International trade and income distribution: reconsidering the evidence

This article reassesses the link between international trade and income distribution. We argue that one way to assess the influence of international trade upon income distribution is to take account of each country’s specific trade patterns by measuring the changes in the factor content of trade. The econometric specification is based on changes in Gini indices (over non-overlapping 4-year intervals), computed exclusively from series drawn from the same source. Our results show that a change in the factor content of trade has a significant impact on income distribution. The sign and magnitude of this impact is conditional on the national income level. We find that an increase in the labor content of trade raises income inequality in poor countries, but reduces it in rich countries (the reverse is true for the capital content of trade). In particular, we show that in the 1980s and 1990s, international trade may have contributed significantly to widening income inequalities in developing countries.     

Capturing Regional Trade Effects in the Presence of Other Trade Effects: The Impact of the Europe Agreement on Poland’s Imports

This paper investigates the impact of the Europe Agreement on Poland’s imports using econometric models applied to highly disaggregated trade data. This allows other influences on Poland’s trade patterns to be controlled for, specifically the effects of other trade agreements and for the emergence of China. The paper shows that the Europe Agreement had transitory effects on Poland’s imports, but that the scale of the trade effects and the balance of trade creation and diversion effects is sensitive to model specification. The preferred dynamic specification which allows for heterogeneity of time effects across sectors identifies the Europe Agreement to have net trade-creating effects.      

Are Bilateral Remittances Countercyclical?

By putting together a relatively large data set on bilateral remittances of emigrants, this paper is able to shed light on the important hypothesis of smoothing. The smoothing hypothesis is that remittances are countercyclical with respect to income in the worker’s country of origin (the recipient of the remittance), while procyclical with respect to income in the migrant’s host country (the sender of the remittance). The econometric results confirm the hypothesis. This affirmation of smoothing is important for two reasons. First, it suggests that remittances should be placed on the list of criteria for an optimum currency area. Second, it brings into doubt plans by governments in some developing countries to harness remittances for their own use, in that government spending in these countries generally fails the test of countercyclicality which remittances pass.     

Special Interest Groups and Trade Policy in the EU

The aim of this work is to employ theoretical and empirical analysis on the role of special interest groups in the determination of the EU trade policy. We build a two-stage game model of trade policy formation in a multisector-multicountry framework. We obtain the level of protection as a function of industry characteristics, in addition to political and economic factors at member state and European levels. The model is then tested by 2SLS estimation using data for 15 countries and 41 sectors. The econometric output suggests empirical support to model’s predictions as it highlights an important role for both national and European groups in trade policy making.      

The Dynamics of International Trade Patterns

This paper introduces new dynamic measures for examining changes in international trade patterns. Using data for 20 OECD countries over the 1980–2000 period, we show that inter-industry trade changes contrary to countries’ previous specialization are frequently the dominant form of trade expansion. The econometric analysis indicates that the observed changes in trade patterns were explained by initial endowments of human-capital and industry-specific changes in labour productivity and labour costs. The results also suggest that trade liberalization induced an increase in the previous specialization of larger OECD economies in industries with increasing returns to scale. JEL no. F1, O33, O50     

Measuring the Effect of Food Safety Standards on China’s Agricultural Exports

According to China’s recent experiences in agricultural trade disputes with the developed countries, China’s exports might be constrained by nontariff barriers. The significance of these barriers is assessed in regression analyses by using a gravity model of agricultural product trade to test the effect of the residue standards on China’s export of vegetables (Chlorpyrifos MRL) and aquatic products (Oxytetracycline MRL). The results show that food safety standards imposed by importing countries have a negative and statistically significant effect on China’s export of agricultural products. The trade effect of food safety standards is much larger than that of the import tariff. JEL no. F13, F14     

Regional Economic Integration and the Location of Multinational Firms

A theoretical model of international location is applied to a process of regional economic integration in which a set of countries mutually removes barriers to trade and investment, thus overcoming the traditional ‘hub and spoke’ setup of regional agreements. The theoretical results are matched with actual trade and foreign investment data from a sample of some 4,200 multinational firms who have invested in Central and Eastern Europe over the 1990–1999 period. Controlling for the effects of the reduction in trade barriers through a proper specification of a gravity model, it is found that the conventional outcome of an agglomeration of economic activities in the centre of the integrating area does not necessarily hold. Multilateral regional integration agreements can act as an important dispersion force significantly driving the location of multinational firms. A panel probit econometric exercise confirms the findings. JEL no. F12, F15, F21     

Intra-industry trade of India: Trends and country-specific factors

Intra-industry Trade of India: Trends and Country-Specific Factors. — The analysis in this paper confirms that trade liberalization biases trade expansion towards intra-industry trade (IIT) in India. The increased level of IIT is largely exportled, that is, caused by a faster growth of exports than of imports. India’s IIT is more intense with high-income countries and is characterized by a greater extent of complementarity. Further, certain country-specific factors which are found to be crucial in the models of vertical IIT are pertinent in influencing the pattern of India’s bilateral IIT.     

Overall trade specialization and economic development: countries diversify

This paper provides evidence for an aspect of trade often disregarded in international trade research: countries’ sectoral export diversification. The results of our semiparametric empirical analysis show that, on average, countries do not specialize; on the contrary, they diversify. Our results are robust for different statistical indices used to measure trade specialization, for the level of sectoral aggregation, and for the level of smoothing in the nonparametric term associated with per capita income. Using a generalized additive model (GAM) with country-specific fixed effects it can be shown that, controlling for countries’ heterogeneity, sectoral export diversification increases with income.

The Skill Content of Inter- and Intra-Industry Trade: Evidence for the United Kingdom

In this paper we investigate the relative importance of net exchanges of skills embodied in intra-industry and inter-industry trade for the UK’s trade with some middle income countries. We also separately measure the net exchanges of skills embodied in vertical and horizontal intra-industry trade (IIT). We find that there are substantial factor exchanges involved in IIT, implying that traditional factor content studies may have seriously underestimated the actual factor content of total trade flows. This means that the adjustment effects of IIT may be greater than is often presumed. We also find, in line with theory, that vertical IIT involves similar net exchanges of labour of different skills to that of inter-industry trade, while horizontal IIT involves much smaller net exchanges of skills. JEL no. F11, F14     

Exchange rate volatility,international trade and labour demand

The purpose of this study is to assess under what conditions exchange rate volatility generates a positive effect on an exporting firm’s labour demand. As the exchange rate volatility increases, so does the value of the export option, provided that firms are flexible with respect to international trade. Higher volatility increases the potential gains from trade and can increase the demand for labour. The firm’s trade flexibility can be interpreted as a real hedging strategy when financial markets are incomplete. In many newly industrializing countries and emerging economies financial markets are imperfect or risk sharing markets are just starting to develop at a rather slow pace.     

Chinese Bilateral Intra-Industry Trade: A Panel Data Study for 50 Countries in the 1992–2001 Period

This study examines the features and determinants of Chinese intra-industry trade during the 1992–2001 transition period for 50 of China’s trade partners. We disentangle total intra-industry trade (TIIT) into vertical intra-industry trade (VIIT) vis-à-vis horizontal intra-industry trade (HIIT), using data at the four-digit SITC level. The findings indicate that Chinese bilateral intra-industry trade, particularly VIIT, increased significantly during this transition period. VIIT appears to be positively related to differences in consumer patterns. HIIT is negatively related to these differences. In addition, we find that FDI has played an important role in determining IIT, especially VIIT. Other significant intra-industry trade drivers are geographical distance, economic size, trade openness and trade composition. Finally, the impact of China’s liberalization policies and the special role of Hong Kong are demonstrated. We discuss a number of important business and political implications that can be drawn from our findings. JEL no. F14     

Assessment of the RF Central Bank’s monetary policy efficiency during the financial crisis

The efficiency of the Bank of Russia’s monetary policy is evaluated in the paper using econometric modeling. The character and impact degree of the used monetary policy instruments on its targets are defined, and conclusions on different actions of the above-mentioned instruments during the crisis and precrisis periods are made.     

Gender,entrepreneurship and socioeconomic reparation in South Africa

Entrepreneurship development has become recognized as a functional means of tackling South Africa’s socioeconomic challenges of slow growth rate, rapidly increasing unemployment, and racially inequitable distribution of income. However, current policies and programs ignore the potential input of the female gender. Yet, females are proven to be capable of using their peculiar gender dispositions effectively as small and micro entrepreneurs. The article examines the socioeconomic outcomes of South Africa’s systemic crisis, gender-specific influences on entrepreneurial supply and alternative women-in-entrepreneurship programs that could be implemented with sensitivity to that country’s sociocultural diversity.     

Does North-South horizontal intra-industry trade really exist? An analysis of the toy industry

Does North-South Horizontal Intra-Industry Trade Really Exist? An Analysis of the Toy Industry. — In a combination of a case study approach and econometric analysis, bilateral intra-industry trade between high income countries and low income countries in the toy industry is investigated. In a number of products there is important bilateral intra-industry trade between both groups of countries. Econometric analysis in which a number of the explanatory variables used were quantified on the basis of the information supplied by the industry-spokesmen yields results which strongly support the view that the bilateral IIT between the high income countries and the low income countries in the toy industry is determined significantly by horizontal product differentiation and economies of scale.     

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.     

TRADE LIBERALIZATION AND PRICE‐COST MARGIN IN INDIAN INDUSTRIES

Using panel data for 137 three‐digit industries for 1980/81 to 1997/98, the paper examines the effect of trade liberalization on price‐cost margins in Indian industries. An econometric model is estimated to explain variations in price‐cost margins, taking tariff and nontariff barriers among the explanatory variables. The results indicate that the lowering of tariffs and removal of quantitative restrictions on imports of manufactures in the 1990s had a significant pro‐competitive effect on Indian industries, particularly concentrated industries, tending to reduce the price‐cost margins. The paper notes that despite the pro‐competitive effects of trade liberalization reinforced by domestic industrial deregulation, the price‐cost margin increased in the post‐reform period in most industries and aggregate manufacturing, which is attributed to a marked fall in the growth rate of real wages and a significant reduction in labor's income share in value added in the post‐reform period, reflecting perhaps a weakening of industrial labor's bargaining power.     

Eliminating contradictions in the domestic metals market under crisis conditions

The influence of foreign trade policy on the development of Russian metallurgy increased from 1990 to 2000. The 2008–2009 crisis makes it possible to critique the achieved results and what consequences metallurgical companies’ orientation toward export has had on Russia’s domestic metals market and the circulation of metal. Alternatives are considered for possible development of metallurgy as affected by the basic trends of metal and capital in the world and domestic markets.     

Monotonicity of indices of “Revealed“ comparative advantage: Empirical evidence on Hillman’s condition

Conclusions The necessary and sufficient condition suggested by Hillman [1980] for the index of RCA, when used in cross-country comparisons, to provide a one-to-one relationship between pre-trade comparative advantage and revealed comparative advantage is fulfilled for the great majority of the “commodities” traded in 1985 by 118 developing economies. Given the low level of data aggregation (the lowest for which statistical information is currently available), the large sample of countries and the high percentage of developing economies’ total exports captured in this research, we can conclude that Balassa’s export-performance index, for cross-country comparisons, is a good indicator of comparative advantage as reflected by pre-trade prices. In other words, Hillman’s condition is a useful indicator of the presence of monotonicity in indices of RCA: we have observed that at a 5-digit level of commodity aggregation, increases in Balassa’s export performance index of RCA are likely to correspond to increases in export levels. Aggregation of commodities at a 3-digit and at a 1-digit level suggests that Hillman’s condition is unlikely to be violated if the cause for values of the Hillman’s Index less than one is due to export specialization; on the contrary, the number of cases of a Hillman Index smaller than one due to a large share of world markets is expected to be negatively related to the level of aggregation. Our results suggest that Hillman’s index should be calculated in any empirical investigation trying to assess the long-term implications of trade liberalization negotiations using an export-performance index of RCA. There is evidence that, if used at a disaggregated level, the HI is a tool that may help flag cases in which the RCA index can be a misleading indicator of countries’ comparative advantage, even in cross-country comparisons. It may also help reduce disagreements regarding the most appropriate coefficient of RCA. Further research should be directed toward enlarging the sample of countries to include the entire world and to incorporate at least three years of trade so as to be able to eliminate the possible influence of cycles.     

Kurzfristige schÄtzfunktionen für den warenhandel der bundesrepublik deutschland

Summary Short-term Foreign Trade Estimates for the Federal Republic of Germany. — In the econometric estimates of Germany’s foreign trade at least one of the cyclical variables, i.e. capacity utilization rate, accelerator and judgement of inventory levels, significantly enters each import equation and — with one exception — each export equation. However, as opposed to the results of other empirical investigations, the dominating influence of the capacity utilization rate could not be substantiated. The long-term influences on import demand are captured by disposable income as well as those final demand components with a high import content. The long-term development of exports can be explained by production in the respective countries. The size of the estimated import price elasticities corresponds quite well with a priori expectations : the lowest elasticity was exhibited by products for which domestic substitutes exist only to a limited degree. On the other hand, imports of price-competitive consumer goods revealed the highest elasticity. The price elasticity of demand for total imports was calculated to be -0.50. With respect to export demand, the equations — disaggregated by countries — produced significant results for the price variables in almost all cases. For total exports to OECD countries the export price elasticity amounted to -1.09. Given this estimate as well as the above mentioned import price elasticity it can be generally concluded that the requirements of the Marshall-Lerner condition are met.

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Résumé L’estimation de court terme du commerce extérieur de la République Fédérale d’Allemagne. — Dans l’estimation économétrique du commerce extérieur allemand des variables cycliques — l’utilisation de l’équipement, l’accélérateur et l’opinion des entreprises sur les stocks — jouent un r?le important. Pourtant, l’influence eminente de l’utilisation de l’équipement dans d’autres investigations empiriques du commerce extérieur ne pouvait pas être supportée ici. Les influences de long terme sur la demande importatrice sont reflétées dans le revenu disponible et dans ceux composantes de la demande finale qui absorbent beaucoup de biens importés. L’évolution de long terme des exportations peut être expliquée par la production dans les pays importatrices. Les coefficients estimés des variables de prix reflètent les caractéristiques économiques des groupes des biens importatrices individuels très bien. L’élasticité-prix des importations allemandes totales se chiffre á -0.50. Dans presque tous les cas, il y avait une influence de prix dans les équations des exportations désagrégées par des pays consommatrices. L’élasticité des exportations allemandes totales vers les pays OCDE se chiffre á -1.09. L’élasticité-prix des importations et des exportations permettent la conclusion que la condition de Marshall-Lerner est satisfaite.

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Resumen Funciones de estimación de corto plazo para el comercio de la Repüblica Federal de Alemania. — En la estimación econométrica del comercio exterior alemán las variables cíclicas de utilización de capacidad instalada, acelerador y apreciación de stock, juegan un papel importante. La influencia más que proporcional de la utilización de la capacidad instalada en otras investigaciones empiricas del comercio exterior no pudo ser confirmada aquf. Las influencias de más largo plazo sobre la demanda por importaciones se reflejan a través del ingreso disponible y de aquellos componentes de la demanda final a los que se incorporan los bienes importados. El desarrollo de largo plazo de las exportaciones se puedo explicar por la producción del pais importador en cuesti?n. Los coeficientes estimados de las variables de precios, reflejan muy bien las caracteristicas econ?micas de los grupos de productos de importación individuales. La elasticidad-precio para todos los productos de importación alemanes es de -0,50. Entre las funciones de exportación desagregadas por paises de destino, se déterminé en casi todos los casos un efecto-precio. La elasticidad-precio del total de las exportaciones alemanas hacia los paises de la OCDE se calculé en -1,09. Junto con la elasticidad-precio de las importaciones, se concluye, que se cnmple la condition Marshall-Lerner.