creation, with no effect on destruction.     

Trade liberalization and unemployment: Theory and evidence from India

A widely held view among the public is that trade liberalization increases unemployment. Using state and industry-level unemployment and trade protection data from India, we find no evidence of any unemployment increasing effect of trade reforms. In fact, our state-level analysis reveals that urban unemployment declines with trade liberalization in states with flexible labor markets and larger employment shares in net exporter industries. Moreover, our industry-level analysis indicates that workers in industries experiencing greater reductions in trade protection were less likely to become unemployed, especially in net export industries. Our results can be explained within a theoretical framework incorporating trade and search-generated unemployment and some institutional features of the Indian economy.     

Trade and financial liberalization with asymmetric information in bank financing

We investigate trade and financial openness in a small developing country where entrepreneurs need bank financing to operate in an import‐competing sector but banks do not observe their ability. This informational asymmetry causes adverse selection of low‐ability individuals into entrepreneurship and also prevents poor but able individuals from being entrepreneurs. We find that trade opening improves national welfare, but a tax is needed on foreign financial capital. Trade opening reduces an income gap between the rich and the poor, while financial opening affects this income gap ambiguously.     

Globalization challenges for the Mexican textile industry

The Doha round and full integration of the textile industry into the GATT have the potential to dramatically affect the Mexican textile industry. This study investigates the nature of scale economies and input relationships for that industry using a cost function with capital, labor, domestic intermediate goods, and imported intermediate goods as inputs. The findings suggest that significant economies of scale exist, and that most inputs are substitutes, although for some years some inputs are complements. Increased domestic input sensitivity to the price of foreign inputs may present challenges for the industry as it struggles to be internationally competitive.     

Trade liberalization, foreign ownership, and the environment in a small open economy

This paper examines the effects of trade liberalization on firm ownership and the environment for a small open economy. It is found that trade liberalization via tariff reductions can result in a dramatic switch in firm ownership from domestic to foreign, coupled with a lower pollution tax.     

Trade liberalization, antidumping, and safeguards: Evidence from India's tariff reform

This paper is the first to use product-level data to examine empirically whether countries use antidumping and safeguard exceptions to unwind commitments to lower tariffs in the face of domestic political-economic pressure. We focus on the case of India, a country that underwent a major exogenous tariff reform program in the early 1990s and subsequently initiated substantial use of safeguard and antidumping import restrictions. We first estimate structural determinants of India's import protection using the Grossman and Helpman (1994) model and provide evidence from its pre-reform tariff data of 1990 that is consistent with the theory. We then re-estimate the model on the Indian tariff data after the trade liberalization is complete and find that the model no longer fits, a result consistent with theory and evidence provided in other settings that India's 1991-1992 IMF arrangement can be interpreted as resulting in an exogenous shock to India's tariff policy. However, when we re-estimate the model on data from 2000-2002 that more completely reflects India's cross-product variation in import protection by including both its post-reform tariffs and its additional non-tariff barriers of antidumping and safeguard import protection, the significance of the Grossman and Helpman model determinant estimates is restored. We interpret these combined results as evidence that India unwound its commitment to reduce tariffs through use of antidumping and safeguard protection in the face of political-economic pressure. The estimates are also economically important and provide one explanation for separate results in the literature that the magnitude of import reduction associated with India's use of antidumping is similar to the initial import expansion associated with its tariff reform. Finally, we interpret the implications of our results for the burgeoning research literature examining the effects of liberalization on India's micro-level development.     

Trade liberalization gains under different trade theories: a case study for Ukraine

We analyze the deep and comprehensive free trade area (DCFTA) between Ukraine and the EU using a multi-regional general-equilibrium simulation model. Three alternative trade structures are implemented: (a) a standard specification of perfect competition based on the Armington assumption of regionally differentiated goods; (b) monopolistic competition among symmetric manufacturing firms; and (c) a competitive selection model of heterogeneous manufacturing firms. Across these structures the DCFTA indicates relatively large gains for Ukraine of more than 3 percent. We show, however, that the gains for Ukraine are lower when we consider monopolistic competition in manufacturing. This is attributed to a movement of resources into Ukraine’s traditional export sectors to the EU, which produce under constant returns. While there is little danger of deindustrialization dominating the overall welfare gains, we do observe substantially lower gains when we consider monopolistic competition. To our knowledge, this is the first empirical confirmation of the theoretic predication that the relative gains from trade in monopolistic competition models might be lower than under perfect competition in the context of a numeric simulation of economic integration. Under the popular heterogeneous-firms monopolistic competition theory we find significant firm selection effects indicating welfare impacts for Ukraine that are less than under the Armington structure but above those found under symmetric firms and monopolistic competition. These results are important considerations for Ukraine’s overall development strategy.