The contribution of trade policy to the openness of the Dutch economy

The last four decades, Dutch exports and imports grew annually about 7.5%, while re-exports rocketed in the last two decades. Using a gravity approach this paper finds that the increase in trade is largely caused by income developments. Trade policy, consisting of reductions in import tariffs and other trade barriers and the creation of the EU internal market, also has a significant impact on trade growth, although much smaller. Without any liberalisation of trade policy since 1970 the ratio of trade (excluding re-exports) to GDP would have been about 8%- points lower. By estimating the trade enhancing-effect of trade policy on GDP we conclude that trade policy has contributed 6% to 8% to the growth of national income in Netherlands since the 1970s. Foreign Direct Investments (FDI) experienced a massive but erratic growth, mostly in the last two decades. Income developments could explain half of that growth; deregulations of national capital markets explain only a small part of FDI growth.

Uncertainty and the export decisions of Dutch firms

This paper analyses the export market entry decisions of Dutch firms and their subsequent growth or market exit. Exporters, particularly when entering new markets, have to learn about market conditions and to search for new trade relations under uncertainty. In that sense the paper also investigates the role of economic diplomacy and knowledge spillovers from colleague-exporters. We combine detailed international trade data by firm and destination between 2002 and 2008 with firm data and export market haracteristics in order to disentangle the firm and country determinants of successful and less successful export behaviour. First, we find that about 5% of all Dutch exporters have just started in their first market and a similar share of exporters ceases all exports. Still, the starting exporters increase their exports very fast. In each market their export growth in their third year as exporter is about twice as high as for established exporters. Many starters also increase their exports by expanding their number of destinations, but they will retreat swiftly if they are not successful. For all exporters we find that more productive and larger firms are more inclined to enter (additional) export markets, and that larger firms are less likely to leave a market. Market characteristics are important as well. Distance and import tariffs reduce the probability to enter the market and increase the probability to exit. Not only distance to the home country matters, but also the distance to export markets already accessed. Firms seem to follow a stepping stone approach for reaching markets further away (physically and culturally). They first enter more nearby markets before moving to more distant markets. Finally, we find that the presence of support offices abroad and trade missions in destination countries, particularly middle income countries, stimulate the entry of new exporters and the growth of export volume. Knowledge spillovers from exporters with the same destinations have also positive effects on market entry.strategic export decisions, sequential export market entry and exit, export growth, economic

Cross your border and look around

This document focuses on innovation, human capital, technology transfers and competition as potential sources of productivity growth for firms. It integrates the views of existing literature such as the two faces of R&D, the convergence debate and the existence of firm-level heterogeneity in productivity. Using firm-level data of 127 industries in the Netherlands, the document analyses which determinants are most relevant for a catch up to the global frontier and in that respect are important for the productivity performance of firms. Moreover, the document takes into account the potential importance of a national frontier. The frontier is defined as the highest productivity level at the national or global level respectively. The document provides econometric evidence that technology transfers matter, predominantly from the national frontier. Particularly, R&D encourages growth through technology transfers from the national frontier. This suggests that firms mainly conduct R&D in order to adopt existing technologies from other (domestic) firms. Competition on Dutch markets plays a role in productivity growth as well. Finally, human capital also seems to affect productivity growth.

Measuring competition in the Netherlands

In the 1990s policy makers took various measures to stimulate competition. This memorandum investigates the question in which direction competition in the Dutch market sector has changed. Four competition indicators are used. These indicators are derived from a database of 87 000 firms as well as from the input-output tables of the National Accounts. Data availability limits the analysis to the period 1993-2001. Remarkably, the indicators do not suggest that competition increased economy-wide. All show that competition changes have been rather small in many industries, but a considerable number of industries experience a sharp rise or strong fall in competition. Nonetheless, the indicators frequently contradict each other on the change in competition at the industry level. These differences can partly be traced back to differences in their economic concepts. In theory, the indicators can differ, because they respond differently to a reallocation of output from inefficient to efficient firms. Econometric and statistical tests provide some but mainly insignificant evidence to support this hypothesis.

Export margins and export barriers: uncovering market entry costs of exporters in the Netherlands

Even though the Netherlands was the worldââ¬â¢s sixth largest exporter in 2009, the majority of Dutch firms does not engage in international trade at all, possibly because they are unable to cover the costs to enter specific foreign markets. What are these costs that limited the internationalisation of Dutch firms? Using detailed and unique transaction-level data on export patterns of about 1,200 large Dutch firms in the years 2006-2007, this research opens the black box of market entry costs. First, we find that more productive firms are both more likely to engage in exports (extensive margin) and to export larger volumes abroad (intensive margin). Second, next to the common determinants of export volumes, such as market size, transport and trade costs, we find that poorly developed foreign institutions and regulations form important impediments to firms’ export decisions, but not to their subsequent export volume decisions. We also find some evidence that such effects on the export decision are relatively large in small markets, whereas export volumes react more to changes in trade and transport costs in large markets.

Static efficiency in Dutch supermarket chain

In this study, we analyse changes in market power in the Dutch supermarket chain and discuss the effects on welfare. The supermarket chain includes consumers, supermarkets, buyer groups and food manufactures. We look at the theoretical background of market power. �Special attention has been paid to recent theories of buyer power of retailers in the vertical chain. Theory suggests that supermarkets can enhance their buyer power by, for instance, using own private brands as an outside option in bargaining with manufacturers. Using firm-level data, indicators reveal that profit margins of both supermarkets and of manufacturers have declined between 1993 and 2005. Hence, competition on these markets seems to have become tougher and mark-ups lower over time. Furthermore, we find no significant empirical indications that supermarkets were able to use their buyer power to shift profits from manufacturers to supermarkets after 1993. Finally, all else equal, in terms of welfare consumers have benefited from fiercer competition in terms of lower prices.

Dutch retail trade on the rise? Relation between competition, innovation and productivity

The Dutch retail trade demonstrated a relatively meagre performance in terms of productivity (growth) during the 1990s, especially seen from an international perspective. This study analyses the productivity performance of the Dutch retail trade in more detail, and focuses on competition and innovation as two main drivers of productivity growth. More precisely, it takes the mutual relationship between competition, innovation and productivity explicitly into account. Between 1993 and 2002 changes in competition varied substantially within the retail trade. However, on average competition slightly declined. Furthermore, only a few firms in the Dutch retail trade innovate. Regression analysis reveals that both competition and innovation enhance productivity growth directly. Further, fiercer competition induces more innovation, and consequently also raises productivity indirectly via innovation.

Using stepping stones to enter distant export markets

This paper analyses firms’ export entry decisions and their subsequent expansion to other export markets using Dutch firm-level international transaction data. In particular new exporters increase quickly the distance between their export markets and their home country. They are also going to export to countries in which the institutional and regulatory quality is lower. We show that firms follow a stepping stone approach for learning to export and to enter distant markets. The probability to enter a market at 1,000 km from the Netherlands increases by about 25% if the firm already exports to a market at 500 km from the new one