Cost effectiveness of R&D and the robustness of Strategic Trade Policy

This paper analyzes the incentives for governments to impose export subsidies when firms invest in a cost saving technology before market competition. Governments first impose an export subsidy or a tax. After observing export policy, firms invest in cost reducing R&D and subsequently compete in the market. Governments subsidize exports under Cournot competition. Under Bertrand competition, export subsidies are positive whenever R&D is suffciently cost-effective at reducing marginal costs, and negative otherwise. The trade policy reversal found in models without endogenous sunk costs disappears if R&D is sufficiently cost-effective. Output subsidies are more robust than implied by the recent literature.

Cost Effectiveness of R&D and the Robustness of Strategic Trade Policy

This paper analyzes the incentives for governments to impose export subsidies when firms invest in a cost saving technology before market competition. Governments first impose an export subsidy or a tax. After observing export policy, firms invest in cost reducing R&D and subsequently compete in the market. Governments subsidize exports under Cournot competition. Under Bertrand competition, export subsidies are positive whenever R&D is sufficiently cost-effective at reducing marginal costs,and negative otherwise.The trade policy reversal found in models without endogenous sunk costs disappears if R&D is sufficiently cost-effective. Output subsidies are more robust than implied by the recent literature.Product Differentiation,Strategic Trade Policy,Policy Reversals,R&D.

The Role of Extensive and Intensive Margins and Export Growth

We investigate and compare countries' export growth based on their performance at the extensive and intensive export margins. Our empirical approach is motivated by an extension to the Melitz (2003) model of heterogeneous firms in which exporters are subject to a one-time sunk cost and also a per-period fixed cost. With imperfect information a firm may enter export markets but shortly exit when it learns its per- period fixed costs. We apply this insight to disaggregated export data and confirm that indeed most export relationships are very short lived. We then show that the survival issue is a significant factor in explaining differences in long run export performance. We find that developing countries would experience significantly higher export growth if they were able to improve their performance with respect to the two key components of the intensive margin: survival and deepening.

Cost effectiveness of R&D and the robustness of Strategic Trade Policy

This paper analyzes the incentives for governments to impose export subsidies when firms invest in a cost saving technology before market competition. Governments first impose an export subsidy or a tax. After observing export policy, firms invest in cost reducing R&D and subsequently compete in the market. Governments subsidize exports under Cournot competition. Under Bertrand competition, export subsidies are positive whenever R&D is sufficiently costeffective at reducing marginal costs, and negative otherwise. The trade policy reversal found in models without endogenous sunk costs disappears if R&D is sufficiently cost-effective. Output subsidies are more robust than implied by the recent literature.

Domestic transport cost reductions and firms’ export behaviour

Transport infrastructure investment reduces the cost of distance and enables firms to establish and maintain contacts over larger distances. Spain has developed an ambitious road building programme over the last decades, which has considerably reduced transport costs to access European markets. In this paper we depart from the traditional aggregate approach in analysing the impacts of transport infrastructure investment. In particular, we examine the export decision of Spanish manufacturing firms and test how domestic transport cost reductions affect firms’ probability of becoming exporters. We estimate models that control for unobserved heterogeneity among firms, endogeneity and initial conditions problems. Our results provide some support for a positive effect of domestic transport improvements on firms’ exporting probability. However, the magnitude of this effects is small, being the strongest effect the one due to previous export experience which suggests high entry costs into export markets

Transport infraestructure, sunk costs and firms' export behaviour

Transport infrastructure investment reduces the cost of distance and enables firms to establish contacts over larger distances. We study the impact of transport-cost reductions on firms’ export behaviour, accounting for the role of entry costs and other firms’ characteristics. Using Spanish data we estimate dynamic probability models controlling for firms’ unobserved heterogeneity and for the simultaneity of firms’ export and location decisions. Our results provide support for a positive effect of domestic transport improvements on firms’ exporting probability for small and medium sized firms. We find a strong effect of previous export experience, suggesting high entry costs into export markets.Export decision, Transport infrastructure, Accessibility, Dynamic panel data

Exchange Rate Pass-through and Industry Characteristics: The Case of Taiwan's Exports of Midstream Petrochemical Products

Based on 1986-1992 survey data of 22 midstream petrochemical industries in Taiwan, the empirical results of the export price, the markup ratio and the price-cost margin equations in this study show that Taiwan's petrochemical firms absorb only a small portion of a given weighted exchange rate change in their export prices, markup ratios and price-cost margins. It implies that Taiwan's petrochemical firms have a weak pricing-to-market pattern. The empirical results may be explained by the volatility of profitability, high market concentration and small export/domestic production share. However, the impacts of the exchange rate change on the export price, markup ratio and price-cost margin have a tendency to increase during the period of 1987" to 1992. The tendency might be attributed to increasing competition of the petrochemical markets in the world, or Taiwanese firms' gradual realization of the importance of holding their world market shares in response to the exchange rate change.

What Explains Germany’s Rebounding Export Market Share?

Germany’s export market share increased since 2000, while most industrial countries experienced declines. This study explores four explanations and evaluates their empirical contributions: (i) improved cost competitiveness, (ii) ties to fast growing trading partners, (iii) increased demand for capital goods, and (iv) regionalized production of goods (e.g. off-shoring). An export model is estimated covering the period 1993–2005. The dominant factor explaining the increase in market share are trade relationships with fast growing countries. Regionalized production in the export sector also played a part. Improved cost competitiveness had a comparatively smaller impact. There is no conclusive evidence of increased demand for capital goods.international trade, export

Vertical Foreclosure and International Trade Policy

We examine conditions under which a low cost vertically integrated manufacturer has an incentive to export an intermediate product to its higher cost (vertically integrated) rival rather than to vertically foreclose, fully cutting off supplies. The nature of supply conditions in the importing country, the size of an import tariff on the final good and optimal policy by the exporting country are all shown to be important for this decision. The exporting country may gain by taxing exports of the final (Cournot) product even though, under Cournot competition, an export subsidy is optimal in the absence of a market for intermediates. In this case, optimal policy also requires an export tax on intermediates, but the higher tax on final goods serves to divert sales to the more profitable market for intermediates increasing the extent of vertical supply. It is optimal to tax the export of both goods or to subsidize the export of both goods. It is never optimal to tax one and subsidize the other.

The contracts between leading agribusiness enterprises and rural households: its effects on firm-level export of agricultural products

In this paper, transaction cost is introduced into the general firm-level export behavior model. By so doing, we build a theoretical model explaining how connection modes between leading agribusiness enterprises and rural households affect the firm-level agricultural products export. Analyzing the dataset of 561 national leading agribusinesses of the year 2003, we use Tobit model to estimate the firm-level export effect of the connection modes. The empirical result demonstrates that connections in the mode of stock-cooperation or cooperation contracts have a significant positive effect on the enterprises export and export ratio. In addition, the connection with more characteristics of factor contract has stronger effect on export than that with commodity contract characteristics.Contracts; Agribusiness; Rural Households; Firm-level; Export