Margins Of International Trade Research Articles

How Patent Rights Affect Vietnam’s Importation

Stronger patent rights will help innovators to protect their inventions in domestic and export markets, however stronger patent right exporting decisions depend on market expansion and market power effects. Although it is quite late to promulgate patent law, Vietnam began to record patent applications and granted them for both domestic and foreign firms from 1981 (patent law was enacted in 2005). However the number of foreign patent applications is different among Vietnam trade partners. I use a number of patent applications of Japan, the United States, the United Kingdom, Germany, and France to analyze the relationship between trade inflow from those countries and patent rights, I find that Japan applied for the greatest number of patents, which have increased over time. Japanese exports to Vietnam are dominated by market power effects, while other countries’ patent application numbers tend to fluctuate or increases insignificantly over time, with exports being dominated by market expansion effects.
 Keywords
 Patent right, market power effects, market expansion effects, Vietnamese importation
 References
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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.

The trade comovement puzzle and the margins of international trade

Countries that trade more with each other tend to have more strongly correlated business cycles. Yet, traditional international business cycle models predict a much weaker link between trade and business cycle comovement. We propose that fluctuations in the number of varieties embedded in trade flows may drive the observed comovement by increasing the correlation among trading partners' aggregate productivity. Our hypothesis is that business cycles should be more strongly correlated between countries that trade a wider variety of goods. We find empirical support for this hypothesis. After decomposing trade into its extensive and intensive margins, we find that the extensive margin explains most of the trade–productivity and trade–output comovement. This result is striking because the extensive margin accounts for only a fourth of the variability in total trade. We then develop a two-country model with heterogeneous firms, endogenous entry, and fixed export costs, in which the aggregate productivity correlation increases with trade in varieties. A numerical exercise shows that our proposed mechanism increases business cycle synchronization compared with the levels predicted by traditional models.

The gravity of financial development

The article empirically tests the link between financial constraints with the extensive (proportion of exporters) and the intensive (volume of exports) margins of international trade. The main contribution is the macroeconomic analysis of this relationship – i.e. the investigation of the effect of finance on trade of all economic sectors combined – which is further reaching than the manufactured-sector-based focus found in the current literature. The study is developed on the basis of a bilateral trade database on 104 countries between 1998 and 2007. The empirical section estimates a two-stage gravity equation using panel data and shows a positive impact of financial development on the marginal variation of the extensive margin. However, the estimate of the relationship between finance and the intensive margin shows an unexpected result. It finds inconsistent results demonstrating a relationship that is negative, positive or statistically null.

Economic integration agreements and the margins of international trade

One of the main policy sources of trade–cost changes is the formation of an economic integration agreement (EIA), which potentially affects an importing country's welfare. This paper: (i) provides the first evidence using gravity equations of both intensive and extensive (goods) margins being affected by EIAs employing a panel data set with a large number of country pairs, product categories, and EIAs from 1962 to 2000; (ii) provides the first evidence of the differential (partial) effects of various “types” of EIAs on these intensive and extensive margins of trade; and (iii) finds a novel differential “timing” of the two margins' (partial) effects with intensive-margin effects occurring sooner than extensive-margin effects, consistent with recent theoretical predictions. The results are robust to correcting for potential sample-selection, firm-heterogeneity, and reverse causality biases.

Effects of Japan’s Economic Partnership Agreements on the Extensive Margin of International Trade

This article investigates the effects of Japan’s economic partnership agreements (EPAs) on the Japanese import variety with respect to tariff reductions and outward foreign direct investments. The study is focused on the impact of changing tariffs and investments on the range of goods that EPA partners export to Japan for the periods 2005–10 and 2007–12. By using disaggregate tariff and trade data at the nine-digit HS level and by introducing the logit estimates with goods-specific effects, the article finds that both tariff reductions and Japan’s outward foreign direct investment help increase the likeliness of a commodity in the industrial sector to be exported to Japan from its EPA partner countries in the periods 2005–10 and 2007–12.

The Trade Comovement Puzzle and the Margins of International Trade

The Trade Comovement Puzzle and the Margins of International Trade

Intellectual property rights and the margins of international trade

Economic theory indicates some ambiguity in the relationship between intellectual property rights (IPRs) and trade. Here, we extend the empirical literature that attempts to resolve this ambiguity by examining how IPRs affect trade along both the intensive – increasing volume of existing goods – and extensive – increasing variety of goods – margins oftrade. Our main results suggest that IPRs have a positive impact on imports, which is driven by a positive effect on the extensive margin and a negative impact on the intensive margin. Splitting countries according to their level of development, market size and imitative ability, we find that the positive impact of IPRs is strongest in less-developed countries, as well as larger countries and those with a higher degree of imitative ability.

The Trade Comovement Puzzle and the Margins of International Trade

The Trade Comovement Puzzle and the Margins of International Trade

The Trade Comovement Puzzle and the Margins of International Trade

Countries that trade more with each other tend to have more correlated business cycles. Yet, traditional international business cycle models predict a much weaker link between trade and business cycle comovement. We propose that the international diffusion of technology through trade in varieties may be driving this comovement by increasing TFP correlation. Our hypothesis is that business cycles should be more correlated between countries that trade a wider variety of goods. We find empirical support for this hypothesis. Decomposing trade into its extensive and intensive margins, we find that the extensive margin explains most of the trade-TFP and trade-output comovement. This finding is striking since the extensive margin accounts for only one third of total trade. We then develop a three-country model of technology innovation and international diffusion through trade, in which TFP correlation increases with trade in varieties. A numerical exercise shows that the proposed mechanism increases business cycle synchronization relative to traditional models. Computing impulse responses to a TFP shock in one country, we find a strong positive effect on the output of its trading partner. Finally, our model implies a trade-output coefficient that is 40% of that in the data and five times higher than that in standard models.

The impact of Preferential Trade Agreements on the margins of international trade

In this paper we consider the trade creating effects of Preferential Trade Agreements (PTAs) for a large sample of countries within the period 1962–2000. The paper builds upon existing literature by examining whether any significant effects of PTAs occur through a change in the variety of exports (the extensive margin) or through a change in the volume of existing products (the intensive margin). To address this issue we employ the commonly used gravity equation as well as a matching approach to deal with potential self-selection problems. Our results indicate that exports respond positively to the formation of a PTA between countries, and that much of this increase in exports occurs along the extensive margin. We also show that the extensive margin responds more strongly to the formation of a PTA in larger exporters and for larger country pairs.