Publication: Trade Liberalization and 'Export Response': Whither Complementary Reforms?
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Published
2011
ISSN
09638199
Date
2012-03-30
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What enables Ecuadorian manufacturing firms to start exporting? And what are the determinants of the share of total sales exported by a firm, once the decision of becoming an exporter has been made? We apply a Heckman selection model to the Ecuador's Investment Climate Survey (ICS) to investigate supply-side constraints to export performance at the firm level. We estimate export propensity (the probability of exporting) and export intensity (the share of total sales that are exported). The application of the Heckman selection model to a rich dataset as the ICS is a major contribution as previous applications of the Heckman selection model used much limited datasets, limiting the range of hypotheses to be tested. Furthermore, other studies on export performance based on ICS data use either Tobit or Probit models, incurring important methodological limitations. We find robust and stable relationships for export propensity and intensity with firm size, import of inputs, labor regulations, in-house R&D, quality certification, Web use, and foreign ownership. Capacity utilization and trade with the US positively affect export intensity, while trade within the Andean Community has the opposite effect in our outcome variable. No significant relationship was found with the infrastructure variables.
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Publication Identifying Supply-Side Constraints to Export Performance in Ecuador : An Exercise with Investment Climate Survey Data(World Bank, Washington, DC, 2007-03)The authors apply a Heckman selection model to the 2003 Investment Climate Survey (ICS) to investigate supply-side constraints to export performance at the firm level in Ecuador. To correct for the non-random truncation problems, they use the Heckman selection model to estimate the probability of exporting (export propensity) and the share of total sales that are exported (export intensity) by Ecuadorian firms. They develop a baseline model with 12 independent variables divided into three categories-idiosyncratic characteristics, technology, and business environment. The authors develop three other models with the addition of variables related to trade integration, business environment, and infrastructure. Results corroborate with the hypothesis implicit in the Heckman model, which considers both decisions made by a firm-whether to export, and how much of its sales to export-to be interdependent. In the Ecuadorian case, they find three important results for the firm's export performance: technology matters; infrastructure does not; and trade orientation is significant, with specialized firms tending to have smaller export intensity when their main trade partners are countries of the Andean Community, and the opposite happening if the United States is their main trade partner. The authors find a robust and stable relationship for export propensity and intensity with size, import of inputs, labor regulations, in-house research and development, quality certification, web-use, and foreign ownership. Also, capacity utilization and trade with the United States positively affect export intensity, while trade within the Andean Community has the opposite effect in the outcome variable. But they find no significant relationship for the infrastructure variables.Publication Pacific Islands - Regional Economic Report : Embarking on a Global Voyage - Trade Liberalization and Complementary Reforms in the Pacific(Washington, DC, 2002-09-10)This regional economic report, evaluates the strategy that the Pacific Island Countries (PICs) have chosen towards liberalizing their economies, and, analyzes as well the interaction of trade liberalization with complementary reforms in taxation, and the public sector. As a consequence of multilateral and unilateral efforts towards freer trade worldwide, preferential access granted to PICs in developed country markets, is being eroded. In particular, the report looks at the Pacific Island Countries Trade Agreement (PICTA), viewed as a "stepping stone" to become more competitive in global markets. It is important to note that the formation of a preferential trade area, as opposed to multilateral or unilateral liberalization, is perceived as trade liberalization, but in a gradual process, to limit disruptions, and adjustments to their economies. However, in order for this "stepping stone" not to become a "stumbling block," the liberalization strategy needs to be actively pursued, through sound policy framework, and trade facilitation. Furthermore, the small un-diversified economies of, and very little trade among PICs suggests very small benefits from PICTA; yet, trade diversion which favors the more industrially advanced members is likely to develop. Nonetheless, the formulation of a free trade agreement between the PICs, and Australia and New Zealand, negotiations over reciprocal free trade agreements with the European Union in 2002 as envisaged, and provision of a free trade association by some PICs with the United States, inevitably will require the widening of preferential trading arrangements beyond PICTA, though the timing is uncertain. It is suggested that the pace and composition of reforms - in particular, more complete trade liberalization, and public sector reform - will need to be calibrated to the progress on efforts to enhance the business environment, and increase labor, and capital mobility.Publication Services Trade and Policy(2010)A substantial body of research has taken shape on trade in services since the mid-1980s. Much of this is inspired by the WTO and regional trade agreements. However, an increasing number of papers focus on the impacts of unilateral services sector liberalization. The literature touches on important linkages between trade and FDI in services and the general pattern of productivity growth and economic development. This paper surveys the literature on services trade, focusing on contributions that investigate the determinants of international trade and investment in services, the potential gains from greater trade, and efforts to cooperate to achieve such liberalization through trade agreements. There is increasing evidence that services liberalization is a major potential source of gains in economic performance, including productivity in manufacturing and the coordination of activities both between and within firms. The performance of service sectors, and thus services policies, may also be an important determinant of trade volumes, the distributional effects of trade, and overall patterns of economic growth and development. At the same time, services trade is also a source of increasing political unease about the impacts of globalization on labor markets, linked to worries about offshoring and the potential pressure this places on wages in high income countries.Publication Modeling Services Liberalization: The Case of Kenya(2009)This paper employs a 55 sector small open economy computable general equilibrium model of the Kenyan economy to assess the impact of the liberalization of regulatory barriers against foreign and domestic business service providers in Kenya. The model incorporates foreign direct investment in business services and productivity effects in imperfectly competitive goods and services markets endogenously, through a Dixit-Stiglitz framework. The ad valorem equivalent of barriers to foreign direct investment have been estimated based on detailed questionnaires completed by specialists in Kenya. We estimate very substantial gains to Kenya from regulatory liberalization in business services, and additional gains from uniform tariffs. The estimated gains increase to 50% of consumption in the long run steady state model, where the impact on the accumulation of capital from an improvement in the productivity of capital is taken into account. Decomposition exercises reveal that the largest gains to Kenya will derive from liberalization of costly regulatory barriers that are non-discriminatory in their impacts between Kenyan and multinational service providers.Publication What Explains Intra-Asian FDI Flows? Do Distance and Trade Matter?(2009)This paper examines intra-Asian FDI flows using bilateral data over the period 1990 to 2005. Does the so-called distance puzzle that has characterized trade and FDI based gravity models exist in the case of intra-Asian FDI flows as well? And if so, to what extent can it be explained by informational assymetries and international trade as opposed to physical distance? These questions are explored in this paper.
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