Daniel Mirza

Import price elasticities: reconsidering the evidence

Recent economic geography and trade empirical studies based on monopolistic competition suggest high levels of trade price elasticities (between 3 and 11). However, price elasticity estimations in trade equations using unit values as price proxies usually lead to lower values of around unity. We show that those inconclusive results may be due to some misspecification in these equations as well as measurement errors in prices. When suitable instrumental variables are used, within a panel of industrialized countries, we obtain high price elasticities, the majority ranging from 1 to 13. The highest estimates correspond to industries producing homogeneous goods.

Policies and International Integration: Influences on Trade and Foreign Direct Investment

Cette etude evalue l’importance des politiques frontalieres et non-frontalieres pour l’integration internationale. L’accent est place sur quatre mesures largement preconisees: suppression des restrictions explicites aux echanges et a l’IDE ; encouragement de la concurrence au plan interne ; amelioration de la capacite d’ajustement des marches du travail; et mise en place de niveaux adequats d’equipements d’infrastructure. L’analyse, qui couvre l’IDE et les echanges de biens et de services, prend ainsi en compte les principaux mecanismes de mondialisation et traite de la plupart des modes de fourniture de services transfrontieres. L’etude analyse d’abord les tendances du commerce, de l’IDE et des politiques dans les quatre domaines examines, en utilisant un vaste ensemble d’indicateurs de politiques structurelles recemment assemble par l’OCDE, qui comprend les nouveaux indicateurs de restrictions a l’IDE decrits par Golub (2003). Elle estime ensuite l’impact de ces politiques sur ...

Environmental Regulations in Gravity Equations: Evidence from Europe

One implication of the pollution haven hypothesis is that countries export more by applying more lenient environmental regulations. Most studies that apply gravity-type equations do not find robust support for environmental regulations to affect bilateral exports. In this paper, we show that one can obtain robust negative effects of stringency, as long as gravity equations are well specified with respect to theory. Our results, based on the European data, are both very consistent with US studies on environmental regulations and another line of very recent studies that infer non-biased price or substitution elasticities from trade equations. We show that more stringent environmental regulations, when depicting a pure cost effect, are reducing exports. The coefficient is even larger in the case where exporting countries are Central and Eastern European countries, comparing to the EU15. Further, we show that there is no significant difference in the impact of regulations on trade in case of dirty and clean sectors. Finally, when using GMM estimation, our environmental stringency coefficient gets significantly reinforced.

What is So Special about Trade in Services

This article argues that trade in services has a specific feature that does not apply to trade in goods. As the traded service is partly produced where it is consumed (i.e. in the importing country), we propose that it must use interactively inputs from both the exporting and importing countries. The modelling of the specificity of traded services is inspired from the O-ring production function presented in Kremer (1993). We then test our analytical framework using a new OECD dataset on bilateral trade in services. We find that policy and non-policy factors affecting the use of inputs in the exporting or importing country indeed have a similar impact on the same flow of traded service between those countries. This finding may contribute to explain why bilateral commerce in tradable-services is typically weaker than bilateral trade in goods.

The Performance of Trading Firms in the Services Sectors – Comparable Evidence from Four EU Countries

We analyse common stylized facts of services firms engaged in trade in a comparative study across four EU member countries. We find that, though relatively less engaged in trade than manufacturing firms, services firms have similar traits. Services firms are more likely to import than to export. Their prevalent type of trade is trade in goods. The complexity of trade activities is increasing in firm size and productivity. Two-way traders outperform one-way traders. Services are more likely to be traded by firms already engaged in trade of goods. Changes in trading status by either adding another dimension of trade (imports, exports) or another type of product (goods, services) are infrequent and are associated with significant pre-switching premia. In contrast, learning effects from switching trading status are uncommon. This evidence points to significant fixed cost of being engaged in trade. Thus, the literature on heterogeneous firms is able to explain the sorting of firms into trading and non-trading firms in the services sectors as well.

Complementarity of Inputs across Countries in Services Trade

This article argues that trade in certain services has a specific feature that does not necessarily apply to goods. In those services, the production process ends in the country where they are eventually consumed (i.e. in the importing country). Hence, we propose that services trade must use interactively inputs from both exporting and importing countries and thus, should be affected in the same manner by their respective costs. We test our analytical framework using a macro dataset on bilateral trade in services and a specific industry dataset on Air passenger international transportation. We find results consistent with our theoretical framework: policy and non-policy factors affecting the use of inputs in both the exporting and the importing country have a symmetric impact on the bilateral flow of services between those countries.

The Discriminatory Effect of Domestic Regulations on International Trade in Services: Evidence from Firm-Level Data

In order to promote international trade in services, the WTO-GATS aims at progressively eliminating discriminatory regulations, which apply to foreign suppliers, by guaranteeing equal national treatment. This paper looks instead at the trade effect of domestic regulations, which apply to all firms indifferently and do not intend to exclude foreign suppliers. We propose a theory-based empirical test to determine whether or not these domestic regulations affect foreign suppliers more than local ones. We take this test to the data by using French firm-level exports of professional services to OECD countries. Our econometric results show that domestic regulations in the importing markets matter significantly for trade in services. They reduce both the decision to export and the individual exports. These results tend to prove that domestic regulations are de facto discriminatory even if they are not de jure.

Trade and the Spillovers of Transnational Terrorism

SummaryWe examine the impact of transnational terrorism diffusion on security and international trade. To counter the diffusion of transnational terrorism, targeted governments implement security measures against countries where terror could potentially diffuse. Since security measures raise trade costs, we argue that countries, close enough to those from where terror originates, should experience negative spillovers on their trade. We find evidence for this hypothesis in our data. We show that the closer a country is to a source of terrorism, the higher the negative spillovers on its trade.

Are Lives a Substitute for Livelihoods? Terrorism, Security, and U.S. Bilateral Imports

What is the impact of terrorism on trade through higher security at the borders? We set up a theory which shows that the impact goes not only from terrorism to trade; higher trade with a partner might, in turn, increase the probability of terrorism acts and make security measures more costly for total welfare. In order to identify the true impact of terrorism, our theory allows then for a strategy to condition out the latter mechanism. We show in particular how past incidents perpetrated in third countries (anywhere in the world except the origin or targeted country) constitute good exogenous factors for current security measures at the borders. Our tests suggest that terrorist incidents have a small effect on US imports on average, but a much higher effect for those origin countries at the top of the distribution of incidents. In addition, the level of the impact is up to three times higher when the acts result in a relatively high number of victims, the products are sensitive to shipping time, and the size of the partner is small. The paper further shows how terrorism affects the number of business visas delivered by the Unites States, thereby impacting significantly US imports in differentiated products. These results suggest that security to prevent terrorism does matter for trade.

Policies and International Integration

Cette etude evalue l’importance des politiques frontalieres et non-frontalieres pour l’integration internationale. L’accent est place sur quatre mesures largement preconisees: suppression des restrictions explicites aux echanges et a l’IDE ; encouragement de la concurrence au plan interne ; amelioration de la capacite d’ajustement des marches du travail; et mise en place de niveaux adequats d’equipements d’infrastructure. L’analyse, qui couvre l’IDE et les echanges de biens et de services, prend ainsi en compte les principaux mecanismes de mondialisation et traite de la plupart des modes de fourniture de services transfrontieres. L’etude analyse d’abord les tendances du commerce, de l’IDE et des politiques dans les quatre domaines examines, en utilisant un vaste ensemble d’indicateurs de politiques structurelles recemment assemble par l’OCDE, qui comprend les nouveaux indicateurs de restrictions a l’IDE decrits par Golub (2003). Elle estime ensuite l’impact de ces politiques sur ...