Margins Of Exports Research Articles

The Gravity of Arms

The aim of this paper is to investigate the determinants of international arms transfers in a gravity model framework. By distinguishing between the decision to export arms (extensive margin) and the value of the arms exported (intensive margin), while also considering its interdependence, is what differentiates this paper from previous research. A theoretically justified gravity model of trade augmented with political and security motives is estimated using a two-stage panel data approach for 104 exporting countries over the period from 1950 to 2007. In addition to the usual gravity variables related to the economic mass of the trading countries and the trade cost factors, the model is extended with political and security factors. The level of democracy in both trading partners, political differences between trading partners and voting similarity with the United States in the UN General Assembly of the countries engaged in trade are the main political factors, whereas the existence of conflicts, military pacts, and embargoes are taken as security motives. The key result indicates that both political and security motives are an important determinant of an arms trade, but their effects on the extensive margin of exports (the decision to order a transfer) differs from their effect on the intensive margin (average value of exports). Moreover, the relative importance of the factors under study has changed since 1989. In the post-cold war period, countries that are less democratic are more likely to export arms, military pacts are less relevant and embargoes play a role.

Output stabilization in fixed and floating regimes: Does trade of new products matter?

This paper studies the dynamics of output and export margins in the aftermath of global shocks in fixed and floating exchange rate regimes. Using a panel vector autoregressive model with exogenous factors, it traces the mean responses of output, terms of trade, extensive and intensive margins to real and nominal shocks in 22 developed economies over the period 1988–2011. We find remarkable differences in the transmission of shocks across exchange rate regimes. Adjustment takes place mainly at the extensive margin in fixed regimes, and implies a crowding out of intensive margins that is not present among floaters. Large movements at the extensive margin are associated with a weaker performance in terms of output stabilization. Our findings are robust to alternative sample selections and identification of the shocks. The evidence in the paper stresses a novel advantage of flexible exchange rates based on their ability to smooth the fluctuations in trade of new products.

R&D Activities and Extensive Margins of Exports in Manufacturing Enterprises: First Evidence for Germany

ABSTRACTThis article uses a new, tailor-made data set to investigate for the first time the links between innovation activities (measured by employees active in research and development) and the extensive margins of exports (number of destination countries; number of goods exported) for manufacturing enterprises in Germany, the third largest exporter of goods on the world market. It documents that more innovative firms outperform less innovative firms at both margins of exports—they export more goods, and they export to a larger number of countries. All of these differences are statistically highly significant and large from an economic point of view.

The effect of immigrants on the extensive and intensive margins of trade

ABSTRACTThis study examines the impact of immigrants on the extensive and intensive margins of South Korean exports. Since trade data contain excessive zero trade flows, we adopt recently suggested Poisson and Gamma pseudo maximum likelihoods. ​​​Our finding shows that immigrant stock in South Korea has significant effect on both the extensive and intensive margins of South Korean exports. Immigrants’ network seems to decrease variable as well as fixed costs of trade.

Export Margins, Price and Quantity of Belarus’s Export Growth

Abstract This paper examines the sources of Belarus’s export growth and decomposes export growth into extensive and intensive margins. This study also aims to determine export margins for intermediate and final goods and to determine the price and quantity components of the intensive export margin. In order to achieve the desired objectives, we use two methods for decomposing export growth, the count method and the export shares method. We analyse Belarus's export growth using export data at the HS-6 digit level for the 2004-2014 period. Our results show that Belarus's exports grew mainly due to growth in the price margin during the studied period 2004-2014. However, the extensive margin was important in export growth to some extent. Comparing the growth rate across final and intermediate goods reveals that although the share of final products in Belarus’s exports is not very big (18.9% in 2014), the average annual growth in exports of final products is higher than that of intermediate goods. Our investigation also shows that Belarus produces a wide range of commodities, but the share of the most of these commodities is not large; its exports depend on a restricted range of commodities. Moreover, most of the commodities are exported to Russia and Ukraine. Our results give us reason to assume that finding new markets for their new products is one of the main challenges for developing countries wishing to increase their exports by an extensive margin. This has important implications for how policy makers promote the trade and diversification of exports.

Extensive and intensive margins of exports: the case of the Philippines

This study investigates the Philippines’ merchandise export patterns by empirically examining its performance of extensive and intensive margins at the product level over the sample period from 1975 to 2012. The main results suggest that the Philippines’ weak exports may be traced primarily from its poor performance at intensive margin, i.e. survival and deepening. In addition, our analysis indicates significant differences on the country’s export performance between its established markets (major trading partners, including Japan, the US, China, Hong Kong, and Korea, and ASEAN-5 members) and its relatively new export destinations (new ASEAN members).

Determinants of Exports: Firm Heterogeneity and Local Context

It is frequently argued that the geographical context in which firms operate can have a crucial impact on their propensity to internationalize. In this paper, we present the results of an empirical analysis that examines the determinants of export performance for a sample including more than 4,300 Italian manufacturing firms over the period 2000-2013, focusing on the role of provincial context, after controlling for firm-level characteristics. To this end, we first adopt a cluster analysis methodology to classify each Italian province in terms of context variables, such as: the distance to foreign markets, the level of human and social capital and the degree of efficiency of the public administration. Second, we estimate a set of binomial choice and linear models to assess the impact of the economic and social environment on the extensive and intensive margins of trade. The results, after confirming that firm-specific factors (size, experience, productivity, capital intensity, innovation, geographical agglomeration and, to some extent, credit constraints) affect both the intensive and the extensive margins of exports, show that context characteristics at the province level have an additional (statistically and economically) significant impact on the export performances of firms.

Using input-output tab les to measure the contribution of industries to the trade balance

The Belarusian economy is in a state of balance since 2016: trade deficit and gross foreign debt were reduced, the local currency strengthened. The problem is in resumption of economic growth, while avoiding trade deficit. The role of structural policy is to control the rate of growth of specific industries. Those industries that provide trade surplus should grow faster. Government was stimulated both investment and consumer demand in the period from 2006 to 2014. As a result, GDP growth reached 5-12%, but subsequently the gross foreign debt exceeded 75% of GDP. We have found that economic growth stimulation through quantitative easing in a small open economy usually leads to imbalances. Furthermore, imbalances reach critical levels if exports declining. In 2016 the situation with exports was extremely unfavorable for Belarus. Therefore, if government could not abandon stimulation entirely, it should still apply it selectively, in order to avoid imbalances. For this purpose, we propose to differentiate the industries in their contribution to the trade balance. We offer a tool for assessing the contribution of each sector of economy (industry, or a product) to the trade balance. Baseline data are presented in the Input-Output tables, and the methodology is based on the Trade in Value Added (TiVA) indicators. Particularly, we line up the aggregate value chains for each final product, distinguishing foreign and domestic value added in gross exports and final demand for each industry. The estimates of the Belarusian economy made it possible to divide the industries into three groups, according to their contribution to the trade balance: Group 1: Products that contribute trade surplus. Domestic value added embodied in these products exceeds domestic final demand, taking into account the intermediate and final imports. This group includes: petroleum products, chemicals, transport services, business services (including software development). Group 2: Products creating trade deficit. Final demand for these products exceeds domestic value added - they are construction services, as well as manufacturing products: machinery and equipment, electronics and vehicles. Group 3: Relatively neutral to the trade balance products, which include garment, wood, retailing, and some others. For instance, it was found that the construction industry creates $3,5-4,5 billion of net imports, while total gross imports equals $44-48 billion in 2012 - 2014. In this period, petroleum products contributed approximately the same amount (if take into consideration export margins) to the domestic value added embodied in gross exports. In 2016 exports of petroleum products declined on a half. The volume of construction works was also halved, that allowed avoiding trade imbalance.

On the effects of non-tariff measures on Brazilian exports

This article estimates the effects of TBT/SPS measures on Brazilian exports, based on the recent literature of gravity models. A Heckman selection model - theoretically grounded on the seminal Melitz model of heterogeneous firms - highlights the role played by zero trade flows as well as firm heterogeneity for estimations using gravity equations, two factors usually omitted in standard specifications. We show that both extensive and intensive margins of Brazilian exports are, on average, negatively affected by pre-existing TBT and SPS measures. Moreover, we contribute to the empirical literature by providing comprehensive evidence of the sectoral effects of such measures over domestic exports. We find that TBT/SPS measures - though predominantly harmful - can foster exports in several sectors of the Brazilian economy.

FDI and the Two Margins of International Trade: Evidence from Korea

The attempt to examine the relationship between FDI and trade has a long history in international trade. There is little corresponding empirical research examining the impact of FDI flows on the two margins. FDI may expand trade through two channels, the extensive margin (the range of existing products that countries export) or the intensive margin (higher volume in each product). We separate the effect of FDI on trade into the extensive and intensive margins of trade. Using Korean outward FDI and export data spanning the period from 1988-2006, this paper finds evidence that the outward FDI flows promote both the extensive and intensive margins of Korean exports, and the FDI effects work mainly through the intensive margin, rather than the extensive margin. The findings imply that governments promoting FDI in order to increase trade should take into account that FDI leads to a complementary effect through the two channels that stimulate the demand for varieties or the volume.

What explains indirect exports of goods and services in Eastern Europe and Central Asia?

This paper investigates the determinants of indirect exporting, using firm-level data for 27 countries in Eastern Europe and Central Asia. Indirect exporting depends on a combination of fixed and variable trade cost factors. We first hypothesize that firms that perceive customs, transportation, crime and legal systems as severe obstacles anticipate higher fixed costs and are more likely to export indirectly. The second hypothesis is that indirect exporting tends to be a temporary strategy. Econometric models are used to test the first hypothesis and transition matrices to test the second. In particular, probit, Heckman-probit and fractional response models are estimated to analyse the determinants of the export mode and the share of indirect exports. The results indicate that the factors that account for the fixed cost of exporting, mainly affect the decision to export indirectly (extensive margin), but some of them also affect, to a lesser extent, the amount exported indirectly (intensive margin). More specifically, factors such as customs and trade restrictions and transportation obstacles affect the extensive margin only, whereas crime affects both margins. Secondly, trade agreement membership mainly affects trade in manufactured goods, while exchange rate volatility affects positively the extensive and intensive margin of indirect exports of services. The results also indicate that firms are more likely to change their status as an indirect exporter than they are to change their status as a direct exporter or a non-exporter, which provides support to the second hypothesis.

The reverse home-market effect in exports: a cross-country study of the extensive margin of exports

Do small countries have higher proportions of firms that export in manufacturing industries than large ones? As small countries are well known to be more open than large ones, it may appear uncontroversial to claim that the answer is yes. Nevertheless, this contradicts predictions from many standard trade models positing a home-market effect in the number of manufacturing firms and exporters. In this article, I present a theoretical model where a home-market effect in the number of firms coexists with a reverse home-market effect in the number of exporters: as in standard models, the number of firms in a small country relative to that in a large one is lower than relative income, but, in contrast to standard models, the relative number of exporters is larger. As a consequence, small countries will have higher proportions firms that export in manufacturing industries—a claim I support empirically.

Service Trade and Occupational Tasks: An Empirical Investigation

AbstractUsing microdata for Belgium, we investigate the relationship between changes in the task content of production and the rise in the number of service exporters. We show that occupational tasks changes display an extremely consistent relationship with participation to service exports: in sectors in which the importance of face‐to‐face communication with customers has increased, the firm‐level likelihood of entering export markets has decreased; instead, the likelihood of exporting increased in sectors in which the sophistication of production and delivery has expanded (following an increase in cognitive tasks). Moreover, our analysis suggests that the change in IT use per se does not strike as being a key underlying force behind the increase in the extensive margin of service exports. These results are robust controlling for comparative advantage, offshoring, trade liberalisation and demand shifts.

Time Zone Effect and the Margins of Exports

AbstractThe negative effect of time zone on trade flows has recently been established in the literature. However, thus far, no paper has explored the differing time zone effect on the intensive and extensive margin. Utilising product‐level trade data, this paper examines the impact of time zone differences on the intensive and extensive margin of exports. Furthermore, this paper examines the non‐linear impact of different levels of time zone differences on exports. Using the Poisson pseudo‐maximum likelihood estimation, the results indicate that the time zone differences negatively affect exports primarily via the extensive margin, with no effect on the intensive margin, which suggests that time zone differences act as a fixed cost of exporting. Furthermore, quartile analysis shows non‐linearities in the time zone measure, more specifically that time zones matter more at larger time zone differences. These results can have important policy implications for nations looking to increase their trade presence.

How Do Exporters React to Changes in Cost Competitiveness?

AbstractVarious international institutions such as the European Commission, the ECB and the OECD often use unit labour costs as a measure of international competitiveness. The goal of this paper was to examine how well this measure is related to international export performance at the firm level. To this end, we use Belgian firm‐level data for the period 1999 to 2010 to analyse the impact of unit labour costs on exports. We find an estimated elasticity of the intensive margin of exports with respect to unit labour costs between −0.2 and −0.4. This elasticity varies between sectors and between firms, with more labour‐intensive firms having a higher elasticity. The microdata also enable us to analyse the impact of unit labour costs on the extensive margin. Our results show that higher unit labour costs reduce the probability of starting to export for non‐exporters and increase the probability of exporters stopping. While our results show that unit labour costs have an impact on the intensive margin and extensive margin of firm‐level exports, the effect is rather low, suggesting that pass‐through of costs into prices is limited. The latter is consistent with recent trade models emphasising that not only relative costs, but also demand factors such as quality and taste matter for explaining firm‐level exports.

ICT and Exporting: The Effects of Broadband on the Extensive Margin of Business Service Exports

AbstractOver the last three decades the global economy has witnessed rapid growth of international trade in services. This has been particularly true of service‐intensive countries such as the UK. Developments in information and communication technologies are an obvious explanation for this. We provide empirical evidence for the effects of broadband use on the firm‐extensive margin of UK service exports. To deal with the issue of causality we build a novel instrument that exploits exogenous variation in access to broadband technologies owing to the historic telephone network. We find evidence for a causal effect from the Internet on trade in business services, but no evidence for an effect on trade in services more generally.

The link between trade openness, export diversification, institutions and output volatility in transition countries

This paper investigates the role of trade openness, export diversification and institutions as potential predictors of output volatility in 25 transition economies in the period 1996–2010. Our results suggest that diversification may not attenuate the output volatility effects of openness for transition countries already at medium or higher levels of diversification, but nonetheless may have this effect at lower levels of diversification. Further, while inflation volatility and conflict both increase output volatility, better political institutions contribute to output stability in transition countries. In addition, we find that differences between diversification at the export margins are not just conceptual, but also substantive: the effect of openness is conditional on export diversification at the intensive margin but not at the extensive margin. These findings are robust to different assumptions regarding the potential endogeneity of openness and institutional quality as well as to alternative proxies for institutions and output volatility and additional control variables.

Effect of non-tariff measures on extensive and intensive margins of exports in seafood trade

This paper explores the effects of non-tariff measures (NTM) on extensive and intensive margins of global exports of seafood in 1996–2011. The main result of this study is the differential and opposite effect of SPS and TBT measures. While SPS measures largely increase extensive margins of export and reduce intensive margins, TBTs mostly reduce exports at extensive margins and increase exports at intensive margins. Specific trade concerns (STC) have larger effect on exports than SPS and TBT notifications, both economically and statistically. Finally, there is substantial heterogeneity of response of exports to NTMs across HS six digit product lines, but the central tendency remains the same as for aggregated data.

Still Different After All These Years Extensive and Intensive Margins of Exports in East and West German Manufacturing Enterprises

Abstract This paper uses a new tailor-made data set to investigate the differences in extensive and intensive margins of exports in manufacturing firms from East Germany and West Germany. It documents that these margins do still differ in 2010, 20 years after the re-unification of Germany. West German firms outperform East German firms at all four margins of exports – they have a larger propensity to export, export a larger share of total sales, export more goods and export to a larger number of countries. All these differences are large from an economic point of view. A decomposition analysis shows that in 2010 between 59 percent and 78 percent of the difference in margins can be explained by differences in firm characteristics.

Extensive and Intensive Margins of Exports and Labor Heterogeneity

AbstractThis paper investigates how changes in skilled and unskilled labor supply affect different margins of exports. Using bilateral trade data in manufacturing sectors of 34 countries from 1995 to 2010, we find that most of the impact of skilled labor on exports goes through the intensive margin, whereas most of the effect of unskilled labor works through the extensive margin. These outcomes result from the impact of labor skill composition on the productivity cut‐off of exporters. We also find that the impact of skilled and unskilled labor on trade margins depends on the income level of countries and on the type of products. The results indicate that the effect of skilled labor is greater for low‐income countries and differentiated products, while that of unskilled labor is greater for high‐income countries and homogeneous products.