International Trade Literature Research Articles

Trade liberalization and self-employment: evidence from 36 OECD countries

This study contributes to the International Trade literature by examining the impact of trade liberation on self-employment, an area that has received less attention in previous research. Using empirical analysis on a panel dataset spanning 36 OECD countries from 1970 to 2015, the study investigates the core determinants and mechanism driving self-employment during periods of trade market opening. The findings consistently support the hypothesis that trade openness leads to an increase in both the unemployment rate and self-employment in OECD countries.

The effects of trade on national productivity - A stimulant or its handmaiden: An empirical evidence from ASEAN nations

The paper investigates the mediating relationship between Trade and National Productivity, proxied by economic growth rate in ASEAN from 2012 – 2021. Using data from the ASEAN Statistical Yearbook, this research, first, reinvigorates the positive effects of trade balance on national productivity to improve the international trade literature given new settings and contemporary contexts, second, examines the translating/mediating effects of trade towards economic performance in the ASEAN by a novel approach through the adoption of generalized least squares and structural equation models. Findings show that there is a positive correlation between FDI and economic growth, a negative between trade openness and economic growth. Interestingly, there is the mediating effects of trade towards the FDI-growth relationship, justified by the tremendous uplift after the presence of trade was conducted into the regression. Albeit found compatible, the paper constrains itself since it did not treat the confounding effects of local market characteristics such as governance structures, institutional quality, intervention of fiscal policies, and the monetary circulation as one of the internal factors; to which the present author humbly suggests for future studies. Moreover, because of data unavailability, hypotheses are tested over the 10-year span, which may impede the inference because of macroeconomic-level policy lags.

Heteroskedastic supply and demand estimation: Analysis and testing

The Feenstra (1994) method is widely used in the international trade literature to estimate supply and demand elasticities. The method is mechanically an IV strategy, and we demonstrate that this has important implications for its application and reliability. The assumptions needed for it to yield unbiased estimates are stronger than previously understood, and in practice, estimates are subject to bias due to both weak instruments and violations of the exclusion restriction. We illustrate how these arise in context and show that standard tests identify estimates that are likely to be biased. In an application to U.S. import data, estimates of import demand and export supply elasticities are substantially lower among goods that pass standard tests relative to those that fail. We find evidence that this difference in elasticities reflects reduction of bias as well as some selection in the set of goods that tend to pass both tests.

Scientific Mapping of Gravity Model of International Trade Literature: A Bibliometric Analysis

The Gravity Model is the galloper of applied international trade literature. This model allows us to estimate trade-impacts of various trade related policies. Thousands of research studies have applied gravity models in their research works. The purpose of this paper is to look at bibliometric analysis of worldwide publication output based on a gravity model of international trade, as covered by Scopus from 1987 to 2021. The study analyses annual productivity, most productive source titles, prolific countries, eminent institutions, linguistic analysis and productivity of authors and their contribution in the subject area. According to the findings, Estimation of trade variables and projections are the most popular areas of subject specification, while in terms of literature gaps, estimation of economic integration, Extensive and Intensive Margin, and Logistics Performance Index receive less attention. 2019 was the most productive year for research on gravity models in international trade. In terms of contemporary research output, the United States, Germany, Spain, and China are the most productive countries; while as per citation analysis the United States, Germany, and the United Kingdom are the top three countries. The most prolific journals for publishing works in the subject of the gravity model of international trade are Journal of International Economics, American Economic Review, and Review of Economics and Statistics. The study attempts to portray the existing literature more comprehensively by showing research collaborations and bibliographic coupling. The findings of this study can be useful to conduct further studies in the future.

On a Forgotten Challenge in the International Trade Literature

On a Forgotten Challenge in the International Trade Literature

The changing contours of global value chains post-COVID: Evidence from the Commonwealth

The COVID-19 pandemic emphasised the global value chains (GVCs) debate by focussing on whether gains from GVC participation outweigh firms associated risks of demand and supply shocks amid rising protectionism. This paper bridges the gap between the international trade and management literature by examining the impact of COVID-19 on Commonwealth countries, an area that has received scant attention in academic literature. Using the Eora database, we simulate scenarios to examine Commonwealth countries’ participation in GVCs post-COVID. We draw on the transaction cost economics (TCE) theory to develop a framework that investigates whether growing protectionism, associated with reshoring, decoupling and nearshoring, could potentially affect the constellation and participation of Commonwealth countries in GVCs post-COVID. Results show that trade protectionism is likely to impact the supply chains and lead to GVC reconfiguration, which could offer opportunities for the Commonwealth countries and firms to potentially gain following the geographical redistribution of suppliers.

Import liberalization and Chinese citizens’ sense of social fairness: empirical research based on 2010–2015 CGSS data

Efficiency and fairness are major social goals. However, the international trade literature focuses on how trade affects economic efficiency, ignoring the issue of fairness. This study examines the impact of import liberalization on Chinese residents’ sense of social fairness using Chinese General Social Survey data covering 2010–2015. It finds that import liberalization improves Chinese residents’ sense of social fairness and that this effect is more significant for groups with low education levels, low incomes, and low social class. Further empirical results show that import liberalization improves Chinese residents’ sense of social fairness by reducing income inequality (Result Fairness) and promoting class mobility (Opportunity Fairness). These findings imply that import liberalization is important for realizing social equity and that there is a great need to promote reform through opening-up in order to foster a fair and just institutional environment.

Patterns of external insertion in global value chains: a comparative analysis between Brazil and China

ABSTRACT The international trade literature has shown the benefits of the international fragmentation of production for developing countries. However, there are considerations about the hierarchy and control in Global Value Chains (GVCs). Thus, this research aims to evaluate the Brazilian and Chinese international insertion in GVCs by proposing an index about technological sophistication in exports (qtech) by technological intensity for 2005-2015. The results pointed out that the integration in GVCs and technological sophistication have been directed towards technological clusters in which Brazil has revealed comparative advantages, while China has been moving towards technological clusters with dynamic comparative advantages.

Global Financial Crisis and Trade Papers: Topic Analysis Via Latent Dirichlet Allocation Model

We examine the trends in the studies published in international trade journals indexed in Web of Science (WoS) before and after the 2008 Global Financial Crisis (GFC). This study investigates the 5001 abstracts of trade articles starting from the post-millennium period by addressing issues in WoS database trade journals using the Latent Dirichlet Allocation (LDA) topic model. The purpose of the study is to evaluate whether topics and words differ that have been discussed in international trade literature before and after GFC. Mostly, contain topics differ when two periods are compared, although trade agreements and disputes, stock markets, and growth issues are frequently mentioned in both periods. In the post-crisis period, volatility, banks, and firm-specific issues are more popular. It is also among the findings that Asian economies gained importance after GFC. Generally, it has been revealed that the topics and titles in the trade literature can reflect current developments in international economics. Therefore, probably for next years, advances in technology as blockchain, emerging economies –especially China and India – and firm-based micro-scale papers will dominate the trade journals.

Services export diversification and services export revenue stability: does trade openness matter?

PurposeThe international trade literature has established that export product diversification lowers export product revenue instability. The current analysis investigates whether this finding carries over services exports.Design/methodology/approachThe empirical analysis covers a sample of 152 countries over the period 1980–2014 and employs the two-step system generalized method of moments (GMM) approach.FindingsThe empirical findings indicate that services export diversification reduces services export revenue instability both over the full sample as well as over sub-samples of high-income countries (HICs), least developed countries (LDCs) as well as developing countries (i.e. non-HICs) that are not LDCs. HICs appear to experience a higher positive effect of services export diversification on services export revenue instability than in developing countries. The analysis also shows that countries that further open-up to international trade enjoy a greater reducing effect of services export diversification on the instability of services export revenue.Research limitations/implicationsThis analysis, therefore, adds to the existing studies on the relationship between export product diversification and the instability of revenue derived from goods exports by focusing on the services export side. An important message from the analysis is that countries that diversify their services export basket enjoy lower services export revenue instability when they further integrate into the world trade market.Practical implicationsThis study highlights the importance of services export diversification, including for stabilizing services export revenue to services traders. Diversifying services export items, including across traditional and modern services sectors involves the implementation of a wide range of policies and measures, of which the liberalization of the services sectors through reduction and eventually the elimination of services trade barriers; the improvement of the business environment and the development of domestic financial markets (see for example, Hoekman, 2017). It could be interesting that another study consider policies and measures that could promote services export diversification.Originality/valueTo the best of the authors’ knowledge, this is the first time this topic is being addressed, including empirically.

Court fairness and firm level export decisions

This paper is the first micro-level study in the international trade literature to examine the causal relationship between court fairness and the firm-level export decisions (propensity and intensity). The paper uses firm-level data from South Asian countries collected and maintained by the World Bank for empirical analysis. Methodologically, the study uses IVprobit and 2SLS models to analyze the pooled cross-sectional data. I estimate various specifications to show that court fairness increases the export share as well as the likelihood that a firm becomes an exporter. Results are robust for both intensive and extensive margins of trade.

Reprint: Trade shocks and the shifting landscape of U.S. manufacturing

Using data over more than a century, we show that shifts in the location of manufacturing industries are a domestic reflection of what the international trade literature refers to as the product cycle in a cross-country context, with industries spawning in high-wage areas with larger pools of educated workers and moving to lower-wage areas with less education as they age or become “standardized.” We exploit the China shock industries as a set of industries that were in the late-stage product cycle by 1990 and show how the activity in those industries shifted from high-innovation areas to low-education areas over the 20th century. The analysis also suggests that the resilience of local labor markets to manufacturing shocks depends on local industries’ phase in the product cycle, on local education levels, and on local manufacturing wages. The risk of unemployment and detachment from the labor force rises most when a shock hits in areas where an industry already has begun phasing out, wages are high, or education levels are low. The results are consistent with the belief that there are long-term, secular trends in U.S. industrial structure driving the movement of industries, which shocks may mitigate or accelerate.

Is publicly-reported firm-level trade data reliable? Evidence from the UK.

In this paper we compare firms' self-reported overseas sales, as reported in a commonly used UK financial reporting dataset, with their actual exports, as reported by Her Majesty's Revenue and Customs (HMRC). Finding that these flows are in several dimensions quite different, we then explore the implications of these differences more formally. Since several studies within the international trade literature report findings based on the self-reported export values in financial datasets, we discuss these findings in light of the departure of financial dataset-based exports from "true" (HMRC) export values.

Trade shocks and the shifting landscape of U.S. manufacturing

Using data over more than a century, we show that shifts in the location of manufacturing industries are a domestic reflection of what the international trade literature refers to as the product cycle in a cross-country context, with industries spawning in high-wage areas with larger pools of educated workers and moving to lower-wage areas with less education as they age or become “standardized.” We exploit the China shock industries as a set of industries that were in the late-stage product cycle by 1990 and show how the activity in those industries shifted from high-innovation areas to low-education areas over the 20th century. The analysis also suggests that the resilience of local labor markets to manufacturing shocks depends on local industries’ phase in the product cycle, on local education levels, and on local manufacturing wages. The risk of unemployment and detachment from the labor force rises most when a shock hits in areas where an industry already has begun phasing out, wages are high, or education levels are low. The results are consistent with the belief that there are long-term, secular trends in U.S. industrial structure driving the movement of industries, which shocks may mitigate or accelerate.

Is the productivity premium of internationalized firms technology-driven?

We ask whether the productivity advantage of internationalized firms documented by the international trade literature can be interpreted most accurately in terms of proximity to the “technological frontier”. We answer in the affirmative using a methodology (based on mixture models) of unbundling technology and total factor productivity (TFP) by estimating “technology-specific” production function parameters. Exploiting detailed data provided by the EFIGE database (a sample of firms distributed across Austria, France, Germany, Hungary, Italy, Spain, and the UK), we find technology gaps (with respect to the frontier) more than three times larger than the TFP gaps on average. We also find sizable technology advantages for firms undertaking foreign direct investment and/or exporting to other European Union countries or to China, for importers of materials, and for firms with competitors in China and the USA. Medium and large firms feature a higher technology premium, which is even higher for firms operating in country-sectors that are more exposed to import competition from China. Younger firms use better technologies but less effectively.

A Behavioral Explanation of Firm’s International Trade Behavior in Emerging Markets

In response to the recent call for firm-level analysis in international trade, this study examines the effects of performance-aspiration level, slack resource, and firm inertia on the risk-taking behavior (export) of firms from a behavioral perspective. Using a Chinese pharmaceutical industry dataset consisting of 1904 firm-year observations for the 1998 to 2000 period, this study finds that exports would increase as the focal firm’s performance level falls below or rises above its aspiration levels, and also as the focal firm’s accumulated slack resources increase. However, as an indicator of inertia, firm size can moderate the relationship between performance-aspiration level, slack resources, and export behavior. Larger firms are more risk-averse and less likely to export, or export less than smaller firms, even when their performance-aspiration level is very high, or very low, or the focal firm has accumulated abundant slack resources. This study contributes to the international trade literature by analyzing firm-level factors in response to a call for management theory perspectives on firms’ trade in emerging markets.

Two-way traders: searching for complementarities between exports and imports in a developing country

ABSTRACT The international trade literature has extensively analysed the role of exports and imports as productivity shifters. However, most studies analyse one of these two activities in isolation, and empirical evidence on this matter to a large extent refers to developed countries. We analyse the relevance of the interaction between exports and imports to determine productivity by applying a test of complementarity between these activities for a developing country. Using firm-level data from Ecuador, we find evidence suggesting that there is complementarity between exports and imports in determining productivity.

Foreign Outsourcing and Technology Transfer under Information Asymmetries

Although outsourcing vs. vertical integration is generally treated as a binary choice in international trade literature, firm-level data reveal that inputs can be imported both within and across firms' boundaries, even within narrowly defined industries from the same host country. This paper outlines a model of foreign sourcing which accommodates this practice (defined as mixed-sourcing) based on information asymmetries between a firm and suppliers on both (i) the firm's cost in transmitting knowledge across borders; and (ii) the supplier's productivity in using this know-how to customize input provision. Supply relationships establish that the firm gives an ownership share to its foreign supplier. The paper explores under what conditions the firm engages in multiple relations with suppliers of different types (high and low productive ones) based on differentiated ownership shares, thus compatible with the evidence of mixed-sourcing.

An exploration of the Halal food export potential for Bangladesh

The global Halal market has been growing faster compared to other consumer segments in the world, which has created an ample export opportunity for many exporting nations. However, the international trade literature is scarce in explaining the trade potentials of the OIC member countries in this fast-growing market. This paper contributes to the literature by reporting empirical findings of a study that explores the Halal food export potential for Bangladesh in the global Halal market. Our investigation of 21 food and food related export commodities from Bangladesh using FAOSTAT published trade data from 2000 to 2016, finds that Bangladesh has high export potential for expansion of 11 commodities to the global Halal market. This paper concludes with contributions to the literature, policy guidelines for enhancing Halal food export from Bangladesh to this unique market and future directions for further research.

A Unified Model of International Business Cycles and Trade

We present a general, competitive open economy business cycle model with capital accumulation, trade in intermediate goods, production externalities in the intermediate and final goods sectors, and iceberg trade costs. Our main theoretical result shows that models developed in the modern international trade literature that feature comparative advantage, monopolistic competition and cost of entry, and firm heterogeneity and cost of exporting are isomorphic, in terms of aggregate equilibrium, to versions of this competitive dynamic model under appropriate restrictions on the externalities. In particular, the restrictions apply on the overall scale of externalities, the split of externalities between the different factors of production, and the identity of the sectors with production externalities. Our quantitative exercise assesses whether various restricted versions of the general model, in forms they are typically considered in the literature, are able to resolve the well-known aggregate empirical puzzles in international business cycle models. Our theoretical result on isomorphism between models then provides insights on why they fail to do so in many instances. We thus provide a unified theoretical and quantitative treatment of the international business cycles and trade literatures in a general dynamic framework.