The home market effect (HME) reveals how industrial location depends on country size. One-factor or immobile-labor models are employed in early studies of the HME, in which the transport costs of the homogeneous good are found to be essential. In more recent literature, two-factor models, with the addition of mobile capital, are also used. This paper compares these models and obtains the following results. First, mobile capital brings the existence of the HME for any transport costs of the homogeneous good. In addition, in a two-factor model, a larger share of capital may result in a smaller firm share, and firms may relocate to a smaller country when the homogeneous good market is more integrated.
{"title":"Mobile Capital and the Home Market Effect","authors":"Hajime Takatsuka, Dao‐Zhi Zeng","doi":"10.2139/ssrn.1504019","DOIUrl":"https://doi.org/10.2139/ssrn.1504019","url":null,"abstract":"The home market effect (HME) reveals how industrial location depends on country size. One-factor or immobile-labor models are employed in early studies of the HME, in which the transport costs of the homogeneous good are found to be essential. In more recent literature, two-factor models, with the addition of mobile capital, are also used. This paper compares these models and obtains the following results. First, mobile capital brings the existence of the HME for any transport costs of the homogeneous good. In addition, in a two-factor model, a larger share of capital may result in a smaller firm share, and firms may relocate to a smaller country when the homogeneous good market is more integrated.","PeriodicalId":14396,"journal":{"name":"International Trade","volume":"35 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2009-11-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"78799997","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Bilateral free trade agreements have generally been analyzed as instances of preferential reciprocal tariff liberalization. Viewed through this lens, such agreements raise concerns both about new competition and about trade diversion. The United States-Peru Trade Promotion Agreement, an example of a serious North-South accord, demonstrates that new market access was not a principal Peruvian goal in the trade negotiations. Instead, the agreement was intended to encourage investment by locking in Peru’s economic reforms. This motivation has very different implications for the global trading system than a quest for preferential access.
{"title":"The United States-Peru Trade Promotion Agreement: What Did You Expect?","authors":"Philip I. Levy","doi":"10.2139/ssrn.1501243","DOIUrl":"https://doi.org/10.2139/ssrn.1501243","url":null,"abstract":"Bilateral free trade agreements have generally been analyzed as instances of preferential reciprocal tariff liberalization. Viewed through this lens, such agreements raise concerns both about new competition and about trade diversion. The United States-Peru Trade Promotion Agreement, an example of a serious North-South accord, demonstrates that new market access was not a principal Peruvian goal in the trade negotiations. Instead, the agreement was intended to encourage investment by locking in Peru’s economic reforms. This motivation has very different implications for the global trading system than a quest for preferential access.","PeriodicalId":14396,"journal":{"name":"International Trade","volume":"94 3","pages":""},"PeriodicalIF":0.0,"publicationDate":"2009-11-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"91463194","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper proposes an alternative analytical model to evaluate the trend and stages of openness of any country from a multidimensional perspective. The new trade analytical model is entitled “The Multi-Level Openness Monitoring Model (MOM-Model)”.
{"title":"The Multi-Level Openness Monitoring Model (Mom-Model): Theoretical Framework","authors":"Mario Arturo Ruiz Estrada","doi":"10.2139/ssrn.1499648","DOIUrl":"https://doi.org/10.2139/ssrn.1499648","url":null,"abstract":"This paper proposes an alternative analytical model to evaluate the trend and stages of openness of any country from a multidimensional perspective. The new trade analytical model is entitled “The Multi-Level Openness Monitoring Model (MOM-Model)”.","PeriodicalId":14396,"journal":{"name":"International Trade","volume":"188 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2009-11-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"72716555","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Many studies have found that international borders represent large barriers to trade. But how do international borders compare to domestic border barriers? We investigate international and domestic border barriers in a unified framework. We consider a data set of exports from individual U.S. states to foreign countries and combine it with trade flows between and within U.S. states. After controlling for distance and country size, we estimate that relative to state-to-state trade, crossing an individual U.S. state’s domestic border appears to entail a larger trade barrier than crossing the international U.S. border. Due to the absence of governmental impediments to trade within the United States, this result is surprising. We interpret it as highlighting the concentration of economic activity and trade flows at the local level.
{"title":"Is the International Border Effect Larger than the Domestic Border Effect? Evidence from U.S. Trade","authors":"Cletus C. Coughlin, D. Novy","doi":"10.2139/ssrn.1505480","DOIUrl":"https://doi.org/10.2139/ssrn.1505480","url":null,"abstract":"Many studies have found that international borders represent large barriers to trade. But how do international borders compare to domestic border barriers? We investigate international and domestic border barriers in a unified framework. We consider a data set of exports from individual U.S. states to foreign countries and combine it with trade flows between and within U.S. states. After controlling for distance and country size, we estimate that relative to state-to-state trade, crossing an individual U.S. state’s domestic border appears to entail a larger trade barrier than crossing the international U.S. border. Due to the absence of governmental impediments to trade within the United States, this result is surprising. We interpret it as highlighting the concentration of economic activity and trade flows at the local level.","PeriodicalId":14396,"journal":{"name":"International Trade","volume":"22 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2009-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"77487420","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The use of different currencies in the invoicing of international trade transactions plays a major role in the international transmission of economic fluctuations. Existing studies argue that an exporter’s invoicing choice reflects structural aspects of its industry, such as market share and the price sensitivity of demand, as well as the hedging of marginal costs (due, for instance, to the use of imported inputs) and macroeconomic volatility. We use a new, highly disaggregated data set to assess the roles of the various invoicing determinants. Our findings support the factors identified in the literature and document a new feature: a link between shipment size and invoicing. Specifically, larger transactions are more likely to be invoiced in the importer’s currency. We offer a theoretical explanation for the empirical link between transaction size and invoicing by allowing invoicing to be set through bargaining between exporters and importers, a feature absent from existing models despite its empirical relevance.
{"title":"Micro, Macro and Strategic Forces in International Trade Invoicing","authors":"L. Goldberg, C. Tille","doi":"10.2139/ssrn.1507115","DOIUrl":"https://doi.org/10.2139/ssrn.1507115","url":null,"abstract":"The use of different currencies in the invoicing of international trade transactions plays a major role in the international transmission of economic fluctuations. Existing studies argue that an exporter’s invoicing choice reflects structural aspects of its industry, such as market share and the price sensitivity of demand, as well as the hedging of marginal costs (due, for instance, to the use of imported inputs) and macroeconomic volatility. We use a new, highly disaggregated data set to assess the roles of the various invoicing determinants. Our findings support the factors identified in the literature and document a new feature: a link between shipment size and invoicing. Specifically, larger transactions are more likely to be invoiced in the importer’s currency. We offer a theoretical explanation for the empirical link between transaction size and invoicing by allowing invoicing to be set through bargaining between exporters and importers, a feature absent from existing models despite its empirical relevance.","PeriodicalId":14396,"journal":{"name":"International Trade","volume":"23 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2009-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"78452563","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We introduce non-tradable goods to the Heckscher-Ohlin-Samuelson (HOS) model to study the distributive effects of terms of trade shocks. We show that the employment of resources in activities producing exclusively for the local market induces a crucial association between domestic spending and factor demand and prices, which is absent in the usual HOS framework. Specifically, in a two-sector economy (producing only exportable and non-tradable goods) there are no redistributive effects of external terms of trade shifts {i.e. no Stolper-Samuelson effect. By extending the model to the domestic production of a third, importable good, we show that distributional tensions arise. Distributional conflicts occur within urban labor groups (skilled vs. unskilled) and not only between the "traditional" rural vs. urban factors. Finally, export taxes are imposed to re-distribute the effects of external shocks. We show that the ability of the government to cushion the impact of the terms of terms shift on the economy's income distribution depends crucially on the use of the tax revenues.
{"title":"On the Distributive Effects of Terms of Trade Shocks: The Role of Non-Tradable Goods","authors":"Sebastian Galiani, D. Heymann, Nicolás E. Magud","doi":"10.2139/ssrn.1324243","DOIUrl":"https://doi.org/10.2139/ssrn.1324243","url":null,"abstract":"We introduce non-tradable goods to the Heckscher-Ohlin-Samuelson (HOS) model to study the distributive effects of terms of trade shocks. We show that the employment of resources in activities producing exclusively for the local market induces a crucial association between domestic spending and factor demand and prices, which is absent in the usual HOS framework. Specifically, in a two-sector economy (producing only exportable and non-tradable goods) there are no redistributive effects of external terms of trade shifts {i.e. no Stolper-Samuelson effect. By extending the model to the domestic production of a third, importable good, we show that distributional tensions arise. Distributional conflicts occur within urban labor groups (skilled vs. unskilled) and not only between the \"traditional\" rural vs. urban factors. Finally, export taxes are imposed to re-distribute the effects of external shocks. We show that the ability of the government to cushion the impact of the terms of terms shift on the economy's income distribution depends crucially on the use of the tax revenues.","PeriodicalId":14396,"journal":{"name":"International Trade","volume":"1 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2009-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"88226727","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper studies whether environmental dumping is a robust strategic environmental policy toward international unionized oligopolies. We introduce trade unions to Barrett (1994) model and show that: (i) When firms compete as Cournot competitors, governments engage in environmental dumping policies; and the extent to which optimal environmental taxes deviate from Pigouvian taxes is greater than in the case where there do not exist trade unions. (ii) When firms compete as Bertrand competitors, optimal environmental policies are determined by the interaction between trade unions’ bargaining strength and the degree of product differentiation. If trade unions’ bargaining strength is sufficient; or given trade unions’ bargaining strength, if the degree of product differentiation is sufficient, governments engage in environmental dumping policies. (iii) These imply that environmental dumping could be a robust strategic environmental policy toward international unionized oligopolies.
{"title":"Environmental Dumping and International Unionized Oligopolies","authors":"Jie Ma, Qi Duan","doi":"10.2139/ssrn.1494877","DOIUrl":"https://doi.org/10.2139/ssrn.1494877","url":null,"abstract":"This paper studies whether environmental dumping is a robust strategic environmental policy toward international unionized oligopolies. We introduce trade unions to Barrett (1994) model and show that: (i) When firms compete as Cournot competitors, governments engage in environmental dumping policies; and the extent to which optimal environmental taxes deviate from Pigouvian taxes is greater than in the case where there do not exist trade unions. (ii) When firms compete as Bertrand competitors, optimal environmental policies are determined by the interaction between trade unions’ bargaining strength and the degree of product differentiation. If trade unions’ bargaining strength is sufficient; or given trade unions’ bargaining strength, if the degree of product differentiation is sufficient, governments engage in environmental dumping policies. (iii) These imply that environmental dumping could be a robust strategic environmental policy toward international unionized oligopolies.","PeriodicalId":14396,"journal":{"name":"International Trade","volume":"365 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2009-10-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"75440285","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper argues that the Republic of Korea (hereafter Korea) is not immune to global crises, but that a more than proportional response of gross domestic product to global crises does not seem to be the general case either. Along this line of reasoning, Korea's extreme response to current crisis in the fourth quarter of 2008 was attributed not only to the crisis in the United States, but also to additional idiosyncratic components, such as the extraordinary collapse of the People's Republic of China's (PRC) imports and the drastic capital outflow from Korea. The paper also emphasizes the differences between the current recession and the currency crisis period. The currency crisis was mainly attributed to the internal fragility of Korea's financial market, but the current recession was caused mostly by external shocks. This difference was clearly reflected in the different responses of private consumption and exports, and hence employment. In the dimension of macroeconomic policy reactions, monetary policy was far more flexible this time than during the currency crisis period. From this analysis, two implications are drawn. First, as far as the economic response of the fourth quarter of 2008 being more extreme than necessary to rebalance the macroeconomic fundamentals in Korea, it is expected that those economic losses can be recovered relatively soon. Yet, for a more visible recovery of the Korean economy, the recovery of the PRC's domestic demand seems necessary, and a full-blown recovery will be in line with the global recovery. A second implication is that structural aspects are critical for maintaining economic stability as well as employing flexible macroeconomic policies. While the Korean economy plunged into a historic crisis in 1997—triggered by the relatively small external shock of the Thai baht crisis—the economy is expected to remain relatively robust this time, even in the midst of the most serious global crisis since the Great Depression.
{"title":"The Republic of Korea’s Economy in the Swirl of Global Crisis","authors":"D. Cho","doi":"10.2139/ssrn.1493027","DOIUrl":"https://doi.org/10.2139/ssrn.1493027","url":null,"abstract":"This paper argues that the Republic of Korea (hereafter Korea) is not immune to global crises, but that a more than proportional response of gross domestic product to global crises does not seem to be the general case either. Along this line of reasoning, Korea's extreme response to current crisis in the fourth quarter of 2008 was attributed not only to the crisis in the United States, but also to additional idiosyncratic components, such as the extraordinary collapse of the People's Republic of China's (PRC) imports and the drastic capital outflow from Korea. The paper also emphasizes the differences between the current recession and the currency crisis period. The currency crisis was mainly attributed to the internal fragility of Korea's financial market, but the current recession was caused mostly by external shocks. This difference was clearly reflected in the different responses of private consumption and exports, and hence employment. In the dimension of macroeconomic policy reactions, monetary policy was far more flexible this time than during the currency crisis period. From this analysis, two implications are drawn. First, as far as the economic response of the fourth quarter of 2008 being more extreme than necessary to rebalance the macroeconomic fundamentals in Korea, it is expected that those economic losses can be recovered relatively soon. Yet, for a more visible recovery of the Korean economy, the recovery of the PRC's domestic demand seems necessary, and a full-blown recovery will be in line with the global recovery. A second implication is that structural aspects are critical for maintaining economic stability as well as employing flexible macroeconomic policies. While the Korean economy plunged into a historic crisis in 1997—triggered by the relatively small external shock of the Thai baht crisis—the economy is expected to remain relatively robust this time, even in the midst of the most serious global crisis since the Great Depression.","PeriodicalId":14396,"journal":{"name":"International Trade","volume":"9 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2009-10-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"80627067","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Nowadays the Romanian garment enterprises struggle to compete in the global marketplace. As a leading exporting sector, the Romanian garment industry could lead the successful integration of the country in the global economy. This requires maximizing competitiveness and national value addition and retention in the industry. The goal of this paper was to show how the value chain approaches, focused on the dynamics of inter-linkages within the productive sector, can be used as managerial tools meant to outline the strategic choices of Romanian garment companies for the purpose of attaining a significant increase in the competitiveness of the products and a consolidation of the place of this industry on the traditional markets and the acces to new markets.
{"title":"The Value Chain Approaches – Managerial Tools for the Romanian Garment Enterprises","authors":"Avrigeanu Alina Florentina","doi":"10.2139/ssrn.1499142","DOIUrl":"https://doi.org/10.2139/ssrn.1499142","url":null,"abstract":"Nowadays the Romanian garment enterprises struggle to compete in the global marketplace. As a leading exporting sector, the Romanian garment industry could lead the successful integration of the country in the global economy. This requires maximizing competitiveness and national value addition and retention in the industry. The goal of this paper was to show how the value chain approaches, focused on the dynamics of inter-linkages within the productive sector, can be used as managerial tools meant to outline the strategic choices of Romanian garment companies for the purpose of attaining a significant increase in the competitiveness of the products and a consolidation of the place of this industry on the traditional markets and the acces to new markets.","PeriodicalId":14396,"journal":{"name":"International Trade","volume":"55 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2009-10-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"84500038","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper studies the relationship between firms’ profits and countervailing duties in vertically related markets characterized by oligopolies. It is shown that a countervailing duty equal to the foreign export subsidy is required to neutralize the impact of foreign export subsidies on the domestic firms’ profits. The domestic country has an incentive to impose a countervailing duty on the foreign final good even though the foreign government only subsidizes exports of the intermediate good. Additionally, the foreign exporting firms may benefit from a countervailing duty more than a foreign export subsidy.
{"title":"Why are Countervailing Duties Imposed? The Firms’ Viewpoint","authors":"Yu-Ter Wang","doi":"10.2139/ssrn.1486602","DOIUrl":"https://doi.org/10.2139/ssrn.1486602","url":null,"abstract":"This paper studies the relationship between firms’ profits and countervailing duties in vertically related markets characterized by oligopolies. It is shown that a countervailing duty equal to the foreign export subsidy is required to neutralize the impact of foreign export subsidies on the domestic firms’ profits. The domestic country has an incentive to impose a countervailing duty on the foreign final good even though the foreign government only subsidizes exports of the intermediate good. Additionally, the foreign exporting firms may benefit from a countervailing duty more than a foreign export subsidy.","PeriodicalId":14396,"journal":{"name":"International Trade","volume":"32 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2009-10-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"91199906","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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