Natalie Chen

Intra-national versus International Trade in the European Union: Why do National Borders Matter?

Based on the estimation of a theoretically consistent gravity equation, together with a careful computation of transportation costs across countries and industries, the Paper first provides estimates of ‘border effects’ among EU countries. The second objective is to examine the reasons for border effects. Contrarily to the previous findings reported in the literature, we show that national trade barriers do provide an explanation. In particular, technical barriers to trade, together with firm and product-specific information costs, increase border effects, whereas non-tariff barriers are not significant. Our results however suggest that these barriers are not the only cause since the spatial clustering of firms is also shown to matter.

Competition, Globalization, and the Decline of Inflation

We investigate theoretically and empirically the competitive effects of increased trade on prices, productivity and markups. Using disaggregated data for EU manufacturing over the period 1988-2000 we find increased openness exerts a negative and significant impact on sectoral prices. Increased openness lowers prices by both reducing markups and raising productivity. In response to an increase in openness, markups show a steep short run decline, which partly reverses later, while productivity rises in a manner that increases over time. Our estimates suggest that EU manufacturing prices fell by 2.3%, productivity rose by 11% and markups fell by 1.6% in response to the observed increase in manufacturing imports. The direct price restraint caused by greater imports, assuming unchanged monetary policy, can explain a fall in inflation of up to 0.14% per annum. The most substantial impact on inflation arises, however, from the role of lower markups in reducing the inflation bias of monetary policy. Our results suggest that increased trade could account for as much as a quarter of European disinflation over this period.

The behaviour of relative prices in the European Union: A sectoral analysis

Using multivariate unit root test methods, this Paper investigates the Purchasing Power Parity (PPP) hypothesis at the sectoral level across six European countries over the last seventeen years. Evidence of mean reversion toward PPP is found for the relative prices of some sectors and countries. Mean reversion in relative prices is explained by cross-country and cross-sectoral characteristics such as the distance between countries, nominal exchange rate volatility, differences in GDP per capita, non-tariff barriers, research and development, advertising, industrial concentration and tradability of the products.

On the Measurement of Trade Costs: Direct vs. Indirect Approaches to Quantifying Standards and Technical Regulations

In this article, we review the literature on the measurement of trade costs in international trade with a special emphasis on nontariff measures and in particular on standards and technical regulations. We distinguish ‘direct’ from ‘indirect’ approaches. The direct approach collects observable data or proxy variables on trade cost components which are then typically used as regressors in a gravity equation of trade. Instead, the indirect approach infers the extent of trade impediments from trade flows. It compares actual trade flows to the trade flows predicted by a hypothetical frictionless benchmark scenario based on a micro-founded trade model, attributing the deviation of actual from predicted trade flows to trade frictions. We argue that economists and policymakers can gain useful insights from both approaches.

Does Migration Empower Married Women

Differences in gender-based labour market discrimination across countries imply that migration may affect husbands and wives differently. If migrant wives experience a relative improvement in their labour market position, bargaining theory suggests that they should experience comparatively larger gains. However, if renegotiation possibilities are limited by institutional mechanisms that achieve long-term commitment, the opposite may be true, particularly if women are specialized in household activities and the labour market allows more flexibility in their labour supply choices. Evidence from the German Socio-Economic Panel indeed shows that, as long as renegotiation opportunities are limited, comparatively better wages for migrant women lead them to bear the double burden of market and household work.