Explaining Home Bias in Consumption: The Role of Intermediate Input Trade

We show that 'home bias' in trade patterns will arise endogenously due to the co-location decisions of intermediate and final goods producers. Our model identifies four implications of home bias arising out of specialized industrial demands. Regions absorb different bundles of goods. Buyers and sellers of intermediate goods co-locate. Intermediate input trade is highly localized. The effect of spatial frictions on trade are magnified. These implications are examined and confirmed using a unique data source that matches the detailed subnational geography of shipments to the characteristics of the shipping establishments. Our results broaden the measurement and interpretation of home bias, and provide new evidence on the role of intermediate inputs in concentrating production.

Monopolistic Competition and International Trade: Reconsidering the Evidence

In this paper, we test some propositions about international trade flows that are derived from a model of monopolistic competition developed by Elhanan Helpman. We investigate whether the volume of trade between OECD countries is consistent with the predictions of a modal in which all trade is intra-industry trade in differentiated products. We then repeat the test with non-OECD countries. We also investigate whether the share of intra-industry trade is consistent with a more general theoretical model in which some, but not all, trade is intra-industry trade. Our results lead us to question the apparent empirical success of these models.

Intra-national Home Bias: Some Explanations

Wolf (2000) demonstrates that trade within the U.S. appears substantially impeded by state borders. We revisit this finding with improved data. We show that much intra-national home bias can be explained by wholesaling activity. Shipments by wholesalers are much more localized within states than shipments from manufacturing establishments. Controlling for relative prices and the use of actual, rather than imputed, shipment distances also reduces home bias estimates.

The Trade Reducing Effects of Market Power in International Shipping

Developing countries pay substantially higher transportation costs than developed nations, which leads to less trade and perhaps lower incomes. This paper investigates price discrimination in the shipping industry and the role it plays in determining transportation costs. In the presence of market power, shipping prices depend on the demand characteristics of goods being traded. We show theoretically and estimate empirically that shipping firms charge higher prices when transporting goods with higher product prices, lower import demand elasticities, and higher tariffs, and when facing fewer competitors on a trade route. These characteristics explain more variation in shipping prices than do conventional proxies such as distance, and significantly contribute to the higher shipping prices facing the developing world. Markups increase shipping prices by at least 83 percent for the mean shipment in Latin American imports. Our findings are also important for evaluating the impact of tariff liberalization. Shipping firms decrease prices by 1-2 percent for every 1 percent reduction in tariffs.

Vertical specialization and the changing nature of world trade

A major feature of globalization has been the enormous increase in international flows of goods and services: countries are now trading much more with each other. In this article, the authors demonstrate the greater role vertical specialization is playing in these increased flows. Vertical specialization occurs when a country uses imported intermediate parts to create a good it later exports--that is, the country links sequentially with other countries to produce a final good. Deriving evidence from four case studies as well as OECD input-output tables, the authors reveal that vertical specialization has accounted for a large and increasing share of international trade over the last several decades. They also note that because the trends encouraging vertical specialization--lower trade barriers and improvements in transportation and communications technologies--are likely to continue, this type of international trade should become even more prevalent in the next century.International trade

Explaining Import Variety and Quality: The Role of the Income Distribution

We examine a generalized version of Flam and Helpman’s (1987) model of vertical differentiation that maps cross-country differences in income distributions to variations in import variety and price distributions. The theoretical predictions are examined and confirmed using micro data on income from the Luxemburg Income Study for 30 countries over 20 years. The pairs of importers whose income distributions look more similar have more export partners in common and more similar import price distributions. Similarly, the importers whose income distributions look more like the world buy from more exporters and have import price distributions that look more like the world.

How Confident Can We Be in CGE-Based Assessments of Free Trade Agreements?

Computable General Equilibrium models, widely used for the analysis of Free Trade Agreements (FTAs) are often criticized for having poor econometric foundations. This paper improves the linkage between econometric estimates of key parameters and their usage in CGE analysis in order to better evaluate the likely outcome of a FTA for the Americas. Our econometric work focuses on estimation of the elasticity of substitution among imports from different countries, which is especially critical for evaluating the positive and normative outcomes of FTAs. We match the data in the econometric exercise to the policy experiment at hand. Then we sample from the distribution of parameter values given by our econometric estimates in order to generate a distribution of model results, from which we can construct confidence intervals. We conclude that there is great potential for combining econometric work with CGE-based policy analysis in order to produce a richer set of results that are likely to prove more satisfying to the sophisticated policy maker.

Explaining import variety and quality: The role of the income distribution

In this paper we examine whether a generalized version of Flam and Helpman's (1987) model of vertical differentiation can reconcile three facts. One, countries import only a subset of available varieties. Two, import prices vary across exporters within narrow product categories. Three, US growth in both import variety and import price dispersion has occurred at the same time that the US income distribution has significantly widened. The generalized model maps cross-country differences in income distributions to variation in import variety and price variation. The theoretical predictions are examined and confirmed using panel data on import variety and prices, and detailed income distribution data from the Luxemborg Income Survey (LIS). Country pairs whose income distributions are growing more similar over time have growing similarity in the distribution of their import prices, and in the number of common export sources from which they buy

The GALEX Arecibo SDSS Survey. VIII. Final Data Release -- The Effect of Group Environment on the Gas Content of Massive Galaxies

We present the final data release from the GALEX Arecibo SDSS Survey (GASS), a large Arecibo program that measured the HI properties for an unbiased sample of ~800 galaxies with stellar masses greater than 10^10 Msun and redshifts 0.025<z<0.05. This release includes new Arecibo observations for 250 galaxies. We use the full GASS sample to investigate environmental effects on the cold gas content of massive galaxies at fixed stellar mass. The environment is characterized in terms of dark matter halo mass, obtained by cross-matching our sample with the SDSS group catalog of Yang et al. Our analysis provides, for the first time, clear statistical evidence that massive galaxies located in halos with masses of 10^13-10^14 Msun have at least 0.4 dex less HI than objects in lower density environments. The process responsible for the suppression of gas in group galaxies most likely drives the observed quenching of the star formation in these systems. Our findings strongly support the importance of the group environment for galaxy evolution, and have profound implications for semi-analytic models of galaxy formation, which currently do not allow for stripping of the cold interstellar medium in galaxy groups.Comment: 36 pages, 16 figures. Accepted for publication in MNRAS. Version with supplementary material available at http://www.mpa-garching.mpg.de/GASS/pubs.php . GASS released data can be found at http://www.mpa-garching.mpg.de/GASS/data.ph