Temporary Trade

Most trade theories assume bilateral trade relationships are forged on the basis of some comparative advantages, scale considerations, market structure or some productivity advantage of firms. Since these factors change slowly, bilateral trade relationships should be stable. However, we argue that over half of the non-zero bilateral trade relationships are of temporary nature: they last for a short period only or appear and disappear in an erratic fashion. With a very detailed country-product transaction level dataset on Hungarian exports, evidence is provided for the importance of temporary trade relationships at the bilateral level. A large share of bilateral trade flows are driven by just a few firms, and results indicate that temporary trade is important for all kinds of firms and products. In terms of empirical applications, we show that gravity equations suggest important differences between the determinants of permanent and temporary trade; and the extensive and intensive margins of trade can also be very sensitive to changes in temporary trade.international trade, duration of trade, firm-product level data

Agglomeration Premium and Trading Activity of Firms

Firms may benefit from proximity to each other due to the existence of several externalities. The productivity premia of firms located in agglomerated regions an be attributed to savings and gains from external economies. However, the capacity to absorb information may depend on activities of the firm, such as involvement in international trade. Importers, exporters and two-way traders are likely to employ a different bundle of resources and be organised differently so that they would appreciate inputs and information from other firms in a different fashion and intensity. Getting a better understanding of such external economies by looking at various types of firms is the focus of present paper. Using Hungarian manufacturing data from 1992-2003, we confirm that firms perform better in agglomerated areas and show that traders gain more in terms of productivity than non-traders when agglomeration rises. Firms that are stable participants of international trade gain 16 % in terms of total factor productivity growth as agglomeration doubles while non-traders may not benefit from agglomeration at all. Results also suggest that traders' productivity premium is most apparent in urbanised economies.agglomeration, international trade, firm heterogeneity

Trade Complexity and Productivity

We exploit a panel dataset of Hungarian firms merged with product-level trade data for the period 1992-2003 to investigate the relation between firms' trading activities (importing, exporting or both) and productivity. We find important self-selection effects of the most productive firms induced by the existence of heterogeneous sunk costs of trade, for both importers and exporters. We relate these sunk costs of trade to the relationship-specific nature of the trade activities, entailing a certain degree of technological and organizational complexity as measured by a number of proxies. We also show that, to the extent that imports and exports are correlated within firms, failing to control for the importing activity leads to overstated average productivity premia of exporters.trade openness, firms' heterogeneity, productivity

Firm behaviour and public infrastructure - The Case of Hungary

In the paper, we test the effect of local development, regional and local policies on the location decisions and productivity of firms. Development indicators include local research and development activity or education while policy decisions used in this study encompass for example tax rates, investment incentives or road construction. The study builds upon a large national panel of firms. Importantly, such a rich dataset has rarely been employed for productivity and location choice exercises. The paper is composed of two sections dealing with location choice and productivity, respectively and we compare the effect of variables used in both sections. Among others, we find that density of road network positively influenced location choice and productivity as well, while a somewhat larger size of administration helps new firms to settle but later on, it has no effect on productivity.industrial location, FDI, productivity, discrete choice mod-els, GMM

Firms and Products in International Trade: Data and Patterns for Hungary

This paper provides a detailed description of Hungarian trade data and key patters drawn at the firm and product level. The IEHAS-CEFiG Hungary dataset is an almost universal panel of balance sheet information (1992-2006) merged with firmproductcountry level customs data (1992-2003) taken until the 2004 EU accession. In the Bernard et al. (2007) tradition, statistics describe the prevalence of trading activity, typology of firms by internationalisation, concentration of trade volume within and across sectors as well as geographical features of activities. The aim of this paper is both to offer background statistics to existing studies and to stimulate future research on firms and trade by offering a great deal of descriptive statistics. After describing datasets, the prevalence of trading activity across sectors, concentration of trading volume across and within sectors, spatial distribution on trade and principal trading partners are described. Stylised facts show that trading activity is heavily concentrated, both exporters and importers show better performance than non-traders, and multi-product and multi-county firms are responsible for the bulk of trade volume.international trade, exporting, firm-product level data

Spillovers from Multinationals to Heterogeneous Domestic Firms: Evidence from Hungary

Firms cluster their economic activities to exploit technological and informational spillovers from other firms. Spillovers through the entry of multinational firms can be particularly beneficial to domestic firms because of their technological superiority. Yet, the importance of foreign firm's spillovers might depend on two key features of domestic firms: their productivity level and its export status. In line with theories and empirical evidence on the absorptive capacity of firms, we argue on the basis of an empirical analysis of Hungarian firms that larger and more productive firms are more able to reap spillovers from multinationals firms than smaller firms. The export status, in contrast, is of minor importance.FDI, multinationals, productivity, spillover, regions

Grid and shake: Spatial aggregation and the robustness of regionally estimated elasticities

This paper proposes a simple and transparent method for measuring spatial robustness of regionally estimated coefficients and considers the role of the administrative districts and of the size of regions. The procedure offers a new solution for a practical empirical issue: comparing the variables of interest across spatially aggregated units. It improves upon existing methods, especially when spatial units are heterogeneous. To illustrate the method, we use Hungarian data and compare estimates of agglomeration externalities at various levels of aggregation. Using the procedure, we find that the method of spatial aggregation seems to be of equal importance to the specification of the econometric modelJRC.B.1-Finance and Econom