A Symmetry Hypothesis and Measurement Biases in the Factor Content of Trade

I revisit Reimer (2006), and Trefler and Zhu (2005, 2006) (RTZ) tests of the Vanek proposition in the presence of international differences in production techniques and global production sharing. In this framework, knowing the bilateral details of each country’s input-output structure is key to the correct calculation of the factor content of trade. Because input-output tables typically lack this detail, RTZ impute the relevant input-output coefficients using a method that implicitly assumes that international flows of goods respond to trade determinants independently of their end-use (Symmetry Hypothesis). This paper uses survey-based input-output coefficients from the Asian Input-Output tables (AIO) that do provide bilateral detail. Exploiting methodological differences in the compilation of the AIO tables and the data underlying RTZ studies, I empirically test the symmetry hypothesis and find that it fails. This failure causes input-output data imputed following RTZ methodology to overstate the gross quantity of both domestic and foreign factors’ services embodied in a country’s trade. However, both biases are systematic and tend to cancel each other out resulting in only a small positive bias on net flows of factors and in the performance of the Vanek proposition

Trade and the Greenhouse Gas Emissions from International Freight Transport

We collect extensive data on worldwide trade by transportation mode and use this to provide detailed comparisons of the greenhouse gas emissions associated with output versus international transportation of traded goods. International transport is responsible for 33 percent of world-wide trade-related emissions, and over 75 percent of emissions for major manufacturing categories like machinery, electronics and transport equipment. US exports intensively make use of air cargo; as a result two-thirds of its export-related emissions are due to international transport, and US exports by themselves generate a third of transport emissions worldwide. Inclusion of transport dramatically changes the ranking of countries by emission intensity. US production emissions per dollar of exports are 16 percent below the world average, but once we include transport US emissions per dollar exported are 59 percent above the world average. We use our data to systematically investigate whether trade inclusive of transport can lower emissions. In one-quarter of cases, the difference in output emissions is more than enough to compensate for the emissions cost of transport. Finally, we examine how likely patterns of trade growth will affect modal use and emissions. Full liberalization of tariffs and GDP growth concentrated in China and India lead to transport emissions growing much faster than the value of trade, due to trade shifting toward distant trading partners. Emissions growth from growing GDP dwarfs any growth from tariff liberalization.

Asymmetries in trade flows and international specialization: Evidence from the Asian Input-Output tables

Chapter 1 of this thesis revisits Reimer (2006), and Trefler and Zhu (2005, 2006) (RTZ) tests of the Vanek proposition in the presence of international differences in production techniques and global production sharing. In this framework, knowing the bilateral details of each country\u27s input-output structure is key to the correct calculation of the factor content of trade. Because input-output tables typically lack this detail, RTZ impute the relevant input-output coefficients using a method that implicitly assumes that international flows of goods respond to trade determinants independently of their end-use ( Symmetry Hypothesis). This chapter uses survey-based input-output coefficients from the Asian Input- Output tables (AIO) that do provide bilateral detail. Exploiting methodological differences in the compilation of the AIO tables and the data underlying RTZ studies, the symmetry hypothesis is empirically tested and found to fail. This failure causes input-output data imputed following RTZ methodology to overstate the gross quantity of both domestic and foreign factors\u27 services embodied in a country\u27s trade. However, both biases are systematic and tend to cancel each other out resulting in only a small positive bias on net flows of factors and in the performance of the Vanek proposition. Chapter 2 examines the determinants of input trade using data from the Asian IO tables. We employ an extension of a widely used model of intermediate input trade in which inputs and final goods are considered symmetric up to differences in expenditure shares. This provides a null hypothesis that inputs and final goods are determined by the same factors. Our estimates provide the following insights. One, the extent of industrial absorption relative to final consumption as measured by input-output tables does help explain the input share of trade. Two, contrary to the maintained assumption of symmetry from our null hypothesis, this is not the only determinant of input trade. Input trade is more likely to be characterized by zeros, less sensitive to factor endowment differences than final goods trade, and more sensitive to trade costs as measured by home bias, contiguity and common language. However, the role of home bias and contiguity is eliminated by the year 2000, consistent with the popular view of the internationalization of input trade. Chapter 3 is in response to Adda and Cornaglia (AC, 2006) article which analyzes the effect of cigarettes taxes on smokers\u27 behaviors. Their work is widely cited because their results suggest taxes on cigarettes may be harmful to smokers\u27 health. Taxes induce smokers to reduce the number of cigarettes smoked but make them smoke each cigarette more intensively (e.g. smokers decrease time between puffs, smoke each cigarette up to the filter or take off the filter altogether). In this chapter, we consider the interpretation and robustness of the empirical results in AC. After replicating AC\u27s original results, we repeat the analysis using a larger sample now available from the NHANES III dataset that covers the same years as the original AC data. For both the original AC sample and the new expanded sample, we fail to find any strong evidence of compensatory behavior from the estimated cigarette and cotinine elasticities. As a robustness check, we also estimate models using cigarette-price data rather than cigarette-tax data. We find that all of the elasticity estimates become statistically insignificant in the price specifications. Failing to find strong support for AC\u27s claim of compensatory behavior in the overall sample, we proceed to estimate cigarette and cotinine elasticities for different subsamples of the data. We do find little systematic evidence of compensatory behavior among the subsamples

Winners and losers from the €uro

Using the synthetic control method, this paper estimates the effect of having joined the monetary union on the income per capita of six early adopters of the euro. Our estimates suggest that while the income per capita of Belgium, France, Germany and Italy would have been higher without the euro, that of Ireland would have been considerably lower. In contrast, the Netherlands would have been as well off without the euro. We show that these estimates are not contingent on our choice of baseline control groups, growth predictors and pre-treatment period. In addition, we use the insights from the literature on the economic determinants of the costs and benefits of monetary unions to explain our estimates. We find that early euro adopters with a business cycle more synchronized to that of the union and more open to intra-union trade or migration, lost less or gained more from the euro. A key role in increasing post-euro income losses of union members has been played by the integration of capital markets

Growth Volatility and Trade: Market Diversification vs. Production Specialization

We analyze how trade affects aggregate volatility using a multi-country, multi-industry, and multi-destination framework. We decompose aggregate output growth risk into destination risk, origin risk, and idiosyncratic risk (and their covariances). We then use this framework to run counterfactuals changing the degree of destination-market diversification (including home) and industry specialization. Using data on 19 industrial sectors, 34 countries, and 84 destination markets for the 1980–2011 period, we find that destination risk dominates, followed by idiosyncratic risk. From the counterfactuals, we find that the effect of increased destination-market diversification is quantitatively important in reducing aggregate volatility for high volatility countries. On the other hand, reducing specialization increases volatility