Is Inequality Harmful for North-South Intra-Industry Trade Growth?

Re-examining the migration–trade link using province data: An application of the generalized propensity score

Abstract The migration–trade link has been studied extensively since the mid nineties, finding a positive impact through different channels. Based on the generalized propensity score (GPS) methodology, we estimate a dose–response function, depicting a non-linear impact of immigration on exports using province data for Spain and Italy. For both countries the response of province exports to more immigrants from a given nationality is always positive, although varies with the level of immigrants. First we find neither minimum threshold nor exhaustion point in the effectiveness of the immigration networks on province exports. Second we find that the value of the potential bilateral exports reac…

Examining the impact of visa restrictions on international tourist flows using panel data: Un análisis con datos de panel

Using newly panel data on visa restrictions for the years 2000 and 2010 in a theory-grounded gravity model, we find a robust, causal negative impact of visa restrictions on international tourist flows. By destination, the detrimental impact of this type of barrier is observed for tourists going to developing countries (with the exception of East and South Asia), but not for those to developed ones. By country of origin of tourists, the impact of visa restrictions appears to be the same for tourists coming from developed and developing countries. These findings have important consequences in policy terms for tourism management at a regional level.

The Trade Creation Effect of Immigrants: Evidence from the Remarkable Case of Spain

There is abundant evidence that immigrant networks are associated with larger exports from the country where they settle to their countries of origin. The direction of causality of this association is less clearly established. Also, we do not know to what extent these increased exports are due to an increase in the number of exporting firms (i.e. the extensive margin of trade) or due to larger values exported by existing firm (i.e. the intensive margin). Using micro data on individual trade transactions from Spanish provinces between 1995 and 2008 and data on the stock of immigrants in those provinces by country of origin we can make progress on both fronts. The richness of our data allows …

Immigrants’ Networks, Distance, and Trade Creation Effects: An Study Employing Province-Level Data for Italy, Spain and Portugal

Neoclassical trade theory assumed international flows of goods (commodities) to be substituting for people (factor) flows under certain circumstances. However, recent empirical evidence shows a complementary relationship between these two types of flows, with migration creating new trade exchanges. Immigrants tend to form networks across borders, reducing fixed trade costs. They also retain some preference for their home-produced goods. These two channels provide the rationale of the immigration trade-enhancing linkage. In this study we investigate that issue for the cases of Italy, Spain and Portugal, employing province-level data for the period 2002–2010. Results show that the first chann…

Investigating sales and advertising rivalry in the UK multipurpose vehicle market (1995–2002)

To what extent do managers account for rivals’ advertising responses? We employ static and dynamic panel techniques to derive estimates that are used to test whether the Dorfman-Steiner optimality condition held in the UK multipurpose vehicle (MPV) market between 1995 and 2002. We show that omitting the response of own advertising to rivals’ advertising leads to substantially lower optimal levels of advertising expenditure compatible with non-retaliation strategies. When recognition of interdependence by the members of the oligopoly is taken into account, the Dorfman-Steiner condition holds. To complete the analysis of the advertising-sales relationship we also examine advertising determina…

Is the Border Effect an Artefact of Geographical Aggregation?

The existence of a large border effect is considered as one of the main puzzles of international macroeconomics. We show that the border effect is, to a large extent, an artefact of geographic concentration. In order to do so we combine international flows with intra-national flows data characterised by a high geographic grid. At this fine grid, intra-national flows are highly localised and dropping sharply with distance. The use of a small geographical unit of reference to measure intra-national bilateral trade flows allows to estimating correctly the negative impact of distance on shipments. When we use sector disaggregated export flows of 50 Spanish provinces in years 2000 and 2005 split…

The extensive and intensive margins of Spanish trade

Recent empirical research highlights that differences in trade flows across countries, products and years are governed by two margins: the intensive margin and the extensive margin. The analysis of the relative contribution of each margin is very important to determine which policies can be more efficient to foster trade at the aggregate, geographic, product or firm level. We use the whole universe of firm level transaction data to analyse the relative contribution of these margins to changes in Spanish trade flows during the 1997–2007 period. We first apply the methodology proposed by Bernard et al. (2009) to decompose trade variation over time into three components: net entry of firms, pr…

Competition and product survival in the UK car market

The paper examines the extent to which inter- and intra-firm competition influenced the survival of cars in the UK market between 1971 and 1998. It is shown that, while competition influenced product survival in all market segments within the UK car market, the nature of that competition differed between them. In the small family and large family car segments, intra-firm competition dominated inter-firm competition. In contrast, in the luxury/sports car segment only inter-firm competition conditions resulted in product survival. Evidence was also found that the luxury/sports car segment has grown more competitive over time and that firms marketing products in the family car segments have be…

The Impact of Exchange Rate Fluctuations on Profit Margins: The UK Car Market, 1971–2002

We investigate the impact on profit margins of exchange rate fluctuations in order to examine optimal pricing policy by source countries in the UK car market. We first estimate a nested logit deman...

Calculating Hedonic Price Indices with Unobserved Product Attributes: An Application to the UK Car Market

We show that hedonic price indices that omit model-specific unobservable product attributes are subject to considerable bias. We utilize a complete panel of new car versions marketed in the UK over 1971–98 which incorporates over 100 observable product characteristics, sales weighting to capture the distribution of purchases across models, and model-specific fixed effects to account for unobservable characteristics. We find that quality-adjusted prices obtained from hedonic regressions that do not account for unobservable characteristics exhibit a severe downward bias. We also show that quality-adjusted prices exhibit distinct sub-market differences having increased in ‘mass production’ seg…

Factor productivity differences and missing trade problems in a regional HOV model

Recent empirical papers testing the performance of the Heckscher-Ohlin-Vanek (HOV) model suggest the need to relax its restrictive assumptions in order to reconcile the theory with the data. This paper examines whether introducing factor productivity differences could help to improve the performance of the HOV model in a regional setting. Using a new dataset of 17 Spanish regions and three different HOV specifications, this paper seeks the existence of Hicks-neutral (HN) or factor-augmenting industry-neutral (FAIN) technological differences. The data support the existence of HN technological differences, which contributes to a remarkable improvement of the regional HOV performance since the…

THE DURATION OF FIRM-DESTINATION EXPORT RELATIONSHIPS: EVIDENCE FROM SPAIN, 1997-2006

I. INTRODUCTION The traditional trade literature that investigates aggregate trade flows emphasizes the sizeable increase in trade relationships since World War II and the remarkable persistence of trade flows. However, recent microlevel studies point out that under the stable aggregate trade flows there is a rich dynamics at firm- and/or product-level with a high turnover. In fact, international-market presence is often a transitory and an uncommon phenomenon. At any period, only a small percentage of home-based firms participate in trade and exporting firms are different from non-exporters (larger, more productive, etc.). Moreover, there is much persistence in exporting status; being an e…

El impacto de la política de visados sobre los flujos internacionales de turistas: Un análisis con datos de panel

Using newly panel data on visa restrictions for the years 2000 and 2010 in a theory-grounded gravity model, we find a robust, causal negative impact of visa restrictions on international tourist flows. By destination, the detrimental impact of this type of barrier is observed for tourists going to developing countries (with the exception of East and South Asia), but not for those to developed ones. By country of origin of tourists, the impact of visa restrictions appears to be the same for tourists coming from developed and developing countries. These findings have important consequences in policy terms for tourism management at a regional level.

The trade-enhancing effect of immigration networks: New evidence on the role of geographic proximity

Abstract We use migration-trade data from Italian, Portuguese and Spanish provinces to examine the importance of geographic proximity in the effectiveness of ethnic networks on bilateral trade. Empirical findings from the gravity model show that the migration-trade link is clearly in-province: exports from a province to a country do not receive any stimuli from immigrants from this country living outside of the province, once we control for country–province time-invariant fixed effects.

THE SURVIVAL OF DIFFERENTIATED PRODUCTS: AN APPLICATION TO THE UK AUTOMOBILE MARKET, 1971-2002*

We investigate how competition affected the survival of products in the UK automobile market between 1971 and 2002. We find, after using a host of controls to account for product characteristics and changes in market structure, that (i) within and between firm spatial competition significantly reduces the life of a model, (ii) initial product differentiation and variant proliferation obviate competition, and (iii) product innovation significantly extends model survival.

The factor content of regional bilateral trade: The role of technology and demand

Abstract The Heckscher–Ohlin–Vanek (HOV) model in its strict form has been strongly rejected by the data. Relaxing some assumptions of the standard HOV model is key to find improvements in its performance. We apply the Davis and Weinstein (2001) methodology to analyse the validity of the HOV model using regions rather than countries. Surprisingly, our results using data for 17 Spanish regions are similar to theirs with international data for OECD countries. Accounting for technological differences improves the predictive capacity of the factor proportions model and including trade costs and geography reduces significantly the missing trade problem. However, relaxing the assumption of factor…