Export Activity and Strategic Trade Policy PDF
Preview Export Activity and Strategic Trade Policy
Studies in International Economics and Institutions Editor Hans-Jiirgen Vosgerau Advisory Board John S. Chipman Elhanan Helpman Ronald W. Jones Murray C. Kemp Horst Siebert Studies in International Economics and Institutions H.-J. Vosgerau (Ed.), New Institutional Arrangements for the World Economy IX, 482 pages. 1989 M. Rauscher, OPEC and the Price of Petroleum XII, 206 pages. 1989 F. Gehrels, H. Herberg, H. Schneider, H.-J. Vosgerau (Eds.), Real Adjustment Processes under Floating Exchange Rates VI, 302 pages, 1990 T. Tivig, Flexible Wechselkurse aus der Sicht des Finanzmarktansatzes IX, 226 Seiten, 1991 S. Berninghaus, H. G. Seifert-Vogt, International Migration Under Incomplete Information VIII, 116 pages, 1991 Horst Krager· Klaus F. Zimmermann (Eds.) Export Activity and Strategic Trade Policy With 10 Figures and 31 Tables Springer-Verlag Berlin Heidelberg New York London Paris Tokyo Hong Kong Barcelona Budapest Dr. HORST KRAGER Institut fUr Aufbaustudien Intemationale Wirtschaftsbeziehungen Universitiit Mannheim L4,1 0-6800 Mannheim 1, FRG Professor Dr. KLAus F. ZIMMERMANN SELAPO Universitiit Miinchen Ludwigstr. 28 RG 0-8000 Miinchen 22, FRG ISBN-13:978-3-642-84687-8 e-ISBN-13 :978-3-642-84685-4 001: 10.1007/978-3-642-84685-4 This work is subject to copyright. All rights are reserved, whether the whole or part oft he material is concerned, specif ically the rights oft ranslation, reprinting, reuse ofi llustrations, recitation, broadcasting, reproduction on microfilms or in other ways, and storage in data banks. Duplication oft his publication or parts thereofis only permitted under the pro visions of the German Copyright Law of September 9,1965, in its version ofJ une 24,1985, and a copyright fee must al ways be paid. Violations fall under the prosecution act of the German Copyright Law. © Springer-Verlag Berlin· Heidelberg 1992 Softcover reprint of the hardcover 1st edition 1992 The use ofr egistered names, trademarks, etc. in this publication does notimply, even in the absence ofa specific state ment, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. 2142/7130-543210 -Printed on acid-free paper Contents I. Introduction Introductory Overview Horst Krager and Klaus F. Zimmermann. 3 II. Issues in Strategic Trade Policy Recent Developments in Strategic Trade Policy and Empirical Evidence Anette Gehrig and Klaus F. Zimmermann 9 Constrained Optimal Trade Policy for Imperfectly Competitive Industries Mike Gasiorek, Alasdair Smith and Anthony J. Venables. 29 III. Determinants of Trade Flows Trade Balances and Exchange Rates: Are They Co-integrated? Horst Krager 59 Plant Size, Scale Economies, and International Trade Joachim Schwalbach 79 Determinants of Export Activity in Italian Manufacturing Industries: Results from Panel Data Klaus F. Zimmermann and Lorenzo Pupillo. . 105 VI IV. Imperfect Markets, Innovations and Learning International Trade in a Neoclassical Model of Innovative Activity with Monopolistic Competition Klaus F. Zimmermann 123 Relative Export Prices and Firm Size in Imperfect Markets Lorenzo Pupillo and Klaus F. Zimmermann. . . . . . . 151 The Learning Curve and Export Price: Some Evidence on Japanese Manufacturing Hideki Yamawaki . 167 List of Contributors 189 I. Introduction Introductory Overview Horst Krager and Klaus F. Zimmermann New theories of international trade suggest that protectionism can make sense. This finding depends on the introduction of market power and increasing returns to scale into the international trade theory. The enormous political implications of this hypothesis have started a large interest in applied or empirical investigations of this issue. However, econometric work in international trade is comparatively scarce, especially if it comes to testing with individual data. Therefore, this volume is considered to be a contribution to fill that gap. The book consists of three substantial sections: Issues in Strategic Trade (Part Ill. Determinants of Trade Flows (Part III) and Imperfect Markets, Innovations and Learning (Part IV). Part II, Issues in Strategic Trade, contains two studies on "Recent Developments in Strategic Trade Policy and Empirical Evidence" by Anette Gehrig und Klaus F. Zimmermann and on "Constraint Optimal Trade Policy for Imperfectly Competitive Industries" by Mike Gasiorek, Alasdair Smith and Anthony J. Venables. Anette Gehrig and Klaus F. Zimmermann survey recent findings in the theory of strategic trade policy as their empirical validation. Under imperfect competition and increasing returns to scale, the classical free trade hypothesis is no longer necessarily best. Empirical findings as well as the theory, however, show that it might be dangerous to use protectionistic instruments ignoring the special assumptions leading to this Studies in International Economics and Institutions H. Krager / K. F. Zimmermann (Eds.), Export Activity and Strategic Trade © Springer-Verlag Berlin Heidelberg 1992 4 advice. Gasiorek. Smith and Venables simulate a calibrated model for the world motor vehicle industry to illustrate how trade policy depends on distortions in the domestic economy. As a result for this industry. using a consumption subsidy e.g. to correct these distortions changes the sign of the export policy and reduces the net tax on imports. However. if the government revenue constraint is modeled. then optimal policy requires the taxation of imports and exports. and trade policies are sensitive to the constraints on government policy. Part III. Determinants of Trade Flows. consists of three papers on "Trade Balances and Exchange Rates: Are they CO-integrated" by Horst Krager. "Plant Size. Scale Economies. and International Trade" by Joachim Schwalbach. and "Determinants of Export Activity in Italian Manufacturing Industries: Results from Panel Data" by Klaus F. Zimmermann and Lorenzo Pupillo. Krager studies the question. whether there is a potential bilateral long-run relationship between exchange rates and trade balances between US. UK. Japan and France on one side and West Germany on the other side. Using the Engle and Granger approach on cointegration. the author finds that in no case the null hypothesis of no cOintegration could be rejected. implying that there is no long-run equilibrium for the variables under consideration. Schwalbach uses two different data sets of manufacturing industries for the Federal Republic of Germany to test the hypothesis that the removal of trade barriers within the European Community increases plant sizes and enables the firms to realize significant scale economies. By use of econometric investigations. he can show that exports and imports have positive and increasing effects on plant size developments towards more cost efficient plant sizes in the Federal Republic of Germany. Finally. Zimmermann and Pupillo investigate the relevance of firm size and market concentration for the degree of export market integration of business firms. A theoretical framework provided. by the authors suggests that there might be a positive impact of market power on export activity. A 5 microeconometric study with a large data set of Italian firms supports this hypothesis. Part IV, Imperfect Markets, Innovations and Learning, contains three papers on "International Trade in a Neoclassical Model of Innovative Activity with Monopolistic Competition" by Klaus F. Zimmermann, "Relative Export Prices and Firm Size in Imperfect Markets" by Lorenzo Pupillo and Klaus F. Zimmermann and "The Learning Curve and Export Price: Some Evidence on Japanese Manufacturing" by Hideki Yamawaki. The paper by Zimmermann examines the relationship between international trade and domestic innovative activity, which is still a neglected field in spite of the growing interest to link issues of industrial organization and trade. A neoclassical model with endogenous process and product innovation is proposed, separating exporting and non-exporting firms. Qualitative results depend on the relative size of the product quality elasticities of both production costs and market demand. The study then relies on an empirical investigation of a large sample of West German business firms supporting a significant and positive impact of international trade on innovations only for exporting firms. The contribution by Pupillo and Zimmermann uses a vast sample of Italian micro data to study the behavior of relative export prices in imperfect markets. It is shown that relative export prices, the relation of prices a firm charges on export and domestic markets, are, in general, downward biased. Moreover, relative export prices depend negatively on firm size and market concentration but positively on the average export share of the industry. This indicates that markets are segmented and firms are able to discriminate prices. Part IV ends with the contribution. by Yamawaki. Many studies in international trade show that learning economies are an important factor determining the international competitiveness of domestic industries. Yamawaki investigates whether domestic producers reduce the export price along the learning curve and whether there are inter-industry differences in the export pricing behavior. He
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