Shuichiro Nishioka

Development-Related Biases in Factor Productivities and the HOV Model of Trade

Past empirical failures of the basic Heckscher-Ohlin-Vanek (HOV) model related to the inability of data to meet its restrictive assumptions, particularly identical international technologies and factor price equalization. Trefler (1993) tried to resuscitate HOV by introducing a simple Hicks-neutral (HN) factor-productivity adjustment, an approach that was heavily criticized. In this paper, we re-examine the productivity question by estimating factor-specific productivities from the individual technology data of multiple countries. Using a dataset of 29 countries, both developed and developing, we find evidence of factor-augmenting technological differences. In particular, the factor-productivity adjustment works well for developed members of the OECD. Further, we find that the ratios of factor productivities are strongly correlated with corresponding factor endowments. This systematic bias implies that the ability of HOV to explain North-South factor trade depends both on relative factor abundance and factor-augmenting productivity gaps.

Recasting the Iron Rice Bowl: The Reform of China's State-Owned Enterprises

Following the enactment of reforms in the mid-1990s, Chinas state-owned enterprises (SOEs) became more profitable. Using theoretical insights from Azmat, Manning, and Van Reenen (2012) and Karabarbounis and Neiman (2014) and econometric methods in De Loecker andWarzynski (2012), this paper finds that SOE restructuring was nevertheless limited. This is because SOE profitability gains in part reflect that they were under less political pressure to hire excess labor and also their cost of capital fell and their capital-labor elasticity of substitution generally exceeded unity. Moreover, SOE productivity lagged that of foreign and private firms.

The Rise of Chinese Exports

The growth of Chinese exports both in volume and in market share over the past two decades is a singular event in the history of world trade. Using data from 1995-2005, we document this growth in a variety of ways. First, we show that the expanded trade is pervasive. Virtually every country in the world has seen China claim a larger share of its import market. Then, we use Constant Market Share (CMS) analysis to try to determine which country or countries have lost market share as China’s trade has grown. Contrary to much discussion in the popular press, we find strong evidence that other developing countries have not seen export shares fall as a result of China’s gains. Rather, our results suggest that China’s share growth has come largely at the expense of exporters based in Japan and the United States. We then turn to an attempt to identify the factor or factors responsible for export growth. Using a large set of data disaggregated at the 5-digit SITC level on trade among 75 countries we look at changes over the period in import unit values. We find that China has maintained a relatively constant price advantage over U.S. and Japanese exports. In addition, we use 3-digit level data to estimate a heterogeneous-firm model that examines the probability of successful entry by a firm into an export market. We find strong evidence that the growth of Chinese exports is due to entry by new firms within any sectors, probably engendered by firm level technological advance or entry of foreign firms that have begun to produce in and export from China.

Per Capita Income and the Mystery of Missing Trade

The literature on the Heckscher–Ohlin–Vanek (HOV) model has concentrated on the production side, particularly the unrealistic assumptions of identical techniques and factor price equalization. However, less is known about the demand side. In this paper, we compare the supply side assumptions versus the demand side assumptions as a cause of the empirical failures in the HOV prediction. While the relaxation in the supply side assumptions is crucial to predict the direction of factor trade, the demand side assumptions are shown to play an important role in explaining why factor trade is “missing” in relation to the HOV prediction. For example of the slope test for labor, the supply side repair improves from 0.026 to 0.162, whereas the demand side repair improves significantly from 0.162 to 0.891.

Trade Frictions and Market Access of Developing Countries: A Product-level Empirical Investigation

This paper examines the effects of trade frictions on export market access at the product level and the role these frictions have on the ability of developing countries to access world markets. We find distance and trade frictions are determinants of the probability of success in entering foreign markets. We examine whether there are any systematic biases from these frictions that further limit market access for exporters from developing countries. Our results suggest that developing countries are not differentially impacted by these factors.