[go: up one dir, main page]
More Web Proxy on the site http://driver.im/
IDEAS home Printed from https://ideas.repec.org/p/ekd/002625/3003.html
   My bibliography  Save this paper

Imports, Product Variety and the Extensive Margin: Some Stylized Facts

Author

Listed:
  • Tohmas Karlsson
Abstract
Product variety has played a central role in models of trade and growth. Classical trade theory postulates that the elimination of trade barriers improves welfare by reducing the wedge between domestic and import prices as well as the ensuing deadweight loss. An entirely different reason for the gains from trade arises from models of monopolistic competition. The new trade theory, by integrating increasing returns to scale and monpolistic competition in a general equilibrium framework, brought the study of varieties into sharp focus by presenting a simple model in which countries gain from trade through the import of new varieties. If consumers value variety and countries cannot produce all varieties due to fixed cost in the production of each variety, consumers stand to gain from trade because it expands the set of available varieties. See the seminal work by Krugman [1979, 1980, 1981, 1983] Although the love-of-variety approach, introduced by Dixit & Stiglitz [1977], is a standard feature of most theoretical as well as applied models in trade and macro, we know very little about the magnitude of the gains from variety at the aggregate level. So far, empirical applications have been lagging behind the theoretical developments, but recently a number of empirical studies have been undertaken in order to empirically estimate the impact of varieties. One application is to compute an import price index, taking new varieties into account, which enables us to calculate the direct welfare gains from an improved access to more varieties. Recent studies seem to indicate that these effects can be quite large, see e.g.Broda & Weinstein [2006]. Futhermore, measures of product variety of inputs are directly related to endogenous growth models, which often assume that a larger set of intermediate inputs increases productivity and growth. The idea that countries can gain from international trade by getting ascces to a larger set of new products or new varieties of already existing products is reflected in many trade and growth models, see e.g.Rivera-Batiz [1991]. Empirical support for this hypothesis has been provided by Goldberg etal. [2009] and Amiti & Konings [2007]. Recent research in international trade emphasizes the importance of firms' extensive margins for understanding overall patterns of trade as well as how firms respond to trade liberalization. A key insight of this literature is that the extensive margins of trade can account for a large share of the variation in imports and exports across countries, see Bernard et.al. [2010]. The distinctive feature of this paper consists in calculating direct measures of product variety for the EU-27 and the OECD countries from 1984 to 2000. Furthermore, we provide aggregate as well as disaggregated, at a secoral level, measures of product variety. The objective is to provide a set of stylized facts regarding the importance of the extensive margin and explicit measures of product variety for imports.using a broad cross section of advanced (and developing) countries and disaggregating across sectors. This description is of value in itself, but would also serve the purpose as background foe further, more analytical studies of the role of the extensive margin for welfare and productivity. Amiti, Mary and Jozef Konings [2007], "Trade Liberalization, Intermediate Inputs, and Productivity", American Economic Review, 97(5), 1611-1638. Bernard, Andrew B., J. Bradford Jensen, Stephan J. Redding, and Peter K. Schott [2009b] "The Margins of U.S. Trade ", American Economic Review, Papers and Proceedings 99:2, 487-493. Broda, Christian and David E. Weinstein [2006], "Globalization and the Gains from Trade", Quarterly Journal of Economics, May, 121(2), 541-585. Dixit & Stiglitz [1977], "Monopolistic Competition and Optimum Product Diversity", American Economic Review, Vol. 67 No. 3, June 1977, 297-308. Feenstra, Robert C. [1994], "New Product Varieties and the Measurement of International Prices", American Economic Review, 84(1), March, 157-177. Feenstra, Robert C., Robert E. Lipsey, Haiyan Deng, Alyson C. Ma, and Hengyong Mo [2005], "World Trade Flows: 1962 - 2000", Working Paper 11040, National Bureau of Economic Research. Funke, Michael and Ralf Ruhwedel [2002], "Export Variety and Export Performance: Empirical Evidence for the OECD Countries", Weltwirtschaftliches Archiv, Vol.138 (1), 97-114. Funke, Michael and Ralf Ruhwedel [2005], "Export variety and economic growth in East Euopean transition economies", Economics of Transition, Volume 13 (1), 25-50. Goldberg, Pinelopi, Amit Khandelwal, Nina Pavenik, and Petia Topalova [2009], "Trade Liberalization and New Imported Inputs", American Economic Review, Papers and Proceedings 99:2, 494-500. Krugman, Paul [1979], "Increasing Returns, Monopolistic Competition, And International Trade", Journal of International Economics, Vol.9, 469-479. Krugman, Paul [1980], "Scale Economies. Product Differentiation, and the Pattern of Trade", American Economic Review, Vol.70, No.5, 950-959. Krugman, Paul [1981], "Intraindustry Specialization and the Gains from Trade", Journal of Political Economy, Vol.89, No.5, 959-973. Krugman, Paul [1983], "New Theories of Trade Among Industrial Countries", American Economic Review, Papers and Proceedings, Vol. 73, No. 2, 343-347. Rivera-Batiz, and P. Romer [1991], "Economic Integration and Endogenous Growth", Quarterly Journal of Economics, 106(2), 531-555. Romer, Paul [1990], "Endogenous Technical Change", Journal of Political Economy, 98, No.5, s71-S102. Romer, Paul [1994], "New goods, old theory, and the welfare costs of trade restrictions", Journal of Development Economics 43 5-38. In the empirical work we will follow rather closely the general approach adopted by Bernard et.al. [2009] and Goldberg etal. [2009] in order to identify the extensive margin in imports. For our computation of product variety we adopt the methodology develped by Feenstra [1994]. xpected results The study would generate two sets of results. First, we would investigate the quantitative importance of the extensive margin for all our countries, i.e. we compute the contribution of new goods to the total change in imports between 1984 and 2000. Second, we would compute simple count measures of product variety as well as the measure proposed by Feenstra (1994), which takes into account the relative share of different goods. We compute these measures for both aggregate imports and for imports on a sector level.

Suggested Citation

  • Tohmas Karlsson, 2011. "Imports, Product Variety and the Extensive Margin: Some Stylized Facts," EcoMod2011 3003, EcoMod.
    • Handle: RePEc:ekd:002625:3003
    as

    Download full text from publisher

    File URL: http://ecomod.net/system/files/Karlsson_ImportsProductVariety_15%20May%202011.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Andrew B. Bernard & J. Bradford Jensen & Stephen J. Redding & Peter K. Schott, 2007. "Firms in International Trade," Journal of Economic Perspectives, American Economic Association, vol. 21(3), pages 105-130, Summer.
    2. Feenstra, Robert C & Markusen, James R, 1994. "Accounting for Growth with New Inputs," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(2), pages 429-447, May.
    3. By Michael Funke & Ralf Ruhwedel, 2001. "Product Variety and Economic Growth: Empirical Evidence for the OECD Countries," IMF Staff Papers, Palgrave Macmillan, vol. 48(2), pages 1-1.
    4. Feenstra, Robert C & Markusen, James R & Zeile, William, 1992. "Accounting for Growth with New Inputs: Theory and Evidence," American Economic Review, American Economic Association, vol. 82(2), pages 415-421, May.
    5. Gene M. Grossman & Elhanan Helpman, 1991. "Quality Ladders in the Theory of Growth," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(1), pages 43-61.
    6. Maurice Kugler & Eric Verhoogen, 2009. "Plants and Imported Inputs: New Facts and an Interpretation," American Economic Review, American Economic Association, vol. 99(2), pages 501-507, May.
    7. Feenstra, Robert C, 1994. "New Product Varieties and the Measurement of International Prices," American Economic Review, American Economic Association, vol. 84(1), pages 157-177, March.
    8. Paul Krugman, 2009. "The Increasing Returns Revolution in Trade and Geography," American Economic Review, American Economic Association, vol. 99(3), pages 561-571, June.
    9. Robert Feenstra & Hiau Looi Kee, 2004. "On the Measurement of Product Variety in Trade," American Economic Review, American Economic Association, vol. 94(2), pages 145-149, May.
    10. David H. Romer & Jeffrey A. Frankel, 1999. "Does Trade Cause Growth?," American Economic Review, American Economic Association, vol. 89(3), pages 379-399, June.
    11. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
    12. Andrew Bernard & J Bradford Jensen & Stephen Redding & Peter Schott, 2009. "The Margins of U.S. Trade (Long Version)," Working Papers 09-18, Center for Economic Studies, U.S. Census Bureau.
    13. Michael Funke & Ralf Ruhwedel, 2005. "Export variety and economic growth in East European transition economies," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 13(1), pages 25-50, January.
    14. Krugman, Paul, 1983. "New Theories of Trade among Industrial Countries," American Economic Review, American Economic Association, vol. 73(2), pages 343-347, May.
    15. Funke, Michael & Ruhwedel, Ralf, 2001. "Export variety and export performance: empirical evidence from East Asia," Journal of Asian Economics, Elsevier, vol. 12(4), pages 493-505.
    16. Pinelopi Koujianou Goldberg & Amit Kumar Khandelwal & Nina Pavcnik & Petia Topalova, 2010. "Imported Intermediate Inputs and Domestic Product Growth: Evidence from India," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 125(4), pages 1727-1767.
    17. Francisco L. Rivera-Batiz & Luis A. Rivera-Batiz, 2018. "Economic Integration and Endogenous Growth," World Scientific Book Chapters, in: Francisco L Rivera-Batiz & Luis A Rivera-Batiz (ed.), International Trade, Capital Flows and Economic Development, chapter 1, pages 3-32, World Scientific Publishing Co. Pte. Ltd..
    18. Feenstra, Robert C. & Madani, Dorsati & Yang, Tzu-Han & Liang, Chi-Yuan, 1999. "Testing endogenous growth in South Korea and Taiwan," Journal of Development Economics, Elsevier, vol. 60(2), pages 317-341, December.
    19. Andrew B. Bernard & J. Bradford Jensen & Stephen J. Redding & Peter K. Schott, 2009. "The Margins of US Trade," American Economic Review, American Economic Association, vol. 99(2), pages 487-493, May.
    20. Michael Funke & Ralf Ruhwedel, 2002. "Export variety and export performance: Empirical evidence for the OECD countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 138(1), pages 97-114, March.
    21. Robert C. Feenstra, 2006. "New Evidence on the Gains from Trade," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 142(4), pages 617-641, December.
    22. Mark Bils & Peter J. Klenow, 2001. "The Acceleration of Variety Growth," American Economic Review, American Economic Association, vol. 91(2), pages 274-280, May.
    23. Robert C. Feenstra & Hiau Looi Kee, 2007. "Trade Liberalisation and Export Variety: A Comparison of Mexico and China," The World Economy, Wiley Blackwell, vol. 30(1), pages 5-21, January.
    24. Pinelopi Goldberg & Amit Khandelwal & Nina Pavcnik & Petia Topalova, 2009. "Trade Liberalization and New Imported Inputs," American Economic Review, American Economic Association, vol. 99(2), pages 494-500, May.
    25. Feenstra, Robert C. & Yang, Tzu-Han & Hamilton, Gary G., 1999. "Business groups and product variety in trade: evidence from South Korea, Taiwan and Japan," Journal of International Economics, Elsevier, vol. 48(1), pages 71-100, June.
    26. David Hummels & Peter J. Klenow, 2005. "The Variety and Quality of a Nation's Exports," American Economic Review, American Economic Association, vol. 95(3), pages 704-723, June.
    27. Krugman, Paul R, 1981. "Intraindustry Specialization and the Gains from Trade," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 959-973, October.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Colantone, Italo & Crinò, Rosario, 2014. "New imported inputs, new domestic products," Journal of International Economics, Elsevier, vol. 92(1), pages 147-165.
    2. repec:zbw:bofitp:2003_008 is not listed on IDEAS
    3. Lukas Mohler & Michael Seitz, 2012. "The gains from variety in the European Union," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 148(3), pages 475-500, September.
    4. Kichun Kang & Byung Chul Ahn, 2010. "China's Penetration of the Korean Market: Stylized Facts and Welfare Effect," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 18(5), pages 54-71, September.
    5. Broda, Christian & Greenfield, Joshua & Weinstein, David E., 2017. "From groundnuts to globalization: A structural estimate of trade and growth," Research in Economics, Elsevier, vol. 71(4), pages 759-783.
    6. Michael Funke & Ralf Ruhwedel, 2005. "Export variety and economic growth in East European transition economies," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 13(1), pages 25-50, January.
    7. Štefan Bojnec & Imre Fertő, 2012. "Agro-food exports variety from the Central and Eastern European countries," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 58(1), pages 1-9.
    8. Ricardo Arguello, 2017. "Trade diversification in Colombia, 1991-2011," Revista Cuadernos de Economia, Universidad Nacional de Colombia, FCE, CID, vol. 36(71), pages 345-378, July.
    9. Craig R. Parsons & Anh Thu Nguyen, 2009. "Import variety and productivity in Japan," Economics Bulletin, AccessEcon, vol. 29(3), pages 1947-1959.
    10. Lee, Jim, 2011. "Export specialization and economic growth around the world," Economic Systems, Elsevier, vol. 35(1), pages 45-63, March.
    11. Frensch, Richard & Gaucaite Wittich, Vitalija, 2009. "Product variety and technical change," Journal of Development Economics, Elsevier, vol. 88(2), pages 242-257, March.
    12. Kang, Kichun, 2009. "The export price index with the effect of variety and an empirical analysis," Economic Modelling, Elsevier, vol. 26(2), pages 385-391, March.
    13. Ademola Obafemi Young, 2024. "Intensive and Extensive Margins of Export Diversification as Strategies for Sustainable Economic Growth: Evidence from the Nigerian Economy," Foreign Trade Review, , vol. 59(2), pages 187-224, May.
    14. Liao, Wei & Santacreu, Ana Maria, 2015. "The trade comovement puzzle and the margins of international trade," Journal of International Economics, Elsevier, vol. 96(2), pages 266-288.
    15. Bouët, Antoine & Estrades, Carmen & Laborde, David, 2011. "Households heterogeneity in a global CGE model: an illustration with the MIRAGE poverty module," Conference papers 332034, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    16. Kancs, d'Artis & Persyn, Damiaan, 2019. "Welfare Gains from the Variety Growth," Working Papers 2019-01, Joint Research Centre, European Commission.
    17. Foster, Neil & Poeschl, Johannes & Stehrer, Robert, 2011. "The impact of Preferential Trade Agreements on the margins of international trade," Economic Systems, Elsevier, vol. 35(1), pages 84-97, March.
    18. repec:zbw:bofitp:2003_017 is not listed on IDEAS
    19. Bel Hadj Tarek, 2012. "Product Differentiation and Intra-Industrial Trade: Quantitative Assessment in the Case of Tunisia," Journal of Economics and Behavioral Studies, AMH International, vol. 4(10), pages 570-587.
    20. Funke, Michael & Ruhwedel, Ralf, 2003. "Trade, product variety and welfare: a quantitative assessment for the transition economies in Central and Eastern Europe," BOFIT Discussion Papers 17/2003, Bank of Finland Institute for Emerging Economies (BOFIT).
    21. Robert C. Feenstra, 2010. "Measuring the gains from trade under monopolistic competition," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 43(1), pages 1-28, February.
    22. Ndubuisi, Gideon & Mensah, Emmanuel & Owusu, Solomon, 2020. "Export Variety and Imported Intermediate Inputs: Industry-Level Evidence from Africa," MPRA Paper 106008, University Library of Munich, Germany.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ekd:002625:3003. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Theresa Leary (email available below). General contact details of provider: https://edirc.repec.org/data/ecomoea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.