On the gains from an expansion in factor mobility in bilateral trade

A single composite-good two-factor input production model is employed to investigate the gains from an expansion in factor mobility between two countries with different neoclassical technologies. Necessary and sufficient conditions for both countries to gain from an expansion in factor mobility are established. The analysis then develops a criterion based on market information for predicting whether a country would gain from an expansion in factor mobility. Finally, the income distributional effects within and between countries of an expansion in factor mobility are discussed.     

Growth gains from trade and education

A multi-sector general equilibrium model is presented where education enhances general human capital, which is essential for increasing or maintaining the mobility of workers across industries. The paper shows that international trade, combined with education, can have a positive growth effect by allowing workers to move easily to, and specialize in, the industry with the greatest productivity in each period, which enables an economy to grow in the long run at the growth rate of the industry with the most rapid technical progress. Depending on the initial ratio of general-to-specific human capital stock, multiple equilibrium growth paths can exist including a poverty trap, and trade liberalization can allow an economy in a poverty trap to transform into one with continuous education and higher output growth.     

Estimating the pro-competitive gains from trade liberalization: an application to Mexican manufacturing

An original two-stage method is proposed to estimate the pro-competitive gains from trade liberalization. In a first step, I estimate the sensitivity of the price-cost margins of domestic firms to changes in the effective rate of protection, on the basis of a structure-performance relationship. This parameter is later exploited in a second step, where the cost of protection is calculated on the basis of a simple partial equilibrium model where domestic and foreign goods are imperfect substitutes. Applied to the Mexican case, this estimation reveals that protection removal depresses margins significantly and suggests that important additional gains can be expected from pro-competitive forces.     

Internal and external gains from international outsourcing

This article examines the implications of international outsourcing in the Heckscher–Ohlin model of general equilibrium by explicitly expounding the external effects to the outsourcing firms. With its focus paced on the labor-augmenting effect of outsourcing, it shows that (a) the standard result of welfare-enhancing outsourcing always holds in the absence of external effects, and (b) in the presence of external effects, however, (i) outsourcing may be welfare-reducing for the outsourcing country; (ii) the effects of outsourcing on sectoral outputs, employment and factor prices depend on factor-intensity ranking, and the signs and the relative magnitudes of the sectoral returns to scale.     

Trade in tourism services: Explaining tourism trade and the impact of the general agreement on trade in services on the gains from trade

The article addresses two questions related with tourism as a service trade. Can tourism be explained as other export activities? Does service liberalisation have a positive or negative impact on tourism receipts in destination countries? Previous research has either focused on the demand side factors (i.e. factors of demand in the origin countries) or on tourism as a long-run factor of economic growth. The research shows that a complementary perspective such as that offered by trade in a supply side perspective can render additional insights towards understanding tourism. This approach can explain why countries have absolute and comparative advantage. Another finding is that tourism as an export can be explained by some of the same destination factors that explain other service exports. Using different panel estimators the importance of supply side factors that are to some extent exclusive to tourism are demonstrated: the general price competitiveness of the destination, tourism infrastructure and the provision of safety. The econometric models also confirm the relevance of other conventional explanatory factors of trade in services such as GDP per capita and internet usage. The last part of the article analyses the welfare gains from trade under the general agreement on trade in services (GATS). The revenue (tourism receipt) effect is decomposed into a volume (arrival) and price effect. Results suggest that liberalisers under the GATS gained especially from a volume effect with average higher growth rates in the number of arrivals. There is also found to be a positive effect on the average income earned per tourist from being a liberaliser.     

Intertemporal gains from trade

The gains-from-trade theorems of atemporal trade theory have direct analogues in intertemporal models. The apparent paradoxes which arise in the comparison of steady states disappear when the complete time paths of perfectly competitive trade and autarky equilibria in a general intertemporal linear production model are considered. The analysis can be extended to cover international investment.     

Country size and trade in intermediate and final goods

This paper documents a negative relationship between country size and the share of final consumption goods in total exports. A model is developed, based on the division of labour and comparative advantage, to explain this relationship. Labour is used to produce traded intermediate inputs which are used in the production of traded final goods. Large countries gain relatively more from comparative advantage than from the division of labour, while the opposite is true for small countries. As in the data, large countries export a smaller share of final goods and a larger share of intermediate goods than small countries. It is shown that the model developed in the paper yields the same results as a model based on monopolistic competition.     

Non-competitive imports and gains from trade

The paper argues for the explicit inclusion in international trade models of goods which cannot be produced in the importing country. Non-competitive goods require a product-requisite factor which is not universally available. International trade in these goods generates much greater per-unit gains from trade than trade in ordinary goods which can be produced in both (all) countries. Omission of these goods from models of international trade leads to the possibility of a gross underestimation of the difference between autarkic and with-trade income levels. The omission of these goods also neglects some dimensions of policy which are important in the real world, such as sanctions.     

Rue the ROOs: Rules of origin and the gains (or losses) from trade agreements

ABSTRACT

This article provides three-good, three-country examples of trade in both intermediate inputs and final goods. These show the adverse effects that rules of origin (ROOs) can have, even in a world where every country has a free trade agreement (FTA) with every other country. ROOs may cause ubiquitous FTAs to yield a level of welfare, for everyone, that is worse than if there were no FTAs at all, and all trade were subject to common nondiscriminatory tariffs. Thus, the move to an ever increasing number of FTAs may be reducing world welfare.     

The role of processing trade in exporters' responses to exchange rate: Evidence from China

Processing trade is an important exporting mode for many countries developed by the export-oriented industrialisation such as 1960s Japan, 1990s Korea and 2000s China. Exporters who rely on processing trade for foreign profits do not enjoy much market power, and hence care more about exchange rate changes. We develop a model to illustrate how processing trade affects exporters' responses to exchange rate fluctuations. The model suggests that the elasticity of export price with respect to exchange rate for processing-trade exporters is greater than that of the ordinary-trade exporters, while the elasticity of export quantity of processing-trade exporters is smaller compared to their ordinary-trade counterparts. Most developing countries' governments offer processing-trade exporters better tax/tariff reduction policy to encourage exporting, which grants processing-trade exporters additional advantage to adjust more on export price and less on quantity when facing changes in exchange rate and therefore causes their different responses to exchange rate fluctuations. We find strong empirical supports by studying the data from China, which is the largest developing country and biggest processing-trade exporter.     

Domestic productivity and variety gains from trade

We show theoretically and confirm empirically that domestic productivity has a significant impact on the demand for foreign varieties under the assumption that domestic and foreign varieties are imperfect substitutes. In particular, the demand for imported varieties is more elastic for countries with comparative advantage. For an average good facing a median trade barrier, doubling the importer–exporter relative export performance decreases the number of imported varieties by 17%. Our findings suggest that the variety gains estimates could be significantly biased if we ignore the substitutability between imported and domestic varieties.     

A strategic and welfare theoretic analysis of free trade areas

We construct a three-country model to determine how the formation of free trade areas (FTAs) affects optimal tariffs and welfare. We find that, at constant rest of the world (ROW) tariffs, the adoption of internal free trade induces union members to reduce their external tariffs below the Kemp-Wan [J. Int. Econom. 6 (1976) 95-97] level, and causes ROW's terms of trade to improve and its welfare to rise. When ROW also behaves optimally, its policy response to the formation of the FTA is to raise tariffs. Generally, FTA members prefer to liberalize internal trade partially and find regional integration appealing only if their collective size is sufficiently large. We also demonstrate how FTAs may undermine the attainment of global free trade.     

Distortions and static negative marginal gains from trade

In this paper, the method of input-output analysis is used for the case of Korea to demonstrate that the promotion of certain exports can result in static inefficiency to the economy. It appears that Korea lost a significant amount of both capital and labor via trade in competitive goods during 1970/1972. Although the simple existence of static losses at any specific point in time does not necessarily imply welfare losses to the economy over the long term, the fact that we can observe such losses implies that we should at least try to justify their existence in terms of dynamic gains.     

全球价值链位置与贸易反倾销——基于中国制造业层面数据的实证

中国制造业具有融入全球价值链分工与遭遇贸易反倾销高位态势并存的现象。基于价值链位置对贸易反倾销影响的理论分析,利用中国制造业全球价值链位置与贸易反倾销数据,分别从资本密集、劳动密集、高技术与低技术四类行业角度实证研究了价值链位置对反倾销的影响。总体上,当中国制造业价值链位置处于领先地位时,遭遇反倾销会减少;处于追赶地位时,遭遇反倾销会增加,但在不同要素密集型和技术水平行业,价值链位置对贸易反倾销的影响存在一定差异。随着中国制造业价值链位置不断攀升,将迎来贸易摩擦频发多发的阶段,这需要区别对待,采取针对性的应对举措。     

Tariffs and formation of free trade agreements networks

This paper examines the formation of bilateral free trade agreements (FTAs) on the basis of country heterogeneity in the tariff level. We demonstrate that a country's unilateral incentive to form an FTA depends on the relative magnitudes of the (negative) market concession effect and the (positive) market expansion effect, both of which are determined by the tariff levels of the two FTA partner countries. Global welfare is maximised when all country pairs form FTAs. Two countries in equilibrium are more likely to form an FTA when their tariff gap is smaller or when their tariff levels are neither very high nor very low. This finding is robust to several extensions of the model. Our preliminary empirical analysis provides some evidence for the finding.     

The clash of liberalizations: Preferential vs. multilateral trade liberalization in the European Union

Preferential trade agreements (PTAs) are characterized by liberalization with respect to only a few partners and thus they can potentially clash with, and retard multilateral trade liberalization (MTL). Yet there is almost no systematic evidence on whether the numerous existing PTAs actually affect MTL. We provide a model showing that PTAs hinder MTL unless they entail accession to a customs union with internal transfers. Using product-level tariffs negotiated by the European Union (EU) in the last two multilateral trade rounds we find that several of its PTAs have clashed with its MTL. However, this effect is absent for EU accessions. Moreover, we provide new evidence on the political economy determinants of trade policy in the EU.     

Market imperfections, wealth inequality, and the distribution of trade gains

Globalization increasingly involves less-developed countries (LDCs), i.e., economies which usually suffer from severe imperfections in their financial systems. Taking these imperfections seriously, we analyze how credit frictions affect the distributive impact of trade liberalizations. We find that free trade significantly widens income differences among firm owners in LDCs: While wealthy entrepreneurs are better off, relatively poor business people lose. Intuitively, with integrated markets, profit margins shrink — which makes access to credit particularly difficult for the least-affluent agents. Richer entrepreneurs, by contrast, win because they can take advantage of new export opportunities. Our findings resonate well with a number of empirical regularities, in particular with the observation that some liberalizing LDCs have observed a surge in top-income shares.     

Trade and the gains from trade with imperfect competition

A simple two-country model is constructed in order to show how imperfect competition can form a basis for trade. Under the assumption of Cournot-Nash behaviour, it is demonstrated that trade will lead to a bilateral welfare improvement when countries are identical in all respects. When countries differ in size, trade will always increase total world real income, but the large country may experience a welfare loss. Increasing returns to scale in the production of the monopolized good complicates the situation further, but it generally remains true that trade increases world real income.     

中美农产品贸易收益核算及贸易摩擦的影响分析

在全球生产分割的背景下,海关统计数据由于包含大量重复计算的成分,并不能真实反映一国某部门的贸易收益情况。文章通过构建跨国投入产出模型,定义增加值出口为衡量双边贸易收益的指标,从增加值出口变化趋势、行业分布情况及贸易收益的实现方式,分别剖析2000~2014年中美两国农产品各部门的增加值出口情况。发现中美农产品双边贸易的盈余方实为中国,农产品行业的大量增加值隐藏在本国的其他部门中出口。中国市场对美国农业经济的拉动作用在提升,两国农产品行业实现收益的方式不同,中国越来越趋向于附加值含量低的粗加工中间品出口。两国农产品贸易关系紧密,对第三国市场的依赖不断下降,中美贸易摩擦对两国农产品行业的收益都将造成较大的冲击。     

Continuity in the gains from trade with similar consumers

The conditions under which one can prove directly that all consumers gain from the elimination of prohibitive tariffs are very stringent. Yet it is intuitively plausible that if these conditions were ‘almost’ met, the results would still obtain and all would gain. We establish this rigorously by use of a topology on economic agents, as developed by Kannai, Debreu and Hildenbrand. Specifically, we show that if, in a given economy, all agents gain in going from autarky to free trade, then in any economies composed of agents sufficiently similar to those in the given one, all will gain.