Papers Received in 2001
Multinational Enterprises and New Trade Theory: Evidence for the Convergence Hypothesis
S. Barrios, University of Manchester
H. Görg, University of Nottingham
E. Strobl, University College Dublin
Abstract: According to the 'convergence hypothesis' multinational enterprises will tend to displace national firms and trade as total market size increases and as countries converge in relative size, factor endowments, and production costs. Using a recent model developed by Markusen and Venables (JIE 1998) as a theoretical framework, we explicitly develop empirical measures to proxy bilateral FDI between two countries and address their properties with regard to the convergence hypothesis. Using a panel of data of country pairs over the years 1985-96 we econometrically test for the relationship between convergence and bilateral FDI. Our results provide some empirical support for the convergence hypothesis.
Keywords: Multinational Enterprises, New Trade Theory, Convergence
Download the paper; Contact address: holger.gorg@nottingham.ac.uk
Trade flows: a facet of regionalism or globalization?
T. Pelagidis, Panteion University of Athens
G. Chortareas, Bank of England
Abstract: This paper examines the evidence about the extent of globalization focusing on some aspects of international trade flows. Descriptive statistics and a casual reading of the existing evidence are provided in the first part of the paper. The focus is on whether the increase of trade flows has been predominantly a global or regional phenomenon. The analysis points to the tentative conclusion that the dominant tendency is the increase in trade within regional blocks (North America, the E.U., and the Asia-Japan blocks) rather than across them. To address the same question a more formal analysis is undertaken in the second part of the paper, by focussing on the relative speed of the convergence in openness within and across regions of the world. Our results indicate that the degree of openness converges faster across the countries of a given region rather than at the global level, reinforcing the conclusions from the narrative part of the paper.
Keywords: International Trade, Globalization, Regionalism
Download the paper; Contact address: pelagidi@panteion.gr
Do Anti-Dumping Rules Facilitate the Abuse of Market Dominance?
M. Theuringer, Institute for Economic Policy
P. Weiß, Institute for Economic Policy
We discuss the effects of AD-protection in a standard Dixit model of entry deterrence. In an AD-regime, the newcomer is constrained by a minimum-price rule in addition to existing irreversible entrance costs. For minimum prices which lie below the Stackelberg one, we find that AD-rules distort competition. We show that AD-protection increases the advantages of entry deterrence for a wide range of combinations of sunk costs and minimum prices. When entrance costs are high, consumer welfare is lower in an AD-regime than under free trade. Consequently, AD-protection facilitates the abuse of market dominance.
Keywords: anti-dumping; trade protection, strategic firm behaviour, abuse of market dominance
Download the paper; Contact address: m.theuringer@uni-koeln.de
Exports, export mode, manufacturing firms
F. Merino, PIE-FEP & Universidad de Alcala
V. Salas, Universidad de Zaragoza
Abstract: The relationship between firm-specific assets and internationalisation in Spanish Manufacturers Research on the internationalisation of business firms has investigated the decision to export and the volume of sales abroad, independently of the decision about the exporting mode. This paper presents a unified theoretical framework to integrate the two decisions, which departs from imperfect competition, sunk costs and transaction costs. The model provides an explanation to the empirical evidence on the incremental stages of internationalisation followed by many firms. The main hypothesis is tested with data from Spanish exporters and the results confirm that asset specificity is the underlying factor that justifies the degree of internationalisation, specially for small and medium size firms.
Download the paper; Contact address: merino@funep.es
Eastern Europe between Transition and Accession: An Analysis of Reform Requirements
D. Piazolo, Kiel Institute of World Economics
Abstract: This paper examines the transition process within Eastern Europe and the integration process with the EU and shows that the requirements for the transition towards a market economy overlap with the requirements for EU accession. Furthermore, the economic situation of the candidate countries is examined and it is pointed out that there is a large gap in the economic development between the Central and Eastern European countries and the EU. The paper argues that the acceeding transition countries still have substantial reform tasks ahead of them and that the expanding EU membership requires also considerable reforms within the EU to reduce the danger of standstill for European policy making.
Keywords: European Integration, Transition Economies, Regional Integration, EU-Enlargement, Acquis Communautaire
Download the paper; Contact address: dpiazolo@ifw.uni-kiel.de
Monopolistic competition and international trade theory
J.P Neary, University College Dublin and CEPR
Abstract: Almost twenty-five years after the appearance of Dixit and Stiglitz's paper on monopolistic competition and optimum product diversity, I try to take stock of the progress which has been made in applying their approach to international trade theory. I review the principal applications to trade theory and present a new one: by embedding DS preferences in a specific-factors framework, I sketch a model which shows how multinational corporations can emerge even between countries with similar factor endowments. Finally, I address some limitations of the approach, including its treatment of variety, returns to scale, entry and firms' strategies.
Keywords: Dixit-Stiglitz model; international trade with increasing returns and product differentiation; monopolistic competition; multinational corporations
Download the paper; Contact address: peter.neary@ucd.ie
Competition, Trade And Wages
J.P Neary, University College Dublin and CEPR
Abstract: I briefly review the empirical evidence in the trade and wages debate, which overwhelmingly rejects the Heckscher-Ohlin explanation for recent increases in OECD skill premia. I then argue that the same evidence is also difficult to reconcile in general equilibrium with the view that exogenous skill-biased technological progress is the sole culprit. Finally, I present a model of oligopolistic competition which is more consistent with the evidence. Removing quantitative import constraints (a metaphor for increased foreign competition) encourages both home and foreign firms to invest more aggressively, raising their demand for skilled labour even at unchanged relative wages.
Keywords: OECD wage inequality; oligopolistic competition; skill-biased technological progress; skill premia; trade and wages.
Download the paper; Contact address: peter.neary@ucd.ie