Market Access and Intermediate Goods Trade

The role of importer access to the finished goods market in intermediate goods trade is examined by estimating the gravity-like equation derived from the NEG model. Importer access to demand for finished goods is calculated by using the estimates in the gravity equation for finished goods trade, and then intermediate goods trade is regressed on the importer access. Results indicate that imports of intermediate goods are sensitive not only to the magnitude of importer demand for finished goods but also to the demand of neighboring countries. Using results of the regression, the impact of US finished goods market expansion on intermediate goods trade in each country is simulated.

Application of factor decomposition techniques to vertical specialisation measurements

The increasing importance of vertical specialisation (VS) trade has been a notable feature of rapid economic globalisation and regional integration. In an attempt to understand countries’ depth of participation in global production chains, many Input-Output based VS indicators have been developed. However, most of them focus on showing the overall magnitude of a country’s VS trade, rather than explaining the roles that specific sectors or products play in VS trade and what factors make the VS change over time. Changes in vertical specialisation indicators are, in fact, determined by mixed and complex factors such as import substitution ratios, types of exported goods and domestic production networks. In this paper, decomposition techniques are applied to VS measurement based on the OECD Input-Output database. The decomposition results not only help us understand the structure of VS at detailed sector and product levels, but also show us the contributions of trade dependency, industrial structures of foreign trade and domestic production system to a country’s vertical specialisation trade.

Chapter 1 Market Access and Intermediate Goods Trade

This paper examines a distinctive feature of intermediate goods trade which the traditional gravity equation fails to capture, i.e., intermediate goods trade is positively related not only to the importing country's demand for finished goods but also to its neighbors' demand for finished goods. We regress a gravity equation for finished goods trade in the first step. Then, introducing the importing country's access to the total demand for finished goods which is calculated by using the estimates in the first step, we regress our gravity equation for trade in intermediate goods. Our regression results confirm such a feature of intermediate goods trade. Using the results of the regression, we simulate how the rise of US consumers' demand for finished goods affects the total imports and exports of intermediate goods in each country.

Trade, economic growth and environment

The literature on trade openness, economic development, and the environment is largely inconclusive about the environmental consequences of trade. This study review previous studies focusing on treating trade and income as endogenous and estimating the overall impact of trade openness on environmental quality using the instrumental variables technique. The results show that whether or not trade has a beneficial effect on the environment varies depending on the pollutant and the country. Trade is found to benefit the environment in OECD countries. It has detrimental effects, however, on sulfur dioxide (SO2) and carbon dioxide (CO2) emissions in non-OECD countries, although it does lower biochemical oxygen demand (BOD) emissions in these countries. The results also find the impact is large in the long term, after the dynamic adjustment process, although it is small in the short term.

Measuring global value chains and regional economic integration : an international input-output approach

Firms that are expanding their cross-border activities, such as vertical specialization trade, outsourcing, and fragmentation productions, have brought dramatic changes to the global economy during the last two decades. In an attempt to understand the evolution of the interaction among countries or country groups, many trade-statistics-based indicators have been developed. However, most of these statistics focus on showing the direct trade-specific-relationship among countries, rather than considering the roles that intercountry and interindustrial production networks play in a global economy. This paper uses the concepts of trade in value added as measured by the input–output tables of OECD and IDE-JETRO to provide alternative indicators that show the evolution of regional economic integration and global value chains for more than 50 economies. In addition, this paper provides thoughts on how to evaluate comparative advantages on the basis of value added using an international input–output model.

Do electricity supply constraints matter for comparative advantage? : a neoclassical approach

This paper examines the extent to which electricity supply constraints could affect sectoral specialization. For this purpose, an empirical trade model is estimated from 1990-2008 panel data on 15 OECD countries and 12 manufacturing sectors. We find that along with Ricardian technological differences and Heckscher-Ohlin factor-endowment differences, productivity-adjusted electricity capacity drives sectoral specialization in several sectors. Among them, electrical equipment, transport equipment, machinery, chemicals, and paper products will see lower output shares as a result of decreases in productivity-adjusted electricity capacity. Furthermore, our dynamic panel estimation reveals that the effects of Ricardian technological differences dominate in the short-run, and factor endowment differences and productivity-adjusted electricity capacity tend to have a significant effect in only the long-run.

On the stability of intra-industry trade

This paper presents the novel finding that two-way intra-industry trade (IIT) in product–country pairs is very unstable over time by using disaggregated trade data of OECD countries. Many products frequently switch among two-way, one-way and zero trade over time. To measure the stability of two-way trade, we propose a measure that we refer to as the "IIT stability index". Our estimation results using the proposed measure show that two-way trade involving markets of different sizes and long distance are likely to be unstable. In addition, primary products are more unstable than manufactured products.

Compilation of a regionally-extended inter-country input-output table and its application to global value chain analysis

Studies on the rise of global value chains (GVCs) have attracted a great deal of interest in the recent economics literature. However, due to statistical and methodological challenges, most existing research ignores domestic regional heterogeneity in assessing the impact of joining GVCs. GVCs are supported not only directly by domestic regions that export goods and services to the world market, but also indirectly by other domestic regions that provide parts, components, and intermediate services to final exporting regions. To better understand the nature of a country's position and degree of participation in GVCs, we need to fully examine the role of individual domestic regions. Understanding the domestic components of GVCs is especially important for larger economies such as China, the US, India and Japan, where there may be large variations in economic scale, geography of manufacturing, and development stages at the domestic regional level. This paper proposes a new framework for measuring domestic linkages to global value chains. This framework measures domestic linkages by endogenously embedding a target country's (e.g. China and Japan) domestic interregional input–output tables into the OECD inter-country input–output model. Using this framework, we can more clearly understand how global production is fragmented and extended internationally and domestically.