The Impact of Technical Barriers to Trade on Home Bias : An application to EU data

The purpose of this paper is trying to estimate the impact of technical barriers to trade on bilateral trade flows of individual EU countries and to evaluate the downward impact of national border on trade flows (home bias). Here we try and identify the effect of technical barriers to trade on EU imports applied to data in which sectors where the EU has sought to introduce harmonized technical regulations to remove technical barriers to trade (New Approach, Old Approach, Mutual Recognition) as well as an aggregate of sectors for which technical barriers are deemed to be unimportant. Using the gravity model, we find that home bias remains substantial for products where the EU has sought to introduce harmonized technical regulations to remove technical barriers to trade but mutual recognition sectors exhibit the smallest home bias. Based upon the analysis on the evolution of home bias in the EU, we find no evidence that the home bias has decreased for products where differences in technical regulations are important.home bias, gravity model, European integration, technical barriers to trade

Harmonization of regulations and trade : empirical evidences for the european manufacturing sector.

As trade among members of the European Union (EU) is now free of tariffs, the harmonization of technical regulations or standards has become an important issue for deeper integration of the internal market. A previous analysis of the completion of the Single Market calculated that in 1996 about 80% of intra-EU trade was been affected by harmonization of technical regulations. A major objective of this thesis is to examine to what extent harmonization of regulations has reduced the so called border effect. After a brief survey of the gravity literature, we propose and test some economic and econometric extensions of the standard gravity model. This model is then applied to total manufacturing as well as to more detailed levels corresponding to different harmonization approaches. We find that harmonization of technical regulations has a positive impact on imports of total manufacturing. However, this hardly explains the importance of border effects within the EU. This result is supported at a more disaggregated level when we distinguish between manufacturing sectors according to the type of EU harmonization including the category where technical barriers do not apply. In addition, sectors where harmonization is of minor importance exhibit smaller border effects. The last part of the thesis examines, with particular reference to EU and enlargement, how environmental regulations at the national and EU level have collided and affected exports. The major findings are that more harmonization has been accompanied by higher levels of domestic environmental regulations in candidate countries. In addition, the level of domestic environmental regulations - when treated endogenously - has a larger negative effect on EU exports. We employ a newly constructed data set that contains information at the three digit level of manufacturing industries. For each industry we identify the dominant harmonization approach used by the European Commission to the removal of technical barriers to trade in the EU.Harmonization of regulations; Gravity; Border effects;

Technical Barriers to Trade in the European Union: Importance for the Accession Countries. CEPS Working Document No. 144, April 2000

With trade in industrial products between the EU and the CEECs now essentially free of tariff and non-tariff restrictions, the principal impact of accession to the EU on trade flows will be through access to the Single Market of the EU. A key element of this will be the removal of technical barriers to trade. In this paper we try and highlight the importance of technical barriers to trade between the EU and the various CEECs, distinguishing sectors according to the different approaches to the removal of these barriers in the EU: mutual recognition, detailed harmonisation (old approach) and minimum requirements (new approach). We utilise two sources of information on technical regulations: a sectoral classification from a previous study of the impact of the Single Market and our own detailed translation of EU product related directives into the relevant tariff codes. The analysis suggests that the importance of technical barriers varies considerably across the CEECs. The adjustment implications of access to the Single Market are likely to be greatest for those most advanced in their accession negotiations

The Harmonization of Technical Barriers to Trade, Innovation and Export Behavior: Theory with an application to EU Environmental Data

A key feature of the EU harmonization of technical barriers to trade (TBT’s) is that exporting firms may entail a compliance costs. This paper provides theoretical and empirical work. In a simple Cournot duopoly with trade, we pursue the idea that process R&D has a positive spillover effect (with different intensities) in lowering the compliance cost and investigate the impact of an R&D subsidy. Using a self-constructed database, which specifically identifies sectors where the EU has sought to introduce harmonized environmental regulations, we find evidence that support this prediction of the theory

Input-output Concepts, Profits and Productivity Growth: An Application Using Flemish Farm Level Data

Farm Management, Productivity Analysis,

Firm Level Productivity under Imperfect Competition in Output and Labor Markets

This article examines the role of the interaction between product market and labor market imperfections in determining total factor productivity growth (TFPG). Embedding Dobbelaere and Mairesse’s (2009) generalization of Hall’s (1990) approach, allowing for the possibility that wages are determined according to an efficient bargaining process between employers and employees, we correct estimated TFPG for possible biases arising from labor market imperfections. Our analysis contributes to the literature in a number of ways. First, we propose a new empirical measure of TFPG which takes into account possible biases coming from imperfect competition on both labor and output markets, whereas Dobbelaere and Mairesse (2009) focus on the decomposition of the Solow residual. Second, in contrast to most of the literature following Hall’s approach, we estimate market power including the user cost of capital stock. Third, we measure the sensitivity of TFPG to an alternative specification of competition based on relative profits. Using a large Dutch firm-level panel database over the period 1989-2005, we find that workers’ unions power, and in general rigidities of the labor market, affect firms’ marginal cost, and, consequently, the markups. Moreover, taking into account variable returns to scale and imperfect competition in the output market translate into increased TFPG, while accounting for labor market bargaining power leads to lower TFPG. Next, the investigation of our empirical relationship between the price-cost margin and an alternative specification of imperfect competition of the output market (profit elasticity) as a sensitivity analysis of the TFPG shows that adding more structure to the competition measure does not affect the level of productivity change.

Farm household risk balancing : implications for policy from an EU perspective

Purpose - Building on the risk balancing theory and on recent discussions the appropriateness of using farm income maximization as behavioural assumption, this paper extends the risk balancing framework by accounting for business-household interactions. The purpose of this paper is to theoretically introduce the concept of farm household risk balancing, a theoretical framework in which the farm household sets a constraint on the total household-level risk and balances farm-level and off-farm-level risk. Design/methodology/approach - The paper argues that the risk behaviour of farmers is better understood by considering risk at the household level. Using an analytical framework, equations are derived linking the farm activities, off-farm activities, consumption and business and private liquidity. Findings - The framework shows that a farm household that wants to minimize the risk that total household cash flow falls below consumption needs, may exhibit a wide variety of behavioural responses to changes in the policy and economic environment. Social implications - The framework suggests multiple ways for policy makers and individual farmers to support risk management. Originality/value - Risk management is at the core of the agricultural policy and it is of paramount importance to be able to understand behavioural responses to market and policy instruments. This paper contributes to that by suggesting that the focus of current risk analysis and management studies may be too narrowly focused at the farm level

Intra-European Trade of Manufacturing Goods: An Extension of the Gravity model

In this paper, we propose and test several extensions of the standard gravity model. This yields a specification that allows for (i) a more flexible income response; (ii) a competitiveness effect with a general and a specific component; and (iii) an alternative and consistent measure of remoteness. Those extensions were found to be significant factors to explain intra-EU trade. Next, we analyze the effect of EU harmonization of technical regulations on domestic and intra-EU trade. We find, at different levels of aggregation of the manufacturing sector, that harmonization of regulations has contributed to more intra-EU trade but, apparently, did not affect the so called border effect

Adjustment to Globalisation: A Study of the Footwear Industry in Europe. CEPS Working Document No. 151, October 2000

In this study of the footwear sector we seek to assess how producers in different EU countries have adjusted to increased competition from low-wage countries. There are a number of features of the performance of the sector in Europe that cast doubt over the applicability of the standard trade model, which has typically been used to assess the impact of globalisation. These characteristics also undermine a number of common perceptions regarding low-skilled labour intensive industries. Firstly, the trade data clearly demonstrate that as import penetration has increased so have export to output ratios. This suggests that adjustment to more intense import competition could entail the movement of resources into the production of higher quality differentiated fashion shoes and not just the movement of resources to other sectors. Secondly, the group of production or unskilled workers in footwear is far from homogeneous, as is often assumed in discussions of the impact of globalisation. Thirdly, for footwear it is apparent that technological change has not been pervasive. Information regarding two new technologies shows widely varying rates of application across countries. Finally, some EU countries have been able to maintain employment and output in footwear whilst in other countries production has declined dramatically. This suggests that a variety of responses to globalisation are available to firms in OECD countries, including outsourcing and overseas investment, quality upgrading and increased flexibility in the context of industrial districts