Environment-energy-growth nexus in Sub-Saharan Africa: The role of intermediate goods

We study the effect on trade in intermediates and final goods of the Central East European Countries’ (CEECs) accession into the European Union (EU) for the period 1999–2009. In doing so, we estimate a gravity model that incorporates the extensive margin of trade and accounts for firm heterogeneity. We capture the importance of production networks by including imports of intermediates as a determinant of a country’s exports of final goods. We find a positive and significant effect of the CEECs accession on EU trade in intermediate and final goods. Once the extensive margin of trade is accounted for, the effect of the CEECs accession into the EU is higher on trade in intermediate goods than on trade in final goods.

This article develops a dual general equilibrium model to analyze the effects of intra-industry trade in both intermediate goods and final goods on the productivity in the final good production. Intra-industry trade in intermediate goods determines an increase in the number of intermediate good varieties available in the final good production, and intra-industry trade in final goods determines a reduction in the number of adaptations of an intermediate good to the final good production. Thereby, the productivity in the final good production increases. Different shares of intra-industry trade in intermediate goods and final goods in a general equilibrium setting implies that Jones' “magnification effect” and both the Rybczynski theorem and the Stolper-Samuelson theorem are not valid.

According to economic literature, a large part of discussion is related to trade in intermediate goods and services as an indication of international outsourcing. Gamberoni et al. (2010) have stated that trade in intermediate goods create about 60 percent of world exports. These data suggest that understanding the determinants of trade in intermediate goods is crucial to comprehend the patterns of trade. The objective of this paper is to analyze the role of international outsourcing in form of trading intermediate products on bilateral trade relations between Iran and China. As an empirical work, we have studied the trade structure of intermediate and final goods traded between two countries during the period 1992-2011. Intermediate and final goods traded are classified into three groups: 1) electronic product, 2) automobiles and motorcycles, and 3) apparel and footwear. Observations on such products show that the share of Iran’s intermediate trade with China in these three industries to total trade is about 55% on average. We have concluded that trade in intermediate goods between Iran and China has been more volatile than that of final goods. These findings confirm the same story for both developed and developing countries, which found by Chen (2010), and Sturgeon and Memedovic (2010).

PurposeRecently published studies stress the importance of trade in intermediate goods. The literature on determinants of trade, however, have largely focused on the sources of comparative advantage in determining aggregate trade flows rather than trade in intermediate goods. The purpose of this paper is to examine the role of institutional quality and trade costs to explain the determinants of trade in intermediates.Design/methodology/approachThe simple model is based on the model of comparative advantage in the gravity framework used by Eaton and Kortum (2002) and Chor (2010) to relate trade flows of intermediate goods to institutional parameters, factor endowments and geography. The empirical tests use a data set containing 172 countries and 17 industries spanning ten years.FindingsThe results confirm the theoretical prediction that a country with higher institutional quality has a comparative advantage in institution-intensive goods and trade costs have a negative effect on trade. The author further finds that these effects are stronger in share of trade in intermediate goods vis-à-vis final goods.Originality/valueTo highlight the distinct nature of trade in intermediate goods, the author separates industry trade flows as intermediate input trade and final goods (consumption goods) trade to compare the importance of different sources of comparative advantage among different types of trade flows. Unlike Eaton and Kortum (2002) and Chor (2010) who used cross-sectional data for final goods trade, the ten-year industry-level panel data are used to compare the relative importance of institutions and geography as determinants in trade in intermediate goods compared to final goods trade and capture the macroeconomic time variant factors as well as industry–country pair characteristics. A significant caveat in gravity regression is that an empirical finding may often be driven by omitted variables. Inclusion of a set of country variables such as GDP, production costs and institutional level may still allow omitted variables to bias the estimation. To avoid this problem, the author includes a fixed effect of exporter and importer as well as industry and year, instead of a set of country characteristics.

The steady growth of international trade in intermediate goods and services has made the relationship between trade and the international division of labour more complex. For 39 countries, the author decomposes the employment effects of international trade into five components, namely, the labour content of – or employment generated by – (1) exports; (2) imports; (3) the import content of exports; (4) the export content of imports; and (5) the third‐country import content of imports. He shows that in 2009, trade in intermediate goods accounted for some 88 million jobs – 14 per cent of all jobs generated by international trade – while the import content of exports accounted for 44 million jobs.

The gains from trade in intermediate goods: A Ricardo-Sraffa-Samuelson model

Carbon emission, energy consumption and intermediate goods trade: A regional study of East Asia

There have been voluminous contributions such as Daudin et al. (2011), Johnson and Noguera (2012), Koopmans et al. (2010), and Trefler and Zhu (2010) in measuring value added trade based on input-output tables as generalizations of the vertical specialization measures following Hummels et al. (2001). These studies focused on trade in intermediate goods as a key feature of recent global trade. In the case of Korea, about 50% of total exports and 70% of its total imports are intermediate goods trade. This paper contributes to the discussion about the trade in intermediate goods and productivity by revisiting Basu (1995), Jones (2011), and Lee and Pyo (2007) to examine implications of trade in intermediate goods for macroeconomic business cycles and productivity and welfare at the current stage of Korean development. The major revision of the Basu (1995) model is attempted by decomposing intermediate goods into domestically produced intermediate inputs and imported intermediate inputs to investigate implications of the model in a small open economy. The major finding is that the procyclicality of the intermediate goods usage relative to labor usage and TFP changes in both value added and gross-output regressions are significantly weaker in a small open economy like Korea than the large economy of the United States. We also investigate the effects of misallocation and multiplier effects due to intermediate goods on industrial productivity and efficiency following the model of Jones (2011). Since the effects of misallocation can be intensified through the industrial input-output structure of the economy, we calculate the intermediate goods multiplier by Korea's 29 manufacturing industries. We find technical changes and the degree of inefficiency are related with the magnitude of multipliers, but we leave a fundamental identification problem to future research.

April 01 2020 Comments on Economic Integration and Network Trade: A Comparison of East Asia and the European Union Author and Article Information Online Issn: 1536-0083 Print Issn: 1535-3516 © 2020 by the Asian Economic Panel and the Massachusetts Institute of Technology2020American Society of Health Economists and Massachusetts Institute of Technology Asian Economic Papers (2020) 19 (1): 40–42. https://doi.org/10.1162/asep_a_00753 Cite Icon Cite Permissions Share Icon Share Twitter LinkedIn Views Icon Views Article contents Figures & tables Video Audio Supplementary Data Peer Review Search Site Citation Comments on Economic Integration and Network Trade: A Comparison of East Asia and the European Union. Asian Economic Papers 2020; 19 (1): 40–42. doi: https://doi.org/10.1162/asep_a_00753 Download citation file: Ris (Zotero) Reference Manager EasyBib Bookends Mendeley Papers EndNote RefWorks BibTex toolbar search Search Dropdown Menu nav search search input Search input auto suggest search filter All ContentAll JournalsAsian Economic Papers Search Advanced Search Fukunari Kimura, Keio University and Economic Research Institute for ASEAN and East Asia: The comparison between East Asia (EA) and the European Union (EU) in the development of network trade is an important topic to be investigated. Nguyen and Wu conducted a gravity equation exercise with the global trade data and with EA/EU regional export data (to the world), focusing on trade in intermediate goods based on Broad Economic Categories (BEC) categories. The careful introduction of variables for “economic mass” and “multilateral resistance” may be a methodological contribution to the literature. The major findings from the regression analysis are as follows. First, with the global trade data, trade in intermediate goods is more sensitive to distance and further influenced by the economic mass of exporters and importers than the total trade. Although the sensitivity in distance has already been detected by many authors, including one of my papers with old-fashioned... You do not currently have access to this content.

A model of trade in intermediate and final goods is developed incorporating the features of increasing returns and monopolistic competition. It is shown that the endowment basis (comparative advantage) for trade becomes crucial in determining trade across stages of production, with the capital‐rich country a net exporter of specialized intermediate inputs and an importer of the final good. The capital‐rich country is shown to be immune to distributional conflicts, whereas for the labour‐rich country the distributional conflict crucially hinges upon the elasticity of substitution between intermediate inputs. Thus, free trade has inherently asymmetric effects on the functional distribution of income for countries differing in labour–capital ratios.

International production fragmentation, trade in intermediate goods and environment

This paper contributes to the debate on the effects of international fragmentation on two-way trade in several ways. Firstly, it is the first study on determinants of horizontal and vertical intraindustry trade in intermediate goods with regard to Italy. Secondly, it studies if and how country-specific factors affect intra-industry trade in intermediate goods when heterogeneity among sectors is allowed. The topic is very important for its policy implications. As is known, the early literature distinguishing vertical from horizontal intra-industry trade is especially concerned that their determinants are not the same, and that an expansion in two-way trade might have different adjustment implications depending on its nature. In the case of input trade, the same motivation applies (since intermediates are a subset of total goods traded) but to a greater extent. The analysis, on the one hand has produced results that support the theoretical hypotheses, on the other hand has confirmed the relevance of considering intersectoral heterogeneity in analyzing determinants of intra-industry trade in intermediate goods.

During the last decade, the volume of international trade has increased significantly as international economic integration has deepened, especially in emerging countries, and national industrial structures have become increasingly aligned with international trade in intermediate goods. The OECD STAN Bilateral Trade Database by Industry and End-use Category (BTDIxE) presents international trade in goods flows broken down both by industry sectors and by end-use categories, allowing insights into the patterns of trade in intermediate goods between countries to track global production networks and supply chains as well as helping to address other trade-related policy issues such as trade in value added and tasks.

A side effect of economic globalisation and new information and communication technologies is the increasing fragmentation of the production process across different countries and continents, contributing to the rise of trade in intermediate goods, which has increased to almost 2/3 of total world trade. Most of this trade, i.e., intermediate goods, are transported by sea. Maritime trade is one of the most economical but also complex ways of trading and transporting goods, requiring good coordination, various stops and controls, transhipments, storage, ICT technology to track the cargo, etc. Therefore, the objective of this paper is to quantify the impact of trade facilitation on trade in intermediate goods on the sample of EU28 countries, using biennial data for the period 2010-2018. We estimate augmented gravity model on bilateral trade data using a Poisson Pseudo Maximum Likelihood (PPML) estimator. Our results suggest that, as expected, logistics, and in particular ICT development, has a significant and positive effect on trade in intermediate inputs, when controlling for other variables in the gravity model such as GDP of trading partners, distance, contiguity, existence of a free trade agreement, exchange rate, and common cultural proxies. Our results support the global trend of development and investment in logistics, and, in particular, new ICT technologies, which can not only contribute to the continued growth of trade in intermediates, but also help mitigate the negative effects of recent global economic shocks.

The New Development Paradigm will result in the significant development of domestic production networks and the accelerated growth of carbon transfers among provinces in China. However, the existing value chain or the trade of intermediate goods decomposition method cannot completely account for the carbon content of intermediate goods. So the paper developed a accounting model for inter-regional intermediate goods trade based on input-output model. The most significant advantage of this accounting model is that by further decomposing final output into three components—final consumption within the region, final consumption flowing to other regions, and final output flowing to other regions as intermediate goods that are not returned to the region—it achieves a more comprehensive decomposition of the value chain in comparison to the established models. This approach allows for the tracking of longer value chains and the accounting for intermediate goods inflows and outflows simultaneously. Furthermore, the accounting of trade in intermediate goods can be conducted for any number of countries, regions, and sectors within the input-output system, thereby providing a foundation for the comprehensive accounting of inter-regional carbon transfers within production networks. With the input-output tables and carbon emission inventories from the CEADs (the China Carbon Emissions Accounting Database), the paper has calculated the changes of the carbon transfer among provinces in the China’s domestic production network from 2012 to 2017 and find that the inter-provincial intermediate goods trade and carbon transfer among provinces is increasing significantly. Each province has a strong incentive to overuse the carbon embodied in the intermediate goods from others, but lacks the motivation to reduce their own carbon emission. In the inter-provincial transfer of the carbon content of intermediate goods in China’s domestic production network, the difference between the average value of the ratio of the carbon content of intermediate goods from other provinces used by each province and that supplied for use by other provinces to the ratio of the carbon content of intermediate goods produced by itself increased by 13.6% between 2012 and 2017. Only a few provinces are evolving towards a win-win between economic and environmental benefits, while most are still facing the evolutionary dilemma in choosing between economic and environmental benefits. In the future, we should comprehensively explore the cooperative governance of carbon emission reduction in the domestic production network, including establishing a national standard for calculating the carbon transfer in domestic production network, improving the carbon emission responsibility sharing mechanism and carbon emission reduction compensation systems.