Tomoya Mori, Jens Wrona, 16 August 2019

The gravity equation has often been used to explain trade between regions or cities within countries. But it assumes that the distribution of industries is exogenous. This column explains how trade estimates are affected if we assume that large, centrally located cities attract more industries whose firms are more likely to export to other cities. Japanese data show exports from these cities are systematically underpredicted by aggregate gravity estimations, as the theory predicts.

Alvaro Espitia, Aaditya Mattoo, Mondher Mimouni, Xavier Pichot, Nadia Rocha, 10 July 2019

Preferential trade agreements cover more than half of world trade. This column argues that while the 280 preferential trade agreements in existence have substantially widened the scope of free trade and reduced average applied tariffs, they have struggled against traditional bastions of protection in poorer countries and have not been able to eliminate the high levels of protection for a handful of sensitive products. While preference margins offered to partners in such agreements seem large, their significance shrinks when competition from both preferential and non-preferential sources is considered.

Reda Cherif, Fuad Hasanov, 16 June 2019

The 'Asian miracles' and their industrial policies are often considered as statistical accidents that cannot be replicated. The column argues that we can learn more about sustained growth from these miracles than from the large pool of failures, and that industrial policy is instrumental in achieving sustained growth. Successful policy uses state intervention for early entry into sophisticated sectors, strong export orientation, and fierce competition with strict accountability.

Jan Hagemejer, Jakub Mućk, 29 May 2019

Fragmentation of production has made it difficult to assess the contribution of exports to economic growth. This column decomposes growth into value added absorbed at home and that exported. Empirical results show that economic growth in Central and East European countries after 1995 was mainly driven by exports. The pace of convergence in Europe for exported value added was around four times faster than for domestic value added.

Wilko Bolt, Kostas Mavromatis, Sweder Van Wijnbergen, 25 April 2019

Increasing protectionism will slow down world trade and may dampen global economic growth. This column examines the global macroeconomic consequences of a major trade conflict between the US and China, and shows that the two countries would be the biggest losers from a 10% ‘tit-for-tat’ trade war between them. As long as it does not get involved in the conflict, the euro area may temporally gain from trade diversion, as competitiveness improves and imports from regions whose exports are blocked elsewhere become cheaper.

David Weinstein, 19 April 2019

Has the trade war with China been good for American businesses and consumers? The first results are in, and David Weinstein tells Tim Phillips who the winners and losers are.

Harald Hau, Difei Ouyang, Weidi Yuan, 01 March 2019

Trade between the US and China is widely thought to have contributed significantly to the decline in US manufacturing employment between 1999 and 2007. Flipping the point of view, this column examines the impact on China of the growth in trade and finds that for every US manufacturing job lost, almost six new Chinese manufacturing jobs were created. International trade did not contribute to faster wage rises for Chinese industrial workers but instead channelled agricultural and non-participating workers into the industrial labour market. 

Marcel Timmer, Sébastien Miroudot, Gaaitzen De Vries, 01 February 2019

A country that appears to be a dominant exporter in a particular good may in fact contribute little value when the production process is internationally fragmented. This column argues that countries today specialise in exporting activities, such as R&D, marketing or fabrication, rather than in exporting particular products. It proposes a new measure that tracks functional specialisation in international trade, and show that countries at similar levels of development can vary widely in their specialisation pattern.

Bernhard Michel, Caroline Hambÿe, Bart Hertveldt, 21 January 2019

Domestic value creation is shaped by how and to what extent economies integrate into global value chains. This column argues that further insights can be gained by distinguishing export-oriented and domestic market firms in standard indicators of global value chain integration and participation. Using data for Belgium, it documents that export-oriented firms differ from domestic market firms in terms of input structure and import patterns. These two types of firms play different roles in determining the nature of a country’s global value chain participation.

Alessandra Bonfiglioli, Rosario Crinò, Gino Gancia, 10 June 2018

To date there has been little systematic evidence on the role of firms in explaining country performance. This column explores how the products of firms from all over the globe fare in competition in the US market. Results show that the countries that capture larger market shares have more exporters, producing higher-quality products, with a more dispersed distribution of firm attributes. Larger and richer markets are characterised by a more dispersed distribution of sales and quality, and a higher incidence of superstar firms.

Mário Centeno, Miguel Castro Coelho, 06 June 2018

Portugal has turned a corner. Having gone through a mild boom, a slump, and a severe recession, all packed into less than two decades, the Portuguese economy has re-emerged with a newfound strength. This column examines this recovery in detail, focusing on important structural reforms that have taken place in the last couple of decades in key areas such as skills, investment, export orientation, labour market, financial intermediation, and public finances. The effects of these reforms were compounded by time as well as efforts to reignite demand.

Stéphanie Brunelin, Jaime de Melo, Alberto Portugal-Perez, 27 April 2018

Rules of origin play a crucial role in preferential trade agreements, and they can also deny intended market access for preference receivers. This column examines a relaxation by the EU of the origin requirements for selected products from Jordan, which is intended to create 200,000 job opportunities for Syrian refugees. While the relaxation decision may have an effect on the refugee crisis in Jordan, further simplifications in RoO requirements are called for.

Koen De Backer, Sébastien Miroudot, Davide Rigo, 19 April 2018

Multinational enterprises that produce goods rely on services to organise their value chain, so barriers to investment in services are likely to affect their production. The column uses a new and comprehensive OECD database to measure the share of services in the exports of multinational enterprises, and also in the output of their foreign affiliates. The results suggest that policymakers may need to focus more on the services that support manufacturing industries.

Naomitsu Yashiro, Konstantins Benkovskis, Jaan Masso, Olegs Tkacevs, Priit Vahter, 13 April 2018

Participation in global value chains provides emerging economies with opportunities for fast-track development and technological upgrading. This column argues that countries need to diversify their exports into knowledge-intensive products and services that generate high value added to make the most out of learning by exporting. Countries that specialise in standardised, generic products or services may not enjoy sufficient improvements in productivity, even if such exports channel knowledge transfer.

Gábor Békés, Balázs Muraközy, 28 March 2018

Globalisation has provided firms with many ways to serve their foreign customers. This column suggests that the set of internationalisation modes can be described as a ladder, with the higher rungs associated with higher levels of productivity and innovation. This ladder has three main steps – indirect exports, direct exports and outsourcing, and service and manufacturing foreign direct investment – and may provide an important source of flexibility for managers to adapt to policy shocks.

Tadashi Ito, Ryohei Nakamura, Manabu Morita, 13 February 2018

For regional firms to survive, they need to find export markets using wholesalers as intermediaries. This column uses a dataset of export activity in Japan to show that this type of indirect export activity occurs predominantly from metropolitan areas, with the probability of direct exports negatively correlated with the distance between manufacturer and wholesaler. Wholesaler productivity (though not manufacturer productivity) was correlated with the probability of these indirect exports, suggesting that wholesalers search for suitable manufacturers, but not vice versa.

Emine Boz, Gita Gopinath, Mikkel Plagborg-Moller, 11 February 2018

In international macroeconomics, it is typically assumed that the exchange rate between two trading partners matters most for trade prices, quantities, and terms of trade. This column presents evidence supporting an alternate view – that a country’s exchange rate relative to the US dollar is most important. This is because invoicing in dollars is common, even when the US is not part of a transaction. The findings have important implications for the conduct of monetary and exchange rate policies.

Stephen Redding, David Weinstein, 02 January 2018

Existing research on export heterogeneity between countries has typically focused on the importance of individual factors. This column presents a unified framework for understanding these contributions in concert. Using US and Chilean data, it demonstrates that products within firms, firms within sectors, and sectors in aggregate are indeed imperfect substitutes. It further shows that models that assume no quality shifts and no changes in variety perform poorly on trade data.

Filippo di Mauro, Vlad Demian, Jan-Paul van de Kerke, 08 December 2017

It is well-established in theoretical and empirical models that an exchange rate movement affects exports, but we are far from a consensus on the size and relevance of this effect. Macro-based analyses tend to yield very low values for the elasticity of exports to the exchange rate, while micro- or sectoral-based estimations tends to be higher. This column shows that one reason for the disagreement is that macro estimations fail to incorporate the characteristics of the underlying distribution of firm productivity and its asymmetries. Doing so generates higher elasticity estimates than the macro estimations, and greater country-level diversification.

Fabrice Defever, Alejandro Riaño, 01 December 2017

Received wisdom suggests that the majority of exporters in a country sell most of their output domestically. This column presents recent research that casts doubt on this assumption. The distribution of export intensity varies substantially and in most countries there are ‘twin peaks’, with some firms exporting a lot of their output, and others a little. This would be consistent with a standard model of international trade if the model were adjusted to recognise that firms differ in the demand they face in each market.

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