Harry P. Bowen

On the theoretical interpretation of indices of trade intensity and revealed comparative advantage

Zusammenfassungüber die theoretische Interpretation der Indizes der Handelsintensität und der internationalen Wettbewerbsfähigkeit (RCA-Werte). — Die Annahme, ein Land exportiere nicht jedes Gut, entzieht der üblichen Schlu\folgerung, da\ die über (unter) Eins Hegenden Werte für die Handelsintensität und die internationale Wettbewerbsfähigkeit einen relativen Vorteil (Nachteil) anzeigen, die theoretische Basis. Daraufhin werden auf der Grundlage des Nettohandels zwei RCA-Indizes abgeleitet. Die Untersuchung verdeutlicht, da\ man die Werte eines Index der Handelsintensität nur dann als Ma\ für die Abweichung des tatsächlichen Handels von dem Handel, der in einer neutralen Welt ohne relative Vorteile zu erwarten wäre, interpretieren kann, wenn man das Verhältnis zwischen Nettohandel und erwarteter Produktion verwendet.RésuméSur l’interprétation théorique des indices de l’intensité du commerce extérieur et d’avantage comparatif révélé. — Cet article démontre que la supposition qu’un pays n’exporte pas chaque bien invalide la base théorique pour l’interprétation commune de la proposition que les valeurs des indices de l’intensité du commerce extérieur et d’avantage comparatif révélé indiquent un avantage (désavantage) relatif si elles excèdent unité (sont < 1). En conséquence, l’auteur dérive deux indices pour révéler l’avantage comparatif basés sur le commerce extérieur net. Cette analyse indique que le calcul adéquat est la relation entre le commerce net et la production attendue si l’on veut interpréter les valeurs d’un indice de l’intensité du commerce extérieur comme mesure de la divergence entre le commerce actuel et le commerce attendu dans un monde neutre sans des avantages relatifs.ResumenSobre la interpretación de índices de intensidad comercial y ventajas comparativas reveladas. — Este artículo muestra que al imponerse el supuesto que un país no exporta todos los productos se invalida la base teórica para la interpretación comÚn que los valores de intensidad comercial y los índices de ventajas comparativas reveladas superiores (menores) a la unidad indican una ventaja (desventaja) comparativa. En respuesta se derivaron dos índices para revelar ventajas comparativas basados sobre el comercio neto. Este análisis indica que para interpretar valores de un índice de intensidad comercial midiendo desviaciones comerciales reales de aquéllas esperadas en un mundo neutral sin ventajas relativas, la computación adecuada es la relación del comercio neto con respecte a la producción esperada.

Applied International Trade Analysis

PART 1: THE TRADING WORLD: PATTERNS AND POLICY The Pattern of International Trade and Factor Flows The Instruments and Environment of Trade Policy PART 2: COMPETITIVE MARKETS: TRADE AND TRADE POLICY The Ricardian Framework The Factor-Abundance Model Trade Policy Factor Specificity, Mobility and Unemployment Multidimensional Extensions of Trade Theory Empirical Tests of the Factor-Abundance Model PART 3: IMPERFECTLY COMPETITIVE MARKETS: TRADE AND TRADE POLICY Imperfect Competition Trade Policy in Imperfectly Competitive Markets Multinational Production PART 4: SPECIAL TOPICS Economic Integration Exchange Rates and International Trade Growth and International Trade Appendix: Data Methods and Sources References and Additional Reading

Testing Moderating Hypotheses in Limited Dependent Variable and Other Nonlinear Models: Secondary Versus Total Interactions

The use of limited dependent variable (LDV) models is becoming ubiquitous in empirical management research. When using such models, researchers frequently postulate and test that the relationship between an explanatory variable and the dependent variable is moderated by another variable by including in the model an interaction variable. Although recent papers clarify methods for analyzing a moderating effect in LDV models, it is not widely appreciated that this effect confounds two moderating effects: one associated with including an interaction variable in the model and one associated with the inherent nonlinearity of such models. This article presents a method to separate these two sources of a moderating effect for a general class of nonlinear models that includes all LDV models commonly used in the management literature. For such models, the article demonstrates that the statistically correct method to assess the validity of a moderating hypothesis is not, as currently recommended, to test for significance of the total moderating effect derived from the model that includes the interaction variable but instead to test for significance of the secondary moderating effect, the latter defined as the difference between two moderating effects: the one in the model that includes the interaction variable and the one in the model that excludes this variable. The result that the secondary effect is the correct statistic for testing a moderating hypothesis is very general, and it applies whenever a moderating hypothesis is to be tested by including an interaction variable in any model, whether linear or nonlinear.

The empirics of multinationality and performance

The relationship between a firm’s degree of multinationality and its performance is perhaps the most studied relationship in the field of international business. In this paper I address issues concerning the empirical estimation of this relationship. I argue for greater delineation of the underlying nature of firms’ multinationality and I point to several statistical issues regarding estimation that appear to need resolution, but which appear to have been largely neglected in the international business literature. Among these are endogeneity of the multinationality construct in the performance relationship and the likelihood that the multinationality-performance relationship is heterogeneous across firms.

Benchmarking the performance of nations: non‐uniform weighting and non‐economic dimensions

Purpose – Most composite indicators of national performance limit their scope to only economic performance criteria and aggregate primitive performance data using subjective fixed weight values applied uniformly to all countries. This paper proposes a weighting method to correct for biases inherent in the use of fixed and uniform weights, and it presents a composite performance indicator that encompasses both economic and non‐economic performance criteria.Design/methodology/approach – The paper presents a method that endogenously determines country‐specific weights that explicitly take account of a countrys own choices and achievements across primitive dimensions of performance. The method is then used to construct a composite inclusive index that combines economic performance with two other performance dimensions: environmental sustainability and governance.Findings – Comparison of the endogenous weight method with the method of using fixed and uniform weights indicates a bias in the latter that penaliz...

Capturing Relatedness: Comprehensive Measures based on Secondary Data

This paper presents new measures of technological and customer-side relatedness constructed from widely available secondary data. Relatedness is a concept central to predicting the existence and nature of a relationship between corporate diversification and firm performance. Yet, finding appropriate measures has been an ongoing struggle. The widely used SIC-based entropy measure has low construct validity, and survey-based measures are hard to replicate across firms and industries and over time. The measures we develop significantly outperform established measures in explaining variation in firm performance across firms and over time, and both sources of relatedness are found to be independent and significant explanations of firm performance.

Are EU Countries Less Integrated than U.S. States? Theory and Evidence

A belief that EU integration is incomplete is often predicated on a comparison to U.S. states. Yet, with low barriers to trade and factor mobility between EU countries, is this belief correct? To address this question, we develop three theoretical predictions regarding the distribution of output and factors across members of an integrated economic area with harmonized policies and free movement of goods and factors. Empirical tests strongly support these predictions for U.S. states and 14 EU countries. Constructing a measure of integration, we find that EU integration rose from the 1960s to equal that of U.S. states by 2000.

Protection and welfare in the presence of dynamic learning

ZusammenfassungProtektion und Wohlfahrt unter der Annahme eines dynamischen Lernprozesses. - Dieser Aufsatz untersucht die WohlfahrtsÄnderungen in einem Land, das auf ein Gut Zölle erhebt, bei dem “learning by doing” möglich ist. Es zeigt sich, da▾ die Protektion die Wohlfahrt selbst dort vermindert, wo das Lernen steigende SkalenertrÄge mit sich bringt, und da▾ Lernen generell die Kosten der Protektion vergrö▾ert. Eine Folge dieses Vergrö▾erungseffektes ist, da▾ sich Wohlfahrtsverluste minimieren lassen, wenn die Industrien geschützt werden, die sich bereits in einem fortgeschrittenen Stadium des Lernprozesses befinden. HandelsbeschrÄnkungen durch DrittlÄnder verringern (erhöhen) die Wohlfahrt von Export-(Import-)LÄndern. Die Verteilung dieser Gewinne (Verluste) im Zeitablauf hÄngt teilweise von der Lernrate in dem betreffenden Land ab.RésuméProtection et bien-Être en présence d’un processus dynamique d’apprendre. - Dans cet article l’auteur analyse le changement en bien-Être d’un pays qui impose ou est soumis aux taxes commerciales sur un bien qui est ouvert au “learning by doing”. Il démontre que le bien-Être est réduit par la protection mÊme si le processus d’apprendre exhibe des rendements croissants d’échelle et que, généralement, ce processus agrandit les coûts de protection. Une implication de cet effet d’agrandissement est que les pertes en bien-Être sont minimisées par des industries protégées qui se trouvent déjà dans des stades avancés du processus. Restrictions imposées par des pays tiers réduisent (augmentent) le bien-Être des pays exportatrices (importatrices). La distribution intertemporales de ces gains (pertes) dépend, partiellement, du taux de croissance du processus d’apprendre d’un pays.ResumenProtectión y bienestar en presencia de aprendizaje dinámico. - Este trabajo analiza cambios en el bienestar de un país que impone o está sujeto a impuestos al comercio sobre un producto para el cual rige el lema “learning by doing”. Se demuestra que la protectión reduce el bienestar incluso cuando el aprendizaje presenta beneficios crecientes y que, en general, el aprendizaje aumenta el costo de la protección. Una implicación de este efecto de magnificación es que se minimizan las pérdidas de bienestar al proteger industrias que se encuentran en niveles avanzados de aprendizaje. Restricciones arancelarias frente a o en terceros países disminuyen (aumentan) el bienestar de países exportadores (importadores). La distribución intertemporal de estas ganancias (pérdidas) depende, en parte, de la tasa de aprendizaje de un país.

On the Extent of Economic Integration

European economic integration is commonly believed to be incomplete, and that further reforms are needed. In this context, the union of U.S. states is considered the benchmark of complete economic integration and is often the basis for comparison regarding the extent of E.U economic integration. Yet, with low trade barriers and with productive factors at least notionally mobile across E.U. countries, is the belief that U.S. states are more integrated than E.U. member states correct? To address this question, this paper first develops three theoretical predictions about the distribution of output and factors that would arise among members of a fully integrated economic area in which goods, capital and labor are freely mobile and policies are harmonized. These theoretical predictions are then empirically tested using data on the output and factor stocks of 14 E.U. member states and the 51 U.S. states (includes District of Columbia) for the period 1965 to 2000. The empirical results convincingly support each theoretical prediction. Hence, contrary to popular belief, the extent of E.U. economic integration is not statistically different from that among U.S. states.

Testing for Moderating Effects in Limited Dependent Variable Models: Structural versus Secondary Interactions

The use of discrete limited dependent variable (LDV) models such as logit and probit is becoming ubiquitous in empirical management research. When using such models, researchers frequently postulate and test that the relationship between an explanatory variable and the dependent variable is moderated by another variable by including in the model an interaction variable. While recent papers clarify the methods for deriving and analyzing a moderating effect in LDV models, it is not widely understood or appreciated that this moderating effect confounds two moderating effects: one that arises from including an interaction variable in the model and one that arises naturally from the inherent nonlinearity of such models. This paper addresses this issue and presents a method to separate these two sources of a moderating effect for a general class of nonlinear models that includes all the LDV models commonly used in the management literature. Given this, the paper demonstrates that the statistically correct method to assess the validity of a moderating hypothesis in such models is not, as currently recommended, to test for significance of the moderating effect derived from the model that includes the interaction variable but is instead to test for significance of the difference between two moderating effects: that arising from the model that includes the interaction variable and arising from the model that excludes the interaction variable; this difference is the secondary moderating effect. The result that the secondary moderating effect is properly the focus of analysis for testing a moderating hypothesis is very general, in that it applies whenever a moderating hypothesis is to be tested by including an interaction variable in any model, whether linear or nonlinear.