Trade, Technology and Wage Inequality in the South African Manufacturing Sectors

This paper advances on previous work on the effects of trade and technical change on labour markets within the framework of Heckscher-Ohlin trade theory. First, we employ dynamic heterogeneous panel estimation techniques not previously used in this context, which separate Heckscher-Ohlin-based long run relationships from short run dynamics that are heterogeneous across sectors. Second, we provide evidence for an unskilled labor abundant developing country that allows comparison of the results against developed country evidence. Third, we consider the appropriateness of alternative approaches and examine endogeneity issues in the impact of technology and price changes on factor returns. For South African manufacturing we find that output prices increase most strongly in sectors that are labor intensive. Our results further suggest that trade-mandated earnings increases are positive for labor, and negative for capital. By contrast technology has mandated negative earnings increases for both factors. We also find that separation of different demand side factors collectively constituting globalization is useful in understanding the impact of trade, and taking account of endogeneity is important in isolating factor and sector bias of technological change.Trade, Total Factor Productivity, Stolper-Samuelson Theorem, Mandated Factor Earnings Changes, Dynamic Heterogeneous Panel Data, Pooled Mean Group Estimation.

Trade booms, trade busts and trade costs

What has driven trade booms and trade busts in the past and present? We derive a micro-founded measure of trade frictions from leading trade theories and use it to gauge the importance of bilateral trade costs in determining international trade flows. We construct a new balanced sample of bilateral trade flows for 130 country pairs across the Americas, Asia, Europe, and Oceania for the period from 1870 to 2000 and demonstrate an overriding role for declining trade costs in the pre-World War I trade boom. In contrast, for the post-World War II trade boom we identify changes in output as the dominant force. Finally, the entirety of the interwar trade bust is explained by increases in trade costs

Klimapolitik ohne Standortnachteile

In the absence of a broad international agreement, national climate policies are less efficient, due to carbon leakage, and more costly, due to causing unemployment and a loss of competitiveness on international markets. As, in many countries, a substantial fraction of emissions results from the production of intermediate goods, such as electricity or transportation services, we investigate whether the above negative side-effects can be addressed by a policy mix that (partially) contains the effects of climate policy to the intermediate goods sector. We use a four-sector general equilibrium model to study a policy mix that consists of taxing emissions and subsidizing the intermediate good. We show that such containment is a second-best approach to combat carbon leakage and to maintain a favorable international market position. Also, it can help to reduce climate-policy-induced unemployment.

Issues in Trade and Protectionism

There is widespread concern that the United States and the rest of the world are descending into a round of protectionism and a trade war reminiscent of what the world experienced in the Great Depression. Such concerns are both overblown and misplaced. In the short term, the main concern in the United States and rest of the world should be to promote an increase in demand through whatever means necessary. For the longer term, there has been an excessive fixation on protection for merchandise trade. Other areas, most notably alternative intellectual property regimes and freer trade in highly paid professional services, offer much larger potential gains than further reductions in barriers to trade in goods.Free Trade, trade, protectionism

How Trade Credits Foster International Trade

Internationally active firms rely intensively on trade credits even though they are considered particularly expensive. This phenomenon has been little explored so far. Our theoretical analysis shows that trade credits can alleviate financial constraints arising from asymmetric information because they serve as a quality signal and reduce the uncertainty related to international transactions. We use unique survey data on German enterprises to test the effect of the use of trade credits on firms' exporting and importing behavior, both at the extensive and intensive margins. Our results support the assertion that trade credits have a positive impact on firms' exporting and importing activities

Politics and trade: lessons from past globalisations

After tracing the link between politics and trade over a millennium, Kevin O'Rourke identifies permanent features of international economic relations. His timing is perfect. The crisis has switched the balance of power. Government is back in the driving seat and corporations look fragile. No one can predict how the cards will fall, but politics is making a come-back and will inevitably play a bigger role in shaping our future.

Trade costs, 1870–2000

What has driven trade booms and trade busts in the past century and a half? Was it changes in global output or in the costs of international trade? To address this question, we derive a micro-founded measure of aggregate bilateral trade costs based on a standard model of trade in differentiated goods. These trade costs gauge the difference between observed bilateral trade and frictionless trade in terms of an implied markup on retail prices of foreign goods. Thus, we are able to estimate the combined magnitude of tariffs, transportation costs, and all other macroeconomic frictions that impede international trade but that are inherently difficult to observe. We use this measure to examine the growth of global trade between 1870 and 1913, its retreat from 1921 to 1939, and its subsequent rise from 1950 to 2000. We find that trade cost declines explain roughly 55 percent of the pre–World War I trade boom and 33 percent of the post–World War II trade boom, while a precipitous rise in trade costs explains the entire interwar trade bust